To amend the Internal Revenue Code of 1986 to provide an incentive to preserve affordable housing in multifamily housing units which are sold or exchanged.

November 12, 2003

Mr. RAMSTAD (for himself and Mr. CARDIN) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to provide an incentive to preserve affordable housing in multifamily housing units which are sold or exchanged.

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 `Affordable Housing Preservation Tax Relief Act of 2003'.

SEC. 2. AFFORDABLE HOUSING PRESERVATION CREDIT.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business-related credits) is amended by inserting after section 42 the following new section:

`SEC. 42A. AFFORDABLE HOUSING PRESERVATION CREDIT.

`(a) GENERAL RULE- For purposes of section 38, the affordable housing preservation credit determined under this section for the taxable year is an amount equal to the preservation allocation amount for the taxable year.

`(b) LIMITATIONS- The amount allowed as a credit to a taxpayer under subsection (a) with respect to a qualified preservation sale shall not exceed the gain recognized by the taxpayer from such sale.

`(c) PRESERVATION ALLOCATION AMOUNT- For purposes of subsection (a)--

`(1) IN GENERAL- The term `preservation allocation amount' means the amount allocated to the taxpayer from a qualified preservation sale by a housing credit agency.

`(2) LIMITATION- The amount allocated under paragraph (1) shall not exceed the excess of--

`(A) the product of--

`(i) the maximum rate tax under section 1 in the case of an individual or section 11 in the case of a corporation, multiplied by

`(ii) the gain recognized by the taxpayer from the qualified preservation sale, over

`(B) the amount of cash or the fair market value of other property received by the taxpayer with respect to the sale.

`(d) QUALIFIED PRESERVATION SALE- For purposes of this section--

`(1) IN GENERAL- The term `qualified preservation sale' means a sale of eligible multifamily housing property to or an exchange of such property with a preservation entity which agrees to maintain affordability and use restrictions regarding the property that are--

`(A) for a term of not less than the extended use period,

`(B) legally enforceable, and

`(C) consistent with the long-term physical and financial viability and character of such housing as affordable housing.

Such restrictions shall be binding on all successors of the preservation entity and shall be recorded as a restrictive covenant on the property pursuant to State law.

`(2) ELIGIBLE MULTIFAMILY HOUSING PROPERTY- The term `eligible multifamily housing property' means--

`(A) property assisted under section 221(d)(3) or section 236 of the National Housing Act and with respect to which the owner is subject to the restrictions described in section 1039(b)(1)(B) of such Act (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990),

`(B) property described in section 512(2)(B) of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (42 U.S.C. 1437f note),

`(C) property with respect to which a loan is made or insured under title V of the Housing Act of 1949, and

`(D) property that either received an allocation of low-income housing tax credit pursuant to paragraph (1) of section 42(h) or was exempted from such paragraph by paragraph (4) of such section.

`(3) AFFORDABLE HOUSING- The term `affordable housing' means housing which is a qualified low-income housing project (as defined in section 42(g)).

`(4) EXTENDED USE PERIOD- The term `extended use period' means the period beginning on the date of sale and ending on the earlier of--

`(A) 30 years after the close of the sale, or

`(B) the date that the property is acquired by foreclosure (or instrument in lieu of foreclosure).

Subparagraph (B) shall not apply if the Secretary determines that the acquisition described therein is part of an arrangement with the owner a purpose of which is to terminate the extended use period.

`(5) PRESERVATION ENTITY- The term `preservation entity' means a housing credit agency or an organization approved by a housing credit agency that has the capacity and commitment to successfully acquire and preserve eligible multifamily housing property. Such preservation entity shall be independent from the seller partnership or its affiliates.

`(e) ALLOCATION BY HOUSING CREDIT AGENCY- For purposes of this section--

`(1) IN GENERAL- The aggregate preservation credit dollar amount which a housing credit agency may allocate for any calendar year is the portion of the State preservation credit ceiling allocated under this subsection for such calendar year to such agency.

