2013 -- S 0733

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LC01828

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO HISTORIC STRUCTURES -- TAX CREDIT

     Introduced By: Senators Goodwin, Pichardo, Pearson, Miller, and Paiva Weed

     Date Introduced: March 13, 2013

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 44-33.2-2 of the General Laws in Chapter 44-33.2 entitled "Historic

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Structures – Tax Credit" is hereby amended to read as follows:

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     44-33.2-2. Definitions. -- As used in this chapter:

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     (1) "Abandoned Project" means a certified rehabilitation approved as of May 15, 2008

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that has voluntarily withdrawn and forfeited any rights to tax credits under this chapter or a

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certified rehabilitation approved as of May 15, 2008 that has not met substantial construction on

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or before May 15, 2013.

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     (1)(2) “Certified historic structure” means a property which is located in the state of

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Rhode Island and is:

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     (i) Listed individually on the National Register of Historic Places; or

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     (ii) Listed individually in the state register of historic places; or

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     (iii) Located in a registered historic district and certified by either the commission or

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Secretary of the Interior as being of historic significance to the district.

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     (2)(3) “Certified rehabilitation” means any rehabilitation of a certified historic structure

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consistent with the historic character of such property or the district in which the property is

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located as determined by the commission guidelines.

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     (3)(4) “Commission” means the Rhode Island historical preservation and heritage

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commission created pursuant to Chapter 44-3-3.

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     (5) "Economic Development Corporation" means the Rhode Island economic

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development corporation created pursuant to chapter 42-64.

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     (4)(6) “Exempt from real property tax” means, with respect to any certified historic

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structure, that the structure is exempt from taxation pursuant to Chapter 44-3-3.

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     (5)(7)“Holding period” means twenty-four (24) months after the commission issues a

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certificate of completed work to the owner. In the case of a rehabilitation which may reasonably

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be expected to be completed in phases as described in subdivision (10) of this section, “holding

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period” shall be extended to include a period of time beginning on the date of issuance of a

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certificate of completed work for the first phase or phases for which a certificate of completed

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work is issued for the last phase.

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     (6)(8) “Placed in service” means that substantial rehabilitation work has been completed

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which would allow for occupancy of the entire structure or some identifiable portion of the

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structure, or the owner has commenced depreciation of the qualified rehabilitation expenditures,

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whichever occurs first.

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     (7)(9)“Principal residence” means the principal residence of the owner within the

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meaning of § 121 of the Internal Revenue Code [26 U.S.C § 121] or any successor provision.

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     (8)(10) “Qualified rehabilitation expenditures” means any amounts expended in the

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rehabilitation of a certified historic structure properly capitalized to the building and either: (i)

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depreciable under the Internal Revenue Code, 26 U.S.C § 1 et seq., or (ii) made with respect to

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property (other than the principal residence of the owner) held for sale by the owner. Fees

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pursuant to § 44-33.2-4(d) are not qualified rehabilitation expenditures. Notwithstanding the

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foregoing, except in the case of a nonprofit corporation, there will be deducted from qualified

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rehabilitation expenditures for the purposes of calculating the tax credit any funds made available

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to the person (including any entity specified in § 44-33.2.-3(a)) incurring the qualified

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rehabilitation expenditures in the form of a direct grant from a federal, state or local governmental

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entity or agency or instrumentality of government. Qualified rehabilitation expenditures shall be

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limited on replacement projects to qualified expenditures incurred and actually paid.

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      (9)(11) “Registered historic district” means any district listed in the National Register of

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Historic Places, or the state register of historic places.

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     (12) "Replacement Project" means any certified historic structure project approved after

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July 1, 2012 pursuant to section 44-33.2-3.1.

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     (13) "Scattered Site Development" means a development project for which the developer

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seeks unified financing to rehabilitate dwelling units in two (2) or more buildings located in an

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area that is defined by a neighborhood revitalization plan and is not more than one mile in

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diameter.

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     (14) "Substantial Construction" means that: (i) The owner of a certified historic structure

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has entered into a contract with the division of taxation and paid the processing fee; (ii) The

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commission has certified that the certified historic structure’s rehabilitation will be consistent

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with the standards set forth in section 44-33.2-4 and (iii) The owner has expended ten percent

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(10%) of its qualified rehabilitation expenditures, estimated in the contract entered into with the

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division of taxation for the project or its first phase of a phased project, or has amended the

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contract to provide for abandonment of a portion of credits due to a change in the scope of the

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project.

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     (10)(15) “Substantial rehabilitation” means, with respect to a certified historic structure,

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that the qualified rehabilitation expenses of the building during the twenty-four (24) month period

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selected by the taxpayer ending with or within the taxable year exceed fifty (50%) of the adjusted

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basis in such building and its structural components as of the beginning of such period. In the

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case of rehabilitation, which may reasonably be expected to be completed in phases set forth in

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architectural plans and specifications competed before the rehabilitation begins, the above

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definition shall be applied by substituting “sixty (60) month period” for “twenty-four (24) month

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period”.

