[Congressional Record Volume 147, Number 70 (Monday, May 21, 2001)]
[Senate]
[Pages S5275-S5277]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BREAUX (for himself, Mr. Jeffords, Mr. Graham, Mr. Chafee, 
        and Mr. Levin):
  S. 920. A bill to amend the Internal Revenue Code of 1986 to provide 
a credit against income tax to individuals who rehabilitate historic 
homes or who are the first purchasers of rehabilitated historic homes 
for use as a principal residence; to the Committee on Finance.
  Mr. BREAUX. Mr. President, I am honored to reintroduce today, along 
with my colleagues Senators Jeffords, Graham, Chafee, and Levin, the 
``Historic Homeownership Assistance Act of 2001''. This bill will 
provide the necessary incentive needed to help preserve, revitalize and 
restore our Nation's older and historic neighborhoods, which often form 
the core of many of our Nation's most distinct urban areas. During the 
106th Congress, this legislation received bipartisan majority support 
in the House with 226 sponsors and enjoyed the support of 39 sponsors 
in the Senate. In the 107th, the House bill, H.R. 1172, sponsored by 
Rep. Clay Shaw, H.R. 1172, is already endorsed by 72 Members to date.
  This bipartisan proposal would create a historic homeowners tax 
credit directed toward housing stock in deteriorating neighborhoods and 
communities located in more than 11,000 Federal, State and local 
historic districts in all 50 states and the District of Columbia. It 
would allow homebuyers and homeowners to take a 40 percent federal tax 
credit on residential properties they rehabilitate for use as their 
primary residence. If enacted, a historic homeowners tax credit would 
be a useful tool to preserve historic neighborhoods and homes in small 
towns and urban areas; make homeownership more affordable for less 
affluent families; revitalize deteriorating older neighborhoods; 
strengthen the tax base for local governments; and combat sprawl and 
urban blight.
  The number of properties eligible for the historic homeowners credit 
is approximately one third of the almost one million structures in 
historic districts nationwide, and 58 percent are located in census 
tracts with a poverty rate of 20 percent or greater. In Louisiana, 91 
percent of the historic districts in the state overlap with census 
tracts with a rate of poverty of 20 percent or more, a figure much 
higher than the national average. My home state of Louisiana also has 
one of the highest concentrations of historic properties in the Nation. 
In a recent National Park Service survey, it was found that 109 
National Register Historic Districts in the State contain 45,084 
historic buildings. The Louisiana Division of Historic Preservation 
reports that of these 45,000 plus structures, 20 percent are in poor 
condition, 20 percent are in only fair condition and 60 percent are 
owner-occupied housing. The City of New Orleans alone is reported to 
have 30,000 vacant housing units, of which 10,000 would qualify for the 
historic homeownership tax credit.

  I cannot emphasize enough how much enactment of this incentive would 
mean to my State and the Nation at large. This bill will make ownership 
of a rehabilitated older home more affordable for residents and 
homebuyers of modest means and incomes while increasing the tax base of 
our most economically distressed urban areas.
  This legislation also includes unique provisions to assist developers 
and mortgage lenders in saving our most vulnerable historic 
neighborhoods. Under the bill, developers could rehabilitate historic 
properties, sell them, and pass the credit onto homebuyers. This 
feature would allow nonprofit housing providers to utilize the credit 
to further the goal of affordable homeownership. In addition, the bill 
offers an option to convert the tax credit to a mortgage credit 
certificate which could be transferred to a bank or mortgage lender to 
reduce the mortgage interest rate, lowering monthly mortgage payments 
to benefit low- and

[[Page S5276]]

moderate-income families who do not have enough tax liability to use 
the credit. In Empowerment Zones, Enterprise Communities, Community 
Renewal areas and distressed census tracts, the credit could also be 
used to lower the cost of the down payment on a historic home.
  America's priceless heritage is being threatened by urban sprawl as 
residents abandon the historic districts for the suburbs. The Historic 
Homeownership Assistance Act is an excellent incentive to aid in the 
restoration of our national, State and local historic districts that 
are currently threatened by abandonment and decay. It would encourage 
local residents to invest in their communities and give first time 
homebuyers an opportunity to move into older neighborhoods. This bill 
will not only preserve our heritage, but also help local governments by 
putting deteriorated ad abandoned properties back on the tax rolls. I 
strongly urge my colleagues to cosponsor this important piece of 
legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 920

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Historic Homeownership 
     Assistance Act''.

