II
119THCONGRESS
1
STSESSION S. 631
To amend the Internal Revenue Code of 1986 to enhance the rehabilitation
credit for buildings in rural areas.
IN THE SENATE OF THE UNITED STATES
FEBRUARY19, 2025
Mrs. C
APITO(for herself and Mr. WARNER) 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 enhance
the rehabilitation credit for buildings in rural areas.
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 ‘‘Rural Historic Tax 4
Credit Improvement Act’’. 5
SEC. 2. ENHANCEMENT OF REHABILITATION CREDIT FOR 6
BUILDINGS IN RURAL AREAS. 7
(a) I
NGENERAL.—Section 47(a) of the Internal Rev-8
enue Code of 1986 is amended— 9
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(1) in paragraph (1), by striking ‘‘For pur-1
poses’’ and inserting ‘‘Except as provided in para-2
graph (3), for purposes’’, and 3
(2) by adding at the end the following new 4
paragraphs: 5
‘‘(3) A
PPLICABLE RURAL PROJECTS .— 6
‘‘(A) I
N GENERAL.—In the case of any ap-7
plicable rural project— 8
‘‘(i) paragraph (1) shall not apply for 9
any qualified rehabilitation expenditures 10
with respect to such project, and 11
‘‘(ii) for the taxable year in which 12
such project is placed in service, the reha-13
bilitation credit for such taxable year is an 14
amount equal to— 15
‘‘(I) in the case of a project 16
which is an affordable housing 17
project, 40 percent of the qualified re-18
habilitation expenditures with respect 19
to such project, or 20
‘‘(II) in the case of a project 21
which is not an affordable housing 22
project, 30 percent of the qualified re-23
habilitation expenditures with respect 24
to such project. 25
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‘‘(B) APPLICABLE RURAL PROJECT .— 1
‘‘(i) I
N GENERAL.—For purposes of 2
this section, the term ‘applicable rural 3
project’ means a qualified rehabilitated 4
building which is located in a rural area. 5
‘‘(ii) L
IMITATION.—In the case of any 6
applicable rural project, the total amount 7
of qualified rehabilitation expenditures 8
which may be taken into account under 9
this section with respect to such project 10
may not exceed $5,000,000. 11
‘‘(iii) R
URAL AREA.—For purposes of 12
this paragraph, the term ‘rural area’ 13
means any area other than— 14
‘‘(I) a city or town that has a 15
population of greater than 50,000 in-16
habitants, or 17
‘‘(II) the urbanized area contig-18
uous and adjacent to a city or town 19
described in subclause (I), as defined 20
by the Bureau of the Census based on 21
the latest decennial census of the 22
United States. 23
‘‘(C) A
FFORDABLE HOUSING PROJECT .— 24
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‘‘(i) IN GENERAL.—For purposes of 1
this paragraph, the term ‘affordable hous-2
ing project’ means a project— 3
‘‘(I) in which— 4
‘‘(aa) not less than 50 per-5
cent of the aggregate square feet 6
of the completed project is hous-7
ing, and 8
‘‘(bb) with respect to the 9
housing described in item (aa), 10
not less than 50 percent of the 11
aggregate square feet of such 12
housing— 13
‘‘(AA) is new affordable 14
housing, or 15
‘‘(BB) continues to pro-16
vide affordable housing, or 17
‘‘(II) in which not less than 33 18
percent of the aggregate square feet 19
of the completed project— 20
‘‘(aa) is new affordable 21
housing, or 22
‘‘(bb) continues to provide 23
affordable housing. 24
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‘‘(ii) AFFORDABLE HOUSING .—For 1
purposes of this paragraph, the term ‘af-2
fordable housing’ means a decent, safe, 3
and sanitary dwelling, apartment, or other 4
living accommodation for a household 5
whose income does not exceed 80 percent 6
of the median income for the market area 7
(as defined by the Secretary of Housing 8
and Urban Development under section 8 of 9
the United States Housing Act of 1937 10
(42 U.S.C. 1437f)). 11
‘‘(4) T
RANSFER OF CREDIT FOR APPLICABLE 12
RURAL PROJECTS.— 13
‘‘(A) I
N GENERAL.—Subject to subpara-14
graph (B) and such regulations or other guid-15
ance as the Secretary may provide, the taxpayer 16
may transfer all or a portion of the credit deter-17
mined under paragraph (3) for an applicable 18
rural project. 19
‘‘(B) C
ERTIFICATION.— 20
‘‘(i) I
N GENERAL.—A transfer under 21
subparagraph (A) shall be accompanied by 22
a certificate which includes— 23
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‘‘(I) the certification for the cer-1
tified historic structure referred to in 2
subsection (c)(3), 3
‘‘(II) the taxpayer’s name, ad-4
dress, tax identification number, date 5
of project completion, and the amount 6
of credit being transferred, 7
‘‘(III) the transferee’s name, ad-8
dress, tax identification number, and 9
the amount of credit being trans-10
ferred, and 11
‘‘(IV) such other information as 12
may be required by the Secretary. 13
‘‘(ii) T
RANSFERABILITY OF CERTIFI -14
CATE.—A certificate issued under this sec-15
tion to a taxpayer shall be transferable to 16
any other taxpayer. 17
‘‘(C) T
AX TREATMENT RELATING TO CER -18
TIFICATE.— 19
‘‘(i) D
ISALLOWANCE OF DEDUC -20
TION.—No deduction shall be allowed for 21
the amount of consideration paid or in-22
curred by the transferee. 23
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‘‘(ii) ALLOWANCE OF CREDIT .—The 1
amount of credit transferred under sub-2
paragraph (A)— 3
‘‘(I) shall not be allowed to the 4
