II 

118TH CONGRESS 

1ST SESSION S. 3436 

To amend the Internal Revenue Code of 1986 to provide a credit for middleincome housing, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 7, 2023 

Mr. WYDEN (for himself and Mr. SULLIVAN) 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 provide 

a credit for middle-income housing, 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 ‘‘Workforce Housing 

5 Tax Credit Act’’. 

6 SEC. 2. MIDDLE-INCOME HOUSING TAX CREDIT. 

7 (a) IN GENERAL.—Subpart D of part IV of sub8 chapter A of chapter 1 of the Internal Revenue Code of 

9 1986 is amended by inserting after section 42 the fol10 lowing new section: 


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1 ‘‘SEC. 42A. MIDDLE-INCOME HOUSING CREDIT. 

2 ‘‘(a) IN GENERAL.—For purposes of section 38, the 

3 amount of the middle-income housing credit determined 

4 under this section for any taxable year in the credit period 

5 shall be an amount equal to— 

6 ‘‘(1) the applicable percentage, of 

7 ‘‘(2) the qualified basis of each qualified mid8 dle-income building. 

9 ‘‘(b) APPLICABLE PERCENTAGE.— 

10 ‘‘(1) DETERMINATION OF APPLICABLE PER11 CENTAGE.—For purposes of this section— 

12 ‘‘(A) IN GENERAL.—The term ‘applicable 

13 percentage’ means, with respect to any building, 

14 the appropriate percentage prescribed by the 

15 Secretary for the earlier of— 

16 ‘‘(i) the month in which such building 

17 is placed in service, or 

18 ‘‘(ii) at the election of the taxpayer, 

19 the month in which the taxpayer and the 

20 housing credit agency enter into an agree21 ment with respect to such building (which 

22 is binding on such agency, the taxpayer, 

23 and all successors in interest) as to the 

24 housing credit dollar amount to be allo25 cated to such building. 


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1 A month may be elected under clause (ii) only 

2 if the election is made not later than the 5th 

3 day after the close of such month. Such an elec4 tion, once made, shall be irrevocable. 

5 ‘‘(B) METHOD OF PRESCRIBING PERCENT6 AGES.—The percentages prescribed by the Sec7 retary for any month shall be percentages which 

8 will yield over a 15-year period amounts of 

9 credit under subsection (a) which have a 

10 present value equal to— 

11 ‘‘(i) 50 percent of the qualified basis 

12 of a new building which is not federally 

13 subsidized for the taxable year, and 

14 ‘‘(ii) 20 percent of the qualified basis 

15 of a building not described in clause (i). 

16 ‘‘(C) METHOD OF DISCOUNTING.—The 

17 present value under subparagraph (B) shall be 

18 determined— 

19 ‘‘(i) as of the last day of the 1st year 

20 of the 15-year period referred to in sub21 paragraph (B), 

22 ‘‘(ii) by using a discount rate equal to 

23 72 percent of the average of the annual 

24 Federal mid-term rate and the annual 

25 Federal long-term rate applicable under 


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1 section 1274(d)(1) to the month applicable 

2 under clause (i) or (ii) of subparagraph 

3 (A) and compounded annually, and 

4 ‘‘(iii) by assuming that the credit al5 lowable under this section for any year is 

6 received on the last day of such year. 

7 ‘‘(2) MINIMUM CREDIT RATE.— 

8 ‘‘(A) IN GENERAL.—The applicable per9 centage for any building which is not federally 

10 subsidized for the taxable year shall not be less 

11 than 5 percent. 

12 ‘‘(B) MINIMUM CREDIT RATE FOR FEDER13 ALLY SUBSIDIZED BUILDINGS.—In the case of 

14 any building to which subparagraph (A) does 

15 not apply, except as provided in paragraph (3), 

16 the applicable percentage shall not be less than 

17 2 percent. 

18 ‘‘(3) EXCEPTION FOR CERTAIN FEDERALLY

19 SUBSIDIZED BUILDINGS.—In the case of any build20 ing to which paragraph (2)(A) does not apply, the 

21 applicable percentage is zero unless— 

22 ‘‘(A) a credit is allowed under section 42 

23 with respect to such building for the taxable 

24 year, and 


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1 ‘‘(B) such building is financed by tax-ex2 empt bonds as described in section 42(h)(4). 

3 ‘‘(4) CROSS REFERENCES.— 

4 ‘‘(A) For treatment of certain rehabilita5 tion expenditures as separate new buildings, see 

6 subsection (e). 

7 ‘‘(B) For determination of applicable per8 centage for increases in qualified basis after the 

9 1st year of the credit period, see subsection 

10 (f)(3). 

11 ‘‘(C) For authority of housing credit agen12 cy to limit applicable percentage and qualified 

13 basis which may be taken into account under 

14 this section with respect to any building, see 

15 subsection (h)(6). 

16 ‘‘(c) QUALIFIED BASIS; QUALIFIED MIDDLE-INCOME

17 BUILDING.—For purposes of this section— 

18 ‘‘(1) QUALIFIED BASIS.— 

19 ‘‘(A) DETERMINATION.—The qualified 

20 basis of any qualified middle-income building 

21 for any taxable year is an amount equal to— 

22 ‘‘(i) the applicable fraction (deter23 mined as of the close of such taxable year); 

24 and 


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1 ‘‘(ii) the eligible basis of such building 

2 (determined under subsection (d)). 

3 ‘‘(B) APPLICABLE FRACTION.—For pur4 poses of subparagraph (A), the term ‘applicable 

5 fraction’ means the smaller of the unit fraction 

6 or the floor space fraction. 

7 ‘‘(C) UNIT FRACTION.—For purposes of 

8 subparagraph (B), the term ‘unit fraction’ 

9 means the fraction— 

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

11 number of middle-income units in the 

12 building, and 

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

14 number of residential rental units (whether 

15 or not occupied) in such building. 

16 ‘‘(D) FLOOR SPACE FRACTION.—For pur17 poses of subparagraph (B), the term ‘floor 

18 space fraction’ means the fraction— 

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

20 total floor space of the middle-income units 

21 in such building, and 

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

23 total floor space of the residential rental 

24 units (whether or not occupied) in such 

25 building. 


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1 ‘‘(2) QUALIFIED MIDDLE-INCOME BUILDING.— 

2 The term ‘qualified middle-income building’ means 

3 any building which is part of a qualified middle-in4 come housing project at all times during the pe5 riod— 

6 ‘‘(A) beginning on the 1st day in the credit 

7 period on which such building is part of such a 

8 project, and 

9 ‘‘(B) ending on the last day of the credit 

10 period with respect to such building. 

11 ‘‘(d) ELIGIBLE BASIS.—For purposes of this sec12 tion— 

13 ‘‘(1) NEW BUILDINGS.—The eligible basis of a 

14 new building is its adjusted basis as of the close of 

15 the 1st taxable year of the credit period. 

16 ‘‘(2) EXISTING BUILDINGS.— 

17 ‘‘(A) IN GENERAL.—The eligible basis of 

18 an existing building is— 

19 ‘‘(i) in the case of a building which 

20 meets the requirements of subparagraph 

21 (B), its adjusted basis as of the close of 

22 the 1st taxable year of the credit period, 

23 and 

24 ‘‘(ii) zero in any other case. 


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1 ‘‘(B) REQUIREMENTS.—A building meets 

2 the requirements of this subparagraph if— 

3 ‘‘(i) the building is acquired by pur4 chase (as defined in section 179(d)(2)), 

5 ‘‘(ii) there is a period of at least 10 

6 years between the date of its acquisition by 

7 the taxpayer and the date the building was 

8 last placed in service, 

9 ‘‘(iii) the building was not previously 

10 placed in service by the taxpayer or by any 

11 person who was a related person with re12 spect to the taxpayer as of the time pre13 viously placed in service, and 

14 ‘‘(iv) except as provided in subsection 

15 (f)(5), a credit is allowable under sub16 section (a) by reason of subsection (e) with 

17 respect to the building. 

18 ‘‘(C) ADJUSTED BASIS.—For purposes of 

19 subparagraph (A), the adjusted basis of any 

20 building shall not include so much of the basis 

21 of such building as is determined by reference 

22 to the basis of other property held at any time 

23 by the person acquiring the building. 

24 ‘‘(D) SPECIAL RULES.— 


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1 ‘‘(i) SPECIAL RULES FOR CERTAIN

2 TRANSFERS.—For purposes of determining 

3 under subparagraph (B)(ii) when a build4 ing was last placed in service, there shall 

5 not be taken into account any placement in 

6 service— 

7 ‘‘(I) in connection with the acqui8 sition of the building in a transaction 

9 in which the basis of the building in 

10 the hands of the person acquiring it is 

11 determined in whole or in part by ref12 erence to the adjusted basis of such 

13 building in the hands of the person 

14 from whom acquired, 

15 ‘‘(II) by a person whose basis in 

16 such building is determined under sec17 tion 1014(a) (relating to property ac18 quired from a decedent), 

19 ‘‘(III) by any governmental unit 

20 or qualified nonprofit organization if 

21 the requirements of subparagraph 

22 (B)(ii) are met with respect to the 

23 placement in service by such unit or 

24 organization and all the income from 


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1 such property is exempt from Federal 

2 income taxation, 

3 ‘‘(IV) by any person who ac4 quired such building by foreclosure 

5 (or by instrument in lieu of fore6 closure) of any purchase-money secu7 rity interest held by such person if the 

8 requirements of subparagraph (B)(ii) 

9 are met with respect to the placement 

10 in service by such person and such 

11 building is resold within 12 months 

12 after the date such building is placed 

13 in service by such person after such 

14 foreclosure, or 

15 ‘‘(V) of a single-family residence 

16 by any individual who owned and used 

17 such residence for no other purpose 

18 than as his principal residence. 

19 ‘‘(ii) RELATED PERSON.—For pur20 poses of subparagraph (B)(iii), a person 

21 (hereinafter in this subclause referred to as 

22 the ‘related person’) is related to any per23 son if the related person bears a relation24 ship to such person specified in section 

25 267(b) or 707(b)(1), or the related person 


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1 and such person are engaged in trades or 

2 businesses under common control (within 

3 the meaning of subsections (a) and (b) of 

4 section 52). 

5 ‘‘(3) SPECIAL RULES RELATING TO DETER6 MINATION OF ADJUSTED BASIS.—For purposes of 

7 this subsection— 

8 ‘‘(A) IN GENERAL.—Except as provided in 

9 subparagraph (B), the adjusted basis of any 

10 building shall be determined without regard to 

11 the adjusted basis of any property which is not 

12 residential rental property. 

13 ‘‘(B) BASIS OF PROPERTY IN COMMON

14 AREAS, ETC., INCLUDED.— 

15 ‘‘(i) IN GENERAL.—Except as pro16 vided in clause (ii), the adjusted basis of 

17 any building shall be determined by taking 

18 into account the adjusted basis of property 

19 (of a character subject to the allowance for 

20 depreciation) used in common areas or 

21 provided as comparable amenities to all 

22 residential rental units in such building. 

23 ‘‘(ii) SPECIAL RULE.—In the case of 

24 any building for which the low-income 

25 housing tax credit is allowable under secVerDate Sep 11 2014 04:30 Dec 23, 2023 Jkt 049200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S3436.IS S3436

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1 tion 42, the adjusted basis of the building 

2 under this section shall be determined 

3 without regard to property used in com4 mon areas or provided as comparable 

5 amenities to all residential rental units in 

6 such building. 

