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Us Congress House Bill HB537

Us Congress 2025-2026 Regular Session

Us Congress House Bill HB537 Compare Versions

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11 I
22 119THCONGRESS
33 1
44 STSESSION H. R. 537
55 To amend the Internal Revenue Code of 1986 to provide tax credits for
66 the conversion of commercial buildings to residential units, to provide
77 support and technical assistance to State and local housing agencies
88 to identify and advance housing conversion opportunities for underutilized
99 commercial buildings, and for other purposes.
1010 IN THE HOUSE OF REPRESENTATIVES
1111 JANUARY16, 2025
1212 Ms. S
1313 HERRILLintroduced the following bill; which was referred to the Com-
1414 mittee on Ways and Means, and in addition to the Committee on Finan-
1515 cial Services, for a period to be subsequently determined by the Speaker,
1616 in each case for consideration of such provisions as fall within the juris-
1717 diction of the committee concerned
1818 A BILL
1919 To amend the Internal Revenue Code of 1986 to provide
2020 tax credits for the conversion of commercial buildings
2121 to residential units, to provide support and technical
2222 assistance to State and local housing agencies to identify
2323 and advance housing conversion opportunities for under-
2424 utilized commercial buildings, and for other purposes.
2525 Be it enacted by the Senate and House of Representa-1
2626 tives of the United States of America in Congress assembled, 2
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3030 SECTION 1. SHORT TITLE. 1
3131 This Act may be cited as the ‘‘Incentivizing New Con-2
3232 versions to Residential Entities to Accelerate Supply and 3
3333 Expand Housing Affordability Act’’ or the ‘‘INCREASE 4
3434 Housing Affordability Act’’. 5
3535 SEC. 2. COMMERCIAL-TO-RESIDENTIAL CREDIT. 6
3636 (a) I
3737 NGENERAL.—Section 46 of the Internal Rev-7
3838 enue Code of 1986 is amended by redesignating paragraph 8
3939 (7) as paragraph (8), by redesignating the paragraph (6) 9
4040 relating to the advanced manufacturing investment credits 10
4141 as paragraph (7), by striking ‘‘and’’ at the end of para-11
4242 graph (7) (as so redesignated), by striking the period at 12
4343 the end of paragraph (8) (as so redesignated) and insert-13
4444 ing ‘‘, and’’, and by adding at the end the following new 14
4545 paragraph: 15
4646 ‘‘(9) the commercial-to-residential credit.’’. 16
4747 (b) A
4848 MOUNT OFCREDIT.—Subpart E of part IV of 17
4949 subchapter A of chapter 1 of the Internal Revenue Code 18
5050 of 1986 is amended by inserting after section 48E the fol-19
5151 lowing new section: 20
5252 ‘‘SEC. 48F. COMMERCIAL-TO-RESIDENTIAL CREDIT. 21
5353 ‘‘(a) I
5454 NGENERAL.—For purposes of section 46, the 22
5555 commercial-to-residential credit for any taxable year is 23
5656 equal to 15 percent of the qualified conversion expendi-24
5757 tures with respect to a qualified converted building. 25
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6161 ‘‘(b) LIMITATION ONCREDITAMOUNT.—The credit 1
6262 determined under subsection (a) may not exceed— 2
6363 ‘‘(1) $200,000 per new residential housing unit, 3
6464 and 4
6565 ‘‘(2) $10,000,000 per qualified converted build-5
6666 ing. 6
6767 ‘‘(c) W
6868 HENEXPENDITURES TAKENINTOAC-7
6969 COUNT.— 8
7070 ‘‘(1) I
7171 N GENERAL.—Qualified conversion ex-9
7272 penditures with respect to any qualified converted 10
7373 building shall be taken into account for the taxable 11
7474 year in which such qualified converted building is 12
7575 placed in service. 13
7676 ‘‘(2) C
7777 OORDINATION WITH SUBSECTION (e).— 14
7878 The amount which would (but for this subpara-15
7979 graph) be taken into account under subparagraph 16
8080 (A) with respect to any qualified converted building 17
8181 shall be reduced (but not below zero) by any amount 18
8282 of qualified conversion expenditures taken into ac-19
8383 count under subsection (e) by the taxpayer or a 20
8484 predecessor of the taxpayer (or, in the case of a sale 21
8585 and leaseback described in section 50(a)(2)(C), by 22
8686 the lessee), to the extent any amount so taken into 23
