of the building) the right to enforce in any
State court the requirement of clause (i),
‘‘(iii) which allows the taxpayer the
right of first refusal to purchase the build-
ing from the low-or-moderate income indi-
vidual to whom the taxpayer first sold the
building,
‘‘(iv) which is binding on all succes-
sors of the taxpayer, and
‘‘(v) which, with respect to the prop-
erty, is recorded pursuant to State law as
a restrictive covenant.
‘‘(C) ALLOCATION
OF
CREDIT
MAY
NOT
EXCEED
AMOUNT
NECESSARY
TO
SUPPORT
COMMITMENT.—The 
housing 
credit 
dollar
amount allocated to any building may not ex-
ceed the amount necessary to support the appli-
cable fraction specified in the low-to-moderate
income housing commitment for such building.
‘‘(D) EFFECT
OF
NONCOMPLIANCE.—If,
during a taxable year, there is a determination
that a low-to-moderate income housing agree-
ment was not in effect as of the beginning of
such year, such determination shall not apply to
any period before such year and subparagraph
(A) shall be applied without regard to such de-
termination if the failure is corrected within 1
year from the date of the determination.
‘‘(E) DEVELOPMENT
PROJECTS
WHICH
CONSIST OF MORE THAN 1 BUILDING.—The ap-
plication of this paragraph to development
projects which consist of more than 1 building
shall be made under regulations prescribed by
the Secretary.
‘‘(6) SPECIAL RULES.—
‘‘(A) BUILDING MUST BE LOCATED WITH-
IN JURISDICTION OF CREDIT AGENCY.—A hous-
ing credit agency may allocate its aggregate
housing credit dollar amount only to buildings
located in the jurisdiction of the governmental
unit of which such agency is a part.
‘‘(B) AGENCY ALLOCATIONS IN EXCESS OF
LIMIT.—If the aggregate housing credit dollar
amounts allocated by a housing credit agency
for any calendar year exceed the portion of the
State housing credit ceiling allocated to such
agency for such calendar year, the housing
credit dollar amounts so allocated shall be re-
duced (to the extent of such excess) for build-
ings in the reverse of the order in which the al-
locations of such amounts were made.
‘‘(C) CREDIT
REDUCED
IF
ALLOCATED
CREDIT DOLLAR AMOUNT IS LESS THAN CREDIT
WHICH WOULD BE ALLOWABLE WITHOUT RE-
GARD TO SALES CONVENTION, ETC.—
‘‘(i) IN
GENERAL.—The amount of
the credit determined under this section
with respect to any building shall not ex-
ceed the clause (ii) percentage of the
amount of the credit which would (but for
this subparagraph) be determined under
this section with respect to such building.
‘‘(ii) DETERMINATION
OF
PERCENT-
AGE.—For purposes of clause (i), the
clause (ii) percentage with respect to any
building is the percentage which—
‘‘(I) the housing credit dollar
amount allocated to such building
bears to
‘‘(II) the credit amount deter-
mined in accordance with clause (iii).
‘‘(iii) DETERMINATION
OF
CREDIT
AMOUNT.—The credit amount determined
in accordance with this clause is the
amount of the credit which would (but for
this subparagraph) be determined under
this section with respect to the building if
this section were applied without regard to
paragraph (2)(A) of subsection (e).
‘‘(D) HOUSING CREDIT AGENCY TO SPECI-
FY
APPLICABLE
PERCENTAGE
AND
MAXIMUM
QUALIFIED
BASIS.—In allocating a housing
credit dollar amount to any building, the hous-
ing credit agency shall specify the applicable
percentage and the maximum qualified basis
which may be taken into account under this
section with respect to such building. The appli-
cable percentage and maximum qualified basis
so specified shall not exceed the applicable per-
centage and qualified basis determined under
this section without regard to this subsection.
‘‘(7) OTHER
DEFINITIONS.—For purposes of
this subsection—
‘‘(A) HOUSING
CREDIT
AGENCY.—The
term ‘housing credit agency’ means any agency
authorized to carry out this subsection.
‘‘(B) 
POSSESSIONS
TREATED
AS
STATES.—The term ‘State’ includes a posses-
sion of the United States.
