[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 3904 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
2d Session
S. 3904
To amend the Internal Revenue Code of 1986 to deny interest and
depreciation deductions for certain taxpayers, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
February 24, 2026
Ms. Warren (for herself, Mr. Merkley, Ms. Klobuchar, Ms. Smith, Mr.
Blumenthal, Ms. Duckworth, Mr. Durbin, Mr. Heinrich, Ms. Hirono, Mr.
Kaine, Mr. Kim, Mr. Markey, Mr. Murphy, Mr. Schatz, Mr. Sanders, Mr.
Schiff, Mr. Van Hollen, Mr. Welch, and Mr. Booker) 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 deny interest and
depreciation deductions for certain taxpayers, 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 ``American Homeownership Act''.
SEC. 2. DISALLOWANCE OF DEDUCTION FOR INTEREST PAID ON REAL PROPERTY
OWNED BY CERTAIN REAL PROPERTY OWNERS.
(a) In General.--Section 163 of the Internal Revenue Code of 1986
is amended by redesignating subsection (n) as subsection (o) and by
inserting after subsection (m) the following new subsection:
``(n) Interest Paid on Residential Rental Property Owned by Certain
Real Property Owners.--
``(1) In general.--No deduction shall be allowed under this
chapter for any interest paid or accrued in connection with--
``(A) any applicable residential property in which
an institutional investment entity (directly or
indirectly) holds a majority interest, or
``(B) single-family residential property in which a
large owner (directly or indirectly) holds a majority
interest.
``(2) Exception for sales to individuals or qualified
nonprofit organizations.--
``(A) In general.--Paragraph (1) shall not apply
with respect to interest paid or accrued in the taxable
year in which applicable residential property is sold.
``(B) Exception.--Subparagraph (A) shall not apply
unless the sale described in such subparagraph is--
``(i) a sale to an individual for use as
the principle residence of the individual
(within the meaning of section 121), or
``(ii) a sale to any qualified nonprofit
organization.
``(C) Qualified nonprofit organization.--
``(i) In general.--For purposes of this
paragraph, the term `qualified nonprofit
organization' means any organization which--
``(I) is not organized for profit,
and
``(II) has as a principal purpose
the creation, development, or
preservation of affordable housing.
``(ii) Certain organizations included.--The
term `qualified nonprofit organization' shall
include--
``(I) any community development
corporation (as defined in section
204(b) of the Department of Veterans
Affairs and Housing and Urban
Development, and Independent Agencies
Appropriations Act, 1997 (12 U.S.C.
1715z-11a(b))),
``(II) any community housing
development organization (as defined in
section 104 of the Cranston-Gonzalez
National Affordable Housing Act (42
U.S.C. 12704)),
``(III) any community-based
development organization qualified
under section 570.204 of title 24, Code
of Federal Regulations, as in effect on
the date of the enactment of this
subsection,
``(IV) any land bank,
``(V) any resident-owned
cooperative or community land trust,
and
``(VI) any subsidiary of a public
housing agency (as defined in section
3(b)(6) of the United States Housing
Act of 1937 (42 U.S.C. 1437a(b)(6))).
``(iii) Land bank.--For purposes of this
subparagraph, the term `land bank' means a
government entity, agency, or program, or a
special purpose nonprofit entity formed by one
or more units of government in accordance with
State or local land bank enabling law, that has
been designated by one or more State or local
governments to acquire, steward, and dispose of
vacant, abandoned, or other problem properties
in accordance with locally determined
priorities and goals.
