Links:
Building Rehabilitation
Colorado Department of Revenue, Taxpayer Service Division
Building Rehabilitation
Tax Credit for the Rehabilitation
of Vacant Commercial Buildings in an Enterprise Zone
(Revised
10/99)
NOTE: You will need to download the free Adobe Acrobat Reader software to view and print the DR 0076 form referred to in this publication.
For tax years beginning on or after Jan. 1, 1989, an owner or a tenant of a building in an enterprise zone which is at least 20 years old and which has been completely vacant for at least two years can claim a tax credit of 25 percent of the cost of rehabilitating such building for commercial use. The credit is limited to $50,000 per building. [§39-30-105.6 C.R.S.] "Commercial" means any building which produces income.
This tax credit is intended to encourage building owners and tenants in Enterprise Zones to put these buildings back into use. A taxpayer must submit the DR 0076 certification from the Enterprise Zone administrator and documentation of the qualified expenditure. However, any taxpayer who is allowed a credit for costs incurred in the rehabilitation of property through the provisions of section 38 of the Internal Revenue Code of 1986, as amended, shall not be allowed to claim the tax credit for rehabilitation of vacant buildings in an Enterprise Zone. (The taxpayer is allowed to claim the enterprise zone investment tax credit for such rehabilitation.)
If the amount of the credit exceeds the amount of income taxes owed by the taxpayer, the remaining credit which is not claimed in a tax year may be carried forward up to five years. The credit must be applied to the earliest income tax year possible.
Qualified Rehabilitation Expenditures
"Qualified expenditures" are expenditures associated with any exterior improvements, structural improvements, mechanical improvements, or electrical improvements necessary to rehabilitate a building for commercial use.
Qualified expenditures include but shall not be limited to: expenditures associated with demolition, carpentry, sheetrock, plaster, painting, ceilings, fixtures, doors, windows, sprinkler systems installed for fire protection purposes, roofing and flashing, exterior repair, cleaning, tuckpointing, and cleanup.
Qualified expenditures do not include: expenditures commonly referred to as soft costs, which include but are not limited to costs associated with appraisals; architectural, engineering, and interior design fees; legal, accounting, and realtor fees; loan fees; sales and marketing; closing; building permit, use and inspection fees; bids; insurance; project signs and phones; temporary power; bid bonds; copying; and rent loss during construction. Qualified expenditures also do not include: costs associated with acquisition; interior furnishings; new additions except as may be required to comply with building and safety codes; excavation; grading; paving; landscaping; and repairs to outbuildings. [§39-20-105.6 (4) C.R.S.]
Calculating the Credit
For example, Mr. Harrison owns an apartment building which has been vacant for three years. The building is 22 years old. During 1989, Mr. Harrison invests $450,000 in repairing ceilings, fixtures, doors, windows and the roof. Of that amount, Harrison spent $50,000 on engineering. Since engineering costs do not qualify for the rehabilitation credit, only $400,000 will be used to calculate the credit.
Total qualified rehabilitation expenditures -- $400,000.00
25 percent of the expenditures -- $100,000.00
Total credit allowed -- $50,000.00
Since the credit for rehabilitation of vacant commercial buildings is limited to $50,000 per building,
Mr. Harrison may only take a credit of $50,000. Mr. Harrison's 1989 income tax liability is $10,000. He could then carry forward the remaining $40,000 credit for as much as five years.
Further Information
For more information on related topics, consult the following DOR publications:
- FYI General 1 "Department of Revenue Publications";
- FYI General 6 "General Information About Colorado Enterprise Zones";
- FYI General 8 "The FYI Program - Index and General Information;"
- FYI Income 1 "Historic Preservation Income Tax Credit;"
- FYI Income 19 "Colorado Net Operating Losses."
Other Colorado "FYI" Tax Publications
Colorado Tax Forms (commonly requested forms)
