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Rehabilitation Credit Granted Deadline Relief

Among the events of this past summer, the Internal Revenue Service issued Notice 2020-58, which gives taxpayers additional time to develop projects in regards to Historic Tax Credits. Relief has been provided and this notice extends the measuring period used in satisfying the substantial rehabilitation test requirements.

The Statutory Transition rule provided in section 13402(c)(2) of the Tax Cuts and Jobs Act has been updated, extending the original measuring period ending between April 1, 2020 and March 31, 2021 to March 31, 2021, thereby affording additional time to complete projects and satisfy the qualified rehabilitation expenditures test. Those rehabilitation credit projects falling within the above window now have the opportunity to have measuring periods longer than the typical 24 or 60 months.  As per the transition rule, the 24- or 60-month measuring period was set to begin no later than June 20, 2018, which would then place the end of the 24 month and 60 month measuring period on June 20, 2020 and June 20, 2023, respectively.  With the ending measuring period extension to March 31, 2021, taxpayers will be able deal with delays that may have been caused by recent events for the June 20, 2020 deadline.

Another major benefit afforded by the transition rule is that taxpayers that satisfy the eligibility requirements can now claim the Historic Tax Credit in the year a property is placed in service instead of spreading the credit claim over 5 years. To be eligible, the project must be placed in service by December 31, 2021 and meet the March 31, 2021 deadline requirements mentioned above. Taxpayers now have the opportunity to complete projects, pass required tests and still qualify under the transition rule.

Except as noted above, all requirements of Section 47 still continue to apply. The 10 percent credit has been repealed but there are still modified rules for claiming the 20 percent credit for certified historic structures.

For more details on the Rehabilitation credit or IRS Notice 2020-58 please reach out to the professionals at Withum.

Author: Christopher Suto, CPA | csuto@withum.com

Real Estate Services

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