7 ‘‘(C) NO REDUCTION FOR DEPRECIA8 TION.—The adjusted basis of any building shall 

9 be determined without regard to paragraphs (2) 

10 and (3) of section 1016(a). 

11 ‘‘(4) SPECIAL RULES FOR DETERMINING ELIGI12 BLE BASIS.— 

13 ‘‘(A) FEDERAL GRANTS NOT TAKEN INTO

14 ACCOUNT IN DETERMINING ELIGIBLE BASIS.— 

15 The eligible basis of a building shall not include 

16 any costs financed with the proceeds of a feder17 ally funded grant. 

18 ‘‘(B) INCREASE IN CREDIT FOR BUILDINGS

19 IN HIGH COST AREAS.— 

20 ‘‘(i) IN GENERAL.—In the case of any 

21 building located in a difficult development 

22 area which is designated for purposes of 

23 this subparagraph— 

24 ‘‘(I) in the case of a new build25 ing, the eligible basis of such building 


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1 shall be 130 percent of such basis de2 termined without regard to this sub3 paragraph, and 

4 ‘‘(II) in the case of an existing 

5 building, the rehabilitation expendi6 tures taken into account under sub7 section (e) shall be 130 percent of 

8 such expenditures determined without 

9 regard to this subparagraph. 

10 ‘‘(ii) LIMITATION.—Clause (i) shall 

11 not apply to any building if paragraph (1) 

12 of subsection (h) does not apply to any 

13 portion of the eligible basis of such build14 ing by reason of paragraph (9) of such 

15 subsection. 

16 ‘‘(iii) DIFFICULT DEVELOPMENT

17 AREAS.— 

18 ‘‘(I) IN GENERAL.—The term 

19 ‘difficult development areas’ means 

20 any area designated by the Secretary 

21 of Housing and Urban Development 

22 as an area which has high construc23 tion, land, or utility costs relative to 

24 area median gross income, any rural 

25 area, and any Indian area. 


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1 ‘‘(II) RURAL AREA.—For pur2 poses of subclause (I), the term ‘rural 

3 area’ means any non-metropolitan 

4 area, or any rural area as defined by 

5 section 520 of the Housing Act of 

6 1949, which is identified by the quali7 fied allocation plan under subsection 

8 (m)(1)(B). 

9 ‘‘(III) INDIAN AREA.—For pur10 poses of subclause (I), the term ‘In11 dian area’ means any Indian area (as 

12 defined in section 4(11) of the Native 

13 American Housing Assistance and 

14 Self Determination Act of 1996 (25 

15 U.S.C. 4103(11))). 

16 ‘‘(IV) SPECIAL RULE FOR BUILD17 INGS IN INDIAN AREAS.—In the case 

18 of an area which is a difficult develop19 ment area solely because it is an In20 dian area, a building shall not be 

21 treated as located in such area unless 

22 such building is assisted or financed 

23 under the Native American Housing 

24 Assistance and Self Determination 

25 Act of 1996 (25 U.S.C. 4101 et seq.) 


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1 or the project sponsor is an Indian 

2 tribe (as defined in section 

3 45A(c)(6)), a tribally designated hous4 ing entity (as defined in section 4(22) 

5 of such Act (25 U.S.C. 4103(22))), or 

6 wholly owned or controlled by such an 

7 Indian tribe or tribally designated 

8 housing entity. 

9 ‘‘(V) LIMIT ON AREAS DES10 IGNATED.—The portions of metropoli11 tan statistical areas which may be 

12 designated for purposes of this sub13 paragraph shall not exceed an aggre14 gate area having 20 percent of the 

15 population of such metropolitan sta16 tistical areas. A comparable rule shall 

17 apply to nonmetropolitan areas. 

18 ‘‘(iv) SPECIAL RULES AND DEFINI19 TIONS.—For purposes of this subpara20 graph— 

21 ‘‘(I) population shall be deter22 mined on the basis of the most recent 

23 decennial census for which data are 

24 available, 


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1 ‘‘(II) area median gross income 

2 shall be determined in accordance 

3 with subsection (g)(4), 

4 ‘‘(III) the term ‘metropolitan sta5 tistical area’ has the same meaning as 

6 when used in section 143(k)(2)(B), 

7 and 

8 ‘‘(IV) the term ‘nonmetropolitan 

9 area’ means any county (or portion 

10 thereof) which is not within a metro11 politan statistical area. 

12 ‘‘(v) BUILDINGS DESIGNATED BY

13 STATE HOUSING CREDIT AGENCY.—Any 

14 building which is designated by the State 

15 housing credit agency as requiring the in16 crease in credit under this subparagraph in 

17 order for such building to be financially 

18 feasible as part of a qualified middle-in19 come housing project shall be treated for 

20 purposes of this subparagraph as located 

21 in a difficult development area which is 

22 designated for purposes of this subpara23 graph. 

24 ‘‘(5) CREDIT ALLOWABLE FOR CERTAIN BUILD25 INGS ACQUIRED DURING 10-YEAR PERIOD.—On apVerDate Sep 11 2014 04:30 Dec 23, 2023 Jkt 049200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\S3436.IS S3436

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1 plication by the taxpayer, the Secretary may waive 

2 paragraph (2)(B)(ii) with respect to any building ac3 quired from an insured depository institution in de4 fault (as defined in section 3 of the Federal Deposit 

5 Insurance Act) or from a receiver or conservator of 

6 such an institution. 

7 ‘‘(6) ACQUISITION OF BUILDING BEFORE END

8 OF PRIOR CREDIT PERIOD.— 

9 ‘‘(A) IN GENERAL.—Under regulations 

10 prescribed by the Secretary, in the case of a 

11 building described in subparagraph (B) (or in12 terest therein) which is acquired by the tax13 payer— 

14 ‘‘(i) paragraph (2)(B) shall not apply, 

15 but 

16 ‘‘(ii) the credit allowable by reason of 

17 subsection (a) to the taxpayer for any pe18 riod after such acquisition shall be equal to 

19 the amount of credit which would have 

20 been allowable under subsection (a) for 

21 such period to the prior owner referred to 

22 in subparagraph (B) had such owner not 

23 disposed of the building. 

24 ‘‘(B) DESCRIPTION OF BUILDING.—A 

25 building is described in this subparagraph if— 


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1 ‘‘(i) a credit was allowed by reason of 

2 subsection (a) to any prior owner of such 

3 building, and 

4 ‘‘(ii) the taxpayer acquired such build5 ing before the end of the credit period for 

6 such building with respect to such prior 

7 owner (determined without regard to any 

8 disposition by such prior owner). 

9 ‘‘(e) REHABILITATION EXPENDITURES TREATED AS

10 SEPARATE NEW BUILDING.— 

11 ‘‘(1) IN GENERAL.—Rehabilitation expenditures 

12 paid or incurred by the taxpayer with respect to any 

13 building shall be treated for purposes of this section 

14 as a separate new building. 

15 ‘‘(2) REHABILITATION EXPENDITURES.—For 

16 purposes of paragraph (1)— 

17 ‘‘(A) IN GENERAL.—The term ‘rehabilita18 tion expenditures’ means amounts chargeable to 

19 capital account and incurred for property (or 

20 additions or improvements to property) of a 

21 character subject to the allowance for deprecia22 tion in connection with the rehabilitation of a 

23 building. 

24 ‘‘(B) COST OF ACQUISITION, ETC., NOT IN25 CLUDED.—Such term does not include the cost 


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1 of acquiring any building (or interest therein) 

2 or any amount not permitted to be taken into 

3 account under paragraph (3) of subsection (d). 

4 ‘‘(C) CERTAIN RELOCATION COSTS.—In 

5 the case of a rehabilitation of a building to 

6 which section 280B does not apply, costs relat7 ing to the relocation of occupants, including— 

8 ‘‘(i) amounts paid to occupants, 

9 ‘‘(ii) amounts paid to third parties for 

10 services relating to such relocation, and 

11 ‘‘(iii) amounts paid for temporary 

12 housing for occupants, 

13 shall be treated as chargeable to capital account 

14 and taken into account as rehabilitation ex15 penditures. 

16 ‘‘(3) MINIMUM EXPENDITURES TO QUALIFY.— 

17 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

18 apply to rehabilitation expenditures with respect 

19 to any building only if— 

20 ‘‘(i) the expenditures are allocable to 

21 1 or more middle-income units or substan22 tially benefit such units, and 

23 ‘‘(ii) the amount of such expenditures 

24 during any 24-month period meets the re25 quirements of whichever of the following 


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1 subclauses requires the greater amount of 

2 such expenditures: 

3 ‘‘(I) The requirement of this sub4 clause is met if such amount is not 

5 less than 20 percent of the adjusted 

6 basis of the building (determined as of 

7 the 1st day of such period and with8 out regard to paragraphs (2) and (3) 

9 of section 1016(a)). 

10 ‘‘(II) The requirement of this 

11 subclause is met if the qualified basis 

12 attributable to such amount, when di13 vided by the number of middle-income 

14 units in the building, is equal to or 

15 greater than the dollar amount in ef16 fect under section 42(e)(3)(A)(ii)(II) 

17 for the calendar year in which such 

18 expenditures are treated as placed in 

19 service under paragraph (4). 

20 ‘‘(B) DATE OF DETERMINATION.—The de21 termination under subparagraph (A) shall be 

22 made as of the close of the 1st taxable year in 

23 the credit period with respect to such expendi24 tures. 


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1 ‘‘(4) SPECIAL RULES.—For purposes of apply2 ing this section with respect to expenditures which 

3 are treated as a separate building by reason of this 

4 subsection— 

5 ‘‘(A) such expenditures shall be treated as 

6 placed in service at the close of the 24-month 

7 period referred to in paragraph (3)(A), and 

8 ‘‘(B) the applicable fraction under sub9 section (c)(1) shall be the applicable fraction for 

10 the building (without regard to paragraph (1)) 

11 with respect to which the expenditures were in12 curred. 

13 Nothing in subsection (d)(2) shall prevent a credit 

14 from being allowed by reason of this subsection. 

15 ‘‘(5) NO DOUBLE COUNTING.—Rehabilitation 

16 expenditures may, at the election of the taxpayer, be 

17 taken into account under this subsection or sub18 section (d)(2)(A)(i) but not under both such sub19 sections. 

20 ‘‘(6) REGULATIONS TO APPLY SUBSECTION

21 WITH RESPECT TO GROUP OF UNITS IN BUILDING.— 

22 The Secretary may prescribe regulations, consistent 

23 with the purposes of this subsection, treating a 

24 group of units with respect to which rehabilitation 


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1 expenditures are incurred as a separate new build2 ing. 

3 ‘‘(f) DEFINITION AND SPECIAL RULES RELATING TO

4 CREDIT PERIOD.— 

5 ‘‘(1) CREDIT PERIOD DEFINED.—For purposes 

6 of this section, the term ‘credit period’ means, with 

7 respect to any building, the period of 15 taxable 

8 years beginning with— 

9 ‘‘(A) the taxable year in which the building 

10 is placed in service, or 

11 ‘‘(B) at the election of the taxpayer, the 

12 succeeding taxable year, 

13 but only if the building is a qualified middle-income 

14 building as of the close of the 1st year of such pe15 riod. The election under subparagraph (B), once 

16 made, shall be irrevocable. 

