II 

114TH CONGRESS 

2D SESSION S. 3384 

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

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 22, 2016 

Mr. WYDEN introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

a credit for middle-income housing, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Middle-Income Hous5 ing Tax Credit Act of 2016’’. 

6 SEC. 2. SENSE OF THE SENATE RELATING TO THE LOW-IN7 COME HOUSING TAX CREDIT. 

8 (a) FINDINGS.—The Senate makes the following 

9 findings: 


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1 (1) The low-income housing tax credit under 

2 section 42 of the Internal Revenue Code of 1986 is 

3 one of the Federal Government’s primary policy 

4 tools for encouraging the development and rehabili5 tation of affordable rental housing. 

6 (2) Since 1986, when the low-income housing 

7 tax credit was first enacted, the credit has financed 

8 about 2,800,000 affordable homes in the United 

9 States for roughly 6,500,000 households. In Oregon, 

10 the program has financed over 37,000 affordable 

11 homes, providing housing to over 85,000 low-income 

12 households. 

13 (3) While the low-income housing tax credit has 

14 been remarkably successful, the Nation still faces an 

15 affordable housing crisis. Today, more than 1 in 4 

16 renter households in the United States—roughly 

17 11,400,000—spend more than half of their income 

18 on rent, leaving too little for other necessities like 

19 food, medical care, and transportation. Meanwhile, 

20 only 1 in 4 eligible low-income households receives 

21 any housing assistance, and we continue to lose af22 fordable housing from our Nation’s stock. 

23 (4) In Oregon, where housing affordability is an 

24 acute problem, demand for low-income housing tax 

25 credits exceeds supply by 3 to 1. 


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1 (5) In July of 2016, the Affordable Housing 

2 Credit Improvement Act of 2016 was introduced to 

3 expand and strengthen the low-income housing tax 

4 credit. To provide States with further tools to en5 courage the development of greatly needed additional 

6 affordable housing, the Affordable Housing Credit 

7 Improvement Act of 2016 would increase the annual 

8 per capita low income housing tax credit allocation 

9 and small State minimum by 50 percent phased in 

10 over 5 years. 

11 (b) SENSE OF THE SENATE.—It is the sense of the 

12 Senate that— 

13 (1) The low-income housing tax credit under 

14 section 42 of the Internal Revenue Code of 1986 is 

15 a critically important Federal Government policy 

16 tool to encourage the production of affordable hous17 ing for low-income families; and 

18 (2) Congress should further improve and en19 hance the low-income housing tax credit by passing 

20 the Affordable Housing Credit Improvement Act of 

21 2016. 

22 SEC. 3. MIDDLE-INCOME HOUSING TAX CREDIT. 

23 (a) IN GENERAL.—Subpart D of part IV of sub24 chapter A of chapter 1 of the Internal Revenue Code of 


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1 1986 is amended by inserting after section 42 the fol2 lowing new section: 

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

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

5 amount of the middle-income housing credit determined 

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

7 shall be an amount equal to— 

8 ‘‘(1) the applicable percentage of 

9 ‘‘(2) the qualified basis of each qualified mid10 dle-income building. 

11 ‘‘(b) APPLICABLE PERCENTAGE.— 

12 ‘‘(1) DETERMINATION OF APPLICABLE PER13 CENTAGE.—For purposes of this section— 

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

15 percentage’ means, with respect to any building, 

16 the appropriate percentage prescribed by the 

17 Secretary for the earlier of— 

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

19 is placed in service, or 

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

21 the month in which the taxpayer and the 

22 housing credit agency enter into an agree23 ment with respect to such building (which 

24 is binding on such agency, the taxpayer, 

25 and all successors in interest) as to the 


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1 housing credit dollar amount to be allo2 cated to such building. 

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

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

5 day after the close of such month. Such an elec6 tion, once made, shall be irrevocable. 

7 ‘‘(B) METHOD OF PRESCRIBING PERCENT8 AGES.—The percentages prescribed by the Sec9 retary for any month shall be percentages which 

10 will yield over a 15-year period amounts of 

11 credit under subsection (a) which have a 

12 present value equal to 50 percent of the quali13 fied basis of a new building. 

14 ‘‘(C) METHOD OF DISCOUNTING.—The 

15 present value under subparagraph (B) shall be 

16 determined— 

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

18 of the 15-year period referred to in sub19 paragraph (B), 

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

21 72 percent of the average of the annual 

22 Federal mid-term rate and the annual 

23 Federal long-term rate applicable under 

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


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

2 (A) and compounded annually, and 

3 ‘‘(iii) by assuming that the credit al4 lowable under this section for any year is 

5 received on the last day of such year. 

6 ‘‘(2) MINIMUM CREDIT RATE.—The applicable 

7 percentage for any building shall not be less than 5 

8 percent. 

9 ‘‘(3) CROSS REFERENCES.— 

10 ‘‘(A) For treatment of certain rehabilita11 tion expenditures as separate new buildings, see 

12 subsection (e). 

13 ‘‘(B) For determination of applicable per14 centage for increases in qualified basis after the 

15 1st year of the credit period, see subsection 

16 (f)(3). 

17 ‘‘(C) For authority of housing credit agen18 cy to limit applicable percentage and qualified 

19 basis which may be taken into account under 

20 this section with respect to any building, see 

21 subsection (h)(6). 

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

23 BUILDING.—For purposes of this section— 

24 ‘‘(1) QUALIFIED BASIS.— 


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1 ‘‘(A) DETERMINATION.—The qualified 

2 basis of any qualified middle-income building 

3 for any taxable year is an amount equal to— 

4 ‘‘(i) the applicable fraction (deter5 mined as of the close of such taxable year) 

6 of 

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

8 (determined under subsection (d)). 

9 ‘‘(B) APPLICABLE FRACTION.—For pur10 poses of subparagraph (A), the term ‘applicable 

11 fraction’ means the smaller of the unit fraction 

12 or the floor space fraction. 

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

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

15 means the fraction— 

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

17 number of middle-income units in the 

18 building, and 

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

20 number of residential rental units (whether 

21 or not occupied) in such building. 

22 ‘‘(D) FLOOR SPACE FRACTION.—For pur23 poses of subparagraph (B), the term ‘floor 

24 space fraction’ means the fraction— 


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

2 total floor space of the middle-income units 

3 in such building, and 

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

5 total floor space of the residential rental 

6 units (whether or not occupied) in such 

7 building. 

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

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

10 middle-income building’ means any building 

11 which is part of a qualified middle-income hous12 ing project at all times during the period— 

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

14 credit period on which such building is 

15 part of such a project, and 

16 ‘‘(ii) ending on the last day of the 

17 credit period with respect to such building. 

18 ‘‘(B) CERTAIN BUILDINGS NOT IN19 CLUDED.—The term ‘qualified middle-income 

20 building’ does not include any building if such 

21 building is designated as a building to which 

22 the low-income housing tax credit applies in an 

23 election under section 42(i)(10). 

24 ‘‘(d) ELIGIBLE BASIS.—For purposes of this sec25 tion— 


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

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

3 the 1st taxable year of the credit period. 

4 ‘‘(2) EXISTING BUILDINGS.— 

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

6 an existing building is— 

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

8 meets the requirements of subparagraph 

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

10 the 1st taxable year of the credit period, 

11 and 

12 ‘‘(ii) zero in any other case. 

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

14 the requirements of this subparagraph if— 

15 ‘‘(i) the building is acquired by pur16 chase (as defined in section 179(d)(2)), 

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

18 years between the date of its acquisition by 

19 the taxpayer and the date the building was 

20 last placed in service, 

21 ‘‘(iii) the building was not previously 

22 placed in service by the taxpayer or by any 

23 person who was a related person with re24 spect to the taxpayer as of the time pre25 viously placed in service, and 


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1 ‘‘(iv) except as provided in subsection 

2 (f)(5), a credit is allowable under sub3 section (a) by reason of subsection (e) with 

4 respect to the building. 

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

6 subparagraph (A), the adjusted basis of any 

7 building shall not include so much of the basis 

8 of such building as is determined by reference 

9 to the basis of other property held at any time 

10 by the person acquiring the building. 

11 ‘‘(D) SPECIAL RULES.— 

12 ‘‘(i) SPECIAL RULES FOR CERTAIN

13 TRANSFERS.—For purposes of determining 

14 under subparagraph (B)(ii) when a build15 ing was last placed in service, there shall 

16 not be taken into account any placement in 

17 service— 

18 ‘‘(I) in connection with the acqui19 sition of the building in a transaction 

20 in which the basis of the building in 

21 the hands of the person acquiring it is 

22 determined in whole or in part by ref23 erence to the adjusted basis of such 

24 building in the hands of the person 

25 from whom acquired, 


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1 ‘‘(II) by a person whose basis in 

2 such building is determined under sec3 tion 1014(a) (relating to property ac4 quired from a decedent), 

5 ‘‘(III) by any governmental unit 

6 or qualified nonprofit organization if 

7 the requirements of subparagraph 

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

9 placement in service by such unit or 

10 organization and all the income from 

11 such property is exempt from Federal 

12 income taxation, 

13 ‘‘(IV) by any person who ac14 quired such building by foreclosure 

15 (or by instrument in lieu of fore16 closure) of any purchase-money secu17 rity interest held by such person if the 

18 requirements of subparagraph (B)(ii) 

19 are met with respect to the placement 

20 in service by such person and such 

21 building is resold within 12 months 

22 after the date such building is placed 

23 in service by such person after such 

24 foreclosure, or 


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1 ‘‘(V) of a single-family residence 

2 by any individual who owned and used 

3 such residence for no other purpose 

4 than as his principal residence. 

