A BILL TO BE ENTITLED
AN ACT to provide for a tax credit for developers of infill projects in historic districts.
The General Assembly of North Carolina enacts:
SECTION 1.  The title of Article 3D of Chapter 105 of the General Statutes reads as rewritten:
"Article 3D.
Historic Rehabilitation and Downtown Infill Construction Tax Credits."
SECTION 2.  Article 3D of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑129.36B.  Credit for new construction in historic downtowns.
(a)	Credit. – A taxpayer is allowed a credit equal to twenty percent (20%) of construction expenditures to build new income‑producing structures on vacant individual lots in a local or national historic downtown district. To claim the credit allowed by this subsection, the taxpayer must provide a copy of a certificate of appropriateness issued by the local historic preservation commission.
(b)	Definitions. – The following definitions apply in this section:
(1)	Construction expenditures. – Expenses incurred in the construction of a structure and added to the property's basis, including architectural and engineering fees and site work. The term excludes the cost of acquiring the property, the cost of development fees, and the cost of personal property.
(2)	Local or national historic downtown district. – The primary commercial or business area, if any, in any of the following:
a.	A National Register Historic District.
b.	A local historic district certified by the United States Department of the Interior.
c.	A locally designated historic district created under the authority of Part 3C of Article 19 of Chapter 160A of the General Statutes.
(3)	Historic preservation commission. – A design review committee, formed under the authority of Part 3C of Article 19 of Chapter 160A of the General Statutes, including a majority of members with a demonstrated special interest in architecture, history, or related fields. 
(4)	Certificate of appropriateness. – Certification, based on criteria established by the historic preservation commission, that ensures that new construction in a historic district is  appropriate to the special character of the district and sensitive to neighboring buildings, in the same manner as required by Part 3C of Article 19 of Chapter 160A of the General Statutes for rehabilitation.
(c)	Allocation. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this section may allocate the credit among any of its owners in its discretion as long as an owner's adjusted basis in the pass‑through entity, as determined under the Code, at the end of the taxable year in which the certified historic structure is placed in service, is at least forty percent (40%) of the amount of credit allocated to that owner. Owners to whom a credit is allocated are allowed the credit as if they had qualified for the credit directly. A pass‑through entity and its owners must include with their tax returns for every taxable year in which an allocated credit is claimed a statement of the allocation made by the pass‑through entity and the allocation that would have been required under G.S. 105‑131.8 or G.S. 105‑269.15."
SECTION 3.  G.S. 105‑129.37(d) reads as rewritten:
"(d)	Forfeiture for Change in Ownership. – If an owner of a pass‑through entity that has qualified for the credit allowed under G.S. 105‑129.35 or G.S. 105‑129.37 disposes of all or a portion of the owner's interest in the pass‑through entity within five years from the date the rehabilitated historic structure or downtown infill structure is placed in service and the owner's interest in the pass‑through entity is reduced to less than two‑thirds of the owner's interest in the pass‑through entity at the time the historic structure or downtown infill structure was placed in service, the owner forfeits a portion of the credit. The amount forfeited is determined by multiplying the amount of credit by the percentage reduction in ownership and then multiplying that product by the forfeiture percentage. The forfeiture percentage equals the recapture percentage found in the table in section 50(a)(1)(B) of the Code. The remaining allowable credit is allocated equally among the five years in which the credit is claimed."
SECTION 4.  This act is effective for taxable years beginning on or after January 1, 2007.