[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 1743 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                S. 1743

To amend the Internal Revenue Code of 1986 to expand the rehabilitation 
                    credit, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 1, 2009

Mrs. Lincoln (for herself and Ms. Snowe) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to expand the rehabilitation 
                    credit, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. INCREASE IN THE REHABILITATION CREDIT FOR CERTAIN SMALLER 
              PROJECTS.

    (a) In General.--Section 47 of the Internal Revenue Code of 1986 
(relating to rehabilitation credit) is amended by adding at the end the 
following new subsection:
    ``(e) Special Rule Regarding Certain Smaller Projects.--
            ``(1) In general.--In the case of any qualified 
        rehabilitated building or portion thereof--
                    ``(A) which is placed in service after the date of 
                the enactment of this subsection, and
                    ``(B) which is a smaller project,
        subsection (a)(2) shall be applied by substituting `30 percent' 
        for `20 percent'.
            ``(2) Maximum credit.--The credit determined under this 
        subsection with respect to any smaller project for all taxable 
        years shall not exceed $1,500,000.
            ``(3) Smaller project defined.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `smaller project' means any qualified 
                rehabilitated building or portion thereof if--
                            ``(i) the qualified rehabilitation 
                        expenditures taken into account for purposes of 
                        this section (or would have been so taken into 
                        account if this subsection had been in effect 
                        for all prior periods) with respect to the 
                        rehabilitation are not over $7,500,000, and
                            ``(ii) no credit was allowed under this 
                        section for either of the 2 prior taxable years 
                        with respect to such building.
                    ``(B) Special rules.--
                            ``(i) Energy efficiency expenditures not 
                        taken into account.--Amounts that are qualified 
                        rehabilitation expenditures solely by reason of 
                        subsection (c)(2)(E) shall not be taken into 
                        account under subparagraph (A)(i).
                            ``(ii) Progress expenditures.--Credit 
                        allowable by reason of subsection (d) shall not 
                        be taken into account under subparagraph 
                        (A)(ii).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to periods after the date of the enactment of this Act, under rules 
similar to the rules of section 48(m) of the Internal Revenue Code of 
1986 (as in effect on the day before the date of the enactment of the 
Revenue Reconciliation Act of 1990).

SEC. 2. USE FOR LODGING NOT TO DISQUALIFY FOR REHABILITATION CREDIT 
              PROPERTY WHICH IS NOT A CERTIFIED HISTORIC STRUCTURE.

    (a) In General.--Subparagraph (C) of section 50(b)(2) of the 
Internal Revenue Code of 1986 (relating to property eligible for the 
investment credit) is amended by striking ``certified historic 
structure'' and inserting ``qualified rehabilitated building''.
    (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after the date of the enactment of this 
Act.

SEC. 3. DATE BY WHICH BUILDING MUST BE FIRST PLACED IN SERVICE.

    (a) In General.--Subparagraph (B) of section 47(c)(1) of the 
Internal Revenue Code of 1986 (relating to the date by which building 
must be first placed in service) is amended--
            (1) by striking ``Building must be first placed in service 
        before 1936'' and inserting ``Date by which building must first 
        be placed in service'', and
            (2) by striking ``before 1936'' at the end of the 
        subparagraph and inserting ``no less than 50 years prior to the 
        year in which qualified rehabilitation expenditures are taken 
        into account under subsection (b)(1)''.
    (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after the date of the enactment of this 
Act.

SEC. 4. MODIFICATIONS REGARDING CERTAIN TAX-EXEMPT USE PROPERTY.

    (a) In General.--Clause (I) of section 47(c)(2)(B)(v) of the 
Internal Revenue Code of 1986 (relating to tax-exempt use property) is 
amended by inserting ``and subclauses (I), (II), and (III) of section 
168(h)(1)(B)(ii) shall not apply'' after ``thereof''.
    (b) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 5. REHABILITATION CREDIT MAY BE TRANSFERRED.

