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104TH CONGRESS

1ST SESSION H. R. 133

To amend the Internal Revenue Code of 1986 to allow a credit against

income tax for the purchase of a principal residence by a first-time

homebuyer.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 4, 1995

Mr. SOLOMON 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

credit against income tax for the purchase of a principal

residence by a first-time homebuyer.

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 ‘‘First-Time Homebuyer

5 Tax Credit Act of 1995’’.

6 SEC. 2. CREDIT FOR FIRST-TIME HOMEBUYERS.

7 (a) IN GENERAL.—Subpart A of part IV of sub8 chapter A of chapter 1 of the Internal Revenue Code of

9 1986 (relating to nonrefundable personal credits) is
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1 amended by inserting after section 22 the following new

2 section:

3 ‘‘SEC. 23. PURCHASE OF PRINCIPAL RESIDENCE BY FIRST4 TIME HOMEBUYER.

5 ‘‘(a) ALLOWANCE OF CREDIT.—If an individual who

6 is a first-time homebuyer purchases a principal residence

7 (within the meaning of section 1034), there shall be al8 lowed to such individual as a credit against the tax im9 posed by this chapter an amount equal to 10 percent of

10 the purchase price of the principal residence.

11 ‘‘(b) LIMITATIONS.—

12 ‘‘(1) MAXIMUM CREDIT.—The credit allowed

13 under subsection (a) shall not exceed $5,000.

14 ‘‘(2) LIMITATION TO ONE RESIDENCE.—The

15 credit under this section shall be allowed with re16 spect to only one residence of the taxpayer.

17 ‘‘(3) MARRIED INDIVIDUALS FILING JOINTLY.—

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

19 return, the credit under this section is allowable only

20 if both the husband and wife are first-time home21 buyers, and the amount specified under paragraph

22 (1) shall apply to the joint return.

23 ‘‘(4) OTHER TAXPAYERS.—In the case of indi24 viduals to whom paragraph (3) does not apply who

25 together purchase the same new principal residence
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1 for use as their principal residence, the credit under

2 this section is allowable only if each of the individ3 uals is a first-time homebuyer, and the sum of the

4 amount of credit allowed to such individuals shall

5 not exceed the lesser of $5,000 or 10 percent of the

6 total purchase price of the residence. The amount of

7 any credit allowable under this section shall be ap8 portioned among such individuals under regulations

9 to be prescribed by the Secretary.

10 ‘‘(5) APPLICATION WITH OTHER CREDITS.—

11 ‘‘(A) GENERAL RULE.—The credit allowed

12 by subsection (a) for any taxable year shall not

13 exceed the amount of the tax imposed by this

14 chapter for the taxable year, reduced by the

15 sum of any other credits allowable under this

16 chapter.

17 ‘‘(B) CARRYFORWARD OF UNUSED CRED18 ITS.—Any credit that is not allowed for the tax19 able year solely by reason of subparagraph (A)

20 shall be carried forward to the succeeding tax21 able year and allowed as a credit for that tax22 able year. However, the credit shall not be car23 ried forward more than 5 taxable years after

24 the taxable year in which the residence is

25 purchased.
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1 ‘‘(6) YEAR FOR WHICH CREDIT ALLOWED.—

2 Fifty percent of the credit allowed by subsection (a)

3 shall be allowed in the taxable year in which the res4 idence is purchased and the remaining fifty percent

5 of the credit shall be allowed in the succeeding tax6 able year.

7 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur8 poses of this section—

9 ‘‘(1) PURCHASE PRICE.—The term ‘purchase

10 price’ means the adjusted basis of the principal resi11 dence on the date of the acquisition thereof.

