Bill Callahan, the Western, PA Community Preservation Coordinator for the Pennsylvania State Historic Preservation Office (SHPO is a bureau within the PA Historical and Museum Commission) in Pittsburgh, PA, joined the Practical Preservation Podcast to discuss the state organization’s myriad services. We covered multiple topics, including:

  • Bill’s background, including how exposure to the negative impacts of the agricultural economy’s crash in the Midwest led to cooperative initiation of a main street program in his Illinois community – a position he credits with his interest in preservation, and the catalyst for his subsequent manifold experiences in historic preservation positions
  • His current position, which involves administration of several programs, including providing technical assistance regarding historic preservation to anyone who asks for it
  • The only way to protect historic resources, and the 2 methods by which a municipality can go about it
  • Grassroots tips, such as networking within local government and other community organizations, and the necessity of understanding one’s local planning processes     
  • A little known resource for private homeowners
  • The overlap of natural resource conservation and historic preservation
  • Positive trends such as increased awareness of the need for preservation

 

Contact/Follow:

Website

Facebook

Twitter

Instagram

YouTube

Linkedin

Contact Information – General inquiry here, or Community preservation coordinators by region – including Bill – here

For community grassroots involvement, Bill also recommends interested citizens visit this general site in addition to consulting directly with him (or other regional community preservation coordinators). This site includes community preservation forms and guidelines as well. And Bill emphasizes the importance of citizen involvement with local planning and economic development offices.

Bill also encourages people to remember that sense of place is important to everyone – including saving buildings that make a place unique and hold memories – and this can be emphasized when working with others to prioritize local preservation. 

 

 

 

 

 

 

 

 

Briana Grosicki, associate principal of PlaceEconomics based in Washington, D.C., joined the Practical Preservation Podcast to discuss the economic benefits of preservation. We covered multiple topics, including:

  • Briana’s background, including growing up regularly visiting local battlefields in Virginia, volunteering with her main street district as a teen, to working with Donovan Rypkema 
  • Briana’s additional roles as chairwoman for Preservation Action and board of director for the National Alliance of Preservation Commissions
  • PlaceEconomics’ specialized consultation services at the intersection of economics and historic preservation, including research and city-wide studies, and educational talks and workshops
  • Specific economic benefits of preservation, including that for every 100 preservation/rehabilitation projects there are 186 jobs created elsewhere in the community, vs. 135 new jobs created per every 100 typical construction projects
  • Dispelling typical myths about preservation, including that historic preservation is a major cause of unaffordable housing, when in reality historic districts are more likely to include mixed-income housing than neighborhoods with speculative development (i.e., flipped houses and airbnbs)
  • Challenges in the field of preservation, such as increasing preservation’s advantages for and accessibility to all people 

 

Contact/Follow:

Website

Facebook

Twitter

Instagram

Linkedin

General Contact

Educational Resources

For individuals interested in getting help with preservation in their community, Briana encourages they contact her or other staff at PlaceEconomics – they are always open to discussing if they are right for a client or community! You should also tell your local officials about PlaceEconomics’ services!

Briana also suggests that individuals who may be less likely to work with PlaceEconomics’ firm directly continue to work on preservation at a grassroots level – from government involvement with organizations such as Preservation Action, to simply maintaining their own historical buildings, investing in existing resources, and using local resources to fund the local economy.

Briana encourages everyone to consider involvement in Preservation Action’s virtual auction this year, scheduled for October 27th, at 7PM

Lindsey Bennett of KIZ Resources, LLC, joined the Practical Preservation Podcast to discuss the company’s tax credit transfer services. We covered multiple topics, including:

  • Origins of the company – originally named for the Keystone Innovation Zone Tax Credit (KIZ) – and their focus on state and federal tax credit transfers for businesses
  • Their specialized services assisting businesses located in historic buildings to enroll in and benefit from the Pennsylvania Historic Preservation Tax Credit Program, as well as federal preservation tax credits
  • Qualifications for the preservation tax credit programs, including that the applicants must have income-producing buildings, the building must be on the National Register of Historic Places, any renovations must follow the Secretary of the Interior’s standards for historic rehabilitation, as well as some other stipulations
  • Other services provided, including assisting clients with selling tax credits, the Keystone Innovation Zone Tax Credit, and Neighborhood Assistance Program, among others
  • Challenges with uncertainty of state budgets, particularly given COVID-19, and Lindsey’s recommendation to business-owning constituents in Pennsylvania to reach out to legislators and encourage them to continue to support funding for tax credits

 

Contact/Follow:

Website

Facebook

Twitter

Linkedin

General contact information

Follow them on Facebook (or contact them) to find out about seminars available to learn more!

 

PART 2 PRESERVATION MONTH 2020 SERIES

LAST WEEK WE PRESENTED PART 1 on Why Preservation Matters. Part 2 of this series focuses on preserving or saving a building. It’s one thing to read and learn about preservation, and it’s a whole other thing to actively do it. While there may be limitations as to what one can accomplish, there is also so much that grassroots efforts can achieve. As the often-repeated quote attributed to Margaret Mead goes:

“Never doubt that a small group of thoughtful, committed, citizens can change the world. Indeed, it is the only thing that ever has.”

Let’s assume you’ve noticed a building that needs an intervention, or someone has announced plans to develop land a historic farmhouse sits on … all is not lost. Read on to explore steps you can take to preserve a building.

Denn House, prior to restoration.

 

GUIDELINES FOR SAVING A BUILDING:

  • Manage your mindset. It’s important to note that saving a building is not easy and not always successful; therefore it is best to know this and the intensity of the process going into it so as not to set yourself up for disappointment if your attempts to save a building are ultimately unsuccessful. First, consider why the place matters to you and why it matters to others; The National Trust for Historic Preservation includes information on the philosophy of why old places matter, and tips on managing your expectations. Determining the practical reasons to save a building can strengthen your own resolve and provide practical arguments when presenting the plan to others.

 

  • Be a history detective and know the threats. It is also essential to know the history of the building, its significance, and anything that poses a threat to its preservation. That National Trust discusses steps to researching, and Wolfe House and Building Movers Guide for Saving a Historic Building also provides suggestions to determine a building’s significance and discern types of threats.

 

  • Determine the building’s future/ongoing purpose. If you have the power to help decide a building’s future or ongoing purpose, or simply want to share reasons the building could benefit the community so that others can see why it’s worth saving, Wolfe House and Building Movers’ Guide recommends determining its possible uses and proposing a plan. The previously-mentioned guide from the National Trust can assist here as well. It is likely much easier to determine the building’s purpose if you are the owner, but even if you do not own it, you can help provide suggestions. It’s also important to decide how to save the building. Wolfe’s Guide also includes information on methods for saving a building.

 

  • Be an advocate and find help. The National Trust first recommends seeking help and support and getting the word out at the grassroots level before taking it to community and government leaders. They also share other ways to spread the word, including the This Place Matters campaign. Gathering community support strengthens the stance that the building is worth something to the community, and therefore carries more weight when you finally do present the project to leadership. Once grassroots support is established, the National Trust and Wolfe’s Guide both share information on sources of assistance, including agencies and governmental organizations at the local, state, and federal levels. The National Trust also includes a list of resources for preservation. Finally, sharing past successes, such as sharing videos of other successful preservation projects, as offered here by the Pennsylvania State Historic Preservation Office, is another way to support your stance on preserving a building.