8787 account has not been required to be recaptured 24
8888 under section 50(a). 25
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9292 ‘‘(d) BONUSCREDITS.— 1
9393 ‘‘(1) A
9494 FFORDABLE HOUSING BONUS CREDIT .— 2
9595 ‘‘(A) I
9696 N GENERAL.—In the case of a quali-3
9797 fied converted building which has been con-4
9898 verted to a majority rental residential use and 5
9999 which satisfies the requirements under subpara-6
100100 graph (B), the amount of the credit determined 7
101101 under subsection (a) (determined without re-8
102102 gard to this subsection) and the limitation on 9
103103 credit amount described in subsection (b) (de-10
104104 termined without regard to this subsection) 11
105105 with respect to such building shall each be in-12
106106 creased by an amount equal to— 13
107107 ‘‘(i) in the case of a qualified con-14
108108 verted building 25 percent or more of the 15
109109 residential units of which are both rent-re-16
110110 stricted and occupied by individuals whose 17
111111 income does not exceed 100 percent of 18
112112 area median income, 10 percent of such 19
113113 amounts, 20
114114 ‘‘(ii) in the case of a qualified con-21
115115 verted building 25 percent or more of the 22
116116 residential units of which are both rent-re-23
117117 stricted and occupied by individuals whose 24
118118 income does not exceed 80 percent of area 25
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122122 median income, 15 percent of such 1
123123 amounts, and 2
124124 ‘‘(iii) in the case of a qualified con-3
125125 verted building 25 percent or more of the 4
126126 residential units of which are both rent-re-5
127127 stricted and occupied by individuals whose 6
128128 income does not exceed 60 percent of area 7
129129 median income, 20 percent of such 8
130130 amounts. 9
131131 ‘‘(B) R
132132 ENT AND INCOME LIMITATION .— 10
133133 For purposes of subparagraph (A), rules similar 11
134134 to the rules of section 42(g) shall apply to de-12
135135 termine whether a unit is rent-restricted, treat-13
136136 ment of units occupied by individuals whose in-14
137137 comes rise above the limit, and treatment of 15
138138 units where Federal rental assistance is reduced 16
139139 as tenant’s income increases. 17
140140 ‘‘(2) P
141141 REVAILING WAGE BONUS CREDIT .— 18
142142 ‘‘(A) I
143143 N GENERAL.—In the case of any 19
144144 qualified converted building with respect to 20
145145 which the taxpayer certifies to the Secretary 21
146146 that the taxpayer satisfied the requirement of 22
147147 subparagraph (B) with respect to the conver-23
148148 sion process, the amount of the credit deter-24
149149 mined under subsection (a) (determined without 25
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152152 •HR 537 IH
153153 regard to this subsection) and the limitation on 1
154154 the credit amount described in subsection (b) 2
155155 (determined without regard to this subsection) 3
156156 with respect to such building shall each be in-4
157157 creased by an amount equal to 15 percent of 5
158158 such amounts. 6
159159 ‘‘(B) P
160160 REVAILING WAGE REQUIREMENT .— 7
161161 The requirement described in this subparagraph 8
162162 is satisfied with respect to any conversion if all 9
163163 laborers or mechanics employed by the taxpayer 10
164164 or any contractor or subcontractor of the tax-11
165165 payer to carry out the conversion were paid 12
166166 wages at rates not less than the prevailing rates 13
167167 for construction, alteration, or repair of a simi-14
168168 lar character in the locality in which such 15
169169 project is located as most recently determined 16
170170 by the Secretary of Labor, in accordance with 17
171171 subchapter IV of chapter 31 of title 40, United 18
172172 States Code. 19
173173 ‘‘(e) D
174174 EFINITIONS.— 20
175175 ‘‘(1) Q
176176 UALIFIED CONVERTED BUILDING .— 21
177177 ‘‘(A) I
178178 N GENERAL.—The term ‘qualified 22
179179 converted building’ means any building (and its 23
180180 structural components) if— 24
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184184 ‘‘(i) prior to conversion, such building 1
185185 was nonresidential real property (as de-2
186186 fined in section 168) which was leased, or 3
