[Congressional Record Volume 171, Number 113 (Monday, June 30, 2025)]
[Senate]
[Pages S4099-S4102]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SA 2700. Mr. WARNER submitted an amendment intended to be proposed to
amendment SA 2360 proposed by Mr. Thune (for Mr. Graham) to the bill
H.R. 1, to provide for reconciliation pursuant to title II of H. Con.
Res. 14; which was ordered to lie on the table; as follows:
At the appropriate place, insert the following:
SEC. _____. NEIGHBORHOOD HOMES CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 is amended by inserting after section 42 the
following new section:
``SEC. 42A. NEIGHBORHOOD HOMES CREDIT.
``(a) Allowance of Credit.--For purposes of section 38, the
neighborhood homes credit determined under this section for
the taxable year is, with respect to each qualified residence
sold by the taxpayer during such taxable year in an
affordable sale, the lesser of--
``(1) an amount equal to--
``(A) the excess (if any) of--
``(i) the reasonable development costs paid or incurred by
the taxpayer with respect to such qualified residence, over
``(ii) the sale price of such qualified residence (reduced
by any reasonable expenses paid or incurred by the taxpayer
in connection with such sale), or
``(B) if the neighborhood homes credit agency determines it
is necessary to ensure financial feasibility, an amount not
to exceed 120 percent of the amount under subparagraph (A),
``(2) 40 percent of the eligible development costs paid or
incurred by the taxpayer with respect to such qualified
residence, or
``(3) 32 percent of the national median sale price for new
homes (as determined pursuant to the most recent census data
available as
[[Page S4100]]
of the date on which the neighborhood homes credit agency
makes an allocation for the qualified project).
``(b) Development Costs.--For purposes of this section--
``(1) Reasonable development costs.--
``(A) In general.--The term `reasonable development costs'
means amounts paid or incurred for the acquisition of
buildings and land, construction, substantial rehabilitation,
demolition of structures, or environmental remediation, to
the extent that the neighborhood homes credit agency
determines that such amounts meet the standards specified
pursuant to subsection (f)(1)(D) (as of the date on which
construction or substantial rehabilitation is substantially
complete, as determined by such agency) and are necessary to
ensure the financial feasibility of such qualified residence.
``(B) Considerations in making determination.--In making
the determination under subparagraph (A), the neighborhood
homes credit agency shall consider--
``(i) the sources and uses of funds and the total
financing,
``(ii) any proceeds or receipts generated or expected to be
generated by reason of tax benefits, and
``(iii) the reasonableness of the developmental costs and
fees.
``(2) Eligible development costs.--The term `eligible
development costs' means the amount which would be reasonable
development costs if the amounts taken into account as paid
or incurred for the acquisition of buildings and land did not
exceed 75 percent of such costs determined without regard to
any amount paid or incurred for the acquisition of buildings
and land.
``(3) Substantial rehabilitation.--The term `substantial
rehabilitation' means amounts paid or incurred for
rehabilitation of a qualified residence if such amounts
exceed the greater of--
``(A) $25,000, or
``(B) 20 percent of the amounts paid or incurred by the
taxpayer for the acquisition of buildings and land with
respect to such qualified residence.
``(4) Construction and rehabilitation only after allocation
taken into account.--
``(A) In general.--The terms `reasonable development costs'
and `eligible development costs' shall not include any amount
paid or incurred before the date on which an allocation is
made to the taxpayer under subsection (e) with respect to the
qualified project of which the qualified residence is part
unless such amount is paid or incurred for the acquisition of
buildings or land.
``(B) Land and building acquisition costs.--Amounts paid or
incurred for the acquisition of buildings or land shall be
included under paragraph (A) only if paid or incurred not
more than 3 years before the date on which the allocation
referred to in subparagraph (A) is made. If the taxpayer
acquired any building or land from an entity (or any related
party to such entity) that holds an ownership interest in the
taxpayer, then such entity must also have acquired such
property within such 3-year period, and the acquisition cost
included under subparagraph (A) with respect to the taxpayer
shall not exceed the amount such entity paid or incurred to
acquire such property.
``(c) Qualified Residence.--For purposes of this section--
``(1) In general.--The term `qualified residence' means a
residence that--
``(A) is real property (constructed on-site or manufactured
off-site) affixed on a permanent foundation,
``(B) is--
``(i) a house which is comprised of 4 or fewer residential
units,
``(ii) a condominium unit, or
``(iii) a house or an apartment owned by a cooperative
housing corporation (as defined in section 216(b)),
``(C) is part of a qualified project with respect to which
the neighborhood homes credit agency has made an allocation
under subsection (e), and
``(D) is located in a qualified census tract (determined as
of the date of such allocation).
