[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1081 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                S. 1081

 To amend the Internal Revenue Code of 1986 to allow a business credit 
    for the development of low-to-moderate income housing for home 
                   ownership, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 21, 2001

 Mr. Torricelli (for himself and Mr. Dayton) 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 business credit 
    for the development of low-to-moderate income housing for home 
                   ownership, 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; ETC.

    (a) Short Title.--This Act may be cited as the ``Low-to-Moderate 
Income Home Ownership Tax Credit Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.
Sec. 2. Credit for low-to-moderate income housing for home ownership.
Sec. 3. Partial exclusion of gain from sale of low-to-moderate income 
                            housing.
Sec. 4. Expansion of rehabilitation credit.

SEC. 2. CREDIT FOR LOW-TO-MODERATE INCOME HOUSING FOR HOME OWNERSHIP.

    (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. 42A. LOW-TO-MODERATE INCOME HOME OWNERSHIP CREDIT.

    ``(a) In General.--For purposes of section 38, the amount of the 
home ownership credit determined under this section for any taxable 
year in the credit period shall be an amount equal to the applicable 
percentage of the qualified basis of each qualified low-to-moderate 
income building.
    ``(b) Applicable Percentage: 70 Percent Present Value Credit for 
New Buildings; 30 Percent Present Value Credit for Existing 
Buildings.--For purposes of this section--
            ``(1) In general.--The term `applicable percentage' means 
        the appropriate percentage prescribed by the Secretary for the 
        earlier of--
                    ``(A) the first month of the credit period with 
                respect to a low-to-moderate income building, or
                    ``(B) at the election of the taxpayer, the month in 
                which the taxpayer and the housing credit agency enter 
                into an agreement with respect to such building (which 
                is binding on such agency, the taxpayer, and all 
                successors in interest) as to the housing credit dollar 
                amount to be allocated to such building.
        A month may be elected under subparagraph (B) only if the 
        election is made not later than the 5th day after the close of 
        such month. Such an election, once made, shall be irrevocable.
            ``(2) Method of prescribing percentages.--The percentages 
        prescribed by the Secretary for any month shall be percentages 
        which will yield over a 10-year period amounts of credit under 
        subsection (a) which have a present value equal to--
                    ``(A) 70 percent of the qualified basis of a new 
                building, and
                    ``(B) 30 percent of the qualified basis of an 
                existing building.
            ``(3) Method of discounting.--The present value under 
        paragraph (2) shall be determined--
                    ``(A) as of the last day of the 1st year of the 10-
                year period referred to in paragraph (2),
                    ``(B) by using a discount rate equal to 72 percent 
                of the average of the annual Federal mid-term rate and 
                the annual Federal long-term rate applicable under 
                section 1274(d)(1) to the month applicable under 
                subparagraph (A) or (B) of paragraph (1) and compounded 
                annually, and
                    ``(C) by assuming that the credit allowable under 
                this section for any year is received on the last day 
                of such year.
    ``(c) Qualified Basis; Eligible Basis; Qualified Low-to-Moderate 
Income Building.--For purposes of this section--
            ``(1) Qualified basis.--
                    ``(A) Determination.--The qualified basis of any 
                qualified low-to-moderate income building for any 
                taxable year is an amount equal to--
                            ``(i) the applicable fraction (determined 
                        as of the close of such taxable year) of
                            ``(ii) the eligible basis of such building.
                    ``(B) Applicable fraction.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), the term `applicable 
                        fraction' means the smaller of the unit 
                        fraction or the floor space fraction.
                            ``(ii) Unit fraction.--For purposes of 
                        clause (i), the term `unit fraction' means the 
                        fraction--
                                    ``(I) the numerator of which is the 
                                number of low-to-moderate income units 
                                in the building, and
                                    ``(II) the denominator of which is 
                                the number of all units (whether or not 
                                occupied) in such building.
                            ``(iii) Floor space fraction.--For purposes 
                        of clause (i), the term `floor space fraction' 
                        means the fraction--
                                    ``(I) the numerator of which is the 
                                total floor space of the low-to-
                                moderate income units in such building, 
                                and
                                    ``(II) the denominator of which is 
                                the total floor space of all units 
                                (whether or not occupied) in such 
                                building.
