Neighborhood Homes Investment Act

Subjects: Taxation


<html><body><pre>[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 657 Introduced in Senate (IS)]

&lt;DOC&gt;






118th CONGRESS
  1st Session
                                 S. 657

 To amend the Internal Revenue Code of 1986 to establish a tax credit 
        for neighborhood revitalization, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 6, 2023

   Mr. Cardin (for himself, Mr. Young, Mr. Wyden, Mr. Moran, and Mr. 
Brown) 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 establish a tax credit 
        for neighborhood revitalization, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Neighborhood Homes Investment Act''.

SEC. 2. FINDINGS AND SENSE OF CONGRESS.

    (a) Findings.--Congress finds the following:
            (1) Experts have determined that it could take nearly a 
        decade to address the housing shortage in the United States, in 
        large part due to increasing housing prices and decreased 
        housing inventory.
            (2) The housing supply shortage disproportionately impacts 
        low-income and distressed communities.
            (3) Homeownership is a primary source of household wealth 
        and neighborhood stability. Many distressed communities have 
        low rates of homeownership and lack quality, affordable starter 
        homes.
            (4) Housing revitalization in distressed communities is 
        prevented by the value gap, the difference between the price to 
        rehabilitate a home and the sale value of the home.
            (5) The Neighborhood Homes Investment Act can address the 
        value gap to increase housing rehabilitation in distressed 
        communities.
            (6) The Neighborhood Homes Investment Act has the potential 
        to generate 500,000 homes over 10 years, $125,000,000,000 of 
        total development activity, over 800,000 jobs in construction 
        and construction-related industries, and over $35,000,000,000 
        in Federal, state, and local tax revenues.
    (b) Sense of Congress.--It is the sense of Congress that the 
neighborhood homes credit (as added under section 3 of this Act) should 
be an activity administered in a manner which--
            (1) is consistent with the Fair Housing Act of 1968 (42 
        U.S.C. 3601 et seq.);
            (2) empowers residents in eligible communities; and
            (3) revitalizes distressed neighborhoods.

SEC. 3. NEIGHBORHOOD HOMES CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 42 the following new section:

``SEC. 42A. NEIGHBORHOOD HOMES CREDIT.

