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.

June 9, 2005

Ms. STABENOW (for herself and Mr. SMITH) introduced the following bill; which was read twice and referred to the Committee on Finance

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.

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.

`(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.

END