5 ‘‘(ii) RELATED PERSON.—For pur6 poses of subparagraph (B)(iii), a person 

7 (hereinafter in this subclause referred to as 

8 the ‘related person’) is related to any per9 son if the related person bears a relation10 ship to such person specified in section 

11 267(b) or 707(b)(1), or the related person 

12 and such person are engaged in trades or 

13 businesses under common control (within 

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

15 section 52). 

16 ‘‘(3) 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 building shall be determined without regard to 

22 the adjusted basis of any property which is not 

23 residential rental property. 

24 ‘‘(B) BASIS OF PROPERTY IN COMMON

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


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1 of any building shall be determined by taking 

2 into account the adjusted basis of property (of 

3 a character subject to the allowance for depre4 ciation) used in common areas or provided as 

5 comparable amenities to all residential rental 

6 units in such building. 

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

9 be determined without regard to paragraphs (2) 

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

11 ‘‘(4) CREDIT ALLOWABLE FOR CERTAIN BUILD12 INGS ACQUIRED DURING 10-YEAR PERIOD DE13 SCRIBED IN PARAGRAPH (2)(B)(II).—On application 

14 by the taxpayer, the Secretary may waive paragraph 

15 (2)(B)(ii) with respect to any building acquired from 

16 an insured depository institution in default (as de17 fined in section 3 of the Federal Deposit Insurance 

18 Act) or from a receiver or conservator of such an in19 stitution. 

20 ‘‘(5) ACQUISITION OF BUILDING BEFORE END

21 OF PRIOR CREDIT PERIOD.— 

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

23 prescribed by the Secretary, in the case of a 

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1 terest therein) which is acquired by the tax2 payer— 

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

4 but 

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

6 subsection (a) to the taxpayer for any pe7 riod after such acquisition shall be equal to 

8 the amount of credit which would have 

9 been allowable under subsection (a) for 

10 such period to the prior owner referred to 

11 in subparagraph (B) had such owner not 

12 disposed of the building. 

13 ‘‘(B) DESCRIPTION OF BUILDING.—A 

14 building is described in this subparagraph if— 

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

16 subsection (a) to any prior owner of such 

17 building, and 

18 ‘‘(ii) the taxpayer acquired such build19 ing before the end of the credit period for 

20 such building with respect to such prior 

21 owner (determined without regard to any 

22 disposition by such prior owner). 

23 ‘‘(e) REHABILITATION EXPENDITURES TREATED AS

24 SEPARATE NEW BUILDING.— 


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

2 paid or incurred by the taxpayer with respect to any 

3 building shall be treated for purposes of this section 

4 as a separate new building. 

5 ‘‘(2) REHABILITATION EXPENDITURES.—For 

6 purposes of paragraph (1)— 

7 ‘‘(A) IN GENERAL.—The term ‘rehabilita8 tion expenditures’ means amounts chargeable to 

9 capital account and incurred for property (or 

10 additions or improvements to property) of a 

11 character subject to the allowance for deprecia12 tion in connection with the rehabilitation of a 

13 building. 

14 ‘‘(B) COST OF ACQUISITION, ETC., NOT IN15 CLUDED.—Such term does not include the cost 

16 of acquiring any building (or interest therein) 

17 or any amount not permitted to be taken into 

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

19 ‘‘(C) CERTAIN RELOCATION COSTS.—In 

20 the case of a rehabilitation of a building to 

21 which section 280B does not apply, costs relat22 ing to the relocation of occupants, including— 

23 ‘‘(i) amounts paid to occupants, 

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

25 services relating to such relocation, and 


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1 ‘‘(iii) amounts paid for temporary 

2 housing for occupants, 

3 shall be treated as chargeable to capital account 

4 and taken into account as rehabilitation ex5 penditures. 

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

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

8 apply to rehabilitation expenditures with respect 

9 to any building only if— 

10 ‘‘(i) the expenditures are allocable to 

11 1 or more middle-income units or substan12 tially benefit such units, and 

13 ‘‘(ii) the amount of such expenditures 

14 during any 24-month period meets the re15 quirements of whichever of the following 

16 subclauses requires the greater amount of 

17 such expenditures: 

18 ‘‘(I) The requirement of this sub19 clause is met if such amount is not 

20 less than 20 percent of the adjusted 

21 basis of the building (determined as of 

22 the 1st day of such period and with23 out regard to paragraphs (2) and (3) 

24 of section 1016(a)). 


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1 ‘‘(II) The requirement of this 

2 subclause is met if the qualified basis 

3 attributable to such amount, when di4 vided by the number of middle-income 

5 units in the building, is equal to or 

6 greater than the dollar amount in ef7 fect under section 42(e)(3)(A)(ii)(II) 

8 for the calendar year in which such 

9 expenditures are treated as placed in 

10 service under paragraph (4). 

11 ‘‘(B) DATE OF DETERMINATION.—The de12 termination under subparagraph (A) shall be 

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

14 the credit period with respect to such expendi15 tures. 

16 ‘‘(4) SPECIAL RULES.—For purposes of apply17 ing this section with respect to expenditures which 

18 are treated as a separate building by reason of this 

19 subsection— 

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

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

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

23 ‘‘(B) the applicable fraction under sub24 section (c)(1) shall be the applicable fraction for 

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


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1 with respect to which the expenditures were in2 curred. 

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

4 from being allowed by reason of this subsection. 

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

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

7 taken into account under this subsection or sub8 section (d)(2)(A)(i) but not under both such sub9 sections. 

10 ‘‘(6) REGULATIONS TO APPLY SUBSECTION

11 WITH RESPECT TO GROUP OF UNITS IN BUILDING.— 

12 The Secretary may prescribe regulations, consistent 

13 with the purposes of this subsection, treating a 

14 group of units with respect to which rehabilitation 

15 expenditures are incurred as a separate new build16 ing. 

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

18 CREDIT PERIOD.— 

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

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

21 respect to any building, the period of 15 taxable 

22 years beginning with— 

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

24 is placed in service, or 


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

2 succeeding taxable year, 

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

4 building as of the close of the 1st year of such pe5 riod. The election under subparagraph (B), once 

6 made, shall be irrevocable. 

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

8 PERIOD.— 

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

10 under subsection (a) with respect to any build11 ing for the 1st taxable year of the credit period 

12 shall be determined by substituting for the ap13 plicable fraction under subsection (c)(1) the 

14 fraction— 

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

16 sum of the applicable fractions determined 

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

18 each full month of such year during which 

19 such building was in service, and 

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

21 ‘‘(B) DISALLOWED 1ST YEAR CREDIT AL22 LOWED IN 16TH YEAR.—Any reduction by rea23 son of subparagraph (A) in the credit allowable 

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

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1 lowable under subsection (a) for the 1st taxable 

2 year following the credit period. 

3 ‘‘(3) DETERMINATION OF APPLICABLE PER4 CENTAGE WITH RESPECT TO INCREASES IN QUALI5 FIED BASIS AFTER 1ST YEAR OF CREDIT PERIOD.— 

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

7 building which was a qualified middle-income 

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

9 credit period, if— 

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

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

12 such period) the qualified basis of such 

13 building exceeds 

14 ‘‘(ii) the qualified basis of such build15 ing as of the close of the 1st year of the 

16 credit period, 

17 the applicable percentage which shall apply 

18 under subsection (a) for the taxable year to 

such excess shall be the percentage equal to 2 19 ⁄3

20 of the applicable percentage which (after the 

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

22 paragraph apply to such basis. 

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

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

25 shall apply to any increase in qualified basis to 


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

2 of such increase. 

3 ‘‘(4) DISPOSITIONS OF PROPERTY.—If a build4 ing (or an interest therein) is disposed of during any 

5 year for which credit is allowable under subsection 

6 (a), such credit shall be allocated between the par7 ties on the basis of the number of days during such 

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

9 ‘‘(5) CREDIT PERIOD FOR EXISTING BUILDINGS

10 NOT TO BEGIN BEFORE REHABILITATION CREDIT

11 ALLOWED.— 

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

13 an existing building shall not begin before the 

14 1st taxable year of the credit period for reha15 bilitation expenditures with respect to the build16 ing. 

17 ‘‘(B) ACQUISITION CREDIT ALLOWED FOR

18 CERTAIN BUILDINGS NOT ALLOWED A REHA19 BILITATION CREDIT.— 

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

21 building described in clause (ii)— 

22 ‘‘(I) subsection (d)(2)(B)(iv) 

23 shall not apply, and 

24 ‘‘(II) the credit period for such 

25 building shall not begin before the 


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1 taxable year which would be the 1st 

2 taxable year of the credit period for 

3 rehabilitation expenditures with re4 spect to the building under the modi5 fications described in clause (ii)(II). 

