The Preservation of Historic Structures Tax Credit

The Preservation of Commercial Historic Structures Program (otherwise known as HPTC or the Historic Preservation Tax Credit) was originally passed in the 2013 legislative session and was titled the “Colorado Job Creation and Main Street Revitalization Act”. This legislation authorized a Colorado State income tax credit to encourage the rehabilitation of historic commercial structures and to support economic revitalization as authorized under C.R.S. 39-22-514.5. The statutes were revised during the 2018 legislative session extending the program – a set amount of tax credits is made available each calendar year to reserve funds for qualified rehabilitation projects on a first-come-first-served basis; reservations for this tax credit must be made prior to 12/31/2029.

This incentive program is jointly administered by OEDIT and History Colorado, and rehabilitation requirements conform to the The Secretary of the Interior’s Standards for Rehabilitation.  In addition to this Colorado income tax credit referred to as the “2014 Credit”, an additional commercial building tax credit referred to as the “1990 Credit”  and the residential historic preservation tax credit as authorized by C.R.S. 29-22-514 are administered by History Colorado. Taxpayers claiming any of these tax credits should make sure to identify the appropriate tax credit on their Colorado State Income Tax Return; on the 2018 Individual Credit Schedule claim the HPTC on Lines 33 and 34 (see Colorado Department of Revenue Instructions & Forms). Taxpayers may not claim both the 1990 and 2014 tax credits for the same historic rehabilitation project.

 

Available HPTC Funding 

Program Guide for detailed information (Currently Under Review)

To apply for State of Colorado Commercial HPTC Program visit the OEDIT Application Portal.  The online application system is only compatible with certain web browsers: Google ChromeMozilla FirefoxSafari and Internet Explorer 10

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).
  • Review and Approval by History Colorado on completed rehabilitation.
  • Approved tax credit certificate will be delivered via email as a PDF from OEDIT’s application system.

 

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

  • The taxpayer should recognize the HPTC tax credit in the tax year that the property was placed in service, even if the credit was issued in a following year.
  • Tax credits offset tax liability, and may be carried forward for up to ten years. Any or all unused portions of the credit can be sold or transferred to third parties, and may be claimed in the tax year that the transfer occurred.
  • After 10 years, any unused and unsold credits will expire.
  • The HPTC credit is not refundable.