280-20-20 R.I. Code R. § 6.5

Current through June 20, 2024

Section 280-RICR-20-20-6.5 - Definitions

A. "Accountant's certification" means the certification of a certified public accountant licensed in the State of Rhode Island containing the information required in the application for an Assignable Historic Preservation Tax Credit Certificate. The accountant's certification includes, but is not limited to, certification of the Adjusted Basis at the beginning of the Rehabilitation, the Rehabilitation costs properly capitalized to the building, and project costs incurred but not eligible for the historic preservation tax credit such as costs for new construction and other costs not chargeable to the capital account. The accountant's certification shall be completed in the form of the Division of Taxation's Form HTC-8016 and shall be accompanied by an opinion of the accountant regarding the accuracy of the required information. The cost certification should include, but is not limited to:

1. A schedule of development costs (separating costs qualified for tax credit from costs not qualified for tax credit) and calculation of historic tax credit basis based on Qualified Rehabilitation Expense (QREs) and documentation from the project.

2. Verification of the existence of development costs by examination of invoices, canceled checks, settlement sheets and related documents.

3. Review of the respective development costs to determine whether the costs were eligible to be included in historic tax credit basis QREs in accordance with R.I. Gen. Laws Chapter 44-33.6.

4. Calculation of the Substantial Rehabilitation Test in accordance with R.I. Gen. Laws § 44-33.6-2(16).

5. Computation of tax credits to be available to the project based upon the determination of QREs included in historic tax credit basis.

B. "Act" means R.I. Gen. Laws Chapter 44-33.6.

C. "Adjusted basis" means the Owner's basis in a building on or after July 3, 2013, adjusted by depreciation and other adjustments that impact basis, computed in accordance with federal income tax law. In general, adjusted basis is determined with reference to the cost of the building (excluding land) in the hands of the Owner at the time of acquisition, decreased by depreciation and other deductions that reduce basis, and increased by costs incurred in connection with the building and capitalized to the building, such as the cost of improvements to the building.

D. "Affiliate" means any entity controlling, controlled by or under common control with such Person, firm, partnership, trust, estate, limited liability company (LLC), corporation (whether profit or non-profit) or other business entity that incurs Qualified Rehabilitation Expenditures (QREs) for the Substantial Rehabilitation of a Certified Historic Structure or some identifiable portion thereof.

E. "Allocation agreement" means an executed agreement among all participants of a pass-through entity, or among all Owners of a building having multiple owners, setting forth the method for allocation of the historic preservation tax credit agreed upon among the participants or co-owners. An allocation agreement may include, without limitation, a partnership agreement, an operating agreement of an LLC, a shareholders agreement, or any other instrument executed by all participants or co-Owners.

F. "Applicant" means a Person submitting an application to the Commission and to the Division of Taxation for determination under § 6.17 of this Part.

G. "Assignable historic preservation tax credit certificate" means a certificate issued by the Division of Taxation to the Owner of a Certified Historic Structure or an Identifiable portion thereof who has incurred QREs that have been approved by the Commission as consistent with the Standards for Rehabilitation, and which QREs have been Placed-in-Service. If the Owner of the Certified Historic Structure is a pass-through entity, an Assignable Historic Preservation Tax Credit Certificate may be issued to each participant in the pass-through entity. The certificate shall specify the amount of the historic preservation tax credit allocable to such Participant, determined pursuant to this regulation.

H. "Assignee" means a Person to whom the historic preservation tax credit certificate is assigned pursuant to R.I. Gen. Laws Chapter 44-33.6.

I. "Assignor" means a holder of an Assignable Historic Preservation Tax Credit Certificate pursuant to § 6.21(A) of this Part, who assigns such Assignable Historic Preservation Tax Credit Certificate to an Assignee pursuant to § 6.21(C) of this Part.

J. "Authorized to be reserved" means the Applicant has previously entered into a Contract with the Division of Taxation, on behalf of the state, which guarantees that the stated estimated tax credits will be available when earned.

K. "Certified historic structure" means a property which is located in the state of Rhode Island and is:

1. Listed individually on the national register of historic places; or

2. Listed individually in the State Register of Historic Places; or

3. Located in a Registered Historic District and certified by either the Commission or Secretary of the Interior as being of historic significance to the district.

L. "Certified rehabilitation" means any Rehabilitation of a Certified Historic Structure consistent with the historic character of such property or the district in which the property is located as determined by the Commission guidelines.

M. "Certificate of completed work" means the written approval issued by the Commission that the completed Rehabilitation is consistent with the Standards for Rehabilitation.

N. "Certification of proposed rehabilitation" means the certification issued by the Commission that the proposed Rehabilitation is consistent with the Standards for Rehabilitation.

O. "Commencement of substantial construction activities" has the meaning set forth in § 6.12 of this Part.

P. "Commission" means the Rhode Island Historical Preservation & Heritage Commission created pursuant to R.I. Gen. Laws § 42-45-2.