6 ‘‘(ii) BUILDING DESCRIBED.—A build7 ing is described in this clause if— 

8 ‘‘(I) a waiver is granted under 

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

10 acquisition of the building, and 

11 ‘‘(II) a credit would be allowed 

12 for rehabilitation expenditures with 

13 respect to such building if subsection 

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

15 the dollar amount in effect under sub16 section (e)(3)(A)(ii)(II) were two17 thirds of such amount. 

18 ‘‘(g) QUALIFIED MIDDLE-INCOME HOUSING

19 PROJECT.—For purposes of this section— 

20 ‘‘(1) IN GENERAL.—The term ‘qualified middle21 income housing project’ means any project for resi22 dential rental property if— 

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

24 units in such project are both rent-restricted 

25 and occupied by individuals whose income is 


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1 100 percent or less of area median gross in2 come, and 

3 ‘‘(B) such project is not federally sub4 sidized and is not financed with the proceeds of 

5 any federally funded grant. 

6 For purposes of subparagraph (A), residential units 

7 in a building which is not a qualified middle-income 

8 building by reason of subsection (c)(2)(B) shall not 

9 be taken into account. 

10 ‘‘(2) RENT-RESTRICTED UNITS.— 

11 ‘‘(A) IN GENERAL.—For purposes of para12 graph (1), a residential unit is rent-restricted if 

13 the gross rent with respect to such unit does 

14 not exceed 30 percent of the imputed income 

15 limitation applicable to such unit. For purposes 

16 of the preceding sentence, the amount of the in17 come limitation under paragraph (1) applicable 

18 for any period shall not be less than such limi19 tation applicable for the earliest period the 

20 building (which contains the unit) was included 

21 in the determination of whether the project is 

22 a qualified middle-income housing project. 

23 ‘‘(B) GROSS RENT.—For purposes of sub24 paragraph (A), gross rent— 


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1 ‘‘(i) includes any utility allowance de2 termined by the Secretary after taking into 

3 account such determinations under section 

4 8 of the United States Housing Act of 

5 1937, 

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

7 supportive service which is paid to the 

8 owner of the unit (on the basis of the mid9 dle-income status of the tenant of the unit) 

10 by any governmental program of assistance 

11 (or by an organization described in section 

12 501(c)(3) and exempt from tax under sec13 tion 501(a)) if such program (or organiza14 tion) provides assistance for rent and the 

15 amount of assistance provided for rent is 

16 not separable from the amount of assist17 ance provided for supportive services, and 

18 ‘‘(iii) does not include any rental pay19 ment to the owner of the unit to the extent 

20 such owner pays an equivalent amount to 

21 the Farmers’ Home Administration under 

22 section 515 of the Housing Act of 1949. 

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

24 service’ means any service provided under a 

25 planned program of services designed to enable 


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1 residents of a residential rental property to re2 main independent and avoid placement in a 

3 hospital, nursing home, or intermediate care fa4 cility for the mentally or physically handi5 capped. 

6 ‘‘(C) IMPUTED INCOME LIMITATION APPLI7 CABLE TO UNIT.—For purposes of this para8 graph, the imputed income limitation applicable 

9 to a unit is the income limitation which would 

10 apply under paragraph (1) to individuals occu11 pying the unit if the number of individuals oc12 cupying the unit were as follows: 

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

14 not have a separate bedroom, 1 individual. 

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

16 1 or more separate bedrooms, 1.5 individ17 uals for each separate bedroom. 

18 ‘‘(D) TREATMENT OF UNITS OCCUPIED BY

19 INDIVIDUALS WHOSE INCOMES RISE ABOVE

20 LIMIT.— 

21 ‘‘(i) IN GENERAL.—Except as pro22 vided in clause (ii), notwithstanding an in23 crease in the income of the occupants of a 

24 middle-income unit above the income limi25 tation applicable under paragraph (1), 


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1 such unit shall continue to be treated as a 

2 middle-income unit if the income of such 

3 occupants initially met such income limita4 tion and such unit continues to be rent-re5 stricted. 

6 ‘‘(ii) NEXT AVAILABLE UNIT MUST BE

7 RENTED TO MIDDLE-INCOME TENANT IF

8 INCOME RISES ABOVE 140 PERCENT OF IN9 COME LIMIT.—If the income of the occu10 pants of the unit increases above 140 per11 cent of the income limitation applicable 

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

13 to apply to such unit if any residential 

14 rental unit in the building (of a size com15 parable to, or smaller than, such unit) is 

16 occupied by a new resident whose income 

17 exceeds such income limitation. 

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

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

20 provided in this paragraph, a building shall be 

21 treated as a qualified middle-income building 

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

23 part) meets the requirements of paragraph (1) 

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

25 credit period for such building. 


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1 ‘‘(B) BUILDINGS WHICH RELY ON LATER

2 BUILDINGS FOR QUALIFICATION.— 

3 ‘‘(i) IN GENERAL.—In determining 

4 whether a building (hereinafter in this sub5 paragraph referred to as the ‘prior build6 ing’) is a qualified middle-income building, 

7 the taxpayer may take into account 1 or 

8 more additional buildings placed in service 

9 during the 12-month period described in 

10 subparagraph (A) with respect to the prior 

11 building only if the taxpayer elects to apply 

12 clause (ii) with respect to each additional 

13 building taken into account. 

14 ‘‘(ii) TREATMENT OF ELECTED

15 BUILDINGS.—In the case of a building 

16 which the taxpayer elects to take into ac17 count under clause (i), the period under 

18 subparagraph (A) for such building shall 

19 end at the close of the 12-month period ap20 plicable to the prior building. 

21 ‘‘(iii) DATE PRIOR BUILDING IS

22 TREATED AS PLACED IN SERVICE.—For 

23 purposes of determining the credit period 

24 for the prior building, the prior building 

25 shall be treated for purposes of this section 


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1 as placed in service on the most recent 

2 date any additional building elected by the 

3 taxpayer (with respect to such prior build4 ing) was placed in service. 

5 ‘‘(C) SPECIAL RULE.—A building— 

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

7 in service as part of a project, and 

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

9 placed in service during the 12-month pe10 riod described in subparagraph (A) with 

11 respect to a prior building which becomes 

12 a qualified middle-income building, 

13 shall in no event be treated as a qualified mid14 dle-income building unless the project is a 

15 qualified middle-income housing project (with16 out regard to such building) on the date such 

17 building is placed in service. 

18 ‘‘(D) PROJECTS WITH MORE THAN 1

19 BUILDING MUST BE IDENTIFIED.—For pur20 poses of this section, a project shall be treated 

21 as consisting of only 1 building unless, before 

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

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

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


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•S 3384 IS

1 project is identified in such form and manner 

2 as the Secretary may provide. 

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

4 Paragraphs (2) (other than subparagraph (A) there5 of), (3), and (7) of section 142(d), and section 

6 6652(j), shall apply for purposes of determining 

7 whether any project is a qualified middle-income 

8 housing project and whether any unit is a middle-in9 come unit; except that, in applying such provisions 

10 for such purposes— 

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

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

13 of this subsection, and 

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

15 means the limitation under paragraph (1) of 

16 this subsection. 

17 ‘‘(5) ELECTION TO TREAT BUILDING AFTER

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

19 purposes of this section, the taxpayer may elect to 

20 treat any building as not part of a qualified middle21 income housing project for any period beginning 

22 after the credit period for such building. 

23 ‘‘(6) SPECIAL RULE WHERE DE MINIMIS EQ24 UITY CONTRIBUTION.—Property shall not be treated 

25 as failing to be residential rental property for purVerDate Sep 11 2014 01:38 Sep 24, 2016 Jkt 059200 PO 00000 Frm 00029 Fmt 6652 Sfmt 6201 E:\BILLS\S3384.IS S3384

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1 poses of this section merely because the occupant of 

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

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

4 toward the purchase by such occupant of a residen5 tial unit in such project if— 

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

7 the occupant on the cessation of his occupancy 

8 of a unit in the project, and 

9 ‘‘(B) the purchase of the unit is not per10 mitted until after the close of the credit period 

11 with respect to the building in which the unit 

12 is located. 

13 Any amount paid to the lessor as described in the 

14 preceding sentence shall be included in gross rent 

15 under paragraph (2) for purposes of determining 

16 whether the unit is rent-restricted. 

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

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

19 treated as a project for purposes of this section shall 

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

21 the buildings are rent-restricted (within the meaning 

22 of paragraph (2)) residential rental units. 

23 ‘‘(8) WAIVER OF CERTAIN RECERTIFI24 CATIONS.—On application by the taxpayer, the Sec25 retary may waive any annual recertification of tenVerDate Sep 11 2014 01:38 Sep 24, 2016 Jkt 059200 PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 E:\BILLS\S3384.IS S3384

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•S 3384 IS

1 ant income for purposes of this subsection, if the en2 tire building is occupied by middle-income tenants. 

3 ‘‘(9) CLARIFICATION OF GENERAL PUBLIC USE

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

5 general public use requirement solely because of oc6 cupancy restrictions or preferences that favor ten7 ants— 

8 ‘‘(A) with special needs, 

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

10 under a Federal program or State program or 

11 policy that supports housing for such a speci12 fied group, or 

13 ‘‘(C) who are involved in artistic or literary 

14 activities. 

