I 

109TH CONGRESS 

1ST SESSION H. R. 1549

To amend the Internal Revenue Code of 1986 to allow an income tax credit 

for the provision of homeownership and community development, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 12, 2005

Mr. REYNOLDS (for himself, Mr. CARDIN, Mr. PORTMAN, Ms. PRYCE of Ohio, 

Mr. ENGLISH of Pennsylvania, Mrs. JOHNSON of Connecticut, Mr. 

HERGER, Mr. RAMSTAD, Mr. HAYWORTH, Mr. LEWIS of Kentucky, Mr. 

FOLEY, Mr. BRADY of Texas, Mr. CANTOR, Ms. HART, Mr. CHOCOLA, 

Mr. MCDERMOTT, Mr. LEWIS of Georgia, Mr. MCNULTY, Mr. JEFFERSON, Mr. POMEROY, Mr. THOMPSON of California, Mr. LARSON of Connecticut, Mr. EMANUEL, Mr. BOEHNER, Mr. FOSSELLA, Mr. BOUSTANY, 

Mr. KIRK, Mr. OTTER, Mr. YOUNG of Alaska, Mr. GARY G. MILLER of 

California, Mr. SHAYS, Mr. CUMMINGS, Mr. FORTUN ̃O, Mr. TOWNS, Mr. 

SIMPSON, Mr. LYNCH, and Mr. SKELTON) 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 allow an 

income tax credit for the provision of homeownership 

and community development, 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 ‘‘Renewing the Dream 

5 Tax Credit Act’’. 
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1 SEC. 2. COMMUNITY HOMEOWNERSHIP CREDIT. 

2 (a) IN GENERAL.—Subpart D of part IV of sub3 chapter A of chapter 1 of the Internal Revenue Code of 

4 1986 (relating to business related credits) is amended by 

5 inserting after section 42 the following new section: 

6 ‘‘SEC. 42A. COMMUNITY HOMEOWNERSHIP CREDIT. 

7 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec8 tion 38, the amount of the homeownership credit deter9 mined under this section for any taxable year in the credit 

10 period shall be an amount equal to the applicable percent11 age of the eligible basis of each qualified residence. 

12 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 

13 this section—

14 ‘‘(1) IN GENERAL.—The term ‘applicable per15 centage’ means the appropriate percentage pre16 scribed by the Secretary for the month in which the 

17 taxpayer and the homeownership credit agency enter 

18 into an agreement with respect to such residence 

19 (which is binding on such agency, the taxpayer, and 

20 all successors in interest) as to the homeownership 

21 credit dollar amount to be allocated to such resi22 dence. 

23 ‘‘(2) METHOD OF PRESCRIBING PERCENT24 AGE.—The percentage prescribed by the Secretary 

25 for any month shall be the percentage which will 

26 yield over a 5-year period amounts of credit under 
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1 subsection (a) which have a present value equal to 

2 50 percent of the eligible basis of a qualified resi3 dence. 

4 ‘‘(3) METHOD OF DISCOUNTING.—The present 

5 value under paragraph (2) shall be determined—

6 ‘‘(A) as of the last day of the 1st year of 

7 the 5-year period referred to in paragraph (2), 

8 ‘‘(B) by using a discount rate equal to 72 

9 percent of the annual Federal mid-term rate 

10 applicable under section 1274(d)(1) to the 

11 month applicable under paragraph (1) and com12 pounded annually, and 

13 ‘‘(C) by assuming that the credit allowable 

14 under this section for any year is received on 

15 the last day of such year. 

16 ‘‘(c) QUALIFIED RESIDENCE.—For purposes of this 

17 section—

18 ‘‘(1) IN GENERAL.—The term ‘qualified resi19 dence’ means any residence—

20 ‘‘(A) which is located—

21 ‘‘(i) in a census tract which has a me22 dian gross income which does not exceed 

23 80 percent of the greater of area or state24 wide median gross income, 
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1 ‘‘(ii) in a rural area (as defined under 

2 section 520 of the Housing Act of 1949), 

3 ‘‘(iii) on a reservation for a federally 

4 recognized Indian tribe, or 

5 ‘‘(iv) in an area of chronic economic 

6 distress, and 

7 ‘‘(B) which is purchased by a qualified 

8 buyer. 

9 For purposes of subparagraph (A)(iv), an area is an 

10 area of chronic economic distress if it is approved 

11 for designation as such under section 143(j)(3); ex12 cept that such designation shall not require the ap13 proval of the Secretary, shall be deemed to be ap14 proved by the Secretary of Housing and Urban De15 velopment if not approved or disapproved by the 

16 Secretary of Housing and Urban Development with17 in 60 days after submission for approval for pur18 poses of section 143(j)(3)(A)(ii), and shall cease to 

19 apply after the end of the 5th calendar year after 

20 the calendar year in which the designation is made. 

