I 

108TH CONGRESS 

1ST SESSION H. R. 3485

To amend the Internal Revenue Code of 1986 to provide an incentive to 

preserve affordable housing in multifamily housing units which are sold 

or exchanged. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 12, 2003

Mr. RAMSTAD (for himself and Mr. CARDIN) 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 provide 

an incentive to preserve affordable housing in multifamily 

housing units which are sold or exchanged.

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 ‘‘Affordable Housing 

5 Preservation Tax Relief Act of 2003’’. 

6 SEC. 2. AFFORDABLE HOUSING PRESERVATION CREDIT. 

7 (a) IN GENERAL.—Subpart D of part IV of sub8 chapter A of chapter 1 of the Internal Revenue Code of 
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1 1986 (relating to business-related credits) is amended by 

2 inserting after section 42 the following new section: 

3 ‘‘SEC. 42A. AFFORDABLE HOUSING PRESERVATION CREDIT. 

4 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

5 the affordable housing preservation credit determined 

6 under this section for the taxable year is an amount equal 

7 to the preservation allocation amount for the taxable year. 

8 ‘‘(b) LIMITATIONS.—The amount allowed as a credit 

9 to a taxpayer under subsection (a) with respect to a quali10 fied preservation sale shall not exceed the gain recognized 

11 by the taxpayer from such sale. 

12 ‘‘(c) PRESERVATION ALLOCATION AMOUNT.—For 

13 purposes of subsection (a)—

14 ‘‘(1) IN GENERAL.—The term ‘preservation al15 location amount’ means the amount allocated to the 

16 taxpayer from a qualified preservation sale by a 

17 housing credit agency. 

18 ‘‘(2) LIMITATION.—The amount allocated under 

19 paragraph (1) shall not exceed the excess of—

20 ‘‘(A) the product of—

21 ‘‘(i) the maximum rate tax under sec22 tion 1 in the case of an individual or sec23 tion 11 in the case of a corporation, multi24 plied by 
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1 ‘‘(ii) the gain recognized by the tax2 payer from the qualified preservation sale, 

3 over 

4 ‘‘(B) the amount of cash or the fair mar5 ket value of other property received by the tax6 payer with respect to the sale. 

7 ‘‘(d) QUALIFIED PRESERVATION SALE.—For pur8 poses of this section—

9 ‘‘(1) IN GENERAL.—The term ‘qualified preser10 vation sale’ means a sale of eligible multifamily 

11 housing property to or an exchange of such property 

12 with a preservation entity which agrees to maintain 

13 affordability and use restrictions regarding the prop14 erty that are—

15 ‘‘(A) for a term of not less than the ex16 tended use period, 

17 ‘‘(B) legally enforceable, and 

18 ‘‘(C) consistent with the long-term physical 

19 and financial viability and character of such 

20 housing as affordable housing. 

21 Such restrictions shall be binding on all successors 

22 of the preservation entity and shall be recorded as 

23 a restrictive covenant on the property pursuant to 

24 State law. 
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1 ‘‘(2) ELIGIBLE MULTIFAMILY HOUSING PROP2 ERTY.—The term ‘eligible multifamily housing prop3 erty’ means—

4 ‘‘(A) property assisted under section 

5 221(d)(3) or section 236 of the National Hous6 ing Act and with respect to which the owner is 

7 subject to the restrictions described in section 

8 1039(b)(1)(B) of such Act (as in effect on the 

9 day before the date of the enactment of the 

10 Revenue Reconciliation Act of 1990), 

11 ‘‘(B) property described in section 

12 512(2)(B) of the Multifamily Assisted Housing 

13 Reform and Affordability Act of 1997 (42 

14 U.S.C. 1437f note), 

15 ‘‘(C) property with respect to which a loan 

16 is made or insured under title V of the Housing 

17 Act of 1949, and 

18 ‘‘(D) property that either received an allo19 cation of low-income housing tax credit pursu20 ant to paragraph (1) of section 42(h) or was 

21 exempted from such paragraph by paragraph 

22 (4) of such section. 

23 ‘‘(3) AFFORDABLE HOUSING.—The term ‘af24 fordable housing’ means housing which is a qualified 
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1 low-income housing project (as defined in section 

2 42(g)). 

3 ‘‘(4) EXTENDED USE PERIOD.—The term ‘ex4 tended use period’ means the period beginning on 

5 the date of sale and ending on the earlier of—

6 ‘‘(A) 30 years after the close of the sale, 

7 or 

8 ‘‘(B) the date that the property is acquired 

9 by foreclosure (or instrument in lieu of fore10 closure). 

11 Subparagraph (B) shall not apply if the Secretary 

12 determines that the acquisition described therein is 

13 part of an arrangement with the owner a purpose of 

14 which is to terminate the extended use period. 

15 ‘‘(5) PRESERVATION ENTITY.—The term ‘pres16 ervation entity’ means a housing credit agency or an 

17 organization approved by a housing credit agency 

18 that has the capacity and commitment to success19 fully acquire and preserve eligible multifamily hous20 ing property. Such preservation entity shall be inde21 pendent from the seller partnership or its affiliates. 

22 ‘‘(e) ALLOCATION BY HOUSING CREDIT AGENCY.—

23 For purposes of this section—

24 ‘‘(1) IN GENERAL.—The aggregate preservation 

25 credit dollar amount which a housing credit agency 
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1 may allocate for any calendar year is the portion of 

2 the State preservation credit ceiling allocated under 

3 this subsection for such calendar year to such agen4 cy. 

