I 
109TH CONGRESS 
2D SESSION 
H. R. 5137 
To assist first-time homebuyers to attain home ownership, and for other 
purposes. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 6, 2006 
Mr. HASTINGS of Florida 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 subsequently determined by the 
Speaker, in each case for consideration of such provisions as fall within 
the jurisdiction of the committee concerned 
A BILL 
To assist first-time homebuyers to attain home ownership, 
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, ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Workforce Housing Act of 2006’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title, etc. 
Sec. 2. Congressional findings. 
Sec. 3. Mortgage down payment accounts. 
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Sec. 4. Refundable credit for contributions to mortgage down payment ac-
counts. 
Sec. 5. Amendments to American Dream Downpayment Initiative. 
Sec. 6. Production of affordable home ownership housing. 
SEC. 2. CONGRESSIONAL FINDINGS. 
The Congress finds that— 
(1) home prices have increased nationally an 
average 50 percent in the past five years; 
(2) in 2005, the median price for a home in the 
United States was $213,900, but only about 11 per-
cent of the adult population in the country could af-
ford to purchase such a home; 
(3) as a result of such prohibitive housing costs, 
employers often cannot maintain or retain a pool of 
qualified workers to fill jobs; 
(4) rising energy costs add to the burden that 
working families face when trying to purchase a 
home; 
(5) in 2005, families in the United States 
spent, on average, $4,300 on all energy costs (in-
cluding home energy bills and gasoline), which is ap-
proximately $600 more than they spent on such 
costs in 2004; 
(6) residential appliances, including heating and 
cooling equipment and water heaters, consume 90 
percent of all energy used in the residential sector 
in the United States; 
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(7) homes and appliances that fail to use en-
ergy efficiently cost on average $500 per year to op-
erate and require over 30 percent more resources, 
further increasing the dependence on fossil fuels, 
and jeopardizing the energy security, of the United 
States; 
(8) within 15 years, renewable energy could be 
generating enough electricity to power 40,000,000 
homes and offset 70 days of oil imports into the 
United States; 
(9) when workers can use nearby mass transit, 
instead of driving to work, toxic greenhouse gases 
that contribute to global warming are reduced by 77 
pounds per person per year; and 
(10) to ensure there is an adequate supply of 
workforce housing and reduce some of the negative 
affects of high energy demands, it is critical to pro-
vide incentives for producing affordable homes that 
are close to transportation hubs and make the best 
use of efficient, renewable energy. 
SEC. 3. MORTGAGE DOWN PAYMENT ACCOUNTS. 
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
additional itemized deductions for individuals) is amended 
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by redesignating section 224 as section 225 and by insert-
ing after section 223 the following new section: 
‘‘SEC. 224. MORTGAGE DOWN PAYMENT ACCOUNTS. 
‘‘(a) ALLOWANCE OF DEDUCTION.— 
‘‘(1) IN
GENERAL.—In the case of an indi-
vidual, there shall be allowed as a deduction for the 
taxable year an amount equal to the aggregate 
amount paid in cash during such taxable year by the 
taxpayer to the mortgage down payment account of 
the taxpayer. 
‘‘(2) DOLLAR LIMITATION.— 
‘‘(A) IN GENERAL.—The amount allowed 
as a deduction under subsection (a) with re-
spect to the taxpayer for any taxable year shall 
not exceed the applicable dollar limit. 
‘‘(B) APPLICABLE DOLLAR LIMIT.— 
‘‘(i) In the case of a taxpayer whose 
modified adjusted gross income for the tax-
able year does not exceed 125 percent of 
area median income, the applicable dollar 
limit shall be equal to $10,000. 
‘‘(ii) In the case of any other tax-
payer, the applicable dollar limit shall be 
zero. 
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‘‘(C) AREA
MEDIAN
INCOME.—For pur-
poses of subparagraph (B)— 
‘‘(i) IN GENERAL.—The area median 
income means the area median income de-
termined by the Secretary of Housing and 
Urban Development for the calendar year 
ending with or within the taxable year of 
the taxpayer. 
‘‘(ii) 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 median income 
means the sum of the residing percentage 
of the area median income for each area in 
which the taxpayer had a principal resi-
dence during the taxable year. 
‘‘(iii) RESIDING
PERCENTAGE.—For 
purposes of clause (ii), the term ‘residing 
percentage’ means the ratio of the number 
of days that the taxpayer had his principal 
residence in an area bears to 365. 
‘‘(D) MODIFIED
ADJUSTED
GROSS
IN-
COME.—The term ‘modified adjusted gross in-
come’ means the adjusted gross income of the 
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taxpayer for the taxable year increased by any 
amount excluded from gross income under sec-
tion 911, 931, or 933. 