21 ‘‘(2) RESIDENCE.—For purposes of paragraph 

22 (1), the term ‘residence’ means—

23 ‘‘(A) a single-family home containing 1 to 

24 4 housing units, 

25 ‘‘(B) a condominium unit, or 
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1 ‘‘(C) stock in a cooperative housing cor2 poration (as defined in section 216(b)). 

3 In the case of a single-family home described in sub4 paragraph (A) that contains more than one housing 

5 unit, the term ‘residence’ shall not include any new 

6 residence and shall include only the portion of such 

7 home that is occupied by the owner thereof (deter8 mined based on the percentage of the total area of 

9 such home that is occupied by the owner). In the 

10 case of subparagraphs (A), (B), and (C), factory11 built homes shall be included in the definition of res12 idence. 

13 ‘‘(3) TIMING OF DETERMINATION.—For pur14 poses of paragraph (1), the determination of wheth15 er a residence is a qualified residence shall be made 

16 at the time a binding commitment for an allocation 

17 of credit is awarded by the homeownership credit 

18 agency; except that the determination of whether a 

19 purchaser is a qualified buyer shall be made at the 

20 time the residence is sold. 

21 ‘‘(4) MEDIAN GROSS INCOME.—For purposes of 

22 this section, median gross income shall be deter23 mined consistent with section 143(f)(2). 

24 ‘‘(d) ELIGIBLE BASIS.—For purposes of this sec25 tion—
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1 ‘‘(1) NEW QUALIFIED RESIDENCES.—

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

3 new qualified residence is—

4 ‘‘(i) in the case of a qualified resi5 dence which is sold in a transaction which 

6 meets the requirements of subparagraph 

7 (B), its adjusted basis (excluding land) im8 mediately before such sale, and 

9 ‘‘(ii) zero in any other case. 

10 ‘‘(B) REQUIREMENTS.—A sale of a quali11 fied residence meets the requirements of this 

12 subparagraph if—

13 ‘‘(i) the buyer acquires the qualified 

14 residence by purchase (as defined in sec15 tion 179(d)(2)), 

16 ‘‘(ii) the buyer of the qualified resi17 dence is not a related person with respect 

18 to the seller, and 

19 ‘‘(iii) in the case of a seller who mate20 rially participates in the development of 

21 the residence, the buyer’s debt financing is 

22 originated by a third party who is not a re23 lated person with respect to such seller. 

24 ‘‘(2) EXISTING QUALIFIED RESIDENCES.—
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1 ‘‘(A) IN GENERAL.—The eligible basis of 

2 an existing qualified residence is—

3 ‘‘(i) in the case of a qualified resi4 dence which is sold in a transaction which 

5 meets the requirements of subparagraph 

6 (B), its adjusted basis (excluding land) im7 mediately before such sale, and 

8 ‘‘(ii) zero in any other case. 

9 ‘‘(B) REQUIREMENTS.—A sale of a quali10 fied residence meets the requirements of this 

11 subparagraph if—

12 ‘‘(i) the buyer acquires the qualified 

13 residence by purchase (as defined in sec14 tion 179(d)(2)), 

15 ‘‘(ii) the qualified residence has un16 dergone substantial rehabilitation in con17 nection with the sale described in clause 

18 (i), 

19 ‘‘(iii) the buyer of the qualified resi20 dence is not a related person with respect 

21 to the seller, and 

22 ‘‘(iv) in the case of a seller who mate23 rially participates in the development of 

24 the residence, the buyer’s debt financing is 
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1 originated by a third party who is not a re2 lated person with respect to such seller. 

3 ‘‘(C) SUBSTANTIAL REHABILITATION.—

4 ‘‘(i) IN GENERAL.—For purposes of 

5 subparagraph (B), substantial rehabilita6 tion means rehabilitation expenditures paid 

7 or incurred with respect to a qualified resi8 dence that are at least $15,000. 

9 ‘‘(ii) INFLATION ADJUSTMENT.—In 

10 the case of a calendar year after 2005, the 

11 dollar amount contained in clause (i) shall 

12 be increased by an amount equal to—

13 ‘‘(I) such dollar amount, multi14 plied by 

15 ‘‘(II) the cost-of-living adjust16 ment determined under section 1(f)(3) 

17 for such calendar year by substituting 

18 ‘calendar year 2004’ for ‘calendar 

19 year 1992’ in subparagraph (B) there20 of. 

