[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 354 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 354

To amend the Internal Revenue Code of 1986 to provide tax incentives to 
           encourage the preservation of low-income housing.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

             February 3 (legislative day, January 30), 1995

  Mr. Breaux (for himself, Mr. Johnston, Mr. Simon, and Mr. Bumpers) 
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 provide tax incentives to 
           encourage the preservation of low-income housing.

    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 ``Low-Income Housing Preservation Act 
of 1995''.

SEC. 2. 15-YEAR RECOVERY PERIOD.

    (a) General Rule.--Subsection (c) of section 168 of the Internal 
Revenue Code of 1986 (relating to applicable recovery period) is 
amended--
            (1) by striking ``as provided in paragraph (2)'' in 
        paragraph (1) and inserting ``as otherwise provided in this 
        subsection'',
            (2) by redesignating paragraph (2) as paragraph (3), and
            (3) by inserting after paragraph (1) the following new 
        paragraph:
            ``(2) Low-income housing.--In the case of any residential 
        rental property which is part of a qualified low-income housing 
        project (as defined in subsection (i)(14)), the applicable 
        recovery period shall be 15 years.''
    (b) Qualified Low-Income Housing Project.--Subsection (i) of 
section 168 of such Code is amended by adding at the end the following 
new paragraph:
            ``(14) Qualified low-income housing project.--
                    ``(A) In general.--For purposes of this section, 
                the term `qualified low-income housing project' means 
                any project for residential rental property if--
                            ``(i) such project is assisted under a 
                        specified HUD program,
                            ``(ii) 50 percent or more of the 
                        residential units in such project--
                                    ``(I) in the case of a project 
                                described in clause (i) or (ii) of 
                                subparagraph (C), are occupied by 
                                individuals whose income (at the time 
                                of their initial occupancy in such 
                                project) was less than 80 percent of 
                                the area median gross income (as of 
                                such time), or
                                    ``(II) in the case of a project 
                                described in clause (iii) or (iv) of 
                                subparagraph (C), are units with 
                                respect to which rental assistance is 
                                provided under section 8 of the United 
                                States Housing Act of 1937 (42 U.S.C. 
                                1437f),
                            ``(iii) such project was originally placed 
                        in service at least 10 years before the 
                        taxpayer acquired an interest in such project,
                            ``(iv) such project is substantially 
                        rehabilitated,
                            ``(v) the taxpayer acquired such taxpayer's 
                        interest in such project by purchase, and
                            ``(vi) such project was not previously 
                        placed in service by the taxpayer or by any 
                        person who was a related person (as defined in 
                        section 42(d)(2)(D)(iii)) with respect to the 
                        taxpayer as of the time previously placed in 
                        service.
                    ``(B) Denial of double benefit.--A project shall 
                not be treated as a qualified low-income housing 
                project if the taxpayer (or any other person holding an 
                interest in such project) claims any benefits with 
                respect to such project under--
                            ``(i) section 42 (relating to low-income 
                        housing credit),
                            ``(ii) section 47 (relating to 
                        rehabilitation credit),
                            ``(iii) the Low-Income Housing Preservation 
                        and Resident Homeownership Act of 1990 (12 
                        U.S.C. 4101 et seq.), or
                            ``(iv) the Emergency Low-Income Housing 
                        Preservation Act of 1987 pursuant to section 
                        604 of the Cranston-Gonzalez National 
                        Affordable Housing Act (12 U.S.C. 4101 note).
                    ``(C) Specified hud programs.--For purposes of 
                subparagraph (A), a project is assisted under a 
                specified HUD program if such project was financed by a 
                loan or mortgage which--
                            ``(i) is insured or held by the Secretary 
                        of Housing and Urban Development under section 
                        221(d)(3) of the National Housing Act (12 
                        U.S.C. 1715l(d)(3)) and bears interest at a 
                        rate determined under the proviso of section 
                        221(d)(5) of such Act,
                            ``(ii) is insured, assisted, or held by 
                        such Secretary or a State or State agency under 
                        section 236 of such Act (12 U.S.C. 1715z-1),
                            ``(iii) is insured or held by such 
                        Secretary under section 221(d)(3) of such Act 
                        and receiving assistance under section 8 of the 
                        United States Housing Act of 1937 (42 U.S.C. 
                        1437f), or
                            ``(iv) is insured or held by such Secretary 
                        under section 221(d)(4) of the National Housing 
                        Act.
                    ``(D) Substantially rehabilitated.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), a project is substantially 
                        rehabilitated if the amount of the 
                        rehabilitation expenditures with respect to 
                        such project during the 24-month period 
                        beginning on the date the taxpayer acquired his 
                        interest in such project equals or exceeds 10 
                        percent of the aggregate adjusted bases (as of 
                        the beginning of such 24-month period) of the 
                        residential rental property which is part of 
                        such project.
                            ``(ii) Rehabilitation expenditures.--
                                    ``(I) In general.--For purposes of 
                                clause (i), the term `rehabilitation 
                                expenditures' means amounts chargeable 
                                to capital account and incurred for 
                                property (or additions or improvements 
                                to property) of a character subject to 
                                the allowance for depreciation in 
                                connection with the rehabilitation of a 
                                building. Such term shall not include 
                                the cost of acquiring the building (or 
                                any interest therein).
                                    ``(II) Special rule.--An 
                                expenditure may be taken into account 
                                only if it benefits the low-income 
                                units in the project at least in 
                                proportion to the total number of units 
                                in such project which are low-income 
                                units. For purposes of the preceding 
                                sentence, the term `low-income units' 
                                means units with respect to which the 
                                requirements of subparagraph (A)(ii) 
                                are met.
                    ``(E) Income determinations.--For purposes of 
                subparagraph (A), income of individuals and area median 
                gross income shall be determined as provided in section 
                142(d)(2)(B).
                    ``(F) Purchase.--For purposes of subparagraph (A), 
                the term `purchase' has the meaning given to such term 
                by section 179(d)(2); except that such term shall not 
                include any acquisition where the basis of the property 
                acquired is determined in whole or in part by reference 
                to the basis of other property held at any time by the 
                person acquiring the property.
                    ``(G) Treatment of units occupied by individuals 
                whose incomes rise above limit.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), notwithstanding an increase in the 
                        income of the occupants of a low-income unit 
                        above the income limitation applicable under 
                        subparagraph (A)(ii), such unit shall continue 
                        to be treated as a low-income unit if the 
                        income of such occupants initially met such 
                        income limitation.
                            ``(ii) Next available unit must be rented 
                        to low-income tenant if income rises above 140 
                        percent of income limit.--If the income of the 
                        occupants of the unit increases above 140 
                        percent of the income limitation applicable 
                        under subparagraph (A)(ii), clause (i) shall 
                        cease to apply to any such unit if any 
                        residential unit in the project (of a size 
                        comparable to, or smaller than, such unit) is 
                        occupied by a new resident whose income exceeds 
                        such income limitation. In the case of a 
                        project described in section 142(d)(4)(B), the 
                        preceding sentence shall be applied by 
                        substituting `170 percent' for `140 percent' 
                        and by substituting `any low-income unit in the 
                        project is occupied by a new resident whose 
                        income exceeds 40 percent of area median gross 
                        income' for `any residential unit in the 
                        project (of a size comparable to, or smaller 
                        than, such unit) is occupied by a new resident 
                        whose income exceeds such income limitation'.
                    ``(H) Recapture rules.--
                            ``(i) Substantially rehabilitation 
                        requirements.--If the requirements of 
                        subparagraph (D) are not satisfied with respect 
                        to any project--
                                    ``(I) such project shall not be 
                                treated as a qualified low-income 
                                housing project for any period 
                                (including periods before the close of 
                                the 24-month period set forth in 
                                subparagraph (D)(i)), and
                                    ``(II) the statutory period for the 
                                assessment of any deficiency 
                                attributable to the failure of the 
                                project to meet such requirements shall 
                                not expire before the date prescribed 
                                by section 6501 for the assessment of a 
                                deficiency for the taxable year in 
                                which the 24-month period set forth in 
                                subparagraph (D)(i) ends.
                            ``(ii) Cross Reference.--

