Does the short-term-rental portion of a historic building count as 'residential' so it can qualify for Utah's 20% Historic Preservation Tax Credit?

Plain-English summary

Utah offers a Historic Preservation Tax Credit: 20% of the qualified rehabilitation expenditures (when they exceed $10,000) you spend fixing up a residential certified historic building. There's a corporate-tax version (§ 59-7-609) and an identical individual-income-tax version (§ 59-10-1006). The catch is the word "residential."

A historic building was being used partly as offices and partly as short-term rentals, and the question was whether the short-term-rental portion counts as "residential" so its rehab costs can earn the credit. The Commission ruled no — short-term rental use is not "residential."

The statute defines "residential" as "a building used for residential use, either owner occupied or income producing," and Commission rules (R865-6F-26A.3 and R865-9I-41(1)(c)) say you look at how the building is used after the rehab is finished. That definition alone didn't settle the question, so the Commission leaned on its own earlier rulings and on dictionaries. Prior PLR 98-030 had treated a weekly rental as commercial, not residential, and PLR 98-088 denied the credit where the building wasn't anyone's personal residence. Webster's and Black's both tie "residential"/"reside" to living somewhere permanently or for a considerable time — which a transient, short-term rental is not.

Two more points sealed it. The office portion plainly isn't residential either, so it doesn't qualify. And Utah law (§ 59-1-1417(2)) tells the Commission to read tax-imposing statutes in the taxpayer's favor but tax credits and exemptions strictly against the taxpayer — so a genuinely close call on a credit breaks against eligibility. (The Commission noted that the sales-tax act elsewhere defines a "short-term rental" as under 30 days (§ 59-12-102(131)); that definition isn't controlling here, but it lines up with treating short stays as non-residential.)

What this means for you

Owners rehabbing historic buildings for short-term rental (Airbnb/VRBO-style)

If you're counting on Utah's 20% Historic Preservation Tax Credit to help fund a renovation, square footage used for short-term rentals likely won't qualify — the state treats transient rental as commercial, not residential. The credit is aimed at buildings used as actual homes (owner-occupied or longer-term income-producing residences). Mixed-use buildings can be split: the residential portion may qualify while office and short-term-rental portions do not, so how you'll use the space after the project matters for the credit math.

Long-term landlords and developers

"Income producing" residential use can qualify — the statute says residential use can be "owner occupied or income producing." The dividing line the Commission drew is duration/permanence of occupancy, not whether you make money from it. Longer-term residential tenancies look residential; weekly/nightly transient stays look commercial.

Accountants and tax professionals

This is a clean example of Utah's interpretive thumb on the scale: under § 59-1-1417(2), credits and exemptions are construed strictly against the taxpayer, so ambiguity in a credit definition won't be resolved in your client's favor. Document the post-completion residential use carefully, and don't assume a sales-tax or property-tax "residential" classification carries over — the Commission analyzed "residential" specifically for this credit using its own prior PLRs and dictionaries.

Common questions

Q: I'm renovating a historic home to run as a short-term rental. Can I claim the 20% credit on that part?
A: No. The Commission ruled the short-term-rental portion isn't "residential," so it doesn't qualify for the Historic Preservation Tax Credit under § 59-7-609 / § 59-10-1006.

Q: What about the part I'll use long-term or live in?
A: Residential use that is owner-occupied or longer-term income-producing can qualify. The problem with short-term rentals is the transient nature of the stays, not that the building earns income.

Q: My building is mixed office + rental. Does any of it qualify?
A: Only the genuinely residential portion. The office portion isn't residential, and the short-term-rental portion isn't either, so those parts are excluded.

Q: Why did the close call go against me?
A: Utah law (§ 59-1-1417(2)) directs the Commission to construe tax credits strictly against the taxpayer, so where a credit's scope is uncertain, the narrower reading wins.

Q: Can I rely on this ruling?
A: Not as binding. A Utah private letter ruling binds the Commission only for the taxpayer and facts it was issued to; its weight for anyone else depends on how closely the facts match. Treat it as a strong signal of how the Commission reads "residential," not a guarantee.