    (a) In General.--Subsection (b) of section 47 of the Internal 
Revenue Code of 1986 (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, not to exceed $5,000,000, 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 the 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.''.
    (b) Conforming Amendment.--The heading for such subsection (b) is 
amended by inserting ``; Eligibility for Credit May Be Assigned'' after 
``Account''.
    (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 the enactment of this Act.

SEC. 6. CREDIT FOR MODERATE REHABILITATIONS.

    (a) In General.--Subclause (I) of section 47(c)(1)(C)(i) of the 
Internal Revenue Code of 1986 (defining substantially rehabilitated) is 
amended by inserting ``50 percent of'' before ``the adjusted basis''.
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to rehabilitations the physical work on which begins after 
the date of the enactment of this Act.

SEC. 7. ADDITION OF ENERGY EFFICIENCY SUPPLEMENT TO REHABILITATION 
              CREDIT.

    (a) In General.--Subsection (a) of section 47 of the Internal 
Revenue Code of 1986 is amended by striking ``and'' at the end of 
paragraph (1), by striking the period at the end of paragraph (2) and 
inserting ``, and'', and by adding at the end the following new 
paragraph:
            ``(3) in the case of a qualified rehabilitated building 
        designed to achieve at least a 30 percent qualified energy use 
        reduction as a result of being substantially rehabilitated 
        (determined under subsection (e)), the energy efficiency 
        supplement with respect to such building.''.
    (b) Energy Efficiency Supplement.--Section 47 of such Code is 
amended by adding at the end the following new subsection:
    ``(e) Energy Efficiency Supplement.--
            ``(1) In general.--For purposes of subsection (a)(3), the 
        energy efficiency supplement shall be determined in accordance 
        with the following table.


``If the achieved qualified energy use   The energy efficiency
 reduction is--                           supplement per square foot of
                                          the building is--
  At least 30 percent but not over 35    $2.00
   percent.
  Over 35 percent but not over 40        $2.67
   percent.
  Over 40 percent but not over 45        $3.42
   percent.
  Over 45 percent but not over 50        $4.18
   percent.
  Over 50 percent......................  $5.00.
 

            ``(2) Limitation.--In no event shall the energy efficiency 
        supplement exceed 50 percent of the qualified rehabilitation 
        expenditures with respect to the qualified rehabilitated 
        building.
            ``(3) Partial allowance.--
                    ``(A) In general.--In order to encourage 
                implementation of building retrofits, the Secretary 
                shall prescribe by regulations the conditions under 
                which a taxpayer may receive a partial energy 
                efficiency supplement corresponding to the actual 
                qualified energy use reduction achieved.
                    ``(B) Taxpayer eligibility.--This paragraph shall 
                apply to a taxpayer only if--
                            ``(i) the taxpayer certifies to the 
                        Secretary that the rehabilitation was 
                        undertaken as part of a plan to achieve a 
                        qualified energy use reduction of at least 30 
                        percent, and
                            ``(ii) such reduction is not substantiated 
                        under any certification process prescribed by 
                        the Secretary, but a qualified energy use 
                        reduction of at least 25 percent is so 
                        substantiated.
                    ``(C) Maximum partial allowance.--The energy 
                efficiency supplement allowable by reason of this 
                paragraph shall not exceed the product of--
                            ``(i) $2.00, and
                            ``(ii) a fraction--
                                    ``(I) the numerator of which is the 
                                number of percentage points of the 
                                achieved qualified energy use 
                                reduction, and
                                    ``(II) the denominator of which is 
                                30.
            ``(4) Qualified energy use reduction.--For purposes of this 
        subsection, the term `qualified energy use reduction' means, 
        for buildings or aggregation of buildings, improvement in 
        energy performance with reference to the energy consumption 
        during the previous year of the building or aggregation of 
        buildings being rehabilitated, while adjusting for other 
        relevant factors including prior vacancy, introduction of 
        modern technologies and systems, and changes in use and 
        occupancy loads.
            ``(5) Regulations.--The Secretary, after consultation with 
        the Administrator of the Environmental Protection Agency and 
        the Secretary of the Interior, shall promulgate such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of the energy efficiency supplement, including 
        prescribing the manner and method for calculating, verifying, 
        and certifying qualified energy use reductions. Such 
        regulations shall provide that a qualified energy use reduction 
        shall be determined by using an established energy benchmarking 
        tool which shall, to the maximum extent feasible, take into 
        account the requirements necessary to become a certified 
        rehabilitation and shall include an approach that determines 
        success in energy efficiency based on actual measured savings 
        after a retrofit is complete.
            ``(6) Coordination.--The Secretary shall designate 
        processes for tracking the numbers and locations of buildings 
        claiming the energy efficiency supplement, with information on 
        projected and actual savings of energy and its value over time 
        in coordination with the Department of Energy.''.
    (c) Substantial Rehabilitation Requirement Not To Apply to Energy 
Efficiency Supplement.--Subparagraph (A) of section 47(c)(1) (defining 
qualified rehabilitated building) is amended by adding at the end the 
following new flush sentence:
                ``Clause (i) shall not apply to so much of the 
                rehabilitation credit as is attributable to the energy 
                efficiency supplement under subsection (a)(3).''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to property placed 
        in service after the date of the enactment of this Act.
            (2) Waiver of substantial rehabilitation requirement.--The 
        amendment made by subsection (c) shall apply with respect to 
        rehabilitations the physical work on which begins after the 
        date of the enactment of this Act.

