Certain building reconstruction, renovation and restoration can help you receive tax credits, but it does not, however, include enlargement or new constructions. Up to 20% of cost for certified historic structures or 10% for buildings in service before 1936 may be taken as credit.

Disaster areas

The credit is temporally increased for property located in specific disaster areas:

• For pre-1936 building (other than certified historic structures) the credit percentage is increased from 10% to 13%.
• For certified historic structures, the credit percentage is increased from 20% to 26%.

GO Zone

The increase applies to property located in disaster areas impacted by Hurricanes Katrina, Rita, and Wilma with respect to qualified rehabilitation expenditures paid or incurred after August 27, 2005 and before January 1, 2010.

Notice 2006-38 provides relief for taxpayers located in these zones. The notice provides that 36 months will be deemed to be a reasonable period to repair and restore qualified rehabilitated buildings without being considered permanently retired from service provided that certain conditions are met. In addition, if the rehabilitated had begun but had not been completed before the President declared a major disaster in the area in which the property is located, the period for the substantial rehabilitation test is tolled for 12 months. For additional information, see Publication 4492, Notice 2006-28, and the instructions to Form 3468.

Midwestern Disaster Areas

The increase applies to qualified rehabilitation expenditures paid or incurred after the applicable disaster date, and before January 1, 2012 on any building damaged in a Midwestern disaster area as the result of severe storms, tornados, or flooding. For additional information see Publication 4492A and the instructions to Form 3468.

Tax Exempt Use Property

The rehabilitation tax credit is not allowed for expenditures with respect to property that is considered to be tax exempt use property. Under the tax-exempt entity leasing rules of 168(h) the threshold to determine if a disqualified lease exists has been raised from more than 35% to more than 50%. The provision is effective for expenditures properly taken into account for periods after December 31, 2007.

Alternative Minimum Tax

Business tax credits generally may not exceed the excess of the taxpayer’s income tax liability over the tentative minimum tax (or, if greater, 25 percent of the regular tax liability in excess of $25,000) Thus, business tax credits cannot offset the alternative minimum tax liability.

For qualified rehabilitation credits determined under Internal Revenue Code Section 47 attributable to qualified rehabilitation expenses properly taken into account for periods after December 31, 2007 the tentative minimum tax is treated as being zero with respect to the rehabilitation tax credit. Thus, a taxpayer may use the rehabilitation tax credit to offset his regular tax liability.

See the instructions on Form 3468, Investment Credit (PDF), for more information.

Façade Easement Market Studies (Dec 2009)

In 2008, the Conservation Easement Issue Management Team commissioned market studies for facade easements in Chicago, New York, and Washington D.C. for the period January 1, 2003 – December 31, 2007. A copy of the market study report prepared for any of the three cities can be obtained by sending an email to sbse.market.studies@irs.gov. In your email, you must indicate the city for which you are requesting a market study and provide your complete name and mailing address.

Due to size, the report will be mailed to you on disk. Multiple copies of the disks cannot be provided due to limited resources.

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