Federal

Historic Tax Credit Growth and Opportunity Act of 2023

Source: Congress.gov · 1,199 words in original text

What This Bill Does

This bill changes the tax rules for people and businesses that rehabilitate (restore and repair) historic buildings. It increases the amount of tax credit (money subtracted from taxes owed) available for these projects and removes a rule that reduced a building's cost basis (the original value used for tax purposes) when a credit was claimed. --- ##

Who It Affects

Taxpayers who rehabilitate qualified historic buildings, including small businesses and investors in historic property restoration projects. --- ##

Key Provisions

- Increases the rehabilitation tax credit percentage to 30 percent for spending between 2020 and 2025, then gradually reduces it to 26 percent in 2026, 23 percent in 2027, and back to 20 percent in 2028 and later. (Sec. 2) - Creates a special rule for small projects that allows a 30 percent credit on rehabilitation spending up to $2,500,000, as long as total qualified spending does not exceed $3,750,000. (Sec. 3) - Changes the definition of "substantially rehabilitated" to require only 50 percent of the adjusted basis instead of the full adjusted basis. (Sec. 4) - Removes the requirement that a building's cost basis be reduced by the amount of the rehabilitation credit claimed. (Sec. 5) - Changes rules for tax-exempt properties so that disqualified lease rules apply only to government entities, not all tax-exempt organizations. (Sec. 6) --- ##

What Changes

If this bill becomes law, people claiming rehabilitation tax credits will receive larger credit percentages during the 2020-2027 period. The tax cost basis of rehabilitated buildings will no longer decrease when credits are claimed. Small projects meeting specific spending limits will qualify for enhanced credits. Determining whether a building qualifies as "substantially rehabilitated" will become easier by using a lower spending threshold. --- ##

Important Definitions

- **Qualified rehabilitated building**: A historic building being restored and repaired in a way that qualifies for tax credits under federal law. - **Qualified rehabilitation expenditures**: Money spent on eligible restoration and repair work on qualifying historic buildings. - **Small project**: Rehabilitation of a historic building where total qualified spending does not exceed $3,750,000 and no similar credit was claimed in the two tax years before the project started. - **Tax-exempt use property**: Property that is leased to or used by organizations exempt from federal income tax. --- ##

Effective Date

Provisions in Section 2 apply to property placed in service after December 31, 2023. Section 3 applies to taxable years beginning after December 31, 2023. Section 4 applies to 24-month and 60-month periods that begin after the date this bill becomes law. Section 5 applies to property placed in service after the date this bill becomes law. Section 6 applies to leases entered into after the date this bill becomes law.