    ``(a) Allowance of Credit.--For purposes of section 38, the 
neighborhood homes credit determined under this section for the taxable 
year is, with respect to each qualified residence sold by the taxpayer 
during such taxable year in an affordable sale, the lesser of--
            ``(1) an amount equal to--
                    ``(A) the excess (if any) of--
                            ``(i) the reasonable development costs paid 
                        or incurred by the taxpayer with respect to 
                        such qualified residence, over
                            ``(ii) the sale price of such qualified 
                        residence (reduced by any reasonable expenses 
                        paid or incurred by the taxpayer in connection 
                        with such sale), or
                    ``(B) if the neighborhood homes credit agency 
                determines it is necessary to ensure financial 
                feasibility, an amount not to exceed 120 percent of the 
                amount under subparagraph (A),
            ``(2) 35 percent of the eligible development costs paid or 
        incurred by the taxpayer with respect to such qualified 
        residence, or
            ``(3) 28 percent of the national median sale price for new 
        homes (as determined pursuant to the most recent census data 
        available as of the date on which the neighborhood homes credit 
        agency makes an allocation for the qualified project).
    ``(b) Development Costs.--For purposes of this section--
            ``(1) Reasonable development costs.--
                    ``(A) In general.--The term `reasonable development 
                costs' means amounts paid or incurred for the 
                acquisition of buildings and land, construction, 
                substantial rehabilitation, demolition of structures, 
                or environmental remediation, to the extent that the 
                neighborhood homes credit agency determines that such 
                amounts meet the standards specified pursuant to 
                subsection (f)(1)(C) (as of the date on which 
                construction or substantial rehabilitation is 
                substantially complete, as determined by such agency) 
                and are necessary to ensure the financial feasibility 
                of such qualified residence.
                    ``(B) Considerations in making determination.--In 
                making the determination under subparagraph (A), the 
                neighborhood homes credit agency shall consider--
                            ``(i) the sources and uses of funds and the 
                        total financing,
                            ``(ii) any proceeds or receipts generated 
                        or expected to be generated by reason of tax 
                        benefits, and
                            ``(iii) the reasonableness of the 
                        developmental costs and fees.
            ``(2) Eligible development costs.--The term `eligible 
        development costs' means the amount which would be reasonable 
        development costs if the amounts taken into account as paid or 
        incurred for the acquisition of buildings and land did not 
        exceed 75 percent of such costs determined without regard to 
        any amount paid or incurred for the acquisition of buildings 
        and land.
            ``(3) Substantial rehabilitation.--The term `substantial 
        rehabilitation' means amounts paid or incurred for 
        rehabilitation of a qualified residence if such amounts exceed 
        the greater of--
                    ``(A) $20,000, or
                    ``(B) 20 percent of the amounts paid or incurred by 
                the taxpayer for the acquisition of buildings and land 
                with respect to such qualified residence.
            ``(4) Construction and rehabilitation only after allocation 
        taken into account.--
                    ``(A) In general.--The terms `reasonable 
                development costs' and `eligible development costs' 
                shall not include any amount paid or incurred before 
                the date on which an allocation is made to the taxpayer 
                under subsection (e) with respect to the qualified 
                project of which the qualified residence is part unless 
                such amount is paid or incurred for the acquisition of 
                buildings or land.
                    ``(B) Land and building acquisition costs.--Amounts 
                paid or incurred for the acquisition of buildings or 
                land shall be included under paragraph (A) only if paid 
                or incurred not more than 3 years before the date on 
                which the allocation referred to in subparagraph (A) is 
                made. If the taxpayer acquired any building or land 
                from an entity (or any related party to such entity) 
                that holds an ownership interest in the taxpayer, then 
                such entity must also have acquired such property 
                within such 3-year period, and the acquisition cost 
                included under subparagraph (A) with respect to the 
                taxpayer shall not exceed the amount such entity paid 
                or incurred to acquire such property.
    ``(c) Qualified Residence.--For purposes of this section--
            ``(1) In general.--The term `qualified residence' means a 
        residence that--
                    ``(A) is real property affixed on a permanent 
                foundation,
                    ``(B) is--
                            ``(i) a house which is comprised of 4 or 
                        fewer residential units,
                            ``(ii) a condominium unit, or
                            ``(iii) a house or an apartment owned by a 
                        cooperative housing corporation (as defined in 
                        section 216(b)),
                    ``(C) is part of a qualified project with respect 
                to which the neighborhood homes credit agency has made 
                an allocation under subsection (e), and
                    ``(D) is located in a qualified census tract 
                (determined as of the date of such allocation).
            ``(2) Qualified census tract.--
                    ``(A) In general.--The term `qualified census 
                tract' means a census tract--
                            ``(i) which--
                                    ``(I) has a median family income 