``(iv) Community land trust.--For purposes
of this subparagraph, the term `community land
trust' means a nonprofit entity, a State, a
unit of local government, or an instrumentality
of a State or unit of local government that--
``(I) is not managed by, or an
affiliate of, a for-profit
organization,
``(II) has as a primary purpose of
acquiring, developing, or holding land
to provide housing that is permanently
affordable to low- and moderate-income
persons,
``(III) monitors properties to
ensure affordability is preserved,
``(IV) provides housing that is
permanently affordable to low- and
moderate-income persons using a ground
lease, deed covenant, or other similar
legally enforceable measure, determined
acceptable by the Secretary, that--
``(aa) keeps housing
affordable to low- and
moderate-income persons for not
less than 30 years, and
``(bb) enables low- and
moderate-income persons to rent
or purchase the housing for
homeownership, and
``(V) maintains preemptive purchase
options to purchase the property if
such purchase would allow the housing
to remain affordable to low- and
moderate-income persons.
``(3) Exception for new single-family housing.--
``(A) In general.--In the case of a single-family
residential property the original use of which begins
with an eligible taxpayer after December 31, 2023,
paragraph (1) shall not apply to interest paid or
accrued by such eligible taxpayer with respect to such
property in any taxable year during the 5-taxable-year
period beginning with the taxable year in which
property is placed in service.
``(B) Eligible taxpayer.--For purposes of this
paragraph, the term `eligible taxpayer' means the
person who constructed the single-family residential
property.
``(4) Exception for new multi-family housing.--
``(A) In general.--Paragraph (1) shall not apply to
any multi-family residential property the original use
of which begins with an eligible taxpayer after
December 31, 2023.
``(B) Eligible taxpayer.--For purposes of this
paragraph, the term `eligible taxpayer' means the
person who constructed the multi-family residential
property.
``(C) Multi-family residential property.--For
purposes of this paragraph, the term `multi-family
residential property' means any applicable residential
property which has 5 or more dwelling units (as defined
in section 168(e)(2)(A)(ii)(I)).
``(5) Exception to preserve uninhabitable housing.--
``(A) In general.--In the case of any interest paid
or accrued with respect to debt which is incurred for
the primary purpose of substantially rehabilitating
previously uninhabitable applicable residential
property, paragraph (1) shall not apply to interest
paid or accrued in any taxable year during the 5-
taxable-year period beginning with taxable year in
which such debt is originally paid or accrued.
``(B) Uninhabitable.--For purposes of this
paragraph, the term `uninhabitable' means, with respect
to applicable residential property, property that is
not fit for human occupancy, contains serious defects
posing risks to health or safety, or does not meet
structural or core system elements of local building
codes.
``(C) Substantial rehabilitation.--For purposes of
this paragraph, the term `substantial rehabilitation'
means, with respect to applicable residential property,
structural repairs or rebuilding, with the cost of
rehabilitation generally being a significant portion of
the property's value after the work is completed.
``(6) Exception for affordable housing.--Paragraph (1)
shall not apply to any interest paid or accrued with respect to
any property--
``(A) which is Federally assisted housing (as
defined in section 579 of the Quality Housing and Work
Responsibility Act of 1998), or
``(B)(i) which--
``(I) has received an allocation of housing
credit dollar amount under section 42(h) for
such taxable year or any prior taxable year, or
``(II) is a building described in section
42(h)(4)(B), and
``(ii) for which an extended low-income housing
commitment described in section 42(h)(6) is in effect
as of the end of the taxable year.
``(7) Definitions.--For purposes of this subsection--
``(A) Institutional investment entity.--The term
`Institutional investment entity' means--
``(i) any issuer that is exempt from
registration under section 3(c) of the
Investment Company Act of 1940, or
``(ii) any other investment vehicle that
pools funds exclusively from accredited
investors as defined in section 230.501 of
title 17, Code of Federal Regulations (or any
successor regulation).
``(B) Large owner.--
``(i) In general.--For purposes of this
subsection, the term `large owner' means any
person who (directly or indirectly) holds a
majority interest in single-family residential
rental properties which in the aggregate
contain 50 or more dwelling units.
``(ii) Aggregation rules.--For purposes of
this subparagraph, all persons treated as a
single employer under subsection (a) or (b) of
section 52, or subsection (m) or (o) of section
414, shall be treated as one taxpayer for
purposes of this section.
