District Lines Autumn 2004
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DISTRICT LINES news and views of the historic districts council autumn 2004 volume XVIII number 2 p.1 ~ Preservation Facade Easements—Tax Benefit or Headache? p.2 ~ President’s Column p.3 ~ Libby Ryan Named LPC Commissioner p.4 ~ACritical Look at New Construction in Historic Districts p. 7 ~Architecture Firm Beyer Blinder Belle Rings in as Landmarks Lion p.8 ~ District Profiles: MacDougal-Sullivan Gardens, Manhattan p.9 ~ John Street/Maiden Lane—A Brief History p.10 ~ Recent Gifts and Grants Preservation Facade Easements—Tax Benefit or Headache? The National Architectural Trust, a The Federal Historic Preservation which it is devalued is the amount of the nonprofit 501(c)(3) organization, opened Tax Incentive Program, passed and signed tax deduction. The deduction is applied for business in 2001 in Washington, D.C., into law in 1976, permits “the owner of to personal income and is limited to a per- moved into New York City in 2002 and is qualified real property [to] receive centage of adjusted gross income in any now actively soliciting facade easements income tax deductions equivalent to the one year, but it can be carried forward for in urban areas in six states primarily in the value of the rights given away to a quali- up to five years. Northeast. Its name lends itself readily to fied charitable or governmental organiza- The Internal Revenue Service at one confusion with the long-established tion,” as noted in a 2003 publication of point stated that it expected the amount National Trust for Historic Preservation. the National Park Service, which oversees by which property is devalued to be Some people think that is deliberate. between ten and 15 percent; and quali- Two factors have made NAT’s efforts fied appraisers, who must be called in on successful: a tax law that enables donors A regional director of the this, have often followed that lead. A of easements to take a tax deduction and source at the IRS said, however, that the NAT’s aggressive marketing campaign, IRS once hired Jewish agency has since removed that sugges- which entices many homeowners with scholars because he thought if tion, uncovered abuses and cautioned the prospect of a one-time tax bonanza. they could understand the that stiff penalties attach to overvaluing At the same time, the issues are complex, easements. the explanations fuzzy and the promises Talmud, they could Here is how it is supposed to work: A possibly too good to be true. understand the Internal property owner agrees to grant an ease- In general, an easement is a release of Revenue Code. ment to National Architectural Trust or a portion of one’s property rights to make another nonprofit easement-holding things easier. Commonly, an easement is organization. He gets the property granted over a strip of land on A’s prop- the program. The law applies to commer- appraised, and let’s say its value is $1 mil- erty that B can use to reach parts of B’s cial property, land trusts, open spaces and lion. The loss in market value of the property. The easement grantor, A, sur- residential property. This article will deal house resulting from the easement is renders his rights to that portion of his only with houses in New York City. then determined by an appraiser and property. Facade easements are more As its name suggests, the Federal comes in at, say, ten percent, and that is ethereal—the surrender of a property Historic Preservation Tax Incentive Pro- the amount which is tax deductible owner’s rights to his facade. In practice, gram was intended to encourage preser- because the donation of his easement has that means he can’t change it without the vation of historic properties, ones listed been to a charitable organization. That is easement holder’s permission. on the National Register of Historic a $100,000 deduction against income for Places. After that, according to the Inter- tax purposes. nal Revenue Code Section 170, the main Other expenses are connected with qualifications (there are pages of them in the easement grant as well. First, the the IRS Code) are that the easement owner makes a cash donation to the non- must be in perpetuity—that it attaches to profit to look after the property and make the property even when it is bought by sure the terms of the easement are not new owners—and that it must be donated being violated. Although the amount is to a qualified organization “exclusively for negotiable, it is often set at five to ten conservation purposes.” percent of the amount of the easement, What historic district is this in? Any restriction on property is con- or up to $10,000 in this case. That (see page 4) sidered to devalue it, and the amount by amount is said to be tax deductible Historic Districts Council District Lines ~ Autumn 2004 ~ page 2 because