12 ‘‘(2) FIRST-TIME HOMEBUYER.—

13 ‘‘(A) IN GENERAL.—The term ‘first-time

14 homebuyer’ means any individual if such indi15 vidual has not had a present ownership interest

16 in any residence (including an interest in a

17 housing cooperative) at any time within the 36-

18 month period ending on the date of acquisition

19 of the residence on which the credit allowed

20 under subsection (a) is to be claimed. An inter21 est in a partnership, S corporation, or trust

22 that owns an interest in a residence is not con23 sidered an interest in a residence for purposes

24 of this paragraph except as may be provided in

25 regulations.
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1 ‘‘(B) CERTAIN INDIVIDUALS.—Notwith2 standing subparagraph (A), an individual is not

3 a first-time homebuyer on the date of purchase

4 of a residence if on that date the running of

5 any period of time specified in section 1034 is

6 suspended under subsection (h) or (k) of sec7 tion 1034 with respect to that individual.

8 ‘‘(3) SPECIAL RULES FOR CERTAIN ACQUISI9 TIONS.—No credit is allowable under this section

10 if—

11 ‘‘(A) the residence is acquired from a per12 son whose relationship to the person acquiring

13 it would result in the disallowance of losses

14 under section 267 or 707(b), or

15 ‘‘(B) the basis of the residence in the

16 hands of the person acquiring it is deter17 mined—

18 ‘‘(i) in whole or in part by reference

19 to the adjusted basis of such residence in

20 the hands of the person from whom it is

21 acquired, or

22 ‘‘(ii) under section 1014(a) (relating

23 to property acquired from a decedent).

24 ‘‘(d) RECAPTURE FOR CERTAIN DISPOSITIONS.—
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1 ‘‘(1) IN GENERAL.—Except as provided in para2 graphs (2) and (3), if the taxpayer disposes of prop3 erty with respect to the purchase of which a credit

4 was allowed under subsection (a) at any time within

5 36 months after the date the taxpayer acquired the

6 property as his principal residence, then the tax im7 posed under this chapter for the taxable year in

8 which the disposition occurs is increased by an

9 amount equal to the amount allowed as a credit for

10 the purchase of such property.

11 ‘‘(2) ACQUISITION OF NEW RESIDENCE.—If, in

12 connection with a disposition described in paragraph

13 (1) and within the applicable period prescribed in

14 section 1034, the taxpayer purchases a new principal

15 residence, then the provisions of paragraph (1) shall

16 not apply and the tax imposed by this chapter for

17 the taxable year in which the new principal residence

18 is purchased is increased to the extent the amount

19 of the credit that could be claimed under this section

20 on the purchase of the new residence (determined

21 without regard to subsection (e)) is less than the

22 amount of credit claimed by the taxpayer under this

23 section.
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1 ‘‘(3) DEATH OF OWNER; CASUALTY LOSS; IN2 VOLUNTARY CONVERSION; ETC.—The provisions of

3 paragraph (1) do not apply to—

4 ‘‘(A) a disposition of a residence made on

5 account of the death of any individual having a

6 legal or equitable interest therein occurring dur7 ing the 36-month period to which reference is

8 made under paragraph (1),

9 ‘‘(B) a disposition of the old residence if it

10 is substantially or completely destroyed by a

11 casualty described in section 165(c)(3) or

12 compulsorily or involuntarily converted (within

13 the meaning of section 1033(a)), or

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

15 in a divorce or legal separation proceeding

16 where the residence is sold or the other spouse

17 retains the residence as a principal residence.

18 ‘‘(e) PROPERTY TO WHICH SECTION APPLIES.—

19 ‘‘(1) IN GENERAL.—The provisions of this sec20 tion apply to a principal residence if—

21 ‘‘(A) the taxpayer acquires the residence

22 on or after January 1, 1995, and before Janu23 ary 1, 1996, or

24 ‘‘(B) the taxpayer enters into, on or after

25 January 1, 1995, and before January 1, 1996,
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1 a binding contract to acquire the residence, and

2 acquires and occupies the residence before July

3 1, 1996.’’

4 (b) CLERICAL AMENDMENT.—The table of sections

5 for subpart A of part IV of subchapter A of chapter 1

6 of such Code is amended by inserting after the item relat7 ing to section 22 the following new item:

‘‘Sec. 23. Purchase of principal residence by first-time homebuyer.’’

8 (c) EFFECTIVE DATE.—The amendments made by

9 this section shall take effect on January 1, 1995.

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