The Lesmeister Building, Pocahontas, Before and After Rehabilitation With Tax Credits
Did you know that when you restore/rehabilitate an old building in downtown Pocahontas, you probably qualify to get your project completed for about half the normal cost?
Select thumbnail to enlarge… Most buildings within the blue border are eligible,or can be made eligible, for historic rehabilitation tax credits.
It’s true! Downtown Pocahontas is a national commercial historic district, and as such, most of the buildings qualify for rehabilitation tax credits that will pay for 45% of the cost of your rehab project. Most old buildings in the historic district are automatically on the National Register of Historic Places, and that makes them eligible for tax credits (there are a few other requirements, listed below, but being on the National Register is a big one).
For example, if you spend $100,000 fixing up your old building the right way, you’ll get $45,000 back through state and federal income tax credits. This means you will pay ZERO federal and state income tax until you’ve used up your credits. You have 20 years to use up your federal tax credits. Arkansas state income tax credits must be used within 5 years, but if you still have credits left and the 5-year deadline is approaching, you can SELL your credits to someone else, generally for about 85 to 90% of face value.
So the bottom line for this example is, you got $100,000 in improvements to your old building, and it only cost you $55,000! A real local example: the Lesmeister Building in downtown Pocahontas cost about $600,000 to convert from a rundown, vacant old building into an upscale guesthouse, but it only cost the building owner $330,000. That’s a $270,000 saving!
To qualify for the 25% state income tax credit, the project must be on the National Register or contributing to a historic district, plus be for one of these purposes:
- Creation of a new business
- Expansion of an existing business
- Establishment of a tourist attraction
- Revitalization of a business district
- Revitalization of a neighborhood.
The 20% federal income tax credit is very similar to the state credit, but the project must be to create an income-producing business.
You can look up different downtown Pocahontas properties HERE to find out their eligibility status for tax credits. Look under the “Contributing Code Key” section. “C” means the building is contributing to the historic district and it eligible for rehab tax credits. “NC” means the building is not contributing because its exterior character has been changed too much by modern additions. In most cases this means a steep sloped roof has been added to a building that originally had a roof that was only gently sloping. The roof add-on would need to be removed before a rehab job could be considered for rehabilitation tax credits.
For more information, contact Five Rivers Historic Preservation or contact the State of Arkansas Historic Preservation Program. A basic description of the program is available HERE.