Division of Historical and Cultural Affairs
Statutory Authority: 30 Delaware Code,Section 1815(b), (30 Del.C. 1815(b))
Historic Preservation Tax Credit, Reg. Governing
1. Title:
Regulations Governing the Historic Preservation Tax Credit.
2. Brief Synopsis:
Chapter 18 Subchapter II of Title 30 was enacted by the General Assembly in 2001. It contained the Historic Preservation Tax Credit Act. This Act is designed to promote community revitalization and redevelopment through the rehabilitation of historic property by providing tax credits for expenditures made to rehabilitate any certified history property. The proposed regulations will provide requirements that will govern certification of historic rehabilitation projects under application for this tax credit.
3. Statutory Basis or Legal Authority to Act:
Title 30 Delaware Code Chapter 18 Subchapter II Section 1815(b)
4. Other Regulations that may be Affected by the Proposal:
The Office of the State Banking Commissioner and the Division of Revenue will adopt regulations or issue guidelines for tax elements of the Historic Preservation Tax Credit Act.
5. Notice of Public Comment:
PLEASE TAKE NOTICE, pursuant to 29 Del.C. Chapter 101, the Division of Historical and Cultural Affairs proposes to adopt rules and regulations pursuant to its authority under 30 Del.C. §1815(b). The Division will receive and consider input from any person in writing on the proposed Rules and Regulations. Any written comments should be submitted to the Division in care of Daniel R. Griffith, Director, Division of Historical and Cultural Affairs, Blue Hen Corporate Center, 655 S. Bay Road, Suite 5A, Dover, DE 19901. The final date to submit written comments is August 31, 2001. Anyone wishing to obtain a copy of the proposed Rules and Regulations should notify Daniel R. Griffith at the above address or call 302-739-5313. This notice will be published in two newspapers of general circulation.
6. Prepared by:
Daniel R. Griffith, Director, 302-739-5313, July 13, 2001
Proposed Regulations Governing the Historic Preservation Tax Credit Act
1.0 Scope
A person or business entity that owns and rehabilitates a certified historic property may receive a credit against personal Delaware State income tax or bank franchise tax liabilities according to procedures and criteria established in these regulations.
2.0 Statutory Authority
These regulations are created pursuant to Chapter 18, Subchapter II of Title 30 Delaware Code which authorizes the Division of Historical and Cultural Affairs to promulgate regulations for implementation of the provisions of this subchapter (except tax-related procedures) including, but not limited to, setting of fees and development of standards for the rehabilitation of eligible historic properties. The subchapter further authorizes the Division of Historical and Cultural Affairs to promulgate the application and forms governing participation in the certification program.
3.0 Definitions
3.1 “Act” means Chapter 18, Subchapter II of Title 30 Delaware Code.
3.2 “Affordable Housing” or "Low income housing” shall mean a housing development that must either:
3.2.1 set aside a minimum of 20% of the units to be occupied by households with incomes at or below 50% of median gross income (as defined by the U. S. Department of Housing and Urban Development), adjusted for family size, for each county OR
3.2.2set aside a minimum of 40% of the units to be occupied by households with incomes at or below 60% of median gross income (as defined by the U. S. Department of Housing and Urban Development).
3.3 “Certified historic property” shall mean a property located within the State of Delaware that is:
3.3.1 individually listed in the National Register of Historic Places; or
3.3.2 located in a historic district listed in the National Register of Historic Places, and certified by the United States Secretary of the Interior as contributing to the historic significance of that district; or
3.3.3 individually designated as a historic property by local ordinance and certified by the Delaware State Historic Preservation Office as meeting the criteria for inclusion in the National Register of Historic Places; or
3.3.4 located in a historic district set apart or registered by a local government, certified by the Delaware State Historic Preservation Office as contributing to the historic significance of such area, and certified by the Delaware State Historic Preservation Office as meeting the criteria for inclusion in the National Register.
3.4 “Certified rehabilitation” shall mean that rehabilitation of a certified historic structure that has been certified by the Delaware State Historic Preservation Officer as a substantial rehabilitation, and is in conformance with the Standards of the Secretary of the Interior for Rehabilitation (36 CRF, part 67) or such other standards as the Delaware State Historic Preservation Office shall from time to time adopt.
3.5 "Certification of Completion", "Completion Certificate" or "Certificate" shall mean the certificate issued by the Delaware State Historic Preservation Officer attesting that certified rehabilitation has been completed and that the documentation of qualified expenditures and project plans that would be required in order to qualify for tax credits under Section 47 of the Internal Revenue Code (whether or not such project would be eligible for such federal tax credit) has been obtained.
