To amend the Internal Revenue Code of 1986 to allow a refundable credit against income tax for the purchase of real property by a first-time purchaser.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``First Time Property Owners Tax 
Credit Act of 2008''.

SEC. 2. REFUNDABLE CREDIT FOR FIRST-TIME PURCHASE OF REAL PROPERTY.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 36 as section 37 and by inserting 
after section 35 the following new section:

``SEC. 36. FIRST-TIME PURCHASE OF REAL PROPERTY.

    ``(a) Allowance of Credit.--In the case of an individual who is a 
first-time purchaser of real property in the United States during any 
taxable year, there shall be allowed as a credit against the tax 
imposed by this subtitle for the taxable year an amount equal to 5 
percent of the purchase price of such property.
    ``(b) Limitations.--
            ``(1) Maximum dollar amount.--
                    ``(A) In general.--The credit allowed under 
                subsection (a) shall not exceed the excess (if any) of 
                $1,500 (2 times such amount in the case of a joint 
                return).
                    ``(B) Inflation adjustment.--In the case of any 
                taxable year beginning after December 31, 2008, the 
                $1,500 amount under subparagraph (A) shall be increased 
                by an amount equal to $1,500, multiplied by the cost-
                of-living adjustment determined under section 1(f)(3) 
                for the calendar year in which the taxable year begins 
                by substituting `2007' for `1992' in subparagraph (B) 
                thereof. If the $1,500 amount as adjusted under the 
                preceding sentence is not a multiple of $10, such 
                amount shall be rounded to the nearest multiple of $10.
            ``(2) Taxable income limitation.--
                    ``(A) In general.--If the taxable income of the 
                taxpayer for any taxable year exceeds the maximum 
                taxable income in the table under subsection (a), (b), 
                (c), or (d) of section 1, whichever is applicable, to 
                which the 25 percent rate applies, the dollar amounts 
                in effect under paragraph (1)(A) for such taxpayer for 
                the following taxable year shall be reduced (but not 
                below zero) by the amount of the excess.
                    ``(B) Change in return status.--In the case of 
                married individuals filing a joint return for any 
                taxable year who did not file such a joint return for 
                the preceding taxable year, subparagraph (A) shall be 
                applied by reference to the highest taxable income of 
                either such individual for the preceding taxable year.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) First-time purchaser.--
                    ``(A) In general.--The term `first-time purchaser' 
                means any individual if such individual (and if 
                married, such individual's spouse) had no present 
                ownership interest in real property during the 2-year 
                period ending on the date of acquisition of the 
                property to which subsection (a) applies.
                    ``(B) One-time only.--If an individual is treated 
                as a first-time purchaser with respect to any real 
                property, such individual may not be treated as a 
                first-time purchaser with respect to any other real 
                property.
                    ``(C) Married individuals filing jointly.--In the 
                case of married individuals who file a joint return, 
                the credit under this section is allowable only if both 
                individuals are first-time purchasers.
                    ``(D) Other taxpayers.--If 2 or more individuals 
                who are not married purchase real property--
                            ``(i) the credit under this section is 
                        allowable only if each of the individuals is a 
                        first-time purchaser, and
                            ``(ii) the amount of the credit allowed 
                        under subsection (a) shall be allocated among 
                        such individuals in such manner as the 
                        Secretary may prescribe, except that the total 
                        amount of the credits allowed to all such 
                        individuals shall not exceed the amount in 
                        effect under subsection (b)(1)(A) for 
                        individuals filing joint returns.
            ``(2) Purchase.--The term `purchase' means any acquisition, 
        but only if--
                    ``(A) the property is not acquired from a person 
                whose relationship to the person acquiring it would 
                result in the disallowance of losses under section 267 
                or 707(b) (but, in applying section 267 (b) and (c) for 
                purposes of this section, paragraph (4) of section 
                267(c) shall be treated as providing that the family of 
                an individual shall include only the individual's 
                spouse, ancestors, and lineal descendants), and
                    ``(B) the basis of the property in the hands of the 
                person acquiring it is not determined--
                            ``(i) in whole or in part by reference to 
                        the adjusted basis of such property in the 
                        hands of the person from whom acquired, or
                            ``(ii) under section 1014(a) (relating to 
                        property acquired from a decedent).
            ``(3) Purchase price.--The term `purchase price' means the 
        adjusted basis of the property on the date on which a binding 
        contract to acquire such property is entered into.
    ``(d) Denial of Double Benefit.--No credit shall be allowed under 
subsection (a) for any expense for which a deduction or credit is 
allowed under any other provision of this chapter.
    ``(e) Basis Adjustment.--For purposes of this subtitle, if a credit 
is allowed under this section with respect to the purchase of any 
property, the basis of such property shall be reduced by the amount of 
the credit so allowed.
    ``(f) Property to Which Section Applies.--The provisions of this 
section apply to real property if--
            ``(1) the taxpayer purchases such property on or after 
        January 1, 2008, and before January 1, 2013, or
            ``(2) the taxpayer enters into, on or after January 1, 
        2008, and before January 1, 2013, a binding contract to 
        purchase such property before July 1, 2014.''.
    (b) Conforming Amendments.--
            (1) Subsection (a) of section 1016 of the Internal Revenue 
        Code of 1986 (relating to general rule for adjustments to 
        basis) is amended by striking ``and'' at the end of paragraph 
        (35), by striking the period at the end of paragraph (36) and 
        inserting ``, and'', and by adding at the end the following new 
        paragraph:
            ``(37) in the case of real property with respect to which a 
        credit was allowed under section 36, to the extent provided in 
        section 36(e).''.
            (2) Section 1324(b)(2) of title 31, United States Code, is 
        amended by inserting ``or 36'' after ``section 35''.
    (c) Clerical Amendment.--The table of sections for subpart C of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by striking the item relating to section 36 and 
inserting the following new items:

``Sec. 36. First-time purchase of real property.
``Sec. 37. Overpayments of tax.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

Summary: First Time Property Owners Tax Credit Act of 2008 - Amends the Internal Revenue Code to allow an income-based, one-time refundable tax credit for first-time homebuyers of 5 of the purchase price of real property located in the United States, up to a maximum credit amount of $1,500 . Makes such credit applicable to purchases of property on or after January 1, 2008, and before January 1, 2013, and to binding contracts made between such dates to purchase such property before July 1, 2014.