Tax Credits for Disaster Relief

The Texas Historic Preservation Tax Credit (THPTC) program can provide financial relief for property owners, by offsetting financial costs related to post-disaster recovery of designated historic buildings.

Certified THPTC projects receive tax credits equal to 25% of qualified rehabilitation expenditures on an approved project. These tax credits can be taken against either the Texas franchise or insurance premium tax liability. Property owners that do not owe either tax can sell their credit. Currently, there is a brisk market for purchase of the credits.

Note that qualified rehabilitation expenditures (QREs) includes most work items that are undertaken directly on a building, including roof replacement, window repair, structural repairs, flooring, wall sheathing or wall finishes, new HVAC, plumbing, or electrical systems. Related labor and professional services are also QREs. Landscape or site work are NOT QREs, along with furniture or cabinetry.

IRS regulations for the Federal Rehabilitation Tax Credit also disallow any expenses paid for with insurance reimbursements or certain grants to count as QREs. Becuase the THPTC program rules reference the Internal Revenue Code, this restriction also applies to the state tax credit. The restriction includes flood relief grants and historic preservation grants administered by the THC. Projects may still apply for the THPTC if their project costs are not fully covered by these funding types. Any QREs paid for out of pocket by a property owner will count towards the credit.

It is important for property owners and those assisting in recovery efforts to understand the program rules and the limitations that may apply, in order to ensure that projects can be certified and credits awarded.

THC staff understands that the program may be overwhelming following a natural disaster. To help guide you through this process, you can speak directly to THC staff about your property and potential application by calling 512-475-0129.

Basic Program Requirements

• Buildings must be used for commercial or non-profit purposes.
  Commercial uses include owner-occupied businesses, or properties that are leased for commercial or residential use. Owner-occupied residences are NOT eligible for participation. State-owned public universities and college are also eligible, but no other government entities can participate at this time.
   
• Buildings must be designated as historic, or be eligible for designation.
  Buildings must be listed in the National Register of Historic Places, or be designated as Recorded Texas Historic Landmarks or State Antiquities Landmarks. Buildings that are not currently designated may still be eligible to participate if they can be determined eligible for one of these designations, and then must complete the designation process prior to project certification and receipt of the credit.
  • You can check to see if your building is already designated, by using THC’s Historic Sites Atlas.
  • Please note that local designations do not typically count for this program, although your local preservation organizations may have a record of buildings with eligible state and federal designations. They may also have additional information regarding your property that can assist you in putting together your application.
     
• Applicants must own the property, or have a long-term lease, and incur repair costs directly.
  A long-term lease is defined by the IRS as having a term of at least 39 years. Repairs paid directly to contractors by a third party (such as an insurance company) do not qualify.
   
• Applicants must spend at least $5000 on qualified rehabilitation expenditures.
   
• All work must meet the Secretary of the Interior’s Standards for Rehabilitation.
  Any work completed, even if undertaken following an emergency, must meet the Standards. Inappropriate work may result in required remediation or in denial. Typically, repairs that are structural in nature or hidden from view (such as mechanical equipment) as well as in-kind replacement of damaged finishes (such as plaster, sheetrock, flooring, or ceiling materials) is easily approvable work.  

Application Process

• Part A: Evaluation of Significance applications must be received by the THC before work is completed.
  This part of the application establishes that your building is designated or eligible for designation. Program rules require that it be submitted before work is completed. Date of project completion must be documented with the Part C application and projects that did submit their Part A application on time will not be certified.
  • Part A applications should include photos of your building from before the storm, as well as after. Buildings that have received significant damage may no longer qualify as historic due to a loss of integrity, as defined by the National Park Service.
     
• Part B: Description of Rehabilitation applications must be submitted as soon as practical.
  Part B applications present detailed information about proposed or completed work items. It is usually recommended that the Part B and all architectural plans be submitted before work is undertaken, although the THC recognizes this may not be possible following a large disaster, when some buildings need immediate repairs. If you have concerns about whether or not your work is appropriate, you can contact the tax credit staff at the THC.
  • If you are submitting a Part B after you have begun work, please include photos taken before work began along with current photos showing completed or in-progress work.
     
• Part C: Request of Certification of Completed Work applications should be submitted when all work is completed.
  Part C applications are used to verify that work was completed appropriately.

All applications must be completed thoroughly. Applications with missing information or without sufficient details to understand the project cannot be properly processed. If the THC has to request additional information, review of your project may be delayed.

Our Application Guide has additional information about how to apply for the Texas Historic Preservation Tax Credit.

In-Progress THPTC Projects

If you have an on-going tax credit project that receives damage due to a natural disaster, please take the following steps to ensure continued success with the program:

• Photograph any damaged areas of your building or property.
• Complete any immediate repairs, if necessary to secure or dry-in your building. Photograph completed repairs.
• Document all completed or proposed work in an Amendment and Advisory Determination Application and submit to THC as soon as practical.
• Contact your THC tax credit reviewer if you have any questions.

Recently Certified THPTC Projects

If you have a project that has been recently completed and certified by the THC for state tax credits, you may apply, with a new application, for additional credits for qualified disaster recovery work.

You must spend at least $5000 on qualified work as described above, but are not required to submit a new Part A application. Instead, please take the following steps:

• Photograph any damaged areas of your building or property.
• Complete any immediate repairs, if necessary to secure or dry-in your building. Photograph completed repairs.
• Document all completed or proposed work in a Part B: Description of Rehabilitation Application and submit to THC as soon as practical.
• Contact your THC tax credit reviewer if you have any questions.

For information about other available assistance, please see THC's Disaster Resources page.