21 Any increase under clause (ii) which is not 

22 a multiple of $1,000 shall be rounded to 

23 the next lowest multiple of $1,000. 

24 ‘‘(D) LIMITATION ON ACQUISITION

25 BASIS.—The eligible basis of an existing quali-
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1 fied residence may not exceed 150 percent of 

2 the qualified rehabilitation expenditures. 

3 ‘‘(3) EFFECT OF SUBSEQUENT SALE, ETC.—A 

4 subsequent sale, assignment, rental, or refinancing 

5 of the qualified residence by the buyer or the subse6 quent sale, assignment, or pooling of the buyer’s fi7 nancing by the originator shall not be considered in 

8 determining whether or not the prior sales trans9 action satisfied the requirements of subparagraph 

10 (B) of paragraph (1) or (2). 

11 ‘‘(4) SPECIAL RULES RELATING TO DETER12 MINATION OF ADJUSTED BASIS.—For purposes of 

13 this subsection—

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

15 subparagraph (B), the adjusted basis of any 

16 qualified residence—

17 ‘‘(i) shall not include so much of the 

18 basis of such qualified residence as is de19 termined by reference to the basis of other 

20 property held at any time by the person 

21 acquiring the residence, and 

22 ‘‘(ii) shall be determined without re23 gard to the adjusted basis of any property 

24 which is not part of such qualified resi25 dence. 
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1 ‘‘(B) BASIS OF PROPERTY IN COMMON

2 AREAS, ETC., INCLUDED.—The adjusted basis 

3 of any qualified residence shall be determined 

4 by taking into account (on a pro rata basis) the 

5 adjusted basis of property (other than land) 

6 used in common areas or provided as com7 parable amenities to all residences within a 

8 project. 

9 ‘‘(5) SPECIAL RULES FOR DETERMINING ELIGI10 BLE BASIS.—

11 ‘‘(A) RELATED PERSON, ETC.—For pur12 poses of this section, a person (in this clause re13 ferred to as the ‘related person’) is related to 

14 any person if the related person bears a rela15 tionship to such person specified in section 

16 267(b) or 707(b)(1), or the related person and 

17 such person are engaged in trades or businesses 

18 under common control (within the meaning of 

19 subsections (a) and (b) of section 52). For pur20 poses of the preceding sentence, in applying 

21 section 267(b) or 707(b)(1), ‘10 percent’ shall 

22 be substituted for ‘50 percent’. 

23 ‘‘(B) NONRESIDENTIAL SPACE EX24 CLUDED.—No portion of the eligible basis of a 
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1 qualified residence shall include costs attrib2 utable to nonresidential space. 

3 ‘‘(C) LIMITATION.—The eligible basis of 

4 any residence may not exceed the mortgage 

5 limit for Federal Housing Administration in6 sured mortgages for single family homes in the 

7 area in which such residence is located. 

8 ‘‘(e) DEFINITION AND SPECIAL RULES RELATING TO

9 CREDIT PERIOD.—

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

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

12 respect to any qualified residence, the period of 5 

13 taxable years beginning with the taxable year in 

14 which the sale of the qualified residence occurs satis15 fying the requirements of subsection (d)(1)(B) or 

16 (d)(2)(B). 

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 quali21 fied residence for the 1st taxable year of the 

22 credit period shall be determined by multiplying 

23 the eligible basis under subsection (d) by the 

24 fraction—
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1 ‘‘(i) the numerator of which is the 

2 sum of the number of remaining whole 

3 months in such 1st taxable year after the 

4 sale of the qualified residence, and 

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

6 ‘‘(B) DISALLOWED 1ST YEAR CREDIT AL7 LOWED IN 6TH YEAR.—Any reduction by reason 

8 of subparagraph (A) in the credit allowable 

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

10 1st taxable year of the credit period shall be al11 lowable under subsection (a) for the 1st taxable 

12 year following the credit period. 

13 ‘‘(f) LIMITATION ON AGGREGATE CREDIT ALLOW14 ABLE WITH RESPECT TO QUALIFIED RESIDENCES LO15 CATED IN A STATE.—

16 ‘‘(1) CREDIT MAY NOT EXCEED CREDIT DOLLAR

17 AMOUNT ALLOCATED TO QUALIFIED RESIDENCE.—

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

19 credit determined under this section for any 

20 taxable year with respect to any qualified resi21 dence shall not exceed the homeownership cred22 it dollar amount allocated to such qualified resi23 dence under this subsection. 

