Incentives

Investment Tax CreditSpecial ValuationOpen Space Taxation
Facade/Conservation EasementConditional Use PermitBuilding Code Relief

There are several government-sponsored incentives available to owners of designated historic properties in Spokane city and the greater Spokane County. While this list provides information regarding government funding, a list of private sources is available here.

Investment Tax Credit

 

A Federal income tax credit may be granted to commercial properties that are listed on the National Register of Historic Places, and on which “substantial rehabilitation” is performed. Pre-certification (phase 1) and completion (phase H), review and approval by the Washington State Department of Archaeology and Historic Preservation and the National Park Service, is required. Rehabilitation must comply with Federal standards for preservation of historic properties. The tax credit can be amortized.

What it does: Dollar-for-dollar Federal income tax credit equal to 20% of the construction costs for rehabilitating an income-producing building; the credit may be used by the building owner or “sold” to a tax credit investor.
Minimum investment: 100% of the building’s “adjusted basis”; that is, the purchase price minus the land cost and depreciation, plus prior improvements.

For non-contributing properties in a National Register Historic District constructed prior to 1936, a 10% Federal rehabilitation tax credit is also available.

What it does: Dollar-for-dollar Federal income tax credit equal to10% of the construction costs for rehabilitation of an income-producing, non-residential building constructed prior to 1936 (contributing properties listed on the National Register of Historic Places are ineligible).
Minimum Investment: 100% of the building’s “adjusted basis” – that is, the purchase price minus the land cost and depreciation, plus prior improvements.

To learn more about Federal Historic Preservation Tax Incentives, click here.

Top of Page

Special Valuation

 

Special Valuation is the revision of the assessed value of an historic property which subtracts, for up to ten years, such rehabilitation costs as approved by the Spokane City-County Historic Landmarks Commission.  Properties must be listed on the Spokane Register of Historic Places prior to application to qualify, and rehabilitation must comply with the Secretary of the Interior’s Standards for Rehabilitation.  Rehabilitation costs must total 25% or more of the assessed valued of the structure (not the land) prior to rehabilitation.

Eligibility

To be classified as eligible for special valuation, a property must meet the following criteria:
1) The property must be listed on the Spokane Register of Historic Places, individually, or certified as a contributing property within a Local Register Historic District.
2) The Historic Landmarks Commission must have approved the work that was completed.
3) Work must have been completed no more than 24 months prior to the application.
4) Rehab costs must be equal to at least 25% of the assessed value of the structure, excluding land, prior to rehabilitation. The County Assessor’s Office sets the value of the property.

Application Process

Step 1: Property is listed on the Spokane Register.
Step 2: Property owner applies for a Certificate of Appropriateness for proposed work and rehabilitates the building in accordance with the Secretary of the Interior’s Standards.
Step 3: Property owner files application for Special Valuation with the Spokane County Assessor’s Office by October 1st.
Step 4: Preservation Office meets with applicant to discuss application requirements and procedures.
Step 5: Property owner submits completed application and documentation to the Historic Preservation Office and a Landmarks Commission Hearing is scheduled.
Step 6: Landmarks Commission conducts public hearing on application.
Step 7: If approved, Historic Preservation Office sends approved amount to the Assessor.
Step 8: Property owner sees a reduction in Spokane county property tax bill within two years.

Considerations

-Application for special valuation must be made no later than 24 months after the beginning date of the rehabilitation work included therein.
-October 1st is the deadline for applications when special valuation is desired for the following year.
-It is recommend that work not be done before a property is listed on the Spokane Register, or reviewed first by the Landmarks Commission.
-Improvements must be consistent with the historic character of the building, and meet the Secretary of the Interior’s Standards for Rehabilitation. A Certificate of Appropriateness must be issued before work is started.
-In order for a historic property to be eligible for special valuation, it must have been substantially rehabilitated – 25% of assessed improvement value
-The property must be maintained in good condition as long as the special valuation is in effect.
-Reduction in property taxes appears two years after special valuation approval and applies until the year following the ten-year period of special valuation.
-Property owners who receive special valuation for a rehabilitation project may also apply for the Federal Investment Tax Credits for the same project.
-The penalty for violating the agreement or other program requirements is substantial. Violators would have to pay the following: all back taxes that would otherwise have been owed, interest on back taxes, and a penalty equal to 12% of back taxes and interest may be due.
-Appeal Process: Any decision on the disqualification of a historic property for special valuation exemption or any other dispute may be appealed to the current year Board of Equalization by July 1st or 30 days after the disqualification, whichever is the later.

Expenditures that Qualify for Rehabilitation Cost Total

Exterior: Windows, doors, painting, roofing
Interior: Plumbing, electrical, lighting, wiring, flooring, doors, windows; heating/air conditioning, finish work, cabinetry (affixed to the wall);
Other: Architectural/consultant fees, taxes, insurance, and utilities during construction, construction administration expenses, construction phase interest expenses.

