[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 5196 Introduced in Senate (IS)]
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118th CONGRESS
2d Session
S. 5196
To amend the Internal Revenue Code of 1986 to establish the New Homes
Tax Credit.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 25, 2024
Mr. Heinrich (for himself, Mr. Wyden, Mr. Welch, and Mr. Van Hollen)
introduced the following bill; which was read twice and referred to the
Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to establish the New Homes
Tax Credit.
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 ``New Homes Tax Credit Act''.
SEC. 2. ESTABLISHMENT OF NEW HOMES TAX CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 is amended by inserting after
section 45AA the following new section:
``SEC. 45BB. NEW HOMES TAX CREDIT.
``(a) Allowance of Credit.--
``(1) In general.--For purposes of section 38, in the case
of a taxpayer who holds a qualified equity investment on a
credit allowance date of such investment which occurs during
the taxable year, the new homes tax credit determined under
this section for such taxable year is an amount equal to the
applicable percentage of the amount paid to the housing
development entity for such investment at its original issue.
``(2) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage is--
``(A) 7 percent with respect to the first credit
allowance date, and
``(B) 8 percent with respect to the remainder of
the credit allowance dates.
``(3) Credit allowance date.--For purposes of paragraph
(1), the term `credit allowance date' means, with respect to
any qualified equity investment--
``(A) the date on which such investment is
initially made, and
``(B) each of the 4 anniversary dates of such date
thereafter.
``(b) Qualified Equity Investment.--
``(1) In general.--For purposes of this section, the term
`qualified equity investment' means any equity investment in a
housing development entity if--
``(A) such investment is acquired by the taxpayer
at its original issue (directly or through an
underwriter) solely in exchange for cash,
``(B) substantially all of such cash is used by the
housing development entity to make qualified housing
investments, and
``(C) such investment is designated for purposes of
this section by the housing development entity.
Such term shall not include any equity investment issued by a
housing development entity more than 5 years after the date
that such entity receives an allocation under subsection (e).
Any allocation not used within such 5-year period may be
reallocated by the Secretary under subsection (e).
``(2) Special rules.--Rules similar to the rules under
paragraphs (2) through (6) of section 45D(b) shall apply for
purposes of this section.
``(c) Housing Development Entity.--For purposes of this section,
the term `housing development entity' means any domestic corporation or
partnership if--
``(1) one of the missions of the entity is to provide
funding for construction of housing for low- and moderate-
income individuals, and
``(2) the entity is certified by the Secretary for purposes
of this section as being a housing development entity.
``(d) Other Definitions.--For purposes of this section--
``(1) Qualified housing investment.--
``(A) In general.--The term `qualified housing
investment' means funding which is provided by a
housing development entity to a qualified construction
business--
``(i) following completion of a qualified
home project by such qualified construction
business, and
``(ii)(I) in the case of a home described
in clause (i) of paragraph (3)(A), after the
housing development entity has confirmed (on or
before the date on which ownership of the home
is transferred to the buyer) that--
``(aa) the home is being sold to a
qualified buyer, and
``(bb) that such buyer has been
provided notice with respect to the
requirements under subsection (g), or
``(II) in the case of a home described in
clause (ii) of such paragraph, after the
housing development entity has confirmed (on or
before the date on which renovation of the home
is completed by the qualified construction
business) that--
``(aa) the home is owned by a
qualified buyer, and
``(bb) that such buyer has been
provided notice with respect to the
requirements under subsection (g).
``(B) Transfer of funds at closing.--With respect
to any funding described in subparagraph (A), such
funding shall be provided by the housing development
entity to the qualified construction business--
``(i) in the case of a home described in
clause (i) of paragraph (3)(A), on the date on
which ownership of the home is transferred to
the qualified buyer, or
``(ii) in the case of a home described in
clause (ii) of such paragraph, on the date on
which renovation of the home is completed by
the qualified construction business.
``(C) Limitation.--In the case of any home
constructed or renovated as part of a qualified home
project, the amount of funding provided by a housing
development entity to a qualified construction business
with respect to such home shall not exceed an amount
equal to 20 percent (or, in the case of a home
renovated as part of a qualified home project, 15
percent) of the median purchase price for single-family
housing in the area in which such home is located, as
determined by the Secretary of Housing and Urban
Development for the purpose of section 1807.402(a)(2)
of title 12, Code of Federal Regulations (or any
successor regulation).
``(2) Qualified construction business.--The term `qualified
construction business' means an entity engaged in the trade or
business of the construction or renovation of residential
housing.
``(3) Qualified home projects.--
``(A) In general.--The term `qualified home
project' means--
``(i) the construction of entry-level homes
which are sold to qualified buyers, or
``(ii) the renovation of Single-family
housing (as such term is used in section
1807.402 of title 12, Code of Federal
Regulations) which is owned by a qualified
buyer.
``(B) Entry-level homes.--The term `entry-level
home' means any residential building which--
``(i) satisfies the requirement under
section 1807.402(a)(1) of title 12, Code of
Federal Regulations, and
``(ii) is designed to be purchased by a
first-time homebuyer (as defined in section 104
of the Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 12704)).
``(4) Qualified buyer.--The term `qualified buyer' means an
individual or family whose income is not greater than 120
percent of area median income.
