I

107TH 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 22, 2001

Mr. SHAW (for himself, Mr. LEWIS of Georgia, Mr. WATKINS, Mr. JEFFERSON, Mr. BECERRA, Mr. NEAL of Massachusetts, Mr. HOUGHTON, Mr.

BLUMENAUER, Mr. ANDREWS, Mr. SANDERS, Mrs. JONES of Ohio, Mr.

BENTSEN, Mr. HOLDEN, Mr. HINCHEY, Ms. MCCOLLUM, Mr. ENGEL,

Mr. MOLLOHAN, Mr. GREENWOOD, Mr. MALONEY of Connecticut, Mr.

CAMP, Mr. RUSH, Mr. BALDACCI, Mr. CANTOR, Mr. HILLIARD, Mr.

ENGLISH, Mr. FROST, Ms. KAPTUR, Mr. STARK, Mr. LEVIN, Mr.

MCDERMOTT, Ms. ROYBAL-ALLARD, Mr. MATSUI, Mr. GUTKNECHT, Mr.

PASCRELL, Mr. COYNE, Mr. KUCINICH, Mr. MCNULTY, Mr. TANCREDO,

Ms. MCKINNEY, Mr. UDALL of Colorado, Mr. CUMMINGS, Ms. HART, Mr.

GEPHARDT, Mrs. JOHNSON of Connecticut, Mr. CARDIN, Mr. DOYLE,

Mrs. THURMAN, Mr. MCGOVERN, Mr. ABERCROMBIE, Mr. GOODLATTE,

Mr. KENNEDY of Rhode Island, Mr. LEWIS of Kentucky, Mr. RAMSTAD,

Mr. MCCRERY, and Mr. FOLEY) 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.
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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’’.

6 SEC. 2. HISTORIC HOMEOWNERSHIP REHABILITATION

7 CREDIT.

8 (a) IN GENERAL.—Subpart A of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of

10 1986 (relating to nonrefundable personal credits) is

11 amended by inserting after section 25A the following new

12 section:

13 ‘‘SEC. 25B. HISTORIC HOMEOWNERSHIP REHABILITATION

14 CREDIT.

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

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

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

18 20 percent of the qualified rehabilitation expenditures

19 made by the taxpayer with respect to a qualified historic

20 home.

21 ‘‘(b) DOLLAR LIMITATION.—

22 ‘‘(1) IN GENERAL.—The credit allowed by sub23 section (a) with respect to any residence of a tax24 payer shall not exceed $40,000 ($20,000 in the case

25 of a married individual filing a separate return).
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1 ‘‘(2) CARRYFORWARD OF CREDIT UNUSED BY

2 REASON OF LIMITATION BASED ON TAX LIABIL3 ITY.—If the credit allowable under subsection (a) for

4 any taxable year exceeds the limitation imposed by

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

6 sum of the credits allowable under this subpart

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

8 to the succeeding taxable year and added to the

9 credit allowable under subsection (a) for such suc10 ceeding taxable year.

11 ‘‘(c) QUALIFIED REHABILITATION EXPENDITURE.—

12 For purposes of this section:

13 ‘‘(1) IN GENERAL.—The term ‘qualified reha14 bilitation expenditure’ means any amount properly

15 chargeable to capital account—

16 ‘‘(A) in connection with the certified reha17 bilitation of a qualified historic home, and

18 ‘‘(B) for property for which depreciation

19 would be allowable under section 168 if the

20 qualified historic home were used in a trade or

21 business.

22 ‘‘(2) CERTAIN EXPENDITURES NOT IN23 CLUDED.—

24 ‘‘(A) EXTERIOR.—Such term shall not in25 clude any expenditure in connection with the re-
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1 habilitation of a building unless at least 5 per2 cent of the total expenditures made in the reha3 bilitation process are allocable to the rehabilita4 tion of the exterior of such building.

5 ‘‘(B) OTHER RULES TO APPLY.—Rules

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

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

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

9 If only a portion of a building is used as the prin10 cipal residence of the taxpayer, only qualified reha11 bilitation expenditures which are properly allocable

12 to such portion shall be taken into account under

13 this section.

