Preserving History, Creating Value: Federal & NJ Historic Tax Credits

Adaptive reuse is more than just preservation—it's a smart investment strategy. By stacking the 20% Federal Historic Tax Credit (HTC) with New Jersey's powerful Historic Property Reinvestment Program (HPRP), developers can offset up to 80% of their rehabilitation costs.

The Federal Historic Tax Credit (HTC)

The foundation of any preservation deal is the Federal HTC. Administered by the National Park Service (NPS) and the IRS, it provides a dollar-for-dollar reduction of federal income tax liability.

• Value: 20% of Qualified Rehabilitation Expenditures (QREs).
• Eligibility: Certified historic structures (listed on the National Register or in a registered district).
• Requirement: The rehab must meet the Secretary of the Interior's Standards for Rehabilitation.
• Structure: Typically syndicated to an investor (like a bank) in exchange for equity.

The NJ Historic Property Reinvestment Program (HPRP)

While the federal credit is steady, the state credit is the accelerator. The HPRP offers massive incentives to close the financing gap on complex rehabs.

The Power of Stacking

The magic happens when you combine them. Because the state program is designed to work with the federal one, you can claim credits on the same eligible costs.

Example Scenario:
A $10M rehabilitation in Newark (a Qualified Incentive Tract).

• Federal HTC (20%): $2,000,000
• NJ HPRP (60%): $6,000,000
• Total Tax Credits: $8,000,000 (80% of rehab costs!)

Note: Basis adjustments and syndication pricing will affect the net equity, but the leverage is undeniable.

Strategic Considerations

1. "One-and-Done" vs. 5-Year

Unlike the federal credit which is claimed over 5 years, the NJ HPRP credit is issued as a single certificate upon completion. This makes it highly attractive to buyers looking for immediate tax relief.

2. Competitive Application

The HPRP is competitive. Applications are scored on historic significance, threat to the property, and community impact. You need a strong narrative and a "shovel-ready" team.

3. NPS Approvals

The "Part 1, 2, and 3" approval process with the National Park Service is rigorous. You must retain a qualified historic consultant to ensure your design meets the Standards. One wrong window replacement can jeopardize the entire credit.