Revitalizing Downtowns and Main Streets

Summary#

This bill creates a new federal tax credit called the Affordable Housing Conversion Credit. The credit equals 20 percent of a taxpayer's qualified conversion expenditures for converting an eligible commercial building into a qualified affordable housing building placed in service in the taxable year. Qualified conversion expenditures are capital costs for depreciable property used in the conversion, generally paid during the two years before the building is placed in service (with special rules for longer projects). The credit does not apply to the cost of acquiring a building. If the same expenditures are used to claim the existing rehabilitation credit, the amount counted for this credit is reduced by 50 percent. A qualified conversion requires conversion costs that exceed the greater of 50 percent of the building's adjusted basis (immediately before conversion) or $100,000. An eligible commercial building must have been placed in service at least 20 years earlier and be nonresidential immediately before conversion.

A qualified affordable housing building must keep at least 20 percent of its units rent-restricted and reserved for households with incomes at or below 80 percent of area median income for a 30-year period after placed in service. Special rules allow a 30 percent credit rate (instead of 20 percent) where at least 20 percent of units serve households at or below 60 percent of area median income in certain low-income or difficult development areas. In rural historic projects, taxpayers may elect a 35 percent rate for up to $2 million of eligible expenditures. The bill requires state housing credit agencies to allocate credit dollar amounts to buildings under an approved allocation plan, and sets a national allocation limit of $12 billion, with up to $3 billion designated for economically distressed areas. The Secretary must create rules for allocation, monitoring, recapture if affordability terms are broken, and reporting. The bill also makes the credit transferable under an existing transferability provision. The credit applies to buildings placed in service after the bill's enactment.

What it means for you#

• Property owners who convert older nonresidential buildings into rental housing may be eligible for a federal tax credit equal to a share of their capital conversion costs, if they meet the program's definitions and get an allocation from their State housing credit agency.
• To qualify, buildings generally must be at least 20 years old and conversion costs must meet the required threshold. A portion of units must remain rent-restricted for a 30-year period at specified income limits.
• State housing credit agencies decide how much credit money each building can receive, following required allocation plans and reporting rules.
• The credit can be transferred, which lets a taxpayer sell or assign the credit under rules that apply to other transferable credits.

Expenses#

• The bill sets a national allocation cap of $12,000,000,000 for the credit. Up to $3,000,000,000 of allocations may be designated for economically distressed areas under rules the Secretary will create.
• The credit rate is generally 20 percent of qualified conversion expenditures, with higher rates possible in certain low-income, rural historic, or difficult development area cases.
• No publicly available information on the bill's estimated federal revenue effects, administrative costs, or overall budget impact is included in the text.

Proponents' View#

No publicly available information.

Opponents' View#

No publicly available information.