17 ‘‘(2) SPECIAL RULE FOR 1ST YEAR OF CREDIT

18 PERIOD.— 

19 ‘‘(A) IN GENERAL.—The credit allowable 

20 under subsection (a) with respect to any build21 ing for the 1st taxable year of the credit period 

22 shall be determined by substituting for the ap23 plicable fraction under subsection (c)(1) the 

24 fraction— 


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

2 sum of the applicable fractions determined 

3 under subsection (c)(1) as of the close of 

4 each full month of such year during which 

5 such building was in service, and 

6 ‘‘(ii) the denominator of which is 12. 

7 ‘‘(B) DISALLOWED 1ST-YEAR CREDIT AL8 LOWED IN 16TH YEAR.—Any reduction by rea9 son of subparagraph (A) in the credit allowable 

10 (without regard to subparagraph (A)) for the 

11 1st taxable year of the credit period shall be al12 lowable under subsection (a) for the 1st taxable 

13 year following the credit period. 

14 ‘‘(3) DETERMINATION OF APPLICABLE PER15 CENTAGE WITH RESPECT TO INCREASES IN QUALI16 FIED BASIS AFTER 1ST YEAR OF CREDIT PERIOD.— 

17 ‘‘(A) IN GENERAL.—In the case of any 

18 building which was a qualified middle-income 

19 building as of the close of the 1st year of the 

20 credit period, if— 

21 ‘‘(i) as of the close of any taxable year 

22 in the credit period (after the 1st year of 

23 such period) the qualified basis of such 

24 building, exceeds 


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1 ‘‘(ii) the qualified basis of such build2 ing as of the close of the 1st year of the 

3 credit period, 

4 the applicable percentage which shall apply 

5 under subsection (a) for the taxable year to 

such excess shall be the percentage equal to 2 6 ⁄3

7 of the applicable percentage which (after the 

8 application of subsection (h)) would but for this 

9 paragraph apply to such basis. 

10 ‘‘(B) 1ST YEAR COMPUTATION APPLIES.— 

11 A rule similar to the rule of paragraph (2)(A) 

12 shall apply to any increase in qualified basis to 

13 which subparagraph (A) applies for the 1st year 

14 of such increase. 

15 ‘‘(4) DISPOSITIONS OF PROPERTY.—If a build16 ing (or an interest therein) is disposed of during any 

17 year for which credit is allowable under subsection 

18 (a), such credit shall be allocated between the par19 ties on the basis of the number of days during such 

20 year the building (or interest) was held by each. 

21 ‘‘(5) CREDIT PERIOD FOR EXISTING BUILDINGS

22 NOT TO BEGIN BEFORE REHABILITATION CREDIT

23 ALLOWED.— 

24 ‘‘(A) IN GENERAL.—The credit period for 

25 an existing building shall not begin before the 


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1 1st taxable year of the credit period for reha2 bilitation expenditures with respect to the build3 ing. 

4 ‘‘(B) ACQUISITION CREDIT ALLOWED FOR

5 CERTAIN BUILDINGS NOT ALLOWED A REHA6 BILITATION CREDIT.— 

7 ‘‘(i) IN GENERAL.—In the case of a 

8 building described in clause (ii)— 

9 ‘‘(I) subsection (d)(2)(B)(iv) 

10 shall not apply, and 

11 ‘‘(II) the credit period for such 

12 building shall not begin before the 

13 taxable year which would be the 1st 

14 taxable year of the credit period for 

15 rehabilitation expenditures with re16 spect to the building under the modi17 fications described in clause (ii)(II). 

18 ‘‘(ii) BUILDING DESCRIBED.—A build19 ing is described in this clause if— 

20 ‘‘(I) a waiver is granted under 

21 subsection (d)(4) with respect to the 

22 acquisition of the building, and 

23 ‘‘(II) a credit would be allowed 

24 for rehabilitation expenditures with 

25 respect to such building if subsection 


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1 (e)(3)(A)(ii)(I) did not apply and if 

2 the dollar amount in effect under sub3 section (e)(3)(A)(ii)(II) were two4 thirds of such amount. 

5 ‘‘(g) QUALIFIED MIDDLE-INCOME HOUSING

6 PROJECT.—For purposes of this section— 

7 ‘‘(1) IN GENERAL.—The term ‘qualified middle8 income housing project’ means any project for resi9 dential rental property if— 

10 ‘‘(A) 60 percent or more of the residential 

11 units in such project are both rent-restricted 

12 and occupied by individuals whose income is 

13 100 percent or less of area median gross in14 come, and 

15 ‘‘(B) not less than 20 percent of the resi16 dential units in such project are units which— 

17 ‘‘(i) are described in subparagraph 

18 (A), and 

19 ‘‘(ii) are not residential units which 

20 are taken into account under section 42. 

21 ‘‘(2) RENT-RESTRICTED UNITS.— 

22 ‘‘(A) IN GENERAL.—For purposes of para23 graph (1), a residential unit is rent-restricted if 

24 the gross rent with respect to such unit does 

25 not exceed 30 percent of the imputed income 


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•S 3436 IS

1 limitation applicable to such unit. For purposes 

2 of the preceding sentence, the amount of the in3 come limitation under paragraph (1) applicable 

4 for any period shall not be less than such limi5 tation applicable for the earliest period the 

6 building (which contains the unit) was included 

7 in the determination of whether the project is 

8 a qualified middle-income housing project. 

9 ‘‘(B) GROSS RENT.—For purposes of sub10 paragraph (A), gross rent— 

11 ‘‘(i) includes any utility allowance de12 termined by the Secretary after taking into 

13 account such determinations under section 

14 8 of the United States Housing Act of 

15 1937, 

16 ‘‘(ii) does not include any fee for a 

17 supportive service which is paid to the 

18 owner of the unit (on the basis of the mid19 dle-income status of the tenant of the unit) 

20 by any governmental program of assistance 

21 (or by an organization described in section 

22 501(c)(3) and exempt from tax under sec23 tion 501(a)) if such program (or organiza24 tion) provides assistance for rent and the 

25 amount of assistance provided for rent is 


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•S 3436 IS

1 not separable from the amount of assist2 ance provided for supportive services, and 

3 ‘‘(iii) does not include any rental pay4 ment to the owner of the unit to the extent 

5 such owner pays an equivalent amount to 

6 the Farmers’ Home Administration under 

7 section 515 of the Housing Act of 1949. 

8 For purposes of clause (ii), the term ‘supportive 

9 service’ means any service provided under a 

10 planned program of services designed to enable 

11 residents of a residential rental property to re12 main independent and avoid placement in a 

13 hospital, nursing home, or intermediate care fa14 cility for the mentally or physically handi15 capped. 

16 ‘‘(C) IMPUTED INCOME LIMITATION APPLI17 CABLE TO UNIT.—For purposes of this para18 graph, the imputed income limitation applicable 

19 to a unit is the income limitation which would 

20 apply under paragraph (1) to individuals occu21 pying the unit if the number of individuals oc22 cupying the unit were as follows: 

23 ‘‘(i) In the case of a unit which does 

24 not have a separate bedroom, 1 individual. 


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1 ‘‘(ii) In the case of a unit which has 

2 1 or more separate bedrooms, 1.5 individ3 uals for each separate bedroom. 

4 In the case of a project with respect to which 

5 a credit is allowable by reason of this section 

6 and for which financing is provided by a bond 

7 described in section 142(a)(7), the imputed in8 come limitation shall apply in lieu of the other9 wise applicable income limitation for purposes 

10 of applying section 142(d)(4)(B)(ii). 

11 ‘‘(D) TREATMENT OF UNITS OCCUPIED BY

12 INDIVIDUALS WHOSE INCOMES RISE ABOVE

13 LIMIT.— 

14 ‘‘(i) IN GENERAL.—Except as pro15 vided in clause (ii), notwithstanding an in16 crease in the income of the occupants of a 

17 middle-income unit above the income limi18 tation applicable under paragraph (1), 

19 such unit shall continue to be treated as a 

20 middle-income unit if the income of such 

21 occupants initially met such income limita22 tion and such unit continues to be rent-re23 stricted. 

24 ‘‘(ii) NEXT AVAILABLE UNIT MUST BE

25 RENTED TO MIDDLE-INCOME TENANT IF


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1 INCOME RISES ABOVE 140 PERCENT OF IN2 COME LIMIT.—If the income of the occu3 pants of the unit increases above 140 per4 cent of the income limitation applicable 

5 under paragraph (1), clause (i) shall cease 

6 to apply to such unit if any residential 

7 rental unit in the building (of a size com8 parable to, or smaller than, such unit) is 

9 occupied by a new resident whose income 

10 exceeds such income limitation. 

11 ‘‘(3) DATE FOR MEETING REQUIREMENTS.— 

12 ‘‘(A) IN GENERAL.—Except as otherwise 

13 provided in this paragraph, a building shall be 

14 treated as a qualified middle-income building 

15 only if the project (of which such building is a 

16 part) meets the requirements of paragraph (1) 

17 not later than the close of the 1st year of the 

18 credit period for such building. 

19 ‘‘(B) BUILDINGS WHICH RELY ON LATER

20 BUILDINGS FOR QUALIFICATION.— 

21 ‘‘(i) IN GENERAL.—In determining 

22 whether a building (hereinafter in this sub23 paragraph referred to as the ‘prior build24 ing’) is a qualified middle-income building, 

25 the taxpayer may take into account 1 or 


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•S 3436 IS

1 more additional buildings placed in service 

2 during the 12-month period described in 

3 subparagraph (A) with respect to the prior 

4 building only if the taxpayer elects to apply 

5 clause (ii) with respect to each additional 

6 building taken into account. 

7 ‘‘(ii) TREATMENT OF ELECTED

8 BUILDINGS.—In the case of a building 

9 which the taxpayer elects to take into ac10 count under clause (i), the period under 

11 subparagraph (A) for such building shall 

12 end at the close of the 12-month period ap13 plicable to the prior building. 

14 ‘‘(iii) DATE PRIOR BUILDING IS

15 TREATED AS PLACED IN SERVICE.—For 

16 purposes of determining the credit period 

17 for the prior building, the prior building 

18 shall be treated for purposes of this section 

19 as placed in service on the most recent 

20 date any additional building elected by the 

21 taxpayer (with respect to such prior build22 ing) was placed in service. 

23 ‘‘(C) SPECIAL RULE.—A building— 

24 ‘‘(i) other than the 1st building placed 

25 in service as part of a project, and 


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1 ‘‘(ii) other than a building which is 

2 placed in service during the 12-month pe3 riod described in subparagraph (A) with 

4 respect to a prior building which becomes 

5 a qualified middle-income building, 

6 shall in no event be treated as a qualified mid7 dle-income building unless the project is a 

8 qualified middle-income housing project (with9 out regard to such building) on the date such 

10 building is placed in service. 

11 ‘‘(D) PROJECTS WITH MORE THAN 1

12 BUILDING MUST BE IDENTIFIED.—For pur13 poses of this section, a project shall be treated 

14 as consisting of only 1 building unless, before 

15 the close of the 1st calendar year in the project 

16 period (as defined in subsection (h)(1)(F)(ii)), 

17 each building which is (or will be) part of such 

18 project is identified in such form and manner 

19 as the Secretary may provide. 

