2005 Vermont Code - § 5930n. — Tax credit for substantial rehabilitation of historic buildings also claiming federal rehabilitation tax credit

§ 5930n. Tax credit for substantial rehabilitation of historic buildings also claiming federal rehabilitation tax credit

(a) Definitions.

(1) "Adjusted basis" means the original cost of the property plus the cost of capital improvements minus any depreciation allowed or allowable under the federal Internal Revenue Code, minus the value of the land.

(2) "Affordable housing" means housing for households whose income is at or below 80 percent of median income, as established by a U.S. Department of Housing and Urban Development median that is identified by the applicant for a tax credit under this section.

(3) "Certified rehabilitation" means a certified rehabilitation as defined in the federal Internal Revenue Code at 26 U.S.C. § 47(c)(2). This definition does not apply to subchapter 11G of chapter 151 of this title.

(4) "Commissioner" means the commissioner of taxes.

(5) "Division" means the division for historic preservation.

(6) "Qualified rehabilitation expenditure" means a qualified rehabilitation expenditure as defined in the Internal Revenue Code, 26 U.S.C. § 47(c) properly chargeable to the certified rehabilitation after July 1, 1998. This definition does not apply to section 5930p of this title.

(7) "Qualified rehabilitation project" means a rehabilitation project, located within a designated downtown development district or a designated village center under the provisions of chapter 76A of Title 24, that is a certified rehabilitation with respect to this section.

(8) "State board" means the Vermont downtown development board established pursuant to chapter 76A of Title 24.

(9) "Substantial rehabilitation" means that qualified rehabilitation expenditures exceed $5,000.00 or the adjusted basis of the building and its structural components, whichever is greater.

(b) State board credit allocation.

(1) An owner or long-term lessee of a building in a downtown development district or village center designated under the provisions of chapter 76A of Title 24 may apply to the state board for an historic building tax credit allocation under this section. The board shall grant approval for an historic building tax credit allocation, and issue a letter of approval, if it finds that the applicant meets the provisions of subdivision (2) of this subsection. The burden of proof shall be on the applicant.

(2) The state board, within 45 days of receipt of a completed application, shall decide, based on the availability of credit, whether or not to grant a tax credit allocation under this section. In granting a tax credit allocation, the state board must first find that:

(A) the building is a certified historic structure and the proposed rehabilitation is a certified rehabilitation; and

(B) the proposed improvements will maintain existing jobs, create additional jobs, or in the case of housing provide that ten percent of the units rehabilitated qualify as affordable housing.

(c) Amount of credit. Except as limited by subsection (f) of this section, the owner of a qualified building shall be entitled to claim against the taxpayer's state individual income tax, state corporate income tax, bank franchise or insurance premiums tax liability a credit in an amount equal to 10 percent for those qualified rehabilitation projects located within a downtown development district, or five percent for those qualified rehabilitation projects located within a village center, of the qualified rehabilitation expenditures.

(d) Claim for credit. A taxpayer claiming a credit under this subchapter shall submit with the first return on which a credit is claimed a copy of the state board tax credit allocation and a copy of the federal income tax return claiming the federal tax credit.

(e) Availability of credit. A credit under this section shall be available for the first tax year in which the qualified building is placed in service after the qualified expenditures were made. Any unused credit may be carried forward to reduce the taxpayer's tax liability for no more than 14 succeeding tax years following the first year the tax credit is claimed.

(f) Limitations and recapture

(1)(A) In any fiscal year after 1998, the state board may award tax credits to all applicants under this section and section 5930p of this title, so that the total shall not exceed $1,000,000.00, when added together with the following:

(i) total sales tax reallocated under section 9819 of this title;

(ii) credits awarded under section 5930q of this title, concerning platform lifts, elevators and sprinklers; and

(iii) credits awarded under section 5930r of this title, concerning village general stores and post office structures.

(B) A total annual allocation of no more than 40 percent of these tax credits in combination with sales tax reallocation may be awarded in connection with all of the projects in a single municipality.

(2) No credit shall be allowed under this section for the cost of acquiring any building or interest therein.

(3) No credit shall be allowed under this section for any expenditure with respect to which the taxpayer does not use the straight line method of depreciation over a recovery period allowed under 26 U.S.C. § 168(c) or (g).

(4) If, within five years after the building is placed in service upon completion of the certified rehabilitation project, any of the following events occur, then for such year and all succeeding years, any unused credit shall be disallowed and the taxpayer shall be liable for a recapture penalty:

(A) the owner of the building for which a tax credit has been awarded under this subchapter disposes of the building; or

(B) the National Park Service has revoked certification for unapproved alterations or for work not done as described in the historic preservation certification application, or the taxpayer has knowingly failed to supply information, or knowingly failed to supply true information required by the division or the state board for certification under this section; or

(C) the taxpayer failed to satisfy any requirement of certification imposed by the state board in the tax credit allocation; or

(D) the taxpayer performed any subsequent work during the five-year period that resulted in loss of status as a certified rehabilitation.

(5)(A) In the event of a disposition under subdivision (4)(A) of this subsection, the recapture penalty shall be a percentage of the total credit used, computed in accordance with the following table:

Years between close of tax year Percent of credit recaptured

when credit became available

and tax year when building

was disposed

Less than one year 100 percent of the credit

One year 80 percent of the credit

Two years 60 percent of the credit

Three years 40 percent of the credit

Four years 20 percent of the credit.

(B) In the event of a determination under subdivisions (4)(B), (C) or (D) of this subsection, the recapture penalty shall be equal to the total state tax credit used. (Added 1997, No. 120 (Adj. Sess.), § 3, eff. Jan. 1, 1999; amended 1999, No. 159 (Adj. Sess.), § 1, eff. May 29, 2000; 2001, No. 114 (Adj. Sess.), § 8, eff. May 28, 2002; No. 114 (Adj. Sess.), § 13, eff. July 1, 2003.)