| Program
Description
A historic preservation easement is a legal agreement that
enables a historic property owner to establish certain preservation
restrictions while retaining possession and use of the property.
There are two general types of historic preservation easements: facade
and interior space.
- Facade preservation easements permanently prevent demolition,
neglect and insensitive alterations to the exterior facade of
a certified historic structure. Facade preservation easements must preserve the entire
building exterior, including the space above the building.
- Interior space preservation easements permanently prevent demolition,
neglect and insensitive alterations to a specified interior space
of a certified historic structure.
By donating a historic preservation easement in perpetuity
to Preservation Easement Trust, a qualified 501(c)(3) nonprofit
charitable organization, the property owner promises to maintain
the easement-protected property while adhering to the easement restrictions.
Once donated, a preservation easement becomes part of the property's
chain of title and permanently remains with the historic property
binding both the present and future owners.
As an incentive, federal law permits the donation of a historic
preservation easement to be treated as a tax-deductible gift.
Thus, the property owner, who conveys the historic preservation
easement, qualifies for a tax-deductible charitable contribution
under Internal Revenue Code Section 170(h) equivalent to the fair
market value of the preservation easement, as determined by a
qualified real estate appraiser. 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; however, depending upon local zoning rules, the valuation
may exceed this range because of lost development rights.
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.
The tax deduction can be spread over six tax years and, in the majority
of cases, may be applied to the property owner's federal and state
income tax returns. Individuals, including Partnerships, LLC's,
S-Corporations and Trusts that pass tax benefits through to individual
shareholders or beneficiaries, are limited to an annual charitable
contribution deduction of 50% of the adjusted gross income prior
to the charitable contribution deduction in which the non-cash component
(i.e., the preservation easement) cannot exceed 30% of the adjusted
gross income. In contrast, Corporations that file IRS Form 1120
are limited to an annual charitable contribution deduction of 10%
of the adjusted gross income prior to the charitable contribution
deduction.
The IRS Form 8283, titled Non-Cash Charitable Contributions, should
be filed with the tax return for the year in which the preservation
easement is contributed and a deduction is first claimed. This form
must be signed by a professional real estate appraiser and by the
qualified 501(c)(3) nonprofit charitable organization accepting
the donation. The
appraisal, including building photographs and the easement deed,
should also be attached to the tax return. |
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