Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 42 - Adjustments to Computed Tax and Tax Credits › Rule 701-42.55 - Historic Preservation and Cultural and Entertainment District Tax Credit for Projects Registered on or After August 15, 2016

Current through Register Vol. 47, No. 3, July 24, 2024
The economic development authority is authorized by the
				  general assembly to award tax credits for a percentage of the qualified
				  rehabilitation expenditures on a qualified rehabilitation project as described
				  in the historic preservation and cultural and entertainment district tax credit
				  program, Iowa Code chapter 404A. The program is administered by the economic
				  development authority with the assistance of the department of cultural affairs
				  and the department of revenue. The general assembly has mandated that the
				  economic development authority, the department of cultural affairs and the
				  department of revenue adopt rules as necessary to administer Iowa Code chapter
				  404A. In general, the department of revenue is responsible for administering
				  tax credit transfers and processing and auditing tax credits claimed on
				  returns. For the economic development authority's rules on the credit program,
				  see 261-Chapter 49. For the department of cultural affairs' rules on the credit
				  program, see 223-Chapter 48.
(1)
Program transition.
2016 Iowa Acts, House File 2443, made
				several changes to the credit program, including transferring primary
				responsibility for the program's administration from the department of cultural
				affairs to the economic development authority. Projects registered prior to
				August 15, 2016, remain under the purview of the department of cultural
				affairs, with assistance from the department of revenue. For department of
				revenue rules related to projects registered prior to August 15, 2016, see
				rules
				701-4254.
				(404A,422) and
				701-4219.
				(404A,422).
(2)
Application, registration, and agreement for the historic preservation
				and cultural and entertainment district tax credit.
For rules on the
				application, registration, and agreement process, see economic development
				authority rules, 261-Chapter 49.
(3)
Computation of the amount of the
				historic preservation and cultural and entertainment district tax
				credit.
The amount of the historic preservation and cultural and
				entertainment district tax credit is a maximum of 25 percent of the qualified
				rehabilitation expenditures verified by the economic development authority
				following project completion, up to the amount specified in the agreement
				between the taxpayer and the economic development authority. For more
				information on the credit computation, see economic development authority
				rules, 261-Chapter 49. The amount remains subject to audit by the department of
				revenue when the credit is claimed on the taxpayer's tax return.
(4)
Qualified rehabilitation
				expenditures.
"Qualified rehabilitation expenditures" means the same
				as defined in Iowa Code section
				404A1(7).
				and rule 261-49.5 (404A) of economic development authority rules. In the event
				of an audit, the department of revenue evaluates whether expenditures comply
				with the agreement between the economic development authority and the eligible
				taxpayer, as well as with applicable statutes and rules, including Internal
				Revenue Code Section 47 and its related regulations.
(5)
Completion of the qualified
				rehabilitation project and claiming the tax credit.
After the economic
				development authority verifies the taxpayer's eligibility for the tax credit,
				the economic development authority shall issue a tax credit certificate. For
				more information on credit certificate issuance, see economic development
				authority rules, 261-Chapter 49.
a.
Claiming the credit.
For the taxpayer to claim the credit, the
				certificate must be included with the taxpayer's income tax return for the tax
				year in which the rehabilitation project is completed or the income tax return
				for any year within the five years following the year of project completion.
				Taxpayers that elect to delay claiming the credit to a later year's return as
				described in this paragraph are subject to the carryforward limitations
				described in paragraph 42.55(5)
"d"
below. The credit may be
				claimed on an amended return so long as the amended return is filed within the
				statute of limitations applicable to the tax year for which the amended tax
				return is being filed.
b.
Information required.
The tax credit certificate shall include
				the taxpayer's name, the taxpayer's address, the taxpayer's tax identification
				number, the address or location of the rehabilitation project, the date the
				project was completed, the amount of the historic preservation and cultural and
				entertainment district tax credit, and, if applicable, an indication of whether
				the credit is nonrefundable (see paragraph 42.55(5)
"c"
below).
				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 42.55(6). In addition, if the
				taxpayer is a partnership, limited liability company, estate or trust, and the
				tax credit is allocated to the owners or beneficiaries of the entity, a list of
				the owners or beneficiaries and the amount of credit allocated to each owner or
				beneficiary shall be provided with the certificate.
c.
Refundability.
A historic
				preservation and cultural and entertainment district tax credit in excess of
				the taxpayer's tax liability is fully refundable with interest computed under
				Iowa Code section
				42225..
				In lieu of claiming the refund, the taxpayer may elect to have the overpayment
				credited to the tax liability for the following tax year. To receive a
				refundable credit, the taxpayer must elect to receive the credit as refundable
				at the Part 3 stage of the application process administered by the economic
				development authority. See the economic development authority's rule 261-49.15
				(404A). Once the taxpayer elects to receive a nonrefundable credit, the
				taxpayer cannot elect to change the credit to a refundable credit or vice
				versa. If the taxpayer is a transferee, the taxpayer may elect to receive the
				credit as refundable when the taxpayer applies to the department of revenue for
				transfer of the tax credit as described in subrule 42.55(6).
d.
Carryforward.
If the
				taxpayer elects to receive a nonrefundable historic preservation and cultural
				and entertainment district tax credit as described in paragraph
				42.55(5)
"b, "
the amount in excess of the taxpayer's tax
				liability may be carried forward for five years following the tax year in which
				the project is completed, or until it is depleted, whichever is earlier. A tax
				credit shall not be carried back to a tax year prior to the tax year in which
				the taxpayer is first eligible to claim the credit. Regardless of whether the
				taxpayer elects to claim the tax credit on a tax return for a year that is
				later than the year of project completion as described in paragraph
				42.55(5)
"a, "
the taxpayer must utilize the entire credit
				within five years following the tax year of the project completion as described
				in this paragraph; any credit amount that is not utilized within the five-year
				carryforward period is forfeited. The five-year carryforward limitation does
				not apply if the taxpayer elects to receive a refundable credit, the excess of
				which may be credited to future tax years as an overpayment.
e.
Allocation of historic
				preservation and cultural and entertainment district tax credits to the
				individual owners of the entity or beneficiaries of an estate or trust.
				A
partnership, limited liability company or S corporation may
				designate the amount of the tax credit to be allocated to each partner, member
				or shareholder. The credit does not have to be allocated based on the pro rata
				share of earnings of the partnership, limited liability company or S
				corporation. For an individual claiming a tax credit of an estate or trust, the
				amount claimed by the individual shall be based upon the pro rata share of the
				individual's earnings from the estate or trust.