[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1886 Introduced in Senate (IS)]







107th CONGRESS
  1st Session
                                S. 1886

 To amend the Internal Revenue Code of 1986 to allow a business credit 
                     for supported elderly housing.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

            December 20 (legislative day, December 18), 2001

   Mr. Dodd 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 supported elderly housing.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Assisted Living Tax Credit Act''.

SEC. 2. SUPPORTED ELDERLY HOUSING 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. 42A. SUPPORTED ELDERLY HOUSING CREDIT.

    ``(a) Amount of Credit.--For purposes of section 38, the amount of 
the supported elderly housing credit determined under this section for 
any taxable year in the credit period shall be an amount equal to the 
sum of--
            ``(1) 9 percent of the qualified basis of each qualified 
        supported elderly building, plus
            ``(2) 4 percent of such qualified basis with respect to any 
        qualified supported elderly building providing qualified 
        supported elderly services.
    ``(b) Qualified Basis; Qualified Supported Elderly Building; Credit 
Period.--For purposes of this section--
            ``(1) Qualified basis.--
                    ``(A) Determination.--The qualified basis of any 
                qualified supported elderly 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 
                        (determined under rules similar to the rules 
                        under section 42(d)).
                    ``(B) Applicable fraction.--For purposes of 
                subparagraph (A), the term `applicable

                fraction' means the smaller of the unit fraction or the 
                floor space fraction.
                    ``(C) Unit fraction.--For purposes of subparagraph 
                (B), the term `unit fraction' means the fraction--
                            ``(i) the numerator of which is the number 
                        of supported elderly units in the building, and
                            ``(ii) the denominator of which is the 
                        number of residential rental units (whether or 
                        not occupied) in such building.
                    ``(D) Floor space fraction.--For purposes of 
                subparagraph (B), the term `floor space fraction' means 
                the fraction--
                            ``(i) the numerator of which is the total 
                        floor space of the supported elderly units in 
                        such building, and
                            ``(ii) the denominator of which is the 
                        total floor space of the residential rental 
                        units (whether or not occupied) in such 
                        building.
                    ``(E) Qualified basis to include portion of 
                building used to provide qualified supported elderly 
                services.--In the case of a qualified supported elderly 
                building described in subsection (a)(2), the qualified 
                basis of such building for any taxable year shall be 
                increased by the lesser of--
                            ``(i) so much of the eligible basis of such 
                        building as is used throughout the year to 
                        provide qualified supported elderly services, 
                        or
                            ``(ii) 20 percent of the qualified basis of 
                        such building (determined without regard to 
                        this subparagraph).
            ``(2) Qualified supported elderly building.--The term 
        `qualified supported elderly building' means any building which 
        is part of a qualified supported elderly housing 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 
                project, and
                    ``(B) ending on the last day of the compliance 
                period with respect to such building.
        Such term does not include any building with respect to which 
        moderate rehabilitation assistance is provided, at any time 
        during the compliance period, under section 8(e)(2) of the 
        United States Housing Act of 1937 (other than assistance under 
        the Stewart B. McKinney Homeless Assistance Act (as in effect 
        on the date of the enactment of this sentence)).
            ``(3) Credit period.--The term `credit period' means, with 
        respect to any building, the period of 10 taxable years 
        beginning with--
                    ``(A) the taxable year in which the building is 
                placed in service, or
                    ``(B) at the election of the taxpayer, the 
                succeeding taxable year,
        but only if the building is a qualified supported elderly 
        building as of the close of the 1st year of such period. The 
        election under subparagraph (B), once made, shall be 
        irrevocable.
            ``(4) Applicable rules.--
                    ``(A) For treatment of certain rehabilitation 
                expenditures as separate new buildings, subsection (e) 
                of section 42 shall apply.
                    ``(B) For rules regarding the application of the 
                credit period, paragraphs (2) through (5) of section 
                42(f) shall apply.
    ``(c) Qualified Supported Elderly Housing Project.--For purposes of 
this section--
            ``(1) In general.--The term `qualified supported elderly 
        housing project' means any project for residential rental 
        property if the project meets the requirements of subparagraph 
(A) or (B) whichever is elected by the taxpayer:
                    ``(A) 20-50 test.--The project meets the 
                requirements of this subparagraph if 20 percent or more 
                of the residential units in such project are both rent-
                restricted and occupied by individuals whose income is 
                50 percent or less of area median gross income.