``(iii) Modifications.--
``(I) In general.--For purposes of
applying clause (ii)--
``(aa) section 52(a) shall
be applied by substituting
`component members' for
`members', and
``(bb) for purposes of
applying section 52(b), the
term `trade or business' shall
include any activity treated as
a trade or business under
paragraph (5) or (6) of section
469(c) (determined without
regard to the phrase `To the
extent provided in regulations'
in such paragraph (6)).
``(II) Component member.--For
purposes of this subparagraph, the term
`component member' has the meaning
given such term by section 1563(b),
except that the determination shall be
made without regard to subparagraphs
(B), (C), (D) or (E) of paragraph (2)
thereof.
``(III) No inference.--The
modifications made by subclause (I)
shall not be construed to create any
inference with respect to the proper
application of section 52 with respect
to any other provision of this title.
``(C) Applicable residential property.--
``(i) In general.--The term `applicable
residential property' means any property which
is--
``(I) residential rental property
(as defined in section
168(e)(2)(A)(i)),
``(II) a manufactured housing
community, or
``(III) a manufactured home (as
defined in section 603 of the National
Manufactured Housing Construction and
Safety Standards Act of 1974 (42 U.S.C.
5402)) which is not residential rental
property (as so defined).
``(ii) Manufactured housing community.--The
term `manufactured housing community' means a
residential real estate development with lots
on which factory-built homes, including
manufactured homes, are located, together with
supporting infrastructure.
``(D) Single-family residential property.--The term
`single-family residential property' means any
applicable residential property which contains 4 or
fewer dwelling units (as defined in section
168(e)(2)(A)(ii)(I)).
``(8) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this subsection, including--
``(A) regulations for identifying the amount of
interest paid or accrued in connection with applicable
residential property and single-family residential
property, including any interest paid or accrued
through indirect financing arrangements,
``(B) regulations, in consultation with the
Secretary of Housing and Urban Development, for
identifying and, to the extent provided by the
Secretary, substantiating the amount of interest paid
or accrued with respect to debt which is incurred for
the primary purpose of substantially rehabilitating
previously uninhabitable applicable residential
property under paragraph (5), and
``(C) regulations to prevent the avoidance of the
purposes of this subsection.''.
(b) Application to Capitalized Amounts.--
(1) In general.--Section 263A(f)(2) of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
subparagraph:
``(D) Exception for certain interest of certain
real property owners.--Subparagraph (A) shall not apply
to any interest for which a deduction would be
disallowed under section 163(n).''.
(2) Carrying charges.--Section 266 of such Code is
amended--
(A) by striking ``No deduction'' and inserting the
following:
``(a) In General.--No deduction'', and
(B) by adding at the end the following new
subsection:
``(b) Special Rule for Certain Interest of Certain Real Property
Owners.--No election may be made under this section to treat as
chargeable to capital account any interest for which a deduction would
be disallowed under section 163(n).''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 3. DISALLOWANCE OF DEPRECIATION IN CONNECTION WITH PROPERTY OF
CERTAIN REAL PROPERTY OWNERS.
(a) In General.--Section 167 of the Internal Revenue Code of 1986
is amended by redesignating subsection (i) as subsection (j) and by
inserting after subsection (h) the following new subsection:
``(i) Deduction Disallowed for Certain Real Property Owners.--
``(1) In general.--No deduction shall be allowed under this
section for--
``(A) any applicable residential property in which
an institutional investment entity (directly or
indirectly) holds a majority interest, or
``(B) single-family residential property in which a
large owner (directly or indirectly) holds a majority
interest.
``(2) Exceptions.--Rules similar to the rules of paragraphs
(2), (3), (4), (5), and (6) of section 163(n) shall apply for
purposes of this subsection.
``(3) Definitions.--For purposes of this subsection--
``(A) Applicable residential property.--The term
`applicable residential property' means--
``(i) any property described in section
163(n)(7)(C), and
``(ii) any improvements to real property
which--
``(I) are directly related to
dwelling units contained on property
described in clause (i), and
``(II) are located on the site of
such dwelling units.
