II 

117TH CONGRESS 

1ST SESSION S. 2511 

To amend the Internal Revenue Code of 1986 to provide an investment 

credit for the conversion of office buildings into other uses. 

IN THE SENATE OF THE UNITED STATES 

JULY 28, 2021 

Ms. STABENOW (for herself and Mr. PETERS) 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 

an investment credit for the conversion of office buildings 

into other uses. 

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 ‘‘Revitalizing Down5 towns Act’’. 

6 SEC. 2. CREDIT FOR QUALIFIED OFFICE CONVERSION. 

7 (a) IN GENERAL.—Section 46 of the Internal Rev8 enue Code of 1986 is amended by striking ‘‘and’’ at the 

9 end of paragraph (5), by striking the period at the end 


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1 of paragraph (6) and inserting ‘‘, and’’, and by adding 

2 at the end the following new paragraph: 

3 ‘‘(7) the qualified office conversion credit.’’. 

4 (b) AMOUNT OF CREDIT.—Subpart E of part IV of 

5 subchapter A of chapter 1 of the Internal Revenue Code 

6 of 1986 is amended by inserting after section 48C the fol7 lowing new section: 

8 ‘‘SEC. 48D. QUALIFIED OFFICE CONVERSION CREDIT. 

9 ‘‘(a) IN GENERAL.—For purposes of section 46, the 

10 qualified office conversion credit for any taxable year is 

11 equal to 20 percent of the qualified conversion expendi12 tures with respect to a qualified converted building. 

13 ‘‘(b) WHEN EXPENDITURES TAKEN INTO AC14 COUNT.— 

15 ‘‘(1) IN GENERAL.—Qualified conversion ex16 penditures with respect to any qualified converted 

17 building shall be taken into account for the taxable 

18 year in which such qualified converted building is 

19 placed in service. 

20 ‘‘(2) COORDINATION WITH SUBSECTION (d).— 

21 The amount which would (but for this subpara22 graph) be taken into account under subparagraph 

23 (A) with respect to any qualified converted building 

24 shall be reduced (but not below zero) by any amount 

25 of qualified conversion expenditures taken into acVerDate Sep 11 2014 03:42 Aug 04, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2511.IS S2511

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1 count under subsection (d) by the taxpayer or a 

2 predecessor of the taxpayer (or, in the case of a sale 

3 and leaseback described in section 50(a)(2)(C), by 

4 the lessee), to the extent any amount so taken into 

5 account has not been required to be recaptured 

6 under section 50(a). 

7 ‘‘(c) DEFINITIONS.— 

8 ‘‘(1) QUALIFIED CONVERTED BUILDING.— 

9 ‘‘(A) IN GENERAL.—The term ‘qualified 

10 converted building’ means any building (and its 

11 structural components) if— 

12 ‘‘(i) prior to conversion, such building 

13 was nonresidential real property (as de14 fined in section 168) which was leased, or 

15 available for lease, to office tenants, 

16 ‘‘(ii) such building has been substan17 tially converted from an office use to a res18 idential, retail, or other commercial use, 

19 ‘‘(iii) in the case of conversion to a 

20 residential use, such converted building 

21 meets the requirements of subparagraph 

22 (D), 

23 ‘‘(iv) such building was initially placed 

24 in service at least 25 years before the be25 ginning of the conversion, and 


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1 ‘‘(v) depreciation (or amortization in 

2 lieu of depreciation) is allowable with re3 spect to such building. 

4 ‘‘(B) SUBSTANTIALLY CONVERTED DE5 FINED.— 

6 ‘‘(i) IN GENERAL.—For purposes of 

7 paragraph (1)(A)(ii), a building shall be 

8 treated as having been substantially con9 verted only if the qualified conversion ex10 penditures during the 24-month period se11 lected by the taxpayer (at the time and in 

12 the manner prescribed by regulation) and 

13 ending with or within the taxable year ex14 ceed the greater of— 

15 ‘‘(I) the adjusted basis of such 

16 building (and its structural compo17 nents), or 

18 ‘‘(II) $15,000. 

