[Congressional Record Volume 151, Number 76 (Thursday, June 9, 2005)]
[Senate]
[Pages S6313-S6316]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. STABENOW (for herself and Mr. Smith):
  S. 1213. A bill to amend the Internal Revenue Code of 1986 to allow a 
refundable credit against income tax for the purchase of a principal 
residence by a first-time homebuyer; to the Committee on Finance.
  Ms. STABENOW. Mr. President, I believe ``home'' is one of the warmest 
words in the English language. At the end of a long day, I think the 
favorite phrase of every hardworking man and woman in this country is: 
``Well, I'll see you tomorrow. I'm going home now.''
  And, that is why I rise today to introduce the First Time Homebuyers' 
Tax Credit Act of 2005.
  The bill I am introducing will spread that warmth by opening the door 
to homeownership to millions of hardworking families, helping them 
cover the initial down payment and closing costs.
  This initiative is in keeping with our longstanding national policy 
of encouraging homeownership.
  Owning a home has always been a fundamental part of the American 
dream.
  We, in Congress, have long recognized the social and economic value 
in high rates of homeownership through laws that we have enacted, such 
as the mortgage interest tax deduction and the capital gains exclusion 
on the sale of a home.
  Over the life of a loan, the mortgage interest tax deduction can save 
homeowners thousands of dollars that they could use for other necessary 
family expenses such as education or health care.
  These benefits, however, are only available to individuals who own 
their own home.
  It is important also to note that owning a home is a principle and 
reliable source of savings as homeowners build equity over the years 
and their homes appreciate.
  For many people, it is home equity--not stocks--that help them 
through the retirement years.
  In addition, owning a home insulates people from spikes in housing 
costs.
  Indeed, while rents may go up, the costs of a fixed monthly mortgage 
payment, in relative terms, will go down over the course of the 
mortgage.
  Clearly, one of the biggest barriers to homeownership for working 
families is the cost of a down payment and the costs associated with 
closing a mortgage.
  According to the Mortgage Bankers Association, typical closing costs 
on an average sized loan of $200,000 can approach approximately $6,000.
  Even with mortgage products that allow a down payment of 3 percent of 
the value of a home, total costs can quickly approach $9,000.
  This is an impossible amount to save for those who are working hard 
to make ends meet. The problem is only getting worse as home values 
climb faster than families can save for a down payment.
  To address this problem, I am introducing the First Time Homebuyers' 
Tax Credit Act of 2005.
  My bill authorizes a one-time tax credit of up to $3,000 for 
individuals and $6,000 for married couples.
  This credit is similar to the existing mortgage interest tax 
deduction in that it creates incentives for people to buy a home.
  To be eligible for the credit, taxpayers must be first-time 
homebuyers who were within the 25 percent bracket or lower in the year 
before they purchase their home. That is $71,950 for single filers, 
$102,800 for heads of household, and $119,950 for joint returns. There 
is a dollar-for-dollar phase-out beyond the cap.

[[Page S6315]]

