Revitalizing Downtowns and Main Streets Act
The Revitalizing Downtowns and Main Streets Act creates a new investment tax credit, the Affordable Housing Conversion Credit (section 48F), to encourage converting vacant or underused non-residential buildings into affordable housing. The credit equals 20 percent of qualifying conversion expenditures for a building converted and placed in service in the tax year. The program is structured similarly to the existing housing (low-income) tax credits, with a national cap of $12 billion and state-by-state allocations overseen by housing credit agencies. Expenditures must occur within a two-year window around the conversion, and the credit is reduced if rehabilitation credit (section 47) is already used for the same expenditures. Rentals must meet long-term affordability requirements (20 percent of units rent-restricted and reserved for those at 80% or less of area median income, with some adjustments in certain distressed areas). The bill also allows transferability of the credit and imposes allocation plans, reporting, and oversight requirements. In short, the bill aims to spur downtown revitalization by turning vacant commercial buildings into affordable housing, using a new 48F investment credit that is funded nationally and allocated by states, with detailed rules to target distressed areas and ensure long-term affordability.
Key Points
- 1New credit: Establishes the affordable housing conversion credit under 48F, equal to 20% of qualified conversion expenditures for a qualified affordable housing building placed in service in the year of claim.
- 2Qualified expenditures and timing: Qualified conversion expenditures are capital expenditures for property depreciable under the depreciation rules (section 168) and related to the conversion. Expenditures must occur within a 2-year window ending when the building is placed in service; costs of acquisition are not eligible.
- 3Conversion thresholds and buildings: A qualified conversion requires expenditures exceeding the greater of 50% of the building’s adjusted basis (before conversion) or $100,000. Eligible commercial buildings must have been placed in service at least 20 years before conversion and were nonresidential real property prior to conversion.
- 4Affordable housing definition and duration: A qualified affordable housing building is a residential building where, for 30 years starting when placed in service, at least 20% of units are rent-restricted and reserved for households with incomes at or below 80% of the area median income (AMI). Rent and income limits follow rules similar to the Section 42 LIHTC program.
- 5Targeting and special rules: In certain distressed areas (qualified census tracts or difficult development areas), the required rent-restricted proportion can be 30% (instead of 20%) if 60% AMI is used; rural historic preservation projects can use 35% instead of 20% up to $2 million of expenditures.
- 6Allocation and caps: Credit is limited by allocations from state housing credit agencies. National cap is $12 billion, with state allocations generally based on population shares, plus additions for economically distressed areas. There are provisions for reallocating unused or oversubscribed funds and rules about binding allocation agreements and reporting.
- 7Plan and oversight: Allocation of credits must follow an approved conversion credit allocation plan, with criteria considering feasibility, affordability, location, revitalization impact, local support, and readiness. Agencies must enter into binding agreements and report allocations to the Secretary.
- 8Transferability and conformity: The credit can be transferred to another party, similar to other tax credits that can be syndicated or sold. The bill makes conforming amendments to tax code sections to add 48F and align it with existing credits.
- 9Effective date: The changes apply to qualified buildings placed in service after the date of enactment.