``(e) National Limitation on Amount of Investments Designated.--
``(1) In general.--For each of calendar years 2025 through
2031, the new homes tax credit limitation for each calendar
year shall be--
``(A) for 2025, $1,000,000,000,
``(B) for 2026 and 2027, $1,500,000,000,
``(C) for 2028 and 2029, $2,000,000,000, and
``(D) for 2030 and 2031, $3,500,000,000.
``(2) Allocation of limitation.--The limitation under
paragraph (1) shall be allocated by the Secretary among housing
development entities selected by the Secretary. In making
allocations under the preceding sentence, the Secretary shall--
``(A) allocate not less than 50 percent of such
limitation for any calendar year to housing development
agencies that commit to make qualified housing
investments to provide housing for individuals or
families whose income is not greater than 80 percent of
area median income,
``(B) allocate not less than 5 percent of such
limitation for any calendar year to housing development
agencies that commit to make qualified housing
investments to provide housing that is exclusively
available to members of an Indian tribe (as such term
is defined in section 4 of the Indian Self-
Determination and Education Assistance Act (25 U.S.C.
5304)), and
``(C) give priority to--
``(i) any community development financial
institution (as defined in section 103 of the
Community Development Banking and Financial
Institutions Act of 1994 (12 U.S.C. 4702))
which is certified as a community development
financial institution under the Community
Development Banking and Financial Institutions
Act of 1994 (12 U.S.C. 4701 et seq.),
``(ii) any community development credit
union,
``(iii) any housing development entity with
prior experience relating to other Federal
programs designed to create affordable housing
for low- and moderate-income individuals, such
as--
``(I) the low-income housing credit
under section 42, and
``(II) the HOME Investment
Partnerships program under subtitle A
of title II of the Cranston-Gonzalez
National Affordable Housing Act (42
U.S.C. 12741 et seq.), and
``(iv) any housing development entity
which--
``(I) has previously worked within
the community in which the proposed
qualified home project is located, and
``(II) can demonstrate engagement
with local officials and low-income
individuals within such community.
``(3) Carryover of unused limitation.--If the new homes tax
credit limitation for any calendar year exceeds the aggregate
amount allocated under paragraph (2) for such year, such
limitation for the succeeding calendar year shall be increased
by the amount of such excess. No amount may be carried under
the preceding sentence to any calendar year after 2036.
``(f) Basis Reduction.--Rules similar to the rules under subsection
(h) of section 45D shall apply for purposes of this section.
``(g) Limitation During Initial 5-Year Period.--
``(1) In general.--
``(A) Principal residence requirement.--Subject to
subparagraph (C), with respect to any qualified home
project for which funding has been provided by a
housing development entity to a qualified construction
business pursuant to the provisions of this section,
the housing development entity shall ensure that,
during the limitation period, the home with respect to
which such funding has been provided remains the
principal residence of the qualified buyer.
``(B) Liens.--With respect to the requirement under
subparagraph (A), the housing development entity shall
enforce such requirement by means of the imposition of
a lien on the home constructed or renovated as part of
the qualified home project, with such lien to be
recorded with the relevant local official or agency
designated to record liens.
``(C) Exception for members of the armed forces.--
In the case of any home constructed or renovated as
part of a qualified home project, if there is a
disposition of such home by the qualified buyer--
``(i) during the limitation period, and
``(ii) which is in connection with
Government orders received by such qualified
buyer for qualified official extended duty
service (as defined in section
36(f)(4)(E)(ii)),
subparagraph (A) shall not apply.
``(2) Limitation period.--For purposes of this subsection,
the term `limitation period' means the 5-year period subsequent
to--
``(A) in the case of a home described in clause (i)
of subsection (d)(3)(A), on the date on which ownership
of the home is transferred to the qualified buyer, or
``(B) in the case of a home described in clause
(ii) of such subsection, on the date on which
renovation of the home is completed by the qualified
construction business.
``(3) Regulations and guidance.--The Secretary shall issue
such regulations or other guidance as the Secretary determines
necessary to carry out the purposes of this subsection.
``(h) Reporting.--
``(1) In general.--Not later than January 1, 2026, and
annually thereafter, the Secretary shall submit a report to the
Committee on Banking, Housing, and Urban Affairs of the Senate,
the Committee on Financial Services of the House of
Representatives, the Committee on Ways and Means of the House
of Representatives, and the Committee on Finance of the Senate,
containing information regarding--
``(A) the size and location of qualified home
projects which have been financially supported by
qualified equity investments for which a credit has
been allowed under this section, and
``(B) the income of individuals and families
residing in homes constructed or renovated as part of
such qualified home projects.
``(2) Collection of information.--The Secretary shall
develop a method to collect and streamline relevant data for
purposes of collecting the information described in paragraph
(1).
``(i) Regulations.--The Secretary shall prescribe such regulations
as may be appropriate to carry out this section.''.
(b) Conforming Amendments.--
(1) Section 38(b) of such Code 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 new homes tax credit determined under section
45BB(a).''.
(2) The table of sections for subpart D of part IV of
subchapter A of chapter 1 of such Code is amended by inserting
after the item relating to section 45AA the following new item:
``Sec. 45BB. New Homes Tax Credit.''.
(c) Effective Date.--The amendments made by this section shall
apply to investments made after December 31, 2024.
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