NM State Income Tax Credit for Preservation of Cultural Properties
The State Income Tax Credit for Registered Cultural Properties program was established in 1984 to encourage the restoration, rehabilitation and preservation of cultural properties across New Mexico.
Since then, more than 800 projects have been approved for rehabilitation of New Mexico homes, hotels, restaurants, businesses and theaters that utilized one of the few financial incentives available to owners of historic properties.
More than 800 homes and businesses in New Mexico have been restored or rehabilitated using state and federal preservation tax credits.
The program is administered by the NM Historic Preservation Division (HPD) and the NM Taxation and Revenue Department. It has a nearly 5:1 community investment ratio for every dollar provided through a credit. In a recent five-year period, the statewide program saw completed rehabilitation construction projects total $7.4 million, spurred by the catalyst of $1.4 million in state income tax credits.
The state income tax credit is available to owners or long-term lessees of historic structures who complete qualified, pre-approved rehabilitations of historic structures. Download an application here.
- The property must be individually listed in the State Register of Cultural Properties or contribute to a historic district so listed. It may be a residence, an income-producing property (such as an apartment building, office or store).
- The State Cultural Properties Review Committee (CPRC) must approve the proposed rehabilitation prior to the beginning of the project. All work must conform to the guidelines in the regulation NMAC 4.10.9 as interpreted by the CPRC, and to HPD’s Guidelines. All parts of the project must be described in Part 1 of the application, including those not eligible for credit e.g. a new addition to the structure.
- The project term expires 24 months from the date of the Part 1 approval.
- The completed project conditions and expenses must be fully documented in Part 2 of the application and the CPRC must certify it as a qualified rehabilitation and establish the expense/tax credit amount.
- The maximum amount of project expenses eligible for the tax credit is $50,000 although the total project cost may exceed this amount.
- Maximum tax credit is 50% of eligible costs of the approved rehabilitation or $25,000 (50% of maximum eligible expenses) or 5 years of tax liability, whichever is least. The credit is applied against New Mexico income tax owed in the year the project is completed and any unused credit may be spread out over four additional years unless used up sooner. If the total amount of credit cannot be utilized within five consecutive tax years, the surplus is forfeited.
- When a listed property is located within the boundaries of a state-certified Arts & Cultural District, the maximum amount of eligible expenses is increased to $100,000 for a maximum 50% tax credit of $50,000.
- The credit is awarded to the property owner or long-term tenant and may not be transferred to other parties. When more than one person owns the property, each is awarded credit according to their percentage of ownership.
Frequently Asked Questions
Who is eligible for the program?
Any individual, partnership or corporation who is a New Mexico taxpayer and:
- Owns or leases a property that is listed in the State Register of Cultural Properties or is a contributing property to a historic district so listed. (Contact the Historic Preservation Division in Santa Fe, 505-827-6320, to find out if your property meets this requirement.)
- Applies to the program and performs a rehabilitation project that was approved by the Cultural Properties Review Committee (CPRC) prior to the beginning of construction.
How much money can I actually save?
This depends on your annual state income tax liability (what you owe the state each year) and the amount of money that you plan on spending on the rehabilitation of your building. HPD recommends that you consult your tax advisor but, to get a rough idea of your potential tax savings, estimate the project’s eligible expenses and divide them by the 50% tax credit rate (keeping in mind the maximum limits cited above). Then multiply your annual state income tax liability by 5 (the number of years in which the tax credit may be used) and compare the two figures. Sometimes applicants cannot use all of their credit but keep in mind that generally a tax credit may eliminate tax debt dollar-for-dollar, unlike a deduction.
What kind of work qualifies for the credit?
All work must conform to the standards in program regulation NMAC 4.10.9 and to HPD Guidelines. The CPRC must approve the work plan before any construction begins. Typical work that may be eligible for credit includes:
- Roof replacement and repair of parapets, eaves, fascia and canalés/scuppers
- Repairing deteriorated woodwork
- Stabilizing foundation and structural elements
- Repairing windows and other character-defining historic features
- Restoring historic interior and exterior trim and finishes
- Replacement of broken or out-of-code mechanical, electrical and plumbing systems
Costs for items such as interior furnishings, new construction, minor repairs, routine maintenance and demolition are not generally eligible toward tax credit.
What if I construct an addition to my house—can I still get receive tax credits?
Possibly, if the addition is part of a larger rehabilitation project. The CPRC reviews all the work in a 24-month period for its effect on the historic characteristics of the building and determines which costs would be eligible for credit.
For instance, a project that includes a new addition at the rear of a house and repair of exterior woodwork on the original historic house could be approved by the CPRC. Costs of the woodwork repair could be eligible toward credit, but the costs of the new addition would not be eligible.
How do I apply for the State Income Tax Credit?
An application can be downloaded from this page or obtained from the NM Historic Preservation Division (HPD). Complete the Part 1 form according to the instructions. Send the application so it arrives at HPD before the deadline of 14 days prior to a meeting of the Cultural Properties Review Committee (CPRC) for action at that meeting. Meeting dates may be found under the Calendar tab on this website.
Federal Historic Tax Credit Program
The National Park Service (NPS) administers the Historic Preservation Tax Incentives Program in cooperation with the NM Historic Preservation Division (HPD). It is a three-part application process and participation in the program is initiated with HPD in Santa Fe.
- The building must be an income-producing property and expenses for any portion used for personal residence do not qualify.
- The building must be individually listed in, or contribute to a historic district listed in the National Register of Historic Places. In some cases the property may be determined eligible for listing, but has not yet been listed at the beginning of the rehabilitation project. The significance of the property is described in Part 1 of the application.
- The eligible expenses of a rehabilitation project must be at least equal to the adjusted basis of the building (value of building minus value of land. See Internal Revenue Code).
- Proposed rehabilitation work must be fully described in the Part 2 application. The work must conform to the Secretary of the Interior's Standards for Rehabilitation as interpreted by the NPS. After project completion, the Part 3 application is used to obtain NPS final certification.
- The program generally allows up to 20% of the eligible costs of rehabilitation work to be credited against Federal income taxes owed in the year the project is completed. Unused credit can be carried back 1 year and forward 19 years. Some provisions of the Internal Revenue Code may affect a taxpayer's ability to utilize the full credit. Taxpayers should seek professional tax advice concerning their specific circumstances.
- Comprehensive information about the program, including application forms and instructions, guidance, on-line tutorials, and an IRS link are available at the National Park Service’s tax credit program website. Early consultation with HPD tax credit staff is highly recommended.