The Missouri Department of Economic Development (DED) enacted a variety of new rules and guidelines for Historic Preservation Tax Credits. Real estate developers looking to utilize historic tax credits need to be aware of these regulations before applying. The following highlights eight of the most notable new and expanded provisions of the Missouri Historic Preservation Tax Credit Program as of March 31, 2019.
- Application Cycles: Two application cycles will occur each year. Applications will be accepted in April and October.
- Project Financing: All applications receiving preliminary approval on or after July 1, 2019, must submit evidence of project financing.
- IOI Definition: The definition of Identity of Interest or Related Party (IOI) has been expanded. The expanded definition revolves around relationships with stockholders of participating entities. Added care must be taken in evaluating such relationships.
- Non-QRE and QRE Listings: Listings of Non-Qualified Rehabilitation Expenditures (Non-QREs) and Qualified Rehabilitation Expenditures (QREs) have been expanded.
- Phased Project Costs: Phased Projects, as defined by the DED, must submit an audit for each phase, regardless of each project phase’s cost.
- Soft Costs: Accrued “Soft Costs” of a project, such as developer fees, legal fees, and contractor profit, can be considered for eligibility only if a related agreement or contract on the prescribed DED form has been submitted at initial application, and approved by DED. Such agreements or contracts must provide for payment within five years of project completion for developer fees, and within six months for all other Soft Costs.
- Cost Caps: New cost caps have been established for developer fees and contractor profit. Developer fees are now capped at 12% of eligible costs, less excluded items, and contractor profit is limited to 6% of eligible costs. These limits had been 20% and 10%, respectively, under prior rules. In addition, contractor overhead, including general requirements, is now limited to a combined 4% of eligible costs.
- Additional Credits: If, after audit review by DED, eligible QREs are greater than the amount approved under the preliminary application, additional credits can be applied for.
The above points are among the key provisions of the Missouri Historic Preservation Tax Credit Program. With regular changes to the program, learn how to maximize the value of Historic Preservation Tax Credits. For more information on utilizing historic tax credits, contact an Anders advisor.All Insights