‘‘(IV) rehabilitated building en-
ergy efficiency property, or 
‘‘(V) an addition or improvement 
to property described in subclause (I), 
(II), (III), or (IV), and’’. 
(b) REHABILITATED BUILDING ENERGY EFFICIENCY 
PROPERTY.—Section 47(c)(2) of such Code is amended by 
adding at the end the following new subparagraph: 
‘‘(E) REHABILITATED BUILDING ENERGY 
EFFICIENCY PROPERTY.— 
‘‘(i) IN
GENERAL.—For purposes of 
subparagraph (A), the term ‘rehabilitated 
building energy efficiency property’ means 
property which is certified as being— 
‘‘(I) affixed to, adjacent to, or in-
tegral to the provision of renewable 
energy to a qualified rehabilitated 
building, or 
‘‘(II) installed as part of a plan 
designed to achieve any energy use re-
duction (within the meaning of sub-
section (f)). 
Subparagraph (B)(i) shall not apply to re-
habilitated building energy efficiency prop-
erty. 
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‘‘(ii) CERTIFICATION.—The Secretary 
shall prescribe the manner and method for 
the making of certifications under clause 
(i).’’. 
(c) 
ENLARGEMENTS.—Clause 
(iii) 
of 
section 
47(c)(2)(B) of such Code is amended by adding at the 
end the following new sentence: ‘‘The preceding sentence 
shall not apply to any rehabilitated building energy effi-
ciency property which is an addition or improvement to 
a building.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to qualified rehabilitated buildings 
placed in service after the date of the enactment of this 
Act. 
SEC. 5. COORDINATION OF ENERGY CREDIT WITH REHA-
BILITATION CREDIT. 
(a) IN GENERAL.—Paragraph (2) of section 48(a) of 
the Internal Revenue Code of 1986 is amended by striking 
subparagraph (B). 
(b) CONFORMING AMENDMENTS.—Paragraph (2) of 
section 48(a) of such Code is amended— 
(1) by redesignating subparagraph (A)(ii) as 
subparagraph (B) and moving such subparagraph 2 
ems to the left, 
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(2) by redesignating subclauses (I) through 
(IV) of subparagraph (A)(i) as clauses (i) through 
(iv), respectively, and by moving such clauses 2 ems 
to the left, and 
(3) by striking so much of such paragraph as 
precedes ‘‘30 percent in the case of—’’ and inserting 
the following: 
‘‘(2) ENERGY PERCENTAGE.—The energy per-
centage is— 
‘‘(A) 30 percent in the case of—’’. 
(c) BASIS REDUCTION.—Paragraph (3) of section 
50(c) of such Code is amended by adding at the end the 
following new flush sentence: 
‘‘In the case of property that qualifies for both the 
energy credit and the rehabilitation credit, the pre-
ceding sentence shall be applied by substituting 
‘none’ for ‘only 50 percent’ each place it appears.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
the date of the enactment of this Act. 
SEC. 6. DATE BY WHICH BUILDING MUST BE FIRST PLACED 
IN SERVICE. 
(a) IN GENERAL.—Subparagraph (B) of section 
47(c)(1) of the Internal Revenue Code of 1986 (relating 
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to the date by which building must be first placed in serv-
ice) is amended— 
(1) by striking ‘‘BUILDING
MUST
BE
FIRST 
PLACED
IN
SERVICE
BEFORE
1936’’ and inserting 
‘‘DATE
BY
WHICH
BUILDING
MUST
FIRST
BE 
PLACED IN SERVICE’’, and 
(2) by striking ‘‘before 1936’’ and inserting ‘‘no 
less than 50 years prior to the year in which quali-
fied rehabilitation expenditures are taken into ac-
count under subsection (b)(1)’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to property placed in service after 
the date of the enactment of this Act. 
SEC. 7. MODIFICATIONS REGARDING CERTAIN TAX-EXEMPT 
USE PROPERTY. 
(a) 
IN
GENERAL.—Subclause 
(I) 
of 
section 
47(c)(2)(B)(v) of the Internal Revenue Code of 1986 (re-
lating to tax-exempt use property) is amended by inserting 
‘‘and 
subclauses 
(I), 
(II), 
and 
(III) 
of 
section 
168(h)(1)(B)(ii) shall not apply’’ after ‘‘thereof’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
the date of the enactment of this Act. 
