I 
109TH CONGRESS 
1ST SESSION H. R. 2488 
To promote State historic tax credits. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 19, 2005 
Mr. CARNAHAN introduced the following bill; which was referred to the 
Committee on Ways and Means 
A BILL 
To promote State historic tax credits. 
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 ‘‘Historic Rehabilitation 
Enhancement Act of 2005’’. 
SEC. 2. SPECIAL RULES FOR DISPOSITIONS OF STATE HIS-
TORIC TAX CREDITS. 
(a) 
PROCEEDS
NOT
INCOME; 
REDUCTION
IN 
BASIS.— 
(1) IN GENERAL.—In the case of a taxpayer 
who receives a State historic tax credit and transfers
or disposes of such credit, or receives a refund of all 
or a portion of such credit— 
(A) no portion of the net proceeds of such 
transfer or disposition or of such refund shall 
constitute income to such taxpayer under sec-
tion 61(a) of the Internal Revenue Code of 
1986, and 
(B) the taxpayer’s adjusted basis in the 
property with respect to which the State his-
toric tax credit is allowed shall be reduced by 
an amount equal to such net proceeds or refund 
received by such taxpayer, 
unless the taxpayer makes an election under sub-
section (b). 
(2) 
DETERMINATION
OF
REDUCTION
IN 
BASIS.—The reduction in basis under paragraph (1) 
shall be applied— 
(A) first, against the basis in the under-
lying real property, 
(B) second, against the adjusted cost of 
acquisition, exclusive of land, as defined in sec-
tion 47(c)(2)(B)(ii) of the Internal Revenue 
Code of 1986, and 
(C) third, against the remaining basis in 
the property.
(3) ADJUSTMENT
IN
BASIS
OF
INTEREST
IN 
PARTNERSHIP
OR
S
CORPORATION.—The adjusted 
basis of— 
(A) a partner’s interest in a partnership, 
or 
(B) stock in an S corporation (as defined 
in section 1361(a)(1) of such Code), 
shall be appropriately adjusted to take into account 
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 
who elects to have this subsection apply, the net pro-
ceeds of the transfer or disposition or the refund de-
scribed in subsection (a) received by such taxpayer 
shall constitute income to such taxpayer under sec-
tion 61(a) of the Internal Revenue Code of 1986. 
(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 of the Internal Revenue Code 
of 1986, the transfer or disposition of State historic tax 
credits with respect to any property by a taxpayer shall 
not affect or reduce the amount of qualified rehabilitation 
expenditures (as defined in section 47(c)(2) of such Code) 
incurred in connection with such property, nor shall such 
transfer or disposition, nor any basis adjustments under 
subsection (a), be treated as an early disposition of invest-
ment credit property for purposes of the recapture provi-
sions of section 50 of such Code. 
(d) STATE HISTORIC TAX CREDITS DEFINED.—For 
purposes of this section, the term ‘‘State historic tax cred-
it’’ means any credit against State or local tax liabilities 
which— 
(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) is transferable or refundable under such 
laws.
(e) EFFECTIVE DATE.—This section shall apply to 
transfers or dispositions made, or refunds received, after 
the date of the enactment of this Act. 
Æ