Q. "Contract" means a contract entered into between Applicant and the Division of Taxation, on behalf of the state, which guarantees that the stated estimated tax credits will be available when earned and may be claimed in full, to the extent of:

1. QREs actually approved by the Division of Taxation; and

2. the taxpayer's tax liability, in the year earned subject in the case of Phased Projects to the provisions of § 6.10 of this Part.

R. "Division of Taxation" means the Rhode Island Division of Taxation.

S. "Estimated qualified rehabilitation expenditures" means the estimated amount of QREs set forth in a Contract for a planned Rehabilitation.

T. "Executive Director" means the executive director of the Commission.

U. "Exempt from real property tax" means, with respect to any Certified Historic Structure, that the structure is exempt from taxation pursuant to R.I. Gen. Laws § 44-3-3.

V. "Force majeure" means an event which is

1. reasonably unforeseen,

2. outside the control of the Applicant and

3. could not be avoided by the Applicant's exercise of due care. By way of example, and not in limitation, any delays, work stoppages, or work force reductions caused by financial difficulties, labor disputes or violations of the law shall not be deemed a force majeure.

W. "Hard construction cost" means the direct Contractor costs for labor, material, equipment, and services associated with an approved project, contractors' overhead and profit, and other direct construction costs. Hard construction costs do not include architectural and engineering fees, survey, legal expenses, insurance premiums, development fees and other soft costs.

X. "Historic preservation certification application" means Parts 1, 2 and 3 of the Commission's application forms for each stage of the certification process, as more fully set forth herein.

Y. "Holding period" means twenty-four (24) months after the Commission issues a Certificate of Completed Work to the Owner. In the case of a Rehabilitation which may reasonably be expected to be completed in phases as described in R.I. Gen. Laws § 44-33.6-2(16), "holding period" shall be extended to include a period of time beginning on the date of issuance of a Certificate of Completed Work for the first phase or phases for which a certificate is issued and continuing until the expiration of twenty-four (24) months after the Certificate of Completed Work issued for the last phase.

Z. "Initial certificate holder" means an Owner or participant named by the Owner to receive the historic tax credit certificate.

AA. "Inspection" means a visit by an authorized representative of the Commission to a property for the purposes of reviewing and evaluating the significance of the building and the proposed, ongoing or completed Rehabilitation work, and by an authorized representative of the Division of Taxation to verify expenses and costs reported.

BB. "Measuring period" means the twenty-four (24) month period selected by the Owner ending within the taxable year in which a Certified Historic Structure is Placed-in-Service. In the case of a Rehabilitation which may reasonably be expected to be completed in phases set forth in architectural plans and specifications completed before the Rehabilitation begins, this definition shall be applied by substituting "sixty (60) month period" for "twenty-four (24) month period." Notwithstanding anything to the contrary herein, the measuring period shall not commence prior to July 3, 2013.

CC. "Neighborhood revitalization plan" means any plan or portion of a plan for the revitalization of one or more defined communities that was developed by a state agency, municipality, or one or more non-profit organizations, each of which is exempt from taxation under Internal Revenue Code, 26 U.S.C. § 501(c)(3) and has as one of its exempt purposes the provision of housing for low and moderate income households [or the revitalization of one or more communities].

DD. "Notification of assignment" means the notification filed with the Division of Taxation of the assignment of all or a portion of the state historic preservation tax credit.

EE. "Owner" means a Person or Persons who hold legal fee or leasehold title to the historic building or an identifiable portion thereof.

FF. "Part 1 application" means the Historic Preservation Certification Application Part 1-Request for Historical Certification.

GG. "Part 2 application" means the Historic Preservation Certification Application Part 2-Request for Certification of Proposed Rehabilitation (2013) and must include a detailed project timeline and associated costs.

HH. "Part 3 application" means the Historic Preservation Certification Application Part 3-Request for Certification of Completed Rehabilitation.

II. "Participant" means a partner in a partnership, member of an LLC, shareholder of a subchapter S corporation, beneficial Owner of a trust, or any other Person having an interest in a pass-through entity.

JJ. "Pass-Through entity" means a partnership, LLC, subchapter S-corporation, association, nominee trust, or any other entity, the tax attributes of which are passed through to the participants in such entity.

KK. "Percentage interest" means the percentage interest in the historic preservation tax credit allocated to an Owner, a participant, a co-owner of a multiple-owner building or identifiable portion thereof, or another Person pursuant to the terms of the applicable Allocation Agreement.

LL. "Person" means any person, partnership, firm, corporation, (including both business and non-profit corporations), LLC, trust, estate, association, or other business entity.

MM. "Phased project" means a project with identifiable portions of the building(s) to be completed in phases set forth in architectural plans and specifications prepared before the physical work on the Rehabilitation begins, as reported in the Part 2 of the application filed with the Commission.

