I 

108TH CONGRESS 

1ST SESSION H. R. 839

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 

FEBRUARY 13, 2003

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

Mrs. JONES of Ohio, Mr. BONILLA, Mr. TERRY, Mr. GARY G. MILLER

of California, Ms. JACKSON-LEE of Texas, Mr. BURGESS, and Ms. HARRIS) 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; ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Renewing the Dream Tax Credit Act’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 
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1 to, or repeal of, a section or other provision, the reference 

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986. 

4 SEC. 2. COMMUNITY HOMEOWNERSHIP CREDIT. 

5 (a) IN GENERAL.—Subpart D of part IV of sub6 chapter A of chapter 1 is amended by inserting after sec7 tion 42 the following new section: 

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

9 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec10 tion 38, the amount of the homeownership credit deter11 mined under this section for any taxable year in the credit 

12 period shall be an amount equal to the applicable percent13 age of the eligible basis of each qualified residence. 

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

15 this section—

16 ‘‘(1) IN GENERAL.—The term ‘applicable per17 centage’ means the appropriate percentage pre18 scribed by the Secretary for the month in which the 

19 taxpayer and the homeownership credit agency enter 

20 into an agreement with respect to such residence 

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

22 all successors in interest) as to the homeownership 

23 credit dollar amount to be allocated to such resi24 dence. 
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1 ‘‘(2) METHOD OF PRESCRIBING PERCENT2 AGE.—The percentage prescribed by the Secretary 

3 for any month shall be the percentage which will 

4 yield over a 5-year period amounts of credit under 

5 subsection (a) which have a present value equal to 

6 50 percent of the eligible basis of a qualified resi7 dence. 

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

9 value under paragraph (2) shall be determined—

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

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

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

13 percent of the annual Federal mid-term rate 

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

15 month applicable under paragraph (1) and com16 pounded annually, and 

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

18 under this section for any year is received on 

19 the last day of such year. 

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

21 section—

22 ‘‘(1) IN GENERAL.—The term ‘qualified resi23 dence’ means any residence—

24 ‘‘(A) which is located—
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1 ‘‘(i) in a census tract which has a me2 dian gross income which does not exceed 

3 80 percent of the greater of area or state4 wide median gross income, 

5 ‘‘(ii) in a rural area (as defined under 

6 section 520 of the Housing Act of 1949), 

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

8 recognized Indian tribe, or 

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

10 distress, and 

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

12 buyer. 

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

14 area of chronic economic distress if it is approved 

15 for designation as such under section 143(j)(3); ex16 cept that such designation shall not require the ap17 proval of the Secretary, shall be deemed to be ap18 proved by the Secretary of Housing and Urban De19 velopment if not approved or disapproved by the 

20 Secretary of Housing and Urban Development with21 in 60 days after submission for approval for pur22 poses of section 143(j)(3)(A)(ii), and shall cease to 

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

24 the calendar year in which the designation is made.
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1 ‘‘(2) RESIDENCE.—For purposes of paragraph 

2 (1), the term ‘residence’ means—

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

4 4 housing units, 

5 ‘‘(B) a condominium unit, or 

6 ‘‘(C) stock in a cooperative housing cor7 poration (as defined in section 216(b)). 

8 In the case of a single-family home described in sub9 paragraph (A) that contains more than one housing 

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

11 residence and shall include only the portion of such 

12 home that is occupied by the owner thereof (deter13 mined based on the percentage of the total area of 

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

15 case of subparagraphs (A), (B), and (C), factory16 built homes shall be included in the definition of res17 idence. 

18 ‘‘(3) TIMING OF DETERMINATION.—For pur19 poses of paragraph (1), the determination of wheth20 er a residence is a qualified residence shall be made 

21 at the time a binding commitment for an allocation 

22 of credit is awarded by the homeownership credit 

23 agency; except that the determination of whether a 

24 purchaser is a qualified buyer shall be made at the 

25 time the residence is sold.
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1 ‘‘(4) MEDIAN GROSS INCOME.—For purposes of 

2 this section, median gross income shall be deter3 mined consistent with section 143(f)(2). 

