Certified Historic Structure: Definition, Credit, and Application

A certified historic structure is a building that the federal government has formally recognized as historically significant for purposes of the 20% rehabilitation tax credit. Under Section 47 of the Internal Revenue Code, a building earns the status one of two ways: it is listed individually on the National Register of Historic Places, or it sits inside a registered historic district and the Secretary of the Interior has certified that it contributes to that district’s historic character.¹ The National Park Service administers the designation for the Department of the Interior, working through each state’s historic preservation office.²

How the Tax Code Defines It

The definition that governs the tax benefit lives in Section 47(c)(3). Two paths lead to the same designation. The first is individual listing on the National Register. The second covers buildings inside a “registered historic district” where the Secretary of the Interior has certified the individual building as historically significant to that district. The statute reads registered historic district broadly: it includes both districts listed on the National Register and districts created under a state or local law that the Secretary has certified as meeting substantially the same preservation standards.¹

The practical consequence: a building does not need to be individually famous. A row house on a block of similar row houses can qualify if the Park Service finds it contributes to the district’s significance, even though it would never be listed on its own. Non-contributing buildings inside a district, whether too new, too heavily altered, or unrelated to what makes the district significant, do not qualify.

What the Designation Is Worth

The main reason to pursue certification is the federal rehabilitation tax credit: 20% of qualified rehabilitation expenditures. Since the Tax Cuts and Jobs Act of 2017, the credit is claimed in equal installments over five years, starting the year the rehabilitated building is placed in service.¹ On a $1 million rehabilitation, that is a $200,000 credit taken at $40,000 per year.

Who Can Actually Use It

The building must be depreciable after the rehabilitation, which in practice means it has to be put to income-producing use: commercial, industrial, agricultural, or rental residential. Owner-occupied personal residences do not qualify.³ Rehabilitation costs allocated to a home office or rental portion of a residence may be eligible, but the rest is out. This is where most homeowners hit a wall. Owning a certified historic structure does not, on its own, get you a federal tax benefit.

Many states run their own historic rehabilitation credit programs alongside the federal one, with rules that sometimes reach residences the federal credit excludes. That is a separate track from the federal designation and worth checking with your State Historic Preservation Office before assuming a project has no incentives available.

What Spending Counts

Qualified rehabilitation expenditures are costs properly capitalized to depreciable real property in connection with a certified rehabilitation. The credit excludes the purchase price of the building, the cost of enlarging it, and expenses on the portion of the property where the owner does not use straight-line depreciation.⁴ The rehabilitation itself also has to be certified by the National Park Service as consistent with the building’s historic character.

The Substantial Rehabilitation Test

Small repairs do not qualify. Your qualified rehabilitation expenditures during a 24-month period have to exceed the greater of the building’s adjusted basis or $5,000. Adjusted basis is roughly what you paid minus accumulated depreciation, measured at the start of the rehabilitation period. For phased projects with architectural plans set in advance, the window stretches to 60 months.¹

Recapture If You Sell Too Soon

Sell the building, convert it to personal use, or otherwise pull it out of income-producing service within five years of completing the rehabilitation, and the IRS reclaims part of the credit. The recapture amount drops by 20 percentage points for each full year you held the property. Dispose in year one and you lose the whole credit; in year two, 80%; year three, 60%; and so on down to 20% in year five.⁴ After five full years, no recapture.

The Work Has to Meet Federal Preservation Standards

A building being certified is only half the equation. The rehabilitation work itself must conform to the Secretary of the Interior’s Standards for Rehabilitation, ten principles codified at 36 CFR Part 67 and applied by the Park Service when it reviews your project.⁵ Fail them and there is no credit, no matter what you spent.

In plain terms, the ten standards require you to:

Use the building for its historic purpose, or a new use that changes its defining features as little as possible.
Preserve the historic character rather than stripping away original materials and distinctive spaces.
Treat the building as a physical record of its era and avoid adding features that create a false sense of history.
Retain later changes that have become historically significant in their own right.
Preserve distinctive finishes, construction techniques, and examples of craftsmanship.
Repair deteriorated features rather than replacing them. When replacement is unavoidable, match the original in design, color, texture, and where possible, materials.
Avoid harsh treatments like sandblasting that damage historic surfaces; clean using the gentlest effective method.
Protect significant archaeological resources on the site.
Make any new additions or exterior changes compatible with the building’s scale and character, but visually distinct from the original.
Build new additions so that removing them later would leave the historic building unharmed.⁵

The additions rules trip owners up most. An addition has to be subordinate to the historic building and clearly distinguishable from it. Duplicating the original form and detailing so closely that the new work reads as part of the historic structure is grounds for denial.⁶ Setting the addition back from the original wall plane, or joining old and new with a recessed link, are the usual solutions.

