| Donation
Process
The historic preservation easement donation process
can be divided into five steps:
1) Submit Preservation Easement Application Form;
2) Obtain Certified Historic Structure Designation;
3) Subordinate Mortgages;
4) Perform Real Estate Appraisal; and,
5) Convey Preservation Easement.
Before proceeding with a preservation easement donation, potential
easement donors are always advised to consult with their attorneys
and tax professionals to understand the specific legal
requirements and tax consequences
associated with conveying a preservation easement and receiving a
tax deduction.
1) Submit Preservation
Easement Application Form
The historic preservation easement donor submits the
completed 2-page Preservation Easement Application (Adobe Acrobat - Download - MS Word) to the Preservation
Easement Trust. Then, the application is promptly reviewed and, if
approved, the easement donor is sent an Easement Donation
Instructional Package, which includes an Acceptance Letter that must
be signed by the easement donor and returned to the Preservation
Easement Trust.
| 2) Obtain Certified
Historic Structure Designation |
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To qualify for a historic preservation easement donation
and its associated federal tax benefits, a property must be either a certified
historic structure or historically important land area. A certified historic
structure is a building or structure that is either individually listed in the
National Register of Historic Places or deemed to be contributing to the historic
significance of a National Register historic district or a certified local historic
district. So, if a building or structure is not a certified historic structure, a
certified historic structure designation must be obtained by submitting an application
to the National Park Service, a division of the U.S. Department of the Interior.
The certification process of historic structures is administered by the
State Historic Preservation Office (“SHPO”) and requires approval from the National
Park Service (“NPS”). Historical property information and photographic images are
used to justify the historic significance of the property. Specifically, if the
building is located within a qualifying historic district, the
easement donor
must submit the Historic Preservation Certificate Application Part 1 - Evaluation of
Significance; otherwise, the easement donor must submit a National Register of
Historic Places Registration Form. While both the SHPO and NPS review the applications,
the SHPO provides advice and comment and the NPS makes the actual certification decision.
In many cases, the easement donor engages an experienced historic preservation
consultant who prepares the NPS application. Upon request, Preservation Easement Trust
can provide a list of experienced historic preservation consultants.
3) Subordinate Mortgages
If the easement donor wishes to utilize the tax deduction benefit
associated with a historic preservation easement donation,
all mortgages (and other encumbrances) must be subordinated to the
preservation easement. The mortgage lenders are required to subordinate
their rights in the property to the rights of the easement holder,
so that in the event of a foreclosure, the preservation easement
will not be extinguished. Therefore, if a mortgage exists, a
subordination application with a copy of the Preservation Easement
Deed must be submitted to each mortgage lender for its approval.
The preservation easement donor engages
a qualified real estate appraiser to perform the appraisal which
must be prepared no earlier than 60 days prior to the preservation
easement donation date but no later than the due date (including
extensions) of the income tax return in which the charitable
deduction is first claimed. The value of the preservation easement donation is usually determined
by applying the "before and after" valuation approach.
Performed by a qualified real estate appraiser, the amount of the
charitable deduction is computed by determining the difference between
the fair market value of the property
before the granting of the preservation easement and the fair market
value of the property after the granting
of the preservation easement. To facilitate the appraisal process,
the Preservation Easement Trust can provide a list of real estate
appraisers with preservation easement valuation experience.
Because each preservation easement valuation depends upon a
number of variables that are unique to each property, including
existing historic preservation laws that may already impact the
property, there is no "one size fits all" approach to valuing
preservation easements. For example, the valuation for a facade
preservation easement typically ranges anywhere from 5% to 15% of
the historic structure’s fair market value. Whereas, the
valuations for development rights and interior space preservation
easements do not fall within any typical range and, thus, can vary
even more significantly from property to property.
5) Convey Preservation
Easement
Once all of the aforementioned steps have been completed
as well as several additional items listed on the
Closing Checklist, the
easement donor is sent an Easement Donation Closing Package. To
initiate the closing process, the easement
donor sends the notarized Preservation Easement Deed with the tax-deductible
charitable cash contribution to the Preservation Easement Trust. In return,
the Preservation Easement Trust provides a completed IRS Form 8283
that the easement donor attaches to the income tax return for the
year in which the preservation easement is contributed and a deduction
is first claimed. Lastly, the Preservation Easement Trust records
the Preservation Easement Deed with the county or town land records
office and forwards a copy to the easement donor and mortgage lender(s).
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