Texas law allows a tax credit for up to 25 percent of eligible costs and expenses relating to the certified rehabilitation of certified historic structures. This credit is available for franchise tax reports originally due on or after Jan. 1, 2015 and for annual insurance premium tax reports originally due on or after Jan. 1, 2018. The credit can only be used for insurance premium taxes due under Texas Insurance Code, Chapters 221, 222, 223, or 224.
To qualify for the credit, you must meet these requirements:
To establish the credit, follow these steps:
The Comptroller’s office will review your documents within four weeks of receiving all required documentation. Upon approval, the Comptroller’s office will mail Form 05-901, Historic Structure Credit Certificate, to you. The Historic Structure Credit Certificate is proof that you have established a historic structure credit and indicates the amount of credit established.
A certified historic structure is a property in Texas that is:
“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).
“Eligible costs” are qualified rehabilitation expenditures as defined by 26 USC Section 47(c)(2) (Qualified rehabilitation expenditure defined).
The depreciation and tax-exempt use provisions of 26 USC Section 47(c)(2) do not apply to costs and expenses incurred by an entity exempt from the franchise tax under Tax Code Section 171.063 (Exemption-Nonprofit Corporation Exempt from Federal Income Tax). These nonprofit entities must satisfy all the other provisions of 26 USC Section 47(c)(2) to establish a credit.
For the period of June 14, 2017 through Dec. 31, 2021, the depreciation and tax-exempt use provisions of 26 USC Section 47(c)(2) do not apply to costs and expenses incurred by an institution of higher education or university system as defined by Education Code Section 61.003 (Definitions). These institutions of higher education or university systems must satisfy all the other provisions of 26 USC Section 47(c)(2) to establish a credit.
Contact your certified public accountant for information on eligible costs and expenses. The Comptroller’s office cannot provide this information.
An “audited cost report” is a report that itemizes the eligible costs and expenses the entity incurred in the certified rehabilitation of the certified historic structure. The cost report must be audited by a certified public accountant.
You can claim the credit by mailing the following forms with your Texas tax report:
The historic structure credit is applied after all other tax credits.
If all other requirements are met, the first tax report on which a particular credit can be claimed is the tax report that is based on the accounting period or tax year that includes the date the structure was placed in service. The credit can also be claimed on the following five consecutive tax reports.
The 2015 report due May 15, 2015 is the first franchise tax report on which any credit can be claimed.
The 2017 tax year report due March 1, 2018 is the first insurance premium tax report on which any credit can be claimed.
Yes, if you are a franchise taxpayer. An insurance premium taxpayer may not claim a credit that it has established. To establish and claim the credit, send these documents with the tax report:
Please note: You must still file your tax report electronically if required to do so, and you must mail the required forms to the Comptroller’s office in order to claim the credit.
Upon the sale or purchase of a historic structure credit, the buyer should receive the following documents from the seller:
Note: The buyer should maintain copies of all these documents for its records.
Within 30 days from the date of the sale, mail Forms 05-901 and 05-179 to the Comptroller’s office.
The buyer cannot claim the credit on a report until it has received Form 05-901, Historic Structure Credit Certificate, from the Comptroller’s office. This may take up to four weeks from the date the Comptroller’s office receives the completed documentation.
After receiving and processing the required documentation, the Comptroller’s office will send each credit owner with a credit balance a new Historic Structure Credit Certificate reflecting its new historic structure credit balance.
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 this form with their Certificate of Eligibility. The total of all the amounts listed on Form AP-235, Item 12 from each registration form must equal the total of the eligible costs and expenses covered on the audited cost report.
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, allocated or claimed.
“Carryforward” is the ability to use, in later tax years, the portion of a credit that cannot be fully claimed in the first year the credit is established because the credit exceeds the amount of tax due on the tax report.
The credit can be taken on a total of six consecutive tax reports.
The sale, assignment, or allocation of a credit does not extend the period for which the credit can be carried forward.
There is no limit on the total number of transactions for the sale or assignment of all or part of the total credit.