20 ‘‘(4) CERTAIN RULES MADE APPLICABLE.— 

21 Paragraphs (2) (other than subparagraph (A) there22 of), (3), and (7) of section 142(d), and section 

23 6652(j), shall apply for purposes of determining 

24 whether any project is a qualified middle-income 

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1 come unit; except that, in applying such provisions 

2 for such purposes— 

3 ‘‘(A) the term ‘gross rent’ shall have the 

4 meaning given such term by paragraph (2)(B) 

5 of this subsection, and 

6 ‘‘(B) the term ‘applicable income limit’ 

7 means the limitation under paragraph (1) of 

8 this subsection. 

9 ‘‘(5) ELECTION TO TREAT BUILDING AFTER

10 CREDIT PERIOD AS NOT PART OF A PROJECT.—For 

11 purposes of this section, the taxpayer may elect to 

12 treat any building as not part of a qualified middle13 income housing project for any period beginning 

14 after the credit period for such building. 

15 ‘‘(6) SPECIAL RULE WHERE DE MINIMIS EQ16 UITY CONTRIBUTION.—Property shall not be treated 

17 as failing to be residential rental property for pur18 poses of this section merely because the occupant of 

19 a residential unit in the project pays (on a voluntary 

20 basis) to the lessor a de minimis amount to be held 

21 toward the purchase by such occupant of a residen22 tial unit in such project if— 

23 ‘‘(A) all amounts so paid are refunded to 

24 the occupant on the cessation of his occupancy 

25 of a unit in the project, and 


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•S 3436 IS

1 ‘‘(B) the purchase of the unit is not per2 mitted until after the close of the credit period 

3 with respect to the building in which the unit 

4 is located. 

5 Any amount paid to the lessor as described in the 

6 preceding sentence shall be included in gross rent 

7 under paragraph (2) for purposes of determining 

8 whether the unit is rent-restricted. 

9 ‘‘(7) SCATTERED SITE PROJECTS.—Buildings 

10 which would (but for their lack of proximity) be 

11 treated as a project for purposes of this section shall 

12 be so treated if all of the dwelling units in each of 

13 the buildings are rent-restricted (within the meaning 

14 of paragraph (2)) residential rental units. 

15 ‘‘(8) WAIVER OF CERTAIN RECERTIFI16 CATIONS.—On application by the taxpayer, the Sec17 retary may waive any annual recertification of ten18 ant income for purposes of this subsection, if the en19 tire building is occupied by middle-income tenants. 

20 ‘‘(9) CLARIFICATION OF GENERAL PUBLIC USE

21 REQUIREMENT.—A project does not fail to meet the 

22 general public use requirement solely because of oc23 cupancy restrictions or preferences that favor ten24 ants— 

25 ‘‘(A) with special needs, or 


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•S 3436 IS

1 ‘‘(B) who are members of a specified group 

2 under a Federal program or State program or 

3 policy that supports housing for such a speci4 fied group. 

5 ‘‘(h) LIMITATION ON AGGREGATE CREDIT ALLOW6 ABLE WITH RESPECT TO PROJECTS LOCATED IN A

7 STATE.— 

8 ‘‘(1) CREDIT MAY NOT EXCEED CREDIT

9 AMOUNT ALLOCATED TO BUILDING.— 

10 ‘‘(A) IN GENERAL.—The amount of the 

11 credit determined under this section for any 

12 taxable year with respect to any building shall 

13 not exceed the housing credit dollar amount al14 located to such building under this subsection. 

15 ‘‘(B) TIME FOR MAKING ALLOCATION.— 

16 Except in the case of an allocation which meets 

17 the requirements of subparagraph (C), (D), 

18 (E), or (F), an allocation shall be taken into ac19 count under subparagraph (A) only if it is 

20 made not later than the close of the calendar 

21 year in which the building is placed in service. 

22 ‘‘(C) EXCEPTION WHERE BINDING COM23 MITMENT.—An allocation meets the require24 ments of this subparagraph if there is a binding 

25 commitment (not later than the close of the calVerDate Sep 11 2014 04:30 Dec 23, 2023 Jkt 049200 PO 00000 Frm 00035 Fmt 6652 Sfmt 6201 E:\BILLS\S3436.IS S3436

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•S 3436 IS

1 endar year in which the building is placed in 

2 service) by the housing credit agency to allocate 

3 a specified housing credit dollar amount to such 

4 building beginning in a specified later taxable 

5 year. 

6 ‘‘(D) EXCEPTION WHERE INCREASE IN

7 QUALIFIED BASIS.— 

8 ‘‘(i) IN GENERAL.—An allocation 

9 meets the requirements of this subpara10 graph if such allocation is made not later 

11 than the close of the calendar year in 

12 which ends the taxable year to which it will 

13 1st apply but only to the extent the 

14 amount of such allocation does not exceed 

15 the limitation under clause (ii). 

16 ‘‘(ii) LIMITATION.—The limitation 

17 under this clause is the amount of credit 

18 allowable under this section (without re19 gard to this subsection) for a taxable year 

20 with respect to an increase in the qualified 

21 basis of the building equal to the excess 

22 of— 

23 ‘‘(I) the qualified basis of such 

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•S 3436 IS

1 able year to which such allocation will 

2 apply, over 

3 ‘‘(II) the qualified basis of such 

4 building as of the close of the 1st tax5 able year to which the most recent 

6 prior housing credit allocation with re7 spect to such building applied. 

8 ‘‘(iii) HOUSING CREDIT DOLLAR

9 AMOUNT REDUCED BY FULL ALLOCA10 TION.—Notwithstanding clause (i), the full 

11 amount of the allocation shall be taken 

12 into account under paragraph (2). 

13 ‘‘(E) EXCEPTION WHERE 10 PERCENT OF

14 COST INCURRED.— 

15 ‘‘(i) IN GENERAL.—An allocation 

16 meets the requirements of this subpara17 graph if such allocation is made with re18 spect to a qualified building which is 

19 placed in service not later than the close of 

20 the second calendar year following the cal21 endar year in which the allocation is made. 

22 ‘‘(ii) QUALIFIED BUILDING.—For pur23 poses of clause (i), the term ‘qualified 

24 building’ means any building which is part 

25 of a project if the taxpayer’s basis in such 


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•S 3436 IS

1 project (as of the date which is 1 year 

2 after the date that the allocation was 

3 made) is more than 10 percent of the tax4 payer’s reasonably expected basis in such 

5 project (as of the close of the second cal6 endar year referred to in clause (i)). Such 

7 term does not include any existing building 

8 unless a credit is allowable under sub9 section (e) for rehabilitation expenditures 

10 paid or incurred by the taxpayer with re11 spect to such building for a taxable year 

12 ending during the second calendar year re13 ferred to in clause (i) or the prior taxable 

14 year. 

15 ‘‘(F) ALLOCATION OF CREDIT ON A

16 PROJECT BASIS.— 

17 ‘‘(i) IN GENERAL.—In the case of a 

18 project which includes (or will include) 

19 more than 1 building, an allocation meets 

20 the requirements of this subparagraph if— 

21 ‘‘(I) the allocation is made to the 

22 project for a calendar year during the 

23 project period, 

24 ‘‘(II) the allocation only applies 

25 to buildings placed in service during 


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•S 3436 IS

1 or after the calendar year for which 

2 the allocation is made, and 

3 ‘‘(III) the portion of such alloca4 tion which is allocated to any building 

5 in such project is specified not later 

6 than the close of the calendar year in 

7 which the building is placed in service. 

8 ‘‘(ii) PROJECT PERIOD.—For pur9 poses of clause (i), the term ‘project pe10 riod’ means the period— 

11 ‘‘(I) beginning with the 1st cal12 endar year for which an allocation 

13 may be made for the 1st building 

14 placed in service as part of such 

15 project, and 

16 ‘‘(II) ending with the calendar 

17 year the last building is placed in 

18 service as part of such project. 

19 ‘‘(2) ALLOCATED CREDIT AMOUNT TO APPLY

20 TO ALL TAXABLE YEARS ENDING DURING OR AFTER

21 CREDIT ALLOCATION YEAR.—Any housing credit dol22 lar amount allocated to any building for any cal23 endar year— 


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•S 3436 IS

1 ‘‘(A) shall apply to such building for all 

2 taxable years in the credit period ending during 

3 or after such calendar year, and 

4 ‘‘(B) shall reduce the aggregate housing 

5 credit dollar amount of the allocating agency 

6 only for such calendar year. 

7 ‘‘(3) HOUSING CREDIT DOLLAR AMOUNT FOR

8 AGENCIES.— 

9 ‘‘(A) IN GENERAL.—The aggregate hous10 ing credit dollar amount which a housing credit 

11 agency may allocate for any calendar year is 

12 the portion of the State housing credit ceiling 

13 allocated under this paragraph for such cal14 endar year to such agency. 

15 ‘‘(B) STATE CEILING INITIALLY ALLO16 CATED TO STATE HOUSING CREDIT AGEN17 CIES.—Except as provided in subparagraph 

18 (D), the State housing credit ceiling for each 

19 calendar year shall be allocated to the housing 

20 credit agency of such State. If there is more 

21 than 1 housing credit agency of a State, all 

22 such agencies shall be treated as a single agen23 cy. 

24 ‘‘(C) STATE HOUSING CREDIT CEILING.— 

25 The State housing credit ceiling applicable to 


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•S 3436 IS

1 any State for any calendar year shall be an 

2 amount equal to the sum of— 

3 ‘‘(i) the unused State housing credit 

4 ceiling (if any) of such State for the pre5 ceding calendar year, 

6 ‘‘(ii) the greater of— 

7 ‘‘(I) $1.00 multiplied by the 

8 State population, or 

9 ‘‘(II) $1,500,000, plus 

10 ‘‘(iii) the amount of State housing 

11 credit ceiling returned in the calendar year. 

12 For purposes of clause (i), the unused State 

13 housing credit ceiling for any calendar year is 

14 the excess (if any) of the sum of the amounts 

15 described in clauses (ii) (reduced by the aggre16 gate amounts described in paragraph (10)(A)(i) 

17 with respect to all elections made for such cal18 endar year) and (iii) over the aggregate housing 

19 credit dollar amount allocated for such year. 

20 For purposes of clause (iii), the amount of 

21 State housing credit ceiling returned in the cal22 endar year equals the housing credit dollar 

23 amount previously allocated within the State to 

24 any project which fails to meet the 10 percent 

25 test under paragraph (1)(E)(ii) on a date after 


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•S 3436 IS

1 the close of the calendar year in which the allo2 cation was made or which does not become a 

3 qualified middle-income housing project within 

4 the period required by this section or the terms 

5 of the allocation or to any project with respect 

6 to which an allocation is cancelled by mutual 

7 consent of the housing credit agency and the al8 location recipient. 

9 ‘‘(D) STATE MAY PROVIDE FOR DIF10 FERENT ALLOCATION.—Rules similar to the 

11 rules of section 146(e) (other than paragraph 

12 (2)(B) thereof) shall apply for purposes of this 

13 paragraph. 

