(h) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2006. 
SEC. 4. REFUNDABLE CREDIT FOR CONTRIBUTIONS TO 
MORTGAGE DOWN PAYMENT ACCOUNTS. 
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by redesignating section 36 as section 
37 and by inserting after section 35 the following new sec-
tion: 
‘‘SEC. 36. CONTRIBUTIONS TO MORTGAGE DOWN PAYMENT 
ACCOUNTS. 
‘‘(a) GENERAL RULE.—In the case of an individual, 
there shall be allowed as a credit against the tax imposed 
by this chapter an amount equal to the amount contrib-
uted by the individual to any mortgage down payment ac-
count of the taxpayer. 
‘‘(b) LIMITATION BASED ON MODIFIED ADJUSTED 
GROSS INCOME.— 
‘‘(1) IN GENERAL.—The amount allowed as a 
credit under subsection (a) with respect to the tax-
payer for any taxable year shall not exceed the appli-
cable dollar limit. 
‘‘(2) APPLICABLE DOLLAR LIMIT.— 
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‘‘(A) IN GENERAL.—In the case of a tax-
payer whose modified adjusted gross income for 
the taxable year does not exceed 100 percent of 
area median income, the applicable dollar limit 
shall be equal to $2,500 ($5,000 in the case of 
a joint return). 
‘‘(B) NO CREDIT FOR INCOMES IN EXCESS 
OF LIMIT.—In the case of any other taxpayer, 
the applicable dollar limit shall be zero. 
‘‘(3) AREA MEDIAN INCOME.—For purposes of 
paragraph (2)— 
‘‘(A) IN GENERAL.—The area median in-
come means the area median income deter-
mined by the Secretary of Housing and Urban 
Development for the calendar year ending with 
or within the taxable year of the taxpayer. 
‘‘(B) TAXPAYER RESIDING IN MORE THAN 
1 AREA FOR THE TAXABLE YEAR.—In the case 
that the taxpayer had more than one principal 
residence during the taxable year, the area me-
dian income means the sum of the residing per-
centage of the area median income for each 
area in which the taxpayer had a principal resi-
dence during the taxable year. 
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‘‘(C) RESIDING
PERCENTAGE.—For pur-
poses of subparagraph (B), the term ‘residing 
percentage’ means the ratio of the number of 
days that the taxpayer had his principal resi-
dence in an area bears to 365. 
‘‘(4) MODIFIED
ADJUSTED
GROSS
INCOME.— 
For purposes of this subsection, the term ‘modified 
adjusted gross income’ means the adjusted gross in-
come of the taxpayer for the taxable year increased 
by any amount excluded from gross income under 
section 911, 931, or 933. 
‘‘(c) ONE-TIME FEDERAL MATCH.— 
‘‘(1) IN GENERAL.—In the case of a taxpayer 
for whom an election is in effect under this sub-
section for any taxable year, the amount allowed as 
a credit under subsection (a) shall be increased by 
$500. 
‘‘(2) COMPLETION OF HOME OWNERSHIP COUN-
SELING COURSE.—A individual may not make an 
election under this subsection unless the individual 
(and if married, such individual’s spouse) has com-
pleted the home ownership counseling under a pro-
gram that meets the requirements under section 
271(c)(2)(C) of the Cranston-Gonzalez National Af-
fordable Housing Act. 
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‘‘(3) ELECTION APPLIES ONLY TO 1 TAXABLE 
YEAR.—An election to have paragraph (1) apply 
with respect to any eligible individual may not be 
made for any taxable year if such an election is in 
effect with respect to such individual for any other 
prior taxable year. 
‘‘(4) 
TAXPAYER
MUST
NOT
HAVE
DEFI-
CIENCY.—Under regulations prescribed by the Sec-
retary, an election under this subsection shall not be 
effective for any taxable year for which the taxpayer 
has unpaid tax or a deficiency. 
‘‘(d) DEPOSIT OF CREDIT AMOUNTS IN MORTGAGE 
DOWN PAYMENT ACCOUNT.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of this title— 
‘‘(A) no amount shall be allowed as a cred-
it under this section unless the taxpayer des-
ignates a mortgage down payment account into 
which such credit can be contributed, and 
‘‘(B) the entire amount of the credit al-
lowed under this section shall be treated as an 
overpayment described in section 6401(b). 
