‘‘(ii) is located in a registered historic 
district (as defined in section 47(c)(3)(B)) 
and is certified by the Secretary of the In-
terior as being of historic significance to 
the district. 
‘‘(5) REHABILITATION NOT COMPLETE BEFORE 
CERTIFICATION.—A rehabilitation shall not be treat-
ed as complete before the date of the certification re-
ferred to in subsection (d). 
‘‘(6) TENANT-STOCKHOLDER IN COOPERATIVE 
HOUSING
CORPORATION.—If the taxpayer holds 
stock as a tenant-stockholder (as defined in section 
216) in a cooperative housing corporation (as de-
fined in such section), such stockholder shall be 
treated as owning the house or apartment which the 
taxpayer is entitled to occupy as such stockholder. 
‘‘(7) ALLOCATION OF EXPENDITURES RELAT-
ING TO EXTERIOR OF BUILDING CONTAINING COOP-
ERATIVE OR CONDOMINIUM UNITS.—The percentage 
of the total expenditures made in the rehabilitation 
of a building containing cooperative or condominium 
residential units allocated to the rehabilitation of the 
exterior of the building shall be attributed propor-
tionately to each cooperative or condominium resi-
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dential unit in such building for which a credit 
under this section is claimed. 
‘‘(8) CARRYBACK
AND
CARRYFORWARD
OF 
CREDIT UNUSED BY REASON OF LIMITATION BASED 
ON TAX LIABILITY.— 
‘‘(A) IN GENERAL.—If the credit allowable 
under subsection (a) for any taxable year ex-
ceeds the applicable tax limit for such taxable 
year, such excess shall be a carryback to the 
preceding taxable year and a carryforward to 
each of the 3 succeeding taxable years and, sub-
ject to the limitations of subparagraph (B), 
shall be added to the credit allowable by sub-
section (a) for such preceding or succeeding 
taxable year, as the case may be. 
‘‘(B) AMOUNT CARRIED TO EACH YEAR.— 
Rules similar to the rules of section 39(a)(2) 
shall apply for purposes of this paragraph. 
‘‘(C) LIMITATION.—The amount of the un-
used credit which may be taken into account 
under subparagraph (A) for any taxable year 
shall not exceed the amount (if any) by which 
the applicable tax limit for such taxable year 
exceeds the sum of— 
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‘‘(i) the credit allowable under sub-
section (a) for such taxable year deter-
mined without regard to this paragraph, 
and 
‘‘(ii) the amounts which, by reason of 
this paragraph, are carried to such taxable 
year and are attributable to taxable years 
before the unused credit year. 
‘‘(D) APPLICABLE TAX LIMIT.—For pur-
poses of this paragraph, the term ‘applicable 
tax limit’ means— 
‘‘(i) in the case of a taxable year to 
which section 26(a)(2) applies, the limita-
tion imposed by section 26(a)(2) for the 
taxable year reduced by the sum of the 
credits allowable under this subpart (other 
than this section), and 
‘‘(ii) in the case of a taxable year to 
which section 26(a)(2) does not apply, the 
limitation imposed by section 26(a)(1) for 
the taxable year reduced by the sum of the 
credits allowable under this subpart (other 
than this section and sections 23, 24, 
25A(i), 25B, 25D, 30, 30B, 30D). 
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‘‘(9) CREDIT MAY BE ASSIGNED.—The amount 
of qualified rehabilitation expenditures which would 
(but for this paragraph) be taken into account under 
subsection (a) for any taxable year by any person 
(hereafter in this paragraph referred to as the ‘ini-
tial taxpayer’)— 
‘‘(A) may be taken into account by any 
other person to whom such expenditures are as-
signed by the initial taxpayer, and 
‘‘(B) shall not be taken to account by ini-
tial taxpayer. 
Any person to whom such expenditures are assigned 
under subparagraph (A) shall be treated for pur-
poses of this title as the taxpayer with respect to 
such expenditures. 
‘‘(f) WHEN
EXPENDITURES
TAKEN
INTO
AC-
COUNT.—In the case of a building other than a building 
to which subsection (g) applies, qualified rehabilitation ex-
penditures shall be treated for purposes of this section as 
made— 
‘‘(1) on the date the rehabilitation is completed, 
or 
‘‘(2) to the extent provided by the Secretary by 
regulation, when such expenditures are properly 
chargeable to capital account. 
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Regulations under paragraph (2) shall include a rule simi-
lar to the rule under section 50(a)(2) (relating to recap-
ture if property ceases to qualify for progress expendi-
tures). 
