The Federal Historic Preservation Tax Incentive Program allows the owner of an eligible historic property to donate a historic preservation easement on the property to a qualified charitable or governmental organization and, in connection with this donation, be eligible to claim a tax deduction in the amount of the easement value as determined by a qualified, independent appraiser.
To be eligible, the property must be either located in a registered historic district or individually listed on the National Register of Historic Places. A registered historic district is one that is either listed on the National Register or a state/local historic district that has been certified by the National Park Service. For properties in a registered historic district, the property must be certified as contributing to the district by the National Park Service. Unlike other federal tax incentives for historic preservation, participation in the easement program is not restricted by the use of the property or its fair market value.
A historic preservation easement is a legal agreement made between a property owner and a qualified charitable or governmental organization to protect in perpetuity a building’s historic character. Legislation passed by Congress in 2006 requires that easements on properties in registered historic districts must protect the entire exterior of the property, rather than just the portion visible from the public right-of-way. By donating an easement, the owner promises not to change the exterior appearance of the property without permission from the charitable or governmental organization. This commitment becomes part of the property deed and extends to future owners as well.
Internal Revenue Tax Code Section 170(h) and the related Treasury Regulations outline the specific requirements for a donor to be eligible for a tax deduction in connection with a historic preservation easement donation. Many state and municipal tax codes also recognize an easement donation as a tax deductible charitable contribution. Any property owner considering participation in the program should consult with his or her legal and tax advisors prior to making a historic preservation easement donation.