Title: Neighborhood Homes Investment Act
Policy area: Taxation

Summary:
Neighborhood Homes Investment Act
This bill establishes a new business-related tax credit to finance home building and rehabilitation in neighborhoods that meet certain eligibility criteria relating to poverty rates, income, and home values. The credit is limited to 35% of the lesser of the qualified development cost (i.e., the cost of construction, substantial rehabilitation, demolition, and environmental remediation of residential properties) or 80% of the national median sale price for new homes. The credit applies to single family homes containing four or fewer residential units, condominiums, or houses or apartments owned by cooperative housing corporations.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 4073 Introduced in Senate (IS)]

<DOC>






116th CONGRESS
  2d Session
                                S. 4073

 To amend the Internal Revenue Code of 1986 to allow a credit against 
      tax for neighborhood revitalization, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 25, 2020

Mr. Cardin (for himself, Mr. Portman, Mr. Coons, Mr. Young, Mr. Brown, 
 and Mr. Scott of South Carolina) introduced the following bill; which 
        was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to allow a credit against 
      tax for neighborhood revitalization, 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.

    This Act may be cited as the ``Neighborhood Homes Investment Act''.

SEC. 2. NEIGHBORHOOD HOMES CREDIT.

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

``SEC. 42A. NEIGHBORHOOD HOMES CREDIT.