                    ``(B) 40-90 test.--The project meets the 
                requirements of this subparagraph if 40 percent or more 
                of the residential units in such project are both rent-
                restricted and occupied by individuals whose income is 
                90 percent or less of area median gross income.
        Any election under this paragraph, once made, shall be 
        irrevocable. For purposes of this paragraph, any property shall 
        not be treated as failing to be residential rental property 
        merely because part of the building in which such property is 
        located is used for purposes other than residential rental 
        purposes.
            ``(2) Rent-restricted units.--
                    ``(A) In general.--For purposes of paragraph (1), a 
                residential unit is rent-restricted if the gross rent 
                with respect to such unit does not exceed 65 percent of 
                the imputed income limitation applicable to such unit. 
                For purposes of the preceding sentence, the amount of 
                the income limitation under paragraph (1) applicable 
                for any period shall not be less than such limitation 
                applicable for the earliest period the building (which 
                contains the unit) was included in the determination of 
                whether the project is a qualified supported elderly 
                housing project.
                    ``(B) Gross rent.--For purposes of subparagraph 
                (A), gross rent--
                            ``(i) includes any fee for a qualified 
                        supported elderly service which is paid to the 
                        owner of the unit (on the basis of the 
                        supported elderly status of the tenant of the 
                        unit) by any governmental program of assistance 
                        (or by an organization described in section 
                        501(c)(3) and exempt from tax under section 
                        501(a)) if such program (or organization) 
                        provides assistance for rent and the amount of 
                        assistance provided for rent is not separable 
                        from the amount of assistance provided for 
                        supportive services,
                            ``(ii) does not include any payment under 
                        section 8 of the United States Housing Act of 
                        1937 or any comparable rental assistance 
                        program (with respect to such unit or occupants 
                        thereof),
                            ``(iii) includes any utility allowance 
                        determined by the Secretary after taking into 
                        account such determinations under section 8 of 
                        the United States Housing Act of 1937, and
                            ``(iv) does not include any rental payment 
                        to the owner of the unit to the extent such 
                        owner pays an equivalent amount to the Farmers' 
                        Home Administration under section 515 of the 
                        Housing Act of 1949.
                    ``(C) Imputed income limitation applicable to 
                unit.--For purposes of this paragraph, the imputed 
                income limitation applicable to a unit is the income 
                limitation which would apply under paragraph (1) to 
                individuals occupying the unit if the number of 
                individuals occupying the unit were as follows:
                            ``(i) In the case of a unit which does not 
                        have a separate bedroom, 1 individual.
                            ``(ii) In the case of a unit which has 1 or 
                        more separate bedrooms, 1.5 individuals for 
                        each separate bedroom.
                In the case of a project with respect to which a credit 
                is allowable by reason of this section and for which 
                financing is provided by a bond described in section 
                142(a)(7), the imputed income limitation shall apply in 
                lieu of the otherwise applicable income limitation for 
                purposes of applying section 142(d)(4)(B)(ii).
                    ``(D) Treatment of units occupied by individuals 
                whose incomes rise above limit.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), notwithstanding an increase in the 
                        income of the occupants of a supported elderly 
                        unit above the income limitation applicable 
                        under paragraph (1), such unit shall continue 
                        to be treated as a supported elderly unit if 
                        the income of such occupants initially met such 
                        income limitation and such unit continues to be 
                        rent restricted.
                            ``(ii) Next available unit must be rented 
                        to supported elderly tenant if income rises 
                        above 140 percent of income limit.--If the 
                        income of the occupants of the unit increases 
                        above 140 percent of the income limitation 
                        applicable under paragraph (1), clause (i) 
                        shall cease to apply to such unit if any 
                        residential rental unit in the building (of a 
                        size comparable to, or smaller than, such unit) 
                        is occupied by a new resident whose income 
                        exceeds such income limitation. In the case of 
                        a project described in section 142(d)(4)(B), 
                        the preceding sentence shall be applied by 
                        substituting `170 percent' for `140 percent' 
                        and by substituting `any supported elderly unit 
                        in the building is occupied by a new resident 
                        whose income exceeds 40 percent of area median 
                        gross income' for `any residential unit in the 
                        building (of a size comparable to, or smaller 
                        than, such unit) is occupied by a new resident 
                        whose income exceeds such income limitation'.
