For projects registered before August 15, 2016, the
department of cultural affairs is authorized by the general assembly to award
tax credits for a percentage of the qualified rehabilitation expenditures on a
qualified rehabilitation project as described in the historic preservation and
cultural and entertainment district tax credit program, Iowa Code chapter 404A.
The program is administered by the department of cultural affairs with the
assistance of the department of revenue. The general assembly has mandated that
the department of cultural affairs and the department of revenue adopt rules to
jointly administer Iowa Code chapter 404A. In general, the department of
cultural affairs is responsible for evaluating whether projects comply with the
prescribed standards for rehabilitation while the department of revenue is
responsible for evaluating whether projects comply with the tax aspects of the
program.
2014 Iowa Acts, House File 2453, amended the historic
preservation and cultural and entertainment district tax credit program
effective July 1, 2014. The department of revenue's provisions for projects
with Part 2 applications approved and tax credits reserved prior to July 1,
2014, are found in rule
701-4219.
(404A,422). The department of revenue's provisions for projects registered on
or after July 1, 2014, and before August 15, 2016, are found in this rule. The
department of cultural affairs' rules related to this program may be found at
223-Chapter 48.
2016 Iowa Acts, House File 2443, amended the program and
transferred primary responsibility for its administration to the economic
development authority effective August 15, 2016. Effective August 15, 2016, the
program is administered by the economic development authority with the
assistance of the department of cultural affairs and the department of revenue.
The department of revenue's provisions for projects registered on or after
August 15, 2016, are found in rule 701-42.55 (404A,422). The economic
development authority's rules related to the program may be found at
261-Chapter 49. When adopted, the department of cultural affairs' rules related
to the program will be found in 223-Chapter 48.
Notwithstanding anything contained herein to the contrary,
the department of cultural affairs shall not reserve tax credits under 2013
Iowa Code chapter 404A as amended by 2013 Iowa Acts, chapter 112, section 1,
for applicants that do not have an approved Part 2 application and a tax credit
reservation on or before June 30, 2014. Projects with approved Part 2
applications and provisional tax credit reservations on or before June 30,
2014, shall be governed by 2013 Iowa Code chapter 404A as amended by 2013 Iowa
Acts, chapter 112, section 1; by 223-Chapter 48, Division I; and by rule
701-4219.
(404A,422). Projects registered on or after July 1, 2014, but before August 15,
2016, shall be governed by 2014 Iowa Code chapter 404A as amended by 2014 Iowa
Acts, House File 2453; by 223-Chapter 48, Division II; and by this rule.
Projects registered on or after August 15, 2016, shall be governed by 2016 Iowa
Code chapter 404A as amended by 2016 Iowa Acts, House File 2443; by 261-Chapter
49; and by rule 701-42.55(404A,422).
(1)
Application, registration, and
agreement for the historic preservation and cultural and entertainment district
tax credit. Taxpayers that want to claim an income tax credit for
completing a qualified rehabilitation project must submit an application for
approval of the project. The application forms and instructions for the
historic preservation and cultural and entertainment district tax credit are
available on the department of cultural affairs' Web site. Once a project is
registered, the taxpayer must enter into an agreement with the department of
cultural affairs to be eligible for the credit.
(2)
Computation of the amount of the
historic preservation and cultural and entertainment district tax
credit. The amount of the historic preservation and cultural and
entertainment district tax credit is a maximum of 25 percent of the qualified
rehabilitation expenditures verified by the department of cultural affairs and
the department of revenue following project completion, up to the amount
specified in the agreement between the taxpayer and the department of cultural
affairs.
(3)
Qualified
rehabilitation expenditures. "Qualified rehabilitation expenditures"
means the same as defined in rule
223-4822. (404A) of
the historical division of the department of cultural affairs. In general, the
department of cultural affairs evaluates whether expenditures comply with the
prescribed standards for rehabilitation while the department of revenue
evaluates whether expenditures comply with the tax requirements to be
considered qualified rehabilitation expenditures, including whether the
expenditures are in accordance with the requirements of Internal Revenue Code
Section 47 and its related regulations.
a.