 

  • Secure funding. The National Trust and Wolfe’s Guide also both include information on how to secure funding or raise money to finance a preservation project. 

 

  • Apply for historic designation AND/OR seek to establish a preservation easement. If you determine that historic designation is an option in the case of your building, the National Trust provides information on many benefits of historic designation at local, state, and federal levels such as protection, funding, and tax credits, as well as suggestions on how to go through the process. If you have the power to do so – usually if you are the owner of the building – seek establishment of a preservation easement as well. The National Park Service discusses easements in detail, and the National Trust indicates that these can be in place in addition/act as a supplement to designations, as they use private legal rights of property owners unlike designations that act at the level of government. Easements – if designated as perpetual – are the only guarantee that the building cannot be demolished or altered significantly in the future. These terms go beyond the protections that a designation can provide. 

 

  • Amplify your reach. Preservation is local. It is also best done as part of a group of like-minded individuals, in a way that works with systems that are already in place.  If you want to ensure that buildings are saved, getting involved with your local preservation group and/or local government is the best way to make certain there is a review process before demolition is allowed to proceed.  You can check your local municipality’s zoning ordinances to  see if historic structures are addressed.

 

 

 

Next week: PART 3 OF THIS SERIES focuses on the Economic Benefits of Preservation.

THIS IS A RE-POST OF A WHAT WE ORIGINALLY POSTED SEPTEMBER 2012:

*Throughout the article denotes changes that have occurred since our original posting of this article. 

Tax Incentives for Preserving Historic Properties

The Federal Historic Preservation Tax Incentives program encourages private sector investment in the rehabilitation and re-use of historic buildings. It creates jobs and is one of the nation’s most successful and cost-effective community revitalization programs. It has leveraged over $62 billion in private investment to preserve 39,600 historic properties since 1976. The National Park Service and the Internal Revenue Service administer the program in partnership with State Historic Preservation Offices.

20% Tax Credit

A 20% income tax credit is available for the rehabilitation of historic, income-producing buildings that are determined by the Secretary of the Interior, through the National Park Service, to be “certified historic structures.” The State Historic Preservation Offices and the National Park Service review the rehabilitation work to ensure that it complies with the Secretary’s Standards for Rehabilitation. The Internal Revenue Service defines qualified rehabilitation expenses on which the credit may be taken. Owner-occupied residential properties do not qualify for the federal rehabilitation tax credit. Learn more about this credit before you apply.* Each year, Technical Preservation Services approves approximately 1000 projects, leveraging nearly $4 billion annually in private investment in the rehabilitation of historic buildings across the country.

*NOTE: Before applying, the National Park Service refers to modifications to the 20% tax credit Public Law No: 115-97 (December 22, 2017) They advise interested applicants consult an accountant or tax advisor to make sure that this federal tax credit is beneficial to individual circumstances. 

10% Tax Credit

*NOTE: There previously was a 10% tax credit available for non-historic buildings built before 1936. Since our original posting of this article in 2012, on December 22, 2017, Public Law No. 115-97 amended the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses.  Section 13402 changed the ITC and repealed a 10% credit for non-historic buildings.  Several websites suggest that change will likely impact a taxpayer’s ability to take advantage of the HTC.  As such, it is best to discuss concerns with an accountant, tax attorney, legal counsel, or the Internal revenue Service to clarify these changes. 

Tax Benefits for Historic Preservation Easements

A historic preservation easement is a voluntary legal agreement, typically in the form of a deed, that permanently protects an historic property. Through the easement, a property owner places restrictions on the development of or changes to the historic property, then transfers these restrictions to a preservation or conservation organization. A historic property owner who donates an easement may be eligible for tax benefits, such as a Federal income tax deduction. Easement rules are complex, so property owners interested in the potential tax benefits of an easement donation should consult with their accountant or tax attorney. Learn more about easements in Easements to Protect Historic Properties: A Useful Historic Preservation Tool with Potential Tax Benefits.

Further Information

Visit last week’s re-posting of our podcast with John E. Walters of LeWalt Consulting Groupe, LLC with more information on tax benefits related to historic properties.

Tell us your thoughts…

Have you been involved in a project that used the federal rehabilitation tax credit?

What questions do you have about the federal income tax credit for historic properties?

What do you want to know more about this tax incentive?

THIS IS A RE-POST OF A PODCAST INTERVIEW WE ORIGINALLY POSTED FEBRUARY 2019:

John Walters from LeWalt Consulting Groupe joined me to discuss how tax strategies can help with land and property preservation efforts.

We covered:

John’s contact information and additional resources:

LeWalt Consulting Groupe, LLC
https://www.facebook.com/LeWaltConsulting

727-388-9024

Tax Codes Referenced:
Conservation Easements
Historic Preservation Tax Incentives
Energy Incentives

Bio:
John is an Enrolled Agent, Certified Tax Coach, Best Selling Author, Instructor and Speaker at the firm LeWalt Consulting Groupe, LLC located in St. Petersburg, Florida.
He is known on LinkedIn as:
“Florida’s Leading Pro-Active Tax and Financial Change Agent for your Diverse needs and Individual Lifestyle”
At LeWalt Consulting Groupe, LLC our PASSION is creating “Tax Alpha” that helps you, as the Entrepreneur and Business Owner, live the “Ultimate”​ TAX-FREE lifestyle you desire using the complexities written into the Internal Revenue Service Tax-Code to your favor!
After all… We believe those numbers on your TAX FORMS is your “REAL” money, why not protect, preserve, and keep it for you and your family?
How may we Help You Live a Life that is less taxing…?
________________________________________________________________________

Transcript:

Announcer: Thank you for tuning into the Practical Preservation podcast. Please take a moment to visit our website practicalpreservationservices.com for additional information and tips to help you restore your historical home. If you’ve not yet done so, please subscribe to us on iTunes, Stitcher, and Sound Cloud, and also like us on Facebook.

Announcer: Welcome to the Practical Preservation podcast hosted by Danielle Keperling. Keperling Preservation Services is a family-owned business based in Lancaster, Pennsylvania dedicated to the preservation of our built architectural history for today’s use as well as future generations. Our weekly podcast provides you with expert advice specific to the unique needs of renovating a historic home, educating by sharing our from-the-trenches preservation knowledge and our guests’ expertise, balancing modern needs while maintaining the historical significance, character, and beauty of your period home.

Danielle: Thank you for joining us on the Practical Preservation podcast. Today, we have John Walters speaking with us about some tax tools that you can use to help preserve buildings. John is an Enrolled Agent, Certified Tax Coach, best-selling author, instructor, and speaker at the firm LeWalt Consulting Groupe, LLC. located in St. Petersburg, Florida. He is known on LinkedIn as Florida’s leading proactive state and financial change agent for your diverse needs and individual lifestyle.

Danielle: “At LeWalt Consulting Groupe, LLC., our passion is creating tax alpha that helps you as the entrepreneur and business owner live the ultimate tax-free lifestyle you desire using the complexities written into the Internal Revenue Service tax code to your favor. After all, we believe those numbers on your tax form is your real money. Why not protect, preserve and keep it for you and your family? How may we help you live a life that is less taxing?”

Danielle: So John, thank you for joining us and sharing your knowledge about the tax code and how that can be used to help us preserve buildings.

John: Well, thank you Danielle. I enjoy talking to people about taxes even though, I’m sure for most, it seems like a boring subject, but it’s one of the most things you’re going to pay all of your life and you might as be able to control it to your best ability.

