S. 631: Rural Historic Tax Credit Improvement Act

The bill, titled the Rural Historic Tax Credit Improvement Act, aims to modify existing tax laws to enhance the rehabilitation credit for buildings located in rural areas. Below are the key components of what the bill would do:

1. Enhanced Rehabilitation Credit

• The current rehabilitation credit will be increased for qualified rehabilitation expenditures for projects in rural areas.
• For projects identified as affordable housing projects, the credit would be raised to 40% of qualifying expenses.
• For other projects that do not qualify as affordable housing, the credit would be 30%.

2. Definition of Applicable Rural Projects

• An applicable rural project is classified as a qualified rehabilitated building located in a rural area.
• A rural area is defined as any area with a population under 50,000, excluding urbanized areas adjacent to larger cities.
• The total accessible qualified rehabilitation expenditures for each project will be capped at $5,000,000.

3. Transferability of the Credit

• The credit for an applicable rural project can be transferred, in whole or in part, between taxpayers.
• Transfers must be accompanied by a certificate detailing various necessary information, including project completion and the amount of credit transferred.
• The recipient of the transferred credit will be able to use it for their taxable year, while the original taxpayer will not claim it.
• Any amount received in this transfer will not be included in gross income.

4. Compliance with Affordable Housing Requirements

• If an affordable housing project violates specific requirements, the taxpayer may face a penalty where the tax liability is increased based on prior credits received.
• Taxpayers can avoid penalties by rectifying violations within a specified period after receiving notice.

5. Other Amendments and Effective Dates

• The amendments proposed would also eliminate adjustments required for the basis of the rehabilitation credit in applicable rural projects.
• Changes will take effect for properties placed in service after December 31, 2025.

Relevant Companies

• None found