I 

109TH CONGRESS 

1ST SESSION H. R. 2488 

To promote State historic tax credits. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 19, 2005 

Mr. CARNAHAN introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL 

To promote State historic tax credits. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Historic Rehabilitation 

5 Enhancement Act of 2005’’. 

6 SEC. 2. SPECIAL RULES FOR DISPOSITIONS OF STATE HIS7 TORIC TAX CREDITS. 

8 (a) PROCEEDS NOT INCOME; REDUCTION IN

9 BASIS.— 

10 (1) IN GENERAL.—In the case of a taxpayer 

11 who receives a State historic tax credit and transfers 
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1 or disposes of such credit, or receives a refund of all 

2 or a portion of such credit— 

3 (A) no portion of the net proceeds of such 

4 transfer or disposition or of such refund shall 

5 constitute income to such taxpayer under sec6 tion 61(a) of the Internal Revenue Code of 

7 1986, and 

8 (B) the taxpayer’s adjusted basis in the 

9 property with respect to which the State his10 toric tax credit is allowed shall be reduced by 

11 an amount equal to such net proceeds or refund 

12 received by such taxpayer, 

13 unless the taxpayer makes an election under sub14 section (b). 

15 (2) DETERMINATION OF REDUCTION IN

16 BASIS.—The reduction in basis under paragraph (1) 

17 shall be applied— 

18 (A) first, against the basis in the under19 lying real property, 

20 (B) second, against the adjusted cost of 

21 acquisition, exclusive of land, as defined in sec22 tion 47(c)(2)(B)(ii) of the Internal Revenue 

23 Code of 1986, and 

24 (C) third, against the remaining basis in 

25 the property. 
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1 (3) ADJUSTMENT IN BASIS OF INTEREST IN

2 PARTNERSHIP OR S CORPORATION.—The adjusted 

3 basis of— 

4 (A) a partner’s interest in a partnership, 

5 or 

6 (B) stock in an S corporation (as defined 

7 in section 1361(a)(1) of such Code), 

8 shall be appropriately adjusted to take into account 

9 adjustments made under this subsection in the basis 

10 of property held by the partnership or S corporation 

11 (if any). 

12 (b) ELECTION TO INCLUDE IN INCOME.— 

13 (1) IN GENERAL.—In the case of a taxpayer 

14 who elects to have this subsection apply, the net pro15 ceeds of the transfer or disposition or the refund de16 scribed in subsection (a) received by such taxpayer 

17 shall constitute income to such taxpayer under sec18 tion 61(a) of the Internal Revenue Code of 1986. 

19 (2) MAKING OF ELECTION.—An election under 

20 this subsection shall be made at such time and in 

21 such manner as the Secretary of the Treasury may 

22 by regulation prescribe. Such election shall apply for 

23 the taxable year for which it is made and for all sub24 sequent taxable years and may be revoked only with 

25 the consent of the Secretary of the Treasury. 
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1 (c) EFFECT ON QUALIFIED REHABILITATION EX2 PENDITURES AND REHABILITATION CREDITS.—For pur3 poses of determining the rehabilitation credit allowable to 

4 a taxpayer under section 47 of the Internal Revenue Code 

5 of 1986, the transfer or disposition of State historic tax 

6 credits with respect to any property by a taxpayer shall 

7 not affect or reduce the amount of qualified rehabilitation 

8 expenditures (as defined in section 47(c)(2) of such Code) 

9 incurred in connection with such property, nor shall such 

10 transfer or disposition, nor any basis adjustments under 

11 subsection (a), be treated as an early disposition of invest12 ment credit property for purposes of the recapture provi13 sions of section 50 of such Code. 

14 (d) STATE HISTORIC TAX CREDITS DEFINED.—For 

15 purposes of this section, the term ‘‘State historic tax cred16 it’’ means any credit against State or local tax liabilities 

17 which— 

18 (1) is allowable under the laws of any State or 

19 political subdivision thereof to a taxpayer with re20 spect to expenditures made for the rehabilitation of 

21 property identified by such laws, and 

22 (2) is transferable or refundable under such 

23 laws. 
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1 (e) EFFECTIVE DATE.—This section shall apply to 

2 transfers or dispositions made, or refunds received, after 

3 the date of the enactment of this Act. 

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