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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 5196 Introduced in Senate (IS)]

<DOC>

118th CONGRESS
  2d Session
                                S. 5196

 To amend the Internal Revenue Code of 1986 to establish the New Homes 
                              Tax Credit.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           September 25, 2024

 Mr. Heinrich (for himself, Mr. Wyden, Mr. Welch, and Mr. Van Hollen) 
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 establish the New Homes 
                              Tax Credit.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``New Homes Tax Credit Act''.

SEC. 2. ESTABLISHMENT OF NEW HOMES TAX CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 45AA the following new section:

``SEC. 45BB. NEW HOMES TAX CREDIT.

    ``(a) Allowance of Credit.--
            ``(1) In general.--For purposes of section 38, in the case 
        of a taxpayer who holds a qualified equity investment on a 
        credit allowance date of such investment which occurs during 
        the taxable year, the new homes tax credit determined under 
        this section for such taxable year is an amount equal to the 
        applicable percentage of the amount paid to the housing 
        development entity for such investment at its original issue.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage is--
                    ``(A) 7 percent with respect to the first credit 
                allowance date, and
                    ``(B) 8 percent with respect to the remainder of 
                the credit allowance dates.
            ``(3) Credit allowance date.--For purposes of paragraph 
        (1), the term `credit allowance date' means, with respect to 
        any qualified equity investment--
                    ``(A) the date on which such investment is 
                initially made, and
                    ``(B) each of the 4 anniversary dates of such date 
                thereafter.
    ``(b) Qualified Equity Investment.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified equity investment' means any equity investment in a 
        housing development entity if--
                    ``(A) such investment is acquired by the taxpayer 
                at its original issue (directly or through an 
                underwriter) solely in exchange for cash,
                    ``(B) substantially all of such cash is used by the 
                housing development entity to make qualified housing 
                investments, and
                    ``(C) such investment is designated for purposes of 
                this section by the housing development entity.
        Such term shall not include any equity investment issued by a 
        housing development entity more than 5 years after the date 
        that such entity receives an allocation under subsection (e). 
        Any allocation not used within such 5-year period may be 
        reallocated by the Secretary under subsection (e).
            ``(2) Special rules.--Rules similar to the rules under 
        paragraphs (2) through (6) of section 45D(b) shall apply for 
        purposes of this section.
    ``(c) Housing Development Entity.--For purposes of this section, 
the term `housing development entity' means any domestic corporation or 
partnership if--
            ``(1) one of the missions of the entity is to provide 
        funding for construction of housing for low- and moderate-
        income individuals, and
            ``(2) the entity is certified by the Secretary for purposes 
        of this section as being a housing development entity.
    ``(d) Other Definitions.--For purposes of this section--
            ``(1) Qualified housing investment.--
                    ``(A) In general.--The term `qualified housing 
                investment' means funding which is provided by a 
                housing development entity to a qualified construction 
                business--
                            ``(i) following completion of a qualified 
                        home project by such qualified construction 
                        business, and
                            ``(ii)(I) in the case of a home described 
                        in clause (i) of paragraph (3)(A), after the 
                        housing development entity has confirmed (on or 
                        before the date on which ownership of the home 
                        is transferred to the buyer) that--
                                    ``(aa) the home is being sold to a 
                                qualified buyer, and
                                    ``(bb) that such buyer has been 
                                provided notice with respect to the 
                                requirements under subsection (g), or
                            ``(II) in the case of a home described in 
                        clause (ii) of such paragraph, after the 
                        housing development entity has confirmed (on or 
                        before the date on which renovation of the home 
                        is completed by the qualified construction 
                        business) that--
                                    ``(aa) the home is owned by a 
                                qualified buyer, and
                                    ``(bb) that such buyer has been 
                                provided notice with respect to the 
                                requirements under subsection (g).
                    ``(B) Transfer of funds at closing.--With respect 
                to any funding described in subparagraph (A), such 
                funding shall be provided by the housing development 
                entity to the qualified construction business--