19 The adjusted basis of the building (and its 

20 structural components) shall be determined 

21 as of the beginning of the 1st day of such 

22 24-month period, or of the holding period 

23 of the building, whichever is later. For 

24 purposes of the preceding sentence, the de25 termination of the beginning of the holding 


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1 period shall be made without regard to any 

2 reconstruction by the taxpayer in connec3 tion with the conversion. 

4 ‘‘(ii) SPECIAL RULE FOR PHASED

5 CONVERSION.—In the case of any conver6 sion which may reasonably be expected to 

7 be completed in phases set forth in archi8 tectural plans and specifications completed 

9 before the conversion begins, clause (i) 

10 shall be applied by substituting ‘60-month 

11 period’ for ‘24-month period’. 

12 ‘‘(iii) LESSEES.—The Secretary shall 

13 prescribe by regulation rules for applying 

14 this subparagraph to lessees. 

15 ‘‘(C) RECONSTRUCTION.—Conversion in16 cludes reconstruction. 

17 ‘‘(D) RESIDENTIAL CONVERSION REQUIRE18 MENTS.— 

19 ‘‘(i) IN GENERAL.—A building meets 

20 the requirements of this subparagraph if— 

21 ‘‘(I) 20 percent or more of the 

22 residential units are both rent-re23 stricted and occupied by individuals 

24 whose income is 80 percent or less of 

25 area median gross income, or 


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1 ‘‘(II) such building is subject to a 

2 written binding State or local agree3 ment with respect to the provision or 

4 financing of affordable housing and 

5 such agreement is documented in such 

6 form and manner as the Secretary 

7 may provide. 

8 ‘‘(ii) RENT AND INCOME LIMITA9 TION.—For purposes of this subparagraph, 

10 rules similar to the rules of subsection (g) 

11 of section 42 shall apply to determine 

12 whether a unit is rent-restricted, treatment 

13 of units occupied by individuals whose in14 comes rise above the limit, and the treat15 ment of units where Federal rental assist16 ance is reduced as tenant’s income in17 creases. 

18 ‘‘(2) QUALIFIED CONVERSION EXPENDITURES

19 DEFINED.— 

20 ‘‘(A) IN GENERAL.—For purposes of sub21 section (a), the term ‘qualified conversion ex22 penditures’ means any amount properly charge23 able to capital account— 


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1 ‘‘(i) for property for which deprecia2 tion is allowable under section 168 and 

3 which is— 

4 ‘‘(I) nonresidential real property 

5 (as defined in section 168), 

6 ‘‘(II) residential rental property 

7 (as defined in section 168), or 

8 ‘‘(III) an addition or improve9 ment to property described in clause 

10 (i) or (ii), and 

11 ‘‘(ii) in connection with the conversion 

12 of a qualified converted building. 

13 ‘‘(B) CERTAIN EXPENDITURES NOT IN14 CLUDED.—The term ‘qualified conversion ex15 penditures’ does not include— 

16 ‘‘(i) STRAIGHT LINE DEPRECIATION

17 MUST BE USED.—Any expenditure with re18 spect to which the taxpayer does not use 

19 the straight line method over a recovery 

20 period determined under subsection (c) or 

21 (g) of section 168. The preceding sentence 

22 shall not apply to any expenditure to the 

23 extent the alternative depreciation system 

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1 ture by reason of subparagraph (B) or (C) 

2 of section 168(g)(1). 

3 ‘‘(ii) COST OF ACQUISITION.—The 

4 cost of acquiring any building or interest 

5 therein. 

6 ‘‘(iii) ENLARGEMENTS.—Any expendi7 ture attributable to the enlargement of an 

8 existing building. 

9 ‘‘(iv) TAX-EXEMPT USE PROPERTY.— 

10 Any expenditure in connection with the 

11 conversion of a building which is allocable 

12 to the portion of such property which is (or 

13 may reasonably be expected to be) tax-ex14 empt use property (within the meaning of 

15 section 168(h)), except that— 

16 ‘‘(I) ‘50 percent’ shall be sub17 stituted for ‘35 percent’ in paragraph 

18 (1)(B)(iii) thereof, and 

19 ‘‘(II) an eligible educational insti20 tution (as defined in section 

21 529(e)(5)) shall not be treated as a 

22 tax-exempt entity. 

23 This clause shall not apply for purposes of 

24 determining whether a building has been 

25 substantially converted. 