NN. "Placed-in-service" means that Substantial Rehabilitation work has been completed which would allow for occupancy of the entire structure or some identifiable portion of the structure, as established in the Part 2 Application or the Owner has commenced depreciation of the QREs, whichever occurs first. Issuance of a certificate of occupancy or similar permit authorizing occupancy of the entire building or some identifiable portion by the municipal authority having jurisdiction shall constitute sufficient evidence for purposes of the Act that the building or the identifiable portion thereof that is the subject of the certificate of occupancy has been placed-in-service. However, a building or identifiable portion thereof may be treated as placed-in-service without a certificate of occupancy if the building or identifiable portion thereof is placed in a condition or state of readiness and availability for a specifically defined function, or upon the commencement of the period for depreciation with respect to the building under the Owner's depreciation practice, whichever occurs earlier.

OO. "Principal residence" means the principal residence of the Owner within the meaning of Internal Revenue Code, 26 U.S.C. § 121 or any successor provision.

PP. "Processing fees" means any of the fees set forth, defined and imposed in R.I. Gen. Laws § 44-33.6-4(d).

QQ. "Qualified rehabilitation expenditures or "QREs" means any amounts expended in the Rehabilitation of a Certified Historic Structure properly capitalized to the building and either:

1. Depreciable under Internal Revenue Code, 26 U.S.C. § 1 et seq., or

2. Made with respect to property (other than the Principal Residence of the Owner) held for sale by the Owner. Processing Fees paid pursuant to this chapter are not qualified Rehabilitation expenses. Notwithstanding the foregoing, except in the case of a nonprofit corporation, there will be deducted from QREs for the purposes of calculating the tax credit any funds made available to the Person (including any entity specified in R.I. Gen. Laws § 44-33.6-3(a) ) incurring the QREs in the form of a direct grant from a federal, state or local governmental entity or agency or instrumentality of government.

RR. "Registered historic district" means any district listed in the national register of historic places or the State Register of Historic Places.

SS. "Rehabilitation" means the preservation of a historic building, its component elements, and its structural system by means of repairs and/or selective replacement of worn out materials and alterations to the building generally which are consistent with the building's documented historic appearance without destroying historically significant later additions.

TT. "Remain idle" means that substantial work has ceased at the subject project; work crews have been reduced by more than twenty-five percent (25%) for reasons unrelated to scheduled completion of work in accordance with the project schedule, reasonably unanticipated physical conditions, or Force Majeure; or the project schedule that was originally submitted by the taxpayer to the Commission has been extended by more than twelve (12) months for reasons other than reasonably unanticipated physical conditions or an event of Force Majeure (by way of example, and not in limitation, any delays, work stoppage, or work force reduction caused by issues with project funding, finances, disputes, or violation of laws shall be deemed to cause a project to Remain Idle).

UU. "Scattered site development" means a development project for which the developer seeks or has obtained unified financing to rehabilitate dwelling units in two (2) or more buildings located in an area that is defined by a Neighborhood Revitalization Plan and is not more than one mile in diameter.

VV. "Social club" means a corporation or other entity and/or its Affiliate that offers its facilities primarily to members for social or recreational purposes and the majority source of its revenue is from funds and/or dues paid by its members and/or an entity defined as a social club pursuant to the Internal Revenue Code, 26 U.S.C. § 501(c)(7).

WW. "Standards for rehabilitation" or "Standards" means the United States Secretary of the Interior's Standards for Rehabilitation.

XX. "State register of historic places" means the state register of historical, architectural, and cultural sites, buildings, places, landmarks, or areas compiled by the Commission pursuant to R.I. Gen. Laws § 42-45-5. Properties are listed on the state register in accordance with the Commission's procedures for registration and protection of historic properties.

YY. "Substantial construction" means that:

1. The Owner of a Certified Historic Structure has entered into a Contract with the Division of Taxation and paid the Processing Fee;

2. The Commission has certified that the Certified Historic Structure's Rehabilitation will be consistent with the standards set forth in R.I. Gen. Laws Chapter 44-33.6; and

3. The Owner has, within five (5) years from the date of the executed Contract, expended ten percent (10%) of its QREs, estimated in the Contract entered into with the Division of Taxation for the project or its first phase of a Phased Project as detailed in the Part 2 Application filed with and approved by the Commission.

ZZ. "Substantial rehabilitation" means, with respect to a Certified Historic Structure, that the qualified Rehabilitation expenses of the building during the twenty-four (24) month period selected by the taxpayer ending with or within the taxable year exceed the Adjusted Basis in such building and its structural components as of the beginning of such period, or July 3, 2013, whichever is later. In the case of any Rehabilitation, which may reasonably be expected to be completed in phases set forth in architectural plans and specifications completed before the Rehabilitation begins, the above definition shall be applied by substituting "sixty (60) month period" for "twenty-four (24) month period".

AAA. "Tax administrator" means the person within the Rhode Island Department of Revenue as described in R.I. Gen. Laws § 44-1-1 et seq.

BBB. "Trade or business" means an activity that is carried on for the production of income from the sale or manufacture of goods or performance of services, excluding residential rental activity.

280 R.I. Code R. § 280-RICR-20-20-6.5