Historical Tax Credit Insurance
What is historical tax credit insurance?
Business entities that rehabilitate and/or use historic buildings constructed prior to 1936 may qualify for federal tax credits. These credits may be recaptured if the property is damaged by fire or other casualty and is no longer considered historically significant. In addition, the tax credits can be recaptured if the property does not remain in commercial use for five years after occupancy.
Insurance is available to protect against these risks. During the period of rehabilitation, if the tax credits are reduced or totally lost due to partial damage or destruction of the property, the policy will pay that amount to investors up to $40,000,000 per property.
During the period of occupancy, tax credits can also be reduced or eliminated if the property does not remain in service for a five year period. If the property is damaged or destroyed by a covered peril and does not meet the use test, then the insurance will pay for that loss of tax credit, again up to $40,000,000 per property.