14 ‘‘(E) POPULATION.—For purposes of this 

15 paragraph, population shall be determined in 

16 accordance with section 146(j). 

17 ‘‘(F) COST-OF-LIVING ADJUSTMENT.— 

18 ‘‘(i) IN GENERAL.—In the case of a 

19 calendar year after 2024, the $1,500,000 

20 and $1.00 amounts in subparagraph (C) 

21 shall each be increased by an amount equal 

22 to— 

23 ‘‘(I) such dollar amount, multi24 plied by 


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•S 3436 IS

1 ‘‘(II) the cost-of-living adjust2 ment determined under section 1(f)(3) 

3 for such calendar year by substituting 

4 ‘calendar year 2023’ for ‘calendar 

5 year 2016’ in subparagraph (A)(ii) 

6 thereof. 

7 ‘‘(ii) ROUNDING.— 

8 ‘‘(I) In the case of the 

9 $1,140,000 amount, any increase 

10 under clause (i) which is not a mul11 tiple of $5,000 shall be rounded to the 

12 next lowest multiple of $5,000. 

13 ‘‘(II) In the case of the $1.00 

14 amount, any increase under clause (i) 

15 which is not a multiple of 5 cents 

16 shall be rounded to the next lowest 

17 multiple of 5 cents. 

18 ‘‘(4) PORTION OF STATE CEILING SET-ASIDE

19 FOR CERTAIN PROJECTS INVOLVING QUALIFIED

20 NONPROFIT ORGANIZATIONS.— 

21 ‘‘(A) IN GENERAL.—Not more than 90 

22 percent of the State housing credit ceiling (de23 termined without regard to paragraph (7)) for 

24 any State for any calendar year shall be allo25 cated to projects other than qualified middle-inVerDate Sep 11 2014 04:30 Dec 23, 2023 Jkt 049200 PO 00000 Frm 00043 Fmt 6652 Sfmt 6201 E:\BILLS\S3436.IS S3436

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•S 3436 IS

1 come housing projects described in subpara2 graph (B). 

3 ‘‘(B) PROJECTS INVOLVING QUALIFIED

4 NONPROFIT ORGANIZATIONS.—For purposes of 

5 subparagraph (A), a qualified middle-income 

6 housing project is described in this subpara7 graph if a qualified nonprofit organization is to 

8 own an interest in the project (directly or 

9 through a partnership) and materially partici10 pate (within the meaning of section 469(h)) in 

11 the development and operation of the project 

12 throughout the credit period. 

13 ‘‘(C) QUALIFIED NONPROFIT ORGANIZA14 TION.—For purposes of this paragraph, the 

15 term ‘qualified nonprofit organization’ means 

16 any organization if— 

17 ‘‘(i) such organization is described in 

18 paragraph (3) or (4) of section 501(c) and 

19 is exempt from tax under section 501(a); 

20 ‘‘(ii) such organization is determined 

21 by the State housing credit agency not to 

22 be affiliated with or controlled by a for23 profit organization; and 


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•S 3436 IS

1 ‘‘(iii) one of the exempt purposes of 

2 such organization includes the fostering of 

3 middle-income housing. 

4 ‘‘(D) TREATMENT OF CERTAIN SUBSIDI5 ARIES.— 

6 ‘‘(i) IN GENERAL.—For purposes of 

7 this paragraph, a qualified nonprofit orga8 nization shall be treated as satisfying the 

9 ownership and material participation test 

10 of subparagraph (B) if any qualified cor11 poration in which such organization holds 

12 stock satisfies such test. 

13 ‘‘(ii) QUALIFIED CORPORATION.—For 

14 purposes of clause (i), the term ‘qualified 

15 corporation’ means any corporation if 100 

16 percent of the stock of such corporation is 

17 held by 1 or more qualified nonprofit orga18 nizations at all times during the period 

19 such corporation is in existence. 

20 ‘‘(E) STATE MAY NOT OVERRIDE SET21 ASIDE.—Nothing in subparagraph (E) of para22 graph (3) shall be construed to permit a State 

23 not to comply with subparagraph (A) of this 

24 paragraph. 


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1 ‘‘(5) BUILDINGS ELIGIBLE FOR CREDIT ONLY

2 IF MINIMUM LONG-TERM COMMITMENT TO MIDDLE3 INCOME HOUSING.— 

4 ‘‘(A) IN GENERAL.—No credit shall be al5 lowed by reason of this section with respect to 

6 any building for the taxable year unless an ex7 tended middle-income housing commitment is in 

8 effect as of the end of such taxable year. 

9 ‘‘(B) EXTENDED MIDDLE-INCOME HOUS10 ING COMMITMENT.—For purposes of this para11 graph, the term ‘extended middle-income hous12 ing commitment’ means any agreement between 

13 the taxpayer and the housing credit agency— 

14 ‘‘(i) which requires that the applicable 

15 fraction (as defined in subsection (c)(1)) 

16 for the building for each taxable year in 

17 the extended use period will not be less 

18 than the applicable fraction specified in 

19 such agreement and which prohibits the 

20 actions described in subclauses (I) and (II) 

21 of subparagraph (E)(ii), 

22 ‘‘(ii) which allows individuals who 

23 meet the income limitation applicable to 

24 the building under subsection (g) (whether 

25 prospective, present, or former occupants 


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•S 3436 IS

1 of the building) the right to enforce in any 

2 State court the requirement and prohibi3 tions of clause (i), 

4 ‘‘(iii) which prohibits the disposition 

5 to any person of any portion of the build6 ing to which such agreement applies unless 

7 all of the building to which such agreement 

8 applies is disposed of to such person, 

9 ‘‘(iv) which prohibits the refusal to 

10 lease to a holder of a voucher or certificate 

11 of eligibility under section 8 of the United 

12 States Housing Act of 1937 because of the 

13 status of the prospective tenant as such a 

14 holder, 

15 ‘‘(v) which is binding on all successors 

16 of the taxpayer, and 

17 ‘‘(vi) which, with respect to the prop18 erty, is recorded pursuant to State law as 

19 a restrictive covenant. 

20 ‘‘(C) ALLOCATION OF CREDIT MAY NOT

21 EXCEED AMOUNT NECESSARY TO SUPPORT

22 COMMITMENT.—The housing credit dollar 

23 amount allocated to any building may not ex24 ceed the amount necessary to support the appli25 cable fraction specified in the extended middleVerDate Sep 11 2014 04:30 Dec 23, 2023 Jkt 049200 PO 00000 Frm 00047 Fmt 6652 Sfmt 6201 E:\BILLS\S3436.IS S3436

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•S 3436 IS

1 income housing commitment for such building, 

2 including any increase in such fraction pursu3 ant to the application of subsection (f)(3) if 

4 such increase is reflected in an amended mid5 dle-income housing commitment. 

6 ‘‘(D) EXTENDED USE PERIOD.—For pur7 poses of this paragraph, the term ‘extended use 

8 period’ means the period— 

9 ‘‘(i) beginning on the 1st day in the 

10 credit period on which such building is 

11 part of a qualified middle-income housing 

12 project, and 

13 ‘‘(ii) ending on the later of— 

14 ‘‘(I) the date specified by such 

15 agency in such agreement, or 

16 ‘‘(II) the date which is 15 years 

17 after the close of the credit period. 

18 ‘‘(E) EXCEPTIONS IF FORECLOSURE OR IF

19 NO BUYER WILLING TO MAINTAIN MIDDLE-IN20 COME STATUS.— 

21 ‘‘(i) IN GENERAL.—The extended use 

22 period for any building shall terminate on 

23 the 61st day after the taxpayer (or a suc24 cessor in interest) provides notice to the 

25 Secretary and the housing credit agency 


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•S 3436 IS

1 that the building has been acquired by 

2 foreclosure (or instrument in lieu of fore3 closure) and that the taxpayer intends the 

4 termination of such period, unless, before 

5 such date, the Secretary or the housing 

6 credit agency determines that such acquisi7 tion is part of an arrangement with the 

8 taxpayer a purpose of which is to termi9 nate such period. 

10 ‘‘(ii) EVICTION, ETC., OF EXISTING

11 MIDDLE-INCOME TENANTS NOT PER12 MITTED.—The termination of an extended 

13 use period under clause (i) shall not be 

14 construed to permit before the close of the 

15 3-year period following such termination— 

16 ‘‘(I) the eviction or the termi17 nation of tenancy (other than for good 

18 cause) of an existing tenant of any 

19 middle-income unit, or 

20 ‘‘(II) any increase in the gross 

21 rent with respect to such unit not oth22 erwise permitted under this section. 

23 ‘‘(F) EFFECT OF NONCOMPLIANCE.—If, 

24 during a taxable year, there is a determination 

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•S 3436 IS

1 ment was not in effect as of the beginning of 

2 such year, such determination shall not apply to 

3 any period before such year and subparagraph 

4 (A) shall be applied without regard to such de5 termination if the failure is corrected within 1 

6 year from the date of the determination. 

7 ‘‘(G) PROJECTS WHICH CONSIST OF MORE

8 THAN 1 BUILDING.—The application of this 

9 paragraph to projects which consist of more 

10 than 1 building shall be made under regulations 

11 prescribed by the Secretary. 

12 ‘‘(6) SPECIAL RULES.— 

13 ‘‘(A) BUILDING MUST BE LOCATED WITH14 IN JURISDICTION OF CREDIT AGENCY.—A hous15 ing credit agency may allocate its aggregate 

16 housing credit dollar amount only to buildings 

17 located in the jurisdiction of the governmental 

18 unit of which such agency is a part. 

19 ‘‘(B) AGENCY ALLOCATIONS IN EXCESS OF

20 LIMIT.—If the aggregate housing credit dollar 

21 amounts allocated by a housing credit agency 

22 for any calendar year exceed the portion of the 

23 State housing credit ceiling allocated to such 

24 agency for such calendar year, the housing 

25 credit dollar amounts so allocated shall be reVerDate Sep 11 2014 04:30 Dec 23, 2023 Jkt 049200 PO 00000 Frm 00050 Fmt 6652 Sfmt 6201 E:\BILLS\S3436.IS S3436

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51 

•S 3436 IS

1 duced (to the extent of such excess) for build2 ings in the reverse of the order in which the al3 locations of such amounts were made. 

4 ‘‘(C) CREDIT REDUCED IF ALLOCATED

5 CREDIT DOLLAR AMOUNT IS LESS THAN CREDIT

6 WHICH WOULD BE ALLOWABLE WITHOUT RE7 GARD TO PLACED IN SERVICE CONVENTION, 

8 ETC.— 

9 ‘‘(i) IN GENERAL.—The amount of 

10 the credit determined under this section 

11 with respect to any building shall not ex12 ceed the clause (ii) percentage of the 

13 amount of the credit which would (but for 

14 this subparagraph) be determined under 

15 this section with respect to such building. 

16 ‘‘(ii) DETERMINATION OF PERCENT17 AGE.—For purposes of clause (i), the 

18 clause (ii) percentage with respect to any 

19 building is the percentage which— 

20 ‘‘(I) the housing credit dollar 

21 amount allocated to such building, 

22 bears to 

23 ‘‘(II) the credit amount deter24 mined in accordance with clause (iii). 