4 ‘‘(d) ELIGIBLE BASIS.—For purposes of this sec5 tion—

6 ‘‘(1) NEW QUALIFIED RESIDENCES.—

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

8 new qualified residence is—

9 ‘‘(i) in the case of a qualified resi10 dence which is sold in a transaction which 

11 meets the requirements of subparagraph 

12 (B), its adjusted basis (excluding land) im13 mediately before such sale, and 

14 ‘‘(ii) zero in any other case. 

15 ‘‘(B) REQUIREMENTS.—A sale of a quali16 fied residence meets the requirements of this 

17 subparagraph if—

18 ‘‘(i) the buyer acquires the qualified 

19 residence by purchase (as defined in sec20 tion 179(d)(2)), 

21 ‘‘(ii) the buyer of the qualified resi22 dence is not a related person with respect 

23 to the seller, and 

24 ‘‘(iii) in the case of a seller who mate25 rially participates in the development of 
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1 the residence, the buyer’s debt financing is 

2 originated by a third party who is not a re3 lated person with respect to such seller. 

4 ‘‘(2) EXISTING QUALIFIED RESIDENCES.—

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

6 an existing qualified residence is—

7 ‘‘(i) in the case of a qualified resi8 dence which is sold in a transaction which 

9 meets the requirements of subparagraph 

10 (B), its adjusted basis (excluding land) im11 mediately before such sale, and 

12 ‘‘(ii) zero in any other case. 

13 ‘‘(B) REQUIREMENTS.—A sale of a quali14 fied residence meets the requirements of this 

15 subparagraph if—

16 ‘‘(i) the buyer acquires the qualified 

17 residence by purchase (as defined in sec18 tion 179(d)(2)), 

19 ‘‘(ii) the qualified residence has un20 dergone substantial rehabilitation in con21 nection with the sale described in clause 

22 (i), 

23 ‘‘(iii) the buyer of the qualified resi24 dence is not a related person with respect 

25 to the seller, and 
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1 ‘‘(iv) in the case of a seller who mate2 rially participates in the development of 

3 the residence, the buyer’s debt financing is 

4 originated by a third party who is not a re5 lated person with respect to such seller. 

6 ‘‘(C) SUBSTANTIAL REHABILITATION.—

7 ‘‘(i) IN GENERAL.—For purposes of 

8 subparagraph (B), substantial rehabilita9 tion means rehabilitation expenditures paid 

10 or incurred with respect to a qualified resi11 dence that are at least $15,000. 

12 ‘‘(ii) INFLATION ADJUSTMENT.—In 

13 the case of a calendar year after 2003, the 

14 dollar amount contained in clause (i) shall 

15 be increased by an amount equal to—

16 ‘‘(I) such dollar amount, multi17 plied by 

18 ‘‘(II) the cost-of-living adjust19 ment determined under section 1(f)(3) 

20 for such calendar year by substituting 

21 ‘calendar year 2002’ for ‘calendar 

22 year 1992’ in subparagraph (B) there23 of. 
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1 Any increase under clause (ii) which is not 

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

3 the next lowest multiple of $1,000. 

4 ‘‘(D) LIMITATION ON ACQUISITION

5 BASIS.—The eligible basis of an existing quali6 fied residence may not exceed 150 percent of 

7 the qualified rehabilitation expenditures. 

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

9 subsequent sale, assignment, rental, or refinancing 

10 of the qualified residence by the buyer or the subse11 quent sale, assignment, or pooling of the buyer’s fi12 nancing by the originator shall not be considered in 

13 determining whether or not the prior sales trans14 action satisfied the requirements of subparagraph 

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

16 ‘‘(4) SPECIAL RULES RELATING TO DETER17 MINATION OF ADJUSTED BASIS.—For purposes of 

18 this subsection—

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

20 subparagraph (B), the adjusted basis of any 

21 qualified residence—

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

23 basis of such qualified residence as is de24 termined by reference to the basis of other
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1 property held at any time by the person 

2 acquiring the residence, and 

3 ‘‘(ii) shall be determined without re4 gard to the adjusted basis of any property 

5 which is not part of such qualified resi6 dence. 

