I
105TH CONGRESS
2D SESSION
H. R. 3290
To amend the Internal Revenue Code of 1986 to modify the low-income
housing credit.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 26, 1998
Mrs. JOHNSON of Connecticut (for herself, Mr. METCALF, Mr. WELLER, and
Mr. HOUGHTON) 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 modify
the low-income housing credit.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Affordable Housing Improvement Act of 1998’’.
(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. INCREASE IN STATE CEILING ON LOW-INCOME
HOUSING CREDITS, ETC.
(a) IN GENERAL.—Clause (i) of section 42(h)(3)(C)
(relating to State housing credit ceiling) is amended by
striking ‘‘$1.25’’ and inserting ‘‘$1.75’’.
(b) ADJUSTMENT
OF
STATE
CEILING
FOR
IN-
CREASES IN COST-OF-LIVING.—Paragraph (3) of section
42(h) (relating to housing credit dollar amount for agen-
cies) is amended by adding at the end the following new
subparagraph:
‘‘(H) COST-OF-LIVING ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of a
calendar year after 1999, the dollar
amount contained in subparagraph (C)(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 1998’ for ‘calendar
year 1992’ in subparagraph (B) there-
of.
‘‘(ii) ROUNDING.—If any increase
under clause (i) is not a multiple of 5
cents, such increase shall be rounded to
the next lowest multiple of 5 cents.’’.
(c) MODIFICATION TO PENALTY FOR AGENCY ALLO-
CATIONS IN EXCESS OF LIMIT.—Subparagraph (B) of sec-
tion 42(h)(7) is amended by striking all that follows the
comma and inserting ‘‘the State housing credit ceiling for
the following calendar year shall be reduced by the amount
of such excess (twice the amount of such excess to the
extent the Secretary determines that the excess allocation
was not inadvertent).’’.
SEC. 3. MODIFICATION OF CRITERIA FOR ALLOCATING
HOUSING CREDITS AMONG PROJECTS.
(a) SELECTION CRITERIA.—Subparagraph (C) of
section 42(m)(1) (relating to certain selection criteria
must be used) is amended—
(1) by inserting ‘‘, including whether the project
includes the use of existing housing as part of a
community revitalization plan’’ before the comma at
the end of clause (iii), and
(2) by striking ‘‘and’’ at the end of clause (vi),
by striking the period at the end of clause (vii) and
inserting a comma, and by adding at the end the
following new clauses:
‘‘(viii) tenant populations of individ-
uals with children, and
‘‘(ix) projects intended for eventual
tenant ownership.’’.
(b) PREFERENCE FOR COMMUNITY REVITALIZATION
PROJECTS LOCATED IN QUALIFIED CENSUS TRACTS.—
Clause (ii) of section 42(m)(1)(B) is amended by striking
‘‘and’’ at the end of subclause (I), by adding ‘‘and’’ at
the end of subclause (II), and by inserting after subclause
(II) the following new subclause:
‘‘(III) projects which are located
in qualified census tracts (as defined
in subsection (d)(5)(C)) and the devel-
opment of which contributes to a con-
certed 
community 
revitalization
plan,’’.
SEC. 
4. 
ADDITIONAL 
RESPONSIBILITIES 
OF 
HOUSING
CREDIT AGENCIES.
(a) MARKET STUDY; PUBLIC DISCLOSURE OF RA-
TIONALE
FOR NOT FOLLOWING CREDIT ALLOCATION
PRIORITIES.—Subparagraph (A) of section 42(m)(1) (re-
lating to responsibilities of housing credit agencies) is
amended by striking ‘‘and’’ at the end of clause (i), by
striking the period at the end of clause (ii) and inserting
a comma, and by adding at the end the following new
clauses:
‘‘(iii) a comprehensive market study
of the housing needs of low-income individ-
uals in the area to be served by the build-
ing is conducted before the credit alloca-
tion 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) SITE VISITS.—Clause (iii) of section 42(m)(1)(B)
(relating to qualified allocation plan) is amended by insert-
ing before the period ‘‘and in monitoring for noncompli-
ance with habitability standards through regular site vis-
its’’.