                    ``(C) Eligible basis.--
                            ``(i) In general.--The eligible basis of 
                        any qualified low-to-moderate income building 
                        for any taxable year shall be determined under 
                        rules similar to the rules under section 42(d), 
                        except that--
                                    ``(I) the determination of the 
                                adjusted basis of any building shall be 
                                made as of the beginning of the credit 
                                period, and
                                    ``(II) such basis shall include 
                                development costs properly attributable 
                                to such building.
                            ``(ii) Development costs.--For purposes of 
                        clause (i)(II), the term `development costs' 
                        includes--
                                    ``(I) site preparation costs,
                                    ``(II) State and local impact fees,
                                    ``(III) reasonable development 
                                costs,
                                    ``(IV) professional fees related to 
                                basis items,
                                    ``(V) construction financing costs 
                                related to basis items other than land, 
                                and
                                    ``(VI) on-site and adjacent 
                                improvements required by State and 
                                local governments.
            ``(2) Qualified low-to-moderate income building.--The term 
        `qualified low-to-moderate income building' means any building 
        which is part of a qualified low-to-moderate income development 
        project at all times during the period--
                    ``(A) beginning on the 1st day in the compliance 
                period on which such building is part of such a 
                development project, and
                    ``(B) ending on the last day of the compliance 
                period with respect to such building.
    ``(d) Rehabilitation Expenditures Treated as Separate New 
Building.--Rehabilitation expenditures paid or incurred by the taxpayer 
with respect to any building shall be treated for purposes of this 
section as a separate new building under the rules of section 42(e).
    ``(e) Definition and Special Rules Relating to Credit Period.--
            ``(1) Credit period defined.--For purposes of this section, 
        the term `credit period' means, with respect to any building, 
        the period of 10 taxable years beginning with the taxable year 
        in which the building (or a low-to-moderate income unit in such 
        building) is first sold by the taxpayer to a low-to moderate 
        income individual after being placed in service.
            ``(2) Special rule for 1st year of credit period.--
                    ``(A) In general.--The credit allowable under 
                subsection (a) with respect to any building for the 1st 
                taxable year of the credit period shall be determined 
                by substituting for the applicable fraction under 
                subsection (c)(1) the fraction--
                            ``(i) the numerator of which is the sum of 
                        the applicable fractions determined under 
                        subsection (c)(1) as of the close of each full 
                        month of such year during which such building 
                        was in service, 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) Credit period for existing buildings not to begin 
        before rehabilitation credit allowed.--The credit period for an 
        existing building shall not begin before the 1st taxable year 
        of the credit period for rehabilitation expenditures with 
        respect to the building.
    ``(f) Qualified Low-to-Moderate Income Development Project.--For 
purposes of this section--
            ``(1) In general.--The term `qualified low-to-moderate 
        income development project' means any development project of 1 
        or more for qualified low-to-moderate income buildings located 
        in an area if 40 percent or more of the residential units in 
        such development project are occupied and owned by individuals 
        whose income is 100 percent or less of area median gross 
        income.
            ``(2) Treatment of units occupied by individuals whose 
        incomes rise above limit.--Notwithstanding an increase in the 
        income of the occupants of a low-to-moderate income unit above 
        the income limitation applicable under paragraph (2) or (3), 
        such unit shall continue to be treated as a low-to-moderate 
        income unit if the income of such occupants initially met such 
        income limitation and such unit continues to be so restricted.
            ``(3) Certain rules made applicable.--Paragraphs (3), (5), 
        (7), and (8) of section 42(g) shall apply for purposes of 
        determining whether any development project is a qualified low-
        to-moderate income development project.
    ``(g) Limitation on Aggregate Credit Allowable With Respect to 
Development Projects Located in a State.--
            ``(1) Credit may not exceed credit amount allocated to 
        building.--The amount of the credit determined under this 
        section for any taxable year with respect to any building shall 
        not exceed the housing credit dollar amount allocated to such 
        building under rules similar to the rules of section 42(h)(1) 
        (determined without regard to subparagraph (D) thereof).
