II 

109TH CONGRESS 

1ST SESSION S. 132 

To amend the Internal Revenue Code of 1986 to allow a deduction for 

premiums on mortgage insurance, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 24, 2005 

Mr. SMITH (for himself and Mrs. LINCOLN) 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 

deduction for premiums on mortgage insurance, 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 ‘‘Mortgage Insurance 

5 Fairness Act’’. 

6 SEC. 2. PREMIUMS FOR MORTGAGE INSURANCE. 

7 (a) IN GENERAL.—Paragraph (3) of section 163(h) 

8 of the Internal Revenue Code of 1986 (relating to quali9 fied residence interest) is amended by adding after sub10 paragraph (D) the following new subparagraph: 
2 

•S 132 IS

1 ‘‘(E) MORTGAGE INSURANCE PREMIUMS

2 TREATED AS INTEREST.— 

3 ‘‘(i) IN GENERAL.—Premiums paid or 

4 accrued for qualified mortgage insurance 

5 by a taxpayer during the taxable year in 

6 connection with acquisition indebtedness 

7 with respect to a qualified residence of the 

8 taxpayer shall be treated for purposes of 

9 this subsection as qualified residence inter10 est. 

11 ‘‘(ii) PHASEOUT.—The amount other12 wise allowable as a deduction under clause 

13 (i) shall be reduced (but not below zero) by 

14 10 percent of such amount for each $1,000 

15 ($500 in the case of a married individual 

16 filing a separate return) (or fraction there17 of) that the taxpayer’s adjusted gross in18 come for the taxable year exceeds 

19 $100,000 ($50,000 in the case of a mar20 ried individual filing a separate return).’’. 

21 (b) DEFINITION AND SPECIAL RULES.—Paragraph 

22 (4) of section 163(h) of the Internal Revenue Code of 

23 1986 (relating to other definitions and special rules) is 

24 amended by adding at the end the following new subpara25 graphs: 
3 

•S 132 IS

1 ‘‘(E) QUALIFIED MORTGAGE INSUR2 ANCE.—The term ‘qualified mortgage insur3 ance’ means— 

4 ‘‘(i) mortgage insurance provided by 

5 the Veterans Administration, the Federal 

6 Housing Administration, or the Rural 

7 Housing Administration, and 

8 ‘‘(ii) private mortgage insurance (as 

9 defined by section 2 of the Homeowners 

10 Protection Act of 1998 (12 U.S.C. 4901), 

11 as in effect on the date of the enactment 

12 of this subparagraph). 

13 ‘‘(F) SPECIAL RULES FOR PREPAID QUALI14 FIED MORTGAGE INSURANCE.—Any amount 

15 paid by the taxpayer for qualified mortgage in16 surance that is properly allocable to any mort17 gage the payment of which extends to periods 

18 that are after the close of the taxable year in 

19 which such amount is paid shall be chargeable 

20 to capital account and shall be treated as paid 

21 in such periods to which so allocated. No deduc22 tion shall be allowed for the unamortized bal23 ance of such account if such mortgage is satis24 fied before the end of its term. The preceding 

25 sentences shall not apply to amounts paid for 
4 

•S 132 IS

1 qualified mortgage insurance provided by the 

2 Veterans Administration or the Rural Housing 

3 Administration.’’. 

4 SEC. 3. INFORMATION RETURNS RELATING TO MORTGAGE 

5 INSURANCE. 

6 Section 6050H of the Internal Revenue Code of 1986 

7 (relating to returns relating to mortgage interest received 

8 in trade or business from individuals) is amended by add9 ing at the end the following new subsection: 

10 ‘‘(h) RETURNS RELATING TO MORTGAGE INSURANCE

11 PREMIUMS.— 

12 ‘‘(1) IN GENERAL.—The Secretary may pre13 scribe, by regulations, that any person who, in the 

14 course of a trade or business, receives from any indi15 vidual premiums for mortgage insurance aggregating 

16 $600 or more for any calendar year, shall make a 

17 return with respect to each such individual. Such re18 turn shall be in such form, shall be made at such 

19 time, and shall contain such information as the Sec20 retary may prescribe. 

21 ‘‘(2) STATEMENT TO BE FURNISHED TO INDI22 VIDUALS WITH RESPECT TO WHOM INFORMATION IS

23 REQUIRED.—Every person required to make a re24 turn under paragraph (1) shall furnish to each indi25 vidual with respect to whom a return is made a writ-
5 

•S 132 IS

1 ten statement showing such information as the Sec2 retary may prescribe. Such written statement shall 

3 be furnished on or before January 31 of the year 

4 following the calendar year for which the return 

5 under paragraph (1) was required to be made. 

6 ‘‘(3) SPECIAL RULES.—For purposes of this 

7 subsection— 

8 ‘‘(A) rules similar to the rules of sub9 section (c) shall apply, and 

10 ‘‘(B) the term ‘mortgage insurance’ 

11 means— 

12 ‘‘(i) mortgage insurance provided by 

13 the Veterans Administration, the Federal 

14 Housing Administration, or the Rural 

15 Housing Administration, and 

16 ‘‘(ii) private mortgage insurance (as 

17 defined by section 2 of the Homeowners 

18 Protection Act of 1998 (12 U.S.C. 4901), 

19 as in effect on the date of the enactment 

20 of this subsection).’’. 

21 SEC. 4. EFFECTIVE DATE. 

22 The amendments made by this Act shall apply to 

23 amounts paid or accrued after the date of enactment of 

24 this Act in taxable years ending after such date. 

Æ