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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 198 Introduced in Senate (IS)]

108th CONGRESS
  1st Session
                                 S. 198

   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 SENATE OF THE UNITED STATES

                            January 21, 2003

Mr. Smith (for himself, Ms. Stabenow, and Mr. Santorum) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL

 
   To amend the Internal Revenue Code of 1986 to allow an income tax 
 credit for the provision of homeownership and community development, 
                        and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``New Homestead 
Economic Opportunity Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 2. COMMUNITY HOMEOWNERSHIP CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by inserting after section 42 the following new section:

``SEC. 42A. HOMEOWNERSHIP CREDIT.

    ``(a) Allowance of Credit.--For purposes of section 38, the amount 
of the homeownership credit determined under this section for any 
taxable year in the credit period shall be an amount equal to the 
applicable percentage of the eligible basis of each qualified 
residence.
    ``(b) Applicable Percentage.--For purposes of this section--
            ``(1) In general.--The term `applicable percentage' means 
        the appropriate percentage prescribed by the Secretary for the 
        month in which the taxpayer and the homeownership credit agency 
        enter into an agreement with respect to such residence (which 
        is binding on such agency, the taxpayer, and all successors in 
        interest) as to the homeownership credit dollar amount to be 
        allocated to such residence.
            ``(2) Method of prescribing percentage.--The percentage 
        prescribed by the Secretary for any month shall be the 
        percentage which will yield over a 5-year period amounts of 
        credit under subsection (a) which have a present value equal to 
        50 percent of the eligible basis of a qualified residence.
            ``(3) Method of discounting.--The present value under 
        paragraph (2) shall be determined--
                    ``(A) as of the last day of the 1st year of the 5-
                year period referred to in paragraph (2),
                    ``(B) by using a discount rate equal to 72 percent 
                of the annual Federal mid-term rate applicable under 
                section 1274(d)(1) to the month applicable under 
                paragraph (1) and compounded annually, and
                    ``(C) by assuming that the credit allowable under 
                this section for any year is received on the last day 
                of such year.
    ``(c) Qualified Residence.--For purposes of this section--
            ``(1) In general.--The term `qualified residence' means any 
        residence--
                    ``(A) which is located--
                            ``(i) in a census tract which has a median 
                        gross income which does not exceed 80 percent 
                        of the greater of area or state-wide median 
                        gross income, or
                            ``(ii) in an area of chronic economic 
                        distress, and
                    ``(B) which is purchased by a qualified buyer.
        For purposes of clause (ii) of subparagraph (A), an area is an 
        area of chronic economic distress if it is approved for 
        designation as such under section 143(j)(3), except that such 
        designation shall not require the approval of the Secretary and 
        shall cease to apply after the end of the 5th calendar year 
        after the calendar year in which the designation is made.
            ``(2) Residence.--For purposes of paragraph (1), the term 
        `residence' means--
                    ``(A) a single-family home containing 1 to 4 
                housing units,
                    ``(B) a condominium unit,
                    ``(C) stock in a cooperative housing corporation 
                (as defined in section 216(b)), or
                    ``(D) any factory-made housing which is permanently 
                affixed to real property.
        In the case of a single-family home described in subparagraph 
        (A) which contains more than 1 housing unit, the term 
        `residence' shall not include any new residence and shall 
        include only the portion of such home which is to be occupied 
        by the owner thereof (based on the percentage of the total area 
        of such home which is to be occupied by the owner).
            ``(3) Timing of determination.--For purposes of paragraph 
        (1), the determination of whether a residence is a qualified 
        residence shall be made at the time a binding commitment for an 
        allocation of credit is awarded by the homeownership credit 
        agency, except that the determination of whether a buyer is a 
        qualified buyer shall be made at the time the residence is 
        sold.
            ``(4) Median gross income.--For purposes of this section, 
        median gross income shall be determined consistent with section 
        143(f)(2).
    ``(d) Eligible Basis.--For purposes of this section--
            ``(1) New qualified residences.--
                    ``(A) In general.--The eligible basis of a new 
                qualified residence is--
                            ``(i) in the case of a qualified residence 
                        which is sold in a transaction which meets the 
                        requirements of subparagraph (B), its adjusted 
                        basis (excluding land) immediately before such 
                        sale, and
                            ``(ii) zero in any other case.