            ``(2) Allocated credit amount to apply to all taxable years 
        ending during or after credit allocation year.--Any housing 
        credit dollar amount allocated to any building for any calendar 
        year--
                    ``(A) shall apply to such building for all taxable 
                years in the credit period ending during or after such 
                calendar year, and
                    ``(B) shall reduce the aggregate housing credit 
                dollar amount of the allocating agency only for such 
                calendar year.
            ``(3) Housing credit dollar amount for agencies.--
                    ``(A) In general.--The aggregate housing credit 
                dollar amount which a housing credit agency may 
                allocate for any calendar year is the portion of the 
                State housing credit ceiling allocated under this 
                paragraph for such calendar year to such agency.
                    ``(B) State ceiling initially allocated to state 
                housing credit agencies.--Except as provided in 
                subparagraphs (D) and (E), the State housing credit 
                ceiling for each calendar year shall be allocated to 
                the housing credit agency of such State. If there is 
                more than 1 housing credit agency of a State, all such 
                agencies shall be treated as a single agency.
                    ``(C) State housing credit ceiling.--The State 
                housing credit ceiling applicable to any State and any 
                calendar year shall be an amount equal to the sum of--
                            ``(i) the unused State housing credit 
                        ceiling (if any) of such State for the 
                        preceding calendar year,
                            ``(ii) the greater of--
                                    ``(I) $1.75 multiplied by the State 
                                population, or
                                    ``(II) $2,000,000,
                            ``(iii) the amount of State housing credit 
                        ceiling returned in the calendar year, plus
                            ``(iv) the amount (if any) allocated under 
                        subparagraph (D) to such State by the 
                        Secretary.
                For purposes of clause (i), the unused State housing 
                credit ceiling for any calendar year is the excess (if 
                any) of the sum of the amounts described in clauses 
                (ii) through (iv) over the aggregate housing credit 
                dollar amount allocated for such year. For purposes of 
                clause (iii), the amount of State housing credit 
                ceiling returned in the calendar year equals the 
                housing credit dollar amount previously allocated 
                within the State to any development project which fails 
                to meet the 10 percent test under section 
                42(h)(1)(E)(ii) on a date after the close of the 
                calendar year in which the allocation was made or which 
                does not become a qualified low-to-moderate income 
                development project within the period required by this 
                section or the terms of the allocation or to any 
                development project with respect to which an allocation 
                is canceled by mutual consent of the housing credit 
                agency and the allocation recipient.
                    ``(D) Unused housing credit carryovers allocated 
                among certain states.--
                            ``(i) In general.--The unused housing 
                        credit carryover of a State for any calendar 
                        year shall be assigned to the Secretary for 
                        allocation among qualified States for the 
                        succeeding calendar year.
                            ``(ii) Unused housing credit carryover.--
                        For purposes of this subparagraph, the unused 
                        housing credit carryover of a State for any 
                        calendar year is the excess (if any) of the 
                        unused State housing credit ceiling for such 
                        year (as defined in subparagraph (C)(i)) over 
                        the excess (if any) of --
                                    ``(I) the unused State housing 
                                credit ceiling for the year preceding 
                                such year, over
                                    ``(II) the aggregate housing credit 
                                dollar amount allocated for such year.
                            ``(iii) Formula for allocation of unused 
                        housing credit carryovers among qualified 
                        states.--The amount allocated under this 
                        subparagraph to a qualified State for any 
                        calendar year shall be the amount determined by 
                        the Secretary to bear the same ratio to the 
                        aggregate unused housing credit carryovers of 
                        all States for the preceding calendar year as 
                        such State's population for the calendar year 
                        bears to the population of all qualified States 
                        for the calendar year. For purposes of the 
                        preceding sentence, population shall be 
                        determined in accordance with section 146(j).
                            ``(iv) Qualified state.--For purposes of 
                        this subparagraph, the term `qualified State' 
                        means, with respect to a calendar year, any 
                        State--
                                    ``(I) which allocated its entire 
                                State housing credit ceiling for the 
                                preceding calendar year, and
                                    ``(II) for which a request is made 
                                (not later than May 1 of the calendar 
                                year) to receive an allocation under 
                                clause (iii).