``(2) Qualified census tract.--
``(A) In general.--The term `qualified census tract' means
a census tract--
``(i) which--
``(I) has a median family income which does not exceed 80
percent of the median family income for the applicable area,
``(II) has a poverty rate that is not less than 130 percent
of the poverty rate of the applicable area, and
``(III) has a median value for owner-occupied homes that
does not exceed the median value for owner-occupied homes in
the applicable area,
``(ii) which--
``(I) is located in a city which has a population of not
less than 50,000 and such city has a poverty rate that is not
less than 150 percent of the poverty rate of the applicable
area,
``(II) has a median family income which does not exceed the
median family income for the applicable area, and
``(III) has a median value for owner-occupied homes that
does not exceed 80 percent of the median value for owner-
occupied homes in the applicable area,
``(iii) which--
``(I) is located in a nonmetropolitan county,
``(II) has a median family income which does not exceed the
median family income for the applicable area, and
``(III) has been designated by a neighborhood homes credit
agency under this clause,
``(iv) which is not otherwise a qualified census tract and
is located in a disaster area (as defined in section
7508A(d)(3)), but only with respect to credits allocated in
any period during which the President of the United States
has determined that such area warrants individual or
individual and public assistance by the Federal Government
under the Robert T. Stafford Disaster Relief and Emergency
Assistance Act, or
``(v) which is not otherwise a qualified census tract and
is identified by the neighborhood homes credit agency,
through methodologies detailed in the qualified allocation
plan, as having a shortage of affordable owner-occupied
homes.
``(B) Applicable area.--The term `applicable area' means--
``(i) in the case of a metropolitan census tract, the
metropolitan area in which such census tract is located, and
``(ii) in the case of a census tract other than a census
tract described in clause (i), the State.
``(d) Affordable Sale.--For purposes of this section--
``(1) In general.--The term `affordable sale' means a sale
to a qualified homeowner of a qualified residence that the
neighborhood homes credit agency certifies as meeting the
standards promulgated under subsection (f)(1)(D) for a price
that does not exceed--
``(A) in the case of any qualified residence not described
in subparagraph (B), (C), or (D), the amount equal to the
product of 4 multiplied by the median family income for the
applicable area (as determined pursuant to the most recent
census data available as of the date of the contract for such
sale),
``(B) in the case of a house comprised of 2 residential
units, 125 percent of the amount described in subparagraph
(A),
``(C) in the case of a house comprised of 3 residential
units, 150 percent of the amount described in subparagraph
(A), or
``(D) in the case of a house comprised of 4 residential
units, 175 percent of the amount described in subparagraph
(A).
``(2) Qualified homeowner.--The term `qualified homeowner'
means, with respect to a qualified residence, an individual--
``(A) who owns and uses such qualified residence as the
principal residence of such individual, and
``(B) whose family income (determined as of the date that a
binding contract for the affordable sale of such residence is
entered into) is 140 percent or less of the median family
income for the applicable area in which the qualified
residence is located.
``(e) Credit Ceiling and Allocations.--
``(1) Credit limited based on allocations to qualified
projects.--
``(A) In general.--The credit allowed under subsection (a)
to any taxpayer for any taxable year with respect to one or
more qualified residences which are part of the same
qualified project shall not exceed the excess (if any) of--
``(i) the amount allocated by the neighborhood homes credit
agency under this paragraph to such taxpayer with respect to
such qualified project, over
``(ii) the aggregate amount of credit allowed under
subsection (a) to such taxpayer with respect to qualified
residences which are a part of such qualified project for all
prior taxable years.
``(B) Deadline for completion.--No credit shall be allowed
under subsection (a) with respect to any qualified residence
unless the affordable sale of such residence is during the 5-
year period beginning on the date of the allocation to the
qualified project of which such residence is a part (or, in
the case of a qualified residence to which subsection (i)
applies, the rehabilitation of such residence is completed
during such 5-year period).
``(2) Limitations on allocations to qualified projects.--
``(A) Allocations limited by state neighborhood homes
credit ceiling.--The aggregate amount allocated to taxpayers
with respect to qualified projects by the neighborhood homes
credit agency of any State for any calendar year shall not
exceed the State neighborhood homes credit amount of such
State for such calendar year.