15 ‘‘(h) LIMITATION ON AGGREGATE CREDIT ALLOW16 ABLE WITH RESPECT TO PROJECTS LOCATED IN A

17 STATE.— 

18 ‘‘(1) CREDIT MAY NOT EXCEED CREDIT

19 AMOUNT ALLOCATED TO BUILDING.— 

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

21 credit determined under this section for any 

22 taxable year with respect to any building shall 

23 not exceed the housing credit dollar amount al24 located to such building under this subsection. 


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1 ‘‘(B) TIME FOR MAKING ALLOCATION.— 

2 Except in the case of an allocation which meets 

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

4 (E), or (F), an allocation shall be taken into ac5 count under subparagraph (A) only if it is 

6 made not later than the close of the calendar 

7 year in which the building is placed in service. 

8 ‘‘(C) EXCEPTION WHERE BINDING COM9 MITMENT.—An allocation meets the require10 ments of this subparagraph if there is a binding 

11 commitment (not later than the close of the cal12 endar year in which the building is placed in 

13 service) by the housing credit agency to allocate 

14 a specified housing credit dollar amount to such 

15 building beginning in a specified later taxable 

16 year. 

17 ‘‘(D) EXCEPTION WHERE INCREASE IN

18 QUALIFIED BASIS.— 

19 ‘‘(i) IN GENERAL.—An allocation 

20 meets the requirements of this subpara21 graph if such allocation is made not later 

22 than the close of the calendar year in 

23 which ends the taxable year to which it will 

24 1st apply but only to the extent the 


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•S 3384 IS

1 amount of such allocation does not exceed 

2 the limitation under clause (ii). 

3 ‘‘(ii) LIMITATION.—The limitation 

4 under this clause is the amount of credit 

5 allowable under this section (without re6 gard to this subsection) for a taxable year 

7 with respect to an increase in the qualified 

8 basis of the building equal to the excess 

9 of— 

10 ‘‘(I) the qualified basis of such 

11 building as of the close of the 1st tax12 able year to which such allocation will 

13 apply, over 

14 ‘‘(II) the qualified basis of such 

15 building as of the close of the 1st tax16 able year to which the most recent 

17 prior housing credit allocation with re18 spect to such building applied. 

19 ‘‘(iii) HOUSING CREDIT DOLLAR

20 AMOUNT REDUCED BY FULL ALLOCA21 TION.—Notwithstanding clause (i), the full 

22 amount of the allocation shall be taken 

23 into account under paragraph (2). 

24 ‘‘(E) EXCEPTION WHERE 10 PERCENT OF

25 COST INCURRED.— 


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•S 3384 IS

1 ‘‘(i) IN GENERAL.—An allocation 

2 meets the requirements of this subpara3 graph if such allocation is made with re4 spect to a qualified building which is 

5 placed in service not later than the close of 

6 the second calendar year following the cal7 endar year in which the allocation is made. 

8 ‘‘(ii) QUALIFIED BUILDING.—For pur9 poses of clause (i), the term ‘qualified 

10 building’ means any building which is part 

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

12 project (as of the date which is 1 year 

13 after the date that the allocation was 

14 made) is more than 10 percent of the tax15 payer’s reasonably expected basis in such 

16 project (as of the close of the second cal17 endar year referred to in clause (i)). Such 

18 term does not include any existing building 

19 unless a credit is allowable under sub20 section (e) for rehabilitation expenditures 

21 paid or incurred by the taxpayer with re22 spect to such building for a taxable year 

23 ending during the second calendar year re24 ferred to in clause (i) or the prior taxable 

25 year. 


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•S 3384 IS

1 ‘‘(F) ALLOCATION OF CREDIT ON A

2 PROJECT BASIS.— 

3 ‘‘(i) IN GENERAL.—In the case of a 

4 project which includes (or will include) 

5 more than 1 building, an allocation meets 

6 the requirements of this subparagraph if— 

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

8 project for a calendar year during the 

9 project period, 

10 ‘‘(II) the allocation only applies 

11 to buildings placed in service during 

12 or after the calendar year for which 

13 the allocation is made, and 

14 ‘‘(III) the portion of such alloca15 tion which is allocated to any building 

16 in such project is specified not later 

17 than the close of the calendar year in 

18 which the building is placed in service. 

19 ‘‘(ii) PROJECT PERIOD.—For pur20 poses of clause (i), the term ‘project pe21 riod’ means the period— 

22 ‘‘(I) beginning with the 1st cal23 endar year for which an allocation 

24 may be made for the 1st building 


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•S 3384 IS

1 placed in service as part of such 

2 project, and 

3 ‘‘(II) ending with the calendar 

4 year the last building is placed in 

5 service as part of such project. 

6 ‘‘(2) ALLOCATED CREDIT AMOUNT TO APPLY

7 TO ALL TAXABLE YEARS ENDING DURING OR AFTER

8 CREDIT ALLOCATION YEAR.—Any housing credit dol9 lar amount allocated to any building for any cal10 endar year— 

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

12 taxable years in the credit period ending during 

13 or after such calendar year, and 

14 ‘‘(B) shall reduce the aggregate housing 

15 credit dollar amount of the allocating agency 

16 only for such calendar year. 

17 ‘‘(3) HOUSING CREDIT DOLLAR AMOUNT FOR

18 AGENCIES.— 

19 ‘‘(A) IN GENERAL.—The aggregate hous20 ing credit dollar amount which a housing credit 

21 agency may allocate for any calendar year is 

22 the portion of the State housing credit ceiling 

23 allocated under this paragraph for such cal24 endar year to such agency. 


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•S 3384 IS

1 ‘‘(B) STATE CEILING INITIALLY ALLO2 CATED TO STATE HOUSING CREDIT AGEN3 CIES.—Except as provided in subparagraphs 

4 (D) and (E), the State housing credit ceiling 

5 for each calendar year shall be allocated to the 

6 housing credit agency of such State. If there is 

7 more than 1 housing credit agency of a State, 

8 all such agencies shall be treated as a single 

9 agency. 

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

11 The State housing credit ceiling applicable to 

12 any State for any calendar year shall be an 

13 amount equal to the sum of— 

14 ‘‘(i) the greater of— 

15 ‘‘(I) $1.00 multiplied by the 

16 State population, or 

17 ‘‘(II) $1,140,000, plus 

18 ‘‘(ii) the amount of State housing 

19 credit ceiling returned in the calendar year. 

20 For purposes of clause (ii), the amount of State 

21 housing credit ceiling returned in the calendar 

22 year equals the housing credit dollar amount 

23 previously allocated within the State to any 

24 project which fails to meet the 10 percent test 

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


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•S 3384 IS

1 close of the calendar year in which the alloca2 tion was made or which does not become a 

3 qualified middle-income housing project within 

4 the period required by this section or the terms 

5 of the allocation or to any project with respect 

6 to which an allocation is cancelled by mutual 

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

9 ‘‘(D) SPECIAL RULE FOR STATES WITH

10 CONSTITUTIONAL HOME RULE CITIES.—For 

11 purposes of this subsection— 

12 ‘‘(i) IN GENERAL.—The aggregate 

13 housing credit dollar amount for any con14 stitutional home rule city for any calendar 

15 year shall be an amount which bears the 

16 same ratio to the State housing credit ceil17 ing for such calendar year as— 

18 ‘‘(I) the population of such city, 

19 bears to 

20 ‘‘(II) the population of the entire 

21 State. 

22 ‘‘(ii) COORDINATION WITH OTHER AL23 LOCATIONS.—In the case of any State 

24 which contains 1 or more constitutional 

25 home rule cities, for purposes of applying 


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•S 3384 IS

1 this paragraph with respect to housing 

2 credit agencies in such State other than 

3 constitutional home rule cities, the State 

4 housing credit ceiling for any calendar year 

5 shall be reduced by the aggregate housing 

6 credit dollar amounts determined for such 

7 year for all constitutional home rule cities 

8 in such State. 

9 ‘‘(iii) CONSTITUTIONAL HOME RULE

10 CITY.—For purposes of this paragraph, the 

11 term ‘constitutional home rule city’ has the 

12 meaning given such term by section 

13 146(d)(3)(C). 

14 ‘‘(E) STATE MAY PROVIDE FOR DIF15 FERENT ALLOCATION.—Rules similar to the 

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

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

18 paragraph. 

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

20 paragraph, population shall be determined in 

21 accordance with section 146(j). 

22 ‘‘(G) COST-OF-LIVING ADJUSTMENT.— 

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

24 calendar year after 2017, the $1,140,000 

25 and $1.00 amounts in subparagraph (C) 


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•S 3384 IS

1 shall each be increased by an amount equal 

2 to— 

3 ‘‘(I) such dollar amount, multi4 plied by 

5 ‘‘(II) the cost-of-living adjust6 ment determined under section 1(f)(3) 

7 for such calendar year by substituting 

8 ‘calendar year 2016’ for ‘calendar 

9 year 1992’ in subparagraph (B) there10 of. 

11 ‘‘(ii) ROUNDING.— 

12 ‘‘(I) In the case of the 

13 $1,140,000 amount, any increase 

14 under clause (i) which is not a mul15 tiple of $5,000 shall be rounded to the 

16 next lowest multiple of $5,000. 

17 ‘‘(II) In the case of the $1.00 

18 amount, any increase under clause (i) 

19 which is not a multiple of 5 cents 

20 shall be rounded to the next lowest 

21 multiple of 5 cents. 

