I

106TH CONGRESS

1ST SESSION H. R. 1172

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

MARCH 17, 1999

Mr. SHAW (for himself, Mr. LEWIS of Georgia, Mrs. JOHNSON of Connecticut,

Mr. CLYBURN, Mr. HOUGHTON, Mrs. THURMAN, Mr. MCCOLLUM, Mrs.

MEEK of Florida, Mr. BORSKI, Mr. WEYGAND, Mr. BLAGOJEVICH, Mr.

SANDLIN, Mr. MURTHA, Mr. SMITH of New Jersey, Mr. BISHOP, Mrs.

KELLY, Ms. KILPATRICK, Mr. EHRLICH, Mr. ETHERIDGE, Mr. GEJDENSON, Mr. BLILEY, Mrs. LOWEY, Mr. GOODE, Mr. HINCHEY, Mr. SABO,

Ms. DELAURO, Mr. FROST, Mr. PETERSON of Minnesota, Mr. PRICE of

North Carolina, Mr. SNYDER, Mr. DELAHUNT, Mr. WALSH, Mr. OLVER,

Mr. DEUTSCH, Mr. PETERSON of Pennsylvania, Mr. FORD, Mr. BONIOR,

Ms. EDDIE BERNICE JOHNSON of Texas, Ms. LOFGREN, Mr. GUTKNECHT, and Mr. WELDON of Pennsylvania) 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,
2

•HR 1172 IH

1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Historic Homeowner3 ship Assistance Act’’.

4 SEC. 2. HISTORIC HOMEOWNERSHIP REHABILITATION

5 CREDIT.

6 (a) IN GENERAL.—Subpart A of part IV of sub7 chapter A of chapter 1 of the Internal Revenue Code of

8 1986 (relating to nonrefundable personal credits) is

9 amended by inserting after section 25A the following new

10 section:

11 ‘‘SEC. 25B. HISTORIC HOMEOWNERSHIP REHABILITATION

12 CREDIT.

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

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

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

16 20 percent of the qualified rehabilitation expenditures

17 made by the taxpayer with respect to a qualified historic

18 home.

19 ‘‘(b) DOLLAR LIMITATION.—

20 ‘‘(1) IN GENERAL.—The credit allowed by sub21 section (a) with respect to any residence of a tax22 payer shall not exceed $40,000 ($20,000 in the case

23 of a married individual filing a separate return).

24 ‘‘(2) CARRYFORWARD OF CREDIT UNUSED BY

25 REASON OF LIMITATION BASED ON TAX LIABIL26 ITY.—If the credit allowable under subsection (a) for
3

•HR 1172 IH

1 any taxable year exceeds the limitation imposed by

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

3 sum of the credits allowable under this subpart

4 (other than this section), such excess shall be carried

5 to the succeeding taxable year and added to the

6 credit allowable under subsection (a) for such suc7 ceeding taxable year.

8 ‘‘(c) QUALIFIED REHABILITATION EXPENDITURE.—

9 For purposes of this section:

10 ‘‘(1) IN GENERAL.—The term ‘qualified reha11 bilitation expenditure’ means any amount properly

12 chargeable to capital account—

13 ‘‘(A) in connection with the certified reha14 bilitation of a qualified historic home, and

15 ‘‘(B) for property for which depreciation

16 would be allowable under section 168 if the

17 qualified historic home were used in a trade or

18 business.

19 ‘‘(2) CERTAIN EXPENDITURES NOT IN20 CLUDED.—

21 ‘‘(A) EXTERIOR.—Such term shall not in22 clude any expenditure in connection with the re23 habilitation of a building unless at least 5 per24 cent of the total expenditures made in the reha-
4

•HR 1172 IH

1 bilitation process are allocable to the rehabilita2 tion of the exterior of such building.

3 ‘‘(B) OTHER RULES TO APPLY.—Rules

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

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

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

7 If only a portion of a building is used as the prin8 cipal residence of the taxpayer, only qualified reha9 bilitation expenditures which are properly allocable

10 to such portion shall be taken into account under

11 this section.

