1.This Act may be cited as the
Community Recovery and Enhancement Act
of 2010
or the CRE Act of 2010
.
2.Deduction for
equity investments used to buy down debt on commercial real property
(a)Part VI of subchapter
B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional
itemized deductions for individuals and corporations) is amended by adding at
the end the following new section:
199A.Deduction for
equity investments used to buy down debt on commercial real property
(a)There shall be
allowed as a deduction an amount equal to—
(1)50 percent of any
qualified debt reduction equity investment made during the taxable year by the
taxpayer in a partnership, and
(2)50 percent of any
qualified debt reduction payment made during the taxable year by the taxpayer
with respect to qualified indebtedness on commercial real property held by the
taxpayer.
Paragraph
(2) shall not apply to any qualified debt reduction payment made by a
partnership.(b)The deduction
allowed by subsection (a) for any taxable year shall not exceed, with respect
to each commercial real property, the excess (if any) of—
(1)the amount of the qualified indebtedness
secured by such property as of the beginning of such taxable year, over
(2)the lesser
of—
(A)50 percent of the
amount described in paragraph (1), or
(B)the adjusted basis
of such property (in the hands of the partnership or the taxpayer, as the case
may be) as of the close of such taxable year (determined without regard to
qualified debt reduction equity investments and qualified debt reduction
payments made during the taxable year and depreciation for such year).
(c)Qualified debt
reduction equity investment; qualified debt reduction paymentFor purposes of this section—
(1)Qualified debt
reduction equity investment
(A)The term qualified debt reduction equity
investment means the amount of any qualified equity investment which is
used by the partnership to reduce the principal amount of qualified
indebtedness of the partnership.
(B)Qualified equity
investmentThe term
qualified equity investment means any equity investment (as
defined in section 45D(b)(6)) in a partnership if—
(i)such investment is
acquired by the taxpayer at its original issue (directly or through an
underwriter) solely in exchange for cash,
(ii)at least 80 percent of such cash is used by
the partnership to reduce the principal amount of qualified indebtedness of the
partnership,
(iii)the portion of
such cash not so used is used by the partnership for improvements to commercial
real property held by the partnership, and
(iv)the person or
persons otherwise entitled to depreciation on such property consent to the
basis reduction under subsection (f)(1).
(C)A
rule similar to the rule of section 1202(c)(3) shall apply for purposes of this
paragraph.
(2)Qualified debt
reduction paymentIn the case
of commercial real property held by a taxpayer other than a partnership, the
term qualified debt reduction payment means the amount of cash
paid by the taxpayer during the taxable year to reduce the principal amount of
qualified indebtedness of the taxpayer.
(d)For purposes of this section—
(1)
(A)The
term qualified indebtedness means, with respect to a partnership,
any indebtedness—
(i)incurred or
assumed by the partnership on or before January 1, 2009, and
(ii)which is secured
by commercial real property held by the partnership at the time the qualified
debt reduction equity investment is made by the taxpayer.
(B)In the case of a taxpayer other than a partnership, the
term qualified indebtedness has the meaning given to such term by
subparagraph (A) determined by substituting—
(i)taxpayer
for partnership
, and
(ii)qualified
debt reduction payment
for qualified debt reduction equity
investment
.
(2)The term commercial real property means
section 1250 property (as defined in section 1250(c)); except that such term
shall not include residential rental property (as defined in section 168(e)(2))
unless the building contains at least 3 dwelling units.
(e)Application of
section 1250For purposes of
determining the depreciation adjustments under section 1250 with respect to any
property—
(1)the deduction
allowed by this section shall be treated as a deduction for depreciation,
and
(2)the depreciation adjustments in respect of
such property shall include all deductions allowed by this section to all
taxpayers by reason of reducing the debt secured by such property.
(f)
(1)The basis of any
property with respect to which any qualified debt reduction equity investment
or qualified debt reduction payment is made shall be reduced by the amount of
the deduction allowed by this section by reason of such investment or
payment.
(2)The indebtedness described in subsection
(d)(1)(A)(i) shall include indebtedness resulting from the refinancing of
indebtedness described in such subsection (or this sentence), but only to the
extent it does not exceed the amount of the indebtedness being
refinanced.
(3)Debt reduction
must be in excess of scheduled paymentsOnly amounts paid in excess of the amounts
required to be paid under the terms of the loan may be taken into account under
this section.
(4)Denial of
deduction for debt-financed investments, etcNo deduction shall be allowed by this
section for any qualified debt reduction equity investment or any qualified
debt reduction payment to the extent indebtedness is incurred or continued to
make such investment or payment.
(5)Recapture of
deduction if additional debt within 3 years
(A)If a partnership incurs any additional debt within 3
years after the date that the partnership received a qualified debt reduction
equity investment, the ordinary income of the taxpayer making such investment
shall be increased by the applicable percentage of the recaptured
deduction.
(B)For purposes of this paragraph, the recaptured
deduction is the excess of—
(i)the deduction allowed by subsection (a) on
account of a qualified debt reduction equity investment, over
(ii)the deduction
which would have been so allowed if such investment had been reduced by such
investment’s share of the additional debt.
(C)The applicable percentage shall be determined in
accordance with the following table:
If,
of the 3 years referred to in subparagraph (A), the additional debt occurs
during the:The
applicable percentage is:
1st such year100
2d such year66 2/3
3d such year33 1/3
(D)Investment’s
share of additional debtA
qualified debt reduction equity investment’s share of additional debt is the
amount which bears the same ratio to such additional debt as such taxpayer’s
qualified debt reduction equity investment bears to the aggregate qualified
debt reduction equity investments of all such taxpayers to which subparagraph
(A) applies by reason of such additional debt.
(E)The
partnership’s deductions under section 168 for periods after a recaptured
deduction under this paragraph shall be determined as if the portion of the
qualified debt reduction equity investment allocable to the recaptured
deduction had never been made.
(F)Similar rules
for qualified debt reduction paymentsRules similar to the rules
of the preceding provisions of this paragraph shall apply to qualified debt
reduction payments.
(6)Exemption from
passive loss rulesSection 469 shall not apply to the deduction
allowed by this section.
(g)This section shall
apply to qualified debt reduction equity investments and qualified debt
reduction payments made after the date of the enactment of this section and
before January 1,
2013.
.
(b)Subsection (k) of
section 312 of such Code is amended by adding at the end the following new
paragraph:
(6)Treatment of
section 199AParagraphs (1)
and (3) shall not apply to the deduction allowed by section
199A.
.
(c)The table of sections for part VI of subchapter B of
chapter 1 of such Code is amended by adding at the end the following new
item:
Sec. 199A. Deduction for equity
investments used to buy down debt on commercial real
property.
.
(d)The amendments made by this section shall apply to taxable
years ending after the date of the enactment of this Act.