I

104TH CONGRESS

1ST SESSION H. R. 1662

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.

IN THE HOUSE OF REPRESENTATIVES

MAY 17, 1995

Mr. SHAW (for himself, Mrs. KENNELLY, Mr. MCCRERY, Mr. NEAL of Massachusetts, Mr. ZIMMER, Mrs. JOHNSON of Connecticut, Mr. GEPHARDT,

Mr. GOSS, Mr. MOAKLEY, Mr. HUTCHINSON, Mr. TORKILDSEN, Mrs.

MALONEY, Mr. RICHARDSON, Mr. HINCHEY, Mr. CLYBURN, and Mr.

NADLER) introduced the following bill; which was referred to the Committee on Ways and Means

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.

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 Homeowner5 ship Assistance Act’’.
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1 SEC. 2. HISTORIC HOMEOWNERSHIP REHABILITATION

2 CREDIT.

3 (a) IN GENERAL.—Subpart A of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of

5 1986 (relating to nonrefundable personal credits) is

6 amended by inserting after section 22 the following new

7 section:

8 ‘‘SEC. 23. HISTORIC HOMEOWNERSHIP REHABILITATION

9 CREDIT.

10 ‘‘(a) GENERAL RULE.—In the case of an individual,

11 there shall be allowed as a credit against the tax imposed

12 by this chapter for the taxable year an amount equal to

13 20 percent of the qualified rehabilitation expenditures

14 made by the taxpayer with respect to a qualified historic

15 home.

16 ‘‘(b) DOLLAR LIMITATION.—

17 ‘‘(1) IN GENERAL.—The credit allowed by sub18 section (a) with respect to any residence of a tax19 payer shall not exceed $50,000 ($25,000 in the case

20 of a married individual filing a separate return).

21 ‘‘(2) CARRYFORWARD OF CREDIT UNUSED BY

22 REASON OF LIMITATION BASED ON TAX LIABIL23 ITY.—If the credit allowable under subsection (a) for

24 any taxable year exceeds the limitation imposed by

25 section 26(a) for such taxable year reduced by the

26 sum of the credits allowable under this subpart
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1 (other than this section), such excess shall be carried

2 to the succeeding taxable year and added to the

3 credit allowable under subsection (a) for such suc4 ceeding taxable year.

5 ‘‘(c) QUALIFIED REHABILITATION EXPENDITURE.—

6 For purposes of this section:

7 ‘‘(1) IN GENERAL.—The term ‘qualified reha8 bilitation expenditure’ means any amount properly

9 chargeable to capital account—

10 ‘‘(A) in connection with the certified reha11 bilitation of a qualified historic home, and

12 ‘‘(B) for property for which depreciation

13 would be allowable under section 168 if the

14 qualified historic home were used in a trade or

15 business.

16 ‘‘(2) CERTAIN EXPENDITURES NOT IN17 CLUDED.—

18 ‘‘(A) EXTERIOR.—Such term shall not in19 clude any expenditure in connection with the re20 habilitation of a building unless at least 5 per21 cent of the total expenditures made in the reha22 bilitation process are allocable to the rehabilita23 tion of the exterior of such building.
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1 ‘‘(B) OTHER RULES TO APPLY.—Rules

2 similar to the rules of clauses (ii) and (iii) of

3 section 47(c)(2)(B) shall apply.

4 ‘‘(3) MIXED USE OR MULTIFAMILY BUILDING.—

5 If only a portion of a building is used as the prin6 cipal residence of the taxpayer, only qualified reha7 bilitation expenditures which are properly allocable

8 to such portion shall be taken into account under

9 this section.

10 ‘‘(d) CERTIFIED REHABILITATION.—For purposes of

11 this section:

12 ‘‘(1) IN GENERAL.—Except as otherwise pro13 vided in this subsection, the term ‘certified rehabili14 tation’ has the meaning given such term by section

15 47(c)(2)(C).

16 ‘‘(2) FACTORS TO BE CONSIDERED IN THE

17 CASE OF TARGETED AREA RESIDENCES, ETC.—

18 ‘‘(A) IN GENERAL.—For purposes of ap19 plying section 47(c)(2)(C) under this section

20 with respect to the rehabilitation of a building

21 to which this paragraph applies, consideration

22 shall be given to—

23 ‘‘(i) the feasibility of preserving exist24 ing architectural and design elements of

25 the interior of such building,
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1 ‘‘(ii) the risk of further deterioration

2 or demolition of such building in the event

3 that certification is denied because of the

4 failure to preserve such interior elements,

5 and

6 ‘‘(iii) the effects of such deterioration

7 or demolition on neighboring historic prop8 erties.

9 ‘‘(B) BUILDINGS TO WHICH THIS PARA10 GRAPH APPLIES.—This paragraph shall apply

11 with respect to any building—

12 ‘‘(i) any part of which is a targeted

13 area residence within the meaning of sec14 tion 143(j)(1), or

15 ‘‘(ii) which is located within an enter16 prise or empowerment zone,

17 but shall not apply with respect to any building

18 which is listed in the National Register.

