On June 14, 2013, Texas Governor Rick Perry signed House Bill 500 (“H.B. 500”) into law. H.B. 500 provides a Historic Tax Credit (HTC) for the certified rehabilitation of certified historic structures. The HTC for franchise tax purposes is effective on January 1, 2015 and may be claimed on eligible costs and expenses (incurred before and after September 1, 2013) associated with the certified rehabilitation of a certified historic structure that is placed in service on or after September 1, 2013. Subsequent to the enactment of H.B. 500, the Texas Attorney General issued Opinion No. GA-1045 explaining various issues raised by taxpayers, including the timing of the implementation of the HTC and clarifying which types of entities can claim, sell, or assign the HTC.
Similar to the Federal Historic Tax Credit, the Texas HTC is available on rehabilitated structures that are separately listed in the National Register of Historic Places, designated as a Recorded Texas Historic Landmark, or certified by the Texas Historic Commission (“Commission”) as contributing to the historic significance of a historic district listed on the national registry or a local district certified by the U.S. Department of Interior. Additionally, the rehabilitation work performed must be certified by the Commission as a certified rehabilitation. According to the Texas Attorney General, the Commission has authority to review applications prior to January 1, 2015 but eligibility certificates will only be issued after January 1, 2015.
The HTC is equal to 25% of the eligible costs and expenses incurred in the certified rehabilitation of a certified historic structure. All eligible rehabilitation costs and expenses incurred before September 1, 2013 and during the placed-in-service dates are eligible to be included in the calculation of the credit. Unlike the Federal Historic Tax Credit, which requires eligible costs and expenses incurred to exceed the greater of $5,000 or the adjusted basis of the property, the Texas HTC only requires eligible costs and expenses incurred to exceed $5,000 prior to the required placed-in-service date of September 1, 2013.
Any entity, whether taxable or not in Texas, can apply for the credit; however, only entities that have Texas franchise tax liability can claim the credit on their Texas reports. Entities that do not have Texas franchise tax liability can sell or assign the credit to an entity that can offset the credit against their Texas franchise tax liability. Unused amounts of the credit can be carried forward by a qualifying taxpayer on five consecutive reports.
It is expected that the Commission and the Comptroller will issue proposed regulations governing the application of the HTC during the second quarter of 2014. Ryan will continue to monitor all developments related to the proposed regulations and provide updates as available. Full details of H.B. 500 can be found on the Texas Legislature website.
TECHNICAL INFORMATION CONTACTS:
Allea Newbold
Principal
Ryan
813.228.7100
allea.newbold@ryan.com
Michael Allen
Principal
Ryan
703.746.0022
michael.allen@ryan.com