Delaware's Historic Preservation Tax Credit Program assists in preserving and rehabilitating historic buildings throughout Delaware. Each fiscal year, $5 million in state tax credits is made available for projects approved under the Program’s guidelines. Since its inception, the Program has proven highly successful in encouraging the rehabilitation of the state’s historic buildings.
Amount of Credits
The amount of the tax credit is equal to a percentage of the cost of the rehabilitation:
- 20% for income-producing (depreciable) historic buildings [which increases to 30% when a project qualifies for the Delaware State Housing Authority’s low income tax credits]
- 30 % for all other historic buildings [owner-occupied, residential buildings; non-profit-owned buildings and church-owned buildings]
Tax credits awarded to a project can be applied to against the applicant’s state income tax, or can be transferred, sold or assigned to any person or corporation with one with Delaware income tax liability, or to banks to be applied against their franchise tax liability. Applications for owner-occupied residential properties are limited to being awarded a maximum of $20,000 every 24 months.
Properties which are eligible to apply to receive these tax credits are buildings which are:
- listed individually in the National Register of Historic Places;
- a contributing building within a National Register-listed historic district;
- local historic landmarks which are eligible for listing in the National Register; or
- a contributing building within a National Register-eligible, locally-designated historic district.
For Program purposes, these are called historic properties.
Rehabilitation projects must:
- be consistent with the historic character of the property;
- be consistent with meet the Secretary of the Interior's Standards for Rehabilitation;
- meet the following applicable substantial rehabilitation test:
- Income-producing properties - the cost of the rehabilitation, within a 24-month period, must exceed the adjusted basis of the building or $5,000, whichever is greater.
- All other properties - the cost of the rehabilitation must be at least $5,000
Most costs associated with an approved rehabilitation project are eligible. They may be contractual or material, and may be associated with exterior or interior rehabilitation, or related to mechanical or electrical systems upgrade or replacement and may include professional services or fees associated with the rehabilitation. For depreciable properties, costs associated with a capital account are also eligible. Unlike the federal tax incentive program, site and landscaping costs are allowable as long as they do not exceed 10% of the overall project costs, and costs associated with additions are allowable if the square footage of the addition does not increase the overall building by more than 25%. Costs which do not qualify for this program are:
- Acquisition costs
- Feasibility studies
- Leasing Expenses
- Personal Property [appliances, furniture, rugs]
- Window treatments
A Credit Award is assigned to a project when an applicant provides a certified estimate of their costs or documentation of their final expenses. If an estimate is provided but the final costs are less, the Credit Award is adjusted; if the final costs exceed the estimate by more than 10%, the Credit Award may also be adjusted. Projects for historic properties located within the state’s Downtown Development Districts are prioritized to receive $1.5 million in tax credits each fiscal year. In addition, in order to prevent very large projects from being assigned all of the tax credits available, a certain portion of the yearly allocation of tax credits is set-aside for smaller projects, A $250 fee for review is required at the time of Certification of Completion request for all projects whose final costs exceed $100,000.
The application contains four parts which consist of Part 1 – Certification of Historic Property; Part 2 – Certification of Rehabilitation; Part 3 – Request for Certificate of Completion; and the Request for Credit Award. Photographs must accompany the first of three parts of the applications. Documentation of costs must accompany the last. To receive a Credit Award in advance of the completion of the project, the applicant must provide a certified estimate of their costs. Work may proceed prior to submission of an application, but applicants are cautioned that they do so at their own risk. Review of the application is carried out by the Delaware Division of Historical and Cultural Affairs. Please contact the Historic Preservation Tax Credit Program Coordinator for assistance in understanding program guidelines and/or filling out the application.
Claiming the Tax Credits
When a project is been completed and is certified as meeting the Standards, historic preservation tax credits awarded to an applicant must be claimed through the Delaware Division of Revenue against their Social Security or Employee Identification number. The applicant may apply these tax credits against their own Delaware income tax liability, or they may transfer these tax credits to another taxpayer. The transfer/sale of the tax credits is a private transaction between the applicant and the transferee who may be any private individual, corporation, or bank who have Delaware income or franchise tax liability. The applicant is required to notify the Delaware Division of Revenue of the transfer. Submission of the Division of Revenue forms to claim or transfer the tax credits is facilitated by the Historic Preservation Tax Credit Program Coordinator.
Joan N. Larrivee
Historic Tax Credit Program Coordinator
Division of Historical and Cultural Affairs
21 The Green
Dover, DE 19901