Iowa Administrative Code › Agency 701 - Revenue Department › Title IV - Individual Income Tax › Chapter 304 - Adjustments to Computed Tax and Tax Credits › Rule 701-304.17 - Eligible Housing Business Tax Credit

Current through Register Vol. 47, No. 3, July 24, 2024
An individual who qualifies as 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 The enterprise zone program was repealed on July 1, 2014, and the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
				  701-42.53 (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. The tax credit may be taken on the tax
				  return for the tax year in which the home is ready for occupancy.
An eligible housing business is one which meets the criteria
				  in 2014 Iowa Code section
				  15E.193B.
(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, or
				  hand or power tools necessary to build or rehabilitate homes.
A taxpayer may claim on the taxpayer's individual income tax
				  return the pro rata share of the Iowa eligible housing business tax credit from
				  a partnership, S corporation, limited liability company, estate, or trust. The
				  portion of the credit claimed by the individual shall be in the same ratio as
				  the individual's pro rata share of the earnings of the partnership, S
				  corporation, limited liability company, or 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.
For tax years beginning prior to January 1, 2007, any Iowa
				  eligible housing business tax credit in excess of the individual's tax
				  liability, less the credits authorized in Iowa Code sections
				  422.12 and
				  422.12B, may be carried forward
				  for seven years or until it is used, whichever is the earlier. For tax years
				  beginning on or after January 1, 2007, any Iowa eligible housing business tax
				  credit in excess of the individual's tax liability less the credits authorized
				  in Iowa Code section 422.12 may be carried forward
				  for seven years or until it is used, whichever is the earlier.
If the eligible housing business fails to maintain the
				  requirements of 2014 Iowa Code section
				  15E.193B, the taxpayer, in order
				  to be an eligible housing business, may be required to repay all or a part of
				  the tax incentives the taxpayer 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 repayment is
				  required 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 & Colette Trebilcock, et
				  al.,
Docket No. 11DORF 042-044, June 11, 2012.
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.
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 42.17(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 a brownfield site as defined in Iowa Code section
				15.291, or if the housing
				development is located in a blighted area as defined in Iowa Code section
				403.17. 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 Bill
				  Smith, and the economic development authority was notified of the transfer
				  prior to July 1, 2014. Once a replacement tax credit certificate has been
				  issued, Mr. Smith cannot file an amended Iowa individual income 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 $150,000 tax credit is going to be transferred to Greg Rogers, and
				  the economic development authority was notified of the transfer prior to July
				  1, 2014. Once a replacement tax credit certificate has been issued, Mr. Rogers
				  cannot file an amended Iowa individual income 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 transferor could have claimed the tax credit.
				  Any consideration received for the transfer of the tax credits 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.