Iowa Administrative Code › Agency 701 - Revenue Department › Title IV - Individual Income Tax › Chapter 304 - Adjustments to Computed Tax and Tax Credits › Rule 701-304.55 - 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 701-42.54 (404A,422) and
				701-42.19 (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
				404A.1(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, thetaxpayer'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 422.25. 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.