On July 1, 2105, the Massachusetts Department of Revenue (“DOR”) issued Working Draft TIR 15-XX relating to transferring historic rehabilitation tax credit awards in single or phased projects, or recapture of historic rehabilitation tax credits.
Historic Tax Credits in Massachusetts:
The historic tax credit is earned when a commercial building is listed on the National Register, is eligible for listing on the National Registry, or is part of a historic district is rehabilitated according to requirements set by the National Parks Service and implemented by the state’s historic commission.
Implications of the DOR’s Release:
One of the more important takeaways from this TIR is that previously awarded tax credits for projects that have not yet been placed in service may be transferred. Moreover, in a phased project, each phase may separately meet the placed in service requirements and thereby have limited recapture risks as well as the ability to transfer awarded tax credits for each phase separately.
Previously, awarded tax credits could not be transferred, with the result that a new owner of a historic property would have to commence the tax credit application procedure anew, which is an expensive, time consuming, and cumbersome process. Therefore, these new transfer procedures are a significant benefit to the development community, and can add value to properties with tax credit awards, as well as allowing new owners to possibly shorten construction time-frames and thereby keep development costs down, resulting in more reasonable apartment rents.
What the TIR means for tax credit eligible sites:
Technical Information Releases or TIRs are released by the Department of Revenue to industry thought leaders in order to gain their perspectives which they will take under advisement when they release the final legislative changes.
What happens next?
Industry thought leaders will submit their opinions on the TIR's proposed changes. The Department of Revenue will review the imput and then issue the final changes. We expect that these changes will be finalized by the 4th quarter of 2015.
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