year to which an election under this sub-
section applies), and 
‘‘(ii) ending on the date on which it is 
expected that the property will be available 
for placing in service. 
‘‘(3) SPECIAL
RULES
FOR
APPLYING
PARA-
GRAPH (1).—For purposes of paragraph (1)— 
‘‘(A) COMPONENT PARTS, ETC.—Property 
which is to be a component part of, or is other-
wise to be included in, any building to which 
this subsection applies shall be taken into ac-
count— 
‘‘(i) at a time not earlier than the 
time at which it becomes irrevocably de-
voted to use in the building, and 
‘‘(ii) as if (at the time referred to in 
clause (i)) the taxpayer had expended an 
amount equal to that portion of the cost to 
the taxpayer of such component or other 
property which, for purposes of this sub-
part, is properly chargeable (during such 
taxable year) to capital account with re-
spect to such building. 
‘‘(B) 
CERTAIN
BORROWING
DIS-
REGARDED.—Any amount borrowed directly or 
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indirectly by the taxpayer from the person con-
verting the property for him shall not be treat-
ed as an amount expended for such conversion. 
‘‘(C) LIMITATION FOR BUILDINGS WHICH 
ARE NOT SELF-CONVERTED.— 
‘‘(i) IN GENERAL.—In the case of a 
building which is not self-converted, the 
amount taken into account under para-
graph (1)(B) for any taxable year shall not 
exceed the amount which represents the 
portion of the overall cost to the taxpayer 
of the conversion which is properly attrib-
utable to the portion of the conversion 
which is completed during such taxable 
year. 
‘‘(ii) 
CARRYOVER
OF
CERTAIN 
AMOUNTS.—In the case of a building which 
is not a self-converted building, if for the 
taxable year— 
‘‘(I) the amount which (but for 
clause (i)) would have been taken into 
account under paragraph (1)(B) ex-
ceeds the limitation of clause (i), then 
the amount of such excess shall be 
taken into account under paragraph 
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(1)(B) for the succeeding taxable 
year, or 
‘‘(II) the limitation of clause (i) 
exceeds the amount taken into ac-
count under paragraph (1)(B), then 
the amount of such excess shall in-
crease the limitation of clause (i) for 
the succeeding taxable year. 
‘‘(D) DETERMINATION OF PERCENTAGE OF 
COMPLETION.—The determination under sub-
paragraph (C)(i) of the portion of the overall 
cost to the taxpayer of the conversion which is 
properly attributable to conversion completed 
during any taxable year shall be made, under 
regulations prescribed by the Secretary, on the 
basis of engineering or architectural estimates 
or on the basis of cost accounting records. Un-
less the taxpayer establishes otherwise by clear 
and convincing evidence, the conversion shall be 
deemed to be completed not more rapidly than 
ratably over the normal conversion period. 
‘‘(E) NO
PROGRESS
EXPENDITURES
FOR 
CERTAIN PRIOR PERIODS.—No qualified conver-
sion expenditures shall be taken into account 
under this subsection for any period before the 
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first day of the first taxable year to which an 
election under this subsection applies. 
‘‘(F) NO
PROGRESS
EXPENDITURES
FOR 
PROPERTY FOR YEAR IT IS PLACED IN SERVICE, 
ETC.—In the case of any building, no qualified 
conversion expenditures shall be taken into ac-
count under this subsection for the earlier of— 
‘‘(i) the taxable year in which the 
building is placed in service, or 
‘‘(ii) the first taxable year for which 
recapture 
is 
required 
under 
section 
50(a)(2) with respect to such property, 
or for any taxable year thereafter. 
‘‘(4) SELF-CONVERTED
BUILDING.—For pur-
poses of this subsection, the term ‘self-converted 
building’ means any building if it is reasonable to 
believe that more than half of the qualified conver-
sion expenditures for such building will be made di-
rectly by the taxpayer. 
‘‘(5) ELECTION.—This subsection shall apply to 
any taxpayer only if such taxpayer has made an 
election under this paragraph. Such an election shall 
apply to the taxable year for which made and all 
subsequent taxable years. Such an election, once 
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made, may be revoked only with the consent of the 
Secretary. 
‘‘(e) DENIAL OF DOUBLE BENEFIT.—A credit shall 
not be allowed under this section for any qualified conver-
sion expenditure for which a credit is allowed under sec-
tion 42 or 47.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 49(a)(1)(C) of the Internal Revenue 
Code of 1986 is amended by striking ‘‘and’’ at the 
end of clause (vii), by striking the period at the end 
of clause (viii) and inserting ‘‘, and’’, and by adding 
after clause (viii) the following new clause: 
‘‘(ix) the portion of the basis of any 
qualified converted property attributable to 
qualified conversion expenditures under 
section 48F.’’. 
(2) Section 50(a)(2)(E) of such Code is amend-
ed by striking ‘‘or 48E(e)’’ and inserting ‘‘48E(e), 
or 48F(d)’’. 
(3) Section 50(b)(2) of such Code is amended 
by striking ‘‘and’’ at the end of subparagraph (C), 
by striking the period at the end of subparagraph 
(D) and inserting ‘‘; and’’, and by adding after sub-
paragraph (D) the following new subparagraph: 
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‘‘(E) a qualified converted building to the 
extent of that portion of the basis which is at-
tributable to qualified conversion expendi-
tures.’’. 
(4) Section 50(b)(3) is amended by inserting ‘‘, 
or, solely with respect to the qualified office conver-
sion credit, an eligible educational institution (as de-
fined in section 529(e)(5))’’ after ‘‘section 521’’. 
(5) The table of sections for subpart E of part 
IV of subchapter A of chapter 1 of such Code is 
amended by inserting after the item relating to sec-
tion 48E the following new item: 
‘‘Sec. 48F. Qualified office conversion credit.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to qualified conversion expendi-
tures incurred after the date of enactment in taxable years 
ending after such date. 
Æ 
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