II 

109TH CONGRESS 

1ST SESSION S. 1213 

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

against income tax for the purchase of a principal residence by a firsttime homebuyer. 

IN THE SENATE OF THE UNITED STATES 

JUNE 9, 2005 

Ms. STABENOW (for herself and Mr. SMITH) 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 

refundable 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. SHORT TITLE. 

4 This Act may be cited as the ‘‘First-Time Home5 buyers’ Tax Credit Act of 2005’’. 

6 SEC. 2. REFUNDABLE CREDIT FOR FIRST-TIME HOME7 BUYERS. 

8 (a) IN GENERAL.—Subpart C of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of 
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1 1986 (relating to refundable credits) is amended by redes2 ignating section 36 as section 37 and by inserting after 

3 section 35 the following new section: 

4 ‘‘SEC. 36. PURCHASE OF PRINCIPAL RESIDENCE BY FIRST5 TIME HOMEBUYER. 

6 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in7 dividual who is a first-time homebuyer of a principal resi8 dence in the United States during any taxable year, there 

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

10 this subtitle for the taxable year an amount equal to 10 

11 percent of the purchase price of the residence. 

12 ‘‘(b) LIMITATIONS.— 

13 ‘‘(1) MAXIMUM DOLLAR AMOUNT.— 

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

15 under subsection (a) shall not exceed the excess 

16 (if any) of— 

17 ‘‘(i) $3,000 (2 times such amount in 

18 the case of a joint return), over 

19 ‘‘(ii) the credit transfer amount deter20 mined under subsection (c) with respect to 

21 the purchase to which subsection (a) ap22 plies. 

23 ‘‘(B) INFLATION ADJUSTMENT.—In the 

24 case of any taxable year beginning after Decem25 ber 31, 2005, the $3,000 amount under sub-
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1 paragraph (A) shall be increased by an amount 

2 equal to $3,000, multiplied by the cost-of-living 

3 adjustment determined under section 1(f)(3) for 

4 the calendar year in which the taxable year be5 gins by substituting ‘2004’ for ‘1992’ in sub6 paragraph (B) thereof. If the $3,000 amount as 

7 adjusted under the preceding sentence is not a 

8 multiple of $10, such amount shall be rounded 

9 to the nearest multiple of $10. 

10 ‘‘(2) TAXABLE INCOME LIMITATION.— 

11 ‘‘(A) IN GENERAL.—If the taxable income 

12 of the taxpayer for any taxable year exceeds the 

13 maximum taxable income in the table under 

14 subsection (a), (b), (c), or (d) of section 1, 

15 whichever is applicable, to which the 25 percent 

16 rate applies, the dollar amounts in effect under 

17 paragraph (1)(A)(i) for such taxpayer for the 

18 following taxable year shall be reduced (but not 

19 below zero) by the amount of the excess. 

20 ‘‘(B) CHANGE IN RETURN STATUS.—In the 

21 case of married individuals filing a joint return 

22 for any taxable year who did not file such a 

23 joint return for the preceding taxable year, sub24 paragraph (A) shall be applied by reference to 
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1 the highest taxable income of either such indi2 vidual for the preceding taxable year. 

3 ‘‘(c) TRANSFER OF CREDIT.— 

4 ‘‘(1) IN GENERAL.—A taxpayer may transfer 

5 all or a portion of the credit allowable under sub6 section (a) to 1 or more persons as payment of any 

7 liability of the taxpayer arising out of— 

8 ‘‘(A) the downpayment of any portion of 

9 the purchase price of the principal residence, 

10 and 

11 ‘‘(B) closing costs in connection with the 

12 purchase (including any points or other fees in13 curred in financing the purchase). 

