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H.R. 83 (ih) To modify the provision of law which provides a permanent appropriation for the compensation of Members of Congress, and for other purposes. [Introduced in House] ...


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108th CONGRESS
  1st Session
                                H. R. 839

   To amend the Internal Revenue Code of 1986 to allow an income tax 
 credit for the provision of homeownership and community development, 
                        and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 13, 2003

 Mr. Portman (for himself, Mr. Cardin, Ms. Pryce of Ohio, Mr. English, 
   Mrs. Jones of Ohio, Mr. Bonilla, Mr. Terry, Mr. Gary G. Miller of 
  California, Ms. Jackson-Lee of Texas, Mr. Burgess, and Ms. Harris) 
 introduced the following bill; which was referred to the Committee on 
                             Ways and Means

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to allow an income tax 
 credit for the provision of homeownership and community development, 
                        and for other purposes.

    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 ``Renewing the Dream 
Tax Credit Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 2. COMMUNITY HOMEOWNERSHIP 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. COMMUNITY HOMEOWNERSHIP CREDIT.

    ``(a) Allowance of Credit.--For purposes of section 38, the amount 
of the homeownership credit determined under this section for any 
taxable year in the credit period shall be an amount equal to the 
applicable percentage of the eligible basis of each qualified 
residence.
    ``(b) Applicable Percentage.--For purposes of this section--
            ``(1) In general.--The term `applicable percentage' means 
        the appropriate percentage prescribed by the Secretary for the 
        month in which the taxpayer and the homeownership credit agency 
        enter into an agreement with respect to such residence (which 
        is binding on such agency, the taxpayer, and all successors in 
        interest) as to the homeownership credit dollar amount to be 
        allocated to such residence.
            ``(2) Method of prescribing percentage.--The percentage 
        prescribed by the Secretary for any month shall be the 
        percentage which will yield over a 5-year period amounts of 
        credit under subsection (a) which have a present value equal to 
        50 percent of the eligible basis of a qualified residence.
            ``(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 5-
                year period referred to in paragraph (2),
                    ``(B) by using a discount rate equal to 72 percent 
                of the annual Federal mid-term rate applicable under 
                section 1274(d)(1) to the month applicable under 
                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 Residence.--For purposes of this section--
            ``(1) In general.--The term `qualified residence' means any 
        residence--
                    ``(A) which is located--
                            ``(i) in a census tract which has a median 
                        gross income which does not exceed 80 percent 
                        of the greater of area or statewide median 
                        gross income,
                            ``(ii) in a rural area (as defined under 
                        section 520 of the Housing Act of 1949),
                            ``(iii) on a reservation for a federally 
                        recognized Indian tribe, or
                            ``(iv) in an area of chronic economic 
                        distress, and
                    ``(B) which is purchased by a qualified buyer.
        For purposes of subparagraph (A)(iv), an area is an area of 
        chronic economic distress if it is approved for designation as 
        such under section 143(j)(3); except that such designation 
        shall not require the approval of the Secretary, shall be 
        deemed to be approved by the Secretary of Housing and Urban 
        Development if not approved or disapproved by the Secretary of 
        Housing and Urban Development within 60 days after submission 
        for approval for purposes of section 143(j)(3)(A)(ii), and 
        shall cease to apply after the end of the 5th calendar year 
        after the calendar year in which the designation is made.
            ``(2) Residence.--For purposes of paragraph (1), the term 
        `residence' means--
                    ``(A) a single-family home containing 1 to 4 
                housing units,
                    ``(B) a condominium unit, or
                    ``(C) stock in a cooperative housing corporation 
                (as defined in section 216(b)).
        In the case of a single-family home described in subparagraph 
        (A) that contains more than one housing unit, the term 
        `residence' shall not include any new residence and shall 
        include only the portion of such home that is occupied by the 
        owner thereof (determined based on the percentage of the total 
        area of such home that is occupied by the owner). In the case 
        of subparagraphs (A), (B), and (C), factory-built homes shall 
        be included in the definition of residence.
            ``(3) Timing of determination.--For purposes of paragraph 
        (1), the determination of whether a residence is a qualified 
        residence shall be made at the time a binding commitment for an 
        allocation of credit is awarded by the homeownership credit 
        agency; except that the determination of whether a purchaser is 
        a qualified buyer shall be made at the time the residence is 
        sold.
            ``(4) Median gross income.--For purposes of this section, 
        median gross income shall be determined consistent with section 
        143(f)(2).
    ``(d) Eligible Basis.--For purposes of this section--
            ``(1) New qualified residences.--
                    ``(A) In general.--The eligible basis of a new 
                qualified residence is--
                            ``(i) in the case of a qualified residence 
                        which is sold in a transaction which meets the 
                        requirements of subparagraph (B), its adjusted 
                        basis (excluding land) immediately before such 
                        sale, and
                            ``(ii) zero in any other case.
                    ``(B) Requirements.--A sale of a qualified 
                residence meets the requirements of this subparagraph 
                if--
                            ``(i) the buyer acquires the qualified 
                        residence by purchase (as defined in section 
                        179(d)(2)),
                            ``(ii) the buyer of the qualified residence 
                        is not a related person with respect to the 
                        seller, and
                            ``(iii) in the case of a seller who 
                        materially participates in the development of 
                        the residence, the buyer's debt financing is 
                        originated by a third party who is not a 
