To provide $4,000,000,000 in new funding through bonding to empower States to undertake significant residential and commercial structure demolition projects in urban and other targeted areas, and for other purposes.

Summary: Restore our Neighborhoods Act of 2012 - Amends the Internal Revenue Code to establish a new category of tax credit bonds to be known as qualified urban demolition bonds. Allows the issuance of $4 billion of such bonds for the purpose of demolishing vacant, abandoned, and tax delinquent properties in urban areas. Provides for the allocation of $2 billion to all states to fund such demolition projects, and an additional $2 billion for certain other states that have greater numbers of vacant or foreclosed properties and higher unemployment rates (qualified states).

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Restore our Neighborhoods Act of 
2012''.

SEC. 2. CREDIT TO HOLDERS OF QUALIFIED URBAN DEMOLITION BONDS.

    (a) In General.--Subpart I of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 54G. QUALIFIED URBAN DEMOLITION BONDS.

    ``(a) Qualified Urban Demolition Bond.--For purposes of this 
subchapter, the term `qualified urban demolition bond' means any bond 
issued as part of an issue if--
            ``(1) 100 percent of the available project proceeds of such 
        issue are to be used for expenditures incurred after the date 
        of the enactment of this section for 1 or more qualified 
        projects pursuant to an allocation of such proceeds to such 
        project or projects by a qualified issuer,
            ``(2) the bond is issued by a qualified issuer and is in 
        registered form (within the meaning of section 149(a)),
            ``(3) the qualified issuer designates such bond for 
        purposes of this section,
            ``(4) the term of each bond which is part of such issue 
        does not exceed 30 years,
            ``(5) such bond is issued during the 5-year period 
        beginning on the date of the enactment of this section, and
            ``(6) the issue meets the requirements of subsection (e).
    ``(b) Limitation on Amount of Bonds Designated.--
            ``(1) In general.--The maximum aggregate face amount of 
        bonds which may be designated under subsection (a) by a State 
        shall not exceed the qualified urban demolition bond limitation 
        amount allocated to such State under paragraph (3).
            ``(2) National qualified urban demolition bond limitation 
        amount.--There is a national qualified urban demolition bond 
        limitation amount of $4,000,000,000.
            ``(3) Allocation to states.--
                    ``(A) In general.--The national qualified urban 
                demolition bond limitation shall be allocated by the 
                Secretary among the States on the following basis and 
                in such manner so as to ensure that all of such 
                limitation amount is allocated before the date which is 
                3 months after the date of the enactment of this 
                section:
                            ``(i) $2,000,000,000 to be allocated among 
                        the qualified States in accordance with 
                        subparagraph (B), and
                            ``(ii) $2,000,000,000 to be equally 
                        allocated among all States.
                    ``(B) Formula for allocation among qualified 
                states.--
                            ``(i) In general.--The amount allocated to 
                        a State under subparagraph (A)(i) shall be an 
                        amount equal to the amount specified in 
                        subparagraph (A)(i) multiplied by the ratio 
                        that the nonseasonal vacant properties in the 
                        State bears to the total nonseasonal vacant 
                        properties of all qualified States.
                            ``(ii) Nonseasonal vacant properties.--For 
                        purposes of clause (i), nonseasonal vacant 
                        properties shall be determined by the Secretary 
                        on the basis of 2010 decennial census.
            ``(4) Allocation of limitation amount by states.--The 
        limitation amount allocated to a State under paragraph (3) 
        shall be allocated by the State to qualified issuers within 
        such State.
            ``(5) Reallocation of unused issuance limitation.--If at 
        the end of the 2-year period beginning on the date of the 
        enactment of this section, the national qualified urban 
        demolition bond limitation amount under paragraph (2) exceeds 
        the total amount of qualified urban demolition bonds issued 
        during such period, such excess shall be reallocated among the 
        qualified States in such manner as the Secretary determines 
        appropriate so as to ensure to the extent possible that all of 
        such limitation amount is issued in the form of qualified urban 
        demolition bonds before the end of the 5-year period beginning 
        on the date of the enactment of this section.
    ``(c) Qualified Project.--For purposes of this section, the term 
`qualified project' means the direct and indirect demolition costs 
properly attributable to any project proposed and approved by a 
qualified issuer, but does not include costs of operation or 
maintenance with respect to such project.
    ``(d) Applicable Credit Rate.--In lieu of section 54A(b)(3), for 
purposes of section 54A(b)(2), the applicable credit rate with respect 
to an issue under this section is the rate equal to an average market 
yield (as of the day before the date of sale of the issue) on 
outstanding long-term corporate debt obligations (determined in such 
manner as the Secretary prescribes).
    ``(e) Special Rules Relating to Expenditures.--In lieu of 
subparagraphs (A) and (B) of section 54A(d)--
            ``(1) In general.--An issue shall be treated as meeting the 
        requirements of this subsection if, as of the date of issuance, 
        the qualified issuer reasonably expects--
                    ``(A) at least 100 percent of the available project 
                proceeds of such issue are to be spent for 1 or more 
                qualified projects within the 5-year expenditure period 
                beginning on such date, and
                    ``(B) to incur a binding commitment with a third 
                party to spend at least 10 percent of the proceeds of 
                such issue with respect to such projects within the 12-
                month period beginning on such date.
            ``(2) Rules regarding continuing compliance after 5-year 
        determination.--To the extent that less than 100 percent of the 
        available project proceeds of such issue are expended by the 
        close of the 5-year expenditure period beginning on the date of 
        issuance, the qualified issuer shall redeem all of the 
        nonqualified bonds within 90 days after the end of such period. 
        For purposes of this paragraph, the amount of the nonqualified 
        bonds required to be redeemed shall be determined in the same 
        manner as under section 142.
    ``(f) Recapture of Portion of Credit Where Cessation of 
Compliance.--If any bond which when issued purported to be a qualified 
urban demolition bond ceases to be such a bond, the qualified issuer 
shall pay to the United States (at the time required by the Secretary) 
an amount equal to the sum of--
            ``(1) the aggregate of the credits allowable under section 
        54A with respect to such bond (determined without regard to 
        section 54A(c)) for taxable years ending during the calendar 
        year in which such cessation occurs and each succeeding 
        calendar year ending with the calendar year in which such bond 
        is redeemed by the land bank, and
            ``(2) interest at the underpayment rate under section 6621 
        on the amount determined under paragraph (1) for each calendar 
        year for the period beginning on the first day of such calendar 
        year.
    ``(g) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualified issuer.--The term `qualified issuer' 
        means--
                    ``(A) a State-authorized land bank, or
                    ``(B) with respect a State that does not have one 
                or more State-authorized land banks, the State or any 
                political subdivision or instrumentality thereof.
            ``(2) State-authorized land bank.--The term `State-
        authorized land bank' means a special unit of government or 
        public purpose corporation--
                    ``(A) expressly charged under State law with the 
                reclamation, repurposing and redevelopment of vacant 
                and abandoned land,
                    ``(B) enabled under State law to conduct large 
                scale demolition projects,
                    ``(C) organized in a State which has enacted 
                legislation allowing for the expedited tax foreclosure 
                of vacant, abandoned, and tax delinquent property, and
                    ``(D) which may include a joint venture among 2 or 
                more State-authorized land banks or among other 
                entities with whom such special unit of government or 
                public purpose corporation is authorized to enter into 
                a joint venture.
            ``(3) Qualified state.--The term `qualified State' means a 
        State which meets 3 of the following 4 requirements:
                    ``(A) The State ranks in the top 20 among all 
                States in percentage change in nonseasonal vacancies in 
                the time period between the 2000 decennial census and 
                the 2010 decennial census.
                    ``(B) The State ranks in the top 25 among all 
                States in unemployment rate (seasonally adjusted) for 
                the most recent 12-month period available.
                    ``(C) The State ranks in the top 25 among all 
                States in percentage of loans in foreclosure for the 
                most recent quarter available.
                    ``(D) The State ranks in the top 20 among all 
                States in the lowest percentage change in population 
                growth in the time period between the 2000 decennial 
                census and the 2010 decennial census.
            ``(4) Credits may be transferred.--Notwithstanding in any 
        law or rule of law shall be construed to limit the 
        transferability of the credit or bond allowed by this section 
        through sale and repurchase agreements.''.
    (b) Conforming Amendments.--
            (1) Paragraph (1) of section 54A(d) of such Code is amended 
        by striking ``or'' at the end of subparagraph (D), by inserting 
        ``or'' at the end of subparagraph (E), and by inserting after 
        subparagraph (E) the following new subparagraph:
                    ``(E) a qualified urban demolition bond,''.
            (2) Subparagraph (C) of section 54A(d)(2) is amended by 
        striking ``and'' at the end of clause (iv), by striking the 
        period at the end of clause (v) and inserting ``, and'', and by 
        adding at the end the following new clause:
    ``(vi) in the case of a qualified urban demolition bond, a purpose 
specified in section 54G(a)(1).''.
            (3) The table of sections for subpart I of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following new item:

``Sec. 54G. Qualified urban demolition bonds.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to bonds issued after the date of the enactment of this Act.

SEC. 3. USE OF NEIGHBORHOOD STABILIZATION PROGRAM FUNDS FOR DEMOLITION 
              ACTIVITIES.

    (a) NSP2 and NSP3 Funds.--
            (1) Exception to limitation on use for demolition.--
        Notwithstanding the 13th proviso of the second undesignated 
        paragraph under the heading ``Community Planning and 
        Development--Community Development Fund'' in title XII of 
        division A of the American Recovery and Reinvestment Act of 
        2009 (Public Law 111-5; 123 Stat. 218) and section 1497(a) of 
        the Dodd-Frank Wall Street Reform and Consumer Protection Act 
        (Public Law 111-203; 124 Stat. 2209), a qualified State or unit 
        of general local government in a qualified State may use all or 
        any portion of any amounts made available from a grant under 
        such second undesignated paragraph or under such section 1497 
        for the purpose set forth in section 2301(c)(4)(D) of the Dodd-
        Frank Wall Street Reform and Consumer Protection Act (42 U.S.C. 
        5301 note), at the sole discretion of the State or unit of 
        general local government.
            (2) Definition.--For purposes of this subsection, the term 
        ``qualified State'' has the meaning given such term in section 
        54G(g) of the Internal Revenue Code of 1986.
    (b) Future Grants.--Subsection (c) of section 2301 of the Housing 
and Economic Recovery Act of 2008 (42 U.S.C. 5301 note) is amended by 
adding at the end the following new paragraph:
            ``(5) Prohibition of limitation on use for demolition.--A 
        qualified State or unit of general local government in a 
        qualified State may use all or any portion of any amounts made 
        available from a grant under this section for the purpose set 
        forth in paragraph (4)(D) of this subsection, at the sole 
        discretion of the State or unit of general local government. 
        For purposes of this paragraph, the term `qualified State' has 
        the meaning given such term in section 54G(g) of the Internal 
        Revenue Code of 1986.''.