187187 available for lease, to office tenants, 4
188188 ‘‘(ii) such building has been substan-5
189189 tially converted from an office use to a res-6
190190 idential or residential-retail mixed use, 7
191191 ‘‘(iii) such building was initially 8
192192 placed in service at least 15 years before 9
193193 the beginning of the conversion, and 10
194194 ‘‘(iv) depreciation (or amortization in 11
195195 lieu of depreciation) is allowable with re-12
196196 spect to such building. 13
197197 ‘‘(B) S
198198 UBSTANTIALLY CONVERTED DE -14
199199 FINED.— 15
200200 ‘‘(i) I
201201 N GENERAL.—For purposes of 16
202202 paragraph (1)(A)(ii), a building shall be 17
203203 treated as having been substantially con-18
204204 verted only if the qualified conversion ex-19
205205 penditures during the 24-month period se-20
206206 lected by the taxpayer (at the time and in 21
207207 the manner prescribed by regulation) and 22
208208 ending with or within the taxable year ex-23
209209 ceed the greater of— 24
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213213 ‘‘(I) the adjusted basis of such 1
214214 building (and its structural compo-2
215215 nents), or 3
216216 ‘‘(II) $15,000. 4
217217 The adjusted basis of the building (and its 5
218218 structural components) shall be determined 6
219219 as of the beginning of the 1st day of such 7
220220 24-month period, or of the holding period 8
221221 of the building, whichever is later. For 9
222222 purposes of the preceding sentence, the de-10
223223 termination of the beginning of the holding 11
224224 period shall be made without regard to any 12
225225 reconstruction by the taxpayer in connec-13
226226 tion with the conversion. 14
227227 ‘‘(ii) S
228228 PECIAL RULE FOR PHASED 15
229229 CONVERSION.—In the case of any conver-16
230230 sion which may reasonably be expected to 17
231231 be completed in phases set forth in archi-18
232232 tectural plans and specifications completed 19
233233 before the conversion begins, clause (i) 20
234234 shall be applied by substituting ‘60-month 21
235235 period’ for ‘24-month period’. 22
236236 ‘‘(iii) L
237237 ESSEES.—The Secretary shall 23
238238 prescribe by regulation rules for applying 24
239239 this subparagraph to lessees. 25
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243243 ‘‘(C) RECONSTRUCTION.—Conversion in-1
244244 cludes reconstruction. 2
245245 ‘‘(2) Q
246246 UALIFIED CONVERSION EXPENDITURES 3
247247 DEFINED.— 4
248248 ‘‘(A) I
249249 N GENERAL.—For purposes of sub-5
250250 section (a), the term ‘qualified conversion ex-6
251251 penditures’ means any amount properly charge-7
252252 able to capital account— 8
253253 ‘‘(i) for property for which deprecia-9
254254 tion is allowable under section 168 and 10
255255 which is— 11
256256 ‘‘(I) nonresidential real property 12
257257 (as defined in section 168), 13
258258 ‘‘(II) residential rental property 14
259259 (as defined in section 168), or 15
260260 ‘‘(III) an addition or improve-16
261261 ment to property described in clause 17
262262 (i) or (ii), and 18
263263 ‘‘(ii) in connection with the conversion 19
264264 of a qualified converted building. 20
265265 ‘‘(B) C
266266 ERTAIN EXPENDITURES NOT IN -21
267267 CLUDED.—The term ‘qualified conversion ex-22
268268 penditures’ does not include— 23
269269 ‘‘(i) S
270270 TRAIGHT LINE DEPRECIATION 24
271271 MUST BE USED.—Any expenditure with re-25
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274274 •HR 537 IH
275275 spect to which the taxpayer does not use 1
276276 the straight line method over a recovery 2
277277 period determined under subsection (c) or 3
278278 (g) of section 168. The preceding sentence 4
279279 shall not apply to any expenditure to the 5
280280 extent the alternative depreciation system 6
281281 of section 168(g) applies to such expendi-7
282282 ture by reason of subparagraph (B) or (C) 8
283283 of section 168(g)(1). 9
284284 ‘‘(ii) C
285285 OST OF ACQUISITION .—The 10
286286 cost of acquiring any building or interest 11
287287 therein. 12
288288 ‘‘(iii) E
289289 NLARGEMENTS.—Any expendi-13
290290 ture attributable to the enlargement of an 14
291291 existing building. 15
292292 ‘‘(iv) T
293293 AX-EXEMPT USE PROPERTY .— 16
294294 Any expenditure in connection with the 17