                                ``For treatment of subsequent failure 
to meet other requirements after initial qualification, see paragraph 
(5) of this subsection.''

SEC. 3. EXEMPTION FROM PASSIVE LOSS LIMITATIONS.

    Section 469 of the Internal Revenue Code of 1986 (relating to 
limitation on passive activity losses and credits) is amended--
            (1) by redesignating subsections (j), (k), (l), and (m) as 
        subsections (k), (l), (m), and (n), respectively, and
            (2) by inserting after subsection (i) the following new 
        subsection:
    ``(j) $50,000 Offset for Certain Low-Income Housing Activities.--
            ``(1) In general.--Subsection (a) shall not apply to that 
        portion of the passive activity loss for any taxable year which 
        is attributable to rental activities with respect to 
        residential rental property which is part of a qualified low-
        income housing project (as defined in section 168(i)(14)).
            ``(2) Dollar limitation.--The aggregate amount to which 
        paragraph (1) applies for any taxable year shall not exceed 
        $50,000 ($25,000 in the case of a separate return by a married 
        individual).
            ``(3) Coordination with subsection (i).--This subsection 
        shall be applied before the application of subsection (i).''

SEC. 4. MINIMUM TAX TREATMENT.

    (a) General Rule.--Paragraph (1) of section 56(a) of the Internal 
Revenue Code of 1986 (relating to depreciation deduction) is amended--
            (1) by redesignating subparagraphs (C) and (D) as 
        subparagraphs (D) and (E), respectively, and
            (2) by inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) Special rule for certain low-income housing 
                projects.--In the case of residential rental property 
                which is part of a qualified low-income housing project 
                (as defined in section 168(i)(14))--
                            ``(i) the depreciation deduction with 
                        respect to 50 percent of the adjusted basis of 
                        such property shall be determined as provided 
                        in subparagraph (A), and
                            ``(ii) the depreciation deduction with 
                        respect to the other 50 percent of such 
                        adjusted basis shall be determined under the 
                        method applicable in computing the regular 
                        tax.''
    (b) Conforming Amendment.--Clause (i) of section 56(g)(4)(A) of 
such Code is amended by inserting before the period at the end the 
following: ``or, if applicable, the rules of subsection (a)(1)(C)''.

SEC. 5. EFFECTIVE DATE.

    The amendments made by this section shall apply to property placed 
in service after December 31, 1995.
                                 <all>