[Congressional Record Volume 147, Number 87 (Thursday, June 21, 2001)]
[Senate]
[Pages S6612-S6616]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. TORRICELLI (for himself and Mr. Dayton):
  S. 1081. A bill to amend the Internal Revenue Code of 1986 to allow a 
business credit for the development of low-to-moderate income housing 
for home ownership, and for other purposes; to the Committee on 
Finance.
  Mr. TORRICELLI. Mr. President, I rise today to introduce a bill which 
builds on the most well received provisions of the highly successful 
Low to Moderate Income Housing Tax Credit bill, LIHTC, of 1986. The 
evidence is clear that the entrepreneurial spirit that has been 
harnessed over the last 15 years in favor of aggressively addressing 
the Nation's need for rental housing can and should be channeled in 
response to the dire need for affordable single family hosing in urban 
America.
  Although the economic prosperity enjoyed by this country for a decade 
led to a home ownership rate that has reached levels of nearly 70 
percent, sadly the rate for central cities is 52 percent. One 
unfortunate reality is that having a good job does not guarantee a 
family a decent place to live at an affordable rate. According to one 
report; ``More than 220,000 teachers, police and public safety officers 
across the country spend more than half their incomes for housing and 
the problem is, in fact, getting worse.''
  Housing experts continually tell us that low homeownership in our 
urban communities is a result of the lack of quality homes to purchase 
and not the lack of potential homeowners. Developers have expressed 
that the high costs associated with building homes in urban areas have 
acted as a disincentive to developing or redeveloping communities. If 
supply drives demand as it often does in the case of other commodities 
then the key to revitalizing neighborhoods that were once jewels is the 
entrepreneural spirit to build homes.
  The use of tax credits to provide a source of capital to dramatically 
increase the rental housing stock has been a wonderful success. In 
recent meetings with developers and community development officials in 
my State of New Jersey, a consistent answer to the question of ``what 
can we do to spur the development of single family homes'' has been 
``just build on the success of the low income housing tax credit 
program''. Using tax incentives for such critical economic development 
purposes, such as overcoming capital market shortages is a proven 
method. In that regard, inclusion of certain industry practice 
development costs in the ``eligible costs'' basis of the property for 
computing tax credits and exclusion of the first $10,000 would quite 
often be just enough to keep developers out of the ``red'' in many 
urban communities.
  In many respects it is only proper that we begin this century 
recapturing space that once served as home of vibrant neighborhoods and 
bustling businesses since the middle of the 19th century. Certainly, 
effective development of space at the core of our urban centers 
requires building on the pride of ownership, rehabilitating classic 
structures that are found in all of our older cities and reclaiming 
land that has served us well.
  As we move ahead as a nation it is critical that we not leave many of 
our urban communities behind. AHEAD, (Affordable Housing and 
Environmental Action through Development), is a sound approach that 
cannot be implemented too soon. I urge my colleagues to support this 
bill. I ask unanimous consent that the text of the bill be printed in 
the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1081

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

     SECTION 1. SHORT TITLE; ETC.

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

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

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

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     business related credits) is amended by adding at the end the 
     following:

     ``SEC. 42A. LOW-TO-MODERATE INCOME HOME OWNERSHIP CREDIT.