‘‘(h) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) COMPLIANCE PERIOD.—The term ‘compli-
ance period’ means, with respect to any building, the
period of 5 taxable years beginning with the 1st tax-
able year of the credit period with respect thereto.
‘‘(2) NEW BUILDING.—The term ‘new building’
means a building the original use of which begins
with the taxpayer.
‘‘(3) EXISTING BUILDING.—The term ‘existing
building’ means any building which is not a new
building.
‘‘(4) APPLICATION TO ESTATES AND TRUSTS.—
In the case of an estate or trust, the amount of the
credit determined under subsection (a) and any in-
crease in tax under subsection (j) shall be appor-
tioned between the estate or trust and the bene-
ficiaries on the basis of the income of the estate or
trust allocable to each.
‘‘(i) RECAPTURE OF CREDIT.—If—
‘‘(1) as of the close of any taxable year in the
compliance period, the amount of the qualified basis
of any building with respect to the taxpayer is less
than
‘‘(2) the amount of such basis as of the close
of the preceding taxable year,
then the taxpayer’s tax under this chapter for the
taxable year shall be increased by the credit recap-
ture amount determined under rules similar to the
rules of section 42(j).
‘‘(j) APPLICATION OF AT-RISK RULES.—For pur-
poses of this section, rules similar to the rules of section
42(k) shall apply.
‘‘(k) CERTIFICATIONS AND OTHER REPORTS TO SEC-
RETARY.—
‘‘(1) CERTIFICATION
WITH
RESPECT
TO
1ST
YEAR OF CREDIT PERIOD.—Following the close of
the 1st taxable year in the credit period with respect
to any qualified low-to-moderate income building,
the taxpayer shall certify to the Secretary (at such
time and in such form and in such manner as the
Secretary prescribes)—
‘‘(A) the taxable year, and calendar year,
in which such building was first sold after being
placed in service,
‘‘(B) the adjusted basis and eligible basis
of such building as of the beginning of the cred-
it period,
‘‘(C) the maximum applicable percentage
and qualified basis permitted to be taken into
account by the appropriate housing credit agen-
cy under subsection (g),
‘‘(D) the election made under subsection
(f) with respect to the qualified low-to-moderate
income housing development project of which
such building is a part, and
‘‘(E) such other information as the Sec-
retary may require.
In the case of a failure to make the certification re-
quired by the preceding sentence on the date pre-
scribed therefor, unless it is shown that such failure
is due to reasonable cause and not to willful neglect,
no credit shall be allowable by reason of subsection
(a) with respect to such building for any taxable
year ending before such certification is made.
‘‘(2) ANNUAL REPORTS TO THE SECRETARY.—
The Secretary may require taxpayers to submit an
information return (at such time and in such form
and manner as the Secretary prescribes) for each
taxable year setting forth—
‘‘(A) the qualified basis for the taxable
year of each qualified low-to-moderate income
building of the taxpayer,
‘‘(B) the information described in para-
graph (1)(C) for the taxable year, and
‘‘(C) such other information as the Sec-
retary may require.
The penalty under section 6652(j) shall apply to any
failure to submit the return required by the Sec-
retary under the preceding sentence on the date pre-
scribed therefor.
‘‘(3) ANNUAL REPORTS FROM HOUSING CREDIT
AGENCIES.—Each agency which allocates any hous-
ing credit amount to any building for any calendar
year shall submit to the Secretary (at such time and
in such manner as the Secretary shall prescribe) an
annual report specifying—
‘‘(A) the amount of housing credit amount
allocated to each building for such year,
‘‘(B) sufficient information to identify each
such building and the taxpayer with respect
thereto, and
‘‘(C) such other information as the Sec-
retary may require.
The penalty under section 6652(j) shall apply to any
failure to submit the report required by the pre-
ceding sentence on the date prescribed therefor.
