Several recent legislative and administrative developments at the federal level should encourage those interested in historic preservation and the recycling of old buildings.
New legislation signed by President Carter extends the historic preservation incentives of the 1976 Tax Reform Act to long-term lessees of eligible buildings. The amendment, developed by Preservation Action, a national preservation lobby group, was designed to permit the restoration or rehabilitation by private developers of major properties owned by local governments, neighborhood preservation groups or historical societies, and other public and nonprofit groups.
Such owners have been very interested in turning their buildings to new uses but have not been able to raise the funds. Private developers have been interested but have needed the accelerated depreciation or rapid amortization benefits to make such projects economically viable.
The 1978 amendments allow private developers who lease eligible buildings for 30 years or more to receive those benefits. The legislation also made the provision retroactive to 1976.
In addition, the D.C. City Council has passed legislation that makes developers prove that they would suffer "irreparable" economic harm if not allowed to tear down designated landmarks they own.
Individual homeowners can use the federal preseravation incentives if parts of their houses are depreciable units, such as a rental apartment or shop.
The new federal amendments also soften the impact of the 1976 act's penalties on those who demolish a building in a historic district, if the building does not contribute to the area's character. The original bill denied accelerated depreciation to any new construction that was built on the site of a demolished building inside a historic district unless the Secretary of the Interior had certified, before demolition, that the building did not contribute to the character of the area.
Owners can now use accelerated depreciation on the new construction where demolished buildings were not considered historic or did not contribute to the area's character. The owner must also certify ignorance of the law to the Internal Revenue Service.
The 1978 tax bill also added a new incentive for recycling buildings, a 10 percent tax credit for the renovation of older commercial buildings. The credit can be applied against the first $25,000 of tax liability and, through a feature that will be phased in over the next four years, it can be applied to up to 90 percent of the tax liability above $25,000.
To qualify, a building must be at least 20 years old, the renovation must retain 75 percent of the exterior walls, and must respect the building's character and integrity.
In an administrative action, the assistant secretary for community planning and development at the Department of Housing and Urban Development, Robert C. Embry Jr., has sent a memorandum to the department's field offices reaffirming activities that can be supported by the department's Community Development Block Grant program.
This program provides funds to cities for locally selected urban development and housing revitalization program. It replaced the category grants programs that previously went to city governments. Block grants have become the primary source of funds for a wide variety of housing rehabilitation and neighborhood preservation programs developed by neighborhood and community organizations.
The memorandum was prompted in part by meetings Embry held earlier last year with representatives from the National Trust for Historic Preservation and by concerns of preservation groups from across the country.
According to the memorandum, cities can use their block grant funds either directly or through neighborhood groups to acquire and rehabilitate historic properties for both public purposes and for lowand moderate-income housing, to make public improvements that enhance the design qualities of a historic district, and to convert historic properties to neighborhood facilities.
The funds can also be used to match the historic preservation grants made by the Department of the Interior's Heritage Conservation and Recreation Service to state hisoric preservation offices and passed on to the cities. The preservation projects, of course, must meet the same guidelines and qualifications as other eligible community development programs.