       ``(a) In General.--For purposes of section 38, the amount 
     of the home ownership credit determined under this section 
     for any taxable year in the credit period shall be an amount 
     equal to the applicable percentage of the qualified basis of 
     each qualified low-to-moderate income building.
       ``(b) Applicable Percentage: 70 Percent Present Value 
     Credit for New Buildings; 30 Percent Present Value Credit for 
     Existing Buildings.--For purposes of this section--
       ``(1) In general.--The term `applicable percentage' means 
     the appropriate percentage prescribed by the Secretary for 
     the earlier of--
       ``(A) the first month of the credit period with respect to 
     a low-to-moderate income building, or
       ``(B) at the election of the taxpayer, the month in which 
     the taxpayer and the housing credit agency enter into an 
     agreement with respect to such building (which is binding on 
     such agency, the taxpayer, and all successors in interest) as 
     to the housing credit dollar amount to be allocated to such 
     building.
     A month may be elected under subparagraph (B) only if the 
     election is made not later than the 5th day after the close 
     of such month. Such an election, once made, shall be 
     irrevocable.
       ``(2) Method of prescribing percentages.--The percentages 
     prescribed by the Secretary for any month shall be 
     percentages which will yield over a 10-year period amounts of 
     credit under subsection (a) which have a present value equal 
     to--
       ``(A) 70 percent of the qualified basis of a new building, 
     and
       ``(B) 30 percent of the qualified basis of an existing 
     building.
       ``(3) Method of discounting.--The present value under 
     paragraph (2) shall be determined--
       ``(A) as of the last day of the 1st year of the 10-year 
     period referred to in paragraph (2),
       ``(B) by using a discount rate equal to 72 percent of the 
     average of the annual Federal mid-term rate and the annual 
     Federal long-term rate applicable under section 1274(d)(1) to 
     the month applicable under subparagraph (A) or (B) of 
     paragraph (1) and compounded annually, and
       ``(C) by assuming that the credit allowable under this 
     section for any year is received on the last day of such 
     year.
       ``(c) Qualified Basis; Eligible Basis; Qualified Low-to-
     Moderate Income Building.--For purposes of this section--
       ``(1) Qualified basis.--

[[Page S6613]]

       ``(A) Determination.--The qualified basis of any qualified 
     low-to-moderate income building for any taxable year is an 
     amount equal to--
       ``(i) the applicable fraction (determined as of the close 
     of such taxable year) of
       ``(ii) the eligible basis of such building.
       ``(B) Applicable fraction.--
       ``(i) In general.--For purposes of subparagraph (A), the 
     term `applicable fraction' means the smaller of the unit 
     fraction or the floor space fraction.
       ``(ii) Unit fraction.--For purposes of clause (i), the term 
     `unit fraction' means the fraction--

       ``(I) the numerator of which is the number of low-to-
     moderate income units in the building, and
       ``(II) the denominator of which is the number of all units 
     (whether or not occupied) in such building.

       ``(iii) Floor space fraction.--For purposes of clause (i), 
     the term `floor space fraction' means the fraction--

       ``(I) the numerator of which is the total floor space of 
     the low-to-moderate income units in such building, and
       ``(II) the denominator of which is the total floor space of 
     all units (whether or not occupied) in such building.

       ``(C) Eligible basis.--
       ``(i) In general.--The eligible basis of any qualified low-
     to-moderate income building for any taxable year shall be 
     determined under rules similar to the rules under section 
     42(d), except that--

       ``(I) the determination of the adjusted basis of any 
     building shall be made as of the beginning of the credit 
     period, and
       ``(II) such basis shall include development costs properly 
     attributable to such building.

       ``(ii) Development costs.--For purposes of clause (i)(II), 
     the term `development costs' includes--

       ``(I) site preparation costs,
       ``(II) State and local impact fees,
       ``(III) reasonable development costs,
       ``(IV) professional fees related to basis items,
       ``(V) construction financing costs related to basis items 
     other than land, and
       ``(VI) on-site and adjacent improvements required by State 
     and local governments.