                        related person with respect to such seller.
            ``(2) Existing qualified residences.--
                    ``(A) In general.--The eligible basis of an 
                existing qualified residence is--
                            ``(i) in the case of a qualified residence 
                        which is sold in a transaction which meets the 
                        requirements of subparagraph (B), its adjusted 
                        basis (excluding land) immediately before such 
                        sale, and
                            ``(ii) zero in any other case.
                    ``(B) Requirements.--A sale of a qualified 
                residence meets the requirements of this subparagraph 
                if--
                            ``(i) the buyer acquires the qualified 
                        residence by purchase (as defined in section 
                        179(d)(2)),
                            ``(ii) the qualified residence has 
                        undergone substantial rehabilitation in 
                        connection with the sale described in clause 
                        (i),
                            ``(iii) the buyer of the qualified 
                        residence is not a related person with respect 
                        to the seller, and
                            ``(iv) in the case of a seller who 
                        materially participates in the development of 
                        the residence, the buyer's debt financing is 
                        originated by a third party who is not a 
                        related person with respect to such seller.
                    ``(C) Substantial rehabilitation.--
                            ``(i) In general.--For purposes of 
                        subparagraph (B), substantial rehabilitation 
                        means rehabilitation expenditures paid or 
                        incurred with respect to a qualified residence 
                        that are at least $15,000.
                            ``(ii) Inflation adjustment.--In the case 
                        of a calendar year after 2003, the dollar 
                        amount contained in clause (i) shall 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 2002' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                        Any increase under clause (ii) which is not a 
                        multiple of $1,000 shall be rounded to the next 
                        lowest multiple of $1,000.
                    ``(D) Limitation on acquisition basis.--The 
                eligible basis of an existing qualified residence may 
                not exceed 150 percent of the qualified rehabilitation 
                expenditures.
            ``(3) Effect of subsequent sale, etc.--A subsequent sale, 
        assignment, rental, or refinancing of the qualified residence 
        by the buyer or the subsequent sale, assignment, or pooling of 
        the buyer's financing by the originator shall not be considered 
        in determining whether or not the prior sales transaction 
        satisfied the requirements of subparagraph (B) of paragraph (1) 
        or (2).
            ``(4) Special rules relating to determination of adjusted 
        basis.--For purposes of this subsection--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the adjusted basis of any qualified 
                residence--
                            ``(i) shall not include so much of the 
                        basis of such qualified residence as is 
                        determined by reference to the basis of 
other property held at any time by the person acquiring the residence, 
and
                            ``(ii) shall be determined without regard 
                        to the adjusted basis of any property which is 
                        not part of such qualified residence.
                    ``(B) Basis of property in common areas, etc., 
                included.--The adjusted basis of any qualified 
                residence shall be determined by taking into account 
                (on a pro rata basis) the adjusted basis of property 
                (other than land) used in common areas or provided as 
                comparable amenities to all residences within a 
                project.
            ``(5) Special rules for determining eligible basis.--
                    ``(A) Related person, etc.--For purposes of this 
                section, a person (in this clause 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'.
                    ``(B) Nonresidential space excluded.--No portion of 
                the eligible basis of a qualified residence shall 
                include costs attributable to nonresidential space.
                    ``(C) Limitation.--The eligible basis of any 
                residence may not exceed the mortgage limit for Federal 
                Housing Administration insured mortgages for single 
                family homes in the area in which such residence is 
                located.
    ``(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 qualified 
        residence, the period of 5 taxable years beginning with the 
        taxable year in which the sale of the qualified residence 
        occurs satisfying the requirements of subsection (d)(1)(B) or 
        (d)(2)(B).
            ``(2) Special rule for 1st year of credit period.--
                    ``(A) In general.--The credit allowable under 
                subsection (a) with respect to any qualified residence 
                for the 1st taxable year of the credit period shall be 
                determined by multiplying the eligible basis under 
                subsection (d) by the fraction--
                            ``(i) the numerator of which is the sum of 
                        the number of remaining whole months in such 
                        1st taxable year after the sale of the 
                        qualified residence, and
                            ``(ii) the denominator of which is 12.
                    ``(B) Disallowed 1st year credit allowed in 6th 
                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.
    ``(f) Limitation on Aggregate Credit Allowable With Respect to 
Qualified Residences Located in a State.--
            ``(1) Credit may not exceed credit dollar amount allocated 
        to qualified residence.--
                    ``(A) In general.--The amount of the credit 
                determined under this section for any taxable year with 
                respect to any qualified residence shall not exceed the 
                homeownership credit dollar amount allocated to such 
                qualified residence under this subsection.
                    ``(B) Time for making allocation.--
                            ``(i) An allocation shall be taken into 
                        account under subparagraph (A) only if it is 
                        made not later than the close of the calendar 
                        year in which the qualified residence is sold.
                            ``(ii) A homeownership credit agency may 

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