Summary

Creates a new, transferable special rehabilitation tax credit for qualified rural building rehab projects: 40% for rural affordable housing and 30% for other rural projects, with a $5 million cap on qualifying rehab expenses. Establishes transfer rules, reporting, and recapture penalties (including a 45‑day cure for affordable‑housing violations), and prevents the usual reduction in a project's tax basis when the credit is claimed for applicable rural projects. Applies to property placed in service after December 31, 2025.

Key Points

• Creates a new transferable rehabilitation tax credit for rural projects: 40% for rural affordable housing, 30% for other rural projects.
• Limits qualifying rehabilitation expenses to $5,000,000 for purposes of the credit cap.
• Allows taxpayers to transfer (sell) the credit to third‑party investors under specified certificate and reporting rules.
• Adds recapture rules and a 45‑day cure period for affordable‑housing requirement violations before credit clawback.
• Stops the usual reduction in a property's tax basis when the rural rehabilitation credit is claimed, including when credited to a lessee.
• All amendments apply to property placed in service after December 31, 2025.
• Raises compliance and reporting obligations for taxpayers and transferees to enable IRS enforcement and recapture.
• Aims to spur rural rehabilitation and preserve or expand affordable housing in rural areas by improving credit marketability.

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