Affordable Housing Bond Enhancement Act
Bill: S.4445 | Sponsor: Sen. Cortez Masto, Catherine (D-NV)
Policy area: Taxation

Summary:
Affordable Housing Bond Enhancement Act
This bill modifies the Mortgage Revenue Bond (MRB) and the Mortgage Credit Certificate (MCC) programs of state housing finance agencies to expand the supply of affordable homes and homeownership for low- and moderate-income homebuyers.
The bill requires the Internal Revenue Service to annually report to the congressional banking and tax committees on the use by states of their private activity bond authority for housing investment. It also increases the MRB home improvement loan limit from $15,000 to $50,000.
The bill permits states to redesignate their carryforward authority and use it for housing investment and permits MRBs to be used to refinance home loans for borrowers who have incomes below 115% of median family income.
The bill modifies the recapture requirement for homeowners who receive a MRB-financed mortgage or an MCC and sell their residences within the first nine years of ownership and reduces the time in which a recapture tax may be assessed from nine to five years.
The bill revises the MCC benefit calculation to a simple percentage of the original loan balance. It also extends the MCC revocation period from two to four years.
The bill reduces the public notice requirement for MCC issuers from 90 days to 30 days and eliminates certain MCC reporting requirements.

To amend the Internal Revenue Code of 1986 to expand housing investment 
          with mortgage revenue bonds, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Affordable Housing 
Bond Enhancement Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment 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 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Reporting requirements for bond usage.
Sec. 3. Use of carryforward bond authority.
Sec. 4. Elimination of refinancing limitation for mortgage revenue 
                            bonds.
Sec. 5. Increase in financing limit for qualified home improvement 
                            loans.
Sec. 6. Revision of recapture tax for mortgage revenue bonds.
Sec. 7. Modifying calculation of credit for interest paid on certified 
                            indebtedness.
Sec. 8. Extension of period for mortgage credit certificate to be in 
                            effect.
Sec. 9. Extension of period to revoke election to issue mortgage credit 
                            certificates.
Sec. 10. Adjustment of public notice requirement.
Sec. 11. Elimination of reporting requirement.

SEC. 2. REPORTING REQUIREMENTS FOR BOND USAGE.

    (a) In General.--Section 146 is amended by adding at the end the 
following:
    ``(o) Reporting.--Not later than April 1 of each calendar year, the 
Secretary shall submit a report to the Committee on Banking, Housing, 
and Urban Affairs of the Senate, the Committee on Financial Services of 
the House of Representatives, the Committee on Ways and Means of the 
House of Representatives, and the Committee on Finance of the Senate, 
containing information, as provided to the Secretary by State and local 
issuing authorities, which specifies for each State--
            ``(1) the purposes for which any State ceiling and 
        carryforward under subsection (f) applicable to such State for 
        the preceding calendar year was used, and
            ``(2) the total amount of--
                    ``(A) any excess amounts described in paragraph (1) 
                of subsection (f) for which the issuing authority did 
                not elect to treat as a carryforward under such 
                subsection, and
                    ``(B) any amount of any carryforward under such 
                subsection which expired pursuant to paragraph (3)(A) 
                of such subsection.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to calendar years beginning after the date of enactment of this Act.

SEC. 3. USE OF CARRYFORWARD BOND AUTHORITY.

