Census Tract Eligibility Using NYS Historic Tax Credits

The NYS Department of Taxation and Finance (DTF) recently issued Advisory Opinion TSB-A-17(3)I determining that a property listed in the National Register of Historic Places (the building) was located within a qualifying census tract for purposes of the historic tax credit (HTC) based on the determination of the New York State Office of Parks, Recreation and Historic Preservation (SHPO) that the building was in a qualifying census tract.

NYS Tax Law § 606(oo) allows for a HTC against NYS tax equal to 100% of the federal HTC (up to $5 million).  Among other requirements, NYS Tax Law § 606[oo][5]) requires that a property to be rehabilitated must be located within a qualified census tract, defined as a census tract at or below 100% of the state median family income.  The state median family income is computed as of January 1 of each year using the most recent 5-year estimate from the American Community Survey published by the United States Census Bureau.  The determination of eligibility is made by SHPO.

In the case detailed in the Advisory Opinion, SHPO approved the rehabilitation plans and issued the developer a letter confirming that the building is located in the qualified census tract and is eligible for the NYS HTC.  However, the specified census tract (using the most recent 5-year American Community Survey estimate published by the US Census Bureau) was higher than the median family income for New York state. As a result, the taxpayer’s lender/investor questioned the developer’s eligibility for the HTC and temporarily ceased closing on the transaction until further guidance could be obtained from DTF. The DTF opinion made clear that for purposes of the HTC, the determination of SHPO as to a census tract’s qualification is controlling and will be followed by DTF.

Note that an Advisory Opinion is issued at the request of a taxpayer, is limited to the facts set forth therein and is binding on the DTF only with respect to the taxpayer to whom it is issued.   Although not binding on other taxpayers, such opinions do provide guidance for taxpayers operating under similar circumstances.