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•S 3436 IS

1 ‘‘(iii) DETERMINATION OF CREDIT

2 AMOUNT.—The credit amount determined 

3 in accordance with this clause is the 

4 amount of the credit which would (but for 

5 this subparagraph) be determined under 

6 this section with respect to the building 

7 if— 

8 ‘‘(I) this section were applied 

9 without regard to paragraphs (2)(A) 

10 and (3)(B) of subsection (f), and 

11 ‘‘(II) subsection (f)(3)(A) were 

12 applied without regard to ‘the percentage equal to 2 13 ⁄3 of’. 

14 ‘‘(D) HOUSING CREDIT AGENCY TO SPECI15 FY APPLICABLE PERCENTAGE AND MAXIMUM

16 QUALIFIED BASIS.—In allocating a housing 

17 credit dollar amount to any building, the hous18 ing credit agency shall specify the applicable 

19 percentage and the maximum qualified basis 

20 which may be taken into account under this 

21 section with respect to such building. The appli22 cable percentage and maximum qualified basis 

23 so specified shall not exceed the applicable per24 centage and qualified basis determined under 

25 this section without regard to this subsection. 


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53 

•S 3436 IS

1 ‘‘(7) INCREASE IN STATE CEILING DEDICATED

2 TO CERTAIN RURAL DEVELOPMENT PROJECTS.— 

3 ‘‘(A) IN GENERAL.—The State housing 

4 credit ceiling for any calendar year shall be in5 creased by an amount equal to 5 percent of the 

6 amount determined under paragraph (3)(C)(ii). 

7 ‘‘(B) USE OF INCREASED AMOUNT.— 

8 ‘‘(i) IN GENERAL.—The amount of 

9 the increase under subparagraph (A) for 

10 any calendar year may only be allocated to 

11 buildings located in a rural area. 

12 ‘‘(ii) RURAL AREA.—For purposes of 

13 clause (i), the term ‘rural area’ means any 

14 non-metropolitan area, or any rural area 

15 as defined by section 520 of the Housing 

16 Act of 1949, which is identified by the 

17 qualified allocation plan under subsection 

18 (l)(1)(B). 

19 ‘‘(8) OTHER DEFINITIONS.—For purposes of 

20 this subsection— 

21 ‘‘(A) HOUSING CREDIT AGENCY.—The 

22 term ‘housing credit agency’ means any agency 

23 authorized to carry out this subsection. 


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•S 3436 IS

1 ‘‘(B) POSSESSIONS TREATED AS STATES.— 

2 The term ‘State’ includes a possession of the 

3 United States. 

4 ‘‘(9) CREDIT FOR BUILDINGS FINANCED BY

5 TAX-EXEMPT BONDS SUBJECT TO VOLUME CAP NOT

6 TAKEN INTO ACCOUNT.—Rules similar to the rules 

7 of subsections (h)(4), (m)(1)(D), and (m)(2)(D) of 

8 section 42 shall apply for purposes of this sub9 section. 

10 ‘‘(10) ELECTION TO TRANSFER STATE HOUSING

11 CREDIT CEILING FOR ALLOCATIONS TO LOW-INCOME

12 BUILDINGS.— 

13 ‘‘(A) IN GENERAL.—If a State housing 

14 credit agency makes an election under this 

15 paragraph with respect to a calendar year— 

16 ‘‘(i) the State housing credit ceiling 

17 for such calendar year under paragraph 

18 (3) (determined before application of para19 graph (7)) shall be reduced by the amount 

20 specified in such election, 

21 ‘‘(ii) the amount determined under 

22 paragraph (7) for such calendar year shall 

23 be reduced by the amount specified in such 

24 election, and 


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•S 3436 IS

1 ‘‘(iii) the amount determined under 

2 section 42(h)(3)(C)(ii) for such calendar 

3 year shall be increased by the sum of the 

4 amounts specified in clauses (i) and (ii), 

5 except that any amount specified under 

6 clause (ii)— 

7 ‘‘(I) may only be allocated under 

8 such section to qualified low-income 

9 buildings (as defined in section 42) lo10 cated in a rural area (as defined in 

11 paragraph (7), and 

12 ‘‘(II) shall not be taken into ac13 count for purposes of determining the 

14 unused housing credit ceiling under 

15 the second sentence of section 

16 42(h)(3)(C). 

17 ‘‘(B) TIME AND MANNER FOR MAKING

18 ELECTION.— 

19 ‘‘(i) IN GENERAL.—An election under 

20 this paragraph— 

21 ‘‘(I) shall be made before the end 

22 of the calendar year with respect to 

23 which such election applies, 

24 ‘‘(II) shall be made in such man25 ner as specified by the Secretary, and 


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•S 3436 IS

1 ‘‘(III) shall separately specify the 

2 amount of reductions to be made 

3 under paragraph (3) and paragraph 

4 (7). 

5 ‘‘(ii) FREQUENCY.—A State housing 

6 credit agency may make more than one 

7 election under this section with respect to 

8 any calendar year, and any such election, 

9 once made, shall be revocable only if such 

10 revocation is made before the end of the 

11 calendar year with respect to which such 

12 election is made. 

13 ‘‘(C) LIMITATION.—The aggregate amount 

14 specified in elections under this paragraph with 

15 respect to any State housing credit agency for 

16 calendar year shall not exceed the sum of— 

17 ‘‘(i) the amount determined under 

18 paragraph (3)(C)(ii) for such calendar 

19 year, plus 

20 ‘‘(ii) the amount determined under 

21 paragraph (7) for such calendar year. 

22 ‘‘(i) DEFINITIONS AND SPECIAL RULES.—For pur23 poses of this section— 

24 ‘‘(1) MIDDLE-INCOME UNIT.— 


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•S 3436 IS

1 ‘‘(A) IN GENERAL.—The term ‘middle-in2 come unit’ means any unit in a building if— 

3 ‘‘(i) such unit is rent-restricted (as de4 fined in subsection (g)(2)), and 

5 ‘‘(ii) the individuals occupying such 

6 unit meet the income limitation applicable 

7 under subsection (g)(1) to the project of 

8 which such building is a part. 

9 ‘‘(B) EXCEPTIONS.— 

10 ‘‘(i) EXCLUSION OF LOW-INCOME

11 UNITS.—A unit shall not be treated as a 

12 middle-income unit if such unit is a low-in13 come unit (as defined under section 

14 42(i)(3)). 

15 ‘‘(ii) UNIT MUST BE SUITABLE FOR

16 PERMANENT OCCUPANCY.— 

17 ‘‘(I) IN GENERAL.—A unit shall 

18 not be treated as a middle-income 

19 unit unless the unit is suitable for oc20 cupancy and used other than on a 

21 transient basis. 

22 ‘‘(II) SUITABILITY FOR OCCU23 PANCY.—For purposes of subclause 

24 (I), the suitability of a unit for occu25 pancy shall be determined under reguVerDate Sep 11 2014 04:30 Dec 23, 2023 Jkt 049200 PO 00000 Frm 00057 Fmt 6652 Sfmt 6201 E:\BILLS\S3436.IS S3436

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•S 3436 IS

1 lations prescribed by the Secretary 

2 taking into account local health, safe3 ty, and building codes. 

4 ‘‘(III) SINGLE-ROOM OCCUPANCY

5 UNITS.—For purposes of subclause 

6 (I), a single-room occupancy unit shall 

7 not be treated as used on a transient 

8 basis merely because it is rented on a 

9 month-by-month basis. 

10 ‘‘(C) SPECIAL RULE FOR BUILDINGS HAV11 ING 4 OR FEWER UNITS.—In the case of any 

12 building which has 4 or fewer residential rental 

13 units, no unit in such building shall be treated 

14 as a middle-income unit if the units in such 

15 building are owned by— 

16 ‘‘(i) any individual who occupies a res17 idential unit in such building, or 

18 ‘‘(ii) any person who is related (as de19 fined in subsection (d)(2)(D)(ii)) to such 

20 individual. 

21 ‘‘(D) RULES RELATING TO STUDENTS.— 

22 ‘‘(i) IN GENERAL.—A unit occupied 

23 solely by individuals who— 

24 ‘‘(I) have not attained age 24, 

25 and 


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•S 3436 IS

1 ‘‘(II) are enrolled in a full-time 

2 course of study at an institution of 

3 higher education (as defined in section 

4 3304(f)), 

5 shall not be treated as a middle-income 

6 unit. 

7 ‘‘(ii) EXCEPTION FOR CERTAIN FED8 ERAL PROGRAMS.—In the case of a feder9 ally assisted building (as defined in sub10 section (d)(6)(C)(i) of section 42), clause 

11 (i) shall not apply to a unit all of the occu12 pants of which meet all applicable require13 ments under the housing program de14 scribed in such subsection through which 

15 the building is assisted, financed, or oper16 ated. 

17 ‘‘(iii) OTHER EXCEPTIONS.—Clause 

18 (i) shall not apply to a unit occupied by an 

19 individual who— 

20 ‘‘(I) is married, if such individ21 ual’s spouse also occupies the unit, 

22 ‘‘(II) is a person with disabilities 

23 (as defined in section 3(b)(3)(E) of 

24 the United States Housing Act of 

25 1937), 


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•S 3436 IS

1 ‘‘(III) is a veteran (as defined in 

2 section 101(2) of title 38, United 

3 States Code), 

4 ‘‘(IV) has one or more qualifying 

5 children (as defined in section 

6 152(c)), if such children also occupy 

7 the unit, the individual is not a de8 pendent (as defined in section 152, 

9 determined without regard to sub10 sections (b)(1), (b)(2), and (d)(1)(B) 

11 thereof) of another individual, and 

12 such children are not claimed as de13 pendents (as so defined) of another 

14 individual, or 

15 ‘‘(V) is, or was immediately prior 

16 to attaining the age of majority— 

17 ‘‘(aa) an emancipated minor 

18 or in legal guardianship as deter19 mined by a court of competent 

20 jurisdiction in the individual’s 

21 State of legal residence, 

22 ‘‘(bb) under the care and 

23 placement responsibility of the 

24 State agency responsible for ad25 ministering a plan under part B 


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•S 3436 IS

1 or part E of title IV of the Social 

2 Security Act, or 

3 ‘‘(cc) was an unaccompanied 

4 youth (within the meaning of sec5 tion 725(6) of the McKinney6 Vento Homeless Assistance Act 

7 (42 U.S.C. 11434a(6))) or a 

8 homeless child or youth (within 

9 the meaning of section 725(2) of 

10 such Act (42 U.S.C. 

11 11434a(2))). 

12 ‘‘(E) OWNER-OCCUPIED BUILDINGS HAV13 ING 4 OR FEWER UNITS ELIGIBLE FOR CREDIT

14 WHERE DEVELOPMENT PLAN.— 

15 ‘‘(i) IN GENERAL.—Subparagraph (C) 

16 shall not apply to the acquisition or reha17 bilitation of a building pursuant to a devel18 opment plan of action sponsored by a 

19 State or local government or a qualified 

20 nonprofit organization. 

21 ‘‘(ii) LIMITATION ON CREDIT.—In the 

22 case of a building to which clause (i) ap23 plies, the applicable fraction shall not ex24 ceed 80 percent of the unit fraction. 


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•S 3436 IS

1 ‘‘(iii) CERTAIN UNRENTED UNITS

2 TREATED AS OWNER-OCCUPIED.—In the 

3 case of a building to which clause (i) ap4 plies, any unit which is not rented for 90 

5 days or more shall be treated as occupied 

6 by the owner of the building as of the 1st 

7 day it is not rented. 

