[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3316 Introduced in House (IH)]

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116th CONGRESS
  1st Session
                                H. R. 3316

 To amend the Internal Revenue Code of 1986 to allow a credit against 
      tax for neighborhood revitalization, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 18, 2019

  Mr. Higgins of New York (for himself and Mr. Kelly of Pennsylvania) 
 introduced the following bill; which was referred to the Committee on 
                             Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to allow a credit against 
      tax for neighborhood revitalization, 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.

    This Act may be cited as the ``Neighborhood Homes Investment Act''.

SEC. 2. NEIGHBORHOOD HOMES CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 42 the following new section:

``SEC. 42A. NEIGHBORHOOD HOMES CREDIT.

    ``(a) Allowance of Credit.--For purposes of section 38, the amount 
of the neighborhood homes credit determined under this section for a 
taxable year for a qualified project shall be, with respect to each 
qualified residence that is part of such qualified project and that 
experiences a qualified completion event during such taxable year, an 
amount equal to--
            ``(1) in the case of an affordable sale, with respect to 
        the seller, the excess of--
                    ``(A) the qualified development cost incurred by 
                such seller for such residence, over
                    ``(B) the sale price of such residence, or
            ``(2) in the case of any other qualified completion event, 
        with respect to a taxpayer other than the owner of the 
        residence (or a related person with respect to such owner), the 
        excess of--
                    ``(A) the development cost incurred by such 
                taxpayer for such residence, over
                    ``(B) the amount received by such taxpayer as 
                payment for such rehabilitation.
    ``(b) Limitations.--
            ``(1) Amount.--The amount determined under subsection (a) 
        with respect to a residence shall not exceed 35 percent of the 
        lesser of--
                    ``(A) the qualified development cost, or
                    ``(B) 80 percent of the national median sale price 
                for new homes.
            ``(2) Allocations.--
                    ``(A) In general.--The amount determined under 
                subsection (a) with respect to a residence that is part 
                of a qualified project and that experiences a qualified 
                completion event shall not exceed the excess of--
                            ``(i) the amount determined under 
                        subparagraph (B), over
                            ``(ii) the amounts previously determined 
                        under subsection (a) with respect to such 
                        qualified project.
                    ``(B) Allocation amount.--The amount determined 
                under this paragraph with respect to a residence that 
                is part of a qualified project and that experiences a 
                qualified completion event is the least of--
                            ``(i) the amount allocated to such project 
                        by the neighborhood homes credit agency under 
                        this section,
                            ``(ii) the amount such agency determines at 
                        the time of the qualified completion event is 
                        necessary to ensure the financial feasibility 
                        of the project given the sources and uses of 
                        funds and the total financing (including local, 
                        State, and Federal subsidies) planned for the 
                        project, or
                            ``(iii) in the case of a qualified 
                        completion event that occurs after the 5-year 
                        period beginning on the date of the allocation 
                        referred to in clause (i), $0.
    ``(c) Qualified Development Cost.--For purposes of this section--
            ``(1) In general.--The term `qualified development cost' 
        means, with respect to a residence so much of the allowable 
        development cost as the neighborhood homes credit agency 
        certifies, at the time of the completion event--
                    ``(A) meets the standards promulgated under 
                subsection (h)(1)(C), and
                    ``(B) does not represent unreasonable fees by the 
                taxpayer claiming the credit under subsection (a).
            ``(2) Allowable development cost.--The term `allowable 
        development cost' means--
                    ``(A) the cost of construction, substantial 
                rehabilitation, demolition of any structure, and 
                environmental remediation, and
                    ``(B) in the case of an affordable sale, so much of 
                the cost of acquiring buildings and land as does not 
                exceed an amount equal to 75 percent of the costs 
                described in subparagraph (A).
            ``(3) Properties with multiple residences.--The allowable 
        development cost of any residence shall include on a pro-rata 
        basis the allowable development cost with respect to common 
        areas or other comparable amenities.
    ``(d) Qualified Project.--For purposes of this section, the term 
`qualified project' means a project that--
            ``(1) a neighborhood homes credit agency certifies will 
        build or substantially rehabilitate 1 or more qualified 
        residences located in one or more qualified census tracts, and
            ``(2) is designated by such agency as a qualified project 
        under this section and is allocated (before such building or 
        substantial rehabilitation begins) a portion of the amount 
        allocated to such agency under subsection (g).
    ``(e) Qualified Census Tract.--For purposes of this section--
            ``(1) In general.--The term `qualified census tract' means 
        a census tract--
                    ``(A) with--
