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AN ACT relating to the rehabilitation of certified historic structures. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
ď˘Section 1. KRS 171.397 is amended to read as follows: 3
(1) (a) For all applications for a preliminary approval received prior to April 30, 4
2010, there shall be allowed as a credit against the taxes imposed by KRS 5
141.020, 141.040, 141.0401, or 136.505, an amount equal to: 6
1. Thirty percent (30%) of the qualified rehabilitation expenses, in the case 7
of owner-occupied residential property; and 8
2. Twenty percent (20%) of the qualified rehabilitation expenses, in the 9
case of all other property. 10
In the case of an exempt entity that has incurred qualified rehabilitation 11
expenses, the credit provided in this subsection shall be available to transfer 12
or assign as provided under subsection (8) or (9) of this section. 13
(b) For applications for preliminary approval received on or after April 30, 2010, 14
the credit shall be refundable if the taxpayer makes an election under 15
subsection (2)(b) of this section. 16
(2) (a) A taxpayer seeking the credit provided under subsection (1) of this section 17
shall file an application for a preliminary determination of maximum credit 18
eligibility before April 30 of the year in which the proposed project will 19
begin. The application shall describe the project and shall include 20
documentation supporting the qualification of the project for the credit, the 21
proposed start date, the proposed completion date, the projected qualified 22
rehabilitation expenses, and any other information the council may require. 23
The council shall determine the preliminary maximum credit available for 24
each taxpayer and shall notify the taxpayer of that amount by June 30 of the 25
year in which the application was filed. If total credits applied for in any year 26
exceed the certified rehabilitation credit cap, plus any amounts added to the 27 UNOFFICIAL COPY 24 RS BR 2390
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cap pursuant to paragraph (c) of this subsection, the provisions of subsection 1
(5) of this section shall be applied to reduce the approved credits for all 2
taxpayers with qualifying applications for that year. 3
(b) 1. An application for a final determination of credit shall be submitted to 4
the council upon completion of the project. 5
2. The application shall include an irrevocable election by the taxpayer to: 6
a. Use the credit, in which case, the credit shall be refundable; or 7
b. Transfer the credit. 8
3. The council shall determine the final amount of credit approved for each 9
taxpayer based upon the actual expenditures, preliminary determination 10
of maximum credit, and a determination that the expenditures are 11
qualified rehabilitation expenses. 12
4. The council shall notify the taxpayer and Department of Revenue of the 13
final approved credit amount within sixty (60) days of the receipt of a 14
completed application from the taxpayer. 15
(c) 1. If the total amount of credits finally approved for a taxpayer under 16
paragraph (b) of this subsection are less than the credits initially 17
approved for a taxpayer under paragraph (a) of this subsection, the 18
difference between the two (2) amounts shall be added to the certified 19
rehabilitation credit cap for the next calendar year. 20
2. If the total amount of credits approved under paragraph (a) of this 21
subsection in any calendar year is less than the certified rehabilitation 22
credit cap, the difference between the credits actually awarded and the 23
certified rehabilitation credit cap shall be added to the certified 24
rehabilitation credit cap for the next calendar year. 25
(3) (a) The maximum credit which may be claimed with regard to owner-occupied 26
residential property shall be one hundred twenty thousand dollars ($120,000) 27 UNOFFICIAL COPY 24 RS BR 2390
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subject to subsection (5) of this section. The credit in this section shall be 1
claimed for the taxable year in which the certified rehabilitation is completed. 2
(b) The maximum credit which may be claimed with regard to all other property 3
that is not owner-occupied residential shall be ten million dollars 4
($10,000,000) subject to subsection (5) of this section. The credit in this 5
section shall be claimed for the taxable year in which the certified 6
rehabilitation is completed. 7
(4) In the case of a husband and wife filing separate returns or filing separately on a 8
joint return, the credit may be taken by either or divided equally, but the combined 9
credit shall not exceed one hundred twenty thousand dollars ($120,000) if subject to 10
the limitation in subsection (3)(a) of this section, or ten million dollars 11
($10,000,000) if subject to the limitation in subsection (3)(b) of this section, subject 12
to the provisions of subsection (5) of this section. 13
(5) The credit amount approved for a calendar year for all taxpayers under subsection 14
(2)(a) of this section shall be limited to the certified rehabilitation credit cap. When 15
the total credits applied for and approved in any year under subsection (2)(a) of this 16
section exceed the certified rehabilitation credit cap, the council shall apportion the 17
certified rehabilitation credit cap as follows: The certified rehabilitation credit cap 18
for the year under consideration shall be multiplied by a fraction, the numerator 19
which is the approved credit amount for an individual taxpayer for a calendar year 20
