I
118THCONGRESS
1
STSESSION H. R. 419
To amend the Internal Revenue Code of 1986 to provide an investment
credit for the conversion of office buildings into other uses.
IN THE HOUSE OF REPRESENTATIVES
JANUARY20, 2023
Mr. G
OMEZ(for himself, Mr. LARSONof Connecticut, and Mr. KILDEE) intro-
duced the following bill; which was referred to the Committee on Ways
and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
an investment credit for the conversion of office buildings
into other uses.
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 ‘‘Revitalizing Down-4
towns Act’’. 5
SEC. 2. CREDIT FOR QUALIFIED OFFICE CONVERSION. 6
(a) I
NGENERAL.—Section 46 of the Internal Rev-7
enue Code of 1986 is amended by redesignating paragraph 8
(7) as paragraph (8), by redesignating the paragraph (6) 9
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relating to the advanced manufacturing investment credits 1
as paragraph (7), by striking ‘‘and’’ at the end of para-2
graph (7) (as so redesignated), by striking the period at 3
the end of paragraph (8) (as so redesginated) and insert-4
ing ‘‘, and’’, and by adding at the end the following new 5
paragraph: 6
‘‘(9) the qualified office conversion credit.’’. 7
(b) A
MOUNT OFCREDIT.—Subpart E of part IV of 8
subchapter A of chapter 1 of the Internal Revenue Code 9
of 1986 is amended by inserting after section 48E the fol-10
lowing new section: 11
‘‘SEC. 48F. QUALIFIED OFFICE CONVERSION CREDIT. 12
‘‘(a) I
NGENERAL.—For purposes of section 46, the 13
qualified office conversion credit for any taxable year is 14
equal to 20 percent of the qualified conversion expendi-15
tures with respect to a qualified converted building. 16
‘‘(b) W
HENEXPENDITURES TAKENINTOAC-17
COUNT.— 18
‘‘(1) I
N GENERAL.—Qualified conversion ex-19
penditures with respect to any qualified converted 20
building shall be taken into account for the taxable 21
year in which such qualified converted building is 22
placed in service. 23
‘‘(2) C
OORDINATION WITH SUBSECTION (d).— 24
The amount which would (but for this subpara-25
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graph) be taken into account under subparagraph 1
(A) with respect to any qualified converted building 2
shall be reduced (but not below zero) by any amount 3
of qualified conversion expenditures taken into ac-4
count under subsection (d) by the taxpayer or a 5
predecessor of the taxpayer (or, in the case of a sale 6
and leaseback described in section 50(a)(2)(C), by 7
the lessee), to the extent any amount so taken into 8
account has not been required to be recaptured 9
under section 50(a). 10
‘‘(c) D
EFINITIONS.— 11
‘‘(1) Q
UALIFIED CONVERTED BUILDING .— 12
‘‘(A) I
N GENERAL.—The term ‘qualified 13
converted building’ means any building (and its 14
structural components) if— 15
‘‘(i) prior to conversion, such building 16
was nonresidential real property (as de-17
fined in section 168) which was leased, or 18
available for lease, to office tenants, 19
‘‘(ii) such building has been substan-20
tially converted from an office use to a res-21
idential, retail, or other commercial use, 22
‘‘(iii) in the case of conversion to a 23
residential use, such converted building 24
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meets the requirements of subparagraph 1
(D), 2
‘‘(iv) such building was initially placed 3
in service at least 25 years before the be-4
ginning of the conversion, and 5
‘‘(v) depreciation (or amortization in 6
lieu of depreciation) is allowable with re-7
spect to such building. 8
‘‘(B) S
UBSTANTIALLY CONVERTED DE -9
FINED.— 10
‘‘(i) I
N GENERAL.—For purposes of 11
paragraph (1)(A)(ii), a building shall be 12
treated as having been substantially con-13
verted only if the qualified conversion ex-14
penditures during the 24-month period se-15
lected by the taxpayer (at the time and in 16
the manner prescribed by regulation) and 17
ending with or within the taxable year ex-18
ceed the greater of— 19
‘‘(I) the adjusted basis of such 20
building (and its structural compo-21
nents), or 22
‘‘(II) $15,000. 23
The adjusted basis of the building (and its 24
structural components) shall be determined 25
