Tag Archives: tax credits

State and Federal Historic Preservation Incentives Available in Oregon

Historic Preservation Incentives at the State and Federal level are either tax incentives or grants. PMA keeps up to date regarding these programs as incentives are ever-changing and apt to suddenly sunset or be revised. Following is a brief explanation of incentives offered by state or federal government or private agencies as of 2016. PMA has worked with multiple owners and agencies across the Pacific Northwest to take advantage of state and federal tax incentive programs, and we can provide expert experience in the latest interpretations of work that meets the standards for these incentives. A few other redevelopment incentive programs are also mentioned below, if they have been successfully combined with historic preservation incentive programs in Oregon.
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FEDERAL AND STATE OF OREGON TAX INCENTIVES

Oregon Special Assessment

  • Properties contributing to a district or individually listed on the National Register and in need of some rehabilitation are eligible for the State of Oregon Special Assessment property tax incentive. Property taxes are “frozen” at the time of application and are held at that value for 10 years. During this time period owners may make significant investments in the property without an increase in assessed value. The earlier the investment is made and the larger the resulting increase in market value, the greater the benefit to the owner.
  • A Preservation Plan must be submitted, outlining the rehabilitation work proposed. Exterior work is prioritized, and the work must meet the Secretary of the Interior’s Standards for Rehabilitation. The total valuation of work must be at least 10% of the property’s Real market value and that amount must be spent in the first five years of the special assessment period.
  • A second term of 10 years is available, with some limitations on the types of preservation work that are eligible for the program. Eligible work includes energy conservation projects, ADA compliance, seismic improvements, or sustainability. The investment must meet or exceed 10% of the Real market value of the property at the time of application.
  • Non-contributing properties in need of rehabilitation could be eligible for the State of Oregon Special Assessment property tax incentive, if it is determined by the State Historic Preservation Office (SHPO) that the property is or would be eligible for listing on the National Register, and that the renovation would restore obscured or missing historic character.



    • Federal Historic Tax Credit Incentives (HTC)

  • Rehabilitation tax credits, in the amount of up to 20% of the amount spent on the project, are available to qualifying projects.
  • Property must be listed either individually or as a contributing property to a historic district listed in the National Register. Alternately, to qualify for up to 10% in tax credits, a non-designated building must have been constructed before 1936.
  • Property must be income-producing for at least 5 years after rehabilitation. Owner-occupied residential projects such as condominiums do not qualify, but apartments or mixed-use projects are eligible. The project must be substantial. The owner must spend more on rehabilitation expenditures than the “adjusted basis” value of the property. The Investment Tax Credit does not include the purchase price of the property.
  • Rehabilitation work must meet certain standards for preservation. These are the Secretary of the Interior’s Standards for Rehabilitation.

    • gus-solomon-interior-courtroom

    Federal Preservation Easement Tax Deduction
    A preservation easement is a legal agreement to protect a historic property from changes, including neglect. The property must be individually listed on the NRHP or a contributing structure within a National Register-listed historic district or local historic district. If a property owner makes a voluntary donation to a trust such as the Historic Preservation League of Oregon (HPLO) of all or a portion of a property, the donation can qualify as a charitable tax donation. Only some of the rights associated with the property are being donated, and the donation permanently limits uses or changes as specified. The owner of the historic property may still use the property, and must maintain it. The owner may sell the property, but the restrictions will remain with the property. The preservation easement may be structured to include only the exterior of a building, or may include air rights, interiors, grounds, or other features.

    OTHER INCENTIVES OR PROGRAMS

    Private and Public Grants
    Grants for historic preservation work vary widely as to eligibility rules, requirements, and amounts. While private-sector grant-making organizations are more apt to change grant programs or requirements year-to-year, they also are more likely to provide larger sums of money. Historic preservation grants are sometimes only available for preservation planning, survey, or designation work as opposed to “brick and mortar” projects.

