1 HB281
2 207896-8
3 By Representatives Gaston, Faulkner, Drummond, Pringle, Rowe,
4 Jones (M), Garrett, Rafferty, Collins, South, Clouse, Coleman,
5 Bracy, Clarke, Faust, McMillan, Brown (C), Wilcox, Stringer
6 and Simpson
7 RFD: Ways and Means Education
8 First Read: 02-FEB-21
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1
2 ENROLLED, An Act,
3 Relating to the state income tax credit for the
4 rehabilitation of qualified historic structures; to amend
5 Sections 40-9F-31, 40-9F-32, 40-9F-33, 40-9F-36, and 40-9F-38
6 of the Code of Alabama 1975, to provide for a disqualifying
7 use; to revise audit requirements; to extend the income tax
8 credit through 2027; to limit the tax credits for tax years
9 2023 through 2027 to certain properties; to clarify the
10 refundability of tax credits for transferees; and to further
11 provide for the Historic Tax Credit Evaluating Committee.
12 BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
13 Section 1. Sections 40-9F-31, 40-9F-32, 40-9F-33 and
14 40-9F-36, 40-9F-36, and 40-9F-38 of the Code of Alabama 1975,
15 are amended as follows:
16 "40-9F-31.
17 As used in this article, the following terms shall
18 have the following meanings:
19 (1) CERTIFIED HISTORIC STRUCTURE. A property located
20 in Alabama which is at least sixty years old, unless the
21 structure is an historic structure located within the
22 boundaries of a National Monument or Park as declared by the
23 United States Congress or the President of the United States,
24 in which case the federal age provisions shall apply, and is
25 certified by the Alabama Historical Commission as being
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1 individually listed in the National Register of Historic
2 Places, eligible for listing in the National Register of
3 Historic Places, or certified by the commission as
4 contributing to the historic significance of a Registered
5 Historic District.
6 (2) CERTIFIED REHABILITATION. Repairs or alterations
7 to a certified historic structure that is certified by the
8 commission as meeting the U.S. Secretary of the Interior's
9 Standards for Rehabilitation which meet the requirements
10 contained in Section 47(c)(2)(C) of the Internal Revenue Code,
11 as amended, or to a certified historic residential structure
12 as defined in subdivision (3).
13 (3) CERTIFIED HISTORIC RESIDENTIAL STRUCTURE. A
14 certified historic structure as defined in subdivision (1).
15 (4) COMMISSION. The Alabama Historical Commission
16 and or its successor.
17 (5) COMMITTEE. The Historic Tax Credit Evaluating
18 Committee established by this article.
19 (6) DEPARTMENT. The Alabama Department of Revenue or
20 its successor.
21 (7) DISQUALIFYING USE. Any use of a certified
22 historic residential structure that is occupied by an Owner
23 and used, exclusively as a primary or secondary residence.
24 (7) (8) OWNER. Any taxpayer filing a State of
25 Alabama income tax return or any entity that is exempt from
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1 federal income taxation pursuant to Section 501(c) of the
2 Internal Revenue Code, as amended, that:
3 a. Owns title to a qualified structure, or
4 b. Owns a leasehold interest in a qualified
5 structure for a term of not less than 39 years.
6 An owner as defined herein shall not be considered a
7 private user as defined in Section 40-9A-1.
8 (8) (9) QUALIFIED REHABILITATION EXPENDITURES. Any
9 expenditure as defined under Section 47(c)(2)(A) of the
10 Internal Revenue Code, as amended, and the related regulations
11 thereunder, and other reasonable expenses and costs expended
12 in the rehabilitation of a qualified structure. For certified
13 historic residential structures, this term shall mean expenses
14 incurred by the taxpayer in the certified rehabilitation of a
15 certified historic residential structure, including but not
16 limited to preservation and rehabilitation work done to the
17 exterior of a certified historic residential structure, repair
18 and stabilization of historic structural systems, restoration
19 of historic plaster, energy efficiency measures except
20 insulation in frame walls, repairs or rehabilitation of
21 heating, air conditioning, or ventilation systems, repairs or
22 rehabilitation of electrical or plumbing systems exclusive of
23 new electrical appliances and electrical or plumbing fixtures,
24 and architectural, engineering, and land surveying fees.
25 Qualified rehabilitation expenditures do not include the cost
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1 of acquisition of the qualified structure, the personal labor
2 by the owner, or any cost associated with the rehabilitation
3 of an outbuilding of the qualified structure, unless the
4 outbuilding is certified by the commission to contribute to
5 the historical significance of the qualified structure.
6 (9) (10) QUALIFIED STRUCTURE. Certified historic
7 structures which are certified by the commission as meeting
8 the requirements contained in Section 47(c)(1)(A)(i) and (ii)
9 of the Internal Revenue Code, as amended, and to certified
10 historic residential structures as defined herein.
