Colo. Code Regs. 39-30-105.6

Current through Register Vol. 47, No. 19, October 10, 2024

Rule 39-30-105.6 - Credit for Rehabilitation of Vacant Buildings

Basis and Purpose. The statutory bases for this rule are sections are 39-21-112(1), 39-30-103(7)(a), 39-30-105.6, and 39-30-108(1), C.R.S. The purpose of the rule is to clarify the term "building," as used in statute and this rule; requirements for the credit related to vacancy, commercial use, and pre-certification; and the application of the limitation on the amount of credit allowed.

(1)Building. For the purpose of section 39-30-105.6, C.R.S., and this rule, the term "building" includes the entire physically contiguous structure, regardless of whether it has been legally divided into separate units.

(2)Building Vacancy. For the purpose of section 39-30-105.6(1), C.R.S., a building is not considered to be unoccupied at any time during which the building is actively utilized by the owner, a lessor, or any other party in the operation of a trade or business including, but not limited to, any storage within the building of inventory, equipment, or other property for an operating business. However, the mere presence of tangible personal property in an otherwise unoccupied building does not disqualify the building for the credit.

(3)Rehabilitation for Commercial Use. For the purpose of section 39-30-105.6(4), C.R.S., a building is rehabilitated for commercial use only if:

(a) the taxpayer's primary use of the building is for commercial purposes; and

(b) the taxpayer does not use any part of the building as their residence, either full-time or part-time.

(4)Credit Limitation. The aggregate amount of credit allowed to each taxpayer with respect to any given building is limited to $50,000. The limit applies to the aggregate amount of the credit, whether allowed in one or more tax years, and to the building as a whole, whether the taxpayer is the owner or tenant of the entire building or one or more separate units therein. The limit applies to each individual, estate, trust, or C corporation who is the owner or tenant of a building, either directly or indirectly as the partner or shareholder in a partnership or S corporation, as well as to each partnership or S corporation that is the owner or tenant of a building or any separate unit or units therein.

(a)Example 1. A taxpayer who is the owner of a vacant building makes qualified expenditures for the purpose of rehabilitating the building in each of three consecutive years. In the first year, the taxpayer makes qualified expenditures totaling $100,000 and is allowed a credit of $25,000 (25% of the qualified expenditures). In the second year, the taxpayer makes qualified expenditures totaling $80,000 and is allowed a credit of $20,000 (25% of the qualified expenditures). Because the aggregate amount of the credit allowed is limited to $50,000 and the taxpayer was allowed credits totaling $45,000 in the two prior years, the amount of credit the taxpayer is allowed in the third year cannot exceed $5,000. In the third year, the taxpayer makes qualified expenditures totaling $60,000 and is allowed a credit of $5,000, rather than $15,000 (25% of the qualified expenditures).

(b)Example 2. A taxpayer owns three units in the same vacant building and makes qualified expenditures for the purpose of rehabilitating each of the three units. The taxpayer makes qualified expenditures of $100,000, $200,000, and $300,000 for the three units, respectively, for a total of $600,000. The total credit the taxpayer is allowed for qualified expenditures for the three units is $50,000, rather than $150,000 (25% of the qualified expenditures).

(c)Example 3. Three unrelated taxpayers own three separate units in the same vacant building. Each of the three taxpayers make qualified expenditures for the purpose of rehabilitating the unit they own. The three taxpayers make qualified expenditures of $80,000, $160,000, and $240,000, respectively. The first taxpayer is allowed a credit of $20,000 (25% of their $80,000 in qualified expenditures). The second taxpayer is allowed a credit of $40,000 (25% of their $160,000 in qualified expenditures). The third taxpayer is allowed a credit of $50,000, rather than $60,000 (25% of their $240,000 in qualified expenditures).

(d)Example 4. A partnership consisting of five partners owns several units within a single building and makes $400,000 in qualified expenditures. A credit of $50,000 is allowed for the qualifying expenditures made by the partnership, rather than $100,000 (25% of the $400,000 in qualified expenditures). Each of the five partners is allowed their distributive share of the $50,000 credit allowed for the qualifying expenditures made by the partnership.

(e)Example 5. An individual is a partner in two different partnerships that separately own units in the same vacant building. Each partnership makes qualified expenditures for the purpose of rehabilitating the units. The two partnerships pass through credits of $25,000 and $40,000, respectively, to the individual partner. However, the total credit the partner is allowed for the rehabilitation of the building is limited to $50,000.

(5)Pre-certification.

(a) No credit is allowed pursuant to section 39-30-105.6, C.R.S., with respect to any expenditure either paid or incurred prior to the taxpayer's submission of a pre-certification form to the enterprise zone administrator pursuant to section 39-30-103(7)(a), C.R.S.

(b) If expenditures are made in multiple tax years for the rehabilitation of the same building, the taxpayer must submit a separate pre-certification form for each year, prior to making any expenditures for that year.

39-30-105.6

42 CR 08, April 10, 2019, effective 5/15/2019

44 CR 18, September 25, 2021, effective 10/15/2021

45 CR 05, March 10, 2022, effective 3/30/2022