S 2666
110th CONGRESS
2d Session
S. 2666
To amend the Internal Revenue Code of 1986 to encourage investment
in affordable housing, and for other purposes.
IN THE SENATE OF THE UNITED STATES
February 25, 2008
Ms. CANTWELL (for herself, Mr. SMITH, Mr. KERRY, Mr. COLEMAN, and Mr.
SALAZAR) 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 encourage investment
in affordable housing, 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 `Affordable Housing Investment
Act of 2008'.
(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.
(c) Table of Contents- The table of contents for this Act is as follows:
Sec. 1. Short title, etc.
TITLE I--FACILITATE DEVELOPMENT OF HOUSING CREDIT PROPERTY
Sec. 101. Renaming the low-income housing credit as the affordable
housing credit.
Sec. 102. Modification of rules for determining applicable percentage.
Sec. 103. Increase in credit for buildings in State designated areas.
Sec. 104. Modification of scattered site rule.
Sec. 105. Treatment of rural projects.
Sec. 106. Expansion of allowable basis for community service facilities.
TITLE II--IMPROVE COORDINATION WITH OTHER FEDERAL HOUSING PROGRAMS
Sec. 201. Affordable housing credits allowed for section 8 moderate
rehabilitation developments.
Sec. 202. Modification to low-income housing credit rules for reduction
of eligible basis by grants received.
TITLE III--FACILITATE PRIVATE INVESTMENT CAPITAL TO INCREASE THE EFFICIENCY
OF AFFORDABLE HOUSING INVESTMENT
Sec. 301. Repeal of recapture bond rule.
Sec. 302. Affordable housing credit allowed against alternative minimum
tax.
Sec. 303. Interest on qualified mortgage bonds, qualified veterans'
mortgage bonds, and qualified residential rental project exempt facility
bonds exempt from alternative minimum tax.
TITLE IV--HELP PRESERVE EXISTING AFFORDABLE HOUSING
Sec. 401. Repeal of 10-year rule for acquisition housing credits.
Sec. 402. Modification of related person rule for affordable housing
credit.
TITLE V--SIMPLIFY ADMINISTRATION OF THE HOUSING CREDIT PROGRAM
Sec. 501. Elimination of certain annual recertifications of tenant
incomes.
TITLE VI--CONFORM MULTIFAMILY HOUSING BOND RULES TO HOUSING CREDIT
RULES
Sec. 601. Coordination of certain rules applicable to affordable housing
credit and qualified residential rental project exempt facility bonds.
TITLE VII--IMPROVE THE MORTGAGE REVENUE BOND PROGRAM
Sec. 701. Special rule for use of mortgage bonds for disaster victims,
single parents, and homemakers.
Sec. 702. Repeal of required use of certain principal repayments on
qualified mortgage issues to redeem bonds.
TITLE VIII--EFFECTIVE DATE
Sec. 801. Effective date.
TITLE I--FACILITATE DEVELOPMENT OF HOUSING CREDIT PROPERTY
SEC. 101. RENAMING THE LOW-INCOME HOUSING CREDIT AS THE AFFORDABLE
HOUSING CREDIT.
(a) In General- The heading of section 42 (relating to low-income housing
credit) is amended by striking `low-income' and inserting `affordable'.
(b) Conforming Amendments-
(1) Sections 38(b)(5), 42(a), 772(a)(7), and 772(d)(5) are each amended
by striking `low-income' and inserting `affordable'.
(2) The headings of subparagraphs (3)(D) and (6)(B) of section 469(i)
are each amended by striking `LOW-INCOME' and inserting `AFFORDABLE'.
(3) The table of sections for subpart D of part IV of subchapter A
of chapter 1 is amended by striking the item relating to section 42
and inserting the following:
`Sec. 42. Affordable housing credit.'.
(c) Effective Date- The amendments made by this section shall take effect
on the date of the enactment of this Act.
SEC. 102. MODIFICATION OF RULES FOR DETERMINING APPLICABLE PERCENTAGE.
