To amend the Internal Revenue Code of 1986 to modify the rehabilitation credit and the low-income housing credit.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Community Restoration and 
Revitalization Act of 2004''.

SEC. 2. MODIFICATIONS TO RULES FOR DETERMINING THE APPLICABLE 
              PERCENTAGE FOR CERTAIN BUILDINGS ELIGIBLE FOR LOW-INCOME 
              HOUSING CREDIT.

    (a) In General.--Subparagraph (B) of section 42(b)(2) of the 
Internal Revenue Code of 1986 (relating to the method of prescribing 
the applicable percentage) is amended by striking ``and'' at the end of 
clause (i), by striking the period at the end of clause (ii) and 
inserting a comma, and by adding at the end the following new clauses:
                            ``(iii) 87.5 percent of the qualified basis 
                        of a building described in paragraph (1)(A), if 
                        the basis of the building is subject to the 
                        basis adjustment for rehabilitation credit 
                        property required under section 50(c), and
                            ``(iv) 37.5 percent of the qualified basis 
                        of a building described in paragraph (1)(B), if 
                        the basis of the building is subject to the 
                        basis adjustment for rehabilitation credit 
                        property required under section 50(c).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to--
            (1) housing credit dollar amounts allocated after December 
        31, 2003, and
            (2) buildings placed in service after such date to the 
        extent paragraph (1) of section 42(h) of the Internal Revenue 
        Code of 1986 does not apply to any building by reason of 
        paragraph (4) thereof, but only with respect to bonds issued 
        after such date.

SEC. 3. MODIFICATION TO BASIS ADJUSTMENT RULE.

    (a) In General.--Paragraph (3) of subsection 50(c) of the Internal 
Revenue Code of 1986 (relating to special rules for determining basis) 
is amended by striking ``energy credit or reforestation credit'' and 
inserting ``energy credit, reforestation credit, or rehabilitation 
credit''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

SEC. 4. 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 `40 percent' 
        for `20 percent' with respect to qualified rehabilitation 
        expenditures not over $1,000,000, and `20 percent' with respect 
        to qualified rehabilitation expenditures of over $1,000,000.
            ``(2) Smaller project defined.--For purposes of this 
        section, the term `smaller project' means any qualified 
        rehabilitated building or portion thereof as to which--
                    ``(A) the qualified rehabilitation expenditures 
                reported by the taxpayer for purposes of calculating 
                the credit under this section are not over $2,000,000, 
                except that for purposes of making this determination, 
                qualified rehabilitation expenditures attributable to 
                the provisions of subsection (c)(2)(E) shall be 
                disregarded, and
                    ``(B) no credit was allowable under this section 
                during any of the two prior taxable years, provided 
                that this subparagraph shall not apply to any building 
                as to which the election provided for in subsection 
                (d)(5) shall have been made.
            ``(3) Coordination with subsection (d).--With respect to 
        any building as to which the election provided for in 
        subsection (d)(5) shall have been made, such building shall be 
        deemed a smaller project only if the qualified rehabilitation 
        expenditures reported by the taxpayer for purposes of 
        calculating the credit under this section with respect to the 
        taxable years to which such election shall apply are, in the 
        aggregate, not over $2,000,000.''.
    (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. 5. 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. 6. 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 amendments made by section shall apply to 
property placed in service after the date of the enactment of this Act.

SEC. 7. 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 striking the period at the end and inserting 
``(1)(B)(ii)(IV), except that for purposes of this clause, `50 percent' 
shall be substituted for `35 percent' in applying section 
168(h)(1)(B)(iii))''.
    (b) Effective Date.--The amendments made by section shall apply to 
property placed in service after the date of the enactment of this Act.

SEC. 8. INCREASE IN REHABILITATION CREDIT FOR BUILDINGS IN HIGH COST 
              AREAS.

    (a) In General.--Paragraph (2) of subsection 47(c) of the Internal 
Revenue Code of 1986 (relating to the definition of qualified 
rehabilitation expenditures) is amended by adding at the end the 
following new subparagraph:
                    ``(E) Increase in credit for buildings in high cost 
                areas.--
                            ``(i) In general.--In the case of any 
                        qualified rehabilitated building located in a 
                        qualified census tract or difficult development 
                        area which is designated for purposes of this 
                        subparagraph, the qualified rehabilitation 
                        expenditures for purposes of this section shall 
                        be 130 percent of such expenditures determined 
                        without regard to this subparagraph.
                            ``(ii) Rules.--For purposes of clause (i), 
                        rules similar to the rules of section 
                        42(d)(5)(C) (excluding clause (i) thereof) 
                        shall be applied.''.
    (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.

Summary: Community Restoration and Revitalization Act of 2004 - Amends the Internal Revenue Code to: (1) allow an increased rehabilitation tax credit for certain low-income buildings. (2) allow a basis reduction adjustment for property eligible for the credit, (3) increase the credit for certain smaller buildings. (4) allow property eligible for the credit to be used for lodging purposes, (5) modify placed-in-service rules for credit property. (6) modify qualification rules for credit property that is tax-exempt use property. And (7) increase the credit for buildings in high cost areas.