SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Creating Homeownership Opportunity 
Act of 2011''.

SEC. 2. HOUSING EQUITY SAVINGS ACCOUNTS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 224 as 
section 225 and by inserting after section 223 the following new 
section:

``SEC. 224. HOUSING EQUITY SAVINGS ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an eligible individual, 
there shall be allowed as a deduction the aggregate amount paid in cash 
during the taxable year by or on behalf of such individual to a housing 
equity savings account of such individual.
    ``(b) Limitation.--The amount allowable as a deduction under 
subsection (a) for any taxable year shall not exceed the lesser of--
            ``(1) $10,000, or
            ``(2) an amount equal to the compensation (as defined in 
        section 219(f)(1)) includible in the individual's gross income 
        for such taxable year.
    ``(c) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means, with respect to any taxable year, any 
individual if such individual (and if married, such individual's 
spouse) had no present ownership interest in a principal residence 
during the 3-year period ending at the close of the preceding taxable 
year.
    ``(d) Housing Equity Savings Account.--For purposes of this 
section, the term `housing equity savings account' means a trust 
created or organized in the United States exclusively for the benefit 
of an individual, but only if the written governing instrument creating 
the trust meets the following requirements:
            ``(1) Except in the case of rollover contributions from 
        another housing equity savings account of such individual--
                    ``(A) no contribution will be accepted unless it is 
                in cash, and
                    ``(B) contributions will not be accepted for the 
                taxable year in excess of the dollar amount in effect 
                for the taxable year under subsection (b)(1).
            ``(2) The trustee is a bank (as defined in section 408(n)) 
        or such other person who demonstrates to the satisfaction of 
        the Secretary that the manner in which such other person will 
        administer the trust will be consistent with the requirements 
        of this section.
            ``(3) No part of the trust funds will be invested in life 
        insurance contracts.
            ``(4) The interest of an individual in the balance in his 
        account is nonforfeitable.
            ``(5) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
    ``(e) Tax Treatment of Distributions.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, any amount distributed out of a housing equity 
        savings account shall be included in gross income of the 
        distributee for the taxable year in which the distribution is 
        received. Notwithstanding any other provision of this title 
        (including chapters 11 and 12), the basis of any person in such 
        an account is zero.
            ``(2) Exception for amounts used to purchase principal 
        residence and for certain payments to individual retirement 
        accounts.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any distribution during the taxable year which would 
                (but for this paragraph) be includible in gross income 
                for such year to the extent that the aggregate of such 
                distributions during the taxable year do not exceed the 
                aggregate qualified payments made by the account 
                beneficiary during such year.
                    ``(B) Qualified payment.--For purposes of this 
                paragraph, the term `qualified payment' means--
                            ``(i) any payment of qualified acquisition 
                        costs (as defined in section 72(t)(8)(C)) 
                        incurred with respect to the principal 
                        residence of the account beneficiary, and
                            ``(ii) any payment to an individual 
                        retirement account but only if--
                                    ``(I) the account beneficiary of 
                                the housing equity savings account from 
                                which the payment is made is also the 
                                beneficiary of the individual 
                                retirement account, and
                                    ``(II) the payment is a qualified 
                                IRA payment.
                        Any payment described in clause (ii) shall be 
                        treated for purposes of this title as a 
                        rollover contribution to the individual 
                        retirement account.
                    ``(C) Qualified ira payment.--For purposes of 
                subparagraph (B), the term `qualified IRA payment' 
                means any payment if--
                            ``(i) the account beneficiary--
                                    ``(I) is an eligible individual at 
                                the time of the payment, and
                                    ``(II) attains age 55 as of the 
                                close of the taxable year during which 
                                the payment is made,
                            ``(ii) the account beneficiary is--
                                    ``(I) an eligible individual at the 
                                time of the payment, and
                                    ``(II) has been an eligible 
                                individual throughout the 20-year 
                                period ending on the date of the 
                                payment, or
                            ``(iii) the payment is made within 1 year 
                        after the date of a payment described in 
                        subparagraph (B)(i).
            ``(3) Exceptions for certain other distributions.--Rules 
        similar to the rules of paragraphs (3), (4), (5), and (6) of 
        section 408(d) shall apply for purposes of this section.
            ``(4) Additional tax on amounts included in gross income.--
        If any distribution from a housing equity savings account is 
        includible in gross income of the account beneficiary, the tax 
        liability of such beneficiary under this chapter for the 
        taxable year in which the distribution is received shall be 
        increased by an amount equal to 20 percent of the amount of the 
        distribution.
    ``(f) Tax Treatment of Accounts.--
            ``(1) Exemption from tax.--A housing equity savings account 
        is exempt from taxation under this subtitle unless such account 
        has ceased to be a housing equity savings account by reason of 
        paragraph (2). Notwithstanding the preceding sentence, any such 
        account is subject to the taxes imposed by section 511 
        (relating to imposition of tax on unrelated business income of 
        charitable, etc. organizations).
            ``(2) Account terminations.--Rules similar to the rules of 
        paragraphs (2) and (4) of section 408(e) shall apply to housing 
        equity savings accounts, and any amount treated as distributed 
        under such rules shall be treated as not used to make payments 
        described in subsection (e)(2).
    ``(g) Beneficiary Must Be Under Age 55.--No deduction shall be 
allowed under this section with respect to any payment to a housing 
equity savings account for the benefit of an individual if such 
individual has attained age 55 before the close of such individual's 