8 ‘‘(2) NEW BUILDING.—The term ‘new building’ 

9 means a building the original use of which begins 

10 with the taxpayer. 

11 ‘‘(3) EXISTING BUILDING.—The term ‘existing 

12 building’ means any building which is not a new 

13 building. 

14 ‘‘(4) APPLICATION TO ESTATES AND TRUSTS.— 

15 In the case of an estate or trust, the amount of the 

16 credit determined under subsection (a) shall be ap17 portioned between the estate or trust and the bene18 ficiaries on the basis of the income of the estate or 

19 trust allocable to each. 

20 ‘‘(5) IMPACT OF TENANT’S OPTION TO ACQUIRE

21 PROPERTY.— 

22 ‘‘(A) IN GENERAL.—No Federal income 

23 tax benefit shall fail to be allowable to the tax24 payer with respect to any qualified middle-in25 come building merely by reason of an option 


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•S 3436 IS

1 held by the tenants (in cooperative form or oth2 erwise) or resident management corporation of 

3 such building or by a qualified nonprofit organi4 zation or government agency to purchase the 

5 property or all of the partnership interests 

6 (other than interests of the person exercising 

7 such option or a related party thereto (within 

8 the meaning of section 267(b) or 707(b)(1))) 

9 relating to the property after the close of the 

10 credit period for a price which is not less than 

11 the minimum purchase price determined under 

12 subparagraph (B). 

13 ‘‘(B) MINIMUM PURCHASE PRICE.—For 

14 purposes of subparagraph (A), the minimum 

15 purchase price under this subparagraph is an 

16 amount equal to the principal amount of out17 standing indebtedness secured by the building 

18 (other than indebtedness incurred within the 5- 

19 year period ending on the date of the sale to 

20 the tenants). In the case of a purchase of a 

21 partnership interest, the minimum purchase 

22 price is an amount equal to such interest’s rat23 able share of the amount determined under the 

24 preceding sentence. 


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•S 3436 IS

1 ‘‘(6) TREATMENT OF RURAL PROJECTS.—For 

2 purposes of this section, in the case of any project 

3 for residential rental property located in a rural area 

4 (as defined in section 520 of the Housing Act of 

5 1949), any income limitation measured by reference 

6 to area median gross income shall be measured by 

7 reference to the greater of area median gross income 

8 or national non-metropolitan median income. 

9 ‘‘(7) DETERMINATION OF WHETHER BUILDING

10 IS FEDERALLY SUBSIDIZED.— 

11 ‘‘(A) IN GENERAL.—Except as otherwise 

12 provided in this paragraph, for purposes of this 

13 section, a project shall be treated as federally 

14 subsidized for any taxable year if, at any time 

15 during such taxable year or any prior taxable 

16 year, there is or was outstanding any obligation 

17 the interest on which is exempt from tax under 

18 section 103 the proceeds of which are or were 

19 used (directly or indirectly) with respect to such 

20 project or the operation thereof. 

21 ‘‘(B) SPECIAL RULE FOR SUBSIDIZED CON22 STRUCTION FINANCING.—Subparagraph (A) 

23 shall not apply to any tax-exempt obligation 

24 used to provide construction financing for any 

25 building if— 


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•S 3436 IS

1 ‘‘(i) such obligation (when issued) 

2 identified the building for which the pro3 ceeds of such obligation would be used, 

4 and 

5 ‘‘(ii) such obligation is redeemed be6 fore such building is placed in service. 

7 ‘‘(8) REDUCTION IN BASIS.—In the case of any 

8 building for which a credit is allowable under this 

9 section and section 42, the basis of the building shall 

10 be reduced by the amount of such credit allowed 

11 under subsection (a). 

12 ‘‘(j) APPLICATION OF AT-RISK RULES.—For pur13 poses of this section— 

14 ‘‘(1) IN GENERAL.—Except as otherwise pro15 vided in this subsection, rules similar to the rules of 

16 section 49(a)(1) (other than subparagraphs 

17 (D)(ii)(II) and (D)(iv)(I) thereof), section 49(a)(2), 

18 and section 49(b)(1) shall apply in determining the 

19 qualified basis of any building in the same manner 

20 as such sections apply in determining the credit base 

21 of property. 

22 ‘‘(2) SPECIAL RULES FOR DETERMINING QUALI23 FIED PERSON.—For purposes of paragraph (1)— 

24 ‘‘(A) IN GENERAL.—If the requirements of 

25 subparagraphs (B), (C), and (D) are met with 


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•S 3436 IS

1 respect to any financing borrowed from a quali2 fied nonprofit organization, the determination 

3 of whether such financing is qualified commer4 cial financing with respect to any qualified mid5 dle-income building shall be made without re6 gard to whether such organization— 

7 ‘‘(i) is actively and regularly engaged 

8 in the business of lending money, or 

9 ‘‘(ii) is a person described in section 

10 49(a)(1)(D)(iv)(II). 

11 ‘‘(B) FINANCING SECURED BY PROP12 ERTY.—The requirements of this subparagraph 

13 are met with respect to any financing if such fi14 nancing is secured by the qualified middle-in15 come building, except that this subparagraph 

16 shall not apply in the case of a federally as17 sisted building described in section 42(d)(6)(C) 

18 if— 

19 ‘‘(i) a security interest in such build20 ing is not permitted by a Federal agency 

21 holding or insuring the mortgage secured 

22 by such building, and 

23 ‘‘(ii) the proceeds from the financing 

24 (if any) are applied to acquire or improve 

25 such building. 


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•S 3436 IS

1 ‘‘(C) PORTION OF BUILDING ATTRIB2 UTABLE TO FINANCING.—The requirements of 

3 this subparagraph are met with respect to any 

4 financing for any taxable year in the credit pe5 riod if, as of the close of such taxable year, not 

6 more than 60 percent of the eligible basis of the 

7 qualified middle-income building is attributable 

8 to such financing (reduced by the principal and 

9 interest of any governmental financing which is 

10 part of a wrap-around mortgage involving such 

11 financing). 

12 ‘‘(D) REPAYMENT OF PRINCIPAL AND IN13 TEREST.—The requirements of this subpara14 graph are met with respect to any financing if 

15 such financing is fully repaid on or before the 

16 earliest of— 

17 ‘‘(i) the date on which such financing 

18 matures, 

19 ‘‘(ii) the 90th day after the close of 

20 the credit period with respect to the quali21 fied middle-income building, or 

22 ‘‘(iii) the date of its refinancing or the 

23 sale of the building to which such financ24 ing relates. 


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•S 3436 IS

1 In the case of a qualified nonprofit organization 

2 which is not described in section 

3 49(a)(1)(D)(iv)(II) with respect to a building, 

4 clause (ii) of this subparagraph shall be applied 

5 as if the date described therein were the 90th 

6 day after the earlier of the date the building 

7 ceases to be a qualified middle-income building 

8 or the date which is 15 years after the close of 

9 a credit period with respect thereto. 

10 ‘‘(3) PRESENT VALUE OF FINANCING.—If the 

11 rate of interest on any financing described in para12 graph (2)(A) is less than the rate which is 1 per13 centage point below the applicable Federal rate as of 

14 the time such financing is incurred, then the quali15 fied basis (to which such financing relates) of the 

16 qualified middle-income building shall be the present 

17 value of the amount of such financing, using as the 

18 discount rate such applicable Federal rate. For pur19 poses of the preceding sentence, the rate of interest 

20 on any financing shall be determined by treating in21 terest to the extent of government subsidies as not 

22 payable. 

23 ‘‘(4) FAILURE TO FULLY REPAY.— 

24 ‘‘(A) IN GENERAL.—To the extent that the 

25 requirements of paragraph (2)(D) are not met, 


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•S 3436 IS

1 then the taxpayer’s tax under this chapter for 

2 the taxable year in which such failure occurs 

3 shall be increased by an amount equal to the 

4 applicable portion of the credit under this sec5 tion with respect to such building, increased by 

6 an amount of interest for the period— 

7 ‘‘(i) beginning with the due date for 

8 the filing of the return of tax imposed by 

9 chapter 1 for the 1st taxable year for 

10 which such credit was allowable, and 

11 ‘‘(ii) ending with the due date for the 

12 taxable year in which such failure occurs, 

13 determined by using the underpayment rate and 

14 method under section 6621. 

15 ‘‘(B) APPLICABLE PORTION.—For pur16 poses of subparagraph (A), the term ‘applicable 

17 portion’ means the aggregate decrease in the 

18 credits allowed to a taxpayer under section 38 

19 for all prior taxable years which would have re20 sulted if the eligible basis of the building were 

21 reduced by the amount of financing which does 

22 not meet requirements of paragraph (2)(D). 

23 ‘‘(C) CERTAIN RULES TO APPLY.—Rules 

24 similar to the rules of subparagraphs (A) and 


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•S 3436 IS

1 (D) of section 42(j)(4) shall apply for purposes 

2 of this subsection. 

3 ‘‘(k) CERTIFICATIONS AND OTHER REPORTS TO SEC4 RETARY.— 

5 ‘‘(1) CERTIFICATION WITH RESPECT TO 1ST

6 YEAR OF CREDIT PERIOD.—Following the close of 

7 the 1st taxable year in the credit period with respect 

8 to any qualified middle-income building, the tax9 payer shall certify to the Secretary (at such time 

10 and in such form and in such manner as the Sec11 retary prescribes)— 

12 ‘‘(A) the taxable year, and calendar year, 

13 in which such building was placed in service, 

14 ‘‘(B) the adjusted basis and eligible basis 

15 of such building as of the close of the 1st year 

16 of the credit period, 

17 ‘‘(C) the maximum applicable percentage 

18 and qualified basis permitted to be taken into 

19 account by the appropriate housing credit agen20 cy under subsection (h), and 

21 ‘‘(D) such other information as the Sec22 retary may require. 

23 In the case of a failure to make the certification re24 quired by the preceding sentence on the date pre25 scribed therefor, unless it is shown that such failure 


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•S 3436 IS

1 is due to reasonable cause and not to willful neglect, 

2 no credit shall be allowable by reason of subsection 

3 (a) with respect to such building for any taxable 

4 year ending before such certification is made. 

5 ‘‘(2) ANNUAL REPORTS TO THE SECRETARY.— 

6 The Secretary may require taxpayers to submit an 

7 information return (at such time and in such form 

8 and manner as the Secretary prescribes) for each 

9 taxable year setting forth— 

10 ‘‘(A) the qualified basis for the taxable 

11 year of each qualified middle-income building of 

12 the taxpayer, 

13 ‘‘(B) the information described in para14 graph (1)(C) for the taxable year, and 

15 ‘‘(C) such other information as the Sec16 retary may require. 

17 The penalty under section 6652(j) shall apply to any 

18 failure to submit the return required by the Sec19 retary under the preceding sentence on the date pre20 scribed therefor. 

