Tax Incentives - Fairfield Cultural District

Tax Incentives in the Fairfield Cultural District

Fairfield is one of over 90 cities in the United States that have implemented a Cultural District, and has positioned the arts and culture as a key element in its revitalization efforts to enhance quality of life.

Potential benefits offered to building owners within the Cultural District include certain types of tax credits or exemptions (or other funding possibilities).
[Many of these benefits also apply to buildings outside of the Cultural District.]

The State Historic Preservation Office (SHPO) of the State Historical Society of Iowa administers the State Historic Preservation Tax Incentive Program, and participates in the certification process for the Federal Historic Preservation Tax Incentives and county Historic Property Tax Exemption programs.

All of these programs encourage the reuse of historic properties while retaining their character-defining features. Ultimately, each of these programs contributes to the revitalization and preservation of historic properties across the state.

The use of multiple programs is encouraged.

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Summary of the Tax Credit Incentives Programs for Historic Properties in Iowa
(See Overview of the Tax Credit Incentives Programs for Historic Properties in Iowa for complete details)

Federal Historic Preservation Tax Incentives Program

Twenty percent of qualified rehabilitation costs are available as a credit against federal income taxes owed for income-producing properties.

Rehabilitation work on historic properties must be "substantial" (an IRS test) and meet The Secretary of Interior's Standards for Rehabilitation.

(A 10% tax credit is also available for non-historic, non-residential, income-producing properties built before 1936. These properties can neither be listed on the National Register nor be a contributing resource in a National Register-listed historic district.)

State Program for Property Rehabilitation Tax Credit

Twenty-five percent of certain rehabilitation costs are available as a credit against the owner(s) state income taxes. Properties do not need to be income producing.

For a residential property or barn constructed before 1937 before rehabilitation, the cost of a qualified rehabilitation project must exceed either $25,000 or 25% of the fair market value (less the land value) - whichever is less.

For commercial properties, the rehabilitation project must exceed 50% of the fair market value of the property (less the land value) before rehabilitation.

Cultural and Entertainment Districts Program of Tax Credit

This program uses the same description, eligibility requirements and regulations as the statewide program described above although the funding is from a separate allocation for projects located within Cultural and Entertainment Districts (CED) certified pursuant to section 303.3B or Great Places agreements pursuant to section 303.3C.

In addition to the eligibility requirements for the state wide program above, properties must be located in a CED or specified in a Great Places agreement.

Small Projects under $500,000

This program uses the same description, eligibility requirements and regulations as the statewide program described above although the funding is from a separate allocation reserved for small projects which have qualified rehabilitation costs less than $500,000.

Temporary Historic Property Tax Exemption

Four-year "freeze" on property tax increases, then 25% increase per year to adjusted value after rehabilitation.

Local property tax incentive for the sensitive, "substantial rehabilitation" of historic buildings. Property taxes remain the same for four years followed by increases of 25% per year for the following four years.

Properties must be listed on or eligible for listing on the National Register, contributing to National Register or local historic districts, or designated by a county or municipal landmark ordinance.

Other SHSI Grants

Other grant programs administered by the State Historical Society of Iowa may also be used to preserve historic properties.

City of Fairfield Property Tax Exemptions

Excerpted from City of Fairfield Tax Abatement Ordinance No 1001, Sections 3.04.050, 3.04.060, 3.04.070, and 3.04.080

Improvements eligible for exemption include rehabilitation, renovation or improvements to existing structures that result in an increase in the assessed valuation of the property; additions to existing structures; and new construction on vacant land or land with existing structures when constructed in accordance with an approved zoning permit.

Real estate that qualifies includes commercial or industrial property, or property that (when the improvements have been completed) consists of 3 or more separate living quarters with at least 75 percent of the building space used for residential purposes.

Additional Information that may be useful

A memo from Cooper Norman (an excerpt)

Historic preservation/rehabilitation grants and other types of support are available from a number of sources, depending on the circumstances. In almost all cases, the property has to be listed on the National Register of Historic Properties. In some cases, the property has to be an income producing property. State sources include the Historical Society of Iowa (see www.iowahistory.org/preservation/index.html), administrator for the REAP/Historic Resource Development Program and a number of private foundations. Federal assistance is available from the National Park Service -- several programs, most prominently the Save America's Treasures program (see www.cr.nps.gov/hps/treasures/) and also a number of technical assistance and advisory programs that are really quite useful and valuable to any preservation effort (see www.nps.gov/history/preservation.htm).

