Were certified Louisiana historic rehabilitation credits subject to statutory recapture, and how did the former two-sale limit count an intermediary transfer?

Plain-English summary

After the historic-preservation agency approved Part 3, the cited credit statutes contained no recapture rule. Revenue could still audit and disallow a credit the taxpayer was not entitled to or an amount exceeding the allowed credit.

Under the transfer rule then in effect, a sale from the credit holder to an intermediary counted as the first transfer, and the intermediary's sale to a Louisiana taxpayer counted as the second and final transfer.

No statutory recapture, but audit authority remained

The ruling found no recapture provision in the historic-credit statute or the general credit-administration statute. It therefore rejected recapture after Part 3 approval by the Department of Culture, Recreation and Tourism.

That did not make an improper claim untouchable. Revenue could disallow a credit that was not actually available or that exceeded the permitted amount, potentially creating additional tax.

Former two-sale rule

The partnership allocated all credits to its general-partner LLC. A transfer from that LLC or one of its members to the intermediary was the first permitted sale. The intermediary's later transfer to a Louisiana taxpayer was the second.

Later statutory change

The official historical note says Act 444 of 2009 eliminated the two-transfer limit beginning July 8, 2009. The two-sale analysis is therefore historical.

Common questions

Q: Did “no recapture” prevent Revenue from auditing the credit?

A: No.

Q: Did the intermediary transfer count as a sale under the former rule?

A: Yes.

Q: Does the ruling's two-sale limit remain current?

A: No. The official note says it was eliminated beginning July 8, 2009.

Citations and references

• La. R.S. 47:6019 — historic rehabilitation credit and former transfer rule
• La. R.S. 47:1675 — general credit administration
• Act 444 of 2009 — elimination of the two-transfer limit noted in the official PDF
• LAC 61:III.101 — Private Letter Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA PLR 08-017

Original ruling text

Historical Note: This PLR addresses La. R.S. 47:6019(A)(3)(b)(i)(aa) prior to the enactment of
Act s 2009, No. 444. Beginning July 8, 2009 the two transfer limit has been eliminated.
Private Letter Ruling
Redacted Version
No. 08-017
Individual Income Tax, Corporation Income Tax and Corporation Franchise Tax
Historic Rehabilitation Credit
October 6, 2008
This is in reply to your request for a private letter ruling concerning whether or not the Louisiana
historic rehabilitation credits as provided under La. R.S. 47:6019 are subject to recapture and
what transfers qualify for the two transfers rule under the same section.
Factual Scenario
You provided these facts:
1.

Company A, L.P. has completed the restoration of the Department Store in LA into a
mixed-use retail/office (non-residential) and residential rental property. The property was
certified as a historic structure on November 17, 2003 and listed in the National Register
on February 15, 2007. The rehabilitation work was completed on August 1, 2007. Costs
attributed to rehabilitation were $$$. On December 4, 2007, the taxpayer received
certification from the Louisiana Division of Historic Preservation. A copy of Part 3 of the
Certification Application is attached as well as the amended Certification.

2.

As the general partner in Company A, L.P., through its operating agreement, Company B,
L.L.C. has been allocated 100% of the Louisiana Historic Rehab Credits. Company B,
L.L.C. will transfer the Louisiana Historic Rehab Credits of $$$ to two parties. One of
these parties will be Company C, L.L.C. who will acquire $$$ of these credits and who
will subsequently transfer these credits to Louisiana taxpayers. There will be no further
transfer of these credits. The credits will be sold for an amount in excess of 75% of the
value of the credits.

3.

An independent auditor has certified the qualifying expenditures for purposes of the
federal tax credits applicable to the project.

Relevant Regulations and Statutes
1.

Louisiana Revised Statute 47:6019(B)(2) states that “any term used in this Section shall
have the same meaning as when used in a comparable context in federal law”. The
statute and the regulations do not refer to originally certified qualifying expenditures
being subject to recapture.
617 North Third Street
P. O. Box 44098
Baton Rouge, Louisiana 70804-4098
225-219-2780  225-219-2759 Fax
TDD# 225-219-2114  www.revenue.louisiana.gov

Proposed PLR No. 08-017
Page 2 of 3
August 13, 2008
2.