    The State Historic Preservation Office (SHPO) administers Federal grants directly to local government entities through the Certified Local Government (CLG) program. The SHPO also administers State grants through the Oregon Heritage Grants, Oregon Museums Grants, Preserving Oregon Grants, Diamonds in the Rough Grants, and Oregon Historic Cemeteries Grants. These are all competitive and offer relatively modest amounts of funding.

    New Market Tax Credit
    In December 2015, Congress approved an extension of the New Market Tax Credit (NMTC) program through 2019. There is an immediate opportunity for investors, low-income communities, and businesses to use this successful program in order to revitalize economically distressed areas and create jobs. The State also runs the Oregon New Market Tax Credit program, which is modeled on the same requirements as the Federal program.

    The Blanchet House of Hospitality, a new (2012) building in a historic district in downtown Portland, used New Markets Tax Credits. NMTC and HTC have also been used together, such as in the Mercy Corps restoration/ expansion in the Skidmore Old Town historic district.
    The NMTC is not available for loans or investments in projects involving residential rental housing alone, but may be used for mixed-use and some other housing projects. Investments must be made to designated Community Development Entities (CDEs), which in turn provide investments in low-income communities. The investment is claimed over a 7-year credit allowance period.

    Low-Income Housing Tax Credits
    The federal government allots a certain amount per state per year to be awarded to developers willing to provide low income housing. Residential rental properties only may qualify for the Low-Income Housing Tax Credits (LIHTC) program. A certain percentage of the units must be restricted to occupants making 50% or less (or 60% or less) of local median income, and the affordability restrictions must be maintained for a minimum of 30 years. LIHTC has been successfully combined with HTC in downtown Portland projects such as the Admiral Apartments, the Martha Washington, and the Bronaugh Apartments.


    Written by Kristen Minor, Associate/Preservation Planner

    Local Historic Preservation Incentives Available in Portland, Oregon

    With a firm comprised of architects and planners, we understand and assist owners and developers navigate local historic preservation incentives made available by the City of Portland. The following is a comprehensive overview of incentives offered by the City, as of 2016, in the form of various use allowances, development rules “waivers,” and opportunities to transfer allowed but unused floor area to other property owners, creating an opportunity for a monetary benefit. We grouped the available historic preservation incentives available by the following: City of Portland Incentives, City of Portland/State of Oregon Building Code Allowances, and Portland Development Commission Programs.

    The City of Portland’s Central City 2035 Plan (as well as other related City code projects) are currently under review. The Proposed Draft was published in June 2016 and is being reviewed by many City and non-City agencies, bureaus, and organizations. Proposed changes directly affect portions of the Portland Zoning Code, but the existing Zoning Code will remain in effect until adoption of the final Central City 2035 Plan, probably in late 2018. Increased transfer options are the major change proposed.

    “Landmark” as defined by the City is a property individually listed on the National Register, or evaluated by the City of Portland as a local historic resource. Many incentives are also available to resources designated contributing to a National Register-listed Historic District or locally designated Conservation District.

    Marshall Wells Lofts building preservation plan.

    Marshall Wells Lofts building preservation plan.


    CITY OF PORTLAND INCENTIVES
    Additional density in Single-Dwelling zones. Landmarks in Single-Dwelling zones may be used as multi-dwelling structures, up to a maximum of one dwelling unit for each 1,000 square feet of site area. No additional off-street parking is required, but the existing number of off-street parking spaces must be retained. The landmark may be expanded and the new floor area used for additional dwelling units only if the expansion is approved through historic design review.

    Additional density in Multi-Dwelling zones. Landmarks and contributing structures in historic districts located in multi-dwelling zones may be used as multi-dwelling structures, with no maximum density. No additional off-street parking is required, but the existing number of off-street parking spaces must be retained. The building may be expanded and the new floor area used for additional dwelling units only if the expansion is approved through historic design review.

    Nonresidential uses in the RX zone. In the RX zone, except on certain sites which directly front on the Park Blocks, up to 100 percent of the floor area of a landmark or contributing structure may be approved for Retail Sales and Service, Office, Major Event Entertainment, or Manufacturing and Production uses through Historic Preservation Incentive Review.