                                which does not exceed 80 percent of the 
                                median family income for the applicable 
                                area,
                                    ``(II) has a poverty rate that is 
                                not less than 130 percent of the 
                                poverty rate of the applicable area, 
                                and
                                    ``(III) has a median value for 
                                owner-occupied homes that does not 
                                exceed the median value for owner-
                                occupied homes in the applicable area,
                            ``(ii) which--
                                    ``(I) is located in a city which 
                                has a population of not less than 
                                50,000 and such city has a poverty rate 
                                that is not less than 150 percent of 
                                the poverty rate of the applicable 
                                area,
                                    ``(II) has a median family income 
                                which does not exceed the median family 
                                income for the applicable area, and
                                    ``(III) has a median value for 
                                owner-occupied homes that does not 
                                exceed 80 percent of the median value 
                                for owner-occupied homes in the 
                                applicable area,
                            ``(iii) which--
                                    ``(I) is located in a 
                                nonmetropolitan county,
                                    ``(II) has a median family income 
                                which does not exceed the median family 
                                income for the applicable area, and
                                    ``(III) has been designated by a 
                                neighborhood homes credit agency under 
                                this clause, or
                            ``(iv) which is not otherwise a qualified 
                        census tract and is located in a disaster area 
                        (as defined in section 7508A(d)(3)), but only 
                        with respect to credits allocated in any period 
                        during which the President of the United States 
                        has determined that such area warrants 
                        individual or individual and public assistance 
                        by the Federal Government under the Robert T. 
                        Stafford Disaster Relief and Emergency 
                        Assistance Act.
                    ``(B) Applicable area.--The term `applicable area' 
                means--
                            ``(i) in the case of a metropolitan census 
                        tract, the metropolitan area in which such 
                        census tract is located, and
                            ``(ii) in the case of a census tract other 
                        than a census tract described in clause (i), 
                        the State.
    ``(d) Affordable Sale.--For purposes of this section--
            ``(1) In general.--The term `affordable sale' means a sale 
        to a qualified homeowner of a qualified residence that the 
        neighborhood homes credit agency certifies as meeting the 
        standards promulgated under subsection (f)(1)(D) for a price 
        that does not exceed--
                    ``(A) in the case of any qualified residence not 
                described in subparagraph (B), (C), or (D), the amount 
                equal to the product of 4 multiplied by the median 
                family income for the applicable area (as determined 
                pursuant to the most recent census data available as of 
                the date of the contract for such sale),
                    ``(B) in the case of a house comprised of 2 
                residential units, 125 percent of the amount described 
                in subparagraph (A),
                    ``(C) in the case of a house comprised of 3 
                residential units, 150 percent of the amount described 
                in subparagraph (A), or
                    ``(D) in the case of a house comprised of 4 
                residential units, 175 percent of the amount described 
                in subparagraph (A).
            ``(2) Qualified homeowner.--The term `qualified homeowner' 
        means, with respect to a qualified residence, an individual--
                    ``(A) who owns and uses such qualified residence as 
                the principal residence of such individual, and
                    ``(B) whose family income (determined as of the 
                date that a binding contract for the affordable sale of 
                such residence is entered into) is 140 percent or less 
                of the median family income for the applicable area in 
                which the qualified residence is located.
    ``(e) Credit Ceiling and Allocations.--
            ``(1) Credit limited based on allocations to qualified 
        projects.--
                    ``(A) In general.--The credit allowed under 
                subsection (a) to any taxpayer for any taxable year 
                with respect to one or more qualified residences which 
                are part of the same qualified project shall not exceed 
                the excess (if any) of--
                            ``(i) the amount allocated by the 
                        neighborhood homes credit agency under this 
                        paragraph to such taxpayer with respect to such 
                        qualified project, over
                            ``(ii) the aggregate amount of credit 
                        allowed under subsection (a) to such taxpayer 
                        with respect to qualified residences which are 
                        a part of such qualified project for all prior 
                        taxable years.
                    ``(B) Deadline for completion.--No credit shall be 
                allowed under subsection (a) with respect to any 
                qualified residence unless the affordable sale of such 
                residence is during the 5-year period beginning on the 
                date of the allocation to the qualified project of 
