HISTORIC TAX CREDITS. Led by its Corporate Sponsor, Gary Appel, the Historic Rehabilitation Tax Credit program creates an incentive for the owners of historic properties to invest in restoring and reusing these buildings. The program allows a property owner to claim a federal income tax credit equal to 20% of the expenses incurred in rehabilitating an historic building. In short: a) the building must be eligible for listing on the National Register of Historic Places (50 years old is a guide, not a requirement); b) the rehabilitation hard and soft costs must be greater than the owner’s tax basis in the building; and c) the work must not damage the historic integrity of the building. If these requirements are satisfactorily met, the property owner who, for example, spends $10 million renovating a historic hotel, can claim a $2 million credit on their federal income taxes. Alternatively, there is a process whereby the owner can monetize the value of the credit based on its present value with a 3rd party investor.
There is a three-step application process, with each step being reviewed first by state preservation officials and then by the National Park Service. The first step involves documenting the significance of the building and its current physical condition. The anticipated result of Step I is the National Park Service deems the property a certified historic structure.’ In Step II, the work is described step-by-step and a full packet of supporting materials, including architectural plans, photographs and historic documentation, is submitted. If Step II is approved, then Step III is submitted upon completion of the project. In short, Step III provides documentation that the project was completed as it was described in Step II. When Step III is approved, notice is sent to the Internal Revenue Service and the credit may be claimed on the ownership entity’s income taxes.
This is a very brief summary of this potential lucrative government program that can make the difference between an economically viable rehabilitation and one that is not started (let alone completed.) Paradigm Tax Group can be retained to represent the property owner in the application process with the National Park Service, including preparation of all parts of the application. While we are not providing legal or accounting advice, Paradigm is available at any time to further discuss the potential benefits of this program with the ownership and its legal, accounting, real estate, design and accounting representatives, all of whom we work with as part of the team to successfully meet its goals. Author: Patrick Connors, Regional Marketing Development Manager at Paradigm Tax Group.
WATCH OUT FOR THOSE DRY CLEANER FACILITIES WHEN REVIEWING A PHASE I ESA. The biggest red flag at a shopping center would be the presence or former presence of a dry cleaning operation. Many releases that occur as a result of a dry cleaning business were not necessarily the result of negligence and could even have resulted through an inadvertent discharge of small quantities of dry cleaning solvents through piping. Soil and groundwater cleanup target levels (CTLs) for dry cleaning compounds in the State of Florida are very low, i.e., you don’t need very much to cause a problem. In addition, these compounds are heavier than water and tend to “sink” in the aquifer, making a release more costly to assess and many times more costly to remediate.
A state funded program was in place to address releases from dry cleaning facilities. The State of Florida Dry Cleaning Solvent Cleanup Program (DCSCUP) provides State funded assessment and remediation of soil and/or groundwater that has been contaminated as a result of dry cleaning solvents from dry cleaning facilities. An eligibility requirement of the program did require that dry cleaning solvent compounds be detected in the soil and/or groundwater; however, it was not required that the detected concentrations meet or exceed regulatory limits in order to make an application to the program. Site remediation under the program did not include third party liability. Applications to the program were not accepted after December 31, 1998.
According to a representative of the Florida Department of Environmental Protection (FDEP), 1,563 dry cleaning facilities (current and former) that were contaminated as a result of a release of dry cleaning solvents, made an application to the DCSCUP. A total of 1,400 sites were deemed eligible for the program. FDEP however, believes that at least 2,800 facilities could have applied, indicating that only about one-half of these types of sites would have been eligible for the program.
It is also interesting to note that facilities deemed ineligible for the DCSCUP cannot be compelled to assess and remediate their sites if knowledge of the release was the result of having made an application to the program. Therefore, do not assume that a dry cleaning facility has not impacted the subsurface if they were deemed program ineligible. Contact MADELINE FELL at mfell@sgfenvironmental.com for additional information regarding environmental concerns associated with dry cleaner facilities or questions regarding phase I environmental site assessments.
HOW THE CAP RATE FORMULA SERVES THREE REAL ESTATE INVESTING PURPOSES. The cap rate formula is undoubtedly the first formula most real estate agents and investors learn when they initially become engaged with real estate investing. Real estate investors, agents, appraisers, property tax assessors and others that evaluate real estate investment property typically all use cap rate in one form or the other. So it makes sense that they would learn how to calculate it. Still, some may not be aware that the cap rate formula can be used to serve three useful purposes when dealing with real estate investment property. Author: James Kobzeff. Source: Learning-Real Estate Investing.
