Historic Tax Credit Growth and Opportunity Act of 2023

To amend the Internal Revenue Code of 1986 to modify the rehabilitation credit for certain small projects, to eliminate the requirement that the taxpayer’s basis in a building be reduced by the amount of the rehabilitation credit determined with respect to such building, and for other purposes. 1. Short title This Act may be cited as the Historic Tax Credit Growth and Opportunity Act of 2023 2. Increase in rehabilitation credit (a) In general Section 47(a) (3) Increased percentage for qualified rehabilitation expenditures before 2028 (A) In general In the case of any qualified rehabilitated building with respect to which there are qualified rehabilitation expenditures paid or incurred in any taxable year beginning after December 31, 2020, and before January 1, 2028— (i) paragraph (2) shall be applied by substituting the applicable percentage 20 percent (ii) the ratable share of such expenditures shall be determined separately under paragraph (2) by applying the applicable percentage for each such taxable year to the expenditures for each such taxable year. (B) Applicable percentage For purposes of this paragraph, the term applicable percentage In the case of a taxable The applicable 2020 through 2025 30 2026 26 2027 23 2028 and thereafter 20 . (b) Effective date The amendments made by this section shall apply to property placed in service after December 31, 2023. 3. Increase in the rehabilitation credit for certain small projects (a) In general Section 47 is amended by adding at the end the following new subsection: (e) Special rule regarding certain small projects (1) In general In the case of any small project— (A) the percentage under subsection (a)(2) shall be 30 percent, and (B) the qualified rehabilitation expenditures taken into account under this section with respect to such project shall not exceed $2,500,000. (2) Small project For purposes of this subsection, the term small project (A) the qualified rehabilitation expenditures taken into account under this section (or which would be so taken into account but for paragraph (1)(B)) with respect to such rehabilitation do not exceed $3,750,000, (B) no credit was allowed under this section with respect to such building to any taxpayer for either of the 2 taxable years immediately preceding the first taxable year in which expenditures described in subparagraph (A) were paid or incurred, and (C) the taxpayer elects (at such time and manner as the Secretary may provide) to have this subsection apply with respect to such rehabilitation. . (b) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2023. 4. Modification of definition of substantially rehabilitated (a) In general Section 47(c)(1)(B)(i)(I) is amended by inserting 50 percent of the adjusted basis (b) Effective date The amendment made by subsection (a) shall apply to determinations with respect to 24-month periods (referred to in clause (i) of section 47(c)(1)(B) 5. Elimination of rehabilitation credit basis adjustment (a) In general Section 50(c) is amended by adding at the end the following new paragraph: (6) Exception for rehabilitation credit In the case of the rehabilitation credit, paragraph (1) shall not apply. . (b) Treatment in case of credit allowed to lessee Section 50(d) is amended by adding at the end the following: In the case of the rehabilitation credit, paragraph (5)(B) of the section 48(d) referred to in paragraph (5) of this subsection shall not apply. (c) Effective date The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act. 6. Modifications regarding certain tax-exempt use property (a) In general Section 47(c)(2)(B)(v) is amended by adding at the end the following new subclause: (III) Disqualified lease rules to apply only in case of government entity For purposes of subclause (I), except in the case of a tax-exempt entity described in section 168(h)(2)(A)(i) (determined without regard to the last sentence of section 168(h)(2)(A)), the determination of whether property is tax-exempt use property shall be made under section 168(h) without regard to whether the property is leased in a disqualified lease (as defined in section 168(h)(1)(B)(ii)). . (b) Effective date The amendments made by this section shall apply to leases entered into after the date of the enactment of this Act.

Summary: Historic Tax Credit Growth and Opportunity Act of 2023 This bill increases the rehabilitation tax credit and modifies certain requirements for the credit. The bill increases the rate of the credit for qualified rehabilitation expenditures in taxable years beginning after December 31, 2020, and before January 1, 2028, after which the rate reverts to 20%. The bill increases the rate of the credit to 30% for certain small projects whose qualified rehabilitation expenditures do not exceed $2.5 million. The bill also expands the types of buildings eligible for rehabilitation by decreasing the rehabilitation threshold from 100% to 50% of project expenses. It also eliminates the basis adjustment requirement for the credit and modifies rules relating to tax-exempt use property eligible for the credit.