I 
111TH CONGRESS 
2D SESSION 
H. R. 5943 
To amend the Internal Revenue Code of 1986 to allow a deduction for 
the portion of any equity investment used to buy down debt on commer-
cial real property. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 29, 2010 
Ms. BERKLEY (for herself, Mr. NUNES, and Mr. CROWLEY) 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 allow a 
deduction for the portion of any equity investment used 
to buy down debt on commercial real property. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Community Recovery 
and Enhancement Act of 2010’’ or the ‘‘CRE Act of 
2010’’. 
VerDate Mar 15 2010 
00:27 Jul 31, 2010
Jkt 089200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\H5943.IH
H5943
smartinez on DSKB9S0YB1PROD with BILLS
SEC. 2. DEDUCTION FOR EQUITY INVESTMENTS USED TO 
BUY DOWN DEBT ON COMMERCIAL REAL 
PROPERTY. 
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
additional itemized deductions for individuals and corpora-
tions) is amended by adding at the end the following new 
section: 
‘‘SEC. 199A. DEDUCTION FOR EQUITY INVESTMENTS USED 
TO BUY DOWN DEBT ON COMMERCIAL REAL 
PROPERTY. 
‘‘(a) IN GENERAL.—There shall be allowed as a de-
duction an amount equal to— 
‘‘(1) 50 percent of any qualified debt reduction 
equity investment made during the taxable year by 
the taxpayer in a partnership, and 
‘‘(2) 50 percent of any qualified debt reduction 
payment made during the taxable year by the tax-
payer with respect to qualified indebtedness on com-
mercial real property held by the taxpayer. 
Paragraph (2) shall not apply to any qualified debt reduc-
tion payment made by a partnership. 
‘‘(b) MAXIMUM DEDUCTION.—The deduction allowed 
by subsection (a) for any taxable year shall not exceed, 
with respect to each commercial real property, the excess 
(if any) of— 
VerDate Mar 15 2010 
00:27 Jul 31, 2010
Jkt 089200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\H5943.IH
H5943
smartinez on DSKB9S0YB1PROD with BILLS
‘‘(1) the amount of the qualified indebtedness 
secured by such property as of the beginning of such 
taxable year, over 
‘‘(2) the lesser of— 
‘‘(A) 50 percent of the amount described 
in paragraph (1), or 
‘‘(B) the adjusted basis of such property 
(in the hands of the partnership or the tax-
payer, as the case may be) as of the close of 
such taxable year (determined without regard to 
qualified debt reduction equity investments and 
qualified debt reduction payments made during 
the taxable year and depreciation for such 
year). 
‘‘(c) QUALIFIED DEBT REDUCTION EQUITY INVEST-
MENT; QUALIFIED DEBT REDUCTION PAYMENT.—For 
purposes of this section— 
‘‘(1) QUALIFIED DEBT REDUCTION EQUITY IN-
VESTMENT.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
debt reduction equity investment’ means the 
amount of any qualified equity investment 
which is used by the partnership to reduce the 
principal amount of qualified indebtedness of 
the partnership. 
VerDate Mar 15 2010 
00:27 Jul 31, 2010
Jkt 089200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\H5943.IH
H5943
smartinez on DSKB9S0YB1PROD with BILLS
‘‘(B) QUALIFIED EQUITY INVESTMENT.— 
The term ‘qualified equity investment’ means 
any equity investment (as defined in section 
45D(b)(6)) in a partnership if— 
‘‘(i) such investment is acquired by 
the taxpayer at its original issue (directly 
or through an underwriter) solely in ex-
change for cash, 
‘‘(ii) at least 80 percent of such cash 
is used by the partnership to reduce the 
principal amount of qualified indebtedness 
of the partnership, 
‘‘(iii) the portion of such cash not so 
used is used by the partnership for im-
provements to commercial real property 
held by the partnership, and 
‘‘(iv) the person or persons otherwise 
entitled to depreciation on such property 
consent to the basis reduction under sub-
section (f)(1). 
