Instructions For Form 3468 - Investment Credit

Rehabilitation Credit: Part III

c. Active negotiation of contracts for the repair or restoration

to be completed within the designated 36-month period, but

You are allowed a credit for qualified rehabilitation expenditures

only if the contracts are finalized prior to January 1, 2007.

made for any qualified rehabilitated building. You must reduce

your depreciable basis by the amount of the credit.

4. The building must have been placed in service before the

beginning of rehabilitation. This requirement is met if the

If the adjusted basis of the building is determined in whole or

building was placed in service by any person at any time before

in part by reference to the adjusted basis of a person other than

the rehabilitation began.

the taxpayer, see Regulations section 1.48-12(b)(2)(viii) for

5. For a building other than a certified historic structure (a)

additional information that must be attached.

at least 75% of the external walls must be retained with 50% or

more kept in place as external walls, and (b) at least 75% of the

Qualified Rehabilitated Building

existing internal structural framework of the building must be

To be a qualified rehabilitated building, your building must meet

retained in place.

all five of the following requirements.

1. The building must have been placed in service (see

Qualified Rehabilitation Expenditures

requirement 4) prior to 1936 unless it is a certified historic

structure. A certified historic structure is any building (a) listed in

To be qualified rehabilitation expenditures, your expenditures

the National Register of Historic Places, or (b) located in a

must meet all six of the following requirements.

registered historic district (as defined in section 47(c)(3)(B)) and

1. The expenditures must be for (a) nonresidential rental

certified by the Secretary of the Interior as being of historic

property, (b) residential rental property (but only if a certified

significance to the district. Certification requests are made

historic structure — see Regulations section 1.48-1(h)), or (c)

through your State Historic Preservation Officer on National

real property that has a class life of more than 12 years.

Park Service (NPS) Form 10-168a, Historic Preservation

Certification Application. The request for certification should be

2. The expenditures must be incurred in connection with the

made prior to physical work beginning on the building.

rehabilitation of a qualified rehabilitated building.

2. The building must be substantially rehabilitated. A

3. The expenditures must be capitalized and depreciated

building is considered substantially rehabilitated if your qualified

using the straight line method.

rehabilitation expenditures during a self-selected 24-month

4. The expenditures cannot include the costs of acquiring or

period that ends with or within your tax year are more than the

enlarging any building.

greater of $5,000 or your adjusted basis in the building and its

structural components. Figure adjusted basis on the first day of

5. If the expenditures are in connection with the

the 24-month period or the first day of your holding period,

rehabilitation of a certified historic structure or a building in a

whichever is later. If you are rehabilitating the building in

registered historic district, the rehabilitation must be certified by

phases under a written architectural plan and specifications that

the Secretary of the Interior as being consistent with the historic

were completed before the rehabilitation began, substitute

character of the property or district in which the property is

“60-month period” for “24-month period.” If the building is in one

located. This requirement does not apply to a building in a

of the designated counties or parishes in the GO Zone, Rita GO

registered historic district if (a) the building is not a certified

Zone, or Wilma GO Zone, the “24-month period” and “60-month

historic structure, (b) the Secretary of the Interior certifies that

period” is extended by 12 months. However, the rehabilitation

the building is not of historic significance to the district, and (c) if

must have begun, but not been completed, and the building

the certification in (b) occurs after the rehabilitation began, the

placed in service prior to the following dates.

taxpayer certifies in good faith that he or she was not aware of

that certification requirement at the time the rehabilitation

States

Date

began.

GO Zone

Florida

August 24, 2005

6. The expenditures cannot include any costs allocable to

the part of the property that is (or may reasonably expect to be)

GO Zone

Louisiana, Mississippi, August 29, 2005

tax-exempt use property (as defined in section 168(h)).

and Alabama

Rita GO Zone

Louisiana and Texas

September 23, 2005

Line 10

Wilma GO Zone

Florida

October 23, 2005

For credit purposes, the expenditures are generally taken into

account for the tax year in which the qualified rehabilitated

3. Depreciation must be allowable with respect to the

building is placed in service. However, with certain exceptions,

building. Depreciation is not allowable if the building is

you may elect to take the expenditures into account for the tax

permanently retired from service. If the building is damaged, it

year in which they were paid (or, for a self-rehabilitated building,

is not considered permanently retired from service where the

when capitalized) if (a) the normal rehabilitation period for the

taxpayer repairs and restores the building and returns it to

building is at least 2 years, and (b) it is reasonable to expect

actual service within a reasonable period of time.

that the building will be a qualified rehabilitated building when

For a building damaged in the GO Zone, Rita GO Zone, or

placed in service. For details, see section 47(d). To make this

Wilma GO Zone, that reasonable period is deemed to be up to

election, check the box on line 10a.The credit, as a percent of

36 months, subject to the following qualifications.

expenditures paid or incurred during the tax year for any

•

qualified rehabilitated building, depends on the type of structure

The building must have been placed in service prior to

and its location.

the date as given in the table above.

•

The relevant 36-month period for that building starts on

Note. The credit is increased for qualified rehabilitated

the same date as given in the table above.

expenditures made on or after the applicable disaster date for

•

qualified rehabilitated buildings or structures damaged or

Beginning no later than August 15, 2006, for GO Zone,

destroyed as a result of the severe storms, tornados, or flooding

Rita GO Zone, or Wilma GO Zone property, the taxpayer must

in the Midwestern disaster area. For details on the affected

be engaged in the repair or restoration of building, defined as:

counties and the applicable disaster dates in the Midwestern

a. Ongoing physical repairs,

disaster area, see Tables 1 and 2 in Publication 4492-B,

b. Written contracts in place for the repair or restoration to

Information for Affected Taxpayers in the Midwestern Disaster

be completed within the designated 36-month period, or

Areas.

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Instructions For Form 3468 - Investment Credit - 2008 Page 5

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