II 

118TH CONGRESS 

1ST SESSION S. 657 

To amend the Internal Revenue Code of 1986 to establish a tax credit 

for neighborhood revitalization, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 6, 2023 

Mr. CARDIN (for himself, Mr. YOUNG, Mr. WYDEN, Mr. MORAN, and Mr. 

BROWN) 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 

a tax credit 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. FINDINGS AND SENSE OF CONGRESS. 

7 (a) FINDINGS.—Congress finds the following: 

8 (1) Experts have determined that it could take 

9 nearly a decade to address the housing shortage in 


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1 the United States, in large part due to increasing 

2 housing prices and decreased housing inventory. 

3 (2) The housing supply shortage disproportion4 ately impacts low-income and distressed commu5 nities. 

6 (3) Homeownership is a primary source of 

7 household wealth and neighborhood stability. Many 

8 distressed communities have low rates of homeown9 ership and lack quality, affordable starter homes. 

10 (4) Housing revitalization in distressed commu11 nities is prevented by the value gap, the difference 

12 between the price to rehabilitate a home and the sale 

13 value of the home. 

14 (5) The Neighborhood Homes Investment Act 

15 can address the value gap to increase housing reha16 bilitation in distressed communities. 

17 (6) The Neighborhood Homes Investment Act 

18 has the potential to generate 500,000 homes over 10 

19 years, $125,000,000,000 of total development activ20 ity, over 800,000 jobs in construction and construc21 tion-related industries, and over $35,000,000,000 in 

22 Federal, state, and local tax revenues. 

23 (b) SENSE OF CONGRESS.—It is the sense of Con24 gress that the neighborhood homes credit (as added under 


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1 section 3 of this Act) should be an activity administered 

2 in a manner which— 

3 (1) is consistent with the Fair Housing Act of 

4 1968 (42 U.S.C. 3601 et seq.); 

5 (2) empowers residents in eligible communities; 

6 and 

7 (3) revitalizes distressed neighborhoods. 

8 SEC. 3. NEIGHBORHOOD HOMES CREDIT. 

9 (a) IN GENERAL.—Subpart D of part IV of sub10 chapter A of chapter 1 of the Internal Revenue Code of 

11 1986 is amended by inserting after section 42 the fol12 lowing new section: 

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

14 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec15 tion 38, the neighborhood homes credit determined under 

16 this section for the taxable year is, with respect to each 

17 qualified residence sold by the taxpayer during such tax18 able year in an affordable sale, the lesser of— 

19 ‘‘(1) an amount equal to— 

20 ‘‘(A) the excess (if any) of— 

21 ‘‘(i) the reasonable development costs 

22 paid or incurred by the taxpayer with re23 spect to such qualified residence, over 

24 ‘‘(ii) the sale price of such qualified 

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1 penses paid or incurred by the taxpayer in 

2 connection with such sale), or 

3 ‘‘(B) if the neighborhood homes credit 

4 agency determines it is necessary to ensure fi5 nancial feasibility, an amount not to exceed 120 

6 percent of the amount under subparagraph (A), 

7 ‘‘(2) 35 percent of the eligible development 

8 costs paid or incurred by the taxpayer with respect 

9 to such qualified residence, or 

10 ‘‘(3) 28 percent of the national median sale 

11 price for new homes (as determined pursuant to the 

12 most recent census data available as of the date on 

13 which the neighborhood homes credit agency makes 

14 an allocation for the qualified project). 

15 ‘‘(b) DEVELOPMENT COSTS.—For purposes of this 

16 section— 

17 ‘‘(1) REASONABLE DEVELOPMENT COSTS.— 

18 ‘‘(A) IN GENERAL.—The term ‘reasonable 

19 development costs’ means amounts paid or in20 curred for the acquisition of buildings and land, 

21 construction, substantial rehabilitation, demoli22 tion of structures, or environmental remedi23 ation, to the extent that the neighborhood 

24 homes credit agency determines that such 

25 amounts meet the standards specified pursuant 


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1 to subsection (f)(1)(C) (as of the date on which 

2 construction or substantial rehabilitation is sub3 stantially complete, as determined by such 

4 agency) and are necessary to ensure the finan5 cial feasibility of such qualified residence. 

