Historic Tax Credit (HTC)

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Historic Tax Credit (HTC) 

Federal and state governments offer financial incentives in the form of tax credits to encourage developers to take on historic redevelopment projects that may otherwise not be economically viable.  Historic reuse involves the refurbishing, and frequently the re-purposing, of historic buildings that are individually designated as historic or are in a designated historic area.   

Dorfman Capital has extensive experience utilizing tax credit incentives that support historic reuse.   We take great pride in making the financing of historic redevelopment projects as smooth and attractive as possible for our clients, knowing that the end result will be of great benefit to the community as well as to the developers and investors.  Our extensive experience, knowledge of the industry and access to resources benefits all parties involved. 

Historic buildings worthy of reuse are often architecturally significant, with additional cultural and aesthetic value.  They have stories worth telling and a heritage worth preserving.  Their reuse improves communities by activating under utilized spaces and delivering a message of hope for the future.  Historic reuse has the added benefit of enhancing quality of place by bringing the past back to life.  

Massachusetts Historic Tax Credits: 

The Massachusetts Historic Rehabilitation Tax Credit complements the federal program, offering an additional incentive of up to 20% of certified rehabilitation costs for preserving the state's historic properties. Established in 2004, this program aims to promote economic development and community revitalization through the preservation of historic structures. 

Federal Historic Tax Credits: 

The Federal Historic Tax Credit program, established by the Tax Reform Act of 1986, offers a 20% tax credit for the certified rehabilitation of income-producing historic buildings. This program is administered by the National Park Service (NPS) in partnership with the Internal Revenue Service (IRS) and State Historic Preservation Offices (SHPOs). 

Timeline/Process for 20% Federal Historic Tax Credit (FHTC) 

Part 1  HPCA (Historic Preservation Certification Application) –Evaluation of Significance. Submission and Approval with NPS (National Park Service) through SHPO (State Historic Preservation Officer). Eligibility involves the property’s age (generally at least 50 years old), integrity (still looks much the way it did in the past) and significance (associated with important historical events, activities or developments). 

Part 2  HPCA – Description of Rehabilitation. (in conformance with the “Secretary of the Interior’s Standards for Rehabilitation.”) Submission and Approval.  

Engage Dorfman Capital: 

• 1st 30 days: due diligence, develop presentation, solicit LOI’s (letters of intent - to     purchase tax credits) from potential investors 
•  2nd 30 days: negotiate LOI’s and choose investor 
•   Next 60 days: documentation and due diligence for closing with investor 

When the developer has all funding sources in place, they will close simultaneously.  At closing, 10-25% of federal historic tax credits are funded to seller/developer.  Construction commences.  Construction cycle usually ranges from 9 months to 2 years. There may be a second  funding of tax credit equity during this cycle. 

Part 3   HPCA – Request for Certification of Completed Work Submission and Approval (at completion of construction).  Upon approval of Part 3, which includes a cost certification from CPA, the balance of the tax credits are funded (distributed to seller/developer). There can typically be a 90 day wait for Part 3 approval. 

Depending on the project, a portion (5-15%) of the funding may be held back until the cash flow from the project is stabilized. The goal for stabilization is one year. 

The above is presented for illustration purposes only. No two projects are the same. 

See: https://www.nps.gov/subjects/taxincentives/about.htm for the US government web page summarizing the Federal Historic Preservation Tax Incentive. Dorfman Capital has extensive experience utilizing tax credit incentives that support historic reuse.  Our knowledge of the industry and access to resources benefits both our developer and investor clients.

Dorfman Capital takes great pride in making the financing of historic redevelopment projects as smooth and attractive as possible for our clients, knowing that the end result will be of great benefit to the community as well as to the developers and investors. 

Federal, state and local governments offer financial incentives for developers to take on historic redevelopment projects that would otherwise not be economically viable.  Historic reuse involves the refurbishing, and frequently the re-purposing, of historic buildings.  There are documented benefits to the communities and those they serve to have these structures restored and revitalized.  

Historic buildings have stories worth telling and a heritage worth preserving.  Their reuse improves communities by activating under utilized spaces and delivering a message of hope for the future.  Historic reuse also has the added benefit of enhancing quality of place by bringing the past back to life.   

Historic buildings worthy of reuse are often architecturally significant, culturally and aesthetically, and would be too expensive to build from scratch now.   Adapting them for new uses can provide a better location, more architectural value, and greater cultural cachet than comparably priced new construction.

Timeline/Process for 20% Federal Historic Tax Credit (FHTC)

Part 1  HPCA (Historic Preservation Certification Application) –Evaluation of Significance. Submission and Approval with NPS (National Park Service) through SHPO (State Historic Preservation Officer). Eligibility involves the property’s age (generally at least 50 years old), integrity (still looks much the way it did in the past) and significance (associated with important historical events, activities or developments).

Part 2  HPCA – Description of Rehabilitation. (in conformance with the “Secretary of the Interior’s Standards for Rehabilitation.”) Submission and Approval. 

Engage Dorfman Capital:

     · 1st 30 days: due diligence, develop presentation, solicit LOI’s (letters of intent - to     purchase tax credits) from potential investors

     · 2nd 30 days: negotiate LOI’s and choose investor

     · Next 60 days: documentation and due diligence for closing with investor

When the developer has all funding sources in place, they will close simultaneously.  At closing, 10-25% of federal historic tax credits are funded to seller/developer.  Construction commences.  Construction cycle usually ranges from 9 months to 2 years. There may be a second  funding of tax credit equity during this cycle.

Part 3   HPCA – Request for Certification of Completed Work Submission and Approval (at completion of construction).  Upon approval of Part 3, which includes a cost certification from CPA, the balance of the tax credits are funded (distributed to seller/developer). There can typically be a 90 day wait for Part 3 approval.

Depending on the project, a portion (5-15%) of the funding may be held back until the cash flow from the project is stabilized. The goal for stabilization is one year.

The above is presented for illustration purposes only. No two projects are the same.

See: www.nps.gov/tps/tax-incentives/taxdocs/about-tax-incentives-2012.pdf for the US government booklet summarizing the Federal Historic Preservation Tax Incentive.