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Delaware General AssemblyDelaware RegulationsMonthly Register of RegulationsAugust 2018


Regulatory Flexibility Act Form

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The Historic Preservation Tax Credit Act (30 Del.C. Ch. 18, Subch. II) was first enacted by the General Assembly in 2001 and was amended in 2002, 2003, 2004, 2005, 2010 and 2014. Program regulations were adopted on July 11, 2002 (6 DE Reg. 108 published 07/01/02), and were amended on July 11, 2004 (8 DE Reg. 194 published 07/01/04), on January 11, 2005 (8 DE Reg. 1031 published 01/01/05), on October 11, 2010 (14 DE Reg. 485, published 11/01/2010) and on September 11, 2014 (18 DE Reg. 237 published 09/01/14). The purpose of these proposed regulatory amendments is to specify under what circumstances a Credit Award would be withdrawn, to establish a time frame during which rehabilitation work may qualify for a Credit Award, and to amend the fee schedule. Clarifications and technical corrections are also made throughout the regulation.
30 Del.C. Ch.18, Subch. II, §1815(b)
PLEASE TAKE NOTICE, pursuant to 29 Del.C. Ch. 101, the Division of Historical and Cultural Affairs proposes to amend rules and regulations pursuant to its authority under 30 Del.C. §1815(b). The Division will receive and consider all written comments on the proposed rules and regulations related to implementation of amendments to the Historic Preservation Tax Credit Act. Submit comments to the Division in care of Timothy A. Slavin, Director, Division of Historical and Cultural Affairs, 21 The Green, Dover, DE 19901. The final date to submit comments is September 4, 2018. Anyone wishing to obtain a copy of the proposed amendments to the rules and regulations should notify Timothy A. Slavin at the above address or call 302-736-7400. This notice will be published in two newspapers of general circulation.
These regulations are created pursuant to 30 Del.C. Ch. 18, Subch. II, 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.
Act” means the 30 Del.C. Ch. 18, Subch. II.
Application” means the Delaware Historic Preservation Tax Credit application that shall consist of four parts, as follows: the Request for Certification of Historic Property (Part 1); the Request for Certification of Rehabilitation (Part 2); the Request for Certificate of Completion (Part 3), and the Request for Credit Award.
Building” means created principally to shelter any form of human activity.
"Certification of Completion", or "Certificate of Completion" means the certificate issued by the Delaware State Historic Preservation Officer attesting that the certified rehabilitation, or, if applicable, a phase of the certified rehabilitation project, 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 (26 USC 47) (whether or not the project would be eligible for the federal tax credit) has been obtained.
Certified historic property” means a property located within the State of Delaware that is:
Certified rehabilitation” means rehabilitation of a certified historic property, or portion of the property, that has been certified by the Delaware State Historic Preservation Officer as a substantial rehabilitation, and is in conformance with the Secretary of the Interior’s Standards for Rehabilitation (36 CRF CFR 67) or other standards as the State Office shall from time to time adopt.
Credit award” means the amount of qualified expenditures as determined by the State Office as part of the Part 2 approval multiplied by the appropriate percentage as determined in 30 Del.C. §1813.
Delaware State Historic Preservation Officer” means the person designated and appointed in accordance with the National Historic Preservation Act of 1966, as amended (16 USC §470a(b)(1)(A) 54 USC §302301(1)). The Delaware State Historic Preservation Officer is an appointed position held by the Director, Division of Historical and Cultural Affairs.
Downtown Development District” or “DDD” means an area within a municipality or unincorporated area designated by the governor as a Downtown Development District under 79 Del. Laws c. 240.
Federal tax credit” means 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 (26 USC 47).
Fiscal Year” means the State of Delaware’s fiscal year.
National Register of Historic Places” or “National Register” means 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) 302101 of the National Historic Preservation Act of 1966, as amended (16 USC §470(a)(1)(A) 54 USC §300101 et seq.).
"Office" or "State Office" means the Delaware State Historic Preservation Office, which is a part of the Division of Historical and Cultural Affairs.
"Owner-occupied historic property" means a certified historic property, or portion of the property, which is owned by the applicant and is being used, or within a reasonable period will be used, by an applicant as the applicant’s principal residence. The 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 that portion shall be eligible under this subchapter to apply for tax credits calculated at the percentage available to owner-occupants.
"Person" or applicant means an 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" or “applicant” shall also mean a non-state governmental entity; or a pass-through entity or person under a lease contract for five years or longer.
Phased rehabilitation” means a certified rehabilitation of a certified historic property reasonably expected to be completed in two or more distinct stages of development as more fully described in Treasury Regulation 1-48-12(b)(v) or a successor provision.
"Property" means real estate and shall include any building which meets the definition in this section, including multiple-unit buildings.