                    ``(E) Special rule for states with constitutional 
                home rule cities.--For purposes of this subsection--
                            ``(i) In general.--The aggregate housing 
                        credit dollar amount for any constitutional 
                        home rule city for any calendar year shall be 
                        an amount which bears the same ratio to the 
                        State housing credit ceiling for such calendar 
                        year as--
                                    ``(I) the population of such city, 
                                bears to
                                    ``(II) the population of the entire 
                                State.
                            ``(ii) Coordination with other 
                        allocations.--In the case of any State which 
                        contains 1 or more constitutional home rule 
                        cities, for purposes of applying this paragraph 
                        with respect to housing credit agencies in such 
State other than constitutional home rule cities, the State housing 
credit ceiling for any calendar year shall be reduced by the aggregate 
housing credit dollar amounts determined for such year for all 
constitutional home rule cities in such State.
                            ``(iii) Constitutional home rule city.--For 
                        purposes of this paragraph, the term 
                        `constitutional home rule city' has the meaning 
                        given such term by section 146(d)(3)(C).
                    ``(F) State may provide for different allocation.--
                Rules similar to the rules of section 146(e) (other 
                than paragraph (2)(B) thereof) shall apply for purposes 
                of this paragraph.
                    ``(G) Population.--For purposes of this paragraph, 
                population shall be determined in accordance with 
                section 146(j).
                    ``(H) Cost-of-living adjustment.--
                            ``(i) In general.--In the case of a 
                        calendar year after 2002, the $2,000,000 and 
                        $1.75 amounts in subparagraph (C) shall each be 
                        increased by an amount equal to--
                                    ``(I) such dollar 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.
                            ``(ii) Rounding.--
                                    ``(I) In the case of the $2,000,000 
                                amount, any increase under clause (i) 
                                which is not a multiple of $5,000 shall 
                                be rounded to the next lowest multiple 
                                of $5,000.
                                    ``(II) In the case of the $1.75 
                                amount, any increase under clause (i) 
                                which is not a multiple of 5 cents 
                                shall be rounded to the next lowest 
                                multiple of 5 cents.
            ``(4) Portion of state ceiling set-aside for certain 
        development projects involving qualified nonprofit 
        organizations.--
                    ``(A) In general.--Not more than 90 percent of the 
                State housing credit ceiling for any State for any 
                calendar year shall be allocated to development 
                projects other than qualified low-to-moderate income 
                development projects described in subparagraph (B).
                    ``(B) Development projects involving qualified 
                nonprofit organizations.--For purposes of subparagraph 
                (A), a qualified low-to-moderate income development 
                project is described in this subparagraph if a 
                qualified nonprofit organization is to materially 
                participate (within the meaning of section 469(h)) in 
                the development and operation of the development 
                project throughout the compliance period.
                    ``(C) Qualified nonprofit organization.--For 
                purposes of this paragraph, the term `qualified 
                nonprofit organization' means any organization if--
                            ``(i) such organization is described in 
                        paragraph (3) or (4) of section 501(c) and is 
                        exempt from tax under section 501(a),
                            ``(ii) such organization is determined by 
                        the State housing credit agency not to be 
                        affiliated with or controlled by a for-profit 
                        organization; and
                            ``(iii) 1 of the exempt purposes of such 
                        organization includes the fostering of low-to-
                        moderate income housing.
                    ``(D) Treatment of certain subsidiaries.--
                            ``(i) In general.--For purposes of this 
                        paragraph, a qualified nonprofit organization 
                        shall be treated as satisfying the ownership 
                        and material participation test of subparagraph 
                        (B) if any qualified corporation in which such 
                        organization holds stock satisfies such test.
                            ``(ii) Qualified corporation.--For purposes 
                        of clause (i), the term `qualified corporation' 
                        means any corporation if 100 percent of the 
                        stock of such corporation is held by 1 or more 
                        qualified nonprofit organizations at all times 
                        during the period such corporation is in 
                        existence.
                    ``(E) State may not override set-aside.--Nothing in 
                subparagraph (F) of paragraph (3) shall be construed to 
                permit a State not to comply with subparagraph (A) of 
                this paragraph.