‘‘(3) COORDINATION
WITH
MORTGAGE
DOWN 
PAYMENT CREDIT.—No amount shall be allowed as 
a deduction under paragraph (1) to the taxpayer if 
a credit is allowed under section 36 for the taxable 
year. 
‘‘(4) DEDUCTION NOT ALLOWED TO DEPEND-
ENTS.—A deduction shall not be allowed to an indi-
vidual for a taxable year under paragraph (1) 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) DEFINITIONS.—For purposes of this section— 
‘‘(1) MORTGAGE DOWN PAYMENT ACCOUNT.— 
The term ‘mortgage down payment account’ means 
a trust created or organized in the United States ex-
clusively for the purpose of paying the qualified ex-
penses of a taxpayer, but only if the written gov-
erning instrument creating the trust meets the fol-
lowing requirements: 
‘‘(A) No contribution will be accepted— 
‘‘(i) unless it is in cash, or 
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‘‘(ii) except in the case of rollover con-
tributions and contributions under section 
36(b)(3)(B), if such contribution would re-
sult in aggregate contributions for the tax-
able year exceeding the amount allowed as 
a deduction under subsection (a). 
‘‘(B) The trustee is a bank (as defined in 
section 408(n)) or another person who dem-
onstrates to the satisfaction of the Secretary 
that the manner in which that person will ad-
minister the trust will be consistent with the re-
quirements of this section or who has so dem-
onstrated with respect to any individual retire-
ment plan. 
‘‘(C) No part of the trust assets will be in-
vested in life insurance contracts. 
‘‘(D) The assets of the trust shall not be 
commingled with other property except in a 
common trust fund or common investment 
fund. 
‘‘(2) QUALIFIED EXPENSES.—The term ‘quali-
fied expenses’ means with respect to a principal resi-
dence of the taxpayer who is a first-time home-
buyer— 
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‘‘(A) the costs of acquiring, constructing, 
or reconstructing the residence, including any 
usual or reasonable settlement, financing, or 
other closing costs qualified acquisition costs, 
‘‘(B) the cost of repairing or replacing 
major structural components of the residence, 
and 
‘‘(C) the costs of purchasing a major appli-
ances for service in the residence. 
‘‘(3) FIRST-TIME HOMEBUYER.— 
‘‘(A) IN GENERAL.—The term ‘first-time 
homebuyer’ means any individual if— 
‘‘(i) such individual (and if married, 
such individual’s spouse) had no present 
ownership interest in a principal residence 
during the 2-year period ending on the 
date of acquisition of the principal resi-
dence to which this subsection applies, and 
‘‘(ii) subsection (h) or (k) of section 
1034 (as in effect on the day before the 
date of the enactment of this paragraph) 
did not suspend the running of any period 
of time specified in section 1034 (as so in 
effect) with respect to such individual on 
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the day before the end of the period speci-
fied in clause (i). 
‘‘(B) PRINCIPAL
RESIDENCE.—The term 
‘principal residence’ has the same meaning as 
when used in section 121. 
‘‘(C) DATE
OF
ACQUISITION.—The term 
‘date of acquisition’ means the date— 
‘‘(i) on which a binding contract to 
acquire the principal residence to which 
subparagraph (A) applies is entered into, 
or 
‘‘(ii) on which construction or recon-
struction of such a principal residence is 
commenced. 
‘‘(c) TAX TREATMENT OF ACCOUNT.— 
‘‘(1) IN GENERAL.—A mortgage down payment 
account shall be exempt from taxation under this 
subtitle. Notwithstanding the preceding sentence, 
the mortgage down payment account shall be subject 
to the taxes imposed by section 511 (relating to im-
position of tax on unrelated business income of char-
itable organizations). 
‘‘(2) ACCOUNT TERMINATIONS.—Rules similar 
to the rules of paragraphs (2) and (4) of section 
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408(e) shall apply to any mortgage down payment 
account. 
‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.— 
‘‘(1) IN GENERAL.—Any distribution shall be 
includible in the gross income of the distributee in 
the manner as provided in section 72. 
‘‘(2) QUALIFIED DISTRIBUTIONS.— 
‘‘(A) EXCLUSION.—Any qualified distribu-
tion from a mortgage down payment account 
shall not be includible in gross income. 