Qualified expenditure” means an amount properly expended by a person for the certified rehabilitation of a certified historic property, but shall not include:
additions to an existing structure except where the combined square footage of all additions is 20% or less than the total square footage of the historic portion of the property and each addition is approved by the Delaware State Historic Preservation Officer, pursuant to federal guidelines, as: preserving the character-defining features of the certified historic property, adequately differentiating the new construction from the existing structure, and complying with requirements regarding safety and accessibility in a manner reasonably designed to minimize any adverse impact on the certified historic property;
Reasonable period” means that an owner shall occupy the rehabilitated property as their principal residence within six months of the issuance of the Certificate of Completion. The State Office, in its sole discretion, may offer one extension, not to exceed three months, for cause.
Resident Curator” means a person who has entered into a contractual agreement with the owner of a certified property in which the person agrees to pay for full restoration of the owner’s property in exchange for a life tenancy in the property without remunerative compensation to the owner for the life tenancy.
Substantial rehabilitation” or “full restoration” means rehabilitation of a certified historic property for which the qualified expenditures, during the 24-month period, or the 60-month period for a phased rehabilitation, selected by the applicant exceeds:
for an income-producing property, the current standard required by Section 47(c)(1)(C) of the Internal Revenue Code (26 USC 47(c)(1)(C)); and
for an owner-occupied historic property, non-income producing property, or property under contract with a resident curator, a minimum expenditure of $5,000.
Taxpayer” means a person, as defined in this section, and shall include an individual or corporation taxable under Title 5, or taxable under either 30 Del.C. Ch. 11, or 30 Del.C. Ch. 19.
4.4 If a property is individually listed in the National Register, submission of a Part 1 application is not required, whether or not an application for the federal tax credit is submitted.
5.1 An applicant may submit a Part 2 application to the State Office requesting that the Delaware State Historic Preservation Officer determine if a proposed rehabilitation plan work meets the criteria as a certified rehabilitation as defined in Section 3.0 of this regulation. The applicant shall file the Part 2 application on standard forms developed by the State Office.
5.4.1 For certified properties held for income (depreciable properties), a new application may be submitted as often as the project work qualifies for income tax credits under Section 47(c)(1)(C) of the Internal Revenue Code (26 USC 47(c)(1)(C))
5.4.2 For all other certified properties, a new application may be submitted no sooner than 24 months from the date of the prior Part 2 approval as long as other program requirements have been met.
5.5 The Part 2 application shall include any proposed rehabilitation work. Any rehabilitation work that has been carried out prior to the approval of the Part 2 application is not eligible for consideration.
5.6 An applicant requesting approval of a phased rehabilitation plan for a depreciable property shall provide the State Office with a description of the phases and their anticipated completion dates when submitting the Part 2 application. The Delaware State Historic Preservation Officer shall notify the applicant if the phased rehabilitation plan is approved. The final completion date for a phased rehabilitation is binding unless the applicant requests a change in writing. For a phased rehabilitation, the applicant is allowed up to 60 months to meet the substantial rehabilitation test.
5.67 The Delaware State Historic Preservation Officer shall determine whether the proposed rehabilitation for which a complete application is received under Section subsection 5.1 of this regulation meets the definition of a certified rehabilitation and shall send the applicant notice of the determination. The State Office may require modifications to the plan work as described in the Part 2 application in order to meet the definition of a certified rehabilitation.
5.78 The Delaware State Historic Preservation Officer may issue a Part 2 approval to an applicant who has obtained a Part 2 certification from the federal government pursuant to 36 CFR 67. Under this provision, an applicant shall file only the cover page of the Delaware Part 2 application.
5.89 Applicants shall begin construction on the approved certified rehabilitation plan work as described in the approved Part 2 application within one year of receiving the Part 2 approval. If construction on the rehabilitation plan work as described in the Part 2 application is not substantially commenced and diligently pursued within this time period, the State Historic Preservation Officer may require that the applicant forfeit will withdraw any assigned credit award Credit Award. Any forfeited tax credits may become available for award to other applicants. Substantially commenced and diligently pursued shall mean means the applicant can demonstrate that a minimum, 25% of the estimated rehabilitation costs was expended within the first year after the tax credits are assigned. The State Office reserves the right to obtain documentation from the applicant supporting the expenditure.
5.911 The Delaware State Historic Preservation Officer, or his/her designated representative, may inspect the historic property to determine if the work is consistent with the approved certified rehabilitation plan work as described in the Part 2 application, and if the project has substantially commenced and is being diligently pursued.
5.102 The applicant may request that the State Office review proposed changes to the project plan certified rehabilitation as described in the Part 2 application after the Part 2 application it is approved. The Delaware State Historic Preservation Officer shall determine whether the proposed change meets the definition of a certified rehabilitation and shall send the applicant notice of the determination.
6.1 Upon completion of the rehabilitation work outlined in the Part 2 application, or an approved project phase, the applicant shall submit to the State Office a Part 3 application with documentation supporting any conditions in the Part 2 application approval, the form(s) required in the Division of Revenue’s regulations indicating the name of the taxpayer who will claim the tax credit, and a final accounting of qualified expenditures. The State Office may prescribe the format in which the documentation of qualified expenditures is submitted. The costs are verified by and may be adjusted by the State Office if documentation is inadequate or costs are disallowed. Any submission of Part 3 of the application with qualified rehabilitation costs of more than $750,000 shall include a certified statement by a certified public accountant verifying that the expenses statement includes only qualified rehabilitation costs.
