Chapter 006

2008 -- H 8016 SUBSTITUTE A

Enacted 04/12/08

 

A N A C T

RELATING TO TAXATION -- HISTORIC STRUCTURES -- TAX CREDITS

          

     Introduced By: Representatives Fox, Murphy, McCauley, E Coderre, and Slater

     Date Introduced: March 06, 2008

 

It is enacted by the General Assembly as follows:

 

     SECTION 1. Sections 44-33.2-2, 44-33.2-3 and 44-33.2-4 of the General Laws in

Chapter 44-33.2 entitled "Historic Structures - Tax Credit" are hereby amended to read as

follows:

 

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

      (1) "Certified historic structure" means a property which is located in the state of Rhode

Island and is:

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

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

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

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

      (2) "Certified rehabilitation" means any rehabilitation of a certified historic structure

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

located as determined by the commission guidelines.

      (3) "Commission" means the Rhode Island historical preservation and heritage

commission created pursuant to section 42-45-2.

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

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

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

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

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

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

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

work is issued and continuing until the expiration of twenty-four (24) months after the certificate

of completed work issued for the last phase.

      (6) "Placed in service" means that substantial rehabilitation work has been completed

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

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

whichever occurs first.

      (7) "Principal residence" means the principal residence of the owner within the meaning

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

      (8) "Qualified rehabilitation expenditures" means any amounts expended in the

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

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

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

Fees pursuant to section 44-33.2-4(d) are not qualified rehabilitation expenditures.

Notwithstanding the foregoing, except in the case of a nonprofit corporation, there will be

deducted from qualified rehabilitation expenditures for the purposes of calculating the tax credit

any funds made available to the person (including any entity specified in section 44-33.2-3(a))

incurring the qualified rehabilitation expenditures in the form of a direct grant from a federal,

state or local governmental entity or agency or instrumentality of government.

      (9) "Registered historic district" means any district listed in the National Register of

Historic Places, or the state register of historic places.

     (10) "Substantial rehabilitation" means, with respect to a certified historic structure, that

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

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

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

In the case of any rehabilitation, which may reasonably be expected to be completed in phases set

forth in architectural plans and specifications completed before the rehabilitation begins, the

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

month period".

 

     44-33.2-3. Tax credit. -- (a) Any person, firm, partnership, trust, estate, limited liability

company, corporation (whether for profit or non-profit) or other business entity that incurs

qualified rehabilitation expenditures for the substantial rehabilitation of a property officially

recorded as having applied to be certified as a certified historic structure, by the Rhode Island

historical preservation and heritage commission through its historic tax credit application process

prior to January 1, 2008, and verified by the division of taxation, provided the rehabilitation

meets standards consistent with the standards of the Secretary of the United States Department of

the Interior for rehabilitation as certified by the commission, shall be entitled to a credit against

the taxes imposed on such person or entity pursuant to chapter 11, 12, 13, 14, 17 or 30 of this

title. For certified historical structures or some identifiable portion of a structure placed in service

prior to January 1, 2008 the credit shall in be an amount equal to thirty percent (30%) of the

qualified rehabilitation expenditures. For certified historical structures or some identifiable

portion of a structure placed in service after December 31, 2007, the credit shall not exceed

twenty-five percent (25%), twenty-six percent (26%), or twenty-seven percent (27%) of the

qualified rehabilitation expenditures as contracted between the division of taxation and the

person, firm, partnership, trust, estate, limited liability company, corporation (whether for profit

or non-profit) or other business entity that incurs qualified rehabilitation expenditures for the

substantial rehabilitation of certified historic structures or some identifiable portion of a structure

to be placed in service after December 31, 2007.