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

13 this section:

14 ‘‘(1) IN GENERAL.—Except as otherwise pro15 vided in this subsection, the term ‘certified rehabili16 tation’ has the meaning given such term by section

17 47(c)(2)(C).

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

19 CASE OF TARGETED AREA RESIDENCES, ETC.—

20 ‘‘(A) IN GENERAL.—For purposes of ap21 plying section 47(c)(2)(C) under this section

22 with respect to the rehabilitation of a building

23 to which this paragraph applies, consideration

24 shall be given to—
5

•HR 1172 IH

1 ‘‘(i) the feasibility of preserving exist2 ing architectural and design elements of

3 the interior of such building,

4 ‘‘(ii) the risk of further deterioration

5 or demolition of such building in the event

6 that certification is denied because of the

7 failure to preserve such interior elements,

8 and

9 ‘‘(iii) the effects of such deterioration

10 or demolition on neighboring historic prop11 erties.

12 ‘‘(B) BUILDINGS TO WHICH THIS PARA13 GRAPH APPLIES.—This paragraph shall apply

14 with respect to any building—

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

16 area residence within the meaning of sec17 tion 143(j)(1), or

18 ‘‘(ii) which is located within an enter19 prise or empowerment zone,

20 but shall not apply with respect to any building

21 which is listed in the National Register.

22 ‘‘(3) APPROVED STATE PROGRAM.—The term

23 ‘certified rehabilitation’ includes a certification made

24 by—
6

•HR 1172 IH

1 ‘‘(A) a State Historic Preservation Officer

2 who administers a State Historic Preservation

3 Program approved by the Secretary of the Inte4 rior pursuant to section 101(b)(1) of the Na5 tional Historic Preservation Act, or

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

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

8 Preservation Act and authorized by a State

9 Historic Preservation Officer, or the Secretary

10 of the Interior where there is no approved State

11 program),

12 subject to such terms and conditions as may be

13 specified by the Secretary of the Interior for the re14 habilitation of buildings within the jurisdiction of

15 such officer (or local government) for purposes of

16 this section.

17 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur18 poses of this section:

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

20 ‘qualified historic home’ means a certified historic

21 structure—

22 ‘‘(A) which has been substantially rehabili23 tated, and

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

25 ‘‘(i) is owned by the taxpayer, and
7

•HR 1172 IH

1 ‘‘(ii) is used (or will, within a reason2 able period, be used) by such taxpayer as

3 his principal residence.

4 ‘‘(2) SUBSTANTIALLY REHABILITATED.—The

5 term ‘substantially rehabilitated’ has the meaning

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

7 in the case of any building described in subsection

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

9 ‘‘(3) PRINCIPAL RESIDENCE.—The term ‘prin10 cipal residence’ has the same meaning as when used

11 in section 121.

12 ‘‘(4) CERTIFIED HISTORIC STRUCTURE.—

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

14 historic structure’ has the meaning given such

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

16 ‘‘(B) CERTAIN STRUCTURES INCLUDED.—

17 Such term includes any building (and its struc18 tural components) which is designated as being

19 of historic significance under a statute of a

20 State or local government, if such statute is

21 certified by the Secretary of the Interior to the

22 Secretary as containing criteria which will sub23 stantially achieve the purpose of preserving and

24 rehabilitating buildings of historic significance.
8

•HR 1172 IH

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

2 The term ‘enterprise or empowerment zone’ means

3 any area designated under section 1391 as an enter4 prise community or an empowerment zone.

5 ‘‘(6) REHABILITATION NOT COMPLETE BEFORE

6 CERTIFICATION.—A rehabilitation shall not be treat7 ed as complete before the date of the certification re8 ferred to in subsection (d).

