[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 98 Introduced in Senate (IS)]
<DOC>
117th CONGRESS
1st Session
S. 98
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
January 28, 2021
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 feasibility.--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 one 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
2022, 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 2021' 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 December 31, 2021.
<all>