(a) In General- Subsection (b) of section 42 is amended--
(1) by striking the semicolon and all that follows to the period in
the heading,
(2) by striking paragraph (1) and inserting the following new paragraph:
`(1) IN GENERAL- For purposes of this section, the term `applicable
percentage' means the greater of the alternative applicable percentage
determined under paragraph (2) or--
`(A) 9 percent in the case of any building to which subparagraph
(B) does not apply, and
`(B) 4 percent in the case of--
`(i) any existing building, and
`(ii) any new building if, at any time during the taxable year
or any prior taxable year, there is or was outstanding any obligation--
`(I) not taken into account under section 146,
`(II) which is exempt from tax under section 103, and
`(III) the proceeds of which are or were used (directly or indirectly)
with respect to such building or the operation thereof.',
(3) by striking `BUILDINGS PLACED IN SERVICE AFTER 1987' in the heading
for paragraph (2) and inserting `ALTERNATIVE APPLICABLE PERCENTAGE',
and
(4) by striking `In the case of any qualified low-income building
placed in service by the taxpayer after 1987, the term `applicable
percentage' means' in paragraph (2)(A) and inserting `For purposes
of paragraph (1), the term `alternative applicable percentage' means'.
(b) Modification of Rules Related to Federal Subsidies-
(1) IN GENERAL- Paragraph (2) of section 42(i) (relating to determination
of whether building is Federally subsidized) is amended to read as
follows:
`(2) EXCEPTIONS FOR CERTAIN NEW BUILDINGS OTHERWISE SUBJECT TO 4 PERCENT
CREDIT LIMITATION-
`(A) ELECTION TO REDUCE ELIGIBLE BASIS BY PROCEEDS OF OBLIGATIONS-
A tax-exempt obligation shall not be taken into account under subsection
(b)(1)(B)(ii) if the taxpayer elects to exclude the proceeds of
such obligation from the eligible basis of the building for purposes
of subsection (d).
`(B) SPECIAL RULE FOR SUBSIDIZED CONSTRUCTION FINANCING- A tax-exempt
obligation used to provide construction financing for any building
shall not be taken into account under subsection (b)(1)(B)(ii) if--
`(i) such obligation (when issued) identified the building for
which the proceeds of such obligation would be used, and
`(ii) such obligation is redeemed before such building is placed
in service.'.
(2) CONFORMING AMENDMENT- Section 1400N(c)(6) is amended by striking
`December 31, 2010' and inserting `the date of the enactment of the
Affordable Housing Investment Act of 2008'.
SEC. 103. INCREASE IN CREDIT FOR BUILDINGS IN STATE DESIGNATED AREAS.
(a) In General- Clause (i) of section 42(d)(5)(C) (relating to increase
in credit for buildings in high cost areas) is amended by striking `or
difficult development area' and inserting `, difficult development area,
or State designated project'.
(b) State Designated Project- Subparagraph (C) of section 42(d)(5) is
amended by adding at the end the following new clause:
`(v) STATE DESIGNATED PROJECT- For purposes of this subparagraph,
the term `State designated project' means any project published
as part of a State's qualified allocation plan (as defined in
subsection (m)(1)(B)) and designated by the housing credit agency
as meeting such criteria for designation under this clause as
the State in which such project is located may specify. The rules
of clauses (ii)(II) and (iii)(II) shall not apply for purposes
designations made under this clause.'.
(c) Conforming Amendment- The heading of subparagraph (C) of section
42(d)(5) is amended by striking `BUILDINGS IN HIGH COST AREAS' and inserting
`CERTAIN BUILDINGS'.
SEC. 104. MODIFICATION OF SCATTERED SITE RULE.
Paragraph (7) of section 42(g) (relating to scattered site projects)
is amended to read as follows:
`(7) SCATTERED SITE PROJECTS- Buildings which would (but for their
lack of proximity) be treated as a project for purposes of this section
shall be so treated if the rent-restricted (within the meaning of
paragraph (2)) residential units of such project are distributed among
such buildings in proportion to the number of residential units in
each building.'.
SEC. 105. TREATMENT OF RURAL PROJECTS.
Section 42(i) (relating to definitions and special rules) is amended
by adding at the end the following new paragraph:
`(8) TREATMENT OF RURAL PROJECTS- For purposes of this section, in
the case of any project for residential rental property located in
a rural area (as defined in section 520 of the Housing Act of 1949),
any income limitation measured by reference to area median gross income
shall be measured by reference to the greater of area median gross
income or national non-metropolitan median income.'.
SEC. 106. EXPANSION OF ALLOWABLE BASIS FOR COMMUNITY SERVICE FACILITIES.