       ``(2) Qualified low-to-moderate income building.--The term 
     `qualified low-to-moderate income building' means any 
     building which is part of a qualified low-to-moderate income 
     development project at all times during the period--
       ``(A) beginning on the 1st day in the compliance period on 
     which such building is part of such a development project, 
     and
       ``(B) ending on the last day of the compliance period with 
     respect to such building.
       ``(d) Rehabilitation expenditures treated as separate new 
     building.--Rehabilitation expenditures paid or incurred by 
     the taxpayer with respect to any building shall be treated 
     for purposes of this section as a separate new building under 
     the rules of section 42(e).
       ``(e) Definition and special rules relating to credit 
     period.--
       ``(1) Credit period defined.--For purposes of this section, 
     the term `credit period' means, with respect to any building, 
     the period of 10 taxable years beginning with the taxable 
     year in which the building (or a low-to-moderate income unit 
     in such building) is first sold by the taxpayer to a low-to 
     moderate income individual after being placed in service.
       ``(2) Special rule for 1st year of credit period.--
       ``(A) In general.--The credit allowable under subsection 
     (a) with respect to any building for the 1st taxable year of 
     the credit period shall be determined by substituting for the 
     applicable fraction under subsection (c)(1) the fraction--
       ``(i) the numerator of which is the sum of the applicable 
     fractions determined under subsection (c)(1) as of the close 
     of each full month of such year during which such building 
     was in service, and
       ``(ii) the denominator of which is 12.
       ``(B) Disallowed 1st year credit allowed in 11th year.--Any 
     reduction by reason of subparagraph (A) in the credit 
     allowable (without regard to subparagraph (A)) for the 1st 
     taxable year of the credit period shall be allowable under 
     subsection (a) for the 1st taxable year following the credit 
     period.
       ``(3) Credit period for existing buildings not to begin 
     before rehabilitation credit allowed.--The credit period for 
     an existing building shall not begin before the 1st taxable 
     year of the credit period for rehabilitation expenditures 
     with respect to the building.
       ``(f) Qualified Low-to-Moderate Income Development 
     Project.--For purposes of this section--
       ``(1) In general.--The term `qualified low-to-moderate 
     income development project' means any development project of 
     1 or more for qualified low-to-moderate income buildings 
     located in an area if 40 percent or more of the residential 
     units in such development project are occupied and owned by 
     individuals whose income is 100 percent or less of area 
     median gross income.
       ``(2) Treatment of units occupied by individuals whose 
     incomes rise above limit.--Notwithstanding an increase in the 
     income of the occupants of a low-to-moderate income unit 
     above the income limitation applicable under paragraph (2) or 
     (3), such unit shall continue to be treated as a low-to-
     moderate income unit if the income of such occupants 
     initially met such income limitation and such unit continues 
     to be so restricted.
       ``(3) Certain rules made applicable.--Paragraphs (3), (5), 
     (7), and (8) of section 42(g) shall apply for purposes of 
     determining whether any development project is a qualified 
     low-to-moderate income development project.
       ``(g) Limitation on aggregate credit allowable with respect 
     to development projects located in a State.--
       ``(1) Credit may not exceed credit amount allocated to 
     building.--The amount of the credit determined under this 
     section for any taxable year with respect to any building 
     shall not exceed the housing credit dollar amount allocated 
     to such building under rules similar to the rules of section 
     42(h)(1) (determined without regard to subparagraph (D) 
     thereof).
       ``(2) Allocated credit amount to apply to all taxable years 
     ending during or after credit allocation year.--Any housing 
     credit dollar amount allocated to any building for any 
     calendar year--
       ``(A) shall apply to such building for all taxable years in 
     the credit period ending during or after such calendar year, 
     and
       ``(B) shall reduce the aggregate housing credit dollar 
     amount of the allocating agency only for such calendar year.
       ``(3) Housing credit dollar amount for agencies.--
       ``(A) In general.--The aggregate housing credit dollar 
     amount which a housing credit agency may allocate for any 
     calendar year is the portion of the State housing credit 
     ceiling allocated under this paragraph for such calendar year 
     to such agency.
       ``(B) State ceiling initially allocated to state housing 
     credit agencies.--Except as provided in subparagraphs (D) and 
     (E), the State housing credit ceiling for each calendar year 
     shall be allocated to the housing credit agency of such 
     State. If there is more than 1 housing credit agency of a 
     State, all such agencies shall be treated as a single agency.
       ``(C) State housing credit ceiling.--The State housing 
     credit ceiling applicable to any State and any calendar year 
     shall be an amount equal to the sum of--
       ``(i) the unused State housing credit ceiling (if any) of 
     such State for the preceding calendar year,
       ``(ii) the greater of--

       ``(I) $1.75 multiplied by the State population, or
       ``(II) $2,000,000,

       ``(iii) the amount of State housing credit ceiling returned 
     in the calendar year, plus
       ``(iv) the amount (if any) allocated under subparagraph (D) 
     to such State by the Secretary.

