Incentives give history a boost

Preservation: Tax-credit programs that reward homeowners who rehabilitate historic properties also draw more folks into the city.

May 09, 1999|By Charles Belfoure | Charles Belfoure,SPECIAL TO THE SUN

Every day, Lynne Puckett enjoys the view of the harbor through new glass doors that open from the third floor of her historic home in Butchers Hill.

The doors, along with the rest of the renovation work she has done, have added value and comfort to her 1870s rowhouse -- and they opened a way to reduce her state income tax bill this year.

More owners of historic properties in Baltimore are taking advantage of two tax credit programs:

One is a city program that freezes property taxes at pre-rehab rates; the other, operated by the state, allows owners to regain 25 percent of their rehabilitation costs in the form of a credit on their Maryland income tax.

FOR THE RECORD - Also in Sunday's Real Estate section, in an article on using tax credits for historic housing, the Northwood Historic District in Baltimore was not included in a list of eligible neighborhoods supplied by the Commission for Historical and Architectural Preservation.
The Sun regrets the errors.

The number of applications to Baltimore's Commission for Historical and Architectural Preservation (CHAP) -- the organization that must approve an owner's rehab plans -- has risen in the last year.

Of 100 applications received, 33 have been completed with a total rehabilitation cost of almost $6 million and $936,526 in tax credits issued to owners.

"The most applications have come from Federal Hill and Fells Point, followed by Roland Park," said Brigitte Fessenden, a preservation planner and administrator of the program.

According to Kathleen Kotarba, executive director of CHAP, it now pays to improve your historic home.

"In the past, there was no financial incentive to improve an historic property," she said. "In fact, you were punished because your property tax assessment would go up; but now you're actually rewarded for the rehab work."

The purpose of the state and city tax credit programs is to encourage preservation and restoration of the 49,000 eligible historic structures in Maryland. It is especially important in Baltimore, which has 21,000 of those homes.

"The programs not only encourage preservation but are an important inducement to bring folks into the city," said Martin P. Azola, president of the Home Builders Association of Maryland and a trustee of the Maryland Historical Trust, which oversees the state program.

The city program, which began in 1996 and is called the Property Tax Credit for Historic Restorations and Rehabilitations, works like a 10-year tax abatement.

If an owner does $20,000 worth of work on a historic structure, for example, the property tax bill could rise $600, from $1,200 to $1,800, to take into account the value of the added improvement to the house. But under the program, the owner's tax bill would be frozen at $1,200 for 10 years, giving him a tax savings of $6,000.

To be eligible, the property can either be an owner-occupied residence or an income-producing property, such as an apartment building or a business in a locally designated historic district or a National Register Historic District. The build- ing can also be individually listed on the National Register of Historic Places or the Baltimore City Landmarks List.

The owner must also follow a procedure to ensure that the work is certified by CHAP. Without CHAP's approval, there can be no property tax credit. Work done on a historic building must meet CHAP's historic preservation guidelines.

In general, the work cannot damage, destroy or cover up important architectural features on either the exterior or the interior. An intricately carved fireplace mantel, for instance, cannot be covered by a new wall, nor could elaborately carved woodwork on a porch be torn down.

Before an owner proceeds with a project, CHAP must precertify the work. This involves submitting "before" photos and an application in which a summary of the proposed work is required.

"Some people finish the entire project and come in and ask to be certified, which is a problem," Fessenden said.

At the project's end, the owner must submit all cost documentation, such as contractor and material invoices, as well as photos of the finished work and a copy of the building permit to CHAP.

The final certification is based on an inspection that verifies the correctness and completion of the work.

CHAP then notifies the state Department of Assessments and Taxation that the owner has been certified for the tax abatement. If an owner decides to sell the house, any unused credit can be transferred to the purchaser.

As an added benefit, CHAP will provide technical assistance to the homeowner throughout the project, which can include a preliminary visit to the project if there are major questions.

About half the projects use professional architectural or interior services that qualify as part of the eligible rehab costs, Fessenden said. An owner's labor costs can be included as well. The rehab work requires a building permit from the city, which is the responsibility of the owner.

The restoration cost must be at least 25 percent of the pre-rehab full cash value of the property. The size and scope of the rehabs range from a new kitchen with appliances to a complete restoration of a building. Additions also qualify, but landscaping and movable furnishings do not.

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