Federal Tax Incentives and Credits
If your brownfield site is in an Opportunity Zone, you may be eligible for tax incentives! Designated low-income and distressed communities in rural areas are eligible for funding to support recovery and growth. New businesses who invest in these Opportunity Zones will be exempt from corporate and personal income tax for 10 years.
The New Markets Tax Credit (NMTC) can be a great option for brownfield redevelopment projects because of their focus on distressed areas. NMTC is a federal financial program that aims for community development and economic growth using tax credits. Brownfield developers should approach existing Community Development Entities (CDEs) for project funding or developers can apply for their own CDE certification. CDEs provide funding for a wide range of redevelopment activities.
The Low-Income Housing Tax Credit (LIHTC) program provides incentives for the development of affordable housing. They can be used as a part of brownfield financing if affordable rental housing is a part of the project. Both profit and non-profit brownfields developers can use LIHTCs to assist with low-income housing financing. This program provides opportunities for restoration of old buildings, creating investment incentives, and it can attract new investors in redevelopment projects.
The Brownfields Expensing Tax Incentive encourages investments in blighted properties and to assist in revitalizing communities. Environmental cleanup costs are fully deductible in the year that they are incurred, rather than capitalized over time.
Energy-efficiency and renewable energy tax incentives can offset cleanup and construction costs to provide brownfield redevelopers an extra income boost. This EPA guide to federal tax incentives breaks down the programs most applicable to brownfield projects.
Historic Tax Credits
Historic tax credits are tax incentives for preserving historic properties to promote the reuse and rehabilitation of historic buildings. It is a cost-effective revitalization program. There are 20% tax credits, 10% tax credits, and tax benefits for historic preservation easements offered.
- A 20% income tax credit is available for the rehabilitation of certified historic structures. The work must comply with the Secretary’s Standards for Rehabilitation.
- A 10% income tax credit is available for the non-residential rehabilitation of non-historic buildings that were placed in service prior to 1936.
- A historic preservation easement permanently protects a historic property. An easement places restrictions on a property, and this easement can be donated for tax benefits, such as a federal income tax deduction.