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as of the beginning of the 1st day of such 1
24-month period, or of the holding period 2
of the building, whichever is later. For 3
purposes of the preceding sentence, the de-4
termination of the beginning of the holding 5
period shall be made without regard to any 6
reconstruction by the taxpayer in connec-7
tion with the conversion. 8
‘‘(ii) S
PECIAL RULE FOR PHASED 9
CONVERSION.—In the case of any conver-10
sion which may reasonably be expected to 11
be completed in phases set forth in archi-12
tectural plans and specifications completed 13
before the conversion begins, clause (i) 14
shall be applied by substituting ‘60-month 15
period’ for ‘24-month period’. 16
‘‘(iii) L
ESSEES.—The Secretary shall 17
prescribe by regulation rules for applying 18
this subparagraph to lessees. 19
‘‘(C) R
ECONSTRUCTION.—Conversion in-20
cludes reconstruction. 21
‘‘(D) R
ESIDENTIAL CONVERSION REQUIRE -22
MENTS.— 23
‘‘(i) I
N GENERAL.—A building meets 24
the requirements of this subparagraph if— 25
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‘‘(I) 20 percent or more of the 1
residential units are both rent-re-2
stricted and occupied by individuals 3
whose income is 80 percent or less of 4
area median gross income, or 5
‘‘(II) such building is subject to a 6
written binding State or local agree-7
ment with respect to the provision or 8
financing of affordable housing and 9
such agreement is documented in such 10
form and manner as the Secretary 11
may provide. 12
‘‘(ii) R
ENT AND INCOME LIMITA -13
TION.—For purposes of this subparagraph, 14
rules similar to the rules of subsection (g) 15
of section 42 shall apply to determine 16
whether a unit is rent-restricted, treatment 17
of units occupied by individuals whose in-18
comes rise above the limit, and the treat-19
ment of units where Federal rental assist-20
ance is reduced as tenant’s income in-21
creases. 22
‘‘(2) Q
UALIFIED CONVERSION EXPENDITURES 23
DEFINED.— 24
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‘‘(A) IN GENERAL.—For purposes of sub-1
section (a), the term ‘qualified conversion ex-2
penditures’ means any amount properly charge-3
able to capital account— 4
‘‘(i) for property for which deprecia-5
tion is allowable under section 168 and 6
which is— 7
‘‘(I) nonresidential real property 8
(as defined in section 168), 9
‘‘(II) residential rental property 10
(as defined in section 168), or 11
‘‘(III) an addition or improve-12
ment to property described in clause 13
(i) or (ii), and 14
‘‘(ii) in connection with the conversion 15
of a qualified converted building. 16
‘‘(B) C
ERTAIN EXPENDITURES NOT IN -17
CLUDED.—The term ‘qualified conversion ex-18
penditures’ does not include— 19
‘‘(i) S
TRAIGHT LINE DEPRECIATION 20
MUST BE USED.—Any expenditure with re-21
spect to which the taxpayer does not use 22
the straight line method over a recovery 23
period determined under subsection (c) or 24
(g) of section 168. The preceding sentence 25
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shall not apply to any expenditure to the 1
extent the alternative depreciation system 2
of section 168(g) applies to such expendi-3
ture by reason of subparagraph (B) or (C) 4
of section 168(g)(1). 5
‘‘(ii) C
OST OF ACQUISITION .—The 6
cost of acquiring any building or interest 7
therein. 8
‘‘(iii) E
NLARGEMENTS.—Any expendi-9
ture attributable to the enlargement of an 10
existing building. 11
‘‘(iv) T
AX-EXEMPT USE PROPERTY .— 12
Any expenditure in connection with the 13
conversion of a building which is allocable 14
to the portion of such property which is (or 15
may reasonably be expected to be) tax-ex-16
empt use property (within the meaning of 17
section 168(h)), except that— 18
‘‘(I) ‘50 percent’ shall be sub-19
stituted for ‘35 percent’ in paragraph 20
(1)(B)(iii) thereof, and 21
‘‘(II) an eligible educational insti-22
tution (as defined in section 23
529(e)(5)) shall not be treated as a 24
tax-exempt entity. 25
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This clause shall not apply for purposes of 1
determining whether a building has been 2
substantially converted. 3
‘‘(v) E
XPENDITURES OF LESSEE .— 4
Any expenditure of a lessee of a building 5