‘‘(2) CREDIT DEPOSITED INTO ACCOUNT.—The 
Secretary shall deposit by electronic funds transfer 
into such designated mortgage down payment ac-
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count the amount treated as an overpayment under 
paragraph (1)(B). 
‘‘(3) JOINT RETURNS.—In the case of a pay-
ment under this subsection with respect to a joint 
return, half of such payment shall be treated as hav-
ing been made to each individual filing such return. 
‘‘(e) CREDIT NOT ALLOWED TO DEPENDENTS.—A 
credit shall not be allowed to an individual for a taxable 
year under subsection (a) if such individual is a dependent 
for whom a deduction is allowable under section 151 to 
another taxpayer for any taxable year beginning in the 
same calendar year in which such individual’s taxable year 
begins.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 72(t)(8)(C) of such Code is amend-
ed by inserting ‘‘or 36’’ before the period at the end. 
(2) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting be-
fore the period ‘‘, or from section 36 of such Code’’. 
(3) The table of sections for subpart C of part 
IV of chapter 1 of the Internal Revenue Code of 
1986 is amended by redesignating the item relating 
to section 36 as an item relating to section 37 and 
by inserting before the item relating to section 37 
the following new item: 
‘‘Sec. 36. Contributions to mortgage down payment accounts.’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to contributions made in taxable 
years beginning after December 31, 2006. 
SEC. 5. AMENDMENTS TO AMERICAN DREAM DOWNPAY-
MENT INITIATIVE. 
(a) HOME
OWNERSHIP
COUNSELING
REQUIRE-
MENT.—Section 271(c) of the Cranston-Gonzalez Na-
tional Affordable Housing Act (42 U.S.C. 12821(c)) is 
amended— 
(1) in paragraph (1), by adding at the end the 
following new subparagraph: 
‘‘(C) HOME
OWNERSHIP
COUNSELING.— 
Providing home ownership counseling that 
meets the requirements of paragraph (2)(C) for 
families who are provided downpayment assist-
ance under this section.’’. 
(2) in paragraph (2), by adding at the end the 
following new subparagraph: 
‘‘(C) HOME OWNERSHIP COUNSELING RE-
QUIREMENT.—Downpayment assistance under 
this section may not be provided under this sec-
tion on behalf of a family unless the family has 
completed a program of counseling with respect 
to the responsibilities and financial manage-
ment involved in home ownership that is ap-
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proved by the Secretary and includes counseling 
regarding strategies to save money, qualifying 
for a mortgage loan, methods to avoid preda-
tory lenders and foreclosure, and, where appro-
priate by region, any requirements and costs re-
garding obtaining flood or other disaster-spe-
cific insurance coverage.’’. 
(b) AMOUNT AND USE OF DOWNPAYMENT ASSIST-
ANCE.—Section 271(c) of the Cranston-Gonzalez National 
Affordable Housing Act (42 U.S.C. 12821(c)) is amend-
ed— 
(1) in paragraph (1)(A), by inserting after the 
period at the end the following: ‘‘Such assistance 
may be used to pay the principal obligation of a 
mortgage loan, taxes, insurance, service charges, ap-
praisal, and any other fees in connection with acqui-
sition of a principal residence.’’; and 
(2) in paragraph (2)(A)— 
(A) in clause (i), by striking ‘‘6 percent’’ 
and inserting ‘‘10 percent’’; and 
(B) in clause (ii), by striking ‘‘$10,000’’ 
and inserting ‘‘$15,000’’. 
(c) PRIORITY FOR CERTAIN POPULATIONS.—Section 
271(c)(2) of the Cranston-Gonzalez National Affordable 
Housing Act (42 U.S.C. 12821(c)(2)), as amended by the 
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preceding provisions of this section, is further amended 
by adding at the end the following new subparagraph: 
‘‘(D) AUTHORITY
FOR
JURISDICTION
TO 
PROVIDE
PRIORITY
FOR
CERTAIN
POPU-
LATIONS.—In 
providing 
assistance 
with 
amounts from a grant under this section, a par-
ticipating jurisdiction may, in the discretion of 
the jurisdiction, provide priority for such assist-
ance to certain categories of eligible low-income 
families, who may include elderly persons, mem-
bers of the Armed Forces, teachers, first re-
sponders, other service workers, persons dis-
placed by natural disasters or governmental ac-
tions, nurses or other health care providers, or 
any other categories of eligible low-income fami-
lies that the participating jurisdiction considers 
appropriate.’’. 
