I
107TH CONGRESS
2D SESSION
H. R. 5052
To amend the Internal Revenue Code of 1986 to allow an income tax credit
for the provision of homeownership and community development, and
for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 27, 2002
Mr. PORTMAN (for himself, Mr. CARDIN, and Mr. WATTS of Oklahoma) intro-
duced 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 an
income tax credit for the provision of homeownership
and community development, 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
‘‘Renewing the Dream Tax Credit Act’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
SEC. 2. COMMUNITY HOMEOWNERSHIP CREDIT.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 is amended by inserting after sec-
tion 42 the following new section:
‘‘SEC. 42A. COMMUNITY HOMEOWNERSHIP CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec-
tion 38, the amount of the homeownership credit deter-
mined under this section for any taxable year in the credit
period shall be an amount equal to the applicable percent-
age of the eligible basis of each qualified residence.
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘applicable per-
centage’ means the appropriate percentage pre-
scribed by the Secretary for the month in which the
taxpayer and the homeownership credit agency enter
into an agreement with respect to such residence
(which is binding on such agency, the taxpayer, and
all successors in interest) as to the homeownership
credit dollar amount to be allocated to such resi-
dence.
‘‘(2) METHOD
OF
PRESCRIBING
PERCENT-
AGE.—The percentage prescribed by the Secretary
for any month shall be the percentage which will
yield over a 5-year period amounts of credit under
subsection (a) which have a present value equal to
50 percent of the eligible basis of a qualified resi-
dence.
‘‘(3) METHOD OF DISCOUNTING.—The present
value under paragraph (2) shall be determined—
‘‘(A) as of the last day of the 1st year of
the 5-year period referred to in paragraph (2),
‘‘(B) by using a discount rate equal to 72
percent of the annual Federal mid-term rate
applicable under section 1274(d)(1) to the
month applicable under paragraph (1) and com-
pounded annually, and
‘‘(C) by assuming that the credit allowable
under this section for any year is received on
the last day of such year.
‘‘(c) QUALIFIED RESIDENCE.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘qualified resi-
dence’ means any residence—
‘‘(A) which is located—
‘‘(i) in a census tract which has a me-
dian gross income which does not exceed
80 percent of the greater of area or state-
wide median gross income,
‘‘(ii) in a rural area (as defined under
section 520 of the Housing Act of 1949),
‘‘(iii) on a reservation for a federally
recognized Indian tribe, or
‘‘(iv) in an area of chronic economic
distress, and
‘‘(B) which is purchased by a qualified
buyer.
For purposes of subparagraph (A)(iv), an area is an
area of chronic economic distress if it is approved
for designation as such under section 143(j)(3); ex-
cept that such designation shall not require the ap-
proval of the Secretary, shall be deemed to be ap-
proved by the Secretary of Housing and Urban De-
velopment if not approved or disapproved by the
Secretary of Housing and Urban Development with-
in 60 days after submission for approval for pur-
poses of section 143(j)(3)(A)(ii), and shall cease to
apply after the end of the 5th calendar year after
the calendar year in which the designation is made.
‘‘(2) RESIDENCE.—For purposes of paragraph
(1), the term ‘residence’ means—
‘‘(A) a single-family home containing 1 to
4 housing units,
‘‘(B) a condominium unit,
‘‘(C) stock in a cooperative housing cor-
poration (as defined in section 216(b)), or
‘‘(D) any factory-made housing which is
permanently affixed to real property.
In the case of a single-family home described in sub-
paragraph (A) that contains more than one housing
unit, the term ‘residence’ shall not include any new
residence and shall include only the portion of such
home that is occupied by the owner thereof (deter-
mined based on the percentage of the total area of
such home that is occupied by the owner).
‘‘(3) TIMING
OF
DETERMINATION.—For pur-
poses of paragraph (1), the determination of wheth-
er a residence is a qualified residence shall be made
at the time a binding commitment for an allocation
of credit is awarded by the homeownership credit
agency; except that the determination of whether a
purchaser is a qualified buyer shall be made at the
time the residence is sold.
