(1) This rule sets forth guidelines and
procedures to be used by the department in the administration of the Historic
Rehabilitation Tax Credit of 2017, as codified in Article 2 of Chapter 9F of
Title 40, Code of Ala. 1975, which provides for a tax
credit under Chapter 18 of Title 40 to Alabama taxpayers for the rehabilitation
of certain historic and certain non-historic buildings in Alabama.
(2) The owner of a project that has been
issued a Tax Credit Certificate shall forward a copy of the Tax Credit
Certificate to the department within 30 days from the date of
issuance.
(3) Credits may only be
claimed by taxpayers holding a Tax Credit Certificate or a Transfer Tax Credit
Certificate. Tax credits granted or transferred to a pass-through entity shall
be claimed at the entity level. Tax credits granted or transferred to a single
member limited liability company or a Q-sub that is disregarded for Federal
Income Tax purposes shall be claimed by the owner of the disregarded entity.
Any non-profit entity allowed a tax credit shall file an Alabama Income Tax
Return for the tax year in which the reservation is allocated to a project, or
the certified rehabilitation is placed in service to claim the credit. The tax
credit shall not be claimed prior to the taxable year in which the certified
rehabilitation is placed in service.
(4) A taxpayer must apply the entire tax
credit against the Income Tax imposed by Chapter 18 for the taxable year in
which the reservation is allocated to a project or the certified rehabilitation
is placed in service. Where the taxes owed by the taxpayer are less than the
tax credit, the taxpayer shall be entitled to claim a refund for the
difference. The tax credit cannot be carried forward to any subsequent tax
year. The tax credit shall not be claimed prior to the taxable year in which
the certified rehabilitation is placed in service. In the event that any
additional credit is allocated to the taxpayer for a given project, the
additional credit must be claimed in the taxable year the additional credit is
allocated to the taxpayer.
(5) On
or after the date the Tax Credit Certificate is issued to the project, the
owner of the project may transfer all or part of their credit. Once a credit is
transferred, only the Transferee may utilize such credit and the credit cannot
be transferred. If the tax owned by the transferee is less than the tax credit,
the transferee is entitled to claim a refund for the difference.
(6) Any tax credit transferred shall be at
the value of at least eighty-five percent (85%) of the present value of the tax
credits. The present value shall be determined by discounting the face value of
the tax credit to account for the time value of money considering the time
between the date the tax credit is transferred and the due date of the
Transferee's Alabama Income Tax Return for the tax year the credit must be
claimed using a discount rate equal to the federal short-term rate plus three
(3) percentage points in effect as of the first of the month the tax credit is
transferred.
Example: Project Z is placed in service June 15, 2019. The
project owner transfers the credit to Transferee with a face value of $1,000 on
September 30, 2019, when the discount rate of interest equals four percent
(4%). The Transferee is a calendar year end filer with an Alabama Income Tax
Return due date of March 15, 2020. For purposes of applying the statutory 85%
of present value limitation, the present value of the tax credit is calculated
by multiplying the tax credit's face value by 1 divided by (1+6/12 of 4%) or
$1,000 x [1/1 + (6/12 x 4%)] or $1,000 x 1/1.02 or $1,000 x 98% which equals a
present value of $980. The $980 present value is then multiplied by 85% to
establish a minimum sale price for the tax credit of $833.33.
(7) Prior to the effectiveness of a transfer,
the Transferor shall file a Transfer Statement with the department along with a
copy of the draft or final Transfer Agreement(s), a copy of the Tax Credit
Certificate and a $1,000 fee for each Transferee listed on the Transfer
Statement. Unless previously filed, the Transferor shall also file a copy of
the executed Transfer Agreement with the department no later than 30 days after
the agreement has been executed. The department shall issue a Transfer Tax
Credit Certificate to each Transferee for the amount listed on the Transfer
Statement within 30 days after receipt of the executed Transfer Agreement. If
the amount of the Transferee's tax credit listed in the agreement is different
from the Transfer Statement originally filed with the department, the
Transferor shall submit an amended Transfer Statement with the executed
agreement.
(8) The aggregate amount
of the tax credit taken or utilized by the owner or Transferees cannot exceed
the amount of credit awarded on the related Tax Credit Certificate or Transfer
Tax Credit Certificate, as applicable.
Notes
Ala. Admin. Code
r. 810-3-137-.02
Amended by
Alabama
Administrative Monthly Volume XXXVI, Issue No. 09, June 29, 2018,
eff. 7/14/2018.
Amended by
Alabama
Administrative Monthly Volume XXXIX, Issue No. 02, November 30,
2020, eff. 1/14/2021.
Amended by
Alabama
Administrative Monthly Volume XXXIX, Issue No. 11, August 31,
2021, eff. 10/15/2021.
Amended by
Alabama
Administrative Monthly Volume XLII, Issue No. 04, January 31,
2024, eff. 3/16/2024.
Author: Kelly Graham, Preeti Gratz, Tawanna
Small
Statutory Authority:
Code of Ala.
1975, ยงยง
40-2A-7(a)(5) and
Title 40, Chapter 9F, Article 2.
