S. 1141 — Introduced in Senate

II 113th CONGRESS 1st Session S. 1141 IN THE SENATE OF THE UNITED STATES June 11, 2013 Mr. Cardin (for himself, Ms. Collins, Mr. Schumer, and Ms. Stabenow) 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 expand the rehabilitation credit, and for other purposes. 1. Short title This Act may be cited as the Creating American Prosperity through Preservation Act of 2013. 2. 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 30 percent for 20 percent. (2) Maximum credit The credit determined under this subsection with respect to any smaller project for all taxable years shall not exceed $1,500,000. (3) Smaller project defined (A) In general For purposes of this subsection, the term smaller project means any qualified rehabilitated building or portion thereof if— (i) the qualified rehabilitation expenditures taken into account for purposes of this section (or would have been so taken into account if this subsection had been in effect for all prior periods) with respect to the rehabilitation are not over $7,500,000, and (ii) no credit was allowed under this section for either of the 2 prior taxable years with respect to such building. (B) Progress expenditures Credit allowable by reason of subsection (d) shall not be taken into account under subparagraph (A)(ii). . (b) Effective Date The amendment made by this section shall apply to periods after the date of the enactment of this Act, under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990). 3. Addition of energy efficiency supplement to rehabilitation credit (a) In general Subsection (a) of section 47 of the Internal Revenue Code of 1986 is amended by striking and at the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting , and, and by adding at the end the following new paragraph: (3) 2 percent of the qualified rehabilitation expenditures if the building is a qualified energy efficient rehabilitated building. . (b) Qualified energy efficient rehabilitated building Section 47 of such Code, as amended by section 2, is amended by adding at the end the following new subsection: (f) Qualified energy efficient rehabilitated building (1) In general The term qualified energy efficient rehabilitated building means any building (and its structural components) if— (A) the building is a qualified rehabilitated building, and (B) (i) the rehabilitation is certified (in accordance with paragraph (4)) as being designed to achieve at least a 30 percent energy use reduction in the building’s energy use, or (ii) the building meets the requirements of paragraph (2)(B)(ii) and is determined under paragraph (2)(B) to achieve at least a 30 percent energy use reduction after being rehabilitated. (2) Determination of energy use reduction For purposes of paragraph (1)— (A) Design-based standards (i) Buildings within the scope of standard 90.1–2007 If the building is within the scope of Standard 90.1–2007, the designed reduction in energy use shall be determined using methods of calculation under paragraph (3) in comparison to a reference building which meets the minimum requirements of such standard. (ii) RESNET buildings If the building is within the scope of RESNET, the designed reduction in energy use shall be determined using methods prescribed by the Secretary which are based on the Residential Energy Services Network Technical Guidelines. (iii) Other buildings If neither clause (i) or (ii) apply to the building, the designed reduction in energy use shall be determined using methods of calculation prescribed by the Secretary in a manner which is consistent with principles under paragraph (3). (B) Measured reductions (i) In general In the case of buildings which meet the requirements of clause (ii), the taxpayer may determine the reduction in energy usage by comparing the energy usage during the period selected by the taxpayer under clause (ii)(I) with the energy usage during the period selected by the taxpayer under clause (ii)(II). (ii) Building requirements A building meets the requirements of this clause if— (I) the building is at least 75 percent occupied during any period (but not less than 12 months) selected by the taxpayer which ends during the 5-year period ending on the date that the rehabilitation begins, and (II) the building is at least 75 percent occupied during the comparable period selected by the tax- payer which begins during the 5-year period beginning on the date that the rehabilitation is completed. (iii) Energy star buildings The reduction in energy use for buildings within the scope of Energy Start Portfolio Manager may be determined for purposes of this subparagraph by using the Energy Star Portfolio Manager Buildings Benchmark Tool. (iv) Special rules The Secretary shall prescribe regulations which preclude the use of this subparagraph, or modify the methods otherwise applicable under this subparagraph, in circumstance where vacancies, changes in use, and other factors which might otherwise yield in materially misleading results. (v) Year credit allowable In the case of a building which is a qualified energy efficient rehabilitated building solely by reason of this subparagraph, the increase in the credit under subsection (a)(3) with respect to such building shall be taken into account for the taxable year which includes the end of the period selected by the taxpayer under clause (ii)(II) in lieu of the taxable year in which the rehabilitated building is placed in service. (3) Methods of calculations (A) In general The Secretary, after consultation with the Secretary of Energy, shall promulgate regulations which describe in detail methods for calculating and verifying energy and power consumption and cost, based on Appendix G of Standard 90.1–2007 (or any subsequent version of such Appendix