Section 42(d)(4)(C) (relating to inclusion of basis of property used
to provide services for certain nontenants) is amended--
(1) by striking `10 percent of the eligible basis' in clause (ii)and
inserting `20 percent of the first $5,000,000 in eligible basis plus
10 percent of the remaining eligible basis', and
(2) by adding at the end the following new flush sentences:
`For each calendar year beginning after 2008, the dollar amount
in clause (ii) shall be increased by an amount equal to such dollar
amount multiplied by the cost-of-living adjustment determined under
section 1(f)(3), determined by substituting `calendar year 2007'
for `calendar year 1992' in subparagraph (B) thereof. If any amount
adjusted under the preceding sentence is not a multiple of $100,000,
such amount shall be rounded to the next lowest multiple of $100,000.'.
TITLE II--IMPROVE COORDINATION WITH OTHER FEDERAL HOUSING PROGRAMS
SEC. 201. AFFORDABLE HOUSING CREDITS ALLOWED FOR SECTION 8 MODERATE
REHABILITATION DEVELOPMENTS.
Paragraph (2) of section 42(c) (relating to qualified low-income building)
is amended by striking the last sentence.
SEC. 202. MODIFICATION TO LOW-INCOME HOUSING CREDIT RULES FOR REDUCTION
OF ELIGIBLE BASIS BY GRANTS RECEIVED.
(a) In General- The Secretary of the Treasury shall modify Treasury
Regulations section 1.42-16(b) to provide that none of the following
shall be considered a grant made with respect to a building or its operation
for purposes of section 42(d)(5)(A) of the Internal Revenue Code of
1986:
(1) Rental assistance under section 521 of the Housing Act of 1949
(42 U.S.C. 1490a).
(2) Assistance under section 538(f)(5) of the Housing Act of 1949
(42 U.S.C. 1490p-2(f)(5)).
(3) Interest reduction payments under section 236 of the National
Housing Act (12 U.S.C. 1715z-1).
(4) Rental assistance under section 202 of the Housing Act of 1959
(12 U.S.C. 1701q).
(5) Rental assistance under section 811 of the Cranston-Gonzalez National
Affordable Housing Act (42 U.S.C. 8013).
(6) Modernization, operating, and rental assistance pursuant to section
202 of the Native American Housing Assistance and Self-Determination
Act of 1996 (25 U.S.C. 4132).
(7) Assistance under title IV of the Stewart B. McKinney Homeless
Assistance Act (42 U.S.C. 11361 et seq.).
(8) Tenant-based rental assistance under section 212 of the Cranston-Gonzalez
National Affordable Housing Act (42 U.S.C. 12742).
(9) Assistance under the AIDS Housing Opportunity Act (42 U.S.C. 12901
et seq.).
(10) Per diem payments under section 2012 of title 38, United States
Code.
(11) Rent supplements under section 101 of the Housing and Urban Development
Act of 1965 (12 U.S.C. 1701s).
(12) Assistance under section 542 of the Housing Act of 1949 (42 U.S.C.
1490r).
(13) Any other ongoing payment used to enable the property to be rented
to low-income tenants.
(b) Effective Date- The modifications required by this section shall
take effect on the date of the enactment of this Act.
(c) No Inference- Nothing contained in subsection (a) may be construed
to create any inference with respect to the consideration of any program
specified under subsection (a) as a grant made with respect to a building
or its operation for purposes of section 42(d)(5)(A) of the Internal
Revenue Code of 1986 as in effect on the day before such date of enactment.
TITLE III--FACILITATE PRIVATE INVESTMENT CAPITAL TO INCREASE THE EFFICIENCY
OF AFFORDABLE HOUSING INVESTMENT
SEC. 301. REPEAL OF RECAPTURE BOND RULE.
(a) In General- Paragraph (6) of section 42(j) (relating to recapture
of credit) is amended to read as follows:
`(6) NO RECAPTURE ON DISPOSITION OF BUILDING (OR INTEREST THEREIN)
REASONABLY EXPECTED TO CONTINUE AS A QUALIFIED LOW-INCOME BUILDING-
`(A) IN GENERAL- In the case of a disposition of a building or an
interest therein, the taxpayer shall be discharged from liability
for any additional tax under this subsection by reason of such disposition
if it is reasonably expected that such building will continue to
be operated as a qualified low-income building for the remaining
compliance period with respect to such building.