Expenditures thatDo Not Qualify for Rehabilitation Cost Total

Homeowner labor
Acquisition costs
Enlargement of the building
Costs for permanent financing
Overhead costs
Fixtures that are not attached
Landscaping costs

Application Fees

Residential properties:  $150 Application Fee + $72 County Auditor Filing Fee = $222 Total Due
Commercial Properties:

Less than 1 Million in rehab at the time of filing: $250 Fee + $72 County Auditor Filing Fee = $322 Total Due
1 Million to 5 Million in rehab at the time of filing: $500 Fee + $72 County Auditor Filing Fee = $572 Total Due
Over 5 Million in rehab at time of filing: $1000 Fee + $72 County Auditor Filing Fee = $1072 Total Due

View brochure of Program Highlights
Download an Special Valuation Application
View Special Valuation Checklist and Affidavit
Residential Special Valuation Example (PDF)
Commercial Special Valuation Example (PDF)

Top of Page

Open Space Taxation

 

The Open Space Taxation Act, Chapter 84.34 RCW, is designed to encourage the preservation of qualified lands through the application of the current use tax assessment concept.  This is a permanent reduction in the percentage of an owner’s property tax based on land value only. A “Public Benefit Rating” is assigned by local elected officials, based on recommendations made by local review agencies. In the case of historic resources, the Landmarks Commission may contribute to the official review process.

An owner or contract purchaser may apply for the current use classification for any of the following:

Agricultural Land

20 or more contiguous acres devoted primarily to commercial agricultural uses.
5-20 acres devoted primarily to commercial agricultural uses with a gross income from such uses of $100 or more per acre for 3 of the 5 years preceding application.
Less than 5 acres devoted to commercial agricultural uses with a gross income from such uses of at least $1000 per year for 3 of the 5 years preceding application.

Timber Land

Land in contiguous ownership of 5 or more acres devoted primarily to the growth and harvest of forest crops.

Open Space Land

Lands which, through preservation in their current use or natural state, would provide some public benefit.

The “Open Space Land” classification provides the opportunity for properties listed on the local, state, or National Register to take advantage of this particular tax incentive. “Open Space Land” refers to a) any land area so designated by an official comprehensive land use plan adopted by any city or county and zoned accordingly; or b) any land area, the preservation of which in its present use would do any of the following:

1. Conserve or enhance natural, cultural or scenic resources
2. Protect streams, stream corridors, wetlands, natural shorelines and aquifers
3. Protect soil resources and unique or critical wildlife and native habitat
4. Promote conservation principals by example or by offering educational opportunities
5. Enhance the value to the public of abutting or neighboring parks, forest, wildlife preserves, nature reservations or sanctuaries or other open space
6. Enhance recreational opportunities
7. Preserve historic and /or archaeological sites
8. Affect any other factors relevant in weighing benefits to the general welfare of preserving the current use of the property.

In most cases, Current Use Assessment results in a reduction in the assessed value of the land, which taxes. The amount of reduction depends on the fair market value of the land and its use. In the case of Open Space Land, the lowering of assessed value is related to the degree of public benefit associated with the classification.

Applications for Open Space Classification can be obtained from the Spokane County Department of Building and Planning, 1026 Broadway, Spokane, Washington 99260. The Historic Preservation Office may provide additional information to those interested in learning more about this program.

Top of Page

Facade/Conservation Easement

 

An easement is a legal agreement whereby the private owner gives up certain privileges with regard to controlling the appearance of his or her real property. Once imposed, it “runs with the land,” obligating future owners to abide by its terms and thus providing effective long-term protection for an historic property in private ownership. In addition, preservation easements can offer potentially significant federal income, estate and gift tax consequences. In exchange for the donation of an easement, consisting of either a portion of land or a building’s facade, an owner may: a) claim a one-time Federal income tax deduction, and b) realize a permanent property tax reduction based on the value of the donated property. The easement must be granted to a qualified entity; and in exchange, the owner must agree to maintain the donated property.

The preservation easement may be drafted to prohibit alterations to significant features of a building, changes in usage of the building and land, topographical changes, subdivision, or further development without the prior review and approval of the easement holder. By limiting changes to an historic site, the owner alters the property’s market value, while benefiting the general public. This change in market value can be treated like any other charitable contribution deduction.

The Internal Revenue Service has recognized the “before and after” valuation test as the approach to be utilized in placing a value on preservation easements. Under this method, the fair market value of the property after the granting of the preservation easement is subtracted from the property’s fair market value prior to the easement donation. The difference is the value of the preservation easement for federal income, estate and gift tax purposes. The actual value of a preservation easement should be determined by a qualified appraiser.

More detailed information on preservation easements, including a sample easement agreement, may be obtained through the Historic Preservation Office.

Due to the complexities of easements and potential tax consequences, those interested are also strongly encouraged to consult a qualified attorney or financial advisor early in the process.

Download Facade Easement Agreement

Top of Page

Conditional Use Permit

 

A permit allowing a non-conforming use may be granted to an historic property by the City or County Zoning Board. The property and use may be declared eligible by the Landmarks Commission.

For more information, contact the Historic Preservation Office or Planning Services at (509) 625-6300.

Top of Page

Building Code Relief

Relief from building code requirements may be granted to historic properties by local code enforcement officers. The Landmarks Commission may recommend historic property eligibility and code deviation.

Download Application for Code Relief

Top of Page

Visit the Community Development Website for additional sources of funding.