     For purposes of clause (i), the unused State housing credit 
     ceiling for any calendar year is the excess (if any) of the 
     sum of the amounts described in clauses (ii) through (iv) 
     over the aggregate housing credit dollar amount allocated for 
     such year. For purposes of clause (iii), the amount of State 
     housing credit ceiling returned in the calendar year equals 
     the housing credit dollar amount previously allocated within 
     the State to any development project which fails to meet the 
     10 percent test under section 42(h)(1)(E)(ii) on a date after 
     the close of the calendar year in which the allocation was 
     made or which does not become a qualified low-to-moderate 
     income development project within the period required by this 
     section or the terms of the allocation or to any development 
     project with respect to which an allocation is canceled by 
     mutual consent of the housing credit agency and the 
     allocation recipient.
       ``(D) Unused housing credit carryovers allocated among 
     certain states.--
       ``(i) In general.--The unused housing credit carryover of a 
     State for any calendar year shall be assigned to the 
     Secretary for allocation among qualified States for the 
     succeeding calendar year.
       ``(ii) Unused housing credit carryover.--For purposes of 
     this subparagraph, the unused housing credit carryover of a 
     State for any calendar year is the excess (if any) of the 
     unused State housing credit ceiling for such year (as defined 
     in subparagraph (C)(i)) over the excess (if any) of --

       ``(I) the unused State housing credit ceiling for the year 
     preceding such year, over
       ``(II) the aggregate housing credit dollar amount allocated 
     for such year.

       ``(iii) Formula for allocation of unused housing credit 
     carryovers among qualified states.--The amount allocated 
     under this subparagraph to a qualified State for any calendar 
     year shall be the amount determined by the Secretary to bear 
     the same ratio to the aggregate unused housing credit 
     carryovers of all States for the preceding calendar year as 
     such State's population for the calendar year bears to the 
     population of all qualified States for the calendar year. For 
     purposes of the preceding sentence, population shall be 
     determined in accordance with section 146(j).
       ``(iv) Qualified state.--For purposes of this subparagraph, 
     the term `qualified State' means, with respect to a calendar 
     year, any State--

       ``(I) which allocated its entire State housing credit 
     ceiling for the preceding calendar year, and
       ``(II) for which a request is made (not later than May 1 of 
     the calendar year) to receive an allocation under clause 
     (iii).

       ``(E) Special rule for states with constitutional home rule 
     cities.--For purposes of this subsection--
       ``(i) In general.--The aggregate housing credit dollar 
     amount for any constitutional home rule city for any calendar 
     year shall be

[[Page S6614]]

     an amount which bears the same ratio to the State housing 
     credit ceiling for such calendar year as--

       ``(I) the population of such city, bears to
       ``(II) the population of the entire State.

       ``(ii) Coordination with other allocations.--In the case of 
     any State which contains 1 or more constitutional home rule 
     cities, for purposes of applying this paragraph with respect 
     to housing credit agencies in such State other than 
     constitutional home rule cities, the State housing credit 
     ceiling for any calendar year shall be reduced by the 
     aggregate housing credit dollar amounts determined for such 
     year for all constitutional home rule cities in such State.
       ``(iii) Constitutional home rule city.--For purposes of 
     this paragraph, the term `constitutional home rule city' has 
     the meaning given such term by section 146(d)(3)(C).
       ``(F) State may provide for different allocation.--Rules 
     similar to the rules of section 146(e) (other than paragraph 
     (2)(B) thereof) shall apply for purposes of this paragraph.
       ``(G) Population.--For purposes of this paragraph, 
     population shall be determined in accordance with section 
     146(j).
       ``(H) Cost-of-living adjustment.--
       ``(i) In general.--In the case of a calendar year after 
     2002, the $2,000,000 and $1.75 amounts in subparagraph (C) 
     shall each be increased by an amount equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f )(3) for such calendar year by substituting 
     `calendar year 2001' for `calendar year 1992' in subparagraph 
     (B) thereof.

       ``(ii) Rounding.--

       ``(I) In the case of the $2,000,000 amount, any increase 
     under clause (i) which is not a multiple of $5,000 shall be 
     rounded to the next lowest multiple of $5,000.
       ``(II) In the case of the $1.75 amount, any increase under 
     clause (i) which is not a multiple of 5 cents shall be 
     rounded to the next lowest multiple of 5 cents.

