Rhode Island Code of Regulations
Title 280 - Department of Revenue
Chapter 20 - Division of Taxation
Subchapter 20 - TAX CREDITS/DEDUCTIONS
Part 3 - Historic Structures Tax Credit (280-RICR-20-20-3)
Section 280-RICR-20-20-3.6 - Substantial Rehabilitation; Qualified Rehabilitation Expenditures
Universal Citation: 280 RI Code of Rules 20 20 3.6
Current through September 18, 2024
A. Substantial Rehabilitation.
1. A Rehabilitation of Certified Historic
Structure shall be deemed a Substantial Rehabilitation only if the Qualified
Rehabilitation Expenditures incurred in the twenty-four (24)-month period
selected by the Owner ending within the taxable year in which the
Rehabilitation is Placed in Service shall equal or exceed fifty percent of the
Adjusted Basis of the Certified Historic Structure as of the beginning of the
twenty-four (24) month period. In the case of projects involving multiple
buildings (except for phased Rehabilitations addressed in §
3.6(A)(2) of
this Part), the Substantial Rehabilitation Test must be met with respect to
each building separately based on the Adjusted Basis attributable to each such
building and the Qualified Rehabilitation Expenditures attributable to each
such building. The twenty-four (24) month period is a measuring period for
testing whether the Rehabilitation is a Substantial Rehabilitation. Qualified
Rehabilitation Expenditures incurred in connection with the Rehabilitation
either before the beginning of the twenty-four (24) month period or after the
Rehabilitation is Placed in Service but prior to the end of the taxable year in
which the Rehabilitation is Placed in Service may be included in the
calculation of the Credit provided the Substantial Rehabilitation Test is
met.
2. In the case of any
Rehabilitation that may reasonably be expected to be completed in phases set
forth in architectural plans and specifications prepared before the physical
work on the Rehabilitation begins, at the election of the Owner, §
3.6(A)(1) of
this Part may be applied by substituting "60 month period" for "24-month
period." A Rehabilitation may reasonably be expected to be completed in phases
if it consists of two or more distinct stages of development. The Commission
may review each phase of a Phased Project as it is presented, and may issue a
Certificate for Completed Work upon completion of each Phase. However, an
Assignable Historic Preservation Investment Tax Credit Certificate may be
issued only upon satisfaction of the Substantial Rehabilitation test for the
entire Phased Project. Thereafter, Assignable Historic Preservation Investment
Tax Credit Certificates may be issued upon issuance of a Certificate of
Completed Work for later phases without again having to meet the Substantial
Rehabilitation test. The Applicant may elect to claim the Credit allowable for
each completed phase of a Phased Project, upon receipt from the Tax Division of
an Assignable Historic Preservation Investment Tax Credit Certificate. Any
Credit claimed prior to final certification of the completed Rehabilitation
will be contingent upon final certification of the completed
Rehabilitation.
B. Qualified Rehabilitation Expenditures.
1.
Qualified Rehabilitation Expenditures are those expenses incurred in connection
with a Substantial Rehabilitation of a Certified Historic Structure that are
properly capitalized to the building and either depreciable under the Internal
Revenue Code or made with respect to property (other than the Principal
Residence of the Owner) held for sale by the Owner.
2. Amounts are properly capitalized to the
building if they are properly includible in computing the depreciable basis of
real property under federal income tax law. Amounts treated as an expense and
deducted in the year paid or incurred or amounts that are otherwise not added
to the basis of real property do not qualify. Amounts incurred for soft costs,
including without limitation architectural and engineering fees, survey fees,
legal expenses, insurance premiums, development fees and other construction
related costs that are added to the depreciable basis of real property satisfy
this requirement.
3. Expenses that
do not qualify as Qualified Rehabilitation Expenditures include, without
limitation:
a. The cost of acquiring a
building, an interest in a building (including a leasehold interest) or land.
For this purpose, interest incurred on a construction loan, the proceeds of
which are used for Qualified Rehabilitation Expenditures (and which is added to
the basis of the Certified Historic Building) is not treated as a cost of
acquisition.
b. Any expense
attributable to an enlargement of a building. A building is enlarged to the
extent that the total volume of the building is increased. An increase in floor
space resulting from interior remodeling is not considered an enlargement. If
expenditures only partially qualify as Qualified Rehabilitation Expenditures
because some of the expenditures are attributable to the enlargement of the
building, the expenditures must be apportioned between the original portion of
the building and the enlargement. The expenditures must be specifically
allocated between the original portion of the building and the enlargement to
the extent possible. If it is not possible to make a specific allocation of the
expenditures, the expenditures must be allocated to each portion on a
reasonable basis. The determination of a reasonable basis for an allocation
depends on factors such as the type of improvement and how the improvement
relates functionally to the building. Example: Historic Rehabilitation project
includes a new rear wing. A new air-conditioning system and a new roof are
installed on the building. A reasonable basis for allocating the expenditures
between the historic building and the new rear wing generally would be the
volume of the historic building (excluding the new wing), served by the
air-conditioning system on the roof, relative to the volume of the new wing
that is served by the air-conditioning system and the roof.
c. Any expense attributable to the
rehabilitation of a Certified Historic Structure, or a building located in a
Registered Historic District, which is not a Certified
Rehabilitation.
d. Any site work
expenses.
e. Any costs of
demolition of adjacent structures.
f. Processing Fees imposed under R.I. Gen.
Laws §§44-32.2-3(b) and
44-33.2-4(d).
4. Public Grants. Except in the
case of nonprofit corporations, there shall be deducted for purposes of
calculating the Historic Preservation Investment Tax Credit any funds made
available to the Person incurring the Qualified Rehabilitation Expenditures in
the form of a direct grant from a federal, state or local governmental entity
or agency or instrumentally thereof.
C. Step in the Shoes. The Owner may take into account Qualified Rehabilitation Expenditures incurred in connection with the same plan of Rehabilitation by any other Person who has or had an interest in the building. Where Qualified Rehabilitation Expenditures are incurred with respect to a building by a Person (or Persons) other than the Owner, and the Owner acquires the building or a portion of the building (including a leasehold interest in the building or a portion thereof) to which the expenditures were allocable, the Owner acquiring such property will be treated as having incurred the Qualified Rehabilitation Expenditures actually incurred by the transferor, provided that the Rehabilitation was not Placed in Service by the transferor, and no Credit with respect to such Qualified Rehabilitation Expenditures is claimed by anyone other than the Owner acquiring the property or that Owner's Assignee(s). In such instances, the Measuring Period during which the Substantial Rehabilitation Test must be met shall include the transferor's period of ownership, and the Adjusted Basis against which Qualified Rehabilitation Expenditures are tested shall be the Adjusted Basis of the transferor as of the beginning of the Measuring Period.
Disclaimer: These regulations may not be the most recent version. Rhode Island may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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