[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5084 Introduced in House (IH)]







106th CONGRESS
  2d Session
                                H. R. 5084

   To amend the Internal Revenue Code of 1986 to provide a credit to 
          promote home ownership among low-income individuals.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 27, 2000

Ms. Roybal-Allard (for herself, Mr. Capuano, Ms. Carson, Mrs. Clayton, 
    Mr. Clyburn, Mr. DeFazio, Mr. Fattah, Mr. Filner, Mr. Frank of 
   Massachusetts, Mr. Frost, Mr. Hinchey, Ms. Lee, Mr. Martinez, Mr. 
Matsui, Ms. Millender-McDonald, Mrs. Napolitano, Mr. Pastor, Mr. Price 
  of North Carolina, and Mrs. Thurman) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to provide a credit to 
          promote home ownership among low-income individuals.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; FINDINGS; PURPOSES.

    (a) Short Title.--This Act may be cited as the ``Home Ownership Tax 
Credit Act of 2000''.
    (b) Findings.--Congress finds the following:
            (1) Home ownership is of primary importance in building 
        wealth in low-income families.
            (2) 67 percent of the wealth that is owned by non-elderly 
        low-income households consists of the equity in their 
        residences and the median wealth of such non-elderly low-income 
        households is 12 times greater than the median wealth for non-
        elderly renters with the same level of income.
            (3) Only 45 percent of low-income households live in owner-
        occupied homes, as compared to 66 percent of all households, 
        and 86 percent of high-income households.
            (4) According to the Bureau of the Census, in 1993, 88 
        percent of all renters and 93 percent of renters earning less 
        than $20,000 could not afford a house selling for half of the 
        regional median house price.
            (5) There is a 23 percentage point difference in home 
        ownership rates between central cities and suburban cities 
        which is largely the result of the concentration of low-income 
        households in central cities.
            (6) The cost of the largest Federal tax incentives for home 
        ownership, the mortgage interest deduction and the real estate 
        tax deduction, is equal to approximately twice the amount of 
        Federal expenditures for direct Federal housing assistance 
        which benefits low-income households.
            (7) The mortgage interest deduction and the real estate tax 
        deduction have little value to low-income households because 
        the itemized tax deductions of low-income households generally 
        do not exceed the standard deduction.
            (8) Over 90 percent of the total benefits of the mortgage 
        interest deduction accrue to home buyers with incomes greater 
        than $40,000.
            (9) Current provisions in the Federal tax code to promote 
        home ownership among low-income households, such as the 
        mortgage revenue bond program, the mortgage credit certificate 
        program, and the low-income housing credit, fail to 
        simultaneously attack the twin constraints of lack of wealth 
        and low income that prevent many low-income households from 
        becoming home owners.
    (c) Purposes.--The purposes of this Act are--
            (1) to establish a decentralized, market-driven approach to 
        increasing home ownership among low-income households,
            (2) to enable low-income households to overcome the wealth 
        and income constraints that frequently prevent such households 
        from becoming home owners, and
            (3) to reduce the disparities in home ownership between 
        low-income households and higher-income households and between 
        central cities and suburban cities.

SEC. 2. HOME OWNERSHIP TAX CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following:

``SEC. 45D. HOME OWNERSHIP TAX CREDIT.