295295 conversion of a building which is allocable 18
296296 to the portion of such property which is (or 19
297297 may reasonably be expected to be) tax-ex-20
298298 empt use property (within the meaning of 21
299299 section 168(h)), except that— 22
300300 ‘‘(I) ‘50 percent’ shall be sub-23
301301 stituted for ‘35 percent’ in paragraph 24
302302 (1)(B)(iii) thereof, and 25
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306306 ‘‘(II) an eligible educational insti-1
307307 tution (as defined in section 2
308308 529(e)(5)) shall not be treated as a 3
309309 tax-exempt entity. 4
310310 This clause shall not apply for purposes of 5
311311 determining whether a building has been 6
312312 substantially converted. 7
313313 ‘‘(v) E
314314 XPENDITURES OF LESSEE .— 8
315315 Any expenditure of a lessee of a building 9
316316 if, on the date the conversion is completed, 10
317317 the remaining term of the lease (deter-11
318318 mined without regard to any renewal peri-12
319319 ods) is less than the recovery period deter-13
320320 mined under section 168(c). 14
321321 ‘‘(f) P
322322 ROGRESSEXPENDITURES.— 15
323323 ‘‘(1) I
324324 N GENERAL.—In the case of any building 16
325325 to which this subsection applies, except as provided 17
326326 in paragraph (3)— 18
327327 ‘‘(A) if such building is self-converted 19
328328 property, any qualified conversion expenditure 20
329329 with respect to such building shall be taken into 21
330330 account for the taxable year for which such ex-22
331331 penditure is properly chargeable to capital ac-23
332332 count with respect to such building, and 24
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336336 ‘‘(B) if such building is not self-converted 1
337337 property, any qualified conversion expenditure 2
338338 with respect to such building shall be taken into 3
339339 account for the taxable year in which paid. 4
340340 ‘‘(2) P
341341 ROPERTY TO WHICH SUBSECTION AP -5
342342 PLIES.— 6
343343 ‘‘(A) I
344344 N GENERAL.—This subsection shall 7
345345 apply to any building which is being converted 8
346346 by or for the taxpayer if— 9
347347 ‘‘(i) the normal conversion period for 10
348348 such building is 2 years or more, and 11
349349 ‘‘(ii) it is reasonable to expect that 12
350350 such building will be a qualified converted 13
351351 building in the hands of the taxpayer when 14
352352 it is placed in service. 15
353353 Clauses (i) and (ii) shall be applied on the basis 16
354354 of facts known as of the close of the taxable 17
355355 year of the taxpayer in which the conversion be-18
356356 gins (or, if later, at the close of the first taxable 19
357357 year to which an election under this subsection 20
358358 applies). 21
359359 ‘‘(B) N
360360 ORMAL CONVERSION PERIOD .—For 22
361361 purposes of subparagraph (A), the term ‘normal 23
362362 conversion period’ means the period reasonably 24
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365365 •HR 537 IH
366366 expected to be required for the conversion of 1
367367 the building— 2
368368 ‘‘(i) beginning with the date on which 3
369369 physical work on the conversion begins (or, 4
370370 if later, the first day of the first taxable 5
371371 year to which an election under this sub-6
372372 section applies), and 7
373373 ‘‘(ii) ending on the date on which it is 8
374374 expected that the property will be available 9
375375 for placing in service. 10
376376 ‘‘(3) S
377377 PECIAL RULES FOR APPLYING PARA -11
378378 GRAPH (1).—For purposes of paragraph (1)— 12
379379 ‘‘(A) C
380380 OMPONENT PARTS , ETC.—Property 13
381381 which is to be a component part of, or is other-14
382382 wise to be included in, any building to which 15
383383 this subsection applies shall be taken into ac-16
384384 count— 17
385385 ‘‘(i) at a time not earlier than the 18
386386 time at which it becomes irrevocably de-19
387387 voted to use in the building, and 20
388388 ‘‘(ii) as if (at the time referred to in 21
389389 clause (i)) the taxpayer had expended an 22
390390 amount equal to that portion of the cost to 23
391391 the taxpayer of such component or other 24
392392 property which, for purposes of this sub-25
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396396 part, is properly chargeable (during such 1
