BEAM Act of 2016

To amend the Internal Revenue Code of 1986 to provide a credit for early payment of principal on certain home mortgages and to reduce the amount which may be treated as acquisition indebtedness for purposes of determining the home mortgage interest deduction. 1. Short title This Act may be cited as the Boosting Equity for the American Middle Class Act of 2016 BEAM Act of 2016 2. Refundable credit for early principal payments on certain home mortgages (a) In general Subpart C of part IV of subchapter A of chapter 1 36C. Early principal payments on certain home mortgages (a) In general In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to 50 percent of the excess home mortgage principal payments made by the taxpayer during such taxable year. (b) Annual dollar limitation The credit allowed under subsection (a) with respect to any taxpayer for any taxable year shall not exceed $500. (c) Lifetime limitation No credit shall be allowed under subsection (a) to any taxpayer for any taxable year if credit was allowed under subsection (a) to such taxpayer for any 10 preceding taxable years. (d) Limitation based on modified adjusted gross income (1) In general The amount which would (but for this paragraph and after the application of subsection (b)) be allowable as a credit under subsection (a) shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which would be so allowable as— (A) the excess of— (i) the taxpayer’s modified adjusted gross income for the taxable year, over (ii) $125,000 (twice such amount in the case of a joint return), bears to (B) $10,000 (twice such amount in the case of a joint return). (2) Modified adjusted gross income The term modified adjusted gross income (e) Excess home mortgage principal payments For purposes of this subsection— (1) In general The term excess home mortgage principal payments (A) the aggregate amount of principal paid by the taxpayer with respect to such indebtedness during such taxable year, over (B) the aggregate amount of principal which would have been paid by the taxpayer with respect to such indebtedness during such taxable year if the taxpayer had timely made each required payment under the terms of the indebtedness during such taxable year (and no other payments). (2) Qualified home mortgage indebtedness (A) In general The term qualified home mortgage indebtedness (i) the residence with respect to such acquisition indebtedness is the primary residence (within the meaning of section 121) of the taxpayer, and (ii) such indebtedness constitutes a traditional mortgage. (B) Traditional mortgage For purposes of this paragraph, the term traditional mortgage (i) the term of which is not less than 15 years and not more than 30 years, and (ii) the required payments under which are each the same amount and made in equal intervals during the term of the indebtedness (or if any payment is required at a different interval, the amount of such payment is adjusted in the same proportion as the change in interval). (f) Rules related to joint returns (1) No credit for married individuals filing separately In the case of a married individual, no credit shall be allowed under this section for any taxable year unless such individual files a joint return with such individual’s spouse for such taxable year. (2) Application of lifetime limitation with respect to joint returns If the credit under subsection (a) is allowed with respect to a joint return for any taxable year, such credit shall be treated for purposes of applying subsection (c) as allowed to both spouses for such taxable year. For purposes of applying subsection (c) with respect to a joint return for any taxable year, the taxpayer shall be treated as having been allowed the credit under subsection (a) for 10 or more preceding taxable years only if both spouses have been so allowed such credits. . (b) Reporting of excess home mortgage principal payments Section 6050H(b)(2) of such Code is amended by striking and (D) the amount of excess home mortgage principal payments (as defined in section 36C(e)) received with respect to such mortgage during the calendar year, and . (c) Conforming amendments (1) Section 6211(b)(4)(A) of such Code is amended by inserting 36C, 36B, (2) Section 1324(b)(2) of title 31, United States Code, is amended by inserting 36C, 36B, (3) The table of sections for subpart C of part IV of subchapter A of chapter 1 Sec. 36C. Early principal payments on certain home mortgages. . (d) Effective date The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

Summary: Boosting Equity for the American Middle Class Act of 2016 or the BEAM Act of 2016 This bill amends the Internal Revenue Code to allow a refundable tax credit equal to 50% of the excess home mortgage principal payments made by a taxpayer during the year. The credit is limited to $500 per year and to taxpayers who have not received the credit for any of the 10 preceding years. The bill reduces the amount of the credit for taxpayers with modified adjusted gross incomes above specified levels. An "excess home mortgage principal payment" is the excess of: (1) the amount of principal paid by the taxpayer with respect to a mortgage during the year, over (2) the amount of principal the taxpayer would have paid by making each required payment on a timely basis under the terms of the mortgage (and no other payments). The mortgage must: (1) be for a primary residence, (2) for a term between 15 and 30 years, and (3) require payments that are each the same amount and made in equal intervals during the term of the mortgage (or if any payment is required at a different interval, the amount of the payment is adjusted in the same proportion as the change in interval). Married individuals must file a joint tax return to claim the credit. Persons engaged in a trade or business (e.g., lenders, mortgage companies, or banks) who are required to report mortgage interest payments from individuals of $600 or more must also report the amount of excess home mortgage principal payments received during the year.