Qualified homeowner downpayment assistance

(a)

In general

Section 501 of the Internal Revenue Code of 1986 (relating to exemption of tax on corporations, certain trusts, etc.) is amended by redesignating subsection (r) as subsection (s) and by inserting after subsection (q) the following new subsection:

(r)

Qualified homeowner downpayment assistance

(1)

In general

For purposes of subsection (c)(3) and sections 170(c)(2), 2055(a)(2), and 2522(a)(2), the term charitable purposes includes the provision of qualified homeowner downpayment assistance. (2)

Qualified homeowner downpayment assistance

For purposes of this subsection, the term qualified homeowner downpayment assistance means a gift of cash for the purpose of providing any downpayment for the acquisition of any property as a principal residence (within the meaning of section 121) for a qualified taxpayer if— (A)with respect to such property, such gift does not exceed 20 percent of 110 percent of the maximum principal obligation allowable, and (B)the purchase price of such property does not exceed 110 percent of the maximum principal obligation allowable. (3)

Maximum principal obligation allowable

The maximum principal obligation allowable with respect to any property is the maximum principal obligation allowable for the area in which such property is located, determined under section 203(b)(2)(A) of the National Housing Act, for a loan insured pursuant to such section 203. (4)

Qualified taxpayer

For purposes of paragraph (2), the term qualified taxpayer means a taxpayer whose modified adjusted gross income for the taxable year in which the downpayment assistance is received does not exceed $110,000 ($220,000 in the case of a joint return). For purposes of the preceding sentence, the term modified adjusted gross income means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933.

(b)

No charitable deduction for contributions for downpayment assistance

Subsection (f) of section 170 of the Internal Revenue Code of 1986 (relating to disallowance of deduction in certain cases and special rules) is amended by adding at the end the following new paragraph:

(19)

Denial of deduction of contributions for downpayment assistance

No deduction shall be allowed under this section for a contribution to an organization which provides homeowner downpayment assistance if the contribution is made directly or indirectly in connection with a transaction in which the purchaser of a home received downpayment assistance and the contributor— (A)received the downpayment assistance, (B)sold the home to the purchaser, (C)loaned money to the purchaser, or (D)otherwise received a commission or other benefit associated with the transaction.

(c)

Exclusion from taxable gifts

(1)

In general

Paragraph (2) of section 2503(e) of such Code (relating to exclusion for certain transfers for educational expenses or medical expenses) is amended by striking or at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting , or, and by inserting after subparagraph (B) the following new subparagraph:

(C)if such payment is qualified homeowner downpayment assistance (as defined in section 501(r)(2)) paid to a lender or the seller of the property on behalf of a donee who is related to the donor.

(2)

Relationship test

Paragraph (2) of section 2503(e) of such Code is amended by adding at the end the following flush sentence:

For purposes of subparagraph (C), a donee is related to a donor if the donee bears a relationship to the donor described in section 529(e)(2) (other than subparagraph (D) thereof).

(3)

Conforming amendment

The heading for section 2503(e) of such Code is amended by striking

educational expenses or medical expenses

and inserting

educational expenses, medical expenses, or downpayment assistance

. (d)

Effective date

The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.