I 
112TH CONGRESS 
2D SESSION 
H. R. 6677 
To amend the Internal Revenue Code of 1986 to replace the mortgage 
interest deduction with a nonrefundable credit for indebtedness secured 
by a residence, to provide affordable housing to extremely low-income 
families, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
DECEMBER 18, 2012 
Mr. ELLISON (for himself and Mr. SCOTT of Virginia) introduced the following 
bill; which was referred to the Committee on Ways and Means, and in 
addition to the Committee on Financial Services, for a period to be subse-
quently determined by the Speaker, in each case for consideration of such 
provisions as fall within the jurisdiction of the committee concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to replace 
the mortgage interest deduction with a nonrefundable 
credit for indebtedness secured by a residence, to provide 
affordable housing to extremely low-income families, and 
for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Common Sense Hous-
ing Investment Act of 2012’’. 
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SEC. 2. CONGRESSIONAL FINDINGS. 
The Congress finds the following: 
(1) Two principal Federal housing goals are to 
increase the rate of home ownership and make rent-
al housing affordable for low-income families and in-
dividuals. 
(2) Much more progress has been achieved on 
the first goal than on the second goal. 
(3) The Federal Government devotes almost 
four times the amount of budgetary resources to 
supporting home ownership than it devotes to mak-
ing affordable rental housing available. 
(4) The burden of housing costs is more pro-
nounced among renters than among owners. 
(5) There is a shortage of nearly 7 million 
homes affordable to families in the bottom 20 per-
cent of income, meaning that there are only 30 af-
fordable units for every 100 families. 
(6) Only one in four families that qualify for 
rental housing assistance receives benefits. 
(7) Housing assistance waiting lists can be 10 
years long and in many communities are closed. 
(8) Public housing facilities in the United 
States have more than $26 billion in deferred main-
tenance after decades of neglect which results in a 
loss of 10,000 units each year. 
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(9) The low income housing tax credit success-
fully provides 100,000 units of affordable housing 
every year. 
(10) Every tax reform commission has rec-
ommended capping the mortgage interest deduction 
and converting it to a fairer and simpler credit. 
(11) More than 75 percent of the value of the 
mortgage interest deduction inures to the benefit of 
the top 20 percent of earners. 
(12) Fewer than half of tax filers with a home 
mortgage claim the mortgage interest deduction. 
(13) Only 9 percent of rural tax filers claim the 
mortgage interest deduction. 
(14) Ninety-six percent of homes sold between 
2000 and 2009 sold for less than $500,000. 
(15) A better approach that provides equitable 
benefits for families who buy homes, enables more 
low- and moderate-income homeowners to receive a 
benefit, and invests in affordable rental housing to 
assist those who used to be homeless or who have 
extremely or very low incomes is needed to strength-
en families and communities. 
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SEC. 3. REPLACEMENT OF MORTGAGE INTEREST DEDUC-
TION WITH MORTGAGE INTEREST CREDIT. 
(a) NONREFUNDABLE CREDIT.—Subpart A of part 
IV of subchapter A of chapter 1 of the Internal Revenue 
Code of 1986 (relating to nonrefundable personal credits) 
is amended by inserting after section 25D the following 
new section: 
‘‘SEC. 25E. INTEREST ON INDEBTEDNESS SECURED BY 
QUALIFIED RESIDENCE. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax 
imposed by this chapter for the taxable year an amount 
equal to 20 percent of the qualified residence interest paid 
or accrued during the taxable year. 
‘‘(b) QUALIFIED RESIDENCE INTEREST.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified resi-
dence interest’ means interest which is paid or ac-
crued during the taxable year on— 
‘‘(A) acquisition indebtedness with respect 
to any qualified residence of the taxpayer, or 
‘‘(B) home equity indebtedness with re-
spect to any qualified residence of the taxpayer. 
For purposes of the preceding sentence, the deter-
mination of whether any property is a qualified resi-
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dence of the taxpayer shall be made as of the time 
the interest is accrued. 
‘‘(2) OVERALL
LIMITATION.—The aggregate 
amount of indebtedness taken into account for any 
period for purposes of this section shall not exceed 
$500,000 ($250,000 in the case of a married indi-
vidual filing a separate return). 
‘‘(3) ACQUISITION INDEBTEDNESS.—The term 
‘acquisition indebtedness’ means any indebtedness 
which— 
‘‘(A) is incurred in acquiring, constructing, 
or substantially improving any qualified resi-
dence of the taxpayer, and 
‘‘(B) is secured by such residence. 
Such term also includes any indebtedness secured by 
such residence resulting from the refinancing of in-
debtedness meeting the requirements of the pre-
ceding sentence (or this sentence), but only to the 
extent the amount of the indebtedness resulting 
from such refinancing does not exceed the amount of 
the refinanced indebtedness. 