(c) LIMITATION
ON FEES IMPOSED
BY HOUSING
CREDIT AGENCIES IN CONNECTION WITH CREDIT ALLO-
CATION.—Subsection (m) of section 42 is amended by
adding at the end the following new paragraph:
‘‘(3) LIMITATION
ON
AMOUNT
OF
FEES
IM-
POSED BY HOUSING CREDIT AGENCY IN CONNEC-
TION WITH CREDIT ALLOCATION.—Fees imposed by
any housing credit agency in connection with activi-
ties carried on by reason of this section may be as-
sessed and collected only in such manner as may
reasonably be expected to result in the collection of
an aggregate amount which does not exceed the ag-
gregate costs of the agency in carrying on such ac-
tivities.’’.
SEC. 5. MODIFICATIONS TO RULES RELATING TO BASIS OF
BUILDING WHICH IS ELIGIBLE FOR CREDIT.
(a) HOME ASSISTANCE
NOT
TO
DISQUALIFY
BUILDING
FOR ADDITIONAL CREDIT AVAILABLE
TO
BUILDINGS IN HIGH COST AREAS.—Clause (i) of section
42(i)(2)(E) (relating to buildings receiving HOME assist-
ance) is amended by striking the last sentence.
(b) ADJUSTED BASIS TO INCLUDE PORTION OF CER-
TAIN BUILDINGS USED BY LOW-INCOME INDIVIDUALS
WHO ARE NOT TENANTS AND BY PROJECT EMPLOY-
EES.—Paragraph (4) of section 42(d) (relating to special
rules relating to determination of adjusted basis) is
amended—
(1) by striking ‘‘subparagraph (B)’’ in subpara-
graph (A) and inserting ‘‘subparagraphs (B) and
(C)’’,
(2) by redesignating subparagraph (C) as sub-
paragraph (D), and
(3) by inserting after subparagraph (B) the fol-
lowing new subparagraph:
‘‘(C) INCLUSION OF BASIS OF PROPERTY
USED
TO
PROVIDE
SERVICES
FOR
CERTAIN
NONTENANTS.—
‘‘(i) 
IN
GENERAL.—The 
adjusted
basis of any building located in a qualified
census tract (as defined in paragraph
(5)(C)) shall be determined by taking into
account the adjusted basis of property (of
a character subject to the allowance for de-
preciation and not otherwise taken into ac-
count) used throughout the taxable year in
providing any community service facility.
‘‘(ii) LIMITATIONS.—The increase in
the adjusted basis of any building which is
taken into account by reason of clause (i)
shall not exceed 20 percent of the eligible
basis of the building (determined without
regard to this subparagraph).
‘‘(iii) COMMUNITY
SERVICE
FACIL-
ITY.—For purposes of this subparagraph,
the term ‘community service facility’
means any facility if—
‘‘(I) such facility is functionally
related and subordinate to the quali-
fied low-income project of which the
building is a part,
‘‘(II) substantially all of the serv-
ices provided by the facility during the
taxable year are provided to individ-
uals whose income is 60 percent or
less of area median income (within the
meaning of subsection (g)(1)(B)), and
‘‘(III) the only services provided
by the facility other than to individ-
uals described in subclause (II) are
provided 
to 
employees 
of 
such
project.’’.
SEC. 6. EFFECTIVE DATES.
(a) IN GENERAL.—Except as otherwise provided in
this section, the amendments made by this Act shall apply
to—
(1) housing credit dollar amounts allocated
after December 31, 1998, and
(2) buildings placed in service after such date
to the extent paragraph (1) of section 42(h) of the
Internal Revenue Code of 1986 does not apply to
any building by reason of paragraph (4) thereof, but
only with respect to bonds issued after such date.
(b) INCREASE IN STATE CEILING.—The amendment
made by section 2(a) shall apply to calendar years after
1998.
(c) LIMITATION ON AGENCY FEES.—The amendment
made by section 4(c) shall apply to calendar years after
1998.
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