II 

111TH CONGRESS 

1ST SESSION S. 1743 

To amend the Internal Revenue Code of 1986 to expand the rehabilitation 

credit, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 1, 2009 

Mrs. LINCOLN (for herself and Ms. SNOWE) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to expand 

the rehabilitation credit, and for other purposes. 

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

3 SECTION 1. INCREASE IN THE REHABILITATION CREDIT 

4 FOR CERTAIN SMALLER PROJECTS. 

5 (a) IN GENERAL.—Section 47 of the Internal Rev6 enue Code of 1986 (relating to rehabilitation credit) is 

7 amended by adding at the end the following new sub8 section: 

9 ‘‘(e) SPECIAL RULE REGARDING CERTAIN SMALLER

10 PROJECTS.— 


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

2 rehabilitated building or portion thereof— 

3 ‘‘(A) which is placed in service after the 

4 date of the enactment of this subsection, and 

5 ‘‘(B) which is a smaller project, 

6 subsection (a)(2) shall be applied by substituting ‘30 

7 percent’ for ‘20 percent’. 

8 ‘‘(2) MAXIMUM CREDIT.—The credit deter9 mined under this subsection with respect to any 

10 smaller project for all taxable years shall not exceed 

11 $1,500,000. 

12 ‘‘(3) SMALLER PROJECT DEFINED.— 

13 ‘‘(A) IN GENERAL.—For purposes of this 

14 subsection, the term ‘smaller project’ means 

15 any qualified rehabilitated building or portion 

16 thereof if— 

17 ‘‘(i) the qualified rehabilitation ex18 penditures taken into account for purposes 

19 of this section (or would have been so 

20 taken into account if this subsection had 

21 been in effect for all prior periods) with re22 spect to the rehabilitation are not over 

23 $7,500,000, and 


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1 ‘‘(ii) no credit was allowed under this 

2 section for either of the 2 prior taxable 

3 years with respect to such building. 

4 ‘‘(B) SPECIAL RULES.— 

5 ‘‘(i) ENERGY EFFICIENCY EXPENDI6 TURES NOT TAKEN INTO ACCOUNT.— 

7 Amounts that are qualified rehabilitation 

8 expenditures solely by reason of subsection 

9 (c)(2)(E) shall not be taken into account 

10 under subparagraph (A)(i). 

11 ‘‘(ii) PROGRESS EXPENDITURES.— 

12 Credit allowable by reason of subsection 

13 (d) shall not be taken into account under 

14 subparagraph (A)(ii).’’. 

15 (b) EFFECTIVE DATE.—The amendment made by 

16 this section shall apply to periods after the date of the 

17 enactment of this Act, under rules similar to the rules of 

18 section 48(m) of the Internal Revenue Code of 1986 (as 

19 in effect on the day before the date of the enactment of 

20 the Revenue Reconciliation Act of 1990). 

21 SEC. 2. USE FOR LODGING NOT TO DISQUALIFY FOR REHA22 BILITATION CREDIT PROPERTY WHICH IS 

23 NOT A CERTIFIED HISTORIC STRUCTURE. 

24 (a) IN GENERAL.—Subparagraph (C) of section 

25 50(b)(2) of the Internal Revenue Code of 1986 (relating 


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1 to property eligible for the investment credit) is amended 

2 by striking ‘‘certified historic structure’’ and inserting 

3 ‘‘qualified rehabilitated building’’. 

4 (b) EFFECTIVE DATE.—The amendment made by 

5 this section shall apply to property placed in service after 

6 the date of the enactment of this Act. 