7 ‘‘(B) BASIS OF PROPERTY IN COMMON

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

9 of any qualified residence shall be determined 

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

11 adjusted basis of property (other than land) 

12 used in common areas or provided as com13 parable amenities to all residences within a 

14 project. 

15 ‘‘(5) SPECIAL RULES FOR DETERMINING ELIGI16 BLE BASIS.—

17 ‘‘(A) RELATED PERSON, ETC.—For pur18 poses of this section, a person (in this clause re19 ferred to as the ‘related person’) is related to 

20 any person if the related person bears a rela21 tionship to such person specified in section 

22 267(b) or 707(b)(1), or the related person and 

23 such person are engaged in trades or businesses 

24 under common control (within the meaning of 

25 subsections (a) and (b) of section 52). For pur-
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1 poses of the preceding sentence, in applying 

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

3 be substituted for ‘50 percent’. 

4 ‘‘(B) NONRESIDENTIAL SPACE EX5 CLUDED.—No portion of the eligible basis of a 

6 qualified residence shall include costs attrib7 utable to nonresidential space. 

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

9 any residence may not exceed the mortgage 

10 limit for Federal Housing Administration in11 sured mortgages for single family homes in the 

12 area in which such residence is located. 

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

14 CREDIT PERIOD.—

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

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

17 respect to any qualified residence, the period of 5 

18 taxable years beginning with the taxable year in 

19 which the sale of the qualified residence occurs satis20 fying the requirements of subsection (d)(1)(B) or 

21 (d)(2)(B). 

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

23 PERIOD.—

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

25 under subsection (a) with respect to any quali-
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1 fied residence for the 1st taxable year of the 

2 credit period shall be determined by multiplying 

3 the eligible basis under subsection (d) by the 

4 fraction—

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

6 sum of the number of remaining whole 

7 months in such 1st taxable year after the 

8 sale of the qualified residence, and 

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

10 ‘‘(B) DISALLOWED 1ST YEAR CREDIT AL11 LOWED IN 6TH YEAR.—Any reduction by reason 

12 of subparagraph (A) in the credit allowable 

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

14 1st taxable year of the credit period shall be al15 lowable under subsection (a) for the 1st taxable 

16 year following the credit period. 

17 ‘‘(f) LIMITATION ON AGGREGATE CREDIT ALLOW18 ABLE WITH RESPECT TO QUALIFIED RESIDENCES LO19 CATED IN A STATE.—

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

21 AMOUNT ALLOCATED TO QUALIFIED RESIDENCE.—

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

23 credit determined under this section for any 

24 taxable year with respect to any qualified resi25 dence shall not exceed the homeownership cred-
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1 it dollar amount allocated to such qualified resi2 dence under this subsection. 

3 ‘‘(B) TIME FOR MAKING ALLOCATION.—

4 ‘‘(i) An allocation shall be taken into 

5 account under subparagraph (A) only if it 

6 is made not later than the close of the cal7 endar year in which the qualified residence 

8 is sold. 

9 ‘‘(ii) A homeownership credit agency 

10 may allocate available homeownership cred11 it dollar amounts to a qualified residence 

12 prior to the year of sale of such qualified 

13 residence if—

14 ‘‘(I) the taxpayer owns fee title 

15 or a leasehold interest of not less than 

16 50 years in the site of the qualified 

17 residence as of the later of the date 

18 which is 6 months after the date that 

19 the allocation was made or the close 

20 of the calendar year in which the allo21 cation is made, and 

22 ‘‘(II) such qualified residence is 

23 completed not later than the close of 

24 the second calendar year following the
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1 calendar year in which the allocation 

2 was made. 