    ``(a) Allowance of Credit.--For purposes of section 38, the amount 
of the neighborhood homes credit determined under this section for a 
taxable year for a qualified project shall be, with respect to each 
qualified residence that is part of such qualified project and that 
experiences a qualified completion event during such taxable year, an 
amount equal to--
            ``(1) in the case of an affordable sale, with respect to 
        the seller, the excess of--
                    ``(A) the qualified development cost incurred by 
                such seller for such qualified residence, over
                    ``(B) the sale price of such qualified residence, 
                or
            ``(2) in the case of any other qualified completion event, 
        with respect to a taxpayer other than the owner of the 
        qualified residence (or a related person with respect to such 
        owner), the excess of--
                    ``(A) the development cost incurred by such 
                taxpayer for such qualified residence, over
                    ``(B) the amount received by such taxpayer as 
                payment for such rehabilitation.
    ``(b) Limitations.--
            ``(1) Amount.--The amount determined under subsection (a) 
        with respect to a qualified residence shall not exceed 35 
        percent of the lesser of--
                    ``(A) the qualified development cost, or
                    ``(B) 80 percent of the national median sale price 
                for new homes (as determined pursuant to the most 
                recent census data available as of the date on which 
                the neighborhood homes credit agency makes an 
                allocation for the qualified project).
            ``(2) Allocations.--
                    ``(A) In general.--The amount determined under 
                subsection (a) with respect to a qualified residence 
                that is part of a qualified project and that 
                experiences a qualified completion event shall not 
                exceed the excess of--
                            ``(i) the amount determined under 
                        subparagraph (B), over
                            ``(ii) the amounts previously determined 
                        under subsection (a) with respect to such 
                        qualified project.
                    ``(B) Allocation amount.--The amount determined 
                under this paragraph with respect to a qualified 
                residence that is part of a qualified project and that 
                experiences a qualified completion event is the least 
                of--
                            ``(i) the amount allocated to such project 
                        by the neighborhood homes credit agency under 
                        this section,
                            ``(ii) pursuant to subparagraph (C), the 
                        amount such agency determines at the time of 
                        the qualified completion event is necessary to 
                        ensure the financial feasibility of the 
                        project, or
                            ``(iii) in the case of a qualified 
                        completion event that occurs after the 5-year 
                        period beginning on the date of the allocation 
                        referred to in clause (i), $0.
                    ``(C) Financial feasability.--For purposes of 
                subparagraph (B)(ii), the neighborhood homes credit 
                agency shall consider--
                            ``(i) the sources and uses of funds and the 
                        total financing planned for the qualified 
                        project,
                            ``(ii) any proceeds or receipts expected to 
                        be generated by reason of tax benefits,
                            ``(iii) the percentage of the amount 
                        allocated to such project under this section 
                        used for project costs other than the cost of 
                        intermediaries, and
                            ``(iv) the reasonableness of the 
                        developmental costs and fees of the qualified 
                        project.
    ``(c) Qualified Development Cost.--For purposes of this section--
            ``(1) In general.--The term `qualified development cost' 
        means, with respect to a qualified residence, so much of the 
        allowable development cost as the neighborhood homes credit 
        agency certifies, at the time of the completion event, meets 
        the standards promulgated under subsection (h)(1)(C).
            ``(2) Allowable development cost.--The term `allowable 
        development cost' means--
                    ``(A) the cost of construction, substantial 
                rehabilitation, demolition of any structure, and 
                environmental remediation, and
                    ``(B) in the case of an affordable sale, so much of 
                the cost of acquiring buildings and land as does not 
                exceed an amount equal to 75 percent of the costs 
                described in subparagraph (A).
            ``(3) Condominium and cooperative housing units.--In the 
        case of a qualified residence described in subparagraph (B) or 
        (C) of subsection (f)(1), the allowable development cost of 
        such qualified residence shall be an amount equal to the total 
        allowable development cost of the entire condominium or 
        cooperative housing property in which such qualified residence 
        is located, multiplied by a fraction--
                    ``(A) the numerator of which is the total floor 
                space of such qualified residence, and
                    ``(B) the denominator of which is the total floor 
                space of all residences within such property.
    ``(d) Qualified Project.--For purposes of this section, the term 
`qualified project' means a project that--
            ``(1) a neighborhood homes credit agency certifies will 
        build or substantially rehabilitate 1 or more qualified 
        residences located in one or more qualified census tracts, and
            ``(2) is designated by such agency as a qualified project 
        under this section and is allocated (before such building or 
        substantial rehabilitation begins) a portion of the amount 
        allocated to such agency under subsection (g).
    ``(e) Qualified Census Tract.--For purposes of this section--
            ``(1) In general.--The term `qualified census tract' means 
        a census tract--
                    ``(A) with--
                            ``(i) a median gross income which does not 
                        exceed 80 percent of the applicable area median 
                        gross income,
                            ``(ii) a poverty rate that is not less than 
                        130 percent of the applicable area poverty 
                        rate, and
                            ``(iii) a median value for owner-occupied 
                        homes that does not exceed applicable area 
                        median value for owner-occupied homes,
                    ``(B) which is located in a city with a population 
                of not less than 50,000 and a poverty rate that is not 
                less than 150 percent of the applicable area poverty 
                rate, and which has--
                            ``(i) a median gross income which does not 
                        exceed the applicable area median gross income, 
                        and
                            ``(ii) a median value for owner-occupied 
                        homes that does not exceed 80 percent of the 
                        applicable area median value for owner-occupied 
                        homes, or
                    ``(C) which is located in a nonmetropolitan county 