                    ``(B) Requirements.--A sale of a qualified 
                residence meets the requirements of this subparagraph 
                if--
                            ``(i) the buyer acquires the qualified 
                        residence by purchase (as defined in section 
                        179(d)(2)),
                            ``(ii) the buyer of the qualified residence 
                        is not a related person with respect to the 
                        seller, and
                            ``(iii) the buyer's debt financing is 
                        originated by a 3rd party who is not a related 
                        person with respect to the seller.
            ``(2) Existing qualified residences.--
                    ``(A) In general.--The eligible basis of an 
                existing qualified residence is--
                            ``(i) in the case of a qualified residence 
                        which is sold in a transaction which meets the 
                        requirements of subparagraph (B), the adjusted 
                        basis of the rehabilitation expenditures with 
                        respect to the qualified residence which are 
                        paid or incurred in connection with such sale, 
                        and
                            ``(ii) zero in any other case.
                    ``(B) Requirements.--A sale of a qualified 
                residence meets the requirements of this subparagraph 
                if--
                            ``(i) the buyer acquires the qualified 
                        residence by purchase (as defined in section 
                        179(d)(2)),
                            ``(ii) the qualified residence has 
                        undergone substantial rehabilitation in 
                        connection with the sale described in clause 
                        (i),
                            ``(iii) the buyer of the qualified 
                        residence is not a related person with respect 
                        to the seller, and
                            ``(iv) the buyer's debt financing is 
                        originated by a 3rd party who is not a related 
                        person with respect to the seller.
                    ``(C) Substantial rehabilitation.--
                            ``(i) In general.--For purposes of 
                        subparagraph (B), substantial rehabilitation 
                        means rehabilitation expenditures paid or 
                        incurred with respect to a qualified residence 
                        which are at least $25,000.
                            ``(ii) Inflation adjustment.--In the case 
                        of a calendar year after 2003, the dollar 
                        amount contained in clause (i) shall be 
                        increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for such calendar year by 
                                substituting `calendar year 2002' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                        Any increase under this clause which is not a 
                        multiple of $1,000 shall be rounded to the next 
                        lowest multiple of $1,000.
            ``(3) Effect of subsequent sale, etc.--A subsequent sale, 
        assignment, rental, or refinancing of the qualified residence 
        by the buyer or the subsequent sale, assignment, or pooling of 
        the buyer's financing by the originator shall not be considered 
        in determining whether or not the prior sales transaction 
        satisfied the requirements of subparagraph (B) of paragraph (1) 
        or (2).
            ``(4) Special rules relating to determination of adjusted 
        basis.--For purposes of this subsection--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the adjusted basis of any qualified 
                residence (or any rehabilitation expenditures in 
                respect thereof)--
                            ``(i) shall not include so much of the 
                        basis of such qualified residence (or 
                        rehabilitation expenditures) as is determined 
                        by reference to the basis of other property 
                        held at any time by the person acquiring the 
                        residence, and
                            ``(ii) shall be determined without regard 
                        to the adjusted basis of any property which is 
                        not part of such qualified residence.
                    ``(B) Basis of property in common areas, etc., 
                included.--The adjusted basis of any qualified 
                residence shall be determined by taking into account 
                (on a pro rata basis) the adjusted basis of property 
                (of a character subject to the allowance for 
                depreciation) used in common areas or provided as 
                comparable amenities to all residences within a 
                project.
            ``(5) Special rules for determining eligible basis.--
                    ``(A) Related person, etc.--For purposes of this 
                section, a person (in this clause referred to as the 
                `related person') is related to any person if the 
                related person bears a relationship to such person 
                specified in section 267(b) or 707(b)(1), or the 
                related person and such person are engaged in trades or 
                businesses under common control (within the meaning of 
                subsections (a) and (b) of section 52). For purposes of 
                the preceding sentence, in applying section 267(b) or 
                707(b)(1), `10 percent' shall be substituted for `50 
                percent'.
                    ``(B) Nonresidential space excluded.--No portion of 
                the eligible basis of a qualified residence shall 
                include costs attributable to nonresidential space.
                    ``(C) Limitation.--The eligible basis of any 
                residence may not exceed the mortgage limit for Federal 
                Housing Administration insured mortgages in the area in 
                which such residence is located.
    ``(e) Definition and Special Rules Relating to Credit Period.--
            ``(1) Credit period defined.--For purposes of this section, 
        the term `credit period' means, with respect to any qualified 
residence, the period of 5 taxable years beginning with the taxable 
year in which the sale of the qualified residence occurs satisfying the 
requirements of subsection (d)(1)(B) or (d)(2)(B).
