House File 685 - Introduced HOUSE FILE 685 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HSB 231) A BILL FOR An Act relating to the administration of the property 1 rehabilitation tax credit program by the department of 2 cultural affairs and including retroactive applicability 3 provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1335HV (2) 84 tw/sc

H.F. 685 Section 1. Section 404A.1, Code 2011, is amended to read as 1 follows: 2 404A.1 Historic preservation and cultural and entertainment 3 district tax credit —— eligible property definitions . 4 1. a. A historic preservation and cultural and 5 entertainment district tax credit, subject to the availability 6 of the credit, is granted against the tax imposed under 7 chapter 422, division II , III , or V , or chapter 432 , for the 8 substantial rehabilitation of eligible property located in this 9 state as provided in this chapter . 10 b. Tax credits in excess of tax liabilities shall be 11 refunded or credited as provided in section 404A.4, subsection 12 3 . 13 2. For purposes of this chapter, unless the context 14 otherwise requires: 15 2. a. Eligible property “Eligible property” means property 16 for which a taxpayer may receive the historic preservation and 17 cultural and entertainment district tax credit computed under 18 this chapter and includes all of the following: 19 a. (1) Property listed on the national register of historic 20 places or eligible for such listing. 21 b. (2) Property designated as of historic significance to a 22 district listed in the national register of historic places or 23 eligible for such designation. 24 c. (3) Property or district designated a local landmark by 25 a city or county ordinance. 26 d. (4) A barn constructed prior to 1937. 27 b. “Placed in service” means the same as used in section 47 28 of the Internal Revenue Code. 29 c. “Qualified rehabilitation costs” means expenditures 30 made for the rehabilitation of eligible property and includes 31 qualified rehabilitation expenditures as defined in section 47 32 of the Internal Revenue Code. 33 (1) Qualified rehabilitation costs include amounts if they 34 are properly includable in computing the basis for tax purposes 35 -1- LSB 1335HV (2) 84 tw/sc 1/ 5

H.F. 685 of the eligible property. 1 (2) Amounts treated as an expense and deducted in the 2 tax year in which they are paid or incurred and amounts that 3 are otherwise not added to the basis for tax purposes of the 4 eligible property are not qualified rehabilitation costs. 5 (3) Amounts incurred for architectural and engineering 6 fees, site survey fees, legal expenses, insurance premiums, 7 development fees, and other construction-related costs are 8 qualified rehabilitation costs to the extent they are added to 9 the basis for tax purposes of the eligible property. 10 (4) Costs of sidewalks, parking lots, and landscaping do not 11 constitute qualified rehabilitation costs. 12 d. “Rehabilitation period” means the period of time during 13 which an eligible property is rehabilitated commencing from 14 the date on which the first qualified rehabilitation cost is 15 incurred and ending with the end of the taxable year in which 16 the property is placed in service. A project’s rehabilitation 17 period may include dates that precede approval of a project 18 under section 404A.3, but any costs incurred prior to such 19 approval must be qualified rehabilitation expenditures as 20 defined in section 47(c)(2) of the Internal Revenue Code in 21 order to be qualified rehabilitation costs under this chapter. 22 e. “Substantial rehabilitation” means qualified 23 rehabilitation costs that meet or exceed the following: 24 (1) In the case of commercial property, costs totaling at 25 least fifty percent of the assessed value of the property, 26 excluding the land, prior to the rehabilitation. 27 (2) In the case of residential property or barns, costs 28 totaling at least twenty-five thousand dollars or twenty-five 29 percent of the assessed value, excluding the land, prior to 30 rehabilitation, whichever is less. 31 Sec. 2. Section 404A.2, Code 2011, is amended to read as 32 follows: 33 404A.2 Amount of credit. 34 1. The amount of the credit equals twenty-five percent of 35 -2- LSB 1335HV (2) 84 tw/sc 2/ 5

