II 

116TH CONGRESS 

2D SESSION S. 4073 

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

tax for neighborhood revitalization, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 25, 2020 

Mr. CARDIN (for himself, Mr. PORTMAN, Mr. COONS, Mr. YOUNG, Mr. 

BROWN, and Mr. SCOTT of South Carolina) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to allow a 

credit against tax for neighborhood revitalization, and 

for other purposes. 

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 ‘‘Neighborhood Homes 

5 Investment Act’’. 

6 SEC. 2. NEIGHBORHOOD HOMES 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 is amended by inserting after section 42 the fol2 lowing new section: 

3 ‘‘SEC. 42A. NEIGHBORHOOD HOMES CREDIT. 

4 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec5 tion 38, the amount of the neighborhood homes credit de6 termined under this section for a taxable year for a quali7 fied project shall be, with respect to each qualified resi8 dence that is part of such qualified project and that expe9 riences a qualified completion event during such taxable 

10 year, an amount equal to— 

11 ‘‘(1) in the case of an affordable sale, with re12 spect to the seller, the excess of— 

13 ‘‘(A) the qualified development cost in14 curred by such seller for such qualified resi15 dence, over 

16 ‘‘(B) the sale price of such qualified resi17 dence, or 

18 ‘‘(2) in the case of any other qualified comple19 tion event, with respect to a taxpayer other than the 

20 owner of the qualified residence (or a related person 

21 with respect to such owner), the excess of— 

22 ‘‘(A) the development cost incurred by 

23 such taxpayer for such qualified residence, over 

24 ‘‘(B) the amount received by such taxpayer 

25 as payment for such rehabilitation. 


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1 ‘‘(b) LIMITATIONS.— 

2 ‘‘(1) AMOUNT.—The amount determined under 

3 subsection (a) with respect to a qualified residence 

4 shall not exceed 35 percent of the lesser of— 

5 ‘‘(A) the qualified development cost, or 

6 ‘‘(B) 80 percent of the national median 

7 sale price for new homes (as determined pursu8 ant to the most recent census data available as 

9 of the date on which the neighborhood homes 

10 credit agency makes an allocation for the quali11 fied project). 

12 ‘‘(2) ALLOCATIONS.— 

13 ‘‘(A) IN GENERAL.—The amount deter14 mined under subsection (a) with respect to a 

15 qualified residence that is part of a qualified 

16 project and that experiences a qualified comple17 tion event shall not exceed the excess of— 

18 ‘‘(i) the amount determined under 

19 subparagraph (B), over 

20 ‘‘(ii) the amounts previously deter21 mined under subsection (a) with respect to 

22 such qualified project. 

23 ‘‘(B) ALLOCATION AMOUNT.—The amount 

24 determined under this paragraph with respect 

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1 fied project and that experiences a qualified 

2 completion event is the least of— 

3 ‘‘(i) the amount allocated to such 

4 project by the neighborhood homes credit 

5 agency under this section, 

6 ‘‘(ii) pursuant to subparagraph (C), 

7 the amount such agency determines at the 

8 time of the qualified completion event is 

9 necessary to ensure the financial feasibility 

10 of the project, or 

11 ‘‘(iii) in the case of a qualified com12 pletion event that occurs after the 5-year 

13 period beginning on the date of the alloca14 tion referred to in clause (i), $0. 

15 ‘‘(C) FINANCIAL FEASABILITY.—For pur16 poses of subparagraph (B)(ii), the neighborhood 

17 homes credit agency shall consider— 

18 ‘‘(i) the sources and uses of funds and 

19 the total financing planned for the quali20 fied project, 

21 ‘‘(ii) any proceeds or receipts expected 

22 to be generated by reason of tax benefits, 

23 ‘‘(iii) the percentage of the amount al24 located to such project under this section 


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1 used for project costs other than the cost 

2 of intermediaries, and 

3 ‘‘(iv) the reasonableness of the devel4 opmental costs and fees of the qualified 

5 project. 

