Cherrytree Group Blog

Historic Rehabiliation Tax Credits: An Option for Relocating Business Pt 2

[fa icon="calendar"] Nov 25, 2013 2:46:00 PM / by Warren Kirshenbaum

The following is part II of an article written by Warren Kirshenbaum published in Area Development Online. To read the entire article now, click here.

     Developers, owners, and managers require innovative financing solutions to fill gaps in project funding. State and federal tax credits, together with depreciation and other available grants, can offset as much as 45% of a construction project’s budget, and they can make or break the feasibility of rehabilitating a historic building that has significant community value.

      The historic rehabilitation tax credit program is one of the nation's most successful and cost-effective community revitalization programs to date. Tax credits encourage private-sector rehabilitation of historic buildings. But the benefits of these tax credits go beyond urban renewal. They can help fund a project that might not otherwise get off the ground, and they can create new construction jobs for the community (which builds further goodwill in the process). In addition, being designated as an historic place may increase surrounding property values, enhancing the economic viability of an entire neighborhood.
 
      In addition to historic rehabilitation tax credits, there are other tax credits worth mentioning that may be applicable. These tax credits may be used together for the same project. Brownfields tax credits (for remediating contamination) and renewable energy tax credits (for investing in or producing renewable energy) are two tax credits, in particular, that may provide an added benefit.

      Both the federal and most state governments recognize that encouraging the rehabilitation of historical properties is beneficial to our communities. Through tax incentives such as the historic rehabilitation tax credit, they offer a solution that manages some of the inherent challenges in preserving an historical building, and potentially provide added financial incentives as well. The value of such credits goes far beyond monetary figures.
 
      The process of applying for and securing historic preservation tax credits, grants, or any other applicable tax credits can be complicated and requires certain specialists, such as an architect, lawyer, consultant, and a syndicator. Seeking out information about this process before the project commences is critical in allowing for the developer to factor the potential tax credit equity into a proposed budget or development pro-forma, which can lead to more control over financing costs.
 
     The Cherrytree Group can deliver our menu of services to provide maximum efficiency and cost effectiveness to our clients. We offer a value-added component to our clients' businesses or projects that results in a scaling of costs, a reduction in project time and expense, and a lower opportunity cost of capital for our clients, leading to their achieving greater productivity and profit.

 

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Topics: Historic Rehabilitation Tax Credit, federal tax credits

Warren Kirshenbaum

Written by Warren Kirshenbaum

Warren is the President and CEO of the Cherrytree Group, a tax credit consulting, brokerage, and syndication firm.

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