3 ‘‘(C) VESTED RIGHT TO CREDIT DOLLAR

4 AMOUNT.—Once a homeownership credit alloca5 tion is received by a taxpayer, the right to such 

6 credit is vested in such taxpayer and is not sub7 ject to recapture, except as provided in para8 graph (5)(B). 

9 ‘‘(2) HOMEOWNERSHIP CREDIT DOLLAR

10 AMOUNT FOR AGENCIES.—

11 ‘‘(A) IN GENERAL.—The aggregate home12 ownership credit dollar amount which a home13 ownership credit agency may allocate for any 

14 calendar year is the portion of the State home15 ownership credit ceiling allocated under this 

16 paragraph for such calendar year to such agen17 cy. 

18 ‘‘(B) STATE CEILING INITIALLY ALLO19 CATED TO STATE HOMEOWNERSHIP CREDIT

20 AGENCIES.—Except as provided in subpara21 graphs (D) and (E), the State homeownership 

22 credit ceiling for each calendar year shall be al23 located to the homeownership credit agency of 

24 such State. If there is more than 1 homeowner-
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1 ship credit agency of a State, all such agencies 

2 shall be treated as a single agency. 

3 ‘‘(C) STATE HOMEOWNERSHIP CREDIT

4 CEILING.—The State homeownership credit ceil5 ing applicable to any State for any calendar 

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

7 ‘‘(i) the unused State homeownership 

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

9 preceding calendar year, 

10 ‘‘(ii) the greater of—

11 ‘‘(I) $1.75 multiplied by the 

12 State population, or 

13 ‘‘(II) $2,000,000, 

14 ‘‘(iii) the amount of State homeowner15 ship credit ceiling returned in the calendar 

16 year, plus 

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

18 under subparagraph (D) to such State by 

19 the Secretary. 

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

21 homeownership credit ceiling for any calendar 

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

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

24 over the aggregate homeownership credit dollar 

25 amount allocated for such year. For purposes of 
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1 clause (iii), the amount of State homeownership 

2 credit ceiling returned in the calendar year 

3 equals the homeownership credit dollar amount 

4 previously allocated within the State to any 

5 qualified residence with respect to which an al6 location is canceled by mutual consent of the 

7 homeownership credit agency and the allocation 

8 recipient. 

9 ‘‘(D) UNUSED HOMEOWNERSHIP CREDIT

10 CARRYOVERS ALLOCATED AMONG CERTAIN

11 STATES.—

12 ‘‘(i) IN GENERAL.—The unused home13 ownership credit carryover of a State for 

14 any calendar year shall be assigned to the 

15 Secretary for allocation among qualified 

16 States for the succeeding calendar year. 

17 ‘‘(ii) UNUSED HOMEOWNERSHIP

18 CREDIT CARRYOVER.—For purposes of this 

19 subparagraph, the unused homeownership 

20 credit carryover of a State for any calendar 

21 year is the excess (if any) of—

22 ‘‘(I) the unused State home23 ownership credit ceiling for the year 

24 preceding such year, over 
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1 ‘‘(II) the aggregate homeowner2 ship credit dollar amount allocated for 

3 such year. 

4 ‘‘(iii) FORMULA FOR ALLOCATION OF

5 UNUSED HOMEOWNERSHIP CREDIT

6 CARRYOVERS AMONG QUALIFIED

7 STATES.—The amount allocated under this 

8 subparagraph to a qualified State for any 

9 calendar year shall be the amount deter10 mined by the Secretary to bear the same 

11 ratio to the aggregate unused homeowner12 ship credit carryovers of all States for the 

13 preceding calendar year as such State’s 

14 population for the calendar year bears to 

15 the population of all qualified States for 

16 the calendar year. 

17 ‘‘(iv) QUALIFIED STATE.—For pur18 poses of this subparagraph, the term 

19 ‘qualified State’ means, with respect to a 

20 calendar year, any State—

21 ‘‘(I) which allocated its entire 

22 State homeownership credit ceiling for 

23 the preceding calendar year, and 

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

25 (not later than May 1 of the calendar 
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1 year) to receive an allocation under 

2 clause (iii). 

