Could a nonprofit corporation or governmental entity owning a qualified historic structure earn the Kansas historic-preservation tax credit?

Plain-English summary

A correspondent asked whether nonprofit corporations and governmental entities could qualify for Kansas's historic-preservation tax credit.

The Department answered yes if the owner and project met the law's other requirements. The Kansas definition of a qualified historic structure covered a certified building whether or not it produced income, reflecting a broader scope than the federal rehabilitation credit described in the letter.

The statute defined a qualified taxpayer as the owner of the qualified historic structure or another person eligible for the federal credit. Thus, an owner was not excluded merely because a governmental or tax-exempt entity could not claim the federal credit.

The 2002 amendment also made the Kansas credit transferable by any person. That feature gave a governmental or nonprofit owner a way to obtain value from a credit it could not use directly against its own income tax.

The Department concluded that individuals, nonprofits, and governmental entities owning qualified historic structures were eligible, subject to all remaining statutory conditions.

What this means for you

Nonprofit and governmental owners

Tax-exempt status did not itself disqualify an owner. Confirm that the building, rehabilitation plan, expenditures, and other requirements qualify.

Historic-project advisers

Do not limit Kansas eligibility to federal-credit taxpayers. The state definition separately included the structure's owner.

Credit purchasers

Transferability was central to making the credit useful to owners without an income-tax liability.

Common questions

Q: Could a nonprofit owner earn the credit?
A: Yes, if it owned a qualified historic structure and met the other requirements.

Q: Could a governmental entity qualify?
A: Yes on the same stated conditions.

Q: Did the owner have to qualify for the federal rehabilitation credit?
A: No. Ownership of the qualified historic structure was an independent route under the Kansas definition.

Citations and references

• K.S.A. 79-32,211, as amended by 2002 S.B. 39, § 31 — Kansas historic-preservation credit
• 2001 H.B. 2128 — original credit legislation and legislative history discussed by the Department
• Internal Revenue Code § 47 — federal rehabilitation credit used for comparison in the opinion

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-2002-017

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

September 27, 2002

XXXX
XXXX
XXXX

Re: Ruling Request re the Kansas Historic Preservation Tax Credit—Not-for-Profit and Governmental Entities

Dear XXXX:

This letter is in response to your correspondence dated August 2, 2002, in which you ask whether the historic preservation tax credit under K.S.A. 79-32,211, as amended by 2002 Senate Bill 39, section 31, is available to not-for-profit corporations and governmental entities.

You note that the 2001 Legislature passed House Bill 2128, which created the historic preservation tax credit, and the subcommittee report to the House Tax Committee on that bill stated the following:

Unlike federal law, which generally allows historic preservation and restoration tax credits only for income-producing properties, the state credits authorized by HB 2128 also would be available to residential and other properties not producing income.

This same language is also contained in the Supplemental Note to that bill. You further point out that the statutory definition of “qualified historic structure” at subsection (b)(2) includes “any building, whether or not income producing, which is defined as a certified historic structure . . .” (italics added). You contend that in passing House Bill 2128, the 2001 Legislature intended to provide an incentive for preservation and rehabilitation of historic structures regardless of the tax status of the owner. Representative Becky Hutchins, who chaired the subcommittee on this bill, has indicated that the committee members discussed buildings such as historic theaters and old school buildings, as well as historic residences, in connection with this legislation.

The tax credits available under section 31 of 2002 Senate Bill 39 are based on a certain percentage of “qualified expenditures” made by a “qualified taxpayer.” See subsection (b)(1). “Qualified taxpayer” is statutorily defined at subsection (b)(4) as “the owner of the qualified historic structure or any other person who may qualify for the federal rehabilitation credit allowed by section 47 of the federal internal revenue code” (italics added). The federal credit is not available to a governmental unit or tax-exempt entity. It is also not available for restoration projects on residences. However, even if an entity does not qualify for the federal credit, it is not necessarily excluded from the Kansas statutory definition of “qualified taxpayer,” so long as the entity is the owner of a “qualified historic structure.”

The 2002 Legislature amended the historic preservation tax credit statute to make the credit transferable by “any person,” pursuant to subsection (c) of section 31, Senate Bill 39. Were the credits nontransferable, they would be of no use to a governmental or non-profit entity owning a “qualified historic structure” and considering a restoration project on that structure.

Given the legislative history, the broad statutory definitions for “qualified historic structure” and “qualified taxpayer,” and given the credit transferability feature, it is the opinion of the Department that the Kansas historic preservation tax credit is available to owners of “qualified historic structures,” including individuals, not-for-profit corporations or governmental entities, so long as the other requirements within the historic preservation tax credit law are met.

Please let me know if you have further questions.

Very truly yours,

Richard L. Cram

Date Composed: 10/04/2002 Date Modified: 10/04/2002

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