Current through Register 1531, September 27, 2024
(1)
Statement of Purpose,
Effective Date.
(a)
Statement of Purpose. 830 CMR 63.38R.1 explains the
calculation of the historic rehabilitation tax credit established by M.G.L. c.
62, § 6J and M.G.L c. 63, § 38R (St. 2003, c. 141, §§ 22,
24 and 82, as amended by St. 2004, c. 65, §§ 5 through 9, 13 through
18, and 54). Under the statute, the Commissioner, in consultation with the
Massachusetts Historical Commission, shall authorize credits annually, for the
period and amounts allowed under M.G.L. c. 62, § 6J and M.G.L. c. 63,
§ 38R.
(b)
Outline
of Topics. 830 CMR 63.38R.1 is organized as follows:
1. Statement of Purpose; Outline of Topics,
Effective Date;
2.
Definitions;
3. Amount of
Credit;
4. Certification of
Rehabilitation; Chosen Projects; Written Notice;
5. Chosen Projects; Application of
Criteria;
6. Application Process
and Administrative Fees;
7.
Transferability of Credit;
8.
Allotment of Credit Among Partners, Members or Owners;
9. First Tax Year for Claiming
Credit;
10. Carryforward of
Credit;
11. Limitations on Credit;
Ordering of Credit;
12. Recapture;
and
13. Authorization to Take
Further Actions.
(c)
Effective Date. 830 CMR 63.38R. 1 takes effect April
13, 2004 and applies to tax years beginning on or after January 1,
2005.
(2)
Definitions. For purposes of 830 CMR 63.38R.1, the
following terms shall have the following meanings, unless the context requires
otherwise:
Certified Rehabilitation, the
rehabilitation of a qualified historic structure that has been approved and
certified by the Chairperson of the Massachusetts Historical Commission as
being consistent with the standards established by the Secretary of the United
States Department of the Interior for rehabilitation of historic
properties.
Chosen Projects, projects which have
received second certification under 830 CMR 63.38R.1(4)(b).
Code, the Internal Revenue Code of
1986, as amended and in effect for the taxable year.
Commission, the Massachusetts
Historical Commission.
Commissioner, the Commissioner of
Revenue.
Completed Projects, chosen projects
which have received final certification under 830 CMR 63.38R.1(4)(c) and which
have been substantially rehabilitated and placed in service.
Placed in Service, this term shall
have the same meaning as the term is given under 47 I.R.C. and any federal
regulations thereunder.
Project, any building or structure,
submitted by the taxpayer to the Commission for certification of
rehabilitation.
Qualified Historic Structure, any
building or structure, located within the Commonwealth that is individually
listed on the National Register of Historic Places or is a
contributing building within a district that is listed on the National
Register of Historic Places or has been determined by the
Massachusetts Historical Commission to be eligible for listing on the
National Register of Historic Places, and which all or any
portion of which is owned, in whole or in part, by the taxpayer.
Qualified Rehabilitation Expenditure,
any amount properly chargeable to a capital account and described in 47 I.R.C.
§ 47(c)(2)(A)(i), as amended and in effect for the taxable year, incurred
in connection with the certified rehabilitation of a qualified historic
structure, but the term shall not include personal property, personal use
property or the cost of acquiring any building or interest therein.
Substantial Rehabilitation and Substantially
Rehabilitated, the qualified rehabilitation expenditures of the
building during the 24-month period selected by the taxpayer ending with or
within the taxable year exceed 25% of the taxpayer's adjusted basis in such
building and its structural components as of the beginning of such period. In
the case of any rehabilitation that may reasonably be expected to be completed
in phases set forth in architectural plans and specifications completed before
the rehabilitation begins, the applicable period referred to in 830 CMR
63.38R.1(2): Substantial Rehabilitation and Substantially
Rehabilitated shall be 60 months.
Taxpayer, a corporation or other
entity subject to an excise imposed by M.G.L. c. 63 and a person, firm,
partnership, trust, estate, limited liability company or other entity subject
to the income tax imposed by M.G.L. c. 62.
(3)
Amount of
Credit.
