The Preservation of Historic Structures Tax Credit

C.R.S. 39-22-514.5

The Preservation of Historic Structures Program (HPTC), jointly administered by OEDIT and History Colorado, issues State of Colorado income tax credits to eligible property owners and qualified tenants of commercial, income producing, and non-owner-occupied historic properties in Colorado that commence a qualified rehabilitation. Please visit History Colorado for more information regarding the Residential Tax Credit Program.

 

Step 1: Review Overall Program Requirements and Tax Credit Funding 

  • Applicants must commence a rehabilitation on a property that is at least 50 years old in accordance to the Standards for Rehabilitation of the US Secretary of the Interior.
  • Applicants that fail to complete the rehabilitation or do not receive approval from History Colorado are subject to denial.
  • Qualified Rehabilitation Expenditures (QREs) must exceed 25% percent of the owner’s original purchase price less the current value attributed to land.
  • Starting 1/1/2020, a flat rate expenditure of $20,000 in QREs will be required to qualify.
  • Applicants may submit for multiple properties, but there is a limit of $1 million per year on any given property.
  • Applicants must submit an Application fee to reserve tax credits and an Issuance fee that cannot be deducted from the tax credits.
  • Applicants may estimate QREs but the tax credit amount is based on Certified QRE’s approved by a CPA that is not affiliated with the owner or qualified tenant.
  • If Certified QREs exceed the amount reserved the office will issue an overage for the difference subject to annual limits and property limits up to the $1,000,000 allowable per property per year.
  • If the Certified QREs are less than the amount reserved, the tax credit issued will be calculated on the actual amount as long as funding is available.
  • The annual tax credit cap is $10 million that is divided into two funding categories:
    • A project with QREs of $2 million or over is a Large Rehabilitation.
    • A project with QREs of less than $2 million is a Small Rehabilitation.
      • In a regular area, the tax credit amount is 25% of the first $2,000,000 in QREs plus 20% of any additional QREs
      • In a disaster area, the tax credit amount is 30% of the first $2,000,000 in QREs plus 25% of any additional QREs
      • Starting 1/1/2020, in rural areas, the tax credit amount is 35% of the first $2,000,000 in QREs plus 30% of any additional QREs
      • See example for calculation of tax credits in a Regular Area:
        • If QREs are $2,000,000 then the tax credit is $5,000,000.00 {.25($2M) = $500,000}
        • If QREs are $3,000,000 then the tax credit is $700,000.00 {.25($2M) + .20($1M) = $700,000}
      • See example for calculation of tax credits in a Disaster Area:
        • If QREs are $2,000,000 then the tax credit is $600,000.00 {.30($2M) = $600,000}
        • If QREs are $3,000,000 then the tax credit is $850,000.00 {.30($2M) + .25($1M) =$850,000}
      • See example for calculation of tax credits in a Rural Area: (applicable 1/1/2020)
        • If QREs are $2,000,000 then the tax credit is $700,000.00{.35($2M) = $700,000}
        • If QREs are $3,000,000 then the tax credit is $1,000,000.00{.35($2M) + .30($1M) =$1,000,000)

 

Step 2: Submit the Qualifying Questionnaire

  • Go to the “OEDIT FUNDING & INCENTIVES APPLICATION PORTAL.”
  • Click on “The Preservation of Historic Structures Tax Credit Program” tile.
  • Locate the “APPLY FOR FUNDING OPPORTUNITIES” tile.
  • Apply for “The Preservation of Historic Structures Tax Credit Qualification FY19.”
  • Successful questionnaires will automatically prompt access to the full application when the page is refreshed.

 

Step 3: Apply for the Reservation of Tax Credits

  • Go to “Edit/View My Applications”
  • Fill out and submit the “HPTC Full Application.”
  • Required Attachments:
    • (1) Proof of Property Control
      • Title
      • Prospective Title (Purchase Agreement or Option to Purchase)
      • A leasehold agreement of at least 5 years in rural areas and 39 years in non-rural and metropolitan areas
    • (2) Appraisal or Assessment from Purchase
    • (3) Construction Work Plan
    • (4) Photographs of the Property Before Rehabilitation
    • (5) Construction Drawings
  • Application Fee:
    • $250 for reservations of tax credits at or under $250,000
    • $500 for reservations of tax credits over $250,000
  • 18 Month Report: rehabilitation must expend at least 20% of estimated QREs within 18 months from the date of reservation.
  • 24 Month Report: on going progress
  • 36 Month Report: on going progress
  • 48 Month Report: on going progress

 

Step 4: Apply for the Issuance of Reserved Tax Credits

  • Must submit the Issuance Request within 1 year from when the property is placed in service or when the certificate of occupancy or completion is issued.
  • Go to “Edit/View My Applications” and locate the reserved “HPTC Full Application.”
  • Click on the “orange” icon to access the “Issuance Request.”
  • Required Attachments:
    • (1) Pictures After Rehabilitation
    • (2) Property Owner Letter
    • (3) Accountants Audit Letter (a CPA non-affiliated with the property owner, tenant, non-profit, and/or business entity)
    • (4) CPA Audited Cost Certification
    • (5) A Certificate of Occupancy, or a Certificate of Competition, or a Placed in Service date approved by History Colorado (with or without a Certified Local Government) or the National Park Services
  • Issuance Fee (3% of the approved tax credit amount).
  • Approval from History Colorado on finalized rehabilitation.
  • Approved tax credits will be delivered via email as a PDF.

 

Step 5: Claim, Use, and Transfer of Tax Credits

  • The property owner may use tax credits against income taxes in the file period when the property was placed in service even if it is issued in a following year.
  • Tax credits may be carried forward for up to ten years and any or all unused portions of the credit can be sold or transferred to third parties, and will be usable in the file period when the transfer occurred.
  • After 10 years, any unused and unsold credits will expire and cannot be refunded.

 

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Wael Khalifa Program Analyst wael.khalifa@state.co.us