Illinois Historic Preservation Tax Credit Program
The Illinois Historic Preservation Tax Credit Program (IL-HTC) provides a state income-tax credit equal to 25% of a project's Qualified Rehabilitation Expenditures (QREs), not to exceed $3 million, to owners of certified historic structures who undertake certified rehabilitations. The substantial investments will create jobs in Illinois, stimulate local economies, and revitalize historic structures and neighborhoods. The Illinois Historic Preservation Tax Credit Program is administered by the Illinois State Historic Preservation Office in the Illinois Department of Natural Resources and runs from January 1, 2019 to December 31, 2028 (35 ILCS 5/228 and 35 ILCS 31/1 et. seq.; also see IT 20-0007-GIL and IT 21-0005-GIL from the Illinois Department of Revenue). The passage of Public Act 102-0741 on May 6, 2022, expanded the definition of "Qualified taxpayer" in Section 35 ILCS 5 to include the owner or "any other person or entity who may qualify for the federal rehabilitation credit allowed by Section 47 of the federal Internal Revenue Code," and it modified section 35 ILCS 5/228 to fully parallel provisions of 35 ILCS 31/10d, removing ambiguities regarding disproportionate and alternate distribution methods among partners, shareholders, or members of qualified tax entities. The passage of Public Act 103-0009 on June 7, 2023, extended the program until December 31, 2028, and increased the annual programmatic allocation to $25 million.
Before the SHPO can issue an IL-HTC certificate, a project must meet all of the following requirements:
- The structure must be:
- listed individually on the National Register of Historic Places, or
- a contributing building within a National Register historic district, or
- a contributing building within a local district that has been certified by the National Park Service (NPS) for the purposes of taking the federal tax credit.
- QREs eligible for the IL-HTC must be incurred between January 1, 2019 and December 31, 2028 and must exceed the greater of $5,000 or the building's adjusted basis as calculated on the day the rehabilitation commenced.
- After the rehabilitation, the structure must be used for income-producing purposes, such as rental-residential, commercial, agricultural, and/or industrial.
- The Part 3 of the project's 20% Federal Historic Rehabilitation Tax Credit (F-HTC) application must be certified by the NPS.
- For related multiple-building rehabilitations, the NPS will determine for F-HTC purposes whether they are one or multiple projects and will assign NPS project numbers accordingly. The IL-HTC program will follow the NPS determination.
- The qualified rehabilitation plan must have obtained an IL-HTC allocation as outlined below.
IL-HTC Allocation Application
The IL-HTC program caps the amount of credit available to be allocated at $15 million in the first year and a total of $75 million over the first five years. Starting in 2024, the SHPO can allocate $25 million annually. There will be two allocation rounds held each year of the 10-year program. The allocation application has three mandatory parts: S-1, S-2, and S-3.
Part S-1 is a virtual workshop, at which SHPO staff will explain the IL-HTC program and its allocation process. Anyone can attend, and no RSVP is required.
For a project’s Part S-1 attendance to count for that round:
The project’s F-HTC Part 2 must be approved or conditionally approved by the NPS by the date of that round's Part S-1 workshop, and
The project must have its NPS project number and city entered into the public WebEx “chat box” during the event.
Part S-2 is a simple online submittal that establishes the order in which the sorted Part S-3s will receive allocations. Projects that submit a Part S-2 will receive an automatic e-mail response confirming the date and time the submittal was received by the SHPO.
To be eligible to submit Part S-2: an applying project must have been represented at that round's Part S-1 workshop.
Part S-3 is an electronic submittal that estimates the project’s qualified rehabilitation expenditures—which determines the project’s potential allocation amount—and asserts the programmatic priorities that the project meets.
The five priorities that can be asserted per project are:
- The structure must be located in a county that borders a state with a historic income-producing-property rehabilitation credit.
- The structure must have been previously owned by a federal, state, or local-governmental entity for no less than six months.
- The structure must be located in a census tract that has a median family income at or below the Illinois median family income; data from the most recent 5-year estimate from the American Community Survey (ACS), published by the U.S. Census Bureau, shall be used to determine eligibility.
- The qualified rehabilitation plan must include in the development partnership a Community Development Entity, a low-profit organization, or a not-for-profit organization, as defined by Section 501(c)(3) of the Internal Revenue Code.
- The structure must be located in an area declared under the federal Robert T. Stafford Disaster Relief and Emergency Assistance Act as an Emergency Declaration (pursuant to Title V of the Act) or Major Disaster Declaration (pursuant to Title IV of the Act). The declaration must be no older than 3 years at the time of application.
For a project's Part S-3 to count for that round: the project must have submitted that round's Part S-2 and attended that round's Part S-1 workshop.
The SHPO reviews all S-3s and provides applicants an opportunity to correct any errors and omissions that the SHPO has identified.
IL-HTC Allocation by the SHPO
The SHPO sorts complete IL-HTC applications and assigns allocations beginning with the project that meets the most priorities and whose Part S-2 was received first and proceeds in descending order until the available allocation amount has been assigned.
The SHPO reviews the estimated QREs for each Part S-3 and determines the project's state tax credit allocation (i.e., the amount of credit the project can apply for upon project completion).
The SHPO assigns allocations equal to the lesser of the following:
- For projects with an NPS-approved F-HTC Part 2 only, 25% of the estimated QREs incurred on or after 1/1/19, or
- For projects that have an NPS-certified F-HTC Part 3 but not a third-party cost certification, 25% of the estimated QREs incurred on or after 1/1/19, or
- For projects that are completed and have an NPS-certified F-HTC Part 3 and a third-party cost certification, 25% of final certified QREs incurred on or after 1/1/19 from the cost certification, or
- $3 million
If, after assigning allocations as described above, the allocation amount remaining is less than that which the next eligible project is requesting, the SHPO allocates the remaining amount to that project. The project may competitively re-apply for the balance of the allocation in a subsequent IL-HTC round.
IL-HTC Certification of QREs
After the NPS certifies a project's F-HTC Part 3, the project owner and a third-party CPA certify the project's expenditures by completing and signing the IL-HTC Certification of QREs form (rev. June 2023), which requires:
- Total QREs; and
- QREs incurred between January 1, 2019 and December 31, 2028; and
- Adjusted basis of the building on the day the qualified rehabilitation plan commenced; and
- The opinion or conclusion that the QREs incurred between January 1, 2019 and December 31, 2028, exceed the greater of $5,000 or the adjusted basis of the building calculated on the day the qualified rehabilitation plan commenced; and
- Total non-QREs, regardless of when they were incurred; and
- Total expenditures (QREs plus non-QREs).
If the completed IL-HTC Certification of QREs is accepted, the SHPO emails the owner a letter that states the amount of eligible IL-HTC credit and requests an issuance fee in the amount of 2% of value of the project's eligible credit. Once the fee is collected, the SHPO issues the owner an IL-HTC Certificate in the amount of the eligible credit.