FEDERAL: Commercial buildings only are eligible to receive the federal credit. Residential properties are not eligible yet, but the Historic Homeownership Assistance Act is pending in Congress and may change the federal law to include tax credits for rehabilitating residences.

RZ: Both commercial and residential buildings are eligible to receive state RZ rehabilitation credits provided the buildings are located within the Renaissance Zone boundary.

FEDERAL: The Internal Revenue Service has a system of recapturing the federal rehabilitation credits if the applicant fails to follow the rules.

RZ: There are no recapture provisions for state credits because the credits cannot be applied for until the project is completed and approved by the State Historical Society and the DCS.

FEDERAL: The applicant must retain ownership of the property for at least five years. Recapture takes place at 20% per year for every year the building is not owned.

RZ: There is no requirement to maintain ownership after the project is completed.

FEDERAL: There are “Placed-in-Service” deadlines with the federal credit that are very important. If a developer sells the property AFTER the building is "placed in service" (even one day) the tax credits are forfeited. Neither the developer nor the new owner can claim the credits.

RZ: There are no similar provisions for state purposes.

FEDERAL: The federal credit is subject to the passive activity loss rules under federal law.

RZ: There are no similar provisions for state purposes.

FEDERAL: The rehabilitation project must comply with the Secretary of the Interior’s Standards for Rehabilitation. If the project does not comply, the owner may face additional setbacks such as the loss of funding or permits from other federally funded programs relating to the building.

RZ: The rehabilitation project must comply with the Secretary of the Interior’s Standards for Rehabilitation. If the project does not comply, the owner will not receive final approval from the State Historical Society or the DCS to apply for the credits.

FEDERAL: The minimum rehabilitation expenses must meet the cost of the Adjusted Basis or $5,000, whichever is greater. The Adjusted Basis formula is:

                Purchase Price

            + Capital

             - Depreciation

             - Land

            = Adjusted Basis

(Adjusted basis has nothing to do with the assessed value.)

RZ: If a project is rehabilitation of historic property in order to qualify for the business income tax exemption, the minimum expenditure is 50% of the current true and full value of the building. If a project is only for the purpose of receiving historical tax credits, there is no minimum expenditure.

FEDERAL: Federal program require an eligible building be listed in the National Register within 30 months of claiming the credit.

RZ: Properties must be located within the Renaissance Zone boundaries AND are listed in, or eligible for, the National Register of Historic Places, the North Dakota State Historic Sites Registry, or a local historic register, are eligible for the state Renaissance Zone rehabilitation credit.

FEDERAL: All or any portion of the federal credit may be claimed upon exceeding a minimum rehabilitation expense amount which is the Adjusted Basis +$1 (see Adjusted Basis formula above).

RZ: There are no similar provisions under the Renaissance Zone law. Credit is claimed in tax year in which the project is completed and excess credits may be carried over for a period of up to five years from the date of the investment.

FEDERAL: The federal credit requires a Processing Fee.

RZ: There is no state review or processing fee.

FEDERAL: The federal credit requires a 10-working-day state review period followed by a 30-day review period upon National Park Service receipt of a Processing Fee. This does not include the time the paperwork is in the mail.

RZ: RZ-credit-only projects are subjected to the 10-working-day state review period. Owners applying for both credits are follow the federal requirements at left.

FEDERAL: The federal credit is available on 20% of the rehabilitation investment for eligible rehabilitation costs. Eligible means expenditures on the building itself, i.e., its systems, materials, and structure. Non-eligible costs are those outside the building's envelope such as landscaping, free-standing signage, sidewalks, and parking lots.

RZ: Eligible expenditures for state purposes also means those incurred with respect to the building only.

FEDERAL: There is no cap on the rehabilitation investment or resulting tax credit available on the federal credit.

RZ: Historical credits are available for 25% of the investment in historical preservation and renovation, up to a maximum of $250,000.

FEDERAL: Applying for the federal credit should occur early in the planning stages to seek approval from the National Park Service. Owners who apply late in the construction phase or after project completion are at risk of not being eligible for, forfeiting, or being subject to the recapture of, the credit.

RZ: Applying for the tax credit should occur early in the planning stages to seek approval from the local Renaissance Zone authority, the local historic preservation commission (if applicable), and the State Historical Society of North Dakota.

FEDERAL: There is no set timeline for applying for the federal rehabilitation tax credits. However, the IRS’s restrictions regarding “Placed-in-Service” apply.

RZ: Qualifying expenditures only include those made after obtaining project approval as a Renaissance Zone project from the city and the DCS.

FEDERAL: The federal project can be phased over a 60-month period. All phases must be outlined in the initial Part II Application.

RZ: There are no similar provisions for state purposes.