       ``(4) Portion of state ceiling set-aside for certain 
     development projects involving qualified nonprofit 
     organizations.--
       ``(A) In general.--Not more than 90 percent of the State 
     housing credit ceiling for any State for any calendar year 
     shall be allocated to development projects other than 
     qualified low-to-moderate income development projects 
     described in subparagraph (B).
       ``(B) Development projects involving qualified nonprofit 
     organizations.--For purposes of subparagraph (A), a qualified 
     low-to-moderate income development project is described in 
     this subparagraph if a qualified nonprofit organization is to 
     materially participate (within the meaning of section 469(h)) 
     in the development and operation of the development project 
     throughout the compliance period.
       ``(C) Qualified nonprofit organization.--For purposes of 
     this paragraph, the term `qualified nonprofit organization' 
     means any organization if--
       ``(i) such organization is described in paragraph (3) or 
     (4) of section 501(c) and is exempt from tax under section 
     501(a),
       ``(ii) such organization is determined by the State housing 
     credit agency not to be affiliated with or controlled by a 
     for-profit organization; and
       ``(iii) 1 of the exempt purposes of such organization 
     includes the fostering of low-to-moderate income housing.
       ``(D) Treatment of certain subsidiaries.--
       ``(i) In general.--For purposes of this paragraph, a 
     qualified nonprofit organization shall be treated as 
     satisfying the ownership and material participation test of 
     subparagraph (B) if any qualified corporation in which such 
     organization holds stock satisfies such test.
       ``(ii) Qualified corporation.--For purposes of clause (i), 
     the term `qualified corporation' means any corporation if 100 
     percent of the stock of such corporation is held by 1 or more 
     qualified nonprofit organizations at all times during the 
     period such corporation is in existence.
       ``(E) State may not override set-aside.--Nothing in 
     subparagraph (F) of paragraph (3) shall be construed to 
     permit a State not to comply with subparagraph (A) of this 
     paragraph.
       ``(5) Buildings eligible for credit only if minimum long-
     term commitment to low-to-moderate income housing.--
       ``(A) In general.--No credit shall be allowed by reason of 
     this section with respect to any building for the taxable 
     year unless a low-to-moderate income housing commitment is in 
     effect as of the end of such taxable year.
       ``(B) Low-to-moderate income housing commitment.--For 
     purposes of this paragraph, the term `low-to-moderate income 
     housing commitment' means any agreement between the taxpayer 
     and the housing credit agency--
       ``(i) which requires that the applicable fraction (as 
     defined in subsection (c)(1)(B)) for the building for each 
     taxable year in the compliance period will not be less than 
     the applicable fraction specified in such agreement,
       ``(ii) which allows individuals who meet the income 
     limitation applicable to the building under subsection (f) 
     (whether prospective, present, or former occupants of the 
     building) the right to enforce in any State court the 
     requirement of clause (i),
       ``(iii) which allows the taxpayer the right of first 
     refusal to purchase the building from the low-or-moderate 
     income individual to whom the taxpayer first sold the 
     building,
       ``(iv) which is binding on all successors of the taxpayer, 
     and
       ``(v) which, with respect to the property, is recorded 
     pursuant to State law as a restrictive covenant.
       ``(C) Allocation of credit may not exceed amount necessary 
     to support commitment.--The housing credit dollar amount 
     allocated to any building may not exceed the amount necessary 
     to support the applicable fraction specified in the low-to-
     moderate income housing commitment for such building.
       ``(D) Effect of noncompliance.--If, during a taxable year, 
     there is a determination that a low-to-moderate income 
     housing agreement was not in effect as of the beginning of 
     such year, such determination shall not apply to any period 
     before such year and subparagraph (A) shall be applied 
     without regard to such determination if the failure is 
     corrected within 1 year from the date of the determination.
       ``(E) Development projects which consist of more than 1 
     building.--The application of this paragraph to development 
     projects which consist of more than 1 building shall be made 
     under regulations prescribed by the Secretary.
       ``(6) Special rules.--
       ``(A) Building must be located within jurisdiction of 
     credit agency.--A housing credit agency may allocate its 
     aggregate housing credit dollar amount only to buildings 
     located in the jurisdiction of the governmental unit of which 
     such agency is a part.
       ``(B) Agency allocations in excess of limit.--If the 
     aggregate housing credit dollar amounts allocated by a 
     housing credit agency for any calendar year exceed the 
     portion of the State housing credit ceiling allocated to such 
     agency for such calendar year, the housing credit dollar 
     amounts so allocated shall be reduced (to the extent of such 
     excess) for buildings in the reverse of the order in which 
     the allocations of such amounts were made.
       ``(C) Credit reduced if allocated credit dollar amount is 
     less than credit which would be allowable without regard to 
     sales convention, etc.--
       ``(i) In general.--The amount of the credit determined 
     under this section with respect to any building shall not 
     exceed the clause (ii) percentage of the amount of the credit 
     which would (but for this subparagraph) be determined under 
     this section with respect to such building.
       ``(ii) Determination of percentage.--For purposes of clause 
     (i), the clause (ii) percentage with respect to any building 
     is the percentage which--

