Commercial Real Estate
How to Get Historic Tax Credit Certification
Learn how to navigate the National Park Service’s three-step application to obtain Historic Tax Credit certification and low-cost capital.
Through the federal Historic Tax Credit (HTC) program, real estate developers can transform shuttered factories into modern lofts, vacant warehouses into office space, and former hospitals into schools and community centers.
And that’s only the beginning. A growing number of affordable housing projects also use HTC. “We’re doing a lot of public housing with buildings built as recently as the ‘60s and ‘70s,” said Cindy Hamilton, Heritage Consulting Group, vice president.
Congress enacted the program to incentivize the preservation of historic building elements. Through HTC, developers can create jobs and revenue to revitalize distressed communities.
“Historic preservation is really an economic development tool,” said John Tess, president, Heritage Consulting Group.
The federal government provides the financial incentive to real estate developers in the form of a tax credit. However, many developers don’t have the funds to use HTC on their own. So they work with banks that directly invest in the projects. That’s why it’s so important to begin working with your bank early in the process. We can share industry information on financing structures plus details on third parties who can help improve your application.
JPMorgan Chase can provide HTC equity for a wide range of qualifying real estate projects, including:
- Multifamily, market-rate and affordable housing
- Mixed-use buildings
- Community facilities
- Select special-use facilities
Significant time and effort go into obtaining HTC approval for these projects, and that work begins long before construction. We typically encourage our clients to consider hiring an industry consultant to help determine eligibility and complete the detailed application.
To be considered historic, the structure must be at least 50 years old and have certified historical significance. You must also complete the building’s rehabilitation according to Department of Interior requirements and use the building for income-producing purposes for at least five years.
Once the project is eligible, you can begin the US Technical Preservation Services’ three-part application process with your local state historic preservation office (SHPO), which may request more information and conduct site visits. SHPO sends its recommendation to the National Park Service (NPS), which provides the final approval.
In Part 1, you present information about the significance and appearance of the building.
You’ll need to include a narrative describing the building’s history. “History is more than names and dates,” said Elizabeth Rosin, principal and CEO, Rosin Preservation. “It’s about the people who envisioned, built and occupied a building.” She looks to city directories, census records and historic maps to learn more about how the structure fits into the community.
If the building is listed individually on the National Register, it is automatically certified historic and you don’t need to complete Part 1.
If the building is not on the National Register, you must establish its historic significance through a separate application process. “A successful National Register nomination finds the hook to the story—why it is significant and worthy of preservation,” Rosin said. A building’s significance may relate to its history, architecture or association with an important person or event.
For Part 2, you describe the building’s condition and the planned rehabilitation work.
Historic consultants can help determine what building elements are historic and should be preserved.
Elements to preserve could be decorative, such as exterior stonework and plaster details in the lobby, or even the walls themselves. For example, midcentury modern buildings are often characterized by their all-glass exteriors and lack of applied ornaments. “These elements communicate just as much about the building and when it was constructed as a mosaic tile floor or elaborate wood trim,” Rosin said.
For Part 3, after the project is done, you submit proof that the work was completed as originally proposed. NPS approval of Part 3 officially recognizes the property as a certified rehabilitation to receive the tax credit.
Upon completion of the project milestones, you become eligible to receive low-cost capital from JPMorgan Chase.