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SEC. 8. SPECIAL RULES FOR DISPOSITIONS OF STATE HIS-
TORIC TAX CREDITS. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
items specifically excluded from gross income) is amended 
by inserting after section 139D the following new section: 
‘‘SEC. 139E. DISPOSITIONS OF STATE HISTORIC TAX CRED-
ITS. 
‘‘(a) EXCLUSION FROM INCOME; BASIS REDUC-
TION.— 
‘‘(1) IN GENERAL.—In the case of a taxpayer 
who receives a State historic tax credit and transfers 
such credit by sale, allocation, or otherwise, or re-
ceives a refund of all or a portion of such credit— 
‘‘(A) no portion of the net proceeds of such 
allocation, disposition, or refund of such credit 
shall constitute income to such taxpayer under 
section 61(a), and 
‘‘(B) the taxpayer’s basis in the property 
with respect to which the State historic tax 
credit is allowed shall be reduced as determined 
under paragraph (2). 
‘‘(2) 
DETERMINATION
OF
REDUCTION
IN 
BASIS.—The reduction in basis under paragraph (1) 
shall be applied— 
‘‘(A) first, against the basis in the land, 
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‘‘(B) second, against so much of the basis 
of any building or interest therein as was not 
treated as a qualified rehabilitation expenditure 
by reason of clause (ii) or (iii) of section 
47(c)(2)(B), and 
‘‘(C) third, against the remaining basis in 
the property. 
‘‘(D) ADJUSTMENT IN BASIS OF INTEREST 
IN PARTNERSHIP OR S CORPORATION.—The ad-
justed basis of— 
‘‘(i) a partner’s interest in a partner-
ship, or 
‘‘(ii) stock in an S corporation (as de-
fined in section 1361(a)(1)), 
shall be appropriately adjusted to take into ac-
count adjustments made under this subsection 
in the basis of property held by the partnership 
or S corporation (if any). 
‘‘(b) ELECTION TO INCLUDE IN INCOME.— 
‘‘(1) IN GENERAL.—In the case of a taxpayer 
elects to have this subsection apply— 
‘‘(A) the net proceeds of the allocation, dis-
position, or refund described in subsection (a) 
received by such taxpayer shall constitute in-
come to such taxpayer under section 61(a), and 
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‘‘(B) subsection (a)(1)(B) shall not apply. 
‘‘(2) MAKING OF ELECTION.—An election under 
this subsection shall be made at such time and in 
such manner as the Secretary of the Treasury may 
by regulation prescribe. Such election shall apply for 
the taxable year for which it is made and for all sub-
sequent taxable years and may be revoked only with 
the consent of the Secretary of the Treasury. 
‘‘(c) EFFECT ON QUALIFIED REHABILITATION EX-
PENDITURES AND REHABILITATION CREDITS.—For pur-
poses of determining the rehabilitation credit allowable to 
a taxpayer under section 47, the transfer or allocation of 
State historic tax credits with respect to any property by 
a taxpayer shall not affect or reduce the amount of quali-
fied rehabilitation expenditures (as defined in section 
47(c)(2)) incurred in connection with such property, nor 
shall such transfer or disposition, nor any basis adjust-
ments under subsection (a), be treated as an early disposi-
tion of investment credit property for purposes of the re-
capture provisions of section 50. 
‘‘(d) STATE HISTORIC TAX CREDITS DEFINED.—For 
purposes of this section, the term ‘State historic tax credit’ 
means any credit against State or local tax liabilities 
which— 
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‘‘(1) is allowable under the laws of any State or 
political subdivision thereof to a taxpayer with re-
spect to expenditures made for the rehabilitation of 
property identified by such laws, and 
‘‘(2) can be allocated, disposed, or refunded 
under such laws.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for such part III is amended by inserting after the item 
relating to section 139E the following new item: 
‘‘Sec. 139E. Dispositions of State historic tax credits.’’. 
(c) EFFECTIVE DATE.—This section shall apply to 
transfers or dispositions made, or refunds received, after 
the date of the enactment of this Act. 
Æ 
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