6.34 Upon approval by the State Office that the completed rehabilitation, or an approved phase, meets the definition of a certified rehabilitation, the State Office shall submit the documentation of qualified expenditures to the Division of Revenue and request a determination of the value of the tax credit for the completed project or an approved phase, meets the definition of a certified rehabilitation, the Delaware State Historic Preservation Officer shall issue a Certificate of Completion for the project, or approved phase. For approved phased rehabilitations, each phase must receive a Certificate of Completion in order for the overall project to be considered a certified rehabilitation.
6.45 After issuing a Certificate of Completion for a project, or an approved phase, receives its Certificate of Completion, the State Office shall submit the documentation outlined in 6.3 of these regulations of qualified expenditures and an 1811AC 0905 form to the Division of Revenue, and request a determination of the value of the tax credit documented expenditures and assignment of the calculated tax credits to the applicant in accordance with subsection 7.4 of these regulations for the completed project or an approved phase. For all projects in which the tax credits are to be applied against franchise taxes, and at other times as requested by the Division of Revenue, the forms and documentation will also be submitted to the State Bank Commissioner’s Office.
6.56 The Division of Revenue or the State Bank Commissioner’s Office will return the forms certifying the value of the tax credit for credits assigned to the project, or an approved phase, to the State Office which shall transmit the Certificate of Completion and the Revenue form(s) to the applicant, or taxpayer who will claim the tax credits.
6.67 In the case of approved phased projects, a single rehabilitation project may receive more than one Certificate of Completion. Credits issued to the initial assignee, or in the case of a tax-exempt assignee, to the first taxable transferee after the associated phase completion, are subject to revocation and repayment to the Delaware Division of Revenue or the Office of the State Bank Commissioner if, under regulations issued by the State Office, a phased rehabilitation is not completed by the agreed upon completion date indicating that the applicant for the credit award is unable or unwilling to complete it; or in the event that the project does not meet the certification requirements previously agreed to with the State Office.
7.1 An applicant shall request a credit award by filing a Request for Credit Award application with the State Office. The Request for Credit Award application may be submitted at the same time or subsequent to the submission of the Part 2 application, but no later than simultaneously shall be submitted with the Part 3 application.
7.32 The State Office will not process an incomplete Request for Credit Award application until all documentation as required in Section 7.2 of the regulations is received. Where adequate documentation is not provided, the State Office shall notify the applicant of the additional information needed to undertake or complete the review.
7.43 The State Historic Preservation Officer shall notify the applicant of the amount of their credit award. The credit award is calculated as a percentage of the qualified expenditures and will be rounded down to the nearest whole dollar. The criteria for applying the percentages to establish the credit award are:
The State Historic Preservation Officer shall notify the applicant of the amount of their credit award.
7.54 The Delaware State Historic Preservation Officer may consider an increase in a credit award where there has been an increase in qualified costs of greater than 5% of the total.
7.65 Despite having been assigned a certain credit award, an applicant may only claim the amount of tax credits which are supported by their actual rehabilitation costs. Excess tax credits made available in these circumstances are not eligible for subsequent award to other applicants.
7.76 Each fiscal year, $100,000 of the $5 million of the total that is allocated for Credit Awards is to be distributed as follows: assigned to make credit awards under these regulations is reserved for distribution to qualified resident curators. If in any fiscal year there are insufficient qualified resident curators to exhaust this allotment, the unused credit amount will be available in the next fiscal year for award to any eligible project.
7.8 Each fiscal year, $1.5 million of the $5 million assigned to make credit awards under these regulations is reserved for projects receiving a credit award of not more than $300,000. After April 1, any unassigned portion of the $1.5 million is released to be available for credit awards to any eligible project.
8.1 The fee for review of rehabilitation work for projects where the qualified expenditures are over $100,000 is $250 for each separate application. Final action will not be taken on an application until the appropriate remittance is received. No fee will be charged for rehabilitation projects where the qualified expenditures are less than $100,000. All applicants who seek a Credit Award for their certified rehabilitation are subject to a fee.
8.2 The applicant shall submit the fee, where applicable, with the Part 3 application. For phased projects, the applicant shall submit the fee with the first Part 3 submitted. All checks shall be made payable to the State of Delaware. The revenue from fees charged for the Historic Preservation Tax Credit Program will be retained by the Division of Historical and Cultural Affairs for inspections and other expenses, which may include operational expenses and personnel costs.
11.1 Annually, on or before January 31st, the Delaware State Historic Preservation Officer shall issue an annual report on the restoration and rehabilitation status of all tax credit projects approved in the previous fiscal year.
Last Updated: December 31 1969 19:00:00.
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