It might be easy to dismiss recent changes to the Federal Rehabilitation Tax Credit as a minor course correction -- nothing which will make a substantive long-term difference.  After all, the initial package of proposed amendments included in the Community Restoration and Revitalization Act included important changes to building eligibility requirements, changing basis rules, revisions to recapture, allowing use of the 10% credit in residential structure renovation, etc..  When the ink dried on the Housing Recovery Act of 2008, however, the only revisions enacted dealt with an alternative minimum tax issue, a requirement that state affordable housing entities consider historic resources in the allocation of affordable housing credits, and a provision which changes the non-profit disqualified lease percentage.

There may well be more here, however, than initially meets the eye - particularly with the lease provision.

Raising the disqualified lease percentage from 35% to 50% may well make it more feasible for local and state government to take advantage of the tax credit for renovating public buildings.  Already, the credit has been used by local government -- such as Sioux City, Iowa, for renovation of their municipal auditorium -- through the creation of extremely sophisticated space utilization schedules that ensure that civic use stays below the 35% level.  The challenge of meeting the 35% maximum, however, was also one of the main hurdles that County Commissioners in Seneca County could not overcome to pursue use of the Federal Rehabilitation Tax Credit for renovation of the Seneca County Courthouse.

Now that non-profits and governmental bodies can lease up to 50% of the space for their own purposes, we may well see more public-private renovation projects of what have heretofore been exclusively public buildings.  Fortunately, Ohio is home to consultants with practical expertise in seeing these types of projects to fruition (including those involved with the Sioux City and other similar projects).

For more information on the use of the Federal Rehabilitation Tax Credit, including recent changes, contact us at: info@preservationohio.org, and we’ll either answer your question directly or get you to right person.

Photo Credit - The Arcade, Cleveland (1890), renovated using the Federal Rehabilitation Tax Credit -- Storm Crypt/Creative Commons License