6 ‘‘(c) QUALIFIED DEVELOPMENT COST.—For pur7 poses of this section— 

8 ‘‘(1) IN GENERAL.—The term ‘qualified devel9 opment cost’ means, with respect to a qualified resi10 dence, so much of the allowable development cost as 

11 the neighborhood homes credit agency certifies, at 

12 the time of the completion event, meets the stand13 ards promulgated under subsection (h)(1)(C). 

14 ‘‘(2) ALLOWABLE DEVELOPMENT COST.—The 

15 term ‘allowable development cost’ means— 

16 ‘‘(A) the cost of construction, substantial 

17 rehabilitation, demolition of any structure, and 

18 environmental remediation, and 

19 ‘‘(B) in the case of an affordable sale, so 

20 much of the cost of acquiring buildings and 

21 land as does not exceed an amount equal to 75 

22 percent of the costs described in subparagraph 

23 (A). 

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1 scribed in subparagraph (B) or (C) of subsection 

2 (f)(1), the allowable development cost of such quali3 fied residence shall be an amount equal to the total 

4 allowable development cost of the entire condo5 minium or cooperative housing property in which 

6 such qualified residence is located, multiplied by a 

7 fraction— 

8 ‘‘(A) the numerator of which is the total 

9 floor space of such qualified residence, and 

10 ‘‘(B) the denominator of which is the total 

11 floor space of all residences within such prop12 erty. 

13 ‘‘(d) QUALIFIED PROJECT.—For purposes of this 

14 section, the term ‘qualified project’ means a project that— 

15 ‘‘(1) a neighborhood homes credit agency cer16 tifies will build or substantially rehabilitate 1 or 

17 more qualified residences located in one or more 

18 qualified census tracts, and 

19 ‘‘(2) is designated by such agency as a qualified 

20 project under this section and is allocated (before 

21 such building or substantial rehabilitation begins) a 

22 portion of the amount allocated to such agency 

23 under subsection (g). 

24 ‘‘(e) QUALIFIED CENSUS TRACT.—For purposes of 

25 this section— 


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1 ‘‘(1) IN GENERAL.—The term ‘qualified census 

2 tract’ means a census tract— 

3 ‘‘(A) with— 

4 ‘‘(i) a median gross income which 

5 does not exceed 80 percent of the applica6 ble area median gross income, 

7 ‘‘(ii) a poverty rate that is not less 

8 than 130 percent of the applicable area 

9 poverty rate, and 

10 ‘‘(iii) a median value for owner-occu11 pied homes that does not exceed applicable 

12 area median value for owner-occupied 

13 homes, 

14 ‘‘(B) which is located in a city with a pop15 ulation of not less than 50,000 and a poverty 

16 rate that is not less than 150 percent of the ap17 plicable area poverty rate, and which has— 

18 ‘‘(i) a median gross income which 

19 does not exceed the applicable area median 

20 gross income, and 

21 ‘‘(ii) a median value for owner-occu22 pied homes that does not exceed 80 per23 cent of the applicable area median value 

24 for owner-occupied homes, or 


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1 ‘‘(C) which is located in a nonmetropolitan 

2 county and which has— 

3 ‘‘(i) a median gross income which 

4 does not exceed the applicable area median 

5 gross income, and 

6 ‘‘(ii) been designated by a neighbor7 hood homes credit agency under this 

8 clause. 

9 ‘‘(2) ADDITIONAL CENSUS TRACTS FOR SUB10 STANTIAL REHABILITATION.—In the case of a quali11 fied residence that is intended for substantial reha12 bilitation described in subsection (f)(5)(B), the term 

13 ‘qualified census tract’ includes a census tract that 

14 meets the requirements of paragraph (1)(A), without 

15 regard to clause (iii), and that is designated by the 

16 neighborhood homes credit agency under this para17 graph. 

18 ‘‘(3) LIST OF QUALIFIED CENSUS TRACTS.— 

19 The Secretary of Housing and Urban Development 

20 shall, for each year, make publicly available a list of 

21 qualified census tracts under— 

22 ‘‘(A) on a combined basis, subparagraphs 

23 (A) and (B) of paragraph (1), 

24 ‘‘(B) subparagraph (C) of such paragraph, 

25 and 


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1 ‘‘(C) paragraph (2). 