            ``(5) Buildings eligible for credit only if minimum long-
        term commitment to low-to-moderate income housing.--
                    ``(A) In general.--No credit shall be allowed by 
                reason of this section with respect to any building for 
                the taxable year unless a low-to-moderate income 
                housing commitment is in effect as of the end of such 
                taxable year.
                    ``(B) Low-to-moderate income housing commitment.--
                For purposes of this paragraph, the term `low-to-
                moderate income housing commitment' means any agreement 
                between the taxpayer and the housing credit agency--
                            ``(i) which requires that the applicable 
                        fraction (as defined in subsection (c)(1)(B)) 
                        for the building for each taxable year in the 
                        compliance period will not be less than the 
                        applicable fraction specified in such 
                        agreement,
                            ``(ii) which allows individuals who meet 
                        the income limitation applicable to the 
                        building under subsection (f) (whether 
                        prospective, present, or former occupants of 
the building) the right to enforce in any State court the requirement 
of clause (i),
                            ``(iii) which allows the taxpayer the right 
                        of first refusal to purchase the building from 
                        the low-or-moderate income individual to whom 
                        the taxpayer first sold the building,
                            ``(iv) which is binding on all successors 
                        of the taxpayer, and
                            ``(v) which, with respect to the property, 
                        is recorded pursuant to State law as a 
                        restrictive covenant.
                    ``(C) Allocation of credit may not exceed amount 
                necessary to support commitment.--The housing credit 
                dollar amount allocated to any building may not exceed 
                the amount necessary to support the applicable fraction 
                specified in the low-to-moderate income housing 
                commitment for such building.
                    ``(D) Effect of noncompliance.--If, during a 
                taxable year, there is a determination that a low-to-
                moderate income housing agreement was not in effect as 
                of the beginning of such year, such determination shall 
                not apply to any period before such year and 
                subparagraph (A) shall be applied without regard to 
                such determination if the failure is corrected within 1 
                year from the date of the determination.
                    ``(E) Development projects which consist of more 
                than 1 building.--The application of this paragraph to 
                development projects which consist of more than 1 
                building shall be made under regulations prescribed by 
                the Secretary.
            ``(6) Special rules.--
                    ``(A) Building must be located within jurisdiction 
                of credit agency.--A housing credit agency may allocate 
                its aggregate housing credit dollar amount only to 
                buildings located in the jurisdiction of the 
                governmental unit of which such agency is a part.
                    ``(B) Agency allocations in excess of limit.--If 
                the aggregate housing credit dollar amounts allocated 
                by a housing credit agency for any calendar year exceed 
                the portion of the State housing credit ceiling 
                allocated to such agency for such calendar year, the 
                housing credit dollar amounts so allocated shall be 
                reduced (to the extent of such excess) for buildings in 
                the reverse of the order in which the allocations of 
                such amounts were made.
                    ``(C) Credit reduced if allocated credit dollar 
                amount is less than credit which would be allowable 
                without regard to sales convention, etc.--
                            ``(i) In general.--The amount of the credit 
                        determined under this section with respect to 
                        any building shall not exceed the clause (ii) 
                        percentage of the amount of the credit which 
                        would (but for this subparagraph) be determined 
                        under this section with respect to such 
                        building.
                            ``(ii) Determination of percentage.--For 
                        purposes of clause (i), the clause (ii) 
                        percentage with respect to any building is the 
                        percentage which--
                                    ``(I) the housing credit dollar 
                                amount allocated to such building bears 
                                to
                                    ``(II) the credit amount determined 
                                in accordance with clause (iii).
                            ``(iii) Determination of credit amount.--
                        The credit amount determined in accordance with 
                        this clause is the amount of the credit which 
                        would (but for this subparagraph) be determined 
                        under this section with respect to the building 
                        if this section were applied without regard to 
                        paragraph (2)(A) of subsection (e).
                    ``(D) Housing credit agency to specify applicable 
                percentage and maximum qualified basis.--In allocating 
                a housing credit dollar amount to any building, the 
                housing credit agency shall specify the applicable 
                percentage and the maximum qualified basis which may be 
                taken into account under this section with respect to 
                such building. The applicable percentage and maximum 
                qualified basis so specified shall not exceed the 
                applicable percentage and qualified basis determined 
                under this section without regard to this subsection.