24 ‘‘(B) TIME FOR MAKING ALLOCATION.—
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1 ‘‘(i) An allocation shall be taken into 

2 account under subparagraph (A) only if it 

3 is made not later than the close of the cal4 endar year in which the qualified residence 

5 is sold. 

6 ‘‘(ii) A homeownership credit agency 

7 may allocate available homeownership cred8 it dollar amounts to a qualified residence 

9 prior to the year of sale of such qualified 

10 residence if—

11 ‘‘(I) the taxpayer owns fee title 

12 or a leasehold interest of not less than 

13 50 years in the site of the qualified 

14 residence as of the later of the date 

15 which is 6 months after the date that 

16 the allocation was made or the close 

17 of the calendar year in which the allo18 cation is made, and 

19 ‘‘(II) such qualified residence is 

20 completed not later than the close of 

21 the second calendar year following the 

22 calendar year in which the allocation 

23 was made. 

24 ‘‘(C) VESTED RIGHT TO CREDIT DOLLAR

25 AMOUNT.—Once a homeownership credit alloca-
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1 tion is received by a taxpayer, the right to such 

2 credit is vested in such taxpayer and is not sub3 ject to recapture, except as provided in para4 graph (5)(B). 

5 ‘‘(2) HOMEOWNERSHIP CREDIT DOLLAR

6 AMOUNT FOR AGENCIES.—

7 ‘‘(A) IN GENERAL.—The aggregate home8 ownership credit dollar amount which a home9 ownership credit agency may allocate for any 

10 calendar year is the portion of the State home11 ownership credit ceiling allocated under this 

12 paragraph for such calendar year to such agen13 cy. 

14 ‘‘(B) STATE CEILING INITIALLY ALLO15 CATED TO STATE HOMEOWNERSHIP CREDIT

16 AGENCIES.—Except as provided in subpara17 graphs (D) and (E), the State homeownership 

18 credit ceiling for each calendar year shall be al19 located to the homeownership credit agency of 

20 such State. If there is more than 1 homeowner21 ship credit agency of a State, all such agencies 

22 shall be treated as a single agency. 

23 ‘‘(C) STATE HOMEOWNERSHIP CREDIT

24 CEILING.—The State homeownership credit ceil-
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1 ing applicable to any State for any calendar 

2 year shall be an amount equal to the sum of—

3 ‘‘(i) the unused State homeownership 

4 credit ceiling (if any) of such State for the 

5 preceding calendar year, 

6 ‘‘(ii) the greater of—

7 ‘‘(I) $1.80 multiplied by the 

8 State population, or 

9 ‘‘(II) $2,000,000, 

10 ‘‘(iii) the amount of State homeowner11 ship credit ceiling returned in the calendar 

12 year, plus 

13 ‘‘(iv) the amount (if any) allocated 

14 under subparagraph (D) to such State by 

15 the Secretary. 

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

17 homeownership credit ceiling for any calendar 

18 year is the excess (if any) of the sum of the 

19 amounts described in clauses (ii) through (iv) 

20 over the aggregate homeownership credit dollar 

21 amount allocated for such year. For purposes of 

22 clause (iii), the amount of State homeownership 

23 credit ceiling returned in the calendar year 

24 equals the homeownership credit dollar amount 

25 previously allocated within the State to any 
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1 qualified residence with respect to which an al2 location is canceled by mutual consent of the 

3 homeownership credit agency and the allocation 

4 recipient. 

5 ‘‘(D) UNUSED HOMEOWNERSHIP CREDIT

6 CARRYOVERS ALLOCATED AMONG CERTAIN

7 STATES.—

8 ‘‘(i) IN GENERAL.—The unused home9 ownership credit carryover of a State for 

10 any calendar year shall be assigned to the 

11 Secretary for allocation among qualified 

12 States for the succeeding calendar year. 

13 ‘‘(ii) UNUSED HOMEOWNERSHIP

14 CREDIT CARRYOVER.—For purposes of this 

15 subparagraph, the unused homeownership 

16 credit carryover of a State for any calendar 

17 year is the excess (if any) of—

18 ‘‘(I) the unused State home19 ownership credit ceiling for the year 

20 preceding such year, over 

21 ‘‘(II) the aggregate homeowner22 ship credit dollar amount allocated for 

23 such year. 

