2005 Vermont Code - § 5930p. — Rehabilitation tax credit for older or historic buildings

§ 5930p. Rehabilitation tax credit for older or historic buildings

(a) Definitions. In addition to the following, the definitions found in section 5930n of this title apply to this section unless otherwise indicated.

(1) "Local board" means a board, council, commission or organization selected or appointed by the legislative body of the municipality and which is empowered by law with the primary administration, oversight, regulation or adjudication of matters of a district listed in subdivision 2793(b)(1) of Title 24.

(2) "Local board certification" means a written statement by the local board that the proposed rehabilitation meets the criteria of subdivisions (b)(2) and (3) of this section.

(3) "Older building" means any building which has been constructed prior to January 1, 1983.

(4) "Qualified expenditures" means construction related expenses, excluding any expenses of an owner or lessee of a private residence, and excluding any expenses of an owner or lessee that is a religious entity operating with a primarily religious purpose, or a state or federal agency, political subdivision, or instrumentality of the United States, incurred to achieve one or more of the objectives of subdivision (b)(2) of this section.

(b)(1) Prior to the commencement of any rehabilitation work, a property owner or lessee may apply to the state board for a rehabilitation tax credit allocation under this section. 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 rehabilitation tax credit allocation. In granting such tax credits, the board shall issue a letter of approval after receiving certification by the local board of the district in which the project is located that the project meets the requirements of subdivisions (2) and (3) of this subsection. In all instances the burden of proof shall be upon the applicant.

(2) A local board shall review a full project description submitted by the applicant, showing the adjusted basis of the structure, all work to be performed and all proposed expenditures, and proof that the applicant's building plan has been approved by the department of labor, and determine whether the project will accomplish one or more of the following primary objectives:

(A) it will bring the building into compliance with the Vermont accessibility law (chapter 4 of Title 21) and the Americans with Disabilities Act;

(B) it will bring the building into compliance with building, electrical, plumbing or life safety codes adopted by the department of labor;

(C) it will abate or make safe lead paint conditions;

(D) it will abate any other substances hazardous to human health or safety;

(E) it will involve participation in the redevelopment of contaminated sites program;

(F) it will rehabilitate a building facade that contributes to the integrity of the downtown development district; or

(G) it will create additional area able to be occupied within the existing building that also accomplishes the objectives of subdivisions (A) through (D) of this subsection.

(3) The local board shall also find all of the following:

(A) the qualified expenditures for a 24-month period selected by the taxpayer and ending within the taxable year exceed $5,000.00; and

(B) the total qualified rehabilitation expenditures of the project do not exceed the adjusted basis of the structure if the structure is listed, or individually eligible for listing in the National Register of Historic Places as determined by the local board in consultation with the division for historic preservation, or the application is solely for the expenses of an exterior elevator access addition to a structure otherwise undergoing a rehabilitation that applies for the state tax credit under section 5930n of this title and for which the costs of such an addition are not a qualified rehabilitation expenditure; and

(C) with respect to buildings listed on the state or national register, the proposed work conforms with or meets the standards adopted by the local board in consultation with the division for historic preservation.

(4) If the local board finds that the project meets one of the purposes of subdivision (2) and all the requirements of subdivision (3) of this subsection, it shall issue a certification to that effect to the state board and recommend approval of a rehabilitation tax credit allocation.

(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, state corporate income, bank franchise or insurance premiums tax liability a credit in an amount equal to 25 percent of an amount not to exceed $100,000.00 of qualified expenditures certified by the local board. An applicant who spends more than $100,000.00 will be eligible for no tax credit under this subchapter for expenditures greater than $100,000.00.

(d) Claim for credit. A taxpayer claiming credit under this subchapter shall submit to the department of taxes with the first return on which a credit is claimed a copy of the state board rehabilitation tax credit allocation and a copy of the local board tax credit certification.

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

(f)(1)s In any fiscal year after 1998, the state board may award tax credits to all applicants under this section and section 5930n of this title, so that the total shall not exceed $1,000,000.00, when considered 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) The owner or long-term lessee of a building that is listed in the National Register of Historic Places, or is determined to be individually eligible by the division as part of the local board's review of the application for the tax credit allocation, whose proposed qualified rehabilitation expenditures equal or exceed the adjusted basis of the building, shall be eligible for a tax credit under section 5930n of this title, but shall not be eligible for a tax credit under this subchapter.

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

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

(5) No credit shall be allowed under this subchapter to both an owner and a lessee on the same leasable unit for which either the owner or the lessee has claimed a tax credit under this subchapter.

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

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

(B) the local board finds that the taxpayer performed any work on the building not contained in the application, knowingly failed to supply any information or true information required by the local board for certification under this section, or failed to satisfy any requirement of certification imposed by the local board; or

(C) the taxpayer performed any subsequent work during the five-year period that causes the building to no longer meet at least one objective of subdivision (b)(2) of this section or all requirements of subdivision (b)(3) of this section.

(7)(A) In the event of a disposition under subdivision (6)(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 (6)(B) or (C) of this subsection, the recapture penalty shall be in an amount equal to the total rehabilitation tax credit used.

(g) In lieu of using its tax credit allocation to reduce its own tax liability, an applicant may request the allocation in the form of a mortgage credit certificate which a bank may accept in return for adjusting the rate or term of the applicant's mortgage or loan related to a leasehold interest on the qualified building. The amount of the mortgage credit certificate shall equal the unused portion of 25 percent of an amount not to exceed $100,000.00 of qualified expenditures certified by the local board. An applicant requesting a mortgage credit certificate subsequent to receiving a tax credit allocation shall provide to the state board a copy of all returns on which a credit under this section was taken. A bank which purchases a mortgage credit certificate may use it to reduce its franchise tax liability under 32 V.S.A. § 5836 for the first tax year in which the qualified building is placed back in service after qualified expenditures were made or in a subsequent year. (Added 1997, No. 120 (Adj. Sess.), § 4, eff. Jan. 1, 1999; amended 1999, No. 159 (Adj. Sess.), § 2, eff. May 29, 2000; 2001, No. 114 (Adj. Sess.), § 9, eff. May 28, 2002; No. 114 (Adj. Sess.), §§ 14, 15, eff. July 1, 2003; 2005, No. 103 (Adj. Sess.), § 3, eff. April 5, 2006.)