A business which qualifies under the workforce housing tax
incentives program is eligible to receive tax incentives for individual income
tax. The workforce housing tax incentives program replaced the eligible housing
business enterprise zone program. An eligible business under the workforce
housing tax incentives program must be approved by the economic development
authority. The administrative rules for the workforce housing tax incentives
program for the economic development authority may be found at 261-Chapter 48.
The general assembly has mandated that the economic development authority and
the department of revenue adopt rules to jointly administer Iowa Code sections
15.351 to
15.356. In general, the economic
development authority is responsible for evaluating whether projects meet the
requirements for a workforce housing tax incentives program while the
department of revenue administers tax credit claims and transfers.
(1)
Definitions.
"Costs directly related" means the same as
defined in rule 261-48.3 (15).
"Qualifying new investment" means the same
as defined in rule 261-48.3 (15).
(2)
Workforce housing tax
incentives. The economic development authority will allocate no more
than $20 million in tax incentives for this program for any fiscal year, $5
million of which shall be reserved for allocation to qualified housing projects
in small cities, as defined in Iowa Code section
15.352(10),
that are registered on or after July 1, 2017. A housing business that has
entered into an agreement with the economic development authority is eligible
to receive the tax incentives described in the following paragraphs:
a.
Sales tax refund. A
housing business may claim a refund of the sales and use tax described in rule
701-278.1 (15).
b.
Investment tax credit.
(1) Computation of the credit. A housing
business may claim a tax credit in an amount not to exceed 10 percent of the
qualifying new investment in a housing project not located in a small city, or
20 percent of the qualifying new investment in a housing project located in a
small city.
(2) Allocation of the
tax credit to the individual owners of the entity or beneficiaries of an estate
or trust. An individual may claim a tax credit if the housing business is a
partnership, limited liability company, S corporation, estate, or trust
electing to have income taxed directly to the individual. The amount claimed by
the individual shall be based upon the pro rata share of the individual's
earnings from the partnership, limited liability company, S corporation,
estate, or trust.
(3)
Refundability. Any tax credit in excess of the taxpayer's liability for the tax
year is not refundable.
(4)
Carryforward. Any tax credit in excess of the taxpayer's liability may be
credited to the tax liability for the following five years or until depleted,
whichever is earlier.
(3)
Claiming the tax
credit-information required. The taxpayer must receive a tax credit
certificate from the economic development authority to claim the eligible
housing business tax credit. The tax credit certificate shall include the
taxpayer's name, the taxpayer's address, the taxpayer's tax identification
number, the date the project was completed, the amount of the eligible housing
business tax credit and the tax year for which the credit may be claimed. In
addition, the tax credit certificate shall include a place for the name and tax
identification number of a transferee and the amount of the tax credit being
transferred, as provided in subrule 304.53(5). The tax credit certificate must
be included with the income tax return for the tax period in which the housing
is ready for occupancy.
(4)
Basis adjustment. The increase in the basis of the property
that would otherwise result from the qualifying new investment shall be reduced
by the amount of the investment tax credit. For example, if a new housing
project had qualifying new investment of $1 million which resulted in a
$100,000 investment tax credit for Iowa tax purposes, the basis of the property
for Iowa income tax purposes would be $900,000.
(5)
Transfer of the credit.
a.
Submission of transferred tax
credit certificate to the department-information required. Tax credit
certificates issued under an agreement entered into pursuant to subrule
304.53(3) may be transferred to any person. Within 90 days of transfer, the
transferee shall submit the transferred tax credit certificate to the
department of revenue along with a statement containing the transferee's name,
tax identification number, and address, the denomination that each replacement
tax credit certificate is to carry, and any other information required by the
department of revenue. However, tax credit certificate amounts of less than the
minimum amount established in rule by the economic development authority shall
not be transferable.
b.
Issuance of replacement certificate by the department. Within
30 days of receiving the transferred tax credit certificate and the
transferee's statement, the department of revenue shall issue one or more
replacement tax credit certificates to the transferee. Each replacement tax
credit certificate must contain the information required for the original tax
credit certificate and must have the same expiration date that appeared on the
transferred tax credit certificate.
c.
Claiming the transferred tax
credit. A tax credit shall not be claimed by a transferee under this
rule until a replacement tax credit certificate identifying the transferee as
the proper holder has been issued. The transferee may use the amount of the tax
credit transferred for any tax year the original transferor could have claimed
the tax credit. Any consideration received for the transfer of the tax credit
shall not be included in Iowa taxable income for individual income, corporation
income or franchise tax purposes. Any consideration paid for the transfer of
the tax credit shall not be deducted from Iowa taxable income for individual
income, corporation income, or franchise tax purposes.
d.
Unlimited number of transferees
and subsequent transfers. There is no limitation on the number of
transferees to whom the credit may be transferred. There is no limitation on
the number of times that the credit may be retransferred by a transferee. The
transferor may divide the credit into multiple credits of alternate
denominations so long as the resulting credits are for amounts of no less than
the minimum amount established in rule by the economic development
authority.
e.
Carryforward
limitations on transferees. The transferee may use the amount of the
transferred tax credit for any tax year that the original transferor could have
claimed the tax credit. The carryforward limitations described in subparagraph
304.53(2)"b"(4) shall apply.
(6)
Repayment of benefits.
If the housing business fails to maintain the requirements of Iowa Code section
15.353, the taxpayer may be
required to repay all or a portion of the tax incentives the taxpayer received.
Irrespective of the fact that the statute of limitations to assess the taxpayer
for repayment of the income tax credit may have expired, the department may
proceed to collect the tax incentives forfeited by failure of the taxpayer to
maintain the requirements of Iowa Code section
15.353. This repayment is
required because it is a recovery of an incentive, rather than an adjustment to
the taxpayer's tax liability. Details on the calculation of the repayment can
be found in 261-subrule 187.5(4) of the administrative rules of the economic
development authority. If the business is a partnership, limited liability
company, S corporation, estate or trust where the income of the taxpayer is
taxed to the individual owner(s) of the business, the department may proceed to
collect the tax incentives against the partners, members, shareholders or
beneficiaries to whom the tax incentives were passed through. See Decision of
the Administrative Law Judge in Damien & Colette Trebilcock, et
al., Docket No. 11D ORF 042-044, June 11, 2012.
This rule is intended to implement Iowa Code sections
15.354 and
15.355.