‘‘(4) MEDIAN GROSS INCOME.—For purposes of
this section, median gross income shall be deter-
mined consistent with section 143(f)(2).
‘‘(d) ELIGIBLE
BASIS.—For purposes of this
section—
‘‘(1) NEW QUALIFIED RESIDENCES.—
‘‘(A) IN GENERAL.—The eligible basis of a
new qualified residence is—
‘‘(i) in the case of a qualified resi-
dence which is sold in a transaction which
meets the requirements of subparagraph
(B), its adjusted basis (excluding land) im-
mediately before such sale, and
‘‘(ii) zero in any other case.
‘‘(B) REQUIREMENTS.—A sale of a quali-
fied residence meets the requirements of this
subparagraph if—
‘‘(i) the buyer acquires the qualified
residence by purchase (as defined in sec-
tion 179(d)(2)),
‘‘(ii) the buyer of the qualified resi-
dence is not a related person with respect
to the seller, and
‘‘(iii) in the case of a seller who mate-
rially participates in the development of
the residence, the buyer’s debt financing is
originated by a third party who is not a re-
lated person with respect to such seller.
‘‘(2) EXISTING QUALIFIED RESIDENCES.—
‘‘(A) IN GENERAL.—The eligible basis of
an existing qualified residence is—
‘‘(i) in the case of a qualified resi-
dence which is sold in a transaction which
meets the requirements of subparagraph
(B), its adjusted basis (excluding land) im-
mediately before such sale, and
‘‘(ii) zero in any other case.
‘‘(B) REQUIREMENTS.—A sale of a quali-
fied residence meets the requirements of this
subparagraph if—
‘‘(i) the buyer acquires the qualified
residence by purchase (as defined in sec-
tion 179(d)(2)),
‘‘(ii) the qualified residence has un-
dergone substantial rehabilitation in con-
nection with the sale described in clause
(i),
‘‘(iii) the buyer of the qualified resi-
dence is not a related person with respect
to the seller, and
‘‘(iv) in the case of a seller who mate-
rially participates in the development of
the residence, the buyer’s debt financing is
originated by a third party who is not a re-
lated person with respect to such seller.
‘‘(C) SUBSTANTIAL REHABILITATION.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (B), substantial rehabilita-
tion means rehabilitation expenditures paid
or incurred with respect to a qualified resi-
dence that are at least $15,000.
‘‘(ii) INFLATION
ADJUSTMENT.—In
the case of a calendar year after 2002, the
dollar amount contained in clause (i) shall
be increased 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.
Any increase under clause (ii) which is not
a multiple of $1,000 shall be rounded to
the next lowest multiple of $1,000.
‘‘(D) 
LIMITATION
ON
ACQUISITION
BASIS.—The eligible basis of an existing quali-
fied residence may not exceed 150 percent of
the qualified rehabilitation expenditures.
‘‘(3) EFFECT OF SUBSEQUENT SALE, ETC.—A
subsequent sale, assignment, rental, or refinancing
of the qualified residence by the buyer or the subse-
quent sale, assignment, or pooling of the buyer’s fi-
nancing by the originator shall not be considered in
determining whether or not the prior sales trans-
action satisfied the requirements of subparagraph
(B) of paragraph (1) or (2).
‘‘(4) SPECIAL
RULES
RELATING
TO
DETER-
MINATION OF ADJUSTED BASIS.—For purposes of
this subsection—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the adjusted basis of any
qualified residence—
‘‘(i) shall not include so much of the
basis of such qualified residence as is de-
termined by reference to the basis of other
property held at any time by the person
acquiring the residence, and
‘‘(ii) shall be determined without re-
gard to the adjusted basis of any property
which is not part of such qualified resi-
dence.