3 ‘‘(E) STATE MAY PROVIDE FOR DIF4 FERENT ALLOCATION.—Rules similar to the 

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

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

7 paragraph. 

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

9 paragraph, population shall be determined in 

10 accordance with section 146(j). 

11 ‘‘(G) COST-OF-LIVING ADJUSTMENT.—

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

13 calendar year after 2003, the $2,000,000 

14 and $1.75 amounts in subparagraph (C) 

15 shall each be increased by an amount equal 

16 to—

17 ‘‘(I) such dollar amount, multi18 plied by 

19 ‘‘(II) the cost-of-living adjust20 ment determined under section 

21 1(f )(3) for such calendar year by sub22 stituting ‘calendar year 2002’ for ‘cal23 endar year 1992’ in subparagraph (B) 

24 thereof. 

25 ‘‘(ii) ROUNDING.—
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1 ‘‘(I) In the case of the 

2 $2,000,000 amount, any increase 

3 under clause (i) which is not a mul4 tiple of $5,000 shall be rounded to the 

5 next lowest multiple of $5,000. 

6 ‘‘(II) In the case of the $1.75 

7 amount, any increase under clause (i) 

8 which is not a multiple of 5 cents 

9 shall be rounded to the next lowest 

10 multiple of 5 cents. 

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

12 FOR CERTAIN PROJECTS INVOLVING QUALIFIED

13 NONPROFIT ORGANIZATIONS.—

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

15 percent of the State homeownership credit ceil16 ing for any State for any calendar year shall be 

17 allocated to projects other than qualified non18 profit housing projects described in subpara19 graph (B). 

20 ‘‘(B) PROJECTS INVOLVING QUALIFIED

21 NONPROFIT ORGANIZATIONS.—For purposes of 

22 subparagraph (A), a qualified nonprofit housing 

23 project is described in this subparagraph if a 

24 qualified nonprofit organization is to own an in25 terest in the project (directly or through a part-
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1 nership) and materially participate (within the 

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

3 and operation of the project throughout the 

4 credit period. 

5 ‘‘(C) QUALIFIED NONPROFIT ORGANIZA6 TION.—For purposes of this paragraph, the 

7 term ‘qualified nonprofit organization’ means 

8 any organization if—

9 ‘‘(i) such organization is described in 

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

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

12 ‘‘(ii) such organization is determined 

13 by the State homeownership credit agency 

14 not to be affiliated with or controlled by a 

15 for-profit organization, and 

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

17 such organization includes the fostering of 

18 low-income housing. 

19 ‘‘(D) TREATMENT OF CERTAIN SUBSIDI20 ARIES.—

21 ‘‘(i) IN GENERAL.—For purposes of 

22 this paragraph, a qualified nonprofit orga23 nization shall be treated as satisfying the 

24 ownership and material participation test 

25 of subparagraph (B) if any qualified cor-
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1 poration in which such organization holds 

2 stock satisfies such test. 

3 ‘‘(ii) QUALIFIED CORPORATION.—For 

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

5 corporation’ means any corporation if 100 

6 percent of the stock of such corporation is 

7 held by 1 or more qualified nonprofit orga8 nizations at all times during the period 

9 such corporation is in existence. 

10 ‘‘(E) STATE MAY NOT OVERRIDE SET11 ASIDE.—Nothing in subparagraph (E) of para12 graph (2) shall be construed to permit a State 

13 not to comply with subparagraph (A) of this 

14 paragraph. 

