State Historic Tax Credits
In addition to Federal Historic Tax Credits, thirty-nine states offer state historic tax credits for historic rehabilitation projects. Like the federal credits, these tax credits can help defray the cost of historic renovations on income-producing buildings. The qualifications and details of these tax credits vary by state and the amount of credit available in each state varies widely. Some states function much like the federal tax credit, with no limit on the amount of tax credits that can be awarded in any given year, while others cap the annual amount of tax credits that projects can receive. To see which states offer a historic tax credit and which do not, visit Novogradac’s Historic Tax Credit Resource Center.
In Pennsylvania, the state historic tax credit is administered by the Department of Community and Economic Development (DCED) and the State Historic Preservation Office (SHPO). Each year up to $3 million can be distributed as historic tax credits across Pennsylvania. Unlike the federal tax credit, the Pennsylvania state tax credits are allocated on a first come, first served basis and are distributed evenly across each region of the state. This means that the amount of credit you receive will vary based on how many other projects are located within your area in any given year.
The application process and qualifications for the state credit are similar to the federal historic tax credit, with a three-part application demonstrating that the building is a certified historic structure and the project meets the Standards for Rehabilitation. However, unlike the federal credit, which can be applied for at any time, the Pennsylvania application period is only open one month per year, usually sometime in the Fall. Because competition for the credits is so steep, the SHPO recommends that applications are submitted on the first day of the application period. In addition to the three-part application related to the historic elements of the project, the DCED also requires a short application to demonstrate that the project will contribute to the economic growth of the local area. You can find more information about Pennsylvania’s state historic tax credit here.
It is important to note that Pennsylvania is on the low end of allowable tax credits in any given year. Many states have much higher, or unlimited, tax credit caps. Multiple studies have shown that historic tax credits “pay” for themselves by generating jobs and economic growth. Organizations such as Preservation Pennsylvania are continuously lobbying for the continuation and expansion of the state historic tax credit. A higher tax credit allocation per year translates into more financial support for reusing historic buildings across Pennsylvania.
