Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-3-137 - HISTORICAL REHABILITATION TAX CREDIT OF 2017 › Section 810-3-137-.02 - Historic Rehabilitation Tax Credit Of 2017 - Availability, Claiming And Transferability Of The Historic Rehabilitation Tax Credit

Current through Register Vol. 42, No. 9, June 28, 2024
(1) This rule sets forth guidelines and
			 procedures to be used by the department in the administration of the Historic
			 Rehabilitation Tax Credit of 2017, as codified in Article 2 of Chapter 9F of
			 Title 40,
Code of Ala. 1975
, which provides for a tax
			 credit under Chapter 18 of Title 40 to Alabama taxpayers for the rehabilitation
			 of certain historic and certain non-historic buildings in Alabama.
(2) The owner of a project that has been
			 issued a Tax Credit Certificate shall forward a copy of the Tax Credit
			 Certificate to the department within 30 days from the date of
			 issuance.
(3) Credits may only be
			 claimed by taxpayers holding a Tax Credit Certificate or a Transfer Tax Credit
			 Certificate. Tax credits granted or transferred to a pass-through entity shall
			 be claimed at the entity level. Tax credits granted or transferred to a single
			 member limited liability company or a Q-sub that is disregarded for Federal
			 Income Tax purposes shall be claimed by the owner of the disregarded entity.
			 Any non-profit entity allowed a tax credit shall file an Alabama Income Tax
			 Return for the tax year in which the reservation is allocated to a project, or
			 the certified rehabilitation is placed in service to claim the credit. The tax
			 credit shall not be claimed prior to the taxable year in which the certified
			 rehabilitation is placed in service.
(4) A taxpayer must apply the entire tax
			 credit against the Income Tax imposed by Chapter 18 for the taxable year in
			 which the reservation is allocated to a project or the certified rehabilitation
			 is placed in service. Where the taxes owed by the taxpayer are less than the
			 tax credit, the taxpayer shall be entitled to claim a refund for the
			 difference. The tax credit cannot be carried forward to any subsequent tax
			 year. The tax credit shall not be claimed prior to the taxable year in which
			 the certified rehabilitation is placed in service. In the event that any
			 additional credit is allocated to the taxpayer for a given project, the
			 additional credit must be claimed in the taxable year the additional credit is
			 allocated to the taxpayer.
(5) On
			 or after the date the Tax Credit Certificate is issued to the project, the
			 owner of the project may transfer all or part of their credit. Once a credit is
			 transferred, only the Transferee may utilize such credit and the credit cannot
			 be transferred. If the tax owned by the transferee is less than the tax credit,
			 the transferee is entitled to claim a refund for the difference.
(6) Any tax credit transferred shall be at
			 the value of at least eighty-five percent (85%) of the present value of the tax
			 credits. The present value shall be determined by discounting the face value of
			 the tax credit to account for the time value of money considering the time
			 between the date the tax credit is transferred and the due date of the
			 Transferee's Alabama Income Tax Return for the tax year the credit must be
			 claimed using a discount rate equal to the federal short-term rate plus three
			 (3) percentage points in effect as of the first of the month the tax credit is
			 transferred.
Example: Project Z is placed in service June 15, 2019. The
				project owner transfers the credit to Transferee with a face value of $1,000 on
				September 30, 2019, when the discount rate of interest equals four percent
				(4%). The Transferee is a calendar year end filer with an Alabama Income Tax
				Return due date of March 15, 2020. For purposes of applying the statutory 85%
				of present value limitation, the present value of the tax credit is calculated
				by multiplying the tax credit's face value by 1 divided by (1+6/12 of 4%) or
				$1,000 x [1/1 + (6/12 x 4%)] or $1,000 x 1/1.02 or $1,000 x 98% which equals a
				present value of $980. The $980 present value is then multiplied by 85% to
				establish a minimum sale price for the tax credit of $833.33.
(7) Prior to the effectiveness of a transfer,
			 the Transferor shall file a Transfer Statement with the department along with a
			 copy of the draft or final Transfer Agreement(s), a copy of the Tax Credit
			 Certificate and a $1,000 fee for each Transferee listed on the Transfer
			 Statement. Unless previously filed, the Transferor shall also file a copy of
			 the executed Transfer Agreement with the department no later than 30 days after
			 the agreement has been executed. The department shall issue a Transfer Tax
			 Credit Certificate to each Transferee for the amount listed on the Transfer
			 Statement within 30 days after receipt of the executed Transfer Agreement. If
			 the amount of the Transferee's tax credit listed in the agreement is different
			 from the Transfer Statement originally filed with the department, the
			 Transferor shall submit an amended Transfer Statement with the executed
			 agreement.
(8) The aggregate amount
			 of the tax credit taken or utilized by the owner or Transferees cannot exceed
			 the amount of credit awarded on the related Tax Credit Certificate or Transfer
			 Tax Credit Certificate, as applicable.
Author:
Kelly Graham, Preeti Gratz, Tawanna
				  Small
Statutory Authority:
Code of Ala.
				  1975
, §§
										40-2A-7(a)(5) and Title 40, Chapter 9F, Article
				  2.