                and which has--
                            ``(i) a median gross income which does not 
                        exceed the applicable area median gross income, 
                        and
                            ``(ii) been designated by a neighborhood 
                        homes credit agency under this clause.
            ``(2) Additional census tracts for substantial 
        rehabilitation.--In the case of a qualified residence that is 
        intended for substantial rehabilitation described in subsection 
        (f)(5)(B), the term `qualified census tract' includes a census 
        tract that meets the requirements of paragraph (1)(A), without 
        regard to clause (iii), and that is designated by the 
        neighborhood homes credit agency under this paragraph.
            ``(3) List of qualified census tracts.--The Secretary of 
        Housing and Urban Development shall, for each year, make 
        publicly available a list of qualified census tracts under--
                    ``(A) on a combined basis, subparagraphs (A) and 
                (B) of paragraph (1),
                    ``(B) subparagraph (C) of such paragraph, and
                    ``(C) paragraph (2).
    ``(f) Other Definitions.--For purposes of this section--
            ``(1) Qualified residence.--The term `qualified residence' 
        means a residence that consists of--
                    ``(A) a single-family home containing 4 or fewer 
                residential units,
                    ``(B) a condominium unit, or
                    ``(C) a house or an apartment owned by a 
                cooperative housing corporation (as defined in section 
                216(b)).
            ``(2) Affordable sale.--
                    ``(A) In general.--
                            ``(i) In general.--The term `affordable 
                        sale' means a sale to a qualified homeowner of 
                        a qualified residence that the neighborhood 
                        homes credit agency certifies as meeting the 
                        standards promulgated under subsection 
                        (h)(1)(D) for a price that does not exceed--
                                    ``(I) in the case of any qualified 
                                residence not described in subclause 
                                (II), (III), or (IV), the amount equal 
                                to the product of 4 multiplied by the 
                                applicable area median gross income,
                                    ``(II) in the case of a single-
                                family home containing two residential 
                                units, 125 percent of the amount 
                                described in subclause (I),
                                    ``(III) in the case of a single-
                                family home containing three 
                                residential units, 150 percent of the 
                                amount described in subclause (I), or
                                    ``(IV) in the case of a single-
                                family home containing four residential 
                                units, 175 percent of the amount 
                                described in subclause (I).
                            ``(ii) Related persons.--
                                    ``(I) In general.--A sale between 
                                related persons shall not be treated as 
                                an affordable sale.
                                    ``(II) Definition.--For purposes of 
                                this section, a person (in this clause 
                                referred to as the `related person') is 
                                related to any person if the related 
                                person bears a relationship to such 
                                person specified in section 267(b) or 
                                707(b)(1), or the related person and 
                                such person are engaged in trades or 
                                businesses under common control (within 
                                the meaning of subsections (a) and (b) 
                                of section 52). For purposes of the 
                                preceding sentence, in applying section 
                                267(b) or 707(b)(1), `10 percent' shall 
                                be substituted for `50 percent'.
            ``(3) Applicable area.--The term `applicable area' means--
                    ``(A) in the case of a metropolitan census tract, 
                the metropolitan area in which such census tract is 
                located, and
                    ``(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, or
                    ``(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 qualified residence that is 
                built or substantially rehabilitated as part of a 
                qualified project and sold, an affordable sale, or
                    ``(B) in the case of a qualified residence that is 
                substantially rehabilitated as part of a qualified 
                project and owned by the same qualified homeowner 
                throughout such rehabilitation, the completion of such 
                rehabilitation (as determined by the neighborhood homes 
                credit agency) to the standards promulgated under 
                subsection (h)(1)(D).
            ``(6) Qualified homeowner.--
                    ``(A) In general.--The term `qualified homeowner' 
                means, with respect to a qualified residence, an 
                individual--
                            ``(i) who owns and uses such qualified 
                        residence as the principal residence of such 
                        individual, and
                            ``(ii) whose income is 140 percent or less 
                        of the applicable area median gross income for 
                        the location of the qualified residence.
                    ``(B) Ownership.--For purposes of a cooperative 
                housing corporation (as such term is defined in section 
                216(b)), a tenant-stockholder shall be treated as 
                owning the house or apartment which such person is 
                entitled to occupy.
                    ``(C) Income.--For purposes of this paragraph, 
                income shall be a determined in accordance with section 
                143(f)(2) and 143(f)(4).
                    ``(D) Timing.--For purposes of this paragraph, the 
                income of a taxpayer shall be determined--
                            ``(i) in the case of a qualified 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
                            ``(ii) in the case of a qualified residence 
                        that is occupied by a qualified homeowner and 
                        intended to be substantially rehabilitated as 
                        part of a qualified project, at the time a 
                        binding contract to undertake such 
                        rehabilitation is made.
            ``(7) Neighborhood homes credit agency.--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 greater of--
                    ``(A) the product of $6, multiplied by the State 
                population (determined in accordance with section 
                146(j)), or
                    ``(B) $8,000,000.
            ``(2) Unused amount.--The State neighborhood homes credit 
        amount for a calendar year shall be increased by the sum of--
                    ``(A) any amount certified by the neighborhood 
                homes credit agency of the State as having been 
                previously allocated to a qualified project and not 
                used during the 5-year period described in subsection 
