The tax credit rate available to the project depends on the location of the commercial structure, the project’s start and application date, and if a deed restriction is required.

Disaster status is placed on a county and is declared by the federal or state government. Once declared the status remains in effect for projects that begin within six years of the declaration date.

Rural is defined as either:

• A municipality with a population of less than fifty thousand people that is not located within the Denver metropolitan area.
• An unincorporated area of any county the total population of which county is less than 50,000 people that is not located within the Denver metropolitan area.

*Project work must have commenced in 2020 or later.

Owner eligibility

You need to be either the property’s:

• Owner
• Tenant with a lease of at least 39 years in urban areas or 5 years in rural areas
• Holder with a property under contract

You must also be a tax-paying entity or an entity that is exempt from federal income taxation subject to section 501(c). Local Governments  are not eligible for the credit.

Project eligibility

Your project needs to meet:

• The Secretary of the Interior's Standards for Rehabilitation
• Substantial remodel criteria
• Timeliness requirements

Substantial remodel criteria
The substantial rehabilitation standard involves the qualified rehabilitation expenses and is based on the application date. 
Applications submitted on or after January 1, 2020 require qualified expenses of at least $20,000. Applications submitted prior to January 1, 2020 must have qualified expenses of 25% of the original purchase price less the current value of the land.

Timeliness requirements
If the rehabilitation project is already complete prior to application for reservation of the tax credit, the project is not eligible for the program.

Project costs are qualified if those costs were incurred no more than 24 months prior to submission of the application for reservation of the tax credit if application is submitted prior to January 1, 2026. Reservation application submissions received after January 1, 2026 may only include expenditures incurred 12 months prior to submission.

Statutorily, at least 20% of the estimated project cost must be incurred within 18 months after the project is fully reserved. If unmet, the reservation will be rescinded and the application will be revoked.

The application for issuance of the tax credit must be submitted within 1 year of the project’s end date to be eligible for tax credit issuance. 

Property eligibility

Your property needs to:

• Produce income
• Be at least 30 years old
• Be listed on the State Register of Historic Properties or landmarked by a certified local government

If multiple rehabilitation projects are proposed for a single property, each project must be completed, with the property open for commercial activity,  before a new project can be started. Any completed project must apply for issuance before submitting an additional application for tax credit reservation on the same property.

Qualified rehabilitation expenditures are expenses necessary to restore a building for commercial use and are defined by IRC 47. Qualified rehabilitation expenditures include but are not limited to:

• Carpentry
• Ceilings
• Cleaning
• Demolition (involved in historic rehabilitation of the structure)
• Doors
• Electrical improvements
• Exterior improvements and repair
• Fixtures
• Structural improvements
• Mechanical improvements
• Painting
• Plaster
• Plumbing and plumbing fixtures
• Roofing and flashing
• Sheetrock
• Sprinkler systems for fire protection
• Tuckpointing
• Windows

These expenditures s are examples of those that are not qualified for the consideration of tax credits but is in no way a comprehensive or exhaustive list of non-qualified expenditures:

• Acquisition costs
• Appliances
• Appraisals
• Application fees
• Bids
• Bid bonds
• Building permits (not related to historic rehabilitation)
• Cabinets
• Carpeting, (if tacked in place and not glued)
• Closing costs
• Consulting fees outside of architecture and engineering - not necessary for design or build
• Copying
• CPA fees
• Decks (not part of original build)
• Demolition (removal of a building on property site)
• Electric system capacity that exceeds that needed for the operation or maintenance of the building (capacity that feeds back to the grid)
• Enlargement costs
• Excavation (not related to the historic preservation of the structure)
• Fencing
• Feasibility studies
• Financing fees (financed)
• Grading
• Interior furnishing
• Landscaping
• Leasing expenses
• Legal, accounting, and realtor fees
• Lost revenue due to rehabilitation work
• Moving (building) costs (if part of acquisition)
• New additions, except as may be required to comply with building and safety codes
• Outdoor lighting remote from the building
• Parking lots
• Paving
• Personal property costs
• Planters
• Porches and porticos (not part of original building)
• Removable fixtures/furniture
• Rent lost due to rehabilitation
• Repairs to outbuildings
• Retaining walls
• Sales and marketing
• Septic tanks/systems
• Sidewalks
• Signage
• Sitework costs
• Solar panels, wind turbines, and geothermal systems
• Storm sewer construction costs
• Tax exempt use
• Total demolition followed by new construction
• Use and inspection fees
• Insurance
• Project signs and phones
• Temporary power

These lists of qualified and non-qualified costs are examples, and are not intended to be exhaustive in nature, but serve as a guide to determine cost qualification. To find further information regarding Qualified Rehabilitation  Expenses (QREs), review the online qualified cost worksheet, (XLS). Since the program relies on Internal Revenue Code for the ultimate determination of Qualified Rehabilitation Expenses (QRE) for all projects, you may find IRC 47 a helpful resource for this purpose.

We reserve tax credits for projects on a first-come, first-served basis. We recommend applying for the tax credit reservation when you are planning the project and will be starting work within a year.

We recommend you contact History Colorado’s Office of Archaeology and Historic Preservation as early as possible to be sure your project meets the requirements for this tax credit.

