Don't Confuse Credit Period with Compliance Period

February 16, 2010
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Many site managers confuse the term “credit period” and “compliance period.” The credit period is the 10-year period during which the owner claims its tax credits. It began either the same taxable year the building was placed in service or the following year. The compliance period is the 15-year period during which you must follow the tax credit law to keep your site in compliance. It starts the same year the credit period does, but lasts five years longer. This is because you must maintain compliance for 15 years, even though the owner claims its 15 years’ worth of tax credits over just 10 years.

Because the tax credit period and the compliance period begin at the same time and affect when the owner can claim credits, managers may think that the two are identical. If you make this mistake, you may believe that your compliance obligations end once the owner stops claiming credits. But this isn’t so.

You must maintain compliance for an additional five years after the owner stops claiming credits—that is, after the credit period ends. If you don’t, the IRS may take back the credits the owner already claimed but doesn’t deserve.