[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3774 Introduced in House (IH)]
107th CONGRESS
2d Session
H. R. 3774
To amend the Internal Revenue Code of 1986 to provide a credit to
promote homeownership among low-income individuals.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 14, 2002
Mr. Jefferson (for himself and Mr. Rangel) 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 homeownership 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 at Last Tax
Credit Act of 2002''.
(b) Findings.--Congress finds the following:
(1) Homeownership is of primary importance in building
wealth in low-income families.
(2) 67 percent of the wealth that is owned by nonelderly
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 of
nonelderly renters with the same level of income.
(3) The national homeownership rate hit a record 68.1
percent in September 2001, but the homeownership rates for
lower-income households are considerably less. While 82.2
percent of households earning 100 percent or more of the
national median income now own homes, only 52.6 percent of
households earning less than the national median are
homeowners. Homeownership rates among households earning less
than 80 percent of the national median are substantially less.
(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
homeownership rates between central cities and suburban cities,
which is largely the result of the concentration of low-income
households in central cities. This concentration of low-income
housing in central cities makes these areas uniquely
susceptible to the negative effects of recession, such as job
loss, which has historically led to a concentration of
foreclosures in central city neighborhoods. Such concentrations
of foreclosures depress area housing value and deplete the
equity wealth of surrounding homeowners.
(6) The cost of the largest Federal tax incentives for
homeownership, 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 Internal Revenue Code of 1986
to promote homeownership 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 homeowners.
(c) Purposes.--The purposes of this Act are--
(1) to establish a decentralized, market-driven approach to
increasing homeownership among households earning less than 80
percent of household median income; and to increase mixed-
income home ownership in new or newly renovated households
located in census tracts targeted for investment and
redevelopment by the United States Department of Housing and
Urban Development (HUD), typically referred to as Difficult to
Develop Areas (DDAs);
(2) to enable these low-income households to overcome
income constraints that frequently prevent them from becoming
homeowners and building wealth through home equity; and
(3) to reduce the disparities in homeownership between low-
income households and higher-income households and between
central cities and suburban cities, and attract investment into
the Nation's central cities.
SEC. 2. HOME AT LAST 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. 45G. HOME AT LAST TAX CREDIT.
``(a) Allowance of Credit.--
``(1) In general.--For purposes of section 38, the amount
of the home at last 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 at last 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 financial reporting period 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 at last tax credit amount allocated such
taxpayer under subsection (b).
``(3) Method of discounting.--For purposes of paragraph
(2), present value shall be determined in the same manner as
the low-income housing tax credit under section 42(b)(2)(C),
except that clause (i) thereof shall be applied as if it read
`as of the last day of the credit period (as defined in section
45G(f)(1))'.
``(b) Allocation of Home at Last Tax Credit Amounts.--
``(1) Amount of credit.--Each qualified State shall receive
a home at last 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 at last tax credit dollar
amount (if any) of such State for the preceding
calendar year or years.
``(2) Qualified state.--For purposes of this section--
``(A) In general.--The term `qualified State' means
a State that has 1 or more housing credit agencies with
an allocation plan that complies with the general
provisions set forth in subparagraph (B). If there is
more than 1 housing credit agency of a State, all such
agencies shall be treated as a single agency.
``(B) Allocation plan.--For purposes of this
paragraph, the term `allocation plan' means a written
plan, submitted to the Secretary by October 15, 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 who will originate
qualified home at last loans during the
calendar year for which the tax credits
are allocated for use,
``(ii) an assurance that the State will not
allocate in excess of 10 percent of the home at
last tax credit amount for the calendar year
for qualified home at last loans which are
neighborhood revitalization project loans,
``(iii) an assurance that the State will
not allocate in excess of 15 percent of the
home at last tax credit amount for the calendar
year to one qualified lender,
``(iv) an assurance that the State will not
allow more than 25 percent of the home at last
tax credit amount for the calendar year to be
used to subsidize home purchases or new home
construction for qualified borrowers earning in
excess of 120 percent of household median
income,
``(v) 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
``(vi) 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)), and
``(B) during the 1-year period beginning on the
date of the credit allocation, uses its own funds to
buy down the interest rate charged of a qualified
borrower such that the aggregate amount of funds
applied as prepaid points is not less than the amount
of the bid of such lender for such credit allocation.
