Tax incentives for long-term residential rental housing

(a)

Special depreciation allowance

(1)

In general

Section 168 of the Internal Revenue Code of 1986, as amended by section 70307 of Public Law 119–21, is amended by adding at the end the following new subsection:

(o)

Special allowance for long-Term residential rental property

(1)

In general

In the case of any long-term residential rental property of a taxpayer making an election under this subsection— (A) the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to the lesser of— (i) an amount equal to the product of— (I) the total number of dwelling units in the long-term residential rental property, multiplied by (II) $150,000, or (ii) 100 percent of the adjusted basis of the long-term residential rental property (other than land), and (B) the adjusted basis of the long-term residential rental property shall be reduced by the amount of such deduction before computing the amount otherwise allowable as a depreciation deduction under this chapter for such taxable year and any subsequent taxable year. (2)

Long-term residential rental property

For purposes of this subsection, the term long-term residential rental property means property— (A) to which this section applies, (B) which is placed in service in the United States after the date of enactment of this subsection, (C) which— (i) is used as residential rental property (as defined in subsection (e)(2)(A)), and (ii) consists of not less than 2 dwelling units, (D) the original use of which commences with the taxpayer, and (E) which is designated by the taxpayer in the election made under this subsection. (3)

Deduction allowed in computing minimum tax

For purposes of determining alternative minimum taxable income under section 55, the deduction under section 167 for long-term residential rental property shall be determined under this section without regard to any adjustment under section 56. (4)

Recapture

If, at any time during the 10-year period beginning on the date that any long-term residential rental property is placed in service by the taxpayer, such property ceases to be used as described in paragraph (2)(C)— (A) section 1245 shall be applied— (i) by treating such property as having been disposed of by the taxpayer as of the first time such property is so used, and (ii) by treating the amount described in subparagraph (B) of section 1245(a)(1) with respect to such disposition as being not less than the amount described in subparagraph (A) of such section, and (B) the basis of the taxpayer in such property, and the taxpayer's allowance for depreciation with respect to such property, shall be appropriately adjusted to take into account amounts recognized by reason of subparagraph (A). (5)

Additional amount for affordable housing

(A)

In general

In the case of any long-term residential rental property which is part of a project which meets any of the requirements described in subparagraph (A), (B), or (C) of section 42(g)(1), as elected by the taxpayer, paragraph (1)(A)(i)(II) shall be applied with respect to such property by substituting $250,000 for $150,000. (B)

Extended recapture period

In the case of any long-term residential rental property described in subparagraph (A), if, at any time during the 15-year period beginning on the date that such property is placed in service by the taxpayer, such property ceases to satisfy the requirements described in such subparagraph, subparagraphs (A) and (B) of paragraph (4) shall apply. (6)

Election

(A)

In general

An election under this subsection for any taxable year shall— (i) specify the property subject to the election, and (ii) except as otherwise provided by the Secretary, be made on the taxpayer's return of the tax imposed by this chapter for the taxable year.

Such election shall be made in such manner as the Secretary may prescribe by regulations or other guidance.

(B)

Election

Any election made under this subsection, and any specification contained in any such election, may not be revoked except with the consent of the Secretary (and the Secretary shall provide such consent only in extraordinary circumstances). (7)

Regulations

The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this subsection, including regulations or other guidance regarding— (A) the application of paragraph (5) in a manner which is consistent with the application of section 42(g), and (B) certification of compliance with the requirements under such paragraph.

(2)

Treatment of long-term residential rental property as section 1245 property

Section 1245(a)(3) of the Internal Revenue Code of 1986 is amended by striking or at the end of subparagraph (F), by striking the period at the end of subparagraph (G) and inserting , or, and by adding at the end the following new subparagraph:

(H)any long-term residential rental property (as defined in section 168(o)(2)).

(b)

Effective date

The amendments made by this section shall apply to property placed in service after the date which is 12 months after the date of the enactment of this Act.