98-030

Response April 14, 1998

REQUEST LETTER

4/7/98

Dear Utah Tax Commission; Irene Rees

I am considering buying a home to restore/rehabilitate and I would like to get state/federal tax credit. When completed the home will probably be used about 9 months of the year as normal rental. But for about 3 months of the year we are considering renting it out by the week. In reviewing what the tax code says, it appears that if it is used for “residential” “income producing” use, that it qualifies for the credit. Is my understanding correct? Please provide an advisory opinion. My fax # is ##### and my home number is #####.

Thank you,

NAME

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NOTE TO ALL REVIEWERS FROM KERRY: I have contacted the State Historic Preservation Office and explained the issue to them. They told me on an issue like this one, they would defer to us, the Tax Commission, for an answer. While they feel comfortable to determine that a bed and breakfast is a commercial property that would not qualify for the credit, they would have asked us for an opinion about this property, had the issue been presented to them.

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RESPONSE LETTER

April 14, 1998

NAME

ADDRESS

CITY STATE ZIP

RE: Advisory Opinion - Historic Preservation Credit on Income Taxes

Dear NAME,

We have received your request for an advisory opinion concerning the historic preservation credit, which is a statutory credit applied to Utah income taxes for qualifying properties. To qualify, the property must be used as a “residential building,” which is defined as “a building used for residential use, either owner occupied or income producing.”

You state that the building you propose to buy and renovate will be used as a “normal” rental for about nine months of the year and a weekly rental for about three months of the year. While the Utah Supreme Court has not discussed the definition of residential property in relation to the historic preservation credit, it has done so in other contexts. The court has determined in other situations that residential use does not include intensive short-term rentals (such as weekly rentals). Instead, property used for short-term rentals is considered commercial in nature. We believe a similar conclusion would result here. Thus, if the property you plan to renovate is used for this commercial purpose (weekly rental for a portion of the year), the property has use other than residential use and will not qualify for the home preservation credit.

Please contact us if you have any other questions.

For the Commission,

Joe B. Pacheco

Commissioner

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