To amend the Internal Revenue Code of 1986 to replace the mortgage interest deduction with a nonrefundable credit for indebtedness secured by a residence, to provide affordable housing to extremely low-income families, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Common Sense Housing Investment Act 
of 2012''.

SEC. 2. CONGRESSIONAL FINDINGS.

    The Congress finds the following:
            (1) Two principal Federal housing goals are to increase the 
        rate of home ownership and make rental housing affordable for 
        low-income families and individuals.
            (2) Much more progress has been achieved on the first goal 
        than on the second goal.
            (3) The Federal Government devotes almost four times the 
        amount of budgetary resources to supporting home ownership than 
        it devotes to making affordable rental housing available.
            (4) The burden of housing costs is more pronounced among 
        renters than among owners.
            (5) There is a shortage of nearly 7 million homes 
        affordable to families in the bottom 20 percent of income, 
        meaning that there are only 30 affordable units for every 100 
        families.
            (6) Only one in four families that qualify for rental 
        housing assistance receives benefits.
            (7) Housing assistance waiting lists can be 10 years long 
        and in many communities are closed.
            (8) Public housing facilities in the United States have 
        more than $26 billion in deferred maintenance after decades of 
        neglect which results in a loss of 10,000 units each year.
            (9) The low income housing tax credit successfully provides 
        100,000 units of affordable housing every year.
            (10) Every tax reform commission has recommended capping 
        the mortgage interest deduction and converting it to a fairer 
        and simpler credit.
            (11) More than 75 percent of the value of the mortgage 
        interest deduction inures to the benefit of the top 20 percent 
        of earners.
            (12) Fewer than half of tax filers with a home mortgage 
        claim the mortgage interest deduction.
            (13) Only 9 percent of rural tax filers claim the mortgage 
        interest deduction.
            (14) Ninety-six percent of homes sold between 2000 and 2009 
        sold for less than $500,000.
            (15) A better approach that provides equitable benefits for 
        families who buy homes, enables more low- and moderate-income 
        homeowners to receive a benefit, and invests in affordable 
        rental housing to assist those who used to be homeless or who 
        have extremely or very low incomes is needed to strengthen 
        families and communities.

SEC. 3. REPLACEMENT OF MORTGAGE INTEREST DEDUCTION WITH MORTGAGE 
              INTEREST CREDIT.

    (a) Nonrefundable Credit.--Subpart A of part IV of subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 (relating to 
nonrefundable personal credits) is amended by inserting after section 
25D the following new section:

``SEC. 25E. INTEREST ON INDEBTEDNESS SECURED BY QUALIFIED RESIDENCE.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to 20 percent of the qualified 
residence interest paid or accrued during the taxable year.
    ``(b) Qualified Residence Interest.--For purposes of this section--
            ``(1) In general.--The term `qualified residence interest' 
        means interest which is paid or accrued during the taxable year 
        on--
                    ``(A) acquisition indebtedness with respect to any 
                qualified residence of the taxpayer, or
                    ``(B) home equity indebtedness with respect to any 
                qualified residence of the taxpayer.
        For purposes of the preceding sentence, the determination of 
        whether any property is a qualified residence of the taxpayer 
        shall be made as of the time the interest is accrued.
            ``(2) Overall limitation.--The aggregate amount of 
        indebtedness taken into account for any period for purposes of 
        this section shall not exceed $500,000 ($250,000 in the case of 
        a married individual filing a separate return).
            ``(3) Acquisition indebtedness.--The term `acquisition 
        indebtedness' means any indebtedness which--
                    ``(A) is incurred in acquiring, constructing, or 
                substantially improving any qualified residence of the 
                taxpayer, and
                    ``(B) is secured by such residence.
        Such term also includes any indebtedness secured by such 
        residence resulting from the refinancing of indebtedness 
        meeting the requirements of the preceding sentence (or this 
        sentence), but only to the extent the amount of the 
        indebtedness resulting from such refinancing does not exceed 
        the amount of the refinanced indebtedness.
            ``(4) Home equity indebtedness.--
                    ``(A) In general.--The term `home equity 
                indebtedness' means any indebtedness (other than 
                acquisition indebtedness) secured by a qualified 
                residence to the extent the aggregate amount of such 
                indebtedness does not exceed--
                            ``(i) the fair market value of such 
                        qualified residence, reduced by
                            ``(ii) the amount of acquisition 
                        indebtedness with respect to such residence.
                    ``(B) Limitation.--The aggregate amount treated as 
                home equity indebtedness for any period shall not 
                exceed $100,000 ($50,000 in the case of a married 
                individual filing a separate return).
    ``(c) Special Rules.--For purposes of this section--
            ``(1) Qualified residence.--The term `qualified residence' 
        means--
                    ``(A) the principal residence (within the meaning 
                of section 121) of the taxpayer, and
                    ``(B) 1 other residence of the taxpayer which is 
                selected by the taxpayer for purposes of this 
                subsection for the taxable year and which is used by 
                the taxpayer as a residence (within the meaning of 
                section 280A(d)(1)).
            ``(2) Married individuals filing separate returns.--If a 
        married couple does not file a joint return for the taxable 
        year--
                    ``(A) such couple shall be treated as 1 taxpayer 
                for purposes of paragraph (1), and
                    ``(B) each individual shall be entitled to take 
                into account 1 residence unless both individuals 
                consent in writing to 1 individual taking into account 
                the principal residence and 1 other residence.
            ``(3) Residence not rented.--For purposes of paragraph 
        (1)(B), notwithstanding section 280A(d)(1), if the taxpayer 
        does not rent a dwelling unit at any time during a taxable 
        year, such unit may be treated as a residence for such taxable 
        year.
            ``(4) Unenforceable security interests.--Indebtedness shall 
        not fail to be treated as secured by any property solely 
        because, under any applicable State or local homestead or other 
        debtor protection law in effect on August 16, 1986, the 
        security interest is ineffective or the enforceability of the 
        security interest is restricted.
            ``(5) Special rules for estates and trusts.--For purposes 
        of determining whether any interest paid or accrued by an 
        estate or trust is qualified residence interest, any residence 
        held by such estate or trust shall be treated as a qualified 
        residence of such estate or trust if such estate or trust 
        establishes that such residence is a qualified residence of a 
        beneficiary who has a present interest in such estate or trust 
        or an interest in the residuary of such estate or trust.
    ``(d) Coordination With Deduction.--In the case of any taxable year 
beginning in calendar years 2013 through 2017, the taxpayer may elect 
to apply this section in lieu of the deduction under section 163 for 
qualified residence interest.''.
    (b) Phaseout of Deduction.--Section 163(h) of such Code is amended 
by adding at the end the following new paragraph:
            ``(5) Phaseout.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 2012, the amount 
                otherwise allowable as a deduction by reason of 
                paragraph (2)(D) shall be the applicable percentage of 
                such amount.
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage shall be 
                determined in accordance with the following table:


