KRS § 171.397 — KY Code / Title XIV / Chapter 171 / Section 171.397
171.397 Rehabilitation of certified historic structures -- Qualified rehabilitation expenses -- Tax credit -- Penalty -- Administrative regulations
Status: in_force

171.397 Rehabilitation of certified historic structures -- Qualified rehabilitation

expenses -- Tax credit -- Penalty -- Administrative regulations.

(1) (a) For all applications for a preliminary approval received prior to April 30,

2010, there shall be allowed as a credit against the taxes imposed by KRS

141.020, 141.040, 141.0401, or 136.505, an amount equal to:

1. Thirty percent (30%) of the qualified rehabilitation expenses, in the case

of owner-occupied residential property; and

2. Twenty percent (20%) of the qualified rehabilitation expenses, in the

case of all other property.

In the case of an exempt entity that has incurred qualified rehabilitation

expenses, the credit provided in this subsection shall be available to transfer or

assign as provided under subsection (8) or (9) of this section.

(b) For applications for preliminary approval received on or after April 30, 2010,

the credit shall be refundable if the taxpayer makes an election under

subsection (2)(b) of this section.

(2) (a) A taxpayer seeking the credit provided under subsection (1) of this section

shall file an application for a preliminary determination of maximum credit

eligibility before April 30 of the year in which the proposed project will begin.

The application shall describe the project and shall include documentation

supporting the qualification of the project for the credit, the proposed start

date, the proposed completion date, the projected qualified rehabilitation

expenses, and any other information the council may require. The council

shall determine the preliminary maximum credit available for each taxpayer

and shall notify the taxpayer of that amount by June 30 of the year in which

the application was filed. If total credits applied for in any year exceed the

certified rehabilitation credit cap, plus any amounts added to the cap pursuant

to paragraph (c) of this subsection, the provisions of subsection (5) of this

section shall be applied to reduce the approved credits for all taxpayers with

qualifying applications for that year.

(b) 1. An application for a final determination of credit shall be submitted to

the council upon completion of the project.

2. The application shall include an irrevocable election by the taxpayer to:

a. Use the credit, in which case, the credit shall be refundable; or

b. Transfer the credit.

3. The council shall determine the final amount of credit approved for each

taxpayer based upon the actual expenditures, preliminary determination

of maximum credit, and a determination that the expenditures are

qualified rehabilitation expenses.

4. The council shall notify the taxpayer and Department of Revenue of the

final approved credit amount within sixty (60) days of the receipt of a

completed application from the taxpayer.

(c) 1. If the total amount of credits finally approved for a taxpayer under

paragraph (b) of this subsection are less than the credits initially

approved for a taxpayer under paragraph (a) of this subsection, the

difference between the two (2) amounts shall be added to the certified

rehabilitation credit cap for the next calendar year.

2. If the total amount of credits approved under paragraph (a) of this

subsection in any calendar year is less than the certified rehabilitation

credit cap, the difference between the credits actually awarded and the

certified rehabilitation credit cap shall be added to the certified

rehabilitation credit cap for the next calendar year.

(3) (a) The maximum credit which may be claimed with regard to owner-occupied

residential property shall be one hundred twenty thousand dollars ($120,000)

subject to subsection (5) of this section. The credit in this section shall be

claimed for the taxable year in which the certified rehabilitation is completed.

(b) The maximum credit which may be claimed with regard to all other property

that is not owner-occupied residential shall be ten million dollars

($10,000,000) subject to subsection (5) of this section. The credit in this

section shall be claimed for the taxable year in which the certified

rehabilitation is completed.

(4) In the case of a husband and wife filing separate returns or filing separately on a

joint return, the credit may be taken by either or divided equally, but the combined

credit shall not exceed one hundred twenty thousand dollars ($120,000) if subject to

the limitation in subsection (3)(a) of this section, or ten million dollars

($10,000,000) if subject to the limitation in subsection (3)(b) of this section, subject

to the provisions of subsection (5) of this section.