       ``(I) the housing credit dollar amount allocated to such 
     building bears to
       ``(II) the credit amount determined in accordance with 
     clause (iii).

       ``(iii) Determination of credit amount.--The credit amount 
     determined in accordance with this clause is the amount of 
     the credit which would (but for this subparagraph) be 
     determined under this section with respect to the building if 
     this section were applied without regard to paragraph (2)(A) 
     of subsection (e).
       ``(D) Housing credit agency to specify applicable 
     percentage and maximum qualified basis.--In allocating a 
     housing credit dollar amount to any building, the housing 
     credit agency shall specify the applicable percentage and the 
     maximum qualified basis which may be taken into account under 
     this section with respect to such building. The applicable 
     percentage and maximum qualified basis so specified shall not 
     exceed the applicable percentage and qualified basis 
     determined under this section without regard to this 
     subsection.
       ``(7) Other definitions.--For purposes of this subsection--
       ``(A) Housing credit agency.--The term `housing credit 
     agency' means any agency authorized to carry out this 
     subsection.
       ``(B) Possessions treated as States.--The term `State' 
     includes a possession of the United States.
       ``(h) Definitions and special rules.--For purposes of this 
     section--
       ``(1) Compliance period.--The term `compliance period' 
     means, with respect to any building, the period of 5 taxable 
     years beginning with the 1st taxable year of the credit 
     period with respect thereto.
       ``(2) New building.--The term `new building' means a 
     building the original use of which begins with the taxpayer.
       ``(3) Existing building.--The term `existing building' 
     means any building which is not a new building.
       ``(4) Application to estates and trusts.--In the case of an 
     estate or trust, the amount of the credit determined under 
     subsection (a) and any increase in tax under subsection (j) 
     shall be apportioned between the estate or trust and the 
     beneficiaries on the basis of the income of the estate or 
     trust allocable to each.
       ``(i) Recapture of credit.--If--
       ``(1) as of the close of any taxable year in the compliance 
     period, the amount of the qualified basis of any building 
     with respect to the taxpayer is less than
       ``(2) the amount of such basis as of the close of the 
     preceding taxable year,

     then the taxpayer's tax under this chapter for the taxable 
     year shall be increased by the credit recapture amount 
     determined under rules similar to the rules of section 42(j).
       ``(j) Application of at-risk rules.--For purposes of this 
     section, rules similar to the rules of section 42(k) shall 
     apply.

[[Page S6615]]

       ``(k) Certifications and other reports to Secretary.--
       ``(1) Certification with respect to 1st year of credit 
     period.--Following the close of the 1st taxable year in the 
     credit period with respect to any qualified low-to-moderate 
     income building, the taxpayer shall certify to the Secretary 
     (at such time and in such form and in such manner as the 
     Secretary prescribes)--
       ``(A) the taxable year, and calendar year, in which such 
     building was first sold after being placed in service,
       ``(B) the adjusted basis and eligible basis of such 
     building as of the beginning of the credit period,
       ``(C) the maximum applicable percentage and qualified basis 
     permitted to be taken into account by the appropriate housing 
     credit agency under subsection (g),
       ``(D) the election made under subsection (f) with respect 
     to the qualified low-to-moderate income housing development 
     project of which such building is a part, and
       ``(E) such other information as the Secretary may require.

