The Substantial Rehabilitation Test and Timing Issues

• Author: William F. Machen
• Pages: 9-15

2.1. Substantial Rehabilitation Test

In order to be eligible for the Rehabilitation Tax Credit, a building

must be a qualied rehabilitated building. The Code denes the

term “qualied rehabilitated building” to mean any building (and

its structural components) that satises the following requirements:

i.

the building has been substantially rehabilitated (as described

in Section 2.2);

ii.

the building was placed in service before the beginning of

the rehabilitation;

iii.

except for a certied historic structure, (A) at least 50 per‑

cent of the building’s external walls were retained in place as

external walls, (B) at least 75 percent of the building’s exter‑

nal walls were retained in place as either external or internal

walls, and (C) at least 75 percent of the building’s internal

structural framework was retained in place; and

iv.

except for a certied historic structure, the building must

rst have been placed in service before 1936.17

17. I.R.C. §47(c)(1)(B).

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The Substantial Rehabilitation

Test and Timing Issues 2

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