Danielle: And understand it the best you can. I know I don’t feel I understand everything as much as I probably should. But yeah, I think the protections that people don’t understand that are written into tax code are really interesting because they can help you finance a project, they can help you make sure the building is preserved. Those things, I don’t think people necessarily think that those are tax code things, but they are. So thank you for sharing that knowledge with us.

John: Sure, no problem.

Danielle: I know one of the things that most people don’t either understand or are aware of is the tax conservation easement. If you could talk to us a little bit about that and help us understand. I understand a little bit from a preservation standpoint that the easement means that the outside can’t be changed because it’s protected, but I don’t understand what the tax ramifications of that is.

John: Okay. In the Internal Revenue Code, there’s a section called 170(h) and it talks about land conservation strategies, especially for federal and state taxes. What a land conservation strategy is designed to do is it’s designed to meet basically the tax payer’s – in this case, your client or whoever you’re working for – financial goals and take into heart their charitable desires.

John: In essence, it’s to preserve their properties and realize their most favorable economic outcomes, and actually, you get some tax savings out of it too. You become part of what we call the ready to conserve your assets for individuals and enjoy the related tax savings possible and the income opportunity in the property’s amenities.

John: In essence, what you want to do is let’s say you have a piece of property, but you don’t want it to be built on or you want to preserve it for generations to come and things like that. There are provisions in the tax code under the land conservation easement strategies is to actually give that land away. In essence, you’re giving it away for the purposes of being able to develop it or use it for some other commercial purpose to the government and you have official documents that tell you that you can do that. In turn, there are charitable deductions that you can take for that conservation.

John: With that, your land is preserved. Basically, you still retain rights to it, but you just can’t use it for other purposes, intended purposes.

Danielle: So it almost restricts you? Yeah, it restricts what you do with it. Okay.

John: Exactly. You have basically a deed of restriction, but that land can be used for whatever thing that you set it up for.

John: For instance, let’s say that you have land and you want to preserve it for hunting and you don’t want anybody to build anything on it. You could have a land conservation easement for that property; it could still be used for hunting and you can use for that purpose. You can even build a structure on there like a lodge or something like that and people could use it for hunting, but they wouldn’t be able to use for some other commercial development.

Danielle: [crosstalk 00:06:17] Yeah.

John: Yeah. In turn, when you take that conservation easement, the government’s giving you a tax deduction and it can be up to 50% of your adjusted gross income. Let’s say for every dollar this property is valued at, you go get it appraised and stuff, sometimes you can get to four to five times the benefit. In essence, what you’re telling is, well, if I built it commercially, this is what it would be valued at. But if I-

Danielle: So if you develop the property, that’s why they use as your [crosstalk 00:07:00]

John: Right.

Danielle: Okay, that makes sense.

John: So if I was going to put a housing development on it, it would be worth X. But if I say, “I don’t want to allow that on there,” they’re going to take that value of the housing development, it’s appraised out, subtract what the land is worth right now, and you get the difference in the tax credits.

Danielle: Okay. Okay, and then is that an actual credit onto … I’m trying to think about what I’m familiar with preservation easements. You usually then donate that to a nonprofit, is that correct? Or is the conservation a little bit different?

John: Yeah, it’s actually donated to the government, per se, because it’s under tax code. Now, there’s the charitable contributions fall under the federal tax code, but you can also get state tax credits too, depending on what state you’re in and the property.

Danielle: Yeah, I know. Yeah, the preservation tax credits are very dependent on which state you’re in, how robust they are.

John: Mm-hmm (affirmative), exactly.

Danielle: Yeah. So this benefits the person that’s doing the easement by reducing their taxable income. Is that pretty much what the goal is?

John: Right. You can reduce your actual tax that you would owe by between 30 and 50% of your adjusted gross income.

Danielle: Okay.

John: Now, let’s say it exceeds 50% of your gross income in that particular year, those charitable credits can be carried over for many years into the future until you can use them up.

Danielle: Okay.

John: Yeah, so typically, if you don’t have a whole lot of income in that particular year, it will just carry over until you can use those up.

Danielle: Use it up, so there’s not a time limit. I was thinking there’s a difference – and now this is telling you what I don’t understand about taxes. There’s a difference between a credit and a deduction, is that correct? So the credit is like just straight money to you, it’s not based on any kind of scale, correct? Is that what-

John: Well, yeah. There are credits that are basically a one-to-one dollar reduction in your taxes. Now, in the credit world-

Danielle: Okay, so [crosstalk 00:09:27] a percentage. Yeah.

John: Exactly. In the credit world though, you have two types of credits. You have what we call non-refundable, meaning that it can reduce your income, your taxes to zero. Then after that, if you still have more credit, you can’t use it anymore. You won’t get additional money back. But if they’re refundable, that means that you could have zero income tax that you owe, and still get a refund back from the government. Now-

Danielle: Oh, okay. Makes sense. Yeah.

John: And with the deductions, they are a percentage, depending on what your marginal tax bracket is. So in essence, a deduction, if you’re in the 25% tax bracket, then you’re going to get 25% or 25 cents back on the dollar for every dollar you deduct.

Danielle: Okay, okay. I know I see, in this area, a lot of conservation easements for farmland.

John: Exactly.

Danielle: Where the families want to preserve their farms from development but they still want to be able to use them and farm them. The easement doesn’t stop you from being able to use it from how you’ve been using it; it’s how you write the easement. Is that correct?

John: Right. So for an example like that, in farming and ranching, Ted Turner, which we all know from the broadcasting world and everything else, he has huge tracks of land in Wyoming and Montana that he has easements on. He still allows – there’s wild buffalo that run on there. He has cattle that graze and everything so it can still be used for ranching, but no one can actually develop it into a housing development or any commercial purpose.

Danielle: Okay, okay. Very, very interesting. Thank you. So then when you go to do the charitable deduction, then they figure out what the amount would be if they developed and then they give you … Is it the difference? Is that pretty much what your credit is?

John: Yeah. So for instance, let’s say it would be valued, appraised, at a million dollars if it was fully developed, but right now in your hands, ownership, it was worth really only $100,000, per se, in undeveloped land and everything else. So in fact, you could probably get a deduction for the $900,000 difference there.

Danielle: Because you’re not using it to develop it completely. It is a benefit then to the community too. That does make sense to me as to why it would be a tax credit also because you’re agreeing to leave it the way it was. It’s not [crosstalk 00:12:20].

John: Right, yeah.

Danielle: Yeah. So what are the risks to somebody who wants to use an easement or a land conservation easement to preserve their property? What would the risks be to that?

John: Well, a couple risks, not necessarily to the owner of the land. There are people that actually don’t own the land but want to invest in the ownership of that property with the original owner to get these tax credits.

Danielle: Oh, right.

John: So some of the risk there would be basically you may not get the asset protection as a limited partner instead of the ownership of it. Operating reserves set aside at a closing. There may be monies that are needed in excess of that property for the conveyance of it and the deed. Could be additional capital calls if other risks – or not risks but unknowns are known about the property. Maybe there was so encumbrances on the property that you didn’t know about and stuff, so money would have to become available to take those encumbrances away so that deed could be unrestricted.

John: Sometimes there’s a taxation risk basically due to audits because sometimes these things are not put together correctly. Lately, there’s been a little bit of talks in the IRS about making this what they call a listed transactions, where they still allow it, but you would have to list it there of what the transaction was and basically have your, per se, ducks in a row if you wanted to-

Danielle: [crosstalk 00:14:19] yeah.