How to Apply

The Historic Preservation Certification Application (NPS Form 10-168) has three parts. Each part goes first to the State Historic Preservation Office, then to the Park Service. The stated review window is 30 days at each level for a complete application, so plan on at least 60 days and often longer if reviewers need more information.⁷

Part 1: Evaluation of Significance

Part 1 asks the Park Service to confirm the building qualifies as a certified historic structure. You file it if your building sits in a registered historic district but is not individually listed. It requires a physical description, a statement of significance, and photographs of every exterior elevation and important interior space, keyed to a floor plan.⁸ Buildings already listed individually on the National Register skip Part 1.

Part 2: Description of Rehabilitation

Part 2 sets out the proposed work in detail: structural repairs, window treatments, interior modifications, any new construction. Before-rehabilitation photographs are mandatory, and they need to cover the same views you will re-photograph after the work.⁹ The Park Service reviews it against the Secretary’s Standards and will flag anything that needs to change.

Filing Part 2 before starting construction is not technically required, but skipping that step means gambling that finished work will pass a Standards review with no practical way to undo mistakes.

Part 3: Certification of Completed Work

Part 3 goes in after the rehabilitation is done. It needs photographs of the finished project matching the Part 2 views, a floor plan keyed to those photos, the project completion date, and a signed statement that the work conforms to the Standards.⁹ The rehabilitation only becomes a “certified rehabilitation” for tax purposes once the Park Service approves Part 3.¹⁰

Fees

The Park Service charges review fees on Parts 2 and 3, scaled to the estimated cost of the rehabilitation. Small projects under a threshold pay nothing; larger projects pay progressively more. Fees are split between the Part 2 and Part 3 stages, and review will not start until the fee is paid.¹¹ Part 1 has no fee.

If You Are Denied

A denial at Part 1, Part 2, or Part 3 can be appealed in writing to the Chief Appeals Officer at the National Park Service in Washington, D.C. You have 30 days from receiving the decision. The appeal can go by letter, fax, or email and must include everything you want the appeals officer to consider. You may request a meeting, but the process is administrative review rather than a formal hearing. The Chief Appeals Officer’s written decision is final at the administrative level.¹²

One boundary worth knowing: a denial of a preliminary determination of significance for an individual property cannot be appealed through this route. The owner has to pursue listing through the standard National Register nomination process instead.¹²

Certification Can Be Revoked

Approval is not the end of the story. The Secretary of the Interior can inspect a completed rehabilitation at any time during the five years after the project finishes. The Park Service can revoke certification if it finds the work was not carried out as described in the approved application, or if the owner did additional unapproved work that conflicts with the Standards after certification.¹³ Before revoking, the Park Service gives the owner 30 days to respond. Revocation triggers tax consequences set by the Treasury, which in practice means the credit gets recaptured.

If plans change during construction, report the change promptly to the Park Service through your State Historic Preservation Office using a continuation or amendment sheet. Treating the approved Part 2 as a fixed baseline and then quietly deviating from it during the build is the fastest way to lose both the certification and the credit.

1
Office of the Law Revision Counsel. 26 USC 47 Rehabilitation Credit
2
eCFR. 36 CFR Part 60 National Register of Historic Places
3
National Park Service. Eligibility Requirements Historic Preservation Tax Incentives
4
Internal Revenue Service. Rehabilitation Credit Historic Preservation FAQs
5
National Park Service. The Secretary of the Interiors Standards for Rehabilitation
6
National Park Service. New Additions to Historic Buildings
7
National Park Service. Historic Preservation Certification Application
8
National Park Service. NPS Form 10-168 Historic Preservation Certification Application Part 1
9
eCFR. 36 CFR 67.6 Certifications of Rehabilitation
10
National Park Service. Historic Preservation Certification Application
11
National Park Service. Application Fees Historic Preservation Tax Incentives
12
eCFR. 36 CFR 67.10 Appeals
13
eCFR. 36 CFR 67.6 Certifications of Rehabilitation