2 ‘‘(f) OTHER DEFINITIONS.—For purposes of this sec3 tion— 

4 ‘‘(1) QUALIFIED RESIDENCE.—The term ‘quali5 fied residence’ means a residence that consists of— 

6 ‘‘(A) a single-family home containing 4 or 

7 fewer residential units, 

8 ‘‘(B) a condominium unit, or 

9 ‘‘(C) a house or an apartment owned by a 

10 cooperative housing corporation (as defined in 

11 section 216(b)). 

12 ‘‘(2) AFFORDABLE SALE.— 

13 ‘‘(A) IN GENERAL.— 

14 ‘‘(i) IN GENERAL.—The term ‘afford15 able sale’ means a sale to a qualified home16 owner of a qualified residence that the 

17 neighborhood homes credit agency certifies 

18 as meeting the standards promulgated 

19 under subsection (h)(1)(D) for a price that 

20 does not exceed— 

21 ‘‘(I) in the case of any qualified 

22 residence not described in subclause 

23 (II), (III), or (IV), the amount equal 

24 to the product of 4 multiplied by the 

25 applicable area median gross income, 


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1 ‘‘(II) in the case of a single-fam2 ily home containing two residential 

3 units, 125 percent of the amount de4 scribed in subclause (I), 

5 ‘‘(III) in the case of a single-fam6 ily home containing three residential 

7 units, 150 percent of the amount de8 scribed in subclause (I), or 

9 ‘‘(IV) in the case of a single-fam10 ily home containing four residential 

11 units, 175 percent of the amount de12 scribed in subclause (I). 

13 ‘‘(ii) RELATED PERSONS.— 

14 ‘‘(I) IN GENERAL.—A sale be15 tween related persons shall not be 

16 treated as an affordable sale. 

17 ‘‘(II) DEFINITION.—For pur18 poses of this section, a person (in this 

19 clause referred to as the ‘related per20 son’) is related to any person if the 

21 related person bears a relationship to 

22 such person specified in section 

23 267(b) or 707(b)(1), or the related 

24 person and such person are engaged 

25 in trades or businesses under common 


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1 control (within the meaning of sub2 sections (a) and (b) of section 52). 

3 For purposes of the preceding sen4 tence, in applying section 267(b) or 

5 707(b)(1), ‘10 percent’ shall be sub6 stituted for ‘50 percent’. 

7 ‘‘(3) APPLICABLE AREA.—The term ‘applicable 

8 area’ means— 

9 ‘‘(A) in the case of a metropolitan census 

10 tract, the metropolitan area in which such cen11 sus tract is located, and 

12 ‘‘(B) in the case of a census tract other 

13 than a census tract described in subparagraph 

14 (A), the State. 

15 ‘‘(4) SUBSTANTIAL REHABILITATION.—The 

16 term ‘substantial rehabilitation’ means rehabilitation 

17 efforts involving qualified development costs that are 

18 not less than the greater of— 

19 ‘‘(A) $20,000, or 

20 ‘‘(B) 20 percent of the cost of acquiring 

21 buildings and land. 

22 ‘‘(5) QUALIFIED COMPLETION EVENT.—The 

23 term ‘qualified completion event’ means— 

24 ‘‘(A) in the case of a qualified residence 

25 that is built or substantially rehabilitated as 


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1 part of a qualified project and sold, an afford2 able sale, or 

3 ‘‘(B) in the case of a qualified residence 

4 that is substantially rehabilitated as part of a 

5 qualified project and owned by the same quali6 fied homeowner throughout such rehabilitation, 

7 the completion of such rehabilitation (as deter8 mined by the neighborhood homes credit agen9 cy) to the standards promulgated under sub10 section (h)(1)(D). 

