Maryland Heritage Structure Rehabilitation Tax Credit

The Program: In Maryland, owners of certified historic structures are potentially eligible for to earn a 20 percent state income tax credit on qualified rehabilitation expenditures. Known collectively as the Heritage Structure Rehabilitation Tax Credit program, there are three specific historic rehabilitation tax credits currently available in Maryland:

  • Homeowner Tax Credit: This credit is for owner-occupied historic homes. Homeowners are potentially eligible for a state income tax credit equal to 20 percent of qualified rehabilitation expenditures. The credit is capped at $50,000 in a 24-month period and must have a minimum of $5,000 of eligible expenses to qualify. These credits are also refundable. This is a true tax credit and there is currently no limit to the amount of homeowner tax credits available in any given year. For more information, visit the Maryland Historical Trust homeowner tax credit page.
  • Small Commercial Tax Credit: The so called ‘Main Street’ rehab tax credit is designed for smaller commercial projects. Small commercial rehabilitations are defined as projects that do not exceed $500,000 in total qualified rehabilitation expenses and are not used for more than 75 percent residential rental purposes. The credit is capped at $50,000 in a 24-month period and must have a minimum of $5,000 of eligible expenses to qualify. This program is currently capped at $4 million worth of tax credits available per year. For more information, visit the Maryland Historical Trust small commercial tax credit page.
  • Competitive Commercial Tax Credit: Larger, income-producing, ‘commercial’ rehab projects are potentially eligible to earn a state income tax credit (capped at $3 million per project) that is equal to 20 percent of eligible rehabilitation expenses for substantial rehabilitation projects. Substantial rehabilitation projects are defined as projects with eligible expenses that exceed the greater of the adjusted basis value of the structure or $25,000. These highly competitive tax credits are annually appropriated and are currently capped at $9 million available for the entire state for the fiscal year.

The Challenge: Funding for the competitive commercial tax credit has been reduced by nearly 90% since its creation in 1996. Virginia, by comparison invests nearly $100 million annually in their program – making preservation work in Virginia potentially more attractive to developers of large-scale, catalytic rehab projects.

Our Position: Preservation Maryland believes the State of Maryland should increase their investment in historic rehabilitation tax credits. We have spearheaded the creation of the Maryland Historic Tax Credit Coalition, and will be submitting legislation to increase funding for the large commercial tax credit program to $15 million per year. This will be a first step to getting the program to full funding at $30 million.

We will also be submitting legislation to that will streamline and increase the efficiency and efficacy of the historic tax credit program. It will include an increase in the large commercial state historic tax credit to 25% for projects resulting in affordable housing. The increase provides incentive to developers to address Maryland’s affordable housing shortage, but it does not require all historic tax credit projects be affordable housing, as past legislation has tried to do.

The legislation will also allow the state historic tax credit to be transferred outside of partnerships.

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