SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Renters Relief Act of 2001''.

SEC. 2. REFUNDABLE CREDIT FOR RENT IN EXCESS OF 30 PERCENT OF INCOME.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 35 as section 36 and by inserting 
after section 34 the following new section:

``SEC. 35. CREDIT FOR RENT IN EXCESS OF 30 PERCENT OF INCOME.

    ``(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 the excess rent amount paid by 
the taxpayer during the taxable year.
    ``(b) Limitations.--
            ``(1) Dollar limitation.--The amount of the credit 
        allowable under subsection (a) for a taxable year shall be not 
        exceed $2,500.
            ``(2) Phaseout.--
                    ``(A) In general.--For purposes of this section, 
                the $2,500 amount referred to in paragraph (1) shall be 
                reduced (but not below zero) by an amount equal to $25 
                multiplied by the number of percentage points (or 
                fraction thereof) by which the taxpayer's modified 
                adjusted gross income for the taxable year exceeds 80 
                percent of the area median income applicable to such 
                taxpayer based on family size.
            ``(3) Special rule for taxpayers subject to more than one 
        area median income in a taxable year.--For purposes of 
        paragraph (2), in the case of a taxpayer who is subject to more 
        than 1 area median income in the taxable year by reason of 
        changes in family size or location of personal residence, the 
        area median income applicable to such taxpayer--
                    ``(A)(i) shall be determined as of the first day of 
                each month on the basis of such family size and 
                location, and
                    ``(ii) shall be \1/12\ of the area median income so 
                applicable, and
                    ``(B) shall be the aggregate of the amounts 
                determined under subparagraph (A) for each month of the 
                taxable year.
            ``(4) Area median income.--For purposes of this subsection, 
        the term `area median income' means area median income as 
        determined by the Secretary of Housing and Urban Development 
        for purposes of the United States Housing Act of 1937 (42 
        U.S.C. 1437 et seq.).
    ``(c) Excess Rent Amount.--For purposes of this section--
            ``(1) In general.--The term `excess rent amount' means the 
        excess (if any) of--
                    ``(A) the amount paid by the taxpayer for rent of a 
                principal residence, over
                    ``(B) 30 percent of the modified adjusted gross 
                income of the taxpayer.
            ``(2) Modified adjusted gross income.--
                    ``(A) In general.--The term `modified adjusted 
                gross income' means adjusted gross income--
                            ``(i) determined--
                                    ``(I) without regard to sections 
                                86, 219, 221, 911, 931, and 933,
                                    ``(II) without regard to the 
                                amounts described in subparagraph (B), 
                                and
                            ``(ii) increased by the amounts described 
                        in subparagraph (C).
                    ``(B) Certain amounts disregarded.--An amount is 
                described in this subparagraph if it is--
                            ``(i) an alimony or separate maintenance 
                        payment (as defined in section 71(b)),
                            ``(ii) the amount of losses from sales or 
                        exchanges of capital assets in excess of gains 
                        from such sales or exchanges to the extent such 
                        amount does not exceed the amount under section 
                        1211(b)(1),
                            ``(iii) the net loss from estates and 
                        trusts,
                            ``(iv) the excess (if any) of amounts 
                        described in section 32(i)(2)(C)(ii) over the 
                        amounts described in section 32(i)(2)(C)(i) 
                        (relating to nonbusiness rents and royalties), 
                        or
                            ``(v) 75 percent of the net loss from the 
                        carrying on of trades or businesses, computed 
                        separately with respect to--
                                    ``(I) trades or businesses (other 
                                than farming) conducted as sole 
                                proprietorships,
                                    ``(II) trades or businesses of 
                                farming conducted as sole 
                                proprietorships, and
                                    ``(III) other trades or businesses.
                For purposes of clause (v), there shall not be taken 
                into account items which are attributable to a trade or 
                business which consists of the performance of services 
                by the taxpayer as an employee.
                    ``(C) Certain amounts included.--An amount is 
                described in this subparagraph if it is--
                            ``(i) interest received or accrued during 
                        the taxable year which is exempt from tax 
                        imposed by this chapter,
                            ``(ii) amounts received as a pension or 
                        annuity, and any distributions or payments 
                        received from an individual retirement plan, by 
                        the taxpayer during the taxable year to the 
                        extent not included in gross income,
                            ``(iii) amount received under, or paid on 
                        behalf of the taxpayer under, any program 
                        receiving Federal, State, or local government 
                        funds if eligibility for, or the amount or type 
                        of, benefits or assistance under the program is 
                        based, in whole or in part, on need, or
                            ``(iv) the amount of social security 
                        benefits (as defined in section 86(d)) received 
                        during the taxable year.
                Clause (ii) shall not include any amount which is not 
                includible in gross income by reason of a trustee-to-
                trustee transfer or a rollover distribution.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Principal residence.--The term `principal residence' 
        shall have same meaning as when used in section 121.
            ``(2) Treatment of expenses paid by dependent.--If a 
        deduction under section 151 with respect to an individual is 
        allowed to another taxpayer for a taxable year beginning in the 
        calendar year in which such individual's taxable year begins, 
        no credit shall be allowed under subsection (a) to such 
        individual for such individual's taxable year.
            ``(3) Multiple taxpayers renting the same principal 
        residence.--This section shall be applied to separately to the 
        portion of the rent paid by an individual to rent the same 
        principal residence with 2 or more taxpayers.
            ``(4) Elderly and handicapped dependents.--In the case of a 
        dependent for whom the taxpayer is allowed an exemption under 
        section 151 who--
                    ``(A) has attained age 65 before the close of the 
                taxable year, or
                    ``(B) retired on disability before the close of the 
                taxable year and who, when he retired, was permanently 
                and totally disabled (within the meaning of section 
                22(e)(3)),
        the principal residence taken into account under this section 
        shall be the principal residence of such dependent.
    ``(e) Denial of Credit if Mortgage Interest Deduction Allowed.--No 
credit shall be allowed under this section for a taxable year for a 
taxpayer for whom deduction under section 163(h) is allowable for the 
taxable year.''.
    (b) Technical Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``or from section 35 of 
        such Code'' before the period at the end.
            (2) The table of sections for such subpart C is amended by 
        striking the item relating to section 35 and inserting the 
        following new items:

                              ``Sec. 35. Credit for rent in excess of 
                                        30 percent of income.
                              ``Sec. 36. Overpayment of taxes.''

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.
Output: Renters Relief Act of 2001 - Amends the Internal Revenue Code to allow a refundable credit (maximum $2,500 per year) for rent in excess of 30 percent of income. Reduces such credit based upon adjusted gross income and area median income (as defined in this Act).