Increased Tax Credit for Rehabilitation Expenditures

Under present law, 20% credit is provided for qualified rehabilitation expenditures on "certified historic structures." A certified historic structure means any building that is listed in the National Register, located in a registered historic district, or certified by the Secretary of the Interior as being of historic significance to the district.

A 10% credit is available for qualified rehabilitation expenditures on a "qualified rehabilitated building," which is defined as a building that was first placed into service before 1936. The pre-1936 building must meet requirements with respect to the retention of existing external walls and internal structural framework in order for expenditures to qualify for the 10% credit. The building is treated as having met the substantial rehabilitation requirement under the 10% credit only if the rehabilitation expenditures during the 24-month period selected by the taxpayer and ending within the taxable year exceed the greater of (1) the adjusted basis of the building and its structural components or (2) $5,000. Generally, a taxpayer must use straight line depreciation or the alternative depreciation system for rehabilitation expenditures to be treated as qualified under the present law.

Under the GO Zone Act, the amount of rehabilitation tax credits is increased from 20% to 26% for historic buildings and from 10% to 13% for buildings placed in service before 1936, for any certified structure or qualified rehabilitated building located in the GO Zone, provided that the qualified rehabilitation expenditures on such buildings or structures are incurred on or after Aug. 28, 2005, and before Jan. 1, 2009.