Corporate Income Tax
High Performance Incentive Program (HPIP) Investment Tax Credtis
REVENUE RULING 12-1998-04
March 23, 1998
When do construction in progress expenditures qualify for the investment tax credit through the high performance incentive program?
The purpose of this revenue ruling is to clarify when construction in progress expenditures may be included in the investment tax credit calculation through the high performance incentive program.
The investment tax credit through the High Performance Incentive Program begins its calculation with qualified business facility investment. K.S.A. 79-32,154(e) defines qualified business facility investment as, “
the value of the real and tangible personal property
, except inventory or property held for sale to customers in the ordinary course of the taxpayer’s business, which constitutes the qualified business facility, or
which is used by the taxpayer in the operation of the qualified business facility
…” (emphasis added)
Construction in progress consists of assets and improvements not yet placed in service. Therefore, they cannot be used in the operation of the taxpayer’s facility. The use of the property does not occur until after the construction is completed.
The Department will allow expenditures for construction in progress in the calculation of the investment tax credit for the high performance incentive program when the investment is first available for use or first capable of being used by the taxpayer.
Capital investment can be included in the calculation for an HPIP investment tax credit only during the HPIP certification (recertification) period. Therefore a business making a large capital investment must try to establish its certification period to coincide with the timeframe during which eligible expenditures are made.
In a multi-phase project spanning more than one twelve month period, where a facility is brought on line section by section, the Department does allow expenditures into the calculation of the investment tax credit for each separate section of a facility as that portion of the facility is brought on line or becomes usable by the taxpayer. Thus, Kansas does not require that the entire facility be operational or capable of use. If a portion of the facility is operational and usable, those expenditures for that portion of the facility should no longer be considered as construction in progress and may be used in the calculation of the credit.
In summary, expenditures for construction in progress are used in the calculation of the investment tax credit when the investment is first available for use or first capable of being used by the taxpayer. Therefore if there are expenditures which are considered as construction in progress, these expenditures are claimed for the investment tax credit when the facility or portion of the facility is fully operational.
John D. LaFaver
Secretary of Revenue
Return to KSA Listing