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

23 FOR CERTAIN PROJECTS INVOLVING QUALIFIED

24 NONPROFIT ORGANIZATIONS.— 


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•S 3384 IS

1 ‘‘(A) IN GENERAL.—Not more than 90 

2 percent of the State housing credit ceiling for 

3 any State for any calendar year shall be allo4 cated to projects other than qualified middle-in5 come housing projects described in subpara6 graph (B). 

7 ‘‘(B) PROJECTS INVOLVING QUALIFIED

8 NONPROFIT ORGANIZATIONS.—For purposes of 

9 subparagraph (A), a qualified middle-income 

10 housing project is described in this subpara11 graph if a qualified nonprofit organization is to 

12 own an interest in the project (directly or 

13 through a partnership) and materially partici14 pate (within the meaning of section 469(h)) in 

15 the development and operation of the project 

16 throughout the credit period. 

17 ‘‘(C) QUALIFIED NONPROFIT ORGANIZA18 TION.—For purposes of this paragraph, the 

19 term ‘qualified nonprofit organization’ means 

20 any organization if— 

21 ‘‘(i) such organization is described in 

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

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

24 ‘‘(ii) such organization is determined 

25 by the State housing credit agency not to 


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•S 3384 IS

1 be affiliated with or controlled by a for2 profit organization; and 

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

4 such organization includes the fostering of 

5 middle-income housing. 

6 ‘‘(D) TREATMENT OF CERTAIN SUBSIDI7 ARIES.— 

8 ‘‘(i) IN GENERAL.—For purposes of 

9 this paragraph, a qualified nonprofit orga10 nization shall be treated as satisfying the 

11 ownership and material participation test 

12 of subparagraph (B) if any qualified cor13 poration in which such organization holds 

14 stock satisfies such test. 

15 ‘‘(ii) QUALIFIED CORPORATION.—For 

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

17 corporation’ means any corporation if 100 

18 percent of the stock of such corporation is 

19 held by 1 or more qualified nonprofit orga20 nizations at all times during the period 

21 such corporation is in existence. 

22 ‘‘(E) STATE MAY NOT OVERRIDE SET23 ASIDE.—Nothing in subparagraph (E) of para24 graph (3) shall be construed to permit a State 


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•S 3384 IS

1 not to comply with subparagraph (A) of this 

2 paragraph. 

3 ‘‘(5) BUILDINGS ELIGIBLE FOR CREDIT ONLY

4 IF MINIMUM LONG-TERM COMMITMENT TO MIDDLE5 INCOME HOUSING.— 

6 ‘‘(A) IN GENERAL.—No credit shall be al7 lowed by reason of this section with respect to 

8 any building for the taxable year unless an ex9 tended middle-income housing commitment is in 

10 effect as of the end of such taxable year. 

11 ‘‘(B) EXTENDED MIDDLE-INCOME HOUS12 ING COMMITMENT.—For purposes of this para13 graph, the term ‘extended middle-income hous14 ing commitment’ means any agreement between 

15 the taxpayer and the housing credit agency— 

16 ‘‘(i) which requires that the applicable 

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

18 for the building for each taxable year in 

19 the extended use period will not be less 

20 than the applicable fraction specified in 

21 such agreement and which prohibits the 

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

23 of subparagraph (E)(ii), 

24 ‘‘(ii) which allows individuals who 

25 meet the income limitation applicable to 


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•S 3384 IS

1 the building under subsection (g) (whether 

2 prospective, present, or former occupants 

3 of the building) the right to enforce in any 

4 State court the requirement and prohibi5 tions of clause (i), 

6 ‘‘(iii) which prohibits the disposition 

7 to any person of any portion of the build8 ing to which such agreement applies unless 

9 all of the building to which such agreement 

10 applies is disposed of to such person, 

11 ‘‘(iv) which prohibits the refusal to 

12 lease to a holder of a voucher or certificate 

13 of eligibility under section 8 of the United 

14 States Housing Act of 1937 because of the 

15 status of the prospective tenant as such a 

16 holder, 

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

18 of the taxpayer, and 

19 ‘‘(vi) which, with respect to the prop20 erty, is recorded pursuant to State law as 

21 a restrictive covenant. 

22 ‘‘(C) ALLOCATION OF CREDIT MAY NOT

23 EXCEED AMOUNT NECESSARY TO SUPPORT

24 COMMITMENT.—The housing credit dollar 

25 amount allocated to any building may not exVerDate Sep 11 2014 01:38 Sep 24, 2016 Jkt 059200 PO 00000 Frm 00044 Fmt 6652 Sfmt 6201 E:\BILLS\S3384.IS S3384

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•S 3384 IS

1 ceed the amount necessary to support the appli2 cable fraction specified in the extended middle3 income housing commitment for such building, 

4 including any increase in such fraction pursu5 ant to the application of subsection (f)(3) if 

6 such increase is reflected in an amended mid7 dle-income housing commitment. 

8 ‘‘(D) EXTENDED USE PERIOD.—For pur9 poses of this paragraph, the term ‘extended use 

10 period’ means the period— 

11 ‘‘(i) beginning on the 1st day in credit 

12 period on which such building is part of a 

13 qualified middle-income housing project, 

14 and 

15 ‘‘(ii) ending on the later of— 

16 ‘‘(I) the date specified by such 

17 agency in such agreement, or 

18 ‘‘(II) the date which is 15 years 

19 after the close of the credit period. 

20 ‘‘(E) EXCEPTIONS IF FORECLOSURE OR IF

21 NO BUYER WILLING TO MAINTAIN MIDDLE-IN22 COME STATUS.— 

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

24 period for any building shall terminate— 


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•S 3384 IS

1 ‘‘(I) on the date the building is 

2 acquired by foreclosure (or instrument 

3 in lieu of foreclosure) unless the Sec4 retary determines that such acquisi5 tion is part of an arrangement with 

6 the taxpayer a purpose of which is to 

7 terminate such period, or 

8 ‘‘(II) on the last day of the pe9 riod specified in subparagraph (I) if 

10 the housing credit agency is unable to 

11 present during such period a qualified 

12 contract for the acquisition of the 

13 middle-income portion of the building 

14 by any person who will continue to op15 erate such portion as a qualified mid16 dle-income building. 

17 Subclause (II) shall not apply to the extent 

18 more stringent requirements are provided 

19 in the agreement or in State law. 

20 ‘‘(ii) EVICTION, ETC. OF EXISTING

21 MIDDLE-INCOME TENANTS NOT PER22 MITTED.—The termination of an extended 

23 use period under clause (i) shall not be 

24 construed to permit before the close of the 

25 3-year period following such termination— 


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•S 3384 IS

1 ‘‘(I) the eviction or the termi2 nation of tenancy (other than for good 

3 cause) of an existing tenant of any 

4 middle-income unit, or 

5 ‘‘(II) any increase in the gross 

6 rent with respect to such unit not oth7 erwise permitted under this section. 

8 ‘‘(F) QUALIFIED CONTRACT.—For pur9 poses of subparagraph (E), the term ‘qualified 

10 contract’ means a bona fide contract to acquire 

11 (within a reasonable period after the contract is 

12 entered into) the nonmiddle-income portion of 

13 the building for fair market value and the mid14 dle-income portion of the building for an 

15 amount not less than the applicable fraction 

16 (specified in the extended middle-income hous17 ing commitment) of— 

18 ‘‘(i) the sum of— 

19 ‘‘(I) the outstanding indebtedness 

20 secured by, or with respect to, the 

21 building, 

22 ‘‘(II) the adjusted investor equity 

23 in the building, plus 


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•S 3384 IS

1 ‘‘(III) other capital contributions 

2 not reflected in the amounts described 

3 in subclause (I) or (II), reduced by 

4 ‘‘(ii) cash distributions from (or avail5 able for distribution from) the project. 

6 The Secretary shall prescribe such regulations 

7 as may be necessary or appropriate to carry out 

8 this paragraph, including regulations to prevent 

9 the manipulation of the amount determined 

10 under the preceding sentence. 

11 ‘‘(G) ADJUSTED INVESTOR EQUITY.— 

12 ‘‘(i) IN GENERAL.—For purposes of 

13 subparagraph (F), the term ‘adjusted in14 vestor equity’ means, with respect to any 

15 calendar year, the aggregate amount of 

16 cash taxpayers invested with respect to the 

17 project increased by the amount equal to— 

18 ‘‘(I) such amount, multiplied by 

19 ‘‘(II) the cost-of-living adjust20 ment for such calendar year, deter21 mined under section 1(f)(3) by sub22 stituting the base calendar year for 

23 ‘calendar year 1987’. 

24 An amount shall be taken into account as 

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•S 3384 IS

1 tent there was an obligation to invest such 

2 amount as of the beginning of the credit 

3 period and to the extent such amount is 

4 reflected in the adjusted basis of the 

5 project. 

6 ‘‘(ii) COST-OF-LIVING INCREASES IN

7 EXCESS OF 5 PERCENT NOT TAKEN INTO

8 ACCOUNT.—Under regulations prescribed 

9 by the Secretary, if the CPI for any cal10 endar year (as defined in section 1(f)(4)) 

11 exceeds the CPI for the preceding calendar 

12 year by more than 5 percent, the CPI for 

13 the base calendar year shall be increased 

14 such that such excess shall never be taken 

15 into account under clause (i). 