11 ‘‘(6) QUALIFIED HOMEOWNER.— 

12 ‘‘(A) IN GENERAL.—The term ‘qualified 

13 homeowner’ means, with respect to a qualified 

14 residence, an individual— 

15 ‘‘(i) who owns and uses such qualified 

16 residence as the principal residence of such 

17 individual, and 

18 ‘‘(ii) whose income is 140 percent or 

19 less of the applicable area median gross in20 come for the location of the qualified resi21 dence. 

22 ‘‘(B) OWNERSHIP.—For purposes of a co23 operative housing corporation (as such term is 

24 defined in section 216(b)), a tenant-stockholder 


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1 shall be treated as owning the house or apart2 ment which such person is entitled to occupy. 

3 ‘‘(C) INCOME.—For purposes of this para4 graph, income shall be a determined in accord5 ance with section 143(f)(2) and 143(f)(4). 

6 ‘‘(D) TIMING.—For purposes of this para7 graph, the income of a taxpayer shall be deter8 mined— 

9 ‘‘(i) in the case of a qualified resi10 dence that is built or substantially rehabili11 tated as part of a qualified project and 

12 sold, at the time a binding contract for 

13 purchase is made, or 

14 ‘‘(ii) in the case of a qualified resi15 dence that is occupied by a qualified home16 owner and intended to be substantially re17 habilitated as part of a qualified project, at 

18 the time a binding contract to undertake 

19 such rehabilitation is made. 

20 ‘‘(7) NEIGHBORHOOD HOMES CREDIT AGEN21 CY.—The term ‘neighborhood homes credit agency’ 

22 means the agency designated by the governor of a 

23 State as the neighborhood homes credit agency of 

24 the State. 

25 ‘‘(g) ALLOCATION.— 


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1 ‘‘(1) STATE NEIGHBORHOOD HOMES CREDIT

2 CEILING.—The State neighborhood homes credit 

3 amount for a State for a calendar year is an amount 

4 equal to the greater of— 

5 ‘‘(A) the product of $6, multiplied by the 

6 State population (determined in accordance 

7 with section 146(j)), or 

8 ‘‘(B) $8,000,000. 

9 ‘‘(2) UNUSED AMOUNT.—The State neighbor10 hood homes credit amount for a calendar year shall 

11 be increased by the sum of— 

12 ‘‘(A) any amount certified by the neighbor13 hood homes credit agency of the State as hav14 ing been previously allocated to a qualified 

15 project and not used during the 5-year period 

16 described in subsection (b)(2)(B)(iii), plus 

17 ‘‘(B) sum of the amount by which the 

18 amount determined under paragraph (1) (with19 out application of this paragraph) exceeded the 

20 amount allocated to qualified projects in each of 

21 the three immediately preceding calendar years. 

22 ‘‘(3) PORTION OF STATE CREDIT CEILING FOR

23 CERTAIN PROJECTS INVOLVING QUALIFIED NON24 PROFIT ORGANIZATIONS.—Rules similar to the rules 

25 of section 42(h)(5) shall apply. 


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1 ‘‘(h) RESPONSIBILITIES OF NEIGHBORHOOD HOMES

2 CREDIT AGENCIES.— 

3 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

4 (g), the State neighborhood homes credit dollar 

5 amount shall be zero for a calendar year unless the 

6 neighborhood homes credit agency of the State— 

7 ‘‘(A) allocates such amount pursuant to a 

8 qualified allocation plan of the neighborhood 

9 homes credit agency, 

10 ‘‘(B) allocates not more than 20 percent of 

11 such amount for the previous year to projects 

12 with respect to qualified residences in census 

13 tracts under subsection (e)(1)(C) or (e)(2), 

14 ‘‘(C) promulgates standards with respect 

15 to reasonable qualified development costs and 

16 fees, 

17 ‘‘(D) promulgates standards with respect 

18 to construction quality, and 

19 ‘‘(E) submits to the Secretary (at such 

20 time and in such manner as the Secretary may 

21 prescribe) an annual report specifying— 

22 ‘‘(i) the amount of the neighborhood 

23 homes credits allocated to each qualified 

24 project for the previous year, 


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1 ‘‘(ii) with respect to each qualified 

