I 

108TH CONGRESS 

1ST SESSION H. R. 1913

To amend the Internal Revenue Code of 1986 to allow a first time homebuyer 

credit for the purchase of principal residences located in rural areas. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 1, 2003

Mr. DAVIS of Alabama (for himself, Mr. LEACH, Mr. ROSS, Mr. HINOJOSA, 

and Mr. LUCAS of Kentucky) introduced the following bill; which was referred to the Committee on Ways and Means 

A BILL

To amend the Internal Revenue Code of 1986 to allow a 

first time homebuyer credit for the purchase of principal 

residences located in rural areas.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Rural Housing Tax 

5 Credit Act of 2003’’. 
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1 SEC. 2. CREDIT FOR PURCHASE OF PRINCIPAL RESI2 DENCES BY FIRST-TIME RURAL HOME3 BUYERS. 

4 (a) IN GENERAL.—Subpart A of part IV of sub5 chapter A of chapter 1 of the Internal Revenue Code of 

6 1986 (relating to nonrefundable personal credits) is 

7 amended by inserting after section 25B the following: 

8 ‘‘SEC. 25C. PURCHASE OF PRINCIPAL RESIDENCES BY 

9 FIRST-TIME RURAL HOMEBUYERS. 

10 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in11 dividual who is a first-time homebuyer of a principal resi12 dence in a rural area during any taxable year, there shall 

13 be allowed as a credit against the tax imposed by this 

14 chapter for the taxable year an amount equal to the lesser 

15 of—

16 ‘‘(1) 10 percent of the purchase price of the 

17 residence, or 

18 ‘‘(2) $5,000. 

19 ‘‘(b) LIMITATIONS.—

20 ‘‘(1) LIMITATION BASED ON ADJUSTED GROSS

21 INCOME.—

22 ‘‘(A) IN GENERAL.—The amount allowed 

23 as a credit under subsection (a) for any taxable 

24 year shall be reduced (but not below zero) by 

25 the amount which bears the same ratio to such 

26 amount as—
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1 ‘‘(i) the excess of—

2 ‘‘(I) the taxpayer’s modified ad3 justed gross income for such taxable 

4 year, over 

5 ‘‘(II) $30,000 ($60,000 in the 

6 case of a joint return), bears to 

7 ‘‘(ii) $10,000 ($20,000 in the case of 

8 a joint return). 

9 ‘‘(B) MODIFIED ADJUSTED GROSS IN10 COME.—For purposes of subparagraph (A), the 

11 term ‘modified adjusted gross income’ means 

12 the adjusted gross income of the taxpayer for 

13 the taxable year increased by any amount ex14 cluded from gross income under section 911, 

15 931, or 933. 

16 ‘‘(2) LIMITATION BASED ON AMOUNT OF

17 TAX.—The credit allowed under subsection (a) for 

18 any taxable year shall not exceed the excess of—

19 ‘‘(A) the sum of the regular tax liability 

20 (as defined in section 26(b)) plus the tax im21 posed by section 55, over 

22 ‘‘(B) the sum of the credits allowable 

23 under this subpart (other than this section and 

24 section 23) and section 27 for the taxable year. 
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1 ‘‘(3) MARRIED INDIVIDUALS FILING JOINTLY.—

2 In the case of a husband and wife who file a joint 

3 return, the credit under this section is allowable only 

4 if the residence is a qualified residence with respect 

5 to both the husband and wife, and the amount speci6 fied under subsection (a)(2) shall apply to the joint 

7 return. 

8 ‘‘(4) MARRIED INDIVIDUALS FILING SEPA9 RATELY.—In the case of a married individual filing 

10 a separate return, subsection (a)(2) shall be applied 

11 by substituting ‘$2,500’ for ‘$5,000’. 

12 ‘‘(5) OTHER TAXPAYERS.—If 2 or more individ13 uals who are not married purchase a qualified resi14 dence, the amount of the credit allowed under sub15 section (a) shall be allocated among such individuals 

16 in such manner as the Secretary may prescribe, ex17 cept that the total amount of the credits allowed to 

18 all such individuals shall not exceed $5,000. 

