How did Kansas increase the historic preservation tax credit for smaller cities?

Plain-English summary

Kansas Notice 22-12 explains changes to the Kansas historic preservation tax credit made by 2022 House Bill 2237 (Section 24), which amended K.S.A. 79-32,211.

Existing credit (continues). A historic preservation tax credit of 25% of qualified expenditures (30% for nonprofit organizations) is allowed for restoring and preserving a qualified historic structure, if the total expenditures equal $5,000 or more.

New, higher rates for smaller cities (subsection (a)(2) and (3)). For tax years beginning 2022 and after, if a qualified taxpayer's expenditures under a qualified rehabilitation plan total $5,000 or more, the credit equals:

• 30% of qualified expenditures for a qualified historic structure in a city with a population between 9,500 and 50,000; or
• 40% of qualified expenditures for a qualified historic structure in a city with a population of less than 9,500.

Bank interest (new subsection (c)). Any bank, savings and loan association, or savings bank must pay tax on 50% of the interest earned on loans to qualified taxpayers used for qualified expenditures, beginning in tax year 2022.

How to claim. Complete and submit Kansas Schedule K-35 with your income tax return. The notice also points readers to the companion Commercial Restoration and Preservation Credit notice for the related Historic Kansas Act (also part of House Bill 2237).

What this means for you

Owners restoring historic structures in smaller communities

• If your qualified historic structure is in a city of fewer than 9,500 people, your credit rate rises to 40%; in a city of 9,500-50,000, it rises to 30% -- up from the base 25% -- for tax years 2022 and after.
• The $5,000 minimum expenditure and the qualified-rehabilitation-plan requirement still apply.
• Claim the credit on Schedule K-35.

Lenders

• Banks and savings institutions must pay tax on 50% of the interest earned on qualifying restoration loans beginning in 2022.

Common questions

What are the new credit rates? 30% in cities of 9,500-50,000 and 40% in cities under 9,500, for tax years 2022 and after; the base 25% (30% for nonprofits) continues elsewhere.

What is the minimum spend? Total qualified expenditures of $5,000 or more.

What form do I use? Kansas Schedule K-35, filed with your income tax return.

What changed for lenders? Banks and savings institutions must pay tax on 50% of interest earned on qualifying restoration loans, beginning in tax year 2022.

Citations and references

• House Bill 2237 (2022), Section 24 -- amended the historic preservation tax credit.
• K.S.A. 79-32,211 -- Kansas historic preservation tax credit; new subsections raise the rate to 30% (cities 9,500-50,000) and 40% (cities under 9,500) for tax years 2022 and after, and require banks to pay tax on 50% of interest on qualifying loans.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 22-12

Original ruling text

Policy and Research
109 SW 9th Street Phone: 785-368-8222
PO Box 3506 Fax: 785-296-1279
Topeka KS 66601-3506 www.ksrevenue.gov
Mark A. Burghart, Secretary Laura Kelly, Governor

                                        NOTICE 22-12

                          HISTORIC PRESERVATION TAX CREDIT

                                    (NOVEMBER 10, 2022)

  During the 2022 Legislative Session House Bill 2237 was passed and signed into law.

Section 24 of the Bill amends the historic preservation tax credit found in K.S.A. 79-32,211. The
amendments add two new credit provisions to the statute.

  Under current law, which continues in effect, a historic preservation tax credit is permitted

for 25% of qualified expenditures (30% for nonprofit organizations) for restoration and
preservation of a qualified historic structure, if the total amount of expenditures equals $5,000 or
more.

   Under the new provisions found in subsection (a)(2) and (3), for all tax years beginning 2022

and all tax years thereafter, if, pursuant to a qualified rehabilitation plan by a qualified taxpayer,
the total amount of expenditures equals $5,000 or more the credit will equal:

   ● 30% of qualified expenditures incurred in the restoration and preservation of a qualified
   historic structure located in a city with a population between 9,500 and 50,000; or

   ● 40% of qualified expenditures incurred in the restoration and preservation of a qualified
   historic structure located in a city with a population of less than 9,500.

   New subsection (c) requires any bank, savings and loan association, or savings bank to pay

taxes on 50% of the interest earned on loans to qualified taxpayers used for qualified expenditures
for the restoration and preservation of a qualified historic structure, beginning in tax year 2022.

    To claim the credit, the taxpayer should complete and submit a Kansas Schedule K-35 with

their income tax return.

   For information regarding the recently enacted Historic Kansas Act, that is also part of House

Bill 2237, see Notice 22-10 Commercial Restoration and Preservation Credit which is available
through the Department's website at: www.ksrevenue.gov.

                               TAXPAYER ASSISTANCE

 Additional copies of this notice, forms or publications are available from our web site,

www.ksrevenue.gov. If you have questions about this Notice, please contact:

                            Taxpayer Assistance Center
                           Kansas Department of Revenue
                           Scott Office Building, 1st Floor
                                  120 SE 10th Ave
                                   P. O. Box 3506
                              Topeka, KS 66601-3506
                                Phone: 785-368-8222
                                 Fax: 785-291-3614