    Nonresidential uses in the RH, R1 and R2 zones. In the RH, R1 and R2 zones, up to 100 percent of the floor area of a landmark or contributing structure may be approved for Retail Sales and Service, Office, or Manufacturing and Production uses as follows:

  • a. Review required. The nonresidential uses must be approved through Historic Preservation Incentive Review; and
  • b. Previous nonresidential use required. The last use in the structure must have been in a nonresidential use category and have been allowed when established; if part of the structure was in residential use, the proposal must include at least as many dwelling units as were part of the last allowed use or uses. If the last allowed use was residential only, the structure is not eligible for this incentive.


    • Daycare is an allowed use in all residential zones in historic landmark or contributing structures. In non-historic structures, daycare uses in residential zones other than RX require a conditional use review.

    Conditional uses in Residential, Commercial, and Employment zones. In these zones, applications for conditional uses at landmarks or contributing structures are processed through a Type II procedure, rather than the longer Type III procedure requiring a public hearing.

    Exemption from minimum density. Minimum housing density regulations do not apply in landmarks or contributing structures.

    Crane building historic consulting for storefront updates.

    Crane building historic consulting for storefront updates.


    Commercial allowances in Central City Industrial zones. National Register-listed properties or those contributing to a National Register-listed historic district have potential to include office and retail uses.

    Commercial allowances in employment and industrial zones. Office and retail uses are allowed in landmarks in areas where those uses are otherwise restricted.

    Increased maximum parking ratios in Central City. National Register-listed properties or those contributing to a National Register-listed historic district within the Central City Core parking area are allowed to increase parking ratios.

    Commercial allowances in Guild’s Lake Industrial Sanctuary District. Increases allowances for office and retail uses in landmarks in an area where non-industrial uses are otherwise restricted.

    The transfer of density and floor area ratio (FAR) from a landmark to another location is allowed in Multi-Dwelling, Commercial, and Employment zones. Historic properties with unused development “potential” therefore may find a market for the FAR.

    Proposed Development transfer opportunities (potentially adopted in 2018):
    Landmarks and contributing resources in historic districts will be able to transfer FAR City-wide, as long as the “sending” resource meets seismic reinforcement standards. Seismic work may be allowable in phases over a period of years. FAR to be transferred is not only the base amount unused by the existing historic structure, but also an additional 3:1.

    U.S. Custom House renovation and historic tax credits.

    U.S. Custom House renovation and historic tax credits.


    PORTLAND DEVELOPMENT COMMISSION PROGRAMS
    The Portland Development Commission (PDC) has operated several programs to benefit owners of existing buildings (not necessarily historic buildings). These programs have been suspended and will be replaced by the Prosperity Investment Program (PIP). Information about the PIP is not yet available, but the program may still provide benefits to owners, similar to the suspended Storefront Improvement Program.

    For further information on how PMA helps owners consider reuse options, navigate the regulations, and take advantage of available benefits – please visit our website to review our multidisciplinary projects and comprehensive architecture, building envelope science, and planning services.

    Written by Kristen Minor, Associate, Preservation Planner

    Navigating the Historic Tax Credit Application

    Historic Tax Credits were founded in partnership with the National Park Service (NPS) and the Internal Revenue Service (IRS) in 1986. As one of a number of incentives to help owners preserve historic properties, Historic Tax Credits have since become the premier financial incentive towards the rehabilitation of income-producing historic properties. Historic Tax Credits can be used for older, non-historic properties as well, so long as they are income-producing, at a lower credit amount. An owner can receive a 20% rehabilitation tax credit for the amount spent on the qualifying rehabilitation of a National Register-listed property, or 10% tax credit for the amount spent on the qualifying rehabilitation of an older property with no historic status.