11 (10) (11) REGISTERED HISTORIC DISTRICT. Any district
12 listed in the National Register of Historic Places and any
13 district which is either of the following:
14 a. Designated under Alabama or local law as
15 containing criteria which substantially achieves the purpose
16 of preserving and rehabilitating buildings of historic
17 significance to the district.
18 b. Certified by the U.S. Secretary of the Interior
19 as meeting substantially all of the requirements for the
20 listing of districts in the National Register of Historic
21 Places.
22 (11) (12) REHABILITATION PLAN. Construction plans
23 and specifications for the proposed rehabilitation of a
24 qualified structure in sufficient detail to enable the
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1 commission to evaluate compliance with the standards developed
2 under this article.
3 (12) (13) SUBSTANTIAL REHABILITATION. Rehabilitation
4 of a qualified structure for which the qualified
5 rehabilitation expenditures exceed 50 percent of the owners
6 original purchase price of the qualified structure or
7 twenty-five thousand dollars ($25,000), whichever is greater.
8 "40-9F-32.
9 (a) The commission shall develop standards for the
10 approval of the substantial rehabilitation of qualified
11 structures for which a tax credit is sought. The standards
12 shall (i) take into account whether the substantial
13 rehabilitation of a qualified structure is consistent with the
14 historic character of the structure or of the Registered
15 Historic District in which the property is located and (ii)
16 for tax years 2023 through 2027, establish a mechanism to
17 require owners to confirm that the proposed use for the
18 qualified structure is not a Disqualifying Use (a) in the
19 application, and (b) prior to the commissions issuance of the
20 tax credit certificate for the qualified structure under
21 40-9F-32(d).
22 (b) Prior to beginning any substantial
23 rehabilitation work on a qualified structure, the owner shall
24 submit an application and rehabilitation plan to the
25 commission and an estimate of the qualified rehabilitation
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1 expenditures under the rehabilitation plan; provided, however,
2 that the owner, at its own risk, may incur qualified
3 rehabilitation expenditures no earlier than six months prior
4 to the submission of the application and rehabilitation plan
5 that are limited to architectural, engineering, and land
6 surveying fees and related soft costs and any costs related to
7 the protection of the qualified structure from deterioration.
8 (c) The commission shall review the application and
9 rehabilitation plan to determine that the information
10 contained therein is complete. If the commission determines
11 that the application and rehabilitation plan are complete, the
12 commission shall recommend the project to the committee for
13 the reservation of a tax credit. If the project is approved
14 for a tax credit by the committee, the commission shall
15 reserve, for the benefit of the owner, an allocation for a tax
16 credit as provided in Section 40-9F-33, and the commission
17 shall notify the owner in writing of the amount of the
18 reservation. The reservation of tax credits does not entitle
19 the owner to an issuance of tax credits until the owner
20 complies with all other requirements of this article for the
21 issuance of the tax credits. The reservation of tax credits
22 shall be made by the commission in the order in which the
23 committee has ranked completed applications and rehabilitation
24 plans. Reservations of tax credits shall be issued by the
25 commission within a reasonable time from the filing of a
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1 completed application and rehabilitation plan. Only the
2 property for which a property address, legal description, or
3 other specific location is provided in the application shall
4 be reviewed. Ownership of an entity that is the owner of
5 property contained in the application shall not be a factor in
6 the commission's review of the application and no subsequent
7 change in the ownership structure of such entity shall result
8 in the loss or rescission of a reservation of tax credits. The
9 owner shall not be permitted to request the review of another
10 property for approval in the place of the property contained
11 in the application. Any application disapproved by the
12 commission or the committee shall be removed from the review
13 process, and the commission shall notify the owner in writing
14 of the decision to remove the application. A disapproved
15 application may be resubmitted, but shall be deemed to be a
16 new submission and may be charged a new application fee. In
17 the event the reservations of tax credits equal the total
18 amount available for reservations during the tax year, all
19 owners with applications then awaiting approval or thereafter
20 submitted shall be notified by the commission that no
21 additional tax credits shall be granted during that tax year.
22 The applications shall remain in active status from the date
23 of the original application and shall be considered for
24 recommendations of tax credits in the event that additional
25 credits become available due to rescission by the commission
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1 or when a new tax year's allocation of tax credits becomes
2 available.
3 Owners receiving a reservation of tax credits shall
4 commence rehabilitation, if rehabilitation has not previously
5 begun, within 18 months of the date of issuance of the written
6 notice from the commission to the owner granting the tax
7 credits. Commencement of rehabilitation shall mean that, as of
8 the date in which actual physical work contemplated by the
9 rehabilitation plan submitted with the application has begun,
10 the owner has incurred no less than 20 percent of the
11 estimated costs of rehabilitation provided in the application.