------------------------------------------------------------------------
                                                          The applicable
     ``For taxable years beginning in calendar year:         percentage
                                                                is:
------------------------------------------------------------------------
2013....................................................            100%
2014....................................................             80%
2015....................................................             60%
2016....................................................             40%
2017....................................................             20%
2018 and thereafter.....................................          0%.''.
------------------------------------------------------------------------

    (c) Phasedown of Mortgage Limit.--Subparagraph (B) of section 
163(h)(3) of such Code is amended by adding at the end the following:
                            ``(iii) Phasedown.--
                                    ``(I) In general.--In the case of 
                                any taxable year beginning in calendar 
                                years 2013 through 2017, clause (ii) 
                                shall be applied by substituting the 
                                amounts specified in the table in 
                                subclause (II) for `$1,000,000' and 
                                `$500,000', respectively.
                                    ``(II) Phasedown amounts.--For 
                                purposes of subclause (I), the amounts 
                                specified in this subclause for a 
                                taxable year shall be the amounts 
                                specified in the following table:


------------------------------------------------------------------------
                                                   Amount       Amount
   ``For taxable years beginning in calendar    substituted  substituted
                     year:                           for          for
                                                $1,000,000:   $500,000:
------------------------------------------------------------------------
2013..........................................   $1,000,000     $500,000
2014..........................................     $900,000     $450,000
2015..........................................     $800,000     $400,000
2016..........................................     $700,000     $350,000
2017..........................................     $600,000  $300,000.''
                                                                       .
------------------------------------------------------------------------

    (d) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after section 25D the following new item:

``Sec. 25E. Interest on indebtedness secured by qualified residence.''.
    (e) Effective Date.--The amendments made by this section shall 
apply with respect to interest paid or accrued after December 31, 2012.

SEC. 4. DEDUCTION ALLOWED FOR INTEREST AND TAXES RELATING TO LAND FOR 
              DWELLING PURPOSES OWNED OR LEASED BY COOPERATIVE HOUSING 
              CORPORATIONS.

    (a) In General.--Subparagraph (B) of section 216(b)(1) of the 
Internal Revenue Code of 1986 is amended by striking ``or land,'' after 
``building,''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to amounts paid or accrued after December 31, 2012.

SEC. 5. USE OF MORTGAGE INTEREST SAVINGS TO INCREASE LOW-INCOME HOUSING 
              TAX CREDIT.

