Rehabilitation Tax Credits for Income-Producing Buildings

The Maryland Sustainable Rehabilitation Communities Tax Credit program is available for commercial income-producing properties (including office, retail, rental housing, etc.) and contains different credit levels available in this program in order to apply:

20% credit for “certified historic structures”
25% credit for “certified historic structures” that are high-performance buildings (LEED Gold certified or the equivalent)
10% credit for non-historic, “qualified rehabilitated structures”

MHT reviews applications for both the Maryland Sustainable Communities Tax Credit Program and the Federal Historic Tax Credit Program (administered by the National Park Service), which can be used either independently or in conjunction with each other.

The amount of Maryland Sustainable Communities Rehabilitation Commercial Tax Credits distributed each year is based upon an annual appropriation in the State's operating budget. The amount varies from year to year based upon the amount included in the Governor's proposed budget and the final budget passed by the General Assembly.

Per the requirements of the legislation, applications for State Commercial Sustainable CommunitiesTax Credits are accepted once annually and are competitively reviewed and ranked. Awards are made to the extent appropriations are available.

Please note that this program operates independently from local jurisdiction tax credit programs and regulations.

Approval of a project from a local jurisdiction cannot be substituted for meeting State requirements and is independent from MHT’s tax credit review.
If you are considering using local tax credits in combination with State tax credits, we recommend that you contact the Rehabilitation Tax Credit staff at MHT before applying for local tax credits or making any changes to your historic property.

For general information about the Sustainable Communities Tax Credit Program or to check the status of your project, please contact Bonnie Baden at bbaden@mdp.state.md.us or (410) 514-7628.

Important Notice

The application period for State Commercial Rehabilitation Tax Credits for FY 2014 is now open.

Applications are being accepted for the Maryland Sustainable Communities Rehabilitation Tax Credit Program until August 31, 2013.

Applicants are highly encouraged to submit projects early in order to receive feedback from staff prior to the application deadline.

Click here to join MHT's mailing list if you would like to be notified when the awards are announced

Tremont Grand Hotel, Baltimore

Eligibility

The first step that commercial property owners or long-term leaseholders of income-producing properties must take is to determine if their property is eligible for the tax credit as either a “certified historic structure” or a “qualified rehabilitated structure.”

Eligibility Flowchart

Click on the image below to view a larger version of this chart.

There are three different credit levels:

Option # 1 - 20% Tax Credit, Certified Historic Structures:

The property is designated as a certified historic structure in one of the following ways:

Individually listed in the National Register of Historic Places,
A contributing resource within a National Register Historic District,
A locally designated structure that MHT determines to be eligible for the National Register,
A contributing resource within a locally designated district that MHT determines to be eligible for National Register listing,
A structure located in and determined significant to a Certified Heritage Area ,

The qualified rehabilitation costs exceed the greater of; the adjusted basis value of the structure or $25,000.

The proposed work is compatible with the Secretary of the Interior’s Standards for Rehabilitation. (not required for non-historic structures in Certified Heritage Areas)

+ 5% additional credit for High Performance Structures

An additional credit of 5% of the total eligible costs is available to projects that intend to be certified as meeting or exceeding LEED Gold or equivalent rating. The additional credit is only available to projects that select this option on the Part 2 application and can document this certification at project completion and Part 3 certification.

Option # 2 – 10% Tax Credit, Qualified Rehabilitated Structures:

The property is located in a National Register or locally designated historic district but does not contribute to the significance of the district.

The project is located within a Sustainable Community, Main Street Maryland or Baltimore City Main Street Community.

The qualified rehabilitation costs exceed the greater of; 50% of the adjusted basis value of the structure or $25,000.

The proposed exterior work is compatible with the Secretary of the Interior’s Standards for Rehabilitation.

The proposed work satisfies all of the following three tests:

50% or more of the existing exterior walls must be retained in place as exterior walls,
75% or more of the existing exterior walls must be retained in place as either interior or exterior walls,
75% or more of the interior structural framework must be retained in place,

Option #3 – 10% Tax Credit, Qualified Rehabilitated Structures:

The property is not located in a National Register or locally designated historic district.

The property is not individually eligible for listing in the National Register of Historic Places.

The project is located within a Sustainable Community, Main Street Maryland or Baltimore City Main Street Community.

The qualified rehabilitation costs exceed the greater of; 50% of the adjusted basis value of the structure or $25,000.

The proposed work satisfies all of the following three tests:

50% or more of the existing exterior walls must be retained in place as exterior walls,
75% or more of the existing exterior walls must be retained in place as either interior or exterior walls,
75% or more of the interior structural framework must be retained in place,

Application Process

The application for Commercial properties is a 3-part process.

Part 1 certifies that a building is either a contributing resource to a historic district, is individually eligible for the National Register of Historic Places, is located in and contributes to a Certified Heritage Area, or is located in a Sustainable Community, Maryland Main Street or Baltimore City Main Street Community;
Part 2 certifies that a proposed scope of work will meet the requirements of the program;
Part 3certifies that the actual completed work meets the requirements of the program.

Approval of all plans must be received prior to starting work, unless the proposed work has been approved under the Federal Historic Preservation Tax Credit Program prior to the State program’s application deadline.

The law governing the State tax credit program defines “qualified rehabilitation expenditures,” in part, as “any amount that is expended in compliance with a plan of proposed rehabilitation that has been approved by the [MHT] Director.” This provision of the law means that rehabilitation expenditures for work that is undertaken prior to the Director’s approval of the Part 2 are ineligible for tax credits.

Application Fee

The Application Fee for the review of Commercial Applications is 3% of the amount of the tax credit awarded to successful commercial tax credit projects and will be payable once plans have been approved. The approved Part 2 application will not be certified and an initial credit certificate issued until the fee is received by MHT.

Fees must be received by the MHT within 120 days of notification of a tax credit award or the award will be withdrawn and the award funds will be returned to the pool of available funds and may be awarded to the next project in the order of final ranking.

After the initial credit certificate is issued, you must notify the MHT in writing within 18 months that the rehabilitation work has begun, and you must complete the rehabilitation within 30 months or the initial credit certificate automatically will expire.

Eligible Projects and Expenses

The Maryland Sustainable Communities Rehabilitation Commercial Tax Credit may be used for projects that “return a structure to a state of utility, through repair or alteration, which makes possible an efficient use while preserving any portions and features of the structure and its site and environment that make the structure and its site and environment historically, architecturally, or culturally significant."

Eligible expenses are those properly chargeable to a capital account incurred to rehabilitate the existing structure.