SECTION 1. EXCLUSION FROM INCOME OF EMPLOYER HOMEOWNERSHIP ASSISTANCE.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by inserting after section 139 the 
following new section:

``SEC. 139A. HOMEOWNERSHIP ASSISTANCE PROGRAMS.

    ``(a) Exclusion From Gross Income.--
            ``(1) In general.--Gross income of an eligible employee 
        does not include amounts paid or incurred by the employer of 
        such employee for homeownership assistance provided to the 
        employee if the assistance is furnished pursuant to a 
        homeownership assistance program described in subsection (b).
            ``(2) Maximum exclusion.--The amount which may be excluded 
        under paragraph (1) for homeownership assistance with respect 
        to an eligible employee shall not exceed an amount equal to 10 
        percent of the maximum principal obligation for a mortgage 
        insured under section 203 of the National Housing Act (12 
        U.S.C. 1709) (as determined in accordance with subsection (b) 
        of such section) with respect to the residence purchased.
    ``(b) Homeownership Assistance Program.--For purposes of this 
section, a homeownership assistance program is a separate written plan 
of an employer for the exclusive benefit of all employees--
            ``(1) under which the employer provides employees with 
        homeownership assistance, and
            ``(2) which meets the requirements of paragraphs (2) 
        through (6) of section 127(b).
    ``(c) Definitions; Special Rules.--For purposes of this section--
            ``(1) Eligible employee.--
                    ``(A) In general.--The term `eligible employee' 
                means an employee--
                            ``(i) with an adjusted gross income for the 
                        taxable year before the year in which the 
                        homeownership assistance is received which does 
                        not exceed--
                                    ``(I) in the case of an individual 
                                described in subsection (c) or (d) of 
                                section 1, $40,000,
                                    ``(II) in the case of an individual 
                                described in section 1(b), $50,000, and
                                    ``(III) in the case of an 
                                individual described in section 1(a), 
                                $80,000, and
                            ``(ii) who is a first-time homebuyer.
                    ``(B) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        2003, each dollar amount under subparagraph (A) 
                        shall be increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for the calendar year in which 
                                the taxable year begins, determined by 
                                substituting `calendar year 2002' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(ii) Rounding rule.--If any amount after 
                        adjustment under clause (i) is not a multiple 
                        of $1,000, such amount shall be rounded to the 
                        next lower multiple of $1,000.
            ``(2) First-time homebuyer.--
                    ``(A) In general.--The term `first-time homebuyer' 
                means any individual if such individual (and if 
                married, such individual's spouse) had no present 
                ownership in a principal residence located in the local 
                area during the 2-year period ending on the date of the 
                purchase of the principal residence to which this 
                section applies.
                    ``(B) One-time only.--If an individual is treated 
                as a first-time homebuyer with respect to any principal 
residence, such individual may not be treated as a first-time homebuyer 
with respect to any other principal residence.
                    ``(C) Principal residence.--The term `principal 
                residence' has the same meaning as when used in section 
                121, except such term shall not include a residence 
                with a purchase price in excess of an amount equal to 
                90 percent of the maximum principal obligation for a 
                mortgage insured under section 203 of the National 
                Housing Act (12 U.S.C. 1709) (as determined in 
                accordance with subsection (b) of such section) with 
                respect to the residence.
            ``(3) Homeownership assistance.--
                    ``(A) In general.--The term `homeownership 
                assistance' means any assistance which is used with 
                respect to a principal residence located in the local 
                area--
                            ``(i) to pay qualified acquisition costs 
                        (as defined in section 72(t)(8)(C)), but only 
                        if the payment is made--
                                    ``(I) in the case of acquisition 
                                costs, before the close of the 120th 
                                day after the day on which such 
                                assistance is received, and
                                    ``(II) in the case of costs for 
                                constructing or reconstructing such 
                                residence, before the close of the 30th 
                                day after the day on which such 
                                construction is complete, or
                            ``(ii) to pay for alterations, repairs, and 
                        improvements to such residence, but only if the 
                        payment is made before the close of the 120th 
                        day after the day on which such residence is 
                        purchased.
                    ``(B) Financing assistance; discharge of 
                indebtedness.--
                            ``(i) In general.--Except as provided in 
                        regulations, if the assistance provided under 
                        any homeownership assistance program consists 
                        of providing (or reducing the costs of) 
                        financing, such assistance shall be treated as 
                        homeownership assistance.
                            ``(ii) Timing.--If the assistance consists 
                        of providing a loan and then discharging all or 
                        a portion of the loan upon completion of a 
                        required period of service, the assistance 
                        shall be treated as provided at the time such 
                        loan, or portion of such loan, is discharged.
            ``(4) Local area.--A residence shall be considered to be 
        located in the local area with respect to the employee if such 
        residence is not more than 50 miles from the employee's 
        principal place of work. For purposes of this paragraph, the 
        distance between two points shall be the shortest of the more 
        commonly traveled routes between such two points.
            ``(5) Employee.--The term `employee' does not include a 
        self-employed individual described in section 401(c)(1).
            ``(6) Test not applicable.--A homeownership assistance 
        program shall not be held or considered to fail to meet any 
        requirements of subsection (b) merely because of utilization 
        rates for the different types of homeownership assistance made 
        available under the program.
            ``(7) Relationship to current law.--
                    ``(A) Disallowance of excluded amounts as credit or 
                deduction.--No deduction or credit shall be allowed to 
                the employee under any other section of this chapter 
                for any amount excluded from income by reason of this 
                section.
                    ``(B) Basis adjustment.--For purposes of this 
                subtitle, if an exclusion is allowed under subsection 
                (a) with respect to a residence, the basis of such 
                residence shall be reduced by the amount of the 
                exclusion.''.
    (b) Reporting Requirements.--Subsection (d)(1) of section 6039D of 
the Internal Revenue Code of 1986 (relating to returns and records with 
respect to certain fringe benefit plans) is amended by striking ``or 
137'' and inserting ``137, or 139''.
    (c) Conforming Amendments.--
            (1) The table of sections for part III of subchapter B of 
        chapter 1 of the Internal Revenue Code of 1986 is amended by 
        inserting after the item relating to section 139 the following 
        new item:

                              ``139A. Homeownership assistance 
                                        programs.''.
            (2) Subsection (a) of section 1016 of such Code (relating 
        to adjustments to basis) is amended by striking ``and'' at the 
        end of paragraph (27), by striking the period at the end of 
        paragraph (28) and inserting ``, and'', and by adding at the 
        end the following new paragraph:
            ``(29) in the case of a residence with respect to which 
        amounts were excluded from income under section 139A, to the 
        extent provided in section 139A(a).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning December 31, 2002.
Amends the Internal Revenue Code to exclude from an eligible employee's gross income amounts paid or incurred by the employer of such employee as part of a homeownership assistance program meeting specified criteria. Sets as a maximum exclusion for one eligible employee an amount equal to 10 percent of the maximum principal obligation for a mortgage insured under the National Housing Act with respect to the residence purchased.Limits participation to first-time homebuyers with incomes below specified levels.Prohibits the exclusion for employees buying residences with prices in excess of 90 percent of the maximum principal obligation for a mortgage insured under the National Housing Act with respect to the residence.Reduces the basis in a residence by the amount of the exclusion.
A bill to amend the Internal Revenue Code of 1986 to exclude from income amounts received by an employee from an employer as assistance towards the purchase of a principal residence.