Rehabilitation credit for historic principal residences

(a)

In general

Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by inserting after section 25D the following new section:

25E.

Rehabilitation of historic principal residences

(a)

General rule

In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 20 percent of the qualified rehabilitation expenditures made by the taxpayer with respect to a qualified historic home. (b)

Qualified rehabilitation expenditure

For purposes of this section— (1)

In general

The term qualified rehabilitation expenditure means any amount properly chargeable to capital account— (A)in connection with the certified rehabilitation of a qualified historic home, and (B)for property for which depreciation would be allowable under section 168 if the qualified historic home were used in a trade or business. (2)

Certain expenditures not included

Rules similar to the rules of clauses (ii) and (iii) of section 47(c)(2)(B) shall apply. (3)

Mixed use or multifamily building

If only a portion of a building is used as the principal residence of the taxpayer, only qualified rehabilitation expenditures which are properly allocable to such portion shall be taken into account under this section. (c)

Certified rehabilitation

For purposes of this section— (1)

In general

The term certified rehabilitation has the meaning given such term by section 47(c)(2)(C). (2)

Approved State program

The term certified rehabilitation includes a certification made by— (A)a State Historic Preservation Officer who administers a State Historic Preservation Program approved by the Secretary of the Interior pursuant to section 101(b)(1) of the National Historic Preservation Act, or (B)a local government, certified pursuant to section 101(c)(1) of the National Historic Preservation Act and authorized by a State Historic Preservation Officer, or the Secretary of the Interior where there is no approved State program, subject to such terms and conditions as may be specified by the Secretary of the Interior for the rehabilitation of buildings within the jurisdiction of such officer (or local government) for purposes of this section. (d)

Definitions and special rules

For purposes of this section— (1)

Qualified historic home

The term qualified historic home means a certified historic structure— (A)which has been substantially rehabilitated, and (B)which (or any portion of which)— (i)is owned by the taxpayer, and (ii)is used (or will, within a reasonable period, be used) by such taxpayer as his principal residence. (2)

Substantially rehabilitated

The term substantially rehabilitated has the meaning given such term by section 47(c)(1)(C). (3)

Principal residence

The term principal residence has the same meaning as when used in section 121. (4)

Certified historic structure

(A)

In general

The term certified historic structure means any building (and its structural components) which— (i)is listed in the National Register, or (ii)is located in a registered historic district (as defined in section 47(c)(3)(B)) and is certified by the Secretary of the Interior as being of historic significance to the district. (5)

Rehabilitation not complete before certification

A rehabilitation shall not be treated as complete before the date of the certification referred to in subsection (c). (6)

Tenant-stockholder in cooperative housing corporation

If the taxpayer holds stock as a tenant-stockholder (as defined in section 216) in a cooperative housing corporation (as defined in such section), such stockholder shall be treated as owning the house or apartment which the taxpayer is entitled to occupy as such stockholder. (e)

Carryforward of unused credit

If the credit allowable under subsection (a) exceeds the limitation imposed by section 26(a) for the taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 25D and 1400C), such excess shall be a carried to each of the 5 succeeding taxable years and, subject to rules similar to the rules of section 39(a)(2), shall be added to the credit allowable by subsection (a) for such succeeding taxable year. (f)

When expenditures taken into account

Qualified rehabilitation expenditures shall be treated for purposes of this section as made— (1)on the date the rehabilitation is completed, or (2)to the extent provided by the Secretary by regulation, when such expenditures are properly chargeable to capital account.

Regulations under paragraph (2) shall include a rule similar to the rule under section 50(a)(2) (relating to recapture if property ceases to qualify for progress expenditures).

(g)

Recapture

(1)

In general

If, before the end of the 5-year period beginning on the date on which the rehabilitation of the building is completed— (A)the taxpayer disposes of such taxpayer’s interest in such building, or (B)such building ceases to be used as the principal residence of the taxpayer or ceases to be a certified historic structure,

the taxpayer’s tax imposed by this chapter for the taxable year in which such disposition or cessation occurs shall be increased by the recapture percentage of the credit allowed under this section for all prior taxable years with respect to such rehabilitation.

(2)

Recapture percentage

For purposes of paragraph (1), the recapture percentage shall be determined in accordance with the table under section 50(a)(1)(B), deeming such table to be amended— (A)by striking If the property ceases to be investment credit property within— and inserting If the disposition or cessation occurs within—, and (B)in clause (i) by striking One full year after placed in service and inserting One full year after the taxpayer becomes entitled to the credit. (3)

Transfer between spouses or incident to divorce

In the case of any transfer described in subsection (a) of section 1041 (relating to transfers between spouses or incident to divorce)— (A)the foregoing provisions of this subsection shall not apply, and (B)the same tax treatment under this subsection with respect to the transferred property shall apply to the transferee as would have applied to the transferor. (h)

Basis adjustments

For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed. (i)

Processing fees

Any State may impose a fee for the processing of applications for the certification of any rehabilitation under this section provided that the amount of such fee is used only to defray expenses associated with the processing of such applications. (j)

Denial of double benefit

No credit shall be allowed under this section for any amount for which credit is allowed under section 47. (k)

Regulations

The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this section, including regulations where less than all of a building is used as a principal residence and where more than 1 taxpayer use the same dwelling unit as their principal residence.

(b)

Conforming amendments

(1)Subsection (a) of section 1016 of such Code is amended by striking and at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting , and, and by adding at the end the following new item:

(38)to the extent provided in section 25E(h).

(2)The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 25D the following new item:

Sec. 25E. Rehabilitation of historic principal residences..

(c)

Effective date

The amendments made by this section shall apply with respect to rehabilitations the physical work on which begins after the date of enactment of this Act.