7 SEC. 3. DATE BY WHICH BUILDING MUST BE FIRST PLACED 

8 IN SERVICE. 

9 (a) IN GENERAL.—Subparagraph (B) of section 

10 47(c)(1) of the Internal Revenue Code of 1986 (relating 

11 to the date by which building must be first placed in serv12 ice) is amended— 

13 (1) by striking ‘‘BUILDING MUST BE FIRST

14 PLACED IN SERVICE BEFORE 1936’’ and inserting 

15 ‘‘DATE BY WHICH BUILDING MUST FIRST BE

16 PLACED IN SERVICE’’, and 

17 (2) by striking ‘‘before 1936’’ at the end of the 

18 subparagraph and inserting ‘‘no less than 50 years 

19 prior to the year in which qualified rehabilitation ex20 penditures are taken into account under subsection 

21 (b)(1)’’. 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 this section shall apply to property placed in service after 

24 the date of the enactment of this Act. 


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1 SEC. 4. MODIFICATIONS REGARDING CERTAIN TAX-EXEMPT 

2 USE PROPERTY. 

3 (a) IN GENERAL.—Clause (I) of section 

4 47(c)(2)(B)(v) of the Internal Revenue Code of 1986 (re5 lating to tax-exempt use property) is amended by inserting 

6 ‘‘and subclauses (I), (II), and (III) of section 

7 168(h)(1)(B)(ii) shall not apply’’ after ‘‘thereof’’. 

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

9 this section shall apply to property placed in service after 

10 the date of the enactment of this Act. 

11 SEC. 5. REHABILITATION CREDIT MAY BE TRANSFERRED. 

12 (a) IN GENERAL.—Subsection (b) of section 47 of the 

13 Internal Revenue Code of 1986 (relating to when expendi14 tures taken into account) is amended by adding at the 

15 end the following new paragraph: 

16 ‘‘(3) CREDIT MAY BE ASSIGNED.—The amount 

17 of qualified rehabilitation expenditures, not to exceed 

18 $5,000,000, which would (but for this paragraph) be 

19 taken into account under subsection (a) for any tax20 able year by any person (hereafter in this paragraph 

21 referred to as the ‘initial taxpayer’)— 

22 ‘‘(A) may be taken into account by any 

23 other person to whom such expenditures are as24 signed by the initial taxpayer, and 

25 ‘‘(B) shall not be taken to account by the 

26 initial taxpayer. 


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1 Any person to whom such expenditures are assigned 

2 under subparagraph (A) shall be treated for pur3 poses of this title as the taxpayer with respect to 

4 such expenditures.’’. 

5 (b) CONFORMING AMENDMENT.—The heading for 

6 such subsection (b) is amended by inserting ‘‘; ELIGI7 BILITY FOR CREDIT MAY BE ASSIGNED’’ after ‘‘AC8 COUNT’’. 

9 (c) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply with respect to rehabilitations the 

11 physical work on which begins after the date of the enact12 ment of this Act. 

13 SEC. 6. CREDIT FOR MODERATE REHABILITATIONS. 

14 (a) IN GENERAL.—Subclause (I) of section 

15 47(c)(1)(C)(i) of the Internal Revenue Code of 1986 (de16 fining substantially rehabilitated) is amended by inserting 

17 ‘‘50 percent of’’ before ‘‘the adjusted basis’’. 

18 (b) EFFECTIVE DATE.—The amendment made by 

19 this section shall apply with respect to rehabilitations the 

20 physical work on which begins after the date of the enact21 ment of this Act. 

22 SEC. 7. ADDITION OF ENERGY EFFICIENCY SUPPLEMENT 

23 TO REHABILITATION CREDIT. 

24 (a) IN GENERAL.—Subsection (a) of section 47 of the 

25 Internal Revenue Code of 1986 is amended by striking 


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

2 at the end of paragraph (2) and inserting ‘‘, and’’, and 

3 by adding at the end the following new paragraph: 

4 ‘‘(3) in the case of a qualified rehabilitated 

5 building designed to achieve at least a 30 percent 

6 qualified energy use reduction as a result of being 

7 substantially rehabilitated (determined under sub8 section (e)), the energy efficiency supplement with 

9 respect to such building.’’. 

10 (b) ENERGY EFFICIENCY SUPPLEMENT.—Section 47 

11 of such Code is amended by adding at the end the fol12 lowing new subsection: 

13 ‘‘(e) ENERGY EFFICIENCY SUPPLEMENT.— 

14 ‘‘(1) IN GENERAL.—For purposes of subsection 

15 (a)(3), the energy efficiency supplement shall be de16 termined in accordance with the following table. 