                which such residence is a part (or, in the case of a 
                qualified residence to which subsection (i) applies, 
                the rehabilitation of such residence is completed 
                during such 5-year period).
            ``(2) Limitations on allocations to qualified projects.--
                    ``(A) Allocations limited by state neighborhood 
                homes credit ceiling.--The aggregate amount allocated 
                to taxpayers with respect to qualified projects by the 
                neighborhood homes credit agency of any State for any 
                calendar year shall not exceed the State neighborhood 
                homes credit amount of such State for such calendar 
                year.
                    ``(B) Set-aside for certain projects involving 
                qualified nonprofit organizations.--Rules similar to 
                the rules of section 42(h)(5) shall apply for purposes 
                of this section.
            ``(3) Determination of state neighborhood homes credit 
        ceiling.--
                    ``(A) In general.--The State neighborhood homes 
                credit amount for a State for a calendar year is an 
                amount equal to the sum of--
                            ``(i) the greater of--
                                    ``(I) the product of $7, multiplied 
                                by the State population (determined in 
                                accordance with section 146(j)), or
                                    ``(II) $9,000,000, and
                            ``(ii) any amount previously allocated to 
                        any taxpayer with respect to any qualified 
                        project by the neighborhood homes credit agency 
                        of such State which can no longer be allocated 
                        to any qualified residence because the 5-year 
                        period described in paragraph (1)(B) expires 
                        during calendar year.
                    ``(B) 3-year carryforward of unused limitation.--
                The State neighborhood homes credit amount for a State 
                for a calendar year shall be increased by the excess 
                (if any) of the State neighborhood homes credit amount 
                for such State for the preceding calendar year over the 
                aggregate amount allocated by the neighborhood homes 
                credit agency of such State during such preceding 
                calendar year. Any amount carried forward under the 
                preceding sentence shall not be carried past the third 
                calendar year after the calendar year in which such 
                credit amount originally arose, determined on a first-
                in, first-out basis.
    ``(f) Responsibilities of Neighborhood Homes Credit Agencies.--
            ``(1) In general.--Notwithstanding subsection (e), the 
        State neighborhood homes credit dollar amount shall be zero for 
        a calendar year unless the neighborhood homes credit agency of 
        the State--
                    ``(A) allocates such amount pursuant to a qualified 
                allocation plan of the neighborhood homes credit 
                agency,
                    ``(B) allocates not more than 20 percent of amounts 
                allocated in the previous year (or for allocations made 
                in 2023, not more than 20 percent of the neighborhood 
                homes credit ceiling for such year) to projects with 
                respect to qualified residences which--
                            ``(i) are located in census tracts 
                        described in subsection (c)(2)(A)(iii), 
                        (c)(2)(A)(iv), (i)(5), or
                            ``(ii) are not located in a qualified 
                        census tract but meet the requirements of 
                        subsection (i)(8),
                    ``(C) promulgates standards with respect to 
                reasonable qualified development costs and fees,
                    ``(D) promulgates standards with respect to 
                construction quality,
                    ``(E) in the case of any neighborhood homes credit 
                agency which makes an allocation to a qualified project 
                which includes any qualified residence to which 
                subsection (i) applies, promulgates standards with 
                respect to protecting the owners of such residences, 
                including the capacity of such owners to pay 
                rehabilitation costs not covered by the credit provided 
                by this section and providing for the disclosure to 
                such owners of their rights and responsibilities with 
                respect to the rehabilitation of such residences,
                    ``(F) submits to the Secretary (at such time and in 
                such manner as the Secretary may prescribe) an annual 
                report specifying--
                            ``(i) the amount of the neighborhood homes 
                        credits allocated to each qualified project for 
                        the previous year,
                            ``(ii) with respect to each qualified 
                        residence completed in the preceding calendar 
                        year--
                                    ``(I) the census tract in which 
                                such qualified residence is located,
                                    ``(II) with respect to the 
                                qualified project that includes such 
                                qualified residence, the year in which 
                                such project received an allocation 
                                under this section,
                                    ``(III) whether such qualified 
                                residence was new, substantially 
                                rehabilitated and sold to a qualified 
                                homeowner, or substantially 
                                rehabilitated pursuant to subsection 
                                (i),
                                    ``(IV) the eligible development 
                                costs of such qualified residence,
                                    ``(V) the amount of the 
                                neighborhood homes credit with respect 