Citations and references

Statutes (Utah Code Ann.):
- § 59-7-609 — corporate-tax Historic Preservation Tax Credit (20% of qualified rehabilitation expenditures over $10,000); (2)(c) defines "residential"
- § 59-10-1006 — individual-income-tax Historic Preservation Tax Credit (same terms); (2)(c) defines "residential"
- § 59-1-1417(2) — construe tax-imposing statutes for the taxpayer, but credits/exemptions strictly against the taxpayer
- § 59-12-102(131) — sales-tax definition of "short-term rental" (under 30 consecutive days), cited by analogy

Rules: Utah Admin. Code R865-6F-26A.3 and R865-9I-41(1)(c) ("residential" applies to use after the project is completed); R861-1A-34 (private letter ruling procedure and appeal rights)

Related Utah rulings cited: PLR 98-030 (weekly rental is commercial, not residential), PLR 98-088 (not a personal residence → not residential)

Source

• Landing page: Utah State Tax Commission — Private Letter Rulings
• Original PDF: 24-001.pdf

Original ruling text

FINAL PRIVATE LETTER RULING

24-001
[THE REQUEST LETTER HAS BEEN REMOVED]

                                   RESPONSE LETTER


                                        June 27, 2024

NAME-1, Technical Preservation Manager
COMPANY-1
EMAIL-1

NAME-2
EMAIL-2

NAME-3
EMAIL-3

Dear NAME-1, NAME-2, and NAME-3:

    This letter is in response to your request for a private letter ruling concerning the

“residential” requirement of Utah’s Historic Preservation Tax Credit (“Credit”). NAME-1 stated
the following in your request letter:

     I have a potential applicant requesting information on whether or not their project
     would meet this program's "residential" requirement. The address is
     ADDRESS-1. They are using part of the property for offices and part of it for
     short-term rentals. Would the short-term rental portion of the house be considered
     "residential"?

NAME-2 and NAME-3, you agreed to join as requesting parties for NAME-1’s request letter.
This private letter ruling concludes that the short-term rental portion would not be considered
“residential.”1

I. Applicable Law

   Utah Code Ann. § 59-7-609 and § 59-10-1006 contain the Credit. For corporate franchise

and income tax purposes, § 59-7-609(1)(a) states the following:
1
You did not ask about the part of the building used for offices. That part of the building would
not have residential use, so it would not qualify for the Credit.

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   For tax years beginning January 1, 1993, and thereafter, there is allowed to a
   taxpayer subject to Section 59-7-104, as a credit against the tax due, an amount
   equal to 20% of qualified rehabilitation expenditures, costing more than $10,000,
   incurred in connection with any residential certified historic building. When
   qualifying expenditures of more than $10,000 are incurred, the credit allowed by
   this section shall apply to the full amount of expenditures.

(Emphasis added.) For individual income tax purposes, § 59-10-1006(1)(a) states the following:

   For tax years beginning January 1, 1993, and thereafter, there is allowed to a
   claimant, estate, or trust, as a nonrefundable tax credit against the income tax due,
   an amount equal to 20% of qualified rehabilitation expenditures, costing more
   than $10,000, incurred in connection with any residential certified historic
   building. When qualifying expenditures of more than $10,000 are incurred, the
   tax credit allowed by this section shall apply to the full amount of expenditures.

(Emphasis added.)

    Utah Code Ann. § 59-7-609(2)(c) and § 59-10-1006(2)(c) contain the following

definition of “residential”:

   "Residential" means a building used for residential use, either owner occupied or
   income producing.

    The State Historic Preservation Office is involved in administering the Credit. In

accordance with § 59-7-609(1)(b) and § 59-10-1006(1)(b), “[a]ll rehabilitation work to which the
tax credit may be applied shall be approved by the State Historic Preservation Office prior to
completion of the rehabilitation project . . .” In accordance with § 59-7-609(1)(d) and
§ 59-10-1006(1)(d), “[t]he commission, in consultation with the State Historic Preservation
Office, shall promulgate rules to implement this section.”

  The Commission has promulgated administrative rules concerning the term, “residential.”

Utah Administrative Code R865-6F-26A.3. provides the following definition of “residential”:

   “Residential” as used in Section 59-7-609 applies only to the use of the building
   after the project is completed.