                    ``(E) Units where federal rental assistance is 
                reduced as tenant's income increases.--If the gross 
                rent with respect to a residential unit exceeds the 
                limitation under subparagraph (A) by reason of the fact 
                that the income of the occupants thereof exceeds the 
                income limitation applicable under paragraph (1), such 
                unit shall, nevertheless, be treated as a rent-
                restricted unit for purposes of paragraph (1) if--
                            ``(i) a Federal rental assistance payment 
                        described in subparagraph (B)(i) is made with 
                        respect to such unit or its occupants, and
                            ``(ii) the sum of such payment and the 
                        gross rent with respect to such unit does not 
                        exceed the sum of the amount of such payment 
                        which would be made and the gross rent which 
                        would be payable with respect to such unit if--
                                    ``(I) the income of the occupants 
                                thereof did not exceed the income 
                                limitation applicable under paragraph 
                                (1), and
                                    ``(II) such units were rent-
                                restricted within the meaning of 
                                subparagraph (A).
                The preceding sentence shall apply to any unit only if 
                the result described in clause (ii) is required by 
                Federal statute as of the date of the enactment of this 
                subparagraph and as of the date the Federal rental 
                assistance payment is made.
            ``(3) Qualified supported elderly service.--The term 
        `qualified supported elderly service' means any service 
        provided under a planned program of services designed to enable 
        residents of a residential rental property to remain 
        independent and avoid placement in a hospital, nursing home, or 
        intermediate care facility for the mentally or physically 
        handicapped. In the case of a single-room occupancy unit or a 
        building described in subsection (h)(2)(B)(iii), such term 
        includes any service provided to assist tenants in locating and 
        retaining permanent housing.
            ``(4) Date for meeting requirements.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, a building shall be treated as a 
                qualified supported elderly building only if the 
                project (of which such building is a part) meets the 
                requirements of paragraph (1) not later than the close 
                of the 1st year of the credit period for such building.
                    ``(B) Buildings which rely on later buildings for 
                qualification.--
                            ``(i) In general.--In determining whether a 
                        building (in this subparagraph referred to as 
                        the `prior building') is a qualified supported 
                        elderly building, the taxpayer may take into 
                        account 1 or more additional buildings placed 
                        in service during the 12-month period described 
                        in subparagraph (A) with respect to the prior 
                        building only if the taxpayer elects to apply 
                        clause (ii) with respect to each additional 
                        building taken into account.
                            ``(ii) Treatment of elected buildings.--In 
                        the case of a building which the taxpayer 
                        elects to take into account under clause (i), 
                        the period under subparagraph (A) for such 
                        building shall end at the close of the 12-month 
                        period applicable to the prior building.
                            ``(iii) Date prior building is treated as 
                        placed in service.--For purposes of determining 
                        the credit period and the compliance period for 
                        the prior building, the prior building shall be 
                        treated for purposes of this section as placed 
                        in service on the most recent date any 
                        additional building elected by the taxpayer 
                        (with respect to such prior building) was 
                        placed in service.
                    ``(C) Special rule.--A building--
                            ``(i) other than the 1st building placed in 
                        service as part of a project, and
                            ``(ii) other than a building which is 
                        placed in service during the 12-month period 
                        described in subparagraph (A) with respect to a 
                        prior building which becomes a qualified 
                        supported elderly building,
                shall in no event be treated as a qualified supported 
                elderly building unless the project is a qualified 
                supported elderly housing project (without regard to 
                such building) on the date such building is placed in 
                service.
                    ``(D) Projects with more than 1 building must be 
                identified.--For purposes of this section, a project 
                shall be treated as consisting of only 1 building 
                unless, before the close of the 1st calendar year in 
                the project period (as defined in subsection 
                (d)(1)(F)(ii)), each building which is (or will be) 
                part of such project is identified in such form and 
                manner as the Secretary may provide.
            ``(5) Certain rules made applicable.--Paragraphs (2) (other 
        than subparagraph (A) thereof), (3), (4), (5), (6), and (7) of 
        section 142(d), and section 6652(j), shall apply for purposes 
        of determining whether any project is a qualified supported 
        elderly housing project and whether any unit is a supported 
        elderly unit; except that, in applying such provisions for such 
        purposes, the term `gross rent' shall have the meaning given 
        such term by paragraph (2)(B) of this subsection.