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1 ‘‘(v) EXPENDITURES OF LESSEE.— 

2 Any expenditure of a lessee of a building 

3 if, on the date the conversion is completed, 

4 the remaining term of the lease (deter5 mined without regard to any renewal peri6 ods) is less than the recovery period deter7 mined under section 168(c). 

8 ‘‘(d) PROGRESS EXPENDITURES.— 

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

10 to which this subsection applies, except as provided 

11 in paragraph (3)— 

12 ‘‘(A) if such building is self-converted 

13 property, any qualified conversion expenditure 

14 with respect to such building shall be taken into 

15 account for the taxable year for which such ex16 penditure is properly chargeable to capital ac17 count with respect to such building, and 

18 ‘‘(B) if such building is not self-converted 

19 property, any qualified conversion expenditure 

20 with respect to such building shall be taken into 

21 account for the taxable year in which paid. 

22 ‘‘(2) PROPERTY TO WHICH SUBSECTION AP23 PLIES.— 


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1 ‘‘(A) IN GENERAL.—This subsection shall 

2 apply to any building which is being converted 

3 by or for the taxpayer if— 

4 ‘‘(i) the normal conversion period for 

5 such building is 2 years or more, and 

6 ‘‘(ii) it is reasonable to expect that 

7 such building will be a qualified converted 

8 building in the hands of the taxpayer when 

9 it is placed in service. 

10 Clauses (i) and (ii) shall be applied on the basis 

11 of facts known as of the close of the taxable 

12 year of the taxpayer in which the conversion be13 gins (or, if later, at the close of the first taxable 

14 year to which an election under this subsection 

15 applies). 

16 ‘‘(B) NORMAL CONVERSION PERIOD.—For 

17 purposes of subparagraph (A), the term ‘normal 

18 conversion period’ means the period reasonably 

19 expected to be required for the conversion of 

20 the building— 

21 ‘‘(i) beginning with the date on which 

22 physical work on the conversion begins (or, 

23 if later, the first day of the first taxable 

24 year to which an election under this sub25 section applies), and 


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1 ‘‘(ii) ending on the date on which it is 

2 expected that the property will be available 

3 for placing in service. 

4 ‘‘(3) SPECIAL RULES FOR APPLYING PARA5 GRAPH (1).—For purposes of paragraph (1)— 

6 ‘‘(A) COMPONENT PARTS, ETC.—Property 

7 which is to be a component part of, or is other8 wise to be included in, any building to which 

9 this subsection applies shall be taken into ac10 count— 

11 ‘‘(i) at a time not earlier than the 

12 time at which it becomes irrevocably de13 voted to use in the building, and 

14 ‘‘(ii) as if (at the time referred to in 

15 clause (i)) the taxpayer had expended an 

16 amount equal to that portion of the cost to 

17 the taxpayer of such component or other 

18 property which, for purposes of this sub19 part, is properly chargeable (during such 

20 taxable year) to capital account with re21 spect to such building. 

22 ‘‘(B) CERTAIN BORROWING DIS23 REGARDED.—Any amount borrowed directly or 

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1 verting the property for him shall not be treat2 ed as an amount expended for such conversion. 

3 ‘‘(C) LIMITATION FOR BUILDINGS WHICH

4 ARE NOT SELF-CONVERTED.— 

5 ‘‘(i) IN GENERAL.—In the case of a 

6 building which is not self-converted, the 

7 amount taken into account under para8 graph (1)(B) for any taxable year shall not 

9 exceed the amount which represents the 

10 portion of the overall cost to the taxpayer 

11 of the conversion which is properly attrib12 utable to the portion of the conversion 

13 which is completed during such taxable 

14 year. 

15 ‘‘(ii) CARRYOVER OF CERTAIN

16 AMOUNTS.—In the case of a building which 

17 is not a self-converted building, if for the 

18 taxable year— 

19 ‘‘(I) the amount which (but for 

20 clause (i)) would have been taken into 

21 account under paragraph (1)(B) ex22 ceeds the limitation of clause (i), then 

23 the amount of such excess shall be 

24 taken into account under paragraph 


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1 (1)(B) for the succeeding taxable 

2 year, or 

3 ‘‘(II) the limitation of clause (i) 

4 exceeds the amount taken into ac5 count under paragraph (1)(B), then 

6 the amount of such excess shall in7 crease the limitation of clause (i) for 

8 the succeeding taxable year. 