``(B) Single-family residential property.--The term
`single-family residential property' means--
``(i) any property described in section
163(n)(7)(D), and
``(ii) any improvements to real property
which--
``(I) are directly related to
dwelling units contained on property
described in clause (i), and
``(II) are located on the site of
such dwelling units.
``(C) Institutional investment entity; large
owner.--The terms `institutional investment entity' and
`large owner' have the respective meanings given such
terms under section 163(n).
``(4) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this subsection, including regulations to prevent
the avoidance of the purposes of this subsection.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 4. PROHIBITION ON SALE OR PROVISION OF FEDERALLY BACKED MORTGAGE
LOANS TO CERTAIN INVESTORS.
(a) Definitions.--In this section:
(1) Covered entity.--The term ``covered entity'' means--
(A) the Department of Housing and Urban
Development, including the Federal Housing
Administration and the Government National Mortgage
Association;
(B) the Department of Veterans Affairs;
(C) the Department of Agriculture;
(D) the Federal National Mortgage Association;
(E) the Federal National Mortgage Corporation; and
(F) any other Federal agency that is selling or
otherwise disposing of covered residential property.
(2) Covered residential property.--The term ``covered
residential property''--
(A) means residential real property or a
manufactured housing community; and
(B) does not include--
(i) Federally assisted housing, as defined
in section 579 of the Quality Housing and Work
Responsibility Act of 1998 (42 U.S.C. 13664);
or
(ii) any residential property that uses tax
credits under section 42 of the Internal
Revenue Code of 1986.
(3) Federally backed mortgage loan.--The term ``Federally
backed mortgage loan'' has the meaning given the term in
section 4022(a) of the CARES Act (15 U.S.C. 9056(a)).
(4) Institutional investment entity; large owner.--The
terms ``institutional investment entity'' and ``large owner''
have the meanings given those terms in subparagraphs (A) and
(B)(i) of section 163(n)(7) of the Internal Revenue Code of
1986, as added by this Act.
(5) Manufactured housing community.--The term
``manufactured housing community'' means a residential real
estate development with lots on which factory-built homes,
including manufactured homes (as defined in section 603 of the
National Manufactured Housing Construction and Safety Standards
Act of 1974 (42 U.S.C. 5402)), are located, together with
supporting infrastructure.
(6) Residential real property.--The term ``residential real
property'' has the meaning given the term in section 1004 of
the Residential Lead-Based Paint Hazard Reduction Act of 1992
(42 U.S.C. 4851b).
(b) Prohibition on Sale.--A covered entity may not sell or
otherwise dispose of Federally backed mortgage loans or covered
residential properties to a large owner or an institutional investment
entity, including a loan or property that is--
(1) a nonperforming or re-performing loan;
(2) a foreclosed home;
(3) a real estate-owned property; or
(4) any other real estate-related asset held by the covered
entity.
(c) Prohibition on Financing.--
(1) In general.--A covered entity may not issue, insure,
guarantee, or securitize any mortgage loan where the borrower
is a large owner or an institutional investment entity, unless
the mortgage loan is related to--
(A) the construction or rehabilitation of housing
with affordability use restrictions; or
(B) the refinance of existing loans related to such
housing, and such refinance will not result in the
elimination of affordability use restrictions.
(2) Application.--The prohibition under paragraph (1) shall
not apply with respect to a mortgage loan that is issued,
insured, guaranteed, or securitized before the date of
enactment of this Act.
SEC. 5. INVESTMENTS IN HOUSING SUPPLY AND HOMEOWNERSHIP.
(a) Definitions.--In this section:
(1) Heir property.--The term ``heir property'' means
residential property for which title passed by operation of law
through intestacy and is held by 2 or more heirs as tenants in
common.