            ``(7) Other definitions.--For purposes of this subsection--
                    ``(A) Housing credit agency.--The term `housing 
                credit agency' means any agency authorized to carry out 
                this subsection.
                    ``(B) Possessions treated as States.--The term 
                `State' includes a possession of the United States.
    ``(h) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Compliance period.--The term `compliance period' 
        means, with respect to any building, the period of 5 taxable 
        years beginning with the 1st taxable year of the credit period 
        with respect thereto.
            ``(2) New building.--The term `new building' means a 
        building the original use of which begins with the taxpayer.
            ``(3) Existing building.--The term `existing building' 
        means any building which is not a new building.
            ``(4) Application to estates and trusts.--In the case of an 
        estate or trust, the amount of the credit determined under 
        subsection (a) and any increase in tax under subsection (j) 
        shall be apportioned between the estate or trust and the 
        beneficiaries on the basis of the income of the estate or trust 
        allocable to each.
    ``(i) Recapture of Credit.--If--
            ``(1) as of the close of any taxable year in the compliance 
        period, the amount of the qualified basis of any building with 
        respect to the taxpayer is less than
            ``(2) the amount of such basis as of the close of the 
        preceding taxable year,
        then the taxpayer's tax under this chapter for the taxable year 
        shall be increased by the credit recapture amount determined 
        under rules similar to the rules of section 42(j).
    ``(j) Application of At-Risk Rules.--For purposes of this section, 
rules similar to the rules of section 42(k) shall apply.
    ``(k) Certifications and Other Reports to Secretary.--
            ``(1) Certification with respect to 1st year of credit 
        period.--Following the close of the 1st taxable year in the 
        credit period with respect to any qualified low-to-moderate 
        income building, the taxpayer shall certify to the Secretary 
        (at such time and in such form and in such manner as the 
        Secretary prescribes)--
                    ``(A) the taxable year, and calendar year, in which 
                such building was first sold after being placed in 
                service,
                    ``(B) the adjusted basis and eligible basis of such 
                building as of the beginning of the credit period,
                    ``(C) the maximum applicable percentage and 
                qualified basis permitted to be taken into account by 
                the appropriate housing credit agency under subsection 
                (g),
                    ``(D) the election made under subsection (f) with 
                respect to the qualified low-to-moderate income housing 
                development project of which such building is a part, 
                and
                    ``(E) such other information as the Secretary may 
                require.
        In the case of a failure to make the certification required by 
        the preceding sentence on the date prescribed therefor, unless 
        it is shown that such failure is due to reasonable cause and 
        not to willful neglect, no credit shall be allowable by reason 
        of subsection (a) with respect to such building for any taxable 
        year ending before such certification is made.
            ``(2) Annual reports to the Secretary.--The Secretary may 
        require taxpayers to submit an information return (at such time 
        and in such form and manner as the Secretary prescribes) for 
        each taxable year setting forth--
                    ``(A) the qualified basis for the taxable year of 
                each qualified low-to-moderate income building of the 
                taxpayer,
                    ``(B) the information described in paragraph (1)(C) 
                for the taxable year, and
                    ``(C) such other information as the Secretary may 
                require.
        The penalty under section 6652(j) shall apply to any failure to 
        submit the return required by the Secretary under the preceding 
        sentence on the date prescribed therefor.
            ``(3) Annual reports from housing credit agencies.--Each 
        agency which allocates any housing credit amount to any 
        building 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 amount of housing credit amount allocated 
                to each building for such year,
                    ``(B) sufficient information to identify each such 
                building and the taxpayer with respect thereto, and
                    ``(C) such other information as the Secretary may 
                require.
        The penalty under section 6652(j) shall apply to any failure to 
        submit the report required by the preceding sentence on the 
        date prescribed therefor.