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

10 principal residence shall, for purposes of this section,

11 be treated as the owner thereof if the remaining

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

13 regulations prescribed by the Secretary) is not less

14 than such minimum period as the regulations re15 quire.

16 ‘‘(8) TENANT-STOCKHOLDER IN COOPERATIVE

17 HOUSING CORPORATION.—If the taxpayer holds

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

19 216) in a cooperative housing corporation (as de20 fined in such section), such stockholder shall be

21 treated as owning the house or apartment which the

22 taxpayer is entitled to occupy as such stockholder.

23 ‘‘(9) ALLOCATION OF EXPENDITURES RELAT24 ING TO EXTERIOR OF BUILDING CONTAINING COOP25 ERATIVE OR CONDOMINIUM UNITS.—The percentage
9

•HR 1172 IH

1 of the total expenditures made in the rehabilitation

2 of a building containing cooperative or condominium

3 residential units allocated to the rehabilitation of the

4 exterior of the building shall be attributed propor5 tionately to each cooperative or condominium resi6 dential unit in such building for which a credit

7 under this section is claimed.

8 ‘‘(f) WHEN EXPENDITURES TAKEN INTO AC9 COUNT.—In the case of a building other than a building

10 to which subsection (g) applies, qualified rehabilitation ex11 penditures shall be treated for purposes of this section as

12 made—

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

14 or

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

16 regulation, when such expenditures are properly

17 chargeable to capital account.

18 Regulations under paragraph (2) shall include a rule simi19 lar to the rule under section 50(a)(2) (relating to recap20 ture if property ceases to qualify for progress expendi21 tures).

22 ‘‘(g) ALLOWANCE OF CREDIT FOR PURCHASE OF RE23 HABILITATED HISTORIC HOME.—

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

25 purchased historic home, the taxpayer shall be treat-
10

•HR 1172 IH

1 ed as having made (on the date of purchase) the ex2 penditures made by the seller of such home which

3 would be qualified rehabilitation expenditures had

4 such expenditures been made by the taxpayer and

5 had such home been a qualified historic home of the

6 taxpayer at the time such expenditures were made.

7 ‘‘(2) QUALIFIED PURCHASED HISTORIC

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

9 ‘qualified purchased historic home’ means any sub10 stantially rehabilitated certified historic structure

11 purchased by the taxpayer if—

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

13 such structure after the date rehabilitation is

14 completed, and the purchase occurs within 5

15 years after such date,

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

17 will, within a reasonable period, be the principal

18 residence of the taxpayer,

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

20 under this section or section 47 with respect to

21 such rehabilitation, and

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

23 information as the Secretary determines is nec24 essary to determine the credit under this sub25 section.
11

•HR 1172 IH

1 ‘‘(h) HISTORIC REHABILITATION MORTGAGE CREDIT

2 CERTIFICATE.—

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

4 lieu of the credit otherwise allowable under this sec5 tion, to receive a historic rehabilitation mortgage

6 credit certificate. An election under this paragraph

7 shall be made—

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

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

10 or

11 ‘‘(B) in any other case, at the time reha12 bilitation is completed.

13 ‘‘(2) HISTORIC REHABILITATION MORTGAGE

14 CREDIT CERTIFICATE.—For purposes of this sub15 section, the term ‘historic rehabilitation mortgage

16 credit certificate’ means a certificate—

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

18 with procedures prescribed by the Secretary,

19 with respect to a certified rehabilitation,

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

21 equal to the credit which would (but for this

22 subsection) be allowable under subsection (a) to

23 the taxpayer with respect to such rehabilitation,

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

25 taxpayer to a lending institution (including a
12

•HR 1172 IH

1 nondepository institution) in connection with a

2 loan—

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

4 with respect to which the credit relates,

5 and

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

7 used for any purpose other than the acqui8 sition or rehabilitation of such building,

9 and

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

11 institution provides to the taxpayer—

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

13 on the loan which results in interest pay14 ment reductions which are substantially

