II

107TH CONGRESS

1ST SESSION S. 1396

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 SENATE OF THE UNITED STATES

SEPTEMBER 4, 2001

Mr. CONRAD (for himself and Mr. HUTCHINSON) 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 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. CREDIT FOR FIRST-TIME HOMEBUYERS.

4 (a) IN GENERAL.—Subpart A of part IV of sub5 chapter A of chapter 1 of the Internal Revenue Code of

6 1986 (relating to nonrefundable personal credits) is

7 amended by inserting before section 26 the following new

8 section:
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1 ‘‘SEC. 25C. PURCHASE OF PRINCIPAL RESIDENCE BY FIRST2 TIME HOMEBUYER.

3 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in4 dividual who is a first-time homebuyer of a principal resi5 dence in the United States during any taxable year, there

6 shall be allowed as a credit against the tax imposed by

7 this chapter for the taxable year an amount equal to 10

8 percent of the purchase price of the residence.

9 ‘‘(b) LIMITATIONS.—

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

11 under subsection (a) shall not exceed $6,500.

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

13 credit under this section shall be allowed with re14 spect to only one residence of the taxpayer.

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

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

17 return, the credit under this section is allowable only

18 if both the husband and wife are first-time home19 buyers, and the amount specified under paragraph

20 (1) shall apply to the joint return.

21 ‘‘(4) MARRIED INDIVIDUALS FILING SEPA22 RATELY.—In the case of a married individual filing

23 a separate return, the credit under this section is al24 lowable only if the individual is a first-time home25 buyer, and subsection (a) shall be applied by sub26 stituting ‘$3,250’ for ‘$6,500’.
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1 ‘‘(5) OTHER TAXPAYERS.—If 2 or more individ2 uals who are not married purchase a principal resi3 dence, the amount of the credit allowed under sub4 section (a) shall be allocated among such individuals

5 in such manner as the Secretary may prescribe, ex6 cept that the total amount of the credits allowed to

7 all such individuals shall not exceed $6,500.

8 ‘‘(c) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) FIRST-TIME HOMEBUYER.—

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

11 homebuyer’ means any individual is such indi12 vidual (and if married, such individual’s spouse)

13 had no present ownership interest in a principal

14 residence in the United States during the 3-

15 year period ending on the date of the purchase

16 of the principal residence to which this section

17 applies.

18 ‘‘(B) ONE-TIME ONLY.—If an individual is

19 treated as a first-time homebuyer with respect

20 to any principal residence, such individual may

21 not be treated as a first-time homebuyer with

22 respect to any other principal residence.

23 ‘‘(2) PRINCIPAL RESIDENCE.—The term ‘prin24 cipal residence’ has the same meaning as when used

25 in section 121.
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1 ‘‘(3) PURCHASE AND PURCHASE PRICE.—The

2 terms ‘purchase’ and ‘purchase price’ have the

3 meanings provided by section 1400C(e).

4 ‘‘(d) CARRYFORWARD OF UNUSED CREDIT.—If the

5 credit allowable under subsection (a) for any taxable year

6 exceeds the limitation imposed by section 26(a) for such

7 taxable year reduced by the sum of the credits allowable

8 under this subpart (other than this section and sections

9 23, 24, 25, 25B, and 1400C) and section 27, such excess

10 shall be carried to the succeeding taxable year and added

11 to the credit allowable under subsection (a) for such tax12 able year.

13 ‘‘(e) REPORTING.—If the Secretary requires informa14 tion reporting under section 6045 by a person described

15 in subsection (e)(2) thereof to verify the eligibility of tax16 payers for the credit allowable by this section, the excep17 tion provided by section 6045(e)(5) shall not apply.

18 ‘‘(f) DENIAL OF DOUBLE BENEFIT.—No credit shall

19 be allowed under subsection (a) if the credit under section

20 1400C is allowed.

