MCG23660 CGR

118TH CONGRESS
1ST SESSION

S.L.C.

S. ll

To amend the Internal Revenue Code of 1986 to impose on excise tax
on the failure of certain hedge funds owning excess single-family residences to dispose of such residences, and for other purposes.

IN THE SENATE OF THE UNITED STATES
llllllllll
Mr. MERKLEY (for himself and Ms. SMITH) introduced the following bill;which was read twice and referred to the Committee onllllllllll

A BILLTo amend the Internal Revenue Code of 1986 to impose
on excise tax on the failure of certain hedge funds owning excess single-family residences to dispose of such
residences, and for other purposes.
1Be it enacted by the Senate and House of Representa-

2 tives of the United States of America in Congress assembled,
3
4SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘End Hedge Fund Con-

5 trol of American Homes Act’’.

MCG23660 CGR

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2
1SEC. 2. EXCISE TAX ON CERTAIN TAXPAYERS FAILING TO

23SELL EXCESS SINGLE-FAMILY RESIDENCES.

(a) IN GENERAL.—Subtitle D of the Internal Rev-

4 enue Code of 1986 is amended by adding at the end the5 following new chapter:
6‘‘CHAPTER 50B—EXCESS SINGLE-FAMILY

7RESIDENCES‘‘Sec. 5000E. Newly acquired single-family residences.
‘‘Sec. 5000F. Excess single-family residences.
‘‘Sec. 5000G. Definitions and other special rules.

8‘‘SEC.

5000E.

9
10

NEWLY

ACQUIREDSINGLE-FAMILYRESI-DENCES.

‘‘(a) IN GENERAL.—In the case of an applicable tax-

11 payer, there is hereby imposed a tax on the acquisition
12 of any newly acquired single-family residence equal to 50
13 percent of the fair market value of such residence.
1415‘‘(b)NEWLY

ACQUIREDSINGLE-FAMILYRESI-DENCE.—For purposes of this section, the term ‘newly ac-

16 quired single-family residence’ means any single-family
17 residence which was acquired by the taxpayer in any tax18 able year which begins after the date of the enactment
19 of this chapter.
2021‘‘SEC. 5000F. EXCESS SINGLE-FAMILY RESIDENCES.

‘‘(a) IN GENERAL.—In the case of an applicable tax-

22 payer who fails to meet the requirements of subsection (b),23 there is hereby imposed a tax equal to the product of—24‘‘(1) $50,000, andMCG23660 CGR

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31‘‘(2) the excess of—2‘‘(A) the number of applicable single-family

3residences owned by the taxpayer as of the last4

day of the taxable year, over5‘‘(B) the sum of—‘‘(i) 50 (zero in the case of any hedge

6fund taxpayer), plus

7‘‘(ii) the maximum permissible units

8for the taxable year.

91011‘‘(b) REQUIREMENT.—‘‘(1) INGENERAL.—Anapplicable taxpayer

12

meets the requirement of this subsection for any tax-13

able year if the number of applicable single-family

14

residences owned by the taxpayer as of the last day

15of the taxable year is equal to or less than the max-

16

imum permissible units determined with respect to17

such taxpayer for such taxable year.

18‘‘(2) SPECIAL RULE FOR CERTAIN SALES.—For19

purposes of applying paragraph (1), a single-family

20

residence which is sold or transferred in a disquali-

21

fied sale during the taxable year shall be treated as

22

a single-family residence which is owned by the ap-

23

plicable taxpayer as of the last day of such taxable

24year.

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41‘‘(c) MAXIMUM PERMISSIBLE UNITS.—The max-

2 imum permissible units with respect to any applicable tax3 payer for any taxable year shall be determined as follows:
The maximum permissible units for a hedge
fund taxpayer is—

The maximum permissible units for any otherapplicable taxpayer is—

the first full taxable year
beginning after the applicable date . . .

90 percent of the number of applicable single-family residences
owned by the taxpayer
on the applicable datethe second taxable year
beginning after the applicable date . . .

80 percent of the number of applicable single-family residences
owned by the taxpayer
on the applicable datethe third taxable year beginning after the applicable date . . .

70 percent of the number of applicable single-family residences
owned by the taxpayer
on the applicable date

the fourth taxable year
beginning after the applicable date . . .

