II

106TH CONGRESS

1ST SESSION S. 664

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 SENATE OF THE UNITED STATES

MARCH 18, 1999

Mr. CHAFEE (for himself, Mr. GRAHAM, Mr. JEFFORDS, and Mr. BREAUX)

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 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’’.
2

•S 664 IS

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 25A the following new

7 section:

8 ‘‘SEC. 25B. 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 $40,000 ($20,000 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
3

•S 664 IS

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.
4

•S 664 IS

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,
5

•S 664 IS

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) APPROVED STATE PROGRAM.—The term

20 ‘certified rehabilitation’ includes a certification made

21 by—

22 ‘‘(A) a State Historic Preservation Officer

23 who administers a State Historic Preservation

24 Program approved by the Secretary of the Inte-
6

•S 664 IS

1 rior pursuant to section 101(b)(1) of the Na2 tional Historic Preservation Act, or

3 ‘‘(B) a local government, certified pursuant

4 to section 101(c)(1) of the National Historic

5 Preservation Act and authorized by a State

6 Historic Preservation Officer, or the Secretary

7 of the Interior where there is no approved State

8 program),

9 subject to such terms and conditions as may be

10 specified by the Secretary of the Interior for the re11 habilitation of buildings within the jurisdiction of

12 such officer (or local government) for purposes of

13 this section.

14 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur15 poses of this section:

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

17 ‘qualified historic home’ means a certified historic

18 structure—

19 ‘‘(A) which has been substantially rehabili20 tated, and

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

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

23 ‘‘(ii) is used (or will, within a reason24 able period, be used) by such taxpayer as

25 his principal residence.
7

•S 664 IS

1 ‘‘(2) SUBSTANTIALLY REHABILITATED.—The

2 term ‘substantially rehabilitated’ has the meaning

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

4 in the case of any building described in subsection

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

6 ‘‘(3) PRINCIPAL RESIDENCE.—The term ‘prin7 cipal residence’ has the same meaning as when used

8 in section 121.

9 ‘‘(4) CERTIFIED HISTORIC STRUCTURE.—

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

11 historic structure’ has the meaning given such

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

13 ‘‘(B) CERTAIN STRUCTURES INCLUDED.—

14 Such term includes any building (and its struc15 tural components) which is designated as being

16 of historic significance under a statute of a

17 State or local government, if such statute is

18 certified by the Secretary of the Interior to the

19 Secretary as containing criteria which will sub20 stantially achieve the purpose of preserving and

21 rehabilitating buildings of historic significance.

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

23 The term ‘enterprise or empowerment zone’ means

24 any area designated under section 1391 as an enter25 prise community or an empowerment zone.
8

•S 664 IS

1 ‘‘(6) REHABILITATION NOT COMPLETE BEFORE

2 CERTIFICATION.—A rehabilitation shall not be treat3 ed as complete before the date of the certification re4 ferred to in subsection (d).

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

6 principal residence shall, for purposes of this section,

7 be treated as the owner thereof if the remaining

8 term of the lease (as of the date determined under

9 regulations prescribed by the Secretary) is not less

10 than such minimum period as the regulations re11 quire.

12 ‘‘(8) TENANT-STOCKHOLDER IN COOPERATIVE

13 HOUSING CORPORATION.—If the taxpayer holds

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

15 216) in a cooperative housing corporation (as de16 fined in such section), such stockholder shall be

17 treated as owning the house or apartment which the

18 taxpayer is entitled to occupy as such stockholder.

19 ‘‘(9) ALLOCATION OF EXPENDITURES RELAT20 ING TO EXTERIOR OF BUILDING CONTAINING COOP21 ERATIVE OR CONDOMINIUM UNITS.—The percentage

22 of the total expenditures made in the rehabilitation

23 of a building containing cooperative or condominium

24 residential units allocated to the rehabilitation of the

25 exterior of the building shall be attributed propor-
9

•S 664 IS

1 tionately to each cooperative or condominium resi2 dential unit in such building for which a credit

3 under this section is claimed.

4 ‘‘(f) WHEN EXPENDITURES TAKEN INTO AC5 COUNT.—In the case of a building other than a building

6 to which subsection (g) applies, qualified rehabilitation ex7 penditures shall be treated for purposes of this section as

8 made—

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

10 or

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

12 regulation, when such expenditures are properly

13 chargeable to capital account.

14 Regulations under paragraph (2) shall include a rule simi15 lar to the rule under section 50(a)(2) (relating to recap16 ture if property ceases to qualify for progress expendi17 tures).

18 ‘‘(g) ALLOWANCE OF CREDIT FOR PURCHASE OF RE19 HABILITATED HISTORIC HOME.—

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

21 purchased historic home, the taxpayer shall be treat22 ed as having made (on the date of purchase) the

23 qualified rehabilitation expenditures made by the

24 seller of such home. For purposes of the preceding

25 sentence, expenditures made by the seller shall be
10

•S 664 IS

1 deemed to be qualified rehabilitation expenditures if

2 such expenditures, if made by the purchaser, would

3 be qualified rehabilitation expenditures.

