HB-6496, As Passed Senate, December 11, 2008

SUBSTITUTE FOR

HOUSE BILL NO. 6496

A bill to amend 1967 PA 281, entitled

"Income tax act of 1967,"

by amending section 266 (MCL 206.266), as amended by 2007 PA 94.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 266. (1) A qualified taxpayer with a rehabilitation plan

certified after December 31, 1998 may credit against the tax

imposed by this act the amount determined pursuant to subsection

(2) for the qualified expenditures for the rehabilitation of a

historic resource pursuant to the rehabilitation plan in the year

in which the certification of completed rehabilitation of the

historic resource is issued. ~~provided that the certification of~~

~~completed rehabilitation was issued not more than 5 years after the~~

~~rehabilitation plan was certified by the~~ ~~Michigan~~ ~~historical~~

~~center.~~ Only those expenditures that are paid or incurred during

the time periods prescribed for the credit under section 47(a)(2)

of the internal revenue code and any related treasury regulations

shall be considered qualified expenditures.

(2) The credit allowed under this section shall be 25% of the

qualified expenditures that are eligible, or would have been

eligible except that the taxpayer elected to transfer the credit

under subsection (12), for the credit under section 47(a)(2) of the

internal revenue code if the taxpayer is eligible for the credit

under section 47(a)(2) of the internal revenue code or, if the

taxpayer is not eligible for the credit under section 47(a)(2) of

the internal revenue code, 25% of the qualified expenditures that

would qualify under section 47(a)(2) of the internal revenue code

except that the expenditures are made to a historic resource that

is not eligible for the credit under section 47(a)(2) of the

internal revenue code, subject to both of the following:

(a) A taxpayer with qualified expenditures that are eligible

for the credit under section 47(a)(2) of the internal revenue code

may not claim a credit under this section for those qualified

expenditures unless the taxpayer has claimed and received a credit

for those qualified expenditures under section 47(a)(2) of the

internal revenue code or the taxpayer has elected to transfer the

credit under subsection (12).

(b) A credit under this section shall be reduced by the amount

of a credit received by the taxpayer for the same qualified

expenditures under section 47(a)(2) of the internal revenue code.

(3) To be eligible for the credit under this section, the

taxpayer shall apply to and receive from the Michigan historical

center certification that the historic significance, the

rehabilitation plan, and the completed rehabilitation of the

historic resource meet the criteria under subsection (6) and either

of the following:

(a) All of the following criteria:

(i) The historic resource contributes to the significance of

the historic district in which it is located.

(ii) Both the rehabilitation plan and completed rehabilitation

of the historic resource meet the federal secretary of the

interior's standards for rehabilitation and guidelines for

rehabilitating historic buildings, 36 CFR part 67.

(iii) All rehabilitation work has been done to or within the

walls, boundaries, or structures of the historic resource or to

historic resources located within the property boundaries of the

resource.

(b) The taxpayer has received certification from the national

park service that the historic resource's significance, the

rehabilitation plan, and the completed rehabilitation qualify for

the credit allowed under section 47(a)(2) of the internal revenue

code.

(4) If a qualified taxpayer is eligible for the credit allowed

under section 47(a)(2) of the internal revenue code, the qualified

taxpayer shall file for certification with the center to qualify

for the credit allowed under section 47(a)(2) of the internal

revenue code. If the qualified taxpayer has previously filed for

certification with the center to qualify for the credit allowed

under section 47(a)(2) of the internal revenue code, additional

filing for the credit allowed under this section is not required.

(5) The center may inspect a historic resource at any time

during the rehabilitation process and may revoke certification of

completed rehabilitation if the rehabilitation was not undertaken

as represented in the rehabilitation plan or if unapproved

alterations to the completed rehabilitation are made during the 5

years after the tax year in which the credit was claimed. The

center shall promptly notify the department of a revocation.

(6) Qualified expenditures for the rehabilitation of a

historic resource may be used to calculate the credit under this

section if the historic resource meets 1 of the criteria listed in

subdivision (a) and 1 of the criteria listed in subdivision (b):

(a) The resource is 1 of the following during the tax year in

which a credit under this section is claimed for those qualified

expenditures:

(i) Individually listed on the national register of historic

places or state register of historic sites.

