HR2941-119

What This Bill Does

The Historic Tax Credit Growth and Opportunity Act changes multiple mechanics in the federal rehabilitation credit. It restores the 20 percent credit as fully allowed in the year the building is placed in service for property placed in service after December 31, 2023. It creates a special small-project election: qualifying rehabilitated buildings can receive a 30 percent credit on up to 3,750,000 dollars of qualified rehabilitation expenditures, or up to 5,000,000 dollars in rural areas, and the credit certificate can be transferred to another taxpayer with required reporting. It also broadens the substantial-rehabilitation test by inserting 50 percent of adjusted basis, removes the basis adjustment that normally reduces basis by the rehabilitation credit, and modifies tax-exempt use property rules so disqualified lease treatment applies only for government entities in that clause.

Who Benefits and How

Historic building owners benefit because the 20 percent credit can be claimed in the placed-in-service year rather than spread out. Small historic rehabilitation projects benefit from a 30 percent credit and higher eligible expenditure caps for rural projects. Rural communities benefit because qualifying rural small projects can use a 5,000,000 dollar expenditure cap instead of 3,750,000 dollars. Tax credit investors benefit because small-project credits can be transferred through certificates with defined tax treatment. Historic preservation contractors and real estate developers benefit if more rehabilitation projects become financeable.

Who Bears the Burden and How

The Internal Revenue Service must issue guidance on small-project elections, transferable certificates, reporting, and section 6418-consistent rules. Credit transferors and transferees must report taxpayer identity, project completion, credit amounts, and transfer details. Federal taxpayers bear the revenue cost of larger and more usable rehabilitation credits. Government-entity lease arrangements remain subject to tighter tax-exempt use property treatment.

Key Provisions

• Amends section 47 to allow the full 20 percent rehabilitation credit in the year a building is placed in service.
• Creates a 30 percent credit for qualifying small projects with 3,750,000 dollar and rural 5,000,000 dollar expenditure caps.
• Authorizes transferability of small-project credit certificates with reporting and tax-treatment rules.
• Eliminates the rehabilitation credit basis adjustment and modifies tax-exempt use property treatment for disqualified leases.