transferor for any taxable year, and 5
‘‘(II) shall be allowable to the 6
transferee as a credit determined 7
under this section for the taxable year 8
of the transferee in which such credit 9
is transferred. 10
‘‘(iii) E
XCLUSION.—Gross income 11
shall not include any amount received in 12
connection with the transfer of the certifi-13
cate. 14
‘‘(D) R
ECAPTURE AND OTHER SPECIAL 15
RULES.—The taxpayer who claims a credit de-16
termined under this section by reason of a 17
transfer of an amount of credit under subpara-18
graph (A) with respect to an applicable rural 19
project shall be treated as the taxpayer with re-20
spect to such project for purposes of section 50. 21
‘‘(E) I
NFORMATION REPORTING .—The 22
transferor and the transferee shall each make 23
such reports regarding the transfer of an 24
amount of credit under paragraph (A) and con-25
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taining such information as the Secretary may 1
require. The reports required by this subsection 2
shall be filed at such time and in such manner 3
as may be required by the Secretary. 4
‘‘(F) R
EGULATIONS.—The Secretary shall 5
prescribe regulations or other guidance to carry 6
out this paragraph in a manner which is con-7
sistent with applicable requirements with re-8
spect to transfer of credits under section 9
6418.’’. 10
(b) R
ECAPTURE FOR FAILURETOCOMPLYWITH 11
A
FFORDABLEHOUSINGREQUIREMENTS.— 12
(1) I
N GENERAL.—Section 50(a) of the Internal 13
Revenue Code of 1986 is amended— 14
(A) by redesignating paragraphs (4) 15
through (6) as paragraphs (5) through (7), re-16
spectively, and 17
(B) by inserting after paragraph (3) the 18
following new paragraph: 19
‘‘(4) F
AILURE TO COMPLY WITH AFFORDABLE 20
HOUSING REQUIREMENTS UNDER REHABILITATION 21
CREDIT.— 22
‘‘(A) I
N GENERAL.—In the case of any ap-23
plicable rural project which is an affordable 24
housing project (as such terms are defined in 25
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section 47(a)(3)) which is eligible for the reha-1
bilitation credit under section 47(a), if such 2
project violates the requirements under section 3
47(a)(3)(C) before the close of the recapture 4
period (as described in paragraph (1)), then the 5
tax under this chapter for the taxable year in 6
which such violation occurs shall be increased 7
by 100 percent of the aggregate decrease in the 8
credits allowed under section 38 for all prior 9
taxable years which would have resulted solely 10
from reducing to zero any credit determined 11
under section 46 which is attributable to the re-12
habilitation credit under section 47(a) with re-13
spect to such project. 14
‘‘(B) E
XCEPTION.—Subparagraph (A) 15
shall not apply if the taxpayer demonstrates to 16
the satisfaction of the Secretary that the viola-17
tion of the requirements under section 18
47(a)(3)(C) has been rectified within 45 days of 19
a determination and notice by the Secretary. 20
‘‘(C) R
EGULATIONS AND GUIDANCE .—The 21
Secretary shall issue such regulations or other 22
guidance as the Secretary determines necessary 23
or appropriate to carry out the purposes of this 24
paragraph, including regulations or other guid-25
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ance which provide for requirements for record-1
keeping or information reporting for purposes 2
of administering the requirements of this para-3
graph.’’. 4
(2) C
ONFORMING AMENDMENTS .— 5
(A) Section 50(a)(5) of such Code, as re-6
designated by paragraph (1), is amended— 7
(i) by striking ‘‘or any applicable 8
transaction to which paragraph (3)(A) ap-9
plies’’ and inserting ‘‘any applicable trans-10
action to which paragraph (3)(A) applies, 11
or any violation to which paragraph (4)(A) 12
applies’’, and 13
(ii) by striking ‘‘cessation or applica-14
ble transaction’’ and inserting ‘‘cessation, 15
applicable transaction, or violation’’. 16
(B) Section 50(a)(7)(C) of such Code, as 17
redesignated by paragraph (1), is amended by 18
striking ‘‘or (3)’’ and inserting ‘‘(3), or (4)’’. 19
(C) Section 1371(d)(1) of such Code is 20
amended by striking ‘‘section 50(a)(5)’’ and in-21
serting ‘‘section 50(a)(6)’’. 22
(c) E
FFECTIVEDATE.—The amendments made by 23
this section shall apply to property placed in service after 24
December 31, 2025. 25
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SEC. 3. ELIMINATION OF REHABILITATION CREDIT BASIS 1
ADJUSTMENT. 2
(a) I
NGENERAL.—Section 50(c) of the Internal Rev-3
enue Code of 1986 is amended by adding at the end the 4
following new paragraph: 5
‘‘(6) E
XCEPTION FOR REHABILITATION CRED -6
IT.—In the case of the rehabilitation credit with re-7
spect to any applicable rural project (as defined in 8
section 47(a)(3)), paragraph (1) shall not apply.’’. 9
(b) T
REATMENT INCASE OFCREDITALLOWED TO 10
L
ESSEE.—Section 50(d) of such Code is amended by add-11
ing at the end the following: ‘‘In the case of the rehabilita-12
tion credit with respect to any applicable rural project (as 13
defined in section 47(a)(3)), paragraph (5)(B) of the sec-14
tion 48(d) referred to in paragraph (5) of this subsection 15
shall not apply.’’. 16
(c) E
FFECTIVEDATE.—The amendments made by 17
this section shall apply to property placed in service after 18
December 31, 2025. 19
Æ
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