To amend the Internal Revenue Code of 1986 to modify the rehabilitation credit and the low-income housing credit.

February 8, 2005

Mr. PORTMAN (for himself, Mr. JEFFERSON, Mrs. JOHNSON of Connecticut, Mr. NEAL of Massachusetts, Mr. ENGLISH of Pennsylvania, Mrs. JONES of Ohio, Mr. TURNER, and Mr. MILLER of North Carolina) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to modify the rehabilitation credit and the low-income housing credit.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Community Restoration and Revitalization Act of 2005'.

SEC. 2. MODIFICATIONS TO RULES FOR DETERMINING THE APPLICABLE PERCENTAGE FOR CERTAIN BUILDINGS ELIGIBLE FOR LOW-INCOME HOUSING CREDIT.

(a) In General- Subparagraph (B) of section 42(b)(2) of the Internal Revenue Code of 1986 (relating to the method of prescribing the applicable percentage) is amended by striking `and' at the end of clause (i), by striking the period at the end of clause (ii) and inserting a comma, and by adding at the end the following new clauses:

`(iii) 87.5 percent of the qualified basis of a building described in paragraph (1)(A), if the basis of the building is subject to the basis adjustment for rehabilitation credit property required under section 50(c), and

`(iv) 37.5 percent of the qualified basis of a building described in paragraph (1)(B), if the basis of the building is subject to the basis adjustment for rehabilitation credit property required under section 50(c).'.

(b) Effective Date- The amendments made by this section shall apply to--

(1) housing credit dollar amounts allocated after December 31, 2004, and

(2) buildings placed in service after such date to the extent paragraph (1) of section 42(h) of the Internal Revenue Code of 1986 does not apply to any building by reason of paragraph (4) thereof, but only with respect to bonds issued after such date.

SEC. 3. MODIFICATION TO BASIS ADJUSTMENT RULE.

(a) In General- Paragraph (3) of subsection 50(c) of the Internal Revenue Code of 1986 (relating to special rules for determining basis) is amended by striking `energy credit or reforestation credit' and inserting `energy credit, reforestation credit, or rehabilitation credit'.

(b) Effective Date- The amendment made by this section shall apply to taxable years beginning after December 31, 2004.

SEC. 4. INCREASE IN THE REHABILITATION CREDIT FOR CERTAIN SMALLER PROJECTS.

(a) In General- Section 47 of the Internal Revenue Code of 1986 (relating to rehabilitation credit) is amended by adding at the end the following new subsection:

`(e) Special Rule Regarding Certain Smaller Projects-

`(1) IN GENERAL- In the case of any qualified rehabilitated building or portion thereof--

`(A) which is placed in service after the date of the enactment of this subsection, and

`(B) which is a smaller project,

subsection (a)(2) shall be applied by substituting `40 percent' for `20 percent' with respect to qualified rehabilitation expenditures not over $1,000,000, and `20 percent' with respect to qualified rehabilitation expenditures of over $1,000,000.

`(2) SMALLER PROJECT DEFINED- For purposes of this section, the term `smaller project' means any qualified rehabilitated building or portion thereof as to which--

`(A) the qualified rehabilitation expenditures reported by the taxpayer for purposes of calculating the credit under this section are not over $2,000,000, except that for purposes of making this determination, qualified rehabilitation expenditures attributable to the provisions of subsection (c)(2)(E) shall be disregarded, and

`(B) no credit was allowable under this section during any of the two prior taxable years, provided that this subparagraph shall not apply to any building as to which the election provided for in subsection (d)(5) shall have been made.

`(3) COORDINATION WITH SUBSECTION (d)- With respect to any building as to which the election provided for in subsection (d)(5) shall have been made, such building shall be deemed a smaller project only if the qualified rehabilitation expenditures reported by the taxpayer for purposes of calculating the credit under this section with respect to the taxable years to which such election shall apply are, in the aggregate, not over $2,000,000.'.

(b) Effective Date- The amendment made by this section shall apply to property placed in service after the date of the enactment of this Act.

SEC. 5. USE FOR LODGING NOT TO DISQUALIFY FOR REHABILITATION CREDIT PROPERTY WHICH IS NOT A CERTIFIED HISTORIC STRUCTURE.

(a) In General- Subparagraph (C) of section 50(b)(2) of the Internal Revenue Code of 1986 (relating to property eligible for the investment credit) is amended by striking `certified historic structure' and inserting `qualified rehabilitated building'.

(b) Effective Date- The amendment made by this section shall apply to property placed in service after the date of the enactment of this Act.

SEC. 6. DATE BY WHICH BUILDING MUST BE FIRST PLACED IN SERVICE.

(a) In General- Subparagraph (B) of section 47(c)(1) of the Internal Revenue Code of 1986 (relating to the date by which building must be first placed in service) is amended--

(1) by striking `BUILDING MUST BE FIRST PLACED IN SERVICE BEFORE 1936' and inserting `DATE BY WHICH BUILDING MUST FIRST BE PLACED IN SERVICE', and

(2) by striking `before 1936' at the end of the subparagraph and inserting `no less than 50 years prior to the year in which qualified rehabilitation expenditures are taken into account under subsection (b)(1)'.

(b) Effective Date- The amendments made by section shall apply to property placed in service after the date of the enactment of this Act.

SEC. 7. MODIFICATIONS REGARDING CERTAIN TAX-EXEMPT USE PROPERTY.

(a) In General- Clause (I) of section 47(c)(2)(B)(v) of the Internal Revenue Code of 1986 (relating to tax-exempt use property) is amended by striking the period at the end and inserting `(1)(B)(ii)(IV), except that for purposes of this clause, `50 percent' shall be substituted for `35 percent' in applying section 168(h)(1)(B)(iii))'.

(b) Effective Date- The amendments made by section shall apply to property placed in service after the date of the enactment of this Act.

SEC. 8. INCREASE IN REHABILITATION CREDIT FOR BUILDINGS IN HIGH COST AREAS.

(a) In General- Paragraph (2) of subsection 47(c) of the Internal Revenue Code of 1986 (relating to the definition of qualified rehabilitation expenditures) is amended by adding at the end the following new subparagraph:

`(E) INCREASE IN CREDIT FOR BUILDINGS IN HIGH COST AREAS-

`(i) IN GENERAL- In the case of any qualified rehabilitated building located in a qualified census tract or difficult development area which is designated for purposes of this subparagraph, the qualified rehabilitation expenditures for purposes of this section shall be 130 percent of such expenditures determined without regard to this subparagraph.

`(ii) RULES- For purposes of clause (i), rules similar to the rules of section 42(d)(5)(C) (excluding clause (i) thereof) shall be applied.'.

(b) Effective Date- The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.

END