Historic Tax Credit bill passes House
Info below from the Iowa Bankers Association, weekly update:
Historic tax credit bill passes Iowa Senate committee
HF 2443 passed the Iowa Senate week with an unfavorable amendment. The bill helps deal with several Department of Economic Development programs including important changes to the Historic Tax Credit program. Due to recent interpretations of the law by the Iowa Department of Revenue, new historic projects have been stalled and several projects that are in process have been put into jeopardy. The Iowa Legislature has long been a proponent of the Historic Tax Credit program and the House-passed bill helped ensure both the ongoing usability and integrity of the program. The Senate amendment, however, institutes a three-year recapture period if the investor (which is often a bank) participates in both state and federal tax credits on any particular project. The end result is that investors will likely purchase state credits or the federal credits, but not both, which increases legal costs for developers and reduces the fair market value of the credit to the state. The bill must now go back to the House where the Senate amendment will likely be accepted. The balance of the bill still contains favorable language as it relates to the Historic Tax Credit program but the Senate amendment makes the program more costly and less efficient for all participants.
Summary of HF 2443:
Inserts Economic Development Authority into Program:
- Transfers administrative oversight of the financial portion of the historic preservation tax credits to Economic Development Authority.
Clarification of Refundability and Carryforward:
- This clarification is for a tax credit claimed by an eligible taxpayer or transferee for qualified rehabilitation projects with agreements entered into on or after July 1, 2014.
- A taxpayer includes an eligible taxpayer or a person transferred a tax credit certificate pursuant to 404A.2(2A).
- A credit in excess of taxpayer’s tax liability for the tax year may be refunded or credited to the taxpayer’s tax liability for the following 5 years or until depleted.
Inserts predictability at registration:
- After registering the qualified rehabilitation project, the authority shall notify the eligible taxpayer of successful registration under the program within a period of time established by rule.
Removes reference to audit from 404A.3(5) ‘Examination and audit of project’
Implementation date shifts from July 1, 2016 to August 15, 2016
- This allows for the Department of Cultural Affairs to distribute reallocated credits that were not being used before the new rules are drafted.
Rewrites Recapture and Repayment Risk for Investors:
- If an eligible taxpayer receives a tax credit certificate by way of a Prohibited Activity the eligible taxpayer is liable for repayment of the tax credit.
- A transferee is subject to liability, revocation, and repayment if the transferee had implied notice or express notice of the prohibited activity or other claim or defense against the tax credits.
- Includes Qualifying Transferee as a safe harbor and defines an associated transferee as an owner, member, shareholder or partner who owns and controls the eligible taxpayer and defines ‘control’ for purposes of this definition.