‘‘(B) 
QUALIFIED
DISTRIBUTION.—For 
purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘quali-
fied distribution’ means any payment of 
distribution— 
‘‘(I) if the qualified expenses of 
the designated beneficiary during the 
taxable year are not less than the ag-
gregate distributions during the tax-
able year, 
‘‘(II) made on or after the date 
on which the individual attains age 
591⁄2, 
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‘‘(III) made to a beneficiary (or 
to the estate of the individual) on or 
after the death of the individual, or 
‘‘(IV) attributable to the individ-
ual’s being disabled (within the mean-
ing of section 72(m)(7). 
‘‘(C) DISTRIBUTIONS IN EXCESS OF EX-
PENSES.— 
‘‘(i) IN GENERAL.—If such aggregate 
distributions exceed such expenses during 
the taxable year, the amount otherwise in-
cludible in gross income under paragraph 
(1) shall be reduced by the amount which 
bears the same ratio to the amount which 
would be includible in gross income under 
paragraph (1) (without regard to this sub-
paragraph) as the qualified expenses bear 
to such aggregate distributions. 
‘‘(ii) MORTGAGE
GRANT
PROGRAMS, 
ETC.—The amount of qualified expenses 
otherwise taken into account under sub-
paragraph (B) with respect to an indi-
vidual shall be reduced by any payment for 
such expenses which is excludible from 
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gross income under any law of the United 
States. 
‘‘(3) ADDITIONAL TAX FOR DISTRIBUTIONS NOT 
USED FOR QUALIFIED EXPENSES.— 
‘‘(A) IN GENERAL.—The tax imposed by 
this chapter for any taxable year on any tax-
payer who receives a payment or distribution 
from a mortgage down payment account which 
is includible in gross income shall be increased 
by 10 percent of the amount which is so includ-
ible. 
‘‘(B) CONTRIBUTIONS RETURNED BEFORE 
CERTAIN
DATE.—Subparagraph (A) shall not 
apply to the distribution of any contribution 
made during a taxable year on behalf of the 
designated beneficiary if— 
‘‘(i) such distribution is made before 
the first day of the sixth month of the tax-
able year following the taxable year, and 
‘‘(ii) such distribution is accompanied 
by the amount of net income attributable 
to such excess contribution. 
Any net income described in clause (ii) shall be 
included in gross income for the taxable year in 
which such excess contribution was made. 
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‘‘(4) ROLLOVER
CONTRIBUTIONS.—Paragraph 
(1) shall not apply to any amount paid or distrib-
uted from a mortgage down payment account to the 
extent that the amount received is paid, not later 
than the 60th day after the date of such payment 
or distribution, into another mortgage down pay-
ment account for the taxpayer. The preceding sen-
tence shall not apply to any payment or distribution 
if such paragraph applied to any prior payment or 
distribution during the 12-month period ending on 
the date of the payment or distribution. 
‘‘(e) RECAPTURE.—The Secretary shall, by regula-
tions, provide for recapturing the benefit provided under 
this section and section 36 with respect to any property 
which ceases to be the principal residence of the taxpayer 
before the end of the 15-year period beginning on the last 
date on which amounts were excluded from gross income 
under subsection (d)(2) with respect to such property. 
Such regulations shall provide exceptions in the case of 
the divorce, disability, or death of the taxpayer. 
‘‘(f) COMMUNITY PROPERTY LAWS.—This section 
shall be applied without regard to any community property 
laws. 
‘‘(g) CUSTODIAL ACCOUNTS.—For purposes of this 
section, a custodial account shall be treated as a trust if 
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the assets of such account are held by a bank (as defined 
in section 408(n) or another person who demonstrates, to 
the satisfaction of the Secretary, that the manner in which 
he will administer the account will be consistent with the 
requirements of this section, and if the custodial account 
would, except for the fact that it is not a trust, constitute 
an account described in subsection (b)(1). For purposes 
of this title, in the case of a custodial account treated as 
a trust by reason of the preceding sentence, the custodian 
of such account shall be treated as the trustee thereof. 
‘‘(h) REPORTS.—The trustee of a mortgage down 
payment account shall make such reports regarding such 
account to the Secretary and to the beneficiary of the ac-
count with respect to contributions, distributions, and 
such other matters as the Secretary may require. The re-
ports required by this subsection shall be filed at such time 
and in such manner and furnished to such individuals at 
such time and in such manner as may be required.’’. 
(b) DEDUCTION ALLOWED WHETHER OR NOT INDI-
VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) 
of section 62 of such Code is amended by inserting before 
the last sentence at the end the following new paragraph: 
‘‘(21) MORTGAGE DOWN PAYMENT ACCOUNT.— 
The deduction allowed by section 224.’’. 