16 ‘‘(iii) BASE CALENDAR YEAR.—For 

17 purposes of this subparagraph, the term 

18 ‘base calendar year’ means the calendar 

19 year with or within which the 1st taxable 

20 year of the credit period ends. 

21 ‘‘(H) MIDDLE-INCOME PORTION.—For 

22 purposes of this paragraph, the middle-income 

23 portion of a building is the portion of such 

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•S 3384 IS

1 fied in the extended middle-income housing 

2 commitment for the building. 

3 ‘‘(I) PERIOD FOR FINDING BUYER.—The 

4 period referred to in this subparagraph is the 

5 1-year period beginning on the date (after the 

6 14th year of the credit period) the taxpayer 

7 submits a written request to the housing credit 

8 agency to find a person to acquire the tax9 payer’s interest in the middle-income portion of 

10 the building. 

11 ‘‘(J) EFFECT OF NONCOMPLIANCE.—If, 

12 during a taxable year, there is a determination 

13 that an extended middle-income housing agree14 ment was not in effect as of the beginning of 

15 such year, such determination shall not apply to 

16 any period before such year and subparagraph 

17 (A) shall be applied without regard to such de18 termination if the failure is corrected within 1 

19 year from the date of the determination. 

20 ‘‘(K) PROJECTS WHICH CONSIST OF MORE

21 THAN 1 BUILDING.—The application of this 

22 paragraph to projects which consist of more 

23 than 1 building shall be made under regulations 

24 prescribed by the Secretary. 

25 ‘‘(6) SPECIAL RULES.— 


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1 ‘‘(A) BUILDING MUST BE LOCATED WITH2 IN JURISDICTION OF CREDIT AGENCY.—A hous3 ing credit agency may allocate its aggregate 

4 housing credit dollar amount only to buildings 

5 located in the jurisdiction of the governmental 

6 unit of which such agency is a part. 

7 ‘‘(B) AGENCY ALLOCATIONS IN EXCESS OF

8 LIMIT.—If the aggregate housing credit dollar 

9 amounts allocated by a housing credit agency 

10 for any calendar year exceed the portion of the 

11 State housing credit ceiling allocated to such 

12 agency for such calendar year, the housing 

13 credit dollar amounts so allocated shall be re14 duced (to the extent of such excess) for build15 ings in the reverse of the order in which the al16 locations of such amounts were made. 

17 ‘‘(C) CREDIT REDUCED IF ALLOCATED

18 CREDIT DOLLAR AMOUNT IS LESS THAN CREDIT

19 WHICH WOULD BE ALLOWABLE WITHOUT RE20 GARD TO PLACED IN SERVICE CONVENTION, 

21 ETC.— 

22 ‘‘(i) IN GENERAL.—The amount of 

23 the credit determined under this section 

24 with respect to any building shall not ex25 ceed the clause (ii) percentage of the 


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1 amount of the credit which would (but for 

2 this subparagraph) be determined under 

3 this section with respect to such building. 

4 ‘‘(ii) DETERMINATION OF PERCENT5 AGE.—For purposes of clause (i), the 

6 clause (ii) percentage with respect to any 

7 building is the percentage which— 

8 ‘‘(I) the housing credit dollar 

9 amount allocated to such building 

10 bears to 

11 ‘‘(II) the credit amount deter12 mined in accordance with clause (iii). 

13 ‘‘(iii) DETERMINATION OF CREDIT

14 AMOUNT.—The credit amount determined 

15 in accordance with this clause is the 

16 amount of the credit which would (but for 

17 this subparagraph) be determined under 

18 this section with respect to the building 

19 if— 

20 ‘‘(I) this section were applied 

21 without regard to paragraphs (2)(A) 

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

23 ‘‘(II) subsection (f)(3)(A) were 

24 applied without regard to ‘the percentage equal to 2 25 ⁄3 of’. 


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1 ‘‘(D) HOUSING CREDIT AGENCY TO SPECI2 FY APPLICABLE PERCENTAGE AND MAXIMUM

3 QUALIFIED BASIS.—In allocating a housing 

4 credit dollar amount to any building, the hous5 ing credit agency shall specify the applicable 

6 percentage and the maximum qualified basis 

7 which may be taken into account under this 

8 section with respect to such building. The appli9 cable percentage and maximum qualified basis 

10 so specified shall not exceed the applicable per11 centage and qualified basis determined under 

12 this section without regard to this subsection. 

13 ‘‘(7) OTHER DEFINITIONS.—For purposes of 

14 this subsection— 

15 ‘‘(A) HOUSING CREDIT AGENCY.—The 

16 term ‘housing credit agency’ means any agency 

17 authorized to carry out this subsection. 

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

19 The term ‘State’ includes a possession of the 

20 United States. 

21 ‘‘(i) DEFINITIONS AND SPECIAL RULES.—For pur22 poses of this section— 

23 ‘‘(1) MIDDLE-INCOME UNIT.— 

24 ‘‘(A) IN GENERAL.—The term ‘middle-in25 come unit’ means any unit in a building if— 


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1 ‘‘(i) such unit is rent-restricted (as de2 fined in subsection (g)(2)), and 

3 ‘‘(ii) the individuals occupying such 

4 unit meet the income limitation applicable 

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

6 which such building is a part. 

7 ‘‘(B) EXCEPTIONS.— 

8 ‘‘(i) IN GENERAL.—A unit shall not 

9 be treated as a middle-income unit unless 

10 the unit is suitable for occupancy and used 

11 other than on a transient basis. 

12 ‘‘(ii) SUITABILITY FOR OCCUPANCY.— 

13 For purposes of clause (i), the suitability 

14 of a unit for occupancy shall be determined 

15 under regulations prescribed by the Sec16 retary taking into account local health, 

17 safety, and building codes. 

18 ‘‘(iii) SINGLE-ROOM OCCUPANCY

19 UNITS.—For purposes of clause (i), a sin20 gle-room occupancy unit shall not be treat21 ed as used on a transient basis merely be22 cause it is rented on a month-by-month 

23 basis. 

24 ‘‘(C) SPECIAL RULE FOR BUILDINGS HAV25 ING 4 OR FEWER UNITS.—In the case of any 


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1 building which has 4 or fewer residential rental 

2 units, no unit in such building shall be treated 

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

4 building are owned by— 

5 ‘‘(i) any individual who occupies a res6 idential unit in such building, or 

7 ‘‘(ii) any person who is related (as de8 fined in subsection (d)(2)(D)(ii)) to such 

9 individual. 

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

11 ‘‘(i) IN GENERAL.—A unit occupied 

12 solely by individuals who— 

13 ‘‘(I) have not attained age 24, 

14 and 

15 ‘‘(II) are enrolled in a full-time 

16 course of study at an institution of 

17 higher education (as defined in section 

18 3304(f)), 

19 shall not be treated as a middle-income 

20 unit. 

21 ‘‘(ii) EXCEPTIONS.—Clause (i) shall 

22 not apply to a unit occupied by an indi23 vidual who— 

24 ‘‘(I) is married, 


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1 ‘‘(II) is a person with disabilities 

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

3 the United States Housing Act of 

4 1937), 

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

6 section 101(2) of title 38, United 

7 States Code), 

8 ‘‘(IV) has one or more qualifying 

9 children (as defined in section 

10 152(c)), or 

11 ‘‘(V) meets the income limitation 

12 applicable under subsection (g)(1) to 

13 the project of which the building is a 

14 part and is, or was immediately prior 

15 to attaining the age of majority— 

16 ‘‘(aa) an emancipated minor 

17 or in legal guardianship as deter18 mined by a court of competent 

19 jurisdiction in the individual’s 

20 State of legal residence, 

21 ‘‘(bb) under the care and 

22 placement responsibility of the 

23 State agency responsible for ad24 ministering a plan under part B 


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1 or part E of title IV of the Social 

2 Security Act, or 

3 ‘‘(cc) was an unaccompanied 

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

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

8 homeless child or youth (within 

9 the meaning of section 725(2) of 

10 such Act (42 U.S.C. 

11 11434a(2))). 

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

14 WHERE DEVELOPMENT PLAN.— 

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

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

19 State or local government or a qualified 

20 nonprofit organization. 

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

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


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1 ‘‘(iii) CERTAIN UNRENTED UNITS

2 TREATED AS OWNER-OCCUPIED.—In the 

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

5 days or more shall be treated as occupied 

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

7 day it is not rented. 

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

9 means a building the original use of which begins 

10 with the taxpayer. 

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

12 building’ means any building which is not a new 

13 building. 

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

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

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

19 trust allocable to each. 

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

21 PROPERTY.— 

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

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


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

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

5 property or a partnership interest relating to 

6 the property after the close of the credit period 

7 for a price which is not less than the minimum 

8 purchase price determined under subparagraph 

9 (B). 

10 ‘‘(B) MINIMUM PURCHASE PRICE.—For 

11 purposes of subparagraph (A), the minimum 

12 purchase price under this subparagraph is an 

13 amount equal to the sum of— 

14 ‘‘(i) the principal amount of out15 standing indebtedness secured by the 

16 building (other than indebtedness incurred 

17 within the 5-year period ending on the date 

18 of the sale to the tenants), and 

19 ‘‘(ii) all Federal, State, and local 

20 taxes attributable to such sale. 