and the denominator which is the total approved credits for all taxpayers for a 21
calendar year. 22
(6) (a) For all applications received prior to April 30, 2010, if the credit amount that 23
may be claimed in any tax year as determined under subsections (3) to (5) of 24
this section exceeds the taxpayer's total tax liabilities under KRS 136.505, 25
141.020, or 141.040 and 141.0401, the taxpayer may carry the excess tax 26
credit forward until the tax credit is used, provided that any tax credits not 27 UNOFFICIAL COPY 24 RS BR 2390
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used within seven (7) years of the taxable year the certified rehabilitation was 1
complete shall be lost. 2
(b) For all applications received on or after April 30, 2010, if the credit amount 3
that may be claimed in any tax year as determined under subsections (3) to (5) 4
of this section exceeds the taxpayer's total tax liabilities under KRS 136.505, 5
141.020, or 141.040 and 141.0401, the taxpayer may receive a refund, if the 6
taxpayer elected to take the credit as required by subsection (2)(b) of this 7
section. 8
(c) For all applications received after April 30, 2023, if the credit amount is 9
transferred in accordance with subsection (2)(b)2.b. of this section and the 10
credit transferred exceeds the taxpayer's total tax liabilities under KRS 11
141.020 or 141.040 and 141.0401, the taxpayer or recipient of the credit 12
may: 13
1. Carry the excess credit forward until the tax credit is used, provided 14
that any tax credits not used within seven (7) years of the taxable year 15
the certified rehabilitation was complete shall be lost; or 16
2. Receive a refund of the excess credit. 17
(7) (a) The credit shall apply against both the tax imposed by KRS 141.020 or 18
141.040 and the limited liability entity tax imposed by KRS 141.0401, with 19
the ordering of credits as provided in KRS 141.0205. 20
(b) 1. For applications received prior to April 30, 2010, if the taxpayer is a 21
pass-through entity not subject to the tax imposed by KRS 141.040, the 22
taxpayer shall apply the credit at the entity level against the limited 23
liability tax entity imposed by KRS 141.0401, and shall also pass the 24
credit through in the same proportion as the distributive share of income 25
or loss is passed through. 26
2. For applications received on or after April 30, 2010, if the taxpayer is a 27 UNOFFICIAL COPY 24 RS BR 2390
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pass-through entity not subject to the tax imposed by KRS 141.040, the 1
taxpayer shall apply the credit at the entity level against the limited 2
liability tax entity imposed by KRS 141.0401, and may receive a refund 3
if the taxpayer elected to take the credit as required by subsection 4
(2)(b)2.a. of this section. 5
(8) Credits received under this section may be transferred or assigned if an election is 6
made under subsection (2)(b) of this section, for some or no consideration, along 7
with any related benefits, rights, responsibilities, and liabilities to a financial 8
institution as defined in KRS 141.010 subject to the taxes imposed by KRS 9
136.505, 141.040, or 141.0401. Within thirty (30) days of the date of any transfer of 10
credits, the party transferring the credits shall notify the Department of Revenue of: 11
(a) The name, address, employer identification number, and bank routing and 12
transfer number, of the party to which the credits are transferred; 13
(b) The amount of credits transferred; and 14
(c) Any additional information the Department of Revenue deems necessary. 15
The provisions of this subsection shall apply to any credits that pass through to a 16
successor or beneficiary of a taxpayer. 17
(9) For purposes of this section, a lessee of a certified historic structure shall be treated 18
as the owner of the structure if the remaining term of the lease is not less than the 19
minimum period promulgated by administrative regulation by the council. 20
(10) The taxes imposed in KRS 141.020, 141.040, and 141.0401 shall not apply to any 21
consideration received for the transfer, sale, assignment, or use of a tax credit 22
approved under this section. 23
(11) The Department of Revenue shall assess a penalty on any taxpayer or exempt entity 24
that performs disqualifying work, as determined by the Kentucky Heritage Council, 25
on a certified historic structure for which a rehabilitation has been certified under 26
this section in an amount equal to one hundred percent (100%) of the tax credit 27 UNOFFICIAL COPY 24 RS BR 2390
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allowed on the rehabilitation. Any penalties shall be assessed against the property 1
owner who performs the disqualifying work and not against any transferee of the 2
credits. 3
(12) The council may impose fees for processing applications for tax credits, not to 4
exceed the actual cost associated with processing the applications. 5
(13) The council may authorize a local government to perform an initial review of 6
applications for the credit allowed under this section and forward the applications to 7
the council with its recommendations. 8
(14) The council and the Department of Revenue may promulgate administrative 9
regulations in accordance with the provisions of KRS Chapter 13A to establish 10
policies and procedures to implement the provisions of subsections (1) to (13) of 11
this section. 12
(15) The tax credit authorized by this section shall apply to tax periods ending on or 13
after December 31, 2005. 14