historic preservation

Financial Incentives

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Special Tax Valuation-a local program

In 1985, the Washington State Legislature passed a law that allows local governments to offer tax relief for historic property owners in the form of reduced property taxes. Through the Special Tax Valuation Program, property owners who complete a substantial rehabilitation within a period of two years may benefit from reduced property taxes for a period of ten years.

Since 1986, the City of Tacoma has approved over $100 million in Special Tax Valuation investment into its historic properties.

How It Works

Generally, qualified expenses associated with a rehabilitation project that meet the requirements below are subtracted from the property assessment each year for 10 years. Property taxes are still paid on the balance, although in some cases a substantial rehabilitation project's costs may exceed the assessed value of the property for several years, effectively negating property taxes.

This "special valuation" of the property offsets potential increase in taxes caused by building improvements and helps owners regain their investment efficiently. Special Valuation may be applied for repeatedly as long as the requirements are met and the qualified expenditures do not exceed the assessed value of the property.

The City does not lose tax revenue in the process, because prior to rehabilitation, most historic buildings in the program are underutilized and generate low revenues. A building increases dramatically in value following a project, and following the 10 year period, returns to a significantly higher assessed value on the tax rolls.

Requirements

Expenses claimed must be reasonably associated with the historic rehabilitation and must occur within a building's original envelope. Additional requirements include:

  • Property must be listed on the Tacoma Register of Historic Places
  • Rehabilitation costs must equal at least 25% of the assessed value of the building itself prior to renovation
  • All project costs must fall within a working period of 24 consecutive months
  • "Rehabilitation Expenditures" that generally qualify include the costs associated with design, materials and construction necessary to bring a building to a state of modern convenience, but do not include costs associated with acquisition of the property or for work to expand the building's size
  • The project must meet the Secretary of Interior's Standards for Rehabilitation of Historic Buildings
  • Renovations must not adversely affect historically significant building's character defining elements

Buildings in historic districts are usually eligible. Historic properties not already listed on the Tacoma Register of Historic Places can be placed on the Tacoma Register though a nomination and review procedure.

For application forms and other helpful documents, please visit the Resource Library.

Federal Historic Rehabilitation Tax Credit Program (HRTC)

The Historic Rehabilitation Tax Credit Program is a one-time federal income tax credit for the costs associated with rehabilitation of historic buildings, jointly administered by the National Park Service and the IRS. The most commonly used tax credit is the 20% credit for income producing properties.

This program is jointly administered by the National Park Service and the Internal Revenue Service. The Washington State Department of Archaeology and Historic Preservation (DAHP) coordinates projects using the Federal HRTC.

Basic requirements include:

  • Property must be listed on the National Register of Historic Places
  • Property must be a building
  • The rehabilitation must meet the Secretary of the Interior's Standards for the Rehabilitation of Historic Properties and the design must be approved by the National Park Service in advance
  • Property must be depreciable--that is, an income producing property (and therefore not the applicant's primary residence)

For more information (outside links):
Incentives!  A guide to the Federal Historic Preservation Tax Incentives Program
Washington State Department of Archaeology and Historic Preservation--Financial Assistance

Please also visit the Resource Library for helpful downloadable documents, and the Related Sites page for more online information.

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