Historic Tax Credits
This page is reproduced with permission from RenovateSTL.com, November 2005.
There are two types of historic districts in the City of St. Louis -
Local and Federal. It is critically important to understand the
difference between the two and whether your renovation project falls
into one or the other (or neither). The location of your project will
determine whether it potentially qualifies for Historic Tax Credits and
what exterior work you can legally perform.
Local Historic Districts
A local historic district is created by the St. Louis City Board of
Aldermen by passing a local ordinance. This local ordinance has legally
enforceable provisions regarding permitting, materials, and design of
all exterior renovation work. "Legally enforceable" means that if the
proper permits are not obtained and/or the design does not meet the
standards in the ordinance, you can be made to remove any offending
work - windows, roofing, a garage, a retaining wall, a fence, a porch,
painting, a deck, glass block infill, etc.
The reasoning behind the creation of local historic districts is
twofold. First, they are a means of preserving a public good (the
historic character of a unique architectural district). Since the
continuity of design is a key component to a historic district, there
would be no means of preserving the architectural heritage without a
locally enforced historic ordinance. Second, it is an economic
stimulus. Several studies have determined that property in designated
historic districts tends to increase both in monetary value and
perceived value at a rate higher than other property. Most buildings in
local historic districts qualify for State and Federal Historic Tax
Credits.
The local historic districts are administered by the Cultural
Resources Office (1015 Locust, 11th floor, 622-3400), a department of
the city government. Anyone performing exterior work in a local
historic district MUST get approval from this office. If you are
performing exterior work as a component of a full renovation, you must
take the drawings to the CRO office and have them approved (stamped) by
a staff member prior to applying for the general building permit. If
you are performing only exterior work that does not require a building
permit (such as replacing a window) you must still get the drawings
approved by the Cultural Resources Office.
Federal Historic Districts
The National Parks Services maintains the National Register of
Historic Places and can determine that an individual building or a
defined district has enough historic architectural significance to the
United States to be listed on this register. This listing carries no
enforcement provision - listed properties become eligible for State and
Federal Historic Tax Credits but unless you receive these tax credits,
you can still do whatever you want to the building, including
demolition.
Several state and Federal programs offer tax credits to qualifying
renovation projects. A tax credit may be used to pay down taxes owed.
For example, the Missouri State Historic Tax Credit applies to
substantial renovation projects in qualifying neighborhoods. At the
time of this writing, it is equal to 25% of the total renovation cost
and may be carried forward ten years and back three. For example:
Total Renovation Cost - $100,000 (qualifying expenditures)
MO Historic Tax Credit - $25,000 (100,000 x .25)
If your annual state income tax is $1,000 (total of $13,000 –
forward 10, back 3) then even after ten years, you would not be able to
take advantage of the full amount. Taking inflation into account, it
may be worthwhile to explore “selling” your tax credits. Businesses
with enough tax liability to take advantage of the credits may be
willing to purchase them at a discount (they make money by purchasing
credits at less than their face value and you get cash in hand). A tax
credit “clearing house” will generally pay between $.80 and $.90 on the
dollar for your tax credits.
The Missouri Department of Natural Resources administers the State
Historic Tax Credit Program. In order to approve tax credits for a
renovation project, work must be performed in compliance with the
Secretary of the Interior’s Standards for Rehabilitation. A descriptive
booklet with illustrations and examples can be obtained from the DNR
web site for a nominal fee.
The other major tax credit program available for owner-occupants in
St. Louis is the Neighborhood Preservation (NPA) tax credit program.
Projects receiving NPA credits are not required to meet the Secretary’s
Standards. NPA tax credits are sometimes referred to as the “lottery”
because the total amount distributed is capped by legislation. Projects
are drawn from the pool of complete applications until all the money is
distributed – last year the State only funded approximately one in ten
NPA applications. Applications are usually due in November.
Designated Historic Districts
In order to qualify for Historic Tax Credits, a building must be
listed on the National Register of Historic Places or be a contributing
building in a recognized historic district. For general information
(this method is not exact and may produce some errors) you can look up
individual addresses at the Community Development Administration’s
Cultural Resources Office web site. For a definitive answer, contact
the Missouri Department of Natural Resources.
http://stlcin.missouri.org/history/beta1a/index.cfm
Most locally designated historic districts qualify for historic tax
credits. However, local historic districts also carry additional
requirements. In a local district, the Cultural Resources Office must
approve all exterior changes on primary facades (typically the front,
and anything visible from the street. You cannot apply for a building
permit until a CRO official has approved the drawings. Each local
district has its own local ordinance with its own requirements. Your
architect should research or be familiar with the appropriate
requirements.
For more information on Tax Credits, visit the following resources:
·City of St. Louis Cultural Resources Office - Local historic district information and local ordinances
·State Historic Preservation Tax Credits - Missouri Department of Economic Development tax credit information
If you decide to pursue tax credits, make sure your architect has
experience with tax credit projects and is aware of your intention. He
or she can provide advice, application assistance, and make sure that
required items are included in the plans.
Standards for Historic Rehabilitation
In order to receive either State or Federal Historic Tax Credits, a
project must conform to the Secretary of the Interior’s Standards for
Historic Rehabilitation. Applications are reviewed in detail by
knowledgeable staff in accordance with these standards. This section is
adapted from the Illustrated Guidelines (1997) published by the
National Park Service. The full text is available online at: http://www2.cr.nps.gov/tps/tax/rhb/.
The following is a summary of the Secretary's Standards.
1.Properties will maintain their current use or be given a new use
compatible with any distinctive features or spaces. In most cases a
conversion (2-family to single family home or warehouse to loft condos
for example) will be considered acceptable if the character defining
aspects of the building are maintained.
2.The historic character of the property will be preserved - Spaces
and architectural features that are deemed to be essential to the
overall historic character of the building must be retained, repaired,
or replicated.
3.Buildings will be recognized as a physical record of its time,
place and use - Adding conjectural elements or artifacts from another
building is discouraged.
4.Changes to a property that have acquired their own historical
significance will be preserved - If a later addition or renovation is
determined to be significant in its own right, it will be considered
character defining.
5.Distinctive materials, features, finishes, and construction
techniques or examples of craftsmanship that characterize a property
will be preserved - Typically this can include moldings, windows,
doors, built-in cabinetry, porches and dormers, cornices, and other
historic elements.
6.Deteriorated historic features will be repaired rather than
replaced - In cases where the original feature is too far deteriorated,
it must be documented and replicated.
7.Treatments that cause damage to historic materials will not be
used - It is necessary to use the gentlest means possible when cleaning
or treating any historic element.
8.Archeological resources will be protected and preserved in place.
9.Additions, exterior alterations, or related new construction will
not destroy historic materials, features, or spatial relationships that
characterize the property - New construction must be differentiated in
design from the original historic property and should be designed and
constructed in a way to protect the integrity of the historic property.
10.New additions and adjacent or related new construction will be
undertaken in such a manner that, if removed in the future, the
essential form and integrity of the historic property and its
environment would be unimpaired.
Historic tax credit applications are reviewed "as a whole." No
single action in and of itself will cause an application to be
rejected. The question that the reviewer asks him or herself is whether
the project as a whole meets the Secretary’s guidelines. The guidelines
recognize the need for some alterations to be made in order for most
projects to be successful – any changes must be made without negatively
impacting the building’s overall historic character.
It is important if you intend to pursue historic tax credits, that
you find an architecture firm and contractor who are familiar with
these requirements.
Please visit RenovateSTL.com for additional updates: http://renovatestl.com/info-historic.php