Information on Historic Preservation Tax Incentives

GGD-84-47: Published: Mar 29, 1984. Publicly Released: Mar 29, 1984.

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In response to a congressional request, GAO provided information on the tax provisions relating to the rehabilitation of certified historic structures authorized by the Tax Reform Act of 1976 and the Revenue Act of 1978.

Two Federal agencies are responsible for administering the historic preservation program: (1) the National Park Service determines whether structures are historically significant and whether the work conforms to standards for rehabilitation; and (2) the Internal Revenue Service (IRS) is responsible for ensuring taxpayer compliance with the tax laws relating to historic structures. Since 1976, the annual caseload of applicants requesting historic structure certifications and the number of structures rehabilitated have increased substantially. GAO found that tax considerations have played a key role in stimulating private investments in historic preservation, and the Federal Government's costs have been small compared with the total amounts spent on rehabilitation. However, GAO found that individuals at the higher income levels and corporations benefit most from this tax incentive. By increasing reliance on State recommendations and by taking various managerial initiatives, the National Park Service has been able to handle an increasing demand for certifications without substantially increasing its staff. Due to the number and complexity of the Internal Revenue Code provisions involved, IRS has experienced some problems in administering the tax incentives. The Economic Recovery Tax Act has partially alleviated these problems. However, three compliance issues remain: (1) the nonreporting or underreporting of amounts recaptured by sale of rehabilitated structures; (2) inappropriate tax benefit claims; and (3) over evaluation of conservation easements.

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