U.S. Senator Ben Cardin (D-MD) recently introduced the Creating American Prosperity through Preservation (CAPP) Act (S. 1141) which would expand Section 47 of the Internal Revenue Code of 1986 which governs the federal Historic Tax Credit (HTC) program.
Major provisions include:
- Section 2: Increase in the Rehabilitation Credit for Certain Smaller Projects. The bill proposes to add a new subsection to the HTC that increases the historic tax credit from 20 percent to 30 percent for smaller projects or those projects with qualified rehabilitation expenditures of less than $7.5 million. This change is meant to help aid rehabilitation of small buildings and projects in rural areas.
- Section 3: Addition of Energy Efficiency Supplement to Rehabilitation Credit. Buildings that meet certain energy efficiency and cost-savings measures would eligible for a 2% credit boost.
- Section 4: Modification to Definition of Qualified Rehabilitation Expenditure. This provision would allow owners to including facilities “affixed to, adjacent to, or integral to the provision of renewable energy to a qualified rehabilitated building, or installed as part of a plan designed to achieve any energy use reduction” as a qualified rehab expenditure.
- Section 5: Coordination of Energy Credit with Rehabilitation Credit. The CAPP Act aims to better coordinate the historic tax credit with energy credits by removing certain stipulations in Section 48 of the IRS Code which governs energy credits. Most notably, the bill would amend the code so that in the case where properties utilize both energy and historic credits, the basis would no longer be reduced by 50%.
- Section 6: Date by Which Building Must Be First Placed In Service. Currently, a qualified rehabilitated building not considered a certified historic structure is defined as one that has been placed in service before 1936. Under the CAPP Act, the date by which buildings must be first placed in service would be expanded to “no less than 50 years prior to the year in which qualified rehabilitation expenditures are taken into account.”
- Section 7: Modifications Regarding Certain Tax-Exempt Use Property. The CAPP Act would modify certain aspects of the historic tax credit relating to tax-exempt use property.
- Section 8: Special Rules for Dispositions of State Historic Tax Credits. Finally, the CAPP Act adds a measure to the rehabilitation credit that eliminates federal taxation of the proceeds of state credits transferred through partnerships and sold as state tax certificates.
The legislation is nearly identical to similar legislation that was introduced in the 112th Congresses and is co-sponsored by Senators Susan Collins (R-ME), Charles Schumer (D-NY), Debbie Stabenow (D-MI), and Bernard Sanders (I-VT). The 2013 CAPP Act was referred to the Senate Committee on Finance.