SEC. 8. MODIFICATION TO DEFINITION OF QUALIFIED REHABILITATION 
              EXPENDITURE.

    (a) In General.--Clause (i) of section 47(c)(2)(A) of the Internal 
Revenue Code of 1986 (relating to the definition of qualified 
rehabilitation expenditures) is amended by striking ``or'' at the end 
of subclause (III), by striking subclause (IV), and by inserting after 
subclause (III) the following new subclauses:
                                    ``(IV) rehabilitated building 
                                energy efficiency property, or
                                    ``(V) an addition or improvement to 
                                property described in subclause (I), 
                                (II), (III), or (IV), and''.
    (b) Rehabilitated Building Energy Efficiency Property.--Section 
47(c)(2) of such Code is amended by adding at the end the following new 
subparagraph:
                    ``(E) Rehabilitated building energy efficiency 
                property.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), the term `rehabilitated 
                        building energy efficiency property' means 
                        property which is certified as being--
                                    ``(I) affixed to, adjacent to, or 
                                integral to the provision of renewable 
                                energy to a qualified rehabilitated 
                                building, or
                                    ``(II) installed as part of a plan 
                                designed to achieve any qualified 
                                energy use reduction (as defined in 
                                subsection (e)(4)) or a reduction in 
                                water use.
                        Subparagraph (B)(i) shall not apply to 
                        rehabilitated building energy efficiency 
                        property.
                            ``(ii) Certification.--The Secretary shall 
                        prescribe the manner and method for the making 
                        of certifications under clause (i).''.
    (c) Enlargements.--Clause (iii) of section 47(c)(2)(B) of such Code 
is amended by adding at the end the following new sentence: ``The 
preceding sentence shall not apply to any rehabilitated building energy 
efficiency property which is an addition or improvement to a 
building.''
    (d) Effective Date.--The amendments made by this section shall 
apply to qualified rehabilitated buildings placed in service after the 
date of the enactment of this Act.

SEC. 9. COORDINATION OF ENERGY CREDIT WITH REHABILITATION CREDIT.

