Who decides whether a building is in a qualifying census tract for New York's historic rehabilitation tax credit, and is that decision binding on the Tax Department?

Plain-English summary

A partnership planning to rehabilitate a certified historic building in Queens received letters from the New York State Office of Parks, Recreation and Historic Preservation (OPRHP) confirming the building sits in a qualifying census tract and is eligible for the Commercial Rehabilitation Tax Credit. But the project's lenders/investors worried the building might not qualify based on their own reading of the raw census data, so the partnership asked the Tax Department to confirm.

The Office of Counsel concluded that OPRHP's determination is controlling and the Tax Department will follow it. New York's historic rehabilitation credit (Tax Law §§ 210-B(26) for corporations, 606(oo) for individuals, 1511(y) for insurers) equals up to 100% of the federal IRC § 47 credit, but only if the project is in a census tract at or below 100% of state median family income. OPRHP — not the Tax Department — makes the qualifying-census-tract determination (TSB-M-13(4)), and once OPRHP has certified eligibility, the Department defers to that call.

What this means for you

Developers and their lenders

The eligibility/qualifying-census-tract question for the historic rehabilitation credit is settled by OPRHP's certification, not by independently parsing Census Bureau data. An OPRHP approval letter is the authority the Tax Department will honor.

Accountants and tax-credit advisors

Direct census-tract eligibility questions to OPRHP and rely on its determination. Note the credit appears across three articles — corporate (§ 210-B(26)), personal income (§ 606(oo)), and insurance (§ 1511(y)) — and is refundable (no interest on the refundable portion).

Common questions

Q: Our lender thinks the census data shows we don't qualify. Who's right? A: OPRHP's determination controls. If OPRHP certified the building is in a qualifying census tract, the Tax Department follows that.

Q: Does the Tax Department independently check the census tract? A: No. That determination is made by OPRHP; the Department defers to it.

Q: Which taxpayers can claim this credit?
A: Corporations (§ 210-B(26)), individuals (§ 606(oo)), and insurance corporations (§ 1511(y)).

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 guidance:

• Tax Law § 210-B(26); § 606(oo); § 1511(y)
• IRC § 47(a)(2), § 47(c)(3)(A); § 167
• TSB-M-13(4)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income-ao-2020.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/multitax/a20-2c-1i.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(2)C,(1)I
Corporation Tax
Income Tax
January 21, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

The Department of Taxation and Finance (“Department”) received a Petition for Advisory Opinion from [ 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 §§ 210-B(26), 606(oo) and 1511(y) is controlling and will be followed by the Department of Taxation and Finance. Facts Petitioner plans to undertake the rehabilitation of the Building. The Building was listed in the National Register of Historic Places in January 2019. The building, therefore, qualifies 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 2021. The Building is located wholly within a specified census tract in Queens County, New York. Petitioner submitted several letters from the New York State Office of Parks, Recreation and Historic Preservation (OPRHP) to the Petitioner in which OPRHP approved the renovation plans and confirmed that OPRHP will certify that the Building located in the specified census tract is eligible for the New York State Commercial Rehabilitation Tax Credit program. Despite the OPRHP’s determination of eligibility, Petitioner’s lenders/investors remain concerned that the building may not be eligible for the New York State Rehabilitation Tax Credit, based upon its reading of the raw census data. Analysis Tax Law §§ 210-B(26), 606(oo), and 1511(y) allow 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. The credit is allowed during the taxable year in which the qualified rehabilitation project is placed into service pursuant to IRC § 167. The credit cannot exceed the taxpayer’s tax due for the year the project is placed into service or, in the case of the corporate taxes, the fixed dollar minimum tax, and is refundable, but 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

-2-

TSB-A-20(2)C,(1)I
Corporation Tax
Income Tax
January 21, 2020

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 §§ 210-B[26][c], 606[oo][5], and 1511[y][5]). The determination of eligibility is made by the OPRHP (see TSB-M-13[4] regarding the Rehabilitation of Historic Properties Credit). As evidenced by the correspondence Petitioner received from OPRHP, OPRHP 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 OPRHP 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: January 21, 2020
/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.