I 118TH CONGRESS 1ST SESSION H. R. 1785 To amend the Internal Revenue Code of 1986 to modify the rehabilitation credit for certain small projects, to eliminate the requirement that the taxpayer’s basis in a building be reduced by the amount of the rehabilita- tion credit determined with respect to such building, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MARCH 24, 2023 Mr. LAHOOD (for himself, Mr. BLUMENAUER, Mr. KELLY of Pennsylvania, Ms. SEWELL, Mr. TURNER, and Mr. HIGGINS of New York) 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 modify the rehabilitation credit for certain small projects, to eliminate the requirement that the taxpayer’s basis in a building be reduced by the amount of the rehabilitation credit determined with respect to such building, 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 VerDate Sep 11 2014 05:15 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 1785 IH SEC. 2. INCREASE IN REHABILITATION CREDIT. 1 (a) IN GENERAL.—Section 47(a) of the Internal Rev- 2 enue Code of 1986 is amended by adding at the end the 3 following new paragraph: 4 ‘‘(3) INCREASED PERCENTAGE FOR QUALIFIED 5 REHABILITATION EXPENDITURES BEFORE 2028.— 6 ‘‘(A) IN GENERAL.—In the case of any 7 qualified rehabilitated building with respect to 8 which there are qualified rehabilitation expendi- 9 tures paid or incurred in any taxable year be- 10 ginning after December 31, 2020, and before 11 January 1, 2028— 12 ‘‘(i) paragraph (2) shall be applied by 13 substituting ‘the applicable percentage’ for 14 ‘20 percent’ with respect to such expendi- 15 tures, and 16 ‘‘(ii) the ratable share of such expend- 17 itures shall be determined separately under 18 paragraph (2) by applying the applicable 19 percentage for each such taxable year to 20 the expenditures for each such taxable 21 year. 22 ‘‘(B) APPLICABLE PERCENTAGE.—For 23 purposes of this paragraph, the term ‘applicable 24 percentage’ means the percentage determined in 25 accordance with the following table: 26 VerDate Sep 11 2014 05:15 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 1785 IH ‘‘In the case of a taxable year beginning in: The applicable percentage is— 2020 through 2025 ................................................................... 30 2026 .......................................................................................... 26 2027 .......................................................................................... 23 2028 and thereafter .................................................................. 20’’. (b) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to property placed in service after 2 December 31, 2023. 3 SEC. 3. INCREASE IN THE REHABILITATION CREDIT FOR 4 CERTAIN SMALL PROJECTS. 5 (a) IN GENERAL.—Section 47 is amended by adding 6 at the end the following new subsection: 7 ‘‘(e) SPECIAL RULE REGARDING CERTAIN SMALL 8 PROJECTS.— 9 ‘‘(1) IN GENERAL.—In the case of any small 10 project— 11 ‘‘(A) the percentage under subsection 12 (a)(2) shall be 30 percent, and 13 ‘‘(B) the qualified rehabilitation expendi- 14 tures taken into account under this section with 15 respect to such project shall not exceed 16 $2,500,000. 17 ‘‘(2) SMALL PROJECT.—For purposes of this 18 subsection, the term ‘small project’ means the reha- 19 bilitation of any qualified rehabilitated building if— 20 ‘‘(A) the qualified rehabilitation expendi- 21 tures taken into account under this section (or 22 VerDate Sep 11 2014 05:15 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 1785 IH which would be so taken into account but for 1 paragraph (1)(B)) with respect to such rehabili- 2 tation do not exceed $3,750,000, 3 ‘‘(B) no credit was allowed under this sec- 4 tion with respect to such building to any tax- 5 payer for either of the 2 taxable years imme- 6 diately preceding the first taxable year in which 7 expenditures described in subparagraph (A) 8 were paid or incurred, and 9 ‘‘(C) the taxpayer elects (at such time and 10 manner as the Secretary may provide) to have 11 this subsection apply with respect to such reha- 12 bilitation.’’. 13 (b) EFFECTIVE DATE.—The amendment made by 14 this section shall apply to taxable years beginning after 15 December 31, 2023. 16 SEC. 4. MODIFICATION OF DEFINITION OF SUBSTANTIALLY 17 REHABILITATED. 18 (a) IN GENERAL.—Section 47(c)(1)(B)(i)(I) is 19 amended by inserting ‘‘50 percent of’’ before ‘‘the ad- 20 justed basis’’. 21 (b) EFFECTIVE DATE.—The amendment made by 22 subsection (a) shall apply to determinations with respect 23 to 24-month periods (referred to in clause (i) of section 24 47(c)(1)(B) of the Internal Revenue Code of 1986) and 25 VerDate Sep 11 2014 05:15 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 1785 IH 60-month periods (referred to in clause (ii) of such sec- 1 tion) which begin after the date of the enactment of this 2 Act. 3 SEC. 5. ELIMINATION OF REHABILITATION CREDIT BASIS 4 ADJUSTMENT. 5 (a) IN GENERAL.—Section 50(c) is amended by add- 6 ing at the end the following new paragraph: 7 ‘‘(6) EXCEPTION FOR REHABILITATION CRED- 8 IT.—In the case of the rehabilitation credit, para- 9 graph (1) shall not apply.’’. 10 (b) TREATMENT IN CASE OF CREDIT ALLOWED TO 11 LESSEE.—Section 50(d) is amended by adding at the end 12 the following: ‘‘In the case of the rehabilitation credit, 13 paragraph (5)(B) of the section 48(d) referred to in para- 14 graph (5) of this subsection shall not apply.’’. 15 (c) EFFECTIVE DATE.—The amendments made by 16 this section shall apply to property placed in service after 17 the date of the enactment of this Act. 18 SEC. 6. MODIFICATIONS REGARDING CERTAIN TAX-EXEMPT 19 USE PROPERTY. 20 (a) IN GENERAL.—Section 47(c)(2)(B)(v) is amend- 21 ed by adding at the end the following new subclause: 22 ‘‘(III) DISQUALIFIED LEASE 23 RULES TO APPLY ONLY IN CASE OF 24 GOVERNMENT ENTITY.—For purposes 25 VerDate Sep 11 2014 05:15 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1785.IH H1785 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 1785 IH of subclause (I), except in the case of 1 a tax-exempt entity described in sec- 2 tion 168(h)(2)(A)(i) (determined with- 3 out regard to the last sentence of sec- 4 tion 168(h)(2)(A)), the determination 5 of whether property is tax-exempt use 6 property shall be made under section 7 168(h) without regard to whether the 8 property is leased in a disqualified 9 lease (as defined in section 10 168(h)(1)(B)(ii)).’’. 11 (b) EFFECTIVE DATE.—The amendments made by 12 this section shall apply to leases entered into after the date 13 of the enactment of this Act. 14 Æ VerDate Sep 11 2014 05:15 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6301 E:\BILLS\H1785.IH H1785 kjohnson on DSK79L0C42PROD with BILLS

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