New Homes Tax Credit Act

Bill: 118-s-5196
Sponsor: full_name: Sen. Heinrich, Martin [D-NM]
Introduced: 2024-09-25
Policy area: Taxation
Latest action: action_date: 2024-09-25
text: Read twice and referred to the Committee on Finance.

Summaries:

tv_txt: II 118th CONGRESS 2d Session S. 5196 IN THE SENATE OF THE UNITED STATES September 25, 2024 Mr. Heinrich (for himself, Mr. Wyden , Mr. Welch , and Mr. Van Hollen ) 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 establish the New Homes Tax Credit.

1. Short title This Act may be cited as the New Homes Tax Credit Act . 2. Establishment of New Homes Tax 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 45AA the following new section: 45BB. New Homes Tax Credit (a) Allowance of credit (1) In general For purposes of section 38, in the case of a taxpayer who holds a qualified equity investment on a credit allowance date of such investment which occurs during the taxable year, the new homes tax credit determined under this section for such taxable year is an amount equal to the applicable percentage of the amount paid to the housing development entity for such investment at its original issue. (2) Applicable percentage For purposes of paragraph (1), the applicable percentage is— (A) 7 percent with respect to the first credit allowance date, and (B) 8 percent with respect to the remainder of the credit allowance dates. (3) Credit allowance date For purposes of paragraph (1), the term credit allowance date means, with respect to any qualified equity investment— (A) the date on which such investment is initially made, and (B) each of the 4 anniversary dates of such date thereafter. (b) Qualified equity investment (1) In general For purposes of this section, the term qualified equity investment means any equity investment in a housing development entity if— (A) such investment is acquired by the taxpayer at its original issue (directly or through an underwriter) solely in exchange for cash, (B) substantially all of such cash is used by the housing development entity to make qualified housing investments, and (C) such investment is designated for purposes of this section by the housing development entity. Such term shall not include any equity investment issued by a housing development entity more than 5 years after the date that such entity receives an allocation under subsection (e). Any allocation not used within such 5-year period may be reallocated by the Secretary under subsection (e). (2) Special rules Rules similar to the rules under paragraphs (2) through (6) of section 45D(b) shall apply for purposes of this section. (c) Housing development entity For purposes of this section, the term housing development entity means any domestic corporation or partnership if— (1) one of the missions of the entity is to provide funding for construction of housing for low- and moderate-income individuals, and (2) the entity is certified by the Secretary for purposes of this section as being a housing development entity. (d) Other definitions For purposes of this section— (1) Qualified housing investment (A) In general The term qualified housing investment means funding which is provided by a housing development entity to a qualified construction business— (i) following completion of a qualified home project by such qualified construction business, and (ii) (I) in the case of a home described in clause (i) of paragraph (3)(A), after the housing development entity has confirmed (on or before the date on which ownership of the home is transferred to the buyer) that— (aa) the home is being sold to a qualified buyer, and (bb) that such buyer has been provided notice with respect to the requirements under subsection (g), or (II) in the case of a home described in clause (ii) of such paragraph, after the housing development entity has confirmed (on or before the date on which renovation of the home is completed by the qualified construction business) that— (aa) the home is owned by a qualified buyer, and (bb) that such buyer has been provided notice with respect to the requirements under subsection (g). (B) Transfer of funds at closing With respect to any funding described in subparagraph (A), such funding shall be provided by the housing development entity to the qualified construction business— (i) in the case of a home described in clause (i) of paragraph (3)(A), on the date on which ownership of the home is transferred to the qualified buyer, or (ii) in the case of a home described in clause (ii) of such paragraph, on the date on which renovation of the home is completed by the qualified construction business. (C) Limitation In the case of any home constructed or renovated as part of a qualified home project, the amount of funding provided by a housing development entity to a qualified construction business with respect to such home shall not exceed an amount equal to 20 percent (or, in the case of a home renovated as part of a qualified home project, 15 percent) of the median purchase price for single-family housing in the area in which such home is located, as determined by the Secretary of Housing and Urban Development for the purpose of section 1807.402(a)(2) of title 12, Code of Federal Regulations (or any successor regulation). (2) Qualified construction business The term qualified construction business means an entity engaged in the trade or business of the construction or renovation of residential housing. (3) Qualified home projects (A) In general The term qualified home project means— (i) the construction of entry-level homes which are sold to qualified buyers, or (ii) the renovation of Single-family housing (as such term is used in section 1807.402 of title 12, Code of Federal Regulations) which is owned by a qualified buyer. (B) Entry-level homes The term entry-level home means any residential building which— (i) satisfies the requirement under section 1807.402(a)(1) of title 12, Code of Federal Regulations, and (ii) is designed to be purchased by a first-time homebuyer (as defined