4 ‘‘(2) QUALIFIED PURCHASED HISTORIC

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

6 ‘qualified purchased historic home’ means any sub7 stantially rehabilitated certified historic structure

8 purchased by the taxpayer if—

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

10 such structure after the date rehabilitation is

11 completed, and the purchase occurs within 5

12 years after such date,

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

14 will, within a reasonable period, be the principal

15 residence of the taxpayer,

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

17 under this section or section 47 with respect to

18 such rehabilitation, and

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

20 information as the Secretary determines is nec21 essary to determine the credit under this sub22 section.

23 ‘‘(h) HISTORIC REHABILITATION MORTGAGE CREDIT

24 CERTIFICATE.—
11

•S 664 IS

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

2 lieu of the credit otherwise allowable under this sec3 tion, to receive a historic rehabilitation mortgage

4 credit certificate. An election under this paragraph

5 shall be made—

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

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

8 or

9 ‘‘(B) in any other case, at the time reha10 bilitation is completed.

11 ‘‘(2) HISTORIC REHABILITATION MORTGAGE

12 CREDIT CERTIFICATE.—For purposes of this sub13 section, the term ‘historic rehabilitation mortgage

14 credit certificate’ means a certificate—

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

16 with procedures prescribed by the Secretary,

17 with respect to a certified rehabilitation,

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

19 equal to the credit which would (but for this

20 subsection) be allowable under subsection (a) to

21 the taxpayer with respect to such rehabilitation,

22 ‘‘(C) which may only be transferred by the

23 taxpayer to a lending institution (including a

24 non-depository institution) in connection with a

25 loan—
12

•S 664 IS

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

2 with respect to which the credit relates,

3 and

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

5 used for any purpose other than the acqui6 sition or rehabilitation of such building,

7 and

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

9 institution provides the taxpayer—

10 ‘‘(i) a reduction in the rate of interest

11 on the loan which results in interest pay12 ment reductions which are substantially

13 equivalent on a present value basis to the

14 face amount of such certificate, or

15 ‘‘(ii) if the taxpayer so elects with re16 spect to a specified amount of the face

17 amount of such a certificate relating to a

18 building—

19 ‘‘(I) which is a targeted area res20 idence within the meaning of section

21 143(j)(1), or

22 ‘‘(II) which is located in an en23 terprise or empowerment zone,

24 a payment which is substantially equivalent

25 to such specified amount to be used to re-
13

•S 664 IS

1 duce the taxpayer’s cost of purchasing the

2 building (and only the remainder of such

3 face amount shall be taken into account

4 under clause (i)).

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

6 amount of the credit specified in the certificate shall

7 be allowed to the lender only to offset the regular

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

9 lender may carry forward all unused amounts under

10 this subsection until exhausted.

11 ‘‘(4) HISTORIC REHABILITATION MORTGAGE

12 CREDIT CERTIFICATE NOT TREATED AS TAXABLE IN13 COME.—Notwithstanding any other provision of law,

14 no benefit accruing to the taxpayer through the use

15 of an historic rehabilitation mortgage credit certifi16 cate shall be treated as taxable income for purposes

17 of this title.

18 ‘‘(i) RECAPTURE.—

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

20 year period beginning on the date on which the reha21 bilitation of the building is completed (or, if sub22 section (g) applies, the date of purchase of such

23 building by the taxpayer)—

24 ‘‘(A) the taxpayer disposes of such tax25 payer’s interest in such building, or
14

•S 664 IS

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

2 principal residence of the taxpayer,

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

4 taxable year in which such disposition or cessation

5 occurs shall be increased by the recapture percent6 age of the credit allowed under this section for all

7 prior taxable years with respect to such rehabilita8 tion.

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

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

11 determined in accordance with the table under

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

13 amended—

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

15 be investment credit property within—’ and in16 serting ‘If the disposition or cessation occurs

17 within—’, and

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

19 after placed in service’ and inserting ‘One full

20 year after the taxpayer becomes entitled to the

21 credit’.

22 ‘‘(j) BASIS ADJUSTMENTS.—For purposes of this

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

24 expenditure with respect to any property (including any

25 purchase under subsection (g) and any transfer under sub-
15

•S 664 IS

1 section (h)), the increase in the basis of such property

2 which would (but for this subsection) result from such ex3 penditure shall be reduced by the amount of the credit

4 so allowed.

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

6 fee for the processing of applications for the certification

7 of any rehabilitation under this section provided that the

8 amount of such fee is used only to defray expenses associ9 ated with the processing of such applications.

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

11 be allowed under this section for any amount for which

12 credit is allowed under section 47.

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

14 such regulations as may be appropriate to carry out the

15 purposes of this section, including regulations where less

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

17 where more than 1 taxpayer use the same dwelling unit

18 as their principal residence.’’

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

20 section 1016 of the Internal Revenue Code of 1986 is

21 amended by striking ‘‘and’’ at the end of paragraph (26),

22 by striking the period at the end of paragraph (27) and

23 inserting ‘‘, and’’, and by adding at the end the following

24 new item:

25 ‘‘(28) to the extent provided in section 25B(j).’’
16

•S 664 IS

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

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

3 of the Internal Revenue Code of 1986 is amended by in4 serting after the item relating to section 25A the following

5 new item:

‘‘Sec. 25B. Historic homeownership rehabilitation credit.’’

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

7 this section shall apply with respect to rehabilitations the

8 physical work on which begins after the date of enactment

9 of this Act.

Æ