(ii) A contributing resource located within a historic district

listed on the national register of historic places or the state

(iii) A contributing resource located within a historic district

designated by a local unit pursuant to an ordinance adopted under

the local historic districts act, 1970 PA 169, MCL 399.201 to

399.215.

(b) The resource meets 1 of the following criteria during the

tax year in which a credit under this section is claimed for those

qualified expenditures:

(i) The historic resource is located in a designated historic

district in a local unit of government with an existing ordinance

under the local historic districts act, 1970 PA 169, MCL 399.201 to

399.215.

(ii) The historic resource is located in an incorporated local

unit of government that does not have an ordinance under the local

historic districts act, 1970 PA 169, MCL 399.201 to 399.215, and

has a population of less than 5,000.

(iii) The historic resource is located in an unincorporated

local unit of government.

(iv) The historic resource is located in an incorporated local

unit of government that does not have an ordinance under the local

historic districts act, 1970 PA 169, MCL 399.201 to 399.215, and is

located within the boundaries of an association that has been

chartered under 1889 PA 39, MCL 455.51 to 455.72.

(v) The historic resource is subject to a historic

preservation easement.

(7) A credit amount assigned under section 39c(7) of ~~the~~

~~single business tax act,~~ former 1975 PA 228 ~~, MCL 208.39c,~~ or

section 435 of the Michigan business tax act, 2007 PA 36, MCL

208.1435, may be claimed against the partner's, member's, or

shareholder's tax liability under this act as provided in section

39c(7) of ~~the single business tax act,~~ former 1975 PA 228 ~~, MCL~~

~~208.39c,~~ or section 435 of the Michigan business tax act, 2007 PA

36, MCL 208.1435.

(8) If the credit allowed under this section for the tax year

and any unused carryforward of the credit allowed by this section

exceed the taxpayer's tax liability for the tax year, that portion

that exceeds the tax liability for the tax year shall not be

refunded but may be carried forward to offset tax liability in

subsequent tax years for 10 years or until used up, whichever

occurs first. For projects for which a certificate of completed

rehabilitation is issued for a tax year beginning after December

31, 2008 and for which the credit amount allowed is less than

$250,000.00, a qualified taxpayer may elect to forgo the carryover

period and receive a refund of the amount of the credit that

exceeds the qualified taxpayer's tax liability. The amount of the

refund shall be equal to 90% of the amount of the credit that

exceeds the qualified taxpayer's tax liability. An election under

this subsection shall be made in the year that a certificate of

completed rehabilitation is issued and shall be irrevocable.

(9) ~~If the~~ For tax years beginning before January 1, 2009, if

a taxpayer sells a historic resource for which a credit under this

section was claimed less than 5 years after the year in which the

credit was claimed, the following percentage of the credit amount

previously claimed relative to that historic resource shall be

added back to the tax liability of the taxpayer in the year of the

sale:

(a) If the sale is less than 1 year after the year in which

the credit was claimed, 100%.

(b) If the sale is at least 1 year but less than 2 years after

the year in which the credit was claimed, 80%.

after the year in which the credit was claimed, 60%.

(d) If the sale is at least 3 years but less than 4 years

after the year in which the credit was claimed, 40%.

(e) If the sale is at least 4 years but less than 5 years

after the year in which the credit was claimed, 20%.

(f) If the sale is 5 years or more after the year in which the

credit was claimed, an addback to the taxpayer's tax liability

shall not be made.

(10) If For tax years beginning before January 1, 2009, if a

certification of completed rehabilitation is revoked under

subsection (5) less than 5 years after the year in which a credit

was claimed, the following percentage of the credit amount

previously claimed relative to that historic resource shall be

added back to the tax liability of the taxpayer in the year of the

revocation:

(a) If the revocation is less than 1 year after the year in

which the credit was claimed, 100%.

