Did the 2002 historic-preservation credit amendments apply to a project begun in 2001 but placed in service during the taxpayer's 2002 tax year?

Plain-English summary

A calendar-year firm began a qualified historic-rehabilitation project in October 2001, expected to place it in service in August 2002, and had not claimed any 2001 historic-preservation credits. It asked whether the 2002 amendments governing assignment and partnership allocation applied.

The amendments applied to tax years beginning after December 31, 2001. Prior law treated the credit as earned when costs were incurred; the amended law treated it as earned when the project was placed in service.

Because the firm had not already claimed a 2001 credit, the Department said it could claim the credit in 2002 for all qualified expenditures incurred on the project, assuming the 2002 tax year began after December 31, 2001 and the project was placed in service that year.

The new provisions allowing assignment by the entity earning the credit and allocation among partners by executed agreement applied to the credit earned in that post-2001 placed-in-service year. They did not apply to credits already claimed in a tax year beginning before the effective date.

What this means for you

Historic-project owners

For the transition facts in this opinion, the placed-in-service year determined which version of the Kansas credit law applied.

Partnerships

The amended allocation-by-agreement rule applied to credits earned when the project was placed in service in an eligible post-2001 tax year.

Tax professionals

Check whether any credit was already claimed under prior law. The Department's answer depended on the taxpayer not having claimed the 2001 expenditures earlier.

Common questions

Q: Did beginning construction in 2001 force use of the old law?
A: No. The amended law applied because the credit was earned when the project was placed in service in 2002.

Q: Could 2001 project costs be included?
A: Yes on these facts because no 2001 credit had already been claimed and the expenditures otherwise qualified.

Q: Did the new assignment and partnership rules apply?
A: Yes to credits earned in the eligible placed-in-service year, not to credits already claimed under an earlier tax year.

Citations and references

• K.S.A. 2001 Supp. 79-32,211, as amended by 2002 S.B. 39, § 31 — historic-preservation credit timing, assignment, and partner allocation

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-2002-012

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

July 22, 2002

XXXX
XXXX
XXXX

Re: Historic Preservation Tax Credit Opinion Letter Request

Dear XXXX:

This letter responds to your correspondence dated July 12, 2002, in which you ask whether the recent amendments in Section 31 of 2002 Senate Bill 39 to the Kansas historic preservation tax credit provisions, K.S.A. 2001 Supp. 79-32,211, apply to the Kansas historic preservation project your firm is involved in. Your letter indicates that the project is pursuant to a qualified rehabilitation plan, commenced construction in October 21, 2001 and will be “placed in service” in August 2002. Your firm is a calendar-year taxpayer. Your firm did not claim historic preservation tax credits under K.S.A. 2001 Supp. 79-32,211 for any expenses incurred in 2001. Section 31 of 2002 Senate Bill 39 provides for assignment of the tax credits, under certain circumstances, and for allocation of the tax credits among partners of a partnership earning the credits by executed agreement. You ask whether these provisions apply to the above project.

As Section 31 provides, the amendments to K.S.A. 2001 Supp. 79-32,211 apply to tax years commencing after December 31, 2001. Under the prior law, the historic preservation tax credits were earned in the tax year that the costs and expenses for the project were incurred. Under the new law, such credits are earned in the year when the project is “placed in service.” Unless you have already claimed in tax year 2001 historic preservation tax credits for costs and expenses incurred in tax year 2001 in connection with the project, you may claim in tax year 2002 historic preservation tax credits with respect to all qualified expenditures incurred in the project, assuming your tax year 2002 commences after December 31, 2001. The new provisions providing for assignment of tax credits by the entity earning the credits and allocation of the credits among partners by executed agreement would apply to the tax credits earned in the tax year when the project is placed into service, assuming it is placed in service in a tax year commencing after December 31, 2001. These new provisions would not apply to any historic preservation tax credits that you have claimed in a tax year commencing prior to December 31, 2001.

Please let me know if you have further questions.

Very truly yours,

Richard L. Cram

Date Composed: 07/24/2002 Date Modified: 07/24/2002

Table 1

Table 2