‘‘(B) BASIS
OF
PROPERTY
IN
COMMON
AREAS, ETC., INCLUDED.—The adjusted basis
of any qualified residence shall be determined
by taking into account (on a pro rata basis) the
adjusted basis of property (other than land)
used in common areas or provided as com-
parable amenities to all residences within a
project.
‘‘(5) SPECIAL RULES FOR DETERMINING ELIGI-
BLE BASIS.—
‘‘(A) RELATED
PERSON, ETC.—For pur-
poses of this section, a person (in this clause re-
ferred to as the ‘related person’) is related to
any person if the related person bears a rela-
tionship to such person specified in section
267(b) or 707(b)(1), or the related person and
such person are engaged in trades or businesses
under common control (within the meaning of
subsections (a) and (b) of section 52). For pur-
poses of the preceding sentence, in applying
section 267(b) or 707(b)(1), ‘10 percent’ shall
be substituted for ‘50 percent’.
‘‘(B) 
NONRESIDENTIAL
SPACE
EX-
CLUDED.—No portion of the eligible basis of a
qualified residence shall include costs attrib-
utable to nonresidential space.
‘‘(C) LIMITATION.—The eligible basis of
any residence may not exceed the mortgage
limit for Federal Housing Administration in-
sured mortgages for single family homes in the
area in which such residence is located.
‘‘(e) DEFINITION AND SPECIAL RULES RELATING TO
CREDIT PERIOD.—
‘‘(1) CREDIT PERIOD DEFINED.—For purposes
of this section, the term ‘credit period’ means, with
respect to any qualified residence, the period of 5
taxable years beginning with the taxable year in
which the sale of the qualified residence occurs satis-
fying the requirements of subsection (d)(1)(B) or
(d)(2)(B).
‘‘(2) SPECIAL RULE FOR 1ST YEAR OF CREDIT
PERIOD.—
‘‘(A) IN GENERAL.—The credit allowable
under subsection (a) with respect to any quali-
fied residence for the 1st taxable year of the
credit period shall be determined by multiplying
the eligible basis under subsection (d) by the
fraction—
‘‘(i) the numerator of which is the
sum of the number of remaining whole
months in such 1st taxable year after the
sale of the qualified residence, and
‘‘(ii) the denominator of which is 12.
‘‘(B) DISALLOWED 1ST YEAR CREDIT AL-
LOWED IN 6TH YEAR.—Any reduction by reason
of subparagraph (A) in the credit allowable
(without regard to subparagraph (A)) for the
1st taxable year of the credit period shall be al-
lowable under subsection (a) for the 1st taxable
year following the credit period.
‘‘(f) LIMITATION ON AGGREGATE CREDIT ALLOW-
ABLE WITH RESPECT TO QUALIFIED RESIDENCES LO-
CATED IN A STATE.—
‘‘(1) CREDIT MAY NOT EXCEED CREDIT DOLLAR
AMOUNT ALLOCATED TO QUALIFIED RESIDENCE.—
‘‘(A) IN
GENERAL.—The amount of the
credit determined under this section for any
taxable year with respect to any qualified resi-
dence shall not exceed the homeownership cred-
it dollar amount allocated to such qualified resi-
dence under this subsection.
‘‘(B) TIME FOR MAKING ALLOCATION.—
‘‘(i) An allocation shall be taken into
account under subparagraph (A) only if it
is made not later than the close of the cal-
endar year in which the qualified residence
is sold.
‘‘(ii) A homeownership credit agency
may allocate available homeownership cred-
it dollar amounts to a qualified residence
prior to the year of sale of such qualified
residence if—
‘‘(I) the taxpayer owns fee title
or a leasehold interest of not less than
50 years in the site of the qualified
residence as of the later of the date
which is 6 months after the date that
the allocation was made or the close
of the calendar year in which the allo-
cation is made, and
‘‘(II) such qualified residence is
completed not later than the close of
the second calendar year following the
calendar year in which the allocation
was made.
