Award and Grants

 Financial Incentives for Restoring Your Barn

The Iowa Barn Foundation is now providing incentives for barn owners to take advantage of tax credits that are available from the federal government and the state of Iowa.

Submitting a nomination to put your barn on the National Register of Historic Places or applying for State Tax Credits can be challenging for many of us, but the financial benefits are significant.  Your barn qualifies for a federal tax credit of 20% of a renovation project if it is on the National Register (or eligible to be listed) and if it is income producing (would likely qualify if located on a working farm).

The State of Iowa offers a 25% tax credit on renovations for barns built prior to 1937.  Please visit the State Historical Society of Iowa’s website, the State Historical Society of Iowa’s website for qualifying details.

For barn owners to get some help in applying for these programs, the Iowa Barn Foundation is offering a cost share program so you can hire consultants to help you work through the process.

The Iowa Barn Foundation will cost share 50 per cent of the cost of the consultant up to $2500.  Interested parties must submit an application to the Iowa Barn Foundation before hiring a consultant.  This application can be obtained from the Iowa Barn Foundation website – use the matching grant application.

Applicants must hire consultants who have been approved by the Association of Iowa Archaeologists or Preservation Iowa.  Cost share payments will be made after completed National Register Nominations and/ or State Tax Credit applications are submitted to the State Historic Preservation Office.  The Iowa Barn Foundation will allocate a given amount of funds to be used for this incentive program.  Once these funds are utilized, any unfunded cost share applications will be considered after the next funding cycle.

The cost for barn renovations can be high.  To counteract this, the Iowa Barn Foundation encourages you to apply for a matching grant to restore your barn, but also strongly consider taking advantage of the tax credits.  If we put all these preservation advantages together, many more of our Iowa barns will remain proud.

If you have questions about this new program from the IBF, please contact Craig Pfantz at cmpfantz@partnercom.net or 641-750-0187.

Iowa Tax Legislation for Barn Restoration

The Iowa General Assembly, in a bill signed by Governor Tom Vilsack in May 2000, enacted legislation of great interest to those restoring barns and other farm structures. House File 2560 added (1) a property rehabilitation credit against state income tax and (2) a provision exempting from property tax increases in assessed value added by a farm structure built prior to 1937.

The income tax credit
The income tax credit, which is refundable, is available for “eligible property” which includes:

• Property listed on the National Register of Historic Places or is eligible for such listing,
• Property designated as of historic significance to a district listed in the national register,
• A local landmark designated by a city or county ordinance, or
• A barn constructed prior to 1937.

The amount of the credit is 25 percent of the “qualified rehabilitation costs” on eligible property. In the case of barns or residential property, the costs must equal at least $25000 or 25 percent of the fair market value of the structure excluding the land, whichever is the less. For commercial property, the rehabilitation costs must equal at least 50 percent of the assessed value of the property, excluding the land, prior to the rehabilitation.

In computing the tax credit, the only costs which may be included are the rehabilitation costs incurred between the period ending on the project completion date and beginning on the later of the date of issuance of approval of the project or two years before the project completion date.

“Qualified rehabilitation costs” include amounts properly includable in computing the income tax basis for the eligible property tax purposes. Architectural fees, site survey fees, legal expenses, insurance premiums, development fees, and other construction-related costs are qualified rehabilitation costs to the extent they are added to the basis of the property. Costs of sidewalks, parking lots, and landscaping do not constitute qualified rehabilitation costs.

The project must receive the approval of the state historic preservation office. The approval process is not to exceed 90 days.

A refunded tax credit cannot exceed 75 percent of the original credit.

Exemption from property tax  – Under the same bill, H.F. 2560, the legislature decreed that the increase in assessed value added to a farm structure”for purposes of preserving the integrity of the internal and external features of the structure as a barn” is exempt from property tax. To be eligible for the exemption, the structure must have been first placed in service as a barn prior to 1937. The exemption applies to the assessment year beginning after the completion of the improvements to preserve the structure as a barn.

For this purpose, the term “barn” means “an agricultural structure, in whatever shape or design, which is used for the storage of farm products or feed or for the housing of farm animals, poultry, or farm equipment.”

Application for the exemption is to be filed not later than February 1 of the first year for which the exemption is requested. The Department of Revenue and Finance is to provide application forms. Once the exemption is granted, it continues to be granted for subsequent assessment years without further action as long as the structure continues to be used as a barn. The taxpayer is to notify the assessing authority when the structure ceases to be used as a barn.

Contributed by Neil E. Harl, Charles F. Curtiss Distinguished Professor in Agriculture and Professor of Economics, Iowa State University, Ames, Iowa; Director for the Center for International Agriculture Finance; Member of the Iowa Bar; charter board member of the Iowa Barn Foundation.

Federal Tax Incentives for Barn Restoration

Those committed to restoring old barns usually have enough enthusiasm to see the project to its conclusion without tax incentives. But, there is an income tax credit available to help cover part of the cost. And there may be depreciation claimable after the restoration.

Rehabilitation credit – A credit is available for rehabilitation expenditures on buildings at least 50 years old in 1986 and buildings that are “certified historic structures.” The credit is equal to 10 percent of expenditures for “qualified rehabilitated buildings” first placed in service before 1936. This ten percent credit is available only for non-residential property. A credit offsets calculated tax dollar for dollar so it is considerably more valuable than a deduction against income.

A 20 percent credit is available for certified historic structures (both residential and non-residential buildings) listed on the National Register of Historic Places or are located in a registered historic district and certified as being of historic significance to the district.

For both the 10 percent and 20 percent credits, the income tax basis must be reduced by the amount of the credit claimed, reducing the amount of depreciation that can be claimed on the property.

The credit is generally claimed in the year the property on which the expenditures are made is placed in service. Buildings must meet several requirements to be eligible.

To be eligible there must be a substantial rehabilitation of the building. The qualifying expenditures over the tax year and the preceding year must exceed the greater of the taxpayer’s adjusted basis in the property or $5000.

For more information about Federal tax credits for rehabilitating barns, go to the National Park Service website and search for Federal Tax Credits.

Depreciation – If a restored or rehabilitated building has a business use, a depreciation deduction may be claimable to the extent of the taxpayer’s basis in the property which includes the funds provided by the taxpayer for rehabilitation. Barns are generally depreciable over 20-years under IRS rules. If a credit is claimed, depreciation is usually limited to straight line depreciation — the same allowance each year over the 20-year life. Otherwise, it may be possible to step up depreciation to one and one-half times the straight line rate.

Contributed by Neil E. Harl, Charles F. Curtiss Distinguished Professor in Agriculture and Professor of Economics, Iowa State University, Ames, Iowa; Director for the Center for International Agriculture Finance; Member of the Iowa Bar; charter board member of the Iowa Barn Foundation.