(2) Qualified homebuyer.--The term ``qualified homebuyer''
means a homebuyer that meets all of the following requirements:
(A) Income.--The household of the homebuyer has an
income that does not exceed--
(i) 120 percent of median income for the
area (as determined by the Secretary of Housing
and Urban Development) within which--
(I) the home to be acquired using
assistance under this section is
located; or
(II) the place of residence of the
homebuyer is located; or
(ii) in the case of a homebuyer acquiring a
home that is located in a high-cost area, as
determined by the Secretary of Housing and
Urban Development, 140 percent of the median
income for the area within which the home to be
acquired using assistance under this section is
located.
(B) First-time homebuyer.--The homebuyer, as self-
attested by the homebuyer, is a first-time homebuyer,
as defined in section 104 of the Cranston Gonzalez
National Affordable Housing Act (42 U.S.C. 12704),
except that--
(i) for the purposes of this section, the
reference in such section 104 to title II shall
be considered to refer to this section; and
(ii) ownership of heir property shall not
be treated as owning a home for purposes of
determining whether a borrower qualifies as a
first-time homebuyer.
(C) First-generation homebuyer.--The homebuyer, as
self-attested by the homebuyer, is--
(i) an individual--
(I) whose parents or legal
guardians do not, or did not at the
time of their death, to the best of the
individual's knowledge, have any
present ownership interest in a
residence in any State, excluding
ownership of heir property or ownership
of chattel; and
(II) whose spouse or domestic
partner has not, during the 3-year
period ending upon acquisition of the
eligible home to be acquired using such
assistance, had any present ownership
interest in a residence in any State,
excluding ownership of heir property or
ownership of chattel, whether the
individual is a co-borrower on the loan
or not; or
(ii) an individual who has at any time been
placed in foster care or institutional care
whose spouse or domestic partner has not,
during the 3-year period ending upon
acquisition of the home to be acquired using
assistance under this section, had any
ownership interest in a residence in any State,
excluding ownership of heir property or
ownership of chattel, whether such individuals
are co-borrowers on the loan or not.
(b) Transfers.--For fiscal year 2026 and each fiscal year
thereafter, there are hereby appropriated amounts equal to the
following percentages of savings (as estimated by the Secretary of the
Treasury) resulting from the limits on deductions established under
sections 163(n) and 167(i) of the Internal Revenue Code of 1986, as
added by this Act:
(1) 80 percent of such amounts to the Secretary of Housing
and Urban Development to provide additional funding for the
HOME Investment Partnerships program under subtitle A of title
II of the Cranston-Gonzalez National Affordable Housing Act (42
U.S.C. 12741 et seq.), to be allocated in accordance with the
formula under that program, except that such amounts shall not
be subject to the requirements under section 231 of such Act
(42 U.S.C. 12771), for the following purposes:
(A) Acquisition of affordable housing, and
associated rehabilitation or preservation of such
acquired housing.
(B) 60 percent of the 80 percent under this
paragraph to be used for new construction of affordable
housing, with at least half of such funds to be used
for new construction of affordable housing for the
benefit of extremely low-income households.
(2) 20 percent of such amounts to the Secretary of Housing
and Urban Development to establish a fund to provide grants of
assistance on behalf of qualified homebuyers, the amount of
which shall not exceed the greater of $20,000 or 10 percent of
the purchase price for each qualified homebuyer, for down
payments, closing costs, and interest rate buydowns associated
with acquiring owner-occupied primary residences.
SEC. 6. INCREASE ANTITRUST MONITORING FOR REAL PROPERTY OWNERS.
(a) Housing Acquisitions Review and Transparency.--
(1) Definitions.--In this section:
(A) Residential property.--The term ``residential
property''--
(i) means property that is zoned or
intended to be used as a dwelling for
individuals or households, including
multifamily housing, condominiums, manufactured
homes, or single-family homes; and
(ii) does not include any place of short-
term lodging.