‘‘If the achieved qualified energy use reduction is— The energy efficiency supplement per 

square foot of 

the building 

is— 

At least 30 percent but not over 35 percent .......... $2.00 

Over 35 percent but not over 40 percent ............... $2.67 

Over 40 percent but not over 45 percent ............... $3.42 

Over 45 percent but not over 50 percent ............... $4.18 

Over 50 percent ...................................................... $5.00. 

17 ‘‘(2) LIMITATION.—In no event shall the energy 

18 efficiency supplement exceed 50 percent of the quali19 fied rehabilitation expenditures with respect to the 

20 qualified rehabilitated building. 


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1 ‘‘(3) PARTIAL ALLOWANCE.— 

2 ‘‘(A) IN GENERAL.—In order to encourage 

3 implementation of building retrofits, the Sec4 retary shall prescribe by regulations the condi5 tions under which a taxpayer may receive a par6 tial energy efficiency supplement corresponding 

7 to the actual qualified energy use reduction 

8 achieved. 

9 ‘‘(B) TAXPAYER ELIGIBILITY.—This para10 graph shall apply to a taxpayer only if— 

11 ‘‘(i) the taxpayer certifies to the Sec12 retary that the rehabilitation was under13 taken as part of a plan to achieve a quali14 fied energy use reduction of at least 30 

15 percent, and 

16 ‘‘(ii) such reduction is not substan17 tiated under any certification process pre18 scribed by the Secretary, but a qualified 

19 energy use reduction of at least 25 percent 

20 is so substantiated. 

21 ‘‘(C) MAXIMUM PARTIAL ALLOWANCE.— 

22 The energy efficiency supplement allowable by 

23 reason of this paragraph shall not exceed the 

24 product of— 

25 ‘‘(i) $2.00, and 


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1 ‘‘(ii) a fraction— 

2 ‘‘(I) the numerator of which is 

3 the number of percentage points of 

4 the achieved qualified energy use re5 duction, and 

6 ‘‘(II) the denominator of which is 

7 30. 

8 ‘‘(4) QUALIFIED ENERGY USE REDUCTION.— 

9 For purposes of this subsection, the term ‘qualified 

10 energy use reduction’ means, for buildings or aggre11 gation of buildings, improvement in energy perform12 ance with reference to the energy consumption dur13 ing the previous year of the building or aggregation 

14 of buildings being rehabilitated, while adjusting for 

15 other relevant factors including prior vacancy, intro16 duction of modern technologies and systems, and 

17 changes in use and occupancy loads. 

18 ‘‘(5) REGULATIONS.—The Secretary, after con19 sultation with the Administrator of the Environ20 mental Protection Agency and the Secretary of the 

21 Interior, shall promulgate such regulations as may 

22 be necessary or appropriate to carry out the pur23 poses of the energy efficiency supplement, including 

24 prescribing the manner and method for calculating, 

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1 tions. Such regulations shall provide that a qualified 

2 energy use reduction shall be determined by using 

3 an established energy benchmarking tool which shall, 

4 to the maximum extent feasible, take into account 

5 the requirements necessary to become a certified re6 habilitation and shall include an approach that de7 termines success in energy efficiency based on actual 

8 measured savings after a retrofit is complete. 

9 ‘‘(6) COORDINATION.—The Secretary shall des10 ignate processes for tracking the numbers and loca11 tions of buildings claiming the energy efficiency sup12 plement, with information on projected and actual 

13 savings of energy and its value over time in coordi14 nation with the Department of Energy.’’. 

15 (c) SUBSTANTIAL REHABILITATION REQUIREMENT

16 NOT TO APPLY TO ENERGY EFFICIENCY SUPPLEMENT.— 

17 Subparagraph (A) of section 47(c)(1) (defining qualified 

18 rehabilitated building) is amended by adding at the end 

19 the following new flush sentence: 

20 ‘‘Clause (i) shall not apply to so much of the 

21 rehabilitation credit as is attributable to the en22 ergy efficiency supplement under subsection 

23 (a)(3).’’. 