`(2) STATE CEILING INITIALLY ALLOCATED TO HOUSING CREDIT AGENCIES- Except as provided in paragraph (4), the State preservation credit ceiling for each calendar year shall be allocated to the housing credit agency of such State. If there is more than 1 housing credit agency of a State, all such agencies shall be treated as a single agency.

`(3) STATE PRESERVATION CREDIT CEILING- The State preservation credit ceiling applicable to any State and any calendar year shall be an amount equal to the sum of--

`(A) the unused State preservation credit ceiling (if any) of such State for the preceding calendar year,

`(B) the sum of--

`(i) $1.00 multiplied by the State population,

`(ii) $1,000,000,

`(iii) the amount of State preservation credit ceiling returned in the calendar year, plus

`(iv) the amount (if any) allocated under paragraph (4) to such State by the Secretary.

For purposes of clause (i), the unused State preservation credit ceiling for any calendar year is the excess (if any) of the sum of the amounts described in clauses (ii) through (iv) over the aggregate preservation credit dollar amount allocated for such year.

`(4) UNALLOCATED CREDIT-

`(A) IN GENERAL- In the event that a State does not allocate all of its preservation credit, such unallocated credit shall be allocated among qualified States for the succeeding calendar year.

`(B) QUALIFIED STATE- For purposes of subparagraph (A), the term `qualified State' means, with respect to a calendar year, any State which allocates its entire State preservation credit from the preceding calendar year and for which a request is made to receive an allocation under subparagraph (C).

`(C) UNUSED PRESERVATION CREDIT CARRYOVER- For purposes of this paragraph, the unused preservation credit carryover of a State for any calendar year is the excess (if any) of--

`(i) the unused State preservation credit ceiling for the year preceding such year, over

`(ii) the aggregate preservation credit dollar amount allocated for such year.

`(D) ALLOCATED AMOUNT- The amount allocated under this paragraph is the amount determined by the Secretary to bear the same ratio to the aggregate unused preservation credit carryover of all States from the preceding calendar year as the population of the State bears to the population of all qualified States for the calendar year. For purpose of the preceding sentence, population shall be determined in accordance with section 146(j).

`(5) HOUSING CREDIT AGENCY DEFINED- The term `housing credit agency' has the meaning given such term by section 42(h)(8)(A).

`(f) RESPONSIBILITIES OF HOUSING CREDIT AGENCY- The housing credit agency (or an agent or other private contractor of such agency) shall--

`(1) determine whether the preservation entity's plan for rehabilitation (if any) and operation of the eligible multifamily housing property is viable for no less than 30 years,

`(2) monitor the affordability and use restrictions for the eligible multifamily housing property, and

`(3) notify the Internal Revenue Service as to any portion of such property which is out of compliance.

`(g) RECAPTURE FOR NONCOMPLIANCE- If the Secretary determines that all or a portion of the multifamily housing property is out of compliance with the requirements of this section, the taxpayer's tax under this chapter for the taxable year shall be increased by the sum of--

`(1) an amount equal to the amount which bears the same ratio to the total credit allowed to the taxpayer under subsection (a) as the taxpayer's share of the portion of such property which is out of compliance bears to the entire property, plus

`(2) interest at the underpayment rate established under section 6621 on the amount determined under paragraph (1) for each prior taxable year for the period beginning on the due date for filing the return for the taxable year for which the credit was allowed under subsection (a).

No deduction shall be allowed under this chapter for interest described in paragraph (2).'.

(b) CREDIT TO BE PART OF GENERAL BUSINESS CREDIT- Subsection (b) of section 38 of such Code (relating to general business credit) is amended by striking `plus' at the end of paragraph (14), by striking the period at the end of paragraph (15) and inserting `, plus', and by adding at the end the following new paragraph:

`(16) the affordable housing preservation credit determined under section 42A(a).'.

(c) CONFORMING AMENDMENT- 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 45F the following new item:

`Sec. 42A. Affordable housing preservation credit.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2003.

END