21 Except in the case of Federal income taxes, 

22 there shall not be taken into account under 

23 clause (ii) any additional tax attributable to the 

24 application of clause (ii). In the case of a pur25 chase of a partnership interest, the minimum 


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1 purchase price is an amount equal to such in2 terest’s ratable share of the amount determined 

3 under the first sentence of this subparagraph. 

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

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

6 for residential rental property located in a rural area 

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

8 1949), any income limitation measured by reference 

9 to area median gross income shall be measured by 

10 reference to the greater of area median gross income 

11 or national non-metropolitan median income. 

12 ‘‘(7) DETERMINATION OF WHETHER BUILDING

13 IS FEDERALLY SUBSIDIZED.— 

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

15 provided in this paragraph, for purposes of sub16 section (g)(1), a project shall be treated as Fed17 erally subsidized for any taxable year if, at any 

18 time during such taxable year or any prior tax19 able year, there is or was outstanding any obli20 gation the interest on which is exempt from tax 

21 under section 103 the proceeds of which are or 

22 were used (directly or indirectly) with respect to 

23 such project or the operation thereof. 

24 ‘‘(B) SPECIAL RULE FOR SUBSIDIZED CON25 STRUCTION FINANCING.—Subparagraph (A) 


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1 shall not apply to any tax-exempt obligation 

2 used to provide construction financing for any 

3 building if— 

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

5 identified the building for which the pro6 ceeds of such obligation would be used, 

7 and 

8 ‘‘(ii) such obligation is redeemed be9 fore such building is placed in service. 

10 ‘‘(8) COORDINATION WITH LOW-INCOME HOUS11 ING CREDIT.—No credit shall be allowed under this 

12 section with respect to any building for which a 

13 credit is allowable under section 42 unless the tax14 payer makes an election under this paragraph. Such 

15 election shall designate the buildings to which this 

16 section applies and, once made, shall be irrevocable. 

17 ‘‘(j) APPLICATION OF AT-RISK RULES.—For pur18 poses of this section— 

19 ‘‘(1) IN GENERAL.—Except as otherwise pro20 vided in this subsection, rules similar to the rules of 

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

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

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

24 qualified basis of any building in the same manner 


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•S 3384 IS

1 as such sections apply in determining the credit base 

2 of property. 

3 ‘‘(2) SPECIAL RULES FOR DETERMINING QUALI4 FIED PERSON.—For purposes of paragraph (1)— 

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

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

7 respect to any financing borrowed from a quali8 fied nonprofit organization, the determination 

9 of whether such financing is qualified commer10 cial financing with respect to any qualified mid11 dle-income building shall be made without re12 gard to whether such organization— 

13 ‘‘(i) is actively and regularly engaged 

14 in the business of lending money, or 

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

16 49(a)(1)(D)(iv)(II). 

17 ‘‘(B) FINANCING SECURED BY PROP18 ERTY.—The requirements of this subparagraph 

19 are met with respect to any financing if such fi20 nancing is secured by the qualified middle-in21 come building, except that this subparagraph 

22 shall not apply in the case of a federally as23 sisted building described in subsection (d)(5)(B) 

24 if— 


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1 ‘‘(i) a security interest in such build2 ing is not permitted by a Federal agency 

3 holding or insuring the mortgage secured 

4 by such building, and 

5 ‘‘(ii) the proceeds from the financing 

6 (if any) are applied to acquire or improve 

7 such building.. 

8 ‘‘(C) PORTION OF BUILDING ATTRIB9 UTABLE TO FINANCING.—The requirements of 

10 this subparagraph are met with respect to any 

11 financing for any taxable year in the credit pe12 riod if, as of the close of such taxable year, not 

13 more than 60 percent of the eligible basis of the 

14 qualified middle-income building is attributable 

15 to such financing (reduced by the principal and 

16 interest of any governmental financing which is 

17 part of a wrap-around mortgage involving such 

18 financing). 

19 ‘‘(D) REPAYMENT OF PRINCIPAL AND IN20 TEREST.—The requirements of this subpara21 graph are met with respect to any financing if 

22 such financing is fully repaid on or before the 

23 earliest of— 

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

25 matures, 


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•S 3384 IS

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

2 the credit period with respect to the quali3 fied middle-income building, or 

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

5 sale of the building to which such financ6 ing relates. 

7 In the case of a qualified nonprofit organization 

8 which is not described in section 

9 49(a)(1)(D)(iv)(II) with respect to a building, 

10 clause (ii) of this subparagraph shall be applied 

11 as if the date described therein were the 90th 

12 day after the earlier of the date the building 

13 ceases to be a qualified middle-income building 

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

15 a credit period with respect thereto. 

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

17 rate of interest on any financing described in para18 graph (2)(A) is less than the rate which is 1 per19 centage point below the applicable Federal rate as of 

20 the time such financing is incurred, then the quali21 fied basis (to which such financing relates) of the 

22 qualified middle-income building shall be the present 

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

24 discount rate such applicable Federal rate. For pur25 poses of the preceding sentence, the rate of interest 


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1 on any financing shall be determined by treating in2 terest to the extent of government subsidies as not 

3 payable. 

4 ‘‘(4) FAILURE TO FULLY REPAY.— 

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

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

7 then the taxpayer’s tax under this chapter for 

8 the taxable year in which such failure occurs 

9 shall be increased by an amount equal to the 

10 applicable portion of the credit under this sec11 tion with respect to such building, increased by 

12 an amount of interest for the period— 

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

14 the filing of the return of tax imposed by 

15 chapter 1 for the 1st taxable year for 

16 which such credit was allowable, and 

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

18 taxable year in which such failure occurs, 

19 determined by using the underpayment rate and 

20 method under section 6621. 

21 ‘‘(B) APPLICABLE PORTION.—For pur22 poses of subparagraph (A), the term ‘applicable 

23 portion’ means the aggregate decrease in the 

24 credits allowed to a taxpayer under section 38 

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1 sulted if the eligible basis of the building were 

2 reduced by the amount of financing which does 

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

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

5 similar to the rules of subparagraphs (A) and 

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

7 of this subsection. 

8 ‘‘(k) CERTIFICATIONS AND OTHER REPORTS TO SEC9 RETARY.— 

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

11 YEAR OF CREDIT PERIOD.—Following the close of 

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

13 to any qualified middle-income building, the tax14 payer shall certify to the Secretary (at such time 

15 and in such form and in such manner as the Sec16 retary prescribes)— 

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

18 in which such building was placed in service, 

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

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

21 of the credit period, 

22 ‘‘(C) the maximum applicable percentage 

23 and qualified basis permitted to be taken into 

24 account by the appropriate housing credit agen25 cy under subsection (h), and 


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1 ‘‘(D) such other information as the Sec2 retary may require. 

3 In the case of a failure to make the certification re4 quired by the preceding sentence on the date pre5 scribed therefor, unless it is shown that such failure 

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

7 no credit shall be allowable by reason of subsection 

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

9 year ending before such certification is made. 

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

11 The Secretary may require taxpayers to submit an 

12 information return (at such time and in such form 

13 and manner as the Secretary prescribes) for each 

14 taxable year setting forth— 

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

16 year of each qualified middle-income building of 

17 the taxpayer, 

18 ‘‘(B) the information described in para19 graph (1)(C) for the taxable year, and 

20 ‘‘(C) such other information as the Sec21 retary may require. 

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

23 failure to submit the return required by the Sec24 retary under the preceding sentence on the date pre25 scribed therefor. 


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1 ‘‘(3) ANNUAL REPORTS FROM HOUSING CREDIT

2 AGENCIES.—Each agency which allocates any hous3 ing credit amount to any building for any calendar 

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

5 in such manner as the Secretary shall prescribe) an 

6 annual report specifying— 

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

8 allocated to each building for such year, 

9 ‘‘(B) sufficient information to identify each 

10 such building and the taxpayer with respect 

11 thereto, and 

12 ‘‘(C) such other information as the Sec13 retary may require. 

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

15 failure to submit the report required by the pre16 ceding sentence on the date prescribed therefor. 

17 ‘‘(l) RESPONSIBILITIES OF HOUSING CREDIT AGEN18 CIES.— 

19 ‘‘(1) PLANS FOR ALLOCATION OF CREDIT

20 AMONG PROJECTS.— 

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

22 other provision of this section, the housing cred23 it dollar amount with respect to any building 

24 shall be zero unless— 


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1 ‘‘(i) such amount was allocated pursu2 ant to a qualified allocation plan of the 

3 housing credit agency which is approved by 

4 the governmental unit (in accordance with 

5 rules similar to the rules of section 

6 42(m)(1)) of which such agency is a part, 

7 ‘‘(ii) such agency notifies the chief ex8 ecutive officer (or the equivalent) of the 

9 local jurisdiction within which the building 

10 is located of such project and provides 

11 such individual a reasonable opportunity to 

12 comment on the project, 

13 ‘‘(iii) a comprehensive market study 

14 of the housing needs of middle-income in15 dividuals in the area to be served by the 

16 project is conducted before the credit allo17 cation is made and at the developer’s ex18 pense by a disinterested party who is ap19 proved by such agency, and 

20 ‘‘(iv) a written explanation is available 

21 to the general public for any allocation of 

22 a housing credit dollar amount which is 

23 not made in accordance with established 

24 priorities and selection criteria of the hous25 ing credit agency. 