if, on the date the conversion is completed, 6
the remaining term of the lease (deter-7
mined without regard to any renewal peri-8
ods) is less than the recovery period deter-9
mined under section 168(c). 10
‘‘(d) P
ROGRESSEXPENDITURES.— 11
‘‘(1) I
N GENERAL.—In the case of any building 12
to which this subsection applies, except as provided 13
in paragraph (3)— 14
‘‘(A) if such building is self-converted 15
property, any qualified conversion expenditure 16
with respect to such building shall be taken into 17
account for the taxable year for which such ex-18
penditure is properly chargeable to capital ac-19
count with respect to such building, and 20
‘‘(B) if such building is not self-converted 21
property, any qualified conversion expenditure 22
with respect to such building shall be taken into 23
account for the taxable year in which paid. 24
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‘‘(2) PROPERTY TO WHICH SUBSECTION AP -1
PLIES.— 2
‘‘(A) I
N GENERAL.—This subsection shall 3
apply to any building which is being converted 4
by or for the taxpayer if— 5
‘‘(i) the normal conversion period for 6
such building is 2 years or more, and 7
‘‘(ii) it is reasonable to expect that 8
such building will be a qualified converted 9
building in the hands of the taxpayer when 10
it is placed in service. 11
Clauses (i) and (ii) shall be applied on the basis 12
of facts known as of the close of the taxable 13
year of the taxpayer in which the conversion be-14
gins (or, if later, at the close of the first taxable 15
year to which an election under this subsection 16
applies). 17
‘‘(B) N
ORMAL CONVERSION PERIOD .—For 18
purposes of subparagraph (A), the term ‘normal 19
conversion period’ means the period reasonably 20
expected to be required for the conversion of 21
the building— 22
‘‘(i) beginning with the date on which 23
physical work on the conversion begins (or, 24
if later, the first day of the first taxable 25
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year to which an election under this sub-1
section applies), and 2
‘‘(ii) ending on the date on which it is 3
expected that the property will be available 4
for placing in service. 5
‘‘(3) S
PECIAL RULES FOR APPLYING PARA -6
GRAPH (1).—For purposes of paragraph (1)— 7
‘‘(A) C
OMPONENT PARTS , ETC.—Property 8
which is to be a component part of, or is other-9
wise to be included in, any building to which 10
this subsection applies shall be taken into ac-11
count— 12
‘‘(i) at a time not earlier than the 13
time at which it becomes irrevocably de-14
voted to use in the building, and 15
‘‘(ii) as if (at the time referred to in 16
clause (i)) the taxpayer had expended an 17
amount equal to that portion of the cost to 18
the taxpayer of such component or other 19
property which, for purposes of this sub-20
part, is properly chargeable (during such 21
taxable year) to capital account with re-22
spect to such building. 23
‘‘(B) C
ERTAIN BORROWING DIS -24
REGARDED.—Any amount borrowed directly or 25
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indirectly by the taxpayer from the person con-1
verting the property for him shall not be treat-2
ed as an amount expended for such conversion. 3
‘‘(C) L
IMITATION FOR BUILDINGS WHICH 4
ARE NOT SELF-CONVERTED.— 5
‘‘(i) I
N GENERAL.—In the case of a 6
building which is not self-converted, the 7
amount taken into account under para-8
graph (1)(B) for any taxable year shall not 9
exceed the amount which represents the 10
portion of the overall cost to the taxpayer 11
of the conversion which is properly attrib-12
utable to the portion of the conversion 13
which is completed during such taxable 14
year. 15
‘‘(ii) C
ARRYOVER OF CERTAIN 16
AMOUNTS.—In the case of a building which 17
is not a self-converted building, if for the 18
taxable year— 19
‘‘(I) the amount which (but for 20
clause (i)) would have been taken into 21
account under paragraph (1)(B) ex-22
ceeds the limitation of clause (i), then 23
the amount of such excess shall be 24
taken into account under paragraph 25
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(1)(B) for the succeeding taxable 1
year, or 2
‘‘(II) the limitation of clause (i) 3
exceeds the amount taken into ac-4