19 ‘‘(c) DEFINITIONS.—For purposes of this section—

20 ‘‘(1) RURAL AREA.—The term ‘rural area’ has 

21 the meaning given such term by section 520 of the 

22 Housing Act of 1949. 

23 ‘‘(2) FIRST-TIME HOMEBUYER.—The term 

24 ‘first-time homebuyer’ has the meaning given such 

25 term by section 72(t)(8)(D)(i). 
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1 ‘‘(3) PRINCIPAL RESIDENCE.—The term ‘prin2 cipal residence’ has the same meaning as when used 

3 in section 121. 

4 ‘‘(4) PURCHASE AND PURCHASE PRICE.—The 

5 terms ‘purchase’ and ‘purchase price’ have the 

6 meanings provided by section 1400C(e). 

7 ‘‘(d) CARRYFORWARD OF UNUSED CREDIT.—If the 

8 credit allowable under subsection (a) for any taxable year 

9 exceeds the limitation imposed by subsection (b)(2) for 

10 such taxable year reduced by the sum of the credits allow11 able under this subpart (other than this section and sec12 tion 23), such excess shall be carried to the succeeding 

13 taxable year and added to the credit allowable under sub14 section (a) for such taxable year. 

15 ‘‘(e) REPORTING.—If the Secretary requires informa16 tion reporting under section 6045 by a person described 

17 in subsection (e)(2) thereof to verify the eligibility of tax18 payers for the credit allowable by this section, the excep19 tion provided by section 6045(e)(5) shall not apply. 

20 ‘‘(f) RECAPTURE OF CREDIT IN CASE OF CERTAIN

21 SALES.—

22 ‘‘(1) IN GENERAL.—Except as provided in para23 graph (5), if the taxpayer—

24 ‘‘(A) fails to use a qualified residence as 

25 the principal residence of the taxpayer, or
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1 ‘‘(B) disposes of a qualified residence, 

2 with respect to the purchase of which a credit was 

3 allowed under subsection (a) at any time within 5 

4 years after the date the taxpayer acquired the prop5 erty, then the tax imposed under this chapter for the 

6 taxable year in which the disposition occurs is in7 creased by the credit recapture amount. 

8 ‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur9 poses of paragraph (1), the credit recapture amount 

10 is an amount equal to the sum of—

11 ‘‘(A) the applicable recapture percentage of 

12 the amount of the credit allowed to the tax13 payer under this section, plus 

14 ‘‘(B) interest at the overpayment rate es15 tablished under section 6621 on the amount de16 termined under subparagraph (A) for each 

17 prior taxable year for the period beginning on 

18 the due date for filing the return for the prior 

19 taxable year involved. 

20 No deduction shall be allowed under this chapter for 

21 interest described in subparagraph (B). 

22 ‘‘(3) APPLICABLE RECAPTURE PERCENTAGE.—

23 ‘‘(A) IN GENERAL.—For purposes of this 

24 subsection, the applicable recapture percentage 

25 shall be determined from the following table:
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The applicable 

recapture 

‘‘If the sale occurs in: percentage is: 

Year 1 ........................................................................ 100

Year 2 ........................................................................ 80

Year 3 ........................................................................ 60

Year 4 ........................................................................ 40

Year 5 ........................................................................ 20

Years 6 and thereafter .............................................. 0.

1 ‘‘(B) YEARS.—For purposes of subpara2 graph (A), year 1 shall begin on the first day 

3 of the taxable year in which the purchase of the 

4 qualified residence described in subsection (a) 

5 occurs. 

6 ‘‘(4) NO CREDITS AGAINST TAX.—Any increase 

7 in tax under this subsection shall not be treated as 

8 a tax imposed by this chapter for purposes of deter9 mining the amount of any credit under this chapter 

10 or for purposes of section 55. 

