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On June 12, 2020, AccountingWEB published an article from David Lionberger detailing recently proposed amendments from the IRS related to the federal historic rehabilitation tax credit. Lionberger also provides examples of how the amended credit would be applied to a rehabilitation project.

The updated proposal, issued on May 22, would amend Treasury Regulation 1.47-7 and include an explanation for how the new five-year period over which the credit may be claimed would be coordinated with other rules for the credit.

Practitioners questioned whether a single rehabilitation credit amount is to be determined for the placed-in-service (PIS) year and allocated ratably over the 5-year period, or whether five separate rehabilitation credit amounts are determined for each year of the period. The proposed regulations clarify that a single rehabilitation tax credit amount is properly determined for the PIS year of the qualified rehabilitated building (e.g. the year the renovation is completed), and the credit would be allocated at 20-percent per year over the five-year period starting in the PIS year.

“The credit is generally 20 percent of the qualified rehabilitation expenditures (QREs) incurred through the end of the PIS year,” Lionberger added. “However, if the qualified rehabilitated building owner claims Section 168(k) bonus first-year depreciation for the QREs, then the credit is 20 percent of the remaining QREs incurred through the end of the PIS year after reduction of for the bonus first-year depreciation.”

For the full article, please click here.

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