‘‘(l) RESPONSIBILITIES OF HOUSING CREDIT AGEN-
CIES.—
‘‘(1) PLANS
FOR
ALLOCATION
OF
CREDIT
AMONG DEVELOPMENT PROJECTS.—
‘‘(A) IN GENERAL.—Notwithstanding any
other provision of this section, the housing cred-
it dollar amount with respect to any building
shall be zero unless—
‘‘(i) such amount was allocated pursu-
ant to a qualified allocation plan of the
housing credit agency which is approved by
the governmental unit (in accordance with
rules similar to the rules of section
147(f)(2) (other than subparagraph (B)(ii)
thereof)) of which such agency is a part,
‘‘(ii) such agency notifies the chief ex-
ecutive officer (or the equivalent) of the
local jurisdiction within which the building
is located of such development project and
provides such individual a reasonable op-
portunity to comment on the development
project,
‘‘(iii) a comprehensive market study
of the housing needs of low- and moderate-
income individuals in the area to be served
by the development project is conducted
before the credit allocation is made and at
the developer’s expense by a disinterested
party who is approved by such agency, and
‘‘(iv) a written explanation is available
to the general public for any allocation of
a housing credit dollar amount which is
not made in accordance with established
priorities and selection criteria of the hous-
ing credit agency.
‘‘(B) QUALIFIED ALLOCATION PLAN.—For
purposes of this paragraph, the term ‘qualified
allocation plan’ means any plan—
‘‘(i) which sets forth selection criteria
to be used to determine housing priorities
of the housing credit agency which are ap-
propriate to local conditions,
‘‘(ii) which also gives preference in al-
locating housing credit dollar amounts
among selected development projects to—
‘‘(I) development projects serving
the lowest income owners, and
‘‘(II) development projects which
are located in qualified census tracts
(as defined in section 42(d)(5)(C))
and the development of which contrib-
utes to a concerted community revital-
ization plan, and
‘‘(iii) which provides a procedure that
the agency (or an agent or other private
contractor of such agency) will follow in
monitoring for noncompliance with the
provisions of this section and in notifying
the Internal Revenue Service of such non-
compliance which such agency becomes
aware of and in monitoring for noncompli-
ance with habitability standards through
regular site visits.
‘‘(C) CERTAIN SELECTION CRITERIA MUST
BE USED.—The selection criteria set forth in a
qualified allocation plan must include—
‘‘(i) development project location,
‘‘(ii) housing needs characteristics,
‘‘(iii) development project characteris-
tics, including whether the development
project includes the use of existing housing
as part of a community revitalization plan,
‘‘(iv) populations with special housing
needs,
‘‘(v) low-to-moderate income housing
waiting lists, and
‘‘(vi) populations of individuals with
children.
‘‘(2) CREDIT ALLOCATED TO BUILDING NOT TO
EXCEED AMOUNT NECESSARY TO ASSURE DEVELOP-
MENT PROJECT FEASIBILITY.—
‘‘(A) IN
GENERAL.—The housing credit
dollar amount allocated to a development
project shall not exceed the amount the housing
credit agency determines is necessary for the fi-
nancial feasibility of the development project
and its viability as a qualified low-to-moderate
income development project throughout the
compliance period.
‘‘(B) AGENCY
EVALUATION.—In making
the determination under subparagraph (A), the
housing credit agency shall consider—
‘‘(i) the sources and uses of funds and
the total financing planned for the develop-
ment project,
‘‘(ii) any proceeds or receipts expected
to be generated by reason of tax benefits,
‘‘(iii) the percentage of the housing
credit dollar amount used for development
project costs other than the cost of inter-
mediaries, and
‘‘(iv) the reasonableness of the devel-
opmental and operational costs of the de-
velopment project.
Clause (iii) shall not be applied so as to impede
the development of development projects in
hard-to-develop areas.
‘‘(C) DETERMINATION MADE WHEN CRED-
IT AMOUNT APPLIED FOR AND WHEN BUILDING
SOLD.—
‘‘(i) IN
GENERAL.—A determination
under subparagraph (A) shall be made as
of each of the following times:
‘‘(I) The application for the
housing credit dollar amount.
‘‘(II) The allocation of the hous-
ing credit dollar amount.
‘‘(III) The date the building is
first sold after having been placed in
service.
‘‘(ii) CERTIFICATION AS TO AMOUNT
OF OTHER SUBSIDIES.—Prior to each de-
termination under clause (i), the taxpayer
shall certify to the housing credit agency
the full extent of all Federal, State, and
local subsidies which apply (or which the
taxpayer expects to apply) with respect to
the building.