In PLR 06-001 a public “entity” was permitted to transfer credits to Louisiana taxpayers.
The Legislature subsequently confirmed this ruling with a change in the term from
“taxpayer” to “persons”.

3.

Louisiana Revised Statute 47:1675(F)(1) allows entities not subject to Louisiana income
or corporation franchise tax who acquire an income or franchise tax credit to allocate the
credit to its partners or members as provided in the statute granting the credit. Louisiana
Revised Statute 47:6019 does not provide an alternative manner in which to allocate the
credits. Since the partnership agreement of Developer allows for credits to be allocated
in a manner that is disproportionate to the partners’ respective equity contributions and
ownership percentages, the allocation is valid.

4.

See PLR 07-017; November 8, 2007.

Rulings Requested
1.

Are the Louisiana Historic Credits provided under La. Rev. Stat. 47:6019 subject to
recapture; and if so, under what circumstances and what is the rate of recapture?

2.

Does the transfer from Company B, L.L.C. or any partner of Company B, L.L.C. to
Louisiana Incentive Consultant, L.L.C. and its subsequent transfer to a Louisiana
taxpayer constitute the allowable two transfers of credits?

Taxpayer’s Conclusions
1.

There are no provisions in La. Rev. Sat. 47:6019 that provide for a recapture of credits
that have been approved the Department of Culture, Recreation and Tourism. Once Part
3 of the Application has been approved, the credits are not subject to recapture.

2.

The transfer from Company B, L.L.C. to Company C, L.L.C. or from any partner of
Company B, L.L.C. represents the first transfer and the subsequent transfer to a
Louisiana taxpayer from Company C, L.L.C. represents the second and final allowable
transfer.

Rulings

1. The Louisiana historic rehabilitation credit is governed by the provisions of R.S. 47:6019
   and the general credits provision in La. R.S. 47:1675. Louisiana Revised Statutes
   47:6019 sets out the specific provisions related to the historic rehabilitation credit. The
   provisions of La. R.S. 47:6019 do not provide for recapture of the credits under any
   circumstances. La. R.S. 47:1675 contains the general administrative provisions for credits
   taken against income and corporation franchise tax. Nothing in the general credits statute
   provides for the recapture of credits against income and corporation franchise tax;
   therefore, once Part 3 of the Application has been approved by the Department of
   Culture, Recreation and Tourism, the rehabilitation tax credits are not subject to recapture
   under the provisions of La. R.S. 47:6019 or La. R.S. 47:1675. However, if the
   Department of Revenue audits a taxpayer and finds that the taxpayer either took a historic
   rehabilitation tax credit they were not entitled to take or took more credit than they were
   allowed to take, the department has the right to disallow the credit. The disallowance of
   the credit may result in the taxpayer owing additional taxes.

Proposed PLR No. 08-017
Page 3 of 3
August 13, 2008

2. The transfer of the historic rehabilitation credit is governed by La. R.S.
   47:6019(A)(3)(b)(i)(aa). The statutes provides in pertinent part that taxpayers who are
   granted rehabilitation tax credits in excess of their tax liability for a year can elect to sell
   their unused credits to another taxpayer with a tax liability. The statute goes on to state
   that the rehabilitation credits may only be sold twice. Under the facts presented in this
   private letter ruling, the transfer or sale of rehabilitation tax credits from Company B,
   L.L.C. or one of its members to Company C, L.L.C. constitutes the first allowed sale of
   the historic credit. A subsequent transfer of the credit from Company C, L.L.C. to another
   Louisiana taxpayer will be the second and final transfer of the tax credit. No additional
   transfer of the tax credit would be allowed.
   If you have any questions or need additional information, please call Michael Pearson, Senior
   Policy Consultant or Danielle B. Clapinski, Attorney, Policy Services Division, at 219-2780.
   Sincerely,

Cynthia Bridges
Secretary
By:

Danielle B. Clapinski
Attorney
Policy Services

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 the department 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 the department's position unless a subsequent declaratory ruling, rule, court case, or statute
supersedes it.