  Normally, tax credits like this are an after-the-fact benefit. They 
do little to get people actually into a home.
  What is particularly innovative and beneficial about the tax credit 
in this bill, however, is that, for the first time, the taxpayer can 
either claim the credit in the year after he or she buys a first home 
or the taxpayer can transfer the credit directly to a lender at 
closing.
  The transferred credit would go toward helping with the down payment 
or closing costs. This is cash at the table.
  As mandated in the bill, the eligible homebuyer would have the money 
for the lender from the Treasury within 30 days of application.
  I am happy to say that this legislation has had strong support. When 
this bill was first introduced in 2003 it garnered the support of: The 
American Bankers Association, America's Community Bankers, the Housing 
Partnership Network, the National Housing Conference, the National 
Congress for Community Economic Development, the National Council of La 
Raza, the National Association of Affordable Housing Lenders, the 
Manufactured Housing Institute, Fannie Mae, Freddie Mac, National 
Community Reinvestment Coalition, Standard Federal Bank, Habitat for 
Humanity, and, the National American Indian Housing Council.
  Clearly, the breadth and diversity of support is strong for this 
legislation.
  This is a bold and aggressive effort to reach out to a large number 
of working families to help them get into this first home.
  The Joint Committee on Taxation has estimated that more than fifteen 
million working people would get into their first home over the next 
seven years because of this new tax credit.
  We are working to send a message to people all over the country that 
if you are working hard to save up enough to get into that first home, 
the Federal government will make a strategic investment in your 
family--it will offer a hand up.
  This is not unlike what we already do through the mortgage interest 
tax deduction for millions of people who are fortunate enough to 
already own their own home.
  We certainly won't do all the hard work for you. You must be frugal 
and save and do most of the work yourself, but we, in Congress, 
understand that it is good for America to enhance homeownership.
  We also understand that this sort of investment in working families 
stimulates the economy.
  No one can deny that when the First Time Homebuyers' Tax Credit is 
enacted and used by millions of people, every single time the credit is 
used, it will be stimulative. Why?
  Because it means someone bought a house. And that generates economic 
activity for multiple small business people. House appraisers and 
Inspectors. Realtors. Lenders. Title insurers. And so on. And there is 
a ripple of economic activity by the new homeowners as they fix up 
their new homes and get settled in.
  Housing has been such a bright light in the sluggish economy we've 
faced for the last several years. My bill is designed to ensure that 
the housing sector remains a strong component of our economy.
  Finally, let me close by emphasizing how happy and proud I am that 
this tax legislation is bipartisan. In a closely divided Senate, and a 
closely divided Congress, it is so important to work across the aisle 
and Senator Smith, who is a real champion for good housing policy, is 
someone I want to work closely with on this bill and other important 
housing legislation. He understands how housing tax benefits help build 
strong communities and provide economic security for millions of 
families.
  I am committed to seeing this legislation passed. And, I welcome the 
chance to work with all of my colleagues to see the dream of 
homeownership expanded to all people.
  Home. Sentimentally, it is one of the warmest words in the English 
language. Economically, it's the key word in bringing millions of 
families in from the cold and letting them begin building wealth for 
themselves and their family.
  I ask unanimous consent that the text of this legislation be printed 
in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1213

       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 ``First-Time Homebuyers' Tax 
     Credit Act of 2005''.

     SEC. 2. REFUNDABLE CREDIT FOR FIRST-TIME HOMEBUYERS.

       (a) In General.--Subpart C of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     refundable credits) is amended by redesignating section 36 as 
     section 37 and by inserting after section 35 the following 
     new section:

     ``SEC. 36. PURCHASE OF PRINCIPAL RESIDENCE BY FIRST-TIME 
                   HOMEBUYER.

