State historic preservation official outlines tax credits and assessment freeze for Lebanon City properties

A representative of the State Historic Preservation Office (SHPO) told Lebanon City property owners on May 11 that federal and state incentives can substantially lower the cost of rehabilitating historic buildings — but only when projects trigger a formal review by SHPO because they involve state or federal funding, licensing or permitting.

"We encourage people to do the right thing with their historic resources, but we are not preservation police," the State Historic Preservation Office representative said, explaining that listing on the National Register does not itself impose restrictions on property owners.

The presenter said the city’s National Register district, designated in 1978, originally covered about 211 buildings; 186 were classified as contributing to the district’s historic significance and 25 non-contributing. Contributing buildings are the ones eligible for the rehabilitation incentives discussed.

Federal rehabilitation tax credits apply to "certified historic" income-producing buildings — defined as an individually listed National Register property, a contributing building in a listed district, or a locally designated district certified by the National Park Service. The SHPO official said the federal credit is typically worth 20% of qualified renovation costs, requires a substantial rehabilitation (an expenditure test measured against the building’s adjusted basis) and that work meet the Secretary of the Interior’s rehabilitation standards. SHPO reviews applications and forwards recommendations to the National Park Service, which makes the final federal determination.

On state incentives, the SHPO representative described a companion state tax credit that is worth 25% and can be paired with the federal credit, but is limited by legislative allocations. The state program caps credits at $3 million per project (effectively a full 25% credit on projects costing up to $12 million) and the agency has $25 million in allocations per year to distribute. The representative said the program currently runs through the end of 2028 and uses five legislative priorities — such as projects in border counties, projects involving nonprofit development partners, or projects in federally declared disaster areas — to rank applicants; allocations are awarded first by priority and then by application date within each priority.

The representative cautioned that the state allocation is an award of credits, not a check: applicants still must complete federal approvals and the project work before the credit is issued. She also noted a CPA must certify costs for the state program and there is an issuance fee (2% of the credit amount). The transcript contained an unclear string about eligible expense dates; the representative said applicants must meet program date windows but the exact date range in the meeting transcript was not specified clearly.

For owner-occupied residential properties, SHPO described a property tax assessment freeze: after completing an eligible rehabilitation project and obtaining approval, assessed valuation is frozen for eight years with additional gradual step-ups over four years thereafter (presenter described it as an eight-year freeze followed by a phased return to full market valuation). Eligibility requires owner-occupancy and meeting the applicable expenditure threshold (the rep said the freeze test is that expenditures must exceed 25% of the assessor’s fair market value within a 24-month span, extendable to 48 months in some cases).

SHPO staff recommended early consultation before work begins. "If you do the work and then call us, and we can't approve it, you can't get a different set of standards because you decided to call us after the fact," the official said, noting site visits are still possible but many reviews are handled digitally.

The presenter gave a practical cautionary example: an owner who replaced historic windows with incompatible new windows later had to replace those windows again with approved ones to obtain credit — an avoidable expense that could have been prevented by consulting SHPO first. She emphasized that rehabilitation standards accept some modern conveniences (for example, insulated-glass windows can be acceptable under rehabilitation standards if replacement is necessary) but that historically significant later changes (a 1930s storefront on an 1870s building) often must be retained because they have acquired historic significance.

SHPO said syndication remains a common financing tool for large projects: investors can take credits through limited partnership structures to provide equity for rehabilitation projects, a process that typically makes sense for multi-million-dollar renovations because of fixed legal setup costs.

The agency urged applicants to attend a required virtual workshop on Aug. 20 that will walk through the three-part application (Part 1: historic status; Part 2: scope of work; Part 3: documentation of completed work). The SHPO representative said materials and links would be provided to the mayor and to attendees and offered to return for site visits and follow-up questions.

Audience members asked whether local grant money (for example, city sales-tax business grants) could count toward the expenditure trigger; SHPO said yes, funds spent on the building can help meet the expenditure threshold but cautioned that not all costs qualify, and owners cannot claim duplicate tax benefits on the same expense. Questions about ownership structures (sole proprietor vs. LLC) were answered: how credits flow depends on ownership entity and partnership agreements, and property owners should consult accountants for structuring.

The presentation concluded with contact information and an offer for SHPO to assist applicants. "If you think you're going to do anything, just let us know," the representative said. "You're not beholden to follow through, but we'd like to keep your options open."