6 ‘‘(B) CONSIDERATIONS IN MAKING DETER7 MINATION.—In making the determination under 

8 subparagraph (A), the neighborhood homes 

9 credit agency shall consider— 

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

11 the total financing, 

12 ‘‘(ii) any proceeds or receipts gen13 erated or expected to be generated by rea14 son of tax benefits, and 

15 ‘‘(iii) the reasonableness of the devel16 opmental costs and fees. 

17 ‘‘(2) ELIGIBLE DEVELOPMENT COSTS.—The 

18 term ‘eligible development costs’ means the amount 

19 which would be reasonable development costs if the 

20 amounts taken into account as paid or incurred for 

21 the acquisition of buildings and land did not exceed 

22 75 percent of such costs determined without regard 

23 to any amount paid or incurred for the acquisition 

24 of buildings and land. 


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1 ‘‘(3) SUBSTANTIAL REHABILITATION.—The 

2 term ‘substantial rehabilitation’ means amounts paid 

3 or incurred for rehabilitation of a qualified residence 

4 if such amounts exceed the greater of— 

5 ‘‘(A) $20,000, or 

6 ‘‘(B) 20 percent of the amounts paid or in7 curred by the taxpayer for the acquisition of 

8 buildings and land with respect to such quali9 fied residence. 

10 ‘‘(4) CONSTRUCTION AND REHABILITATION

11 ONLY AFTER ALLOCATION TAKEN INTO ACCOUNT.— 

12 ‘‘(A) IN GENERAL.—The terms ‘reasonable 

13 development costs’ and ‘eligible development 

14 costs’ shall not include any amount paid or in15 curred before the date on which an allocation is 

16 made to the taxpayer under subsection (e) with 

17 respect to the qualified project of which the 

18 qualified residence is part unless such amount 

19 is paid or incurred for the acquisition of build20 ings or land. 

21 ‘‘(B) LAND AND BUILDING ACQUISITION

22 COSTS.—Amounts paid or incurred for the ac23 quisition of buildings or land shall be included 

24 under paragraph (A) only if paid or incurred 

25 not more than 3 years before the date on which 


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1 the allocation referred to in subparagraph (A) 

2 is made. If the taxpayer acquired any building 

3 or land from an entity (or any related party to 

4 such entity) that holds an ownership interest in 

5 the taxpayer, then such entity must also have 

6 acquired such property within such 3-year pe7 riod, and the acquisition cost included under 

8 subparagraph (A) with respect to the taxpayer 

9 shall not exceed the amount such entity paid or 

10 incurred to acquire such property. 

11 ‘‘(c) QUALIFIED RESIDENCE.—For purposes of this 

12 section— 

13 ‘‘(1) IN GENERAL.—The term ‘qualified resi14 dence’ means a residence that— 

15 ‘‘(A) is real property affixed on a perma16 nent foundation, 

17 ‘‘(B) is— 

18 ‘‘(i) a house which is comprised of 4 

19 or fewer residential units, 

20 ‘‘(ii) a condominium unit, or 

21 ‘‘(iii) a house or an apartment owned 

22 by a cooperative housing corporation (as 

23 defined in section 216(b)), 

24 ‘‘(C) is part of a qualified project with re25 spect to which the neighborhood homes credit 


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1 agency has made an allocation under subsection 

2 (e), and 

3 ‘‘(D) is located in a qualified census tract 

4 (determined as of the date of such allocation). 

5 ‘‘(2) QUALIFIED CENSUS TRACT.— 

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

7 census tract’ means a census tract— 

8 ‘‘(i) which— 

9 ‘‘(I) has a median family income 

10 which does not exceed 80 percent of 

11 the median family income for the ap12 plicable area, 

13 ‘‘(II) has a poverty rate that is 

14 not less than 130 percent of the pov15 erty rate of the applicable area, and 

16 ‘‘(III) has a median value for 

17 owner-occupied homes that does not 

18 exceed the median value for owner-oc19 cupied homes in the applicable area, 

20 ‘‘(ii) which— 

21 ‘‘(I) is located in a city which has 

22 a population of not less than 50,000 

23 and such city has a poverty rate that 

24 is not less than 150 percent of the 

25 poverty rate of the applicable area, 


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1 ‘‘(II) has a median family income 