``(B) Set-aside for certain projects involving qualified
nonprofit organizations.--Rules similar to the rules of
section 42(h)(5) shall apply for purposes of this section.
``(3) Determination of state neighborhood homes credit
ceiling.--
``(A) In general.--The State neighborhood homes credit
amount for a State for a calendar year is an amount equal to
the sum of--
``(i) the greater of--
``(I) the product of $9, multiplied by the State population
(determined in accordance with section 146(j)), or
``(II) $12,000,000, and
``(ii) any amount previously allocated to any taxpayer with
respect to any qualified project by the neighborhood homes
credit agency of such State which can no longer be allocated
to any qualified residence because the 5-year period
described in paragraph (1)(B) expires during calendar year.
``(B) 3-year carryforward of unused limitation.--The State
neighborhood homes credit amount for a State for a calendar
year shall be increased by the excess (if any) of the State
neighborhood homes credit amount
[[Page S4101]]
for such State for the preceding calendar year over the
aggregate amount allocated by the neighborhood homes credit
agency of such State during such preceding calendar year. Any
amount carried forward under the preceding sentence shall not
be carried past the third calendar year after the calendar
year in which such credit amount originally arose, determined
on a first-in, first-out basis.
``(f) Responsibilities of Neighborhood Homes Credit
Agencies.--
``(1) In general.--Notwithstanding subsection (e), the
State neighborhood homes credit dollar amount shall be zero
for a calendar year unless the neighborhood homes credit
agency of the State--
``(A) allocates such amount pursuant to a qualified
allocation plan of the neighborhood homes credit agency,
``(B) subject to paragraph (2), allocates not more than 20
percent of amounts allocated in the previous year (or for
allocations made in the first allocation year under this
section, not more than 20 percent of the neighborhood homes
credit ceiling for such year) to projects with respect to
qualified residences which--
``(i) are located in census tracts described in subsection
(c)(2)(A)(iii), (c)(2)(A)(iv), (i)(5), or
``(ii) are not located in a qualified census tract but meet
the requirements of subsection (i)(8),
``(C) subject to paragraph (2), in addition to any
allocation described in subparagraph (B), allocates not more
than 20 percent of amounts allocated in the previous year (or
for allocations made in the first allocation year under this
section, not more than 20 percent of the neighborhood homes
credit ceiling for such year) to projects with respect to
qualified residences which are located in any census tract
described in subsection (c)(2)(A)(v), except that, with
respect to any qualified residence located within such census
tract which is sold to a qualified homeowner, subsection
(d)(2) shall be applied by substituting `120 percent' for
`140 percent',
``(D) promulgates standards with respect to reasonable
qualified development costs and fees,
``(E) promulgates standards with respect to construction
quality which are consistent with building codes or other
standards required by the State or local jurisdiction in
which the project is located,
``(F) in the case of any neighborhood homes credit agency
which makes an allocation to a qualified project which
includes any qualified residence to which subsection (i)
applies, promulgates standards with respect to protecting the
owners of such residences, including the capacity of such
owners to pay rehabilitation costs not covered by the credit
provided by this section and providing for the disclosure to
such owners of their rights and responsibilities with respect
to the rehabilitation of such residences,
``(G) submits to the Secretary (at such time and in such
manner as the Secretary may prescribe) an annual report
specifying--
``(i) the amount of the neighborhood homes credits
allocated to each qualified project for the previous year,
``(ii) with respect to each qualified residence completed
in the preceding calendar year--
``(I) the census tract in which such qualified residence is
located,
``(II) with respect to the qualified project that includes
such qualified residence, the year in which such project
received an allocation under this section,
``(III) whether such qualified residence was new,
substantially rehabilitated and sold to a qualified
homeowner, or substantially rehabilitated pursuant to
subsection (i),
``(IV) the eligible development costs of such qualified
residence,
``(V) the amount of the neighborhood homes credit with
respect to such qualified residence,
``(VI) the sales price of such qualified residence, if
applicable, and
``(VII) the family income of the qualified homeowner
(expressed as a percentage of the applicable area median
family income for the location of the qualified residence),
and
``(iii) such other information as the Secretary may
require,
``(H) makes available to the general public a written
explanation for any allocation of a neighborhood homes credit
dollar amount which is not made in accordance with
established priorities and selection criteria of the
neighborhood homes credit agency, and
``(I) provide educational outreach on application and
compliance requirements, including for small residential
builders and remodelers.