H.F. 685 the qualified rehabilitation costs made to incurred for the 1 substantial rehabilitation of eligible property. 2 a. In the case of commercial property, rehabilitation costs 3 must equal at least fifty percent of the assessed value of the 4 property, excluding the land, prior to the rehabilitation. 5 b. In the case of residential property or barns, the 6 rehabilitation costs must equal at least twenty-five thousand 7 dollars or twenty-five percent of the assessed value, excluding 8 the land, prior to the rehabilitation, whichever is less. 9 c. In computing the tax credit for eligible property that 10 is classified as residential or as commercial with multifamily 11 residential units, the rehabilitation costs used shall not 12 exceed one hundred thousand dollars per residential unit. 13 d. In computing the tax credit, the only costs which may 14 be included are the qualified rehabilitation costs incurred 15 between the period ending on the project completion date and 16 beginning on the date two years prior to the project completion 17 date, provided that any qualified rehabilitation costs incurred 18 prior to the date of approval of the project as provided in 19 section 404A.3 must be qualified rehabilitation expenditures 20 under the federal rehabilitation credit in section 47 of the 21 Internal Revenue Code. 22 2. For purposes of this chapter , qualified rehabilitation 23 costs include amounts if they are properly includable in 24 computing the basis for tax purposes of the eligible property. 25 a. Amounts treated as an expense and deducted in the tax 26 year in which they are paid or incurred and amounts that are 27 otherwise not added to the basis for tax purposes of the 28 eligible property are not qualified rehabilitation costs. 29 b. Amounts incurred for architectural and engineering 30 fees, site survey fees, legal expenses, insurance premiums, 31 development fees, and other construction-related costs are 32 qualified rehabilitation costs to the extent they are added to 33 the basis for tax purposes of the eligible property. 34 c. Costs of sidewalks, parking lots, and landscaping do not 35 -3- LSB 1335HV (2) 84 tw/sc 3/ 5

H.F. 685 constitute qualified rehabilitation costs. 1 3. 2. For purposes of individual and corporate income 2 taxes and the franchise tax, the increase in the basis of the 3 rehabilitated property that would otherwise result from the 4 qualified rehabilitation costs shall be reduced by the amount 5 of the credit computed under this chapter . 6 Sec. 3. Section 404A.3, subsection 3, paragraph b, Code 7 2011, is amended to read as follows: 8 b. The eligible property shall be placed in service within 9 thirty-six sixty months of the date on which the project 10 application was approved under this section . For purposes of 11 this section , “placed in service” has the same meaning as used 12 for purposes of section 47 of the Internal Revenue Code. The 13 department may provide by rule for the allowance of additional 14 time to complete a project. 15 Sec. 4. Section 404A.4, subsection 1, Code 2011, is amended 16 to read as follows: 17 1. Upon completion of the rehabilitation project, a 18 certification of completion must be obtained from the state 19 historic preservation office of the department of cultural 20 affairs. A completion certificate shall identify the person 21 claiming the tax credit under this chapter and the qualified 22 rehabilitation costs incurred up to the two years preceding the 23 completion date during the rehabilitation period . 24 Sec. 5. Section 404A.4, subsection 2, paragraph d, Code 25 2011, is amended to read as follows: 26 d. For the fiscal year beginning July 1, 2012, and for each 27 fiscal year thereafter, the department office shall reserve not 28 more than forty-five million dollars worth of tax credits for 29 any one taxable year. 30 Sec. 6. RETROACTIVE APPLICABILITY. This Act applies 31 retroactively to July 1, 2009, for projects approved and tax 32 credits reserved on or after that date. 33 EXPLANATION 34 This bill relates to the administration of the historic 35 -4- LSB 1335HV (2) 84 tw/sc 4/ 5

H.F. 685 preservation property rehabilitation tax credit program 1 administered by the department of cultural affairs. 2 The bill makes the following changes to the administration 3 of the program: 4 (1) Currently, property classified as residential or as 5 commercial with multifamily residential units may not exceed 6 $100,000 in rehabilitation costs used per residential unit. 7 The bill eliminates this requirement. 8 (2) Currently, the program uses a 24-month period for 9 purposes of determining the costs that qualify for purposes 10 of computing the amount of the tax credit. The bill provides 11 for a rehabilitation period commencing from the date the first 12 qualified rehabilitation cost is incurred and ending with the 13 end of the taxable year in which the property is placed in 14 service. 15 (3) Currently, all rehabilitation projects must be 16 completed and placed in service within 36 months of approval. 17 The bill allows projects up to 60 months in which to be 18 completed. 19 (4) A reference to the department of cultural affairs is 20 changed to the state historic preservation office. 21 The bill applies retroactively to July 1, 2009, for projects 22 approved and tax credits reserved on or after that date. 23 -5- LSB 1335HV (2) 84 tw/sc 5/ 5