            ``(2) Special rule for 1st year of credit period.--
                    ``(A) In general.--The credit allowable under 
                subsection (a) with respect to any qualified residence 
                for the 1st taxable year of the credit period shall be 
                determined by multiplying the eligible basis under 
                subsection (d) by the fraction--
                            ``(i) the numerator of which is the sum of 
                        the number of remaining whole months in such 
                        1st taxable year after the sale of the 
                        qualified residence, and
                            ``(ii) the denominator of which is 12.
                    ``(B) Disallowed 1st year credit allowed in 6th 
                year.--Any reduction by reason of subparagraph (A) in 
                the credit allowable (without regard to subparagraph 
                (A)) for the 1st taxable year of the credit period 
                shall be allowable under subsection (a) for the 1st 
                taxable year following the credit period.
    ``(f) Limitation on Aggregate Credit Allowable With Respect to 
Qualified Residences Located in a State.--
            ``(1) Credit may not exceed credit dollar amount allocated 
        to qualified residence.--
                    ``(A) In general.--The amount of the credit 
                determined under this section for any taxable year with 
                respect to any qualified residence shall not exceed the 
                homeownership credit dollar amount allocated to such 
                qualified residence under this subsection.
                    ``(B) Time for making allocation.--
                            ``(i) General rule.--An allocation shall be 
                        taken into account under subparagraph (A) only 
                        if it is made not later than the close of the 
                        calendar year in which the qualified residence 
                        is sold, and only if the qualified residence is 
                        sold within 1 year after the residence (or the 
                        rehabilitation expenditures, as applicable) is 
                        completed.
                            ``(ii) Earlier allocation by agency.--A 
                        homeownership credit agency may allocate 
                        available homeownership credit dollar amounts 
                        to a qualified residence prior to the year of 
                        sale of such qualified residence if--
                                    ``(I) the taxpayer owns fee title 
                                or a leasehold interest of not less 
                                than 50 years in the site of the 
                                qualified residence as of the later of 
                                the date which is 6 months after the 
                                date that the allocation was made or 
                                the close of the calendar year in which 
                                the allocation is made, and
                                    ``(II) such qualified residence is 
                                completed not later than the close of 
                                the 2nd calendar year following the 
                                calendar year in which the allocation 
                                was made.
                    ``(C) Vested right to credit dollar amount.--Once a 
                homeownership credit allocation is received by a 
                taxpayer, the right to such credit is vested in such 
                taxpayer and is not subject to recapture, except as 
                provided in paragraph (4)(B).
            ``(2) Homeownership credit dollar amount for agencies.--
                    ``(A) In general.--The aggregate homeownership 
                credit dollar amount which a homeownership credit 
                agency may allocate for any calendar year is the 
                portion of the State homeownership credit ceiling 
                allocated under this paragraph for such calendar year 
                to such agency.
                    ``(B) State ceiling initially allocated to state 
                homeownership credit agencies.--Except as provided in 
                subparagraphs (D) and (E), the State homeownership 
                credit ceiling for each calendar year shall be 
                allocated to the homeownership credit agency of such 
                State. If there is more than 1 homeownership credit 
                agency of a State, all such agencies shall be treated 
                as a single agency.
                    ``(C) State homeownership credit ceiling.--The 
                State homeownership credit ceiling applicable to any 
                State for any calendar year before 2003 shall be zero 
                and for any calendar year after 2002 shall be an amount 
                equal to the sum of--
                            ``(i) the unused State homeownership credit 
                        ceiling (if any) of such State for the 
                        preceding calendar year,
                            ``(ii) the greater of--
                                    ``(I) $1.75 multiplied by the State 
                                population, or
                                    ``(II) $2,000,000,
                            ``(iii) the amount of State homeownership 
                        credit ceiling returned in the calendar year, 
                        plus
                            ``(iv) the amount (if any) allocated under 
                        subparagraph (D) to such State by the 
                        Secretary.
                For purposes of clause (i), the unused State 
                homeownership credit ceiling for any calendar year is 
                the excess (if any) of the sum of the amounts described 
                in clauses (ii) through (iv) over the aggregate 
                homeownership credit dollar amount allocated for such 
                year, except that such amount shall be zero for 2003. 
                For purposes of clause (iii), the amount of State 
                homeownership credit ceiling returned in the calendar 
                year equals the homeownership credit dollar amount 
                previously allocated within the State to any qualified 
                residence with respect to which an allocation is 
                canceled by mutual consent of the homeownership credit 
                agency and the allocation recipient.