``(2) Alternative for certain states.--
``(A) In general.--In the case of any State which, for a
calendar year, is an applicable State (as defined in
subparagraph (B)), in lieu of the requirements under
subparagraphs (B) and (C) of paragraph (1), the neighborhood
homes credit agency of the State may elect to allocate not
more than 40 percent of amounts allocated in the previous
year (or for allocations made in the first allocation year
under this section, not more than 40 percent of the
neighborhood homes credit ceiling for such year) to projects
with respect to qualified residences which are described in
either subparagraph (B) or (C) of paragraph (1).
``(B) Applicable state.--For purposes of this paragraph,
the term `applicable State' means a State which, for purposes
of the determining the amount under subsection (e)(3)(A)(i)
for the calendar year with respect to such State, received
the amount described in subclause (II) of such subsection.
``(3) Qualified allocation plan.--For purposes of this
subsection, the term `qualified allocation plan' means any
plan which--
``(A) sets forth the selection criteria to be used to
prioritize qualified projects for allocations of State
neighborhood homes credit dollar amounts, including--
``(i) the need for new or substantially rehabilitated
owner-occupied homes in the area addressed by the project,
``(ii) the expected contribution of the project to
neighborhood stability and revitalization, including the
impact on neighborhood residents,
``(iii) the capability and prior performance of the project
sponsor, and
``(iv) the likelihood the project will result in long-term
homeownership,
``(B) has been made available for public comment,
``(C) as determined by the neighborhood homes credit
agency, is likely to result in the selection of highly
qualified applicants while also minimizing, to the extent
practicable, application costs and barriers to entry for
small residential builders and re-modelers, and
``(D) provides a procedure that the neighborhood homes
credit agency (or any agent or contractor of such agency)
shall follow for purposes of--
``(i) identifying noncompliance with any provisions of this
section, and
``(ii) notifying the Internal Revenue Service of any such
noncompliance of which the agency becomes aware.
``(g) Repayment.--
``(1) In general.--
``(A) Sold during 5-year period.--If a qualified residence
is sold during the 5-year period beginning immediately after
the affordable sale of such qualified residence referred to
in subsection (a), the seller shall transfer an amount equal
to the repayment amount to the relevant neighborhood homes
credit agency.
``(B) Use of repayments.--A neighborhood homes credit
agency shall use any amount received pursuant to subparagraph
(A) only for purposes of qualified projects.
``(2) Repayment amount.--For purposes of paragraph (1)(A)--
``(A) In general.--The repayment amount is an amount equal
to the applicable percentage of the gain from the sale to
which the repayment relates.
``(B) Applicable percentage.--For purposes of subparagraph
(A), the applicable percentage is 50 percent, reduced by 10
percentage points for each year of the 5-year period referred
to in paragraph (1)(A) which ends before the date of such
sale.
``(3) Lien for repayment amount.--A neighborhood homes
credit agency receiving an allocation under this section
shall place a lien on each qualified residence that is built
or rehabilitated as part of a qualified project for an amount
such agency deems necessary to ensure potential repayment
pursuant to paragraph (1)(A).
``(4) Waiver.--
``(A) In general.--The neighborhood homes credit agency may
waive the repayment required under paragraph (1)(A) if the
agency determines that making a repayment would constitute a
hardship to the seller.
``(B) Hardship.--For purposes of subparagraph (A), with
respect to the seller, a hardship may include--
``(i) divorce,
``(ii) disability,
``(iii) illness, or
``(iv) any other hardship identified by the neighborhood
homes credit agency for purposes of this paragraph.
``(h) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Neighborhood homes credit agency.--The term
`neighborhood homes credit agency' means the agency
designated by the governor of a State as the neighborhood
homes credit agency of the State.
``(2) Qualified project.--The term `qualified project'
means a project that a neighborhood homes credit agency
certifies will build or substantially rehabilitate one or
more qualified residences.
``(3) Determinations of family income.--Rules similar to
the rules of section 143(f)(2) shall apply for purposes of
this section.
``(4) Possessions treated as states.--The term `State'
includes the District of Columbia and the possessions of the
United States.
``(5) Special rules related to condominiums and cooperative
housing corporations.--
``(A) Determination of development costs.--In the case of a
qualified residence described in clause (ii) or (iii) of
subsection (c)(1)(A), the reasonable development costs and
eligible development costs of such qualified residence shall
be an amount equal to such costs, respectively, of the entire
condominium or cooperative housing property in which such
qualified residence is located, multiplied by a fraction--
``(i) the numerator of which is the total floor space of
such qualified residence, and
``(ii) the denominator of which is the total floor space of
all residences within such property.