                                to such qualified residence,
                                    ``(VI) the sales price of such 
                                qualified residence, if applicable, and
                                    ``(VII) the family income of the 
                                qualified homeowner (expressed as a 
                                percentage of the applicable area 
                                median family income for the location 
                                of the qualified residence), and
                            ``(iii) such other information as the 
                        Secretary may require, and
                    ``(G) makes available to the general public a 
                written explanation for any allocation of a 
                neighborhood homes credit dollar amount which is not 
                made in accordance with established priorities and 
                selection criteria of the neighborhood homes credit 
                agency.
        Subparagraph (B) shall be applied by substituting `40 percent' 
        for `20 percent' each place it appears in the case of any State 
        in which at least 45 percent of the State population resides 
        outside metropolitan statistical areas (within the meaning of 
        section 143(k)(2)(B)) and less than 20 percent of the census 
        tracts located in the State are described in subsection 
        (c)(2)(A)(i).
            ``(2) Qualified allocation plan.--For purposes of this 
        subsection, the term `qualified allocation plan' means any plan 
        which--
                    ``(A) sets forth the selection criteria to be used 
                to prioritize qualified projects for allocations of 
                State neighborhood homes credit dollar amounts, 
                including--
                            ``(i) the need for new or substantially 
                        rehabilitated owner-occupied homes in the area 
                        addressed by the project,
                            ``(ii) the expected contribution of the 
                        project to neighborhood stability and 
                        revitalization, including the impact on 
                        neighborhood residents,
                            ``(iii) the capability and prior 
                        performance of the project sponsor, and
                            ``(iv) the likelihood the project will 
                        result in long-term homeownership,
                    ``(B) has been made available for public comment, 
                and
                    ``(C) provides a procedure that the neighborhood 
                homes credit agency (or any agent or contractor of such 
                agency) shall follow for purposes of--
                            ``(i) identifying noncompliance with any 
                        provisions of this section, and
                            ``(ii) notifying the Internal Revenue 
                        Service of any such noncompliance of which the 
                        agency becomes aware.
    ``(g) Repayment.--
            ``(1) In general.--
                    ``(A) Sold during 5-year period.--If a qualified 
                residence is sold during the 5-year period beginning 
                immediately after the affordable sale of such qualified 
                residence referred to in subsection (a), the seller 
                shall transfer an amount equal to the repayment amount 
                to the relevant neighborhood homes credit agency.
                    ``(B) Use of repayments.--A neighborhood homes 
                credit agency shall use any amount received pursuant to 
                subparagraph (A) only for purposes of qualified 
                projects.
            ``(2) Repayment amount.--For purposes of paragraph (1)(A)--
                    ``(A) In general.--The repayment amount is an 
                amount equal to the applicable percentage of the gain 
                from the sale to which the repayment relates.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage is 50 
                percent, reduced by 10 percentage points for each year 
                of the 5-year period referred to in paragraph (1)(A) 
                which ends before the date of such sale.
            ``(3) Lien for repayment amount.--A neighborhood homes 
        credit agency receiving an allocation under this section shall 
        place a lien on each qualified residence that is built or 
        rehabilitated as part of a qualified project for an amount such 
        agency deems necessary to ensure potential repayment pursuant 
        to paragraph (1)(A).
            ``(4) Waiver.--
                    ``(A) In general.--The neighborhood homes credit 
                agency may waive the repayment required under paragraph 
                (1)(A) if the agency determines that making a repayment 
                would constitute a hardship to the seller.
                    ``(B) Hardship.--For purposes of subparagraph (A), 
                with respect to the seller, a hardship may include--
                            ``(i) divorce,
                            ``(ii) disability,
                            ``(iii) illness, or
                            ``(iv) any other hardship identified by the 
                        neighborhood homes credit agency for purposes 
                        of this paragraph.
    ``(h) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Neighborhood homes credit agency.--The term 
        `neighborhood homes credit agency' means the agency designated 
        by the governor of a State as the neighborhood homes credit 
        agency of the State.
            ``(2) Qualified project.--The term `qualified project' 
        means a project that a neighborhood homes credit agency 
        certifies will build or substantially rehabilitate one or more 
        qualified residences.
            ``(3) Determinations of family income.--Rules similar to 
        the rules of section 143(f)(2) shall apply for purposes of this 
        section.
            ``(4) Possessions treated as states.--The term `State' 
        includes the District of Columbia and the possessions of the 
        United States.
            ``(5) Special rules related to condominiums and cooperative 
        housing corporations.--
                    ``(A) Determination of development costs.--In the 
                case of a qualified residence described in clause (ii) 
                or (iii) of subsection (c)(1)(A), the reasonable 