(a)
Calculation of Credit. The credit shall be equal to a
percentage, not to exceed 20%, of the qualified rehabilitation expenditures
made by the taxpayer with respect to a qualified historic structure which has
received final certification and has been placed in service as provided for in
830 CMR 63.38R.1(9).
(b)
Available Credit for Allocation. The Commission shall
determine and account for the amount of credit available for allocation. The
amount available in any given year shall be equal to the sum of:
1. the annual authorized credit amount for
that year under M.G.L. c. 62, § 6J and M.G.L. c. 63, § 38R;
2. any recapture amounts;
3. any credit amount previously allocated to
a chosen project under 830 CMR 63.38R.1(3)(c), which is disallowed by the
Commission upon final certification under 830 CMR 63.38R.1(4)(c);
4. any credit amount previously allocated to
a chosen project under 830 CMR 63.38R.1(3)(c), which is disallowed by the
Commission upon the Commission's determination that the chosen project cannot
move forward due to financial infeasibility or other impediment or the chosen
project is materially changed from its plans as submitted and approved by the
Commission when allocated the credit under 830 CMR 63.38R.1(3)(c);
and
5. any credit amount authorized
but not allocated in a previous year. Upon the Commission's determination that
the project cannot move forward under 830 CMR 63.38R.1(3)(b)4., the Commission
shall issue a written notice to the chosen project containing a statement of
reason for the Commission's determination. In no event shall the total amount
of credits allocated during any given year exceed the amount that is available
for allocation as set forth in 830 CMR 63.38R.1(3)(b).
(c)
Allocation of
Credit. The Commission shall allocate the available credit among
projects chosen to receive second certification. Each chosen project shall be
allocated a percentage, not to exceed 20%, of qualified rehabilitation
expenditures as proposed and certified under 830 CMR 63.38R.1(4). The
Commission shall apply the criteria set forth under 830 CMR 63.38R.1(5) and
assess and prioritize each initially certified project within the deadlines set
forth under 830 CMR 63.38R.1(6). After such assessment, the Commission may
issue the second certification to one or more projects and allocate some or all
of the available credit among such chosen projects.
(d)
Credit
Certificates. The Commission may issue a credit certificate to a
completed project on or after the date it issues the final certification as
allowed under 830 CMR 63.38R.1(4)(c). In no event shall the total amount of
credit certificates issued for any given year exceed the total amount of
credits that are available to be allocated for such year, as set forth in 830
CMR 63.38R.1(3)(b).
(e)
Examples. The following examples illustrate the
application of 830 CMR 63.38R.1(3).
Example 1. The annual authorized
credit amount under M.G.L. c. 62, § 6J and M.G.L. c. 63, § 38R is $15
million per calendar year for five years. In calendar year one the Commission
issues to ten projects second certifications totaling $11 million in allocated
credits. The Commission will rollover into calendar year two the $4 million of
unallocated credits. Therefore, in calendar year two the Commission may
allocate up to $19 million in credits.
Example 2. The annual authorized
credit amount under M.G.L. c. 62, § 6J and M.G.L. c. 63, § 38R is $15
million per calendar year for five years. In calendar year one the Commission
issues to ten projects second certifications totaling $11 million in allocated
credits and in calendar year two the Commission issues second certifications to
twelve additional projects totaling $17 million in allocated credits.
Therefore, at the end of calendar year two the cumulative authorized maximum is
$30 million of which the Commission has allocated $28 million. The Commission
will rollover into calendar year three the $2 million of unallocated credits.
Therefore, in calendar year three the Commission may allocate up to $17 million
in credits.
(4)
Certification of Rehabilitation.
(a)
Initial
Certification. An initial certification is the certification by
the Commission that the structure meets the definition of a qualified historic
structure.
(b)
Second
Certification; Chosen Projects; Written Notice. A second
certification is issued by the Commission prior to construction, certifying
that if completed as proposed, the rehabilitation work will meet the standards
required for a certified rehabilitation. The Commission may issue a second
certification during or after the construction process.
1. Projects which receive second
certification are chosen projects. The Commission shall allocate some or all of
the available credit among chosen projects as provided for in 830 CMR
63.38R.1(3)(c).
2. The Commission
shall issue a written notice to applicants for second certification within such
time as prescribed by the Commission. A chosen project shall receive a written
notice of acceptance that contains a statement detailing the allocation of
credit as determined by the Commission under 830 CMR 63.38R.1(3)(c). An
applicant that is not chosen for second certification shall receive a written
notice that contains a statement of reason for its not having been
selected.