John: Yeah. Of course, as always, anything in the code is subject to abuse.

Danielle: Right.

John: You may be working with unscrupulous people, a.k.a. crooks, that want to take your money basically and don’t do it properly so the whole deal falls apart.

Danielle: Yeah. That and I know that when we talk to home owners about it, people are nervous about restricting their deeds. I don’t know if you have that knowledge if it … Does it lower the value of the property or is it usually somebody who would be interested in conservation, is that something that would be appealing to them?

John: Oh, it would be very appealing to someone because most of us do have a charitable gift to us or want to do something, either that, preserve it for nature or actually for our legacy and stuff like that. But even if you end up selling the property or whatever, that easement and everything else can convey to the next group of people in ownership.

Danielle: Yeah, it attaches to the deed. Yep. Then they then have to … As far as I know, that is the only preservation tool that actually restricts what you can do because even being on the National Register, that building can still be torn down if you take the appropriate steps and get approval. You know what I mean?

John: Right.

Danielle: So that doesn’t protect it as much as the easement does. I know of a project here in Lancaster that they were going to develop. It was where Thaddeus Stevens had his offices in Lancaster. They were going to tear it down and then the nonprofit that held the easement came forward and said, “No, you can’t. We have an easement on this property.” And they actually ended up, it’s really a cool building to look at now because they incorporated the modern construction around this building. It’s marrying that old with the new, but they had to keep the original building there because they did hold the easement.

Danielle: That’s the only preservation tool that I know guarantees that the building will not change and have to stay the way it has been. So very, very [crosstalk 00:16:51].

John: Yeah, exactly because you are actually accepting a deed of restriction that permanently prohibits some sort of commercial exploitation and rights to the real estate property and stuff. You’re absolutely right. That’s pretty much the most ironclad vehicle there to be able to preserve something.

Danielle: Right, okay. And then I know you had given me some notes. I have that you would talk about the energy efficient property credits.

John: Sure, sure.

Danielle: Those are being extended, which is kind of exciting for people who are wanting to maybe put some green energy to use in their homes.

John: Yeah. The wind and solar credits have actually been extended to 2024 because our government sees the value of doing that and making us less reliant, basically, on fuels like oil and gas and things like that. The interesting thing is for these types of credits, you can qualify up to 30% of the eligible cost, which in fact, I just did one for a client this tax season.

John: They invested in a solar roof. They spent $52,000 on the roof. They ended up getting a $17,000 tax credit back, so it kind of wiped out all of their tax that they owed. Yeah and they’ll actually get to carry some over into the subsequent years because they used up all the taxes that they had this particular year.

John: So yeah, the beauty about theirs is … They were so excited because they started getting checks from the power company. In fact-

Danielle: Oh, that is exciting.

John: Yeah! They got a $400 check back from Duke Energy, which is the provider in the area. They were so elated because now the power company owes them money.

Danielle: Yeah. I know that when we started talking, you and I had started talking about doing this podcast topic, we had just been talking about the Tesla roof material. Those are individual solar cells. They picked all things that would be traditional materials and you can’t tell the difference. I’ll be curious to see how those are embraced, once they do their full roll-out, by the preservation community because those solar panels, the types of [crosstalk 00:19:42] they chose-

John: Oh, the new shingles?

Danielle: Yeah, but they chose slate and tile, those are not inexpensive roofing materials anyway. So if somebody’s going to do that, I’ll be curious to see how it’s embraced by the preservation community because there’s definitely that intersection of green and then traditional-looking materials at least.

John: Right.

Danielle: I think that’s pretty exciting.

John: Yeah. A lot of those things are coming out from the world of the Tesla vehicles and all of that to Elon Musk and producing new types of materials.

John: Yeah, that was the thing is people, they liked the idea of the solar, but they didn’t want to have these what they would consider ugly panels on their roof. So now-

Danielle: [crosstalk 00:20:29], yeah, yeah.

John: Yeah. It’s probably going to be in your world, open up a lot more opportunity and people to want to do that because yeah, now they can more look like the original property that we’re trying to preserve and everything, and get the efficiency out of it of modern energy systems.

Danielle: Yeah, definitely. I think that’s something exciting to definitely keep an eye on.

Danielle: The other thing and something that I think that people know about but it’s kind of like they don’t know a lot about it is the rehabilitation credits. I know the federal government has theirs, and then the State of Pennsylvania has some. There’s not a lot of money in the state. The tax credits here are very new for rehabilitation. I think they’re only a couple of years-old. I know that the federal tax credits have been around for a while and they’ve actually shown good economic development benefits, but if you could talk a little bit about the Rehabilitation Credits in the tax code.

John: Yeah, there’s rehabilitation credits.

Danielle: That’s a tough word.

John: Yeah, I know. That’s under Internal Revenue Code Section 47. There are actually two of them. One, it’s a 10% of the qualified rehabilitation expenditures, or whatever you spend, with respect to the qualified rehabilitated building. Other than a certified – it doesn’t have to be a certified historic structure in this case, okay?

Danielle: Right.

John: You can still get 10% of that. Now, in the second case, you can get 20% of the qualified rehabilitation expenditure, or cost, if it is a certified historic structure. So there, you can benefit even more.

John: Basically, the federal government is telling us, “Look, we understand you want to keep these buildings. They’re great buildings or whatever like that. They just need some tender love and care. We’re going to help you lower the cost to go ahead and rehab these buildings, especially if you’re going to keep them in order, use them for an economic purpose.”

John: So what we’re kind of looking at too is, okay, what’s in it for the government? Well, obviously if you’re going to be able to use that building, rehab it, for its use or just bring it back up to code so you can keep using it, well, they’re going to get more tax money, right?

Danielle: Right, right.

John: Because you’re going to remain in business and use that building. Well, the states, obviously, are still going to benefit because they’re going to get additional property taxes and they’ll probably reassess it on the rehabbed cost of it because, oh, it’s gone up in value because you rehabilitated it. There’s two benefits there.

John: Now, obviously the states benefits aren’t as rich as the federal government because, as we know, our government’s got plenty of money to throw around. Right?

Danielle: Right. Maryland has a really good rehabilitation credit system though. Theirs is, I think if you combined the federal and Maryland’s, you can get up to 50%.

John: Yeah.

Danielle: Yeah, so some of the states have a really good system.

John: I think it’s great. And so basically, it’s something to take into benefit there if you have a building that would meet those criteria. There again, you might get a little bit if it’s not a historic building, but still, it might be in your benefit to do it.

John: Now, like everything that we do in the tax code, there’s good and bad things. Well, the good thing is, yes, you could get some assistance there for doing it. The bad thing is you might have to jump over some hurdles, some paperwork, this and that, and everything else. But I found that once you do it, it’s well worth it.

Danielle: Yeah, I agree. It is a process to get through that because at first, you have to be approved by the State Historic Preservation Office, and then you go. They actually, once they have everything that they need, then they forward it onto the National Park Service for review. But typically, it is a lot of paperwork, but most people can get through it. It’s just having to stay on top of it.

Danielle: I do know one thing that is, and the tax benefits, one thing that’s kind of frustrating to homeowners that this is mostly or it is just for income-producing properties. So you’ve either gotta be a business or a bed and breakfast or rental unit, something like that.