15 equivalent on a present value basis to the

16 face amount of such certificate, or

17 ‘‘(ii) if the taxpayer so elects with re18 spect to a specified amount of the face

19 amount of such a certificate relating to a

20 building—

21 ‘‘(I) which is a targeted area res22 idence (within the meaning of section

23 143(j)(1)), or

24 ‘‘(II) which is located in an en25 terprise or empowerment zone,
13

•HR 1172 IH

1 a payment which is substantially equivalent

2 to such specified amount to be used to re3 duce the taxpayer’s cost of purchasing the

4 building (and only the remainder of such

5 face amount shall be taken into account

6 under clause (i)).

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

8 amount of the credit specified in the certificate shall

9 be allowed to the lender only to offset the regular

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

11 lender may carry forward all unused amounts under

12 this subsection until exhausted.

13 ‘‘(4) HISTORIC REHABILITATION MORTGAGE

14 CREDIT CERTIFICATE NOT TREATED AS TAXABLE IN15 COME.—Notwithstanding any other provision of law,

16 no benefit accruing to the taxpayer through the use

17 of a historic rehabilitation mortgage credit certifi18 cate shall be included in gross income for purposes

19 of this title.

20 ‘‘(i) RECAPTURE.—

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

22 year period beginning on the date on which the reha23 bilitation of the building is completed (or, if sub24 section (g) applies, the date of purchase of such

25 building by the taxpayer)—
14

•HR 1172 IH

1 ‘‘(A) the taxpayer disposes of such tax2 payer’s interest in such building, or

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

4 principal residence of the taxpayer,

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

6 taxable year in which such disposition or cessation

7 occurs shall be increased by the recapture percent8 age of the credit allowed under this section for all

9 prior taxable years with respect to such rehabilita10 tion.

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

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

13 determined in accordance with the table under

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

15 amended—

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

17 be investment credit property within—’ and in18 serting ‘If the disposition or cessation occurs

19 within—’, and

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

21 after placed in service’ and inserting ‘One full

22 year after the taxpayer becomes entitled to the

23 credit’.

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

25 subtitle, if a credit is allowed under this section for any
15

•HR 1172 IH

1 expenditure with respect to any property (including any

2 purchase under subsection (g) and any transfer under sub3 section (h)), the increase in the basis of such property

4 which would (but for this subsection) result from such ex5 penditure shall be reduced by the amount of the credit

6 so allowed.

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

8 fee for the processing of applications for the certification

9 of any rehabilitation under this section provided that the

10 amount of such fee is used only to defray expenses associ11 ated with the processing of such applications.

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

13 be allowed under this section for any amount for which

14 credit is allowed under section 47.

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

16 such regulations as may be appropriate to carry out the

17 purposes of this section, including regulations where less

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

19 where more than 1 taxpayer use the same dwelling unit

20 as their principal residence.’’

21 (b) CONFORMING AMENDMENTS.—

22 (1) Subsection (c) of section 23 of such Code

23 is amended by striking ‘‘and section 1400C’’ and in24 serting ‘‘and sections 25B and 1400C’’.
16

•HR 1172 IH

1 (2) Subparagraph (C) of section 25(e)(1) of

2 such Code is amended by inserting ‘‘, 25B,’’ after

3 ‘‘sections 23’’.

4 (3) Subsection (d) of section 1400C of such

5 Code is amended by striking ‘‘other than this sec6 tion)’’ and inserting ‘‘other than this section and

7 section 25B)’’.

8 (4) Subsection (a) of section 1016 of such Code

9 is amended by striking ‘‘and’’ at the end of para10 graph (26), by striking the period at the end of

11 paragraph (27) and inserting ‘‘, and’’, and by add12 ing at the end the following new item:

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

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

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

16 of such Code is amended by inserting after the item relat17 ing to section 25A the following new item:

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

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

19 this section shall apply with respect to rehabilitations the

20 physical work on which begins after the date of enactment

21 of this Act.

Æ