                development costs and eligible development costs of 
                such qualified residence shall be an amount equal to 
                such costs, respectively, of the entire condominium or 
                cooperative housing property in which such qualified 
                residence is located, multiplied by a fraction--
                            ``(i) the numerator of which is the total 
                        floor space of such qualified residence, and
                            ``(ii) the denominator of which is the 
                        total floor space of all residences within such 
                        property.
                    ``(B) Tenant-stockholders of cooperative housing 
                corporations treated as owners.--In the case of a 
                cooperative housing corporation (as such term is 
                defined in section 216(b)), a tenant-stockholder shall 
                be treated as owning the house or apartment which such 
                person is entitled to occupy.
            ``(6) Related party sales not treated as affordable 
        sales.--
                    ``(A) In general.--A sale between related persons 
                shall not be treated as an affordable sale.
                    ``(B) Related persons.--For purposes of this 
                paragraph, a person (in this subparagraph referred to 
                as the `related person') is related to any person if 
                the related person bears a relationship to such person 
                specified in section 267(b) or 707(b)(1), or the 
                related person and such person are engaged in trades or 
                businesses under common control (within the meaning of 
                subsections (a) and (b) of section 52). For purposes of 
                the preceding sentence, in applying section 267(b) or 
                707(b)(1), `10 percent' shall be substituted for `50 
                percent'.
            ``(7) Inflation adjustment.--
                    ``(A) In general.--In the case of a calendar year 
                after 2023, the dollar amounts in subsections 
                (b)(3)(A), (e)(3)(A)(i)(I), (e)(3)(A)(i)(II), and 
                (i)(2)(C) shall each be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for such 
                        calendar year by substituting `calendar year 
                        2022' for `calendar year 2016' in subparagraph 
                        (A)(ii) thereof.
                    ``(B) Rounding.--
                            ``(i) In the case of the dollar amounts in 
                        subsections (b)(3)(A) and (i)(2)(C), any 
                        increase under paragraph (1) which is not a 
                        multiple of $1,000 shall be rounded to the 
                        nearest multiple of $1,000.
                            ``(ii) In the case of the dollar amount in 
                        subsection (e)(3)(A)(i)(I), any increase under 
                        paragraph (1) which is not a multiple of $0.01 
                        shall be rounded to the nearest multiple of 
                        $0.01.
                            ``(iii) In the case of the dollar amount in 
                        subsection (e)(3)(A)(i)(II), any increase under 
                        paragraph (1) which is not a multiple of 
                        $100,000 shall be rounded to the nearest 
                        multiple of $100,000.
            ``(8) Report.--
                    ``(A) In general.--The Secretary shall annually 
                issue a report, to be made available to the public, 
                which contains the information submitted pursuant to 
                subsection (f)(1)(F).
                    ``(B) De-identification.--The Secretary shall 
                ensure that any information made public pursuant to 
                subparagraph (A) excludes any information that would 
                allow for the identification of qualified homeowners.
            ``(9) List of qualified census tracts.--The Secretary of 
        Housing and Urban Development shall, for each year, make 
        publicly available a list of qualified census tracts under--
                    ``(A) on a combined basis, clauses (i) and (ii) of 
                subsection (c)(2)(A),
                    ``(B) clause (iii) of such subsection, and
                    ``(C) subsection (i)(5)(A).
            ``(10) Denial of deductions if converted to rental 
        housing.--If, during the 5-year period beginning immediately 
        after the affordable sale of a qualified residence referred to 
        in subsection (a), an individual who owns a qualified residence 
        (whether or not such individual was the purchaser in such 
        affordable sale) fails to use such qualified residence as such 
        individual's principal residence for any period of time, no 
        deduction shall be allowed for expenses paid or incurred by 
        such individual with respect to renting, during such period of 
        time, such qualified residence.
    ``(i) Application of Credit With Respect to Owner-Occupied 
Rehabilitations.--
            ``(1) In general.--In the case of a qualified 
        rehabilitation by the taxpayer of any qualified residence which 
        is owned (as of the date that the written binding contract 
        referred to in paragraph (3) is entered into) by a specified 
        homeowner, the rules of paragraphs (2) through (7) shall apply.
            ``(2) Alternative credit determination.--In the case of any 
        qualified residence described in paragraph (1), the 
        neighborhood homes credit determined under subsection (a) with 
        respect to such residence shall (in lieu of any credit 
        otherwise determined under subsection (a) with respect to such 
        residence) be allowed in the taxable year during which the 
        qualified rehabilitation is completed (as determined by the 
        neighborhood homes credit agency) and shall be equal to the 
        least of--
                    ``(A) the excess (if any) of--
                            ``(i) the amounts paid or incurred by the 
                        taxpayer for the qualified rehabilitation of 
                        the qualified residence to the extent that such 
                        amounts are certified by the neighborhood homes 
                        credit agency (at the time of the completion of 
                        such rehabilitation) as meeting the standards 
