By Elizabeth K. Lewis, Business Assurance & Advisory Services Manager | Real Estate & Construction Industry Team
The Virginia Department of Housing and Community Development offers grant money for rehabilitation, expansion, or new construction projects that occur within the boundaries of Enterprise Zones of the Commonwealth. Projects located in these zones that exceed $100,000 in capitalized costs and are placed in service within the grant year are eligible for application. Although the grant is not a dollar for dollar reimbursement, amounts of up to 20% of the qualified real property investment over $100,000 may be granted (up to a maximum award of $100,000 for investments under $5 million), subject to other requirements.
The building or facility may be commercial, industrial, or mixed-use (if at least 30% of space is designated as commercial or industrial). Qualified expenditures can be associated with any exterior, interior, structural, mechanical, or electrical improvements and must be capitalized and depreciated as real property for tax purposes. This excludes any soft costs, machinery, tools, or otherwise expensed items.
As part of the application process, applicants must provide an Attestation report from an independent CPA that includes verification of the included costs and other requirements. The report requires the CPA to review sufficient proof of each expenditure (invoice and/or payment) to verify qualification in accordance with the requirements. In addition, the CPA must attest to the fact that those costs have been appropriately capitalized in the owner’s accounting records.
Applications (and the CPA’s report) are typically due on April 1 following the grant year end (December 31). Although the 2017 resources are not yet available, it’s not too soon to begin preparing! Here are some guidelines to take advantage of the grant and ensure a smooth application process:
- Check that your renovations or rehabilitated building are located in an enterprise zone
- Ensure the project is complete and placed in service by the end of the calendar year. Sufficient “placed in service” documentation includes a final certificate of occupancy or final building inspection dated within the grant year
- Review the list of qualified investments
- Ensure all qualified expenditures are paid for or reimbursed by the property owner
- Keep all itemized receipts and request itemized invoices from any contractors
- Maintain transparent accounting records so that all qualified expenditures related to the project are clearly identifiable
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.