Good news for developers in Texas. The rehabilitation of certified historic structures placed in service on or after Sept. 1 will be eligible for the state’s new historic tax credit.
On June 14, Gov. Rick Perry signed a law that provides a tax credit equal to 25 percent of eligible costs and expenses incurred in a certified rehabilitation that totals more than $5,000. The tax credit may be applied against franchise tax obligations beginning Jan. 1, 2015. State historic tax credits can be transferred multiple times. Entities can also use the tax credits a little at a time—unused credits can be carried forward on up to five consecutive franchise tax reports.
Certified historic structures include landmarks listed individually in the National Register of Historic Places, recorded Texas Historic Landmarks, state archeological landmarks, or properties that contribute to historic districts.
Texas joins a number of other states that have their own historic tax credit program. A federal historic rehabilitation tax credit has also been a critical tool in preserving landmark buildings. In many cases, developers have used these state and federal credits to finance the conversion of buildings into affordable housing.
The Texas Historical Commission and the Texas Comptroller of Public Accounts will adopt the rules necessary to implement the new credit. Entities that pay Texas franchise taxes can claim the credit by first applying to the Historical Commission to certify their rehabilitation. The entity may then present their Historic Commission certificate to the comptroller along with an audited cost report on the rehab.
A state sales tax exemption on labor is also available for work to buildings listed in the National Register of Historic Places. County and local taxing authorities may grant property tax exemptions for buildings with state or local historical designations.