    (a) In General.--Paragraph (2) of section 48(a) of the Internal 
Revenue Code of 1986 is amended by striking subparagraph (B).
    (b) Basis Reduction.--Paragraph (3) of section 50(c) of such Code 
is amended by adding at the end the following new flush sentence:
        ``In the case of property that qualifies for both the energy 
        credit and the rehabilitation credit, the preceding sentence 
        shall be applied by substituting `none' for `only 50 percent' 
        each place it appears.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 10. SPECIAL RULES FOR DISPOSITIONS OF STATE HISTORIC TAX CREDITS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by inserting after section 139C the 
following new section:

``SEC. 139D. DISPOSITIONS OF STATE HISTORIC TAX CREDITS.

    ``(a) Exclusion From Income; Basis Reduction.--
            ``(1) In general.--In the case of a taxpayer who receives a 
        State historic tax credit and transfers or disposes of such 
        credit, or receives a refund of all or a portion of such 
        credit--
                    ``(A) no portion of the net proceeds of such 
                transfer or disposition or of such refund shall 
                constitute income to such taxpayer under section 61(a), 
                and
                    ``(B) the taxpayer's adjusted basis in the property 
                with respect to which the State historic tax credit is 
                allowed shall be reduced by an amount equal to such net 
                proceeds or refund received by such taxpayer,
        unless the taxpayer makes an election under subsection (b).
            ``(2) Determination of reduction in basis.--The reduction 
        in basis under paragraph (1) shall be applied--
                    ``(A) first, against the basis in the land,
                    ``(B) second, against so much of the basis of any 
                building or interest therein as was not treated as a 
                qualified rehabilitation expenditure by reason of 
                clause (ii) or (iii) of section 47(c)(2)(B), and
                    ``(C) third, against the remaining basis in the 
                property.
                    ``(D) Adjustment in basis of interest in 
                partnership or s corporation.--The adjusted basis of--
                            ``(i) a partner's interest in a 
                        partnership, or
                            ``(ii) stock in an S corporation (as 
                        defined in section 1361(a)(1)),
                shall be appropriately adjusted to take into account 
                adjustments made under this subsection in the basis of 
                property held by the partnership or S corporation (if 
                any).
    ``(b) Election To Include in Income.--
            ``(1) In general.--In the case of a taxpayer who elects to 
        have this subsection apply, the net proceeds of the transfer or 
        disposition or the refund described in subsection (a) received 
        by such taxpayer shall constitute income to such taxpayer under 
        section 61(a).
            ``(2) Making of election.--An election under this 
        subsection shall be made at such time and in such manner as the 
        Secretary of the Treasury may by regulation prescribe. Such 
        election shall apply for the taxable year for which it is made 
        and for all subsequent taxable years and may be revoked only 
        with the consent of the Secretary of the Treasury.
    ``(c) Effect on Qualified Rehabilitation Expenditures and 
Rehabilitation Credits.--For purposes of determining the rehabilitation 
credit allowable to a taxpayer under section 47, the transfer or 
disposition of State historic tax credits with respect to any property 
by a taxpayer shall not affect or reduce the amount of qualified 
rehabilitation expenditures (as defined in section 47(c)(2)) incurred 
in connection with such property, nor shall such transfer or 
disposition, nor any basis adjustments under subsection (a), be treated 
as an early disposition of investment credit property for purposes of 
the recapture provisions of section 50.
    ``(d) State Historic Tax Credits Defined.--For purposes of this 
section, the term `State historic tax credit' means any credit against 
State or local tax liabilities which--
            ``(1) is allowable under the laws of any State or political 
        subdivision thereof to a taxpayer with respect to expenditures 
        made for the rehabilitation of property identified by such 
        laws, and
            ``(2) is transferable or refundable under such laws.''.
    (b) Clerical Amendment.--The table of sections for such part III is 
amended by inserting after the item relating to section 139C the 
following new item:

``Sec. 139D. Dispositions of state historic tax credits.''.
    (c) Effective Date.--This section shall apply to transfers or 
dispositions made, or refunds received, after the date of the enactment 
of this Act.
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