2 which does not exceed the median 

3 family income for the applicable area, 

4 and 

5 ‘‘(III) has a median value for 

6 owner-occupied homes that does not 

7 exceed 80 percent of the median value 

8 for owner-occupied homes in the ap9 plicable area, 

10 ‘‘(iii) which— 

11 ‘‘(I) is located in a nonmetropoli12 tan county, 

13 ‘‘(II) has a median family income 

14 which does not exceed the median 

15 family income for the applicable area, 

16 and 

17 ‘‘(III) has been designated by a 

18 neighborhood homes credit agency 

19 under this clause, or 

20 ‘‘(iv) which is not otherwise a quali21 fied census tract and is located in a dis22 aster area (as defined in section 

23 7508A(d)(3)), but only with respect to 

24 credits allocated in any period during 

25 which the President of the United States 


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1 has determined that such area warrants in2 dividual or individual and public assistance 

3 by the Federal Government under the Rob4 ert T. Stafford Disaster Relief and Emer5 gency Assistance Act. 

6 ‘‘(B) APPLICABLE AREA.—The term ‘appli7 cable area’ means— 

8 ‘‘(i) in the case of a metropolitan cen9 sus tract, the metropolitan area in which 

10 such census tract is located, and 

11 ‘‘(ii) in the case of a census tract 

12 other than a census tract described in 

13 clause (i), the State. 

14 ‘‘(d) AFFORDABLE SALE.—For purposes of this sec15 tion— 

16 ‘‘(1) IN GENERAL.—The term ‘affordable sale’ 

17 means a sale to a qualified homeowner of a qualified 

18 residence that the neighborhood homes credit agency 

19 certifies as meeting the standards promulgated 

20 under subsection (f)(1)(D) for a price that does not 

21 exceed— 

22 ‘‘(A) in the case of any qualified residence 

23 not described in subparagraph (B), (C), or (D), 

24 the amount equal to the product of 4 multiplied 

25 by the median family income for the applicable 


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1 area (as determined pursuant to the most re2 cent census data available as of the date of the 

3 contract for such sale), 

4 ‘‘(B) in the case of a house comprised of 

5 2 residential units, 125 percent of the amount 

6 described in subparagraph (A), 

7 ‘‘(C) in the case of a house comprised of 

8 3 residential units, 150 percent of the amount 

9 described in subparagraph (A), or 

10 ‘‘(D) in the case of a house comprised of 

11 4 residential units, 175 percent of the amount 

12 described in subparagraph (A). 

13 ‘‘(2) QUALIFIED HOMEOWNER.—The term 

14 ‘qualified homeowner’ means, with respect to a 

15 qualified residence, an individual— 

16 ‘‘(A) who owns and uses such qualified res17 idence as the principal residence of such indi18 vidual, and 

19 ‘‘(B) whose family income (determined as 

20 of the date that a binding contract for the af21 fordable sale of such residence is entered into) 

22 is 140 percent or less of the median family in23 come for the applicable area in which the quali24 fied residence is located. 

25 ‘‘(e) CREDIT CEILING AND ALLOCATIONS.— 


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1 ‘‘(1) CREDIT LIMITED BASED ON ALLOCATIONS

2 TO QUALIFIED PROJECTS.— 

3 ‘‘(A) IN GENERAL.—The credit allowed 

4 under subsection (a) to any taxpayer for any 

5 taxable year with respect to one or more quali6 fied residences which are part of the same 

7 qualified project shall not exceed the excess (if 

8 any) of— 

9 ‘‘(i) the amount allocated by the 

10 neighborhood homes credit agency under 

11 this paragraph to such taxpayer with re12 spect to such qualified project, over 

13 ‘‘(ii) the aggregate amount of credit 

14 allowed under subsection (a) to such tax15 payer with respect to qualified residences 

16 which are a part of such qualified project 

17 for all prior taxable years. 

18 ‘‘(B) DEADLINE FOR COMPLETION.—No 

19 credit shall be allowed under subsection (a) 

20 with respect to any qualified residence unless 

21 the affordable sale of such residence is during 

22 the 5-year period beginning on the date of the 

23 allocation to the qualified project of which such 

24 residence is a part (or, in the case of a qualified 

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1 habilitation of such residence is completed dur2 ing such 5-year period). 

3 ‘‘(2) LIMITATIONS ON ALLOCATIONS TO QUALI4 FIED PROJECTS.— 

5 ‘‘(A) ALLOCATIONS LIMITED BY STATE

6 NEIGHBORHOOD HOMES CREDIT CEILING.—The 

7 aggregate amount allocated to taxpayers with 

8 respect to qualified projects by the neighbor9 hood homes credit agency of any State for any 

10 calendar year shall not exceed the State neigh11 borhood homes credit amount of such State for 

12 such calendar year. 