21 ‘‘(3) ANNUAL REPORTS FROM HOUSING CREDIT

22 AGENCIES.—Each agency which allocates any hous23 ing credit amount to any building for any calendar 

24 year shall submit to the Secretary (at such time and 


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•S 3436 IS

1 in such manner as the Secretary shall prescribe) an 

2 annual report specifying— 

3 ‘‘(A) the amount of housing credit amount 

4 allocated to each building for such year, 

5 ‘‘(B) sufficient information to identify each 

6 such building and the taxpayer with respect 

7 thereto, and 

8 ‘‘(C) such other information as the Sec9 retary may require. 

10 The penalty under section 6652(j) shall apply to any 

11 failure to submit the report required by the pre12 ceding sentence on the date prescribed therefor. 

13 ‘‘(l) RESPONSIBILITIES OF HOUSING CREDIT AGEN14 CIES.— 

15 ‘‘(1) PLANS FOR ALLOCATION OF CREDIT

16 AMONG PROJECTS.— 

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

18 other provision of this section, the housing cred19 it dollar amount with respect to any building 

20 shall be zero unless— 

21 ‘‘(i) such amount was allocated pursu22 ant to a qualified allocation plan of the 

23 housing credit agency which is approved by 

24 the governmental unit (in accordance with 


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•S 3436 IS

1 rules similar to the rules of section 

2 42(m)(1)) of which such agency is a part, 

3 ‘‘(ii) a comprehensive market study of 

4 the housing needs of middle-income indi5 viduals in the area to be served by the 

6 project is conducted before the credit allo7 cation is made and at the developer’s ex8 pense by a disinterested party who is ap9 proved by such agency, and 

10 ‘‘(iii) a written explanation is available 

11 to the general public for any allocation of 

12 a housing credit dollar amount which is 

13 not made in accordance with established 

14 priorities and selection criteria of the hous15 ing credit agency. 

16 ‘‘(B) QUALIFIED ALLOCATION PLAN.—For 

17 purposes of this paragraph, the term ‘qualified 

18 allocation plan’ means any plan— 

19 ‘‘(i) which sets forth selection criteria 

20 to be used to determine housing priorities 

21 of the housing credit agency which are ap22 propriate to local conditions, 

23 ‘‘(ii) which also gives preference in al24 locating housing credit dollar amounts 

25 among selected projects to— 


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•S 3436 IS

1 ‘‘(I) projects obligated to serve 

2 qualified tenants for the longest peri3 ods, 

4 ‘‘(II) projects in areas with insuf5 ficient supply of housing affordable to 

6 median income households, 

7 ‘‘(III) projects which target hous8 ing to tenants at a range of incomes 

9 between 60 and 100 percent of area 

10 median gross income, and 

11 ‘‘(IV) projects located near tran12 sit hubs, and 

13 ‘‘(iii) which provides a procedure that 

14 the agency (or an agent or other private 

15 contractor of such agency) will follow in 

16 monitoring for noncompliance with the 

17 provisions of this section and in notifying 

18 the Internal Revenue Service of such non19 compliance which such agency becomes 

20 aware of and in monitoring for noncompli21 ance with habitability standards through 

22 regular site visits. 

23 ‘‘(C) CERTAIN SELECTION CRITERIA MUST

24 BE USED.—The selection criteria set forth in a 

25 qualified allocation plan must include— 


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•S 3436 IS

1 ‘‘(i) project location, 

2 ‘‘(ii) housing needs characteristics, 

3 ‘‘(iii) project characteristics, including 

4 whether the project includes the use of ex5 isting housing as part of a community revi6 talization plan, 

7 ‘‘(iv) sponsor characteristics, 

8 ‘‘(v) tenant populations with special 

9 housing needs, 

10 ‘‘(vi) tenant populations of individuals 

11 with children, 

12 ‘‘(vii) projects intended for eventual 

13 tenant ownership, 

14 ‘‘(viii) the energy efficiency of the 

15 project, and 

16 ‘‘(ix) the historic nature of the 

17 project. 

18 ‘‘(D) CERTAIN SELECTION CRITERIA PRO19 HIBITED.—The selection criteria set forth in a 

20 qualified allocation plan shall not include a re21 quirement of local approval or local contribu22 tions, either as a threshold qualification re23 quirement or as part of a point system to be 

24 considered for allocations of housing credit dol25 lar amount. 


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1 ‘‘(2) CREDIT ALLOCATED TO BUILDING NOT TO

2 EXCEED AMOUNT NECESSARY TO ASSURE PROJECT

3 FEASIBILITY.— 

4 ‘‘(A) IN GENERAL.—The housing credit 

5 dollar amount allocated to a project shall not 

6 exceed the amount the housing credit agency 

7 determines is necessary for the financial feasi8 bility of the project and its viability as a quali9 fied middle-income housing project throughout 

10 the credit period. 

11 ‘‘(B) AGENCY EVALUATION.—In making 

12 the determination under subparagraph (A), the 

13 housing credit agency shall consider— 

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

15 the total financing planned for the project, 

16 ‘‘(ii) any proceeds or receipts expected 

17 to be generated by reason of tax benefits, 

18 ‘‘(iii) the percentage of the housing 

19 credit dollar amount used for project costs 

20 other than the cost of intermediaries, and 

21 ‘‘(iv) the reasonableness of the devel22 opmental and operational costs of the 

23 project. 

24 Clause (iii) shall not be applied so as to impede 

25 the development of projects in hard-to-develop 


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1 areas. Such a determination shall not be con2 strued to be a representation or warranty as to 

3 the feasibility or viability of the project. 

4 ‘‘(C) DETERMINATION MADE WHEN CRED5 IT AMOUNT APPLIED FOR AND WHEN BUILDING

6 PLACED IN SERVICE.— 

7 ‘‘(i) IN GENERAL.—A determination 

8 under subparagraph (A) shall be made as 

9 of each of the following times: 

10 ‘‘(I) The application for the 

11 housing credit dollar amount. 

12 ‘‘(II) The allocation of the hous13 ing credit dollar amount. 

14 ‘‘(III) The date the building is 

15 placed in service. 

16 ‘‘(ii) CERTIFICATION AS TO AMOUNT

17 OF OTHER SUBSIDIES.—Prior to each de18 termination under clause (i), the taxpayer 

19 shall certify to the housing credit agency 

20 the full extent of all Federal, State, and 

21 local subsidies which apply (or which the 

22 taxpayer expects to apply) with respect to 

23 the building. 


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1 ‘‘(m) REGULATIONS.—The Secretary shall prescribe 

2 such regulations as may be necessary or appropriate to 

3 carry out the purposes of this section, including— 

4 ‘‘(1) regulations dealing with— 

5 ‘‘(A) projects which include more than 1 

6 building or only a portion of a building, or 

7 ‘‘(B) buildings which are placed in service 

8 in portions, 

9 ‘‘(2) regulations providing for the application of 

10 this section to short taxable years, 

11 ‘‘(3) regulations preventing the avoidance of the 

12 rules of this section, 

13 ‘‘(4) regulations providing the opportunity for 

14 housing credit agencies to correct administrative er15 rors and omissions with respect to allocations and 

16 record keeping within a reasonable period after their 

17 discovery, taking into account the availability of reg18 ulations and other administrative guidance from the 

19 Secretary, and 

20 ‘‘(5) in consultation with the Secretary of 

21 Housing and Urban Development, regulations or 

22 guidance to promote uniform definitions and to 

23 streamline requirements for with respect to qualified 

24 middle-income buildings which receive funding from 

25 programs administrated by the Department of HousVerDate Sep 11 2014 04:30 Dec 23, 2023 Jkt 049200 PO 00000 Frm 00078 Fmt 6652 Sfmt 6201 E:\BILLS\S3436.IS S3436

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1 ing and Urban Development, including programs au2 thorized by Native American Housing Assistance 

3 and Self-Determination Act of 1996 .’’. 

4 (b) TREATMENT AS PART OF GENERAL BUSINESS

5 CREDIT.—Section 38(b) of the Internal Revenue Code of 

6 1986 is amended by striking ‘‘plus’’ at the end of para7 graph (40), by striking the period at the end of paragraph 

8 (41) and inserting ‘‘, plus’’, and by adding at the end the 

9 following new paragraph: 

10 ‘‘(42) the middle-income housing credit deter11 mined under section 42A(a).’’. 

12 (c) REDUCTION IN BASIS.—Section 1016(a) of the 

13 Internal Revenue Code of 1986 is amended— 

14 (1) by striking ‘‘and’’ at the end of paragraph 

15 (37); 

16 (2) by redesignating paragraph (38) as para17 graph (39); and 

18 (3) by inserting after paragraph (37) the fol19 lowing new paragraph: 

20 ‘‘(38) to the extent provided in section 

21 42A(i)(8), and’’. 

22 (d) TREATMENT UNDER BASE EROSION MINIMUM

23 TAX .—Section 59A(b)(4) of he Internal Revenue Code 

24 of 1986 is amended by redesignating subparagraphs (B) 

25 and (C) as subparagraphs (C) and (D), respectively, and 


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1 by inserting after subparagraphs (A) the following new 

2 subparagraph: 

3 ‘‘(B) the middle-income housing credit de4 termined under section 42A(a),’’. 

5 (e) CONFORMING AMENDMENTS RELATING TO LOW6 INCOME HOUSING TAX CREDIT.—Section 42(n) of the In7 ternal Revenue Code of 1986 is amended— 

8 (1) by striking ‘‘regulations’’ in the matter pre9 ceding paragraph (1), 

10 (2) by inserting ‘‘regulations’’ before ‘‘dealing 

11 with’’ in paragraph (1), 

12 (3) by inserting ‘‘regulations’’ before ‘‘pro13 viding’’ in paragraphs (2) and (4), 

14 (4) by inserting ‘‘regulations’’ before ‘‘pre15 venting’’ in paragraph (3), 

16 (5) by striking ‘‘and’’at the end of paragraph 

17 (3), 

18 (6) by striking the period at the end of para19 graph (4) and inserting ‘‘, and’’, and 

20 (7) by adding at the end the following new 

21 paragraph: 

22 ‘‘(5) in consultation with the Secretary of 

23 Housing and Urban Development, regulations or 

24 guidance to promote uniform definitions and to 

25 streamline requirements for with respect to qualified 


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1 low-income buildings which receive funding from 

2 programs administrated by the Department of Hous3 ing and Urban Development, including programs au4 thorized by Native American Housing Assistance 

5 and Self-Determination Act of 1996.’’. 

6 (f) CONFORMING AMENDMENTS.— 

7 (1) Section 45L(e) of the Internal Revenue 

8 Code of 1986 is amended by inserting ‘‘or 42A’’ 

9 after ‘‘42’’. 

10 (2) Section 50(c)(3)(C) of such Code is amend11 ed by inserting ‘‘or 42A’’ after ‘‘42’’. 

12 (3) Section 55(c)(1) of such Code is amended 

13 by inserting ‘‘42A(j),’’ before ‘‘45(e)(11)(C)’’. 

14 (4) Subsections (i)(3)(C), (i)(6)(B)(i), and 

15 (k)(1) of section 469 of such Code are each amended 

16 by inserting ‘‘or 42A’’ after ‘‘42’’. 

17 (5) The table of sections for subpart D of part 

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

19 amended by inserting after the item relating to sec20 tion 42 the following new item: 

‘‘Sec. 42A. Middle-income housing credit.’’. 

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

22 this section shall apply to buildings placed in service after 

23 December 31, 2023, in taxable years ending after such 

24 date. 

Æ 


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