24 ‘‘(iii) FORMULA FOR ALLOCATION OF

25 UNUSED HOMEOWNERSHIP CREDIT
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1 CARRYOVERS AMONG QUALIFIED

2 STATES.—The amount allocated under this 

3 subparagraph to a qualified State for any 

4 calendar year shall be the amount deter5 mined by the Secretary to bear the same 

6 ratio to the aggregate unused homeowner7 ship credit carryovers of all States for the 

8 preceding calendar year as such State’s 

9 population for the calendar year bears to 

10 the population of all qualified States for 

11 the calendar year. 

12 ‘‘(iv) QUALIFIED STATE.—For pur13 poses of this subparagraph, the term 

14 ‘qualified State’ means, with respect to a 

15 calendar year, any State—

16 ‘‘(I) which allocated its entire 

17 State homeownership credit ceiling for 

18 the preceding calendar year, and 

19 ‘‘(II) for which a request is made 

20 (not later than May 1 of the calendar 

21 year) to receive an allocation under 

22 clause (iii). 

23 ‘‘(E) STATE MAY PROVIDE FOR DIF24 FERENT ALLOCATION.—Rules similar to the 

25 rules of section 146(e) (other than paragraph 
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1 (2)(B) thereof) shall apply for purposes of this 

2 paragraph. 

3 ‘‘(F) POPULATION.—For purposes of this 

4 paragraph, population shall be determined in 

5 accordance with section 146(j). 

6 ‘‘(G) COST-OF-LIVING ADJUSTMENT.—

7 ‘‘(i) IN GENERAL.—In the case of a 

8 calendar year after 2005, the $2,000,000 

9 and $1.80 amounts in subparagraph (C) 

10 shall each be increased by an amount equal 

11 to—

12 ‘‘(I) such dollar amount, multi13 plied by 

14 ‘‘(II) the cost-of-living adjust15 ment determined under section 1(f)(3) 

16 for such calendar year by substituting 

17 ‘calendar year 2004’ for ‘calendar 

18 year 1992’ in subparagraph (B) there19 of. 

20 ‘‘(ii) ROUNDING.—

21 ‘‘(I) In the case of the 

22 $2,000,000 amount, any increase 

23 under clause (i) which is not a mul24 tiple of $5,000 shall be rounded to the 

25 next lowest multiple of $5,000. 
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1 ‘‘(II) In the case of the $1.80 

2 amount, any increase under clause (i) 

3 which is not a multiple of 5 cents 

4 shall be rounded to the next lowest 

5 multiple of 5 cents. 

6 ‘‘(3) PORTION OF STATE CEILING SET-ASIDE

7 FOR CERTAIN PROJECTS INVOLVING QUALIFIED

8 NONPROFIT ORGANIZATIONS.—

9 ‘‘(A) IN GENERAL.—Not more than 90 

10 percent of the State homeownership credit ceil11 ing for any State for any calendar year shall be 

12 allocated to projects other than qualified non13 profit housing projects described in subpara14 graph (B). 

15 ‘‘(B) PROJECTS INVOLVING QUALIFIED

16 NONPROFIT ORGANIZATIONS.—For purposes of 

17 subparagraph (A), a qualified nonprofit housing 

18 project is described in this subparagraph if a 

19 qualified nonprofit organization is to own an in20 terest in the project (directly or through a part21 nership) and materially participate (within the 

22 meaning of section 469(h)) in the development 

23 and operation of the project throughout the 

24 credit period. 
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1 ‘‘(C) QUALIFIED NONPROFIT ORGANIZA2 TION.—For purposes of this paragraph, the 

3 term ‘qualified nonprofit organization’ means 

4 any organization if—

5 ‘‘(i) such organization is described in 

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

7 is exempt from tax under section 501(a), 

8 ‘‘(ii) such organization is determined 

9 by the State homeownership credit agency 

10 not to be affiliated with or controlled by a 

11 for-profit organization, and 

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

13 such organization includes the fostering of 

14 low-income housing. 

15 ‘‘(D) TREATMENT OF CERTAIN SUBSIDI16 ARIES.—

17 ‘‘(i) IN GENERAL.—For purposes of 

18 this paragraph, a qualified nonprofit orga19 nization shall be treated as satisfying the 

20 ownership and material participation test 

21 of subparagraph (B) if any qualified cor22 poration in which such organization holds 

23 stock satisfies such test. 

24 ‘‘(ii) QUALIFIED CORPORATION.—For 

25 purposes of clause (i), the term ‘qualified 
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1 corporation’ means any corporation if 100 

2 percent of the stock of such corporation is 

3 held by 1 or more qualified nonprofit orga4 nizations at all times during the period 

5 such corporation is in existence. 