John: Right.

Danielle: One other thing that I learned that’s very interesting is the tax credits on your passive income. Well, most people don’t have a lot of passive income. So I sat through a presentation. I’m like, “Oh, that makes so much sense.” Banks are willing to pay, buy the tax credits from you, because they have passive income and they can use them. The credits are transferrable. I didn’t know that.

John: Yeah, yeah.

Danielle: When I heard that, I was like, “Oh my goodness. I never would have thought to shop my tax credits to anybody,” but there are people who do it.

John: That’s an interesting point that you bring up. You know, a lot of people say, “Well, if I can’t use them, I lose them.” No, they actually have benefit and people are willing to use them. The other thing too is you’ve heard of those called carbon tax credits for pollution and everything else?

Danielle: Yeah, yeah.

John: Well, let’s say you have a business and you get X amount of tax credits, but your business is pretty efficient, non-polluting, and everything else. You get these credits but you don’t use them all the way or whatever like that. Well, there’s certain other businesses that are more polluting and they need more credits than they actually get from whatever they’re producing, so they’ll buy those credits from you and that helps them out too. There is a market for that.

Danielle: Yes, I would have never even thought that until I was sitting in that presentation. I’m like, “That makes so much sense.” Because most people, even if they’re high-income people, don’t have a lot of passive income, but banks do. I thought that was a really, really interesting thing that I learned.

John: Yeah. And the thing most people don’t understand is you have to match up the types of income and losses to be able to take them. For what you’re just saying there, if you have passive income, you have to have passive losses to match up against them. You can’t take income that you earned from your job and actually offset passive income or investment income in there. That’s a key.

John: What we try to do there is if we do have a client that does have lots of passive losses, we try to find some passive incomes. We call it a PIG PAL strategy. Passive activity losses matched up with passive income generations.

Danielle: Oh, okay. Very cool. Yeah, you understand how to maximize these strategies. I thank you for sharing your knowledge with me and our listeners. Could you tell me, unless, did you have anything else you wanted to share or anything that we didn’t care that you wanted to?

John: Well, I think that’s pretty good.

Danielle: Oh, okay. Very good.

John: There’s so much embedded in there.

Danielle: There is.

John: Yeah.

Danielle: And I’ll definitely, the tax codes or sections that you referenced, on the website resource section, I will definitely put those there so people can go and read them.

John: Okay.

Danielle: And your information will definitely be on the website too, but how can our audience get a hold of you if they have specific questions or they want to use your expertise to help preserve their buildings?

John: Well, they can actually call my office if they want. My phone number directly is 727-388-9024. If, by chance, somebody doesn’t answer the phone, leave a message and we get back to you in a short amount of time.

John: You can also go to my website it’s www.lewaltconsultinggroup.com and leave a message there or we have lots of information on the website that you can contact us or find out some other information about the different tax codes. I think you’ll probably put our website on your-

Danielle: I will, yeah, I’ll definitely make sure that gets put on the website too. We’ll have links, and I’ll have the additional information, and anything else that we think that would be good resources for all of our listeners.

Danielle: Thank you so much for joining us today.

John: Okay, well, yeah. It was a pleasure talking here and one last thing.

Danielle: Oh, sure.

John: With the broadness of the tax code, people think, “Oh, it’s just in general,” or whatever. There’s really something for everybody in there, we just have to sometimes dig deep for you. If you employ certain people, there’s tax credits for employing certain groups of people.

Danielle: Right, yeah. We had just learned that we could get a Made in America tax credit because we manufacture. I never even thought about what we do as manufacturing, but it is! There’s always something in there that you might not even think would apply to you.

John: Yeah, so every situation, individual situation, is different. Don’t think that there’s nothing in there for you. There may be, depending on what you want to do. Hey, it’s worth a phone call or a short email conversation. We can see what we can do for you.

Danielle: Okay, very good. Thank you so much again.

Announcer: Thanks for listening to the Practical Preservation podcast. The resources discussed during this episode are on our website at practicalpreservationservices.com/podcast.

Announcer: If you received value from this episode and know someone else that would get value from it as well, please share it with them. Join us next week for another episode of the Practical Preservation podcast.

Announcer: For more information on restoring your historic home, visit us at practicalpreservationservices.com

 

Scott T. Hanson of Your Historic House joined the Practical Preservation podcast to discuss his book, Restoring Your Historic House, the result of 4 years of hard work and dedication to present a practical and comprehensive guide for historic homeowners. We covered a multitude of topics including:

  • How the present-day Conway Scenic Railroad and train station served as a catalyst for Scott’s passion for preservation
  • Scott’s observation that a dearth of information on preservation for homeowners necessitated filling that gap, and inspired him to write his book
  • Lessons, challenges, and resources for aspiring preservationists and homeowners
  • Advice for homeowners interested in preservation, restoration, or rehabilitation, including practical examples of ways to offset costs
  • The book’s detailed inspiring stories of homeowners’ projects, including a description a local Central PA project featured in (and on the front cover!) of the book
  • Information on book-purchasing options and opportunities to meet Scott

Contact/Follow:

Scott T. Hanson

Website

Facebook

Instagram

Buying Options:

Amazon.com for a discounted price

Scott’s website for signed and personalized signed copies, as well as other books for sale

 

Stephen McNair of Mc Nair Historic Preservation joined the Practical Preservation podcast to share with us his experiences and the services his firm provides.  Listen to learn: 

  • Potential issues with historic tax credits
  • Trends in adaptive reuse
  • Economic incentives for commerical use preservation projects
  • The biggest obstacles and challenges for planning historic projects

Contact:

Website

Facebook

 

Gina Douty joined the Practical Preservation podcast to share with us her over 30 years of historic preservation experience.  Having worked in both the public and private sectors she brings a variety of experiences and knowledge to the discussion (we had a great conversation after we finished the recording about her early experiences as a young, female architect – I wished I had kept the recorder going).

Gina Douty offers historic preservation consulting in Central Pennsylvania (and beyond) her services include:

  • Federal and State Historical Rehabilitation Tax Credit applications and submissions
  • PA Historic Resource Survey Form preparation and submissions
  • National Register Nominations
  • Rehabilitation Proposals
  • Section 106 Reviews as an Architectural Historian (36 CFR Part 61)
  • Grant Writing
  • Historic Building Research, Documentation, Assessment, and General Design Guidance

Contact:

Gina M Douty, Historic Preservation Consulting, LLC 717-512-1032 or email: [email protected]

Conference: PA Statewide Conference on Heritage – No Norm Dorm Case Study 

Bio:

Gina M. Douty is a historic preservation consultant who lives and works in Mechanicsburg, Pennsylvania.  Her undergraduate degree is from Penn State University in Architecture with a Special Studies in Historic Preservation.  She began pursuing a Masters in American Studies at Penn State Harrisburg, while working full-time as a Historic Preservation Specialist, then later, an Architectural Designer II with the PA Historical and Museum Commission in Harrisburg.  Gina became a mom, and she took some quality time off from my career to raise her family.  Eventually, she began to work part-time at the office and part-time at a home office, with an architectural firm in Harrisburg.  For over ten years, she was the firm’s preservationist, then later, an Associate.  In 2012, with nearly 25 years in the Historic Preservation field, she created Gina M. Douty, Historic Preservation Consulting, LCC, a certified woman-owned, small business, to assist those who desire, need, or have a passion for historic preservation consulting services.  Gina later completed her Masters degree in Historic Preservation from the Savannah College of Art and Design, and was fortunate to receive the Graduate Achievement award as Preservationist of the Year for her graduating class.