‘‘(C) VESTED RIGHT TO CREDIT DOLLAR
AMOUNT.—Once a homeownership credit alloca-
tion is received by a taxpayer, the right to such
credit is vested in such taxpayer and is not sub-
ject to recapture, except as provided in para-
graph (5)(B).
‘‘(2) 
HOMEOWNERSHIP
CREDIT
DOLLAR
AMOUNT FOR AGENCIES.—
‘‘(A) IN GENERAL.—The aggregate home-
ownership credit dollar amount which a home-
ownership credit agency may allocate for any
calendar year is the portion of the State home-
ownership credit ceiling allocated under this
paragraph for such calendar year to such agen-
cy.
‘‘(B) STATE
CEILING
INITIALLY
ALLO-
CATED
TO
STATE
HOMEOWNERSHIP
CREDIT
AGENCIES.—Except as provided in subpara-
graphs (D) and (E), the State homeownership
credit ceiling for each calendar year shall be al-
located to the homeownership credit agency of
such State. If there is more than 1 homeowner-
ship credit agency of a State, all such agencies
shall be treated as a single agency.
‘‘(C) STATE
HOMEOWNERSHIP
CREDIT
CEILING.—The State homeownership credit ceil-
ing applicable to any State for any calendar
year shall be an amount equal to the sum of—
‘‘(i) the unused State homeownership
credit ceiling (if any) of such State for the
preceding calendar year,
‘‘(ii) the greater of—
‘‘(I) $1.75 multiplied by the
State population, or
‘‘(II) $2,000,000,
‘‘(iii) the amount of State homeowner-
ship credit ceiling returned in the calendar
year, plus
‘‘(iv) the amount (if any) allocated
under subparagraph (D) to such State by
the Secretary.
For purposes of clause (i), the unused State
homeownership credit ceiling for any calendar
year is the excess (if any) of the sum of the
amounts described in clauses (ii) through (iv)
over the aggregate homeownership credit dollar
amount allocated for such year. For purposes of
clause (iii), the amount of State homeownership
credit ceiling returned in the calendar year
equals the homeownership credit dollar amount
previously allocated within the State to any
qualified residence with respect to which an al-
location is canceled by mutual consent of the
homeownership credit agency and the allocation
recipient.
‘‘(D) UNUSED
HOMEOWNERSHIP
CREDIT
CARRYOVERS
ALLOCATED
AMONG
CERTAIN
STATES.—
‘‘(i) IN GENERAL.—The unused home-
ownership credit carryover of a State for
any calendar year shall be assigned to the
Secretary for allocation among qualified
States for the succeeding calendar year.
‘‘(ii) 
UNUSED
HOMEOWNERSHIP
CREDIT CARRYOVER.—For purposes of this
subparagraph, the unused homeownership
credit carryover of a State for any calendar
year is the excess (if any) of—
‘‘(I) the unused State home-
ownership credit ceiling for the year
preceding such year, over
‘‘(II) the aggregate homeowner-
ship credit dollar amount allocated for
such year.
‘‘(iii) FORMULA FOR ALLOCATION OF
UNUSED
HOMEOWNERSHIP
CREDIT
CARRYOVERS
AMONG
QUALIFIED
STATES.—The amount allocated under this
subparagraph to a qualified State for any
calendar year shall be the amount deter-
mined by the Secretary to bear the same
ratio to the aggregate unused homeowner-
ship credit carryovers of all States for the
preceding calendar year as such State’s
population for the calendar year bears to
the population of all qualified States for
the calendar year.
‘‘(iv) QUALIFIED
STATE.—For pur-
poses of this subparagraph, the term
‘qualified State’ means, with respect to a
calendar year, any State—
‘‘(I) which allocated its entire
State homeownership credit ceiling for
the preceding calendar year, and
‘‘(II) for which a request is made
(not later than May 1 of the calendar
year) to receive an allocation under
clause (iii).
‘‘(E) STATE
MAY
PROVIDE
FOR
DIF-
FERENT
ALLOCATION.—Rules similar to the
rules of section 146(e) (other than paragraph