24 (d) EFFECTIVE DATES.— 


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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by this section 

3 shall apply to property placed in service after the 

4 date of the enactment of this Act. 

5 (2) WAIVER OF SUBSTANTIAL REHABILITATION

6 REQUIREMENT.—The amendment made by sub7 section (c) shall apply with respect to rehabilitations 

8 the physical work on which begins after the date of 

9 the enactment of this Act. 

10 SEC. 8. MODIFICATION TO DEFINITION OF QUALIFIED RE11 HABILITATION EXPENDITURE. 

12 (a) IN GENERAL.—Clause (i) of section 47(c)(2)(A) 

13 of the Internal Revenue Code of 1986 (relating to the defi14 nition of qualified rehabilitation expenditures) is amended 

15 by striking ‘‘or’’ at the end of subclause (III), by striking 

16 subclause (IV), and by inserting after subclause (III) the 

17 following new subclauses: 

18 ‘‘(IV) rehabilitated building en19 ergy efficiency property, or 

20 ‘‘(V) an addition or improvement 

21 to property described in subclause (I), 

22 (II), (III), or (IV), and’’. 

23 (b) REHABILITATED BUILDING ENERGY EFFICIENCY

24 PROPERTY.—Section 47(c)(2) of such Code is amended by 

25 adding at the end the following new subparagraph: 


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1 ‘‘(E) REHABILITATED BUILDING ENERGY

2 EFFICIENCY PROPERTY.— 

3 ‘‘(i) IN GENERAL.—For purposes of 

4 subparagraph (A), the term ‘rehabilitated 

5 building energy efficiency property’ means 

6 property which is certified as being— 

7 ‘‘(I) affixed to, adjacent to, or in8 tegral to the provision of renewable 

9 energy to a qualified rehabilitated 

10 building, or 

11 ‘‘(II) installed as part of a plan 

12 designed to achieve any qualified en13 ergy use reduction (as defined in sub14 section (e)(4)) or a reduction in water 

15 use. 

16 Subparagraph (B)(i) shall not apply to re17 habilitated building energy efficiency prop18 erty. 

19 ‘‘(ii) CERTIFICATION.—The Secretary 

20 shall prescribe the manner and method for 

21 the making of certifications under clause 

22 (i).’’. 

23 (c) ENLARGEMENTS.—Clause (iii) of section 

24 47(c)(2)(B) of such Code is amended by adding at the 

25 end the following new sentence: ‘‘The preceding sentence 


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1 shall not apply to any rehabilitated building energy effi2 ciency property which is an addition or improvement to 

3 a building.’’ 

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

5 this section shall apply to qualified rehabilitated buildings 

6 placed in service after the date of the enactment of this 

7 Act. 

8 SEC. 9. COORDINATION OF ENERGY CREDIT WITH REHA9 BILITATION CREDIT. 

10 (a) IN GENERAL.—Paragraph (2) of section 48(a) of 

11 the Internal Revenue Code of 1986 is amended by striking 

12 subparagraph (B). 

13 (b) BASIS REDUCTION.—Paragraph (3) of section 

14 50(c) of such Code is amended by adding at the end the 

15 following new flush sentence: 

16 ‘‘In the case of property that qualifies for both the 

17 energy credit and the rehabilitation credit, the pre18 ceding sentence shall be applied by substituting 

19 ‘none’ for ‘only 50 percent’ each place it appears.’’. 

20 (c) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to property placed in service after 

22 the date of the enactment of this Act. 


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1 SEC. 10. SPECIAL RULES FOR DISPOSITIONS OF STATE HIS2 TORIC TAX CREDITS. 

3 (a) IN GENERAL.—Part III of subchapter B of chap4 ter 1 of the Internal Revenue Code of 1986 (relating to 

5 items specifically excluded from gross income) is amended 

6 by inserting after section 139C the following new section: 

7 ‘‘SEC. 139D. DISPOSITIONS OF STATE HISTORIC TAX CRED8 ITS. 