Other programs are offered by the National Trust for Historic Preservation, and other specialty organizations (specializing in certain building types, such as churches, etc.). National Historic Preservation Tax Credits ($0.20 federal tax credit on each $1.00 of qualifying expenditure) are offered through the IRS, with qualification and certification for the program administered partially by the State Historic Society of Iowa.

Cooper Norman's company, Prairie Architects, offers specialized services in historic preservation planning, rehabilitation, and adaptive reuse architecture. It is located in Fairfield.

Another useful document from Cooper Norman

Many, if not most, of the properties in the targeted district have the age and physical integrity to qualify as candidates for nomination to the National Register of Historical Properties, and taken as a group, probably would qualify as contributing structures within a blanket historical district nomination as well. Other properties, particularly commercial properties around the square, do not presently retain the requisite integrity to qualify, as their original facades are obscured by later finish systems, but the removal of these finishes with the restoration of the original façade - providing they are sufficiently intact - may in itself constitute acceptable work in the eyes of SHPO and IRS reviewers, and might be the basis for successful nomination to the National Register and participation in the program. As noted in Jack Porter's memo, this is evaluated on a case by case basis by SHPO.

Taken in combination (federal credits only apply to income producing properties), the 25% state tax credit plus the 20% federal tax credit have the potential to radically mitigate the costs associated with qualifying improvements to these structures. These credits are applicable, dollar for dollar, against the property owner's state and federal income tax liability, and may be applied over a number of years until their full value is realized. It may also be possible to sell these credits - an issue for non-profit owners who have no state or federal tax liability - usually at a small discount, to institutional buyers who in turn apply them against their own tax liabilities.

Qualifying properties outside the district can, in principle, still qualify for the tax credit, though this is limited to income-producing properties.

Benefits of a Cultural District

The benefits offered to certified districts could include historic tax credits for rehabilitation of historic structures or other incentives which create live/work space for cultural workers, space for cultural and entertainment enterprises and access financial assistance programs from state agencies and other funding partners.

Iowa Department of Cultural Affairs: Iowa Community Cultural Grants, Cultural Enrichment Operating Support Grants for Multi-discipline organizations. Funding possibilities are listed under the "Funding" menu item at www.culturalaffairs.org.
Iowa Arts Council: Project and Residency Grants, Operational Support Grants for Arts Organizations. Special Initiatives Grants. (www.iowaartscouncil.org/funding/overview.shtml)
State Historical Society of Iowa: Historic Resource Development Program (HRDP), Temporary Property Tax Exemption, Federal Rehabilitation Investment Tax Credits and Iowa Historic Property Tax Credit. (www.iowahistory.org/preservation/index.html)
Iowa Department of Economic Development (www.iowalifechanging.com/community/)
Iowa Finance Authority (www.iowafinanceauthority.gov)

Local Loan Program to Serve Larger Area -
From KMCD News Jan 16, 2006
(Click here for Fairfield Ledger update 01/04/07)

The Fairfield Revitalization Loan Program makes additions and changes for the new year.

Bob Phipps, executive vice president of the Fairfield Chamber of Commerce met with the four Fairfield area banks to renew the Fairfield Revitalization Loan Program for 2006.

The committee decided to expand the loan area to include the new Fairfield Cultural District, providing more business opportunities for the Fairfield area. In the past the loan program has only served retail business development within three blocks of the square.

The program will also offer a maximum loan of one hundred thousand dollars, with a three-year guaranteed fixed rate of 6.25 percent for 2006.

Phipps says he looks forward to retailers taking advantage of this program offered by the banks and the Chamber.

The Revitalization Loan Program is a cooperative program between Iowa State Bank, First National Bank, Libertyville Savings Bank and Midwest One Bank of Fairfield.

Phipps says he would like to thank those banks and their representatives for their willingness to participate in this program.

The program provides low interest business loans for retail businesses.

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Contact the appropriate government body for specific requirements for your property, as requirements may have changed.

Updated Oct 15, 2007, by the Fairfield Cultural Alliance.