     (b) Notwithstanding any provisions of the general laws or regulations adopted thereunder

to the contrary, including, but not limited to, the provisions of chapter 2 of title 37, the division of

taxation is hereby expressly authorized and empowered to enter into contracts with persons,

firms, partnerships, trusts, estates, limited liability companies, corporations (whether for profit or

non-profit) or other business entities that incur qualified rehabilitation expenditures for the

substantial rehabilitation of certified historic structures or some identifiable portion of a structure

to be placed in service after December 31, 2007, for the following purposes, all of which shall be

set forth in more particular detail as follows:

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

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

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

business entities that will incur qualified rehabilitation expenditures for the substantial

rehabilitation of a certified historic structure or some identifiable portion of a structure to be

placed in service after December 31, 2007, the delivery of one hundred percent (100%) of the tax

credit in an amount which is the lesser of: (i) the amount of the tax credit identified in the contract

with the division of taxation on or before May 15, 2008 in consideration of any processing fees;

or (ii) the actual qualified rehabilitation expenditures multiplied by the tax credit percentage

selected by the taxpayer on or before May 15, 2008 and any processing fees. The tax credit and

fee shall not exceed the following combinations which shall be selected by any person, firm,

partnership, trust, estate, limited liability company, corporation (whether for profit or non-profit)

or other business entity that will incur qualified rehabilitation expenditures for the substantial

rehabilitation of certified historic structures or some identifiable portion of a structure to be

placed in service after December 31, 2007:

     (A) For an amount of credit not exceeding twenty-five percent (25%) of the qualified

rehabilitation expenditures, the fee shall be an amount equal to three percent (3%) of the qualified

rehabilitation expenditures.

     (B) For an amount of credit not exceeding twenty-six percent (26%) of the qualified

rehabilitation expenditures, the fee shall be an amount equal to four percent (4%) of the qualified

rehabilitation expenditures.

     (C) For an amount of credit not exceeding twenty-seven percent (27%) of the qualified

rehabilitation expenditures, the fee shall be an amount equal to five percent (5%) of the qualified

rehabilitation expenditures.

     (D) As referred to in subsection 44-33.2-4(d), two and one quarter percent (2.25%) of the

qualified rehabilitation expenditures shall be paid by May 15, 2008 with the remaining percent to

be paid by March 5, 2009. Payments made after March 5, 2009 shall accrue interest as set forth in

section 44-1-7.

      (E) The division of taxation and the Rhode Island historical preservation and heritage

commission shall reconcile tax credits and fees with the persons, firms, partnerships, trusts,

estates, limited liability companies, corporation (whether for profit or non-profit) or other

business entities contracted with as part of the final project certification. In the event that the

processing fee paid is greater than the amount of actual qualified rehabilitation expenditures

multiplied by the percentage chosen pursuant to subsection 44-33.2-3(b), the persons, firms,

partnerships, trusts, estates, limited liability companies, corporations (whether for profit or non-

profit) or other business entities that incur qualified rehabilitation expenditures for the substantial

rehabilitation of certified historic structures or some identifiable portion of a structure to be

placed in service after December 31, 2007, shall be refunded such difference, without interest.

     (F) Any contract executed pursuant to this chapter by a person, firm, partnership, trust,

estate, limited liability company, corporation (whether for profit or non-profit) or other business

entity that incurs qualified rehabilitation expenditures for the substantial rehabilitation of certified

historic structures or some identifiable portion of a structure to be placed in service after

December 31, 2007, shall be assignable to: (i) an affiliate thereof without any consent from the

division of taxation or (ii) a person, firm, partnership, trust, estate, limited liability company,

corporation (whether for profit or non-profit) or other business entity that incurs qualified

rehabilitation expenditures for the substantial rehabilitation of certified historic structures or some

identifiable portion of a structure to be placed in service after December 31, 2007, with such

assignment to be approved by the division of taxation, which approval shall not be unreasonably

withheld. For purposes of this subsection, "affiliate" shall be defined as any entity controlling,

controlled by or under common control with such person, firm, partnership, trust, estate, limited

liability company, corporation (whether for profit or non-profit) or other business entity.

