Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 58 - Filing Returns, Payment of Tax, Penalty and Interest, and Tax Credits › Rule 701-58.8 - Eligible Housing Business Tax Credit

Current through Register Vol. 47, No. 3, July 24, 2024
For tax years beginning on or after January 1, 2000, a
				  financial institution may claim on the franchise tax return the pro rata share
				  of the Iowa eligible housing business tax credit from a partnership, limited
				  liability company, estate or trust which has been approved as an eligible
				  housing business by the economic development authority. The enterprise zone
				  program was repealed on July 1, 2014, and the eligible housing business tax
				  credit has been replaced with the workforce housing tax incentives program. See
				  rule
				  701-5822.
				  (15) for information on the tax incentives provided under the workforce housing
				  tax incentives program. Any investment tax credit earned by businesses approved
				  under the enterprise zone program prior to July 1, 2014, remains valid and can
				  be claimed on tax returns filed after July 1, 2014.
An eligible housing business may receive a tax credit of up
				  to 10 percent of the new investment which is directly related to the building
				  or rehabilitating of homes in an enterprise zone. The tax credit may be taken
				  on the tax return for the tax year in which the home is ready for occupancy.
				  The portion of the credit claimed by the taxpayer shall be in the same ratio as
				  the taxpayer's pro-rata share of the earnings of the partnership, limited
				  liability company, estate or trust, except for projects beginning on or after
				  July 1,2005, which used low-income housing tax credits authorized under Section
				  42 of the Internal Revenue Code to assist in the financing of the housing
				  development. For these projects, the partnership, limited liability company or
				  S corporation may designate the amount of the tax credit to be allocated to
				  each partner, member or shareholder. Any eligible housing business tax credit
				  in excess of the franchise tax liability must be carried forward for seven
				  years or until it is used, whichever is the earlier.
Prior to January 1, 2001, the tax credit cannot exceed 10
				  percent of $120,000 for each home or individual unit in a multiple dwelling
				  unit building. Effective January 1, 2001, the tax credit cannot exceed 10
				  percent of $140,000 for each home or individual unit in a multiple dwelling
				  unit building.
(1)
Computation
				of credit.
New investment which is directly related to the building or
				rehabilitating of homes includes but is not limited to the following costs:
				land, surveying, architectural services, building permits, inspections,
				interest on a construction loan, building materials, roofing, plumbing
				materials, electrical materials, amounts paid to subcontractors for labor and
				materials provided, concrete, labor, landscaping, appliances normally provided
				with a new home, heating and cooling equipment, millwork, drywall and drywall
				materials, nails, bolts, screws, and floor coverings.
New investment does not include the machinery, equipment,
				  hand or power tools necessary to build or rehabilitate homes.
If the eligible housing business fails to maintain the
				  requirements of 2014 Iowa Code section
				  15E193B.
				  to be an eligible housing business, the taxpayer may be required to repay all
				  or a part of the tax incentives the business received. Irrespective of the fact
				  that the statute of limitations to assess the taxpayer for repayment of the
				  income tax credit may have expired, the department may proceed to collect the
				  tax incentives forfeited by failure to maintain the requirements of 2014 Iowa
				  Code section 15E.193B. This is because it is a recovery of an incentive, rather
				  than an adjustment to the taxpayer's tax liability. Details on the calculation
				  of the repayment can be found in 261-subrule 187.5(4) of the administrative
				  rules of the economic development authority. If the business is a partnership,
				  limited liability company, S corporation, estate or trust where the income of
				  the taxpayer is taxed to the individual owner(s) of the business, the
				  department may proceed to collect the tax incentives against the partners,
				  members, shareholders or beneficiaries to whom the tax incentives were passed
				  through. See Decision of the Administrative Law Judge in
Damien & Co
				  lette Trebilcock, etal.,
Docket No. 11DORF 042-044, June 11,
				  2012.
Effective for tax periods beginning on or after January
				  1,2003, the taxpayer must receive a tax credit certificate from the economic
				  development authority to claim the eligible housing business tax credit. The
				  tax credit certificate shall include the taxpayer's name, the taxpayer's
				  address, the taxpayer's tax identification number, the date the project was
				  completed, the amount of the eligible housing business tax credit, and the tax
				  year for which the credit may be claimed. In addition, the tax credit
				  certificate shall include a place for the name and tax identification number of
				  a transferee and the amount of the tax credit being transferred, as provided in
				  subrule 58.8(2). The tax credit certificate must be included with the income
				  tax return for the tax period in which the home is ready for occupancy. The
				  administrative rules for the eligible housing business tax credit for the
				  economic development authority may be found under 261-Chapter 59.
