Connecticut State Tax Credits and Other Considerations for Developers
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Transcript of Connecticut State Tax Credits and Other Considerations for Developers
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Connecticut State Tax Creditsand
Other Considerations for Developers
Todd Doyle, Esq.
February 12, 2009
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About Shipman & Goodwin
• Founded in 1919
• 145 Attorneys
• Full Service Law Firm
• Four offices in Connecticut
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S&G Tax Practice• All aspects of federal, state and
international taxation, including planning, restructuring, audit and tax controversy.
Many Developer Clients Tax Credit Counseling
Research & Development Tax Credit
Federal Rehabilitation Tax Credit
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State Tax Credit Basics
• Timing – Must apply for credit allocation PRIOR to start of construction
• Qualification – must be a “Substantial Rehabilitation”QREs in excess of 25% of Property’s
Assessed ValueApplication requires an estimate of QREs
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QREsFederal vs. State Credit
Key:
No shading = Federal
Green = State
Red = Neither State nor Federal
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Federal vs. State Tax CreditsTreatment of Projected Costs as QREs
• Acquisition• Hard Costs• Retail Improvements• Accounting• A&E• Permits• Remediation of Building• Land /Streetscaping• Marketing Expenses
• Legal & Title• Utility charges• R.E. taxes during construction• Financing Fees• Survey• Construction Loan Interest• Developer Fees• Contractor’s Overhead
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Two State Credits• Historic Structures Credit (C.G.S.§10-416a)
25% Credit – up to $2.7 M Applies only to Residential Developments
• Historic Preservation Credit (C.G.S.§10-416b)Applies to both Residential and Non-Residential “Mixed
Used” Developments25% Credit – up to $5 M over 3 years30% Credit available to Affordable Housing Projects
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Choosing Between the Two Credits
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Tax Credit Mechanism
• Developer submits final certification to Commission upon Project Completion
• Commission issues Tax Credit Voucher
• Voucher = LESSER of Applicable percentage of Projected QREsApplicable percentage of QREs
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Tax Credit Mechanism (cont.)• Credit may be applied against the following
taxes:Insurance and Health CentersCorporation BusinessAir CarriersRailroad CompaniesCommunity Antenna Television SystemsUtilities Company
• Voucher may be Transferred – Once• Carryforward up to 5 years
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State Sales Tax Incentives for Developers
Carpentry Construction
Management Demolition Flooring
Foundation work Property Management Painting Plumbing Roofing
• State Sales Tax Exemption Applicable to Certified Rehabilitation Projects (Reg. §12-407(2)(i)(I)-1). Exempts certain otherwise taxable construction services
from 6% sales tax Exempted services include
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Sales Tax Exemption Considerations
• Exemption granted under Regulations applicable to “New Construction” (Reg. §12-407(2)(i)(I)-1(c) )
• Definitions of terms “Certified Rehabilitation,” “Substantial Rehabilitation” and “QRE” determined under Federal Law. (Thus, Exemption may apply even where project does not qualify for State credits)
• Exemption Applies only to labor costs, not materials Exceptions for certain types of “fixed-fee” contracts
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Sales Tax Exemption Considerations (cont.)
• Some labor costs always taxable (e.g., Janitorial, landscaping, maintenance)
• Developer must issue CERT 102 to Contractor
• Document all phases of Construction
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Take Away• Generous State benefits Available for Historic
Rehabilitation Projects• Get organized – early• Get counsel• Helpful Publications
DRS Guide to Connecticut Business Tax Credits (IP 2007(31))
DRS Building Contractors’ Guide to Sales and Use Taxes (IP 2006(35))
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Connecticut State Tax Creditsand
Other Considerations for Developers
Todd Doyle, Esq.
January 22, 2009