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     SECTION 2. Chapter 44-33.2 of the General Laws entitled "Historic Structures – Tax

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Credit" is hereby amended by adding thereto the following section:

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     44-33.2-3.1. Replacement Projects. -- (a) The tax administrator shall make available to

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the economic development corporation, the department of labor and training, and the commission

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any information and/or data that the administrator may consider necessary to administer this

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chapter.

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     (b) On July 1, 2013, and every month thereafter, the division of taxation shall report to

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the economic development corporation, the commission, the state budget officer, the house fiscal

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advisor and the senate fiscal advisor on all abandoned projects along with the estimated tax

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credits for said projects. The division of taxation shall also report the cumulative investment

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earnings and processing fees received and processing fees reimbursed, in order to provide the

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economic development corporation and the commission with the maximum limit of replacement

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projects that can be awarded.

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     (c) The economic development corporation and the commission shall solicit and accept

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applications for replacement projects, which shall be processed and approved in accordance with

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the terms and provisions of chapter 44-33.2 and the rules and regulations promulgated and

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amended from time to time in accordance with this chapter. These replacement project(s) shall be

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entitled to tax credits under this chapter, the total amount of which can not exceed the amount

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reported in subsection 44-33.2-3.1(b). The economic development corporation and commission

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shall award replacement projects based on the following criteria:

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     (1) Replacement projects shall meet all requirements for a certified historic structure

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under this chapter;

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     (2) Replacement projects shall not be a social club or club defined under Internal

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Revenue Code section 501(c)(7);

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     (3) Replacement projects shall not consist of a single family home or a property that

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contains less than four (4) residential apartments or condominiums; provided, however, a

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scattered site development with five (5) or more residential units in the aggregate but no more

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than thirty percent (30%) of the total project, which may include single family homes, shall be

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eligible for the tax credit;

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     (4) Replacement projects that are immediately ready for commencement and completion

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within twenty four (24) months after approval shall receive preference;

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     (5) Replacement projects that address qualified historic tax structures and projects located

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in cities and towns that are eligible for the distressed communities relief fund, as defined in

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section 45-13-12, shall receive preference.

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     (d) Within ninety (90) days of receiving notification of being awarded a replacement

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project, the person, firm, partnership, trust, estate, limited liability company, corporation (whether

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profit or nonprofit) or other business entity that incurs qualified rehabilitation expenditures shall

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pay a nonrefundable fee to the division of taxation in the amount of three percent (3%) of the

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qualified rehabilitation expenditures.

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     (e) Upon payment of the fees as set forth in this section, the division of taxation shall, on

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behalf of the state of Rhode Island guaranty, through a contract with persons, firms, partnerships,

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trusts, estates, limited liability companies, corporations (whether for profit or nonprofit) or other

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business entities that will incur qualified rehabilitation expenditures for the substantial

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rehabilitation of a certified historic structure, the delivery of one hundred percent (100%) of the

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tax credit, which shall not exceed twenty-five percent (25%) of the qualified rehabilitation

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expenditures.

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     (f) For purposes of replacement projects, substantial construction must be met within one

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(1) year from the date of approval.

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     (g) Replacement projects, where such substantial rehabilitation of a certified historic

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structure pursuant to this chapter includes qualified rehabilitation expenditures that exceed ten

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million dollars ($10,000,000), shall only utilize contractors that participate in a class A

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apprenticeship program that is registered with and approved by the U.S. department of labor or

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the department of labor and training, as required pursuant to chapter 28-45, and has graduated

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apprentices to journeyperson status within three (3) of the past five (5) years for each separate

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trade or classification which it employs craft employees.

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     (1) The tax administrator shall request verification from the department of labor and

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training of origination of the apprenticeship program seeking to be verified.

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     (2) The department of labor and training shall provide written verification regarding the

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registration and approval of apprenticeship programs to the tax administrator no later than thirty

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(30) days from receipt of the request.

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     (3) The tax administrator may disqualify those qualified rehabilitation expenditures

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related only to the expenditures, for which an approved apprenticeship program was not verified

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by the department of labor and training.

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     (h) The tax credit for replacement projects under this subsection shall be administered

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consistent with all other provisions of this chapter.

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     (i) The commission, in consultation with the economic development corporation and

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division of taxation, shall promulgate such rules and regulations as are necessary to carry out the

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intent and purpose of this chapter.

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     SECTION 3. This act shall take effect upon passage.

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LC01828

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO HISTORIC STRUCTURES -- TAX CREDIT

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     This act would enable the economic development corporation and the Rhode Island

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historical preservation and heritage commission to solicit and accept applications for replacement

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projects for those projects which have been abandoned.

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     This act would take effect upon passage.

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LC01828

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