To amend the Internal Revenue Code of 1986 to provide an incentive to preserve affordable housing in multifamily housing units which are sold or exchanged.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Affordable Housing Preservation Tax 
Relief Act of 2003''.

SEC. 2. AFFORDABLE HOUSING PRESERVATION CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business-related 
credits) is amended by inserting after section 42 the following new 
section:

``SEC. 42A. AFFORDABLE HOUSING PRESERVATION CREDIT.

    ``(a) General Rule.--For purposes of section 38, the affordable 
housing preservation credit determined under this section for the 
taxable year is an amount equal to the preservation allocation amount 
for the taxable year.
    ``(b) Limitations.--The amount allowed as a credit to a taxpayer 
under subsection (a) with respect to a qualified preservation sale 
shall not exceed the gain recognized by the taxpayer from such sale.
    ``(c) Preservation Allocation Amount.--For purposes of subsection 
(a)--
            ``(1) In general.--The term `preservation allocation 
        amount' means the amount allocated to the taxpayer from a 
        qualified preservation sale by a housing credit agency.
            ``(2) Limitation.--The amount allocated under paragraph (1) 
        shall not exceed the excess of--
                    ``(A) the product of--
                            ``(i) the maximum rate tax under section 1 
                        in the case of an individual or section 11 in 
                        the case of a corporation, multiplied by
                            ``(ii) the gain recognized by the taxpayer 
                        from the qualified preservation sale, over
                    ``(B) the amount of cash or the fair market value 
                of other property received by the taxpayer with respect 
                to the sale.
    ``(d) Qualified Preservation Sale.--For purposes of this section--
            ``(1) In general.--The term `qualified preservation sale' 
        means a sale of eligible multifamily housing property to or an 
        exchange of such property with a preservation entity which 
        agrees to maintain affordability and use restrictions regarding 
        the property that are--
                    ``(A) for a term of not less than the extended use 
                period,
                    ``(B) legally enforceable, and
                    ``(C) consistent with the long-term physical and 
                financial viability and character of such housing as 
                affordable housing.
        Such restrictions shall be binding on all successors of the 
        preservation entity and shall be recorded as a restrictive 
        covenant on the property pursuant to State law.
            ``(2) Eligible multifamily housing property.--The term 
        `eligible multifamily housing property' means--
                    ``(A) property assisted under section 221(d)(3) or 
                section 236 of the National Housing Act and with 
                respect to which the owner is subject to the 
                restrictions described in section 1039(b)(1)(B) of such 
                Act (as in effect on the day before the date of the 
                enactment of the Revenue Reconciliation Act of 1990),
                    ``(B) property described in section 512(2)(B) of 
                the Multifamily Assisted Housing Reform and 
                Affordability Act of 1997 (42 U.S.C. 1437f note),
                    ``(C) property with respect to which a loan is made 
                or insured under title V of the Housing Act of 1949, 
                and
                    ``(D) property that either received an allocation 
                of low-income housing tax credit pursuant to paragraph 
                (1) of section 42(h) or was exempted from such 
                paragraph by paragraph (4) of such section.
            ``(3) Affordable housing.--The term `affordable housing' 
        means housing which is a qualified low-income housing project 
        (as defined in section 42(g)).
            ``(4) Extended use period.--The term `extended use period' 
        means the period beginning on the date of sale and ending on 
        the earlier of--
                    ``(A) 30 years after the close of the sale, or
                    ``(B) the date that the property is acquired by 
                foreclosure (or instrument in lieu of foreclosure).
        Subparagraph (B) shall not apply if the Secretary determines 
        that the acquisition described therein is part of an 
        arrangement with the owner a purpose of which is to terminate 
        the extended use period.
            ``(5) Preservation entity.--The term `preservation entity' 
        means a housing credit agency or an organization approved by a 
        housing credit agency that has the capacity and commitment to 
        successfully acquire and preserve eligible multifamily housing 
        property. Such preservation entity shall be independent from 
        the seller partnership or its affiliates.
    ``(e) Allocation by Housing Credit Agency.--For purposes of this 
section--
            ``(1) In general.--The aggregate preservation credit dollar 
        amount which a housing credit agency may allocate for any 
        calendar year is the portion of the State preservation credit 
        ceiling allocated under this subsection for such calendar year 
        to such agency.
            ``(2) State ceiling initially allocated to housing credit 
        agencies.--Except as provided in paragraph (4), the State 
        preservation credit ceiling for each calendar year shall be 
        allocated to the housing credit agency of such State. If there 
