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E. Historic Rehabilitation Tax Credits (Article 3D of Chapter
105)
- General Information
- Tax Credited (G.S. 105-129.37(a))
The credits provided in this Article are allowed only against
income tax.
- Credit Limitations (G.S. 105-129.37(b))
A credit allowed may not exceed the amount of tax against
which it is claimed for the taxable year reduced by the sum
of all credits allowed, except payments of tax made by or
on behalf of the taxpayer.
A credit must be taken in five equal installments beginning
with the taxable year in which the property is placed in service.
Any unused portion of a credit may be carried forward for
the succeeding five years.
- Forms
Form CD-425 is used to report any tax credits claimed under
this article. This form must be filed for any taxable year
in which a credit or an installment of a credit against the
taxpayer's tax liability for that year is claimed.
- Credit for Rehabilitating Income-Producing Historic Structure
(G.S. 105-129.35)
- Credit
A taxpayer that is allowed a federal income tax credit under
Section 47 of the Code for making qualified rehabilitation
expenditures for a certified historic structure located in
North Carolina is allowed a State income tax credit equal
to twenty percent (20%) of the expenditures that qualify for
the federal credit
- Allocation (G.S. 105-129.35(b))
Notwithstanding the provisions of G.S. 105-131.8 and G.S.
105-269.15, a pass-through entity that qualifies for the credit
may allocate the credit among any of its owners at its discretion
as long as the amount of credit allocated does not exceed
the owner's adjusted basis in the pass-through entity, as
determined under the Code, at the end of the taxable year
in which the certified historic structure is placed in service.
Owners to whom a credit is allocated are allowed the credit
as if they had qualified for the credit directly. A pass-through
entity and its owners must include a statement of the allocation
made by the pass-through entity and the allocation that would
have been required under G.S. 105-131.8 or G.S. 105-269.15
with their tax returns for every taxable year in which an
allocated credit is claimed. A pass-through entity includes
a Subchapter S corporation, a limited liability company, a
limited partnership, a general partnership and a joint venture.
- Forfeiture for Disposition (G.S. 105-129.37(c))
A taxpayer who is required under section 50 of the Code to
recapture all or part of the federal credit for rehabilitating
an income-producing historic structure located in this State
forfeits the corresponding part of the State credit allowed
with respect to that historic structure. If the credit was
allocated among the owners of a pass-through entity, the forfeiture
applies to the owners in the same proportion that the credit
was allowed.
- Forfeiture for Change in Ownership (G.S. 105-129.37(d))
If an owner of a pass-through entity that has qualified for
the credit allowed disposes of all or a portion of the owner's
interest in the pass-through entity within five years from
the date the rehabilitated historic structure is placed in
service and the owner's interest is reduced to less than two-thirds
of the owner's interest in the pass-through entity at the
time the historic structure was place in service, the owner
forfeits a portion of the credit. The amount forfeited is
determined by multiplying the amount of credit by the percentage
reduction in ownership and then multiplying that product by
the forfeiture percentage. The forfeiture percentage equals
the recapture percentage found in the table in section 50(a)(1)(B)
of the Code. The remaining allowable credit is allocated equally
among the five years in which the credit is claimed.
- Exceptions to Forfeiture (G.S. 105-129.37(e))
Forfeiture for change in ownership is not required if the
change in ownership is the result of any of the following:
- The death of the owner.
- A merger, consolidation, or similar transaction requiring
approval by the shareholders, partners, or members of
the taxpayer under applicable State law, to the extent
the taxpayer does not receive cash or tangible property
in the merger, consolidation, or other similar transaction.
- Liability from Forfeiture (G.S. 105-129.37(f))
A taxpayer or an owner of a pass-through entity that forfeits
a credit under this section is liable for all past taxes avoided
as a result of the credit plus interest at the rate established
under G.S. 105-241.1(i), computed from the date the taxes
would have been due if the credit had not been allowed. The
past taxes and interest are due 30 days after the date the
credit is forfeited. A taxpayer or owner of a pass-through
entity that fails to pay the taxes and interest by the due
date is subject to penalties as provided in G.S. 105-236.
- Credit for Rehabilitating Non-income-Producing Historic Structure
(G.S. 105-129.36)
- Credit
A taxpayer that is not allowed a federal income tax credit
under Section 47 of the Code and who incurs rehabilitation
expenses for a non-income producing State-certified historic
structure is allowed a credit against North Carolina income
tax.
The amount of the credit is thirty percent (30%) of the rehabilitation
expenses taken in five equal installments beginning with the
taxable year in which the property is placed in service.
Rehabilitation expenses do not include the cost of acquiring
the property, site work, personal property or cost attributable
to the enlargement of the existing property.
- Eligibility
To qualify for the credit, the taxpayer's rehabilitation expenses
must exceed twenty-five thousand dollars ($25,000) within
a 24-month period.
- Substantiation
To claim the credit, a taxpayer must attach to the return
a copy of the certification issued by the State Historic Preservation
Officer.
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