(2)
Transfer of the
				eligible housing business tax credit.
For tax periods beginning on or
				after January 1, 2003, the eligible housing business tax credit certificates
				may be transferred to any person or entity if low-income housing tax credits
				authorized under Section 42 of the Internal Revenue Code are used to assist in
				the financing of the housing development. In addition, the eligible housing
				business tax credit certificates may be transferred to any person or entity for
				projects beginning on or after July 1, 2005, if the housing development is
				located in abrownfield site as defined in Iowa Code section
				15291., or if the
				housing development is located in a blighted area as defined in Iowa Code
				section
				40317.. No more than
				$3 million of tax credits for housing developments located in brownfield sites
				or blighted areas may be transferred in a calendar year, with no more than $1.5
				million being transferred for any one eligible housing business in a calendar
				year.
The excess of the $3 million limitation of tax credits
				  eligible for transfer in the 2013 and 2014 calendar years for housing
				  developments located in brownfield sites or blighted areas cannot be claimed by
				  a transferee prior to January 1, 2016. The eligible housing business must have
				  notified the economic development authority in writing before July 1, 2014, of
				  the business's intent to transfer any tax credits for housing developments
				  located in brownfield sites or blighted areas. If a tax credit certificate is
				  issued by the economic development authority for a housing development approved
				  prior to July 1, 2014, that is located in a brownfield site or blighted area,
				  the tax credit can still be claimed by the eligible business, but the tax
				  credit cannot be transferred by the eligible business if the economic
				  development authority was not notified prior to July 1, 2014.
EXAMPLE 1: A housing development located in a brownfield site
				  was completed in December 2013 and was issued a tax credit certificate totaling
				  $250,000. The $3 million calendar cap for transferred tax credits for
				  brownfield sites and blighted areas has already been reached for the 2013 and
				  2014 tax years. The $250,000 tax credit is going to be transferred to ABC Bank,
				  and the economic development authority was notified of the transfer prior to
				  July 1, 2014. Once a replacement tax credit certificate has been issued, ABC
				  Bank cannot file an amended Iowa franchise tax return for the 2013 tax year
				  until January 1, 2016, to claim the $250,000 tax credit.
EXAMPLE 2: A housing development located in a blighted area
				  was completed in May 2014 and was issued a tax credit certificate totaling
				  $150,000. The $3 million calendar cap for transferred tax credits for
				  brownfield sites and blighted areas has already been reached for the 2014 tax
				  year. The $ 15 0,000 tax credit is going to be transferred to XYZ Bank and the
				  economic development authority was notified of the transfer prior to July 1,
				  2014. Once a replacement tax credit certificate has been issued, XYZ Bank
				  cannot file an amended Iowa franchise tax return for the 2014 tax year until
				  January 1, 2016, to claim the $150,000 tax credit.
Within 90 days of transfer of the tax credit certificate for
				  transfers prior to July 1,2006, the transferee must submit the transferred tax
				  credit certificate to the economic development authority, along with a
				  statement which contains the transferee's name, address and tax identification
				  number, and the amount of the tax credit being transferred. For transfers on or
				  after July 1, 2006, the transferee must submit the transferred tax credit
				  certificate to the department of revenue. Within 30 days of receiving the
				  transferred tax credit certificate and the statement from the transferee for
				  transfers prior to July 1,2006, the economic development authority will issue a
				  replacement tax credit certificate to the transferee. For transfers on or after
				  July 1, 2006, the department of revenue will issue the replacement tax credit
				  certificate to the transferee. If the transferee is a partnership, limited
				  liability company or S corporation, the transferee shall provide a list of the
				  partners, members or shareholders and information on how the housing business
				  tax credit should be divided among the partners, members or shareholders. The
				  transferee shall also provide the tax identification numbers and addresses of
				  the partners, members or shareholders. The replacement tax credit certificate
				  must contain the same information that was on the original certificate and must
				  have the same expiration date as the original tax credit certificate.
The transferee may use the amount of the tax credit for any
				  tax period for which the original transfer or could have claimed the tax
				  credit. Any consideration received for the transfer of the tax credit shall not
				  be included in Iowa taxable income for individual income, corporation income or
				  franchise tax purposes.
Any consideration paid for the transfer of the tax credit
				  shall not be deducted from Iowa taxable income for individual income,
				  corporation income or franchise tax purposes.
This rule is intended to implement 2014 Iowa Code section
				  15E.193B.