‘‘(g) ALLOWANCE OF CREDIT FOR PURCHASE OF RE-
HABILITATED HISTORIC HOME.— 
‘‘(1) IN GENERAL.—In the case of a qualified 
purchased historic home, the taxpayer shall be treat-
ed as having made (on the date of purchase) the ex-
penditures made by the seller of such home. For 
purposes of the preceding sentence, expenditures 
made by the seller shall be deemed to be qualified 
rehabilitation expenditures if such expenditures, if 
made by the purchaser, would be qualified rehabili-
tation expenditures. 
‘‘(2) 
QUALIFIED
PURCHASED
HISTORIC 
HOME.—For purposes of this subsection, the term 
‘qualified purchased historic home’ means any sub-
stantially rehabilitated certified historic structure 
purchased by the taxpayer if— 
‘‘(A) the taxpayer is the first purchaser of 
such structure after the date rehabilitation is 
completed, and the purchase occurs within 5 
years after such date, 
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‘‘(B) the structure (or a portion thereof) 
will, within a reasonable period, be the principal 
residence of the taxpayer, 
‘‘(C) no credit was allowed to the seller 
under this section or section 47 with respect to 
such rehabilitation, and 
‘‘(D) the taxpayer is furnished with such 
information as the Secretary determines is nec-
essary to determine the credit under this sub-
section. 
‘‘(h) RECAPTURE.— 
‘‘(1) IN GENERAL.—If, before the end of the 5- 
year period beginning on the date on which the reha-
bilitation of the building is completed (or, if sub-
section (g) applies, the date of purchase of such 
building by the taxpayer)— 
‘‘(A) the taxpayer disposes of such tax-
payer’s interest in such building, or 
‘‘(B) such building ceases to be used as the 
principal residence of the taxpayer or ceases to 
be a certified historic structure, the taxpayer’s 
tax imposed by this chapter for the taxable year 
in which such disposition or cessation occurs 
shall be increased by the recapture percentage 
of the credit allowed under this section for all 
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prior taxable years with respect to such reha-
bilitation. 
‘‘(2) RECAPTURE PERCENTAGE.—For purposes 
of paragraph (1), the recapture percentage shall be 
determined in accordance with the table under sec-
tion 50(a)(1)(B), deeming such table to be amend-
ed— 
‘‘(A) by striking ‘If the property ceases to 
be investment credit property within—’ and in-
serting ‘If the disposition or cessation occurs 
within—’, and 
‘‘(B) in clause (i) by striking ‘One full year 
after placed in service’ and inserting ‘One full 
year after the taxpayer becomes entitled to the 
credit’. 
‘‘(3) TRANSFER BETWEEN SPOUSES OR INCI-
DENT TO DIVORCE.—In the case of any transfer de-
scribed in subsection (a) of section 1041 (relating to 
transfers between spouses or incident to divorce)— 
‘‘(A) the foregoing provisions of this sub-
section shall not apply, and 
‘‘(B) the same tax treatment under this 
subsection with respect to the transferred prop-
erty shall apply to the transferee as would have 
applied to the transferor. 
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‘‘(i) BASIS ADJUSTMENTS.—For purposes of this 
subtitle, if a credit is allowed under this section for any 
expenditure with respect to any property (including any 
purchase under subsection (g)), the increase in the basis 
of such property which would (but for this subsection) re-
sult from such expenditure shall be reduced by the amount 
of the credit so allowed. 
‘‘(j) PROCESSING FEES.—Any State may impose a 
fee for the processing of applications for the certification 
of any rehabilitation under this section provided that the 
amount of such fee is used only to defray expenses associ-
ated with the processing of such applications. 
‘‘(k) DENIAL OF DOUBLE BENEFIT.—No credit shall 
be allowed under this section for any amount for which 
credit is allowed under section 47. 
‘‘(l) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be appropriate to carry out the 
purposes of this section, including regulations where less 
than all of a building is used as a principal residence and 
where more than 1 taxpayer use the same dwelling unit 
as their principal residence.’’ 
(b) CONFORMING AMENDMENTS.— 
(1)(A) Paragraph (1) of section 23(c) of such 
Code is amended by inserting ‘‘, 25E,’’ after ‘‘25D’’. 
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(B) Subparagraph (C) of section 25(e)(1) of 
such Code is amended by inserting ‘‘25E,’’ after 
‘‘sections 25D,’’. 
