Rural Historic Tax Credit Improvement Act
Sponsored By: Senator Shelley Capito
Introduced
Summary
Boosts historic-rehab tax incentives in rural areas to encourage preservation and affordable housing. The bill would create higher, transferrable tax credits for qualifying rural rehabilitation projects and set rules for eligibility, caps, and recapture.
Show full summary
- Families and rural residents: Targets projects that dedicate at least 50 percent of a project's space to housing and defines "affordable" as households at or below 80 percent of the area median income. This aims to help preserve or create lower-cost housing in smaller towns.
- Developers and investors: Offers larger credits — 40 percent of qualified rehabilitation expenditures for qualifying affordable housing projects and 30 percent for other eligible rural projects. That makes some rural rehab projects more financially attractive.
- Tax administration and project rules: Allows credit transfers with required reporting, disallows a deduction for amounts paid for a transferred credit, and removes the usual basis adjustment for these projects and lessees. It caps qualifying rehab costs at $5.0 million per project and creates a recapture rule that can increase tax by 100 percent for violations.
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Bill Overview
Analyzed Economic Effects
4 provisions identified: 3 benefits, 1 costs, 0 mixed.
Bigger rural rehab tax credit
If enacted, the bill would create a new "applicable rural project" rehab credit for buildings in rural areas placed in service after Dec 31, 2025. For the taxable year the project is placed in service the credit would equal 40% of qualified rehabilitation expenditures (QREs) for affordable housing projects and 30% for other projects. The credit counts up to $5,000,000 of QREs per project. The bill defines "rural area" and the affordable-housing tests that projects must meet.
No basis cut after rural credit
If enacted, the bill would prevent the normal tax-basis reduction for property when a taxpayer claims the rural rehabilitation credit for applicable rural projects placed in service after Dec 31, 2025. The same exception would apply for lessees referenced in the related Code provisions. That change would help future depreciation deductions and reduce taxable gains on sale.
Sellable rural rehab tax credits
If enacted, the bill would let taxpayers sell all or part of the rural rehabilitation credit for qualifying projects placed in service after Dec 31, 2025, subject to Treasury rules. Transfers must use a certificate with project and taxpayer details and that certificate can itself be transferred. Amounts received from selling the credit would not be included in gross income and the buyer claims the credit; both parties must report transfers and the buyer becomes responsible for recapture if required.
Stronger tax penalty for housing violations
If enacted, the bill would add a tough recapture rule for applicable rural affordable housing projects placed in service after Dec 31, 2025. If the project violates the affordable housing requirements during the recapture period, the taxpayer's tax for the year of violation would increase by 100% of the prior credits that would be lost. The taxpayer can avoid the penalty if the violation is fixed within 45 days after the Secretary's notice. The Secretary would issue rules on recordkeeping and reporting.
Sponsors & CoSponsors
Sponsor
Shelley Capito
WV • R
Cosponsors
Mark Warner
VA • D
Sponsored 2/19/2025
Roll Call Votes
No roll call votes available for this bill.
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