60 percent of the number of applicable single-family residences
owned by the taxpayer
on the applicable date

the fifth taxable year beginning after the applicable date . . .

50 percent of the number of applicable single-family residences
owned by the taxpayer
on the applicable datethe sixth taxable year beginning after the applicable date . . .

40 percent of the number of applicable single-family residences
owned by the taxpayer
on the applicable datethe seventh taxable year
beginning after the applicable date . . .

30 percent of the number of applicable single-family residences
owned by the taxpayer
on the applicable datethe eighth taxable year
beginning after the applicable date . . .

20 percent of the number of applicable single-family residencesowned by the taxpayer
on the applicable date

50 plus 90 percent of thenumber of applicablesingle-family residences owned by thetaxpayer on the applicable date
50 plus 80 percent of thenumber of applicablesingle-family residences owned by thetaxpayer on the applicable date
50 plus 70 percent of thenumber of applicablesingle-family residences owned by the
taxpayer on the applicable date
50 plus 60 percent of thenumber of applicablesingle-family residences owned by the
taxpayer on the applicable date
50 plus 50 percent of thenumber of applicablesingle-family residences owned by thetaxpayer on the applicable date
50 plus 40 percent of thenumber of applicablesingle-family residences owned by thetaxpayer on the applicable date
50 plus 30 percent of thenumber of applicablesingle-family residences owned by thetaxpayer on the applicable date
50 plus 20 percent of thenumber of applicablesingle-family residences owned by thetaxpayer on the applicable date‘‘In the case of—MCG23660 CGR

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5
The maximum permissible units for a hedge
fund taxpayer is—The maximum permissible units for any otherapplicable taxpayer is—

the ninth taxable year
beginning after the applicable date . . .

10 percent of the number of applicable single-family residences
owned by the taxpayer
on the applicable date

any taxable year beginning more than 9years after the applicable date . . .

050 plus 10 percent of thenumber of applicablesingle-family residences owned by thetaxpayer on the applicable date50.

‘‘In the case of—1‘‘(d) DEFINITIONS.—For purposes of this section—

2

‘‘(1)

3

DENCE.—The4dence’ means any single-family residence which was

5acquired on or before the applicable date.

678APPLICABLE

SINGLE-FAMILYRESI-term ‘applicable single-family resi-‘‘(2) APPLICABLE DATE.—‘‘(A) IN GENERAL.—The term ‘applicabledate’ means—9‘‘(i) the last day of the first full tax-

10

able year ending on or after the date of the11enactment of this chapter, or12‘‘(ii) in the case of any taxpayer de-13

scribed in subparagraph (B), the date pro-14

vided in such subparagraph.

15‘‘(B) TAXPAYERS CHANGING STATUS.—

16‘‘(i) IN GENERAL.—In the case of any

17applicable taxpayer described in clause (ii),18

the applicable date means the last day of19

the taxable year immediately preceding theMCG23660 CGR

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6
1

taxable year in which the taxpayer is de-2

scribed in such clause.

3‘‘(ii)APPLICABLE

4SCRIBED.—An

5

scribed in this clause with respect to any

6taxable year if—TAXPAYER

DE-

applicable taxpayer is de-7‘‘(I) such taxpayer was not a8hedge fund taxpayer for the preceding

9taxable year, and‘‘(II) such taxpayer is a hedge

10fund taxpayer for such taxable year.

1112‘‘(3) HEDGE FUND TAXPAYER.—For purposes

13of this subsection, the term ‘hedge fund taxpayer’

14means, with respect to any taxable year, any appli-

15

cable taxpayer which has $50,000,000 or more in16

net value or assets under management on any day

17during the taxable year.

1819‘‘SEC. 5000G. DEFINITIONS AND OTHER SPECIAL RULES.

‘‘(a) APPLICABLE TAXPAYER.—For purposes of this20 chapter—2122‘‘(1) IN GENERAL.—The term ‘applicable taxpayer’ means any applicable entity which—‘‘(A) manages funds pooled from investors,

2324andMCG23660 CGRS.L.C.

7‘‘(B) is a fiduciary with respect to such in-12vestors.

