‘‘(B) in the case of a census tract other 
than a census tract described in subparagraph 
(A), the State. 
‘‘(4) 
SUBSTANTIAL
REHABILITATION.—The 
term ‘substantial rehabilitation’ means rehabilitation 
efforts involving qualified development costs that are 
not less than the greater of— 
‘‘(A) $20,000, and 
‘‘(B) 20 percent of the cost of acquiring 
buildings and land. 
‘‘(5) QUALIFIED
COMPLETION
EVENT.—The 
term ‘qualified completion event’ means— 
‘‘(A) in the case of a residence that is built 
or substantially rehabilitated as part of a quali-
fied project and sold, an affordable sale, or 
‘‘(B) in the case of a residence that is sub-
stantially rehabilitated as part of a qualified 
project and owned by the same qualified home-
owner throughout such rehabilitation, the com-
pletion of such rehabilitation (as determined by 
the neighborhood homes credit agency) to the 
standards 
promulgated 
under 
subsection 
(h)(1)(D). 
‘‘(6) QUALIFIED HOMEOWNER.— 
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‘‘(A) IN
GENERAL.—The term ‘qualified 
homeowner’ means, with respect to a residence, 
an individual— 
‘‘(i) who owns and uses such residence 
as the principal residence of such indi-
vidual, and 
‘‘(ii) whose income is 140 percent or 
less of the applicable area median gross in-
come for the location of the residence. 
‘‘(B) OWNERSHIP.—For purposes of a co-
operative housing corporation (as such term is 
defined in section 216(b)), a tenant-stockholder 
shall be treated as owning the house or apart-
ment which such person is entitled to occupy. 
‘‘(C) INCOME.—For purposes of this para-
graph, income shall be a determined in accord-
ance with section 143(f)(2) and 143(f)(4). 
‘‘(D) TIMING.—For purposes of this para-
graph, the income of a taxpayer shall be deter-
mined— 
‘‘(i) in the case of a residence that is 
built or substantially rehabilitated as part 
of a qualified project and sold, at the time 
a binding contract for purchase is made, or 
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‘‘(ii) in the case of a residence that is 
occupied by a qualified homeowner and in-
tended to be substantially rehabilitated as 
part of a qualified project, at the time a 
binding contract to undertake such reha-
bilitation is made. 
‘‘(7) NEIGHBORHOOD
HOMES
CREDIT
AGEN-
CY.—The term ‘neighborhood homes credit agency’ 
means the agency designated by the governor of a 
State as the neighborhood homes credit agency of 
the State. 
‘‘(g) ALLOCATION.— 
‘‘(1) STATE
NEIGHBORHOOD
HOMES
CREDIT 
CEILING.—The State neighborhood homes credit 
amount for a State for a calendar year is an amount 
equal to the sum of— 
‘‘(A) the greater of— 
‘‘(i) the product of $3, multiplied by 
the State population (determined in ac-
cordance with section 146(j)), or 
‘‘(ii) $4,000,000, plus 
‘‘(B) the converted private activity bond 
amount with respect to the State for the cal-
endar year. 
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‘‘(2) UNUSED AMOUNT.—The State neighbor-
hood homes credit amount for a calendar year shall 
be increased by the sum of— 
‘‘(A) any amount certified by the neighbor-
hood homes credit agency of the State as hav-
ing been previously allocated to a qualified 
project and not used during the 5-year period 
described in subsection (b)(2)(iii), plus 
‘‘(B) sum of the amount by which the 
amount determined under paragraph (1) (with-
out application of this paragraph) exceeded the 
amount allocated to qualified projects in each of 
the three immediately preceding calendar years. 
