[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4759 Introduced in House (IH)]
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117th CONGRESS
1st Session
H. R. 4759
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
July 28, 2021
Mr. Gomez (for himself, Mr. Larson of Connecticut, and Mr. Kildee)
introduced 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 Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Revitalizing Downtowns Act''.
SEC. 2. CREDIT FOR QUALIFIED OFFICE CONVERSION.
(a) In General.--Section 46 of the Internal Revenue Code of 1986 is
amended by striking ``and'' at the end of paragraph (5), by striking
the period at the end of paragraph (6) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(7) the qualified office conversion credit.''.
(b) Amount of Credit.--Subpart E of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 is amended by inserting
after section 48C the following new section:
``SEC. 48D. QUALIFIED OFFICE CONVERSION CREDIT.
``(a) In General.--For purposes of section 46, the qualified office
conversion credit for any taxable year is equal to 20 percent of the
qualified conversion expenditures with respect to a qualified converted
building.
``(b) When Expenditures Taken Into Account.--
``(1) In general.--Qualified conversion expenditures with
respect to any qualified converted building shall be taken into
account for the taxable year in which such qualified converted
building is placed in service.
``(2) Coordination with subsection (d).--The amount which
would (but for this subparagraph) be taken into account under
subparagraph (A) with respect to any qualified converted
building shall be reduced (but not below zero) by any amount of
qualified conversion expenditures taken into account under
subsection (d) by the taxpayer or a predecessor of the taxpayer
(or, in the case of a sale and leaseback described in section
50(a)(2)(C), by the lessee), to the extent any amount so taken
into account has not been required to be recaptured under
section 50(a).
``(c) Definitions.--
``(1) Qualified converted building.--
``(A) In general.--The term `qualified converted
building' means any building (and its structural
components) if--
``(i) prior to conversion, such building
was nonresidential real property (as defined in
section 168) which was leased, or available for
lease, to office tenants,
``(ii) such building has been substantially
converted from an office use to a residential,
retail, or other commercial use,
``(iii) in the case of conversion to a
residential use, such converted building meets
the requirements of subparagraph (D),
``(iv) such building was initially placed
in service at least 25 years before the
beginning of the conversion, and
``(v) depreciation (or amortization in lieu
of depreciation) is allowable with respect to
such building.
``(B) Substantially converted defined.--
``(i) In general.--For purposes of
paragraph (1)(A)(ii), a building shall be
treated as having been substantially converted
only if the qualified conversion expenditures
during the 24-month period selected by the
taxpayer (at the time and in the manner
prescribed by regulation) and ending with or
within the taxable year exceed the greater of--
``(I) the adjusted basis of such
building (and its structural
components), or
``(II) $15,000.
The adjusted basis of the building (and its
structural components) shall be determined as
of the beginning of the 1st day of such 24-
month period, or of the holding period of the
building, whichever is later. For purposes of
the preceding sentence, the determination of
the beginning of the holding period shall be
made without regard to any reconstruction by
the taxpayer in connection with the conversion.
``(ii) Special rule for phased
conversion.--In the case of any conversion
which may reasonably be expected to be
completed in phases set forth in architectural
plans and specifications completed before the
conversion begins, clause (i) shall be applied
by substituting `60-month period' for `24-month
period'.
``(iii) Lessees.--The Secretary shall
prescribe by regulation rules for applying this
subparagraph to lessees.
``(C) Reconstruction.--Conversion includes
reconstruction.
``(D) Residential conversion requirements.--
``(i) In general.--A building meets the
requirements of this subparagraph if--
``(I) 20 percent or more of the
residential units are both rent-
restricted and occupied by individuals
whose income is 80 percent or less of
area median gross income, or
``(II) such building is subject to
a written binding State or local
agreement with respect to the provision
or financing of affordable housing and
such agreement is documented in such
form and manner as the Secretary may
provide.
``(ii) Rent and income limitation.--For
purposes of this subparagraph, rules similar to
the rules of subsection (g) of section 42 shall
apply to determine whether a unit is rent-
restricted, treatment of units occupied by
individuals whose incomes rise above the limit,
and the treatment of units where Federal rental
assistance is reduced as tenant's income
increases.
