Secretary of Interior Ken Salazar Talks Historic Tax Credits in Detroit
studiozONE, llc and Integrity Building Group, LLC had the great pleasure of attending a public hearing led by Secretary of Interior Ken Salazar today at the historic Odd Fellows in Southwest Detroit organized by Senator Carl Levin.
Detroit has one of the country’s largest collection of historic buildings and obviously many need significant renovation and improvement. The Department of Interior has had a Historic Tax Credit program to help defray the additional costs of historic renovation for years. The program is an Earned Income Tax Credit program which essentially means you have to spend the money first to even qualify for the tax credit.
The way the Historic Tax Credit program works is relatively simple.
Step One, the developer has to have the historic property nominated and certified by the Department of the Interior.
Step Two, the developer must identify the historic features and spaces of the building and show how the building will look when the proposed improvements are completed. This is where architects come in, architects document the existing conditions and the proposed improvements as well as the design. The Department of Interior will review the proposed improvements and if they follow the Secretary’s Standards, grant approval for the project to be built as designed.
Step Three, the developer must complete all the improvements and construction according the approved proposed design. This is where the builder comes into the project.
Step Four, the developer must document the final improvements after construction as well as the costs for all the improvements and have this certified by the Department of the Interior. Both the architect and builder are involved in this cost as well as an accountant to certify all the costs.
If the developer completes all these steps and the Secretary of the Interior approves the final improvements, then the Department of Interior will send a letter to the Department of Treasury and IRS who will process the tax credits.
Essentially, the tax credit benefits for the developer are for every dollar he spent, he will get twenty cents back in tax credits. So if the developer had spent $1,000,000, he will earn a $200,000 historic tax credit.
Its not as simple as all that as this requires a lot of effort to monetize the historic tax credit but it helps defrays the costs of the construction and improvements.
Secretary Salazar was in Detroit to get first hand feedback on how the program was working and what improvements could be made. The audience provided a lot of great feedback as the audience was full of developers, architects and builders who have been involved in the historic tax credit process.
Ultimately Secretary Salazar is going to compile recommendations, both legislative and administrative within the Department of Interior. These are to be ready by March 1st, 2013.
studiozONE, llc and Integrity Building Group, LLC have been leaders in the historic renovation field, both as architects and builders. The renovation of the Grand Army of the Republic Building in downtown Detroit in which studiozONE, llc and Integrity Building Group, LLC is a perfect example of our team in action with historic tax credits.
The Grand Army of the Republic renovation will utilize historic tax credits as part of its financing for the project. We have received approval from the Department of the Interior for the proposed improvements and we have recently completed Phase I, the building envelope. Phase II, the interior improvements are set to begin shortly.
Keep following our blog to follow the steps as the Grand Army of the Republic building moves forward to its full restoration.