The Federal, National, and local governments, in recognition of the importantance of Historic Preservation, offer tax incentives to encourage the preservation of historic properties. Additional private and voluntary financial and legal tools are also available to encourage preservation. Listed below are a brief description of some of the incentives for preservation.
Ad Valorem Exemptions for Historic PropertiesIn 1992, a statewide election resulted in the passage of a constitutional amendment authorizing tax exemptions for eligible historic properties. This enabling legislation gives counties and municipalities the authority to pass these types of ordinances.
Alachua County has passed the Ad Valorem Tax Exemption for Historic Properties (Chapter 39.7 Revenue and Finance ), however, it has not acquired CLG status and so any application for tax incentive programs for properties listed have to be directed to the state.
Federal Tax IncentivesCurrently, income-producing properties listed on the National Register of Historic Places and/or deemed contributing to a National Register of Historic Places historic district are eligible for a tax credit based on the costs of rehabilitation. The tax credit is a dollar-for-dollar credit and not a deduction. This amount is equal to 20% of the cost of rehabilitating a property that that is either listed or eligible for listing on the National Register of Historic Places. Properties that are not eligible for listing but are over 50 years of age may be eligible for a 10% tax credit. Rehabilitation must follow certain guidelines established by the National Park Service and explained in the Secretary of the Interior's Standards for Rehabilitation.
Low-Income Housing CreditsThe Tax Reform Act of 1986 provides for special relief for investors in certain low-income housing projects of historic buildings. A 70% federal income tax credit is available for rehabilitation of low-income housing. If the project is federally subsidized, a 30% tax credit is available instead. For more information the Internal Revenue Service should be contacted.
OtherFederal codes contain a number of preservation-related incentives. Such assistance often comes in the form of relief from rules and requirements that normally apply to nonhistoric buildings. For example, in coastal zone areas where specific elevations are required for federal insurance policies, exemptions are provided to qualified historic structures when reconstruction is necessary after a major disaster and special accessibility provisions for historic buildings to meet the requirements of the American with Disabilities Act.
Private and Voluntary Preservation Tools
EasementsBecause of federal tax considerations, the charitable gift of a preservation easement is by far the most commonly used voluntary preservation technique. A preservation easement is a formal agreement between a property owner ("grantor") and a government agency or a preservation organization ("grantee"). The easement is usually placed with the a non-profit organization that maintains the right of review and approve proposed alterations to the structure or its setting before they are undertaken, and to enforce the easement terms in event of a violation. Tax advantages are available for some easements. Federal law permits, for example, the donation of a facade easement for the purpose of preserving the exterior integrity of a qualified historic building.
GrantsGrant money is available through federal or state agencies for improvement, restoration, and preservation of eligible properties. The National Trust for Historic Preservation, the Department of Housing and Urban Development, the Division of Historical Resources at the Florida Department of State, and the Department of Transportation offer funds to individuals, organizations, and local governments.
National Trust for Historic Preservation:financial assistance includes:
Division of Historical Resources Grant Program:Matching grants are available from the Division for acquisition and development; survey and planning, and community education. Most grant awards range from $5,000 to $25,000. Historical museums can also apply for grants-in-aid for up to 20% of the museum's annual operating expense. Alachua County has utilized, and should continue to apply for, these grant monies.
Division of Cultural Affairs Grant Program:This department, also located within the Florida Department of State, administers a Cultural Facilities Grants Program which can provide assistance to preservation projects that involve historic buildings that are being renovated to meet cultural program needs, such as performing arts facilities, art museums, theaters, etc. The Cultural Institution Grants Program provides operating support to cultural organizations, including history museums.
Community Development Block Grant Rights:This federal program permits the use of funds distributed as community block grants for historic preservation purposes, such as rehabilitation of qualifying historic buildings.
ISTEA and TEA-21:The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) and its reauthorization bill, the Transportation Equity Act for the 21st Century (TEA-21), have provided or will provide additional funding for historic properties impacted by transportation projects. Websites dedicated to these measures should be perused periodically for upcoming information. Continuing awareness of projects that could be funded through this program is highly recommended.
Florida's Community Contribution Tax Credit ProgramThis program created by the Florida Legislature is intended to encourage private corporations and insurance companies to participate in revitalization of community sponsored preservation projects. Administered by the Florida Department of Community Affairs, the program allows any corporation paying Florida corporate income tax or insurance premium tax to receive a tax credit equal to 50% of the donation to an approved community development or historic preservation project. Businesses are eligible to receive credits of up to $200,000 each fiscal year. Non-profit organizations and units of state and local governments may apply to become eligible project sponsors and receive donations under the program.
Mutual CovenantsMutual Covenants are agreements among adjacent property owners to subject each participating property owner's land to a common system of property maintenance and regulation. Such control is critcal in historic areas that involve substantial amounts of open space where development of the land would irreversibly damage the historic character of an area.
Revolving FundA revolving fund, normally administered by a non-profit or governmental unit, established a monetary basis on which property can be bought, improved, maintained, and sold. The revolving fund is a pool of capital created and reserved for a specific activity (such as the purchase of an endangered historic building) with the condition that the money will be returned for additional activities. Monies are subsequently returned and reused. Revolving funds have proven to be an effective tool to stimulate preservation of historic properties, both through acquisition and resale of properties, and through loans to individuals for restoration or rehabilitation. Funds are replenished through proceeds from sales, rentals, loan repayments, and interest, and revolved to new projects.
Funding to create a revolving fund is available through the National Trust for Historic Preservation. This fund provides below-market-rate loans of up to $150,000 to nonprofit organizations and public agencies to help preserve properties listed in or eligible for the National Register of Historic Places. Funds may be used to create local revolving funds, for site acquisition or rehabilitation work.
Purchase of Development Rights (PDR)This device involves the acquisition by a local governmental agency of the right to further develop a historic property. After the acquisition of development rights, the land remains in private ownership, but the landowner has sold the right to further develop the property. By acquiring only the development rights, rather than the full-fee interest, the local government ensures that the parcel will remain in its present use, without the expense of outright purchase. Rather than paying market value for the parcel, the community only pays the difference in the full market value of the parcel and its value in its present use. Because it remains in private ownership, the community avoids maintenance and management responsibilities. Also, the land remains on the tax rolls, albeit at a reduced valuation to reflect the land's market value in light of the development restrictions. Purchase of development rights provide permanent protection, while zoning is subject to political pressures for change. These programs typically rely on loyal bond issues or real estate transfer taxes for funding.
Transfer of Development Rights (TDR)Transfer of development rights are similar to PDRs in that the right to further develop a property is sold in order to keep the historic property at its present density. However, instead of governmental agency purchasing the rights, the landowner sells the rights to further develop the property to another private entity. The private entity in turn can then develop their own parcel of land at a density increase, beyond their zoning limits. The historic property remains in the ownership of the original owner and keeps the property on the tax rolls at a reduced rate. It simply eliminates the pressure to further develop the land. TDR programs can achieve the same result as PDRs while avoiding the large public acquisition costs. With TDRs, new development absorbs the cost of protecting the historic resources.