11 ‘‘(5) DEATH OF OWNER; CASUALTY LOSS; IN12 VOLUNTARY CONVERSION; ETC.—The provisions of 

13 paragraph (1) do not apply to—

14 ‘‘(A) a disposition of a qualified residence 

15 made on account of the death of any individual 

16 having a legal or equitable interest therein oc17 curring during the 5-year period to which ref18 erence is made under paragraph (1),

19 ‘‘(B) a disposition of the old qualified resi20 dence if it is substantially or completely de21 stroyed by a casualty described in section 
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1 165(c)(3) or compulsorily or involuntarily con2 verted (within the meaning of section 1033(a)), 

3 or 

4 ‘‘(C) a disposition pursuant to a settlement 

5 in a divorce or legal separation proceeding 

6 where the qualified residence is sold or the 

7 other spouse retains such residence. 

8 ‘‘(g) BASIS ADJUSTMENT.—For purposes of this sub9 title, if a credit is allowed under this section with respect 

10 to the purchase of any residence, the basis of such resi11 dence shall be reduced by the amount of the credit so al12 lowed.’’. 

13 (b) CONFORMING AMENDMENTS.—

14 (1) Subsection (a) of section 1016 of such Code 

15 (relating to general rule for adjustments to basis) is 

16 amended by striking ‘‘and’’ at the end of paragraph 

17 (27), by striking the period at the end of paragraph 

18 (28) and inserting ‘‘, and’’, and by adding at the 

19 end the following new paragraph: 

20 ‘‘(29) in the case of a residence with respect to 

21 which a credit was allowed under section 25C, to the 

22 extent provided in section 25C(g).’’. 

23 (2) Section 24(b)(3)(B), as added by the Eco24 nomic Growth and Tax Relief Reconciliation Act of 
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1 2001, is amended by striking ‘‘23 and 25B’’ and in2 serting ‘‘23, 25B, and 25C’’. 

3 (3) Section 25(e)(1)(C) is amended by striking 

4 ‘‘23 and 1400C’’ and by inserting ‘‘23, 25C, and 

5 1400C’’. 

6 (4) Section 25(e)(1)(C), as amended by the 

7 Economic Growth and Tax Relief Reconciliation Act 

8 of 2001, is amended by inserting ‘‘25C,’’ after 

9 ‘‘25B,’’. 

10 (5) Section 25B, as added by the Economic 

11 Growth and Tax Relief Reconciliation Act of 2001, 

12 is amended by striking ‘‘section 23’’ and inserting 

13 ‘‘sections 23 and 25C’’. 

14 (6) Section 26(a)(1), as amended by the Eco15 nomic Growth and Tax Relief Reconciliation Act of 

16 2001, is amended by striking ‘‘and 25B’’ and insert17 ing ‘‘25B, and 25C’’. 

18 (7) Section 1400C(d) is amended by inserting 

19 ‘‘and section 25C’’ after ‘‘this section’’. 

20 (8) Section 1400C(d), as amended by the Eco21 nomic Growth and Tax Relief Reconciliation Act of 

22 2001, is amended by striking ‘‘and 25B’’ and insert23 ing ‘‘25B, and 25C’’. 

24 (9) The table of sections for subpart A of part 

25 IV of subchapter A of chapter 1 is amended by in-
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1 serting before the item relating to section 26 the fol2 lowing:

‘‘Sec. 25C. Purchase of principal residences by first-time rural 

homebuyers.’’.

3 (c) EFFECTIVE DATE.—

4 (1) IN GENERAL.—The amendments made by 

5 subsections (a) and (b)(9) shall apply to purchases 

6 after the date of the enactment of this Act, in tax7 able years ending after such date. 

8 (2) TEMPORARY CONFORMING AMENDMENTS.—

9 The amendments made by paragraphs (1), (3), and 

10 (7) of subsection (b) shall apply to taxable years 

11 ending before January 1, 2004. 

12 (3) PERMANENT CONFORMING AMENDMENTS.—

13 The amendments made by paragraphs (2), (4), (5), 

14 (6), (7), and (8) of subsection (b) shall apply to tax15 able years beginning after December 31, 2003.

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