The Future of Our History: Increasing Wisconsin’s Historic Rehabilitation Tax Credit
Co-Author: Andrew Lang
Late in 2013, the Wisconsin Legislature passed 2013 Wisconsin Act 62, which doubled the state income tax credit from 10 percent to 20 percent for the rehabilitation of historic buildings. This 20 percent credit was intended both to promote the preservation and rehabilitation of Wisconsin’s historic properties and put the state on a comparable footing with rehabilitation tax credits available in neighboring states. The 20 percent credit is only available for the rehabilitation of historic income-generating buildings, such as stores, restaurants, or apartments. Historic buildings used as private homes can receive a 25 percent income tax credit, but follow a slightly different set of rules.
This article describes the three-step process of obtaining the rehabilitation tax credit for an income-generating building and focuses primarily on the Wisconsin state income tax credits, rather than the federal income tax credits. Interested parties may be able to obtain both, but will need to file a different set of applications.
To qualify as a “Historic” property in the state of Wisconsin, a building must either be listed on the State Register or the National Register of historic places, or be part of a listed historic district. The Wisconsin Historical Society allows individuals to search or browse both the national and state registers through its website. Certifying a building’s historic character is the first step in the tax credit process. A copy of the state’s certification application is available here.
Once the building is certified as historic, one must first file a description of the proposed rehabilitation with the Wisconsin Historical Society and receive approval. The Historical Society reviews these rehabilitation proposals to determine what work is eligible to receive the tax credit. Approval is essential because only pre-approved work is eligible for the full tax credit. There is a partial credit available to people who begin rehabilitation work without applying first, but this will only cover expenses generated after the application is approved.
The Wisconsin Historical Society requires that all proposed rehabilitation work follow the standards set by the National Park Service (NPS). Generally, these standards promote efforts to preserve distinctive characteristics and materials, and limit additions or the use of materials that would significantly alter the building’s character. A complete listing of NPS standards for rehabilitation is available online and specific guidelines for various projects are available as well. Examples of rehabilitation projects include repair of original features, exterior building cleaning, mortar repair (tuckpointing), electrical and plumbing system replacement, roof replacement, and the addition of storm windows.
For more information regarding these and other projects, see these guidelines published by the Wisconsin Historical Society. It is important to note the credit only applies to certain eligible expenses which include all interior and exterior work on the building itself—except for the cost of moveable equipment—and exclude site work, such as paving or landscaping. The minimum cost incurred for full eligibility under the state law must be at least $50,000.
After the work is completed, one must file a Request for Certification of Completed Work. The Historical Society will review this application to verify the rehabilitation work was done in accordance with its standards. Finally, the tax credit will only remain valid if the ownership and building’s historic character are maintained for at least the next five years following the rehabilitation. If the building is sold or altered within that five-year period, any claimed tax credit must be repaid to the Wisconsin Department of Revenue at a prorated amount.
It is hoped the new tax credit will help preserve Wisconsin’s history by promoting the rehabilitation of historic buildings and neighborhoods. Rehabilitated and restored properties serve as visible reminders of our state’s past and contribute to the character of our communities. The state and federal tax credits have already been responsible for saving some of Wisconsin’s most interesting and unusual historic properties. There is also the hope that encouraging the restoration of historic buildings will help revitalize local economies, as many downtown areas contain numerous aging and historic buildings.
For additional information about the Wisconsin Historic Rehabilitation Tax Credit see:
Application Instructions for STATE Income-Producing Tax Credits, Wis. Historical Soc’y (2014), http://preview.wisconsinhistory.org/pdfs/hp/HPR-STATE-Instructions-Tax-Credits-for-Income-Producing-Properties.pdf.
Application Instructions for FEDERAL & STATE Income-Producing Tax Credits, Wis. Historical Soc’y (2014), http://preview.wisconsinhistory.org/pdfs/hp/HPR-FedState-Instructions-Tax-Credits-for-Income-Producing-Properties.pdf.
Individual Income Tax Historic Rehabilitation Tax Credit, Wis. Dep’t of Revenue (last updated Jan. 22, 2014), http://www.revenue.wi.gov/faqs/pcs/historic.html.
Tax Credits for Historic Income-Producing Buildings, Wis. Historical Soc’y (2014), http://preview.wisconsinhistory.org/Content.aspx?dsNav=N:4294963828-4294963805&dsRecordDetails=R:CS3215.
Historic Home Owners’ Tax Credits, Wis. Historical Soc’y (2014), http://www.wisconsinhistory.org/hp/architecture/tax_credit.asp#tax%20credits.
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