‘‘(C) REDEMPTIONS.—A rule similar to the 
rule of section 1202(c)(3) shall apply for pur-
poses of this paragraph. 
‘‘(2) QUALIFIED DEBT REDUCTION PAYMENT.— 
In the case of commercial real property held by a 
VerDate Mar 15 2010 
00:27 Jul 31, 2010
Jkt 089200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\H5943.IH
H5943
smartinez on DSKB9S0YB1PROD with BILLS
taxpayer other than a partnership, the term ‘quali-
fied debt reduction payment’ means the amount of 
cash paid by the taxpayer during the taxable year to 
reduce the principal amount of qualified indebted-
ness of the taxpayer. 
‘‘(d) OTHER DEFINITIONS.—For purposes of this 
section— 
‘‘(1) QUALIFIED INDEBTEDNESS.— 
‘‘(A) PARTNERSHIPS.—The term ‘qualified 
indebtedness’ means, with respect to a partner-
ship, any indebtedness— 
‘‘(i) incurred or assumed by the part-
nership on or before January 1, 2009, and 
‘‘(ii) which is secured by commercial 
real property held by the partnership at 
the time the qualified debt reduction equity 
investment is made by the taxpayer. 
‘‘(B) OTHER TAXPAYERS.—In the case of 
a taxpayer other than a partnership, the term 
‘qualified indebtedness’ has the meaning given 
to such term by subparagraph (A) determined 
by substituting— 
‘‘(i) ‘taxpayer’ for ‘partnership’, and 
VerDate Mar 15 2010 
00:27 Jul 31, 2010
Jkt 089200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\H5943.IH
H5943
smartinez on DSKB9S0YB1PROD with BILLS
‘‘(ii) ‘qualified debt reduction pay-
ment’ for ‘qualified debt reduction equity 
investment’. 
‘‘(2) COMMERCIAL REAL PROPERTY.—The term 
‘commercial real property’ means section 1250 prop-
erty (as defined in section 1250(c)); except that such 
term shall not include residential rental property (as 
defined in section 168(e)(2)) unless the building con-
tains at least 3 dwelling units. 
‘‘(e) APPLICATION OF SECTION 1250.—For purposes 
of determining the depreciation adjustments under section 
1250 with respect to any property— 
‘‘(1) the deduction allowed by this section shall 
be treated as a deduction for depreciation, and 
‘‘(2) the depreciation adjustments in respect of 
such property shall include all deductions allowed by 
this section to all taxpayers by reason of reducing 
the debt secured by such property. 
‘‘(f) SPECIAL RULES.— 
‘‘(1) BASIS
REDUCTION.—The basis of any 
property with respect to which any qualified debt re-
duction equity investment or qualified debt reduction 
payment is made shall be reduced by the amount of 
the deduction allowed by this section by reason of 
such investment or payment. 
VerDate Mar 15 2010 
00:27 Jul 31, 2010
Jkt 089200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6201
E:\BILLS\H5943.IH
H5943
smartinez on DSKB9S0YB1PROD with BILLS
‘‘(2) REFINANCINGS.—The indebtedness de-
scribed in subsection (d)(1)(A)(i) shall include in-
debtedness resulting from the refinancing of indebt-
edness described in such subsection (or this sen-
tence), but only to the extent it does not exceed the 
amount of the indebtedness being refinanced. 
‘‘(3) DEBT REDUCTION MUST BE IN EXCESS OF 
SCHEDULED PAYMENTS.—Only amounts paid in ex-
cess of the amounts required to be paid under the 
terms of the loan may be taken into account under 
this section. 
‘‘(4) DENIAL
OF
DEDUCTION
FOR
DEBT-FI-
NANCED INVESTMENTS, ETC.—No deduction shall be 
allowed by this section for any qualified debt reduc-
tion equity investment or any qualified debt reduc-
tion payment to the extent indebtedness is incurred 
or continued to make such investment or payment. 