                    ``(D) Unused homeownership credit carryovers 
                allocated among certain states.--
                            ``(i) In general.--The unused homeownership 
                        credit carryover of a State for any calendar 
                        year shall be assigned to the Secretary for 
                        allocation among qualified States for the 
                        succeeding calendar year.
                            ``(ii) Unused homeownership credit 
                        carryover.--For purposes of this subparagraph, 
                        the unused homeownership credit carryover of a 
                        State for any calendar year is the excess (if 
                        any) of the unused State homeownership credit 
                        ceiling for such year (as defined in 
                        subparagraph (C)(i)) over the excess (if any) 
                        of--
                                    ``(I) the unused State 
                                homeownership credit ceiling for the 
                                year preceding such year, over
                                    ``(II) the aggregate homeownership 
                                credit dollar amount allocated for such 
                                year.
                            ``(iii) Formula for allocation of unused 
                        homeownership credit carryovers among qualified 
                        states.--The amount allocated under this 
                        subparagraph to a qualified State for any 
                        calendar year shall be the amount determined by 
                        the Secretary to bear the same ratio to the 
                        aggregate unused homeownership credit 
                        carryovers of all States for the preceding 
                        calendar year as such State's population for 
                        the calendar year bears to the population of 
                        all qualified States for the calendar year.
                            ``(iv) Qualified state.--For purposes of 
                        this subparagraph, the term `qualified State' 
                        means, with respect to a calendar year, any 
                        State--
                                    ``(I) which allocated its entire 
                                State homeownership credit ceiling for 
                                the preceding calendar year, and
                                    ``(II) for which a request is made 
                                (not later than May 1 of the calendar 
                                year) to receive an allocation under 
                                clause (iii).
                    ``(E) State may provide for different allocation.--
                Rules similar to the rules of section 146(e) (other 
                than paragraph (2)(B) thereof) shall apply for purposes 
                of this paragraph.
                    ``(F) Population.--For purposes of this paragraph, 
                population shall be determined in accordance with 
                section 146(j).
                    ``(G) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of a 
                        calendar year after 2003, the $2,000,000 and 
                        $1.75 amounts in subparagraph (C) shall each be 
                        increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for such calendar year by 
                                substituting `calendar year 2002' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(ii) Rounding.--
                                    ``(I) In the case of the $2,000,000 
                                amount, any increase under clause (i) 
                                which is not a multiple of $5,000 shall 
                                be rounded to the next lowest multiple 
                                of $5,000.
                                    ``(II) In the case of the $1.75 
                                amount, any increase under clause (i) 
                                which is not a multiple of 5 cents 
                                shall be rounded to the next lowest 
                                multiple of 5 cents.
            ``(3) Limitation on allocations to areas of chronic 
        economic distress.--Not more than 50 percent of a homeownership 
        credit agency's portion of the State homeownership credit 
        ceiling for a calendar year may be allocated to residences 
        located in areas which are designated as areas of chronic 
        economic distress in accordance with paragraph (1) of 
        subsection (c).
            ``(4) Special rules.--
                    ``(A) Residence must be located within jurisdiction 
                of credit agency.--A homeownership credit agency may 
                allocate its aggregate homeownership credit dollar 
                amount only to qualified residences located in the 
                jurisdiction of the governmental unit of which such 
                agency is a part.
                    ``(B) Agency allocations in excess of limit.--If 
                the aggregate homeownership credit dollar amounts 
                allocated by a homeownership credit agency for any 
                calendar year exceed the portion of the State 
                homeownership credit ceiling allocated to such agency 
                for such calendar year, the homeownership credit dollar 
                amounts so allocated shall be reduced (to the extent of 
                such excess) for residences in the reverse of the order 
                in which the allocations of such amounts were made.
    ``(g) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Completed.--The term `completed' means the point in 
        time where a qualified residence is first placed in a condition 
        or state of readiness and availability for occupancy.
            ``(2) Project.--The term `project' means 1 or more 
        residences together with functionally related and subordinate 
        facilities developed and made available to inhabitants of such 
        residences, including recreational facilities and parking 
        areas. To constitute a project, each residence must--
                    ``(A) be developed by the same taxpayer pursuant to 
                common planning and feasibility studies,
                    ``(B) be financed through a common plan of 
                construction financing, and
                    ``(C) have common ownership prior to sale.