            ``(6) Election to treat building after compliance period as 
        not part of a project.--For purposes of this section, the 
        taxpayer may elect to treat any building as not part of a 
        qualified supported elderly housing project for any period 
        beginning after the compliance period for such building.
            ``(7) Special rule where de minimis equity contribution.--
        Property shall not be treated as failing to be residential 
        rental property for purposes of this section merely because the 
        occupant of a residential unit in the project pays (on a 
        voluntary basis) to the lessor a de minimis amount to be held 
        toward the purchase by such occupant of a residential unit in 
        such project if--
                    ``(A) all amounts so paid are refunded to the 
                occupant on the cessation of his occupancy of a unit in 
                the project, and
                    ``(B) the purchase of the unit is not permitted 
                until after the close of the compliance period with 
                respect to the building in which the unit is located.
        Any amount paid to the lessor as described in the preceding 
        sentence shall be included in gross rent under paragraph (2) 
        for purposes of determining whether the unit is rent-
        restricted.
            ``(8) Scattered site projects.--Buildings which would (but 
        for their lack of proximity) be treated as a project for 
        purposes of this section shall be so treated if all of the 
        dwelling units in each of the buildings are rent-restricted 
        (within the meaning of paragraph (2)) residential rental units.
            ``(9) Waiver of certain de minimis errors and 
        recertifications.--On application by the taxpayer, the 
        Secretary may waive--
                    ``(A) any recapture under subsection (i) in the 
                case of any de minimis error in complying with 
                paragraph (1), or
                    ``(B) any annual recertification of tenant income 
                for purposes of this subsection, if the entire building 
                is occupied by supported elderly tenants.
    ``(d) Limitation on Aggregate Credit Allowable With Respect to 
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 supported elderly housing credit dollar amount 
        allocated to such building under rules similar to the rules of 
        paragraph (1) of section 42(h).
            ``(2) Allocated credit amount to apply to all taxable years 
        ending during or after credit allocation year.--Any supported 
        elderly housing credit dollar amount allocated to any building 
        for any calendar year--
                    ``(A) shall apply to such building for all taxable 
                years in the compliance period ending during or after 
                such calendar year, and
                    ``(B) shall reduce the aggregate supported elderly 
                housing credit dollar amount of the allocating agency 
                only for such calendar year.
            ``(3) Supported elderly housing credit dollar amount for 
        agencies.--
                    ``(A) In general.--The aggregate supported elderly 
                housing credit dollar amount which a supported elderly 
                housing credit agency may allocate for any calendar 
                year is the portion of the State supported elderly 
                housing credit ceiling allocated under this paragraph 
                for such calendar year to such agency.
                    ``(B) State ceiling initially allocated to state 
                supported elderly housing credit agencies.--Except as 
                provided in subparagraphs (D) and (E), the State 
                supported elderly housing credit ceiling for each 
                calendar year shall be allocated to the supported 
                elderly housing credit agency of such State. If there 
                is more than 1 supported elderly housing credit agency 
                of a State, all such agencies shall be treated as a 
                single agency.
                    ``(C) State supported elderly housing credit 
                ceiling.--The State supported elderly housing credit 
                ceiling applicable to any State and any calendar year 
                shall be an amount equal to the sum of--
                            ``(i) the unused State supported elderly 
                        housing credit ceiling (if any) of such State 
                        for the preceding calendar year,
                            ``(ii) $1.25 multiplied by the State 
                        population,
                            ``(iii) the amount of State supported 
                        elderly 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 supported 
                elderly housing credit ceiling for any calendar year is 
                the excess (if any) of the sum of the amounts described 
                in clauses (i) through (iv) over the aggregate 
                supported elderly housing credit dollar amount 
                allocated for such year. For purposes of clause (iii), 
                the amount of State supported elderly housing credit 
                ceiling returned in the calendar year equals the 
                supported elderly housing credit dollar amount 
                previously allocated within the State to any 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 supported elderly housing 
                project within the period required by this section or 
                the terms of the allocation or to any project with 
                respect to which an allocation is canceled by mutual 
                consent of the supported elderly housing credit agency 
                and the allocation recipient.