     In the case of a failure to make the certification required 
     by the preceding sentence on the date prescribed therefor, 
     unless it is shown that such failure is due to reasonable 
     cause and not to willful neglect, no credit shall be 
     allowable by reason of subsection (a) with respect to such 
     building for any taxable year ending before such 
     certification is made.
       ``(2) Annual reports to the Secretary.--The Secretary may 
     require taxpayers to submit an information return (at such 
     time and in such form and manner as the Secretary prescribes) 
     for each taxable year setting forth--
       ``(A) the qualified basis for the taxable year of each 
     qualified low-to-moderate income building of the taxpayer,
       ``(B) the information described in paragraph (1)(C) for the 
     taxable year, and
       ``(C) such other information as the Secretary may require.

     The penalty under section 6652(j) shall apply to any failure 
     to submit the return required by the Secretary under the 
     preceding sentence on the date prescribed therefor.
       ``(3) Annual reports from housing credit agencies.--Each 
     agency which allocates any housing credit amount to any 
     building for any calendar year shall submit to the Secretary 
     (at such time and in such manner as the Secretary shall 
     prescribe) an annual report specifying--
       ``(A) the amount of housing credit amount allocated to each 
     building for such year,
       ``(B) sufficient information to identify each such building 
     and the taxpayer with respect thereto, and
       ``(C) such other information as the Secretary may require.

     The penalty under section 6652(j) shall apply to any failure 
     to submit the report required by the preceding sentence on 
     the date prescribed therefor.
       ``(l) Responsibilities of housing credit agencies.--
       ``(1) Plans for allocation of credit among development 
     projects.--
       ``(A) In general.--Notwithstanding any other provision of 
     this section, the housing credit dollar amount with respect 
     to any building shall be zero unless--
       ``(i) such amount was allocated pursuant to a qualified 
     allocation plan of the housing credit agency which is 
     approved by the governmental unit (in accordance with rules 
     similar to the rules of section 147(f)(2) (other than 
     subparagraph (B)(ii) thereof)) of which such agency is a 
     part,
       ``(ii) such agency notifies the chief executive officer (or 
     the equivalent) of the local jurisdiction within which the 
     building is located of such development project and provides 
     such individual a reasonable opportunity to comment on the 
     development project,
       ``(iii) a comprehensive market study of the housing needs 
     of low- and moderate-income individuals in the area to be 
     served by the development project is conducted before the 
     credit allocation is made and at the developer's expense by a 
     disinterested party who is approved by such agency, and
       ``(iv) a written explanation is available to the general 
     public for any allocation of a housing credit dollar amount 
     which is not made in accordance with established priorities 
     and selection criteria of the housing credit agency.
       ``(B) Qualified allocation plan.--For purposes of this 
     paragraph, the term `qualified allocation plan' means any 
     plan--
       ``(i) which sets forth selection criteria to be used to 
     determine housing priorities of the housing credit agency 
     which are appropriate to local conditions,
       ``(ii) which also gives preference in allocating housing 
     credit dollar amounts among selected development projects 
     to--

       ``(I) development projects serving the lowest income 
     owners, and
       ``(II) development projects which are located in qualified 
     census tracts (as defined in section 42(d)(5)(C)) and the 
     development of which contributes to a concerted community 
     revitalization plan, and

       ``(iii) which provides a procedure that the agency (or an 
     agent or other private contractor of such agency) will follow 
     in monitoring for noncompliance with the provisions of this 
     section and in notifying the Internal Revenue Service of such 
     noncompliance which such agency becomes aware of and in 
     monitoring for noncompliance with habitability standards 
     through regular site visits.
       ``(C) Certain selection criteria must be used.--The 
     selection criteria set forth in a qualified allocation plan 
     must include--
       ``(i) development project location,
       ``(ii) housing needs characteristics,
       ``(iii) development project characteristics, including 
     whether the development project includes the use of existing 
     housing as part of a community revitalization plan,
       ``(iv) populations with special housing needs,
       ``(v) low-to-moderate income housing waiting lists, and
       ``(vi) populations of individuals with children.
       ``(2) Credit allocated to building not to exceed amount 
     necessary to assure development project feasibility.--
       ``(A) In general.--The housing credit dollar amount 
     allocated to a development project shall not exceed the 
     amount the housing credit agency determines is necessary for 
     the financial feasibility of the development project and its 
     viability as a qualified low-to-moderate income development 
     project throughout the compliance period.
       ``(B) Agency evaluation.--In making the determination under 
     subparagraph (A), the housing credit agency shall consider--
       ``(i) the sources and uses of funds and the total financing 
     planned for the development project,
       ``(ii) any proceeds or receipts expected to be generated by 
     reason of tax benefits,
       ``(iii) the percentage of the housing credit dollar amount 
     used for development project costs other than the cost of 
     intermediaries, and
       ``(iv) the reasonableness of the developmental and 
     operational costs of the development project.