        For purposes of this paragraph, it is not necessary that all 
        residences within a project be contiguous or that all 
        residences consist only of either new residences or existing 
        residences and it is not necessary that each residence within a 
        project be a qualified residence.
            ``(3) Qualified buyer.--
                    ``(A) In general.--The term `qualified buyer' means 
                a buyer if at the time of the acquisition of the 
                qualified residence, the buyer--
                            ``(i) is 1 or more individuals whose income 
                        does not exceed 80 percent of the area median 
                        gross income (70 percent for families of less 
                        than 3 members), and
                            ``(ii) intends to occupy the residence as 
                        the buyer's principal residence (within the 
                        meaning of section 121).
                    ``(B) Special rules in qualified census tracts.--
                With respect to residences located in qualified census 
                tracts (as defined in section 42), subparagraph (A) 
                shall be applied by substituting `100 percent' for `80 
                percent' and `90 percent' for `70 percent'.
                    ``(C) Determination of income.--For purposes of 
                this paragraph, a buyer's income shall be determined in 
                accordance with section 143(f)(4).
            ``(4) New qualified residence.--The term `new qualified 
        residence' means a qualified residence the original ownership 
        of which begins with the taxpayer.
            ``(5) Existing qualified residence.--The term `existing 
        qualified residence' means any qualified residence which is not 
        a new qualified residence.
            ``(6) Homeownership credit agency.--The term `homeownership 
        credit agency' means any agency authorized to carry out this 
        section.
            ``(7) Possessions treated as states.--The term `State' 
        includes the District of Columbia and a possession of the 
        United States.
            ``(8) Application to estates and trusts.--In the case of an 
        estate or trust, the amount of the credit determined under 
        subsection (a) shall be apportioned between the estate or trust 
        and the beneficiaries on the basis of the income of the estate 
        or trust allocable to each.
    ``(h) Reduction in Tax Benefits.--
            ``(1) Recapture of credit.--If within the first 3 years 
        after the original purchase of a qualified residence, the 
        residence is sold by the qualified buyer to a buyer who does 
        not qualify as a qualified buyer, the qualified buyer--
                    ``(A) shall deduct and withhold an amount equal to 
                the recapture amount from the amount realized on such 
                sale, and
                    ``(B) shall transfer such amount to the 
                homeownership credit agency which allocated the 
                homeownership credit dollar amount to such residence.
            ``(2) Recapture amount.--For purposes of paragraph (1), the 
        recapture amount is an amount equal to 50 percent of the gain 
        resulting from such resale, reduced by 1/36th for each month 
        the resale occurs after the original purchase.
            ``(3) Denial of deductions if converted to rental 
        housing.--If a qualified residence is converted to rental 
        housing within the first 3 years after the original purchase, 
        no deduction under this chapter shall be permitted to offset 
        rental income with respect to such residence during such 
        period.
    ``(i) Application of At-Risk Rules.--For purposes of this section, 
rules of section 465 shall not apply in determining the eligible basis 
of any qualified residence.
    ``(j) Reports to the Secretary.--
            ``(1) From the taxpayer.--The Secretary may require 
        taxpayers to submit an information return (at such time and in 
        such form and manner as the Secretary prescribes) for each 
        taxable year setting forth--
                    ``(A) the eligible basis for the taxable year of 
                each qualified residence with respect to which the 
                taxpayer is claiming a credit under this section,
                    ``(B) the amount of all homeownership credit 
                allocations received by the taxpayer from any and all 
                State homeownership credit agencies, and
                    ``(C) such other information as the Secretary may 
                require.
        The penalty under section 6652(j) shall apply to any failure to 
        submit the return required by the Secretary under the preceding 
        sentence on the date prescribed therefor.
            ``(2) From homeownership credit agencies.--Each agency 
        which allocates any homeownership credit dollar amount to any 
        residence for any calendar year shall submit to the Secretary 
        (at such time and in such form and manner as the Secretary 
        shall prescribe) an annual report specifying--
                    ``(A) the amount of the homeownership credit dollar 
                amount allocated to each residence for such year,
                    ``(B) sufficient information to identify each such 
                residence and the taxpayer initially entitled to claim 
                the credit under this section with respect thereto, and
                    ``(C) such other information as the Secretary may 
                require.
