Historic homeownership rehabilitation credit

(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.

Historic homeownership rehabilitation credit

(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)

Dollar limitation

The credit allowed by subsection (a) with respect to any residence of a taxpayer shall not exceed $60,000 ($30,000 in the case of a married individual filing a separate return). (c)

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

(A)

Exterior

Such term shall not include any expenditure in connection with the rehabilitation of a building unless at least 5 percent of the total expenditures made in the rehabilitation process are allocable to the rehabilitation of the exterior of such building. (B)

Other rules to apply

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. (d)

Certified rehabilitation

For purposes of this section, the term certified rehabilitation has the meaning given such term by section 47(c)(2)(C). (e)

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 (d). (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. (7)

Allocation of expenditures relating to exterior of building containing cooperative or condominium units

The percentage of the total expenditures made in the rehabilitation of a building containing cooperative or condominium residential units allocated to the rehabilitation of the exterior of the building shall be attributed proportionately to each cooperative or condominium residential unit in such building for which a credit under this section is claimed. (8)

Carryback and carryforward of credit unused by reason of limitation based on tax liability

(A)

In general

If the credit allowable under subsection (a) for any taxable year exceeds the applicable tax limit for such taxable year, such excess shall be a carryback to the preceding taxable year and a carryforward to each of the 3 succeeding taxable years and, subject to the limitations of subparagraph (B), shall be added to the credit allowable by subsection (a) for such preceding or succeeding taxable year, as the case may be. (B)

Amount carried to each year

Rules similar to the rules of section 39(a)(2) shall apply for purposes of this paragraph. (C)

Limitation

The amount of the unused credit which may be taken into account under subparagraph (A) for any taxable year shall not exceed the amount (if any) by which the applicable tax limit for such taxable year exceeds the sum of— (i)the credit allowable under subsection (a) for such taxable year determined without regard to this paragraph, and (ii)the amounts which, by reason of this paragraph, are carried to such taxable year and are attributable to taxable years before the unused credit year. (D)

Applicable tax limit

For purposes of this paragraph, the term applicable tax limit means— (i)in the case of a taxable year to which section 26(a)(2) applies, the limitation imposed by section 26(a)(2) for the taxable year reduced by the sum of the credits allowable under this subpart (other than this section), and (ii)in the case of a taxable year to which section 26(a)(2) does not apply, the limitation imposed by section 26(a)(1) for the taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 23, 24, 25A(i), 25B, 25D, 30, 30B, 30D). (9)

Credit may be assigned

The amount of qualified rehabilitation expenditures which would (but for this paragraph) be taken into account under subsection (a) for any taxable year by any person (hereafter in this paragraph referred to as the initial taxpayer)— (A)may be taken into account by any other person to whom such expenditures are assigned by the initial taxpayer, and (B)shall not be taken to account by initial taxpayer.

Any person to whom such expenditures are assigned under subparagraph (A) shall be treated for purposes of this title as the taxpayer with respect to such expenditures.

(f)

When expenditures taken into account

In the case of a building other than a building to which subsection (g) applies, 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)

Allowance of credit for purchase of rehabilitated historic home

(1)

In general

In the case of a qualified purchased historic home, the taxpayer shall be treated as having made (on the date of purchase) the expenditures made by the seller of such home. For purposes of the preceding sentence, expenditures made by the seller shall be deemed to be qualified rehabilitation expenditures if such expenditures, if made by the purchaser, would be qualified rehabilitation expenditures. (2)

Qualified purchased historic home

For purposes of this subsection, the term qualified purchased historic home means any substantially rehabilitated certified historic structure purchased by the taxpayer if— (A)the taxpayer is the first purchaser of such structure after the date rehabilitation is completed, and the purchase occurs within 5 years after such date, (B)the structure (or a portion thereof) will, within a reasonable period, be the principal residence of the taxpayer, (C)no credit was allowed to the seller under this section or section 47 with respect to such rehabilitation, and (D)the taxpayer is furnished with such information as the Secretary determines is necessary to determine the credit under this subsection. (h)

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 (or, if subsection (g) applies, the date of purchase of such building by the taxpayer)— (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. (i)

Basis adjustments

For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property (including any purchase under subsection (g)), 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. (j)

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. (k)

Denial of double benefit

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

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)(A)Paragraph (1) of section 23(c) of such Code is amended by inserting , 25E, after 25D. (B)Subparagraph (C) of section 25(e)(1) of such Code is amended by inserting 25E, after sections 25D,. (C)Subparagraph (A) of section 25D(2) of such Code is amended by inserting and section 25E after (other than this section. (D)Paragraph (1) of section 1400C(d) of such Code is amended by striking section 25D and inserting sections 25D and 25E. (2)(A)Clause (ii) of section 25(e)(1)(C) of such Code is amended by inserting 25E, after 25D,. (B)Paragraph (2) of section 1400C of such Code is amended by inserting 25E, after 25D,. (3)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(i).

(c)

Clerical amendment

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. Historic homeownership rehabilitation credit..

(d)

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.

Expansion of incentives for building rehabilitation

(a)

Increase in rehabilitation credit for buildings in high cost areas

Paragraph (2) of subsection 47(c) of such Code (defining qualified rehabilitation expenditures) is amended by adding at the end the following new subparagraph:

(E)

Increase in credit for buildings in high cost areas

In the case of any qualified rehabilitated building which is residential rental property (as defined in paragraph (2)(D)) located in a qualified census tract or difficult development area which is designated for purposes of section 42(d)(5)(C), the qualified rehabilitation expenditures taken into account under this section shall be 130 percent of such expenditures determined without regard to this subparagraph.

(b)

Rehabilitation credit may be transferred

(1)

In general

Subsection (b) of section 47 of such Code (relating to when expenditures taken into account) is amended by adding at the end the following new paragraph:

(3)

Credit may be assigned

The amount of qualified rehabilitation expenditures with respect to property described in subsection (c)(1)(A)(iv)(II) which would (but for this paragraph) be taken into account under subsection (a) for any taxable year by any person (hereafter in this paragraph referred to as the initial taxpayer)— (A)may be taken into account by any other person to whom such expenditures are assigned by the initial taxpayer, and (B)shall not be taken to account by initial taxpayer.

Any person to whom such expenditures are assigned under subparagraph (A) shall be treated for purposes of this title as the taxpayer with respect to such expenditures.

(2)

Conforming amendment

The heading for such subsection (b) is amended by inserting

; eligibility for credit may be assigned

after

account

. (c)

Applicability to buildings held for sale

(1)

In general

(A)Clause (iv) of section 47(c)(1)(A) of such Code is amended to read as follows:

(iv)depreciation (or amortization in lieu of depreciation)— (I)is allowable with respect to such building, or (II)in the case of a residential property, would be allowable with respect to such building but for the building being held for sale.

(B)Paragraph (2) of section 47(c) of such Code is amended by adding at the end the following new subparagraph:

(E)

Special rule for certain property held for sale

For purposes of this paragraph, in the case of a qualified rehabilitated building described in paragraph (1)(A)(iv)(II), such building shall be treated as owned by the taxpayer as rental property with respect to which the straight line depreciation method is used over a recovery period determined under subsection (c) or (g) of section 168.

(2)

Conforming amendment

Paragraph (4) of section 50(a) of such Code is amended by striking or at the end of subparagraph (A), but striking the period at the end of subparagraph (B) and inserting , or, and by inserting after subparagraph (B) the following new subparagraph:

(C)property described in section 47(c)(1)(A)(iv)(II) that has not otherwise ceased to be investment property.

(d)

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.