To provide grants to States for low-income housing projects in lieu of low-income housing credits.

Summary: Low Income Housing Tax Credit Exchange Expansion and Job Creation Act of 2010 - Directs the Secretary of the Treasury to make grants to: (1) state housing credit agencies in lieu of low-income credit allocations in 2010; and (2) states for bond-subsidized housing projects.

Requires state housing credit agencies and states to use grants to make subawards to finance the construction or acquisition and rehabilitation of qualified low-income buildings. Requires the return of grant funds not used to make such subawards before January 1, 2012.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Low Income Housing Tax Credit 
Exchange Expansion and Job Creation Act of 2010''.

SEC. 2. GRANTS TO STATES FOR LOW-INCOME HOUSING PROJECTS IN LIEU OF 
              LOW-INCOME HOUSING CREDIT ALLOCATIONS FOR 2010.

    (a) In General.--The Secretary of the Treasury shall make a grant 
to the housing credit agency of each State in an amount equal to such 
State's low-income housing credit allocation election amount.
    (b) Low-Income Housing Credit Allocation Election Amount.--For 
purposes of this section, the term ``low-income housing credit 
allocation election amount'' means, with respect to any State, such 
amount as the State may elect which does not exceed 85 percent of the 
product of--
            (1) the sum of--
                    (A) 100 percent of the State housing credit ceiling 
                for 2010 which is attributable to amounts described in 
                clauses (i) and (iii) of section 42(h)(3)(C) of the 
                Internal Revenue Code of 1986, plus
                    (B) 40 percent of the State housing credit ceiling 
                for 2010 which is attributable to amounts described in 
                clauses (ii) and (iv) of such section, multiplied by
            (2) 10.
    (c) Subawards for Low-Income Buildings.--
            (1) In general.--A State housing credit agency receiving a 
        grant under this section shall use such grant to make subawards 
        to finance the construction or acquisition and rehabilitation 
        of qualified low-income buildings. A subaward under this 
        section may be made to finance a qualified low-income building 
        with or without an allocation under section 42 of the Internal 
        Revenue Code of 1986, except that a State housing credit agency 
        may make subawards to finance qualified low-income buildings 
        without an allocation only if it makes a determination that 
        such use will increase the total funds available to the State 
        to build and rehabilitate affordable housing. In complying with 
        such determination requirement, a State housing credit agency 
        shall establish a process in which applicants that are 
        allocated credits are required to demonstrate good faith 
        efforts to obtain investment commitments for such credits 
        before the agency makes such subawards.
            (2) Subawards subject to same requirements as low-income 
        housing credit allocations.--Any such subaward with respect to 
        any qualified low-income building may be in the form of a grant 
        or a loan of any duration and shall be made in the same manner 
        and shall be subject to the same limitations (including rent, 
        income, and use restrictions on such building) as an allocation 
        of housing credit dollar amount allocated by such State housing 
        credit agency under section 42 of the Internal Revenue Code of 
        1986, except that such subawards shall not be limited by, or 
        otherwise affect (except as provided in subsection (i)(9) of 
        such section), the State housing credit ceiling applicable to 
        such agency.
            (3) Compliance and asset management.--The State housing 
        credit agency shall perform asset management functions to 
        ensure compliance with section 42 of the Internal Revenue Code 
        of 1986 and the long-term viability of buildings funded by any 
        subaward under this section. The State housing credit agency 
        may collect reasonable fees from a subaward recipient to cover 
        expenses associated with the performance of its duties under 
        this paragraph, including the reasonable costs of administering 
        such subawards. The State housing credit agency may retain an 
        agent or other private contractor to satisfy the requirements 
        of this paragraph.
            (4) Recapture.--The State housing credit agency shall 
        impose conditions or restrictions, including a requirement 
        providing for recapture, on any subaward under this section so 
        as to assure that the building with respect to which such 
        subaward is made remains a qualified low-income building during 
        the compliance period. Any amounts of recapture shall be 
        proportional to the length of time of the noncompliance 
        compared to the 15-year compliance period and the percentage of 
        qualified basis out of compliance compared to the total 
        qualified basis. Any such recapture shall be payable to the 
        Secretary of the Treasury for deposit in the general fund of 
        the Treasury and may be enforced by means of liens or such 
        other methods as the Secretary of the Treasury determines 
        appropriate. A State housing credit agency may subordinate any 
        such lien (or other security interest) to other loans made by 
        third parties.
    (d) Return of Unused Grant Funds.--Any grant funds not used to make 
subawards under this section before January 1, 2012, shall be returned 
to the Secretary of the Treasury on such date. The portion of any 
subaward which is not disbursed before such date shall be returned to 
the Secretary of the Treasury on such date unless the subawardee has 
paid or incurred before January 1, 2012, at least 30 percent of the 
subawardee's total adjusted basis in land and depreciable property that 
is reasonably expected to be part of the low-income housing building 
with respect to which such subaward is made. The portion of any 
subaward which is not disbursed before January 1, 2013, shall be 
returned to the Secretary of the Treasury on such date. Any subawards 
returned to the State housing credit agency on or after January 1, 
2012, shall be promptly returned to the Secretary of the Treasury. Any 
amounts returned to the Secretary of the Treasury under this subsection 
shall be deposited in the general fund of the Treasury.
    (e) Definitions.--Any term used in this section which is also used 
in section 42 of the Internal Revenue Code of 1986 shall have the same 
meaning for purposes of this section as when used in such section 42. 
Any reference in this section to the Secretary of the Treasury shall be 
treated as including the Secretary's delegate.
    (f) Appropriations.--There is hereby appropriated to the Secretary 
of the Treasury such sums as may be necessary to carry out this 
section.