5 ‘‘(2) STATE CEILING INITIALLY ALLOCATED TO

6 HOUSING CREDIT AGENCIES.—Except as provided in 

7 paragraph (4), the State preservation credit ceiling 

8 for each calendar year shall be allocated to the hous9 ing credit agency of such State. If there is more 

10 than 1 housing credit agency of a State, all such 

11 agencies shall be treated as a single agency. 

12 ‘‘(3) STATE PRESERVATION CREDIT CEILING.—

13 The State preservation credit ceiling applicable to 

14 any State and any calendar year shall be an amount 

15 equal to the sum of—

16 ‘‘(A) the unused State preservation credit 

17 ceiling (if any) of such State for the preceding 

18 calendar year, 

19 ‘‘(B) the sum of—

20 ‘‘(i) $1.00 multiplied by the State 

21 population, 

22 ‘‘(ii) $1,000,000, 

23 ‘‘(iii) the amount of State preserva24 tion credit ceiling returned in the calendar 

25 year, plus 
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1 ‘‘(iv) the amount (if any) allocated 

2 under paragraph (4) to such State by the 

3 Secretary. 

4 For purposes of clause (i), the unused State 

5 preservation credit ceiling for any calendar year 

6 is the excess (if any) of the sum of the amounts 

7 described in clauses (ii) through (iv) over the 

8 aggregate preservation credit dollar amount al9 located for such year. 

10 ‘‘(4) UNALLOCATED CREDIT.—

11 ‘‘(A) IN GENERAL.—In the event that a 

12 State does not allocate all of its preservation 

13 credit, such unallocated credit shall be allocated 

14 among qualified States for the succeeding cal15 endar year. 

16 ‘‘(B) QUALIFIED STATE.—For purposes of 

17 subparagraph (A), the term ‘qualified State’ 

18 means, with respect to a calendar year, any 

19 State which allocates its entire State preserva20 tion credit from the preceding calendar year 

21 and for which a request is made to receive an 

22 allocation under subparagraph (C). 

23 ‘‘(C) UNUSED PRESERVATION CREDIT CAR24 RYOVER.—For purposes of this paragraph, the 
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1 unused preservation credit carryover of a State 

2 for any calendar year is the excess (if any) of—

3 ‘‘(i) the unused State preservation 

4 credit ceiling for the year preceding such 

5 year, over 

6 ‘‘(ii) the aggregate preservation credit 

7 dollar amount allocated for such year. 

8 ‘‘(D) ALLOCATED AMOUNT.—The amount 

9 allocated under this paragraph is the amount 

10 determined by the Secretary to bear the same 

11 ratio to the aggregate unused preservation cred12 it carryover of all States from the preceding 

13 calendar year as the population of the State 

14 bears to the population of all qualified States 

15 for the calendar year. For purpose of the pre16 ceding sentence, population shall be determined 

17 in accordance with section 146(j). 

18 ‘‘(5) HOUSING CREDIT AGENCY DEFINED.—The 

19 term ‘housing credit agency’ has the meaning given 

20 such term by section 42(h)(8)(A). 

21 ‘‘(f) RESPONSIBILITIES OF HOUSING CREDIT AGEN22 CY.—The housing credit agency (or an agent or other pri23 vate contractor of such agency) shall—

24 ‘‘(1) determine whether the preservation enti25 ty’s plan for rehabilitation (if any) and operation of 
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1 the eligible multifamily housing property is viable for 

2 no less than 30 years, 

3 ‘‘(2) monitor the affordability and use restric4 tions for the eligible multifamily housing property, 

5 and 

6 ‘‘(3) notify the Internal Revenue Service as to 

7 any portion of such property which is out of compli8 ance. 

9 ‘‘(g) RECAPTURE FOR NONCOMPLIANCE.—If the Sec10 retary determines that all or a portion of the multifamily 

11 housing property is out of compliance with the require12 ments of this section, the taxpayer’s tax under this chap13 ter for the taxable year shall be increased by the sum of—

14 ‘‘(1) an amount equal to the amount which 

15 bears the same ratio to the total credit allowed to 

16 the taxpayer under subsection (a) as the taxpayer’s 

17 share of the portion of such property which is out 

18 of compliance bears to the entire property, plus 

19 ‘‘(2) interest at the underpayment rate estab20 lished under section 6621 on the amount determined 

21 under paragraph (1) for each prior taxable year for 

22 the period beginning on the due date for filing the 

23 return for the taxable year for which the credit was 

24 allowed under subsection (a). 
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1 No deduction shall be allowed under this chapter for inter2 est described in paragraph (2).’’. 

3 (b) CREDIT TO BE PART OF GENERAL BUSINESS

4 CREDIT.—Subsection (b) of section 38 of such Code (re5 lating to general business credit) is amended by striking 

6 ‘‘plus’’ at the end of paragraph (14), by striking the period 

7 at the end of paragraph (15) and inserting ‘‘, plus’’, and 

8 by adding at the end the following new paragraph: 

9 ‘‘(16) the affordable housing preservation credit 

10 determined under section 42A(a).’’. 

11 (c) CONFORMING AMENDMENT.—The table of sec12 tions for subpart D of part IV of subchapter A of chapter 

13 1 of such Code is amended by inserting after the item 

14 relating to section 45F the following new item:

‘‘Sec. 42A. Affordable housing preservation credit.’’.

15 (d) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to taxable years beginning after 

17 December 31, 2003.

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