     Clause (iii) shall not be applied so as to impede the 
     development of development projects in hard-to-develop areas.
       ``(C) Determination made when credit amount applied for and 
     when building sold.--
       ``(i) In general.--A determination under subparagraph (A) 
     shall be made as of each of the following times:

       ``(I) The application for the housing credit dollar amount.
       ``(II) The allocation of the housing credit dollar amount.
       ``(III) The date the building is first sold after having 
     been placed in service.

       ``(ii) Certification as to amount of other subsidies.--
     Prior to each determination under clause (i), the taxpayer 
     shall certify to the housing credit agency the full extent of 
     all Federal, State, and local subsidies which apply (or which 
     the taxpayer expects to apply) with respect to the building.
       ``(m) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section, including regulations--
       ``(1) dealing with--
       ``(A) development projects which include more than 1 
     building or only a portion of a building,
       ``(B) buildings which are sold in portions,
       ``(2) providing for the application of this section to 
     short taxable years,
       ``(3) preventing the avoidance of the rules of this 
     section, and
       ``(4) providing the opportunity for housing credit agencies 
     to correct administrative errors and omissions with respect 
     to allocations and record keeping within a reasonable period 
     after their discovery, taking into account the availability 
     of regulations and other administrative guidance from the 
     Secretary.
       ``(n) Termination.--Clause (ii) of subsection (g)(3)(C) 
     shall not apply to any amount allocated after December 31, 
     2004.''.
       (b) Current Year Business Credit Calculation.--Section 
     38(b) of the Internal Revenue Code of 1986 (relating to 
     current year business credit) is amended by striking ``plus'' 
     at the end of paragraph (12), by striking the period at the 
     end of paragraph (13) and inserting ``, plus'', and by adding 
     at the end the following:
       ``(14) the home ownership credit determined under section 
     42A(a).''.
       (c) Limitation on Carryback.--Subsection (d) of section 39 
     of the Internal Revenue Code of 1986 (relating to carryback 
     and carryforward of unused credits) is amended by adding at 
     the end the following:
       ``(10) No carryback of home ownership credit before 
     effective date.--No amount of unused business credit 
     available under section 42A may be carried back to a taxable 
     year beginning on or before the date of the enactment of this 
     paragraph.''.
       (d) Conforming Amendments.--
       (1) Section 55(c)(1) of the Internal Revenue Code of 1986 
     is amended by inserting ``or subsection (i) or (j) of section 
     42A'' after ``section 42''.
       (2) Subsections (i)(c)(3), (i)(c)(6)(B)(i), and (k)(1) of 
     section 469 of such Code are each amended by inserting ``or 
     42A'' after ``section 42''.
       (3) Section 772(a) of such Code is amended by striking 
     ``and'' at the end of paragraph (10), by redesignating 
     paragraph (11) as paragraph (12), and by inserting after 
     paragraph (10) the following:
       ``(11) the home ownership credit determined under section 
     42A, and''.
       (4) Section 774(b)(4) of such Code is amended by inserting 
     ``, 42A(i),'' after ``section 42(j)''.

[[Page S6616]]

       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986 is amended by inserting after the item 
     relating to section 42 the following:

``Sec. 42A. Low-to-moderate income home ownership credit.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to expenditures made in taxable years beginning 
     after the date of the enactment of this Act.

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

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

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

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

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

     SEC. 4. EXPANSION OF REHABILITATION CREDIT.

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