taxes

Franchise Tax Credit for Certified Rehabilitation of Certified Historic Structures

Overview

Texas law provides a franchise tax credit for the certified rehabilitation of certified historic structures, up to 25 percent of eligible costs and expenses for franchise tax reports originally due on or after Jan. 1, 2015.

Qualifying for This Credit

To qualify for the credit:

  • The structure must be placed in service on or after Sept. 1, 2013;
  • The entity must have an ownership interest in the structure during the calendar year the structure was placed in service after the rehabilitation; and
  • The total amount of eligible costs and expenses incurred by the entity must exceed $5,000.

Establishing This Credit

  1. Contact the Texas Historical Commission (THC) for information on how to certify the rehabilitation of a certified historic structure. THC will assist you with the process of obtaining a Certificate of Eligibility.
  2. Contact a certified public accountant to obtain an audited cost report that itemizes the eligible costs and expenses the entity incurred in the certified rehabilitation of the certified historic structure.
  3. Mail these documents to the Comptroller’s office:
  4. Upon approval, the Comptroller’s office will mail Form 05-901, Historic Structure Credit Certificate, to you. The Historic Structure Certificate is your proof you have established a franchise tax credit amount for the historic structure rehabilitation.

Frequently Asked Questions

What is a certified historic structure?

A certified historic structure is a property in Texas that is:

  • Listed individually in the National Register of Historic Places;
  • Designated as a Recorded Texas Historic Landmark under Government Code 442.006 or as a state archeological landmark under Natural Resources Code, Chapter 191; or
  • Certified by the Texas Historical Commission as contributing to the historic significance of:
    • A historic district listed in the National Register of Historic Places; or
    • A local district certified by the U.S. Department of the Interior in accordance with 36 CFR Section 67.9, Certifications of State and local historic districts.
What is certified rehabilitation?

“Certified rehabilitation” is the rehabilitation of a certified historic structure that the Texas Historical Commission has certified as meeting the U.S. Secretary of the Interior’s Standards for Rehabilitation as defined in 36 CFR Section 67.7, Standards for rehabilitation.

What are eligible costs?

“Eligible costs” are qualified rehabilitation expenditures as defined by Internal Revenue Code , Section 47(c)(2), Rehabilitation credit.

Contact your certified public accountant for information on eligible costs and expenses. The Comptroller’s office cannot provide this information.

What is an audited cost report?

An “audited cost report” itemizes the eligible costs and expenses the entity incurred in the certified rehabilitation of the certified historic structure and must be issued by a certified public accountant.

Once I have established the credit, how can I claim the credit on a franchise tax report?

A taxable entity can claim the credit by mailing the following forms with their Texas franchise tax report:

If I haven’t established the credit yet, can I claim the credit on a franchise tax report?

If you have not yet established the credit, you can establish and claim the credit by sending these documents with your franchise tax report:

How do I buy or sell a franchise tax historic structure credit?

Upon the sale or purchase of a franchise tax credit for the rehabilitation of a historic structure, the buyer should receive from the seller:

Within 30 days from the date of the sale, mail Forms 05-179 and 05-901 to the Comptroller.

Note: The buyer cannot claim the credit on a report until it has received Form 05-901, Historic Structure Credit Certificate, from the Comptroller. This may take up to four weeks.

Once the credit is transferred, the Comptroller will send each credit owner with a credit balance a new Historic Structure Credit Certificate reflecting their new franchise tax historic structure credit balance.

Can each owner receive a share of the credit when a structure is owned by more than one person or entity?

Yes, multiple owners can receive a share of the credit if each owner completes Form AP-235, Texas Historic Structure Credit Registration (PDF), and mails these together with the Certificate of Eligibility. The total of all the amounts listed under Form AP-235, Item 12 on each registration form must equal the total of the eligible costs and expenses covered on the audited cost report.

How does the Comptroller determine the expiration date on Form 05-901, Historic Structure Credit Certificate?

The expiration date listed on Form 05-901 is six years from the placed-in-service date listed on the Certificate of Eligibility, regardless of whether the credit is sold, assigned or allocated.

What is carryforward, and for how many years can I carry the credit forward?

“Carryforward” is the remaining portion of a credit that cannot be claimed in the current year because the credit cannot exceed the amount of franchise tax due for the report after any other applicable tax credits.

The unused portion of the credit can be carried forward for not more than five consecutive reports.

How many times can I sell or assign the credit?

There is no limit on the total amount of transactions for the sale or assignment of all or part of the total credit.

Additional Resources

Texas Historical Commission