Many apply for tax credit

Program supports renovations to historic properties

113 filed in state last year

March 05, 2000|By Martin Schneider | Martin Schneider,SPECIAL TO THE SUN

An increase in a state tax credit for renovating historic properties has many Baltimore residents joining a record number of Marylanders who have applied for the program.

Last year, 113 Maryland property owners filed for the tax credit compared with 59 the year before, meaning the number of historic buildings that will undergo substantial renovations has almost doubled in the past two years.

Under Maryland's Heritage Preservation Tax Credit, owners of residential and commercial historic property are allowed income tax credits equal to 25 percent of the cost of renovating the property. For example, a property owner spending $60,000 on renovation would be eligible to receive a $15,000 income tax credit.

Applications for historic tax credits in Baltimore surged as well, rising to 56 last year, compared with 44 in 1998 and 13 in 1996.

Michael Day, chief of the office of preservation services for Maryland Historical Trust, said the increase may not be immediately evident, but the renovations will have a substantial impact in regions across the state.

"This isn't going to have a major impact on people's lives -- they may not even realize it. But, the quality of life in downtown areas especially is going to improve. This is going to make a difference," Day said. "Since the economy is good, we may see larger projects and even entire city blocks get revitalized because of this program.

"I think you are going to see a mini-renaissance in building downtown."

The Maryland Historical Trust estimates that more than 49,000 structures in Maryland are eligible for the tax credit program.

"In most of our historic districts -- from Fells Point to Federal Hill to Roland Park -- we are seeing substantial investment both commercial and residential," said Brigitte V. Fessenden, city planner for historic preservation for Baltimore's Commission for Historical and Architectural Preservation.

Last year, the state increased the tax credit to its current mark, up from 15 percent in 1998 and 10 percent in 1997. Day said the increase is partially responsible for the surge in applications for the tax credit program.

"When the state agreed to increase the tax credit, we thought the floodgates would open. But we never imagined an increase of this magnitude," said Judith Kremen of Baltimore County Historical Trust.

The influx of interested property owners has not only resulted in more applications statewide, but substantially more dollar investment in historic renovations.

"We had anticipated that we would do $50 million in total project investment for the last fiscal year. But by the end of 1999, we've done $150 million. We're not even halfway through the fiscal year and we've done three times as much investment," Day said.

The tax credit is available for owner-occupied residential properties as well as income-producing properties, but the building must be a "certified heritage structure."

A certified heritage structure includes property that is listed in the National Register of Historic Places, is designated as historic property under local law, or is located in a historic district or certified heritage area.

To qualify for the tax credit, the cost of renovating the historical property must exceed $5,000 in a 24-month period for residential property. In October, the state also began offering property owners the option of taking a mortgage credit instead of the tax credit. Under the mortgage credit option, property owners can transfer the amount of their tax credit to their mortgage lender in exchange for a reduction in the principal amount or interest rate of the loan.

"I think the mortgage credit option, when it gets fully understood, is going to increase the revitalization as well," Day said.

But Kremen said it is often the tax credit that makes renovation possible for owners of historical property.

"Typically, the calls we get are from people who want to own an old house and the only way they feel they can make it work and buy the home of their dreams is to take the tax credit," Kremen said.

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