12 Within 36 months of the date of issuance of the written notice
13 from the commission to the owner granting the tax credit
14 reservation, the owner must have incurred an additional 50
15 percent of the estimated costs of rehabilitation provided in
16 the application. Within 60 months of the date of issuance of
17 the written notice from the commission to the owner granting
18 the tax credit reservation, the project must be completed.
19 Owners receiving a reservation of tax credits shall submit
20 evidence of compliance with the provisions of this subsection.
21 If the commission determines that an owner has failed to
22 comply with the requirements provided under this section, the
23 reservation of tax credits for the owner may be rescinded and,
24 if so, the amount of tax credits shall then be included in the
25 total amount of available tax credits provided for in
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1 subsection (c) of Section 40-9F-33, from which reservations
2 may be granted. Any owner whose reservation of tax credits are
3 rescinded shall be notified of the rescission from the
4 commission and, upon receipt of the notice, may submit a new
5 application but may be charged a new application fee.
6 (d) Following the completion of a substantial
7 rehabilitation of a qualified structure, the owner shall
8 notify the commission that the substantial rehabilitation has
9 been completed and shall certify the qualified rehabilitation
10 expenditures incurred with respect to the rehabilitation plan.
11 In addition, the owner shall provide the commission with: (i)
12 a cost and expense certification, prepared by a licensed
13 certified public accountant that is not an affiliate of the
14 owner, certifying the total qualified rehabilitation
15 expenditures and the total amount of tax credits against any
16 state tax due that is specified in this article for which the
17 owner is eligible under Section 40-9F-33 and, if the qualified
18 rehabilitation expenditures exceed two hundred thousand
19 dollars ($200,000), the cost and expense certification must be
20 audited by the licensed certified public accountant; and (ii)
21 an appraisal of the qualified structure prepared by an
22 independent MAI designated and licensed real estate appraiser.
23 The commission shall review the documentation of the
24 rehabilitation and verify its compliance with the
25 rehabilitation plan. The commission shall also review the
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1 content of the cost and expense certification as well as the
2 appraisal to ensure compliance with standards adopted by rule
3 of the commission. Within 90 days after receipt and approval
4 of the foregoing documentation from the owner, the commission
5 shall issue a tax credit certificate in an amount equivalent
6 to the lesser of: (i) the amount of the tax credit reservation
7 issued for the project under the provisions of subsection (c),
8 or (ii) 25 percent of the actual qualified rehabilitation
9 expenditures for certified historic structures. In the event
10 the amount of qualified rehabilitation expenditures incurred
11 by the owner would result in the issuance of an amount of tax
12 credits in excess of the amount of tax credits reserved for
13 the owner under subsection (c), the owner may apply to the
14 commission for issuance of tax credits in an amount equal to
15 the excess. Applications for issuance of tax credits in excess
16 of the amount of tax credits reserved for the owner shall be
17 made on a form prescribed by the commission and shall
18 represent a separate certificate that shall be issued, subject
19 to all provisions regarding priority provided in Section
20 40-9F-38.
21 (e) In order to obtain a credit against any state
22 tax due that is specified in this article, a taxpayer shall
23 file the tax credit certificate with the taxpayer's Alabama
24 state tax return.
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1 (f) The department shall grant a tax credit against
2 any state tax due that is specified in this article to a
3 taxpayer holding the tax credit certificate issued under
4 subsection (d) or, in the case of a transferee, issued by the
5 department pursuant to Section 40-9F-33 against any tax due
6 under Chapter 18 in the amount stated on the tax credit
7 certificate. The department shall have the right to audit and
8 to reassess any credit improperly obtained by the owner, in
9 accordance with the Taxpayers' Bill of Rights and the Uniform
10 Revenue Procedures contained in Chapter 2A; provided, however
11 that only the owner initially awarded the tax credit
12 certificate, and not any subsequent transferee of the tax
13 credit certificate or person to whom tax credits have been
14 passed through pursuant to Section 40-9F-33, shall be liable
15 for any credit improperly obtained by the owner.
16 (g) For processing the taxpayers application for a
17 tax credit, the commission may impose the following
18 application fees:
19 (i) For qualified rehabilitation expenses of one
20 million dollars ($1,000,000) or less, a fee equal to one
21 percent (1%) of the qualified rehabilitation expenditures.
22 (ii) For qualified rehabilitation expenses from one
23 million and one dollars ($1,000,001) to ten million dollars
24 ($10,000,000), a fee equal to fifteen thousand dollars
25 ($15,000).
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1 (iii) For qualified rehabilitation expenses over ten
2 million dollars ($10,000,000), a fee equal to twenty thousand
3 dollars ($20,000).
4 (iv) A