13 ‘‘(B) SET-ASIDE FOR CERTAIN PROJECTS

14 INVOLVING QUALIFIED NONPROFIT ORGANIZA15 TIONS.—Rules similar to the rules of section 

16 42(h)(5) shall apply for purposes of this sec17 tion. 

18 ‘‘(3) DETERMINATION OF STATE NEIGHBOR19 HOOD HOMES CREDIT CEILING.— 

20 ‘‘(A) IN GENERAL.—The State neighbor21 hood homes credit amount for a State for a cal22 endar year is an amount equal to the sum of— 

23 ‘‘(i) the greater of— 


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1 ‘‘(I) the product of $7, multiplied 

2 by the State population (determined 

3 in accordance with section 146(j)), or 

4 ‘‘(II) $9,000,000, and 

5 ‘‘(ii) any amount previously allocated 

6 to any taxpayer with respect to any quali7 fied project by the neighborhood homes 

8 credit agency of such State which can no 

9 longer be allocated to any qualified resi10 dence because the 5-year period described 

11 in paragraph (1)(B) expires during cal12 endar year. 

13 ‘‘(B) 3-YEAR CARRYFORWARD OF UNUSED

14 LIMITATION.—The State neighborhood homes 

15 credit amount for a State for a calendar year 

16 shall be increased by the excess (if any) of the 

17 State neighborhood homes credit amount for 

18 such State for the preceding calendar year over 

19 the aggregate amount allocated by the neigh20 borhood homes credit agency of such State dur21 ing such preceding calendar year. Any amount 

22 carried forward under the preceding sentence 

23 shall not be carried past the third calendar year 

24 after the calendar year in which such credit 


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1 amount originally arose, determined on a first2 in, first-out basis. 

3 ‘‘(f) RESPONSIBILITIES OF NEIGHBORHOOD HOMES

4 CREDIT AGENCIES.— 

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

6 (e), the State neighborhood homes credit dollar 

7 amount shall be zero for a calendar year unless the 

8 neighborhood homes credit agency of the State— 

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

10 qualified allocation plan of the neighborhood 

11 homes credit agency, 

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

13 amounts allocated in the previous year (or for 

14 allocations made in 2023, not more than 20 

15 percent of the neighborhood homes credit ceil16 ing for such year) to projects with respect to 

17 qualified residences which— 

18 ‘‘(i) are located in census tracts de19 scribed in subsection (c)(2)(A)(iii), 

20 (c)(2)(A)(iv), (i)(5), or 

21 ‘‘(ii) are not located in a qualified 

22 census tract but meet the requirements of 

23 subsection (i)(8), 


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1 ‘‘(C) promulgates standards with respect 

2 to reasonable qualified development costs and 

3 fees, 

4 ‘‘(D) promulgates standards with respect 

5 to construction quality, 

6 ‘‘(E) in the case of any neighborhood 

7 homes credit agency which makes an allocation 

8 to a qualified project which includes any quali9 fied residence to which subsection (i) applies, 

10 promulgates standards with respect to pro11 tecting the owners of such residences, including 

12 the capacity of such owners to pay rehabilita13 tion costs not covered by the credit provided by 

14 this section and providing for the disclosure to 

15 such owners of their rights and responsibilities 

16 with respect to the rehabilitation of such resi17 dences, 

18 ‘‘(F) submits to the Secretary (at such 

19 time and in such manner as the Secretary may 

20 prescribe) an annual report specifying— 

21 ‘‘(i) the amount of the neighborhood 

22 homes credits allocated to each qualified 

23 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, substantially rehabili13 tated and sold to a qualified home14 owner, or substantially rehabilitated 

15 pursuant to subsection (i), 

16 ‘‘(IV) the eligible development 

17 costs of such qualified residence, 

18 ‘‘(V) the amount of the neighbor19 hood homes credit with respect to 

20 such qualified residence, 

21 ‘‘(VI) the sales price of such 

22 qualified residence, if applicable, and 

23 ‘‘(VII) the family income of the 

24 qualified homeowner (expressed as a 

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1 dian family income for the location of 

2 the qualified residence), and 

3 ‘‘(iii) such other information as the 

4 Secretary may require, and 

5 ‘‘(G) makes available to the general public 

6 a written explanation for any allocation of a 

7 neighborhood homes credit dollar amount which 

8 is not made in accordance with established pri9 orities and selection criteria of the neighbor10 hood homes credit agency. 