                (b)(2)(B)(iii), plus
                    ``(B) sum of the amount by which the amount 
                determined under paragraph (1) (without application of 
                this paragraph) exceeded the amount allocated to 
                qualified projects in each of the three immediately 
                preceding calendar years.
            ``(3) Portion of state credit ceiling for certain projects 
        involving qualified nonprofit 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 qualified residences in census tracts under 
                subsection (e)(1)(C) or (e)(2),
                    ``(C) promulgates standards with respect to 
                reasonable qualified development costs and fees,
                    ``(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,
                            ``(ii) with respect to each qualified 
                        residence completed in the preceding calendar 
                        year--
                                    ``(I) the census tract in which 
                                such qualified residence is located,
                                    ``(II) with respect to the 
                                qualified project that includes such 
                                qualified residence, the year in which 
                                such project received an allocation 
                                under this section,
                                    ``(III) whether such qualified 
                                residence was new or substantially 
                                rehabilitated,
                                    ``(IV) the eligible basis of such 
                                qualified residence,
                                    ``(V) the amount of the 
                                neighborhood homes credit with respect 
                                to such qualified residence,
                                    ``(VI) the sales price of such 
                                qualified residence or, in the case of 
                                a qualified residence that is 
                                substantially rehabilitated as part of 
                                a qualified project and is owned by the 
                                same qualified homeowner during the 
                                entirety of such rehabilitation, the 
                                cost of the substantial rehabilitation, 
                                and
                                    ``(VII) the income of the qualified 
                                homeowner (expressed as a percentage of 
                                the applicable area median gross income 
                                for the location of the qualified 
                                residence), and
                            ``(iii) such other information as the 
                        Secretary may require.
            ``(2) Qualified allocation plan.--For purposes of this 
        subsection, the term `qualified allocation plan' means any plan 
        which--
                    ``(A) sets forth the selection criteria to be used 
                to prioritize qualified projects for allocations 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 
                        revitalization,
                            ``(iii) the capability of the project 
                        sponsor, and
                            ``(iv) the likelihood the project will 
                        result in long-term homeownership,
                    ``(B) has been made available for public comment, 
                and
                    ``(C) provides a procedure that the neighborhood 
                homes credit agency (or any agent or contractor of such 
                agency) shall follow for purposes of--
                            ``(i) identifying noncompliance with any 
                        provisions of this section, and
                            ``(ii) notifying the Internal Revenue 
                        Service of any such noncompliance of which the 
                        agency becomes aware.
    ``(i) Possessions Treated as States.--For purposes of this section, 
the term `State' includes the District of Columbia and a possession of 
the United States.
    ``(j) Repayment.--
            ``(1) In general.--
                    ``(A) Sold during 5-year period.--If a qualified 
                residence is sold during the 5-year period beginning on 
                the date of the qualified completion event described in 
                subsection (a) with respect to such qualified 
                residence, the seller shall transfer an amount equal to 
                the repayment amount from the amount realized on such 
                sale to the relevant neighborhood homes credit agency.
                    ``(B) Use of repayments.--A neighborhood homes 
                credit agency shall use any amount received pursuant to 
                subparagraph (A) only for purposes of qualified 
                projects.
            ``(2) Repayment amount.--For purposes of paragraph (1)(A), 
        the repayment amount is an amount equal to 50 percent of the 
        gain from such resale, reduced by 20 percent for each year of 
        the 5-year period referred to in paragraph (1)(A) which ends 
        before the date of the sale referred to in such paragraph.
            ``(3) Lien for repayment amount.--A neighborhood homes 
        credit agency receiving an allocation under this section shall 
        place a lien on each qualified residence that is built or 
        rehabilitated as part of a qualified project for an amount such 
        agency deems necessary to ensure potential repayment pursuant 
        to paragraph (1)(A).
            ``(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 qualified residence fails to use such 
        qualified 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 
        renting, during such period of time, such qualified residence.
            ``(5) Waiver.--The neighborhood homes credit agency may 
        waive the repayment required under paragraph (1)(A) in the case 
        of homeowner experiencing a hardship.
    ``(k) Report.--
            ``(1) In general.--The Secretary shall annually issue a 
        report, to be made available to the public, which contains the 
        information submitted pursuant to subsection (h)(1)(E).
            ``(2) De-identification.--The Secretary shall ensure that 
        any information made public pursuant to paragraph (1) excludes 
        any information that would allow for the identification of 
        qualified homeowners.
    ``(l) Inflation Adjustment.--
            ``(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 determined 
                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 sentence 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), 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)(B), any increase under the preceding 
                sentence which is not a multiple of $100,000 shall be 
                rounded to the nearest multiple of $100,000.''.
    (b) Current Year Business Credit Calculation.--Section 38(b) of the 
Internal Revenue Code of 1986 is amended by redesignating paragraphs 
(6) through (33) as paragraphs (7) through (34), 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 
subsection:
    ``(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 subsection.''.
    (d) Conforming Amendments.--Subsections (i)(3)(C), (i)(6)(B)(i), 
and (k)(1) of section 469 of the Internal Revenue Code of 1986 are each 
amended by inserting ``or 42A'' after ``section 42''.
    (e) 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 inserting after the item relating to section 42 the 
following:

``Sec. 42A. Neighborhood homes credit.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after the date of enactment of this 
Act.
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