                            ``(i) a median gross income which does not 
                        exceed 80 percent of the applicable area median 
                        gross income,
                            ``(ii) a poverty rate that is not less than 
                        130 percent of the applicable area poverty 
                        rate, and
                            ``(iii) a median value for owner-occupied 
                        homes that does not exceed applicable area 
                        median value for owner-occupied homes, or
                    ``(B) that is--
                            ``(i) in a nonmetropolitan county,
                            ``(ii) with a median gross income which 
                        does not exceed the applicable area median 
                        gross income, and
                            ``(iii) designated by a neighborhood homes 
                        credit agency under this clause.
            ``(2) Additional census tracts for substantial 
        rehabilitation.--In the case of a residence that is intended 
        for substantial rehabilitation described in subsection 
        (f)(5)(B), the term `qualified census tract' includes a census 
        tract that meets the requirements of paragraph (1)(A), without 
        regard to clause (iii), and that is designated by the 
        neighborhood homes credit agency under this paragraph.
            ``(3) List of qualified census tracts.--The Secretary of 
        Housing and Urban Development shall make publically available a 
        list of qualified census tracts under paragraph (1)(A), a list 
        of qualified census tracts under paragraph (1)(B), and a list 
        of qualified census tracts under paragraph (2) for each year.
    ``(f) Other Definitions.--For purposes of this section--
            ``(1) Qualified residence.--The term `qualified residence' 
        means a residence that consists of--
                    ``(A) a single-family home containing 4 or fewer 
                residential units,
                    ``(B) a condominium, or
                    ``(C) a house or an apartment owned by a 
                cooperative housing corporation (as defined in section 
                216(b)).
            ``(2) Affordable sale.--
                    ``(A) In general.--
                            ``(i) In general.--The term `affordable 
                        sale' means a sale to a qualified homeowner of 
                        a residence that the neighborhood homes credit 
                        agency certifies as meeting the standards 
                        promulgated under subsection (h)(1)(D) for a 
                        price that does not exceed--
                                    ``(I) in the case of any residence 
                                not described in subclause (II), (III), 
                                or (IV), the amount equal to the 
                                product of 4 multiplied by the 
                                applicable area median gross income,
                                    ``(II) in the case of a single-
                                family home containing two residential 
                                units, 125 percent of the amount 
                                described in subclause (I),
                                    ``(III) in the case of a single-
                                family home containing three 
                                residential units, 150 percent of the 
                                amount described in subclause (I), or
                                    ``(IV) in the case of a single-
                                family home containing four residential 
                                units, 175 percent of the amount 
                                described in subclause (I).
                            ``(ii) Related persons.--
                                    ``(I) In general.--A sale between 
                                related persons shall not be treated as 
                                an affordable sale.
                                    ``(II) Definition.--For purposes of 
                                this section, a person (in this clause 
                                referred to as the `related person') is 
                                related to any person if the related 
                                person bears a relationship to such 
                                person specified in section 267(b) or 
                                707(b)(1), or the related person and 
                                such person are engaged in trades or 
                                businesses under common control (within 
                                the meaning of subsections (a) and (b) 
                                of section 52). For purposes of the 
                                preceding sentence, in applying section 
                                267(b) or 707(b)(1), `10 percent' shall 
                                be substituted for `50 percent'.
            ``(3) Applicable area.--The term `applicable area' means--
                    ``(A) in the case of a metropolitan census tract, 
                the metropolitan area in which such census tract is 
                located, and
                    ``(B) in the case of a census tract other than a 
                census tract described in subparagraph (A), the State.
            ``(4) Substantial rehabilitation.--The term `substantial 
        rehabilitation' means rehabilitation efforts involving 
        qualified development costs that are not less than the greater 
        of--
                    ``(A) $20,000, and
                    ``(B) 20 percent of the cost of acquiring buildings 
                and land.
            ``(5) Qualified completion event.--The term `qualified 
        completion event' means--
                    ``(A) in the case of a residence that is built or 
                substantially rehabilitated as part of a qualified 
                project and sold, an affordable sale, or
                    ``(B) in the case of a residence that is 
                substantially rehabilitated as part of a qualified 
                project and owned by the same qualified homeowner 
