The MiMo/Biscayne Boulevard Historic District was created by the City of Miami in 2006. It became the first commercial historic district in the City and one of the first primarily “MiMo” historic districts in the Country. Two of the many benefits available to historic buildings in the District are Federal tax credits and local property tax abatements for a substantial rehabilitation.
The Federal Historic Rehabilitation Tax Credit program creates an incentive for the owners of historic commercial properties to invest in restoring and reusing these buildings. The program allows a property owner to claim a federal income tax credit equal to 20% of the capitalized real estate expenses incurred in renovating a historic building. In short: the building must be eligible for listing on the National Register of Historic Places (50 years old is a guide not a requirement); the rehabilitation hard and soft costs must be greater than the owner’s tax basis in the building; and the work must not damage the historic integrity of the building. If these requirements are met satisfactorily, then, for example, the property owner who spends $5 million renovating a historic hotel can claim a $1 million credit on its Federal income taxes.
There is a three-step application process, with each step being reviewed first by state preservation officials and then by the National Park Service. The first step involves documenting the significance of the building and its current physical condition in order to be listed. In Part II, the work is described step-by-step and a full packet of supporting materials, including architectural plans, photographs and historic documentation, is submitted. Part III is submitted upon completion of the project providing an estimate of renovation costs and documentation that the project was completed as described and approved in Part II.
Both the City of Miami and Miami-Dade County will abate their respective portions of the real estate taxes for ten (10) years attributable to the increase in the building’s (not land) tax assessed value due to an approved rehabilitation of an eligible historic building. The application process is similar to that of the Federal program but requires approval of the City and County Historic Preservation Boards and Commissions. A recorded covenant is entered into agreeing to maintain the historic integrity of the Property for the length of the abatement.
While both programs are potentially very valuable, they are more complicated than they appear from the summary description above. For example, while a designated “local district,” there is no official Federal district. Thus properties such as the Vagabond had to go through a more challenging process for Federal approval. A group effort to create a Federal district would enhance the cachet of the neighborhood as well as allowing buildings an easier path to qualify. Advice and representation from experts in the field is strongly recommended.
Gary A. Appel, Esq.
Senior Managing Consultant/Principal
Paradigm Tax Group
4770 Biscayne Blvd., Suite 1100
Miami, FL 33137
305-576-0033
gappel@paradigmtax.com