6 ‘‘(E) STATE MAY NOT OVERRIDE SET7 ASIDE.—Nothing in subparagraph (E) of para8 graph (2) shall be construed to permit a State 

9 not to comply with subparagraph (A) of this 

10 paragraph. 

11 ‘‘(4) LIMITATION ON ALLOCATIONS TO AREAS

12 OF CHRONIC ECONOMIC DISTRESS.—No more than 

13 50 percent of a homeownership credit agency’s por14 tion of the State homeownership credit ceiling for a 

15 calendar year may be allocated to residences located 

16 in areas that—

17 ‘‘(A) are designated as areas of chronic 

18 economic distress in accordance with paragraph 

19 (1) of subsection (c), and 

20 ‘‘(B) that do not meet the requirements of 

21 clause (i), (ii), or (iii) of subsection (c)(1)(A). 

22 ‘‘(5) SPECIAL RULES.—

23 ‘‘(A) RESIDENCE MUST BE LOCATED

24 WITHIN JURISDICTION OF CREDIT AGENCY.—A 

25 homeownership credit agency may allocate its 
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1 aggregate homeownership credit dollar amount 

2 only to qualified residences located in the juris3 diction of the governmental unit of which such 

4 agency is a part. 

5 ‘‘(B) AGENCY ALLOCATIONS IN EXCESS OF

6 LIMIT.—If the aggregate homeownership credit 

7 dollar amounts allocated by a homeownership 

8 credit agency for any calendar year exceed the 

9 portion of the State homeownership credit ceil10 ing allocated to such agency for such calendar 

11 year, the homeownership credit dollar amounts 

12 so allocated shall be reduced (to the extent of 

13 such excess) for residences in the reverse of the 

14 order in which the allocations of such amounts 

15 were made. 

16 ‘‘(g) DEFINITIONS AND SPECIAL RULES.—For pur17 poses of this section—

18 ‘‘(1) COMPLETED.—The term ‘completed’ 

19 means the point in time where a qualified residence 

20 is first placed in a condition or state of readiness 

21 and availability for occupancy. 

22 ‘‘(2) PROJECT.—The term ‘project’ means 1 or 

23 more residences together with functionally related 

24 and subordinate facilities developed and made avail25 able to inhabitants of such residences, including rec-
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1 reational facilities and parking areas. To constitute 

2 a project, each residence must—

3 ‘‘(A) be developed by the same taxpayer 

4 pursuant to common planning and feasibility 

5 studies, 

6 ‘‘(B) be financed through a common plan 

7 of construction financing, and 

8 ‘‘(C) have common ownership prior to sale. 

9 For purposes of this paragraph, it is not necessary 

10 that all residences within a project be contiguous or 

11 that all residences consist only of either new resi12 dences or existing residences and it is not necessary 

13 that each residence within a project be a qualified 

14 residence. 

15 ‘‘(3) QUALIFIED BUYER.—

16 ‘‘(A) IN GENERAL.—The term ‘qualified 

17 buyer’ means a buyer if at the time of the ac18 quisition of the qualified residence, the buyer—

19 ‘‘(i) is 1 or more individuals whose in20 come does not exceed 80 percent of the 

21 area median gross income (70 percent for 

22 families of less than 3 members), and 

23 ‘‘(ii) intends to occupy the residence 

24 as the buyer’s principal residence (within 

25 the meaning of section 121). 
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1 ‘‘(B) SPECIAL RULES IN QUALIFIED CEN2 SUS TRACTS.—With respect to residences lo3 cated in qualified census tracts (as defined in 

4 section 42), subparagraph (A) shall be applied 

5 by substituting ‘100 percent’ for ‘80 percent’ 

6 and ‘90 percent’ for ‘70 percent’. 

7 ‘‘(C) DETERMINATION OF INCOME.—For 

8 purposes of this paragraph, a buyer’s income 

9 shall be determined in accordance with section 

10 143(f)(4). 

11 ‘‘(4) NEW QUALIFIED RESIDENCE.—The term 

12 ‘new qualified residence’ means a qualified residence 

13 the original ownership of which begins with the tax14 payer. 

15 ‘‘(5) EXISTING QUALIFIED RESIDENCE.—The 

16 term ‘existing qualified residence’ means any quali17 fied residence which is not a new qualified residence. 

18 ‘‘(6) HOMEOWNERSHIP CREDIT AGENCY.—The 

19 term ‘homeownership credit agency’ means any 

20 agency authorized to carry out this section. 

21 ‘‘(7) POSSESSIONS TREATED AS STATES.—The 

22 term ‘State’ includes the District of Columbia and a 

23 possession of the United States. 