    (a) In General.--Subclause (I) of section 42(h)(3)(C)(ii) of the 
Internal Revenue Code of 1986 is amended by striking ``$1.75 ($1.50 for 
2001)'' and inserting ``$2.70''.
    (b) Inflation Adjustment.--Subparagraph (H) of section 42(h)(3) of 
such Code is amended to read as follows:
                    ``(H) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of a 
                        calendar year after 2002, the $2,000,000 amount 
                        in subparagraph (C) shall be increased by an 
                        amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for such calendar year by 
                                substituting `calendar year 2001' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(ii) Per capita amount.--In the case of a 
                        calendar year after 2013, the $2.70 amount in 
                        subparagraph (C) shall be increased by an 
                        amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for such calendar year by 
                                substituting `calendar year 2012' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                            ``(iii) Rounding.--
                                    ``(I) In the case of the $2,000,000 
                                amount, any increase under clause (i) 
                                which is not a multiple of $5,000 shall 
                                be rounded to the next lowest multiple 
                                of $5,000.
                                    ``(II) In the case of the $2.70 
                                amount, any increase under clause (ii) 
                                which is not a multiple of 5 cents 
                                shall be rounded to the next lowest 
                                multiple of 5 cents.''.
    (c) Eligible Basis.--Clause (i) of section 42(d)(5)(B) of such Code 
is amended by striking ``and'' at the end of subclause (I), by striking 
the period at the end of subclause (II) and inserting ``, and'', and by 
adding at the end the following:
                                    ``(III) in the case of a building 
                                containing units which are designated 
                                to serve extremely low-income 
                                households by the State housing credit 
                                agency and require the increase in 
                                credit under this subparagraph in order 
                                for such building to be financially 
                                feasible as part of a qualified low-
                                income housing project, the eligible 
                                basis of such building determined by 
                                the portion of such units shall be 150 
                                percent of such basis determined 
                                without regard to this subparagraph.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to allocations made in calendar years beginning after December 
31, 2012.

SEC. 6. USE OF MORTGAGE INTEREST SAVINGS FOR AFFORDABLE HOUSING 
              PROGRAMS.

    (a) Use of Savings.--For each year, the Secretary of the Treasury 
shall determine the amount of revenues accruing to the general fund of 
the Treasury by reason of the enactment of section 3 of this Act that 
remain after use of such revenues in accordance with section 5 of this 
Act and shall credit an amount equal to such remaining revenues as 
follows:
            (1) Housing trust fund.--The Secretary shall credit the 
        Housing Trust Fund established under section 1338 of the 
        Federal Housing Enterprises Financial Safety and Soundness Act 
        of 1992 (12 U.S.C. 4568) with an amount equal to 60 percent of 
        the amount such remaining revenues.
            (2) Section 8 rental assistance.--The Secretary shall 
        credit an amount equal to 30 percent of the amount of such 
        remaining revenues to the Secretary of Housing and Urban 
        Development for use only for providing tenant- and project-
        based rental assistance under section 8 of the United States 
        Housing Act of 1937 (42 U.S.C. 1437f).
            (3) Public housing capital fund.--The Secretary shall 
        credit an amount equal to 10 percent of the amount of such 
        remaining revenues to the Public Housing Capital Fund under 
        section 9(d) of the United States Housing Act of 1937 (42 
        U.S.C. 1437g(d)).
    (b) Changes to Housing Trust Fund.--Not later than the expiration 
of the 6-month period beginning on the date of the enactment of this 
Act, the Secretary of Housing and Urban Development shall revise the 
regulations relating to the Housing Trust Fund established under 
section 1338 of the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992 (12 U.S.C. 4568) to provide that such section is 
carried out with the maximum amount of flexibility possible while 
complying with such section, which shall include revising such 
regulations--
            (1) to increase the limitation on amounts from the Fund 
        that are available for use for operating assistance for 
        housing;
            (2) to allow public housing agencies and tribally 
        designated housing entities to be recipient of grants amounts 
        from the Fund that are allocated to a State or State designated 
        entity; and
            (3) eliminate the applicability of rules for the Fund that 
        are based on the HOME Investment Partnerships Act (42 U.S.C. 
        1721 et seq.).

Summary: Common Sense Housing Investment Act of 2012 - Amends the Internal Revenue Code, with respect to the tax deduction for mortgage interest, to: (1) allow, in lieu of such deduction, a tax credit for 20% of mortgage interest paid in a taxable year for the taxpayer's principal residence and one other residence; (2) provide for a phaseout of the tax deduction for mortgage interest between 2013 and 2017; (3) allow a deduction for interest and taxes relating to land for dwelling purposes owned or leased by cooperative housing corporations; and (4) increase the state housing credit ceiling for the low-income housing tax credit.

Directs the Secretary of the Treasury to apply the savings from the enactment of this Act to the Housing Trust Fund, for assistance under the Section 8 low-income housing program, and for the Public Housing Capital Fund.