‘‘(5) RECAPTURE
OF
DEDUCTION
IF
ADDI-
TIONAL DEBT WITHIN 3 YEARS.— 
‘‘(A) IN GENERAL.—If a partnership in-
curs any additional debt within 3 years after 
the date that the partnership received a quali-
fied debt reduction equity investment, the ordi-
nary income of the taxpayer making such in-
VerDate Mar 15 2010 
00:27 Jul 31, 2010
Jkt 089200
PO 00000
Frm 00007
Fmt 6652
Sfmt 6201
E:\BILLS\H5943.IH
H5943
smartinez on DSKB9S0YB1PROD with BILLS
vestment shall be increased by the applicable 
percentage of the recaptured deduction. 
‘‘(B) RECAPTURED DEDUCTION.—For pur-
poses of this paragraph, the recaptured deduc-
tion is the excess of— 
‘‘(i) the deduction allowed by sub-
section (a) on account of a qualified debt 
reduction equity investment, over 
‘‘(ii) the deduction which would have 
been so allowed if such investment had 
been reduced by such investment’s share of 
the additional debt. 
‘‘(C) APPLICABLE PERCENTAGE.—The ap-
plicable percentage shall be determined in ac-
cordance with the following table: 
‘‘If, of the 3 years referred to in 
subparagraph 
(A), 
the 
addi-
tional debt occurs during the: 
The applicable percentage 
is: 
1st such year ................................................................................
100 
2d such year .................................................................................
66 2⁄3 
3d such year .................................................................................
33 1⁄3 
‘‘(D) INVESTMENT’S
SHARE
OF
ADDI-
TIONAL DEBT.—A qualified debt reduction eq-
uity investment’s share of additional debt is the 
amount which bears the same ratio to such ad-
ditional debt as such taxpayer’s qualified debt 
reduction equity investment bears to the aggre-
gate qualified debt reduction equity investments 
VerDate Mar 15 2010 
19:40 Jul 31, 2010
Jkt 089200
PO 00000
Frm 00008
Fmt 6652
Sfmt 6201
E:\BILLS\H5943.IH
H5943
smartinez on DSKB9S0YB1PROD with BILLS
of all such taxpayers to which subparagraph 
(A) applies by reason of such additional debt. 
‘‘(E) SUBSEQUENT
DEPRECIATION.—The 
partnership’s deductions under section 168 for 
periods after a recaptured deduction under this 
paragraph shall be determined as if the portion 
of the qualified debt reduction equity invest-
ment allocable to the recaptured deduction had 
never been made. 
‘‘(F) SIMILAR
RULES
FOR
QUALIFIED 
DEBT REDUCTION PAYMENTS.—Rules similar to 
the rules of the preceding provisions of this 
paragraph shall apply to qualified debt reduc-
tion payments. 
‘‘(6) 
EXEMPTION
FROM
PASSIVE
LOSS 
RULES.—Section 469 shall not apply to the deduc-
tion allowed by this section. 
‘‘(g) APPLICATION OF SECTION.—This section shall 
apply to qualified debt reduction equity investments and 
qualified debt reduction payments made after the date of 
the enactment of this section and before January 1, 
2013.’’. 
(b) EARNINGS AND PROFITS.—Subsection (k) of sec-
tion 312 of such Code is amended by adding at the end 
the following new paragraph: 
VerDate Mar 15 2010 
00:27 Jul 31, 2010
Jkt 089200
PO 00000
Frm 00009
Fmt 6652
Sfmt 6201
E:\BILLS\H5943.IH
H5943
smartinez on DSKB9S0YB1PROD with BILLS
‘‘(6) TREATMENT
OF
SECTION
199A.—Para-
graphs (1) and (3) shall not apply to the deduction 
allowed by section 199A.’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for part VI of subchapter B of chapter 1 of such Code 
is amended by adding at the end the following new item: 
‘‘Sec. 199A. Deduction for equity investments used to buy down debt on com-
mercial real property.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after the 
date of the enactment of this Act. 
Æ 
VerDate Mar 15 2010 
00:27 Jul 31, 2010
Jkt 089200
PO 00000
Frm 00010
Fmt 6652
Sfmt 6301
E:\BILLS\H5943.IH
H5943
smartinez on DSKB9S0YB1PROD with BILLS