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

2 purposes of this paragraph, the term ‘qualified 

3 allocation plan’ means any plan— 

4 ‘‘(i) which sets forth selection criteria 

5 to be used to determine housing priorities 

6 of the housing credit agency which are ap7 propriate to local conditions, 

8 ‘‘(ii) which also gives preference in al9 locating housing credit dollar amounts 

10 among selected projects to— 

11 ‘‘(I) projects obligated to serve 

12 qualified tenants for the longest peri13 ods, 

14 ‘‘(II) projects in areas where 

15 rents are unaffordable to median in16 come households, 

17 ‘‘(III) projects which target hous18 ing to tenants at a range of incomes 

19 between 60 and 100 percent of area 

20 median gross income, taking local in21 come and market conditions into ac22 count, and 

23 ‘‘(IV) projects located near tran24 sit hubs, and 


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•S 3384 IS

1 ‘‘(iii) which provides a procedure that 

2 the agency (or an agent or other private 

3 contractor of such agency) will follow in 

4 monitoring for noncompliance with the 

5 provisions of this section and in notifying 

6 the Internal Revenue Service of such non7 compliance which such agency becomes 

8 aware of and in monitoring for noncompli9 ance with habitability standards through 

10 regular site visits. 

11 ‘‘(C) CERTAIN SELECTION CRITERIA MUST

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

13 qualified allocation plan must include— 

14 ‘‘(i) project location, 

15 ‘‘(ii) housing needs characteristics, 

16 ‘‘(iii) project characteristics, including 

17 whether the project includes the use of ex18 isting housing as part of a community revi19 talization plan, 

20 ‘‘(iv) sponsor characteristics, 

21 ‘‘(v) tenant populations with special 

22 housing needs, 

23 ‘‘(vi) tenant populations of individuals 

24 with children, 


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1 ‘‘(vii) projects intended for eventual 

2 tenant ownership, 

3 ‘‘(viii) the energy efficiency of the 

4 project, and 

5 ‘‘(ix) the historic nature of the 

6 project. 

7 ‘‘(D) CERTAIN SELECTION CRITERIA PRO8 HIBITED.—The selection criteria set forth in a 

9 qualified allocation plan shall not include a re10 quirement of local approval or local contribu11 tions, either as a threshold qualification re12 quirement or as part of a point system to be 

13 considered for allocations of housing credit dol14 lar amount. This subparagraph shall not apply 

15 to the notice and opportunity to comment re16 quirement for chief executive officers (or the 

17 equivalent) of local jurisdictions under subpara18 graph (A)(ii). 

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

20 EXCEED AMOUNT NECESSARY TO ASSURE PROJECT

21 FEASIBILITY.— 

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

23 dollar amount allocated to a project shall not 

24 exceed the amount the housing credit agency 

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1 bility of the project and its viability as a quali2 fied middle-income housing project throughout 

3 the credit period. 

4 ‘‘(B) AGENCY EVALUATION.—In making 

5 the determination under subparagraph (A), the 

6 housing credit agency shall consider— 

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

8 the total financing planned for the project, 

9 ‘‘(ii) any proceeds or receipts expected 

10 to be generated by reason of tax benefits, 

11 ‘‘(iii) the percentage of the housing 

12 credit dollar amount used for project costs 

13 other than the cost of intermediaries, and 

14 ‘‘(iv) the reasonableness of the devel15 opmental and operational costs of the 

16 project. 

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

18 the development of projects in hard-to-develop 

19 areas. Such a determination shall not be con20 strued to be a representation or warranty as to 

21 the feasibility or viability of the project. 

22 ‘‘(C) DETERMINATION MADE WHEN CRED23 IT AMOUNT APPLIED FOR AND WHEN BUILDING

24 PLACED IN SERVICE.— 


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1 ‘‘(i) IN GENERAL.—A determination 

2 under subparagraph (A) shall be made as 

3 of each of the following times: 

4 ‘‘(I) The application for the 

5 housing credit dollar amount. 

6 ‘‘(II) The allocation of the hous7 ing credit dollar amount. 

8 ‘‘(III) The date the building is 

9 placed in service. 

10 ‘‘(ii) CERTIFICATION AS TO AMOUNT

11 OF OTHER SUBSIDIES.—Prior to each de12 termination under clause (i), the taxpayer 

13 shall certify to the housing credit agency 

14 the full extent of all Federal, State, and 

15 local subsidies which apply (or which the 

16 taxpayer expects to apply) with respect to 

17 the building. 

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

19 such regulations as may be necessary or appropriate to 

20 carry out the purposes of this section, including regula21 tions— 

22 ‘‘(1) dealing with— 

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

24 building or only a portion of a building, 


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•S 3384 IS

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

2 in portions, 

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

4 to short taxable years, 

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

6 this section, and 

7 ‘‘(4) providing the opportunity for housing cred8 it agencies to correct administrative errors and omis9 sions with respect to allocations and record keeping 

10 within a reasonable period after their discovery, tak11 ing into account the availability of regulations and 

12 other administrative guidance from the Secretary.’’. 

13 (b) TREATMENT AS PART OF GENERAL BUSINESS

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

15 1986 is amended by striking ‘‘plus’’ at the end of para16 graph (35), by striking the period at the end of paragraph 

17 (36) and inserting ‘‘, plus’’, and by adding at the end the 

18 following new paragraph: 

19 ‘‘(37) the middle-income housing credit deter20 mined under section 42A(a).’’. 

21 (c) UNUSED ALLOCATIONS CARRIED OVER TO LOW22 INCOME HOUSING CREDIT.— 

23 (1) IN GENERAL.—Clause (i) of section 

24 42(h)(3)(C) of the Internal Revenue Code of 1986 

25 is amended— 


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1 (A) by striking ‘‘the unused’’ and inserting 

2 ‘‘the sum of— 

3 ‘‘(I) the unused’’, 

4 (B) by inserting ‘‘plus’’ after ‘‘calendar 

5 year,’’, and 

6 (C) by adding at the end the following new 

7 subclause: 

8 ‘‘(II) the unused middle-income 

9 State housing credit (if any) of such 

10 State for the preceding calendar 

11 year,’’. 

12 (2) UNUSED MIDDLE-INCOME STATE HOUSING

13 CREDIT.—Section 42(h)(3)(C) of such Code is 

14 amended by inserting ‘‘, and the unused middle-in15 come State housing credit for any calendar year is 

16 the excess (if any) of the amount described in sec17 tion 42A(h)(3)(C) for such State over the aggregate 

18 amount of middle-income housing credit dollar 

19 amount allocated by such State under section 42A 

20 fo such year’’ after ‘‘for such year’’. 

21 (3) UNUSED MIDDLE INCOME STATE HOUSING

22 CREDIT INCLUDED IN CARRYOVER ALLOCATION.— 

23 Section 42(h)(3)(D)(ii) of such Code is amended— 

24 (A) by inserting ‘‘the sum of’’ after ‘‘the 

25 excess (if any) of’’, and 


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1 (B) by inserting ‘‘plus the unused middle2 income State housing credit (as so defined)’’ 

3 after ‘‘as defined in subparagraph (C)(i))’’. 

4 (d) COORDINATION WITH LOW-INCOME HOUSING

5 CREDIT.— 

6 (1) IN GENERAL.—Section 42(i) of the Internal 

7 Revenue Code of 1986 is amended by adding at the 

8 end the following new paragraph: 

9 ‘‘(10) COORDINATION WITH MIDDLE-INCOME

10 HOUSING CREDIT.—No credit shall be allowed under 

11 this section with respect to any building for which 

12 a credit is allowable under section 42A unless the 

13 taxpayer makes an election under this paragraph. 

14 Such election shall designate the buildings to which 

15 this section applies and, once made, shall be irrev16 ocable.’’. 

17 (2) CONFORMING AMENDMENTS.— 

18 (A) Section 42(c)(2) of such Code is 

19 amended by adding at the end the following 

20 flush sentence: 

21 ‘‘Such term does not include any building if such 

22 building is designated as a building to which the 

23 middle-income housing tax credit applies in an elec24 tion under section 42A(i)(8).’’. 


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1 (B) Section 42(g)(1) of such Code is 

2 amended by adding at the end the following 

3 new sentence: ‘‘For purposes of the first sen4 tence of this paragraph, residential units in a 

5 building which is not a qualified middle-income 

6 building by reason of the second sentence of 

7 subsection (c)(2) shall not be taken into ac8 count.’’. 

9 (e) CONFORMING AMENDMENTS.— 

10 (1) Section 55(c)(1) of the Internal Revenue 

11 Code of 1986 is amended by inserting ‘‘42A(j),’’ be12 fore ‘‘45(e)(11)’’. 

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

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

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

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

17 redesignating paragraphs (8), (9), and (10) as para18 graphs (9), (10), and (11), respectively, and by in19 serting after paragraph (7) the following new para20 graph: 

21 ‘‘(8) the middle-income housing credit deter22 mined under section 42A,’’. 

23 (4) The table of sections for subpart D of part 

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


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1 amended by inserting after the item relating to sec2 tion 42 the following new item: 

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

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

4 this section shall apply to taxable years ending after the 

5 date of the enactment of this Act. 

Æ 


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