    ``(a) Allowance of Credit.--
            ``(1) In general.--For purposes of section 38, the amount 
        of the home ownership tax credit determined under this section 
        for any taxable year in the credit period shall be an amount 
        equal to the applicable percentage of the home ownership tax 
        credit amount allocated such taxpayer by a State housing 
        finance agency in the credit allocation year under subsection 
        (b).
            ``(2) Applicable percentage.--For purposes of this section, 
        the Secretary shall prescribe the applicable percentage for any 
        year in which the taxpayer is a qualified lender. Such 
        percentage with respect to any month in the credit period with 
        respect to such taxpayer shall be percentages which will yield 
        over such period amounts of credit under paragraph (1) which 
        have a present value equal to 100 percent of the home ownership 
        tax credit amount allocated such taxpayer under subsection (b).
            ``(3) Method of discounting.--The present value under 
        paragraph (2) shall be determined in the same manner as the 
        low-income housing credit under section 42(b)(2)(C).
    ``(b) Allocation of Home Ownership Tax Credit Amounts.--
            ``(1) Amount of credit.--Each qualified State shall receive 
        a home ownership tax credit dollar amount for each calendar 
        year in an amount equal to the sum of--
                    ``(A) an amount equal to--
                            ``(i) 40 cents multiplied by the State 
                        population, multiplied by
                            ``(ii) 10, plus
                    ``(B) the unused home ownership tax credit dollar 
                amount (if any) of such State for the preceding year.
            ``(2) Qualified state.--For purposes of this section--
                    ``(A) In general.--The term `qualified State' means 
                a State with an approved allocation plan to allocate 
                home ownership tax credits to qualified lenders through 
                the State housing finance agency.
                    ``(B) Approved allocation plan.--For purposes of 
                this paragraph, the term `approved allocation plan' 
                means a written plan, certified by the Secretary, which 
                includes--
                            ``(i) selection criteria for the allocation 
                        of credits to qualified lenders--
                                    ``(I) based on a process in which 
                                lenders submit bids for the value of 
                                the credit, and
                                    ``(II) which gives priority to 
                                qualified lenders with qualified home 
                                ownership loans which are prepaid 
                                during a calendar year, for credit 
                                allocations in the succeeding calendar 
                                year,
                            ``(ii) an assurance that the State will not 
                        allocate in excess of 10 percent of the home 
                        ownership tax credit amount for the calendar 
                        year for qualified home ownership loans which 
                        are neighborhood revitalization project loans,
                            ``(iii) a procedure that the agency (or an 
                        agent or other private contractor of such 
                        agency) will follow in monitoring for 
                        noncompliance with the provisions of this 
                        section and in notifying the Internal Revenue 
                        Service of such noncompliance with respect to 
                        which such agency becomes aware, and
                            ``(iv) such other assurances as the 
                        Secretary may require.
            ``(3) Qualified lender.--For purposes of this section, the 
        term `qualified lender' means a lender which--
                    ``(A) is an insured depository institution (as 
                defined in section 3 of the Federal Deposit Insurance 
                Act), an insured credit union (as defined in section 
                101(7) of the Federal Credit Union Act), 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)), 
                or nonprofit community development corporation (as 
                defined in section 613 of the Community Economic 
                Development Act of 1981 (42 U.S.C. 9802)),
                    ``(B) makes available, through such lender or the 
                lender's designee, pre-purchase home ownership 
                counseling for mortgagors, and
                    ``(C) during the 1-year period beginning on the 
                date of the credit allocation, originates not less than 
                100 qualified home ownership loans in an aggregate 
                amount not less than the amount of the bid of such 
                lender for such credit allocation.
            ``(4) Carryover of credit.--A home ownership tax credit 
        amount received by a State for any calendar year and not 
        allocated in such year shall remain available to be allocated 
        in the succeeding calendar year.
            ``(5) Population.--For purposes of this section, population 
        shall be determined in accordance with section 146(j).
            ``(6) Cost-of-living adjustment.--
                    ``(A) In general.--In the case of a calendar year 
                after 2001, the 40 cent amount contained in paragraph 
                (1)(A)(i) shall be increased by an amount equal to--
                            ``(i) such amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for such 
                        calendar year by substituting `calendar year 
                        2000' for `calendar year 1992' in subparagraph 
                        (B) thereof.
                    ``(B) Rounding.--If any amount as adjusted under 
                subparagraph (A) is not a multiple of 5 cents, such 
                amount shall be rounded to the next lowest multiple of 
                5 cents.
    ``(c) Qualified Home Ownership Loan Defined.--For purposes of this 
section--
            ``(1) In general.--The term `qualified home ownership loan' 
        means a loan originated and funded by a qualified lender which 
        is secured by a second lien on a residence, but only if--
                    ``(A) the requirements of subsections (d), (e), and 
                (f) are met,
                    ``(B) subject to subparagraph (F), the proceeds 
                from such loan are applied exclusively--
                            ``(i) to acquire such residence, or
                            ``(ii) to substantially improve such 
                        residence in connection with a neighborhood 
                        revitalization project,
                    ``(C) the principal amount of the loan--