 

John Walters from LeWalt Consulting Groupe joined me to discuss how tax strategies can help with land and property preservation efforts.

We covered:

John’s contact information and additional resources:

LeWalt Consulting Groupe, LLC
https://www.facebook.com/LeWaltConsulting

727-388-9024

Tax Codes Referenced:
Conservation Easements
Historic Preservation Tax Incentives
Energy Incentives

Bio:
John is an Enrolled Agent, Certified Tax Coach, Best Selling Author, Instructor and Speaker at the firm LeWalt Consulting Groupe, LLC located in St. Petersburg, Florida.
He is known on LinkedIn as:
“Florida’s Leading Pro-Active Tax and Financial Change Agent for your Diverse needs and Individual Lifestyle”
At LeWalt Consulting Groupe, LLC our PASSION is creating “Tax Alpha” that helps you, as the Entrepreneur and Business Owner, live the “Ultimate”​ TAX-FREE lifestyle you desire using the complexities written into the Internal Revenue Service Tax-Code to your favor!
After all… We believe those numbers on your TAX FORMS is your “REAL” money, why not protect, preserve, and keep it for you and your family?
How may we Help You Live a Life that is less taxing…?

Tran

Announcer: Thank you for tuning into the Practical Preservation podcast. Please take a moment to visit our website practicalpreservationservices.com for additional information and tips to help you restore your historical home. If you’ve not yet done so, please subscribe to us on iTunes, Stitcher, and Sound Cloud, and also like us on Facebook.

Announcer: Welcome to the Practical Preservation podcast hosted by Danielle Keperling. Keperling Preservation Services is a family-owned business based in Lancaster, Pennsylvania dedicated to the preservation of our built architectural history for today’s use as well as future generations. Our weekly podcast provides you with expert advice specific to the unique needs of renovating a historic home, educating by sharing our from-the-trenches preservation knowledge and our guests’ expertise, balancing modern needs while maintaining the historical significance, character, and beauty of your period home.

Danielle: Thank you for joining us on the Practical Preservation podcast. Today, we have John Walters speaking with us about some tax tools that you can use to help preserve buildings. John is an Enrolled Agent, Certified Tax Coach, best-selling author, instructor, and speaker at the firm LeWalt Consulting Groupe, LLC. located in St. Petersburg, Florida. He is known on LinkedIn as Florida’s leading proactive state and financial change agent for your diverse needs and individual lifestyle.

Danielle: “At LeWalt Consulting Groupe, LLC., our passion is creating tax alpha that helps you as the entrepreneur and business owner live the ultimate tax-free lifestyle you desire using the complexities written into the Internal Revenue Service tax code to your favor. After all, we believe those numbers on your tax form is your real money. Why not protect, preserve and keep it for you and your family? How may we help you live a life that is less taxing?”

Danielle: So John, thank you for joining us and sharing your knowledge about the tax code and how that can be used to help us preserve buildings.

John: Well, thank you Danielle. I enjoy talking to people about taxes even though, I’m sure for most, it seems like a boring subject, but it’s one of the most things you’re going to pay all of your life and you might as be able to control it to your best ability.

Danielle: And understand it the best you can. I know I don’t feel I understand everything as much as I probably should. But yeah, I think the protections that people don’t understand that are written into tax code are really interesting because they can help you finance a project, they can help you make sure the building is preserved. Those things, I don’t think people necessarily think that those are tax code things, but they are. So thank you for sharing that knowledge with us.

John: Sure, no problem.

Danielle: I know one of the things that most people don’t either understand or are aware of is the tax conservation easement. If you could talk to us a little bit about that and help us understand. I understand a little bit from a preservation standpoint that the easement means that the outside can’t be changed because it’s protected, but I don’t understand what the tax ramifications of that is.

John: Okay. In the Internal Revenue Code, there’s a section called 170(h) and it talks about land conservation strategies, especially for federal and state taxes. What a land conservation strategy is designed to do is it’s designed to meet basically the tax payer’s – in this case, your client or whoever you’re working for – financial goals and take into heart their charitable desires.

John: In essence, it’s to preserve their properties and realize their most favorable economic outcomes, and actually, you get some tax savings out of it too. You become part of what we call the ready to conserve your assets for individuals and enjoy the related tax savings possible and the income opportunity in the property’s amenities.

John: In essence, what you want to do is let’s say you have a piece of property, but you don’t want it to be built on or you want to preserve it for generations to come and things like that. There are provisions in the tax code under the land conservation easement strategies is to actually give that land away. In essence, you’re giving it away for the purposes of being able to develop it or use it for some other commercial purpose to the government and you have official documents that tell you that you can do that. In turn, there are charitable deductions that you can take for that conservation.

John: With that, your land is preserved. Basically, you still retain rights to it, but you just can’t use it for other purposes, intended purposes.

Danielle: So it almost restricts you? Yeah, it restricts what you do with it. Okay.

John: Exactly. You have basically a deed of restriction, but that land can be used for whatever thing that you set it up for.

John: For instance, let’s say that you have land and you want to preserve it for hunting and you don’t want anybody to build anything on it. You could have a land conservation easement for that property; it could still be used for hunting and you can use for that purpose. You can even build a structure on there like a lodge or something like that and people could use it for hunting, but they wouldn’t be able to use for some other commercial development.

Danielle: [crosstalk 00:06:17] Yeah.

John: Yeah. In turn, when you take that conservation easement, the government’s giving you a tax deduction and it can be up to 50% of your adjusted gross income. Let’s say for every dollar this property is valued at, you go get it appraised and stuff, sometimes you can get to four to five times the benefit. In essence, what you’re telling is, well, if I built it commercially, this is what it would be valued at. But if I-

Danielle: So if you develop the property, that’s why they use as your [crosstalk 00:07:00]

John: Right.

Danielle: Okay, that makes sense.

John: So if I was going to put a housing development on it, it would be worth X. But if I say, “I don’t want to allow that on there,” they’re going to take that value of the housing development, it’s appraised out, subtract what the land is worth right now, and you get the difference in the tax credits.

Danielle: Okay. Okay, and then is that an actual credit onto … I’m trying to think about what I’m familiar with preservation easements. You usually then donate that to a nonprofit, is that correct? Or is the conservation a little bit different?

John: Yeah, it’s actually donated to the government, per se, because it’s under tax code. Now, there’s the charitable contributions fall under the federal tax code, but you can also get state tax credits too, depending on what state you’re in and the property.

Danielle: Yeah, I know. Yeah, the preservation tax credits are very dependent on which state you’re in, how robust they are.

John: Mm-hmm (affirmative), exactly.

Danielle: Yeah. So this benefits the person that’s doing the easement by reducing their taxable income. Is that pretty much what the goal is?

John: Right. You can reduce your actual tax that you would owe by between 30 and 50% of your adjusted gross income.

Danielle: Okay.

John: Now, let’s say it exceeds 50% of your gross income in that particular year, those charitable credits can be carried over for many years into the future until you can use them up.

Danielle: Okay.

John: Yeah, so typically, if you don’t have a whole lot of income in that particular year, it will just carry over until you can use those up.