taxable year for which the contribution was made.
    ``(h) Other Definitions and Special Rules.--
            ``(1) Other definitions.--For purposes of this section--
                    ``(A) Account beneficiary.--The term `account 
                beneficiary' means the individual for whose benefit the 
                housing equity savings account was established.
                    ``(B) Principal residence.--The term `principal 
                residence' has the same meaning as when used in section 
                121, except that such term shall include only 
                residences located in the United States.
            ``(2) Cost-of-living adjustment.--
                    ``(A) In general.--In the case of any taxable 
                beginning in a calendar after 2012, the dollar amount 
                in subsection (b)(1) 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 such taxable year begins 
                        determined by substituting `calendar year 2011' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding.--If any increase under subparagraph 
                (A) is not a multiple of $50, such increase shall be 
                rounded to the nearest multiple of $50.
            ``(3) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Section 219(d)(2) (relating to no deduction 
                for rollovers).
                    ``(B) Section 219(f)(3) (relating to time when 
                contributions deemed made).
                    ``(C) Section 219(f)(5) (relating to employer 
                payments).
                    ``(D) Section 408(g) (relating to community 
                property laws).
                    ``(E) Section 408(h) (relating to custodial 
                accounts).
    ``(i) Reports.--The trustee of a housing equity savings account 
shall make such reports regarding such account to the Secretary and to 
the individual for whose benefit the account is maintained with respect 
to contributions, distributions, and such other matters as the 
Secretary may by regulation prescribe. The reports required by this 
subsection shall be filed at such time and in such manner, and 
furnished to such individuals at such time and in such manner, as may 
be required by such regulations.''.
    (b) Deduction Allowed in Arriving at Adjusted Gross Income.--
Subsection (a) of section 62 of such Code is amended by inserting after 
paragraph (21) the following new paragraph:
            ``(22) Housing equity savings account contributions.--The 
        deduction allowed by section 224.''.
    (c) Tax on Excess Contributions.--
            (1) Subsection (a) of section 4973 of such Code (relating 
        to tax on excess contributions to individual retirement 
        accounts, etc.) is amended by striking ``or'' at the end of 
        paragraph (4), by inserting ``or'' at the end of paragraph (5), 
        and by inserting after paragraph (5) the following new 
        paragraph:
            ``(6) a housing equity savings account (within the meaning 
        of section 224(d)),''.
            (2) Section 4973 of such Code is amended by adding at the 
        end the following new subsection:
    ``(h) Excess Contributions to Housing Equity Savings Accounts.--For 
purposes of this section, in the case of housing equity savings 
accounts (within the meaning of section 224(d)), the term `excess 
contributions' means the sum of--
            ``(1) the excess (if any) of--
                    ``(A) the aggregate amount contributed for the 
                taxable year to the accounts (other than rollover 
                contributions), over
                    ``(B) the amount allowable as a deduction under 
                section 224 for such contributions, and
            ``(2) the amount determined under this subsection for the 
        preceding taxable year, reduced by the sum of--
                    ``(A) the distributions out of the accounts which 
                were included in gross income under rules similar to 
                the rules of section 408(d)(5) which apply to such 
                accounts by reason of section 224(e)(3), and
                    ``(B) the excess (if any) of--
                            ``(i) the maximum amount allowable as a 
                        deduction under section 224(b) for the taxable 
                        year, over
                            ``(ii) the amount contributed to the 
                        accounts for the taxable year.
        For purposes of this subsection, any contribution which is 
        distributed out of the housing equity savings account in a 
        distribution to which the rules similar to the rules of section 
        408(d)(4) which apply to such accounts by reason of section 
        224(e)(3) shall be treated as an amount not contributed.''.
    (d) Tax on Prohibited Transactions.--
            (1) In general.--Paragraph (1) of section 4975(e) of such 
        Code (relating to prohibited transactions) is amended by 
        striking ``or'' at the end of subparagraph (F), by 
        redesignating subparagraph (G) as subparagraph (H), and by 
        inserting after subparagraph (F) the following new 
        subparagraph:
                    ``(G) a housing equity savings account described in 
                section 224(d), or''.
            (2) Special rule.--Subsection (c) of section 4975 of such 
        Code is amended by adding at the end the following new 
        paragraph:
            ``(7) Special rule for housing equity savings accounts.--An 
        individual for whose benefit a housing equity savings account 
        is established shall be exempt from the tax imposed by this 
        section with respect to any transaction concerning such account 
        (which would otherwise be taxable under this section) if 
        section 224(f)(2) applies with respect to such transaction.''.
    (e) Failure To Provide Reports on Housing Equity Savings 
Accounts.--Paragraph (2) of section 6693(a) of such Code (relating to 
failure to provide reports on individual retirement accounts or 
annuities) is amended by striking ``and'' at the end of subparagraph 
(D), by striking the period at the end of subparagraph (E) and 
inserting ``, and'', and by adding at the end the following new 
subparagraph:
                    ``(F) Section 224(i) (relating to housing equity 
                savings accounts).''.
    (f) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by striking the item 
relating to section 224 and inserting the following new items:

``Sec. 224. Housing equity savings accounts.
``Sec. 225. Cross references.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to contributions for taxable years beginning after December 31, 
2011.
Creating Homeownership Opportunity Act of 2011 - Amends the Internal Revenue Code to establish tax-exempt housing equity savings accounts to assist individual taxpayers under the age of 55 in paying the costs of acquiring, constructing, or reconstructing a principal residence. Allows: (1) a deduction from gross income for cash contributions to such accounts for the lesser of $10,000 or the compensation includible in the taxpayer's gross income for a taxable year, (2) an exclusion from gross income of amounts distributed from such accounts that are used by an account beneficiary to purchase a principal residence or make payments to such beneficiary's individual retirement account (IRA), and (3) a tax-free rollover into an IRA if an account beneficiary reaches age 55 or has maintained an account for 20 years without purchasing a residence.
To amend the Internal Revenue Code of 1986 to allow a deduction for contributions to tax-exempt Housing Equity Savings Accounts.