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

15 this section:

16 ‘‘(1) IN GENERAL.—Except as otherwise pro17 vided in this subsection, the term ‘certified rehabili18 tation’ has the meaning given such term by section

19 47(c)(2)(C).

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

21 CASE OF TARGETED AREA RESIDENCES, ETC.—

22 ‘‘(A) IN GENERAL.—For purposes of ap23 plying section 47(c)(2)(C) under this section

24 with respect to the rehabilitation of a building
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1 to which this paragraph applies, consideration

2 shall be given to—

3 ‘‘(i) the feasibility of preserving exist4 ing architectural and design elements of

5 the interior of such building,

6 ‘‘(ii) the risk of further deterioration

7 or demolition of such building in the event

8 that certification is denied because of the

9 failure to preserve such interior elements,

10 and

11 ‘‘(iii) the effects of such deterioration

12 or demolition on neighboring historic prop13 erties.

14 ‘‘(B) BUILDINGS TO WHICH THIS PARA15 GRAPH APPLIES.—This paragraph shall apply

16 with respect to any building—

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

18 area residence within the meaning of sec19 tion 143(j)(1), or

20 ‘‘(ii) which is located within an enter21 prise community or empowerment zone as

22 designated under section 1391, or a re23 newal community designated under section

24 1400(e),
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1 but shall not apply with respect to any building

2 which is listed in the National Register.

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

4 ‘certified rehabilitation’ includes a certification made

5 by—

6 ‘‘(A) a State Historic Preservation Officer

7 who administers a State Historic Preservation

8 Program approved by the Secretary of the Inte9 rior pursuant to section 101(b)(1) of the Na10 tional Historic Preservation Act, or

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

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

13 Preservation Act and authorized by a State

14 Historic Preservation Officer, or the Secretary

15 of the Interior where there is no approved State

16 program,

17 subject to such terms and conditions as may be

18 specified by the Secretary of the Interior for the re19 habilitation of buildings within the jurisdiction of

20 such officer (or local government) for purposes of

21 this section.

22 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur23 poses of this section:
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1 ‘‘(1) QUALIFIED HISTORIC HOME.—The term

2 ‘qualified historic home’ means a certified historic

3 structure—

4 ‘‘(A) which has been substantially rehabili5 tated, and

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

7 ‘‘(i) is owned by the taxpayer, and

8 ‘‘(ii) is used (or will, within a reason9 able period, be used) by such taxpayer as

10 his principal residence.

11 ‘‘(2) SUBSTANTIALLY REHABILITATED.—The

12 term ‘substantially rehabilitated’ has the meaning

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

14 in the case of any building described in subsection

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

16 ‘‘(3) PRINCIPAL RESIDENCE.—The term ‘prin17 cipal residence’ has the same meaning as when used

18 in section 121.

19 ‘‘(4) CERTIFIED HISTORIC STRUCTURE.—

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

21 historic structure’ means any building (and its

22 structural components) which—

23 ‘‘(i) is listed in the National Register,

24 or
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1 ‘‘(ii) is located in a registered historic

2 district (as defined in section 47(c)(3)(B))

3 within which only qualified census tracts

4 (or portions thereof) are located, and is

5 certified by the Secretary of the Interior as

6 being of historic significance to the dis7 trict.

8 ‘‘(B) CERTAIN STRUCTURES INCLUDED.—

9 Such term includes any building (and its struc10 tural components) which is designated as being

11 of historic significance under a statute of a

12 State or local government, if such statute is

13 certified by the Secretary of the Interior to the

14 Secretary as containing criteria which will sub15 stantially achieve the purpose of preserving and

16 rehabilitating buildings of historic significance.

17 ‘‘(C) QUALIFIED CENSUS TRACTS.—For

18 purposes of subparagraph (A)(ii)—

19 ‘‘(i) IN GENERAL.—The term ‘quali20 fied census tract’ means a census tract in

21 which the median income is less than twice

22 the statewide median family income.

