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
701-501.18 (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
701-501.48 (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
701-501.18 (404A,422). Projects
registered on or after July 1, 2014, but before August 15, 2016, shall be
governed 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
701-501.48 (404A,422).
(1)
Application, registration, and
agreement for the historic preservation and cultural and entertainment district
tax credit. Taxpayers that want to claim a corporation 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' website. 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
223-48.22 (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
404A.1(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
404A.1(4)
shall be considered "qualified rehabilitation expenditures" if they are for
"structural components," as that term is defined in Treasury Regulation ยง
1.48-1(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
404A.1(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
223-48.22 (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 corporation income tax return
for the tax year in which the rehabilitation project is completed or the
corporation 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
501.47(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 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 501.47(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 501.47(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 422.25. 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. See
department of cultural affairs' 223-Chapter 48. Once the taxpayer elects to
receive a nonrefundable credit, the taxpayer cannot select to change the credit
to a refundable credit or vice versa. 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 501.47(5).
d.
Carryforward. If the
taxpayer elects to receive a nonrefundable historic preservation and cultural
and entertainment district tax credit as described in paragraph
501.47(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
501.47(4)"a," the taxpayer must utilize the entire credit
within five years of 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 the original transferor could have
claimed the tax credit. The carryforward limitations described in paragraph
501.47(4)"d" shall apply.
(6)
Appeals. Challenges to
an action by the department of revenue related to tax credit transfers,
claiming 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
422.33.