it is made to a charitable organi- 630. It holds 348 in New York City alone ment donation are located in districts zation, the easement-holding organiza- with another 205 pending, according to that are already regulated by the Land- tion. Appraiser’s and lawyer’s fees may be Steven McClain, co-founder of the organ- marks Preservation Commission—many taken as miscellaneous deductions. ization at its base in Washington. Preser- New York City historic districts are listed Actually, the IRS source said that the vation Easement Trust is another on the National Register—and if the argu- $10,000 might not be deductible. “If you organization working in New York City ment is made that trusts’ monitoring is have to pay to have your donation doing only easements. Based in Princeton, more vigilant than LPC’s, the reply would accepted, it would be an involuntary pay- New Jersey, it started in March 2004, be that their job is also easier: violations ment, and as such it would not be focuses on commercial properties and has on voluntarily donated property are deductible.” only two projects under conveyance now, bound to be minimal, while those on Other charitable organizations also according to its president, Robert Plotka. reluctant owners in historic districts are accept easements and have done so for The watchdog function of easement- more problematic. Moreover, LPC can- many years: seven of them are nationwide holding organizations is pivotal to their not monitor the more than 20,000 build- and about 100, including the Preservation credibility. NATand some others monitor continued on page 9 League of New York State, are statewide. their easement properties once a year. To give an example of their scope and NAT does it primarily by taking photo- reach: nationally, the National Trust for graphs and comparing them with earlier Historic Preservation in Washington ones. Historic Charleston [South Car- holds about 100 easements; in New York olina] Foundation, a statewide organiza- PRESIDENTP R E S I D E N T ’ S COLUMNC O L U M N State, the Preservation League holds two tion, sends a questionnaire to the owner upstate; and in New York City, the New inquiring about repairs, problems, plans York Landmarks Conservancy holds 24. and changes in the neighborhood; and These three are organizations with many then someone from the foundation stops preservation programs besides ease- by, looks at the property and fills out a ments—the National Trust for Historic form. Then, if unauthorized changes have Preservation, for example, lobbies Con- taken place, the easement holder gets in gress, advises state and local partners such touch with the property owner to try to as HDC, gives grants to help preserve his- straighten things out. toric structures, sponsors conferences Violations are uncommon—Paul and publishes preservation literature, Edmondson, vice president and legal among other activities. In contrast, NAT counsel to the National Trust for Historic does only easements, of which it holds Preservation, said that only a few minor violations have been discovered on trust easements, and most are settled with a photo: P. Decker phone call. The Historic Landmarks State Senator Liz Krueger, HDC’s 2004 Foundation of Indiana, however (which Friend in High Places, at the Grassroots DIS TRICT holds 50 to 60 easements), is in court now Preservation Awards ceremony in May with with two violations, both of them David Goldfarb, HDC’s president. LINES derelict and vacant properties of subse- news and views of the quent owners, not the ones who donated hhistoricistoric districtsdistricts councilcouncil the easements. I am just beginning my second year as If owning a property with an ease- president of the Historic Districts Coun- editor ~ Penelope Bareau ment sounds a lot like owning a property cil and feel excited about all that we have layout and production ~ Ross Horowitz in a designated historic district, it should. accomplished and look forward to even editorial consultant ~ Jack Taylor In both cases you need approval to change more progress. We have dramatically contributors ~ Simeon Bankoff, Penelope Bareau, your property. In an historic district, you increased the number of educational pro- Eve Kahn, Annemieke Beemster Leverenz, Alice Rich, Carolyn Siegel apply to the Landmarks Preservation grams we present throughout the city; and staff ~ Simeon Bankoff, Executive Director; Jay Commission. If you are an easement we have increased our staff, which has Platt, Deputy Director; Alice Rich, Preservation enabled us to accomplish many of our Associate; Annemieke Beemster Leverenz, donor, you apply to the easement holder. Carolyn Siegel, Luke Stettner, Interns If you are an easement donor living in an goals, for example, the designation of St. the historic districts council is the historic district, you apply to both.