(B) Investment rental property.--The term
``investment rental property'' means real property
that--
(i) will not be rented to an entity,
including any entity of the acquiring person,
except for the sole purpose of maintaining,
managing, or supervising the operation of the
real property; and
(ii) will be held solely for rental or
investment purposes.
(C) Place of short-term lodging.--The term ``place
of short-term lodging'' means a hotel, motel, inn,
short-term rental, or other place of lodging that
advertises at a price that is a nightly, hourly, or
weekly rate.
(2) Amendments making housing transactions reportable.--
(A) Single acquisition.--Section 7A(a) of the
Clayton Act (15 U.S.C. 18a(a)) is amended by adding at
the end the following: ``For purposes of this
subsection, all acquisitions of residential property
(as defined in section 6(a) of the American
Homeownership Act by any person within a single
calendar year shall be deemed to be a single
acquisition and notification pursuant to this
subsection shall be filed by the acquiring person upon
acquiring the property that brings such single
acquisition within any requirement described in
paragraph (2) when aggregated with all other prior
acquisitions of residential property by the person in
that calendar year.''.
(B) Exemption.--Section 7A(c)(1) of the Clayton Act
(15 U.S.C. 18a(c)(1)) is amended by inserting ``,
unless the transaction includes residential property or
investment rental property (as defined in section 6(a)
of the American Homeownership Act), including in the
form of a real estate investment trust, that is not
solely intended for the personal use of an
individual.''.
(C) Code of federal regulations.--The Federal Trade
Commission, with the concurrence of the Assistant
Attorney General in charge of the Antitrust Division of
the Department of Justice, shall, by rule, in
accordance with section 553 of title 5, United States
Code--
(i) amend part 802 of title 16, Code of
Federal Regulations to conform with the
amendments to section 7A(a) of the Clayton Act
(15 U.S.C. 18(a)) made by this paragraph; and
(ii) rescind any rules exempting
residential property or investment rental
property pursuant to section 7A(d)(2)(B) of
that Act.
(3) Rulemaking.--The Federal Trade Commission, with the
concurrence of the Assistant Attorney General in charge of the
Antitrust Division of the Department of Justice and by rule, in
accordance with section 553 of title 5, United States Code,
shall issue rules relating to the form and documentary material
and information relevant to any acquisition or aggregated
acquisitions of residential property is necessary and
appropriate under section 7A(a) of the Clayton Act (15 U.S.C.
18a(a)), as amended by paragraph (2), to enable the Federal
Trade Commission and the Assistant Attorney General to
determine whether such acquisition or aggregated acquisitions
may violate the antitrust laws, as defined in subsection (a) of
the first section of the Clayton Act (15 U.S.C. 12).
(b) Presumption of Unlawful Merger or Acquisition.--
(1) Sense of congress.--It is the sense of Congress that--
(A) market concentration and the change in market
concentration due to a merger or acquisition can be an
important indicator of the merger or acquisition's risk
of substantially lessening competition; and
(B) in a landmark case, the Supreme Court correctly
explained that the ``intense congressional concern with
the trend toward concentration warrants dispensing, in
certain cases, with elaborate proof of market
structure, market behavior, or probable anticompetitive
effects.'' United States v. Philadelphia National Bank,
374 U.S. 321 (1963).
(2) Presumption.--
(A) In general.--For the avoidance of doubt, the
Department of Justice and the Federal Trade Commission
shall apply the presumption that an acquisition
involving residential property increasing the relevant
market share of the acquiring person to more than 30
percent violates the antitrust laws, as defined in
subsection (a) of the first section of the Clayton Act
(15 U.S.C. 12), and that such acquisition constitutes
an unfair method of competition under section 5 of the
Federal Trade Commission Act (15 U.S.C. 45).
(B) Rule of construction.--The clarification
described in subparagraph (A) shall not be read to
limit the use of the presumption under that
subparagraph in other markets, cast doubt on other
presumptions in antitrust enforcement, or suggest that
a market share that is less than 30 percent is
presumptively lawful.
<all>