    ``(l) Responsibilities of Housing Credit Agencies.--
            ``(1) Plans for allocation of credit among development 
        projects.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this section, the housing credit dollar 
                amount with respect to any building shall be zero 
                unless--
                            ``(i) such amount was allocated pursuant to 
                        a qualified allocation plan of the housing 
                        credit agency which is approved by the 
                        governmental unit (in accordance with rules 
                        similar to the rules of section 147(f)(2) 
                        (other than subparagraph (B)(ii) thereof)) of 
                        which such agency is a part,
                            ``(ii) such agency notifies the chief 
                        executive officer (or the equivalent) of the 
                        local jurisdiction within which the building is 
                        located of such development project and 
                        provides such individual a reasonable 
                        opportunity to comment on the development 
                        project,
                            ``(iii) a comprehensive market study of the 
                        housing needs of low- and moderate-income 
                        individuals in the area to be served by the 
                        development project is conducted before the 
                        credit allocation is made and at the 
                        developer's expense by a disinterested party 
                        who is approved by such agency, and
                            ``(iv) a written explanation is available 
                        to the general public for any allocation of a 
                        housing credit dollar amount which is not made 
                        in accordance with established priorities and 
                        selection criteria of the housing credit 
                        agency.
                    ``(B) Qualified allocation plan.--For purposes of 
                this paragraph, the term `qualified allocation plan' 
                means any plan--
                            ``(i) which sets forth selection criteria 
                        to be used to determine housing priorities of 
                        the housing credit agency which are appropriate 
                        to local conditions,
                            ``(ii) which also gives preference in 
                        allocating housing credit dollar amounts among 
                        selected development projects to--
                                    ``(I) development projects serving 
                                the lowest income owners, and
                                    ``(II) development projects which 
                                are located in qualified census tracts 
                                (as defined in section 42(d)(5)(C)) and 
the development of which contributes to a concerted community 
revitalization plan, and
                            ``(iii) which provides 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 which such agency 
                        becomes aware of and in monitoring for 
                        noncompliance with habitability standards 
                        through regular site visits.
                    ``(C) Certain selection criteria must be used.--The 
                selection criteria set forth in a qualified allocation 
                plan must include--
                            ``(i) development project location,
                            ``(ii) housing needs characteristics,
                            ``(iii) development project 
                        characteristics, including whether the 
                        development project includes the use of 
                        existing housing as part of a community 
                        revitalization plan,
                            ``(iv) populations with special housing 
                        needs,
                            ``(v) low-to-moderate income housing 
                        waiting lists, and
                            ``(vi) populations of individuals with 
                        children.
            ``(2) Credit allocated to building not to exceed amount 
        necessary to assure development project feasibility.--
                    ``(A) In general.--The housing credit dollar amount 
                allocated to a development project shall not exceed the 
                amount the housing credit agency determines is 
                necessary for the financial feasibility of the 
                development project and its viability as a qualified 
                low-to-moderate income development project throughout 
                the compliance period.
                    ``(B) Agency evaluation.--In making the 
                determination under subparagraph (A), the housing 
                credit agency shall consider--
                            ``(i) the sources and uses of funds and the 
                        total financing planned for the development 
                        project,
                            ``(ii) any proceeds or receipts expected to 
                        be generated by reason of tax benefits,
                            ``(iii) the percentage of the housing 
                        credit dollar amount used for development 
                        project costs other than the cost of 
                        intermediaries, and
                            ``(iv) the reasonableness of the 
                        developmental and operational costs of the 
                        development project.
                Clause (iii) shall not be applied so as to impede the 
                development of development projects in hard-to-develop 
                areas.
                    ``(C) Determination made when credit amount applied 
                for and when building sold.--
                            ``(i) In general.--A determination under 
                        subparagraph (A) shall be made as of each of 
                        the following times:
                                    ``(I) The application for the 
                                housing credit dollar amount.
                                    ``(II) The allocation of the 
                                housing credit dollar amount.
                                    ``(III) The date the building is 
                                first sold after having been placed in 
                                service.
                            ``(ii) Certification as to amount of other 
                        subsidies.--Prior to each determination under 
                        clause (i), the taxpayer shall certify to the 
                        housing credit agency the full extent of all 
                        Federal, State, and local subsidies which apply 
                        (or which the taxpayer expects to apply) with 
                        respect to the building.
