credit determined under subsection (a) shall be ap-
portioned between the estate or trust and the bene-
ficiaries on the basis of the income of the estate or 
trust allocable to each. 
‘‘(h) REDUCTION IN TAX BENEFITS.—
‘‘(1) RECAPTURE OF CREDIT.—If within the 5-
year period beginning on the date of the original 
purchase of a qualified residence, the residence is 
sold, the qualified buyer—
‘‘(A) shall deduct and withhold an amount 
equal to the recapture amount from the amount 
realized on such sale, and 
‘‘(B) shall transfer such amount to the 
homeownership credit agency which allocated 
the homeownership credit dollar amount to such 
residence. 
‘‘(2) RECAPTURE
AMOUNT.—For purposes of 
paragraph (1), the recapture amount is an amount 
equal to the lesser of—
‘‘(A) 50 percent of the gain from such re-
sale, or 
‘‘(B) the homeownership credit dollar 
amount allocated to such residence, reduced by 
1/36th of such amount for each month after the 
first 2 years of the 5-year period referred to in
paragraph (1) which is before the date of the 
sale referred to in paragraph (1). 
‘‘(3) DENIAL OF DEDUCTIONS IF CONVERTED 
TO RENTAL HOUSING.—If a qualified residence is 
converted to rental housing within the 5-year period 
beginning on the date of the original purchase of the 
qualified residence, no deduction under this chapter 
shall be permitted to offset rental income with re-
spect to such residence during such period. 
‘‘(i) APPLICATION OF AT-RISK RULES.—For pur-
poses of this section, rules of section 465 shall not apply 
in determining the eligible basis of any qualified residence. 
‘‘(j) REPORTS TO THE SECRETARY.—
‘‘(1) FROM
THE
TAXPAYER.—The Secretary 
may require taxpayers to submit an information re-
turn (at such time and in such form and manner as 
the Secretary prescribes) for each taxable year set-
ting forth—
‘‘(A) the eligible basis for the taxable year 
of each qualified residence with respect to which 
the taxpayer is claiming a credit under this sec-
tion, 
‘‘(B) the amount of all homeownership 
credit allocations received by the taxpayer from
any and all State homeownership credit agen-
cies, 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. 
‘‘(2) FROM
HOMEOWNERSHIP
CREDIT
AGEN-
CIES.—Each agency which allocates any homeowner-
ship credit dollar amount to any residence for any 
calendar year shall submit to the Secretary (at such 
time and in such form and manner as the Secretary 
shall prescribe) an annual report specifying—
‘‘(A) the amount of the homeownership 
credit dollar amount allocated to each residence 
for such year, 
‘‘(B) sufficient information to identify each 
such residence and the taxpayer initially enti-
tled to claim the credit under this section with 
respect thereto, and 
‘‘(C) such other information as the Sec-
retary may require. 
‘‘(k) RESPONSIBILITIES OF HOMEOWNERSHIP CRED-
IT AGENCIES.—
‘‘(1) PLANS
FOR
ALLOCATION
OF
CREDIT 
AMONG RESIDENCES.—
‘‘(A) IN GENERAL.—Notwithstanding any 
other provision of this section, the homeowner-
ship credit dollar amount with respect to any 
qualified residence shall be zero unless such 
amount was allocated pursuant to a qualified 
allocation plan of the homeownership credit 
agency which is approved by the governmental 
unit (in accordance with rules similar to the 
rules of section 147(f)(2) (other than subpara-
graph (B)(ii) thereof)) of which such agency is 
a part. 
‘‘(B) QUALIFIED ALLOCATION PLAN.—For 
purposes of this paragraph, the term ‘qualified 
allocation plan’ means any plan which sets forth 
selection criteria to be used to determine the 
homeownership development priorities of the 
homeownership credit agency which are appro-
priate to local conditions. 
‘‘(C) CERTAIN
HOMEOWNERSHIP
DEVEL-
OPMENT CRITERIA MUST BE USED.—The devel-
opment criteria set forth in a qualified alloca-
tion plan must include—
‘‘(i) contribution of the development 
to community stability and revitalization, 
‘‘(ii) community and local government 
support for the development, 
‘‘(iii) need for homeownership develop-
ment within the area, 
‘‘(iv) sponsor capability, and 
‘‘(v) long-term sustainability of the 
project as owner-occupied residences. 
‘‘(2) CREDIT ALLOCATED TO RESIDENCE NOT 
TO EXCEED AMOUNT NECESSARY TO ASSURE FEASI-
BILITY.—
‘‘(A) IN
GENERAL.—The homeownership 
credit dollar amount allocated to a residence 
shall not exceed the amount the homeownership 
credit agency determines is necessary for the 
feasibility of the residence. 
‘‘(B) AGENCY
EVALUATION.—In making 
the determination under subparagraph (A), the 
homeownership credit agency shall consider—
‘‘(i) the sources and uses of funds and 
the total financing planned for the resi-
dence, 
‘‘(ii) any proceeds or receipts expected 
to be generated by reason of tax benefits,
‘‘(iii) the anticipated appraised value 
of the residence, 
‘‘(iv) the reasonableness of the devel-
opmental costs of the residence, and 
‘‘(v) the affordability to a reasonable 
range of prospective qualified buyers. 
‘‘(C) DETERMINATION MADE WHEN CRED-
IT DOLLAR AMOUNT APPLIED FOR.—A deter-
mination under subparagraph (A) shall be made 
as of each of the following times: 
‘‘(i) The application for the home-
ownership credit dollar amount. 
‘‘(ii) The allocation of the homeowner-
ship credit dollar amount. 
‘‘(3) LIEN FOR RECAPTURE AMOUNT.—A home-
ownership credit dollar amount may be allocated by 
a homeownership credit agency to a residence only 
if such agency has a lien on such residence for the 
payment of any amount potentially required to be 
paid under subsection (h) to such agency. 
‘‘(l) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section, including regula-
tions—
‘‘(1) dealing with—
‘‘(A) projects which include more than 1 
residence or only a portion of a residence, and 
‘‘(B) buildings which are completed in por-
tions, 
‘‘(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 homeowner-
ship credit agencies to correct administrative errors 
and omissions with respect to allocations and record-
keeping within a reasonable period after their dis-
covery, taking into account the availability of regula-
tions and other administrative guidance from the 
Secretary.’’. 
(b) CURRENT YEAR BUSINESS CREDIT CALCULA-
TION.—Section 38(b) of such Code (relating to current 
year business credit) is amended by striking ‘‘plus’’ at the 
end of paragraph (18), by striking the period at the end 
of paragraph (19) and inserting ‘‘, plus’’, and by adding 
at the end the following new paragraph: 
‘‘(20) the homeownership credit determined 
under section 42A(a).’’. 
(c) CONFORMING AMENDMENTS.—
(1) Section 55(c)(1) of such Code is amended 
by inserting ‘‘or subsection (h) or (i) of section 42A’’ 
after ‘‘section 42’’. 
(2) Subsections (i)(3)(D), (i)(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 homeownership credit determined 
under section 42A, and’’. 
(4) Section 774(b)(4) of such Code is amended 
by inserting ‘‘, 42A(h),’’ after ‘‘section 42(j)’’. 
(d) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of such Code is amended by inserting after the item relat-
ing to section 42 the following:
‘‘Sec. 42A. Community homeownership credit.’’.
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to qualified residences sold after 
the date of the enactment of this Act.
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