count under paragraph (1)(B), then 5
the amount of such excess shall in-6
crease the limitation of clause (i) for 7
the succeeding taxable year. 8
‘‘(D) D
ETERMINATION OF PERCENTAGE OF 9
COMPLETION.—The determination under sub-10
paragraph (C)(i) of the portion of the overall 11
cost to the taxpayer of the conversion which is 12
properly attributable to conversion completed 13
during any taxable year shall be made, under 14
regulations prescribed by the Secretary, on the 15
basis of engineering or architectural estimates 16
or on the basis of cost accounting records. Un-17
less the taxpayer establishes otherwise by clear 18
and convincing evidence, the conversion shall be 19
deemed to be completed not more rapidly than 20
ratably over the normal conversion period. 21
‘‘(E) N
O PROGRESS EXPENDITURES FOR 22
CERTAIN PRIOR PERIODS.—No qualified conver-23
sion expenditures shall be taken into account 24
under this subsection for any period before the 25
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first day of the first taxable year to which an 1
election under this subsection applies. 2
‘‘(F) N
O PROGRESS EXPENDITURES FOR 3
PROPERTY FOR YEAR IT IS PLACED IN SERVICE , 4
ETC.—In the case of any building, no qualified 5
conversion expenditures shall be taken into ac-6
count under this subsection for the earlier of— 7
‘‘(i) the taxable year in which the 8
building is placed in service, or 9
‘‘(ii) the first taxable year for which 10
recapture is required under section 11
50(a)(2) with respect to such property, 12
or for any taxable year thereafter. 13
‘‘(4) S
ELF-CONVERTED BUILDING .—For pur-14
poses of this subsection, the term ‘self-converted 15
building’ means any building if it is reasonable to 16
believe that more than half of the qualified conver-17
sion expenditures for such building will be made di-18
rectly by the taxpayer. 19
‘‘(5) E
LECTION.—This subsection shall apply to 20
any taxpayer only if such taxpayer has made an 21
election under this paragraph. Such an election shall 22
apply to the taxable year for which made and all 23
subsequent taxable years. Such an election, once 24
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made, may be revoked only with the consent of the 1
Secretary. 2
‘‘(e) D
ENIAL OFDOUBLEBENEFIT.—A credit shall 3
not be allowed under this section for any qualified conver-4
sion expenditure for which a credit is allowed under sec-5
tion 42 or 47.’’. 6
(c) C
ONFORMINGAMENDMENTS.— 7
(1) Section 49(a)(1)(C) of the Internal Revenue 8
Code of 1986 is amended by striking ‘‘and’’ at the 9
end of clause (vii), by striking the period at the end 10
of clause (viii) and inserting ‘‘, and’’, and by adding 11
after clause (viii) the following new clause: 12
‘‘(ix) the portion of the basis of any 13
qualified converted property attributable to 14
qualified conversion expenditures under 15
section 48F.’’. 16
(2) Section 50(a)(2)(E) of such Code is amend-17
ed by striking ‘‘or 48E(e)’’ and inserting ‘‘48E(e), 18
or 48F(d)’’. 19
(3) Section 50(b)(2) of such Code is amended 20
by striking ‘‘and’’ at the end of subparagraph (C), 21
by striking the period at the end of subparagraph 22
(D) and inserting ‘‘; and’’, and by adding after sub-23
paragraph (D) the following new subparagraph: 24
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‘‘(E) a qualified converted building to the 1
extent of that portion of the basis which is at-2
tributable to qualified conversion expendi-3
tures.’’. 4
(4) Section 50(b)(3) is amended by inserting ‘‘, 5
or, solely with respect to the qualified office conver-6
sion credit, an eligible educational institution (as de-7
fined in section 529(e)(5))’’ after ‘‘section 521’’. 8
(5) The table of sections for subpart E of part 9
IV of subchapter A of chapter 1 of such Code is 10
amended by inserting after the item relating to sec-11
tion 48E the following new item: 12
‘‘Sec. 48F. Qualified office conversion credit.’’.
(d) EFFECTIVEDATE.—The amendments made by 13
this section shall apply to qualified conversion expendi-14
tures incurred after the date of enactment in taxable years 15
ending after such date. 16
Æ
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