15 ‘‘(4) LIMITATION ON ALLOCATIONS TO AREAS

16 OF CHRONIC ECONOMIC DISTRESS.—No more than 

17 50 percent of a homeownership credit agency’s por18 tion of the State homeownership credit ceiling for a 

19 calendar year may be allocated to residences located 

20 in areas that—

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

22 economic distress in accordance with paragraph 

23 (1) of subsection (c), and 

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

25 clause (i), (ii), or (iii) of subsection (c)(1)(A). 
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1 ‘‘(5) SPECIAL RULES.—

2 ‘‘(A) RESIDENCE MUST BE LOCATED

3 WITHIN JURISDICTION OF CREDIT AGENCY.—A 

4 homeownership credit agency may allocate its 

5 aggregate homeownership credit dollar amount 

6 only to qualified residences located in the juris7 diction of the governmental unit of which such 

8 agency is a part. 

9 ‘‘(B) AGENCY ALLOCATIONS IN EXCESS OF

10 LIMIT.—If the aggregate homeownership credit 

11 dollar amounts allocated by a homeownership 

12 credit agency for any calendar year exceed the 

13 portion of the State homeownership credit ceil14 ing allocated to such agency for such calendar 

15 year, the homeownership credit dollar amounts 

16 so allocated shall be reduced (to the extent of 

17 such excess) for residences in the reverse of the 

18 order in which the allocations of such amounts 

19 were made. 

20 ‘‘(g) DEFINITIONS AND SPECIAL RULES.—For pur21 poses of this section—

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

23 means the point in time where a qualified residence 

24 is first placed in a condition or state of readiness 

25 and availability for occupancy. 
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1 ‘‘(2) PROJECT.—The term ‘project’ means 1 or 

2 more residences together with functionally related 

3 and subordinate facilities developed and made avail4 able to inhabitants of such residences, including rec5 reational facilities and parking areas. To constitute 

6 a project, each residence must—

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

8 pursuant to common planning and feasibility 

9 studies, 

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

11 of construction financing, and 

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

13 For purposes of this paragraph, it is not necessary 

14 that all residences within a project be contiguous or 

15 that all residences consist only of either new resi16 dences or existing residences and it is not necessary 

17 that each residence within a project be a qualified 

18 residence. 

19 ‘‘(3) QUALIFIED BUYER.—

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

21 buyer’ means a buyer if at the time of the ac22 quisition of the qualified residence, the buyer—

23 ‘‘(i) is 1 or more individuals whose in24 come does not exceed 80 percent of the
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1 area median gross income (70 percent for 

2 families of less than 3 members), and 

3 ‘‘(ii) intends to occupy the residence 

4 as the buyer’s principal residence (within 

5 the meaning of section 121). 

6 ‘‘(B) SPECIAL RULES IN QUALIFIED CEN7 SUS TRACTS.—With respect to residences lo8 cated in qualified census tracts (as defined in 

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

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

11 and ‘90 percent’ for ‘70 percent’. 

12 ‘‘(C) DETERMINATION OF INCOME.—For 

13 purposes of this paragraph, a buyer’s income 

14 shall be determined in accordance with section 

15 143(f)(4). 

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

17 ‘new qualified residence’ means a qualified residence 

18 the original ownership of which begins with the tax19 payer. 

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

21 term ‘existing qualified residence’ means any quali22 fied residence which is not a new qualified residence. 

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

24 term ‘homeownership credit agency’ means any 

25 agency authorized to carry out this section. 
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1 ‘‘(7) POSSESSIONS TREATED AS STATES.—The 

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

3 possession of the United States. 

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

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

6 credit determined under subsection (a) shall be ap7 portioned between the estate or trust and the bene8 ficiaries on the basis of the income of the estate or 

9 trust allocable to each. 

10 ‘‘(h) REDUCTION IN TAX BENEFITS.—

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

12 year period beginning on the date of the original 

13 purchase of a qualified residence, the residence is 

14 sold, the qualified buyer—

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

16 equal to the recapture amount from the amount 

17 realized on such sale, and 

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

19 homeownership credit agency which allocated 

20 the homeownership credit dollar amount to such 

21 residence. 

