Alabama Historic Rehabilitation Tax Credit

4/24/2014
1
Certified Public Accountants and Business Consultants
Dan Johnson
2200 Jack Warner Parkway, Tuscaloosa, AL 35401 US | +1 205-345-8440 | www.jmf.com
Filing the Alabama Historical
Rehabilitation Tax Credit
• Two problems with filing the credit in Alabama
1) At this time the forms do not exist
2) The law was recently changed
• AL HB 509 passed both houses on April 3rd, 2014.
This allows a one‐time transfer of the AHRTC. AL
Dept. of Revenue (ADOR) is required by the law to
create a transfer form.
Overview
1. Case study on filing the Federal Historic Tax Credit (HTC) for a
partnership
2. Case study on filing the HTC for an individual
3. Discuss how ADOR will (or might) mirror the federal filings
for these returns
4. New transfer form from HB 509

4/24/2014
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Partnership Case Study
Facts of the Case
HTC Example Filing, LLC has 2 owners
1. Mister Developer (individual) ‐ 99% of HTC Example Filing
a. contributed 396,000 of Cash
2. AHRTC Investor LLC ‐ 1% of HTC Example Filing
a. Contributed 4,000 of Cash
b. AHRTC Investor LLC is 100% owned by Local Bank CO
Note: See Federal Form 1065 handout
Partnership Case Study (cont.)
Facts of the Case
1/1/13 Purchase a property for $1,000,000. $200,000 of the
acquisition was allocated to Land.
Local Bank CO loans the entity $3,100,000. (For simplicity ‐ payments
and interest begin in 2014)
According to the LLC agreement, the rehabilitation credits are being
allocated 90% to AHRTC Investor LLC and 10% to Mister Developer.
WARNING:
The non‐pro‐rata allocation of the credits on the 1065 is
not allowed under federal law.
The case study allocates the credits non‐pro‐rata as per the
AHRTC rules in order to mimic an Alabama tax return filing.

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Facts of the Case
The rehabilitation of $2,500,000 is completed on 10/31/13. The cost
breakdown is as follows:
• $200,000    Land Improvements
• $100,000    Fixtures & Furniture
• $550,000    Expansion to the Building (non‐QRE)
• $1,650,000 Building Rehabilitation (QRE)
The credits are issued on 11/30/13.
Form 3468
Form 3468 Statement

4/24/2014
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Partner K‐1
K‐1 Statement
Things to Note
The credit is not reported on the partnership’s books. It is a K‐1
informational item. (It is possible for a corporation to have a deferred tax asset).
In Alabama the AHRTC is allocated pro‐rata, unless there is a written
agreement to allocate the credit in another manner.
The Federal HTC can only be allocated pro‐rata, with the exception of
the Master Tenant transfer.
ADOR could mirror the Federal Form 3468 by adding an AHRTC
section to the AL Form OC

4/24/2014
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Individual Case Study
Facts of the Case
Mister Developer Form 1040
• Single
• W‐2 wages of $190,000
• K‐1 from HTC Example Filing
• No other income or deductions
Form 3468
Certified Public Accountants and Business Consultants2200 Jack Warner Parkway, Tuscaloosa, AL 35401 US | +1 205-345-8440 | www.jmf.com
Form 1040

4/24/2014
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Credit Carryover
Individual Case Study (cont.)
Things to Note
The K‐1 from HTC Example Filing has a significant loss due to bonus
depreciation. (‐$145,000)
Mister Developer has $45,000 of AGI, therefore his income tax is
$4,868. He will have a credit carryover.
ADOR could mirror the Federal Form 3468 by adding an AHRTC
section to the AL Form OC
AL HB 509 2014
HB 509 amended the law to:
1) allow for a one‐time only transfer of the credits to any tax
payer(s).
2) Remove the restrictions on the change in ownership.
HB 509 is effective retroactively to May 15, 2013, the start date of the
original law.

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AL HB 509 2014
ADOR will create a “form transfer statement to be filed by the
transferor with the department prior to the purported transfer of any
credit issued.”
The Transfer Form shall include:
1. Name of the transferor
2. Name of each transferee
3. Federal taxpayer identification number of the transferor &
transferee
4. The amount of the tax credit to be transferred to each transferee
AL HB 509 2014
The Filings shall include:
1. “A completed transfer statement form”
2. “A copy of the tax credit certificate issued”
3. Documentation of “the amount of tax credits which the transferor
intends to transfer”
4. “A copy of the proposed written transfer agreement”
5. “A transfer fee payable to the department in the amount of one
thousand dollars ($1,000) per transferee listed on the transfer
statement form
AL HB 509 2014
Transferor has 30 days from the date of the written transfer
agreement to file the transfer form.
ADOR will issue a tax credit certificate to each transferee within 30
days of the filing.

4/24/2014
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Thank You
Questions?
Dan Johnson 205‐349‐1322 djohnson@jmf.com

Alabama Historic Rehabilitation Tax Credit

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