    There is a minimum threshold of rehabilitation investment that must be met in order to qualify. Rehabilitation project costs must be equal to the Real Market Value (as assessed by the local tax authority) minus the value of the land or $5000, whichever is greater. Rehabilitation Tax Credits for tax-exempt historic properties are possible provided that the investment partner using the tax credits is a for profit, tax paying entity. Typically, separate Limited Liability Corporations are established through which rehabilitation funding flows to the project.
    Pacific-Tower-Tax-Credits20% Rehabilitation Tax Credit
    The most common use of historic tax credits is the 20% Rehabilitation Tax Credit. To qualify for the 20% historic tax credit a property must be listed on the National Register of Historic Places either individually or as a contributing resource within a historic district. Properties must be a building as defined by Treasury Regulation 1.48-1(e), income producing, and undergo a certified rehabilitation process, which is evaluated by the NPS and the State Historic Preservation Office (SHPO). This process includes the completion of a three part application: Part 1-Evauation of Significance (not typically necessary if the building is already on the National Register); Part 2-Description of Rehabilitation; and Part 3-Request for Certification of Completed Work. Once completed and approved by the NPS the 20% tax credit can be claimed for the tax year in which the property was certified by the NPS. Tax credits can be taken in phases as well, as long as each phase meets certain conditions.

    10% Rehabilitation Tax Credit
    To qualify for the 10% rehabilitation tax credit a property must have been built before 1936. Properties eligible for the 10% tax credit must be buildings, income producing, non-residential, and remain on the original site. Historic properties that have been relocated do not qualify. Other conditions include the retention of at least 50% of the external walls, at least 75% of internal and external walls, and at least 75% of the internal framework. Unlike the application process for the 20% Historic Tax Credit, there is no formal review process or certification. However, the tax credits are redeemed the same way. Buildings listed individually or contributing resources within a Historic District on the National Register of Historic Places are not eligible for the 10% tax credit.

    Current Trends
    The staff at PMA have years of experience navigating the Historic Tax Credit application, placing properties on the National Register of Historic Places, and working with the State Historic Preservation Office and the National Park Service to assure the rehabilitation project qualifies and receives historic tax credits.
    US-Custom-House-Tax-Credit
    From initial application of Part I through final certification of Part III, 180 days or more can elapse. Current development practices and financial investment processes place pressure on the development schedule to initiate rehabilitation prior to final approval by the National Park Service. Early construction places the tax credit under risk and final approval can be withheld pending review of all rehabilitation impacts. Market demand for open space with exposed mechanical, electrical, and plumbing systems is creating a trend in rehabilitation of historic properties to expose these functional systems.

    PMA’s experience in working with the market demand and reaction to the trend by SHPO and NPS, can provide owners with advice on where reviewers will be more stringent. PMA has worked with NPS when a Condition of Approval was placed on the submitted Part 2 Description of Rehabilitation requesting alteration of completed ceiling conditions throughout the building in occupied space. Although the owner did know that construction prior to approval was a risk, they also needed to have some spaces complete in order to retain certain tenants and meet the financial loan terms. PMA sought a compromise with NPS retaining completed ceilings, but altering the design intent and finish in those spaces not yet complete in order to meet the new Condition of Approval.
    usch_Ground Floor_Northeast Room (Viewing Northwest)
    Similarly, PMA has noted in the Part II application process an acceptance of exposed fire sprinkler lines and exposed conduits but resistance to exposed ductwork and exposed cable trays. Whereas it could be argued that exposed mechanical and wiring systems are akin to exposed electrical systems in that the exposed work does not have a long-term impact on the historic walls, floors, and ceilings, the combined affect changes the subjective visual impact from NPS perspective.

    Each of the above trends requires diligent documentation and on-going discussion during the construction process, which, in itself, can be very fluid and entail rapid changes. The tax credit consultant must be skilled in communication and work with both the development team and tax credit reviewers.

    PMA Technical Assistance
    PMA is proud to undertake historic tax credit commissions as these projects have been a great way for our office to combine our specializations in architecture and preservation. Over the last five years, PMA has completed numerous Historic Tax Credit applications throughout Oregon and Washington. Overall, Historic Tax Credits have proven to be vital to the financial proforma and successful investment strategy to preserve and rehabilitate historic properties.
    Pac-Tower-Tax-Credit

    Written by Peter Meijer AIA, NCARB, Principal / Kristen Minor, Preservation Planner / Brandon Grilc, Preservation Specialist