Nebraska Historic Tax Credit General Information
This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue (DOR) until amended. A guidance document does not include internal procedural documents that only affect the internal operations of DOR and does not impose additional requirements or penalties on regulated parties or include confidential information or rules and regulations made in accordance with the Administrative Procedure Act. If you believe that this guidance document imposes additional requirements or penalties on regulated parties, you may request a review of the document.
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(Nebraska Job Creation and Mainstreet Revitalization Act)
The Nebraska Job Creation and Mainstreet Revitalization Act (Act) (Laws 2014, LB191 and Neb. Rev. Stat. §§ 77‑2901 to 77‑2912) is jointly administered by History Nebraska and the Nebraska Department of Revenue (DOR). The Act provides up to $15 million in Nebraska Historic Tax Credits (NHTCs) to be allocated annually, beginning January 1, 2015 and ending December 31, 2022. This credit is equal to 20% of eligible expenditures incurred for improvements to qualifying historically significant real property and is limited to $1 million of tax credits per project. NHTC may be used against income tax, the premium tax imposed on insurance companies, or the franchise tax imposed on financial institutions. This credit is transferrable and subject to certain limitations.
The applicant must apply with History Nebraska for certification of the historical status of the property, approval of the proposed improvements, and allocation of NHTC. After completing the improvements and placing the property in service, the applicant must then apply with History Nebraska for a completed rehabilitation certification. Please refer to History Nebraska for more information.
After History Nebraska has certified the completed rehabilitation project, the applicant must submit a Part 4— Request for Certification of Credits (Part 4) through NHTC’s web application, and include a Checklist developed by DOR to assist in gathering necessary documentation, Schedule I and II along with all documentation required to support the eligible expenditures to DOR for review and approval. Applicants may contact DOR prior to submitting their Part 4 to review documents and address common issues. DOR will notify the applicant of the approved eligible expenditures, the certified credit amount, and the amount of the fee required to be paid to DOR by the designated due date before any tax credit certificates are issued.
An eligible expenditure is any cost incurred for the improvement of historically significant real property located in Nebraska including, but not limited to, qualified rehabilitation expenditures as defined in IRC § 47(c)(2), and related regulations, as long as the improvement is in conformance with the standards as defined below. Eligible expenditures also include expenditures incurred up to six months prior to the first submission date of the Part 2 application for architectural fees, accounting and legal fees, or costs related to protecting the historically significant real property from deterioration.
Historically Significant Real Property (Property)
Historically Significant Real Property means a building or structure used for any purpose, except for a single-family detached residence. A property can be determined to be historically significant in four ways under Neb. Rev. Stat. § 77‑2902(3):
- Individually listed in the National Register of Historic Places;
- Located within a National Register district and contributing to the historical significance of the district;
- Individually designated pursuant to a certified local preservation ordinance; or
- Located within a district designated under a certified local historic preservation ordinance and contributing to the historical significance of the district or the district's economic viability.
Improvement means a rehabilitation, preservation, or restoration project that contributes to the basis, functionality, or value of the property with a total cost meeting the minimum required levels of at least $25,000 in all cities; or the greater of $25,000 or 25% of the assessed value of the property if the project is in Lincoln or Omaha.
Placed in Service
Placed in service means that either a temporary or final certificate of occupancy has been issued for the improvement or the improvement is sufficiently complete to allow for its intended use.
Standards means the Secretary of the Interior's Standards for the Treatment of Historic Properties as promulgated by the U.S. Department of the Interior; or specific standards for the rehabilitation, preservation, and restoration of historically significant real property contained in a properly adopted local preservation ordinance or resolution that has been approved by the State Historic Preservation Officer.
Who Can Apply for the NHTC
Any natural person, political subdivision, limited liability company, partnership, private domestic or private foreign corporation, or domestic or foreign nonprofit corporation can apply for the NHTC.
Application, Tax Credit Allocation, and Tax Credit Certification Process
- Prior to commencing the rehabilitation work, the applicant must first apply with History Nebraska to receive a tax credit allocation under the Act. History Nebraska is responsible for certifying the historical status of the property, assigning priority dates, allocating tax credits, and approving the proposed work. Once the project is complete and placed in service, the applicant must request a completed rehabilitation certification from History Nebraska within 12 months.
Contact History Nebraska for more information on the application process, application forms, application timeline, and how to request an allocation of NHTCs.
1500 R Street
PO Box 82554
Lincoln, NE 68501
- After the project is complete and History Nebraska has issued the completed rehabilitation certification, the applicant will apply to DOR to examine the eligible expenditures, and calculate and certify tax credits. If more than 30 days have passed since the request for completed rehabilitation certification was filed with the History Nebraska, the applicant may petition DOR directly without a determination from History Nebraska.
- The applicant must submit a Part 4 electronically through NHTC’s web application at nhtc.ne.gov, along with the Checklist developed by DOR, and all documentation supporting the eligible expenditures.
- Pre-application review is available prior to formal submission of the Part 4. If requested, DOR will perform a pre-application review after the NHTC Part 3 is approved.
- DOR will issue a letter requesting additional documentation for any eligible expenditure that was not adequately supported. The related credits may be denied if the supporting documentation is not provided on or before the date prescribed in the letter.
- If necessary, DOR will issue a predenial letter prior to making a final determination that reduces eligible expenditures and credits. If the applicant disagrees with any proposed denials and credits they may provide the required information on or before the date prescribed in the predenial letter.