    ``(k) Responsibilities of Homeownership Credit Agencies.--
            ``(1) Plans for allocation of credit among residences.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this section, the homeownership credit 
                dollar amount with respect to any qualified residence 
                shall be zero unless such amount was allocated pursuant 
                to a qualified allocation plan of the homeownership 
                credit agency which is approved by the governmental 
                unit (in accordance with rules similar to the rules of 
                section 147(f)(2) (other than subparagraph (B)(ii) 
                thereof)) of which such agency is a part.
                    ``(B) Qualified allocation plan.--For purposes of 
                this paragraph, the term `qualified allocation plan' 
                means any plan which sets forth the homeownership 
                development priorities of the homeownership credit 
                agency.
                    ``(C) Certain homeownership development priorities 
                must be used.--The development priorities set forth in 
                a qualified allocation plan must include--
                            ``(i) contribution of the development to 
                        community stability and revitalization,
                            ``(ii) community and local government 
                        support for the development,
                            ``(iii) need for homeownership development 
                        within the area,
                            ``(iv) sponsor capability, and
                            ``(v) long-term sustainability of the 
                        project as owner-occupied residences.
            ``(2) Credit allocated to residence not to exceed amount 
        necessary to assure feasibility.--
                    ``(A) In general.--The homeownership credit dollar 
                amount allocated to a residence shall not exceed the 
                amount the homeownership credit agency determines is 
                necessary for the feasibility of the residence.
                    ``(B) Agency evaluation.--In making the 
                determination under subparagraph (A), the homeownership 
                credit agency shall consider--
                            ``(i) the sources and uses of funds and the 
                        total financing planned for the residence,
                            ``(ii) any proceeds or receipts expected to 
                        be generated by reason of tax benefits,
                            ``(iii) the anticipated appraised value of 
                        the residence, and
                            ``(iv) the reasonableness of the 
                        developmental costs of the residence.
                    ``(C) Determination made when credit dollar amount 
                applied for.--A determination under subparagraph (A) 
                shall be made as of each of the following times:
                            ``(i) The application for the homeownership 
                        credit dollar amount.
                            ``(ii) The allocation of the homeownership 
                        credit dollar amount.
            ``(3) Lien for recapture amount.--A homeownership credit 
        dollar amount may be allocated by a homeownership credit agency 
        to a residence only if such agency has a lien on such residence 
        for the payment of any amount potentially required to be paid 
        under subsection (h) to such agency.
    ``(l) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations--
            ``(1) dealing with--
                    ``(A) projects which include more than 1 residence 
                or only a portion of a residence, and
                    ``(B) buildings which are completed in portions,
            ``(2) providing for the application of this section to 
        short taxable years,
            ``(3) preventing the avoidance of the rules of this 
        section, and
            ``(4) providing the opportunity for homeownership credit 
        agencies to correct administrative errors and omissions with 
        respect to allocations and record keeping within a reasonable 
        period after their discovery, taking into account the 
        availability of regulations and other administrative guidance 
        from the Secretary.''.
    (b) Current Year Business Credit Calculation.--Section 38(b) 
(relating to current year business credit) is amended by striking 
``plus'' at the end of paragraph (14), by striking the period at the 
end of paragraph (15) and inserting ``, plus'', and by adding at the 
end the following:
            ``(16) the homeownership credit determined under section 
        42A(a).''.
    (c) Limitation on Carryback.--Subsection (d) of section 39 
(relating to carryback and carryforward of unused credits) is amended 
by adding at the end the following:
            ``(11) No carryback of homeownership credit before 
        effective date.--No amount of unused business credit available 
        under section 42A may be carried back to a taxable year 
        beginning on or before the date of the enactment of this 
        paragraph.''.
    (d) Conforming Amendments.--
            (1) Section 55(c)(1) is amended by inserting ``or 
        subsection (h) or (i) of section 42A'' after ``section 42''.
            (2) Subsections (i)(3)(D), (i)(6)(B)(i), and (k)(1) of 
        section 469 are each amended by inserting ``or 42A'' after 
        ``section 42''.
            (3) Section 772(a) is amended by striking ``and'' at the 
        end of paragraph (10), by redesignating paragraph (11) as 
        paragraph (12), and by inserting after paragraph (10) the 
        following:
            ``(11) the homeownership credit determined under section 
        42A, and''.
            (4) Section 774(b)(4) is amended by inserting ``, 42A(h),'' 
        after ``section 42(j)''.
    (e) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 42 the following:

                              ``Sec. 42A. Homeownership credit.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to qualified residences sold after December 31, 2002.
                                 <all>
```