‘‘(m) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section, including
regulations—
‘‘(1) dealing with—
‘‘(A) development projects which include
more than 1 building or only a portion of a
building,
‘‘(B) buildings which are sold in portions,
‘‘(2) providing for the application of this section
to short taxable years,
‘‘(3) preventing the avoidance of the rules of
this section, and
‘‘(4) providing the opportunity for housing cred-
it agencies to correct administrative errors and omis-
sions with respect to allocations and record keeping
within a reasonable period after their discovery, tak-
ing into account the availability of regulations and
other administrative guidance from the Secretary.
‘‘(n) TERMINATION.—Clause (ii) of subsection
(g)(3)(C) shall not apply to any amount allocated after
December 31, 2004.’’.
(b) CURRENT YEAR BUSINESS CREDIT CALCULA-
TION.—Section 38(b) of the Internal Revenue Code of
1986 (relating to current year business credit) is amended
by striking ‘‘plus’’ at the end of paragraph (14), by strik-
ing the period at the end of paragraph (15) and inserting
‘‘, plus’’, and by adding at the end the following:
‘‘(16) the home ownership credit determined
under section 42A(a).’’.
(c) LIMITATION ON CARRYBACK.—Subsection (d) of
section 39 of the Internal Revenue Code of 1986 (relating
to carryback and carryforward of unused credits) is
amended by adding at the end the following:
‘‘(11) NO
CARRYBACK
OF
HOME
OWNERSHIP
CREDIT BEFORE EFFECTIVE DATE.—No amount of
unused business credit available under section 42A
may be carried back to a taxable year beginning on
or before the date of the enactment of this para-
graph.’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 55(c)(1) of the Internal Revenue
Code of 1986 is amended by inserting ‘‘or subsection
(i) or (j) of section 42A’’ after ‘‘section 42’’.
(2) Subsections (i)(c)(3), (i)(c)(6)(B)(i), and
(k)(1) of section 469 of such Code are each amended
by inserting ‘‘or 42A’’ after ‘‘section 42’’.
(3) Section 772(a) of such Code is amended by
striking ‘‘and’’ at the end of paragraph (10), by re-
designating paragraph (11) as paragraph (12), and
by inserting after paragraph (10) the following:
‘‘(11) the home ownership credit determined
under section 42A, and’’.
(4) Section 774(b)(4) of such Code is amended
by inserting ‘‘, 42A(i),’’ after ‘‘section 42(j)’’.
(e) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 is amended by in-
serting after the item relating to section 42 the following:
‘‘Sec. 42A. Low-to-moderate income home ownership credit.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenditures made in taxable
years beginning after the date of the enactment of this
Act.
SEC. 3. PARTIAL EXCLUSION OF GAIN FROM SALE OF LOW-
TO-MODERATE INCOME HOUSING.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 139 as section 140 and inserting
after section 138 the following new section:
‘‘SEC. 139. CERTAIN GAIN FROM SALE OF LOW-TO-MOD-
ERATE INCOME HOUSING.
‘‘(a) IN GENERAL.—Gross income shall not include
the gain from the sale of any low-to-moderate income
building made during the taxable year and with respect
to which the taxpayer is allowed a credit under section
42A.
‘‘(b) LIMITATION.—The amount of gain which may
be taken into account under subsection (a) with respect
to the sale of a low-to-moderate income building shall not
exceed $10,000 for each low-to-moderate income unit in
such building.’’.
(b) CONFORMING AMENDMENT.—The table of sec-
tions for part III of subchapter B of chapter 1 of such
Code is amended by striking the item relating to section
139 and inserting the following new items:
‘‘Sec. 139. Certain gain from sale of low-to-moderate income housing.
‘‘Sec. 140. Cross references to other Acts.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply sales in taxable years beginning
after the date of the enactment of this Act.
SEC. 4. EXPANSION OF REHABILITATION CREDIT.
(a) CREDIT APPLICABLE TO BUILDINGS AT LEAST
50 YEARS OLD.—Subparagraph (B) of section 47(c)(1) of
the Internal Revenue Code of 1986 (relating to qualified
rehabilitated building is amended to read as follows:
‘‘(B) BUILDING
MUST
BE
AT
LEAST 50
YEARS OLD.—In the case of a building other
than a certified historic structure, a building
shall not be a qualified rehabilitated building
unless the building was first placed in service
before the date which is at least 50 years before
the date such building is placed in service for
purposes of the credit under this section.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to property placed in service after
the date of the enactment of this Act.
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