                            ``(i) is not less than 10 percent of the 
                        purchase price of the residence securing the 
                        loan,
                            ``(ii) is not more than the lesser of--
                                    ``(I) 30 percent of such purchase 
                                price, or
                                    ``(II) $25,000, and
                            ``(iii) results in a housing-debt to income 
                        ratio with respect to such residence of not 
                        more than 28 percent,
                    ``(D) in the case of a neighborhood revitalization 
                project loan, subparagraph (C) shall be applied--
                            ``(i) by substituting `$40,000' for 
                        `$25,000', and
                            ``(ii) by substituting `appraised value' 
                        for `purchase price' unless the lender chooses 
                        not to apply this clause,
                    ``(E) the loan has a term of 30 years, and
                    ``(F) the loan is required to be repaid in any case 
                in which the loan which is secured by the first lien on 
                the residence is refinanced and the amount of 
                indebtedness resulting from the refinancing exceeds the 
                amount of the refinanced indebtedness.
            ``(2) Adjustment of amounts based on changes in housing 
        prices.--
                    ``(A) In general.--In the case of a calendar year 
                after 2001, the amounts under subparagraphs (C) and (D) 
                of paragraph (1) shall be increased by an amount equal 
                to--
                            ``(i) such amount, multiplied by
                            ``(ii) the housing price adjustment for 
                        such calendar year.
                    ``(B) Housing price adjustment.--For purposes of 
                subparagraph (A), the housing price adjustment for any 
                calendar year is the percentage (if any) by which--
                            ``(i) the housing price index for the 
                        preceding calendar year, exceeds
                            ``(ii) the housing price index for calendar 
                        year 2000.
                    ``(C) Housing price index.--For purposes of 
                subparagraph (B), the housing price index means the 
                housing price index published by the Federal Housing 
                Finance Board (as established in section 2A of the 
                Federal Home Loan Bank Act (12 U.S.C. 1422a)) for the 
                calendar year.
    ``(d) Mortgagor.--
            ``(1) In general.--A loan meets the requirements of this 
        subsection if it is made to a mortgagor--
                    ``(A) whose family income for the year in which the 
                mortgagor applies for the loan is 80 percent or less of 
                the area median gross income for the area in which the 
                residence which secures the mortgage is located,
                    ``(B) for whom the housing debt-to-income ratio 
                with respect to the residence securing the loan would 
                (but for the qualified home ownership loan) exceed 28 
                percent,
                    ``(C) for whom the loan would not result in a total 
                debt-to-income ratio which is greater than the 
                guidelines set by the Federal Housing Administration 
                (or any other ratio as determined by the State housing 
                finance agency or lender if such ratio is less than 
                such guidelines), and
                    ``(D) who attends pre-purchase home ownership 
                counseling provided by the qualified lender or the 
                lender's designee.
            ``(2) Determination of family income.--For purposes of this 
        subsection and subsection (h), the family income of a mortgagor 
        and area median gross income shall be determined in accordance 
        with section 143(f)(2).
    ``(e) Residence Requirements.--A loan meets the requirements of 
this subsection if it is secured by a residence that is--
            ``(1) a single-family residence which is the principal 
        residence (within the meaning of section 121) of the mortgagor, 
        or can reasonably be expected to become the principal residence 
        of the mortgagor within a reasonable time after the financing 
        is provided,
            ``(2) purchased by the mortgagor with a down payment in an 
        amount not less than the lesser of--
                    ``(A) 2 percent of the purchase price, or
                    ``(B) $1,000, and
            ``(3) in the case of a mortgagor with a family income 
        greater than 50 percent of the area median gross income, as 
        determined under subsection (d)(1)(A), not financed in 
        connection with a qualified mortgage issued under section 143.
For purposes of paragraph (1), a manufactured home shall not be treated 
as a single-family residence unless such home meets the requirements of 
section 604(h) of the Housing and Community Development Act of 1974.
    ``(f) Definition and Special Rules Relating to Credit Period.--
            ``(1) Credit period defined.--For purposes of this section, 
        the term `credit period' means the period of 10 taxable years 
        beginning with the taxable year in which a home ownership tax 
        credit amount is allocated to the taxpayer.
            ``(2) Special rule for 1st year of credit period.--
                    ``(A) In general.--The credit allowable under 
                subsection (a) with respect to any taxpayer for the 1st 
                taxable year of the credit period shall be determined 
                by substituting for the applicable percentage under 
                subsection (a)(2) the fraction--
                            ``(i) the numerator of which is the sum of 
                        the applicable percentages determined under 
                        subsection (a)(2) as of the close of each full 
                        month of such year, during which the taxpayer 
                        was a qualified lender, and
                            ``(ii) the denominator of which is 12.
                    ``(B) Disallowed 1st year credit allowed in 11th 
                year.--Any reduction by reason of subparagraph (A) in 
                the credit allowable (without regard to subparagraph 
                (A)) for the 1st taxable year of the credit period 
                shall be allowable under subsection (a) for the 1st 
                taxable year following the credit period.
            ``(3) Disposition of home ownership loans.--If a qualified 
        home ownership loan is disposed of during any year for which a 
        credit is allowable under subsection (a), such credit shall be 
        allocated between the parties on the basis of the number of 
        days during such year the mortgage was held by each and the 