19 ‘‘(3) COOPERATIVE AGREEMENTS.—The term

20 ‘certified rehabilitation’ includes a certification made

21 in accordance with a contract or cooperative agree22 ment between the Secretary of the Interior and a

23 State Historic Preservation Officer which authorizes

24 such officer (or a local government certified pursu25 ant to section 101(c)(1) of the National Historic
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1 Preservation Act), subject to such terms or condi2 tions as may be specified in such agreement, to cer3 tify the rehabilitation of buildings within the juris4 diction of such officer (or local government) for pur5 poses of this section.

6 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur7 poses of this section:

8 ‘‘(1) QUALIFIED HISTORIC HOME.—The term

9 ‘qualified historic home’ means a certified historic

10 structure—

11 ‘‘(A) which has been substantially rehabili12 tated, and

13 ‘‘(B) which (or any portion of which)—

14 ‘‘(i) is owned by the taxpayer, and

15 ‘‘(ii) is used (or will, within a reason16 able period, be used) by such taxpayer as

17 his principal residence.

18 ‘‘(2) SUBSTANTIALLY REHABILITATED.—The

19 term ‘substantially rehabilitated’ has the meaning

20 given such term by section 47(c)(1)(C); except that,

21 in the case of any building described in subsection

22 (d)(2), clause (i)(I) thereof shall not apply.

23 ‘‘(3) PRINCIPAL RESIDENCE.—The term ‘prin24 cipal residence’ has the same meaning as when used

25 in section 1034.
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1 ‘‘(4) CERTIFIED HISTORIC STRUCTURE.—

2 ‘‘(A) IN GENERAL.—The term ‘certified

3 historic structure’ has the meaning given such

4 term by section 47(c)(3).

5 ‘‘(B) CERTAIN STRUCTURES INCLUDED.—

6 Such term includes any building (and its struc7 tural components) which is designated as being

8 of historic significance under a statute of a

9 State or local government, if such statute is

10 certified by the Secretary of the Interior to the

11 Secretary as containing criteria which will sub12 stantially achieve the purpose of preserving and

13 rehabilitating buildings of historic significance.

14 ‘‘(5) ENTERPRISE OR EMPOWERMENT ZONE.—

15 The term ‘enterprise or empowerment zone’ means

16 any area designated under section 1391 as an enter17 prise community or an empowerment zone.

18 ‘‘(6) REHABILITATION NOT COMPLETE BEFORE

19 CERTIFICATION.—A rehabilitation shall not be treat20 ed as complete before the date of the certification re21 ferred to in subsection (d).

22 ‘‘(7) LESSEES.—A taxpayer who leases his

23 principal residence shall, for purposes of this section,

24 be treated as the owner thereof if the remaining

25 term of the lease (as of the date determined under
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1 regulations prescribed by the Secretary) is not less

2 than such minimum period as the regulations re3 quire.

4 ‘‘(8) TENANT-STOCKHOLDER IN COOPERATIVE

5 HOUSING CORPORATION.—If the taxpayer holds

6 stock as a tenant-stockholder (as defined in section

7 216) in a cooperative housing corporation (as de8 fined in such section), such stockholder shall be

9 treated as owning the house or apartment which the

10 taxpayer is entitled to occupy as such stockholder.

11 ‘‘(f) WHEN EXPENDITURES TAKEN INTO AC12 COUNT.—In the case of a building other than a building

13 to which subsection (g) applies, qualified rehabilitation ex14 penditures shall be treated for purposes of this section as

15 made—

16 ‘‘(1) on the date the rehabilitation is completed,

17 or

18 ‘‘(2) to the extent provided by the Secretary by

19 regulation, when such expenditures are properly

20 chargeable to capital account.

21 Regulations under paragraph (2) shall include a rule simi22 lar to the rule under section 50(a)(2) (relating to recap23 ture if property ceases to qualify for progress expendi24 tures).
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1 ‘‘(g) ALLOWANCE OF CREDIT FOR PURCHASE OF RE2 HABILITATED HISTORIC HOME.—

3 ‘‘(1) IN GENERAL.—In the case of a qualified

4 purchased historic home, the taxpayer shall be treat5 ed as having made (on the date of purchase) the

6 qualified rehabilitation expenditures made by the

7 seller of such home.

8 ‘‘(2) QUALIFIED PURCHASED HISTORIC

9 HOME.—For purposes of this subsection, the term

10 ‘qualified purchased historic home’ means any sub11 stantially rehabilitated certified historic structure

12 purchased by the taxpayer if—

13 ‘‘(A) the taxpayer is the first purchaser of

14 such structure after the date rehabilitation is

15 completed, and the purchase occurs within 5

16 years after such date,

17 ‘‘(B) the structure (or a portion thereof)

18 will, within a reasonable period, be the principal

19 residence of the taxpayer,

20 ‘‘(C) no credit was allowed to the seller

21 under this section or section 47 with respect to

22 such rehabilitation, and

23 ‘‘(D) the taxpayer is furnished with such

24 information as the Secretary determines is nec-
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1 essary to determine the credit under this sub2 section.

