Affordable Housing Improvement Act of 1998

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Affordable Housing 
Improvement Act of 1998''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 2. INCREASE IN STATE CEILING ON LOW-INCOME HOUSING CREDITS, ETC.

    (a) In General.--Clause (i) of section 42(h)(3)(C) (relating to 
State housing credit ceiling) is amended by striking ``$1.25'' and 
inserting ``$1.75''.
    (b) Adjustment of State Ceiling for Increases in Cost-of-Living.--
Paragraph (3) of section 42(h) (relating to housing credit dollar 
amount for agencies) is amended by adding at the end the following new 
subparagraph:
                    ``(H) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of a 
                        calendar year after 1999, the dollar amount 
                        contained in subparagraph (C)(i) 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 such calendar year by 
                                substituting `calendar year 1998' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(ii) Rounding.--If any increase under 
                        clause (i) is not a multiple of 5 cents, such 
                        increase shall be rounded to the next lowest 
                        multiple of 5 cents.''.
    (c) Modification to Penalty for Agency Allocations in Excess of 
Limit.--Subparagraph (B) of section 42(h)(7) is amended by striking all 
that follows the comma and inserting ``the State housing credit ceiling 
for the following calendar year shall be reduced by the amount of such 
excess (twice the amount of such excess to the extent the Secretary 
determines that the excess allocation was not inadvertent).''.

SEC. 3. MODIFICATION OF CRITERIA FOR ALLOCATING HOUSING CREDITS AMONG 
              PROJECTS.

    (a) Selection Criteria.--Subparagraph (C) of section 42(m)(1) 
(relating to certain selection criteria must be used) is amended--
            (1) by inserting ``, including whether the project includes 
        the use of existing housing as part of a community 
        revitalization plan'' before the comma at the end of clause 
        (iii), and
            (2) by striking ``and'' at the end of clause (vi), by 
        striking the period at the end of clause (vii) and inserting a 
comma, and by adding at the end the following new clauses:
                            ``(viii) tenant populations of individuals 
                        with children, and
                            ``(ix) projects intended for eventual 
                        tenant ownership.''.
    (b) Preference for Community Revitalization Projects Located in 
Qualified Census Tracts.--Clause (ii) of section 42(m)(1)(B) is amended 
by striking ``and'' at the end of subclause (I), by adding ``and'' at 
the end of subclause (II), and by inserting after subclause (II) the 
following new subclause:
                                    ``(III) projects which are located 
                                in qualified census tracts (as defined 
                                in subsection (d)(5)(C)) and the 
                                development of which contributes to a 
                                concerted community revitalization 
                                plan,''.

SEC. 4. ADDITIONAL RESPONSIBILITIES OF HOUSING CREDIT AGENCIES.

    (a) Market Study; Public Disclosure of Rationale for Not Following 
Credit Allocation Priorities.--Subparagraph (A) of section 42(m)(1) 
(relating to responsibilities of housing credit agencies) is amended by 
striking ``and'' at the end of clause (i), by striking the period at 
the end of clause (ii) and inserting a comma, and by adding at the end 
the following new clauses:
                            ``(iii) a comprehensive market study of the 
                        housing needs of low-income individuals in the 
                        area to be served by the building is conducted 
                        before the credit allocation is made and at the 
                        developer's expense by a disinterested party 
                        who is approved by such agency, and
                            ``(iv) a written explanation is available 
                        to the general public for any allocation of a 
                        housing credit dollar amount which is not made 
                        in accordance with established priorities and 
                        selection criteria of the housing credit 
                        agency.''.
    (b) Site Visits.--Clause (iii) of section 42(m)(1)(B) (relating to 
qualified allocation plan) is amended by inserting before the period 
``and in monitoring for noncompliance with habitability standards 
through regular site visits''.
    (c) Limitation on Fees Imposed by Housing Credit Agencies in 
Connection With Credit Allocation.--Subsection (m) of section 42 is 
amended by adding at the end the following new paragraph:
            ``(3) Limitation on amount of fees imposed by housing 
        credit agency in connection with credit allocation.--Fees 
        imposed by any housing credit agency in connection with 
        activities carried on by reason of this section may be assessed 
        and collected only in such manner as may reasonably be expected 
        to result in the collection of an aggregate amount which does 
        not exceed the aggregate costs of the agency in carrying on 
        such activities.''.

SEC. 5. MODIFICATIONS TO RULES RELATING TO BASIS OF BUILDING WHICH IS 
              ELIGIBLE FOR CREDIT.

    (a) HOME Assistance Not To Disqualify Building for Additional 
Credit Available to Buildings in High Cost Areas.--Clause (i) of 
section 42(i)(2)(E) (relating to buildings receiving HOME assistance) 
is amended by striking the last sentence.
    (b) Adjusted Basis To Include Portion of Certain Buildings Used by 
Low-Income Individuals Who Are Not Tenants and by Project Employees.--
Paragraph (4) of section 42(d) (relating to special rules relating to 
determination of adjusted basis) is amended--
            (1) by striking ``subparagraph (B)'' in subparagraph (A) 
        and inserting ``subparagraphs (B) and (C)'',
            (2) by redesignating subparagraph (C) as subparagraph (D), 
        and
            (3) by inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) Inclusion of basis of property used to 
                provide services for certain nontenants.--
                            ``(i) In general.--The adjusted basis of 
                        any building located in a qualified census 
                        tract (as defined in paragraph (5)(C)) shall be 
                        determined by taking into account the adjusted 
                        basis of property (of a character subject to 
                        the allowance for depreciation and not 
                        otherwise taken into account) used throughout 
                        the taxable year in providing any community 
                        service facility.
                            ``(ii) Limitations.--The increase in the 
                        adjusted basis of any building which is taken 
                        into account by reason of clause (i) shall not 
                        exceed 20 percent of the eligible basis of the 
                        building (determined without regard to this 
                        subparagraph).
                            ``(iii) Community service facility.--For 
                        purposes of this subparagraph, the term 
                        `community service facility' means any facility 
                        if--
                                    ``(I) such facility is functionally 
                                related and subordinate to the 
                                qualified low-income project of which 
                                the building is a part,
                                    ``(II) substantially all of the 
                                services provided by the facility 
                                during the taxable year are provided to 
                                individuals whose income is 60 percent 
                                or less of area median income (within 
                                the meaning of subsection (g)(1)(B)), 
                                and
                                    ``(III) the only services provided 
                                by the facility other than to 
                                individuals described in subclause (II) 
                                are provided to employees of such 
                                project.''.

SEC. 6. EFFECTIVE DATES.

    (a) In General.--Except as otherwise provided in this section, the 
amendments made by this Act shall apply to--
            (1) housing credit dollar amounts allocated after December 
        31, 1998, and
            (2) buildings placed in service after such date to the 
        extent paragraph (1) of section 42(h) of the Internal Revenue 
        Code of 1986 does not apply to any building by reason of 
        paragraph (4) thereof, but only with respect to bonds issued 
        after such date.
    (b) Increase in State Ceiling.--The amendment made by section 2(a) 
shall apply to calendar years after 1998.
    (c) Limitation on Agency Fees.--The amendment made by section 4(c) 
shall apply to calendar years after 1998.

Summary: Affordable Housing Improvement Act of 1998 - Amends the Internal Revenue Code to increase, and link to the cost-of-living adjustment, the State low-income housing credit ceiling. Modifies provisions concerning: (1) the criteria for allocating housing credits among projects, (2) the responsibilities of housing credit agencies, and (3) the basis of a credit-eligible building.