2 residence completed in the preceding cal3 endar year— 

4 ‘‘(I) the census tract in which 

5 such qualified residence is located, 

6 ‘‘(II) with respect to the qualified 

7 project that includes such qualified 

8 residence, the year in which such 

9 project received an allocation under 

10 this section, 

11 ‘‘(III) whether such qualified res12 idence was new or substantially reha13 bilitated, 

14 ‘‘(IV) the eligible basis of such 

15 qualified residence, 

16 ‘‘(V) the amount of the neighbor17 hood homes credit with respect to 

18 such qualified residence, 

19 ‘‘(VI) the sales price of such 

20 qualified residence or, in the case of a 

21 qualified residence that is substan22 tially rehabilitated as part of a quali23 fied project and is owned by the same 

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1 tirety of such rehabilitation, the cost 

2 of the substantial rehabilitation, and 

3 ‘‘(VII) the income of the quali4 fied homeowner (expressed as a per5 centage of the applicable area median 

6 gross income for the location of the 

7 qualified residence), and 

8 ‘‘(iii) such other information as the 

9 Secretary may require. 

10 ‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur11 poses of this subsection, the term ‘qualified alloca12 tion plan’ means any plan which— 

13 ‘‘(A) sets forth the selection criteria to be 

14 used to prioritize qualified projects for alloca15 tions of State neighborhood homes credit dollar 

16 amounts, including— 

17 ‘‘(i) the need for new or substantially 

18 rehabilitated owner-occupied homes in the 

19 area addressed by the project, 

20 ‘‘(ii) the expected contribution of the 

21 project to neighborhood stability and revi22 talization, 

23 ‘‘(iii) the capability of the project 

24 sponsor, and 


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1 ‘‘(iv) the likelihood the project will re2 sult in long-term homeownership, 

3 ‘‘(B) has been made available for public 

4 comment, and 

5 ‘‘(C) provides a procedure that the neigh6 borhood homes credit agency (or any agent or 

7 contractor of such agency) shall follow for pur8 poses of— 

9 ‘‘(i) identifying noncompliance with 

10 any provisions of this section, and 

11 ‘‘(ii) notifying the Internal Revenue 

12 Service of any such noncompliance of 

13 which the agency becomes aware. 

14 ‘‘(i) POSSESSIONS TREATED AS STATES.—For pur15 poses of this section, the term ‘State’ includes the District 

16 of Columbia and a possession of the United States. 

17 ‘‘(j) REPAYMENT.— 

18 ‘‘(1) IN GENERAL.— 

19 ‘‘(A) SOLD DURING 5-YEAR PERIOD.—If a 

20 qualified residence is sold during the 5-year pe21 riod beginning on the date of the qualified com22 pletion event described in subsection (a) with 

23 respect to such qualified residence, the seller 

24 shall transfer an amount equal to the repay25 ment amount from the amount realized on such 


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1 sale to the relevant neighborhood homes credit 

2 agency. 

3 ‘‘(B) USE OF REPAYMENTS.—A neighbor4 hood homes credit agency shall use any amount 

5 received pursuant to subparagraph (A) only for 

6 purposes of qualified projects. 

7 ‘‘(2) REPAYMENT AMOUNT.—For purposes of 

8 paragraph (1)(A), the repayment amount is an 

9 amount equal to 50 percent of the gain from such 

10 resale, reduced by 20 percent for each year of the 

11 5-year period referred to in paragraph (1)(A) which 

12 ends before the date of the sale referred to in such 

13 paragraph. 

14 ‘‘(3) LIEN FOR REPAYMENT AMOUNT.—A 

15 neighborhood homes credit agency receiving an allo16 cation under this section shall place a lien on each 

17 qualified residence that is built or rehabilitated as 

18 part of a qualified project for an amount such agen19 cy deems necessary to ensure potential repayment 

20 pursuant to paragraph (1)(A). 