24 ‘‘(8) APPLICATION TO ESTATES AND TRUSTS.—

25 In the case of an estate or trust, the amount of the 
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1 credit determined under subsection (a) shall be ap2 portioned between the estate or trust and the bene3 ficiaries on the basis of the income of the estate or 

4 trust allocable to each. 

5 ‘‘(h) REDUCTION IN TAX BENEFITS.—

6 ‘‘(1) RECAPTURE OF CREDIT.—If within the 5-

7 year period beginning on the date of the original 

8 purchase of a qualified residence, the residence is 

9 sold, the qualified buyer—

10 ‘‘(A) shall deduct and withhold an amount 

11 equal to the recapture amount from the amount 

12 realized on such sale, and 

13 ‘‘(B) shall transfer such amount to the 

14 homeownership credit agency which allocated 

15 the homeownership credit dollar amount to such 

16 residence. 

17 ‘‘(2) RECAPTURE AMOUNT.—For purposes of 

18 paragraph (1), the recapture amount is an amount 

19 equal to the lesser of—

20 ‘‘(A) 50 percent of the gain from such re21 sale, or 

22 ‘‘(B) the homeownership credit dollar 

23 amount allocated to such residence, reduced by 

24 1/36th of such amount for each month after the 

25 first 2 years of the 5-year period referred to in 
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1 paragraph (1) which is before the date of the 

2 sale referred to in paragraph (1). 

3 ‘‘(3) DENIAL OF DEDUCTIONS IF CONVERTED

4 TO RENTAL HOUSING.—If a qualified residence is 

5 converted to rental housing within the 5-year period 

6 beginning on the date of the original purchase of the 

7 qualified residence, no deduction under this chapter 

8 shall be permitted to offset rental income with re9 spect to such residence during such period. 

10 ‘‘(i) APPLICATION OF AT-RISK RULES.—For pur11 poses of this section, rules of section 465 shall not apply 

12 in determining the eligible basis of any qualified residence. 

13 ‘‘(j) REPORTS TO THE SECRETARY.—

14 ‘‘(1) FROM THE TAXPAYER.—The Secretary 

15 may require taxpayers to submit an information re16 turn (at such time and in such form and manner as 

17 the Secretary prescribes) for each taxable year set18 ting forth—

19 ‘‘(A) the eligible basis for the taxable year 

20 of each qualified residence with respect to which 

21 the taxpayer is claiming a credit under this sec22 tion, 

23 ‘‘(B) the amount of all homeownership 

24 credit allocations received by the taxpayer from 
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1 any and all State homeownership credit agen2 cies, and 

3 ‘‘(C) such other information as the Sec4 retary may require. 

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

6 failure to submit the return required by the Sec7 retary under the preceding sentence on the date pre8 scribed therefor. 

9 ‘‘(2) FROM HOMEOWNERSHIP CREDIT AGEN10 CIES.—Each agency which allocates any homeowner11 ship credit dollar amount to any residence for any 

12 calendar year shall submit to the Secretary (at such 

13 time and in such form and manner as the Secretary 

14 shall prescribe) an annual report specifying—

15 ‘‘(A) the amount of the homeownership 

16 credit dollar amount allocated to each residence 

17 for such year, 

18 ‘‘(B) sufficient information to identify each 

19 such residence and the taxpayer initially enti20 tled to claim the credit under this section with 

21 respect thereto, and 

22 ‘‘(C) such other information as the Sec23 retary may require. 

24 ‘‘(k) RESPONSIBILITIES OF HOMEOWNERSHIP CRED25 IT AGENCIES.—
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1 ‘‘(1) PLANS FOR ALLOCATION OF CREDIT

2 AMONG RESIDENCES.—

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

4 other provision of this section, the homeowner5 ship credit dollar amount with respect to any 

6 qualified residence shall be zero unless such 

7 amount was allocated pursuant to a qualified 

8 allocation plan of the homeownership credit 

9 agency which is approved by the governmental 

10 unit (in accordance with rules similar to the 

11 rules of section 147(f)(2) (other than subpara12 graph (B)(ii) thereof)) of which such agency is 

13 a part. 

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

15 purposes of this paragraph, the term ‘qualified 

16 allocation plan’ means any plan which sets forth 

17 selection criteria to be used to determine the 

18 homeownership development priorities of the 

19 homeownership credit agency which are appro20 priate to local conditions. 

