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Frequently Asked Questions regarding Tax Credit

How can I find out if my property is historically designated? If it is not, how can I get it designated?

What if I have already begun the rehabilitation of my property - is it still possible to qualify for the tax credit?
Can I apply for credits more than once?
What if the work takes longer than 24 months to complete?
If I am taking the federal investment credit, how would the state credit apply?
What if my project includes a new addition to my historic property? Would such a project qualify?
My property does not currently meet building codes - to bring it up to code may mean that certain historic features are sacrificed. Would the project still qualify?
I intend to do much of the labor myself in order to cut costs. Can I claim tax credits on some of my own labor or "sweat equity"?
If I take the tax credit and then decide that I must sell my property or break my lease within 5 years, what are the consequences?
If a property is owned or leased by more than one taxpayer, can all involved taxpayers qualify for the tax credit? If so, how is the application made?
I would like to see a sample break down of a project?
Who do I contact for more information regarding the tax credit program?

 

How can I find out if my property is historically designated? If it is not, how can I get it designated?

Answer: There are three ways you can find out if your property is designated: contact the Planning and Development Services Division at 303-651-8330; email the Planning and Development Services Divison ; or visit our Designated Landmark website. If your property is a Designated Landmark you are eligible for the State Income Tax Credit.

If your property is not listed as a Designated Landmark and is located between 4th and 9th Avenue and between Kimbark and Atwood Street, historic survey information exists regarding your home. Please use the following resources to see if your property has been surveyed: contact the Planning and Development Services Division at 303-651-8330; email the Planning and Development Services Division; or visit our Historic Eastside Architectural Survey website. Once you have located your property and it is eligible, please complete the designation application form and contact Brien Schumacher, Historic Preservation Liaison at 303-651-8764 to discuss the next steps to designation.

If you are unable to locate your property with either of the above resources, please contact the Planning and Develoment Services Division staff and they will work with you to determine if your property is eligible for designation.

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What if I have already begun the rehabilitation of my property - is it still possible to qualify for the tax credit?

Answer: Yes. You can still apply for credit on the unfinished portion. However, you will not be able to claim any credit on costs incurred on the already completed work. Also, you cannot being work on that unfinished portion until you have received approval of your preliminary application (Part 1).

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Can I apply for the credit more than once?

Answer: Yes, as long as you qualify for the credits each time you apply (i.e. you must spend at least $5,000). In fact, if you are intending to carry a project out over a few years, you should break it into separate "phases" of work so that each phase can be realistically accomplished within the 24 month time frame.

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What if the work takes longer than 24 months to complete?

Answer: A one time extension of the 24 month time period can be granted by the reviewing entity "upon showing of good cause." However, you must provide a reasonable explanation of why the project could not be completed on schedule, and there is no guarantee that the extension will be granted. If it is likely that the project will take a full two years, and may run over, the project should be broken into two phases.

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If I am taking the federal investment tax credit, how would the state credit apply?

Answer: If you will be taking the federal credit and have received the necessary federal approvals, no additional application for state credit needs to be filed. You can simply claim a state credit on the basis of the approvals for the federal credit. However, the amount of the state credit allowed is limited to 10% of the total available federal credit (i.e. 10% of the 20% federal credit, or 2% of your rehabilitation costs). This credit is covered in a separate section of state law CRS 39-22-507.5.

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What if my project includes a new addition to my historic property? Would such a project qualify?

Answer: Possibly. The costs of new additions or enlargements do not qualify for the credit, so you certainly could not claim a credit on the cost of the addition. However, if you were also spending over $5,000 on rehabilitation work on the original historic building, and the project otherwise met the standards for approval, you could claim the credit on that portion of the project. The same holds true for landscaping, site improvements and other "non-allowable costs." As long as the overall project meets with the approval of the reviewing entity, and as long as there are at least $5,000 in allowable costs, you can claim the credit on those allowable costs, but only on those allowable costs.

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My property does not currently meet building codes - to bring it up to code may mean that certain historic features are sacrificed. Would the project still qualify?

Answer: Yes. In fact this is a fairly common problem with historic properties. A project should never be denied because of the need to address legitimate code concerns. Contact Brien Schumacher, Historic Preservation Commission Liaison, at 303-651-8764 or contact our Building Inspection Division at 303-651-8303 prior to submitting a Certificate of Appropriateness, they can assist you in reviewing your project.

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I intend to do much of the labor myself in order to cut costs. Can I claim tax credit on some of my own labor or "sweat equity"?

Answer: No. You simply cannot claim a credit unless you have receipts documenting the actual expenditure of the costs claimed. While your time is certainly valuable, you cannot use it as a basis for claiming any credit. If the cost of materials, however, exceed $5,000 you can claim a credit against those actual costs.

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If I take the tax credit and then decide that I must sell my property or break my lease within 5 years, what are the consequences?

Answer: If you decide to sell your property within 5 years of completion of the project or if you are a tenant and terminate a long-term lease, you will have to refund to the state all or a portion of any credit used according to the following formula:

Within the first year;
100%
Within the second year;
80%
Within the third year;
60%
Within the fourth year;
40%
Within the fifth year;
20%

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If a property is owned or leased by more than one taxpayer, can all involved taxpayers qualify for the tax credit? IF so, how is the application made?

Answer: Yes. Several taxpayers may qualify for credit for a single property as long as each taxpayer is a part owner or qualified tenant. These qualified taxpayers may jointly submit the required application and fees along with a list of all owners and qualified tenants intending to claim the tax credit (CRS 39-22-514). There shall be a rebuttable presumption that the total available tax credit shall be divided pro rata according to the number of such taxpayers. Such presumption shall be rebuttable only upon filing of a binding agreement with the reviewing entity which is signed by all of the taxpayers who qualify for the credit for the same property and which specifies the manner in which the amount of the tax credit is to be divided among such taxpayers (CRS 39-22-514). Multiply taxpayers should keep in mind that the total available credit is $50,000 per project not per taxpayer.

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I would like to see a sample breakdown of a project?

Answer:

Rehabilitation Costs = $45,000

Available credit = 20% of $45,000 = $9,000

Assume the taxpayer owes $1,700 in state income tax each year:

Taxpayer pays no state income taxes for 5 years:

Total tax savings = $1,700 x 5 years = $8,500
(note that taxpayer could not utilize all available tax credit)

Assume same project, but taxpayer owes $3,200 in state income tax each year:

Each year, taxpayer pays 50% of tax liability over $2,000:

$3,200 - $2,000 = $1,200

$1,200 x 50% = $600 per year is paid to the state

Total tax savings per year = $3,200 - $600 = $2,600

Summary
Taxes Paid
Taxes Saved
Year 1
$600
$2,600
Year 2
$600
$2,600
Year 3
$600
$2,600
Year 4
$2,000
$1,200
TOTALS
$3,800
$9,000

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Who do I contact for more information regarding the tax credit program?

Answer: For more information, contact the Colorado Historical Society at 303-866-3678 or the Planning and Development Services Division at 303-651-8330.