3 ‘‘(h) HISTORIC REHABILITATION MORTGAGE CREDIT

4 CERTIFICATE.—

5 ‘‘(1) IN GENERAL.—The taxpayer may elect, in

6 lieu of the credit otherwise allowable under this sec7 tion, to receive a historic rehabilitation mortgage

8 credit certificate. An election under this paragraph

9 shall be made—

10 ‘‘(A) in the case of a building to which

11 subsection (g) applies, at the time of purchase,

12 or

13 ‘‘(B) in any other case, at the time reha14 bilitation is completed.

15 ‘‘(2) HISTORIC REHABILITATION MORTGAGE

16 CREDIT CERTIFICATE.—For purposes of this sub17 section, the term ‘historic rehabilitation mortgage

18 credit certificate’ means a certificate—

19 ‘‘(A) issued to the taxpayer, in accordance

20 with procedures prescribed by the Secretary,

21 with respect to a certified rehabilitation,

22 ‘‘(B) the face amount of which shall be

23 equal to the credit which would (but for this

24 subsection) be allowable under subsection (a) to

25 the taxpayer with respect to such rehabilitation,
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1 ‘‘(C) which may only be transferred by the

2 taxpayer to a lending institution in connection

3 with a loan—

4 ‘‘(i) that is secured by the building

5 with respect to which the credit relates,

6 and

7 ‘‘(ii) the proceeds of which may not be

8 used for any purpose other than the acqui9 sition or rehabilitation of such building,

10 and

11 ‘‘(D) in exchange for which such lending

12 institution provides the taxpayer a reduction

13 (determined as provided in such regulations) in

14 the rate of interest on the loan.

15 ‘‘(3) USE OF CERTIFICATE BY LENDER.—The

16 amount of the credit specified in the certificate shall

17 be allowed to the lender only to offset the regular

18 tax (as defined in section 55(c)) of such lender. The

19 lender may carry forward all unused amounts under

20 this subsection until exhausted.

21 ‘‘(i) RECAPTURE.—

22 ‘‘(1) IN GENERAL.—If, before the end of the 5-

23 year period beginning on the date on which the reha24 bilitation of the building is completed (or, if sub-
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1 section (g) applies, the date of purchase of such

2 building by the taxpayer)—

3 ‘‘(A) the taxpayer disposes of such tax4 payer’s interest in such building, or

5 ‘‘(B) such building ceases to be used as the

6 principal residence of the taxpayer,

7 the taxpayer’s tax imposed by this chapter for the

8 taxable year in which such disposition or cessation

9 occurs shall be increased by the recapture percent10 age of the credit allowed under this section for all

11 prior taxable years with respect to such rehabilita12 tion.

13 ‘‘(2) RECAPTURE PERCENTAGE.—For purposes

14 of paragraph (1), the recapture percentage shall be

15 determined in accordance with the table under

16 section 50(a)(1)(B), deeming such table to be

17 amended—

18 ‘‘(A) by striking ‘If the property ceases to

19 be investment credit property within—’ and in20 serting ‘If the disposition or cessation occurs

21 within—’, and

22 ‘‘(B) in clause (i) by striking ‘One full year

23 after placed in service’ and inserting ‘One full

24 year after the taxpayer becomes entitled to the

25 credit’.
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1 ‘‘(j) BASIS ADJUSTMENTS.—For purposes of this

2 subtitle, if a credit is allowed under this section for any

3 expenditure with respect to any property (including any

4 purchase under subsection (g) and any transfer under sub5 section (h)), the increase in the basis of such property

6 which would (but for this subsection) result from such ex7 penditure shall be reduced by the amount of the credit

8 so allowed.

9 ‘‘(k) PROCESSING FEES.—Any State may impose a

10 fee for the processing of applications for the certification

11 of any rehabilitation under this section provided that the

12 amount of such fee is used only to defray expenses associ13 ated with the processing of such applications.

14 ‘‘(l) DENIAL OF DOUBLE BENEFIT.—No credit shall

15 be allowed under this section for any amount for which

16 credit is allowed under section 47.

17 ‘‘(m) REGULATIONS.—The Secretary shall prescribe

18 such regulations as may be appropriate to carry out the

19 purposes of this section, including regulations where less

20 than all of a building is used as a principal residence and

21 where more than 1 taxpayer use the same dwelling unit

22 as their principal residence.’’

23 (b) CONFORMING AMENDMENT.—Subsection (a) of

24 section 1016 of such Code is amended by striking ‘‘and’’

25 at the end of paragraph (24), by striking the period at
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1 the end of paragraph (25) and inserting ‘‘, and’’, and by

2 adding at the end the following new item:

3 ‘‘(26) to the extent provided in section 23(j).’’

4 (c) CLERICAL AMENDMENT.—The table of sections

5 for subpart A of part IV of subchapter A of chapter 1

6 of such Code is amended by inserting after the item relat7 ing to section 22 the following new item:

‘‘Sec. 23. Historic homeownership rehabilitation credit.’’

8 (d) EFFECTIVE DATE.—The amendments made by

9 this section shall apply with respect to rehabilitations the

10 physical work on which begins after the date of enactment

11 of this Act.

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