(b) If the revocation is at least 1 year but less than 2 years

after the year in which the credit was claimed, 80%.

years after the year in which the credit was claimed, 60%.

(d) If the revocation is at least 3 years but less than 4

years after the year in which the credit was claimed, 40%.

(e) If the revocation is at least 4 years but less than 5

years after the year in which the credit was claimed, 20%.

(f) If the revocation is 5 years or more after the year in

which the credit was claimed, an addback to the taxpayer's tax

liability shall not be made.

(11) For tax years beginning after December 31, 2008, if a

certificate of completed rehabilitation is revoked under subsection

(5) or if the historic resource is sold or disposed of less than 5

years after being placed in service as defined in section 47(b)(1)

of the internal revenue code and related treasury regulations, the

following percentage of the credit amount previously claimed

relative to that historic resource shall be added back to the tax

liability of the qualified taxpayer that received the certificate

of completed rehabilitation and not the assignee in the year of the

revocation:

(a) If the revocation is less than 1 year after the historic

resource is placed in service, 100%.

(b) If the revocation is at least 1 year but less than 2 years

after the historic resource is placed in service, 80%.

years after the historic resource is placed in service, 60%.

(d) If the revocation is at least 3 years but less than 4

years after the historic resource is placed in service, 40%.

(e) If the revocation is at least 4 years but less than 5

years after the historic resource is placed in service, 20%.

(f) If the revocation is at least 5 years or more after the

historic resource is placed in service, an add back to the

qualified taxpayer tax liability shall not be required.

(12) A qualified taxpayer who receives a certificate of

completed rehabilitation after December 31, 2008 may elect to forgo

claiming the credit and transfer the credit along with the

ownership of the property for which the credit may be claimed to a

new owner. The new owner shall be treated as the qualified taxpayer

having incurred the rehabilitation costs and shall be subject to

the recapture provisions under subsection (11) if the new owner

sells or disposes of the property within 5 years after the new

owner acquired the property. For purposes of this subsection and

subsection (11), the placed in service date for a new owner is the

date the new owner acquired the property for which the credit is

claimed.

(13) ~~(11)~~ The department of history, arts, and libraries

through the Michigan historical center may impose a fee to cover

the administrative cost of implementing the program under this

section.

(14) ~~(12)~~ The qualified taxpayer shall attach all of the

following to the qualified taxpayer's annual return under this act:

(a) Certification of completed rehabilitation.

(b) Certification of historic significance related to the

historic resource and the qualified expenditures used to claim a

credit under this section.

an assignee under section 39c of ~~the single business tax act,~~

former 1975 PA 228 ~~, MCL 208.39c,~~ or section 435 of the Michigan

business tax act, 2007 PA 36, MCL 208.1435, of any portion of a

credit allowed under that section.

(15) ~~(13)~~ The department of history, arts, and libraries shall

promulgate rules to implement this section pursuant to the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328.

(16) ~~(14)~~ The total of the credits claimed under this section

and section 39c of ~~the single business tax act,~~ former 1975 PA 228

~~, MCL 208.39c,~~ or section 435 of the Michigan business tax act,

2007 PA 36, MCL 208.1435, for a rehabilitation project shall not

exceed 25% of the total qualified expenditures eligible for the

credit under this section for that rehabilitation project.

(17) ~~(15)~~ The department of history, arts, and libraries

through the Michigan historical center shall report all of the

following to the legislature annually for the immediately preceding

state fiscal year:

(a) The fee schedule used by the center and the total amount

of fees collected.

(b) A description of each rehabilitation project certified.

project.

(18) ~~(16)~~ As used in this section:

(a) "Contributing resource" means a historic resource that

contributes to the significance of the historic district in which

it is located.

(b) "Historic district" means an area, or group of areas not

necessarily having contiguous boundaries, that contains 1 resource

or a group of resources that are related by history, architecture,

archaeology, engineering, or culture.

historic building, structure, site, object, feature, or open space

located within a historic district designated by the national

or a local unit acting under the local historic districts act, 1970

PA 169, MCL 399.201 to 399.215; or that is individually listed on

the state register of historic sites or national register of

historic places and includes all of the following:

(i) An owner-occupied personal residence or a historic resource

located within the property boundaries of that personal residence.

