How to Get Iowa’s Historic Preservation Tax Credits

The Iowa Historic Preservation Tax Credit program provides a financial incentive for the rehabilitation of historic properties across the state. Its purpose is to encourage private investment in returning underutilized or vacant historic buildings to productive use, thereby revitalizing communities. Administered by the Iowa Economic Development Authority (IEDA) in partnership with the State Historic Preservation Office (SHPO), the program makes the often-costly process of updating historic structures more financially feasible. This initiative helps preserve the unique character of Iowa’s towns and cities.

Determining Project Eligibility

A project’s qualification for the tax credit depends on the historic status of the property and the financial scope of the rehabilitation. The building itself must be historically significant. This is demonstrated if the property is individually listed on the National Register of Historic Places, is a contributing property within a National Register-listed historic district, or has been designated as a historic landmark under a local city or county ordinance. The SHPO can also determine if a property is eligible for a National Register listing, which would satisfy this requirement.

The project must also qualify as a “substantial rehabilitation,” a financial test ensuring significant restoration efforts. The requirements, which do not include the value of the land, vary by property type. For commercial properties, rehabilitation costs must be at least 50% of the building’s pre-rehabilitation assessed value or $50,000, whichever is less. For non-commercial properties, the threshold is 25% of the assessed value or $25,000, whichever is less.

Calculating the Tax Credit

Approved projects can receive a state income tax credit equal to 25 percent of the Qualified Rehabilitation Expenditures (QREs). These expenditures are defined under Section 47 of the Internal Revenue Code and include costs directly related to the physical restoration of the building.

QREs include expenses for structural components, such as repairing foundations or roofs, and systems upgrades like new electrical wiring and plumbing. Architectural and engineering fees are also qualified costs. However, certain expenses are excluded, including the price of acquiring the property, the cost of new construction that expands the building, and site work such as parking lots, sidewalks, and landscaping.

To illustrate, if a project has an adjusted basis of $400,000 and incurs $500,000 in QREs, the tax credit would be calculated by taking 25 percent of the QREs. This results in a $125,000 state tax credit for the project owner.

Required Information for the Application

Iowa uses the federal Historic Preservation Certification Application. Applicants must gather several documents to complete these forms, including:

• Proof of ownership, such as a deed or a qualifying long-term lease.
• Documentation of the building’s historic status.
• A detailed description of the proposed work, with architectural plans.
• Photographs of the property’s pre-rehabilitation condition.
• An itemized budget of anticipated QREs to prove the project meets the substantial rehabilitation test.

Application forms and instructions are available on the IEDA and SHPO websites.

The Application and Review Process

The application is a sequential process that begins before any physical work starts. The first step is submitting Part 1 (Evaluation of Significance) and Part 2 (Description of Rehabilitation) of the application to the SHPO. This submission details the building’s historic status and the planned work, allowing the SHPO to ensure the project complies with the U.S. Secretary of the Interior’s Standards for Rehabilitation.

The SHPO reviews the plans and may request modifications to protect the building’s historic character. Once the SHPO approves these parts, the project is registered with the IEDA, and tax credits are reserved for the project, pending final approval. This reservation provides developers with assurance as they move forward with construction.

Upon completion of the rehabilitation project, the applicant submits the Part 3 application, the Request for Certification of Completed Work. This package must include “after” photographs that document the finished work, along with a final, certified accounting of all QREs. The SHPO reviews this submission to verify that the completed project matches the approved plans. After SHPO approval, the IEDA gives its final sign-off and issues the official tax credit certificate.

Claiming and Transferring the Credit

The credit can be used to directly offset the owner’s Iowa income tax liability. Because the credit is refundable, any amount that exceeds the owner’s tax liability for the year can be paid out as a direct refund. If the owner prefers, the unused portion of the credit can be carried forward for up to five years. To claim the credit, the owner files Form IA 148 Tax Credits Schedule with their state tax return.

Iowa’s program also allows the tax credits to be transferred. A project owner can sell their tax credit certificate to another Iowa taxpayer, who can then use it to reduce their own state tax liability. This option is particularly useful for non-profit developers or owners with insufficient tax liability to use the full credit themselves. The sale must be registered with the IEDA, which then issues a new certificate to the buyer to complete the transfer.