(d) DEFINITION OF FIRST-TIME HOMEBUYER.—Sec-
tion 271(a) of the Cranston-Gonzalez National Affordable 
Housing Act (42 U.S.C. 12821(a)) is amended— 
(1) by resdesignating paragraphs (2) through 
(4) as paragraphs (2) through (5), respectively; and 
(2) by inserting after paragraph (1) the fol-
lowing new paragraph: 
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‘‘(2) 
FIRST-TIME
HOMEBUYER.—The 
term 
‘first-time homebuyer’ has the meaning given such 
term in paragraph (14) of section 104, except that 
an individual may not be excluded from consider-
ation as a first-time homebuyer under such para-
graph on the basis that the individual— 
‘‘(A) owns or owned a home with, or re-
sided in a home owned by, a spouse, former 
spouse, or other person if such individual no 
longer resides in such home and was a victim 
of domestic abuse (as such term is defined in 
section 40002 of the Violence Against Women 
Act of 1994 (42 U.S.C. 13925)) from such 
spouse, former spouse, or other person; or 
‘‘(B) owns or owned, as a principal resi-
dence during the 3-year period referred to in 
such paragraph, a home from which such per-
son is displaced as a result of a government ac-
tion other than eviction from public housing as-
sisted under title I of the United States Hous-
ing Act of 1937 (42 U.S.C. 1437 et seq.).’’. 
(e) PERIOD OF AFFORDABILITY.—Paragraph (2) of 
section 271(f) of the Cranston-Gonzalez National Afford-
able Housing Act (42 U.S.C. 12821) is amended by insert-
ing before the period at the end the following: ‘‘, except 
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that any housing purchased with downpayment assistance 
under this section shall meet the affordability require-
ments under section 215(b) and the regulations issued 
under such section for a minimum period of 15 years, re-
gardless of the amount of such downpayment assistance 
provided’’. 
(f) REPORT.—Subsection (h) of section 271 of the 
Cranston-Gonzalez National Affordable Housing Act (42 
U.S.C. 12821) is amended— 
(1) by striking ‘‘June 30, 2006’’ and inserting 
‘‘June 30 of each year ’’; and 
(2) by adding after and below paragraph (2) 
the following: 
‘‘The report under this subsection shall include informa-
tion regarding the quality and quantity of housing pur-
chased using assistance made available under this section, 
the amount of assistance provided per family, the incomes 
of the families assisted, the amount of time that low-in-
come families assisted under this section continue to reside 
in housing purchased with such assistance, the quality of 
home ownership counseling provided in connection with 
such assistance, the types of priorities established by par-
ticipating jurisdictions pursuant to subsection (c)(2)(D), 
and the benefits to such jurisdictions resulting from estab-
lishing such priorities.’’. 
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(g) AUTHORIZATION
OF
APPROPRIATIONS.—Sub-
section (k) of section 271 of the Cranston-Gonzalez Na-
tional Affordable Housing Act (42 U.S.C. 12821(k)) is 
amended by striking ‘‘2007’’ and inserting the following: 
‘‘2006 and $200,000,000 for each of fiscal years 2007 
through 2014’’. 
SEC. 6. PRODUCTION OF AFFORDABLE HOME OWNERSHIP 
HOUSING. 
(a) PROGRAM AUTHORITY.—The Secretary of Hous-
ing and Urban Development shall carry out a program to 
make grants to units of general local government to pro-
vide financial assistance to developers for the production 
of housing for home ownership that meets the require-
ments of this section and is affordable to low- and mod-
erate-income families. 
(b) GRANT AND ASSISTANCE AMOUNTS.—The Sec-
retary shall establish limitations— 
(1) regarding the amount of a grant that may 
be made under this section to a unit of general local 
government; and 
(2) the portion of the total development costs of 
housing to be constructed using such grant amounts 
that may be funded with such grant amounts. 
(c) AFFORDABLE DWELLING UNITS.—Amounts from 
a grant under this Act may be used only for costs involved 
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