                    ``(D) Unused supported elderly housing credit 
                carryovers allocated among certain states.--
                            ``(i) In general.--The unused supported 
                        elderly 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 supported elderly housing 
                        credit carryover.--For purposes of this 
                        subparagraph, the unused supported elderly 
                        housing credit carryover of a State for any 
                        calendar year is the excess (if any) of--
                                    ``(I) the unused State supported 
                                elderly housing credit ceiling for the 
                                year preceding such year, over
                                    ``(II) the aggregate supported 
                                elderly housing credit dollar amount 
                                allocated for such year.
                            ``(iii) Formula for allocation of unused 
                        supported elderly 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 supported elderly 
                        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 supported elderly 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 supported 
                        elderly 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 supported elderly 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 supported elderly housing 
                        credit agencies in such State other than 
                        constitutional home rule cities, the State 
supported elderly housing credit ceiling for any calendar year shall be 
reduced by the aggregate supported elderly 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).
            ``(4) Credit for buildings financed by tax-exempt bonds 
        subject to volume cap not taken into account.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                the portion of any credit allowable under subsection 
                (a) which is attributable to eligible basis financed by 
                any obligation the interest on which is exempt from tax 
                under section 103 if--
                            ``(i) such obligation is taken into account 
                        under section 146, and
                            ``(ii) principal payments on such financing 
                        are applied within a reasonable period to 
                        redeem obligations the proceeds of which were 
                        used to provide such financing.
                    ``(B) Special rule where 50 percent or more of 
                building is financed with tax-exempt bonds subject to 
                volume cap.--For purposes of subparagraph (A), if 50 
                percent or more of the aggregate basis of any building 
                and the land on which the building is located is 
                financed by any obligation described in subparagraph 
                (A), paragraph (1) shall not apply to any portion of 
                the credit allowable under subsection (a) with respect 
                to such building.
            ``(5) Portion of state ceiling set-aside for certain 
        projects involving qualified nonprofit organizations.--
                    ``(A) In general.--Not more than 90 percent of the 
                State supported elderly housing credit ceiling for any 
                State for any calendar year shall be allocated to 
                projects other than qualified supported elderly housing 
                projects described in subparagraph (B).
                    ``(B) Projects involving qualified nonprofit 
                organizations.--For purposes of subparagraph (A), a 
                qualified supported elderly housing 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 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 supported elderly 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 
                        supported elderly 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.
            ``(6) Buildings eligible for credit only if minimum long-
        term commitment to supported elderly housing.--
                    ``(A) In general.--Under rules similar to the rules 
                under section 42(h)(6), no credit shall be allowed by 
                reason of this section with respect to any building for 
                the taxable year unless an extended supported elderly 
                housing commitment is in effect as of the end of such 
                taxable year.
                    ``(B) Extended supported elderly housing 
                commitment.--For purposes of this paragraph, the term 
                `extended supported elderly housing commitment' has the 
                meaning given the term `extended low-income housing 
                commitment' under section 42(h)(6).
            ``(7) Application of certain rules.--For purposes of this 
        section, rules similar to the rules of section 42(h)(7) shall 
        apply.
            ``(8) Other definitions.--For purposes of this subsection--
                    ``(A) Supported elderly housing credit agency.--The 
                term `supported elderly 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.
    ``(e) 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 15 taxable 
        years beginning with the 1st taxable year of the credit period 
        with respect thereto.
            ``(2) Supported elderly unit.--
                    ``(A) In general.--The term `supported elderly 
                unit' means any unit in a building if--
                            ``(i) such unit is rent-restricted (as 
                        defined in subsection (c)(2)), and
                            ``(ii) the individuals occupying such unit 
                        meet the income limitation applicable under 
                        subsection (c)(1) to the project of which such 
                        building is a part.
                    ``(B) Exceptions.--
                            ``(i) In general.--A unit shall not be 
                        treated as a supported elderly unit unless the 
                        unit is suitable for occupancy and used other 
                        than on a transient basis.
                            ``(ii) Suitability for occupancy.--For 
                        purposes of clause (i), the suitability of a 
                        unit for occupancy shall be determined under 
                        regulations prescribed by the Secretary taking 
                        into account local health, safety, and building 
                        codes.
