17VAC10-30-120: Qualification for credit

Credits against tax shall be available for the material rehabilitation of a certified historic structure. Material rehabilitation means improvements or reconstruction consistent with the Standards for Rehabilitation, the cost of which amounts to at least 50% of the assessed value of the buildings for local real estate tax purposes for the year before the start of rehabilitation, unless the building is an owner-occupied building, in which case the cost shall amount to at least 25% of the assessed value of such building for local real estate tax purposes for the year before such rehabilitation expenses were incurred. An owner-occupied building is any building, at least 75% of which is used as a personal residence by the owner, or which is available for occupancy by the owner for at least 75% of the year. The assessed value of the building for local real estate tax purposes does not include any assessment for land. The determination of whether a rehabilitation has been material shall be made at the entity level, not at the partner or shareholder level.

Example 1. Certified historic structure has a 2012 tax assessment of $20,000 for the land, $80,000 for the building and a 2013 assessment of $20,000 for the land, $70,000 for the building. Taxpayer submits a plan of rehabilitation on December 1, 2013. Taxpayer applies for a building permit for work to be done in accordance with the plan of rehabilitation on December 15, 2013. Taxpayer incurs eligible rehabilitation expenses in the amount of $37,500 pursuant to the plan of rehabilitation. Rehabilitation is completed in 2015. Taxpayer is not entitled to a tax credit because taxpayer's eligible rehabilitation expenses ($37,500) do not exceed 50% of the assessed value of the building in the year prior to the start of rehabilitation ($40,000).

Example 2. Same facts as above, except taxpayer applies for the building permit on January 2, 2014. Eligible rehabilitation expenses ($37,500) exceed 50% of the assessed value of the building in the year prior to the start of rehabilitation ($35,000). Therefore, taxpayer is entitled to a credit of 20% (for completion in 2015) of $37,500.