Historic Tax Credits in Pennsylvania and New York:  How do they do it?

William Neumann
March 24, 2021

The New Jersey Historic Property Reinvestment Program is a reality! As we await clarification on how the program will actually work, we might look to our neighbors, the Commonwealth of Pennsylvania and the State of New York, to understand how they established their tax credits for historic property. While using those references and other states’ programs you will notice the commonalities coinciding with the long established Federal Rehabilitation Investment Tax Credits (RITC).  A simple interpretation of this important federal program can be found at the National Park Service link.

For many states, common federal factors for historic tax credits include:

  • Real property has to be listed in some way on the National Register of Historic Places. 
  • Exterior and interior rehabilitation and preservation methods must adhere to the Secretary of Interior Standards. 
  • (Spoiler alert!) Projects must be income producing and not private residences.
  • Projects must meet a “substantial rehabilitation test,” should be completed in a timely manner (generally 24 months) and must be owned and operated as an income producing property by the same owner/ applicant for five years.

The Commonwealth of Pennsylvania

The Pennsylvania Historic Preservation Tax Credit (HPTC) was signed into law in July 2012. The program is administered by the Pennsylvania Department of Community & Economic Development (DCED). 

Along with the RITC factors already listed, all Pennsylvania projects must include a qualified rehabilitation plan that is approved by the Pennsylvania Historical and Museum Commission (PHMC) and the applications are further vetted by the Pennsylvania State Historic Preservation Office (PA SHPO.) As reported in the PA SHPO’s blog, Pennsylvania Historic Preservation, for the first five years of existence the program had: “182 applications received with over $56.6 million in requested credits. 81 projects were funded with the $15 million in credits available ($3 million per year over the 5 years.)” 

Electronic applications and hard copies are usually accepted during one month only (generally in October) and are ranked on a “first-come, first-served basis” per submission date.  Although the credits are distributed equitably for each of the commonwealth’s five regions, the “demand for the credits generally exceeds the availability.”

Supporting documents must include: photographs of the project and surroundings, a map showing the location of the building and or the boundaries of the historic district and a statement of historic and architectural significance. There is a flat application fee of $100.00.

The awarded tax credits “shall not exceed 25 percent of the qualified expenditures” or rehabilitation costs and may not exceed $500,000 in any fiscal year. These credits may be applied against the state tax liability of most legal business entities. Pennsylvania limits them to no more than $5,000,000 in tax credits per fiscal year.

The State of New York

Governor Cuomo and the New York State Legislature extended the availability of New York State Rehabilitation Tax Credit Program for Income Producing Properties (NYSRTC) to December 31, 2024 and allowed unused credits established before 2015 to be carried forward indefinitely. See link here

The NYS rehabilitation tax credit program must be used (or “stacked”) along with the Federal Rehabilitation Investment Tax Credit Program (RITC).  Owners of income producing properties that have been approved to receive the 20% federal rehabilitation tax credit automatically qualify for the additional state tax credit if the property is located in an eligible census tract.  The New York State Office of Parks, Recreation, and Historic Preservation will issue a certification allowing owners to take the state credit. 

Basically, there is no application form. Fees are set through a schedule for rehabilitation costs and range from a final fee of $50.00 for a 20K project to $5,000.00 for a project cost of up to $10,000,000. Additionally, the The NYS Real Property Tax Exemptions for Historic Properties allows municipalities to apply a five-year freeze on increases in assessment that results after an owner has added value to a rehabilitated a property. After five years, any increased taxes will be phased in over a future five years.  This equates to a ten-year delay in a tax obligation from the new assessment.

New York State does have a separate tax credit for non-income producing, historic homeowners. The New York State Historic Homeownership Rehabilitation Credit is an income tax credit equal to 20% of the qualified rehabilitation expenses for repair, maintenance, and upgrades to historic homes and has a credit limit of $50,000 per year. An applicant  must own and live in the house and the domicile must be listed on the New York State and National Registers of Historic Places. The rehabilitation expenses must be $5,000 or more with a minimum of 5% of that being spent on exterior work. All projects must be approved before work begins.

Will New Jersey’s still evolving New Jersey Historic Property Reinvestment Program reflect the practices established by Pennsylvania or New York State? The New Jersey Economic Development Authority (EDA) is charged with figuring it all out and is seeking input from the public and especially motivated stakeholders. During the next few months Preservation New Jersey will be committed to report on details for our state’s tax credits for historic properties.

William “Billy” Neumann is a Preservation New Jersey Board of Director and chairs the Marketing Committee. He is the former Chairperson of Bergen County’s Historic Preservation Advisory Board and led Rutherford’s HPC for five years. He has authored two local history books, several National Register nominations and presents talks, walks and demonstrations on history, historic preservation, commercial photography and beekeeping.