        portion of the total credit allocated to the qualified lender 
        which is attributable to such mortgage.
    ``(g) Loss of Credit.--If, during the taxable year, a qualified 
home ownership loan is repaid prior to the expiration of the credit 
period with respect to such loan, the amount of the home ownership tax 
credit attributable to such loan is no longer available under 
subsection (a). A rule similar to the rule of subsection (f)(3) shall 
apply for purposes of the preceding sentence.
    ``(h) Recapture of Portion of Federal Subsidy From Home Owner.--
            ``(1) In general.--If, during the taxable year, any 
        taxpayer described in paragraph (3) disposes of an interest in 
        a residence with respect to which a home ownership tax credit 
        amount applies, then the taxpayer's tax imposed by this chapter 
        for such taxable year shall be increased by 50 percent of the 
        gain (if any) on the disposition of such interest.
            ``(2) Exceptions.--Paragraph (1) shall not apply to any 
        disposition--
                    ``(A) by reason of death,
                    ``(B) which is made on a date that is more than 10 
                years after the date on which the qualified home 
                ownership loan secured by such residence was made, or
                    ``(C) in which the purchaser of the residence 
                assumes the qualified home ownership loan secured by 
                the residence.
            ``(3) Income limitation.--A taxpayer is described in this 
        paragraph if, on the date of the disposition, the family income 
        of the mortgagor is 115 percent or more of the area median 
        gross income as determined under subsection (d)(1)(A) for the 
        year in which the disposition occurs.
            ``(4) Special rules relating to limitation on recapture 
        amount based on gain realized.--For purposes of this 
        subsection, rules similar to the rules of section 143(m)(6) 
        shall apply.
            ``(5) Lender to inform mortgagor of potential recapture.--
        The qualified lender which makes a qualified home ownership 
        loan to a mortgagor shall, at the time of settlement, provide a 
        written statement informing the mortgagor of the potential 
        recapture under this subsection.
            ``(6) Special rules.--For purposes of this subsection, 
        rules similar to the rules of section 143(m)(8) shall apply.
    ``(i) Other Definitions.--For purposes of this section--
            ``(1) Neighborhood revitalization project loan.--
                    ``(A) In general.--The term `neighborhood 
                revitalization project loan' means a loan secured by a 
                second lien on a residence, the proceeds of which are 
                used to substantially improve such residence in 
                connection with a neighborhood revitalization project.
                    ``(B) Neighborhood revitalization project.--The 
                term `neighborhood revitalization project' means a 
                project of sufficient size and scope to alleviate 
                physical deterioration and stimulate investment in--
                            ``(i) a geographic location within the 
                        jurisdiction of a unit of local government (but 
                        not the entire jurisdiction) designated in 
                        comprehensive plans, ordinances, or other 
                        documents as a neighborhood, village, or 
                        similar geographic designation, or
                            ``(ii) the entire jurisdiction of a unit of 
                        local government if the population of such 
                        jurisdiction is not in excess of 25,000.
            ``(2) State.--The term `State' includes a possession of the 
        United States.
            ``(3) State housing finance agency.--The term `State 
        housing finance agency' means the public agency, authority, 
        corporation, or other instrumentality of a State that has the 
        authority to provide residential mortgage loan financing 
        throughout the State.
    ``(j) Certification and Other Reports to the Secretary.--
            ``(1) Certification with respect to state allocation of 
        home ownership tax credits.--The Secretary may, upon a finding 
        of noncompliance, revoke the certification of a qualified State 
        and revoke any qualified home ownership tax credit amounts 
        allocated to such State or allocated by such State to a 
        qualified lender.
            ``(2) Annual report from housing finance agencies.--Each 
        State housing finance agency which allocates any home ownership 
        tax credit amount to any qualified lender for any calendar year 
        shall submit to the Secretary (at such time and in such manner 
        as the Secretary shall prescribe) an annual report specifying--
                    ``(A) the home ownership tax credit amount 
                allocated to each qualified lender for such year, and
                    ``(B) with respect to each qualified lender--
                            ``(i) the principal amount of each 
                        qualified home ownership loan made by such 
                        lender in such year, and
                            ``(ii) the number of qualified home 
                        ownership loans made by such lender in such 
                        year.
        The penalty under section 6652(j) shall apply to any failure to 
        submit the report required by this paragraph on the date 
        prescribed therefore.
    ``(k) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''
    (b) Limitation on Carryback of Unused Credit.--Subsection (d) of 
section 39 of the Internal Revenue Code of 1986 (relating to carryback 
and carryforward of unused credits) is amended by adding at the end the 
following:
            ``(9) No carryback of home ownership tax credits before 
        effective date.--No portion of the unused business credit for 
        any taxable year which is attributable to the home ownership 
        tax credit determined under section 45D may be carried back to 
        a taxable year ending before the date of the enactment of 
        section 45D.''
    (c) Conforming Amendments.--
            (1) Section 38(b) of the Internal Revenue Code of 1986 is 
        amended--
                    (A) by striking ``plus'' at the end of paragraph 
                (11),
                    (B) by striking the period at the end of paragraph 
                (12), and inserting ``, plus'', and
                    (C) by adding at the end the following:
            ``(13) the home ownership tax credit determined under 
        section 45D.''
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 is amended by adding at the end the 
        following:

                              ``Sec. 45D. Home ownership tax credit.''
    (d) Effective Date.--The amendments made by this section apply to 
calendar years after 2000.
                                 <all>