Low-Income Housing Revitalization Act

Summary: Low-Income Housing Revitalization Act - Amends Internal Revenue Code (IRC) provisions relating to the low-income housing credit to increase the credit from four percent to nine percent with respect to new buildings that are federally subsidized. 
Extends the low-income housing credit permanently. 
Amends IRC accounting provisions to exempt low-income housing credit activities from limitations on passive losses. 
Revises the accelerated cost recovery system in connection with low-income residential rental property to reduce the applicable recovery period from 27.5 to 20 years. 
Disallows an income tax deduction for any expense relating to residential rental units unless such units are suitable for occupancy. 
Excludes deductions for business expenses, interest on indebtedness,  and taxes from calculations to determine the passive loss limitation in connection with rental real estate activity relating to a qualified low-income housing project in which a noncorporate taxpayer actively or materially participates.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Low-Income Housing Revitalization 
Act''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds that--
            (1) the United States faces an unprecedented crisis arising 
        from the rapid decline of affordable housing,
            (2) new construction of housing for low- and moderate-
        income families is at a virtual standstill,
            (3) according to a 1989 report of the Bureau of the Census, 
        the Nation's housing stock occupied by persons living in 
        poverty is 12.4 million units, of which 2.2 million units (or 
        18 percent) are substandard,
            (4) by 1995, as many as 900,000 federally subsidized low-
        income rental housing units could be lost as a result of the 
        prepayment of federally subsidized mortgages,
            (5) scores of existing low-income housing units will 
        continue to disappear as older buildings are destroyed and in 
        their place are constructed higher priced rental units and 
        condominiums, creating an even greater shortage of affordable 
        housing,
            (6) Federal expenditures to meet the housing needs of low- 
        and moderate-income persons declined 70 percent from 
        $30,200,000,000 billion in fiscal year 1981 to $7,500,000,000 
        billion in fiscal year 1989, and such expenditures were 
        increased only to $8,900,000,000 billion in fiscal year 1990 
        and to $9,500,000,000 billion in fiscal year 1991,
            (7) an increasing number of Americans face the possibility 
        of homelessness unless existing low-income housing units are 
        rehabilitated and new housing units are constructed,
            (8) the rising number of ill-housed and homeless families 
        is partially caused by displacement due to the rehabilitation 
        and gentrification of formerly low-income housing, and
            (9) owners of substandard low-income housing units continue 
        to claim Federal tax deductions without making the necessary 
        repairs or renovations to bring their low-income housing 
        property up to State or local building codes.
    (b) Purpose.--It is the purpose of this Act--
            (1) to encourage the development of affordable, decent, 
        safe, and sanitary housing for low- and moderate-income 
        families,
            (2) to rehabilitate and construct low-income rental housing 
        units by providing investment incentives to private developers 
        through a shortening of the depreciation recovery period on 
        low-income rental property to 20 years,
            (3) to deny business-related tax deductions claimed by 
        owners of low-income rental housing units who consistently 
        violate State and local health, safety, and building codes by 
        maintaining substandard rental housing units, and
            (4) to exempt from the passive loss limitation certain 
        deductions relating to low-income housing.

SEC. 3. IMPROVEMENTS IN LOW-INCOME HOUSING CREDIT.

    (a) Permanent Extension.--Section 42 of the Internal Revenue Code 
of 1986 is amended by striking subsection (o) (relating to 
termination).
    (b) Increase in Credit for Federally Subsidized New Buildings.--
Paragraph (1) of section 42(b) of such Code (relating to value of low-
income housing credit) is amended--
            (1) in subparagraph (A), by striking ``which are not 
        federally subsidized for the taxable year'', and
            (2) in subparagraph (B), by striking the dash and all that 
        follows through ``(ii)''.
    (c) Exemption From Passive Loss Limitation.--Clause (i) of section 
469(d)(2)(A) of such Code (relating to passive activity losses) is 
amended by inserting ``(other than section 42)'' after ``subpart D''.
    (d) Effective Dates.--
            (1) Extension.--The amendment made by subsection (a) shall 
        apply to calendar years after 1991.
            (2) Modifications.--The amendments made by subsections (b) 
        and (c) shall apply to property placed in service after 
        December 31, 1992.

