La. Admin. Code tit. 61 § I-1917

Current through Register Vol. 50, No. 8, August 20, 2024

Section I-1917 - Louisiana Rehabilitation of Historic Structures Tax Credit

A. General Description

1. Revised Statute 47:6019 authorizes an income and corporation franchise tax credit for eligible costs and expenses incurred during the rehabilitation of a historic structure located in a downtown development district or a cultural district. Eligible structures must be nonresidential real property or residential rental property.

2. The tax credit for QREs is earned only in the year in which the property attributable to the expenditures is placed in service. However, regardless of the year in which the property is placed in service, the amount of the credit shall equal 25 percent of the eligible costs and expenses of the rehabilitation incurred prior to January 1, 2018, and 20 percent of the eligible costs and expenses of the rehabilitation incurred on or after January 1, 2018.

3. No taxpayer, or any entity affiliated with such taxpayer, shall claim more than $5,000,000 of credit annually for any number of structures rehabilitated within a downtown development district or cultural district.

4. The credit shall be allowed against the income tax for the taxable period in which the credit is earned and against the franchise tax for the taxable period following the period in which the credit is earned. If the tax credit allowed pursuant to R.S. 47:6019 exceeds the amount of such taxes due, any unused credit may be carried forward as a credit against subsequent tax liability for a period not to exceed five years. The credit may be used in addition to the 20 percent federal tax credit for such purposes.

5. The tax credit shall not be allowed for the rehabilitation costs and expenses that are paid for with state or federal funds, unless the state or federal funds are reported as taxable income or are structured as repayable loans.

B. Definitions

Assistant Secretary-the Assistant Secretary of the Office of Legal Affairs, Louisiana Department of Revenue, or, in the absence of such official, another designee as authorized by the secretary.

CPA-certified public accountant.

Cultural District-a district designated by a local governing authority in accordance with law for the purpose of revitalizing a community by creating a hub of cultural activity, including affordable artist housing and workspace, which has been determined by the Department of Culture, Recreation and Tourism to meet the criteria established to be so designated.

Department-the Louisiana Department of Revenue.

Downtown Development District-a downtown development district or central business development district created by law, or by ordinance adopted prior to January 1, 2002, in a home rule charter municipality.

Eligible Costs and Expenses-qualified rehabilitation expenditures as defined in section 47(c)(2)(A) of the Internal Revenue Code of 1986, as amended, except that "substantially rehabilitated shall mean that the qualified rehabilitation expenditures must exceed $10,000.

Phased Projects-a project which is completed in multiple phases.

QREs-qualified rehabilitation expenses.

SHPO-State Historic Preservation Office.

SOI-Com pliant-work performed in accordance with the Secretary of the Interiors Standards for Rehabilitation.

Transfer-for purposes of the fee requirement, an assignment, disposition, transfer or allocation of tax credits.

C. Application Procedure

1. Initial Determination of Eligibility by the SHPO

a. The SHPO determines whether the structure, before and after the work is performed, qualifies as contributing to the historical significance of the district. Specifically, the SHPO determines whether work was performed on an eligible structure and whether such work performed was SOI-compliant. A project is determined to be a certified rehabilitation if the building itself meets eligibility requirements and the work is SOI-compliant.

b. The SHPO makes a determination as to whether a project is determined to be a certified rehabilitation through a three-part application process administered by an architectural historian.

i. In Part 1, the SHPO certifies whether the structure is eligible for the Program.

ii. In Part 2, the SHPO certifies whether the work, as proposed by the applicant, is SOI-compliant.

iii. In Part 3, the SHPO confirms that the actual work performed by the applicant was indeed SOI-compliant.

c. If the project is determined by SHPO to be a certified rehabilitation, the SHPO shall provide to the applicant, with copies to the department, an approved "part 3-request for certification of completed work", and an executed section 1 of Form R-6121B.

2. Approval of the Credit by the Department of Revenue

a. An applicant shall submit the following to the department:

i. a certified audit report or examined cost certification prepared by an independent auditor, which report and auditor meet the following minimum qualifications as set forth by the department:

(a). the auditor must be a CPA licensed in the State of Louisiana or in compliance with the CPA Mobility Act and must be an independent third party not related to the applicant;

(b). the CPA must be listed on the legislative auditor approved listing, or, if not licensed in Louisiana, in compliance with the CPA Mobility Act;

(c). the auditors opinion must be addressed to the party which has engaged the auditor, but may expressly permit others to rely on the same;

(d). the name of the auditors firm, address, and telephone number must be evident on the report;

(e). the auditors opinion must be dated no earlier than the completion of the audit fieldwork;

(f). the certified audit report or examined cost certification must be performed in accordance with auditing standards set forth by the American Institute of Certified Public Accountants, the auditor must have sufficient knowledge of accounting principles and the SOI standards for rehabilitation. The auditors opinion should be accompanied by the cost report of QREs, the notes to the cost report, and a completed CPA certification form;

(g). the period during which qualified rehabilitation costs were incurred must be noted;

(h). the certified audit report or examined cost certification must provide a breakdown of all related party transactions, as defined by the Statement of Financial Accounting Standards No. 57 and include the following:

(i). the name and address of the related party;

(ii). the nature of the relationship between the related party and the applicant;

(iii). the nature and amount of the transaction;

(iv). the federal and state tax identification numbers of the related party for total payments equal to $10,000 or greater, and payment schedule if there are remaining outstanding balances;

(v). if there are no related party transactions, the cost report must include a note indicating such;