which is in effect at the time of the certification). (B) Computer software (i) In general Any calculation under subparagraph (A) shall be prepared by qualified computer software. (ii) Qualified computer software For purposes of subparagraph (A), the term qualified computer software means software— (I) which is included (at the time of the certification) on the published list of qualified software by the Department of Energy, (II) which provides such information as the Secretary may require, including information that allows the user to document the energy efficiency features of the building and its projected annual energy costs, and (III) which provides standardized outputs for building energy performance and, to the maximum extent practicable, relies on industry best practices and existing guidelines. (4) Certifications (A) In general The Secretary shall prescribe the manner and method for the making of certifications under this subsection. (B) Procedures The Secretary shall include as part of the certification process procedures for inspection and testing by qualified individuals described in subparagraph (C) to ensure compliance of buildings with energy-savings plans and targets. Such procedures shall be comparable, given the difference between commercial and residential buildings, to the requirements in the Mortgage Industry National Accreditation Procedures for Home Energy Rating Systems. (C) Qualified individuals Individuals qualified to determine compliance shall be only those individuals who are recognized by an organization certified by the Secretary for such purposes. For purposes of the preceding sentence, an individual shall not be qualified with respect to a building unless the individual is— (i) a registered professional engineer, (ii) not a direct employee of the owner of the commercial building or multifamily building, and (iii) licensed in the State in which such building is located. (5) Standard 90.1–2007 For purposes of this subsection, the term Standard 90.1–2007 means Standard 90.1–2007 of the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America (or any subsequent version of such Standard which is in effect at the time of the certification). (6) Allocation of credit for tax-exempt property Paragraphs (3) and (4) of section 50(b), and clause (v) of subsection (c)(2)(B), shall not apply to those qualified rehabilitation expenditures that are taken into account for purposes of certifying a building as a qualified energy efficient rehabilitated building under this subsection. Any rehabilitation credit which is allowable by reason of the preceding sentence may be assigned to any other person, and such other person shall be treated as the taxpayer with respect thereto. (7) Coordination The Secretary shall designate processes for tracking the numbers and locations of buildings claiming the rehabilitation by reason of this subsection, as well as providing information on projected and actual savings of energy and its value over time in coordination with the Department of Energy. (8) Regulations The Secretary, after consultation with the Administrator of the Environmental Protection Agency and the Secretary of the Interior, shall promulgate such regulations as may be necessary or appropriate to carry out the purposes of this subsection, including regulations— (A) to take into account new technologies regarding energy efficiency and renewable energy for purposes of determining energy efficiency and savings under this subsection, and (B) to provide for a recapture of the credit determined under this subsection if the design referred to in paragraph (1)(B) is not fully implemented. . (c) Substantial rehabilitation requirement not To apply to energy efficiency supplement Subparagraph (A) of section 47(c)(1) of such Code (defining qualified rehabilitated building) is amended by adding at the end the following new flush sentence: Clause (i) shall not apply to so much of the rehabilitation credit as is determined under subsection (a)(3). . (d) Effective dates (1) In general Except as provided in paragraph (2), the amendments made by this section shall apply to property placed in service after the date of the enactment of this Act. (2) Waiver of substantial rehabilitation requirement The waiver of the requirement of section 47(c)(1)(A)(i) of the Internal Revenue Code of 1986 made by section 47(f)(1)(A) of such Code, as added by this Act, shall apply with respect to rehabilitations the physical work on which begins after the date of the enactment of this Act. 4. Modification to definition of qualified rehabilitation expenditure (a) In general Clause (i) of section 47(c)(2)(A) of the Internal Revenue Code of 1986 (relating to the definition of qualified rehabilitation expenditures) is amended by striking or at the end of subclause (III), by striking subclause (IV), and by inserting after subclause (III) the following new subclauses: (IV) rehabilitated building energy efficiency property, or (V) an addition or improvement to property described in subclause (I), (II), (III), or (IV), and . (b) Rehabilitated building energy efficiency property Section 47(c)(2) of such Code is amended by adding at the end the following new subparagraph: (E) Rehabilitated building energy efficiency property (i) In general For purposes of subparagraph (A), the term rehabilitated building energy efficiency property means property which is certified as being— (I) affixed to, adjacent to, or integral to the provision of renewable energy to a qualified rehabilitated building, or (II) installed as part of a plan designed to achieve any energy use reduction (within the meaning of subsection (f)). Subparagraph (B)(i) shall not apply to rehabilitated building energy efficiency property. (ii) Certification