You can potentially save money on your property taxes through the Restoration Tax Abatement program in Louisiana after a renovation. Property owners participating in the program can obtain a five-to-ten-year abatement of ad valorem property taxes on the renovations and improvements of existing owner-occupied residences and existing commercial structures in qualifying districts. An architecture firm with experience in historic architecture and historic tax credits, such as Adamick Architecture, can assist you with designing qualifying renovations and the necessary documentation for the Restoration Tax Abatement. The restoration tax abatement program is separate from the rehabilitation tax credits also available to property owners through the State of Louisiana and the Federal Government.
What is the Restoration Tax Abatement Program?
According Title 13 of the Louisiana Administrative Code,
The Restoration Tax Abatement Program provides to commercial property owners and homeowners who expand, restore, improve or develop an existing structure in a downtown development district, economic development district or historic district (the “project”), the right for five years after completion of the work, to pay ad valorem taxes based on the assessed valuation of the property for the year prior to the commencement of the project.
(Title 13, §901. B.)
What does Ad Valorem mean?
Ad valorem property taxes are based on the assessed value of two aspects of real estate: the value of the land itself and the value of any improvements, such as buildings. Renovations to an existing structure on a property will likely lead to the increased assessed values for the improvements on the land, and thus higher ad valorem property taxes.
How can the Restoration Tax Abatement program save property owners money?
The Restoration Tax Abatement Program is designed to encourage people to make such renovations or improvements which can potentially increase the value of their property by “freezing” the portion of their property taxes that are based on the improvements on the property, such as buildings or other structures, at the rate prior the renovations for five years, with the option of renewing for an additional five years.
What properties are eligible for the Restoration Tax Abatement program?
Properties within the state of Louisiana may be eligible for the Restoration Tax Abatement if they meet the following criteria:
- The property must have an existing building that will be used either for commercial purposes or is currently used as an owner-occupied residence.
- The property is located within any of the following districts: downtown development district, an economic development district, or a historic district.
- The owner of the property must not have paid ad valorem taxes on the renovated improvements already; that is, the tax abatement cannot be retroactive.
What are the requirements for historic properties with the Restoration Tax Abatement program?
In addition to the above eligibility requirements, properties that are listed on the National Register of Historic Places or are listed as contributing structures to a historic district listed on the National Register must comply with the Secretary of the Interior’s “Standards for Rehabilitating Historic Structures”, subject to interpretation by the Division of Historic Preservation, Louisiana Department of Culture, Recreation, and Tourism.
Where are the requirements for owner-occupied residence?
For an owner-occupied residence to be eligible for the Restoration Tax Abatement, the minimum cost of the rehabilitation must be equal to or greater than 25% percent of the assessed valuation of the improvements prior to the renovations. Such renovations can include expansion, restoration, improvement, or development of a property. According to Title 13, an owner-occupied residence is defined as “any structure occupied by the owner and used principally for residential use including condominium units, duplexes, and other multiple residence structures.” For instance, a two-family home would qualify as a owner-occupied residence if the owner resides in one dwelling unit but still leases the other dwelling unit.
How do you apply for the Restoration Tax Abatement?
The application process includes submitting a detailed application that includes the following documentation:
- The RTA1 application form accompanied by a complete description of the project
- Proof of ownership for the property
- A legal description of the property and plot map
- A copy of the building permit issued for the property
- Photograph(s) of the property before renovations and a rendering of how the property will look after the completion of the project
- The assessed value of the structure only (improvements) and the taxes paid on the structure only (not including the land value)
- A copy of the tax invoice from the parish assessor for the year prior to the renovations
All applications must also include the following certification:
A certification from the local governing authority that the structure is in a downtown development district, an historic district, or an economic development district specifically designated as such for this program.
Applications for historic properties must also include the following certification, per Title 13:
[I]f the project is a “certified historic structure” as defined in §905.B, Certification from the Louisiana Department of Culture, Recreation, and Tourism, Division of Historic Preservation that the project meets the National Park Service requirements for restoration projects known as The Secretary of the Interior’s “Standards for Rehabilitating Historic Structures.” This is mandatory if the project is located in downtown New Orleans or downtown Shreveport[.]
Applications for properties with owner-occupied residences must include the following two statements, per Title 13:
A statement certifying that the minimum rehabilitation cost incurred to the owner-occupied residence project will be equal to or greater than 25 percent of the assessed valuation of the improvements located on the property prior to the commencement of the expansion, restoration, improvement, or development; and
A statement certifying that the owner-occupied residence project will be completed within a 24-month period.
The application along with all documentation and necessary application fees must be provided to Office of Commerce and Industry with the State of Louisiana at the same time.
What is the approval process for Restoration Tax Abatement applications?
Once the application is received by the Office of Commerce and Industry, the application is forwarded to the appropriate local governing authority at the parish and/or municipal level for review. They will certify whether the property is located in the appropriate district and whether the property meets the definition of a commercial structure or owner-occupied residence in the appropriate jurisdiction. The appropriate local governing authority will conduct a public hearing regarding the application before giving its approval, and will also notify the tax recipient body affected.
What needs to happen after the renovations in order for the tax abatement to take effect?
Once the application is approved and the project is completed, the owner must submit documentation certifying the beginning and ending of the project and an affidavit of final cost for the project. The Office of Commerce and Industry will inform the property owner of the effective date for the contract for the tax abatement. The owner must also submit an annual report to the parish assessor to be listed separately on the assessment rolls.
Can the Restoration Tax Abatement be renewed?
Yes. Owners of properties awarded a Restoration Tax Abatement can apply once for five-year renewal of the abatement at the end of the five-year contract term. The abatement cannot be renewed if the property owner has already paid ad valorem property taxes on the higher assessed value that includes renovations; in other words, the abatement cannot be applied retroactively.
Can the Restoration Tax Abatement be transferred?
If the property is sold within the five-year contract period for the tax abatement, the tax abatement can be transferred from the old owner to the new owner, subject to approval by the appropriate local governing authority.
How can Adamick Architecture help me obtain Restoration Tax Abatement for my property?
Adamick Architecture specializes in renovating existing buildings in historic districts, both residential commercial. We have extensive experience in producing the necessary documentation for projects subject to review by the Division of Historic Preservation with the state of Louisiana, such as for state and federal historic tax credits applications. Adamick Architecture can design qualifying renovations for your property and help you complete the application and accompanying documentation to obtain a Restoration Tax Abatement contract for your property.