(c)
Final Certification. A final certification is issued
by the Commission when construction is completed, certifying that the work was
completed as proposed and that the costs are consistent with the work
completed. Such final certification shall be acceptable as proof that the
expenditures related to such construction qualify as qualified rehabilitation
expenditures for purposes of the credit allowed under M.G.L. c. 62, § 6J
or M.G.L. c. 63, § 38R, and 830 CMR 63.38R.1.
(5)
Chosen Projects; Application
of Criteria. Within the application schedule provided for in 830
CMR 38R. 1 (6)(a), the Commission shall assess each initially certified
project's contribution to the significance of the area and the relative public
benefit of its proposed rehabilitation to the Commonwealth by applying the
following criteria:
(a)
Affordable
Housing. At least 25% of the tax credits shall be allowed for
projects that contain affordable housing whenever possible and consistent with
the criteria set forth in 830 CMR 63.38R.1(5).
(b)
Preservation.
The extent to which historic, architectural or cultural preservation is
achieved for the features and portions of the structure and its site and
environment. In considering the extent of historic preservation, the Commission
will review the project's utilization of traditional materials and technology
and the retention of historic fabric. The project, when necessary, will be
consistent with local and state planning priorities for development or
protection. In addition, the Commission will consider the extent to which the
project complements other state revitalization efforts. The Commission will
give consideration to the level of historic significance as defined by the
National Register of Historic Places.
(c)
Potential for Loss or
Destruction. Consideration of the potential loss or destruction of
the historic structure(s), but for the financial assistance of the credit, by
evaluating the overall condition of the property including, but not limited to,
an assessment of deferred maintenance, water penetration or structural
failure.
(d)
Statement
of Need. Assessment and demonstration of the impact and need for
the financial assistance of the credit utilizing an evaluation of the extent of
benefit from other funding sources.
(e)
Geographic
Diversity. The project's potential for enhancing the geographic
distribution of tax credit allocations throughout the Commonwealth.
(f)
Administration and
Feasibility of the Project. The relative soundness and feasibility
of the proposal as reflected in a budget that details eligible costs and a
proposal consistent with the Secretary of Interior's Standards for the
Rehabilitation of Historic Properties. Submission to the Commission of a
conditions survey or work progress checklist. Compliance with relevant state
laws or any pertinent Executive Orders such as Executive Orders regarding
housing, affirmative action or sprawl and growth planning.
(g)
Public Support.
The extent to which the taxpayer has sought public comments or received public
support for the project from public organizations including, but not limited
to, the Statewide Preservation Organization, the National Trust for Historic
Preservation and any local historical commission.
(h)
State of
Utility. The extent to which the project will transform a
structure or site that currently lacks beneficial or practical use into one
that reflects positively on the community and the Commonwealth.
(i)
Economic Impact.
The project's economic impact on the surrounding community and the Commonwealth
as a whole.
The Commission shall determine, utilizing the criteria set
forth in 830 CMR 38R.1(5) and within the application schedule provided for in
830 CMR 38R.1(6), which projects, if any, are eligible to receive second
certification under 830 CMR 38R.1(4)(b). The Commission's determination is not
an adjudicatory proceeding under M.G.L. c. 30A, § 1 and therefore is not
subject to review under M.G.L. c. 30A, § 14.
(6)
Application Process and
Administrative Fees.
(a)
Application Deadlines. Applications for initial,
second and final certification are to be submitted to the Commission.
Applications for initial and final certification are accepted and considered on
a rolling basis. Applications for second certification are accepted and
considered on a schedule as follows:
1.
applications received by the Commission by April
30th will be considered for approval within such
time as prescribed by the Commission;
2. applications received by the Commission by
August 31st will be considered for approval within
such time as prescribed by the Commission; and
3. applications received by the Commission by
January 15th will be considered for approval within
such time as prescribed by the Commission.
The Commission is not required to issue second certifications
in all application cycles.
(b)
Application
Forms. Application forms can be obtained from the
Commission.
(c)
Initial
Applications. Applications for certification may be accepted under
the application schedule on or after April 13, 2004; provided, however, that
the Commission shall not issue final certifications before January 1,
2005.
(d)
Application
Fees. The Commission may impose a fee for any stage of the
application and certification process.