11 Subparagraph (B) shall be applied by substituting 

12 ‘40 percent’ for ‘20 percent’ each place it appears in 

13 the case of any State in which at least 45 percent 

14 of the State population resides outside metropolitan 

15 statistical areas (within the meaning of section 

16 143(k)(2)(B)) and less than 20 percent of the cen17 sus tracts located in the State are described in sub18 section (c)(2)(A)(i). 

19 ‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur20 poses of this subsection, the term ‘qualified alloca21 tion plan’ means any plan which— 

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

23 used to prioritize qualified projects for alloca24 tions of State neighborhood homes credit dollar 

25 amounts, including— 


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

2 rehabilitated owner-occupied homes in the 

3 area addressed by the project, 

4 ‘‘(ii) the expected contribution of the 

5 project to neighborhood stability and revi6 talization, including the impact on neigh7 borhood residents, 

8 ‘‘(iii) the capability and prior perform9 ance of the project sponsor, and 

10 ‘‘(iv) the likelihood the project will re11 sult in long-term homeownership, 

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

13 comment, and 

14 ‘‘(C) provides a procedure that the neigh15 borhood homes credit agency (or any agent or 

16 contractor of such agency) shall follow for pur17 poses of— 

18 ‘‘(i) identifying noncompliance with 

19 any provisions of this section, and 

20 ‘‘(ii) notifying the Internal Revenue 

21 Service of any such noncompliance of 

22 which the agency becomes aware. 

23 ‘‘(g) REPAYMENT.— 

24 ‘‘(1) IN GENERAL.— 


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

2 qualified residence is sold during the 5-year pe3 riod beginning immediately after the affordable 

4 sale of such qualified residence referred to in 

5 subsection (a), the seller shall transfer an 

6 amount equal to the repayment amount to the 

7 relevant neighborhood homes credit agency. 

8 ‘‘(B) USE OF REPAYMENTS.—A neighbor9 hood homes credit agency shall use any amount 

10 received pursuant to subparagraph (A) only for 

11 purposes of qualified projects. 

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

13 paragraph (1)(A)— 

14 ‘‘(A) IN GENERAL.—The repayment 

15 amount is an amount equal to the applicable 

16 percentage of the gain from the sale to which 

17 the repayment relates. 

18 ‘‘(B) APPLICABLE PERCENTAGE.—For 

19 purposes of subparagraph (A), the applicable 

20 percentage is 50 percent, reduced by 10 per21 centage points for each year of the 5-year pe22 riod referred to in paragraph (1)(A) which ends 

23 before the date of such sale. 

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

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1 cation under this section shall place a lien on each 

2 qualified residence that is built or rehabilitated as 

3 part of a qualified project for an amount such agen4 cy deems necessary to ensure potential repayment 

5 pursuant to paragraph (1)(A). 

6 ‘‘(4) WAIVER.— 

7 ‘‘(A) IN GENERAL.—The neighborhood 

8 homes credit agency may waive the repayment 

9 required under paragraph (1)(A) if the agency 

10 determines that making a repayment would 

11 constitute a hardship to the seller. 

12 ‘‘(B) HARDSHIP.—For purposes of sub13 paragraph (A), with respect to the seller, a 

14 hardship may include— 

15 ‘‘(i) divorce, 

16 ‘‘(ii) disability, 

17 ‘‘(iii) illness, or 

18 ‘‘(iv) any other hardship identified by 

19 the neighborhood homes credit agency for 

20 purposes of this paragraph. 

21 ‘‘(h) OTHER DEFINITIONS AND SPECIAL RULES.— 

22 For purposes of this section— 

23 ‘‘(1) NEIGHBORHOOD HOMES CREDIT AGEN24 CY.—The term ‘neighborhood homes credit agency’ 

25 means the agency designated by the governor of a 


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1 State as the neighborhood homes credit agency of 

2 the State. 

3 ‘‘(2) QUALIFIED PROJECT.—The term ‘qualified 

4 project’ means a project that a neighborhood homes 

5 credit agency certifies will build or substantially re6 habilitate one or more qualified residences. 

7 ‘‘(3) DETERMINATIONS OF FAMILY INCOME.— 

8 Rules similar to the rules of section 143(f)(2) shall 

9 apply for purposes of this section. 

10 ‘‘(4) POSSESSIONS TREATED AS STATES.—The 

11 term ‘State’ includes the District of Columbia and 

12 the possessions of the United States. 

