The Oregon SHPO currently has two tax incentive programs to encourage the appropriate rehabilitation and maintenance of historic properties. Both are limited to properties that are listed in the National Register of Historic Places.
- Federal Tax Incentive
- State Tax Incentive
Federal Tax Incentive
*** IMPORTANT UPDATE: As of August 15th, paper applications will no longer be accepted as SHPO and NPS are transitioning to an all-electronic submission process that can be found here. Please email joy.sears@oprd.oregon.gov for instructions about submitting Federal Tax Incentive applications.***
Implemented in 1976, the federal government has offered an income tax credit as an incentive for rehabilitating income-producing, historic buildings listed in the National Register of Historic Places. This tax credit program is administered in Oregon by the State Historic Preservation Office (SHPO) in conjunction with the National Park Service (NPS) in Washington, D.C., which makes the final decisions on project eligibility, and the Internal Revenue Service (IRS) who handles the actual tax credit component.
Before applying, consult your accountant or tax advisor to make sure that this federal tax credit is beneficial to you. Certain income and other restrictions may have a bearing on whether an owner is able to use the credit. IRS administers the Department of the Treasury's involvement with the Federal Historic Preservation Tax Incentives Program. The IRS has provided written guidance on these complex federal regulations, which is available as easy-to-read guidance here.
There is a 20% Investment Tax Credit (ITC) available for rehabilitating, National Register listed historic buildings. The ITC is a percentage of the rehabilitation costs and does not include the purchase price. This is a tax credit, not a deduction.
Example: 20% of a $100,000 rehabilitation = $20,000 tax credit
This ITC is available for buildings listed in the National Register of Historic Places, which, after rehabilitation, must be used for commercial or residential rental use. It is not available for the rehabilitation of a private, owner-occupied residence.
Any work on the interior or exterior of the building that structurally stays with the building qualifies for the tax credit.
Examples of work that qualifies: walls, partitions, floors, ceilings, permanent coverings such as paneling or tiling, windows and doors, components of central air conditioning or heating systems, plumbing and plumbing fixtures, electrical wiring and lighting fixtures, chimneys, stairs, escalators, elevators, sprinkling systems, fire escapes, and other components related to the operation or maintenance of the building.
Examples of work that does not qualify:
- Acquisition costs
- Appliances
- Cabinets
- Carpeting (if tacked in place and not glued)
- Decks (not part of original building)
- Demolition costs (removal of a building on property site)
- Enlargement costs (increase in total volume)
- Fencing
- Feasibility studies
- Financing fees
- Furniture
- Landscaping
- Leasing Expenses
- Moving (building) costs (if part of acquisition)
- Outdoor lighting remote from building
- Parking lot
- Paving
- Planters
- Porches and Porticos (not part of original building)
- Retaining walls
- Sidewalks
- Signage
- Storm sewer construction costs
- Window treatments
All work must meet the Secretary of the Interior's Standards for Rehabilitation to be approved. The work must be reviewed by the SHPO and certified by the National Park Service in order to qualify. This is done by completing an application and submitting it to the SHPO along with photographs showing all work areas (interior and exterior) for the entire project even if no work is being undertaken in that space. Owners take a risk if they do work before official written approval from NPS of their plans occurs.
The rehabilitation expenditures must be “substantial" and exceed the greater of either the "adjusted basis" of the building or $5,000.
"Adjusted basis" is the purchase price minus the cost of the land at time of purchase minus any depreciation already taken by the current owner plus cost of any capital improvements made since purchase.
Example (recent purchase): $500,000 (purchase price) - $170,000 (land) = $330,000 (adjusted basis). Rehabilitation expenses must exceed the minimum $330,000 in order to qualify.
Example (long-time ownership): $150,000 (purchase price) - $41,000 (depreciation) - $70,000 (land) + $1,500 (capital improvement) = $ 40,500 (adjusted basis); Rehabilitation expenses must exceed minimum of $ 40,500 to qualify for the credit.
An owner must keep a building at least five years in order to avoid any recapture of the tax credit by the IRS. The recapture amount ranges from 100% of the tax credit if the building was sold within the first year, to 20% of the tax credit if it is sold within the fifth year.
Here are some resources to assist you in this process:
State Tax Incentive
The State Tax Incentive is the Oregon Special Assessment Property Tax Program for Commercial Historic Properties. Oregon was the first in the nation to offer a preservation tax incentive for historic properties in 1975, and it has undergone numerous changes over the years. The Special Assessment program is a 10-year benefit for National Register-listed commercial properties, offering a property tax break in exchange for qualifying work being completed and meeting a spending threshold during the benefit period. For information on the previous version of the Special Assessment program, please contact Joy Sears at 971-345-7219 or email Joy.Sears@oprd.oregon.gov.
