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103D CONGRESS

1ST SESSION H. R. 1093

To amend the Internal Revenue Code of 1986 to promote the development

and preservation of rental housing for low- and moderate-income families.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 24, 1993

Mr. DIXON (for himself, Mr. FRANK of Massachusetts, Mrs. MINK, Mr. MURPHY, Mr. OWENS, Mr. JEFFERSON, Mr. WASHINGTON, Ms. NORTON, Mr.

RANGEL, and Mr. TORRES) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to promote

the development and preservation of rental housing for

low- and moderate-income families.

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 ‘‘Low-Income Housing

5 Revitalization Act’’.

6 SEC. 2. FINDINGS AND PURPOSE.

7 (a) FINDINGS.—The Congress finds that—
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1 (1) the United States faces an unprecedented

2 crisis arising from the rapid decline of affordable

3 housing,

4 (2) new construction of housing for low- and

5 moderate-income families is at a virtual standstill,

6 (3) according to a 1989 report of the Bureau

7 of the Census, the Nation’s housing stock occupied

8 by persons living in poverty is 12.4 million units, of

9 which 2.2 million units (or 18 percent) are sub10 standard,

11 (4) by 1995, as many as 900,000 federally sub12 sidized low-income rental housing units could be lost

13 as a result of the prepayment of federally subsidized

14 mortgages,

15 (5) scores of existing low-income housing units

16 will continue to disappear as older buildings are de17 stroyed and in their place are constructed higher

18 priced rental units and condominiums, creating an

19 even greater shortage of affordable housing,

20 (6) Federal expenditures to meet the housing

21 needs of low- and moderate-income persons declined

22 70 percent from $30,200,000,000 billion in fiscal

23 year 1981 to $7,500,000,000 billion in fiscal year

24 1989, and such expenditures were increased only to
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1 $8,900,000,000 billion in fiscal year 1990 and to

2 $9,500,000,000 billion in fiscal year 1991,

3 (7) an increasing number of Americans face the

4 possibility of homelessness unless existing low-in5 come housing units are rehabilitated and new hous6 ing units are constructed,

7 (8) the rising number of ill-housed and home8 less families is partially caused by displacement due

9 to the rehabilitation and gentrification of formerly

10 low-income housing, and

11 (9) owners of substandard low-income housing

12 units continue to claim Federal tax deductions with13 out making the necessary repairs or renovations to

14 bring their low-income housing property up to State

15 or local building codes.

16 (b) PURPOSE.—It is the purpose of this Act—

17 (1) to encourage the development of affordable,

18 decent, safe, and sanitary housing for low- and mod19 erate-income families,

20 (2) to rehabilitate and construct low-income

21 rental housing units by providing investment incen22 tives to private developers through a shortening of

23 the depreciation recovery period on low-income rent24 al property to 20 years,
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1 (3) to deny business-related tax deductions

2 claimed by owners of low-income rental housing

3 units who consistently violate State and local health,

4 safety, and building codes by maintaining sub5 standard rental housing units, and

6 (4) to exempt from the passive loss limitation

7 certain deductions relating to low-income housing.

8 SEC. 3. IMPROVEMENTS IN LOW-INCOME HOUSING CREDIT.

9 (a) PERMANENT EXTENSION.—Section 42 of the In10 ternal Revenue Code of 1986 is amended by striking sub11 section (o) (relating to termination).

12 (b) INCREASE IN CREDIT FOR FEDERALLY SUB13 SIDIZED NEW BUILDINGS.—Paragraph (1) of section

14 42(b) of such Code (relating to value of low-income hous15 ing credit) is amended—

16 (1) in subparagraph (A), by striking ‘‘which are

17 not federally subsidized for the taxable year’’, and

18 (2) in subparagraph (B), by striking the dash

19 and all that follows through ‘‘(ii)’’.

20 (c) EXEMPTION FROM PASSIVE LOSS LIMITATION.—

21 Clause (i) of section 469(d)(2)(A) of such Code (relating

22 to passive activity losses) is amended by inserting ‘‘(other

23 than section 42)’’ after ‘‘subpart D’’.

24 (d) EFFECTIVE DATES.—
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1 (1) EXTENSION.—The amendment made by

2 subsection (a) shall apply to calendar years after

3 1991.

4 (2) MODIFICATIONS.—The amendments made

5 by subsections (b) and (c) shall apply to property

6 placed in service after December 31, 1992.

7 SEC. 4. ACCELERATED DEPRECIATION SCHEDULE FOR

8 QUALIFIED RENTAL HOUSING.

9 (a) IN GENERAL.—Paragraph (1) of section 168(c)

10 of the Internal Revenue Code of 1986 (relating to depre11 ciation recovery period) is amended by striking the item

12 relating to residential rental property and inserting the

13 following:

‘‘Low-income residential rental property .................................. 20 years

Other residential rental property ........................................ 27.5 years’’.

