I 
110TH CONGRESS 
1ST SESSION H. R. 1491 
To amend the Internal Revenue Code of 1986 to provide an incentive to 
preserve affordable housing in multifamily housing units which are sold 
or exchanged. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 13, 2007 
Mr. DAVIS of Alabama (for himself and Mr. RAMSTAD) introduced the 
following bill; which was referred to the Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
an incentive to preserve affordable housing in multifamily 
housing units which are sold or exchanged. 
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 ‘‘Affordable Housing 
Preservation Tax Relief Act of 2007’’. 
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SEC. 2. EXCLUSION OF GAIN FROM SALES OF AFFORDABLE 
HOUSING WHICH IS ATTRIBUTABLE TO DE-
PRECIATION. 
(a) IN GENERAL.—Part I of subchapter P of chapter 
1 of the Internal Revenue Code of 1986 (relating to treat-
ment of capital gains) is amended by inserting after sec-
tion 1202 the following new section: 
‘‘SEC. 1203. EXCLUSION OF GAIN FROM QUALIFIED SALES 
OF MULTIFAMILY HOUSING. 
‘‘(a) IN GENERAL.—Gross income shall not include 
gain from the qualified sale or exchange of eligible multi-
family housing property. 
‘‘(b) EXCLUSION LIMITED TO DEPRECIATION.—The 
amount of gain excluded from gross income under sub-
section (a) with respect to any property shall not exceed 
the depreciation adjustments (as defined in section 
1250(b)(3)) in respect of such property. 
‘‘(c) QUALIFIED SALE OR EXCHANGE.—For purposes 
of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified sale or 
exchange’ means a sale of eligible multifamily hous-
ing property to or an exchange of such property with 
a preservation entity which agrees to maintain af-
fordability and use restrictions regarding the prop-
erty that are— 
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‘‘(A) for a term of not less than the ex-
tended use period, 
‘‘(B) legally enforceable, and 
‘‘(C) consistent with the requirements of 
paragraph (2). 
Such restrictions shall be binding on all successors 
of the preservation entity and shall be recorded as 
a restrictive covenant on the property pursuant to 
State law. 
‘‘(2) 
AFFORDABILITY
AND
USE
RESTRIC-
TIONS.— 
‘‘(A) IN GENERAL.—Affordability and use 
restrictions regarding a property are consistent 
with this paragraph if— 
‘‘(i) in the case of property with re-
spect to which assistance described in sub-
section (d) is still in effect (as determined 
by the Secretary), such property satisfies 
the affordability and use restrictions in 
connection with such assistance, or 
‘‘(ii) in the case of any other property, 
such property is maintained as affordable 
housing. 
‘‘(B) AFFORDABLE
HOUSING.—The term 
‘affordable housing’ means housing which would 
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be a qualified low-income housing project (as 
defined in section 42(g)) if subparagraph (A) of 
section 42(g)(1) did not apply and subpara-
graph (B) of such section were applied by sub-
stituting ‘51 percent’ for ‘40 percent’. Eligible 
multifamily housing property shall not fail to be 
treated as affordable housing solely because 
residents of such property (while such property 
was described in subparagraph (A)(i)) continue 
to reside in such property. 
‘‘(3) CERTIFICATION
BY
PROGRAM
ADMINIS-
TRATOR.—The term ‘qualified sale or exchange’ 
shall not include any sale or exchange of property 
unless the housing credit agency certifies— 
‘‘(A) that the transferee with respect to 
such property is a qualified preservation entity, 
‘‘(B) that affordability and use restrictions 
will be maintained with respect to such property 
during the extended use period, and 
‘‘(C) the amount of gain which the trans-
feror will be allowed to exclude from gross in-
come under subsection (a) (determined at the 
entity level in the case of a partnership or S 
corporation). 
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‘‘(4) EXTENDED USE PERIOD.—The term ‘ex-
tended use period’ means the period beginning on 
the date of sale and ending on the earlier of— 
‘‘(A) 30 years after the close of the sale, 
or 
‘‘(B) the date that the property is acquired 
by foreclosure (or instrument in lieu of fore-
closure). 
Subparagraph (B) shall not apply if the Secretary 
determines that the acquisition described therein is 
part of an arrangement with the owner a purpose of 
which is to terminate the extended use period. 
‘‘(d) ELIGIBLE
MULTIFAMILY
HOUSING
PROP-
ERTY.—For purposes of this section, the term ‘eligible 
multifamily housing property’ means any section 1250 
property (as defined in section 1250(c))— 
‘‘(1) which is assisted under section 221(d)(3) 
or section 236 of the National Housing Act (or fi-
nanced or assisted by direct loan or tax abatement 
under similar provisions of State or local laws) and 
with respect to which the owner is subject to the re-
strictions described in section 1039(b)(1)(B) (as in 
effect on the day before the date of the enactment 
of the Revenue Reconciliation Act of 1990), 
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‘‘(2) which is described in section 512(2)(B) of 
the Multifamily Assisted Housing Reform and Af-
fordability Act of 1997 (42 U.S.C. 1437f note), 
‘‘(3) with respect to which a loan is made or in-
sured under title V of the Housing Act of 1949, or 
‘‘(4) which either received an allocation of low- 
income housing tax credit pursuant to paragraph (1) 
of section 42(h) or was exempted from such para-
graph by paragraph (4) of such section. 