       ``(a) Allowance of Credit.--In the case of an individual 
     who is a first-time homebuyer of a principal residence in the 
     United States during any taxable year, there shall be allowed 
     as a credit against the tax imposed by this subtitle for the 
     taxable year an amount equal to 10 percent of the purchase 
     price of the residence.
       ``(b) Limitations.--
       ``(1) Maximum dollar amount.--
       ``(A) In general.--The credit allowed under subsection (a) 
     shall not exceed the excess (if any) of--
       ``(i) $3,000 (2 times such amount in the case of a joint 
     return), over
       ``(ii) the credit transfer amount determined under 
     subsection (c) with respect to the purchase to which 
     subsection (a) applies.
       ``(B) Inflation adjustment.--In the case of any taxable 
     year beginning after December 31, 2005, the $3,000 amount 
     under subparagraph (A) shall be increased by an amount equal 
     to $3,000, multiplied by the cost-of-living adjustment 
     determined under section 1(f)(3) for the calendar year in 
     which the taxable year begins by substituting `2004' for 
     `1992' in subparagraph (B) thereof. If the $3,000 amount as 
     adjusted under the preceding sentence is not a multiple of 
     $10, such amount shall be rounded to the nearest multiple of 
     $10.
       ``(2) Taxable income limitation.--
       ``(A) In general.--If the taxable income of the taxpayer 
     for any taxable year exceeds the maximum taxable income in 
     the table under subsection (a), (b), (c), or (d) of section 
     1, whichever is applicable, to which the 25 percent rate 
     applies, the dollar amounts in effect under paragraph 
     (1)(A)(i) for such taxpayer for the following taxable year 
     shall be reduced (but not below zero) by the amount of the 
     excess.
       ``(B) Change in return status.--In the case of married 
     individuals filing a joint return for any taxable year who 
     did not file such a joint return for the preceding taxable 
     year, subparagraph (A) shall be applied by reference to the 
     highest taxable income of either such individual for the 
     preceding taxable year.
       ``(c) Transfer of Credit.--
       ``(1) In general.--A taxpayer may transfer all or a portion 
     of the credit allowable under subsection (a) to 1 or more 
     persons as payment of any liability of the taxpayer arising 
     out of--
       ``(A) the downpayment of any portion of the purchase price 
     of the principal residence, and
       ``(B) closing costs in connection with the purchase 
     (including any points or other fees incurred in financing the 
     purchase).
       ``(2) Credit transfer mechanism.--
       ``(A) In general.--Not less than 180 days after the date of 
     the enactment of this section, the Secretary shall establish 
     and implement a credit transfer mechanism for purposes of 
     paragraph (1). Such mechanism shall require the Secretary 
     to--
       ``(i) certify that the taxpayer is eligible to receive the 
     credit provided by this section with respect to the purchase 
     of a principal residence and that the transferee is eligible 
     to receive the credit transfer,
       ``(ii) certify that the taxpayer has not received the 
     credit provided by this section with respect to the purchase 
     of any other principal residence,
       ``(iii) certify the credit transfer amount which will be 
     paid to the transferee, and
       ``(iv) require any transferee that directly receives the 
     credit transfer amount from the Secretary to notify the 
     taxpayer within 14 days of the receipt of such amount.
     Any check, certificate, or voucher issued by the Secretary 
     pursuant to this paragraph shall include the taxpayer 
     identification number of the taxpayer and the address of the 
     principal residence being purchased.
       ``(B) Timely receipt.--The Secretary shall issue the credit 
     transfer amount not less than 30 days after the date of the 
     receipt of an application for a credit transfer.
       ``(3) Payment of interest.--
       ``(A) In general.--Notwithstanding any other provision of 
     this title, the Secretary shall pay interest on any amount 
     which is not paid to a person during the 30-day period 
     described in paragraph (2)(B).
       ``(B) Amount of interest.--Interest under subparagraph (A) 
     shall be allowed and paid--
       ``(i) from the day after the 30-day period described in 
     paragraph (2)(B) to the date payment is made, and
       ``(ii) at the overpayment rate established under section 
     6621.

[[Page S6316]]

       ``(C) Exception.--This paragraph shall not apply to 
     failures to make payments as a result of any natural disaster 
     or other circumstance beyond the control of the Secretary.
       ``(4) Effect on legal rights and obligations.--Nothing in 
     this subsection shall be construed to--
       ``(A) require a lender to complete a loan transaction 
     before the credit transfer amount has been transferred to the 
     lender, or
       ``(B) prevent a lender from altering the terms of a loan 
     (including the rate, points, fees, and other costs) due to 
     changes in market conditions or other factors during the 
     period of time between the application by the taxpayer for a 
     credit transfer and the receipt by the lender of the credit 
     transfer amount.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) First-time homebuyer.--
       ``(A) In general.--The term `first-time homebuyer' has the 
     same meaning as when used in section 72(t)(8)(D)(i).
       ``(B) One-time only.--If an individual is treated as a 
     first-time homebuyer with respect to any principal residence, 
     such individual may not be treated as a first-time homebuyer 
     with respect to any other principal residence.
       ``(C) Married individuals filing jointly.--In the case of 
     married individuals who file a joint return, the credit under 
     this section is allowable only if both individuals are first-
     time homebuyers.
       ``(D) Other taxpayers.--If 2 or more individuals who are 
     not married purchase a principal residence--
       ``(i) the credit under this section is allowable only if 
     each of the individuals is a first-time homebuyer, and
       ``(ii) the amount of the credit allowed under subsection 
     (a) shall be allocated among such individuals in such manner 
     as the Secretary may prescribe, except that the total amount 
     of the credits allowed to all such individuals shall not 
     exceed the amount in effect under subsection (b)(1)(A) for 
     individuals filing joint returns.
       ``(2) Principal residence.--The term `principal residence' 
     has the same meaning as when used in section 121. Except as 
     provided in regulations, an interest in a partnership, S 
     corporation, or trust which owns an interest in a residence 
     shall not be treated as an interest in a residence for 
     purposes of this paragraph.
       ``(3) Purchase.--
       ``(A) In general.--The term `purchase' means any 
     acquisition, but only if--
       ``(i) the property is not acquired from a person whose 
     relationship to the person acquiring it would result in the 
     disallowance of losses under section 267 or 707(b) (but, in 
     applying section 267 (b) and (c) for purposes of this 
     section, paragraph (4) of section 267(c) shall be treated as 
     providing that the family of an individual shall include only 
     the individual's spouse, ancestors, and lineal descendants), 
     and
       ``(ii) the basis of the property in the hands of the person 
     acquiring it is not determined--

       ``(I) in whole or in part by reference to the adjusted 
     basis of such property in the hands of the person from whom 
     acquired, or
       ``(II) under section 1014(a) (relating to property acquired 
     from a decedent).