14 ‘‘(2) CREDIT TRANSFER MECHANISM.— 

15 ‘‘(A) IN GENERAL.—Not less than 180 

16 days after the date of the enactment of this sec17 tion, the Secretary shall establish and imple18 ment a credit transfer mechanism for purposes 

19 of paragraph (1). Such mechanism shall require 

20 the Secretary to— 

21 ‘‘(i) certify that the taxpayer is eligi22 ble to receive the credit provided by this 

23 section with respect to the purchase of a 

24 principal residence and that the transferee 

25 is eligible to receive the credit transfer, 
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1 ‘‘(ii) certify that the taxpayer has not 

2 received the credit provided by this section 

3 with respect to the purchase of any other 

4 principal residence, 

5 ‘‘(iii) certify the credit transfer 

6 amount which will be paid to the trans7 feree, and 

8 ‘‘(iv) require any transferee that di9 rectly receives the credit transfer amount 

10 from the Secretary to notify the taxpayer 

11 within 14 days of the receipt of such 

12 amount. 

13 Any check, certificate, or voucher issued by the 

14 Secretary pursuant to this paragraph shall in15 clude the taxpayer identification number of the 

16 taxpayer and the address of the principal resi17 dence being purchased. 

18 ‘‘(B) TIMELY RECEIPT.—The Secretary 

19 shall issue the credit transfer amount not less 

20 than 30 days after the date of the receipt of an 

21 application for a credit transfer. 

22 ‘‘(3) PAYMENT OF INTEREST.— 

23 ‘‘(A) IN GENERAL.—Notwithstanding any 

24 other provision of this title, the Secretary shall 

25 pay interest on any amount which is not paid 
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1 to a person during the 30-day period described 

2 in paragraph (2)(B). 

3 ‘‘(B) AMOUNT OF INTEREST.—Interest 

4 under subparagraph (A) shall be allowed and 

5 paid— 

6 ‘‘(i) from the day after the 30-day pe7 riod described in paragraph (2)(B) to the 

8 date payment is made, and 

9 ‘‘(ii) at the overpayment rate estab10 lished under section 6621. 

11 ‘‘(C) EXCEPTION.—This paragraph shall 

12 not apply to failures to make payments as a re13 sult of any natural disaster or other cir14 cumstance beyond the control of the Secretary. 

15 ‘‘(4) EFFECT ON LEGAL RIGHTS AND OBLIGA16 TIONS.—Nothing in this subsection shall be con17 strued to— 

18 ‘‘(A) require a lender to complete a loan 

19 transaction before the credit transfer amount 

20 has been transferred to the lender, or 

21 ‘‘(B) prevent a lender from altering the 

22 terms of a loan (including the rate, points, fees, 

23 and other costs) due to changes in market con24 ditions or other factors during the period of 

25 time between the application by the taxpayer 
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1 for a credit transfer and the receipt by the 

2 lender of the credit transfer amount. 

3 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur4 poses of this section— 

5 ‘‘(1) FIRST-TIME HOMEBUYER.— 

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

7 homebuyer’ has the same meaning as when 

8 used in section 72(t)(8)(D)(i). 

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

10 treated as a first-time homebuyer with respect 

11 to any principal residence, such individual may 

12 not be treated as a first-time homebuyer with 

13 respect to any other principal residence. 

14 ‘‘(C) MARRIED INDIVIDUALS FILING

15 JOINTLY.—In the case of married individuals 

16 who file a joint return, the credit under this 

17 section is allowable only if both individuals are 

18 first-time homebuyers. 

19 ‘‘(D) OTHER TAXPAYERS.—If 2 or more 

20 individuals who are not married purchase a 

21 principal residence— 

22 ‘‘(i) the credit under this section is al23 lowable only if each of the individuals is a 

24 first-time homebuyer, and 
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1 ‘‘(ii) the amount of the credit allowed 

2 under subsection (a) shall be allocated 

3 among such individuals in such manner as 

4 the Secretary may prescribe, except that 

5 the total amount of the credits allowed to 

6 all such individuals shall not exceed the 

7 amount in effect under subsection 

8 (b)(1)(A) for individuals filing joint re9 turns. 