Danielle: Use it up, so there’s not a time limit. I was thinking there’s a difference – and now this is telling you what I don’t understand about taxes. There’s a difference between a credit and a deduction, is that correct? So the credit is like just straight money to you, it’s not based on any kind of scale, correct? Is that what-

John: Well, yeah. There are credits that are basically a one-to-one dollar reduction in your taxes. Now, in the credit world-

Danielle: Okay, so [crosstalk 00:09:27] a percentage. Yeah.

John: Exactly. In the credit world though, you have two types of credits. You have what we call non-refundable, meaning that it can reduce your income, your taxes to zero. Then after that, if you still have more credit, you can’t use it anymore. You won’t get additional money back. But if they’re refundable, that means that you could have zero income tax that you owe, and still get a refund back from the government. Now-

Danielle: Oh, okay. Makes sense. Yeah.

John: And with the deductions, they are a percentage, depending on what your marginal tax bracket is. So in essence, a deduction, if you’re in the 25% tax bracket, then you’re going to get 25% or 25 cents back on the dollar for every dollar you deduct.

Danielle: Okay, okay. I know I see, in this area, a lot of conservation easements for farmland.

John: Exactly.

Danielle: Where the families want to preserve their farms from development but they still want to be able to use them and farm them. The easement doesn’t stop you from being able to use it from how you’ve been using it; it’s how you write the easement. Is that correct?

John: Right. So for an example like that, in farming and ranching, Ted Turner, which we all know from the broadcasting world and everything else, he has huge tracks of land in Wyoming and Montana that he has easements on. He still allows – there’s wild buffalo that run on there. He has cattle that graze and everything so it can still be used for ranching, but no one can actually develop it into a housing development or any commercial purpose.

Danielle: Okay, okay. Very, very interesting. Thank you. So then when you go to do the charitable deduction, then they figure out what the amount would be if they developed and then they give you … Is it the difference? Is that pretty much what your credit is?

John: Yeah. So for instance, let’s say it would be valued, appraised, at a million dollars if it was fully developed, but right now in your hands, ownership, it was worth really only $100,000, per se, in undeveloped land and everything else. So in fact, you could probably get a deduction for the $900,000 difference there.

Danielle: Because you’re not using it to develop it completely. It is a benefit then to the community too. That does make sense to me as to why it would be a tax credit also because you’re agreeing to leave it the way it was. It’s not [crosstalk 00:12:20].

John: Right, yeah.

Danielle: Yeah. So what are the risks to somebody who wants to use an easement or a land conservation easement to preserve their property? What would the risks be to that?

John: Well, a couple risks, not necessarily to the owner of the land. There are people that actually don’t own the land but want to invest in the ownership of that property with the original owner to get these tax credits.

Danielle: Oh, right.

John: So some of the risk there would be basically you may not get the asset protection as a limited partner instead of the ownership of it. Operating reserves set aside at a closing. There may be monies that are needed in excess of that property for the conveyance of it and the deed. Could be additional capital calls if other risks – or not risks but unknowns are known about the property. Maybe there was so encumbrances on the property that you didn’t know about and stuff, so money would have to become available to take those encumbrances away so that deed could be unrestricted.

John: Sometimes there’s a taxation risk basically due to audits because sometimes these things are not put together correctly. Lately, there’s been a little bit of talks in the IRS about making this what they call a listed transactions, where they still allow it, but you would have to list it there of what the transaction was and basically have your, per se, ducks in a row if you wanted to-

Danielle: [crosstalk 00:14:19] yeah.

John: Yeah. Of course, as always, anything in the code is subject to abuse.

Danielle: Right.

John: You may be working with unscrupulous people, a.k.a. crooks, that want to take your money basically and don’t do it properly so the whole deal falls apart.

Danielle: Yeah. That and I know that when we talk to home owners about it, people are nervous about restricting their deeds. I don’t know if you have that knowledge if it … Does it lower the value of the property or is it usually somebody who would be interested in conservation, is that something that would be appealing to them?

John: Oh, it would be very appealing to someone because most of us do have a charitable gift to us or want to do something, either that, preserve it for nature or actually for our legacy and stuff like that. But even if you end up selling the property or whatever, that easement and everything else can convey to the next group of people in ownership.

Danielle: Yeah, it attaches to the deed. Yep. Then they then have to … As far as I know, that is the only preservation tool that actually restricts what you can do because even being on the National Register, that building can still be torn down if you take the appropriate steps and get approval. You know what I mean?

John: Right.

Danielle: So that doesn’t protect it as much as the easement does. I know of a project here in Lancaster that they were going to develop. It was where Thaddeus Stevens had his offices in Lancaster. They were going to tear it down and then the nonprofit that held the easement came forward and said, “No, you can’t. We have an easement on this property.” And they actually ended up, it’s really a cool building to look at now because they incorporated the modern construction around this building. It’s marrying that old with the new, but they had to keep the original building there because they did hold the easement.

Danielle: That’s the only preservation tool that I know guarantees that the building will not change and have to stay the way it has been. So very, very [crosstalk 00:16:51].

John: Yeah, exactly because you are actually accepting a deed of restriction that permanently prohibits some sort of commercial exploitation and rights to the real estate property and stuff. You’re absolutely right. That’s pretty much the most ironclad vehicle there to be able to preserve something.

Danielle: Right, okay. And then I know you had given me some notes. I have that you would talk about the energy efficient property credits.

John: Sure, sure.

Danielle: Those are being extended, which is kind of exciting for people who are wanting to maybe put some green energy to use in their homes.

John: Yeah. The wind and solar credits have actually been extended to 2024 because our government sees the value of doing that and making us less reliant, basically, on fuels like oil and gas and things like that. The interesting thing is for these types of credits, you can qualify up to 30% of the eligible cost, which in fact, I just did one for a client this tax season.

John: They invested in a solar roof. They spent $52,000 on the roof. They ended up getting a $17,000 tax credit back, so it kind of wiped out all of their tax that they owed. Yeah and they’ll actually get to carry some over into the subsequent years because they used up all the taxes that they had this particular year.

John: So yeah, the beauty about theirs is … They were so excited because they started getting checks from the power company. In fact-

Danielle: Oh, that is exciting.

John: Yeah! They got a $400 check back from Duke Energy, which is the provider in the area. They were so elated because now the power company owes them money.

Danielle: Yeah. I know that when we started talking, you and I had started talking about doing this podcast topic, we had just been talking about the Tesla roof material. Those are individual solar cells. They picked all things that would be traditional materials and you can’t tell the difference. I’ll be curious to see how those are embraced, once they do their full roll-out, by the preservation community because those solar panels, the types of [crosstalk 00:19:42] they chose-

John: Oh, the new shingles?

Danielle: Yeah, but they chose slate and tile, those are not inexpensive roofing materials anyway. So if somebody’s going to do that, I’ll be curious to see how it’s embraced by the preservation community because there’s definitely that intersection of green and then traditional-looking materials at least.

John: Right.

Danielle: I think that’s pretty exciting.

John: Yeah. A lot of those things are coming out from the world of the Tesla vehicles and all of that to Elon Musk and producing new types of materials.

John: Yeah, that was the thing is people, they liked the idea of the solar, but they didn’t want to have these what they would consider ugly panels on their roof. So now-

Danielle: [crosstalk 00:20:29], yeah, yeah.

John: Yeah. It’s probably going to be in your world, open up a lot more opportunity and people to want to do that because yeah, now they can more look like the original property that we’re trying to preserve and everything, and get the efficiency out of it of modern energy systems.

