The Tax Cuts and Jobs Act has eliminated and changed the rehabilitation credit.
Prior Law
Through December 31, 2017
A 20% credit is allowed for qualified rehabilitation expenditures to a certified historic structure (i.e., any structure that is listed in the National Register, or that is located in a registered historic district and is certified by the Secretary of the Interior to the Secretary of the Treasury as being of historic significance to the district). Alternatively, a 10% credit is allowed for qualified rehabilitation expenditures with respect to a qualified rehabilitated building, which generally means a building that was first placed in service before 1936. A building is treated as having met the substantial rehabilitation requirement under the 10% credit only if the rehabilitation expenditures during the 24-month period exceed the greater of (1) the adjusted basis of the building (and its structural components), or (2) $5,000.
New Law
Effective for tax years beginning after December 31, 2017
The 10% credit for qualified rehabilitation expenditures with respect to a pre-’36 building is repealed. A change was made to the 20% credit provided for qualified rehabilitation expenditures with respect to a certified historic structure, which can now be claimed ratably over a 5-year period beginning in the tax year in which a qualified rehabilitated structure is placed in service.
Commentary
A transition rule provides that for qualified rehabilitation expenditures (either a certified historic structure or a pre-’36 building), any building owned or leased (as provided under pre-Act law) by the taxpayer at all times on and after January 1, 2018, the 24-month period, or the 60-month period selected by the taxpayer under the rule for phased rehabilitation is to begin no later than the end of the 180-day period beginning on December 22, 2017, and apply to such expenditures paid or incurred after the end of the tax year in which such 24- or 60-month period ends.