3.6 “Delaware State Historic Preservation Officer” shall mean the person designated and appointed in accordance with 16 USC Sec. 470a(b)(1)(a), as amended.
3.7 “Federal tax credit” shall mean the Federal Rehabilitation Tax Credit as defined in the United States Tax Code, Title 26, Subtitle A, Chapter 1, Subchapter A, Part IV, Subpart E, Section 47.
3.8 "Lending institution" shall mean any bank, trust company, savings and loan association, building and loan association or licensed lender, which is taxable under Title 5 or taxable under Chapter 19 of Title 30.
3.9 “National Register of Historic Places” shall mean the National Register of districts, sites, buildings, structures, and objects significant in American history, architecture, archaeology, engineering, and culture that the United States Secretary of the Interior is authorized to expand and maintain pursuant to Section 101(a)(1) of the National Historic Preservation Act of 1966, as amended.
3.10 "Office" or "State Office" shall mean the Delaware State Historic Preservation Office.
3.11 "Owner-occupied historic property" shall mean any certified historic property, or any portion thereof, which is owned by a taxpayer and is being used, or within a reasonable period will be used, by such taxpayer as the taxpayer's principal residence. “Reasonable period” shall mean within six months of the issuance of the Certification of Completion. The State Office, in its sole discretion, may offer one extension, not to exceed three months, for cause. Such property may consist of part of a multiple dwelling or multiple purpose building or series of buildings, including a cooperative or condominium. If only a portion of a building is used as the principal residence, only those qualified expenditures that are properly allocable to such portion shall be eligible under this subchapter.
3.12 "Person" shall include any individual; any form of company or corporation which is lawful within the State of Delaware (including limited liability companies and S corporations), whether or not for profit; any form of partnership which is lawful within the State of Delaware (including limited liability partnerships), whether or not for profit; any trust or estate, and any lawful joint venture. "Person" shall also include any governmental entity, pass-through entity, or person under a lease contract for five years or longer.
3.13 "Property" shall mean real estate, and shall include any building or structure, including multiple-unit structures.
3.14 “Qualified expenditure” shall mean any amount properly expended by a person for the certified rehabilitation of a certified historic property, but shall not include:
3.14.1 acquisition of real property, or acquiring an interest in real property;
3.14.2 any addition to an existing structure, except where the combined square footage of all additions is twenty percent or less than the total square footage of the historic portion of the property; and each such addition is approved by the Delaware State Historic Preservation Officer, pursuant to federal guidelines, as:
3.14.2.1 preserving the character-defining features of the certified historic property,
3.14.2.2 adequately differentiating the new construction from the existing structure, and
3.14.2.3 complying with requirements regarding safety and accessibility in a manner reasonably designed to minimize any adverse impact on the certified historic property;
3.14.3 paving or landscaping costs which exceed ten percent (10%) of the total qualified expenditures;
3.14.4 sales and marketing costs; and
3.14.5 expenditures not properly charged to a capital account, including, in the case of owner occupied property, expenditures that would not properly be charged to a capital account where the owner using such property is a trade or business.
3.15 "Residential property" shall include cooperatives and condominiums.
3.16 “Substantial rehabilitation” shall mean rehabilitation of a certified historic property for which the qualified expenditures, during the twenty-four month period selected by the taxpayer and ending with or within the taxable year, exceed:
3.16.1 for income-producing property, and non-income producing property other than owner-occupied historic property, the current standard required by Section 47(c)(I)(C) of the Internal Revenue Code; and
3.16.2 for owner-occupied historic property, five thousand dollars ($5,000).
3.17 “Taxpayer” shall include any 'person' as defined in this section, and shall include any individual or corporation taxable under Title 5, or taxable under either Chapter 11 or Chapter 19 of Title 30.
4.0 Procedures for Certification of Historic Structures
4.1 A taxpayer may request that a property be certified by the Delaware State Historic Preservation Officer as a significant historic resource by filing an application for certification with the Delaware State Historic Preservation Office. An application shall be filed on standard forms available from the Delaware State Historic Preservation Office. The request for certification as a significant historic resource shall be known as Part 1 of the Delaware Historic Preservation Tax Credit Application. An incomplete application may not be processed until all required application information has been received. The State Historic Preservation Office will notify the taxpayer of the additional information needed to undertake or complete the review.