SEC. 3. GRANTS TO STATES FOR LOW-INCOME HOUSING PROJECTS IN LIEU OF 
              LOW-INCOME HOUSING CREDITS FOR BOND-SUBSIDIZED HOUSING 
              PROJECTS.

    (a) In General.--The Secretary of the Treasury shall make a grant 
to each State in an amount equal to such State's low-income bond-
subsidized housing election amount.
    (b) Low-Income Bond-Subsidized Housing Election Amount.--For 
purposes of this section--
            (1) In general.--The term ``low-income bond-subsidized 
        housing election amount'' means, with respect to any State, 
        such amount as the State may elect which does not exceed 85 
        percent of the State's bond-subsidized credit amount.
            (2) Bond-subsidized credit amount.--The term ``bond-
        subsidized credit amount'' means, with respect to any State, 
        the aggregate amount of low-income housing credits which the 
        State determines would, but for section 42(i)(9) of the 
        Internal Revenue Code of 1986, be awarded under section 
        42(h)(4)(B) of such Code times 10 with respect to qualified 
        low-income buildings receiving an allocation of qualified 
        residential rental project bonds of such State during 2010.
            (3) Qualified residential rental project bonds.--The term 
        ``qualified residential rental project bond'' means, with 
        respect to any State, any qualified bond (as defined in section 
        141(e) of the Internal Revenue Code of 1986) if such bond--
                    (A) is issued as part of an issue 95 percent or 
                more of the net proceeds of which are to be used to 
                provide qualified residential rental projects (within 
                the meaning of section 142 of such Code), and
                    (B) is taken into account under section 146 of such 
                Code with respect to the State ceiling applicable to 
                such State.
    (c) Subawards for Low-Income Buildings.--
            (1) In general.--A State receiving a grant under this 
        section shall use such grant to make subawards to finance the 
        construction or acquisition and rehabilitation of qualified 
        low-income buildings which have received the corresponding 
        allocation of qualified residential rental project bonds 
        referred to in subsection (b)(2).
            (2) Subawards subject to same requirements as low-income 
        housing credit allocations.--Any such subaward with respect to 
        any qualified low-income building may be in the form of a grant 
        or a loan of any duration and shall be made in the same manner 
        and shall be subject to the same limitations (including rent, 
        income, and use restrictions on such building) as an allocation 
        of housing credit dollar amount allocated by the State housing 
        credit agency of such State under section 42 of the Internal 
        Revenue Code of 1986, except that such subawards shall not be 
        limited by, or otherwise affect, the State housing credit 
        ceiling applicable to such agency.
            (3) Compliance and asset management.--A State receiving a 
        grant under this section shall perform asset management 
        functions to ensure compliance with section 42 of the Internal 
        Revenue Code of 1986 and the long-term viability of buildings 
        funded by any subaward under this section. A State may collect 
        reasonable fees from a subaward recipient to cover expenses 
        associated with the performance of its duties under this 
        paragraph, including the reasonable costs of administering such 
        subawards. A State may retain an agent or other private 
        contractor to satisfy the requirements of this paragraph.
            (4) Recapture.--A State receiving a grant under this 
        section shall impose conditions or restrictions, including a 
        requirement providing for recapture, on any subaward under this 
        section so as to assure that the building with respect to which 
        such subaward is made remains a qualified low-income building 
        during the compliance period. Any amounts of recapture shall be 
        proportional to the length of time of the noncompliance 
        compared to the 15-year compliance period and the percentage of 
        qualified basis out of compliance compared to the total 
        qualified basis. Any such recapture shall be payable to the 
        Secretary of the Treasury for deposit in the general fund of 
        the Treasury and may be enforced by means of liens or such 
        other methods as the Secretary of the Treasury determines 
        appropriate. A State housing credit agency may subordinate any 
        such lien (or other security interest) to other loans made by 
        third parties.
    (d) Reallocation of Bond Authority.--A State housing credit agency 
shall establish a process in which applicants that are allocated bonds 
and receive a subaward pursuant to subsection (c) are required to 
demonstrate good faith efforts to obtain purchasers for such bonds. If 
a subawardee is unable to obtain purchasers or if the State makes a 
determination that reallocation of bond authority will increase the 
total funds available to the State to build and rehabilitate affordable 
housing, a subawardee may return its bond allocation to the State 
without affecting its subaward under subsection (c) and the State may 
reallocate such bond authority only for qualified residential rental 
projects. Reallocated bonds shall not be taken into account for 
purposes of determining eligibility for low-income housing credits 
under section 42(h)(4) of the Internal Revenue Code of 1986 or for 
purposes of determining eligibility for grants under subsection (c).
    (e) Return of Unused Grant Funds.--Any grant funds not used to make 
subawards under this section before January 1, 2012, shall be returned 
to the Secretary of the Treasury on such date. The portion of any 
subaward which is not disbursed before such date shall be returned to 
the Secretary of the Treasury on such date unless the subawardee has 
paid or incurred before January 1, 2012, at least 30 percent of the 
subawardee's total adjusted basis in land and depreciable property that 
is reasonably expected to be part of the low-income housing building 
with respect to which such subaward is made. The portion of any 
subaward which is not disbursed before January 1, 2013, shall be 
returned to the Secretary of the Treasury on such date. Any subawards 
returned to the State housing credit agency on or after January 1, 
2012, shall be promptly returned to the Secretary of the Treasury. Any 
amounts returned to the Secretary of the Treasury under this subsection 
shall be deposited in the general fund of the Treasury.
    (f) Definitions.--Any term used in this section which is also used 
in section 42 of the Internal Revenue Code of 1986 shall have the same 
meaning for purposes of this section as when used in such section 42. 
Any reference in this section to the Secretary of the Treasury shall be 
treated as including the Secretary's delegate.
    (g) Appropriations.--There is hereby appropriated to the Secretary 
of the Treasury such sums as may be necessary to carry out this 
section.