(7)
Transferability of
Credit.
(a)
Transferors, Transferees. Any taxpayer allowed to take
the historic rehabilitation credit may transfer the credit, in whole or in
part, to any individual or entity, without the requirement of transferring any
ownership interest in the project or any interest in the entity which owns the
project. Transferees are entitled to apply the credits against the tax or
excise with the same effect as if the transferee had incurred the qualified
rehabilitation expenditures. For treatment of carryover credit, see 830 CMR
63.38R.1(10). The credit can be transferred only on or after the date a chosen
project becomes a completed project. For recapture treatment, see 830 CMR
63.38R.1(12).
(b)
Notice and Transfer Statement. The Commission, in
consultation with the Department of Revenue, shall promulgate a form of
transfer statement to be filed by the transferor of the rehabilitation credit.
The transfer statement shall be required in addition to the transfer contract
required in 830 CMR 63.38R.1(7)(c). Transfer Statement forms may be obtained
from the Commission. The transferor shall file a transfer statement and a copy
of the proposed transfer contract with the Department of Revenue prior to the
transfer and shall further file with the Department of Revenue the executed
transfer contract within 30 days after the completed transfer. The transfer
statement shall provide the name and federal taxpayer identification number of
each transferor and transferee. Further, such statement shall indicate the
amount of historic rehabilitation credit transferred to each transferee. The
statement shall also contain such other information as the Department of
Revenue or the Commission may from time to time require.
(c)
Transfer Contract
Requirements. Any taxpayer transferring his or her credit must
enter into a transfer contract with the transferee. The transfer contract must
specify the following:
1. description and
address for all structures in the project;
2. the date each structure in the project was
placed in service;
3. the schedule
of years during which the credit may be taken and the amount of credit
previously taken for the project including all previous transferees;
and
4. the amount of credit being
transferred.
(d)
Transferred Eligibility to Claim Credit. Any taxpayer
who is a transferee of the historic rehabilitation credit may, provided all
transfer and other requirements or limitations are met, apply such credit to
either the tax imposed under M.G.L. c. 62 or the excise imposed under M.G.L. c.
63.
(8)
Allotment of Credit among Partners, Members or Owners.
Historic rehabilitation tax credits allowed to a partnership, a limited
liability company taxed as a partnership or multiple owners of property shall
be passed through to the persons designated as partners, members or owners,
respectively, pro rata or, without regard to their sharing of
other tax or economic attributes of such entity, pursuant to an executed
agreement among such persons designated as partners, members or owners
documenting an alternative distribution method.
(9)
First Tax Year for Claiming
Credit. A taxpayer may apply the credit against the tax or excise
imposed by M.G.L. c. 62 or c. 63, beginning with the tax year a chosen project
becomes a completed project.
(10)
Carryforward of Credit.
(a)
Carryforward
Period. Any taxpayer allowed a credit under M.G.L. c. 62, §
6J or c. 63, § 38R, and 830 CMR 63.38R.1 for any taxable year may carry
over and apply to the tax imposed by M.G.L. c. 62 or the excise imposed by
M.G.L. c. 63, in any of the succeeding five taxable years, the portion, as
reduced from year to year, of those credits which exceed such tax or excise for
the taxable year. The carryover period, for any taxpayer, cannot exceed five
taxable years after the close of the taxable year during which the chosen
project becomes a completed project as provided for in 830 CMR
63.38R.1(9).
(b)
Carryforward of Transferred Credits. A transferee
shall use the credit in the year it is transferred. If the credit allowable for
any tax year exceeds the transferee's tax liability for that tax year, the
transferee may carryforward and apply in a subsequent taxable year the portion,
as reduced from year to year, of those credits which exceed such tax for the
taxable year; provided, however, that the carryover period cannot exceed five
taxable years after the close of the taxable year during which the chosen
project becomes a completed project as provided for in 830 CMR
63.38R.1(9).
(11)
Ordering of Credit; Limitations on Credit.
(a)
Ordering of
Credit. The credit may be applied in combination with other
credits allowed under M.G.L. c. 62 in any order. Similarly, the credit may be
applied in combination with other credits allowed under M.G.L. c. 63 in any
order.
(b)
Minimum
Excise Limitation. The credit may not be applied to reduce the
minimum excise due under M.G.L. c. 63, §§ 32(b) and 39(b).
