Federal

Historic Tax Credit Growth and Opportunity Act of 2023

Source: Congress.gov · 903 words in original text

What This Bill Does

This bill amends tax rules for historic buildings to make it easier and more profitable for people to rehabilitate (restore and improve) old structures listed as historically significant. The bill increases tax credits (money subtracted from taxes owed) for certain small historic rehabilitation projects and expands which types of buildings qualify for these credits.

Who It Affects

Owners of historic buildings or portions of historic buildings who rehabilitate them and claim tax credits. Businesses and individuals who invest in restoring certified historic structures. Tax-exempt entities (organizations that don't pay taxes) that own historic property.

Key Provisions

- Small projects that cost between $0 and $3,750,000 to rehabilitate can claim a 30 percent tax credit instead of the standard 20 percent, capped at $750,000 total credit per project (Sec. 2). - A "small project" must be a certified historic structure where no tax credit was claimed in either of the two years immediately before rehabilitation started (Sec. 2). - More types of buildings become eligible for rehabilitation credits by changing how their value is calculated (Sec. 3). - Property owners who receive rehabilitation credits no longer have their building's cost basis (the value used for tax purposes) reduced (Sec. 4). - Tax-exempt entities other than government entities can now claim rehabilitation credits without restrictions about disqualified leases (leases that don't meet certain requirements) (Sec. 5).

What Changes

The tax credit for small historic projects increases from 20 percent to 30 percent of rehabilitation costs, with a maximum credit of $750,000 per project. More buildings qualify for these credits. Building owners keep their full cost basis for tax purposes after claiming credits. Non-government tax-exempt organizations face fewer restrictions when claiming credits.

Important Definitions

"Qualified rehabilitated building" - a certified historic structure that undergoes restoration work meeting tax code requirements. "Small project" - a certified historic structure with rehabilitation costs not exceeding $3,750,000 where no credit was claimed in the two immediately prior tax years. "Tax-exempt use property" - property used by organizations that don't pay income taxes, with rules modified in this bill.

Effective Date

Changes for small projects apply to buildings placed in service (completed and ready for use) after the date this law is enacted (Sec. 2). Changes to eligible building types apply to tax years beginning after December 31, 2022 (Sec. 3). Changes eliminating basis adjustments apply to property placed in service after the date this law is enacted (Sec. 4). Changes to tax-exempt entity rules apply to property placed in service after the date this law is enacted (Sec. 5).