SEC. 4. COORDINATION OF LOW-INCOME HOUSING CREDIT WITH LOW-INCOME 
              HOUSING GRANTS.

    (a) In General.--Paragraph (9) of section 42(i) of the Internal 
Revenue Code of 1986 is amended by redesignating subparagraph (B) as 
subparagraph (D) and by inserting after subparagraph (A) the following 
new subparagraphs:
                    ``(B) Reduction in state housing credit ceiling for 
                low-income housing grants received in 2010.--For 
                purposes of this section, the amounts described in 
                clauses (i) through (iv) of subsection (h)(3)(C) with 
                respect to any State for 2010 shall each be reduced by 
                so much of such amount as is taken into account in 
                determining the amount of any grant to such State under 
                section 2 of the Low Income Housing Tax Credit Exchange 
                Expansion and Job Creation Act of 2010.
                    ``(C) Denial of credit for bond-subsidized 
                buildings receiving subawards with 2010 grant funds.--
                No credit shall be determined under this section with 
                respect to any qualified low-income building to the 
                extent of the bond-subsidized credit amount determined 
                with respect to such building under section 3 of the 
                Low Income Housing Tax Credit Exchange Expansion and 
                Job Creation Act of 2010 if any subaward is made with 
                respect to such building under such section.''.
    (b) Grants and Loans Not To Reduce Basis.--Subparagraph (D) of 
section 42(i)(9) of such Code, as redesignated by this section, is 
amended by striking ``by the amount of any grant described in 
subparagraph (A)'' and inserting ``by reason of any grant or loan made 
under section 1602 of the American Recovery and Reinvestment Tax Act of 
2009 or section 2 or 3 of the Low Income Housing Tax Credit Exchange 
Expansion and Job Creation Act of 2010''.
    (c) Exclusion of Grants From Gross Income.--Paragraph (9) of 
section 42(i) of such Code, as amended by this section, is amended by 
adding at the end the following new subparagraph:
                    ``(E) Exclusion of grants from gross income.--Any 
                grant made under section 1602 of the American Recovery 
                and Reinvestment Tax Act of 2009 or section 2 or 3 of 
                the Low Income Housing Tax Credit Exchange Extension 
                Act of 2009 shall not be includible in the gross income 
                or alternative minimum taxable income of the 
                taxpayer.''.
    (d) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        taxable years ending after December 31, 2009.
            (2) Reductions in state housing credit ceiling.--
        Subparagraph (B) of section 42(i)(9) of the Internal Revenue 
        Code of 1986, as amended by subsection (a), shall apply to 
        determinations of State housing credit ceiling for calendar 
        years after 2009.
            (3) Exclusion of grants from gross income.--The amendment 
        made by subsection (c) shall apply to taxable years ending 
        after December 31, 2008.