``(4) Carryover of credit.--A home at last 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 2002, 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
2001' 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 at Last Loan Defined.--For purposes of this
section, the term `qualified home at last loan' means a first mortgage
single-family residential loan funded by a qualified lender to finance
the purchase or construction or purchase and construction of a
residence by a qualified borrower which has a lower-than-market
interest rate as a result of a lender rate `buydown', but only if--
``(1) the requirements of subsections (d) and (e) are met,
``(2) subject to paragraph (6), the proceeds from such loan
are applied exclusively--
``(A) to acquire such residence, or
``(B) to acquire and substantially improve such
residence in connection with a neighborhood
revitalization project, or
``(C) to build a residence,
``(3) the principal amount of the loan is not greater than
105 percent of the purchase price of the residence securing the
loan,
``(4) the loan results in a monthly housing expense-to-
income ratio with respect to such residence of not more than 33
percent at the time of closing,
``(5) the total of prepaid points used to buy down the
effective interest rate is not more than--
``(A) $10,000 for qualified borrowers earning
greater than 70 percent of area household median
income,
``(B) $20,000 for qualified borrowers earning 70
percent or less of area household median income,
``(C) in the case of a neighborhood revitalization
project loan, subparagraph (A) shall be applied by
substituting `$15,000' for `$10,000', and subparagraph
(B) shall be applied by substituting `$25,000' for
`$20,000', or
``(D) in the case of a below-market-rate loan
offered by a State housing finance agency in
conjunction with a mortgage revenue bond program,
subparagraph (A) shall be applied by substituting
`$5,000' for `$10,000', and subparagraph (B) shall be
applied by substituting `$10,000' for `$20,000',
``(6) the loan has a term of 30 years,
``(7) the loan has a fixed interest rate and fully
amortizes over the term of the mortgage,
``(8) the loan is a conventional single-family first
mortgage, a government-guaranteed single-family first mortgage,
or a single-family first mortgage originated under a program
which is administered by the State and which is in existence on
the date of enactment of this section, and
``(9) the loan is in an amount not greater than the maximum
principal obligation amount eligible for insurance under
section 203(b)(2) of the National Housing Act (12 U.S.C.
1709)(b)(2)) for a 1-family dwelling.
``(d) Mortgagor.--
``(1) In general.--A loan meets the requirements of this
subsection if it is made to a mortgagor--
``(A) whose household income for the year in which
the mortgagor applies for the loan is 80 percent or
less of the area median gross household income for the
area in which the residence which secures the mortgage
is located, or
``(B) who is buying a home or duplex for owner-
occupancy in a census tract targeted for reinvestment
and redevelopment by the Department of Housing and
Urban Development, regardless of household income,
``(C) for whom the monthly housing expense-to-
income ratio with respect to a market-rate single-
family mortgage would exceed 28 percent,
``(D) but for whom a qualified home at last loan
would not result in a monthly housing expense-to-income
ratio greater than 33 percent at the time of closing,
``(E) who has not owned a home within the three
years prior to the date of applying for a qualified
home at last loan, and
``(F) who attends pre-purchase homeownership
counseling provided by a qualified nonprofit
organization consistent with standards established by
the American Homeownership Education and Counseling
Institute (AHECI).
``(2) Determination of household income.--For purposes of
this subsection and subsection (h), the household 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) 1 percent of the purchase price, or
``(B) $1,000, and
``(3) in the case of a mortgagor with a household 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.--
``(1) Credit period defined.--For purposes of this section,
the term `credit period' means the taxable year in which a home
at last tax credit amount is allocated to the taxpayer.
``(2) Disposition of home at last loans.--If a qualified
home at last loan is disposed of in the 12 months following its
closing date as a result of a borrower default, the taxpayer
forfeits the credit making it available for reallocation by the
State.
``(3) Prepayment of home at last loans.--If, during the 12
months following its closing date, a qualified home at last
loan is fully repaid by the borrower, the lender may claim only
a portion of the tax credit with the remainder being forfeited
and available for reallocation. The portion of tax credit that
can be claimed is determined by dividing the number of days
that have passed between the closing date and the date of
payoff by 365 and multiplying that number by the value of the
tax credit allocated to the lender for the purposes of
originating the prepaid home at last loan.
``(g) 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
first mortgage on a one- to four-family 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.
``(h) Certification and Other Reports to the Secretary.--
``(1) Certification with respect to state allocation of
home at last tax credits.--The Secretary may, upon a finding of
noncompliance, revoke the certification of a qualified State
and revoke any qualified home at last 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 at last
tax credit amount to any qualified lender for any calendar year
shall make available to the public no later than November 1 of
the following year) an annual report specifying--
``(A) the home at last 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 at last loan made by such lender
in such year,
``(ii) the number of qualified home at last
loans made by such lender in such year,
``(iii) the interest rate prior to buydown
and the effective interest rate after buydown
of each qualified home at last loan,
``(iv) the status of each qualified
homeownership loan defined as `performing',
`delinquent less than 60 days', `delinquent 60
days or more', or `in foreclosure',
``(v) the household income as a percent of
area median household income of each qualified
borrower,
``(vi) any other information the Secretary
may deem essential to assuring fair mortgage
pricing and that the benefit of the tax credit
is being passed through the taxpayer to the
qualified borrower in the form of a lower
interest rate, and
``(vii) the penalty under section 6652(j)
shall apply to any failure to provide the
report required by this paragraph on the date
prescribed herein.
``(i) Regulations.--The Secretary may 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:
``(11) No carryback of home at last tax credits before
effective date.--No portion of the unused business credit for
any taxable year which is attributable to the home at last tax
credit determined under section 45G may be carried back to a
taxable year ending before the date of the enactment of section
45G.''
(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
(14),
(B) by striking the period at the end of paragraph
(15) and inserting ``, plus'', and
(C) by adding at the end the following:
``(16) the home at last tax credit determined under section
45G.''
(2) The table of sections for subpart D of part IV of
subchapter A of chapter 1 of such Code is amended by adding at
the end the following:
``Sec. 45G. Home at last tax credit.''
(d) Effective Date.--The amendments made by this section shall
apply to calendar years after 2001.
<all>