                            ``(i) in the case of a home described in 
                        clause (i) of paragraph (3)(A), on the date on 
                        which ownership of the home is transferred to 
                        the qualified buyer, or
                            ``(ii) in the case of a home described in 
                        clause (ii) of such paragraph, on the date on 
                        which renovation of the home is completed by 
                        the qualified construction business.
                    ``(C) Limitation.--In the case of any home 
                constructed or renovated as part of a qualified home 
                project, the amount of funding provided by a housing 
                development entity to a qualified construction business 
                with respect to such home shall not exceed an amount 
                equal to 20 percent (or, in the case of a home 
                renovated as part of a qualified home project, 15 
                percent) of the median purchase price for single-family 
                housing in the area in which such home is located, as 
                determined by the Secretary of Housing and Urban 
                Development for the purpose of section 1807.402(a)(2) 
                of title 12, Code of Federal Regulations (or any 
                successor regulation).
            ``(2) Qualified construction business.--The term `qualified 
        construction business' means an entity engaged in the trade or 
        business of the construction or renovation of residential 
        housing.
            ``(3) Qualified home projects.--
                    ``(A) In general.--The term `qualified home 
                project' means--
                            ``(i) the construction of entry-level homes 
                        which are sold to qualified buyers, or
                            ``(ii) the renovation of Single-family 
                        housing (as such term is used in section 
                        1807.402 of title 12, Code of Federal 
                        Regulations) which is owned by a qualified 
                        buyer.
                    ``(B) Entry-level homes.--The term `entry-level 
                home' means any residential building which--
                            ``(i) satisfies the requirement under 
                        section 1807.402(a)(1) of title 12, Code of 
                        Federal Regulations, and
                            ``(ii) is designed to be purchased by a 
                        first-time homebuyer (as defined in section 104 
                        of the Cranston-Gonzalez National Affordable 
                        Housing Act (42 U.S.C. 12704)).
            ``(4) Qualified buyer.--The term `qualified buyer' means an 
        individual or family whose income is not greater than 120 
        percent of area median income.
    ``(e) National Limitation on Amount of Investments Designated.--
            ``(1) In general.--For each of calendar years 2025 through 
        2031, the new homes tax credit limitation for each calendar 
        year shall be--
                    ``(A) for 2025, $1,000,000,000,
                    ``(B) for 2026 and 2027, $1,500,000,000,
                    ``(C) for 2028 and 2029, $2,000,000,000, and
                    ``(D) for 2030 and 2031, $3,500,000,000.
            ``(2) Allocation of limitation.--The limitation under 
        paragraph (1) shall be allocated by the Secretary among housing 
        development entities selected by the Secretary. In making 
        allocations under the preceding sentence, the Secretary shall--
                    ``(A) allocate not less than 50 percent of such 
                limitation for any calendar year to housing development 
                agencies that commit to make qualified housing 
                investments to provide housing for individuals or 
                families whose income is not greater than 80 percent of 
                area median income,
                    ``(B) allocate not less than 5 percent of such 
                limitation for any calendar year to housing development 
                agencies that commit to make qualified housing 
                investments to provide housing that is exclusively 
                available to members of an Indian tribe (as such term 
                is defined in section 4 of the Indian Self-
                Determination and Education Assistance Act (25 U.S.C. 
                5304)), and
                    ``(C) give priority to--
                            ``(i) any community development financial 
                        institution (as defined in section 103 of the 
                        Community Development Banking and Financial 
                        Institutions Act of 1994 (12 U.S.C. 4702)) 
                        which is certified as a community development 
                        financial institution under the Community 
                        Development Banking and Financial Institutions 
                        Act of 1994 (12 U.S.C. 4701 et seq.),
                            ``(ii) any community development credit 
                        union,
                            ``(iii) any housing development entity with 
                        prior experience relating to other Federal 
                        programs designed to create affordable housing 
                        for low- and moderate-income individuals, such 
                        as--
                                    ``(I) the low-income housing credit 
                                under section 42, and
                                    ``(II) the HOME Investment 
                                Partnerships program under subtitle A 