      (b) (c) Tax credits allowed pursuant to this chapter shall be allowed for the taxable year

in which such certified historic structure or an identifiable portion of the structure is placed in

service provided that the substantial rehabilitation test is met for such year.

     (c) (d) If the amount of the tax credit exceeds the taxpayer's total tax liability for the year

in which the substantially rehabilitated property is placed in service, the amount that exceeds the

taxpayer's tax liability may be carried forward for credit against the taxes imposed for the

succeeding ten (10) years, or until the full credit is used, whichever occurs first for the tax credits.

Credits allowed to a partnership, a limited liability company taxed as a partnership or multiple

owners of property shall be passed through to the persons designated as partners, members or

owners respectively pro rata or pursuant to an executed agreement among such persons

designated as partners, members or owners documenting an alternate distribution method without

regard to their sharing of other tax or economic attributes of such entity.

      (d) (e) (1) If the taxpayer has not claimed the tax credits in whole or part, taxpayers

eligible for the tax credits may assign, transfer or convey the credits, in whole or in part, by sale

or otherwise to any individual or entity, including, but not limited to, condominium owners in the

event the certified historic structure is converted into condominiums. The assignee of the tax

credits may use acquired credits to offset up to one hundred percent (100%) of the tax liabilities

otherwise imposed pursuant to chapter 11, 12, 13, (other than the tax imposed under section 44-

13-13), 14, 17 or 30 of this title. The assignee may apply the tax credit against taxes imposed on

the assignee until the end of the tenth (10th) calendar year after the year in which the substantially

rehabilitated property is placed in service or until the full credit assigned is used, whichever

occurs first. Fiscal year assignees may claim the credit until the expiration of the fiscal year that

ends within the tenth (10th) year after the year in which the substantially rehabilitated property is

placed in service. The assignor shall perfect the transfer by notifying the state of Rhode Island

division of taxation, in writing, within thirty (30) calendar days following the effective date of the

transfer and shall provide any information as may be required by the division of taxation to

administer and carry out the provisions of this section.

      (2) For purposes of this chapter, any assignment or sales proceeds received by the

taxpayer for its assignment or sale of the tax credits allowed pursuant to this section shall be

exempt from this title. If a tax credit is subsequently recaptured under subsection (e) of this

section, revoked or adjusted, the seller's tax calculation for the year of revocation, recapture, or

adjustment shall be increased by the total amount of the sales proceeds, without proration, as a

modification under chapter 30 of this title. In the event that the seller is not a natural person, the

seller's tax calculation under chapters 11, 12, 13 (other than with respect to the tax imposed under

section 44-13-13), 14, 17, or 30 of this title, as applicable, for the year of revocation, recapture, or

adjustment, shall be increased by including the total amount of the sales proceeds without

proration.

      (e) (f) Substantial rehabilitation of property that is exempt from real property tax shall be

ineligible for the tax credits authorized under this chapter. In the event a certified historic

structure undergoes a substantial rehabilitation pursuant to this chapter and within twenty-four

(24) months after issuance of a certificate of completed work the property becomes exempt from

real property tax, the taxpayer's tax for the year shall be increased by the total amount of credit

actually used against the tax.

      (f) (g) In the case of a corporation, this credit is only allowed against the tax of a

corporation included in a consolidated return that qualifies for the credit and not against the tax of

other corporations that may join in the filing of a consolidated tax return.

 

     44-33.2-4. Administration. -- (a) To claim the tax credit authorized in this chapter,

taxpayers shall apply: (i) to the commission: (i) prior to the certified historic structure being

placed in service for a certification that the certified historic structure's rehabilitation will be

consistent with the standards of the Secretary of the United States Department of the Interior for

rehabilitation; and (ii) after completion of the rehabilitation work of to the certified historic

structure: for: (A) to the commission for a certification that the rehabilitation is consistent with

the standards of the Secretary of the United States Department of the Interior for rehabilitation,

and (B) to the division of taxation for a certification as to the amount of tax credit for which the

rehabilitation qualifies. The commission and the division of taxation shall be entitled to rely on

the facts represented in the application without independent investigation and, with respect to the

amount of tax credit for which the rehabilitation qualifies, upon the certification of a certified

public accountant licensed in the state of Rhode Island. The applications shall be developed by

the commission and the division of taxation and may be amended from time to time.

