taxes

Tax Credit for Certified Rehabilitation of Certified Historic Structures

Overview

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.

Qualifying for the Credit

To qualify for the credit, you must meet these requirements:

  • the structure must be placed in service on or after Sept. 1, 2013;
  • the entity that establishes the credit 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 that establishes the credit must exceed $5,000.

To establish the credit, follow these steps:

Establishing the Credit

  1. Contact the Texas Historical Commission (THC) for information about how to certify the rehabilitation of a certified historic structure. The Texas Historical Commission will assist you with 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:
    • A completed Form AP-235, Texas Historic Structure Credit Registration (PDF)
    • The Certificate of Eligibility issued by the Texas Historical Commission
    • An audited cost report completed by a certified public accountant

      Texas Comptroller of Public Accounts
      P.O. Box 149348
      Austin, TX 78714-9348

      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.

Frequently Asked Questions

What is a certified historic structure?

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

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 26 USC Section 47(c)(2) (Qualified rehabilitation expenditure defined).

Nonprofit Entities:

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.

Institutions of Higher Education and University Systems:

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.

What is an audited cost report?

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.

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

You can claim the credit by mailing the following forms with your Texas tax report:

Franchise Tax

Insurance Premium Tax

  • Form 25-125 Texas Historic Structure Credit Supplement for Credit Claimed on Insurance Premium Tax Report (PDF)
  • Form 05-901 Historic Structure Credit Certificate – The Comptroller’s office will mail this form to you upon approval of the credit (see Establishing This Credit section) or after processing the sale, assignment or allocation of the credit.
  • Please note: An insurance premium taxpayer cannot use a historic structure credit it establishes or receives as an allocation from a pass-through entity. Insurance premium taxpayers may only use a credit they acquire through a sale or assignment. Refer to Tax Code Section 171.908(e) regarding the sale or assignment of the credit for insurance premium taxpayers.

The historic structure credit is applied after all other tax credits.

How can I determine on which reports an established credit can be claimed?

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.

Franchise Tax

The 2015 report due May 15, 2015 is the first franchise tax report on which any credit can be claimed.

Insurance Premium Tax

The 2017 tax year report due March 1, 2018 is the first insurance premium tax report on which any credit can be claimed.

Can I establish a credit at the same time I file a tax report and use it on that tax report?

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.

How do I notify the Comptroller’s office when I buy or sell a historic structure 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.

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 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.

How does the Comptroller's office 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, allocated or claimed.

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

“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.

How many times can I sell or assign the credit?

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

Additional Resources

Texas Historical Commission