(ii) An income-producing commercial, industrial, or residential

resource or a historic resource located within the property

boundaries of that resource.

(iii) A resource owned by a governmental body, nonprofit

organization, or tax-exempt entity that is used primarily by a

taxpayer lessee in a trade or business unrelated to the

governmental body, nonprofit organization, or tax-exempt entity and

that is subject to tax under this act.

(iv) A resource that is occupied or utilized by a governmental

body, nonprofit organization, or tax-exempt entity pursuant to a

long-term lease or lease with option to buy agreement.

(v) Any other resource that could benefit from rehabilitation.

(d) "Local unit" means a county, city, village, or township.

(e) "Long-term lease" means a lease term of at least 27.5

years for a residential resource or at least 31.5 years for a

nonresidential resource.

(f) "Michigan historical center" or "center" means the state

historic preservation office of the Michigan historical center of

the department of history, arts, and libraries or its successor

agency.

(g) "Open space" means undeveloped land, a naturally

landscaped area, or a formal or man-made landscaped area that

provides a connective link or a buffer between other resources.

(h) "Person" means an individual, partnership, corporation,

association, governmental entity, or other legal entity.

(i) "Qualified expenditures" means capital expenditures that

qualify, or would qualify except that the taxpayer elected to

transfer the credit under subsection (12), for a rehabilitation

credit under section 47(a)(2) of the internal revenue code if the

taxpayer is eligible for the credit under section 47(a)(2) of the

internal revenue code or, if the taxpayer is not eligible for the

credit under section 47(a)(2) of the internal revenue code, the

qualified expenditures that would qualify under section 47(a)(2) of

the internal revenue code except that the expenditures are made to

a historic resource that is not eligible for the credit under

section 47(a)(2) of the internal revenue code, that were paid. ~~not~~

~~more than 5 years after the certification of the rehabilitation~~

~~plan that included those expenditures was approved by the center,~~

~~and that were paid after~~ ~~December 31, 1998~~ ~~for the rehabilitation~~

~~of a historic resource.~~ Qualified expenditures do not include

capital expenditures for nonhistoric additions to a historic

resource except an addition that is required by state or federal

regulations that relate to historic preservation, safety, or

accessibility.

(j) "Qualified taxpayer" means a person that is an assignee

under section 39c of ~~the single business tax act,~~ former 1975 PA

228 ~~, MCL 208.39c,~~ or section 435 of the Michigan business tax act,

House Bill No. 6496 as amended December 11, 2008

2007 PA 36, MCL 208.1435, or either owns the resource to be

rehabilitated or has a long-term lease agreement with the owner of

the historic resource and that has qualified expenditures for the

rehabilitation of the historic resource equal to or greater than

10% of the state equalized valuation of the property. If the

historic resource to be rehabilitated is a portion of a historic or

nonhistoric resource, the state equalized valuation of only that

portion of the property shall be used for purposes of this

subdivision. If the assessor for the local tax collecting unit in

which the historic resource is located determines the state

equalized valuation of that portion, that assessor's determination

shall be used for purposes of this subdivision. If the assessor

does not determine that state equalized valuation of that portion,

qualified expenditures, for purposes of this subdivision, shall be

equal to or greater than 5% of the appraised value as determined by

a certified appraiser. If the historic resource to be rehabilitated

does not have a state equalized valuation, qualified expenditures

for purposes of this subdivision shall be equal to or greater than

5% of the appraised value of the resource as determined by a

certified appraiser.

(k) "Rehabilitation plan" means a plan for the rehabilitation

of a historic resource that meets the federal secretary of the

interior's standards for rehabilitation and guidelines for

rehabilitation of historic buildings under 36 CFR part 67.

Enacting section 1. This amendatory act takes effect January

1, 2009.

<<Enacting section 2. This amendatory act does not take effect

unless Senate Bill No. 973 of the 94th Legislature is enacted into law.>>