10 ‘‘(2) PRINCIPAL RESIDENCE.—The term ‘prin11 cipal residence’ has the same meaning as when used 

12 in section 121. Except as provided in regulations, an 

13 interest in a partnership, S corporation, or trust 

14 which owns an interest in a residence shall not be 

15 treated as an interest in a residence for purposes of 

16 this paragraph. 

17 ‘‘(3) PURCHASE.— 

18 ‘‘(A) IN GENERAL.—The term ‘purchase’ 

19 means any acquisition, but only if— 

20 ‘‘(i) the property is not acquired from 

21 a person whose relationship to the person 

22 acquiring it would result in the disallow23 ance of losses under section 267 or 707(b) 

24 (but, in applying section 267 (b) and (c) 

25 for purposes of this section, paragraph (4) 
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1 of section 267(c) shall be treated as pro2 viding that the family of an individual shall 

3 include only the individual’s spouse, ances4 tors, and lineal descendants), and 

5 ‘‘(ii) the basis of the property in the 

6 hands of the person acquiring it is not de7 termined— 

8 ‘‘(I) in whole or in part by ref9 erence to the adjusted basis of such 

10 property in the hands of the person 

11 from whom acquired, or 

12 ‘‘(II) under section 1014(a) (re13 lating to property acquired from a de14 cedent). 

15 ‘‘(B) CONSTRUCTION.—A residence which 

16 is constructed by the taxpayer shall be treated 

17 as purchased by the taxpayer. 

18 ‘‘(4) PURCHASE PRICE.—The term ‘purchase 

19 price’ means the adjusted basis of the principal resi20 dence on the date of acquisition (within the meaning 

21 of section 72(t)(8)(D)(iii)). 

22 ‘‘(e) DENIAL OF DOUBLE BENEFIT.—No credit shall 

23 be allowed under subsection (a) for any expense for which 

24 a deduction or credit is allowed under any other provision 

25 of this chapter. 
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1 ‘‘(f) BASIS ADJUSTMENT.—For purposes of this sub2 title, if a credit is allowed under this section with respect 

3 to the purchase of any residence, the basis of such resi4 dence shall be reduced by the amount of the credit so al5 lowed. 

6 ‘‘(g) PROPERTY TO WHICH SECTION APPLIES.— 

7 ‘‘(1) IN GENERAL.—The provisions of this sec8 tion apply to a principal residence if— 

9 ‘‘(A) the taxpayer purchases the residence 

10 on or after January 1, 2005, and before Janu11 ary 1, 2010, or 

12 ‘‘(B) the taxpayer enters into, on or after 

13 January 1, 2005, and before January 1, 2010, 

14 a binding contract to purchase the residence, 

15 and purchases and occupies the residence before 

16 July 1, 2011.’’. 

17 (b) CONFORMING AMENDMENTS.— 

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

20 for adjustments to basis) is amended by striking 

21 ‘‘and’’ at the end of paragraph (30), by striking the 

22 period at the end of paragraph (31) and inserting ‘‘, 

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

24 paragraph: 
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1 ‘‘(32) in the case of a residence with respect to 

2 which a credit was allowed under section 36, to the 

3 extent provided in section 36(f).’’. 

4 (2) Section 1324(b)(2) of title 31, United 

5 States Code, is amended by striking ‘‘or’’ before 

6 ‘‘enacted’’ and by inserting before the period at the 

7 end ‘‘, or from section 36 of such Code’’. 

8 (c) CLERICAL AMENDMENT.—The table of sections 

9 for subpart C of part IV of subchapter A of chapter 1 

10 of the Internal Revenue Code of 1986 is amended by strik11 ing the item relating to section 36 and inserting the fol12 lowing new items: 

‘‘Sec. 36. Purchase of principal residence by first-time homebuyer. 

‘‘Sec. 37. Overpayments of tax.’’. 

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

14 this section shall apply to taxable years beginning after 

15 December 31, 2004. 

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