(C) Subparagraph (A) of section 25D(2) of 
such Code is amended by inserting ‘‘and section 
25E’’ after ‘‘(other than this section’’. 
(D) Paragraph (1) of section 1400C(d) of such 
Code is amended by striking ‘‘section 25D’’ and in-
serting ‘‘sections 25D and 25E’’. 
(2)(A) Clause (ii) of section 25(e)(1)(C) of such 
Code is amended by inserting ‘‘25E,’’ after ‘‘25D,’’. 
(B) Paragraph (2) of section 1400C of such 
Code is amended by inserting ‘‘25E,’’ after ‘‘25D,’’. 
(3) Subsection (a) of section 1016 of such Code 
is amended by striking ‘‘and’’ at the end of para-
graph (36), by striking the period at the end of 
paragraph (37) and inserting ‘‘, and’’, and by add-
ing at the end the following new item: 
‘‘(38) to the extent provided in section 25E(i).’’ 
(c) CLERICAL AMENDMENT.—The table of sections 
for subpart A of part IV of subchapter A of chapter 1 
of such Code is amended by inserting after the item relat-
ing to section 25D the following new item: 
‘‘Sec. 25E. Historic homeownership rehabilitation credit.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to rehabilitations the 
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physical work on which begins after the date of enactment 
of this Act. 
SEC. 3. EXPANSION OF INCENTIVES FOR BUILDING REHA-
BILITATION. 
(a) INCREASE
IN REHABILITATION CREDIT
FOR 
BUILDINGS IN HIGH COST AREAS.—Paragraph (2) of 
subsection 47(c) of such Code (defining qualified rehabili-
tation expenditures) is amended by adding at the end the 
following new subparagraph: 
‘‘(E) INCREASE IN CREDIT FOR BUILDINGS 
IN
HIGH
COST
AREAS.—In the case of any 
qualified rehabilitated building which is residen-
tial rental property (as defined in paragraph 
(2)(D)) located in a qualified census tract or 
difficult development area which is designated 
for purposes of section 42(d)(5)(C), the quali-
fied rehabilitation expenditures taken into ac-
count under this section shall be 130 percent of 
such expenditures determined without regard to 
this subparagraph.’’. 
(b) REHABILITATION
CREDIT
MAY
BE
TRANS-
FERRED.— 
(1) IN GENERAL.—Subsection (b) of section 47 
of such Code (relating to when expenditures taken 
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into account) is amended by adding at the end the 
following new paragraph: 
‘‘(3) CREDIT MAY BE ASSIGNED.—The amount 
of qualified rehabilitation expenditures with respect 
to property described in subsection (c)(1)(A)(iv)(II) 
which would (but for this paragraph) be taken into 
account under subsection (a) for any taxable year by 
any person (hereafter in this paragraph referred to 
as the ‘initial taxpayer’)— 
‘‘(A) may be taken into account by any 
other person to whom such expenditures are as-
signed by the initial taxpayer, and 
‘‘(B) shall not be taken to account by ini-
tial taxpayer. 
Any person to whom such expenditures are assigned 
under subparagraph (A) shall be treated for pur-
poses of this title as the taxpayer with respect to 
such expenditures.’’. 
(2) CONFORMING AMENDMENT.—The heading 
for such subsection (b) is amended by inserting ‘‘; 
ELIGIBILITY FOR CREDIT MAY BE ASSIGNED’’ after 
‘‘ACCOUNT’’. 
(c) APPLICABILITY
TO
BUILDINGS
HELD
FOR 
SALE.— 
(1) IN GENERAL.— 
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(A) Clause (iv) of section 47(c)(1)(A) of 
such Code is amended to read as follows: 
‘‘(iv) depreciation (or amortization in 
lieu of depreciation)— 
‘‘(I) is allowable with respect to 
such building, or 
‘‘(II) in the case of a residential 
property, would be allowable with re-
spect to such building but for the 
building being held for sale.’’. 
(B) Paragraph (2) of section 47(c) of such 
Code is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(E) SPECIAL RULE FOR CERTAIN PROP-
ERTY HELD FOR SALE.—For purposes of this 
paragraph, in the case of a qualified rehabili-
tated 
building 
described 
in 
paragraph 
(1)(A)(iv)(II), such building shall be treated as 
owned by the taxpayer as rental property with 
respect to which the straight line depreciation 
method is used over a recovery period deter-
mined under subsection (c) or (g) of section 
168.’’. 
(2) CONFORMING AMENDMENT.—Paragraph (4) 
of section 50(a) of such Code is amended by striking 
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