I 
109TH CONGRESS 
1ST SESSION 
H. R. 883
To amend the Internal Revenue Code of 1986 to allow a first time homebuyer 
credit for the purchase of principal residences located in rural areas. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 17, 2005
Mr. DAVIS of Alabama (for himself, Mr. LEACH, Mr. ROGERS of Alabama, Mr. 
HINOJOSA, Mr. SANDERS, Mr. PAUL, Mr. MCHUGH, and Mr. CONYERS) 
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 allow a 
first time homebuyer credit for the purchase of principal 
residences located in rural areas.
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 ‘‘Rural Housing Tax 
Credit Act of 2005’’.
SEC. 2. CREDIT FOR PURCHASE OF PRINCIPAL RESI-
DENCES 
BY 
FIRST-TIME 
RURAL 
HOME-
BUYERS. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to nonrefundable personal credits) is 
amended by inserting after section 25B the following: 
‘‘SEC. 25C. PURCHASE OF PRINCIPAL RESIDENCES BY 
FIRST-TIME RURAL HOMEBUYERS. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual who is a first-time homebuyer of a principal resi-
dence in a rural area during any taxable year, there shall 
be allowed as a credit against the tax imposed by this 
chapter for the taxable year an amount equal to the lesser 
of—
‘‘(1) 10 percent of the purchase price of the 
residence, or 
‘‘(2) $5,000. 
‘‘(b) LIMITATIONS.—
‘‘(1) LIMITATION BASED ON ADJUSTED GROSS 
INCOME.—
‘‘(A) IN GENERAL.—The amount allowed 
as a credit under subsection (a) for any taxable 
year shall be reduced (but not below zero) by 
the amount which bears the same ratio to such 
amount as—
‘‘(i) the excess of—
‘‘(I) the taxpayer’s modified ad-
justed gross income for such taxable 
year, over 
‘‘(II) $30,000 ($60,000 in the 
case of a joint return), bears to 
‘‘(ii) $10,000 ($20,000 in the case of 
a joint return). 
‘‘(B) MODIFIED
ADJUSTED
GROSS
IN-
COME.—For purposes of subparagraph (A), the 
term ‘modified adjusted gross income’ means 
the adjusted gross income of the taxpayer for 
the taxable year increased by any amount ex-
cluded from gross income under section 911, 
931, or 933. 
‘‘(2) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—The credit allowed under subsection (a) for 
any taxable year shall not exceed the excess of—
‘‘(A) the sum of the regular tax liability 
(as defined in section 26(b)) plus the tax im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under this subpart (other than this section) and 
section 27 for the taxable year.
‘‘(3) MARRIED INDIVIDUALS FILING JOINTLY.—
In the case of a husband and wife who file a joint 
return, the credit under this section is allowable only 
if the residence is a qualified residence with respect 
to both the husband and wife, and the amount speci-
fied under subsection (a)(2) shall apply to the joint 
return. 
‘‘(4) MARRIED
INDIVIDUALS
FILING
SEPA-
RATELY.—In the case of a married individual filing 
a separate return, subsection (a)(2) shall be applied 
by substituting ‘$2,500’ for ‘$5,000’. 
‘‘(5) OTHER TAXPAYERS.—If 2 or more individ-
uals who are not married purchase a qualified resi-
dence, the amount of the credit allowed under sub-
section (a) shall be allocated among such individuals 
in such manner as the Secretary may prescribe, ex-
cept that the total amount of the credits allowed to 
all such individuals shall not exceed $5,000. 
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) RURAL AREA.—The term ‘rural area’ has 
the meaning given such term by section 520 of the 
Housing Act of 1949. 
‘‘(2) 
FIRST-TIME
HOMEBUYER.—The 
term 
‘first-time homebuyer’ has the meaning given such 
term by section 72(t)(8)(D)(i).
‘‘(3) PRINCIPAL RESIDENCE.—The term ‘prin-
cipal residence’ has the same meaning as when used 
in section 121. 
‘‘(4) PURCHASE AND PURCHASE PRICE.—The 
terms ‘purchase’ and ‘purchase price’ have the 
meanings provided by section 1400C(e). 
‘‘(d) CARRYFORWARD OF UNUSED CREDIT.—If the 
credit allowable under subsection (a) for any taxable year 
exceeds the limitation imposed by subsection (b)(2) for 
such taxable year reduced by the sum of the credits allow-
able under this subpart (other than this section), such ex-
cess shall be carried to the succeeding taxable year and 
added to the credit allowable under subsection (a) for such 
taxable year. 
‘‘(e) REPORTING.—If the Secretary requires informa-
tion reporting under section 6045 by a person described 
in subsection (e)(2) thereof to verify the eligibility of tax-
payers for the credit allowable by this section, the excep-
tion provided by section 6045(e)(5) shall not apply. 
‘‘(f) RECAPTURE OF CREDIT IN CASE OF CERTAIN 
SALES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (5), if the taxpayer—
‘‘(A) fails to use a qualified residence as 
the principal residence of the taxpayer, or
‘‘(B) disposes of a qualified residence, 
with respect to the purchase of which a credit was 
allowed under subsection (a) at any time within 5 
years after the date the taxpayer acquired the prop-
erty, then the tax imposed under this chapter for the 
taxable year in which the disposition occurs is in-
creased by the credit recapture amount. 
‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur-
poses of paragraph (1), the credit recapture amount 
is an amount equal to the sum of—
‘‘(A) the applicable recapture percentage of 
the amount of the credit allowed to the tax-
payer under this section, plus 
‘‘(B) interest at the overpayment rate es-
tablished under section 6621 on the amount de-
termined under subparagraph (A) for each 
prior taxable year for the period beginning on 
the due date for filing the return for the prior 
taxable year involved. 
No deduction shall be allowed under this chapter for 
interest described in subparagraph (B). 
‘‘(3) APPLICABLE RECAPTURE PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the applicable recapture percentage 
shall be determined from the following table:
The applicable 
recapture 
‘‘If the sale occurs in: 
percentage is: 
Year 1 ........................................................................
100
Year 2 ........................................................................
Year 3 ........................................................................
Year 4 ........................................................................
Year 5 ........................................................................
Years 6 and thereafter ..............................................
0.
‘‘(B) YEARS.—For purposes of subpara-
graph (A), year 1 shall begin on the first day 
of the taxable year in which the purchase of the 
qualified residence described in subsection (a) 
occurs. 
‘‘(4) NO CREDITS AGAINST TAX.—Any increase 
in tax under this subsection shall not be treated as 
a tax imposed by this chapter for purposes of deter-
mining the amount of any credit under this chapter 
or for purposes of section 55. 
‘‘(5) DEATH OF OWNER; CASUALTY LOSS; IN-
VOLUNTARY CONVERSION; ETC.—The provisions of 
paragraph (1) do not apply to—
‘‘(A) a disposition of a qualified residence 
made on account of the death of any individual 
having a legal or equitable interest therein oc-
curring during the 5-year period to which ref-
erence is made under paragraph (1), 
‘‘(B) a disposition of the old qualified resi-
dence if it is substantially or completely de-
stroyed by a casualty described in section
165(c)(3) or compulsorily or involuntarily con-
verted (within the meaning of section 1033(a)), 
or 
‘‘(C) a disposition pursuant to a settlement 
in a divorce or legal separation proceeding 
where the qualified residence is sold or the 
other spouse retains such residence. 
‘‘(g) BASIS ADJUSTMENT.—For purposes of this sub-
title, if a credit is allowed under this section with respect 
to the purchase of any residence, the basis of such resi-
dence shall be reduced by the amount of the credit so al-
lowed.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 1016 of such Code 
(relating to general rule for adjustments to basis) is 
amended by striking ‘‘and’’ at the end of paragraph 
(30), by striking the period at the end of paragraph 
(31) and inserting ‘‘, and’’, and by adding at the 
end the following new paragraph: 
‘‘(32) in the case of a residence with respect to 
which a credit was allowed under section 25C, to the 
extent provided in section 25C(g).’’. 
(2) Section 23(b)(4)(B) of such Code is amend-
ed by inserting ‘‘and section 25C’’ after ‘‘this sec-
tion’’.
(3) Section 24(b)(3)(B) of such Code is amend-
ed by striking ‘‘23 and 25B’’ and inserting ‘‘23, 
25B, and 25C’’. 
(4) Section 25(e)(1)(C) of such Code is amend-
ed by inserting ‘‘25C’’ after ‘‘25B’’. 
(5) Section 25B of such Code is amended by 
striking ‘‘section 23’’ and inserting ‘‘sections 23 and 
25C’’. 
(6) Section 26(a)(1) of such Code is amended 
by striking ‘‘and 25B’’ and inserting ‘‘25B, and 
25C’’. 
(7) Section 904(i) of such Code is amended by 
striking ‘‘and 25B’’ and inserting ‘‘25B, and 25C’’. 
(8) Section 1400C(d) of such Code is amended 
by striking ‘‘and 25B’’ and inserting ‘‘25B, and 
25C’’. 
(9) The table of sections for subpart A of part 
IV of subchapter A of chapter 1 of such Code is 
amended by inserting before the item relating to sec-
tion 26 the following:
‘‘Sec. 25C. Purchase of principal residences by first-time rural homebuyers.’’.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by 
subsections (a) and (b)(9) shall apply to purchases 
after the date of the enactment of this Act, in tax-
able years ending after such date.
(2) SUBSECTION (B).—
(A) The amendments made by subsection 
(b) (other than paragraph (9) thereof) shall 
apply to taxable years beginning after Decem-
ber 31, 2005. 
(B) In the case of taxable years beginning 
before January 1, 2006, for purposes of apply-
ing the provisions of subpart A of part IV of 
subchapter A of chapter 1 of such Code relating 
to limitations based on amount of tax and 
carryovers of credit and of section 904(i)—
(i) section 25C(b)(2) of such Code, as 
added by subsection (a), shall not apply, 
and 
(ii) section 25C of such Code (as so 
added) shall be stacked after section 23 of 
such Code.
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