Could a city downtown development authority sell Louisiana historic rehabilitation tax credits it earned even though it owed no state income or franchise tax?

Plain-English summary

A city downtown development authority could sell Louisiana Historic Rehabilitation Credits it had validly earned, even though the public entity was not liable for state income or franchise tax.

The authority owned vacant downtown properties, rehabilitated them under the statutory requirements, and received credit approval from the state historic-preservation office. Selling the credits was necessary to make rehabilitation and resale cost-effective.

The Department read the transfer provision broadly enough to include an entity that earned the credit but could not use it against its own tax.

Why the authority qualified to sell

The general Title 47 definition described a taxpayer as a person liable to pay tax or file a return, which did not directly fit the development authority.

But that definition applied unless the context clearly required otherwise. The credit statute aimed to encourage rehabilitation of downtown historic structures and did not prevent nonprofits, municipalities, or their subdivisions from earning credits.

Prohibiting those entities from selling credits would make the incentive worthless to them. The Department therefore interpreted the transfer rule to advance the statute's purpose.

Statutory amendment noted in the ruling

The document says Act 439 later replaced “taxpayers” with “persons” in the transfer clause for credit sales after August 11, 2005. That amendment followed the transaction addressed by the ruling.

Common questions

Q: Could the downtown development authority sell its credits?

A: Yes.

Q: Did it need its own Louisiana income or franchise-tax liability?

A: No, under this ruling's purpose-based interpretation.

Q: Had the authority actually earned and received approval for the credits?

A: Yes. It completed qualifying rehabilitation and received approval from the state historic-preservation office.

Q: Did the statute later change?

A: Yes. The ruling notes that Act 439 changed “taxpayers” to “persons” for later credit sales.

Citations and references

• La. R.S. 47:6019 — Louisiana Historic Rehabilitation Credit
• La. R.S. 47:2(4) — Title 47 taxpayer definition
• La. Civ. Code art. 10 — interpretation according to legislative purpose
• 2005 La. Acts 439 — transfer-language amendment noted in the ruling
• LAC 61:III.101 — Private Letter Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA PLR 06-001

Original ruling text

Private Letter Ruling (Redacted)
No. 06-001
January 18, 2006
Corporation Income Tax, Corporation Franchise Tax, and Individual Income Tax
Historic Rehabilitation Tax Credit Earned by a Downtown Development District

This is in reply to your request for a private letter ruling as to whether the Downtown Development
Authority, an agency of City is permitted to sell the Louisiana Historic Rehabilitation Credits that
they have earned.
Facts
The Downtown Development Authority (DDA) is a public entity created by City and oversees
City’s Downtown Development District, a development district created by the Louisiana
Legislature.
The DDA owns property within City’s Downtown Development District that was eligible for the
historic rehabilitation credit. Prior to their purchase and rehabilitation by the DDA the properties
were vacant for an extended period of time. The DDA applied to the Department of Culture,
Recreation, and Tourism, Division of Historic Preservation (SHPO) for the credit, have rehabilitated
the buildings according to the statutory requirements, and have been granted the credit by SHPO.
The sale of the tax credits is necessary to make the cost of the rehabilitation and resale of the
properties cost effective.
Ruling Request
Is the DDA, an agency of the City, permitted to sell the Historic Rehabilitation Credits?
Discussion
In 2002, the Louisiana Legislature created an income and corporation franchise tax credit for the
rehabilitation of historic structures located in downtown areas. The Louisiana Historic
Rehabilitation Credit, La. Rev. Stat. 47:6019, allows a credit against income and corporation
franchise tax for the amount of costs and expenses incurred during the rehabilitation of a historic
structure located in a downtown development district. The credit cannot exceed twenty-five percent
of the eligible costs and expenses of the rehabilitation for any taxable year, is limited to one credit
per historic structure rehabilitated, and cannot exceed two hundred fifty thousand dollars.
As additional incentive to encourage rehabilitation of downtown historic structures, the credit was
made transferable. La. Rev. Stat. 47:6019(A)(3)(b)(i)(aa) provides that “[t]axpayers who are
awarded tax credits in excess of their tax liabilities for a given year may elect to sell their unused
tax credits to taxpayers with a Louisiana tax liability provided the unused credits are sold for a
minimum of seventy-five percent of the value of the tax benefits. 1 ” (Emphasis added.)
In order for the DDA to sell the credits that they have earned they must be considered a taxpayer for
purposes of La. Rev. Stat. 47:6019. La. Rev. Stat. 47:2 provides definitions to be used throughout
Title 47 and includes a definition of taxpayer.