       ``(B) Construction.--A residence which is constructed by 
     the taxpayer shall be treated as purchased by the taxpayer.
       ``(4) Purchase price.--The term `purchase price' means the 
     adjusted basis of the principal residence on the date of 
     acquisition (within the meaning of section 72(t)(8)(D)(iii)).
       ``(e) Denial of Double Benefit.--No credit shall be allowed 
     under subsection (a) for any expense for which a deduction or 
     credit is allowed under any other provision of this chapter.
       ``(f) Basis Adjustment.--For purposes of this subtitle, if 
     a credit is allowed under this section with respect to the 
     purchase of any residence, the basis of such residence shall 
     be reduced by the amount of the credit so allowed.
       ``(g) Property to Which Section Applies.--
       ``(1) In general.--The provisions of this section apply to 
     a principal residence if--
       ``(A) the taxpayer purchases the residence on or after 
     January 1, 2005, and before January 1, 2010, or
       ``(B) the taxpayer enters into, on or after January 1, 
     2005, and before January 1, 2010, a binding contract to 
     purchase the residence, and purchases and occupies the 
     residence before July 1, 2011.''.
       (b) Conforming Amendments.--
       (1) Subsection (a) of section 1016 of the Internal Revenue 
     Code of 1986 (relating to general rule for adjustments to 
     basis) is amended by striking ``and'' at the end of paragraph 
     (30), by striking the period at the end of paragraph (31) and 
     inserting ``, and'', and by adding at the end the following 
     new paragraph:
       ``(32) in the case of a residence with respect to which a 
     credit was allowed under section 36, to the extent provided 
     in section 36(f).''.
       (2) Section 1324(b)(2) of title 31, United States Code, is 
     amended by striking ``or'' before ``enacted'' and by 
     inserting before the period at the end ``, or from section 36 
     of such Code''.
       (c) Clerical Amendment.--The table of sections for subpart 
     C of part IV of subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986 is amended by striking the item relating 
     to section 36 and inserting the following new items:

``Sec. 36. Purchase of principal residence by first-time homebuyer.
``Sec. 37. Overpayments of tax.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2004.

  Mr. SMITH. Mr. President, today I introduce important legislation to 
enable more Americans to realize the dream of homeownership. The First-
Time Homebuyers' Tax Credit Act that Senator Stabenow and I are 
introducing would give a one-time tax credit that will help more 
Americans to become homeowners.
  Homeownership brings safety and stability to families and their 
communities. People who own their homes have the security of knowing 
that they have a reliable investment, and they are protected from 
spikes in housing costs. Yet despite these advantages, barriers exist 
for many who are looking to make the leap to homeownership.
  Even for families and individuals who can make monthly mortgage 
payments, down payment and closing costs can prove too great a burden. 
Based on information from the Mortgage Bankers Association, the average 
loan of $175,000 would incur closing costs of approximately $4,000. 
Combined with even a modest down-payment of as little as 3 percent of a 
home's value, total costs can quickly approach $9,000 or more.
  To help Americans achieve the dream of private homeownership, the 
First-Time Homebuyer Bill would provide a tax credit of up to $3,000 to 
individuals and up to $6,000 for families falling within or below the 
27 percent tax bracket.
  The bill would allow first-time homebuyers to claim the credit on 
their tax return or transfer the credit directly to the lender at 
closing, providing an immediate benefit to potential homeowners. This 
credit is similar to the Washington DC Homebuyers' Tax Credit.
  While Congress has enacted legislation to increase incentives for 
homeownership in the past, including the mortgage interest tax 
deduction, these benefits are available only to those who already own a 
home. In contrast, the First Time Homebuyer Bill will help increase 
homeownership among those who are working towards their first home 
purchase.
  I thank you for the opportunity to speak today, and I urge my 
colleagues to support this important legislation.
                                 ______