``(2) Qualified conversion expenditures defined.--
``(A) In general.--For purposes of subsection (a),
the term `qualified conversion expenditures' means any
amount properly chargeable to capital account--
``(i) for property for which depreciation
is allowable under section 168 and which is--
``(I) nonresidential real property
(as defined in section 168),
``(II) residential rental property
(as defined in section 168), or
``(III) an addition or improvement
to property described in clause (i) or
(ii), and
``(ii) in connection with the conversion of
a qualified converted building.
``(B) Certain expenditures not included.--The term
`qualified conversion expenditures' does not include--
``(i) Straight line depreciation must be
used.--Any expenditure with respect to which
the taxpayer does not use the straight line
method over a recovery period determined under
subsection (c) or (g) of section 168. The
preceding sentence shall not apply to any
expenditure to the extent the alternative
depreciation system of section 168(g) applies
to such expenditure by reason of subparagraph
(B) or (C) of section 168(g)(1).
``(ii) Cost of acquisition.--The cost of
acquiring any building or interest therein.
``(iii) Enlargements.--Any expenditure
attributable to the enlargement of an existing
building.
``(iv) Tax-exempt use property.--Any
expenditure in connection with the conversion
of a building which is allocable to the portion
of such property which is (or may reasonably be
expected to be) tax-exempt use property (within
the meaning of section 168(h)), except that--
``(I) `50 percent' shall be
substituted for `35 percent' in
paragraph (1)(B)(iii) thereof, and
``(II) an eligible educational
institution (as defined in section
529(e)(5)) shall not be treated as a
tax-exempt entity.
This clause shall not apply for purposes of
determining whether a building has been
substantially converted.
``(v) Expenditures of lessee.--Any
expenditure of a lessee of a building if, on
the date the conversion is completed, the
remaining term of the lease (determined without
regard to any renewal periods) is less than the
recovery period determined under section
168(c).
``(d) Progress Expenditures.--
``(1) In general.--In the case of any building to which
this subsection applies, except as provided in paragraph (3)--
``(A) if such building is self-converted property,
any qualified conversion expenditure with respect to
such building shall be taken into account for the
taxable year for which such expenditure is properly
chargeable to capital account with respect to such
building, and
``(B) if such building is not self-converted
property, any qualified conversion expenditure with
respect to such building shall be taken into account
for the taxable year in which paid.
``(2) Property to which subsection applies.--
``(A) In general.--This subsection shall apply to
any building which is being converted by or for the
taxpayer if--
``(i) the normal conversion period for such
building is 2 years or more, and
``(ii) it is reasonable to expect that such
building will be a qualified converted building
in the hands of the taxpayer when it is placed
in service.
Clauses (i) and (ii) shall be applied on the basis of
facts known as of the close of the taxable year of the
taxpayer in which the conversion begins (or, if later,
at the close of the first taxable year to which an
election under this subsection applies).
``(B) Normal conversion period.--For purposes of
subparagraph (A), the term `normal conversion period'
means the period reasonably expected to be required for
the conversion of the building--
``(i) beginning with the date on which
physical work on the conversion begins (or, if
later, the first day of the first taxable year
to which an election under this subsection
applies), and
``(ii) ending on the date on which it is
expected that the property will be available
for placing in service.
``(3) Special rules for applying paragraph (1).--For
purposes of paragraph (1)--
``(A) Component parts, etc.--Property which is to
be a component part of, or is otherwise to be included
in, any building to which this subsection applies shall
be taken into account--
``(i) at a time not earlier than the time
at which it becomes irrevocably devoted to use
in the building, and
``(ii) as if (at the time referred to in
clause (i)) the taxpayer had expended an amount
equal to that portion of the cost to the
taxpayer of such component or other property
which, for purposes of this subpart, is
properly chargeable (during such taxable year)
to capital account with respect to such
building.
``(B) Certain borrowing disregarded.--Any amount
borrowed directly or indirectly by the taxpayer from
the person converting the property for him shall not be
treated as an amount expended for such conversion.