‘‘(4) HOME EQUITY INDEBTEDNESS.— 
‘‘(A) IN GENERAL.—The term ‘home eq-
uity indebtedness’ means any indebtedness 
(other than acquisition indebtedness) secured 
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by a qualified residence to the extent the aggre-
gate amount of such indebtedness does not ex-
ceed— 
‘‘(i) the fair market value of such 
qualified residence, reduced by 
‘‘(ii) the amount of acquisition indebt-
edness with respect to such residence. 
‘‘(B) LIMITATION.—The aggregate amount 
treated as home equity indebtedness for any pe-
riod shall not exceed $100,000 ($50,000 in the 
case of a married individual filing a separate re-
turn). 
‘‘(c) SPECIAL RULES.—For purposes of this sec-
tion— 
‘‘(1) QUALIFIED RESIDENCE.—The term ‘quali-
fied residence’ means— 
‘‘(A) the principal residence (within the 
meaning of section 121) of the taxpayer, and 
‘‘(B) 1 other residence of the taxpayer 
which is selected by the taxpayer for purposes 
of this subsection for the taxable year and 
which is used by the taxpayer as a residence 
(within the meaning of section 280A(d)(1)). 
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‘‘(2) MARRIED INDIVIDUALS FILING SEPARATE 
RETURNS.—If a married couple does not file a joint 
return for the taxable year— 
‘‘(A) such couple shall be treated as 1 tax-
payer for purposes of paragraph (1), and 
‘‘(B) each individual shall be entitled to 
take into account 1 residence unless both indi-
viduals consent in writing to 1 individual taking 
into account the principal residence and 1 other 
residence. 
‘‘(3) RESIDENCE NOT RENTED.—For purposes 
of 
paragraph 
(1)(B), 
notwithstanding 
section 
280A(d)(1), if the taxpayer does not rent a dwelling 
unit at any time during a taxable year, such unit 
may be treated as a residence for such taxable year. 
‘‘(4) UNENFORCEABLE SECURITY INTERESTS.— 
Indebtedness shall not fail to be treated as secured 
by any property solely because, under any applicable 
State or local homestead or other debtor protection 
law in effect on August 16, 1986, the security inter-
est is ineffective or the enforceability of the security 
interest is restricted. 
‘‘(5) SPECIAL
RULES
FOR
ESTATES
AND 
TRUSTS.—For purposes of determining whether any 
interest paid or accrued by an estate or trust is 
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qualified residence interest, any residence held by 
such estate or trust shall be treated as a qualified 
residence of such estate or trust if such estate or 
trust establishes that such residence is a qualified 
residence of a beneficiary who has a present interest 
in such estate or trust or an interest in the resid-
uary of such estate or trust. 
‘‘(d) COORDINATION WITH DEDUCTION.—In the case 
of any taxable year beginning in calendar years 2013 
through 2017, the taxpayer may elect to apply this section 
in lieu of the deduction under section 163 for qualified 
residence interest.’’. 
(b) PHASEOUT OF DEDUCTION.—Section 163(h) of 
such Code is amended by adding at the end the following 
new paragraph: 
‘‘(5) PHASEOUT.— 
‘‘(A) IN
GENERAL.—In the case of any 
taxable year beginning in a calendar year after 
2012, the amount otherwise allowable as a de-
duction by reason of paragraph (2)(D) shall be 
the applicable percentage of such amount. 
‘‘(B) 
APPLICABLE
PERCENTAGE.—For 
purposes of subparagraph (A), the applicable 
percentage shall be determined in accordance 
with the following table: 
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‘‘For taxable years beginning in calendar year: 
The applicable 
percentage is: 
2013 ............................................................................................
100%
2014 ............................................................................................
80%
2015 ............................................................................................
60%
2016 ............................................................................................
40%
2017 ............................................................................................
20%
2018 and thereafter ....................................................................
0%.’’. 
(c) PHASEDOWN OF MORTGAGE LIMIT.—Subpara-
graph (B) of section 163(h)(3) of such Code is amended 
by adding at the end the following: 
‘‘(iii) PHASEDOWN.— 
‘‘(I) IN GENERAL.—In the case 
of any taxable year beginning in cal-
endar years 2013 through 2017, 
clause (ii) shall be applied by sub-
stituting the amounts specified in the 
table 
in 
subclause 
(II) 
for 
‘$1,000,000’ and ‘$500,000’, respec-
tively. 
‘‘(II) PHASEDOWN
AMOUNTS.— 
For purposes of subclause (I), the 
amounts specified in this subclause 
for a taxable year shall be the 
amounts specified in the following 
table: 
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‘‘For taxable years beginning in calendar year: 
Amount 
substituted 
for 
$1,000,000: 
Amount 
substituted 
for 
$500,000: 
2013 ........................................................................
$1,000,000 
$500,000
2014 ........................................................................
$900,000 
$450,000
2015 ........................................................................
$800,000 
$400,000
2016 ........................................................................
$700,000 
$350,000
2017 ........................................................................
$600,000 
$300,000.’’. 