23 ‘‘(ii) DATA USED.—The determination

24 under clause (i) shall be made on the basis
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1 of the most recent decennial census for

2 which data are available.

3 ‘‘(5) REHABILITATION NOT COMPLETE BEFORE

4 CERTIFICATION.—A rehabilitation shall not be treat5 ed as complete before the date of the certification re6 ferred to in subsection (d).

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

8 principal residence shall, for purposes of this section,

9 be treated as the owner thereof if the remaining

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

11 regulations prescribed by the Secretary) is not less

12 than such minimum period as the regulations re13 quire.

14 ‘‘(7) TENANT-STOCKHOLDER IN COOPERATIVE

15 HOUSING CORPORATION.—If the taxpayer holds

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

17 216) in a cooperative housing corporation (as de18 fined in such section), such stockholder shall be

19 treated as owning the house or apartment which the

20 taxpayer is entitled to occupy as such stockholder.

21 ‘‘(8) ALLOCATION OF EXPENDITURES RELAT22 ING TO EXTERIOR OF BUILDING CONTAINING COOP23 ERATIVE OR CONDOMINIUM UNITS.—The percentage

24 of the total expenditures made in the rehabilitation

25 of a building containing cooperative or condominium
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1 residential units allocated to the rehabilitation of the

2 exterior of the building shall be attributed propor3 tionately to each cooperative or condominium resi4 dential unit in such building for which a credit

5 under this section is claimed.

6 ‘‘(f) WHEN EXPENDITURES TAKEN INTO AC7 COUNT.—In the case of a building other than a building

8 to which subsection (g) applies, qualified rehabilitation ex9 penditures shall be treated for purposes of this section as

10 made—

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

12 or

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

14 regulation, when such expenditures are properly

15 chargeable to capital account.

16 Regulations under paragraph (2) shall include a rule simi17 lar to the rule under section 50(a)(2) (relating to recap18 ture if property ceases to qualify for progress expendi19 tures).

20 ‘‘(g) ALLOWANCE OF CREDIT FOR PURCHASE OF RE21 HABILITATED HISTORIC HOME.—

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

23 purchased historic home, the taxpayer shall be treat24 ed as having made (on the date of purchase) the ex25 penditures made by the seller of such home. For
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1 purposes of the preceding sentence, expenditures

2 made by the seller shall be deemed to be qualified

3 rehabilitation expenditures if such expenditures, if

4 made by the purchaser, would be qualified rehabili5 tation expenditures.

6 ‘‘(2) QUALIFIED PURCHASED HISTORIC

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

8 ‘qualified purchased historic home’ means any sub9 stantially rehabilitated certified historic structure

10 purchased by the taxpayer if—

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

12 such structure after the date rehabilitation is

13 completed, and the purchase occurs within 5

14 years after such date,

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

16 will, within a reasonable period, be the principal

17 residence of the taxpayer,

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

19 under this section or section 47 with respect to

20 such rehabilitation, and

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

22 information as the Secretary determines is nec23 essary to determine the credit under this sub24 section.
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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
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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 community or empowerment
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1 zone as designated under section

2 1391, or a renewal community as des3 ignated under section 1400(e),

4 a payment which is substantially equivalent

5 to such specified amount to be used to re6 duce the taxpayer’s cost of purchasing the

7 building (and only the remainder of such

8 face amount shall be taken into account

9 under clause (i)).

10 ‘‘(3) METHOD OF DISCOUNTING.—The present

11 value under paragraph (2)(D)(i) shall be

12 determined—

13 ‘‘(A) for a period equal to the term of the

14 loan referred to in subparagraph (D)(i),

15 ‘‘(B) by using the convention that any pay16 ment on such loan in any taxable year within

17 such period is deemed to have been made on

18 the last day of such taxable year,

19 ‘‘(C) by using a discount rate equal to 65

20 percent of the average of the annual Federal

21 mid-term rate and the annual Federal long22 term rate applicable under section 1274(d)(1)

23 to the month in which the taxpayer makes an

24 election under paragraph (1) and compounded

25 annually, and
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1 ‘‘(D) by assuming that the credit allowable

2 under this section for any year is received on

3 the last day of such year.