9 ‘‘(D) DETERMINATION OF PERCENTAGE OF

10 COMPLETION.—The determination under sub11 paragraph (C)(i) of the portion of the overall 

12 cost to the taxpayer of the conversion which is 

13 properly attributable to conversion completed 

14 during any taxable year shall be made, under 

15 regulations prescribed by the Secretary, on the 

16 basis of engineering or architectural estimates 

17 or on the basis of cost accounting records. Un18 less the taxpayer establishes otherwise by clear 

19 and convincing evidence, the conversion shall be 

20 deemed to be completed not more rapidly than 

21 ratably over the normal conversion period. 

22 ‘‘(E) NO PROGRESS EXPENDITURES FOR

23 CERTAIN PRIOR PERIODS.—No qualified conver24 sion expenditures shall be taken into account 

25 under this subsection for any period before the 


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1 first day of the first taxable year to which an 

2 election under this subsection applies. 

3 ‘‘(F) NO PROGRESS EXPENDITURES FOR

4 PROPERTY FOR YEAR IT IS PLACED IN SERVICE, 

5 ETC.—In the case of any building, no qualified 

6 conversion expenditures shall be taken into ac7 count under this subsection for the earlier of— 

8 ‘‘(i) the taxable year in which the 

9 building is placed in service, or 

10 ‘‘(ii) the first taxable year for which 

11 recapture is required under section 

12 50(a)(2) with respect to such property, 

13 or for any taxable year thereafter. 

14 ‘‘(4) SELF-CONVERTED BUILDING.—For pur15 poses of this subsection, the term ‘self-converted 

16 building’ means any building if it is reasonable to 

17 believe that more than half of the qualified conver18 sion expenditures for such building will be made di19 rectly by the taxpayer. 

20 ‘‘(5) ELECTION.—This subsection shall apply to 

21 any taxpayer only if such taxpayer has made an 

22 election under this paragraph. Such an election shall 

23 apply to the taxable year for which made and all 

24 subsequent taxable years. Such an election, once 


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1 made, may be revoked only with the consent of the 

2 Secretary. 

3 ‘‘(e) DENIAL OF DOUBLE BENEFIT.—A credit shall 

4 not be allowed under this section for any qualified conver5 sion expenditure for which a credit is allowed under sec6 tion 42 or 47.’’. 

7 (c) CONFORMING AMENDMENTS.— 

8 (1) Section 49(a)(1)(C) of the Internal Revenue 

9 Code of 1986 is amended by striking ‘‘and’’ at the 

10 end of clause (iv), by striking the period at the end 

11 of clause (v) and inserting ‘‘, and’’, and by adding 

12 after clause (v) the following new clause: 

13 ‘‘(vi) the portion of the basis of any 

14 qualified converted property attributable to 

15 qualified conversion expenditures under 

16 section 48D.’’. 

17 (2) Section 50(a)(2)(E) of such Code is amend18 ed by striking ‘‘or 48C(b)(2)’’ and inserting 

19 ‘‘48C(b)(2), or 48D(d)’’. 

20 (3) Section 50(b)(2) of such Code is amended 

21 by striking ‘‘and’’ at the end of subparagraph (C), 

22 by striking the period at the end of subparagraph 

23 (D) and inserting ‘‘; and’’, and by adding after sub24 paragraph (D) the following new subparagraph: 


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1 ‘‘(E) a qualified converted building to the 

2 extent of that portion of the basis which is at3 tributable to qualified conversion expendi4 tures.’’. 

5 (4) Section 50(b)(3) is amended by inserting ‘‘, 

6 or, solely with respect to the qualified office conver7 sion credit, an eligible educational institution (as de8 fined in section 529(e)(5))’’ after ‘‘section 521’’. 

9 (5) The table of sections for subpart E of part 

10 IV of subchapter A of chapter 1 of such Code is 

11 amended by inserting after the item relating to sec12 tion 48C the following new item: 

‘‘Sec. 48D. Qualified office conversion credit.’’. 

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

14 this section shall apply to qualified conversion expendi15 tures incurred after the date of enactment in taxable years 

16 ending after such date. 

Æ 


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