Before applying for the State Tax Incentive, please review the information below.
To receive the appropriate SHPO forms for application, amendments or progress reporting, contact us at Special.Assessment@oprd.oregon.gov and we will provide the current forms to you.
A preservation plan outlines all the individual projects expected to be completed during the 10-year benefit period. Creating a successful preservation plan can take several weeks to complete. It's best to start developing the plan at least a couple of months before the formal application is made and work with SHPO to obtain feedback as the plan is developed.
The Preservation Plan must include ALL work projected to be completed during the 10-year Special Assessment term, regardless of whether the work qualifies toward the program’s minimum spending requirement (see "Mininum Spending Requirement" information below). This is essential because even non-qualifying projects may increase the property's value. If those improvements aren’t documented in the Preservation Plan, the county assessor will not apply the specially assessed value to those particular improvements. As a result, property owners could face higher assessments for work that wasn’t documented.
A minimum spending requirement of 10% of the property’s Real Market Value, provided in the 1st benefit year, is required by the end of the 5th benefit year. During the application process, the preservation plan is reviewed, and each project listed in the plan is identified as either qualifying or not qualifying for use in the calculation of the likelihood of meeting the minimum spending requirement at the time of application. During the 10-year benefit term, progress reports outlining the status of all projects in the approved preservation plan will be provided by the owner and reviewed by SHPO staff. The amount spent on projects previously identified as qualifying will be calculated and applied toward the minimum spending requirement. The minimum spending requirement must be met by the end of the 5th benefit year and is a condition of eligibility to remain enrolled in the program. Failure to meet the minimum spending requirement by the end of the 5th benefit year activates the process for removal from the program.
Examples of qualifying projects
- Exterior, roof to foundation, especially visible from the public right-of-way
- Correcting any structural issues (may or may not be visible)
- Seismic retrofits
Examples of non-qualifying projects
- Any interior work
- Appliances
- Electrical, plumbing, HVAC
Minimum Spending Requirement
A minimum spending requirement must be met by the end of the 5th year of the benefit term. The minimum spending requirement is 10% of the Real Market Value (RMV) stated on the tax statement received from the county. Spending compliance is required to avoid removal from the program and will be reported through the required Progress Reports. Failure to meet the minimum spending requirement will result in disqualification, and back taxes, penalties, and interest will be calculated by the county assessor’s office and billed to you.
Progress Reporting
The SHPO requests progress reports in the 3rd, 6th, and 9th years of the benefit period, until all projects in the preservation plan are completed. Completion and submittal of the progress reports to the SHPO is a requirement to avoid removal from the program. Progress reporting is a requirement until the work outlined in the preservation plan on file with SHPO is 100% complete.
Application Fee
Once an application for the Special Assessment program is approved, the property owner is billed a non-refundable application fee of 1/3 of 1% (.0033) of the Real Market Value of the property at the time of application. Do not pay the fee until you receive notification from the SHPO to do so,
Change of Contact Information Notification
An owner must notify the SHPO if a mailing or email address or phone number changes during the benefit period.
Change of Property Ownership Notification
Notification to the SHPO is required by the owner on file if the property is sold any time during the 10-year benefit period. A new owner must agree in writing to assume the preservation plan on file with the SHPO to continue receiving the tax benefit, even if the plan is 100% complete.
National Register Listing
To be eligible for the Special Assessment program, a property must be listed in the National Register of Historic Places either individually or as part of a historic district. If the property is not already listed in the National Register it is the responsibility of the property owner to obtain said listing within two years of enrollment in the program. Details about the National Register of Historic Places can be found here.
An enrolled property may be removed from the benefit program by the owner for any reason with a formal written correspondence to SHPO and the County Assessor’s Office in which the property is located.
An enrolled property may be removed from the benefit program administratively by SHPO due to non-compliance with any of the owner obligations and program requirements. (see "Owner Obligations - Program Requirements" above)
As a result of either owner or administrative removal, back taxes with penalties and interest, as calculated by the county assessor’s office, will be billed to the property owner.
Forms
- To receive the appropriate SHPO forms for application, amendments or progress reporting, contact us at Special.Assessment@oprd.oregon.gov and we will provide the current forms to you.
Publications
Guidance