If you’ve completed (or are planning) a historic building renovation in Louisiana, you may be eligible for valuable state historic tax credits. These credits can significantly offset your state tax liability—but what happens if you don’t need all of them, or can’t fully use them? The good news: Louisiana’s historic tax credits are fully transferable, which opens up new possibilities for property owners, developers, and investors alike.
Here’s what you need to know if you’re interested in transferring or selling Louisiana historic tax credits.
1. Louisiana’s Historic Tax Credits Are Fully Transferable
Under Louisiana law, state historic tax credits may be sold or transferred from the person or entity that earns them (the transferor) to another Louisiana taxpayer (the transferee). Better still, these credits can be transferred multiple times, without limit. This makes them a flexible and powerful tool in structuring historic rehabilitation projects.
For example, suppose a developer completes a $1 million historic renovation project that earns $200,000 in state historic tax credits. If the developer only has $50,000 in Louisiana tax liability this year, they can choose to sell the remaining $150,000 in credits to another taxpayer who can use them.
2. Notification Requirements: Letting the LDR Know
To keep everything above board, both the transferor and transferee must notify the Louisiana Department of Revenue (LDR) about the transfer. This written notification must be submitted within 10 business days of the transfer.
Failure to submit the required notification in a timely manner may result in the transferee being unable to use the credit until the LDR receives proper notice—so don’t skip this step.
3. Transfer Processing Fee
Each transfer of historic tax credits is subject to a processing fee, set by the LDR through formal rules and regulations. Make sure to account for this fee in your transaction budget and confirm the current fee amount directly with the LDR or through your tax credit advisor.
4. Important Considerations Before You Transfer or Buy Credits
Carryforward Period Doesn’t Reset: The five-year carryforward period for using the credit begins when it was originally earned—not when it’s transferred. So, if a credit was earned two years ago, the buyer has only three years left to use it.
Compliance Matters: Failure to properly notify the LDR can delay or even disallow the transferee's use of the credit.
Eligibility of the Credit: If the seller didn’t have the legal right to the credit (for example, if they didn’t meet the program requirements), the LDR may disallow the credit—even for a buyer who paid good money for it. Always verify the credit’s validity before transferring.
An Example: Selling Credits to a Louisiana Investor
Let’s say Jane owns a historic commercial building in Shreveport. After a certified rehabilitation project, she earns $120,000 in Louisiana historic tax credits. Jane’s business won’t owe much state tax this year, so she chooses to sell $100,000 of those credits to a local investor, Mike, who has high Louisiana tax liability. Jane and Mike work with their tax advisors to structure the deal, complete the necessary paperwork, pay the transfer fee, and notify the LDR within 10 business days of the sale.
Mike can now use the purchased credits to reduce his Louisiana tax bill, and Jane benefits from a cash infusion that helps her recoup her investment faster.
Who to Contact with Questions
If you have questions about how the process works or need help determining the value of your credits, the Louisiana Department of Revenue is the overseeing agency. However, working with an experienced tax credit consultant can simplify the process and help you avoid common pitfalls.
Ready to Explore Your Tax Credit Options?
If you're wondering whether your building qualifies for Louisiana historic tax credits—or if you’ve already earned credits and are considering transferring or selling them—our team is here to help. We offer free consultations to assess your project’s eligibility and can guide you through the application process, including Parts 1 through 3 of the historic tax credit application.
Reach out today to schedule your consultation and learn how to make the most of Louisiana’s generous historic tax credit program. Whether you're a property owner, developer, or investor, we're here to help you unlock the full potential of your historic project.