                            ``(iii) Transitional housing for 
                        homeless.--For purposes of clause (i), a unit 
                        shall be considered to be used other than on a 
                        transient basis if the unit contains sleeping 
                        accommodations and kitchen and bathroom 
                        facilities and is located in a building--
                                    ``(I) which is used exclusively to 
                                facilitate the transition of homeless 
                                individuals (within the meaning of 
                                section 103 of the Stewart B. McKinney 
                                Homeless Assistance Act (42 U.S.C. 
                                11302), as in effect on the date of the 
                                enactment of this clause) to 
                                independent living within 24 months, 
                                and
                                    ``(II) in which a governmental 
                                entity or qualified nonprofit 
                                organization (as defined in subsection 
                                (d)(5)(C)) provides such individuals 
                                with temporary housing and supportive 
                                services designed to assist such 
                                individuals in locating and retaining 
                                permanent housing.
                            ``(iv) Single-room occupancy units.--For 
                        purposes of clause (i), a single-room occupancy 
                        unit shall not be treated as used on a 
                        transient basis merely because it is rented on 
                        a month-by-month basis.
                    ``(C) Special rule for buildings having 4 or fewer 
                units.--In the case of any building which has 4 or 
                fewer residential rental units, no unit in such 
                building shall be treated as a supported elderly unit 
                if the units in such building are owned by--
                            ``(i) any individual who occupies a 
                        residential unit in such building, or
                            ``(ii) any person who is related (within 
                        the meaning of section 42(d)(2)(D)(iii)) to 
                        such individual.
                    ``(D) Owner-occupied building having 4 or fewer 
                units eligible for credit where development plan.--
                            ``(i) In general.--Subparagraph (C) shall 
                        not apply to the acquisition or rehabilitation 
                        of a building pursuant to a development plan of 
                        action sponsored by a State or local government 
                        or a qualified nonprofit organization (as 
                        defined in subsection (d)(5)(C)).
                            ``(ii) Limitation on credit.--In the case 
                        of a building to which clause (i) applies, the 
                        applicable fraction shall not exceed 80 percent 
                        of the unit fraction.
                            ``(iii) Certain unrented units treated as 
                        owner-occupied.--In the case of a building to 
                        which clause (i) applies, any unit which is not 
                        rented for 90 days or more shall be treated as 
                        occupied by the owner of the building as of the 
                        1st day it is not rented.
            ``(3) 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 (i) 
        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.
            ``(4) Impact of tenants right of 1st refusal to acquire 
        property.--
                    ``(A) In general.--No Federal income tax benefit 
                shall fail to be allowable to the taxpayer with respect 
                to any qualified supported elderly building merely by 
                reason of a right of 1st refusal held by the tenants 
                (in cooperative form or otherwise) or resident 
                management corporation of such building or by a 
                qualified nonprofit organization (as defined in 
                subsection (d)(5)(C)) or government agency to purchase 
                the property after the close of the compliance period 
                for a price which is not less than the minimum purchase 
                price determined under subparagraph (B).
                    ``(B) Minimum purchase price.--For purposes of 
                subparagraph (A), the minimum purchase price under this 
                subparagraph is an amount equal to the sum of--
                            ``(i) the principal amount of outstanding 
                        indebtedness secured by the building (other 
                        than indebtedness incurred within the 5-year 
                        period ending on the date of the sale to the 
                        tenants), and
                            ``(ii) all Federal, State, and local taxes 
                        attributable to such sale.
                Except in the case of Federal income taxes, there shall 
                not be taken into account under clause (ii) any 
                additional tax attributable to the application of 
                clause (ii).
    ``(f) Recapture of Credit.--
            ``(1) In general.--If--
                    ``(A) 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
                    ``(B) 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).
    ``(g) Application of At-Risk Rules.--For purposes of this section, 
rules similar to the rules of section 42(k) shall apply.
    ``(h) Responsibilities of Taxpayers and Supported Elderly Housing 
Credit Agencies.--For purposes of this section, subsections (l) and (m) 
of section 42 shall apply.
    ``(i) 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) projects which include more than 1 building 
                or only a portion of a building,
                    ``(B) buildings which are placed in service 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 supported elderly 
        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.''.
    (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 supported elderly housing 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 supported elderly housing 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 (f) or (g) 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 supported elderly housing credit determined 
        under section 42A, and''.
            (4) Section 774(b)(4) of such Code is amended by inserting 
        ``, 42A(f),'' 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. Supported elderly housing 
                                        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.
                                 <all>