II 118TH CONGRESS 1ST SESSION S. 639 To amend the Internal Revenue Code of 1986 to improve the historic rehabilitation tax credit, and for other purposes. IN THE SENATE OF THE UNITED STATES MARCH 2, 2023 Mr. CARDIN (for himself, Mr. CASSIDY, Ms. CANTWELL, and Ms. COLLINS) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to improve the historic rehabilitation tax credit, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Historic Tax Credit 4 Growth and Opportunity Act of 2023’’. 5 SEC. 2. INCREASE IN THE REHABILITATION CREDIT FOR 6 CERTAIN SMALL PROJECTS. 7 (a) IN GENERAL.—Section 47 of the Internal Rev- 8 enue Code of 1986 is amended by adding at the end the 9 following new subsection: 10 VerDate Sep 11 2014 01:06 Mar 15, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S639.IS S639 kjohnson on DSK79L0C42PROD with BILLS 2 •S 639 IS ‘‘(e) SPECIAL RULE REGARDING CERTAIN SMALL 1 PROJECTS.— 2 ‘‘(1) IN GENERAL.—In the case of any qualified 3 rehabilitated building or portion thereof— 4 ‘‘(A) which is placed in service after the 5 date of the enactment of this subsection, and 6 ‘‘(B) which is a small project, 7 subsection (a)(2) shall be applied by substituting ‘30 8 percent’ for ‘20 percent’. 9 ‘‘(2) MAXIMUM CREDIT.—The credit under this 10 section (after application of this subsection) with re- 11 spect to any project for all taxable years shall not 12 exceed $750,000. 13 ‘‘(3) SMALL PROJECT.— 14 ‘‘(A) IN GENERAL.—For purposes of this 15 subsection, the term ‘small project’ means any 16 certified historic structure or portion thereof 17 if— 18 ‘‘(i) the total qualified rehabilitation 19 expenditures taken into account for pur- 20 poses of this section with respect to the re- 21 habilitation do not exceed $3,750,000, and 22 ‘‘(ii) no credit was allowed under this 23 section for either of the two immediately 24 VerDate Sep 11 2014 01:06 Mar 15, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S639.IS S639 kjohnson on DSK79L0C42PROD with BILLS 3 •S 639 IS preceding taxable years with respect to 1 such building. 2 ‘‘(B) PROGRESS EXPENDITURES.—Credit 3 allowable by reason of subsection (d) shall not 4 be taken into account under subparagraph 5 (A)(ii).’’. 6 (b) EFFECTIVE DATE.—The amendment made by 7 this section shall apply to periods after the date of the 8 enactment of this Act, under rules similar to the rules of 9 section 48(m) of the Internal Revenue Code of 1986 (as 10 in effect on the day before the date of the enactment of 11 the Revenue Reconciliation Act of 1990). 12 SEC. 3. INCREASING THE TYPE OF BUILDINGS ELIGIBLE 13 FOR REHABILITATION. 14 (a) IN GENERAL.—Section 47(c)(1)(B)(i)(I) of the 15 Internal Revenue Code of 1986 is amended by inserting 16 ‘‘50 percent of’’ before ‘‘the adjusted basis’’. 17 (b) EFFECTIVE DATE.—The amendment made by 18 subsection (a) shall apply to taxable years beginning after 19 December 31, 2022. 20 SEC. 4. ELIMINATION OF REHABILITATION CREDIT BASIS 21 ADJUSTMENT. 22 (a) IN GENERAL.—Section 50(c) of the Internal Rev- 23 enue Code of 1986 is amended by adding at the end the 24 following new paragraph: 25 VerDate Sep 11 2014 01:06 Mar 15, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S639.IS S639 kjohnson on DSK79L0C42PROD with BILLS 4 •S 639 IS ‘‘(6) EXCEPTION FOR REHABILITATION CRED- 1 IT.—In the case of the rehabilitation credit, para- 2 graph (1) shall not apply.’’. 3 (b) TREATMENT IN CASE OF CREDIT ALLOWED TO 4 LESSEE.—Section 50(d) of such Code is amended by add- 5 ing at the end the following: ‘‘In the case of the rehabilita- 6 tion credit, paragraph (5)(B) of the section 48(d) referred 7 to in paragraph (5) of this subsection shall not apply.’’. 8 (c) EFFECTIVE DATE.—The amendments made by 9 this section shall apply to property placed in service after 10 the date of the enactment of this Act. 11 SEC. 5. MODIFICATIONS REGARDING CERTAIN TAX-EXEMPT 12 USE PROPERTY. 13 (a) IN GENERAL.—Section 47(c)(2)(B)(v) of the In- 14 ternal Revenue Code of 1986 is amended by adding at the 15 end the following new subclause: 16 ‘‘(III) DISQUALIFIED LEASE 17 RULES TO APPLY ONLY IN CASE OF 18 GOVERNMENT ENTITY.—For purposes 19 of subclause (I), except in the case of 20 a tax-exempt entity described in sec- 21 tion 168(h)(2)(A)(i), the determina- 22 tion of whether property is tax-exempt 23 use property shall be made under sec- 24 tion 168(h) without regard to whether 25 VerDate Sep 11 2014 01:06 Mar 15, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S639.IS S639 kjohnson on DSK79L0C42PROD with BILLS 5 •S 639 IS the property is leased in a disqualified 1 lease (as defined in section 2 168(h)(1)(B)(ii)).’’. 3 (b) EFFECTIVE DATE.—The amendments made by 4 this section shall apply to property placed in service after 5 the date of the enactment of this Act. 6 Æ VerDate Sep 11 2014 01:06 Mar 15, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\S639.IS S639 kjohnson on DSK79L0C42PROD with BILLS

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