                throughout such rehabilitation, the completion of such 
                rehabilitation (as determined by the neighborhood homes 
                credit agency) to the standards promulgated under 
                subsection (h)(1)(D).
            ``(6) Qualified homeowner.--
                    ``(A) In general.--The term `qualified homeowner' 
                means, with respect to a residence, an individual--
                            ``(i) who owns and uses such residence as 
                        the principal residence of such individual, and
                            ``(ii) whose income is 140 percent or less 
                        of the applicable area median gross income for 
                        the location of the residence.
                    ``(B) Ownership.--For purposes of a cooperative 
                housing corporation (as such term is defined in section 
                216(b)), a tenant-stockholder shall be treated as 
                owning the house or apartment which such person is 
                entitled to occupy.
                    ``(C) Income.--For purposes of this paragraph, 
                income shall be a determined in accordance with section 
                143(f)(2) and 143(f)(4).
                    ``(D) Timing.--For purposes of this paragraph, the 
                income of a taxpayer shall be determined--
                            ``(i) in the case of a residence that is 
                        built or substantially rehabilitated as part of 
                        a qualified project and sold, at the time a 
                        binding contract for purchase is made, or
                            ``(ii) in the case of a residence that is 
                        occupied by a qualified homeowner and intended 
                        to be substantially rehabilitated as part of a 
                        qualified project, at the time a binding 
                        contract to undertake such rehabilitation is 
                        made.
            ``(7) Neighborhood homes credit agency.--The term 
        `neighborhood homes credit agency' means the agency designated 
        by the governor of a State as the neighborhood homes credit 
        agency of the State.
    ``(g) Allocation.--
            ``(1) State neighborhood homes credit ceiling.--The State 
        neighborhood homes credit amount for a State for a calendar 
        year is an amount equal to the sum of--
                    ``(A) the greater of--
                            ``(i) the product of $3, multiplied by the 
                        State population (determined in accordance with 
                        section 146(j)), or
                            ``(ii) $4,000,000, plus
                    ``(B) the converted private activity bond amount 
                with respect to the State for the calendar year.
            ``(2) Unused amount.--The State neighborhood homes credit 
        amount for a calendar year shall be increased by the sum of--
                    ``(A) any amount certified by the neighborhood 
                homes credit agency of the State as having been 
                previously allocated to a qualified project and not 
                used during the 5-year period described in subsection 
                (b)(2)(iii), plus
                    ``(B) sum of the amount by which the amount 
                determined under paragraph (1) (without application of 
                this paragraph) exceeded the amount allocated to 
                qualified projects in each of the three immediately 
                preceding calendar years.
            ``(3) Converted private activity bond amount.--
                    ``(A) In general.--For purposes of this paragraph, 
                the converted private activity bond amount with respect 
                to any State for any calendar year shall be 60 percent 
                of the amount elected by--
                            ``(i) the State agency that is an issuer of 
                        qualified mortgage bonds (as defined in section 
                        143) that is designated by the governor of the 
                        State under this subparagraph for such year, or
                            ``(ii) if no such agency exists, the 
                        neighborhood homes credit agency of the State.
                    ``(B) Reduction of private activity bond ceiling.--
                The State ceiling under section 146(d)(1) shall be 
                reduced by the amount elected under subparagraph (A).
            ``(4) Portion of state credit ceiling for certain projects 
        involving qualified nonprofit organizations.--Rules similar to 
        the rules of section 42(h)(5) shall apply.
    ``(h) Responsibilities of Neighborhood Homes Credit Agencies.--
            ``(1) In general.--Notwithstanding subsection (g), the 
        State neighborhood homes credit dollar amount shall be zero for 
        a calendar year unless the neighborhood homes credit agency of 
        the State--
                    ``(A) allocates such amount pursuant to a qualified 
                allocation plan of the neighborhood homes credit 
                agency,
                    ``(B) allocates not more than 20 percent of such 
                amount for the previous year to projects with respect 
                to residences in census tracts under subsection 
                (e)(1)(B) or (e)(2),
                    ``(C) promulgates standards with respect to 
                reasonable qualified development costs,
                    ``(D) promulgates standards with respect to 
                construction quality, and
                    ``(E) submits to the Secretary (at such time and in 
                such manner as the Secretary may prescribe) an annual 
                report specifying--
                            ``(i) the amount of the neighborhood homes 
                        credits allocated to each qualified project for 
                        the previous year, and
                            ``(ii) such other information as the 
                        Secretary may require.
            ``(2) Qualified allocation plan.--For purposes of this 
        paragraph, the term `qualified allocation plan' means any plan 
        which--
