History lovers and business people like to see as many as possible of the state's historical properties preserved, and tax credits aid in those endeavors. Both the federal government and the state of Mississippi provide tax incentives for historic preservation — federal is 20 percent of qualified rehabilitation expenses and the state credits are 25 percent. These tax credits can be combined.
Michael Morris, director of public relations for the Mississippi Department of Archives and History, says the two credits usually are combined. “To qualify for either tax credit, a building must be listed in, or eligible for listing in, the National Register of Historic Places, a designation that makes the building a certified historic structure,” he said. “The project must also comply with the Secretary of the Interior’s Standards for Rehabilitation. In addition, the property must be income producing at the completion of the rehabilitation project.” The National Register is maintained by the National Park Service.
Morris explains that applicants (property owners) must complete a three-part application and are strongly encouraged to submit Parts 1 and 2 for approval prior to the start of work on a project. “Part 1 of the application must be approved prior to placing the building back into service. Part 3 certifies that the project meets the Secretary’s Standards and designates the project as a 'certified rehabilitation,' which authorizes the applicant to claim the tax credits.”
Leigh Jaunsen, managing partner with Dale Partners Architects, notes that the rehabilitation must be substantial, meaning the value of the prerehabilitation has to exceed the rehabilitation value of the building. “It's a significant amount of money so it is definitely worth considering in every project that involves a historic building or district, but sometimes it is difficult to maintain all the historic features and include all the elements needed for the end user at the same time,” she said.
“An owner has to weigh the benefits of the tax credit and the limitations that some of the historic features may have on the final design.”
Jaunsen, who has the AIA, LEED AP BD+C designations and has worked on numerous historic preservation projects, says, “I think the program works well in that it combines the goal of preserving historic structures with economic development goals and creates a powerful incentive for developers to make the extra effort to preserve parts of the structure that otherwise would have been changed or eliminated in order to be cost effective.
“This strategy works very well in markets that are thriving, but in areas that are struggling economically or dealing with blight, it is often difficult to update a historic building to a modern use and preserve all of the historic features.”
She give as an example a main street building that was once office and retail would work well as restaurants and downtown living but needs balconies to be added to the main facade to create the kind of downtown living product capable of producing the rental rates that make the project economically feasible. “Because the building did not originally have balconies, the project does not qualify for tax credits,” she said. “I'd like to see more economically challenged areas have a little more flexibility.”
Dale Partners has completed many historic preservation projects although Jaunsen says a lot of their historic work has been through municipalities and universities which do not qualify for tax incentives. The most recent project was The Mill at Starkville.
Morris says there's a substantial difference in rehabilitation and restoration, and lists some outstanding rehabilitation projects ranging in size from small downtown commercial buildings to warehouses, schools, courthouses, historic hotels and office buildings. Recent examples include the McGrath Building in Brookhaven, Canton High School, the Lamar Life Building in Jackson, and Travelers Hotel in Clarksdale.