Rehabilitation Tax Credit Deadline is Extended

By Andrew Smith August 7, 2020

The IRS recently provided more time for taxpayers to qualify for the Internal Revenue Code Section 47 “rehabilitation credit.”

Background

Subject to a number of limits and qualifications, the credit amounts to as much as 20% of the cost of rehabilitating certain historic structures. One qualification is that the property must be “substantially rehabilitated.” A taxpayer generally meets this qualification by making qualified expenditures in excess of the taxpayer’s basis in the building during a self-selected 24 month or alternative 60 month period.

Extension

Obviously the Covid-19 pandemic has impacted taxpayers’ abilities to complete many tasks as planned, and previously the IRS softened the blow on those interested in this credit by issuing Notice 2020-23, which allowed anyone whose 24 or 60 month period ended after March 31 and before July 15 of this year to enjoy an extension of that period until July 15 of this year. Now, the IRS took that a favorable step further by issuing Notice 2020-58, extending the deadline to incur qualifying expenditures until March 31, 2021 for anyone whose 24 or 60 month period ends after March 31 of this year and before March 31 of 2021.

Related matters

Interestingly, two other real estate-related deadlines have not (at least yet) received this additional extension. The 180 day period to invest certain capital gains into a Section 1400Z qualified opportunity fund and the 180 day exchange deadline and 45 day identification deadline related to Section 1031 “like-kind exchanges” were given an extension by Notice 2020-23, similar to the rehabilitation credit described above. However, those deadlines expired a few weeks ago on July 15 and were not extended again by Notice 2020-58.

For more information or a discussion on how this may impact you, please contact Andy Smith or your BNN advisor at 800.244.7444.