The Federal Historic Preservation Tax Incentive Program, a program created by Congress, allows the owner of a property certified as historic by the National Park Service to donate a preservation easement on the property to a qualified charitable or governmental organization. In connection with this donation, the owner may be eligible to claim a non-cash charitable contribution deduction in an amount equal to the fair market value of the easement, as determined by an independent, qualified appraiser. Program Q&A
Questions frequently asked about this donation process include:
What is the Trust for Architectural Easements?
What is the Federal Historic Preservation Tax Incentive Program?
What factors caused Congress to pass this legislation?
The National Historic Preservation Act of 1966 recognizes preservation as a federal priority by instituting reforms in federal policy that counteract the destruction brought about by urban renewal and federal highway building. The Act also created the National Register of Historic Places, the official list of the nation’s historic places worthy of preservation. Properties listed in the National Register must be considered when federal undertakings will affect them, and they are eligible for federal tax incentives for preservation.
Federal tax incentives were enacted by Congress in 1976 and amended in 1980, 2006, and 2008 to encourage voluntary preservation as an enhancement of local preservation efforts. This legislation serves as the basis for the Program. Congress’ concern that government regulation fails to adequately protect historic properties is as valid today as it was when the legislation was first enacted. According to a survey by the National Alliance of Preservation Commissions, approximately 50% of historic districts listed in the National Register have no local oversight. Further, 40% of the local commissions that regulate historic districts lack the authority to enforce decisions. Many preservation commissions also lack sufficient funding or staff to monitor those properties they are charged with overseeing.
What is a historic preservation easement?
How long does a historic preservation easement last?
What restrictions are imposed on the property owner?
What criteria does the Trust use when reviewing a proposed change?
How long does it take to receive a decision from the Trust regarding a proposed change to a property?
What are the tax benefits of donating an easement?
What is the value of a historic preservation easement and how is it determined?
In recent years, easement valuation has come under increased scrutiny by the IRS. IRS Notices and other communications pertaining to easement valuation are available at the IRS website and in Tax Laws and IRS Matters on the Trust’s website. In particular, IRS Publication 561 – Determining the Value of Donated Property – provides crucial information. It is important for property owners to review this information with their own legal and/or tax advisors prior to making an easement donation.
How does the public benefit from the donation of a historic preservation easement?
• The Program is an effective method of encouraging owners of historically-significant properties to make historic preservation easement donations. The terms of the easement donation require that the donor and future owners of the property properly maintain the property and prohibit alterations inconsistent with the historic character of the protected facades. The easement also prohibits demolition of the structure. Such requirements ensure that properties subject to a historic preservation easement are preserved for public enjoyment forever.
• Historic preservation easements further our country’s efforts to preserve historically-significant properties and neighborhoods by creating a system of oversight, regulation and enforcement that is separate from local government preservation efforts, which are often subject to financial limitations and political influences. When an independent charitable organization receives a donation of a historic preservation easement, it is bound by the terms of the easement and its mission to protect the historic character of the subject property in perpetuity for the benefit of the community.
• By preserving historically-significant properties and neighborhoods through historic preservation easements, such properties and neighborhoods can be used as a living artifact to educate the public about America’s history, culture and heritage.
• The visible maintenance and preservation of only a few historic residences in a single neighborhood, resulting from donations of historic preservation easements, can have a positive influence and foster voluntary preservation of the remainder of the homes in the historic neighborhood.
What are the Trust for Architectural Easements’ accomplishments with respect to the acceptance and protection of easement donations?
What are the Trust for Architectural Easements’ accomplishments other than the protection of historic properties with easements?
The Trust supports local initiatives to restore the character of historic neighborhoods. The Trust has provided grants to community groups in New York’s Greenwich Village and NoHo to restore portions of the neighborhoods’ historic granite cobblestone streets. The Trust has also provided financial support to community groups working to preserve and restore historic neighborhood parks. Canal Park and James Bogardus Triangle, both in New York, and Hiscock Park in Boston are public spaces the Trust has helped restore. Funding of the Citywide Monuments Conservation Program, run by the New York City Department of Parks and Recreation, allowed summer interns to restore public works of art in New York’s parks.