4 ‘‘(4) USE OF CERTIFICATE BY LENDER.—The

5 amount of the credit specified in the certificate shall

6 be allowed to the lender only to offset the regular

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

8 lender may carry forward all unused amounts under

9 this subsection until exhausted.

10 ‘‘(5) HISTORIC REHABILITATION MORTGAGE

11 CREDIT CERTIFICATE NOT TREATED AS TAXABLE IN12 COME.—Notwithstanding any other provision of law,

13 no benefit accruing to the taxpayer through the use

14 of a historic rehabilitation mortgage credit certifi15 cate shall be included in gross income for purposes

16 of this title.

17 ‘‘(i) RECAPTURE.—

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

19 year period beginning on the date on which the reha20 bilitation of the building is completed (or, if sub21 section (g) applies, the date of purchase of such

22 building by the taxpayer)—

23 ‘‘(A) the taxpayer disposes of such tax24 payer’s interest in such building, or
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1 ‘‘(B) such building ceases to be used as the

2 principal residence of the taxpayer or ceases to

3 be a certified historic structure,

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

5 taxable year in which such disposition or cessation

6 occurs shall be increased by the recapture percent7 age of the credit allowed under this section for all

8 prior taxable years with respect to such rehabilita9 tion.

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

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

12 determined in accordance with the table under sec13 tion 50(a)(1)(B), deeming such table to be

14 amended—

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

16 be investment credit property within—’ and in17 serting ‘If the disposition or cessation occurs

18 within—’, and

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

20 after placed in service’ and inserting ‘One full

21 year after the taxpayer becomes entitled to the

22 credit’.

23 ‘‘(3) TRANSFER BETWEEN SPOUSES OR INCI24 DENT TO DIVORCE.—In the case of any transfer de-
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1 scribed in subsection (a) of section 1041 (relating to

2 transfers between spouses or incident to divorce)—

3 ‘‘(A) the foregoing provisions of this sub4 section shall not apply, and

5 ‘‘(B) the same tax treatment under this

6 subsection with respect to the transferred prop7 erty shall apply to the transferee as would have

8 applied to the transferor.

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

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

11 expenditure with respect to any property (including any

12 purchase under subsection (g) and any transfer under sub13 section (h)), the increase in the basis of such property

14 which would (but for this subsection) result from such ex15 penditure shall be reduced by the amount of the credit

16 so allowed.

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

18 fee for the processing of applications for the certification

19 of any rehabilitation under this section provided that the

20 amount of such fee is used only to defray expenses associ21 ated with the processing of such applications.

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

23 be allowed under this section for any amount for which

24 credit is allowed under section 47.
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1 ‘‘(m) REGULATIONS.—The Secretary shall prescribe

2 such regulations as may be appropriate to carry out the

3 purposes of this section, including regulations where less

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

5 where more than 1 taxpayer use the same dwelling unit

6 as their principal residence.’’

7 (b) CONFORMING AMENDMENTS.—

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

9 is amended by striking ‘‘and section 1400C’’ and in10 serting ‘‘and sections 25B and 1400C’’.

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

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

13 ‘‘sections 23’’.

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

15 Code is amended by striking ‘‘other than this sec16 tion)’’ and inserting ‘‘other than this section and

17 section 25B)’’.

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

19 is amended by striking ‘‘and’’ at the end of para20 graph (26), by striking the period at the end of

21 paragraph (27) and inserting ‘‘, and’’, and by add22 ing at the end the following new item:

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

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

25 for subpart A of part IV of subchapter A of chapter 1
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1 of such Code is amended by inserting after the item relat2 ing to section 25A the following new item:

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

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

4 this section shall apply with respect to rehabilitations the

5 physical work on which begins after the date of enactment

6 of this Act.

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