‘‘(3) CONVERTED
PRIVATE
ACTIVITY
BOND 
AMOUNT.— 
‘‘(A) IN GENERAL.—For purposes of this 
paragraph, the converted private activity bond 
amount with respect to any State for any cal-
endar year shall be 60 percent of the amount 
elected by— 
‘‘(i) the State agency that is an issuer 
of qualified mortgage bonds (as defined in 
section 143) that is designated by the gov-
ernor of the State under this subparagraph 
for such year, or 
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‘‘(ii) if no such agency exists, the 
neighborhood homes credit agency of the 
State. 
‘‘(B) REDUCTION
OF
PRIVATE
ACTIVITY 
BOND CEILING.—The State ceiling under sec-
tion 146(d)(1) shall be reduced by the amount 
elected under subparagraph (A). 
‘‘(4) PORTION OF STATE CREDIT CEILING FOR 
CERTAIN
PROJECTS
INVOLVING
QUALIFIED
NON-
PROFIT ORGANIZATIONS.—Rules similar to the rules 
of section 42(h)(5) shall apply. 
‘‘(h) RESPONSIBILITIES OF NEIGHBORHOOD HOMES 
CREDIT AGENCIES.— 
‘‘(1) IN GENERAL.—Notwithstanding subsection 
(g), the State neighborhood homes credit dollar 
amount shall be zero for a calendar year unless the 
neighborhood homes credit agency of the State— 
‘‘(A) allocates such amount pursuant to a 
qualified allocation plan of the neighborhood 
homes credit agency, 
‘‘(B) allocates not more than 20 percent of 
such amount for the previous year to projects 
with respect to residences in census tracts 
under subsection (e)(1)(B) or (e)(2), 
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‘‘(C) promulgates standards with respect 
to reasonable qualified development costs, 
‘‘(D) promulgates standards with respect 
to construction quality, and 
‘‘(E) submits to the Secretary (at such 
time and in such manner as the Secretary may 
prescribe) an annual report specifying— 
‘‘(i) the amount of the neighborhood 
homes credits allocated to each qualified 
project for the previous year, and 
‘‘(ii) such other information as the 
Secretary may require. 
‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur-
poses of this paragraph, the term ‘qualified alloca-
tion plan’ means any plan which— 
‘‘(A) sets forth the selection criteria to be 
used to prioritize qualified projects for alloca-
tions of State neighborhood homes credit dollar 
amounts, including— 
‘‘(i) the need for new or substantially 
rehabilitated owner-occupied homes in the 
area addressed by the project, 
‘‘(ii) the expected contribution of the 
project to neighborhood stability and revi-
talization, 
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‘‘(iii) the capability of the project 
sponsor, and 
‘‘(iv) the likelihood the project will re-
sult in long-term homeownership, and 
‘‘(B) has been made available for public 
comment. 
‘‘(i) POSSESSIONS TREATED AS STATES.—For pur-
poses of this section, the term ‘State’ includes the District 
of Columbia and a possession of the United States. 
‘‘(j) REPAYMENT.— 
‘‘(1) IN GENERAL.—If a residence is sold dur-
ing the 5-year period beginning on the date of the 
qualified completion event described in subsection 
(a) with respect to such residence, the seller shall 
transfer an amount equal to the repayment amount 
from the amount realized on such sale to the rel-
evant neighborhood homes credit agency to be used 
to stabilize or revitalize qualified census tracts (de-
termined without regard to paragraphs (1)(B) and 
(2) of subsection (e)). 
‘‘(2) REPAYMENT AMOUNT.—For purposes of 
paragraph (1), the repayment amount is an amount 
equal to 50 percent of the gain from such resale, re-
duced by 20 percent for each year of the 5-year pe-
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riod referred to in paragraph (1) which ends before 
the date of the sale referred to in paragraph (1). 
‘‘(3) LIEN
FOR
REPAYMENT
AMOUNT.—A 
neighborhood homes credit agency receiving an allo-
cation under this section shall place a lien on each 
residence that is built or rehabilitated as part of a 
qualified project for the greatest amount that could 
be required to be paid under this subsection to such 
agency. 
