When you’re searching for an Alaska commercial real estate space—whether for office, retail or industrial use—you likely have a set of criteria that will need to be met. Among them are square footage, amenities and of course, location. But before you let frustration set in when looking for a commercial property that checks all of the boxes, you might like to consider a historic Alaska building.
Why? The historic tax credit you could receive just may sweeten the deal enough to make it the best possible option.
What It Is
Historic tax credits (often referred to as HTCs) are given to help preserve historic buildings and prompt business owners to complete the necessary repairs to keep them in use. They do not require you to restore the property to its original purpose or appearance, but seek to preserve original building materials and configurations when possible. These tax credits are equal to 10 or 20 percent of the expenses required to rehabilitate the property and as a result, help to offset the investor’s federal income tax liability.
What You Should Know
Historic tax credits do have certain guidelines and limitations to note, which include the following:
- HTCs cannot be sold by a property owner.
- Not all project costs are factored in the credit calculation, for instance, landscaping fees. It is important to do the research to understand exactly which costs will be included in the credit calculations. Not included among qualified rehabilitation expenses (Called QREs) are acquisition costs, personal property, new building additions or construction, demolition, landscaping and parking lots.
- Credits do not always need to be used in the year in which the certificate of occupancy is issued. HTCs can be carried back one year and forward 20 years, or until they are completely used.
- To use the HTC, a building must be income-producing or used in a business, historic or built before 1936. It must be listed in the National Register of Historic Places, in a historic district listed in the National Register or contribute to a similar qualifying historic district.
- If the building meets all of the historic requirements above, the rehab is eligible for a 20 percent HTC. If not, it can be eligible for a 10 percent HTC, but must be built before 1936 and income-producing or used in a business.
How To Get It
You’re ready to commit to a historic Alaska building, with the help of the HTC, but what is the next step? You must submit a three-part Preservation Certification Application to the Department of Natural Resources’ State Historic Preservation Office (SHPO) in the area in which the building resides. The SHPO will review the first two parts of the application which determine if the building meets the historic requirements and the plans for rehabilitation. If they comply, the application is sent to the US Department of the Interior via the National Park Service for final review and certification.
It is only after this sequence of reviews that the credits will be approved. Once the rehab is completed, the third part of the application—the Request for Certification of Completed Work—is submitted to confirm that the work was finished according to the agreed upon plans. Both the SHPO and the NPS will need to sign off before the certification can be included with the tax return.
Let Us Guide You
By taking advantage of the historic tax credit available to you, you not only help to preserve historic Alaskan buildings for the future, but also create more jobs than new construction projects simply due to the labor intensive work a historic project involves. Your search for the perfect Alaska commercial real estate property could end up bolstering the economy and revitalizing your community, while offsetting your tax bill, which is the ultimate winning scenario. In Alaska alone, government officials are looking to expand the tax credit to favor smaller rural communities— a change that would increase the credit to 30 percent on a project under $1.5 million and expand the credit from developers to investors who could use a tax break.
Contact Northern Edge Real Estate today for more information about available commercial properties!