    ``(m) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations--
            ``(1) dealing with--
                    ``(A) development projects which include more than 
                1 building or only a portion of a building,
                    ``(B) buildings which are sold in portions,
            ``(2) providing for the application of this section to 
        short taxable years,
            ``(3) preventing the avoidance of the rules of this 
        section, and
            ``(4) providing the opportunity for housing credit agencies 
        to correct administrative errors and omissions with respect to 
        allocations and record keeping within a reasonable period after 
        their discovery, taking into account the availability of 
        regulations and other administrative guidance from the 
        Secretary.
    ``(n) Termination.--Clause (ii) of subsection (g)(3)(C) shall not 
apply to any amount allocated after December 31, 2004.''.
    (b) Current Year Business Credit Calculation.--Section 38(b) of the 
Internal Revenue Code of 1986 (relating to current year business 
credit) is amended by striking ``plus'' at the end of paragraph (12), 
by striking the period at the end of paragraph (13) and inserting ``, 
plus'', and by adding at the end the following:
            ``(14) the home ownership credit determined under section 
        42A(a).''.
    (c) Limitation on Carryback.--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:
            ``(10) No carryback of home ownership credit before 
        effective date.--No amount of unused business credit available 
        under section 42A may be carried back to a taxable year 
        beginning on or before the date of the enactment of this 
        paragraph.''.
    (d) Conforming Amendments.--
            (1) Section 55(c)(1) of the Internal Revenue Code of 1986 
        is amended by inserting ``or subsection (i) or (j) of section 
        42A'' after ``section 42''.
            (2) Subsections (i)(c)(3), (i)(c)(6)(B)(i), and (k)(1) of 
        section 469 of such Code are each amended by inserting ``or 
        42A'' after ``section 42''.
            (3) Section 772(a) of such Code is amended by striking 
        ``and'' at the end of paragraph (10), by redesignating 
        paragraph (11) as paragraph (12), and by inserting after 
        paragraph (10) the following:
            ``(11) the home ownership credit determined under section 
        42A, and''.
            (4) Section 774(b)(4) of such Code is amended by inserting 
        ``, 42A(i),'' after ``section 42(j)''.
    (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. Low-to-moderate income home 
                                        ownership credit.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to expenditures made in taxable years beginning after the date of 
the enactment of this Act.

SEC. 3. PARTIAL EXCLUSION OF GAIN FROM SALE OF LOW-TO-MODERATE INCOME 
              HOUSING.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by redesignating section 139 as section 
140 and inserting after section 138 the following new section:

``SEC. 139. CERTAIN GAIN FROM SALE OF LOW-TO-MODERATE INCOME HOUSING.

    ``(a) In General.--Gross income shall not include the gain from the 
sale of any low-to-moderate income building made during the taxable 
year and with respect to which the taxpayer is allowed a credit under 
section 42A.
    ``(b) Limitation.--The amount of gain which may be taken into 
account under subsection (a) with respect to the sale of a low-to-
moderate income building shall not exceed $10,000 for each low-to-
moderate income unit in such building.''.
    (b) Conforming Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of such Code is amended by striking the item 
relating to section 139 and inserting the following new items:

``Sec. 139. Certain gain from sale of low-to-moderate income housing.
``Sec. 140. Cross references to other Acts.''.
    (c) Effective Date.--The amendments made by this section shall 
apply sales in taxable years beginning after the date of the enactment 
of this Act.

SEC. 4. EXPANSION OF REHABILITATION CREDIT.

    (a) Credit Applicable to Buildings at Least 50 Years Old.--
Subparagraph (B) of section 47(c)(1) of the Internal Revenue Code of 
1986 (relating to qualified rehabilitated building is amended to read 
as follows:
                    ``(B) Building must be at least 50 years old.--In 
                the case of a building other than a certified historic 
                structure, a building shall not be a qualified 
                rehabilitated building unless the building was first 
                placed in service before the date which is at least 50 
                years before the date such building is placed in 
                service for purposes of the credit under this 
                section.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to property placed in service after the date of the enactment of this 
Act.
                                 <all>