Development Benefits : Federal Tax Incentives
GO Zone Bonus Depreciation
Allows taxpayers an additional first-year 50% bonus depreciation allowance on GO Zone property. Nonresidential real property or residential rental property must be placed in service on or before December 31, 2010. Certain tangible personal property qualifies if substantially all of the use of property is in the building and placed in service within 90 days after building is placed in service. Deduction allowed for AMT purposes. Recapture applies. Not available in conjunction with GO Zone Tax Exempt Bonds. May be carried back up to 5 years if it results in a net operating loss.
Rehabilitation Tax Credit
The 20 percent credit available for qualified expenditures of certified historic structures is increased to 26 percent. The 10 percent credit available for qualified rehabilitation expenditures with respect to buildings placed in service prior to 1936 is increased to 13 percent. The increased amounts apply to expenditures paid or incurred prior to January 1, 2009 and thereafter the 20 and 10 percent credit apply.
New Market Tax Credits
GO Zone tax legislation increases the allocation of new market tax credits by $300 million for 2005 and 2006 and $400 million for GO Zone investments for 2007. The credit, claimed over seven annual allowance dates, is 39% of the qualified investment and facilitates discounted rate financing (e.g. 200 basis points) and/or funding of equity (e.g., 15% of equity).
GO Zone Bonds
Additional tax-exempt private activity bonds, called Gulf Opportunity Zone bonds or GO Zone bonds, can be authorized prior to 2011 for the purpose of financing the construction and repair of real estate and infrastructure in the Gulf Opportunity Zone. Proceeds from the GO Zone bonds can be used for repairs and construction of both residential and nonresidential real property as well as for public utility projects. Qualified GO Zone bonds are treated as qualified mortgage bonds or as exempt facility bonds.