3‘‘(2) APPLICABLE ENTITY.—‘‘(A) IN GENERAL.—The term ‘applicable

4
5entity’ means—6‘‘(i) any partnership,7‘‘(ii) any corporation, or8‘‘(iii) any real estate investment trust.

9‘‘(B) EXCEPTIONS.—The term ‘applicable

10entity’ shall not include—

11‘‘(i) an organization which is de-12

scribed in section 501(c)(3) and exempt

13

from tax under section 501(a), or14‘‘(ii) an organization primarily en-15

gaged in the construction or rehabilitation

16of single-family residences.

17‘‘(b) SINGLE-FAMILY RESIDENCE.—For purposes of

18 this chapter—19‘‘(1) INGENERAL.—Theterm ‘single-family

20residence’ means a residential property consisting of

21

1-to-4 dwelling units.

22232425‘‘(2) EXCEPTIONS.—Such term shall not include—‘‘(A) any unoccupied single-family residence acquired through foreclosure,MCG23660 CGRS.L.C.

8‘‘(B) any single-family residence that is—12‘‘(i) not rented or leased, and3‘‘(ii) used as the principal residence4(within the meaning of section 121) of any

5person who has an ownership interest in

6

the applicable taxpayer, or7‘‘(C)anysingle-familyresidence

con-8

structed, acquired, or operated with Federal ap-

9propriated funding sources.

10‘‘(c) ACQUISITION; OWNERSHIP.—For purposes of

11 this chapter, an applicable taxpayer shall be treated—12‘‘(1) as acquiring a single-family residence if

13

the applicable taxpayer acquires a majority owner-

14

ship interest in the single-family residence, regard-

15

less of the percentage of that ownership interest,

16and17‘‘(2) as owning a single-family residence if the18

applicable taxpayer owns a majority ownership inter-19

est in the single-family residence, regardless of the20

percentage of that ownership interest.

21‘‘(d) DISQUALIFIED SALE.—For purposes of this22 chapter, the term ‘disqualified sale’ means any sale or
23 transfer to—2425‘‘(1) a corporation or other entity engaged in atrade or business, orMCG23660 CGRS.L.C.

91‘‘(2) an individual who owns any other single-

2

family residence at the time of such sale or transfer.

3‘‘(e) AGGREGATION RULES.—

4‘‘(1) IN GENERAL.—For purposes of this chap-

5ter, all persons which are treated as a single em-

6ployer under subsections (a) and (b) of section 52

7

shall be treated as a single person.

89‘‘(2) MODIFICATIONS.—For purposes of thissubsection—

10‘‘(A) section 52(a) shall be applied by sub-11stituting ‘component members’ for ‘members’,

12and13‘‘(B) for purposes of applying section

1452(b), the term ‘trade or business’ shall include

15

any activity treated as a trade or business

16

under paragraph (5) or (6) of section 469(c)17(determined without regard to the phrase ‘To18

the extent provided in regulations’ in such para-19graph (6)).

20‘‘(3) COMPONENT MEMBER.—For purposes of

21

this paragraph, the term ‘component member’ has

22

the meaning given such term by section 1563(b), ex-23

cept that the determination shall be made without

24

regard to section 1563(b)(2).

25‘‘(f) REPORTING.—MCG23660 CGR

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101‘‘(1) IN GENERAL.—The Secretary shall require2

such reporting as the Secretary determines nec-

3

essary or appropriate to carry out the purposes of4

this section, including reporting with respect to—5‘‘(A) the dates on which single-family resi-

6

dences owned by an applicable taxpayer were7

acquired by such taxpayer, and8‘‘(B) whether any person acquiring a sin-

9gle-family residence from an applicable taxpayer

10owns any other single-family residences at the11time of the acquisition.

12‘‘(2) FAILURE TO REPORT.—

13‘‘(A) IN GENERAL.—Any person who fails

14

to report information required under paragraph15(1) or who fails to include correct information

16

in such report shall pay a penalty of $20,000.

17‘‘(B) REASONABLE

CAUSE WAIVER.—No18

penalty shall be imposed under this paragraph

19with respect to any failure if it is shown that

20such failure is due to reasonable cause and not21

to willful neglect.