Type of property and services eligible. In accordance with
Iowa Code section
404A1(6).,
the types of property and services claimed for the state tax credit must be
"qualified rehabilitation expenditures" in accordance with Internal Revenue
Code Section 47. Notwithstanding the foregoing sentence, expenditures incurred
by an eligible taxpayer that is a nonprofit organization as defined in Iowa
Code section
404A1(4).
shall be considered "qualified rehabilitation expenditures" if they are for
"structural components," as that term is defined in Treasury Regulation ยง
1.484(e)(2), and for amounts incurred for architectural and engineering fees,
site survey fees, legal expenses, insurance premiums, development fees and
other construction-related costs.
b.
Effect of financing sources on
eligibility of expenditures. Qualified rehabilitation expenditures do
not include expenditures financed by federal, state, or local government grants
or forgivable loans unless otherwise allowed under Section 47 of the Internal
Revenue Code. For an eligible taxpayer that is a nonprofit organization as
defined in Iowa Code section
404A1(4).
that is not eligible for the federal rehabilitation credit, or another person
that is not eligible for the federal rehabilitation credit, expenditures
financed with federal, state, or local government grants or forgivable loans
are not qualified rehabilitation expenditures.
(4)
Completion of the qualified
rehabilitation project and claiming the tax credit on the Iowa return.
After the taxpayer completes a qualified rehabilitation project, the taxpayer
will be issued a certificate of completion of the project from the department
of cultural affairs if the project complies with the federal standards, as
defined in rule
223-4822. (404A).
After the department of cultural affairs and the department of revenue verify
the taxpayer's eligibility for the tax credit, the department of cultural
affairs shall issue a tax credit certificate.
a.
Claiming the credit. For
the taxpayer to claim the credit, the certificate must be included with the
taxpayer's income tax return for the tax year in which the rehabilitation
project is completed or the income tax return for any tax year within the five
years following the tax year of project completion. Taxpayers that elect to
delay claiming the credit to a later tax year return as described in this
paragraph are subject to the carryforward limitations described in paragraph
42.54(4)"d" below. The credit may be claimed on an amended
return so long as the amended return is filed within the statute of limitations
applicable to the tax year for which the amended tax return is being
filed.
b.
Information
required. The tax credit certificate shall include the taxpayer's
name, the taxpayer's address, the taxpayer's tax identification number, the
address or location of the rehabilitation project, the date the project was
completed, the amount of the historic preservation and cultural and
entertainment district tax credit, and, if applicable, an indication of whether
the credit is nonrefundable (see paragraph 42.54(4)"c" below).
In addition, the tax credit certificate shall include a place for the name and
tax identification number of a transferee and the amount of the tax credit
being transferred, as provided in subrule 42.54(5). In addition, if the
taxpayer is a partnership, limited liability company, estate or trust, and the
tax credit is allocated to the owners or beneficiaries of the entity, a list of
the owners or beneficiaries and the amount of credit allocated to each owner or
beneficiary shall be provided with the certificate.
c.
Refundability. A historic
preservation and cultural and entertainment district tax credit in excess of
the taxpayer's tax liability is fully refundable with interest computed under
Iowa Code section
42225..
In lieu of claiming the refund, the taxpayer may elect to have the overpayment
credited to the tax liability for the following tax year. To receive a
refundable credit, the taxpayer must elect to receive the credit as refundable
at the Part 3 stage of the application process administered by the department
of cultural affairs. Once the taxpayer elects to receive a nonrefundable
credit, the taxpayer cannot elect to change the credit to a refundable credit
or vice versa. See department of cultural affairs' 223-Chapter 48. If the
taxpayer is a transferee, the taxpayer may elect to receive the credit as
refundable or nonrefundable when the taxpayer applies to the department of
revenue for transfer of the tax credit as described in subrule
42.54(5).
d.
Carryforward. If the taxpayer elects to receive a
nonrefundable historic preservation and cultural and entertainment district tax
credit as described in paragraph 42.54(4)"b, " the amount in
excess of the taxpayer's tax liability may be carried forward for five years
following the tax year in which the project is completed, or until it is
depleted, whichever is earlier. A tax credit shall not be carried back to a tax
year prior to the tax year in which the taxpayer is first eligible to claim the
credit. Regardless of whether the taxpayer elects to claim the tax credit on a
tax return for a year that is later than the year of project completion as
described in paragraph 42.54(4)"a, " the taxpayer must utilize
the entire credit within five years following the tax year of the project
completion as described in this paragraph; any credit amount that is not
utilized within the five-year carryforward period is forfeited. The five-year
carryforward limitation does not apply if the taxpayer elects to receive a
refundable credit, the excess of which may be credited to future tax years as
an overpayment.
e.