21 ‘‘(C) CERTAIN HOMEOWNERSHIP DEVEL22 OPMENT CRITERIA MUST BE USED.—The devel23 opment criteria set forth in a qualified alloca24 tion plan must include—
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1 ‘‘(i) contribution of the development 

2 to community stability and revitalization, 

3 ‘‘(ii) community and local government 

4 support for the development, 

5 ‘‘(iii) need for homeownership develop6 ment within the area, 

7 ‘‘(iv) sponsor capability, and 

8 ‘‘(v) long-term sustainability of the 

9 project as owner-occupied residences. 

10 ‘‘(2) CREDIT ALLOCATED TO RESIDENCE NOT

11 TO EXCEED AMOUNT NECESSARY TO ASSURE FEASI12 BILITY.—

13 ‘‘(A) IN GENERAL.—The homeownership 

14 credit dollar amount allocated to a residence 

15 shall not exceed the amount the homeownership 

16 credit agency determines is necessary for the 

17 feasibility of the residence. 

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

19 the determination under subparagraph (A), the 

20 homeownership credit agency shall consider—

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

22 the total financing planned for the resi23 dence, 

24 ‘‘(ii) any proceeds or receipts expected 

25 to be generated by reason of tax benefits, 
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1 ‘‘(iii) the anticipated appraised value 

2 of the residence, 

3 ‘‘(iv) the reasonableness of the devel4 opmental costs of the residence, and 

5 ‘‘(v) the affordability to a reasonable 

6 range of prospective qualified buyers. 

7 ‘‘(C) DETERMINATION MADE WHEN CRED8 IT DOLLAR AMOUNT APPLIED FOR.—A deter9 mination under subparagraph (A) shall be made 

10 as of each of the following times: 

11 ‘‘(i) The application for the home12 ownership credit dollar amount. 

13 ‘‘(ii) The allocation of the homeowner14 ship credit dollar amount. 

15 ‘‘(3) LIEN FOR RECAPTURE AMOUNT.—A home16 ownership credit dollar amount may be allocated by 

17 a homeownership credit agency to a residence only 

18 if such agency has a lien on such residence for the 

19 payment of any amount potentially required to be 

20 paid under subsection (h) to such agency. 

21 ‘‘(l) REGULATIONS.—The Secretary shall prescribe 

22 such regulations as may be necessary or appropriate to 

23 carry out the purposes of this section, including regula24 tions—

25 ‘‘(1) dealing with—
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1 ‘‘(A) projects which include more than 1 

2 residence or only a portion of a residence, and 

3 ‘‘(B) buildings which are completed in por4 tions, 

5 ‘‘(2) providing for the application of this section 

6 to short taxable years, 

7 ‘‘(3) preventing the avoidance of the rules of 

8 this section, and 

9 ‘‘(4) providing the opportunity for homeowner10 ship credit agencies to correct administrative errors 

11 and omissions with respect to allocations and record12 keeping within a reasonable period after their dis13 covery, taking into account the availability of regula14 tions and other administrative guidance from the 

15 Secretary.’’. 

16 (b) CURRENT YEAR BUSINESS CREDIT CALCULA17 TION.—Section 38(b) of such Code (relating to current 

18 year business credit) is amended by striking ‘‘plus’’ at the 

19 end of paragraph (18), by striking the period at the end 

20 of paragraph (19) and inserting ‘‘, plus’’, and by adding 

21 at the end the following new paragraph: 

22 ‘‘(20) the homeownership credit determined 

23 under section 42A(a).’’. 

24 (c) CONFORMING AMENDMENTS.—
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1 (1) Section 55(c)(1) of such Code is amended 

2 by inserting ‘‘or subsection (h) or (i) of section 42A’’ 

3 after ‘‘section 42’’. 

4 (2) Subsections (i)(3)(D), (i)(6)(B)(i), and 

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

6 by inserting ‘‘or 42A’’ after ‘‘section 42’’. 

7 (3) Section 772(a) of such Code is amended by 

8 striking ‘‘and’’ at the end of paragraph (10), by re9 designating paragraph (11) as paragraph (12), and 

10 by inserting after paragraph (10) the following: 

11 ‘‘(11) the homeownership credit determined 

12 under section 42A, and’’. 

13 (4) Section 774(b)(4) of such Code is amended 

14 by inserting ‘‘, 42A(h),’’ after ‘‘section 42(j)’’. 

15 (d) CLERICAL AMENDMENT.—The table of sections 

16 for subpart D of part IV of subchapter A of chapter 1 

17 of such Code is amended by inserting after the item relat18 ing to section 42 the following:

‘‘Sec. 42A. Community homeownership credit.’’.

19 (e) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to qualified residences sold after 

21 the date of the enactment of this Act.

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