``(B) Tenant-stockholders of cooperative housing
corporations treated as owners.--In the case of a cooperative
housing corporation (as such term is defined in section
216(b)), a tenant-stockholder shall be treated as owning the
house or apartment which such person is entitled to occupy.
[[Page S4102]]
``(6) Related party sales not treated as affordable
sales.--
``(A) In general.--A sale between related persons shall not
be treated as an affordable sale.
``(B) Related persons.--For purposes of this paragraph, a
person (in this subparagraph referred to as the `related
person') is related to any person if the related person bears
a relationship to such person specified in section 267(b) or
707(b)(1), or the related person and such person are engaged
in trades or businesses under common control (within the
meaning of subsections (a) and (b) of section 52). For
purposes of the preceding sentence, in applying section
267(b) or 707(b)(1), `10 percent' shall be substituted for
`50 percent'.
``(7) Inflation adjustment.--
``(A) In general.--In the case of a calendar year after
2025, the dollar amounts in subsections (b)(3)(A),
(e)(3)(A)(i)(I), (e)(3)(A)(i)(II), and (i)(2)(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 2024' for `calendar year 2016' in subparagraph
(A)(ii) thereof.
``(B) Rounding.--
``(i) In the case of the dollar amounts in subsections
(b)(3)(A) and (i)(2)(C), any increase under paragraph (1)
which is not a multiple of $1,000 shall be rounded to the
nearest multiple of $1,000.
``(ii) In the case of the dollar amount in subsection
(e)(3)(A)(i)(I), any increase under paragraph (1) which is
not a multiple of $0.01 shall be rounded to the nearest
multiple of $0.01.
``(iii) In the case of the dollar amount in subsection
(e)(3)(A)(i)(II), any increase under paragraph (1) which is
not a multiple of $100,000 shall be rounded to the nearest
multiple of $100,000.
``(8) Report.--
``(A) In general.--The Secretary shall annually issue a
report, to be made available to the public, which contains
the information submitted pursuant to subsection (f)(1)(G).
``(B) De-identification.--The Secretary shall ensure that
any information made public pursuant to subparagraph (A)
excludes any information that would allow for the
identification of qualified homeowners.
``(9) List of qualified census tracts.--The Secretary of
Housing and Urban Development shall, for each year, make
publicly available a list of qualified census tracts under--
``(A) on a combined basis, clauses (i) and (ii) of
subsection (c)(2)(A),
``(B) clause (iii) of such subsection, and
``(C) subsection (i)(5)(A).
``(10) Denial of deductions if converted to rental
housing.--If, during the 5-year period beginning immediately
after the affordable sale of a qualified residence referred
to in subsection (a), an individual who owns a qualified
residence (whether or not such individual was the purchaser
in such affordable sale) fails to use such qualified
residence as such individual's principal residence for any
period of time, no deduction shall be allowed for expenses
paid or incurred by such individual with respect to renting,
during such period of time, such qualified residence.
``(i) Application of Credit With Respect to Owner-Occupied
Rehabilitations.--
``(1) In general.--In the case of a qualified
rehabilitation by the taxpayer of any qualified residence
which is owned (as of the date that the written binding
contract referred to in paragraph (3) is entered into) by a
specified homeowner, the rules of paragraphs (2) through (7)
shall apply.
``(2) Alternative credit determination.--In the case of any
qualified residence described in paragraph (1), the
neighborhood homes credit determined under subsection (a)
with respect to such residence shall (in lieu of any credit
otherwise determined under subsection (a) with respect to
such residence) be allowed in the taxable year during which
the qualified rehabilitation is completed (as determined by
the neighborhood homes credit agency) and shall be equal to
the least of--
``(A) the excess (if any) of--
``(i) the amounts paid or incurred by the taxpayer for the
qualified rehabilitation of the qualified residence to the
extent that such amounts are certified by the neighborhood
homes credit agency (at the time of the completion of such
rehabilitation) as meeting the standards specified pursuant
to subsection (f)(1)(D), over
``(ii) any amounts paid to such taxpayer for such
rehabilitation,
``(B) 50 percent of the amounts described in subparagraph
(A)(i), or
``(C) $50,000.