The Secretary shall prescribe the manner and method for the making of certifications under clause (i). . (c) Enlargements Clause (iii) of section 47(c)(2)(B) of such Code is amended by adding at the end the following new sentence: The preceding sentence shall not apply to any rehabilitated building energy efficiency property which is an addition or improvement to a building.. (d) Effective date The amendments made by this section shall apply to qualified rehabilitated buildings placed in service after the date of the enactment of this Act. 5. Coordination of energy credit with rehabilitation credit (a) In general Paragraph (2) of section 48(a) of the Internal Revenue Code of 1986 is amended by striking subparagraph (B). (b) Conforming amendments Paragraph (2) of section 48(a) of such Code is amended— (1) by redesignating subparagraph (A)(ii) as subparagraph (B) and moving such subparagraph 2 ems to the left, (2) by redesignating subclauses (I) through (IV) of subparagraph (A)(i) as clauses (i) through (iv), respectively, and by moving such clauses 2 ems to the left, and (3) by striking so much of such paragraph as precedes 30 percent in the case of— and inserting the following: (2) Energy percentage The energy percentage is— (A) 30 percent in the case of— . (c) Basis reduction Paragraph (3) of section 50(c) of such Code is amended by adding at the end the following new flush sentence: In the case of property that qualifies for both the energy credit and the rehabilitation credit, the preceding sentence shall be applied by substituting none for only 50 percent each place it appears.. (d) Effective date The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act. 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 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 amendment made by this section shall apply to property placed in service after the date of the enactment of this Act. 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 inserting and subclauses (I), (II), and (III) of section 168(h)(1)(B)(ii) shall not apply after thereof. (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. 8. Special rules for dispositions of State historic tax credits (a) In general Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by inserting after section 139D the following new section: 139E. Dispositions of State historic tax credits (a) Exclusion from income; basis reduction (1) In general In the case of a taxpayer who receives a State historic tax credit and transfers such credit by sale, allocation, or otherwise, or receives a refund of all or a portion of such credit— (A) no portion of the net proceeds of such allocation, disposition, or refund of such credit shall constitute income to such taxpayer under section 61(a), and (B) the taxpayer's basis in the property with respect to which the State historic tax credit is allowed shall be reduced as determined under paragraph (2). (2) Determination of reduction in basis The reduction in basis under paragraph (1) shall be applied— (A) first, against the basis in the land, (B) second, against so much of the basis of any building or interest therein as was not treated as a qualified rehabilitation expenditure by reason of clause (ii) or (iii) of section 47(c)(2)(B), and (C) third, against the remaining basis in the property. (D) Adjustment in basis of interest in partnership or s corporation The adjusted basis of— (i) a partner’s interest in a partnership, or (ii) stock in an S corporation (as defined in section 1361(a)(1)), shall be appropriately adjusted to take into account adjustments made under this subsection in the basis of property held by the partnership or S corporation (if any). (b) Election To include in income (1) In general In the case of a taxpayer elects to have this subsection apply— (A) the net proceeds of the allocation, disposition, or refund described in subsection (a) received by such taxpayer shall constitute income to such taxpayer under section 61(a), and (B) subsection (a)(1)(B) shall not apply. (2) Making of election An election under this subsection shall be made at such time and in such manner as the Secretary of the Treasury may by regulation prescribe. Such election shall apply for the taxable year for which it is made and for all subsequent taxable years and may be revoked only with the consent of the Secretary of the Treasury. (c) Effect on qualified rehabilitation expenditures and rehabilitation credits For purposes of determining the rehabilitation credit allowable to a taxpayer under section 47, the transfer or allocation of State historic tax credits with respect to any property by a taxpayer shall not affect or reduce the amount of qualified rehabilitation expenditures (as defined in section 47(c)(2)) incurred in connection with such property, nor shall such transfer or disposition, nor any basis adjustments under subsection (a), be treated as an early disposition of investment credit property for purposes of the recapture provisions of section 50. (d) State historic tax credits defined For purposes of this section, the term State historic tax credit means any credit against State or local tax liabilities which— (1) is allowable under the laws of any State or political subdivision thereof to a taxpayer with respect to expenditures made for the rehabilitation of property identified by such laws, and (2) can be allocated, disposed, or refunded under such laws. . (b) Clerical amendment The table of sections for such part III is amended by inserting after the item relating to section 139D the following new item: Sec. 139E. Dispositions of State historic tax credits.. (c) Effective Date This section shall apply to transfers or dispositions made, or refunds received, after the date of the enactment of this Act.