News in Cortland NY

New Help for Owners of Historic Buildings

New York State passes much-needed incentive for renovation of commercial or residential properties. Many properties in Cortland County qualify!

New York State has just approved a much-needed incentive that will encourage new investment in the reuse of historic buildings in both urban and rural communities. The new legislation (A.11987 / S.8392) now provides for a state income tax credit for the rehabilitation costs of historic commercial and residential structures. The legislation is now before the Governor, and is expected to be approved shortly.

The Cortland County BDC-IDA has worked with state agencies through the New York State Quality Communities program to help push this much-needed legislation for the past five years, and has already been in touch with the New York Preservation League about implementation of the program here in Cortland County. Cortland County was the inaugural winner of the New York State Quality Communities Award for Excellence, and the Cortland County BDC-IDA is a member of the Quality Communities Task Force on Downtown Revitalization and Historic Preservation.

“This is a huge milestone,” said Linda Hartsock, executive director of the Cortland County BDC-IDA. “New York was woefully behind other states in recognizing the importance of preservation tax credits for homeowners. This was a missing resource for neighborhood development, particularly in Upstate communities that have a large stock of older homes. We were pleased to support efforts by the New York State Department of State and the New York State Preservation League to help provide local communities and property owners with new tools for historic preservation. We’re optimistic that the program will further catalyze neighborhood development and revitalization of downtown commercial districts.”

The BDC-IDA will be offering workshops on the new state program this fall.

The program will particularly benefit the City of Cortland, which was recently named a Preserve America community, and contains a designated historic district, making many properties eligible for the incentives. The Village of Homer’s federal and state historic district also is immediately eligible. Through the legislation, other municipalities may identify by resolution an area that is in need of community renewal because of deteriorated and/or vacant buildings, and adopt a historic preservation and community renewals program to encourage property owners to complete substantial rehabilitation projects. Upon the adoption of local laws, filed with the Office of Parks, Recreation and Historic Preservation, that agency will work with those local communities to implement the program.

“The benefit of this new state program is that it provides both technical assistance to communities, as well as incentives for property owners,” added Hartsock. “The tax credits through the program can be significant, particularly for owners of commercial properties, who can now receive both federal and state preservation tax credits. This program should also be a real impetus for homeowners – particularly young families -- to move into historic neighborhoods and tackle home restoration projects.”

The new preservation and rehabilitation credits will be applicable for taxable years beginning January 1, 2007. Under the legislation, State and National Register-listed owner-occupied residential structures in distressed areas are eligible for a New York State income tax credit covering 20% of exterior rehabilitation costs, up to a credit value of $25,000. National Register-listed eligible commercial properties that qualify for the Federal Rehabilitation Tax Credit, would also qualify for an additional New York State income tax credit, covering 30% of rehabilitation costs, up to a credit value of $100,000.

“This legislation will undoubtedly prove one of the most effective programs in New York State for the revitalization of historic residential neighborhoods and downtown commercial districts,” said Jay DiLorenzo, President of the New York State Preservation League. The residential rehabilitation program will provide a first-ever financial incentive for homeowners and homebuyers for upkeep and stewardship of historic homes. The commercial tax credit offers a financial incentive that complements an existing federal program for historic structures, likely attracting additional projects to the federal program.

The Cortland BDC-IDA will work with owners of historic properties to help them understand resources that are available to help facilitate historic renovation projects, as well as provide links to information on the new tax credits. Resources range from information on grants, loans and potential tax incentives, to liaison with historic commissions, and federal, state and nonprofit agencies, which can provide technical assistance, ideas and programs.

Owners of income producing buildings listed on the National Register of Historic Places or located within a National Register District already qualify for federal tax incentives for historic preservation projects, including commercial, industrial or rental residential properties. A number of local developers have used this program to renovate buildings, particularly in the City of Cortland’s historic district.

Renovations must follow the Secretary of Interior Standards for rehabilitation to be eligible for the federal tax credits. Renovations must follow the New York State Office of Parks, Recreation and Historic Preservation guidelines for rehabilitation to be eligible for the state tax credit.

To learn more about federal rehabilitation guidelines: www.nysparks.state.ny.us

To learn more about federal guidelines through the Internal Revenue Service: www.irs.gov

To learn more about state rehabilitation guidelines: www.nysparks.state.ny.us or www.nysparks.state.ny.us/shpo

Owners of historic properties can also gain additional federal tax deductions through the donation of a conservation easement on their building to a government agency or qualified nonprofit organization. A preservation easement is a voluntary transfer of rights to modify the exterior in a way that will compromise the historic character and integrity of the property, while still enabling the occupants to retain ownership and possession, and enjoy tax advantages. Easements carry forward for new owners, so it is useful for property owners who want to ensure that the historic, cultural and archeological characteristics of their property will be maintained. Changes to the property are allowed, subject to the approval of the entity that holds the easement. Preservation easements are an economical way for communities to ensure protection of their historic resources, since they do not require the resources of government agencies to purchase and maintain properties. The easements are maintained without cost to the taxpayer. The value of the easement, as determined by a qualified appraisal, can be claimed as a charitable donation from taxable income. In order to be eligible for the tax deduction, the property must be listed in the National Register of Historic Places individually or as a component of a National Register historic district.

Locally, the Landmark Society is a qualified nonprofit organization that could hold conservation easements. The nonprofit organization was established to assist historic properties in the Homer-Cortland area, and is administered by former Homer Mayor Mary Alice Bellardini.

In addition to these new programs, the Department of Housing and Urban Development’s Federal Housing Administration (FHA) also has an existing flexible loan program that helps developers, investors and families at all income levels to buy and restore properties in urban and rural historic districts. The program operates through FHA approved lending institutions, and the loans are insured by the FHA. The 203(k) Mortgage Rehabilitation Insurance Program helps preservationists deal with problems such as appraisal barriers, the cost of second mortgages, and down payment and closing costs. Unlike many mortgage programs, the 203(k) is available to purchasers before restorations are completed.

Read a 28-page glossy magazine produced by the Cortland County BDC-IDA about historic preservation projects and resources for historic preservation in Cortland County. The magazine is on-line at www.cortlandbusiness.com/pdf/BDCNews_Spring2003.pdf

The BDC-IDA has also compiled a historic preservation resource guide, which is available at www.cortlandbusiness.com/news/304resources.html.