                    ``(A) sets forth the selection criteria to be used 
                to prioritize qualified projects for allocations of 
                State neighborhood homes credit dollar amounts, 
                including--
                            ``(i) the need for new or substantially 
                        rehabilitated owner-occupied homes in the area 
                        addressed by the project,
                            ``(ii) the expected contribution of the 
                        project to neighborhood stability and 
                        revitalization,
                            ``(iii) the capability of the project 
                        sponsor, and
                            ``(iv) the likelihood the project will 
                        result in long-term homeownership, and
                    ``(B) has been made available for public comment.
    ``(i) Possessions Treated as States.--For purposes of this section, 
the term `State' includes the District of Columbia and a possession of 
the United States.
    ``(j) Repayment.--
            ``(1) In general.--If a residence is sold during the 5-year 
        period beginning on the date of the qualified completion event 
        described in subsection (a) with respect to such residence, the 
        seller shall transfer an amount equal to the repayment amount 
        from the amount realized on such sale to the relevant 
        neighborhood homes credit agency to be used to stabilize or 
        revitalize qualified census tracts (determined without regard 
        to paragraphs (1)(B) and (2) of subsection (e)).
            ``(2) Repayment amount.--For purposes of paragraph (1), the 
        repayment amount is an amount equal to 50 percent of the gain 
        from such resale, reduced by 20 percent for each year of the 5-
        year period referred to in paragraph (1) which ends before the 
        date of the sale referred to in paragraph (1).
            ``(3) Lien for repayment amount.--A neighborhood homes 
        credit agency receiving an allocation under this section shall 
        place a lien on each residence that is built or rehabilitated 
        as part of a qualified project for the greatest amount that 
        could be required to be paid under this subsection to such 
        agency.
            ``(4) Denial of deductions if converted to rental 
        housing.--If, during the 5-year period beginning on the date of 
        the qualified completion event described in subsection (a), an 
        individual who owns a residence fails to use such residence as 
        such individual's principal residence for any period of time, 
        no deduction shall be allowed for expenses paid or incurred by 
        such individual with respect to renting, during such period of 
        time, such residence.
            ``(5) Waiver.--The neighborhood homes credit agency may 
        waive the repayment required under paragraph (1) in the case of 
        homeowner experiencing a hardship.
    ``(k) Inflation Adjustment.--
            ``(1) In general.--In the case of a calendar year after 
        2020, the dollar amounts in this section shall be increased by 
        an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `calendar year 2019' for `calendar year 
                2016' in subparagraph (A)(ii) thereof.
            ``(2) Rounding.--
                    ``(A) Substantial rehabilitation.--In the case of 
                the dollar amount in subsection (f)(4), any increase 
                under the preceding sentence which is not a multiple of 
                $1,000 shall be rounded to the nearest multiple of 
                $1,000.
                    ``(B) In the case of the dollar amount in 
                subsection (g)(1)(A)(i), any increase under the 
                preceding sentence which is not a multiple of $0.01 
                shall be rounded to the nearest multiple of $0.01.
                    ``(C) In the case of the dollar amount in 
                subsection (g)(1)(A)(ii), any increase under the 
                preceding sentence which is not a multiple of $100,000 
                shall be rounded to the nearest multiple of 
                $100,000.''.
    (b) Current Year Business Credit Calculation.--Section 38(b) (of 
the Internal Revenue Code of 1986) is amended by redesignating 
paragraphs (6) through (37) as paragraphs (7) through (38), 
respectively, and by inserting after paragraph (5) the following new 
paragraph:
            ``(6) the neighborhood homes credit determined under 
        section 42A(a),''.
    (c) Limitation on Carryback.--Section 39 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new section:
    ``(e) No Carryback of Neighborhood Homes Credit Before Effective 
Date.--No amount of the unused credit attributable to section 42A may 
be taken into account under section 38(a)(3) for any taxable year 
beginning before the date of the enactment of this Act.''.
    (d) Cancellation of Indebtedness.--Section 108 of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking ``or'' at the end of subsection (a)(1)(D), 
        by striking the period at the end of subsection (a)(1)(E)(ii) 
        and inserting ``, or'', and adding at the end of subsection 
        (a)(1) the following new subparagraph:
                    ``(F) if the discharge is qualified neighborhood 
                homes credit indebtedness.'', and
            (2) by adding at the end of subsection (b)(2) the following 
        new subparagraph:
                    ``(H) Special rules relating to qualified 
                neighborhood homes credit indebtedness.--For purposes 
                of this section, the term `qualified neighborhood homes 
                credit indebtedness' means indebtedness arising in 
                connection with the development of a qualified 
                residence under section 42A.''.
    (e) Conforming Amendments.--Subsections (i)(3)(D), (i)(6)(B)(i), 
and (k)(1) of section 469 of the Internal Revenue Code of 1986 are each 
amended by inserting ``or 42A'' after ``section 42''.
    (f) 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. Neighborhood homes credit.''
    (g) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after December 31, 2019.
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