13 ‘‘(5) SPECIAL RULES RELATED TO CONDOMIN14 IUMS AND COOPERATIVE HOUSING CORPORATIONS.— 

15 ‘‘(A) DETERMINATION OF DEVELOPMENT

16 COSTS.—In the case of a qualified residence de17 scribed in clause (ii) or (iii) of subsection 

18 (c)(1)(A), the reasonable development costs and 

19 eligible development costs of such qualified resi20 dence shall be an amount equal to such costs, 

21 respectively, of the entire condominium or coop22 erative housing property in which such qualified 

23 residence is located, multiplied by a fraction— 


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1 ‘‘(i) the numerator of which is the 

2 total floor space of such qualified resi3 dence, and 

4 ‘‘(ii) the denominator of which is the 

5 total floor space of all residences within 

6 such property. 

7 ‘‘(B) TENANT-STOCKHOLDERS OF COOPER8 ATIVE HOUSING CORPORATIONS TREATED AS

9 OWNERS.—In the case of a cooperative housing 

10 corporation (as such term is defined in section 

11 216(b)), a tenant-stockholder shall be treated 

12 as owning the house or apartment which such 

13 person is entitled to occupy. 

14 ‘‘(6) RELATED PARTY SALES NOT TREATED AS

15 AFFORDABLE SALES.— 

16 ‘‘(A) IN GENERAL.—A sale between related 

17 persons shall not be treated as an affordable 

18 sale. 

19 ‘‘(B) RELATED PERSONS.—For purposes 

20 of this paragraph, a person (in this subpara21 graph referred to as the ‘related person’) is re22 lated to any person if the related person bears 

23 a relationship to such person specified in sec24 tion 267(b) or 707(b)(1), or the related person 

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1 nesses under common control (within the mean2 ing of subsections (a) and (b) of section 52). 

3 For purposes of the preceding sentence, in ap4 plying section 267(b) or 707(b)(1), ‘10 percent’ 

5 shall be substituted for ‘50 percent’. 

6 ‘‘(7) INFLATION ADJUSTMENT.— 

7 ‘‘(A) IN GENERAL.—In the case of a cal8 endar year after 2023, the dollar amounts in 

9 subsections (b)(3)(A), (e)(3)(A)(i)(I), 

10 (e)(3)(A)(i)(II), and (i)(2)(C) shall each be in11 creased by an amount equal to— 

12 ‘‘(i) such dollar amount, multiplied by 

13 ‘‘(ii) the cost-of-living adjustment de14 termined under section 1(f)(3) for such 

15 calendar year by substituting ‘calendar 

16 year 2022’ for ‘calendar year 2016’ in sub17 paragraph (A)(ii) thereof. 

18 ‘‘(B) ROUNDING.— 

19 ‘‘(i) In the case of the dollar amounts 

20 in subsections (b)(3)(A) and (i)(2)(C), any 

21 increase under paragraph (1) which is not 

22 a multiple of $1,000 shall be rounded to 

23 the nearest multiple of $1,000. 

24 ‘‘(ii) In the case of the dollar amount 

25 in subsection (e)(3)(A)(i)(I), any increase 


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1 under paragraph (1) which is not a mul2 tiple of $0.01 shall be rounded to the near3 est multiple of $0.01. 

4 ‘‘(iii) In the case of the dollar amount 

5 in subsection (e)(3)(A)(i)(II), any increase 

6 under paragraph (1) which is not a mul7 tiple of $100,000 shall be rounded to the 

8 nearest multiple of $100,000. 

9 ‘‘(8) REPORT.— 

10 ‘‘(A) IN GENERAL.—The Secretary shall 

11 annually issue a report, to be made available to 

12 the public, which contains the information sub13 mitted pursuant to subsection (f)(1)(F). 

14 ‘‘(B) DE-IDENTIFICATION.—The Secretary 

15 shall ensure that any information made public 

16 pursuant to subparagraph (A) excludes any in17 formation that would allow for the identification 

18 of qualified homeowners. 

19 ‘‘(9) LIST OF QUALIFIED CENSUS TRACTS.— 

20 The Secretary of Housing and Urban Development 

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

22 qualified census tracts under— 

23 ‘‘(A) on a combined basis, clauses (i) and 

24 (ii) of subsection (c)(2)(A), 

25 ‘‘(B) clause (iii) of such subsection, and 


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1 ‘‘(C) subsection (i)(5)(A). 