    (a) In General.--Paragraph (3) of section 146(f) is amended--
            (1) by striking subparagraph (A) and inserting the 
        following:
                    ``(A) In general.--If any issuing authority--
                            ``(i) elects a carryforward under paragraph 
                        (1) with respect to any carryforward purpose,
                            ``(ii) receives a carryforward under 
                        paragraph (4)(B)(i) with respect to any 
                        carryforward purpose, or
                            ``(iii) redesignates a carryforward under 
                        paragraph (4)(B)(ii) for any carryforward 
                        purpose,
                any private activity bonds issued by such authority 
                with respect to such purpose at any time during the 3 
                calendar years following the calendar year in which the 
                carryforward arose shall not be taken into account 
                under subsection (a) to the extent the amount of such 
                bonds issued at or prior to such time does not exceed 
                the amount of the carryforward elected, received, or 
                redesignated for such purpose, provided that such 
                amount has not been subsequently transferred to another 
                issuing authority or redesignated for another purpose 
                pursuant to paragraph (4)(B).'', and
            (2) in subparagraph (B), by inserting ``, or received or 
        redesignated for,'' after ``with respect to''.
    (b) Election.--Paragraph (4) of section 146(f) is amended to read 
as follows:
            ``(4) Election.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), any election under this subsection 
                (and any identification or specification contained 
                therein), once made, shall be irrevocable.
                    ``(B) Exception for housing.--
                            ``(i) Transfer.--In the case of any 
                        carryforward elected under paragraph (1) by an 
                        issuing authority with respect to any 
                        carryforward purpose, during the period 
                        described in paragraph (3)(A) with respect to 
                        such carryforward, such issuing authority may 
                        transfer such carryforward to any issuing 
                        authority within the same State that is 
                        authorized to issue qualified mortgage bonds or 
                        exempt facility bonds described in section 
                        142(a)(7).
                            ``(ii) Redesignation.--In the case of any 
                        carryforward--
                                    ``(I) elected under paragraph (1) 
                                by an issuing authority with respect to 
                                any carryforward purpose which has not 
                                been transferred pursuant to clause 
                                (i), or
                                    ``(II) received by an issuing 
                                authority pursuant to clause (i) with 
                                respect to any carryforward purpose,
                        during the period described in paragraph (3)(A) 
                        with respect to such carryforward, such issuing 
                        authority may redesignate such carryforward to 
                        be for the purpose of issuing qualified 
                        mortgage bonds or mortgage credit certificates, 
                        or for the purpose of issuing exempt facility 
                        bonds described in section 142(a)(7).
                            ``(iii) State direction.--In the case of a 
                        State which has enacted a law described in 
                        subsection (e)(1), such State may, by law, 
                        prohibit, limit, require, or otherwise direct 
                        transfer or redesignation by issuing 
                        authorities within such State (except in the 
                        case of a constitutional home rule city) 
                        pursuant to this subparagraph.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to elections made under section 146(f) of the Internal Revenue 
Code of 1986 after December 31, 2022.

SEC. 4. ELIMINATION OF REFINANCING LIMITATION FOR MORTGAGE REVENUE 
              BONDS.

    (a) In General.--Section 143(i)(1) is amended by adding at the end 
the following:
                    ``(D) Exception for refinancing for certain 
                mortgagors.--
                            ``(i) In general.--The refinancing of a 
                        mortgage on a residence of a mortgagor who, as 
                        of the date of such refinancing, satisfies the 
                        principal residence requirements under 
                        subsection (c)(1) and the income requirements 
                        under subsection (f) shall not be treated as 
                        the acquisition or replacement of an existing 
                        mortgage for purposes of subparagraph (A).
                            ``(ii) Special rule.--In applying clause 
                        (i) to any refinancing, subsection (d) shall 
                        not apply.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to refinancing loans closed on or after the date of enactment of this 
Act.

SEC. 5. INCREASE IN FINANCING LIMIT FOR QUALIFIED HOME IMPROVEMENT 
              LOANS.

    (a) Increase in Financing Limit.--Paragraph (4) of section 143(k) 
is amended by striking ``$15,000'' and inserting ``$50,000''.
    (b) Inflation Adjustment.--Paragraph (4) of section 143(k), as 
amended by subsection (a), is amended--
            (1) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively, and by moving such clauses (as so 
        redesignated) 2 ems to the right,
            (2) by striking ``The term'' and inserting the following:
                    ``(A) In general.--The term'', and
            (3) by adding at the end the following:
                    ``(B) Inflation adjustment.--
                            ``(i) In general.--In the case of any 
                        calendar year beginning after 2022, the $50,000 
                        amount in subparagraph (A) 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, 
                                determined by substituting `2021' for 
                                `2016' in subparagraph (A)(ii) thereof.
                            ``(ii) Rounding.--If any increase under 
                        clause (i) is not a multiple of $100, such 
                        increase shall be rounded to the nearest 
                        multiple of $100.''.
    (c) Effective Dates.--
            (1) Increase in financing limit.--The amendments made by 
        subsection (a) shall apply to loans made on or after the date 
        of enactment of this Act.
            (2) Inflation adjustment.--The amendments made by 
        subsection (b) shall apply to calendar years beginning after 
        December 31, 2022.