In addition to promoting preservation in existing historic districts, the Trust is also an effective ally for groups and individuals working to obtain federal designation for their historic properties and neighborhoods, including listing on the National Register of Historic Places and certification as a registered historic district. The Trust has assisted with these efforts in the following communities:
Reservoir Hill Historic District (Listed in 2004)
Beacon Hill Historic District (Additional documentation, 2007)
Boston Transit Commission Building (former) (Listed in 2007)
304 Park Avenue South (Listed in 2005)
Blum and Blum Lofts (Listed in 2004)
Carnegie Hill Historic District (Certified in 2003)
Fred F. French Building (Listed in 2004)
General Electric Building (former) (Listed in 2004)
Ladies’ Mile Historic District (Listed in 2003)
Look Building (former) (Listed in 2004)
Madison Square North Historic District (Certified in 2004)
Metropolitan Museum District (Certified in 2002)
NoHo East Historic District (Certified in 2003)
R.C. Williams Warehouse (Listed in 2005)
Riverside/West End Historic District (Certified in 2004)
Treadwell Farm Historic District (Listed in 2004)
Wall Street Historic District (Listed in March 2007)
What are the steps involved in donating a historic preservation easement to the Trust for Architectural Easements?
The donor submits an application to the Trust providing the Trust with basic information about the property; a refundable deposit of $1,000, payable by check or credit card, accompanies the application.
If necessary, the Trust assists the donor in obtaining certification that the property contributes to its historic district from the National Park Service.
If the property is mortgaged, the Trust will work with the donor and the donor’s mortgage lender(s) to request subordination from each mortgage lender.
Once National Park Service certification and lender subordination(s) have been received, the donor is advised to obtain an qualified appraisal of the historic preservation easement from an independent, qualified appraiser. If requested, the Trust can provide the donor with a list of appraisers with whom other donors have worked. The appraiser provides copies of the appraisal to the donor and the Trust.
The Trust sends the donor a closing package that includes the final easement and recording forms for signature and notarization, and the amount of the cash contribution requested to accompany the easement donation for the purpose of funding current operations and future easement stewardship.
Upon return of the closing documents by the donor, the Trust accepts the easement donation, and records the easement in the local land records.
The appraiser finalizes the appraisal report, incorporating the date of donation and the recorded easement.
The Trust sends the donor a letter acknowledging both the donation of the easement and the cash contribution, along with the required documentation for tax filing purposes.
Annually thereafter the Trust inspects the exterior of the property to ensure it remains in compliance with the easement restrictions.
How can I determine if a property is eligible?
Why should someone get a tax deduction for an easement donation on a property in a historic district when local ordinances prohibit the same kinds of actions prohibited by the easement?
Easement donations represent binding agreements between property owners and the Trust for Architectural Easements and cannot be amended or terminated. Such easements are binding upon future owners of the property and thus, the properties are restricted in perpetuity. Local ordinances, however, can be revoked or changed at any time. Further, in some instances the preservation standards used by local preservation commissions differ from the Secretary of the Interior’s Standards used by the Trust, and often local preservation commissions have the authority and discretion to permit alterations and demolition as a result of economic development pressures. Moreover, unlike some local ordinances, easements granted to the Trust go further than just regulating changes; they prohibit demolition-by-neglect and require that the structural integrity of the entire building be preserved along with the historic character of the exterior. The Trust’s easements are monitored annually and enforced faithfully, free of economic or political influences that often interfere with the regulation and enforcement of local ordinances. Conversely, a survey by the National Alliance of Preservation Commissions found that approximately 40% of all preservation commissions lack enforcement ability. Many also lack the proper procedures and funding to monitor the properties within their jurisdiction. The Trust for Architectural Easements maintains a stewardship fund of approximately $12 million to ensure sufficient funding to monitor and enforce the easements it holds.
A research report, Historic Preservation Options in New York City: Similarities and Differences Between Landmarks Preservation Commission Regulation and Donation of Preservation Easement, prepared by architectural historian Anthony Robins of Thompson & Columbus, Inc., provides an example of why federal historic preservation protections remain a necessity even where local preservation protections exist by examining the operation and effectiveness of the two programs in New York City.