     SEC. 2. 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 25A the following new section:

     ``SEC. 25B. 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.--
       ``(1) In general.--The credit allowed by subsection (a) 
     with respect to any residence of a taxpayer shall not exceed 
     $40,000 ($20,000 in the case of a married individual filing a 
     separate return).
       ``(2) Carryforward of credit unused by reason of limitation 
     based on tax liability.--If the credit allowable under 
     subsection (a) for any taxable year exceeds the limitation 
     imposed by section 26(a) for such taxable year reduced by the 
     sum of the credits allowable under this subpart (other than 
     this section), such excess shall be carried to the succeeding 
     taxable year and added to the credit allowable under 
     subsection (a) for such succeeding taxable year.
       ``(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:
       ``(1) In general.--Except as otherwise provided in this 
     subsection, the term `certified rehabilitation' has the 
     meaning given such term by section 47(c)(2)(C).
       ``(2) Factors to be considered in the case of targeted area 
     residences, etc.--
       ``(A) In general.--For purposes of applying section 
     47(c)(2)(C) under this section with respect to the 
     rehabilitation of a building to which this paragraph applies, 
     consideration shall be given to--
       ``(i) the feasibility of preserving existing architectural 
     and design elements of the interior of such building,
       ``(ii) the risk of further deterioration or demolition of 
     such building in the event that certification is denied 
     because of the failure to preserve such interior elements, 
     and
       ``(iii) the effects of such deterioration or demolition on 
     neighboring historic properties.
       ``(B) Buildings to which this paragraph applies.--This 
     paragraph shall apply with respect to any building--
       ``(i) any part of which is a targeted area residence within 
     the meaning of section 143(j)(1), or
       ``(ii) which is located within an enterprise community or 
     empowerment zone as designated under section 1391, or a 
     renewal community designated under section 1400(e),

     but shall not apply with respect to any building which is 
     listed in the National Register.
       ``(3) 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.
       ``(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); except that, in the case of any building 
     described in subsection (d)(2), clause (i)(I) thereof shall 
     not apply.
       ``(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)) within which only qualified 
     census tracts (or portions thereof) are located, and is 
     certified by the Secretary of the Interior as being of 
     historic significance to the district.
       ``(B) Certain structures included.--Such term includes any 
     building (and its structural components) which is designated 
     as being of historic significance under a statute of a State 
     or local government, if such statute is certified by the 
     Secretary of the Interior to the Secretary as containing 
     criteria which will substantially achieve the purpose of 
     preserving and rehabilitating buildings of historic 
     significance.
       ``(C) Qualified census tracts.--For purposes of 
     subparagraph (A)(ii)--
       ``(i) In general.--The term `qualified census tract' means 
     a census tract in which the median income is less than twice 
     the statewide median family income.
       ``(ii) Data used.--The determination under clause (i) shall 
     be made on the basis of the most recent decennial census for 
     which data are available.
       ``(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) Lessees.--A taxpayer who leases his principal 
     residence shall, for purposes of this section, be treated as 
     the owner thereof if the remaining term of the lease (as 
     of the date determined under regulations prescribed by the 
     Secretary) is not less than such minimum period as the 
     regulations require.
       ``(7) 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.
       ``(8) 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.
       ``(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).