(d) CLERICAL AMENDMENT.—The table of sections 
for subpart A of part IV of subchapter A of chapter 1 
of such Code is amended by inserting after section 25D 
the following new item: 
‘‘Sec. 25E. Interest on indebtedness secured by qualified residence.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to interest paid or 
accrued after December 31, 2012. 
SEC. 4. DEDUCTION ALLOWED FOR INTEREST AND TAXES 
RELATING TO LAND FOR DWELLING PUR-
POSES OWNED OR LEASED BY COOPERATIVE 
HOUSING CORPORATIONS. 
(a) IN GENERAL.—Subparagraph (B) of section 
216(b)(1) of the Internal Revenue Code of 1986 is amend-
ed by striking ‘‘or land,’’ after ‘‘building,’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to amounts paid or accrued after 
December 31, 2012. 
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SEC. 5. USE OF MORTGAGE INTEREST SAVINGS TO IN-
CREASE LOW-INCOME HOUSING TAX CREDIT. 
(a) 
IN
GENERAL.—Subclause 
(I) 
of 
section 
42(h)(3)(C)(ii) of the Internal Revenue Code of 1986 is 
amended by striking ‘‘$1.75 ($1.50 for 2001)’’ and insert-
ing ‘‘$2.70’’. 
(b) INFLATION ADJUSTMENT.—Subparagraph (H) of 
section 42(h)(3) of such Code is amended to read as fol-
lows: 
‘‘(H) COST-OF-LIVING ADJUSTMENT.— 
‘‘(i) IN GENERAL.—In the case of a 
calendar year after 2002, the $2,000,000 
amount in subparagraph (C) shall be in-
creased by an amount equal to— 
‘‘(I) such dollar amount, multi-
plied by 
‘‘(II) the cost-of-living adjust-
ment determined under section 1(f)(3) 
for such calendar year by substituting 
‘calendar year 2001’ for ‘calendar 
year 1992’ in subparagraph (B) there-
of. 
‘‘(ii) PER
CAPITA
AMOUNT.—In the 
case of a calendar year after 2013, the 
$2.70 amount in subparagraph (C) shall 
be increased by an amount equal to— 
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‘‘(III) in the case of a building 
containing units which are designated 
to serve extremely low-income house-
holds by the State housing credit 
agency and require the increase in 
credit under this subparagraph in 
order for such building to be finan-
cially feasible as part of a qualified 
low-income housing project, the eligi-
ble basis of such building determined 
by the portion of such units shall be 
150 percent of such basis determined 
without 
regard 
to 
this 
subpara-
graph.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to allocations made in calendar 
years beginning after December 31, 2012. 
SEC. 6. USE OF MORTGAGE INTEREST SAVINGS FOR AF-
FORDABLE HOUSING PROGRAMS. 
(a) USE OF SAVINGS.—For each year, the Secretary 
of the Treasury shall determine the amount of revenues 
accruing to the general fund of the Treasury by reason 
of the enactment of section 3 of this Act that remain after 
use of such revenues in accordance with section 5 of this 
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Act and shall credit an amount equal to such remaining 
revenues as follows: 
(1) HOUSING
TRUST
FUND.—The Secretary 
shall credit the Housing Trust Fund established 
under section 1338 of the Federal Housing Enter-
prises Financial Safety and Soundness Act of 1992 
(12 U.S.C. 4568) with an amount equal to 60 per-
cent of the amount such remaining revenues. 
(2) SECTION 8 RENTAL ASSISTANCE.—The Sec-
retary shall credit an amount equal to 30 percent of 
the amount of such remaining revenues to the Sec-
retary of Housing and Urban Development for use 
only for providing tenant- and project-based rental 
assistance under section 8 of the United States 
Housing Act of 1937 (42 U.S.C. 1437f). 
(3) PUBLIC
HOUSING
CAPITAL
FUND.—The 
Secretary shall credit an amount equal to 10 percent 
of the amount of such remaining revenues to the 
Public Housing Capital Fund under section 9(d) of 
the United States Housing Act of 1937 (42 U.S.C. 
1437g(d)). 
(b) CHANGES TO HOUSING TRUST FUND.—Not later 
than the expiration of the 6-month period beginning on 
the date of the enactment of this Act, the Secretary of 
Housing and Urban Development shall revise the regula-
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tions relating to the Housing Trust Fund established 
under section 1338 of the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (12 U.S.C. 
4568) to provide that such section is carried out with the 
maximum amount of flexibility possible while complying 
with such section, which shall include revising such regula-
tions— 
(1) to increase the limitation on amounts from 
the Fund that are available for use for operating as-
sistance for housing; 
(2) to allow public housing agencies and tribally 
designated housing entities to be recipient of grants 
amounts from the Fund that are allocated to a State 
or State designated entity; and 
(3) eliminate the applicability of rules for the 
Fund that are based on the HOME Investment 
Partnerships Act (42 U.S.C. 1721 et seq.). 
Æ 
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