Donate a historic facade to reap tax benefit.
A facade preservation easement allows the property owner to donate the building's exterior to a qualified charitable organization such as The National Architectural Trust. In return, the owner can claim a charitable deduction of approximately 10 percent to 15 percent of the entire building's appraised fair market value.
Many property owners have been unaware of the facade donation potential or have been deterred because of refinancing and marketability concerns. In today's environment, however, increasing familiarity with the program has lead to property owners recognizing the full benefits of facade donations.
Since 1976, the Federal Historic Preservation Tax Incentive Program has allowed owners of historic properties to donate what is known as a Facade Conservation Easement to a qualified charitable organization. The tax benefit is designed to encourage the preservation of the outward appearance of historic buildings and structures. Thus, not every building or structure can qualify for the easement program.
Taxpayers are eligible who own property that is either:
* Located within a historic district designated in the National Register of Historic Places and is certified by the National Park Service as a historically significant structure; or
* Separately identified on the Federal Register as historically significant.
If property owners have ruled out registering their particular building with the National Register of Historic Places because of all the accompanying restrictions, a facade easement may be a more feasible option. In these cases, the property owner donates only the exterior, giving the charitable organization control of the building's facade. Any exterior changes that the owner wants to make
would require prior approval from the charitable organization that now has the easement rights. However, facade donations still allow the owner to keep title of the property. The owner also can change the interior, rent, sell or gift the property without the charitable organization's involvement.
Realizing this one-time major tax break occurs in the year the donation is made. Of course, if a mortgage exists on the property, the mortgage holder must sanction the donation as well.
In the past, banks and other financial institutions have been reluctant to approve such easements because they were not familiar with the process. In recent years, financial representatives have better understood the program and are more willing to consider permitting facade donations.
In addition, some owners have been reluctant to participate for fear a facade easement will hurt the property's value when it is eventually sold--the facade easement stays with the property without any further tax breaks for the new owners. However, this particular concern has not proven out over the years.
Property owners interested in the facade easement donation should understand that although the process ultimately is beneficial, it is not simple. It can be complex just to sign up for the program.
Property owners should seek advice from financial professionals familiar with qualified charitable organizations and their requirements in order to complete the proper forms, meet the requirements, and gain lender approval to ensure that the full tax advantage can be gained.
MARC WIEDER, CPA ANCHIN, BLOCK & ANCHIN LLP
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||Insiders Outlook; Federal Historic Preservation Tax Incentive Program|
|Publication:||Real Estate Weekly|
|Date:||Sep 29, 2004|
|Previous Article:||College housing: if we build it, they will come.|
|Next Article:||TIC 1031 exchanges high yield solution.|