SEC. 6. REVISION OF RECAPTURE TAX FOR MORTGAGE REVENUE BONDS.

    (a) In General.--Subparagraph (C) of section 143(m)(4) is amended 
to read as follows:
                    ``(C) Holding period percentage.--The term `holding 
                period percentage' means the percentage determined in 
                accordance with the following table:

``If the disposition occurs during  The holding period percentage is:
        a year after the testing 
        date which is:
        The 1st such year..................................         20 
        The 2nd such year..................................         40 
        The 3rd such year..................................         60 
        The 4th such year..................................         80 
        The 5th such year..................................     100.''.

    (b) Conforming Amendment.--Section 143(m)(7)(B)(ii) is amended by 
striking ``9-year period'' and inserting ``5-year period''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2021.

SEC. 7. MODIFYING CALCULATION OF CREDIT FOR INTEREST PAID ON CERTIFIED 
              INDEBTEDNESS.

    (a) In General.--Section 25 is amended--
            (1) in subsection (a)--
                    (A) in paragraph (1), by striking subparagraph (B) 
                and inserting the following:
                    ``(B) the original principal amount of the 
                certified indebtedness amount on which interest was 
                paid or accrued by the taxpayer during the taxable 
                year.'', and
                    (B) in paragraph (2)--
                            (i) in the heading, by striking ``where 
                        credit rate exceeds 20 percent'', and
                            (ii) in subparagraph (A), by striking ``If 
                        the certificate credit rate exceeds 20 percent, 
                        the'' and inserting ``The'', and
            (2) in subsection (d)--
                    (A) by striking paragraph (1) and inserting the 
                following:
            ``(1) In general.--
                    ``(A) Certificate credit rate.--Subject to 
                subparagraph (B), the certificate credit rate specified 
                in any mortgage credit certificate shall not be less 
                than 1 percent or more than 5 percent.
                    ``(B) Variable rate.--With respect to any mortgage 
                credit certificate, the issuing authority may elect to 
                specify a different certificate credit rate for each 
                year of the term of the mortgage.'', and
                    (B) in paragraph (2)--
                            (i) in the heading, by striking 
                        ``certificate credit rates'' and inserting 
                        ``amount of credit certificates'', and
                            (ii) in subparagraph (A)(ii), by inserting 
                        ``average annual'' before ``certificate credit 
                        rate''.
    (b) Effective Date.--The amendments made by this section shall 
apply to mortgage credit certificates issued after December 31, 2021.

SEC. 8. EXTENSION OF PERIOD FOR MORTGAGE CREDIT CERTIFICATE TO BE IN 
              EFFECT.

    (a) In General.--Section 25(e)(3)(B) is amended by striking 
``second'' and inserting ``fourth''.
    (b) Effective Date.--The amendments made by this section shall 
apply to mortgage credit certificates issued after December 31, 2022.

SEC. 9. EXTENSION OF PERIOD TO REVOKE ELECTION TO ISSUE MORTGAGE CREDIT 
              CERTIFICATES.

    (a) In General.--Section 25(c)(2) is amended by adding at the end 
the following:
                    ``(C) Revocation of election to issue mortgage 
                credit certificates.--For purposes of any election made 
                by an issuing authority under subparagraph (A)(ii) 
                during any calendar year, such issuing authority may 
                subsequently elect to reduce the nonissued bond amount 
                (as defined in subsection (d)(2)(B)) for such calendar 
                year, provided that such election is made not later 
                than the end of the succeeding calendar year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to elections made by an issuing authority under section 25(c)(2)(A)(ii) 
of the Internal Revenue Code of 1986 after December 31, 2022.

SEC. 10. ADJUSTMENT OF PUBLIC NOTICE REQUIREMENT.

    (a) In General.--Section 25(e)(5) is amended by striking ``90 
days'' and inserting ``30 days''.
    (b) Effective Date.--The amendments made by this section shall 
apply to notices provided after December 31, 2022.

SEC. 11. ELIMINATION OF REPORTING REQUIREMENT.

    (a) In General.--Section 25 is amended by striking subsection (g).
    (b) Conforming Amendments.--Section 6709 is amended--
            (1) by striking subsection (c), and
            (2) by redesignating subsection (d) as subsection (c).
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of enactment of this Act.
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