[Congressional Record Volume 149, Number 170 (Friday, November 21, 2003)]
[Senate]
[Pages S15414-S15415]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SANTORUM (for himself and Mrs. Feinstein):
  S. 1918. A bill to amend the Internal Revenue Code of 1986 to provide 
that qualified homeowner downpayment assistance is a charitable 
purpose; to the Committee on Finance.
  Mr. SANTORUM. Mr. President, I am please to introduce today, along 
with my colleague from California, Senator Feinstein, legislation that 
will further one of the most important public policy goals we have as a 
Nation--the goal of homeownership. Homeownership is a significant part 
of the American dream. It has been called the backbone of our economy. 
It is widely considered the primary means by which American families 
create middle-class wealth and build financial security.
  Homeownership is all those things and more. It is the cornerstone of 
healthy communities across our Nation. It is good for families, good 
for our schools, good for our neighborhoods. Equity in homes is the 
leading source for collateral for small business start-up borrowing, 
and home equity loans are the leading provider of funds for a college 
education. Some experts even say home owners are more likely to vote.
  Despite the many benefits, there are still too many Americans for 
whom the

[[Page S15415]]

American dream of homeownership is unreachable. There are too many 
American families who pay rent month after month, never accumulating 
equity, never experiencing the joy of raising their children in a home 
they own, and look forward to passing along to future generations. That 
is especially true among Americans from minority populations. Though 
nationwide nearly 70 percent of Americans own their own home, 
homeownership rates among African-Americans and Hispanics is less than 
50 percent.
  There are any number of obstacles to homeownership, but there is one 
problem that is widely considered the single biggest obstacle: the lack 
of funds for a down payment. Again, this is disproportionately true 
among minority families, which frequently have less accumulated wealth 
that can be used for a down payment.
  President Bush has proposed creating the American Dream Down Payment 
Fund, which would provide down payment assistance to 40,000 families 
every year. I support that effort, and I applaud President Bush for 
proposing this bold new initiative. The President has set a goal of 
increasing the number of minority homeowners by at least 5.5 million by 
the end of this decade, which the Department of Housing and Urban 
Development estimates would create $256 billion in economic activity. I 
believe that is an important goal for us as a Nation.
  I also believe that as we work to find ways for the Federal 
Government to increase homeownership, we need to encourage the private 
sector to do the same. There are a number of non-profit organizations 
in our country doing just that by providing a gift of down payment 
assistance to potential homeowners. These gifts of down payment 
assistance go to families and individuals who have the income to afford 
a mortgage, but who would otherwise be prevented from buying a home 
because they lack funds for a down payment. Last year non-profit 
organizations provided gifts of down payment assistance to over 85,000 
home buyers--and the number will likely be much higher this year. One 
organization alone has helped over 160,000 individuals and families 
become homeowners, by providing a gift of funds for a down payment. And 
all without collecting a single dime of government funding.

  That is why I am so pleased to be introducing this legislation today. 
I want to be sure the private sector can continue playing such a vital 
role in increasing homeownership by providing down payment assistance. 
Although many charities holding tax exemptions under section 501(c)(3) 
of the Internal Revenue Code provide down payment assistance, IRS 
regulations do not clearly address down payment assistance programs.
  Our legislation will clarify that, under certain circumstances, the 
provision of down payment assistance to American families for use in 
purchasing low or moderate price homes constitutes charitable activity. 
Rather than developing our own standard for eligible home purchases, we 
have relied on the National Housing Act rule for FHA-insured loans. Our 
provision applies to purchases of a principal residence if the amount 
of the mortgage is less than the maximum mortgage amount eligible for 
FHA insurance in the geographic area in which the home is located. That 
will ensure that a charitable down payment assistance program is not 
used to support the purchase of rental properties or expensive homes.
  Our legislation also includes one other provision designed to protect 
the Treasury. Home sellers often contribute to charitable down payment 
assistance providers in connection with the sale of a home. Those 
contributions are used to replenish the pool to make available gift 
assistance for other home buyers. Although the contributions are being 
made to a charity, they are not charitable in nature; they are expenses 
of selling a home. The legislation clarifies that a party to a home 
sale transaction may not claim a charitable contribution deduction for 
a contribution to a down payment assistance provider made in connection 
with the sale.
  Although IRS regulations do not clearly address down payment 
assistance programs, our legislation merely codifies current practice. 
As a result, I do not anticipate that the legislation will result in a 
significant change in tax revenues.
  Non-profit providers of down payment assistance help tens of 
thousands of Americans every year become homeowners. These 
organizations are changing lives, changing families, changing our 
communities--and they are doing it all without a single dime of 
taxpayer funds. I am pleased my colleague from California, Senator 
Feinstein, has joined me in introducing this legislation. I ask all of 
my colleagues to join us in this important effort.
  Mrs. FEINSTEIN. Mr. President, I am pleased to join with the 
distinguished Senator from Pennsylvania, Senator Santorum, to introduce 
legislation that will promote the American dream of homeownership.
  Our legislation will specify that providing homeownership down 
payment assistance to American families constitutes a charitable 
activity under the regulations of the Internal Revenue Service.
  As the cornerstone of middle-class wealth in our nation, we should be 
doing everything possible to promote broad investment in owner-occupied 
housing. Today, we have that chance.
  It should not be a surprise that homeownership among low to moderate 
income families is lower than for those with higher incomes. The single 
biggest obstacle to achieving this dream is the lack of a downpayment.
  Across America there are organizations that assist low to moderate 
income families with that first important step toward homeownership. In 
California, one of these groups, the Nehemiah Corporation, helps 
literally thousands of families each year by providing down payments.
  While the Federal Government provides tax incentives for increased 
homeownership, we should make it easier for the private sector to 
provide their own brand of incentives. Importantly, this legislation 
will do several things to ensure that the private sector continues to 
have the tools it needs to provide this important assistance.
  One, our legislation will specify that homeownership down payment 
assistance to American families constitutes a charitable activity.
  Currently, Internal Revenue Service regulations do not clearly 
address the special circumstances of those organizations that provide 
downpayment assistance to families.
  Two, our bill is structured to ensure that a charitable down payment 
assistance program is not used to support the purchase of rental 
properties or expensive homes.
  Three, our legislation is designed so that the taxpayers do not pick-
up the tab. Since, home sellers often contribute to charitable down 
payment assistance providers in connection with the sale of a home, 
those contributions are not charitable in nature; they are an expense 
related to selling a home.
  This legislation clarifies that a party to a home sale transaction 
may not claim a charitable contribution deduction for a contribution to 
a down payment assistance organization made in connection with the 
sale.
  And, although Internal Revenue Service regulations do not 
specifically address down payment assistance programs, our legislation 
merely codifies current practice.
  This legislation will ensure the continued growth of this essential 
segment of the financial services market at no cost to the taxpayers.
  And, as my friend from Pennsylvania has said, equity in homes is the 
leading source for collateral for small business start-up borrowing.
  At a time when the economy still fails to produce jobs, the expansion 
of small business and the employment they provide is essential to the 
health of our economy.
  It is a win-win situation in the truest sense of the term and I urge 
my colleagues to support it.
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