14 (b) DEFINITIONS.—Paragraph (2) of section 168(e)

15 of such Code (relating to classification of property for de16 preciation) is amended by adding at the end the following

17 new subparagraphs:

18 ‘‘(C) LOW-INCOME RESIDENTIAL RENTAL

19 PROPERTY.—The term ‘low-income residential

20 rental property’ means residential rental prop21 erty which is a qualified low-income housing

22 project (within the meaning of section 42(g)).

23 ‘‘(D) OTHER RESIDENTIAL RENTAL PROP24 ERTY.—The term ‘other residential rental prop-
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1 erty’ means residential rental property which is

2 not low-income residential rental property.’’

3 (c) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to property placed in service after

5 December 31, 1992.

6 SEC. 5. DISALLOWANCE OF DEDUCTIONS FOR EXPENSES

7 RELATING TO SUBSTANDARD RENTAL HOUS8 ING.

9 (a) IN GENERAL.—Part IX of subchapter B of chap10 ter 1 of the Internal Revenue Code of 1986 (relating to

11 items not deductible) is amended by adding at the end

12 the following new section:

13 ‘‘SEC. 280I. EXPENSES RELATING TO SUBSTANDARD RENT14 AL HOUSING.

15 ‘‘(a) GENERAL RULE.—No deduction (including any

16 deduction for depreciation or amortization) shall be al17 lowed under this chapter for any expense relating to a

18 rental dwelling unit by any taxpayer who derives rental

19 income from the unit, unless the unit is suitable for occu20 pancy.

21 ‘‘(b) SUITABILITY FOR OCCUPANCY.—For purposes

22 of subsection (a), the suitability of a rental dwelling unit

23 for occupancy shall be determined under regulations pre24 scribed by the Secretary taking into account local health,

25 safety, and building codes.’’
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1 (b) CONFORMING AMENDMENT.—The table of sec2 tions for such part IX is amended by adding at the end

3 the following new item:

‘‘Sec. 280I. Expenses relating to substandard rental housing.’’

4 (c) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to taxable years ending after De6 cember 31, 1992.

7 SEC. 6. EXEMPTION FROM PASSIVE LOSS LIMITATION FOR

8 CERTAIN DEDUCTIONS RELATING TO QUALI9 FIED RENTAL HOUSING.

10 (a) IN GENERAL.—Subsection (e) of section 469 of

11 the Internal Revenue Code of 1986 (relating to special

12 rules for determining income or loss from a passive activ13 ity) is amended by adding at the end the following new

14 paragraph:

15 ‘‘(5) SPECIAL RULES FOR DEDUCTIONS ALLOW16 ABLE FOR TAXES, INTEREST, AND TRADE OR BUSI17 NESS EXPENSES WITH RESPECT TO RENTAL REAL

18 ESTATE ACTIVITIES IN WHICH TAXPAYER ACTIVELY

19 OR MATERIALLY PARTICIPATES.—

20 ‘‘(A) IN GENERAL.—Subsection (a) shall

21 not apply to any amount allowable as a deduc22 tion under section 162, 163, or 164 (deter23 mined without regard to this section) for

24 amounts paid during the taxable year with re-
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1 spect to qualified rental real estate activities of

2 the taxpayer.

3 ‘‘(B) APPLICATION OF SECTION TO OTHER

4 DEDUCTIONS.—The income from qualified rent5 al real estate activities of the taxpayer shall be

6 reduced (but not below zero) by the amount to

7 which subsection (a) does not apply by reason

8 of subparagraph (A) for purposes of determin9 ing whether subsection (a) applies to other de10 ductions with respect to such activities.

11 ‘‘(C) QUALIFIED RENTAL REAL ESTATE

12 ACTIVITY.—For purposes of this paragraph, the

13 term ‘qualified real estate activity’ means any

14 rental real estate activity relating to a qualified

15 low-income housing project (within the meaning

16 of section 42(g)) with respect to which during

17 the taxable year the taxpayer—

18 ‘‘(i) actively participates (within the

19 meaning of subsection (i)(6)), or

20 ‘‘(ii) materially participates (within

21 the meaning of subsection (h)).’’

22 (b) TECHNICAL AMENDMENT.—Paragraph (4) of

23 section 469(j) of such Code (relating to allocation of pas24 sive activity loss and credit) is amended by striking ‘‘and

25 the passive activity credit (and the $25,000 amount under
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1 subsection (i))’’ and inserting the following: ‘‘, the passive

2 activity credit, the $25,000 amount under subsection (i),

3 and the amount to which subsection (a) does not apply

4 by reason of subsection (e)(5)(A)’’.

5 (c) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to taxable years beginning after

7 December 31, 1992.

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