        is more than 1 housing credit agency of a State, all such 
        agencies shall be treated as a single agency.
            ``(3) State preservation credit ceiling.--The State 
        preservation credit ceiling applicable to any State and any 
        calendar year shall be an amount equal to the sum of--
                    ``(A) the unused State preservation credit ceiling 
                (if any) of such State for the preceding calendar year,
                    ``(B) the sum of--
                            ``(i) $1.00 multiplied by the State 
                        population,
                            ``(ii) $1,000,000,
                            ``(iii) the amount of State preservation 
                        credit ceiling returned in the calendar year, 
                        plus
                            ``(iv) the amount (if any) allocated under 
                        paragraph (4) to such State by the Secretary.
                For purposes of clause (i), the unused State 
                preservation 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 
                preservation credit dollar amount allocated for such 
                year.
            ``(4) Unallocated credit.--
                    ``(A) In general.--In the event that a State does 
                not allocate all of its preservation credit, such 
                unallocated credit shall be allocated among qualified 
                States for the succeeding calendar year.
                    ``(B) Qualified state.--For purposes of 
                subparagraph (A), the term `qualified State' means, 
                with respect to a calendar year, any State which 
                allocates its entire State preservation credit from the 
                preceding calendar year and for which a request is made 
                to receive an allocation under subparagraph (C).
                    ``(C) Unused preservation credit carryover.--For 
                purposes of this paragraph, the unused preservation 
                credit carryover of a State for any calendar year is 
                the excess (if any) of--
                            ``(i) the unused State preservation credit 
                        ceiling for the year preceding such year, over
                            ``(ii) the aggregate preservation credit 
                        dollar amount allocated for such year.
                    ``(D) Allocated amount.--The amount allocated under 
                this paragraph is the amount determined by the 
                Secretary to bear the same ratio to the aggregate 
                unused preservation credit carryover of all States from 
                the preceding calendar year as the population of the 
                State bears to the population of all qualified States 
                for the calendar year. For purpose of the preceding 
                sentence, population shall be determined in accordance 
                with section 146(j).
            ``(5) Housing credit agency defined.--The term `housing 
        credit agency' has the meaning given such term by section 
        42(h)(8)(A).
    ``(f) Responsibilities of Housing Credit Agency.--The housing 
credit agency (or an agent or other private contractor of such agency) 
shall--
            ``(1) determine whether the preservation entity's plan for 
        rehabilitation (if any) and operation of the eligible 
        multifamily housing property is viable for no less than 30 
        years,
            ``(2) monitor the affordability and use restrictions for 
        the eligible multifamily housing property, and
            ``(3) notify the Internal Revenue Service as to any portion 
        of such property which is out of compliance.
    ``(g) Recapture for Noncompliance.--If the Secretary determines 
that all or a portion of the multifamily housing property is out of 
compliance with the requirements of this section, the taxpayer's tax 
under this chapter for the taxable year shall be increased by the sum 
of--
            ``(1) an amount equal to the amount which bears the same 
        ratio to the total credit allowed to the taxpayer under 
        subsection (a) as the taxpayer's share of the portion of such 
        property which is out of compliance bears to the entire 
        property, plus
            ``(2) interest at the underpayment rate established under 
        section 6621 on the amount determined under paragraph (1) for 
        each prior taxable year for the period beginning on the due 
        date for filing the return for the taxable year for which the 
        credit was allowed under subsection (a).
No deduction shall be allowed under this chapter for interest described 
in paragraph (2).''.
    (b) Credit to Be Part of General Business Credit.--Subsection (b) 
of section 38 of such Code (relating to general business credit) is 
amended by striking ``plus'' at the end of paragraph (14), by striking 
the period at the end of paragraph (15) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
            ``(16) the affordable housing preservation credit 
        determined under section 42A(a).''.
    (c) Conforming 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 relating to section 45F the following new 
item:

``Sec. 42A. Affordable housing preservation credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

Summary: Affordable Housing Preservation Tax Relief Act of 2003 - Amends the Internal Revenue Code to establish an affordable housing credit for the qualified preservation sale or exchange of an eligible multifamily property to or with a preservation entity which agrees to maintain specified affordability and use restrictions regarding the property.