22‘‘(C) TREATMENT OF PENALTY.—The pen-23alty under this paragraph shall be paid upon24

notice and demand by the Secretary, and shall25

be assessed and collected in the same mannerMCG23660 CGR

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111

as an assessable penalty under subchapter B of

2chapter 68.’’.

3(b) TAX FORM.—Not later than 180 days after the4 date of the enactment of this Act, the Secretary of the5 Treasury (or the Secretary’s delegate) shall publish a form
6 to be used for calculating the amount of tax owned under7 chapter 50B of the Internal Revenue Code of 1986 (as8 added by subsection (a)).
910(c) CERTIFICATION.—(1) INGENERAL.—Thereporting required

11

under section 5000G(f)(1)(B) of the Internal Rev-

12

enue Code of 1986, as added by subsection (a), shall13

include a certification from each individual to whom

14

a single-family residence is sold or transferred from15

an applicable taxpayer.

16(2) FORMOF

CERTIFICATION.—Thecertifi-

17

cation required under this subsection shall be signed

18

by the purchaser or transferee and state the fol-

19lowing:

20
21(A) The name and address of the purchaser or transferee.

22(B) The sale is not a sale disqualified sale23

(as defined in section 5000G(d) of the Internal

24

Revenue Code of 1986, as added by this sec-25tion).

MCG23660 CGRS.L.C.

121(C) The purchaser or transferee will be2subject to the penalty imposed under section

35000G(f)(2) of such Code for any false certifi-

4cation.

5(3) DEFINITIONS.—Any term used in this sub-6

section which is used in chapter 50B of the Internal

7

Revenue Code of 1986 (as added by this section)

8

shall have the meaning give such term under such

9chapter.

10(d) CLERICAL AMENDMENT.—The table of chapters

11 for subtitle D of the Internal Revenue Code of 1986 is
12 amended by adding at the end the following new item:‘‘CHAPTER 50B—EXCESS SINGLE-FAMILY RESIDENCES’’.

13(e) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years beginning after
15 the date of enactment of this Act.
161718SEC. 3. USE OF TAX REVENUES FOR DOWN PAYMENT ASSISTANCE GRANTS.

(a) ESTABLISHMENT OF HOUSING DOWNPAYMENT

19 TRUST FUND.—
20(1) IN GENERAL.—Subchapter A of chapter 98

21of the Internal Revenue Code of 1986 is amended by22

adding at the end the following new section:

23‘‘SEC. 9512. HOUSING DOWNPAYMENT TRUST FUND.

24‘‘(a) CREATION OF TRUST FUND.—There is estab-

25 lished in the Treasury of the United States a trust fundMCG23660 CGR

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1 to be known as the Housing Downpayment Trust Fund
2 (hereinafter in this section referred to as the ‘Trust
3 Fund’), consisting of such amounts as may be appro4 priated or credited to such Trust Fund as provided in this5 section and section 9602(b).
6‘‘(b) TRANSFERS TO TRUST FUND.—There are here-

7 by appropriated to the Trust Fund amounts equivalent to8 revenues received in the Treasury from the tax imposed
9 by sections 5000E and 5000F.
10‘‘(c) EXPENDITURES FROM TRUST FUND.—Amounts

11 in the Trust Fund shall be available, as provided in appro12 priations Acts, only for grants under section 3(b) of the13 End Hedge Fund Control of American Homes Act.’’.
14(2) CLERICAL AMENDMENT.—The table of sec-15tions for subchapter A of chapter 98 of the Internal

16Revenue Code of 1986 is amended by adding at the17end the following new item:‘‘Sec. 9512. Housing Downpayment Trust Fund.’’.

1819(b) GRANTS PROGRAM FOR DOWN PAYMENT ASSISTANCE PROGRAMS.—

20(1) ESTABLISHMENT.—The Secretary of Hous-21

ing and Urban Development shall establish a pro-

22

gram under which the Secretary makes grants to23

State housing finance agencies to establish new or

24

supplement existing programs that provide down

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141

payment assistance to families purchasing homes

2within the State.

3(2) PRIORITY.—A State housing finance agency

4that receives a grant under this section shall give

5priority to families seeking assistance to purchase6

any single-family residence that is sold or trans-

7

ferred by an applicable taxpayer (as defined in sec-

8

tion 5000G of the Internal Revenue Code of 1986,9

as added by section 2).