                                of title II of the Cranston-Gonzalez 
                                National Affordable Housing Act (42 
                                U.S.C. 12741 et seq.), and
                            ``(iv) any housing development entity 
                        which--
                                    ``(I) has previously worked within 
                                the community in which the proposed 
                                qualified home project is located, and
                                    ``(II) can demonstrate engagement 
                                with local officials and low-income 
                                individuals within such community.
            ``(3) Carryover of unused limitation.--If the new homes tax 
        credit limitation for any calendar year exceeds the aggregate 
        amount allocated under paragraph (2) for such year, such 
        limitation for the succeeding calendar year shall be increased 
        by the amount of such excess. No amount may be carried under 
        the preceding sentence to any calendar year after 2036.
    ``(f) Basis Reduction.--Rules similar to the rules under subsection 
(h) of section 45D shall apply for purposes of this section.
    ``(g) Limitation During Initial 5-Year Period.--
            ``(1) In general.--
                    ``(A) Principal residence requirement.--Subject to 
                subparagraph (C), with respect to any qualified home 
                project for which funding has been provided by a 
                housing development entity to a qualified construction 
                business pursuant to the provisions of this section, 
                the housing development entity shall ensure that, 
                during the limitation period, the home with respect to 
                which such funding has been provided remains the 
                principal residence of the qualified buyer.
                    ``(B) Liens.--With respect to the requirement under 
                subparagraph (A), the housing development entity shall 
                enforce such requirement by means of the imposition of 
                a lien on the home constructed or renovated as part of 
                the qualified home project, with such lien to be 
                recorded with the relevant local official or agency 
                designated to record liens.
                    ``(C) Exception for members of the armed forces.--
                In the case of any home constructed or renovated as 
                part of a qualified home project, if there is a 
                disposition of such home by the qualified buyer--
                            ``(i) during the limitation period, and
                            ``(ii) which is in connection with 
                        Government orders received by such qualified 
                        buyer for qualified official extended duty 
                        service (as defined in section 
                        36(f)(4)(E)(ii)),
                subparagraph (A) shall not apply.
            ``(2) Limitation period.--For purposes of this subsection, 
        the term `limitation period' means the 5-year period subsequent 
        to--
                    ``(A) in the case of a home described in clause (i) 
                of subsection (d)(3)(A), on the date on which ownership 
                of the home is transferred to the qualified buyer, or
                    ``(B) in the case of a home described in clause 
                (ii) of such subsection, on the date on which 
                renovation of the home is completed by the qualified 
                construction business.
            ``(3) Regulations and guidance.--The Secretary shall issue 
        such regulations or other guidance as the Secretary determines 
        necessary to carry out the purposes of this subsection.
    ``(h) Reporting.--
            ``(1) In general.--Not later than January 1, 2026, and 
        annually thereafter, the Secretary shall submit a report to the 
        Committee on Banking, Housing, and Urban Affairs of the Senate, 
        the Committee on Financial Services of the House of 
        Representatives, the Committee on Ways and Means of the House 
        of Representatives, and the Committee on Finance of the Senate, 
        containing information regarding--
                    ``(A) the size and location of qualified home 
                projects which have been financially supported by 
                qualified equity investments for which a credit has 
                been allowed under this section, and
                    ``(B) the income of individuals and families 
                residing in homes constructed or renovated as part of 
                such qualified home projects.
            ``(2) Collection of information.--The Secretary shall 
        develop a method to collect and streamline relevant data for 
        purposes of collecting the information described in paragraph 
        (1).
    ``(i) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out this section.''.
    (b) Conforming Amendments.--
            (1) Section 38(b) of such Code is amended by striking 
        ``plus'' at the end of paragraph (40), by striking the period 
        at the end of paragraph (41) and inserting ``, plus'', and by 
        adding at the end the following new paragraph:
            ``(42) the new homes tax credit determined under section 
        45BB(a).''.
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 45AA the following new item:

``Sec. 45BB. New Homes Tax Credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to investments made after December 31, 2024.
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