      (b) Within ninety (90) days after the commission's and the division of taxation's receipt

of the taxpayer's application requesting certification for the completed rehabilitation work, (i) the

commission shall issue the taxpayer: (i) a written determination either denying or certifying the

rehabilitation, and (ii) the division of taxation shall issue a certification of the amount of credit for

which the rehabilitation qualifies. To claim the tax credit, the commission's and the division of

taxation's certification as to the amount of the tax credit shall be attached to all state tax returns

on which the credit is claimed.

      (c) No taxpayer may benefit from the provisions of this chapter unless the owner of the

certified historic structure grants a restrictive covenant to the commission, agreeing that during

the holding period no alterations to the certified historic structure will be made without the

commission's approval and in a manner inconsistent with the standards of the Secretary of the

United States Department of the Interior.

      (d) The division of taxation commission shall charge a fee equal to two and one quarter

percent (2.25%) of the qualified rehabilitation expenditures of structures placed in service after

July 31, 2005 and prior to January 1, 2008. The fee shall have been paid by May 15, 2008 for

certified historical structures or some identifiable portion of a structure to qualify for the thirty

percent (30%) tax credits under subsection 44-33.2-3(a). For certified historical structures or

some identifiable portion of a structure placed in service after December 31, 2007, the division of

taxation shall charge a fee equal to three percent (3%), four percent (4%), or five percent (5%) of

the qualified rehabilitation expenditures as contracted between the division of taxation and the

person, firm, partnership, trust, estate, limited liability company, corporation (whether for profit

or non-profit) or other business entity that incurs qualified rehabilitation expenditures for the

substantial rehabilitation of certified historic structures or some identifiable portion of a structure

to be placed in service after December 31, 2007; provided further that two and one quarter

percent (2.25%) of the qualified rehabilitation expenditures shall be paid by May 15, 2008 with

the remaining percent to be paid by March 5, 2009. Payments made after March 5, 2009 shall

accrue interest as set forth in section 44-1-7.

      (e) If information comes to the attention of the commission or the division of taxation at

any time up to and including the last day of the holding period that is materially inconsistent with

representations made in an application, the commission or the division of taxation may deny the

requested certification, or revoke a certification previously given or terminate the contract, with

any processing fees paid to be forfeited.

     (f) The general assembly hereby finds that the state's fiscal budgetary crisis is of such a

nature to cause immediate peril to the public health, safety or welfare that any regulations

promulgated by the division of taxation or the Rhode Island historical preservation and heritage

commission in furtherance of this chapter must be promulgated as emergency regulations

pursuant to subsection 42-35-3(b).

 

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

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

 

     44-33.2-4.1. Historic preservation tax credit trust fund. – There is hereby created the

historic preservation tax credit trust fund outside of the state general fund for the purpose of

reserving funds for tax credits issued under this section. The assembly may cause sufficient

amounts to be deposited into the fund equal to the amounts of credits under contract no later than

September 1, 2008. The assembly authorizes the governor to borrow such funds as necessary to

guarantee all obligations incurred under contracts, subject to the provisions of chapter 35-18, the

public corporation debt management act. The state controller shall transfer amounts from the fund

to the state general revenues equal to the credits taken by taxpayers as certified by the division of

taxation.

     All processing fees collected pursuant to this chapter after June 30, 2008 shall be

deposited in the historic preservation tax credit trust fund and not the state general fund.

 

     SECTION 3 This act shall take effect upon passage.

     

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LC02420/SUB A/6

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