Purchasing Historic Tax Credits to Reduce Texas Margin Tax

By way of background, under Texas law, a margin tax credit is allowed for the certified rehabilitation of certified historic structures, up to 25 percent of eligible costs and expenses. Qualified taxpayers may obtain a margin tax credit if it rehabilitates a certified historic structure and it establishes the credit through a verification process with the Texas Comptroller (the “Comptroller”).

Generally, taxpayers that meet the requirements to obtain such credits are unable to utilize all of the credits. Starting with the 2015 Report year (2014 tax year), taxpayers are able to sell/assign those credits to other taxpayers.

Upon the sale or purchase of a margin tax credit for the rehabilitation of a historic structure, the buyer should receive from the seller:

• The Historic Structure Credit Certificate (Form 05-901)
• The Texas Franchise Tax Sale, Assignment or Allocation of Historic Structure Credit (Form 05-179)
  • Both the seller and the buyer must sign this form
• A copy of the Certificate of Eligibility
• A copy of the audited cost report

Within 30 days from the date of the sale, mail Form 05-179 and Form 05-901 to the Comptroller. The buyer cannot claim the credit on a report until the Comptroller has processed them, which normally takes two to four weeks. Once the credit is transferred, the Comptroller will send each credit owner with a credit balance a new Historic Structure Credit Certificate reflecting their new margin tax historic structure credit balance.

The unused portion of the credit can be carried forward for not more than five consecutive reports. For questions about this regulation or other state and local tax matters, please contact us.