Application fees

The application fee is paid when you reserve the tax credit and is based on the estimated tax credit:

• $250 to reserve tax credits under $250,000
• $500 to reserve tax credits of $250,000 or more

The issuance fee is paid when your project is complete and is 3% of the approved tax credit amount. 

Application process

The application process includes:

1. Complete and pass the qualifying questionnaire in the OEDIT application portal.
   1. We encourage you to complete the qualification questionnaire before starting the project or during the early stages of the project.
   2. Log in or create a new account. To protect your personal information, we manually add users to the portal, so it may take several days to activate your account.
   3. If your answers to the questionnaire qualify your project, the OEDIT application portal will automatically give you access to the Commercial Historic Preservation Tax Credit reservation application when you refresh the webpage.
2. Complete the reservation application in the OEDIT application portal and submit all application materials.
   • We, alongside History Colorado will review your project plan. History Colorado will ensure that your project follows the Standards for Rehabilitation and is or will qualify as an historic structure. The project scope cannot be changed or added to once the reservation application is approved. We will:
     • Confirm ownership or minimum lease-term requirements.
     • Evaluate the qualified rehabilitation expenses to make sure that the substantial remodel requirements are met
     • Make sure that the project plan is clear.
     • Review your project work plan to assure all elements of the rehab are detailed and include estimated costs.
     • Review your photos that document the structure prior to rehabilitation.
3. After you complete your rehabilitation project, you need to apply for the issuance of the reserved tax credit. This needs to occur within one year from the conclusion of the project.
   • Complete the issuance application in the OEDIT application portal and submit all issuance application materials:
   • Photos that document the rehabilitation work
   • Your project cost worksheet
   • A third-party agreed upon procedures (AUP)  letter completed by a Certified Public Accountant (CPA). The AUP  certifies that:
     1. The expenses associated with the rehabilitation project plan are outlined in the full/reservation application (work outside of the approved project plan will not be considered for tax credits)
     2. The expenses were incurred and paid by the qualified applicant
     3. The expenses are categorized appropriately as qualified or non-qualified following IRC 47
     4. It accurately describes the scope of testing conducted in accordance with General Auditing Standards and declares that the project costs comply with the standards for rehabilitation adopted by IRC 47 and Colorado Revised Statute 39-22-514.5
     5. It attests to the project start and completion dates utilizing certificate of occupancy, a certificate of competition, or a placed in service date.
        1. When the above certificates are not appropriate the date the last cost was incurred marks the project’s completion date and hence, the placed in service date.
     6. We, alongside History Colorado, will review your project materials. Once we verify the qualified rehabilitation expenses, you will need to pay the issuance application fee. If your project meets all requirements, the tax credit will be issued up to the amount reserved. The tax credit is issued via email from the OEDIT application system.
4. Claim the tax credit
   • Submit the tax credit certificate with your Colorado income tax return as early as the tax year that the project was placed in service.
   • You have up to 10 years to utilize or transfer the credit before it expires.
5. Overages
   1. If qualified rehabilitation expenditures exceed the total amount of a project’s reserved tax credits, the project owner may apply for additional tax credits. Issuance will be subject to the availability of funds and cannot exceed the total amount of qualified rehabilitation expenditures.
   2. The available funding amount will be determined using the reservation pool available for the calendar year in which the reserved funds were issued.
   3. If the additional expenditures exceed available credits, only the remaining credits may be applied for.
   4. If there are no tax credits available for reservation during the calendar year in which issuance was made, applications for overages will not be accepted.
6. Transfer a tax credit
   • You will need to complete a transfer application in the OEDIT application portal and submit a tax credit purchase and transfer agreement notarized by both the transferor and the transferee.

Under current law, this program expires on December 31, 2032, so you need to reserve your tax credit before that date.

You may carry forward this tax credit for up to 10 years. After 10 years, any unused and unsold credits will expire. You may transfer these tax credits, meaning you can sell them after you complete your project. Selling credits can bring in additional funds for your project for a cash match, grant, or loan. Selling credits is also a taxable event, please seek advice from your tax attorney to discuss how this may impact your federal and state income taxes. This tax credit is not refundable.

Colorado’s Commercial Historic Rehabilitation Tax Credit began in 1990. In 2014, House Bill 14-1311 passed with overwhelming bipartisan support to expand and update the credit. The legislature budgeted $10 million annually in state income tax credits. Half of the funding is for small projects and half is for large projects. This designation ensures representation for projects in rural communities and small projects.

In 2018, Colorado reauthorized the credit for $10 million per year with the same allocation for small and large projects. Changes in 2018 include:

• Increasing the credit rate for projects in rural areas to 35%.
• Removing obstacles for small projects, including lowering the lease requirement for rural projects and replacing a cost basis formula for the substantial remodel criteria to a flat amount of $20,000.
• Separating residential and commercial incentives in statute and clarifying the rules for each.
• Changing technical parts of the tax credit to increase efficiency and reduce the program cost.

In 2024, modified the statute to add a third $5 million pool of credits specifically for housing projects.

Download the Historic Preservation Tax Credit, (XLS), which outlines the tax credit balance available for both small and large projects.