[[Page S5277]]

       ``(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) Historic Rehabilitation Mortgage Credit 
     Certificate.--
       ``(1) In general.--The taxpayer may elect, in lieu of the 
     credit otherwise allowable under this section, to receive a 
     historic rehabilitation mortgage credit certificate. An 
     election under this paragraph shall be made--
       ``(A) in the case of a building to which subsection (g) 
     applies, at the time of purchase, or
       ``(B) in any other case, at the time rehabilitation is 
     completed.
       ``(2) Historic rehabilitation mortgage credit 
     certificate.--For purposes of this subsection, the term 
     `historic rehabilitation mortgage credit certificate' means a 
     certificate--
       ``(A) issued to the taxpayer, in accordance with procedures 
     prescribed by the Secretary, with respect to a certified 
     rehabilitation,
       ``(B) the face amount of which shall be equal to the credit 
     which would (but for this subsection) be allowable under 
     subsection (a) to the taxpayer with respect to such 
     rehabilitation,
       ``(C) which may only be transferred by the taxpayer to a 
     lending institution (including a nondepository institution) 
     in connection with a loan--
       ``(i) that is secured by the building with respect to which 
     the credit relates, and
       ``(ii) the proceeds of which may not be used for any 
     purpose other than the acquisition or rehabilitation of such 
     building, and
       ``(D) in exchange for which such lending institution 
     provides to the taxpayer--
       ``(i) a reduction in the rate of interest on the loan which 
     results in interest payment reductions which are 
     substantially equivalent on a present value basis to the face 
     amount of such certificate, or
       ``(ii) if the taxpayer so elects with respect to a 
     specified amount of the face amount of such a certificate 
     relating to a building--

       ``(I) which is a targeted area residence (within the 
     meaning of section 143(j)(1)), or
       ``(II) which is located in an enterprise community or 
     empowerment zone as designated under section 1391, or a 
     renewal community as designated under section 1400(e),

     a payment which is substantially equivalent to such specified 
     amount to be used to reduce the taxpayer's cost of purchasing 
     the building (and only the remainder of such face amount 
     shall be taken into account under clause (i)).
       ``(3) Method of discounting.--The present value under 
     paragraph (2)(D)(i) shall be determined--
       ``(A) for a period equal to the term of the loan referred 
     to in subparagraph (D)(i),
       ``(B) by using the convention that any payment on such loan 
     in any taxable year within such period is deemed to have been 
     made on the last day of such taxable year,
       ``(C) by using a discount rate equal to 65 percent of the 
     average of the annual Federal mid-term rate and the annual 
     Federal long-term rate applicable under section 1274(d)(1) to 
     the month in which the taxpayer makes an election under 
     paragraph (1) and compounded annually, and
       ``(D) by assuming that the credit allowable under this 
     section for any year is received on the last day of such 
     year.
       ``(4) Use of certificate by lender.--The amount of the 
     credit specified in the certificate shall be allowed to the 
     lender only to offset the regular tax (as defined in section 
     55(c)) of such lender. The lender may carry forward all 
     unused amounts under this subsection until exhausted.
       ``(5) Historic rehabilitation mortgage credit certificate 
     not treated as taxable income.--Notwithstanding any other 
     provision of law, no benefit accruing to the taxpayer through 
     the use of a historic rehabilitation mortgage credit 
     certificate shall be included in gross income for purposes of 
     this title.
       ``(i) 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.
       ``(j) 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) and any transfer under subsection (h)), 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.
       ``(k) 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.
       ``(l) Denial of Double Benefit.--No credit shall be allowed 
     under this section for any amount for which credit is allowed 
     under section 47.
       ``(m) 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 (c) of section 23 of such Code is amended by 
     striking ``and section 1400C'' and inserting ``and sections 
     25B and 1400C''.
       (2) Subparagraph (C) of section 25(e)(1) of such Code is 
     amended by inserting ``, 25B,'' after ``sections 23''.
       (3) Subsection (d) of section 1400C of such Code is amended 
     by striking ``other than this section)'' and inserting 
     ``other than this section and section 25B)''.
       (4) Subsection (a) of section 1016 of such Code is amended 
     by striking ``and'' at the end of paragraph (26), by striking 
     the period at the end of paragraph (27) and inserting ``, 
     and'', and by adding at the end the following new item:
       ``(28) to the extent provided in section 25B(j).''
       (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 25A 
     the following new item:

``Sec. 25B. 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.
                                 ______