in section 104 of the Cranston-Gonzalez National Affordable Housing Act ( 42 U.S.C. 12704 )). (4) Qualified buyer The term qualified buyer means an individual or family whose income is not greater than 120 percent of area median income. (e) National limitation on amount of investments designated (1) In general For each of calendar years 2025 through 2031, the new homes tax credit limitation for each calendar year shall be— (A) for 2025, $1,000,000,000, (B) for 2026 and 2027, $1,500,000,000, (C) for 2028 and 2029, $2,000,000,000, and (D) for 2030 and 2031, $3,500,000,000. (2) Allocation of limitation The limitation under paragraph (1) shall be allocated by the Secretary among housing development entities selected by the Secretary. In making allocations under the preceding sentence, the Secretary shall— (A) allocate not less than 50 percent of such limitation for any calendar year to housing development agencies that commit to make qualified housing investments to provide housing for individuals or families whose income is not greater than 80 percent of area median income, (B) allocate not less than 5 percent of such limitation for any calendar year to housing development agencies that commit to make qualified housing investments to provide housing that is exclusively available to members of an Indian tribe (as such term is defined in section 4 of the Indian Self-Determination and Education Assistance Act ( 25 U.S.C. 5304 )), and (C) give priority to— (i) any community development financial institution (as defined in section 103 of the Community Development Banking and Financial Institutions Act of 1994 ( 12 U.S.C. 4702 )) which is certified as a community development financial institution under the Community Development Banking and Financial Institutions Act of 1994 ( 12 U.S.C. 4701 et seq. ), (ii) any community development credit union, (iii) any housing development entity with prior experience relating to other Federal programs designed to create affordable housing for low- and moderate-income individuals, such as— (I) the low-income housing credit under section 42, and (II) the HOME Investment Partnerships program under subtitle A of title II of the Cranston-Gonzalez National Affordable Housing Act ( 42 U.S.C. 12741 et seq. ), and (iv) any housing development entity which— (I) has previously worked within the community in which the proposed qualified home project is located, and (II) can demonstrate engagement with local officials and low-income individuals within such community. (3) Carryover of unused limitation If the new homes tax credit limitation for any calendar year exceeds the aggregate amount allocated under paragraph (2) for such year, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2036. (f) Basis reduction Rules similar to the rules under subsection (h) of section 45D shall apply for purposes of this section. (g) Limitation during initial 5-Year period (1) In general (A) Principal residence requirement Subject to subparagraph (C), with respect to any qualified home project for which funding has been provided by a housing development entity to a qualified construction business pursuant to the provisions of this section, the housing development entity shall ensure that, during the limitation period, the home with respect to which such funding has been provided remains the principal residence of the qualified buyer. (B) Liens With respect to the requirement under subparagraph (A), the housing development entity shall enforce such requirement by means of the imposition of a lien on the home constructed or renovated as part of the qualified home project, with such lien to be recorded with the relevant local official or agency designated to record liens. (C) Exception for members of the armed forces In the case of any home constructed or renovated as part of a qualified home project, if there is a disposition of such home by the qualified buyer— (i) during the limitation period, and (ii) which is in connection with Government orders received by such qualified buyer for qualified official extended duty service (as defined in section 36(f)(4)(E)(ii)), subparagraph (A) shall not apply. (2) Limitation period For purposes of this subsection, the term limitation period means the 5-year period subsequent to— (A) in the case of a home described in clause (i) of subsection (d)(3)(A), on the date on which ownership of the home is transferred to the qualified buyer, or (B) in the case of a home described in clause (ii) of such subsection, on the date on which renovation of the home is completed by the qualified construction business. (3) Regulations and guidance The Secretary shall issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of this subsection. (h) Reporting (1) In general Not later than January 1, 2026, and annually thereafter, 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 regarding— (A) the size and location of qualified home projects which have been financially supported by qualified equity investments for which a credit has been allowed under this section, and (B) the income of individuals and families residing in homes constructed or renovated as part of such qualified home projects. (2) Collection of information The Secretary shall develop a method to collect and streamline relevant data for purposes of collecting the information described in paragraph (1). (i) Regulations The Secretary shall prescribe such regulations as may be appropriate to carry out this section. . (b) Conforming amendments (1) Section 38(b) of such Code is amended by striking plus at the end of paragraph (40), by striking the period at the end of paragraph (41) and inserting , plus , and by adding at the end the following new paragraph: (42) the new homes tax credit determined under section 45BB(a). . (2) 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 45AA the following new item: Sec. 45BB. New Homes Tax Credit. . (c) Effective date The amendments made by this section shall apply to investments made after December 31, 2024.