‘‘(e) PRESERVATION ENTITY.—For purposes of this 
section, the term ‘preservation entity’ means a housing 
credit agency or an organization approved by a housing 
credit agency that has the capacity and commitment to 
successfully acquire and preserve eligible multifamily 
housing property. An organization shall not be treated as 
a preservation entity with respect to any taxpayer if such 
organization is related (as defined in section 267) to such 
taxpayer. 
‘‘(f) RESPONSIBILITIES OF HOUSING CREDIT AGEN-
CY.—The housing credit agency (or an agent or other pri-
vate contractor of such agency) shall— 
‘‘(1) determine whether the preservation enti-
ty’s plan for rehabilitation (if any) and operation of 
the eligible multifamily housing property is viable for 
no less than 30 years, 
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‘‘(2) monitor the affordability and use restric-
tions for the eligible multifamily housing property, 
and 
‘‘(3) notify the Internal Revenue Service as to 
any portion of such property which is out of compli-
ance. 
‘‘(g) RECAPTURE FOR NONCOMPLIANCE.—If the Sec-
retary determines that all or a portion of the multifamily 
housing property acquired by a preservation entity in a 
transfer to which subsection (a) applied is out of compli-
ance with the requirements of this section, the preserva-
tion entity’s tax imposed under this chapter for the taxable 
year shall be increased by (or if such entity is not other-
wise subject to tax under this chapter, there shall be im-
posed on such entity a tax equal to) 12.5 percent of the 
amount which bears the same ratio to the amount certified 
under subsection (c)(3)(C) with respect to such property 
as such entity’s share of the portion of such property 
which is out of compliance bears to the entire property. 
The amount otherwise determined under this subsection 
(without regard to this sentence) shall be reduced by the 
product of 3.33 percent of such amount, multiplied by the 
number of years after the qualified sale or exchange that 
the property was in compliance with the requirements of 
this section. 
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‘‘(h) COORDINATION WITH SECTION 1250.—In the 
case of a qualified sale or exchange of eligible multifamily 
housing property a portion of the gain from which is treat-
ed as ordinary income under section 1250, such portion 
of the gain shall be excluded from gross income under sub-
section (a) before any remaining portion of such gain.’’. 
(b) APPLICATION OF 25 PERCENT CAPITAL GAINS 
RATE.—Clause (i) of section 1(h)(6)(A) of the Internal 
Revenue Code of 1986 is amended to read as follows: 
‘‘(i) the sum of— 
‘‘(I) the amount of long-term 
capital gain (not otherwise treated as 
ordinary income) which would be 
treated as ordinary income if section 
1250(b)(1) included all depreciation 
and the applicable percentage under 
section 1250(a) were 100 percent, and 
‘‘(II) the amount of long-term 
capital gain (not otherwise excluded 
from gross income) which would be 
excluded from gross income under sec-
tion 1203 if subsection (b) thereof did 
not apply, over’’. 
(c) CONFORMING AMENDMENTS.— 
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(1) Subparagraph (B) of section 172(d)(2) of 
the Internal Revenue Code of 1986 is amended by 
striking ‘‘section 1202’’ and inserting ‘‘section 1202 
and 1203’’. 
(2) Paragraph (4) of section 642(c) of such 
Code is amended by striking the first sentence and 
inserting the following: ‘‘To the extent that the 
amount otherwise allowable as a deduction under 
this subsection consists of gain described in section 
1202(a) or 1203(a), proper adjustment shall be 
made for any exclusion allowable to the estate or 
trust under section 1202 or section 1203, as the 
case may be.’’ 
(3) Paragraph (3) of section 643(a) of such 
Code is amended by striking ‘‘section 1202’’ and in-
serting ‘‘sections 1202 and 1203’’. 
(4) Paragraph (4) of section 691(c) of such 
Code is amended by inserting ‘‘1203,’’ after 
‘‘1202,’’. 
(5) Paragraph (2) of section 871(a) of such 
Code is amended by inserting ‘‘and 1203’’ after 
‘‘section 1202’’. 
(6) The table of sections for part I of sub-
chapter P of chapter 1 of such Code is amended by 
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inserting after the item relating to section 1202 the 
following new item: 
‘‘Sec. 1203. Exclusion of gain from qualified sales of multifamily housing.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2007. 
Æ 
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