                        specified pursuant to subsection (f)(1)(C), 
                        over
                            ``(ii) any amounts paid to such taxpayer 
                        for such rehabilitation,
                    ``(B) 50 percent of the amounts described in 
                subparagraph (A)(i), or
                    ``(C) $50,000.
            ``(3) Qualified rehabilitation.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `qualified rehabilitation' means a 
                rehabilitation or reconstruction performed pursuant to 
                a written binding contract between the taxpayer and the 
                specified homeowner if the amount paid or incurred by 
                the taxpayer in the performance of such rehabilitation 
                or reconstruction exceeds the dollar amount in effect 
                under subsection (b)(3)(A).
                    ``(B) Application of limitation to expenses paid or 
                incurred after allocation.--A rule similar to the rule 
                of section (b)(4) shall apply for purposes of this 
                subsection.
            ``(4) Specified homeowner.--For purposes of this 
        subsection, the term `qualified homeowner' means, with respect 
        to a qualified residence, an individual--
                    ``(A) who owns and uses such qualified residence as 
                the principal residence of such individual as of the 
                date that the written binding contract referred to in 
                paragraph (3) is entered into, and
                    ``(B) whose family income (determined as of such 
                date) does not exceed the median family income for the 
                applicable area (with respect to the census tract in 
                which the qualified residence is located).
            ``(5) Additional census tracts in which owner-occupied 
        residences may be located.--In the case of any qualified 
        residence described in paragraph (1), the term `qualified 
        census tract' includes any census tract which--
                    ``(A) meets the requirements of subsection 
                (c)(2)(A)(i) without regard to subclause (III) thereof, 
                and
                    ``(B) is designated by the neighborhood homes 
                credit agency for purposes of this paragraph.
            ``(6) Modification of repayment requirement.--In the case 
        of any qualified residence described in paragraph (1), 
        subsection (g) shall be applied by beginning the 5-year period 
        otherwise described therein on the date on which the qualified 
        homeowner acquired such residence.
            ``(7) Related parties.--Paragraph (1) shall not apply if 
        the taxpayer is the owner of the qualified residence described 
        in paragraph (1) or is related (within the meaning of 
        subsection (h)(6)(B)) to such owner.
            ``(8) Pyrrhotite remediation.--The requirement of 
        subsection (c)(1)(C) shall not apply to a qualified 
        rehabilitation under this subsection of a qualified residence 
        that is documented by an engineer's report and core testing to 
        have a foundation that is adversely impacted by pyrrhotite or 
        other iron sulfide minerals.
    ``(j) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations that prevent avoidance of the rules, and 
abuse of the purposes, of this section.''.
    (b) Credit Allowed as Part of General Business Credit.--Section 
38(b) of the Internal Revenue Code of 1986 is amended by striking 
``plus'' at the end of paragraph (37), by striking the period at the 
end of paragraph (38) and inserting ``, plus'', and by adding at the 
end the following new paragraph:
            ``(39) the neighborhood homes credit determined under 
        section 42A(a).''.
    (c) Credit Allowed Against Alternative Minimum Tax.--Section 
38(c)(4)(B) of the Internal Revenue Code of 1986 is amended by 
redesignating clauses (iv) through (xii) as clauses (v) through (xiii), 
respectively, and by inserting after clause (iii) the following new 
clause:
                            ``(iv) the credit determined under section 
                        42A,''.
    (d) Basis Adjustments.--
            (1) Energy efficient home improvement credit.--Section 
        25C(g) of the Internal Revenue Code of 1986 is amended by 
        adding after the first sentence the following new sentence: 
        ``This subsection shall not apply for purposes of determining 
        the eligible development costs or adjusted basis of any 
        building under section 42A.''.
            (2) Residential clean energy credit.--Section 25D(f) of 
        such Code is amended by adding after the first sentence the 
        following new sentence: ``This subsection shall not apply for 
        purposes of determining the eligible development costs or 
        adjusted basis of any building under section 42A.''.
            (3) New energy efficient home credit.--Section 45L(e) of 
        such Code is amended by inserting ``or for purposes of 
        determining the eligible development costs or adjusted basis of 
        any building under section 42A'' after ``section 42''.
    (e) Exclusion From Gross Income.--Part III of subchapter B of 
chapter 1 of the Internal Revenue Code of 1986 is amended by inserting 
before section 140 the following new section:

``SEC. 139J. STATE ENERGY SUBSIDIES FOR QUALIFIED RESIDENCES.

    ``(a) Exclusion From Gross Income.--Gross income shall not include 
the value of any subsidy provided to a taxpayer (whether directly or 
indirectly) by any State energy office (as defined in section 124(a) of 
the Energy Policy Act of 2005 (42 U.S.C. 15821(a))) for purposes of any 
energy improvements made to a qualified residence (as defined in 
section 42A(c)(1)).''.
    (f) Conforming Amendments.--
            (1) Subsections (i)(3)(C), (i)(6)(B)(i), and (k)(1) of 
        section 469 of the Internal Revenue Code of 1986 are each 
        amended by inserting ``or 42A'' after ``section 42''.
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 42 the following new item:

``Sec. 42A. Neighborhood homes credit.''.
            (3) The table of sections for part III of subchapter B of 
        chapter 1 of such Code is amended by inserting before the item 
        relating to section 140 the following new item:

``Sec. 139J. State energy subsidies for qualified residences.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2023.
                                 &lt;all&gt;
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