Allocation of historic preservation and cultural and entertainment
district tax credits to the individual owners of the entity or beneficiaries of
an estate or trust. A partnership, limited liability company or S
corporation may designate the amount of the tax credit to be allocated to each
partner, member or shareholder. The credit does not have to be allocated based
on the pro rata share of earnings of the partnership, limited liability company
or S corporation. For an individual claiming a tax credit of an estate or
trust, the amount claimed by the individual shall be based upon the pro rata
share of the individual's earnings from the estate or trust.
(5)
Transfer of the
historic preservation and cultural and entertainment district tax
credit. The historic preservation and cultural and entertainment
district tax credit certificates may be transferred to any person or entity.
The transferee may use the amount of the tax credit transferred against the
taxes imposed in Iowa Code chapter 422, divisions II, III, and V, and in Iowa
Code chapter 432, for any tax year the original transferor could have claimed
the tax credit. Transferees must elect to receive either a refundable or
nonrefundable tax credit. Once the transferee elects to receive a nonrefundable
credit, the transferee cannot elect to change the credit to a refundable credit
or vice versa. A tax credit certificate of less than $1,000 shall not be
transferable.
a.
Transfer
process -information required. Within 90 days of
transfer of the tax credit certificate, the transferee must submit the
transferred tax credit certificate to the department of revenue along with a
statement that contains the transferee's name, address and tax identification
number, the amount of the tax credit being transferred, an election to receive
either a refundable or nonrefundable tax credit, and the amount of all
consideration provided in exchange for the tax credit and the names of
recipients of any consideration provided in exchange for the tax credit. If a
payment of money was any part of the consideration provided in exchange for the
tax credit, the transferee shall list the amount of the payment of money in its
statement to the department of revenue. If any part of the consideration
provided in exchange for the tax credit included nonmonetary consideration,
including but not limited to any promise, representation, performance,
discharge of debt or nonmonetary rights or property, the tax credit transferee
shall describe the nature of the nonmonetary consideration and disclose any
value the transferor and transferee assigned to the nonmonetary consideration.
The tax credit transferee must indicate on its statement to the department of
revenue if no consideration was provided in exchange for the tax credit. Within
30 days of receiving the transferred tax credit certificate and the statement
from the transferee, the department of revenue will issue the replacement tax
credit certificate to the transferee. If the transferee is a partnership,
limited liability company or S corporation, the transferee shall provide a list
of the partners, members or shareholders and information on how the historic
preservation and cultural and entertainment district tax credit should be
divided among the partners, members or shareholders. The transferee shall also
provide the tax identification numbers and addresses of the partners, members
or shareholders. The certificate must have the same information required for
the original tax certificate and must have the same expiration date as the
original tax credit certificate. The transferee may not claim a tax credit
until a replacement certificate identifying the transferee as the proper holder
has been issued.
b.
Consideration. Any consideration received for the transfer of
the tax credit shall not be included in Iowa taxable income for individual
income, corporation income or franchise tax purposes.
Any consideration paid for the transfer of the tax credit
shall not be deducted from Iowa taxable income for individual income,
corporation income or franchise tax purposes.
c.
Unlimited number of transferees
and subsequent transfers. There is no limitation on the number of
transferees to whom the credit may be transferred. There is no limitation on
the number of times that the credit may be retransferred by a transferee. The
transferor may divide the credit into multiple credits of alternate
denominations so long as the resulting credits are for amounts of no less than
$1,000.
d.
Carryforward
limitations on transferees. The transferee may use the amount of the
transferred tax credit for any tax year that the original transferor could have
claimed the tax credit. The carryforward limitations described in paragraph
42.54(4)"d" shall apply.
(6)
Appeals. Challenges to
an action by the department of revenue related to tax credit transfers, the
claiming of tax credits, tax credit revocation, or repayment or recovery of tax
credits must be brought pursuant to 701-Chapter 7.
This rule is intended to implement Iowa Code chapter 404A as
amended by 2016 Iowa Acts, House File 2443, and Iowa Code section
4221.
ID.