‘‘(4) DENIAL OF DEDUCTIONS IF CONVERTED 
TO RENTAL HOUSING.—If, during the 5-year period 
beginning on the date of the qualified completion 
event described in subsection (a), an individual who 
owns a residence fails to use such residence as such 
individual’s principal residence for any period of 
time, no deduction shall be allowed for expenses paid 
or incurred by such individual with respect to rent-
ing, during such period of time, such residence. 
‘‘(5) WAIVER.—The neighborhood homes credit 
agency may waive the repayment required under 
paragraph (1) in the case of homeowner experi-
encing a hardship. 
‘‘(k) INFLATION ADJUSTMENT.— 
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‘‘(1) IN GENERAL.—In the case of a calendar 
year after 2020, the dollar amounts in this section 
shall be increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar 
year by substituting ‘calendar year 2019’ for 
‘calendar year 2016’ in subparagraph (A)(ii) 
thereof. 
‘‘(2) ROUNDING.— 
‘‘(A) SUBSTANTIAL REHABILITATION.—In 
the case of the dollar amount in subsection 
(f)(4), any increase under the preceding sen-
tence which is not a multiple of $1,000 shall be 
rounded to the nearest multiple of $1,000. 
‘‘(B) In the case of the dollar amount in 
subsection (g)(1)(A)(i), any increase under the 
preceding sentence which is not a multiple of 
$0.01 shall be rounded to the nearest multiple 
of $0.01. 
‘‘(C) In the case of the dollar amount in 
subsection (g)(1)(A)(ii), any increase under the 
preceding sentence which is not a multiple of 
$100,000 shall be rounded to the nearest mul-
tiple of $100,000.’’. 
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(b) CURRENT YEAR BUSINESS CREDIT CALCULA-
TION.—Section 38(b) (of the Internal Revenue Code of 
1986) is amended by redesignating paragraphs (6) 
through (37) as paragraphs (7) through (38), respectively, 
and by inserting after paragraph (5) the following new 
paragraph: 
‘‘(6) the neighborhood homes credit determined 
under section 42A(a),’’. 
(c) LIMITATION ON CARRYBACK.—Section 39 of the 
Internal Revenue Code of 1986 is amended by adding at 
the end the following new section: 
‘‘(e) NO CARRYBACK
OF NEIGHBORHOOD HOMES 
CREDIT BEFORE EFFECTIVE DATE.—No amount of the 
unused credit attributable to section 42A may be taken 
into account under section 38(a)(3) for any taxable year 
beginning before the date of the enactment of this Act.’’. 
(d) CANCELLATION
OF
INDEBTEDNESS.—Section 
108 of the Internal Revenue Code of 1986 is amended— 
(1) by striking ‘‘or’’ at the end of subsection 
(a)(1)(D), by striking the period at the end of sub-
section (a)(1)(E)(ii) and inserting ‘‘, or’’, and add-
ing at the end of subsection (a)(1) the following new 
subparagraph: 
‘‘(F) if the discharge is qualified neighbor-
hood homes credit indebtedness.’’, and 
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(2) by adding at the end of subsection (b)(2) 
the following new subparagraph: 
‘‘(H) SPECIAL RULES RELATING TO QUALI-
FIED NEIGHBORHOOD HOMES CREDIT INDEBT-
EDNESS.—For purposes of this section, the 
term ‘qualified neighborhood homes credit in-
debtedness’ means indebtedness arising in con-
nection with the development of a qualified resi-
dence under section 42A.’’. 
(e) 
CONFORMING
AMENDMENTS.—Subsections 
(i)(3)(D), (i)(6)(B)(i), and (k)(1) of section 469 of the In-
ternal Revenue Code of 1986 are each amended by insert-
ing ‘‘or 42A’’ after ‘‘section 42’’. 
(f) 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. Neighborhood homes credit.’’ 
(g) EFFECTIVE DATE.—The amendments made by 
this section shall apply to calendar years beginning after 
December 31, 2019. 
Æ 
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