- DOR will issue an NHTC Eligible Expenditure and Credit Determination approving or denying (in whole or in part) the submitted eligible expenditures and calculating the tax credits based on the approved eligible expenditures and the allocated credits within 60 days after submission of the Part 4, unless the parties agree to extend the deadline to 90 days.
- If the applicant disagrees with DOR's NHTC Eligible Expenditure and Credit Determination they may appeal to the District Court of Lancaster County within 30 days after the issuance of the determination. See Neb. Rev. Stat. § 84-917.
- In order for DOR to issue certificates of credit for the approved credits, the applicant must pay DOR the Part 4 fee through electronic funds withdrawal prior to the designated date in the NHTC Eligible Expenditure and Credit Determination. The fee is equal to 0.85% of the amount of credits approved by DOR.
Date to Begin Calculating Eligible Expenditures
Qualified eligible expenditures incurred on and after the first submission date of the Part 2 application to the History Nebraska through the end of the applicant fiscal year when the project was placed in service.
Expenditures Incurred Prior to the Submission Date
Expenditures incurred up to six months prior to the first submission date of the Part 2 application are not allowable unless they are for architectural fees, accounting and legal fees, or costs related to the protection of the historically significant real property from deterioration.
Expenses Incurred for the Protection of Historically Significant Buildings. Neb. Rev. Stat. § 77-2905(5)
Expenses incurred for the protection of a historically significant building are only permitted for temporary or emergency repairs that are limited to the least degree of intervention and preparatory to other work. The documentation necessary to substantiate such expenditures will vary based on the work involved. For example, a picture of a hole in a roof will establish that the roof needed to be patched (not replaced), but expenses to repair a wall will need to be supported by a statement from a third party engineer, for example, indicating that collapse was imminent if the repair did not occur.
Expenditures Incurred by an Original Applicant When a Building is Sold
Expenditures incurred by an applicant who transfers ownership of a building to a new owner before a project is placed-in-service may be included in the new owner’s calculation of eligible expenditures as long as the prior owner does not claim those expenditures in a separate NHTC application.
Types and Transferability of NHTCs
DOR will issue two types of tax credit certificates. Both types may be used to offset income tax, the premium tax imposed on insurance companies, or the franchise tax imposed on financial institutions.
- An NHTC that can be used by the taxpayer to offset a tax, or distributed through the ownership structure like a Type B credit (see below), but can also be transferred, sold, or assigned one or more times, either in whole or in part, by or to any person or legal entity before it is used to offset a tax. Political subdivisions and entities exempt from income tax under IRC § 501(c)(3) will be issued all Type A credit certificates.
- An NHTC that can be used by the applicant to offset a tax, or distributed through multiple ownership tiers of a partnership, limited liability company, or an S corporation to the owners in the same manner as the partners, members, or shareholders account for their proportionate shares of the entity's income or losses; or pursuant to an executed agreement among the partners, members, or shareholders documenting an alternate distribution method. These credits cannot be transferred, sold, assigned, or distributed outside the ownership structure. Any entity other than political subdivisions and entities exempt from income tax under IRC § 501(c)(3) will be issued tax credit certificates that have been divided equally (50%) between Type A and Type B.
Issuance of NHTCs
The original issuance of the tax credit certificates will be to the applicant.
All transfers, sales, assignments or distributions of NHTCs must be submitted to DOR within 15 days of the
transfer through the NHTC web application at nhtc.ne.gov. See Neb. Rev. Stat. § 77-2909(4). Once a transfer is confirmed by a transferee, or a distribution request is approved by DOR, it cannot be reversed.
Tax credits may be claimed starting with the taxable year that the improvement is placed in service. The members/partners/shareholders of a flow-through entity may not use Type B NHTCs (non-transferable credits) to offset a tax liability in any tax year prior to the year in which they obtained an ownership interest in the entity.
The tax credit is nonrefundable; however, any credit that is not used can be carried forward until fully utilized or until December 31, 2027, whichever is earlier.
Recapture of the NHTCs
If at any time during the five years after the improvement is placed in service, History Nebraska determines that the property has been the subject of work not in substantial conformance with the approved application or the documents from which the tax credit was calculated, the tax credits will be subject to recapture. For instance, failure to use straight line depreciation, except where it is not required, would not be in substantial conformance with the credit calculation and is a recapture event. As a condition of DOR issuing tax credit certificates, NHTCs are subject to recapture from the person owning the property on the date History Nebraska determines the recapture event occurred. Refer to History Nebraska for more information on the causes of recapture.
- If a recapture event occurs, all or some of the tax credits will be recaptured from the property owner, based on the date History Nebraska determines the recapture event occurred.
- If the property owner is a partnership, a limited liability company, or an S corporation, the liability for the recaptured credits will be proportionate to the partners', members', or shareholders' ownership in the applicable entity.
- A property owner will be given a written notice and allowed six months to correct any nonconformance before recapture is made.
Questions with regard to the NHTC that are within DOR’s responsibilities under the program should be directed to:
Revenue Tax Specialist, Policy Section
Nebraska Department of Revenue
301 Centennial Mall South
PO Box 94818
Lincoln, NE 68509-4818
402-471-5669 Fax: 402-471-5946
Questions with regard to the NHTC that are within History Nebraska’s responsibilities under the program should be directed to:
1500 “R” Street
PO Box 82554
Lincoln, NE 68501