Local Government Owners of Historic Property Asked to Convey Property by End of 2017: What Public Officials Should Know

<p>Federal tax reform is likely to be enacted before the end of the year. While the final form of the bill has not been determined, it is nearly certain that federal historic preservation tax credits—an important financing mechanism for preservation of historic properties—will be significantly affected. In fact, most observers anticipate that the value of the tax credits will be diminished by tax reform, thereby making historic preservation projects more difficult to finance and complete. For that reason, some real estate developers have asked local government owners of historic properties to convey those properties to new ownership before the end of the 2017 tax year (December 31, 2017) in order to “grandfather” those projects under the older, more favorable rules. This post briefly describes how federal tax reform could affect historic rehabilitation projects and offers some guidance for North Carolina public officials who wish to respond (on a very tight deadline) to a request to transfer historic properties owned by local governments.</p> How the House and Senate Tax Reform Bills Would Change Historic Preservation Tax Credits <p>Under current law (pre-2018), a taxpayer who invests in restoring a historic building can receive a tax credit equal to 20% of the expenses incurred to restore the building for an income-producing purpose. Only qualified expenses for historic components (not land acquisition or non-historic elements) count for this purpose. Large projects—such as historic mills in the center of many small downtowns—can potentially generate huge sums of tax credits.</p> <p>Most real estate developers cannot use all of those tax credits themselves, [...]</p>