(c)
50% Limitation
Inapplicable. In determining the amount of the credit allowable
for a taxable year, the 50% limitation imposed by M.G.L. c. 63, § 32C does
not apply.
(d)
Combined
Group Members. A taxpayer that participates in the filing of a
combined Massachusetts return of income may apply the credit against the
portions of the combined group's excise liability attributable to the taxpayer,
determined in accordance with the provisions of
830 CMR
63.32B.1(8), and not against
the excise liability of other group members.
(e)
Credit
Nonrefundable. The credit is nonrefundable.
(12)
Recapture.
(a)
Recapture. If,
before the end of the five year period beginning on the date on which the
chosen project becomes a completed project, the taxpayer disposes of such
taxpayer's interest in the project, the taxpayer's tax for the taxable year in
which such disposition occurs shall be increased by the recapture amount. Any
carryforward credit shall be adjusted by reason of such disposition.
(b)
Transferees;
Recapture. Only taxpayers with an ownership interest on the date
on which the chosen project becomes a completed project shall be subject to
recapture. Transferees are not subject to recapture.
(c)
Amount of
Recapture. The recapture amount shall equal the amount of the
credit taken by the taxpayer, including any transferred credit, minus the
credit allowed for ownership, but not less than zero. The credit allowed for
ownership shall be the product of the amount of the credit allowed multiplied
by a ratio, the numerator of which is the number of months the rehabilitated
structure is owned by the taxpayer, and the denominator of which is 60. Credit
taken includes any credit transferred. The month of disposition is considered a
month owned by the taxpayer.
(d)
Partial Disposition. In the case of a partial
disposition of the taxpayer's ownership interest in the project the recapture
amount shall be pro rated.
(e)
Examples. The following examples illustrate the
application of 830 CMR 63.38R.1(12).
Example 1. Calendar year taxpayer is
allowed $ 100,000 of credit for a completed project as of April 30, 2005. In
tax year 2005 taxpayer takes $40,000 of credit on his return, transfers $10,000
of credit and carries forward $50,000 of credit. On April 30, 2006 taxpayer
disposes of 100% of his interest in the project. The taxpayer has owned the
project for 20% of the required time (12 months divided by 60 months) and is
therefore allowed 20% of the $100,000 credit for ownership, or $20,000. The
taxpayer has taken $50,000 of credit ($40,000 on his or her return plus the
$10,000 transferred credit) and will have a $30,000 recapture tax in his 2006
tax year. The $50,000 carryforward is disallowed.
Example 2. Same facts as Example 1,
except that in tax year 2005 taxpayer takes $10,000 of credit on his or her
return, transfers $5,000 of credit and carries forward $85,000 of credit. The
taxpayer has taken $15,000 of the credit but is allowed $20,000 of the credit
for ownership. There is no recapture tax, but the carryforward is reduced to
$5,000.
Example 3. Same facts as Example 2,
except the taxpayer disposes of 10% of his ownership interest on April 30,
2006. In this case 10% of the taxpayer's $100,000 allowed credit is subject to
recapture. The taxpayer has owned this portion ($10,000) of the project for 20%
of the required time (12 months divided by 60 months) and is allowed 20% of the
$10,000 credit for ownership, or $2,000. In addition, the taxpayer still is
entitled to 90% of $100,000 of the allowed credit. Therefore, the taxpayer is
allowed $92,000 of the credit. There is no recapture tax, but the carryforward
is reduced by $8,000.
(13)
Authorization to Take
Further Actions. Nothing in 830 CMR 63.38R.1 shall be deemed to
limit the express or implied authority of the Commission or the Department of
Revenue to take all actions deemed by the Commission or the Department of
Revenue in their discretion to be consistent with the authority granted under
M.G.L. c. 62, § 6J and c. 63, § 38R (St. 2003, c. 141, §§
22, 24, 82 and St. 2004, c. 65, §§ 5 through 9, 13 through 18, and
54).
REGULATORY AUTHORITY
830 CMR 63.38R.1: M.G.L. c. 62, §§ 6J and M.G.L. c.
63, § 38R (St. 2003, c. 141, §§ 22, 24, 82 and St. 2004, c. 65,
§§ 5-9, 13-18, 54)