``(3) Qualified rehabilitation.--
``(A) In general.--For purposes of this subsection, the
term `qualified rehabilitation' means a rehabilitation or
reconstruction performed pursuant to a written binding
contract between the taxpayer and the specified homeowner if
the amount paid or incurred by the taxpayer in the
performance of such rehabilitation or reconstruction exceeds
the dollar amount in effect under subsection (b)(3)(A).
``(B) Application of limitation to expenses paid or
incurred after allocation.--A rule similar to the rule of
section (b)(4) shall apply for purposes of this subsection.
``(4) Specified homeowner.--For purposes of this
subsection, the term `specified homeowner' means, with
respect to a qualified residence, an individual--
``(A) who owns and uses such qualified residence as the
principal residence of such individual as of the date that
the written binding contract referred to in paragraph (3) is
entered into, and
``(B) whose family income (determined as of such date) does
not exceed the median family income for the applicable area
(with respect to the census tract in which the qualified
residence is located).
``(5) Additional census tracts in which owner-occupied
residences may be located.--In the case of any qualified
residence described in paragraph (1), the term `qualified
census tract' includes any census tract which--
``(A) meets the requirements of subsection (c)(2)(A)(i)
without regard to subclause (III) thereof, and
``(B) is designated by the neighborhood homes credit agency
for purposes of this paragraph.
``(6) Modification of repayment requirement.--In the case
of any qualified residence described in paragraph (1),
subsection (g) shall be applied by beginning the 5-year
period otherwise described therein on the date on which the
qualified homeowner acquired such residence.
``(7) Related parties.--Paragraph (1) shall not apply if
the taxpayer is the owner of the qualified residence
described in paragraph (1) or is related (within the meaning
of subsection (h)(6)(B)) to such owner.
``(8) Pyrrhotite remediation.--The requirement of
subsection (c)(1)(D) shall not apply to a qualified
rehabilitation under this subsection of a qualified residence
that is documented by an engineer's report and core testing
to have a foundation that is adversely impacted by pyrrhotite
or other iron sulfide minerals.
``(j) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section, including regulations that
prevent avoidance of the rules, and abuse of the purposes, of
this section.''.
(b) Credit Allowed as Part of General Business Credit.--
Section 38(b) is amended by striking ``plus'' at the end of
paragraph (40), by striking the period at the end of
paragraph (41) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(42) the neighborhood homes credit determined under
section 42A(a).''.
(c) Credit Allowed Against Alternative Minimum Tax.--
Section 38(c)(4)(B) is amended by redesignating clauses (iv)
through (xii) as clauses (v) through (xiii), respectively,
and by inserting after clause (iii) the following new clause:
``(iv) the credit determined under section 42A,''.
(d) Basis Adjustments.--
(1) Energy efficient home improvement credit.--Section
25C(g) is amended by adding after the first sentence the
following new sentence: ``This subsection shall not apply for
purposes of determining the eligible development costs or
adjusted basis of any building under section 42A.''.
(2) Residential clean energy credit.--Section 25D(f) is
amended by adding after the first sentence the following new
sentence: ``This subsection shall not apply for purposes of
determining the eligible development costs or adjusted basis
of any building under section 42A.''.
(3) New energy efficient home credit.--Section 45L(e) is
amended by inserting ``or for purposes of determining the
eligible development costs or adjusted basis of any building
under section 42A'' after ``section 42''.
(e) Exclusion From Gross Income.--Part III of subchapter B
of chapter 1, as amended by this Act, is amended by inserting
before section 140 the following new section:
``SEC. 139M. STATE ENERGY SUBSIDIES FOR QUALIFIED RESIDENCES.
``(a) Exclusion From Gross Income.--Gross income shall not
include the value of any subsidy provided to a taxpayer
(whether directly or indirectly) by any State energy office
(as defined in section 124(a) of the Energy Policy Act of
2005 (42 U.S.C. 15821(a))) for purposes of any energy
improvements made to a qualified residence (as defined in
section 42A(c)(1)).''.
(f) Conforming Amendments.--
(1) Subsections (i)(3)(C), (i)(6)(B)(i), and (k)(1) of
section 469 are each amended by inserting ``or 42A'' after
``section 42''.
(2) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 42 the following new item:
``Sec. 42A. Neighborhood homes credit.''.
(3) The table of sections for part III of subchapter B of
chapter 1, as amended by this Act, is amended by inserting
before the item relating to section 140 the following new
item:
``Sec. 139M. State energy subsidies for qualified residences.''.
(g) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2025.
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