(5) The credit amount approved for a calendar year for all taxpayers under subsection

(2)(a) of this section shall be limited to the certified rehabilitation credit cap. When

the total credits applied for and approved in any year under subsection (2)(a) of this

section exceed the certified rehabilitation credit cap, the council shall apportion the

certified rehabilitation credit cap as follows: The certified rehabilitation credit cap

for the year under consideration shall be multiplied by a fraction, the numerator

which is the approved credit amount for an individual taxpayer for a calendar year

and the denominator which is the total approved credits for all taxpayers for a

calendar year.

(6) (a) For all applications received prior to April 30, 2010, if the credit amount that

may be claimed in any tax year as determined under subsections (3) to (5) of

this section exceeds the taxpayer's total tax liabilities under KRS 136.505,

141.020, or 141.040 and 141.0401, the taxpayer may carry the excess tax

credit forward until the tax credit is used, provided that any tax credits not

used within seven (7) years of the taxable year the certified rehabilitation was

complete shall be lost.

(b) For all applications received on or after April 30, 2010, if the credit amount

that may be claimed in any tax year as determined under subsections (3) to (5)

of this section exceeds the taxpayer's total tax liabilities under KRS 136.505,

141.020, or 141.040 and 141.0401, the taxpayer may receive a refund, if the

taxpayer elected to take the credit as required by subsection (2)(b) of this

section.

(7) (a) The credit shall apply against both the tax imposed by KRS 141.020 or

141.040 and the limited liability entity tax imposed by KRS 141.0401, with

the ordering of credits as provided in KRS 141.0205.

(b) 1. For applications received prior to April 30, 2010, if the taxpayer is a

pass-through entity not subject to the tax imposed by KRS 141.040, the

taxpayer shall apply the credit at the entity level against the limited

liability tax entity imposed by KRS 141.0401, and shall also pass the

credit through in the same proportion as the distributive share of income

or loss is passed through.

2. For applications received on or after April 30, 2010, if the taxpayer is a

pass-through entity not subject to the tax imposed by KRS 141.040, the

taxpayer shall apply the credit at the entity level against the limited

liability tax entity imposed by KRS 141.0401, and may receive a refund

if the taxpayer elected to take the credit as required by subsection

(2)(b)2.a. of this section.

(8) Credits received under this section may be transferred or assigned if an election is

made under subsection (2)(b) of this section, for some or no consideration, along

with any related benefits, rights, responsibilities, and liabilities to a financial

institution as defined in KRS 141.010 subject to the taxes imposed by KRS

136.505, 141.040, or 141.0401. Within thirty (30) days of the date of any transfer of

credits, the party transferring the credits shall notify the Department of Revenue of:

(a) The name, address, employer identification number, and bank routing and

transfer number, of the party to which the credits are transferred;

(b) The amount of credits transferred; and

(c) Any additional information the Department of Revenue deems necessary.

The provisions of this subsection shall apply to any credits that pass through to a

successor or beneficiary of a taxpayer.

(9) For purposes of this section, a lessee of a certified historic structure shall be treated

as the owner of the structure if the remaining term of the lease is not less than the

minimum period promulgated by administrative regulation by the council.

(10) The taxes imposed in KRS 141.020, 141.040, and 141.0401 shall not apply to any

consideration received for the transfer, sale, assignment, or use of a tax credit

approved under this section.

(11) The Department of Revenue shall assess a penalty on any taxpayer or exempt entity

that performs disqualifying work, as determined by the Kentucky Heritage Council,

on a certified historic structure for which a rehabilitation has been certified under

this section in an amount equal to one hundred percent (100%) of the tax credit

allowed on the rehabilitation. Any penalties shall be assessed against the property

owner who performs the disqualifying work and not against any transferee of the

credits.

(12) The council may impose fees for processing applications for tax credits, not to

exceed the actual cost associated with processing the applications.

(13) The council may authorize a local government to perform an initial review of

applications for the credit allowed under this section and forward the applications to

the council with its recommendations.

(14) The council and the Department of Revenue may promulgate administrative

regulations in accordance with the provisions of KRS Chapter 13A to establish

policies and procedures to implement the provisions of subsections (1) to (13) of

this section.

(15) The tax credit authorized by this section shall apply to tax periods ending on or after

December 31, 2005.