4.2 The Delaware State Historic Preservation Officer shall determine whether the property for which a complete application is received meets the definition of certified historic property. If the property meets this definition, the Delaware State Historic Preservation Officer shall approve the application. If the property does not meet the definition, the Delaware State Historic Preservation Officer shall disapprove the application.
4.3 The Delaware State Historic Preservation Officer shall send the taxpayer notice that the application has been approved or disapproved.
4.4 The State Office shall certify whether a property located in a historic district or individually designated by local ordinance meets the criteria for inclusion in the National Register.
5.0 Procedures for Certification of Rehabilitation
5.1 A taxpayer may request a determination by the Delaware State Historic Preservation Officer that a proposed substantial rehabilitation plan meets the criteria for certification by filing an application with the Delaware State Historic Preservation Office. An application shall be filed on standard forms available from the Delaware State Historic Preservation Office. The criteria to be used for certification will be the United States Secretary of Interior’s Standards for Rehabilitation. The request for certification of rehabilitation shall be known as Part 2 of the Delaware Historic Preservation Tax Credit application.
5.2 Applications submitted to the Delaware State Historic Preservation Office must be delivered by means of a postal delivery service that provides a stamp or receipt with date and time of mailing.
5.3 A taxpayer is encouraged to submit Part 1 of the "Historic Preservation Certification Application" prior to, or with, Part 2. Part 2 of the application will not be processed until an adequately documented and approved Part 1 is on file.
5.4 An incomplete application will not be processed until all required application information has been received. Where adequate documentation is not provided, the State Historic Preservation Office will notify the taxpayer of the additional information needed to undertake or complete review.
5.5 The Delaware State Historic Preservation Officer shall determine whether the proposed substantial rehabilitation for which a complete application is received under Section 5.1 of this regulation meets the Standards for Rehabilitation and shall send the applicant notice of the determination and of the credit award. The State Office may require modifications to the plan in conformance with the Secretary of Interior’s Standards for Rehabilitation.
5.6 The approval by the State Office of the proposed rehabilitation plan shall be known as a Part 2 approval and the amount of tax credit as defined in Section 9.0 of these regulations applied against the qualified expenditures in accordance with Section 1813 of Title 30 Delaware Code shall represent the "credit award." A taxpayer is required to have submitted the Part 2 application and received the Part 2 approval prior to undertaking any rehabilitation work for which a taxpayer is seeking credit.
5.7 In requesting Certification of Rehabilitation (Part 2) for a rehabilitation plan in excess of $1,000,000 in cost, a taxpayer must provide cost estimates of qualified expenditures for the proposed rehabilitation prepared by an independent qualified estimator. This information will be used to determine the credit award for approved Part 2 applications. The credit award for projects under $1,000,000 in rehabilitation cost is based on the applicant’s estimate provided in the Part 2 application.
5.8 Credits will be awarded in chronological order based upon the date and time on which each application receives Part 2 approval from the State Office.
5.9 All applicants must begin construction on the approved Part 2 plan within one year of receiving the Part 2 approval. Applicants, having received Part 2 approval, must notify the State Office in writing of the start date of the rehabilitation work. If construction on the rehabilitation plan is not substantially commenced and diligently pursued within this time period, the applicant will forfeit the awarded credits, and the credits awarded to such applicant will become available for award to other applicants. Substantially commenced and diligently pursued means that twenty-five percent (25%) of the estimated rehabilitation costs must have been expended. The State Office reserves the right to obtain documentation from the applicant supporting the expenditure.
5.10 The ongoing project may be inspected by the Delaware State Historic Preservation Officer or his/her designated representative to determine if the work meets the “Standards for Rehabilitation.”
6.0 Procedures for certification of Completion
6.1 Upon completion of a certified rehabilitation, the taxpayer must submit a Part 3 application (Request for Certification of Completed Work), with required documentation, to the Delaware State Historic Preservation Office. The completed project may be inspected by the Delaware State Historic Preservation Officer or his/her designated representative to determine if the work meets the "Standards for Rehabilitation."
6.2 Upon approval by the State Office that the completed rehabilitation meets the definition of a certified rehabilitation, the State Office shall submit the documentation to the Director of the Division of Revenue or the Office of the State Banking Commissioner and request a determination of the value of the tax credit.
6.3 Upon receipt of the certification of the value of the tax credit associated with the Certificate of Completion by the Director of the Division of Revenue or the Office of the State Banking Commissioner, the Delaware State Historic Preservation Officer shall issue a Certificate of Completion to the applicant.