2 ‘‘(10) DENIAL OF DEDUCTIONS IF CONVERTED

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

4 beginning immediately after the affordable sale of a 

5 qualified residence referred to in subsection (a), an 

6 individual who owns a qualified residence (whether 

7 or not such individual was the purchaser in such af8 fordable sale) fails to use such qualified residence as 

9 such individual’s principal residence for any period 

10 of time, no deduction shall be allowed for expenses 

11 paid or incurred by such individual with respect to 

12 renting, during such period of time, such qualified 

13 residence. 

14 ‘‘(i) APPLICATION OF CREDIT WITH RESPECT TO

15 OWNER-OCCUPIED REHABILITATIONS.— 

16 ‘‘(1) IN GENERAL.—In the case of a qualified 

17 rehabilitation by the taxpayer of any qualified resi18 dence which is owned (as of the date that the writ19 ten binding contract referred to in paragraph (3) is 

20 entered into) by a specified homeowner, the rules of 

21 paragraphs (2) through (7) shall apply. 

22 ‘‘(2) ALTERNATIVE CREDIT DETERMINATION.— 

23 In the case of any qualified residence described in 

24 paragraph (1), the neighborhood homes credit deter25 mined under subsection (a) with respect to such resVerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657

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1 idence shall (in lieu of any credit otherwise deter2 mined under subsection (a) with respect to such res3 idence) be allowed in the taxable year during which 

4 the qualified rehabilitation is completed (as deter5 mined by the neighborhood homes credit agency) 

6 and shall be equal to the least of— 

7 ‘‘(A) the excess (if any) of— 

8 ‘‘(i) the amounts paid or incurred by 

9 the taxpayer for the qualified rehabilitation 

10 of the qualified residence to the extent that 

11 such amounts are certified by the neigh12 borhood homes credit agency (at the time 

13 of the completion of such rehabilitation) as 

14 meeting the standards specified pursuant 

15 to subsection (f)(1)(C), over 

16 ‘‘(ii) any amounts paid to such tax17 payer for such rehabilitation, 

18 ‘‘(B) 50 percent of the amounts described 

19 in subparagraph (A)(i), or 

20 ‘‘(C) $50,000. 

21 ‘‘(3) QUALIFIED REHABILITATION.— 

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

23 subsection, the term ‘qualified rehabilitation’ 

24 means a rehabilitation or reconstruction per25 formed pursuant to a written binding contract 


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1 between the taxpayer and the specified home2 owner if the amount paid or incurred by the 

3 taxpayer in the performance of such rehabilita4 tion or reconstruction exceeds the dollar 

5 amount in effect under subsection (b)(3)(A). 

6 ‘‘(B) APPLICATION OF LIMITATION TO EX7 PENSES PAID OR INCURRED AFTER ALLOCA8 TION.—A rule similar to the rule of section 

9 (b)(4) shall apply for purposes of this sub10 section. 

11 ‘‘(4) SPECIFIED HOMEOWNER.—For purposes 

12 of this subsection, the term ‘qualified homeowner’ 

13 means, with respect to a qualified residence, an indi14 vidual— 

15 ‘‘(A) who owns and uses such qualified res16 idence as the principal residence of such indi17 vidual as of the date that the written binding 

18 contract referred to in paragraph (3) is entered 

19 into, and 

20 ‘‘(B) whose family income (determined as 

21 of such date) does not exceed the median family 

22 income for the applicable area (with respect to 

23 the census tract in which the qualified residence 

24 is located). 


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1 ‘‘(5) ADDITIONAL CENSUS TRACTS IN WHICH

2 OWNER-OCCUPIED RESIDENCES MAY BE LOCATED.— 

3 In the case of any qualified residence described in 

4 paragraph (1), the term ‘qualified census tract’ in5 cludes any census tract which— 

6 ‘‘(A) meets the requirements of subsection 

7 (c)(2)(A)(i) without regard to subclause (III) 

8 thereof, and 

9 ‘‘(B) is designated by the neighborhood 

10 homes credit agency for purposes of this para11 graph. 

12 ‘‘(6) MODIFICATION OF REPAYMENT REQUIRE13 MENT.—In the case of any qualified residence de14 scribed in paragraph (1), subsection (g) shall be ap15 plied by beginning the 5-year period otherwise de16 scribed therein on the date on which the qualified 

17 homeowner acquired such residence. 