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

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

24 equal to the lesser of—
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1 ‘‘(A) 50 percent of the gain from such re2 sale, or 

3 ‘‘(B) the homeownership credit dollar 

4 amount allocated to such residence, reduced by 

5 1/36th of such amount for each month after the 

6 first 2 years of the 5-year period referred to in 

7 paragraph (1) which is before the date of the 

8 sale referred to in paragraph (1). 

9 ‘‘(3) DENIAL OF DEDUCTIONS IF CONVERTED

10 TO RENTAL HOUSING.—If a qualified residence is 

11 converted to rental housing within the 5-year period 

12 beginning on the date of the original purchase of the 

13 qualified residence, no deduction under this chapter 

14 shall be permitted to offset rental income with re15 spect to such residence during such period. 

16 ‘‘(i) APPLICATION OF AT-RISK RULES.—For pur17 poses of this section, rules of section 465 shall not apply 

18 in determining the eligible basis of any qualified residence. 

19 ‘‘(j) REPORTS TO THE SECRETARY.—

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

21 may require taxpayers to submit an information re22 turn (at such time and in such form and manner as 

23 the Secretary prescribes) for each taxable year set24 ting forth—
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1 ‘‘(A) the eligible basis for the taxable year 

2 of each qualified residence with respect to which 

3 the taxpayer is claiming a credit under this sec4 tion, 

5 ‘‘(B) the amount of all homeownership 

6 credit allocations received by the taxpayer from 

7 any and all State homeownership credit agen8 cies, and 

9 ‘‘(C) such other information as the Sec10 retary may require. 

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

12 failure to submit the return required by the Sec13 retary under the preceding sentence on the date pre14 scribed therefor. 

15 ‘‘(2) FROM HOMEOWNERSHIP CREDIT AGEN16 CIES.—Each agency which allocates any homeowner17 ship credit dollar amount to any residence for any 

18 calendar year shall submit to the Secretary (at such 

19 time and in such form and manner as the Secretary 

20 shall prescribe) an annual report specifying—

21 ‘‘(A) the amount of the homeownership 

22 credit dollar amount allocated to each residence 

23 for such year, 

24 ‘‘(B) sufficient information to identify each 

25 such residence and the taxpayer initially enti-
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1 tled to claim the credit under this section with 

2 respect thereto, and 

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

5 ‘‘(k) RESPONSIBILITIES OF HOMEOWNERSHIP CRED6 IT AGENCIES.—

7 ‘‘(1) PLANS FOR ALLOCATION OF CREDIT

8 AMONG RESIDENCES.—

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

10 other provision of this section, the homeowner11 ship credit dollar amount with respect to any 

12 qualified residence shall be zero unless such 

13 amount was allocated pursuant to a qualified 

14 allocation plan of the homeownership credit 

15 agency which is approved by the governmental 

16 unit (in accordance with rules similar to the 

17 rules of section 147(f)(2) (other than subpara18 graph (B)(ii) thereof)) of which such agency is 

19 a part. 

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

21 purposes of this paragraph, the term ‘qualified 

22 allocation plan’ means any plan which sets forth 

23 selection criteria to be used to determine the 

24 homeownership development priorities of the
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1 homeownership credit agency which are appro2 priate to local conditions. 

3 ‘‘(C) CERTAIN HOMEOWNERSHIP DEVEL4 OPMENT CRITERIA MUST BE USED.—The devel5 opment criteria set forth in a qualified alloca6 tion plan must include—

7 ‘‘(i) contribution of the development 

8 to community stability and revitalization, 

9 ‘‘(ii) community and local government 

10 support for the development, 

11 ‘‘(iii) need for homeownership develop12 ment within the area, 

13 ‘‘(iv) sponsor capability, and 

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

15 project as owner-occupied residences. 