397397 taxable year) to capital account with re-2
398398 spect to such building. 3
399399 ‘‘(B) C
400400 ERTAIN BORROWING DIS -4
401401 REGARDED.—Any amount borrowed directly or 5
402402 indirectly by the taxpayer from the person con-6
403403 verting the property for him shall not be treat-7
404404 ed as an amount expended for such conversion. 8
405405 ‘‘(C) L
406406 IMITATION FOR BUILDINGS WHICH 9
407407 ARE NOT SELF-CONVERTED.— 10
408408 ‘‘(i) I
409409 N GENERAL.—In the case of a 11
410410 building which is not self-converted, the 12
411411 amount taken into account under para-13
412412 graph (1)(B) for any taxable year shall not 14
413413 exceed the amount which represents the 15
414414 portion of the overall cost to the taxpayer 16
415415 of the conversion which is properly attrib-17
416416 utable to the portion of the conversion 18
417417 which is completed during such taxable 19
418418 year. 20
419419 ‘‘(ii) C
420420 ARRYOVER OF CERTAIN 21
421421 AMOUNTS.—In the case of a building which 22
422422 is not a self-converted building, if for the 23
423423 taxable year— 24
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427427 ‘‘(I) the amount which (but for 1
428428 clause (i)) would have been taken into 2
429429 account under paragraph (1)(B) ex-3
430430 ceeds the limitation of clause (i), then 4
431431 the amount of such excess shall be 5
432432 taken into account under paragraph 6
433433 (1)(B) for the succeeding taxable 7
434434 year, or 8
435435 ‘‘(II) the limitation of clause (i) 9
436436 exceeds the amount taken into ac-10
437437 count under paragraph (1)(B), then 11
438438 the amount of such excess shall in-12
439439 crease the limitation of clause (i) for 13
440440 the succeeding taxable year. 14
441441 ‘‘(D) D
442442 ETERMINATION OF PERCENTAGE OF 15
443443 COMPLETION.—The determination under sub-16
444444 paragraph (C)(i) of the portion of the overall 17
445445 cost to the taxpayer of the conversion which is 18
446446 properly attributable to conversion completed 19
447447 during any taxable year shall be made, under 20
448448 regulations prescribed by the Secretary, on the 21
449449 basis of engineering or architectural estimates 22
450450 or on the basis of cost accounting records. Un-23
451451 less the taxpayer establishes otherwise by clear 24
452452 and convincing evidence, the conversion shall be 25
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456456 deemed to be completed not more rapidly than 1
457457 ratably over the normal conversion period. 2
458458 ‘‘(E) N
459459 O PROGRESS EXPENDITURES FOR 3
460460 CERTAIN PRIOR PERIODS.—No qualified conver-4
461461 sion expenditures shall be taken into account 5
462462 under this subsection for any period before the 6
463463 first day of the first taxable year to which an 7
464464 election under this subsection applies. 8
465465 ‘‘(F) N
466466 O PROGRESS EXPENDITURES FOR 9
467467 PROPERTY FOR YEAR IT IS PLACED IN SERVICE , 10
468468 ETC.—In the case of any building, no qualified 11
469469 conversion expenditures shall be taken into ac-12
470470 count under this subsection for the earlier of— 13
471471 ‘‘(i) the taxable year in which the 14
472472 building is placed in service, or 15
473473 ‘‘(ii) the first taxable year for which 16
474474 recapture is required under section 17
475475 50(a)(2) with respect to such property, 18
476476 or for any taxable year thereafter. 19
477477 ‘‘(4) S
478478 ELF-CONVERTED BUILDING .—For pur-20
479479 poses of this subsection, the term ‘self-converted 21
480480 building’ means any building if it is reasonable to 22
481481 believe that more than half of the qualified conver-23
482482 sion expenditures for such building will be made di-24
483483 rectly by the taxpayer. 25
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487487 ‘‘(5) ELECTION.—This subsection shall apply to 1
488488 any taxpayer only if such taxpayer has made an 2
489489 election under this paragraph. Such an election shall 3
490490 apply to the taxable year for which made and all 4
491491 subsequent taxable years. Such an election, once 5
492492 made, may be revoked only with the consent of the 6
493493 Secretary. 7
494494 ‘‘(g) D
