Is a building in a qualifying census tract for the historic rehabilitation credit when the Office of Parks, Recreation and Historic Preservation has approved it, even though the tract's median income later looked too high?

Plain-English summary

A developer rehabilitating a building expected to be a "certified historic structure" got a letter from the New York State Office of Parks, Recreation and Historic Preservation (OPRHP) confirming the building's census tract is eligible for the state Rehabilitation Tax Credit. Later, a lender noticed the tract's median family income (per the latest five-year American Community Survey) looked higher than the state's, and questioned eligibility. The developer asked whether the building is in a qualifying census tract.

The Office of Counsel concluded that OPRHP's determination controls and the Tax Department will follow it. Under Tax Law § 606(oo), eligibility for the credit (worth 100% of the federal IRC § 47 credit, up to $5 million per structure) turns on the project being in a qualifying census tract, and the statute and TSB-M-13(4)I assign that determination to OPRHP.

What this means for you

Historic-rehabilitation developers and investors

Once OPRHP issues its eligibility letter, you have the determination that matters for the state credit - the Tax Department won't second-guess the census-tract call. A lender's independent read of Census data does not override OPRHP.

Accountants and tax preparers

Treat the OPRHP eligibility letter as the controlling document on the qualifying-census-tract requirement. Keep it in the file; it is the Department's basis for honoring the credit.

Common questions

Q: A lender thinks the tract's income is too high - does that disqualify us?
A: Not on its own. The qualifying-census-tract determination is OPRHP's to make, and the Department follows it.

Q: How big is the credit?
A: 100% of the federal rehabilitation credit under IRC § 47(a)(2), capped at $5 million per structure, refundable per Tax Law § 686.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

Statutes and regulations:
- Tax Law § 606(oo); § 686
- IRC § 47; § 167
- TSB-M-13(4)I (Rehabilitation of Historic Properties Credit)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_2017.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a17_3i.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-17(3)I
Income Tax
June 30, 2017

Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO – I170127A

The Department of Taxation and Finance (“Department”) received a Petition for
Advisory Opinion from REDACTED REDACTED (“Petitioner”). Petitioner asks, whether the
property specified in the petition (“the Building”), is located within a qualifying census tract for
the tax credit for rehabilitation of historic properties.
We conclude that the determination of the New York State Office of Parks, Recreation
and Historic Preservation that the Building is in a qualifying census tract for purposes of the tax
credit for the rehabilitation of historic properties under Tax Law § 606(00) is controlling and will
be followed by the Department of Taxation and Finance.
Facts
Petitioner began renovation work to the Building and anticipates that the Building will be
listed in the National Register of Historic Places as a “certified historic structure” under IRC §
47(c)(3)(A). The rehabilitation of the Building is expected to be completed and placed in
service, within the meaning of IRC § 167, in 2017. The Building is located wholly within a
specified census tract in Monroe County, New York. The New York State Office of Parks,
Recreation and Historic Preservation approved the renovation plans and issued Petitioner a letter
dated August 15, 2016, confirming that the Building located in the specified census tract is
“eligible for the New York State commercial Rehabilitation Tax Credit program.”
Subsequent to Petitioner’s receipt of the August 15, 2016 correspondence, Petitioner’s
lender/investor noted that the median family income for the specified census tract using the most
recent five-year American Community Survey estimate published by the United States Census
Bureau was higher than the median family income for New York State. As a result, Petitioner’s
lender/investor questioned Petitioner’s eligibility for the credit for rehabilitation of historic
properties and temporarily ceased renovations of the Building until further guidance could be
obtained.
Analysis
Tax Law § 606(oo) allows for a credit against tax equal to one hundred percent of the
federal credit allowed for the rehabilitation of historic properties under IRC § 47(a)(2), up to five
million dollars per structure. The credit is allowed during the taxable year in which the qualified
rehabilitation project is placed into service, pursuant to IRC § 167. The credit can exceed the
taxpayer’s tax due for the year the project is placed into service and is refundable in accordance

-2-

TSB-A-17(3)I
Income Tax
June 30, 2017

with the provisions in Tax Law § 686; no interest will be paid on the refundable portion of the
credit.
To be eligible for the credit, the project must be located within a census tract that is
identified as being at or below 100% of the state median family income (“qualifying census
tract”). The state median family income is computed as of January 1 of each year using the most
recent five-year estimate from the American Community Survey published by the United States
Census Bureau (see Tax Law § 606[oo][5]).
The determination of eligibility is made by the New York State Office of Parks,
Recreation and Historic Preservation (see TSB-M-13[4]I regarding to the Rehabilitation of
Historic Properties Credit). As evidenced by the August 15, 2016 correspondence, the New
York State Office of Parks, Recreation and Historic Preservation determined that the
rehabilitation project at the Building located in the specified census tract is eligible for the New
York State Rehabilitation Tax Credit program, and approved the project. The determination
made by the New York State Office of Parks, Recreation and Historic Preservation is controlling,
and the Department of Taxation and Finance will follow the determination of that office that the
Building is located in a qualifying census tract.

DATED: June 30, 2017

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

NOTE:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.