(c) PROHIBITED TRANSACTIONS.— 
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(1) EXCEPTION FOR TAXABLE DISTRIBUTIONS 
FROM MORTGAGE DOWN PAYMENT ACCOUNTS.—Sub-
section (c) of section 4975 of such Code (defining to 
prohibited transaction) is amended by adding at the 
end the following new paragraph: 
‘‘(7) SPECIAL RULE FOR MORTGAGE DOWN PAY-
MENT ACCOUNTS.—An individual for whose benefit a 
mortgage down payment account is established and 
any contributor to such account shall be exempt 
from the tax imposed by this section with respect to 
any transaction concerning such account (which 
would otherwise be taxable under this section) if sec-
tion 224(d)(3) applies with respect to such trans-
action.’’. 
(2) PLAN DEFINED.—Paragraph (1) of section 
4975(e) of such Code is amended by striking ‘‘or’’ 
at the end of subparagraph (F), by striking the pe-
riod at the end of subparagraph (G) and inserting 
‘‘, or’’, and by inserting after subparagraph (G) the 
following new subparagraph: 
‘‘(H) a mortgage down payment account 
described in section 224.’’. 
(d) EXCESS CONTRIBUTIONS.— 
(1) IN
GENERAL.—Section 4973(a) of such 
Code relating to tax imposed) is amended by striking 
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‘‘or’’ at the end of paragraph (4), by inserting ‘‘or’’ 
at the end of paragraph (5), and by inserting after 
paragraph (5) the following new paragraph: 
‘‘(6) a mortgage down payment account (within 
the meaning of section 224(b)(1)).’’. 
(2) EXCESS
CONTRIBUTIONS
TO
MORTGAGE 
DOWN PAYMENT ACCOUNTS.—Section 4973 of such 
Code (relating to tax on excess contributions to cer-
tain tax-favored accounts and annuities) is amended 
by adding at the end the following new subsection: 
‘‘(h) EXCESS CONTRIBUTIONS TO MORTGAGE DOWN 
PAYMENT ACCOUNTS.—For purposes of this section— 
‘‘(1) IN GENERAL.—In the case of contributions 
to a mortgage down payment account, the term ‘ex-
cess contributions’ means the sum of— 
‘‘(A) the excess (if any) of— 
‘‘(i) the amount contributed for the 
taxable year to the accounts (other than a 
rollover contribution described in section 
224(d)(4) and contributions under section 
36(c), over 
‘‘(ii) the amount allowable as a deduc-
tion under section 224 for such contribu-
tions or as a credit under section 36 for 
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such contributions, as the case may be, 
and 
‘‘(B) the amount determined under this 
subsection for the preceding taxable year, re-
duced by the sum of— 
‘‘(i) the distributions out of the ac-
counts for the taxable year (other than 
rollover distributions), and 
‘‘(ii) the excess (if any) of the max-
imum amount which may be contributed to 
the accounts for the taxable year over the 
amount contributed to the accounts for the 
taxable year. 
‘‘(2) SPECIAL RULES.—For purposes of para-
graph (1), the following contributions shall not be 
taken into account: 
‘‘(A) Any contribution which is distributed 
out of the mortgage down payment account in 
a distribution to which section 224(d)(3)(B) ap-
plies. 
‘‘(B) Any rollover contribution.’’. 
(e) PENALTY ON FAILURE TO REPORT.—Paragraph 
(2) of section 6693(a) of such Code (relating to provisions) 
is amended by striking ‘‘and’’ at the end of subparagraph 
(D), by striking the period at the end of subparagraph 
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(E) and inserting ‘‘, and’’, and by inserting after subpara-
graph (E) the following new subparagraph: 
‘‘(F) section 224(g) (relating to mortgage 
down payment accounts).’’. 
(f) CONFORMING AMENDMENTS.— 
(1) Section 26(b)(2) of such Code is amended 
by striking ‘‘and’’ at the end of subparagraph S, by 
striking the period at the end of subparagraph (T) 
and inserting ‘‘, and’’, and by inserting after sub-
paragraph (T) the following new subparagraph: 
‘‘(U) section 224(d)(3) (relating to additional 
tax for distributions not used for qualified ex-
penses).’’. 
(2) Section 72(t)(8)(C) of such Code is amend-
ed by inserting at the end the following new sen-
tence: ‘‘Such costs shall not include any amount 
taken into account under section 224.’’. 
(g) CLERICAL AMENDMENTS.—The table of sections 
for part VII of subchapter B of chapter 1 of such Code 
is amended by redesignating the item relating to section 
224 as an item relating to section 225 and by inserting 
after the item relating to section 223 the following new 
item: 
‘‘Sec. 224. Mortgage down payment accounts.’’. 
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