16 ‘‘(2) CREDIT ALLOCATED TO RESIDENCE NOT

17 TO EXCEED AMOUNT NECESSARY TO ASSURE FEASI18 BILITY.—

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

20 credit dollar amount allocated to a residence 

21 shall not exceed the amount the homeownership 

22 credit agency determines is necessary for the 

23 feasibility of the residence. 
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1 ‘‘(B) AGENCY EVALUATION.—In making 

2 the determination under subparagraph (A), the 

3 homeownership credit agency shall consider—

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

5 the total financing planned for the resi6 dence, 

7 ‘‘(ii) any proceeds or receipts expected 

8 to be generated by reason of tax benefits, 

9 ‘‘(iii) the anticipated appraised value 

10 of the residence, 

11 ‘‘(iv) the reasonableness of the devel12 opmental costs of the residence, and 

13 ‘‘(v) the affordability to a reasonable 

14 range of prospective qualified buyers. 

15 ‘‘(C) DETERMINATION MADE WHEN CRED16 IT DOLLAR AMOUNT APPLIED FOR.—A deter17 mination under subparagraph (A) shall be made 

18 as of each of the following times: 

19 ‘‘(i) The application for the home20 ownership credit dollar amount. 

21 ‘‘(ii) The allocation of the homeowner22 ship credit dollar amount. 

23 ‘‘(3) LIEN FOR RECAPTURE AMOUNT.—A home24 ownership credit dollar amount may be allocated by 

25 a homeownership credit agency to a residence only 
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1 if such agency has a lien on such residence for the 

2 payment of any amount potentially required to be 

3 paid under subsection (h) to such agency. 

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

5 such regulations as may be necessary or appropriate to 

6 carry out the purposes of this section, including regula7 tions—

8 ‘‘(1) dealing with—

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

10 residence or only a portion of a residence, and 

11 ‘‘(B) buildings which are completed in por12 tions, 

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

14 to short taxable years, 

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

16 this section, and 

17 ‘‘(4) providing the opportunity for homeowner18 ship credit agencies to correct administrative errors 

19 and omissions with respect to allocations and record20 keeping within a reasonable period after their dis21 covery, taking into account the availability of regula22 tions and other administrative guidance from the 

23 Secretary.’’. 

24 (b) CURRENT YEAR BUSINESS CREDIT CALCULA25 TION.—Section 38(b) (relating to current year business 
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1 credit) is amended by redesignating paragraphs (6) 

2 through (15) as paragraphs (7) through (16), respectively, 

3 and by inserting after paragraph (5) the following new 

4 paragraph: 

5 ‘‘(6) the homeownership credit determined 

6 under section 42A(a),’’. 

7 (c) LIMITATION ON CARRYBACK.—Subsection (d) of 

8 section 39 (relating to carryback and carryforward of un9 used credits) is amended by adding at the end the fol10 lowing: 

11 ‘‘(11) NO CARRYBACK OF HOMEOWNERSHIP

12 CREDIT BEFORE EFFECTIVE DATE.—No amount of 

13 unused business credit available under section 42A 

14 may be carried back to a taxable year beginning on 

15 or before the date of the enactment of this para16 graph.’’. 

17 (d) CONFORMING AMENDMENTS.—

18 (1) Section 55(c)(1) is amended by inserting 

19 ‘‘or subsection (h) or (i) of section 42A’’ after ‘‘sec20 tion 42’’. 

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

22 (k)(1) of section 469 are each amended by inserting 

23 ‘‘or 42A’’ after ‘‘section 42’’. 

24 (3) Section 772(a) is amended by striking 

25 ‘‘and’’ at the end of paragraph (10), by redesig-
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1 nating paragraph (11) as paragraph (12), and by in2 serting after paragraph (10) the following: 

3 ‘‘(11) the homeownership credit determined 

4 under section 42A, and’’. 

5 (4) Section 774(b)(4) is amended by inserting 

6 ‘‘, 42A(h),’’ after ‘‘section 42(j)’’. 

7 (e) CLERICAL AMENDMENT.—The table of sections 

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

9 is amended by inserting after the item relating to section 

10 42 the following:

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

11 (f) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to qualified residences sold after 

13 the date of the enactment of this Act.

Æ