(i). a reasonableness/fairness opinion shall be submitted, if applicable, comparing the amounts charged on related party transactions to what an independent party would have charged for similar work and/or services;

(j). for any total payments $100,000 or greater, the report or certification must include the following:

(i). name and address of the payee;

(ii). federal and state tax numbers of the payee;

(iii). any state/and/or local license numbers of the payee (i.e. contractors license); and

(iv). total amount paid (Form R-6122).

b. For those applicants whose total project cost is $500,000 or less, the following information may be submitted in lieu of the requirements contained in Subparagraph C.2.a of this Section. Projects submitted in multiple phases, "phased projects", where the estimated total costs of all phases of a project is greater than $500,000 must submit the information required in Subparagraph C.2.a of this Section, regardless of whether the specific cost for any particular phase being submitted for review is $500,000 or less. For qualifying projects, an applicant must submit the following information:

i. an itemized listing of all QREs as well as all non-QREs, detailing all costs and eligible expenses as defined in Section 47(c)(2)(A) of the Internal Revenue Code of 1986, as amended. The itemized listing must conform to the requirements of Subclause C.2.a.i.(f) of this Section, as provided, and contain an arms-length comparison for each expenditure submitted as well as the period during which the rehabilitation costs were incurred. Column headings for the list must include: category of work, method of payment, date paid, name of payee/contractor, description of expenditure, total amount of expenditure and amount of QREs. The department may require documentation to verify whether the expenses claimed were actually incurred during the rehabilitation;

ii. an invoice for each QRE totaling $2,500 or more. Where the aggregate payments to a single payee are equal to or greater than $100,000, the federal and state tax numbers as well as any state and/or local license numbers (i.e. contractors license) must be submitted;

iii. a notarized statement attesting that the expenditures submitted were incurred in connection with the rehabilitation of a "certified historic structure" that is properly chargeable to a capital account. Such expenditures include: architectural and engineering fees; construction interest and taxes; developers fees; general administrative fees; legal and professional fees; and rehabilitation costs. Common expenditures which do not qualify as QREs include, but are not limited to: acquisition costs; appliances; appraisal costs; cabinets; carpeting (when tacked and not glued to floor); demolition costs; financing fees; furniture; leasing expenses; marketing costs; moving costs; parking lot; paving and landscape costs; and signage.

c. The department shall review the certified audit report, examined cost certification, or itemized listing of all QREs and non-QREs. The department may request additional documentation from the applicant as it determines necessary. Further, the department may rely on the SHPO for any technical assistance, as determined necessary during the review process. This assistance includes, but is not limited to, interpretations of the Secretary of the Interior standards for rehabilitation. For projects with a placed in service date occurring on or after January 1, 2018 that have expenditures incurred both before and after January 1, 2018, the audit report, examined cost certification or itemized listing submitted for review shall segregate such expenditures by date so as to allow the proper credit rate to be determined. Failure to so segregate such expenditures will result in credit being applied at a blanket rate of 20 percent.

d. After all supporting documentation is received and approved, the department shall complete and provide to the applicant Section 2 of Form R-6121-B, thereby confirming the certified amount of the tax credit earned by the applicant. With the exception of phased projects, the final year of the placed in service date shall be the first year the credit may be utilized. Issuance of the tax credit certificate shall be delayed by any outstanding tax balances of the applicant until all such tax balances are resolved.

D. Internal Appeal Process

1. Applicants may appeal the denial of the certification of expenditures to the assistant secretary.

a. Written notice of the intent to appeal must be received by the department within ten business days from the date of the denial letter.

b. The full appeal must be received by the department no later than 30 calendar days from the date of the denial letter. Appeals must be in writing and must detail specific reasons the denial should be partially or completely reconsidered or overturned.

i. Upon a showing of reasonable cause, the assistant secretary may extend the deadline for submission of the full appeal.

c. The assistant secretary, at his discretion, may hold a hearing in connection with the appeal.

2. Upon review of the appeal and consideration of the hearing, if applicable, the assistant secretary shall take one of the following actions:

a. sustain, in full or in part, the denial;

b. overturn, in full or in part, the denial.

3. The assistant secretarys final written decision to any appeal must be issued no later than 90 days after receiving the full appeal.

E. Claiming or Transferring the Tax Credit

1. All tax credits issued pursuant to R.S. 47:6019 must be registered and conform to all requirements of the Tax Credit Registry, as provided in R.S. 47:1524, in order to be claimed on a return or transferred.

2. Persons who are awarded tax credits may elect to sell their unused tax credits to one or more individuals or entities. The tax credits may be transferred or sold by a taxpayer or any subsequent transferee an unlimited number of times. However, the transfer of the credit does not extend the carry forward period of the credit.

3. Transferors and transferees shall submit to the department in writing a notification of any transfer or sale of tax credits within ten business days after the transfer or sale of such credits. The notification shall be accompanied by a tax credit transfer processing fee of $200. The notification shall include the transferors tax credit balance prior to transfer, the credit identification number assigned by the state historic preservation office, the remaining balance after transfer, all federal and Louisiana tax identification numbers for both transferor and transferee, the date of transfer, the amount transferred, and any other information requested by the department. Failure to comply with this notification provision will result in the disallowance of the tax credit until the parties are in full compliance.

La. Admin. Code tit. 61, § I-1917

Promulgated by the Department of Revenue, Policy Services Division, LR 442023 (11/1/2018).

AUTHORITY NOTE: Promulgated in accordance with R.S. 47:1511 and R.S. 47:6019.