Danielle: Yeah, definitely. I think that’s something exciting to definitely keep an eye on.

Danielle: The other thing and something that I think that people know about but it’s kind of like they don’t know a lot about it is the rehabilitation credits. I know the federal government has theirs, and then the State of Pennsylvania has some. There’s not a lot of money in the state. The tax credits here are very new for rehabilitation. I think they’re only a couple of years-old. I know that the federal tax credits have been around for a while and they’ve actually shown good economic development benefits, but if you could talk a little bit about the Rehabilitation Credits in the tax code.

John: Yeah, there’s rehabilitation credits.

Danielle: That’s a tough word.

John: Yeah, I know. That’s under Internal Revenue Code Section 47. There are actually two of them. One, it’s a 10% of the qualified rehabilitation expenditures, or whatever you spend, with respect to the qualified rehabilitated building. Other than a certified – it doesn’t have to be a certified historic structure in this case, okay?

Danielle: Right.

John: You can still get 10% of that. Now, in the second case, you can get 20% of the qualified rehabilitation expenditure, or cost, if it is a certified historic structure. So there, you can benefit even more.

John: Basically, the federal government is telling us, “Look, we understand you want to keep these buildings. They’re great buildings or whatever like that. They just need some tender love and care. We’re going to help you lower the cost to go ahead and rehab these buildings, especially if you’re going to keep them in order, use them for an economic purpose.”

John: So what we’re kind of looking at too is, okay, what’s in it for the government? Well, obviously if you’re going to be able to use that building, rehab it, for its use or just bring it back up to code so you can keep using it, well, they’re going to get more tax money, right?

Danielle: Right, right.

John: Because you’re going to remain in business and use that building. Well, the states, obviously, are still going to benefit because they’re going to get additional property taxes and they’ll probably reassess it on the rehabbed cost of it because, oh, it’s gone up in value because you rehabilitated it. There’s two benefits there.

John: Now, obviously the states benefits aren’t as rich as the federal government because, as we know, our government’s got plenty of money to throw around. Right?

Danielle: Right. Maryland has a really good rehabilitation credit system though. Theirs is, I think if you combined the federal and Maryland’s, you can get up to 50%.

John: Yeah.

Danielle: Yeah, so some of the states have a really good system.

John: I think it’s great. And so basically, it’s something to take into benefit there if you have a building that would meet those criteria. There again, you might get a little bit if it’s not a historic building, but still, it might be in your benefit to do it.

John: Now, like everything that we do in the tax code, there’s good and bad things. Well, the good thing is, yes, you could get some assistance there for doing it. The bad thing is you might have to jump over some hurdles, some paperwork, this and that, and everything else. But I found that once you do it, it’s well worth it.

Danielle: Yeah, I agree. It is a process to get through that because at first, you have to be approved by the State Historic Preservation Office, and then you go. They actually, once they have everything that they need, then they forward it onto the National Park Service for review. But typically, it is a lot of paperwork, but most people can get through it. It’s just having to stay on top of it.

Danielle: I do know one thing that is, and the tax benefits, one thing that’s kind of frustrating to homeowners that this is mostly or it is just for income-producing properties. So you’ve either gotta be a business or a bed and breakfast or rental unit, something like that.

John: Right.

Danielle: One other thing that I learned that’s very interesting is the tax credits on your passive income. Well, most people don’t have a lot of passive income. So I sat through a presentation. I’m like, “Oh, that makes so much sense.” Banks are willing to pay, buy the tax credits from you, because they have passive income and they can use them. The credits are transferrable. I didn’t know that.

John: Yeah, yeah.

Danielle: When I heard that, I was like, “Oh my goodness. I never would have thought to shop my tax credits to anybody,” but there are people who do it.

John: That’s an interesting point that you bring up. You know, a lot of people say, “Well, if I can’t use them, I lose them.” No, they actually have benefit and people are willing to use them. The other thing too is you’ve heard of those called carbon tax credits for pollution and everything else?

Danielle: Yeah, yeah.

John: Well, let’s say you have a business and you get X amount of tax credits, but your business is pretty efficient, non-polluting, and everything else. You get these credits but you don’t use them all the way or whatever like that. Well, there’s certain other businesses that are more polluting and they need more credits than they actually get from whatever they’re producing, so they’ll buy those credits from you and that helps them out too. There is a market for that.

Danielle: Yes, I would have never even thought that until I was sitting in that presentation. I’m like, “That makes so much sense.” Because most people, even if they’re high-income people, don’t have a lot of passive income, but banks do. I thought that was a really, really interesting thing that I learned.

John: Yeah. And the thing most people don’t understand is you have to match up the types of income and losses to be able to take them. For what you’re just saying there, if you have passive income, you have to have passive losses to match up against them. You can’t take income that you earned from your job and actually offset passive income or investment income in there. That’s a key.

John: What we try to do there is if we do have a client that does have lots of passive losses, we try to find some passive incomes. We call it a PIG PAL strategy. Passive activity losses matched up with passive income generations.

Danielle: Oh, okay. Very cool. Yeah, you understand how to maximize these strategies. I thank you for sharing your knowledge with me and our listeners. Could you tell me, unless, did you have anything else you wanted to share or anything that we didn’t care that you wanted to?

John: Well, I think that’s pretty good.

Danielle: Oh, okay. Very good.

John: There’s so much embedded in there.

Danielle: There is.

John: Yeah.

Danielle: And I’ll definitely, the tax codes or sections that you referenced, on the website resource section, I will definitely put those there so people can go and read them.

John: Okay.

Danielle: And your information will definitely be on the website too, but how can our audience get a hold of you if they have specific questions or they want to use your expertise to help preserve their buildings?

John: Well, they can actually call my office if they want. My phone number directly is 727-388-9024. If, by chance, somebody doesn’t answer the phone, leave a message and we get back to you in a short amount of time.

John: You can also go to my website it’s www.lewaltconsultinggroup.com and leave a message there or we have lots of information on the website that you can contact us or find out some other information about the different tax codes. I think you’ll probably put our website on your-

Danielle: I will, yeah, I’ll definitely make sure that gets put on the website too. We’ll have links, and I’ll have the additional information, and anything else that we think that would be good resources for all of our listeners.

Danielle: Thank you so much for joining us today.

John: Okay, well, yeah. It was a pleasure talking here and one last thing.

Danielle: Oh, sure.

John: With the broadness of the tax code, people think, “Oh, it’s just in general,” or whatever. There’s really something for everybody in there, we just have to sometimes dig deep for you. If you employ certain people, there’s tax credits for employing certain groups of people.

Danielle: Right, yeah. We had just learned that we could get a Made in America tax credit because we manufacture. I never even thought about what we do as manufacturing, but it is! There’s always something in there that you might not even think would apply to you.

John: Yeah, so every situation, individual situation, is different. Don’t think that there’s nothing in there for you. There may be, depending on what you want to do. Hey, it’s worth a phone call or a short email conversation. We can see what we can do for you.

Danielle: Okay, very good. Thank you so much again.

Announcer: Thanks for listening to the Practical Preservation podcast. The resources discussed during this episode are on our website at practicalpreservationservices.com/podcast.

Announcer: If you received value from this episode and know someone else that would get value from it as well, please share it with them. Join us next week for another episode of the Practical Preservation podcast.

Announcer: For more information on restoring your historic home, visit us at practicalpreservationservices.com