21 ‘‘(4) DENIAL OF DEDUCTIONS IF CONVERTED

22 TO RENTAL HOUSING.—If, during the 5-year period 

23 beginning on the date of the qualified completion 

24 event described in subsection (a), an individual who 

25 owns a qualified residence fails to use such qualified 


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1 residence as such individual’s principal residence for 

2 any period of time, no deduction shall be allowed for 

3 expenses paid or incurred by such individual with re4 spect to renting, during such period of time, such 

5 qualified residence. 

6 ‘‘(5) WAIVER.—The neighborhood homes credit 

7 agency may waive the repayment required under 

8 paragraph (1)(A) in the case of homeowner experi9 encing a hardship. 

10 ‘‘(k) REPORT.— 

11 ‘‘(1) IN GENERAL.—The Secretary shall annu12 ally issue a report, to be made available to the pub13 lic, which contains the information submitted pursu14 ant to subsection (h)(1)(E). 

15 ‘‘(2) DE-IDENTIFICATION.—The Secretary shall 

16 ensure that any information made public pursuant 

17 to paragraph (1) excludes any information that 

18 would allow for the identification of qualified home19 owners. 

20 ‘‘(l) INFLATION ADJUSTMENT.— 

21 ‘‘(1) IN GENERAL.—In the case of a calendar 

22 year after 2020, the dollar amounts in this section 

23 shall be increased by an amount equal to— 

24 ‘‘(A) such dollar amount, multiplied by 


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1 ‘‘(B) the cost-of-living adjustment deter2 mined under section 1(f)(3) for such calendar 

3 year by substituting ‘calendar year 2019’ for 

4 ‘calendar year 2016’ in subparagraph (A)(ii) 

5 thereof. 

6 ‘‘(2) ROUNDING.— 

7 ‘‘(A) SUBSTANTIAL REHABILITATION.—In 

8 the case of the dollar amount in subsection 

9 (f)(4), any increase under the preceding sen10 tence which is not a multiple of $1,000 shall be 

11 rounded to the nearest multiple of $1,000. 

12 ‘‘(B) In the case of the dollar amount in 

13 subsection (g)(1)(A), any increase under the 

14 preceding sentence which is not a multiple of 

15 $0.01 shall be rounded to the nearest multiple 

16 of $0.01. 

17 ‘‘(C) In the case of the dollar amount in 

18 subsection (g)(1)(B), any increase under the 

19 preceding sentence which is not a multiple of 

20 $100,000 shall be rounded to the nearest mul21 tiple of $100,000.’’. 

22 (b) CURRENT YEAR BUSINESS CREDIT CALCULA23 TION.—Section 38(b) of the Internal Revenue Code of 

24 1986 is amended by redesignating paragraphs (6) through 


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1 (33) as paragraphs (7) through (34), respectively, and by 

2 inserting after paragraph (5) the following new paragraph: 

3 ‘‘(6) the neighborhood homes credit determined 

4 under section 42A(a),’’. 

5 (c) LIMITATION ON CARRYBACK.—Section 39 of the 

6 Internal Revenue Code of 1986 is amended by adding at 

7 the end the following new subsection: 

8 ‘‘(e) NO CARRYBACK OF NEIGHBORHOOD HOMES

9 CREDIT BEFORE EFFECTIVE DATE.—No amount of the 

10 unused credit attributable to section 42A may be taken 

11 into account under section 38(a)(3) for any taxable year 

12 beginning before the date of the enactment of this sub13 section.’’. 

14 (d) CONFORMING AMENDMENTS.—Subsections 

15 (i)(3)(C), (i)(6)(B)(i), and (k)(1) of section 469 of the In16 ternal Revenue Code of 1986 are each amended by insert17 ing ‘‘or 42A’’ after ‘‘section 42’’. 

18 (e) CLERICAL AMENDMENT.—The table of sections 

19 for subpart D of part IV of subchapter A of chapter 1 

20 of the Internal Revenue Code of 1986 is amended by in21 serting after the item relating to section 42 the following: 

‘‘Sec. 42A. Neighborhood homes credit.’’. 

22 (f) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to calendar years beginning after 

24 the date of enactment of this Act. 

Æ 


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