1

Historical Note: Subsequent to the transaction that is the subject of this private letter ruling, 2005
La. Acts 439 amended La. Rev. Stat. 47:6019. The amendment of this subclause, (A)(3)(b)(i)(aa),
substituted the term “taxpayers” with the term “persons”. The new language will apply to all sales
of the Historic Rehabilitation Tax Credit after August 11, 2005, the effective date of Act 439.

Redacted Private Letter Ruling 06-001
Page 2 of 2
January 18, 2006
47:2. General definitions
For the purposes of this Title, unless the context clearly otherwise requires or unless
otherwise defined in specific portions of the Title, the following words and phrases shall
have the respective meanings ascribed to them in this Section:
…
(4) “Taxpayer” means any person liable to pay a tax or file a return under any provision
in which the word “taxpayer” appears, regardless of whether such person has paid any
tax or filed the required return.
The DDA is not liable to pay or file a return for state income or franchise tax and, therefore, does
not appear to fit directly under the La. Rev. Stat. 47:2(4) definition of taxpayer. However, the
opening paragraph of La. Rev. Stat. 47:2 provides that if the context clearly requires otherwise that
the definitions, including the definition of taxpayer, can be interpreted more broadly. In addition,
La. C.C. Art. 10 states that “[w]hen the language of the law is susceptible of different meanings, it
must be interpreted as having the meaning that best conforms to the purpose of the law.”
The purpose of La. Rev. Stat. 47:6019 is to encourage the rehabilitation of historical buildings in
Louisiana’s downtown areas. There is nothing in the La. Rev. Stat. 47:6019 that prevents non-profit
organizations, municipalities or their subdivisions from earning the credit. As long as the entity
meets all the statutory requirements and complies with the application and approval process
administered by SHPO, they will be granted a credit. The word “taxpayer” does not appear until the
transfer provision. If the word “taxpayer” when used in this context refers only to those persons
subject to Louisiana income and corporation franchise tax, then certain persons or entities that have
properly earned the credit not only cannot use the credit but would be prohibited from selling the
credit, thus making the incentive created by the legislature of no value to this group.
Allowing any person or entity who earns the credit to sell the credit, even if they are not subject to
Louisiana income or franchise tax effectuates the purpose of the law by increasing the pool of
persons who can cost effectively rehabilitate Louisiana’s historic structures.
Ruling
The City Downtown Development Authority is authorized to sell any Louisiana Historic
Rehabilitation tax credits that it earns.
If you have any questions or need additional information, please call Michael Pearson, Senior
Policy Consultant, or Leonore Heavey, Attorney, Policy Services Division, at 225-219-2780.
Sincerely,
_/s/______
Cynthia Bridges
Secretary
By:

Leonore F. Heavey
Attorney
Policy Services Division

This correspondence constitutes a private letter ruling (PLR) by the Louisiana Department of Revenue, as provided for
by section 61:III.101 of the Louisiana Administrative Code. A PLR provides guidance to a specific taxpayer at the
taxpayer's request. It is a written statement that applies principles of law to a specific set of facts or a particular tax
situation. A PLR does not have the force and effect of law, and is not binding on the person who requested it or on any
other taxpayer. This PLR is binding on LDR only as to the taxpayer to whom it is addressed, and only if the facts
presented were truthful and complete and the transaction was carried out as proposed. It continues as authority for
LDR's position unless a subsequent declaratory ruling, rule, court case, or statute supersedes it.