18 ‘‘(7) RELATED PARTIES.—Paragraph (1) shall 

19 not apply if the taxpayer is the owner of the quali20 fied residence described in paragraph (1) or is re21 lated (within the meaning of subsection (h)(6)(B)) 

22 to such owner. 

23 ‘‘(8) PYRRHOTITE REMEDIATION.—The require24 ment of subsection (c)(1)(C) shall not apply to a 

25 qualified rehabilitation under this subsection of a 


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1 qualified residence that is documented by an engi2 neer’s report and core testing to have a foundation 

3 that is adversely impacted by pyrrhotite or other 

4 iron sulfide minerals. 

5 ‘‘(j) REGULATIONS.—The Secretary shall prescribe 

6 such regulations as may be necessary or appropriate to 

7 carry out the purposes of this section, including regula8 tions that prevent avoidance of the rules, and abuse of 

9 the purposes, of this section.’’. 

10 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI11 NESS CREDIT.—Section 38(b) of the Internal Revenue 

12 Code of 1986 is amended by striking ‘‘plus’’ at the end 

13 of paragraph (37), by striking the period at the end of 

14 paragraph (38) and inserting ‘‘, plus’’, and by adding at 

15 the end the following new paragraph: 

16 ‘‘(39) the neighborhood homes credit deter17 mined under section 42A(a).’’. 

18 (c) CREDIT ALLOWED AGAINST ALTERNATIVE MIN19 IMUM TAX.—Section 38(c)(4)(B) of the Internal Revenue 

20 Code of 1986 is amended by redesignating clauses (iv) 

21 through (xii) as clauses (v) through (xiii), respectively, and 

22 by inserting after clause (iii) the following new clause: 

23 ‘‘(iv) the credit determined under sec24 tion 42A,’’. 

25 (d) BASIS ADJUSTMENTS.— 


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1 (1) ENERGY EFFICIENT HOME IMPROVEMENT

2 CREDIT.—Section 25C(g) of the Internal Revenue 

3 Code of 1986 is amended by adding after the first 

4 sentence the following new sentence: ‘‘This sub5 section shall not apply for purposes of determining 

6 the eligible development costs or adjusted basis of 

7 any building under section 42A.’’. 

8 (2) RESIDENTIAL CLEAN ENERGY CREDIT.— 

9 Section 25D(f) of such Code is amended by adding 

10 after the first sentence the following new sentence: 

11 ‘‘This subsection shall not apply for purposes of de12 termining the eligible development costs or adjusted 

13 basis of any building under section 42A.’’. 

14 (3) NEW ENERGY EFFICIENT HOME CREDIT.— 

15 Section 45L(e) of such Code is amended by inserting 

16 ‘‘or for purposes of determining the eligible develop17 ment costs or adjusted basis of any building under 

18 section 42A’’ after ‘‘section 42’’. 

19 (e) EXCLUSION FROM GROSS INCOME.—Part III of 

20 subchapter B of chapter 1 of the Internal Revenue Code 

21 of 1986 is amended by inserting before section 140 the 

22 following new section: 


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1 ‘‘SEC. 139J. STATE ENERGY SUBSIDIES FOR QUALIFIED 

2 RESIDENCES. 

3 ‘‘(a) EXCLUSION FROM GROSS INCOME.—Gross in4 come shall not include the value of any subsidy provided 

5 to a taxpayer (whether directly or indirectly) by any State 

6 energy office (as defined in section 124(a) of the Energy 

7 Policy Act of 2005 (42 U.S.C. 15821(a))) for purposes 

8 of any energy improvements made to a qualified residence 

9 (as defined in section 42A(c)(1)).’’. 

10 (f) CONFORMING AMENDMENTS.— 

11 (1) Subsections (i)(3)(C), (i)(6)(B)(i), and 

12 (k)(1) of section 469 of the Internal Revenue Code 

13 of 1986 are each amended by inserting ‘‘or 42A’’ 

14 after ‘‘section 42’’. 

15 (2) The table of sections for subpart D of part 

16 IV of subchapter A of chapter 1 of such Code is 

17 amended by inserting after the item relating to sec18 tion 42 the following new item: 

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

19 (3) The table of sections for part III of sub20 chapter B of chapter 1 of such Code is amended by 

21 inserting before the item relating to section 140 the 

22 following new item: 

‘‘Sec. 139J. State energy subsidies for qualified residences.’’. 


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1 (g) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2023. 

Æ 


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