6.4 In the alternative to 6.2 and 6.3 of the section, the Delaware State Historic Preservation Officer may certify such rehabilitation and issue a Certificate of Completion to any applicant who has obtained a Part I and Part II certification from the federal government issued pursuant to 36 CFR part 67, where applicable. The taxpayer will still need to file a State of Delaware Part 3 application (Request for Certification of Completed Work) and submit applicable fees for review.
7.0 Fees for Processing Rehabilitation Certification Request
7.1 The fee for review of rehabilitation work for projects where the qualified expenditures are over $100,000 is $250 for each separate application. The fee from a single applicant for multiple projects shall not exceed $2,500. Final action will not be taken on any application until the appropriate remittance is received. No fee will be charged for rehabilitation projects where the qualified expenditures are under $100,000.
7.2 The fee must be submitted with the Part 3 application (Request for Certification of Completed Work). All checks shall be made payable to the State of Delaware.
8.0 Administrative Review
8.1 An applicant whose application has been disapproved by the Delaware State Historic Preservation Officer under these regulations may file a written request for review with the Secretary of State or the Secretary’s designee within 60 days after the notice of disapproval is sent.
8.2 The Secretary of State or the Secretary’s designee shall review the request within 60 days after receipt of the request. If the Secretary of State or the Secretary’s designee determines that the application filed meets the standards set forth in that regulation the application shall be considered approved. If the Secretary of State or Secretary’s designee determines that the application filed does not meet the standards set forth in that regulation, the application shall be disapproved. The Secretary of State or Secretary’s designee shall promptly notify the applicant of the Secretary’s determination.
8.3 An applicant whose application has been disapproved by the Secretary of State may appeal that action in accordance with the Administrative Procedures Act, 29 Delaware Code Section 10101 et seq.
8.4 An appellant who has exhausted all administrative remedies shall be entitled to judicial review in accordance with Subchapter V of the Administrative Procedures Act.
9.0 Claiming a credit
9.1 Once Parts 1, 2, and 3 have been reviewed and approved by the Delaware State Historic Preservation Office as a certified rehabilitation and all required fees have been received, the Delaware State Historic Preservation Officer will send a "Certificate of Completion" to the taxpayer.
9.2 To claim the State tax credit, a taxpayer, assignee, purchaser, or transferee of the credit shall attach the Certificate of Completion to the Delaware tax return against which the credit is claimed and submit such tax return to the Division of Revenue or to the Office of the State Bank Commissioner with respect to Title 30 income taxes and Title 5 franchise taxes, respectively. No such claim for State tax credit shall be made prior to the one-year anniversary of receipt of the Part 2 approval from the State Office.
9.3 The historic preservation tax credit is effective for Part 2 approvals granted by the Delaware State Historic Preservation Officer for state fiscal years beginning on or after July 1, 2000 but before June 30, 2010.
9.4 The historic preservation tax credit is effective for first claim applications made pursuant to the Act for state fiscal years beginning on or after July 1, 2002.
9.5 A taxpayer must begin taking the credit for the year such taxpayer receives the Certificate of Completion from the Delaware State Historic Preservation Office.
10.0 Amount of credit allowed
10.1 The historic preservation tax credit for those taxpayers that are allowed to claim the Federal Rehabilitation Investment Tax Credit is twenty percent of qualified expenditures.
10.2 The historic preservation tax credit for those taxpayers that are not eligible for the Federal Rehabilitation Investment Tax Credit is thirty percent of the qualified expenditures.
10.3 The historic preservation tax credit for those taxpayers that are eligible for the Federal Rehabilitation Investment Tax Credit is thirty percent of the qualified expenditures when such property is to be committed to affordable housing.
10.4 The historic preservation tax credit for those taxpayers that are not eligible for the Federal Rehabilitation Investment Tax Credit is forty percent of the qualified expenditures when such property is to be committed to affordable housing.
10.5 No single certified rehabilitation of owner-occupied historic property may receive a tax credit in excess of $20,000.
10.6 The maximum amount of credit awards under the historic preservation tax credit program shall not exceed $3,000,000 in any state fiscal year. If a credit award would result in an exceedence of the $3,000,000 limitation for the state fiscal year in which it is awarded, the amount by which such credit award exceeds $3,000,000 shall carry over to the succeeding state fiscal year and shall receive priority for that year.