Rehabilitation Tax Credit (RTC)

How does the Rehabilitation Tax Credit affect Florida businesses?

The Rehabilitation Tax Credit (RTC) is a federal tax incentive that encourages the preservation and revitalization of historic buildings. This credit gives businesses a percentage of the qualified rehabilitation expenditures incurred during the renovation or restoration of certified historic structures.

In Florida, the RTC can significantly impact local businesses by promoting the economic development of historic areas, creating job opportunities, and preserving the state’s architectural heritage. Additionally, the rehabilitation process often results in job creation, providing employment opportunities for both skilled and unskilled workers in various sectors, such as construction, architecture, and tourism. Finally, preserving historic buildings helps maintain the state’s cultural identity, attracting tourists and contributing to the local economy.

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Which Florida and federal laws and regulations apply to the RTC?

The Rehabilitation Tax Credit follows federal laws and regulations, specifically Section 47 of the Internal Revenue Code. This code section outlines the eligibility criteria, tax credit amounts, and other requirements for claiming the RTC. In addition to federal regulations, the National Park Service, in partnership with the Internal Revenue Service and State Historic Preservation Offices, manages the RTC program and provides further guidance on its implementation.

While the RTC is a federal program, the Florida government helps facilitate the credit within the state. The Florida Division of Historical Resources administers state-level historic preservation programs. It works with the National Park Service to review RTC applications and ensure projects meet relevant state and federal guidelines.

Which Florida businesses qualify for the RTC?

Businesses must meet the following requirements:

• The property must be a certified historic structure, either listed individually on the National Register of Historic Places or located within a registered historic district and deemed significant by the National Park Service;
• The rehabilitation project must meet the Secretary of the Interior’s Standards for Rehabilitation, ensuring that the building retains its historic character while being adapted for modern use;
• The rehabilitation costs must exceed the adjusted basis of the building or $5,000, whichever is greater; and
• The property must be for an income-producing purpose, such as a business or rental property, for at least five years after the rehabilitation project finishes.

When a set of facts is appropriate to meet the requirements of the RTC, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation, please contact our office to set up your initial consultation.

What are the strategic benefits for qualifying Florida businesses?

• Financial Incentive: The RTC provides a 20% tax credit on eligible rehabilitation expenses, reducing the project’s overall cost and making it more financially feasible.
• Increased Property Value: Rehabilitating historic properties often increases property values, providing long-term financial benefits for the business owner and the community.
• Attraction of New Customers: A well-preserved historic building can attract new customers, increasing revenue and contributing to the growth of the business.
• Environmental Sustainability: Adaptive reuse of existing structures reduces waste and conserves resources, aligning with sustainable development practices and potentially attracting environmentally conscious customers.
• Collaboration Opportunities: The RTC can be combined with other state and local incentives, enabling businesses to maximize their financial benefits and collaborate with government agencies to promote economic development.

Please contact our office to set up your initial consultation to see what actions or defenses may be available for your unique situation.

Frequently Asked Questions

1. How do businesses apply for the Rehabilitation Tax Credit in Florida?

Businesses must first consult with the State Historic Preservation Office (SHPO) to discuss their project and receive guidance on the application process. Then, they must submit a Part 1 application to the SHPO to certify the historic structure and a Part 2 application for the proposed rehabilitation work. Upon approval, businesses can begin the rehabilitation project and, once completed, submit a Part 3 application for the final certification, which enables them to claim the tax credit on their federal income tax return.

2.  Can the Rehabilitation Tax Credit be combined with other tax incentives or grants?

Yes, the Rehabilitation Tax Credit may combine with other federal, state, or local incentives, such as the New Markets Tax Credit, Low-Income Housing Tax Credit, or grants for historic preservation. Combining these incentives can help maximize the financial benefits of rehabilitating a historic property, making it more attractive for businesses to invest in these projects.

3.  What happens if the building is sold or transferred before the five-year holding period ends?

If a business sells or transfers the rehabilitated property before the end of the five-year holding period, a portion of the Rehabilitation Tax Credit may need to be recaptured. The recapture amount derives from a sliding scale, with 100% of the credit recaptured if the property is sold or transferred within the first year and decreasing by 20% for each subsequent year until the holding period lapses. Therefore, businesses must know this requirement and plan accordingly when considering the Rehabilitation Tax Credit.

Have more questions about an economic development-related situation?

Crucially, this overview of the RTC does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain tireless advocates at every step. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.