Utah Administrative Code R865-9I-41(1)(c) states the following:

   “Residential” as used in Section 59-10-1006 applies only to the use of the
   building after the project is completed.

The term “residential” is not further defined by the Utah Code or by the Utah Administrative
Rules.

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   Utah Code Ann. § 59-1-1417(2) requires the Commission to construe a statute as follows:

   Regardless of whether a taxpayer has paid or remitted a tax, fee, or charge, the
   commission or a court considering a case involving the tax, fee, or charge shall:
   (a) construe a statute imposing the tax, fee, or charge strictly in favor of the
       taxpayer; and
   (b) construe a statute providing an exemption from or credit against the tax, fee,
       or charge strictly against the taxpayer.

II. Analysis

    As mentioned previously, you asked the following question: “Would the short-term rental

portion of the house be considered ‘residential’?” This private letter ruling concludes that the
short-term rental portion would not be considered “residential.” The analysis for this conclusion
is provided below.

    In accordance with § 59-7-609 and § 59-10-1006, the Credit is limited to "any residential

certified historic building" (emphasis added). This private letter ruling only addresses the
requirement that the residential certified historic building be "residential." Utah Code Ann.
§ 59-7-609(2)(c) and § 59-10-1006(2)(c) define "residential" as "a building used for residential
use, either owner occupied or income producing" (emphasis added). Administrative rules
R865-6F-26A.3. and R865-9I-41(1)(c) further define "residential" as "appl[ying] only to the use
of the building after the project is completed." Thus, the definitions of "residential" found in the
Utah Code and in the Utah Administrative Rules, considered alone, do not directly resolve the
issue of whether the short-term rental portion of a house would be considered "residential."

    The Commission has issued unrelated private letter rulings (“PLRs”) addressing the issue

of whether certain certified historic buildings were “residential” for purposes of the Credit. For
PLR 98-030, the building was to be used as a normal rental for about nine months of a year and
as a weekly rental for about three months of a year. The Commission explained that a weekly
rental was considered to be commercial in nature. The Commission concluded that the building
did not meet the requirement of being “residential.” PLR 98-030 indicated that its analysis was
based on Utah Supreme Court decisions about “residential” as used in other contexts; however,
PLR 98-030 did not identify those decisions. For PLR 98-088, the building was not going to be
used as a person’s personal residence. The Commission concluded that the building did not meet
the requirement of being “residential” when the building would not be used as a person’s
personal residence.

   The short-term rental situation you presented is similar to the weekly rental situation

presented in PLR 98-030. If the Commission follows PLR 98-030, the certified historic building
used for a short-term rental would not be considered “residential.” Similar to the building
referenced in PLR 98-088, the building would not be used as a person’s personal residence.

    Before reaching its conclusion about “residential,” this private letter ruling considers

dictionary definitions found in Webster’s New Universal Unabridged Dictionary (“Webster’s”)

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and in Black’s Law Dictionary.

   Webster’s defines “residential” as follows in part:

   1. Of or pertaining to residence or to residences: a residential requirement for a
   doctorate. 2. Suited for or characterized by private residences: a residential
   neighborhood . . .

Webster’s New Universal Unabridged Dictionary, 1638 (1st ed. 2003). Webster’s defines
“residence” as follows in part:

   1. The place, esp., the house, in which a person lives or resides; dwelling place;
   home. Suited for or characterized by private residences: Their residence is in New
   York City. 2. A structure serving as a dwelling or home, esp. one of large
   proportion and superior quality: They have a summer residence in Connecticut.
   ...

Id. Webster’s defines “reside” as follows in part:

   1. To dwell permanently or for a considerable time: She resides at 15 Maple
   Street. . . .

Id.

    The above definitions from Webster’s suggest that “residential” applies to a private

dwelling or home in which a person lives or dwells permanently or for a considerable time. A
short-term rental would not meet this definition.