``(C) Limitation for buildings which are not self-
converted.--
``(i) In general.--In the case of a
building which is not self-converted, the
amount taken into account under paragraph
(1)(B) for any taxable year shall not exceed
the amount which represents the portion of the
overall cost to the taxpayer of the conversion
which is properly attributable to the portion
of the conversion which is completed during
such taxable year.
``(ii) Carryover of certain amounts.--In
the case of a building which is not a self-
converted building, if for the taxable year--
``(I) the amount which (but for
clause (i)) would have been taken into
account under paragraph (1)(B) exceeds
the limitation of clause (i), then the
amount of such excess shall be taken
into account under paragraph (1)(B) for
the succeeding taxable year, or
``(II) the limitation of clause (i)
exceeds the amount taken into account
under paragraph (1)(B), then the amount
of such excess shall increase the
limitation of clause (i) for the
succeeding taxable year.
``(D) Determination of percentage of completion.--
The determination under subparagraph (C)(i) of the
portion of the overall cost to the taxpayer of the
conversion which is properly attributable to conversion
completed during any taxable year shall be made, under
regulations prescribed by the Secretary, on the basis
of engineering or architectural estimates or on the
basis of cost accounting records. Unless the taxpayer
establishes otherwise by clear and convincing evidence,
the conversion shall be deemed to be completed not more
rapidly than ratably over the normal conversion period.
``(E) No progress expenditures for certain prior
periods.--No qualified conversion expenditures shall be
taken into account under this subsection for any period
before the first day of the first taxable year to which
an election under this subsection applies.
``(F) No progress expenditures for property for
year it is placed in service, etc.--In the case of any
building, no qualified conversion expenditures shall be
taken into account under this subsection for the
earlier of--
``(i) the taxable year in which the
building is placed in service, or
``(ii) the first taxable year for which
recapture is required under section 50(a)(2)
with respect to such property,
or for any taxable year thereafter.
``(4) Self-converted building.--For purposes of this
subsection, the term `self-converted building' means any
building if it is reasonable to believe that more than half of
the qualified conversion expenditures for such building will be
made directly by the taxpayer.
``(5) Election.--This subsection shall apply to any
taxpayer only if such taxpayer has made an election under this
paragraph. Such an election shall apply to the taxable year for
which made and all subsequent taxable years. Such an election,
once made, may be revoked only with the consent of the
Secretary.
``(e) Denial of Double Benefit.--A credit shall not be allowed
under this section for any qualified conversion expenditure for which a
credit is allowed under section 42 or 47.''.
(c) Conforming Amendments.--
(1) Section 49(a)(1)(C) of the Internal Revenue Code of
1986 is amended by striking ``and'' at the end of clause (iv),
by striking the period at the end of clause (v) and inserting
``, and'', and by adding after clause (v) the following new
clause:
``(vi) the portion of the basis of any
qualified converted property attributable to
qualified conversion expenditures under section
48D.''.
(2) Section 50(a)(2)(E) of such Code is amended by striking
``or 48C(b)(2)'' and inserting ``48C(b)(2), or 48D(d)''.
(3) Section 50(b)(2) of such Code is amended by striking
``and'' at the end of subparagraph (C), by striking the period
at the end of subparagraph (D) and inserting ``; and'', and by
adding after subparagraph (D) the following new subparagraph:
``(E) a qualified converted building to the extent
of that portion of the basis which is attributable to
qualified conversion expenditures.''.
(4) Section 50(b)(3) is amended by inserting ``, or, solely
with respect to the qualified office conversion credit, an
eligible educational institution (as defined in section
529(e)(5))'' after ``section 521''.
(5) The table of sections for subpart E of part IV of
subchapter A of chapter 1 of such Code is amended by inserting
after the item relating to section 48C the following new item:
``Sec. 48D. Qualified office conversion credit.''.
(d) Effective Date.--The amendments made by this section shall
apply to qualified conversion expenditures incurred after the date of
enactment in taxable years ending after such date.
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