9 ‘‘(a) EXCLUSION FROM INCOME; BASIS REDUC10 TION.— 

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

12 who receives a State historic tax credit and transfers 

13 or disposes of such credit, or receives a refund of all 

14 or a portion of such credit— 

15 ‘‘(A) no portion of the net proceeds of such 

16 transfer or disposition or of such refund shall 

17 constitute income to such taxpayer under sec18 tion 61(a), and 

19 ‘‘(B) the taxpayer’s adjusted basis in the 

20 property with respect to which the State his21 toric tax credit is allowed shall be reduced by 

22 an amount equal to such net proceeds or refund 

23 received by such taxpayer, 

24 unless the taxpayer makes an election under sub25 section (b). 


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1 ‘‘(2) DETERMINATION OF REDUCTION IN

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

3 shall be applied— 

4 ‘‘(A) first, against the basis in the land, 

5 ‘‘(B) second, against so much of the basis 

6 of any building or interest therein as was not 

7 treated as a qualified rehabilitation expenditure 

8 by reason of clause (ii) or (iii) of section 

9 47(c)(2)(B), and 

10 ‘‘(C) third, against the remaining basis in 

11 the property. 

12 ‘‘(D) ADJUSTMENT IN BASIS OF INTEREST

13 IN PARTNERSHIP OR S CORPORATION.—The ad14 justed basis of— 

15 ‘‘(i) a partner’s interest in a partner16 ship, or 

17 ‘‘(ii) stock in an S corporation (as de18 fined in section 1361(a)(1)), 

19 shall be appropriately adjusted to take into ac20 count adjustments made under this subsection 

21 in the basis of property held by the partnership 

22 or S corporation (if any). 

23 ‘‘(b) ELECTION TO INCLUDE IN INCOME.— 

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

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1 ceeds of the transfer or disposition or the refund de2 scribed in subsection (a) received by such taxpayer 

3 shall constitute income to such taxpayer under sec4 tion 61(a). 

5 ‘‘(2) MAKING OF ELECTION.—An election under 

6 this subsection shall be made at such time and in 

7 such manner as the Secretary of the Treasury may 

8 by regulation prescribe. Such election shall apply for 

9 the taxable year for which it is made and for all sub10 sequent taxable years and may be revoked only with 

11 the consent of the Secretary of the Treasury. 

12 ‘‘(c) EFFECT ON QUALIFIED REHABILITATION EX13 PENDITURES AND REHABILITATION CREDITS.—For pur14 poses of determining the rehabilitation credit allowable to 

15 a taxpayer under section 47, the transfer or disposition 

16 of State historic tax credits with respect to any property 

17 by a taxpayer shall not affect or reduce the amount of 

18 qualified rehabilitation expenditures (as defined in section 

19 47(c)(2)) incurred in connection with such property, nor 

20 shall such transfer or disposition, nor any basis adjust21 ments under subsection (a), be treated as an early disposi22 tion of investment credit property for purposes of the re23 capture provisions of section 50. 

24 ‘‘(d) STATE HISTORIC TAX CREDITS DEFINED.—For 

25 purposes of this section, the term ‘State historic tax credit’ 


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1 means any credit against State or local tax liabilities 

2 which— 

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

4 political subdivision thereof to a taxpayer with re5 spect to expenditures made for the rehabilitation of 

6 property identified by such laws, and 

7 ‘‘(2) is transferable or refundable under such 

8 laws.’’. 

9 (b) CLERICAL AMENDMENT.—The table of sections 

10 for such part III is amended by inserting after the item 

11 relating to section 139C the following new item: 

‘‘Sec. 139D. Dispositions of state historic tax credits.’’. 

12 (c) EFFECTIVE DATE.—This section shall apply to 

13 transfers or dispositions made, or refunds received, after 

14 the date of the enactment of this Act. 

Æ 


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