New provisions included in the Economic Recovery Tax Act of 1981 are stronger incentives than ever before for the rehabilitation of historic structures in this area and have made some previously infeasible preservation projects possible, according to participants in a seminar on preservation tax incentives held this week in Washington.

"The 1981 act has allowed many projects to . . . work out, when they didn't before," said conference speaker William J. Langelier, whose firm has arranged financing for the rehabilitation of historic properties nationwide.

The District conference was the 13th in a series cosponsored by the National Trust for Historic Preservation, the National Park Service, and the National Conference of State Historic Preservation Officers. The meeting attracted more than 400 participants, ranging from lawyers, architects and real estate developers, to bankers, real estate agents and individual owners of historic properties.

The 1981 act provides tax incentives to owners who rehabilitate older buildings. For commercial and industrial properties at least 30 years old, developers may take a 15 percent investment tax credit for their rehabilitation expenses. For structures at least 40 years old, a 20 percent credit can be taken. Owners can then depreciate the balance of the rehabilitation costs over a 15 year period, using the straight-line method. Prior to 1982, there was only a 10 percent investment credit for qualified rehabilitation expenditures on such properties.

To qualify for any of the new tax credits, the rehabilitation expenses within a 24-month period must at least equal the owners' adjusted basis in the property, that is, the cost of the building and its capital improvements, minus depreciation.

An investor can subtract an investment tax credit directly from the amount of taxes owed. Deductions, in contrast, only reduce a taxpayers' income subject to taxation.

The biggest tax breaks under the new law go to renovators of certified historic structures, who can take an initial 25 percent investment tax credit for the rehabilitation costs and depreciate the entire amount, instead of just the balance, over a 15-year period.

This special 25 percent credit now also extends to income-producing residential properties, such as rental housing, if they are certified historic structures.

To qualify for the 25 percent credit, properties must either be in historic districts or on the National Register of Historic Places or eligible for it. The National Register now contains 26,000 listings, 10 percent of which are historic districts with a total of nearly one million structures.

Developers who want the 25 percent tax credit must have their project approved by their state's historic preservation office and by the National Park Service. If a property is not already individually listed in the National Register but is located in a registered historic district, the building's owner must obtain official certification that it adds to the district's "sense of time and place and contributes to its historic development."

The rehabilitation work must conform to 10 specific standards intended to preserve structure's architectural and historical integrity.

Qualifying for the 25 percent tax credit is more paperwork for the developer, but it can provide 15 to 20 percent more in cost-recovery reductions than would be available with 30- and 40-year-old noncertified buildings.

In spite of these strong new incentives for rehabilitation work, applications to renovate historic District structures have continued at about the same pace since the new law went into effect Jan. 1.

The D.C. Historic Preservation Office, the District agency that processes requests for renovation projects, has received about 30 applications so far this year, according to the office's director, Lucy Franklin.

In the previous five years, her office had approved about 400 projects under the provisions of the 1976 Tax Reform Act, which provided some of the first important tax incentives for the rehabilitation of historic structures. Many of those projects involved smaller investors who converted townhouses from residential to commercial use.

"A lot of the projects we approved under the 1976 act wouldn't be able to take advantage of the new law," Franklin said, because of the requirement that the renovation costs equal the owners' adjusted basis in the property. Franklin is hopeful that the new tax provisions will encourage the renovation of historic properties downtown.

The District has 10 historic districts now listed on or soon to be added to the National Register. There are an estimated 15,000 properties within those areas.

Another difficulty facing prospective renovators is the uncertainty of obtaining lending for their projects.

"Financing historic properties is exceedingly difficult because of the dramatic changes in the real estate finance market," said seminar panelist Gary Kopff, director of the North American Developments Co.

"The 25 percent investment tax credit has great value," he said, "but it was based on two incorrect assumptions that long-term fixed rate debt is available and that equity is scarce. Both of these premises have not been true for the last 12 to 18 months."

There is nevertheless a wide variety of financing alternatives for historic preservation projects, Kopff said, but a developer must expect lending arrangements to take longer, must be prepared to seek funds in other parts of the United States or overseas, and must work with someone able to structure elaborate financial plans.

"Tax benefits are gravy on the potatoes, but they don't matter if the potatoes are lump," said David Lafave, executive vice president of David Clark & Associates. That company is working with a group of tenants to co-develop the Envoy Towers, a condominium conversion on 16th Street NW. The building has received historic structure status, and the developers will be able to pass the rehabilitation tax credits on to apartment purchasers, but only for those who rent out their units, as the new tax credits are not available to owner occupants.

The Clark company also intends to donate a facade easement on the building, which will produce a further tax savings.

An owner donating an easement to a nonprofit organization or a government agency gives up the right to make certain changes in the property or to develop it, thus reducing its value. The donor can take this reduction in value as a charitable contribution deduction. It is the only special tax incentive available to owner occupants of historic residential structures.

Other District historic structures undergoing rehabilitation include the First American Bank building at 15th and H streets NW and the Willard Hotel at 15th and Pennsylvania. The bank is adding two stories to the top, and filling in an interior courtyard with new construction. The original structure was completed in 1907 and was planned by architect Waddie Wood, along with Edward Donn and William Deming. Other projects Wood designed include the Car Barn at 36th and M streets NW, the Department of Interior building at 18th and C NW, and many houses and apartment buildings in the Dupont Circle and Kalorama neighborhoods.

First American Bank carried out the rehabilitation work primarily to keep its offices in the District and to centralize its operating staff in one location, rather than to make use of any tax benefits, bank president C. Jackson Ritchie told the seminar participants.

It is still unclear how much of the bank's $15 million renovation work will be subject to preservation tax breaks, Ritchie said.

Tax credit savings at the Willard Hotel project represent between $6 and $10 million out of a total cost of approximately $110 million, said Oliver T. Carr, whose company is the managing partner in the renovation work. The Carr company became the managing partner for the project after the original developer, the Stuart Golding Co., of Florida, failed to obtain long-term financing. The Carr company, which has obtained a five-year commercial bank loan commitment, will reduce the amount of space originally planned for hotel use and increase office and retail space.

"The job would have been done without the investment tax credits," Carr commented, "but not nearly as well as it will be done now."

Like the First American Bank building, the Willard is a certified historical landmark. Its architect, Henry Hardenbergh, also designed the Plaza Hotel and the Dakota apartments in New York.

A problem future renovators may face comes with the threat to federal matching funds for the state historic preservation offices that review rehabilitation plans. The Reagan administration has recommended no federal funding in fiscal year 1983 for the state offices, which received $21 million this year.

"I see a real paradox," said Nancy Light, a National Trust media information assistant. "The Secretary of Interior has pushed through some wonderful tax incentives. At the same time he is cutting off the funds that go to the agencies that administer these programs."