SEC. 4. ACCELERATED DEPRECIATION SCHEDULE FOR QUALIFIED RENTAL HOUSING.

    (a) In General.--Paragraph (1) of section 168(c) of the Internal 
Revenue Code of 1986 (relating to depreciation recovery period) is 
amended by striking the item relating to residential rental property 
and inserting the following:

``Low-income residential rental property.............          20 years
  Other residential rental property..................     27.5 years''.
    (b) Definitions.--Paragraph (2) of section 168(e) of such Code 
(relating to classification of property for depreciation) is amended by 
adding at the end the following new subparagraphs:
                    ``(C) Low-income residential rental property.--The 
                term `low-income residential rental property' means 
                residential rental property which is a qualified low-
                income housing project (within the meaning of section 
                42(g)).
                    ``(D) Other residential rental property.--The term 
                `other residential rental property' means residential 
                rental property which is not low-income residential 
                rental property.''
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 1992.

SEC. 5. DISALLOWANCE OF DEDUCTIONS FOR EXPENSES RELATING TO SUBSTANDARD 
              RENTAL HOUSING.

    (a) In General.--Part IX of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items not deductible) is 
amended by adding at the end the following new section:

``SEC. 280I. EXPENSES RELATING TO SUBSTANDARD RENTAL HOUSING.

    ``(a) General Rule.--No deduction (including any deduction for 
depreciation or amortization) shall be allowed under this chapter for 
any expense relating to a rental dwelling unit by any taxpayer who 
derives rental income from the unit, unless the unit is suitable for 
occupancy.
    ``(b) Suitability for Occupancy.--For purposes of subsection (a), 
the suitability of a rental dwelling unit for occupancy shall be 
determined under regulations prescribed by the Secretary taking into 
account local health, safety, and building codes.''
    (b) Conforming Amendment.--The table of sections for such part IX 
is amended by adding at the end the following new item:

                              ``Sec. 280I. Expenses relating to 
                                        substandard rental housing.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1992.

SEC. 6. EXEMPTION FROM PASSIVE LOSS LIMITATION FOR CERTAIN DEDUCTIONS 
              RELATING TO QUALIFIED RENTAL HOUSING.

    (a) In General.--Subsection (e) of section 469 of the Internal 
Revenue Code of 1986 (relating to special rules for determining income 
or loss from a passive activity) is amended by adding at the end the 
following new paragraph:
            ``(5) Special rules for deductions allowable for taxes, 
        interest, and trade or business expenses with respect to rental 
        real estate activities in which taxpayer actively or materially 
        participates.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to any amount allowable as a deduction under section 
                162, 163, or 164 (determined without regard to this 
                section) for amounts paid during the taxable year with 
                respect to qualified rental real estate activities of 
                the taxpayer.
                    ``(B) Application of section to other deductions.--
                The income from qualified rental real estate activities 
                of the taxpayer shall be reduced (but not below zero) 
                by the amount to which subsection (a) does not apply by 
                reason of subparagraph (A) for purposes of determining 
                whether subsection (a) applies to other deductions with 
                respect to such activities.
                    ``(C) Qualified rental real estate activity.--For 
                purposes of this paragraph, the term `qualified real 
                estate activity' means any rental real estate activity 
                relating to a qualified low-income housing project 
                (within the meaning of section 42(g)) with respect to 
                which during the taxable year the taxpayer--
                            ``(i) actively participates (within the 
                        meaning of subsection (i)(6)), or
                            ``(ii) materially participates (within the 
                        meaning of subsection (h)).''
    (b) Technical Amendment.--Paragraph (4) of section 469(j) of such 
Code (relating to allocation of passive activity loss and credit) is 
amended by striking ``and the passive activity credit (and the $25,000 
amount under subsection (i))'' and inserting the following: ``, the 
passive activity credit, the $25,000 amount under subsection (i), and 
the amount to which subsection (a) does not apply by reason of 
subsection (e)(5)(A)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1992.