   Black’s Law Dictionary defines “residence” as follows in part:

   1. The act or fact of living in a given place for some time <a year’s residence in
   New Jersey>. --Also termed residency. 2. The place where one actually lives, as
   distinguished from a domicile <she made her residence in Oregon>. • Residence
   usu. just means bodily presence as an inhabitant in a given place; domicile usu.
   requires bodily presence plus an intention to make the place one’s home. A person
   thus may have more than one residence at a time but only one domicile.
   Sometimes, though, the two terms are used synonymously. . . . 3. A house or other
   fixed abode; a dwelling <a three-story residence>. . . .

Black’s Law Dictionary, 1423 (9th ed. 2009). Black’s Law Dictionary defines “residency” and
“resident,” as follows in part:

   residency. (14c) 1. A place of residence, esp. an official one <the diplomat’s
   residency>. 2. RESIDENCE (1) <one year’s residency to be eligible for in-state
   tuition>.
   resident, adj. . . . 2. Dwelling in a place other than one’s home on a long-term


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    basis <the hospital’s resident patient>.
    resident, n. (15c) 1. A person who lives in a particular place. 2. A person who has
    a home in a particular place. . . .

Black’s Law Dictionary, 1424 (9th ed. 2009).2

   The above definitions suggest that “residential” applies to a home or other place in which

a person lives or dwells for some time or on a long-term basis. A short-term rental would not
meet this definition.3

    After considering prior PLR 98-030, PLR 98-088, and the above dictionary definitions,

this private letter ruling concludes that the short-term rental portion of a house would not be
considered “residential.” This conclusion is consistent with § 59-1-1417(2)(b)'s requirement for
the Commission to "construe a statute providing [a] credit against the tax, fee, or charge strictly
against the taxpayer."

III. Conclusion

   As stated previously, this private letter ruling concludes that the short-term rental portion

of a house would not be considered “residential.”

    The Tax Commission’s conclusions are based on the facts as you described them and the

Utah law currently in effect. Should the facts be different or if the law were to change, a different
conclusion may be warranted. If you feel we have misunderstood the facts as you have presented
them, you have additional facts that may be relevant, or you have any other questions, please feel
free to contact the Commission.

    Additionally, you may also appeal the private letter ruling in the following two ways.

    First, you may file a petition for declaratory order, which would serve to challenge

the Commission's interpretation of statutory language or authority under a statute. This petition
must be in written form, and submitted within thirty (30) days after the date of this private letter
ruling. You may submit your petition by any of the means given below. Failure to submit your
2
Black’s Law Dictionary does not define “residential” alone. Black’s Law Dictionary, 1424 (9th ed.
2009). Black’s Law Dictionary defines “residential” in other contexts: e.g. “residential care,” “residential
cluster,” “residential community treatment center,” etc. Id. Black’s Law Dictionary does not define
“reside.” Id. at 1423.
3
In the context of the Utah Sales and Use Tax Act, the Utah Legislature defined "short-term rental"
in Utah Code Ann. § 59-12-102(131) as follows:

    As used in this chapter:
    ....
    (131) (a) "Short-term rental" means a lease or rental for less than 30 consecutive days.
           (b) "Short-term rental" does not include car sharing.
    ....


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petition within the 30-day time frame could forfeit your appeal rights and will be deemed a
failure to exhaust your administrative remedies. Declaratory orders are discussed in Utah
Administrative Code R861-1A-34 C.2. and in Utah Administrative Code R861-1A-31. The Utah
Administrative Code is currently available at https://adminrules.utah.gov.

     Second, you may file a petition for redetermination of agency action if your private letter

ruling leads to an audit assessment, a denial of a claim, or some other agency action at a division
level. This petition must be written and may use form TC-738, available online
at http://tax.utah.gov/forms/current/tc-738.pdf. Your petition must be submitted by any of the
means given below, within thirty (30) days, generally, of the date of the notice of agency action
that describes the agency action you are challenging.

     You may access general information about Tax Commission Appeals online

at http://tax.utah.gov/commission-office/appeals. You may file an appeal through any of the
means provided below:

• Best way—by email: [email protected]

• By mail: Tax Appeals
USTC
210 North 1950 West
Salt Lake City, UT 84134

• By fax: 801-297-3919

                                          For the Commission,



                                          Jennifer N. Fresques
                                          Commissioner

JNF/aln
24-001

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