495495 ENIAL OFDOUBLEBENEFIT.—A credit shall 8
496496 not be allowed under this section for any qualified conver-9
497497 sion expenditure for which a credit is allowed under sec-10
498498 tion 42 or 47.’’. 11
499499 (c) C
500500 ONFORMINGAMENDMENTS.— 12
501501 (1) Section 49(a)(1)(C) of the Internal Revenue 13
502502 Code of 1986 is amended by striking ‘‘and’’ at the 14
503503 end of clause (vii), by striking the period at the end 15
504504 of clause (viii) and inserting ‘‘, and’’, and by adding 16
505505 after clause (viii) the following new clause: 17
506506 ‘‘(ix) the portion of the basis of any 18
507507 qualified converted property attributable to 19
508508 qualified conversion expenditures under 20
509509 section 48F.’’. 21
510510 (2) Section 50(a)(2)(E) of such Code is amend-22
511511 ed by striking ‘‘or 48E(e)’’ and inserting ‘‘48E(e), 23
512512 or 48F(e)’’. 24
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516516 (3) Section 50(b)(2) of such Code is amended 1
517517 by striking ‘‘and’’ at the end of subparagraph (C), 2
518518 by striking the period at the end of subparagraph 3
519519 (D) and inserting ‘‘; and’’, and by adding after sub-4
520520 paragraph (D) the following new subparagraph: 5
521521 ‘‘(E) a qualified converted building to the 6
522522 extent of that portion of the basis which is at-7
523523 tributable to qualified conversion expendi-8
524524 tures.’’. 9
525525 (4) Section 50(b)(3) is amended by inserting ‘‘, 10
526526 or, solely with respect to the commercial-to-residen-11
527527 tial credit, an eligible educational institution (as de-12
528528 fined in section 529(e)(5))’’ after ‘‘section 521’’. 13
529529 (5) The table of sections for subpart E of part 14
530530 IV of subchapter A of chapter 1 of such Code is 15
531531 amended by inserting after the item relating to sec-16
532532 tion 48E the following new item: 17
533533 ‘‘Sec. 48F. Commercial-to-residential credit.’’.
534534 (d) EFFECTIVEDATE.—The amendments made by 18
535535 this section shall apply to qualified conversion expendi-19
536536 tures incurred after the date of enactment in taxable years 20
537537 ending after such date. 21
538538 SEC. 3. COMMERCIAL TO RESIDENTIAL CONVERSION ADVI-22
539539 SORY BOARD. 23
540540 (a) E
541541 STABLISHMENT.—Not later than 1 year after 24
542542 the date of the enactment of this Act, the Secretary of 25
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545545 •HR 537 IH
546546 Housing and Urban Development shall establish an advi-1
547547 sory board to carry out the duties described in subsection 2
548548 (c). 3
549549 (b) M
550550 EMBERSHIP.—The advisory board shall be com-4
551551 posed of not less than 20 members, appointed by the Sec-5
552552 retary. 6
553553 (c) D
554554 UTIES.—The advisory board shall provide 7
555555 logistical support, technical assistance, best practices, and 8
556556 training to State and local housing agencies with respect 9
557557 to— 10
558558 (1) identifying the best candidates for commer-11
559559 cial to residential conversions that are financially 12
560560 and logistically feasible and meet demonstrated 13
561561 housing demand in localities within the State or lo-14
562562 cality; 15
563563 (2) conducting floor plan and feasibility anal-16
564564 yses for prospective commercial to residential con-17
565565 versions; 18
566566 (3) expediting State or local regulatory proc-19
567567 esses and permitting processes to allow for faster 20
568568 approval and construction of commercial to residen-21
569569 tial conversions; 22
570570 (4) reforming of local regulatory and zoning 23
571571 barriers to allow for more commercial to residential 24
572572 conversions; and 25
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575575 •HR 537 IH
576576 (5) identifying Federal and State funding 1
577577 sources that can be used by localities to provide fi-2
578578 nancial assistance on commercial to residential con-3
579579 version projects. 4
580580 (d) A
581581 UTHORIZATION OFAPPROPRIATIONS.—There is 5
582582 authorized to be appropriated to carry out this section 6
583583 $5,000,000 for each of fiscal years 2025 through 2029. 7
584584 Æ
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