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Historic Tax Credit

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justinschroeder

Sophomore Member
Joined
Sep 13, 2007
Professional Status
Certified General Appraiser
State
Illinois
I have a property that is being redeveloped. They are getting a Federal Historic Tax Credit in the amount of $360,000. This credit is deducted from the federal income tax for the owner. Does this affect the real estate valuation? I am split, in that: 1) the incentive helps with redevelopment and 2) I feel that since it is income tax it is business and not real estate.
 

justinschroeder

Sophomore Member
Joined
Sep 13, 2007
Professional Status
Certified General Appraiser
State
Illinois
The developer gets a one time tax credit and must hold the property for five years. If they sell within five year there is a 20% recapture per year.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
These credits don't necessarily "run with the land" and can be sold to an entity that does not have ownership in the real property. So no, it's not real property
 

justinschroeder

Sophomore Member
Joined
Sep 13, 2007
Professional Status
Certified General Appraiser
State
Illinois
Historic tax credits cant be sold to tax credit buyers, like section 42 tax credits (without creating a partnership and even then they have been thrown out in court)...but the more I look at it I don't think it should be included.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
Historic tax credits cant be sold to tax credit buyers, like section 42 tax credits (without creating a partnership and even then they have been thrown out in court)...but the more I look at it I don't think it should be included.
My understanding is that there are syndicates that commonly purchase these credits. This is something that I haven't been personally involved with..
 
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justinschroeder

Sophomore Member
Joined
Sep 13, 2007
Professional Status
Certified General Appraiser
State
Illinois
My understanding is that there are syndicates that commonly purchase these credits. This is something that I haven't been involved in with my appraiser hat on but have relatives dealing with that very issue in the past

From what I read on them, The tax credit investor has create a partnership with the owner, however, a court in New Jersey ruled that a tax credit investor is not entitled to Historic Tax Credits. It appears that they are done and just not caught. Regardless, I agree with your first comment.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
From what I read on them, The tax credit investor has create a partnership with the owner, however, a court in New Jersey ruled that a tax credit investor is not entitled to Historic Tax Credits. It appears that they are done and just not caught. Regardless, I agree with your first comment.
OK I stand corrected :)
 
Last edited:

RebelNYC

Junior Member
Joined
Aug 6, 2009
Professional Status
Certified General Appraiser
State
District of Columbia
I have a property that is being redeveloped. They are getting a Federal Historic Tax Credit in the amount of $360,000. This credit is deducted from the federal income tax for the owner. Does this affect the real estate valuation? I am split, in that: 1) the incentive helps with redevelopment and 2) I feel that since it is income tax it is business and not real estate.

We have books on that.

https://www.appraisalinstitute.org/...ation-and-the-valuation-process-third-dition/
 
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