21 ‘‘(g) BASIS ADJUSTMENT.—For purposes of this sub22 title, if a credit is allowed under this section with respect

23 to the purchase of any residence, the basis of such resi24 dence shall be reduced by the amount of the credit so al25 lowed.
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1 ‘‘(h) PROPERTY TO WHICH SECTION APPLIES.—The

2 provisions of this section apply to a principal residence if

3 the taxpayer enters into, on or after September 1, 2001,

4 and before September 1, 2002, a binding contract to pur5 chase the residence, and purchases and occupies the resi6 dence before April 1, 2003.’’.

7 (b) CONFORMING AMENDMENTS.—

8 (1) Subsection (a) of section 1016 of the Inter9 nal Revenue Code of 1986 (relating to general rule

10 for adjustments to basis) is amended by striking

11 ‘‘and’’ at the end of paragraph (26), by striking the

12 period at the end of paragraph (27) and inserting ‘‘,

13 and’’, and by adding at the end the following new

14 paragraph:

15 ‘‘(28) in the case of a residence with respect to

16 which a credit was allowed under section 25C, to the

17 extent provided in section 25C(g).’’.

18 (2) Subsection (a) of section 1016 of the Inter19 nal Revenue Code of 1986 (relating to general rule

20 for adjustments to basis), as amended by section

21 205(b)(3) of the Economic Growth and Tax Relief

22 Reconciliation Act of 2001, is amended by striking

23 ‘‘and’’ at the end of paragraph (27), by striking the

24 period at the end of paragraph (28) and inserting ‘‘,
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•S 1396 IS

1 and’’, and by adding at the end the following new

2 paragraph:

3 ‘‘(29) in the case of a residence with respect to

4 which a credit was allowed under section 25C, to the

5 extent provided in section 25C(g).’’.

6 (3) Section 23(b)(4)(B) of such Code, as added

7 by section 202(f)(1) of the Economic Growth and

8 Tax Relief Reconciliation Act of 2001, is amended

9 by inserting ‘‘and section 25C’’ after ‘‘this section’’.

10 (4) Section 24(b)(3)(B) of such Code, as added

11 and amended by the Economic Growth and Tax Re12 lief Reconciliation Act of 2001, is amended by strik13 ing ‘‘23 and 25B’’ and inserting ‘‘23, 25B, and

14 25C’’.

15 (5) Section 25(e)(1)(C) of such Code is amend16 ed by striking ‘‘23 and 1400C’’ and by inserting

17 ‘‘23, 25C, and 1400C’’.

18 (6) Section 25(e)(1)(C) of such Code, as

19 amended by the Economic Growth and Tax Relief

20 Reconciliation Act of 2001, is amended by inserting

21 ‘‘25C,’’ after ‘‘25B,’’.

22 (7) Section 25B of such Code, as added by sec23 tion 618(a) of the Economic Growth and Tax Relief

24 Reconciliation Act of 2001, is amended by striking

25 ‘‘section 23’’ and inserting ‘‘sections 23 and 25C’’.
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1 (8) Section 1400C(d) of such Code is amended

2 by inserting ‘‘and section 25C’’ after ‘‘this section’’.

3 (9) Section 1400C(d) of such Code, as amended

4 by the Economic Growth and Tax Relief Reconcili5 ation Act of 2001, is amended by striking ‘‘and

6 25B’’ and inserting ‘‘25B, and 25C’’.

7 (10) The table of sections for subpart A of part

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

9 amended by inserting before the item relating to sec10 tion 26 the following new item:

‘‘Sec. 25C. Purchase of principal residence by first-time homebuyer.’’.

11 (c) EFFECTIVE DATES.—

12 (1) IN GENERAL.—The amendments made by

13 subsections (a) and (b)(10) shall apply to taxable

14 years beginning after December 31, 2000.

15 (2) TEMPORARY CONFORMING AMENDMENTS.—

16 The amendments made by paragraphs (1), (5), and

17 (8) of subsection (b) shall apply to taxable years be18 ginning after December 31, 2000, and before Janu19 ary 1, 2002.

20 (3) PERMANENT CONFORMING AMENDMENTS.—

21 The amendments made by paragraphs (2), (3), (4),

22 (6), (7), and (9) of subsection (b) shall apply to tax23 able years beginning after December 31, 2001.

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