`(B) STATUTE OF LIMITATIONS-
`(i) EXTENSION OF PERIOD- The period for assessing a deficiency
attributable to the application of subparagraph (A) with respect
to a building (or interest therein) during the compliance period
with respect to such building shall not expire before the expiration
of 3 years after the end of such compliance period.
`(ii) ASSESSMENT- Such deficiency may be assessed before the expiration
of the 3-year period referred to in clause (i) notwithstanding
the provisions of any other law or rule of law which would otherwise
prevent such assessment.'.
(b) Information Reporting-
(1) IN GENERAL- Subpart B of part III of subchapter A of chapter 61
(relating to information concerning transactions with other persons)
is amended by inserting after section 6050V the following new section:
`SEC. 6050W. RETURNS RELATING TO PAYMENT OF LOW-INCOME HOUSING CREDIT
REPAYMENT AMOUNT.
`(a) Requirement of Reporting- Every person who, at any time during
the taxable year, is an owner of a building (or an interest therein)--
`(1) which is in the compliance period at any time during such year,
and
`(2) with respect to which recapture is required by section 42(j),
shall, at such time as the Secretary may prescribe, make the return
described in subsection (b).
`(b) Form and Manner of Returns- A return is described in this subsection
if such return--
`(1) is in such form as the Secretary may prescribe, and
`(A) the name, address, and TIN of each person who, with respect
to such building or interest, was formerly an investor in such owner
at any time during the compliance period,
`(B) the amount (if any) of any credit recapture amount required
under section 42(j), and
`(C) such other information as the Secretary may prescribe.
`(c) Statements To Be Furnished to Persons With Respect to Whom Information
Is Required- Every person required to make a return under subsection
(a) shall furnish to each person whose name is required to be set forth
in such return a written statement showing--
`(1) the name and address of the person required to make such return
and the phone number of the information contact for such person, and
`(2) the information required to be shown on the return with respect
to such person.
The written statement required under the preceding sentence shall be
furnished on or before March 31 of the year following the calendar year
for which the return under subsection (a) is required to be made.
`(d) Compliance Period- For purposes of this section, the term `compliance
period' has the meaning given such term by section 42(i).'.
(2) ASSESSABLE PENALTIES-
(A) Subparagraph (B) of section 6724(d)(1) (relating to definitions)
is amended by inserting after clause (xxi) the following new clause:
`(xxii) section 6050W (relating to returns relating to payment
of low-income housing credit repayment amount),'.
(B) Paragraph (2) of section 6724(d) is amended by striking `or'
at the end of subparagraph (BB), by striking the period at the end
of subparagraph (CC) and inserting `, or', and by adding after subparagraph
(CC) the following new subparagraph:
`(DD) section 6050W (relating to returns relating to payment of
low-income housing credit repayment amount).'.
(3) CLERICAL AMENDMENT- The table of sections for subpart B of part
III of subchapter A of chapter 61 is amended by inserting after the
item relating to section 6050V the following new item:
`Sec. 6050W. Returns relating to payment of low-income housing credit
repayment amount.'.
(1) IN GENERAL- The amendments made by this section shall apply with
respect to any liability for the credit recapture amount under section
42(j) of the Internal Revenue Code of 1986 that arises after the date
of the enactment of this Act.
(2) SPECIAL RULE FOR LOW-INCOME HOUSING BUILDINGS SOLD BEFORE DATE
OF ENACTMENT OF THIS ACT- In the case of a building disposed of before
the date of the enactment of this Act with respect to which the taxpayer
posted a bond (or alternative form of security) under section 42(j)
of the Internal Revenue Code of 1986 (as in effect before such date
of enactment), the taxpayer may elect (by notifying the Secretary
of the Treasury in writing)--
(A) to cease to be subject to the bond requirements under section
42(j)(6) of such Code, as in effect before such date of enactment,
and
(B) to be subject to the requirements of section 42(j) of such Code,
as amended by this section.
SEC. 302. AFFORDABLE HOUSING CREDIT ALLOWED AGAINST ALTERNATIVE MINIMUM
TAX.
(a) In General- Subparagraph (B) of section 38(c)(4) (relating to special
rules for specified credits) is amended by redesignating clauses (ii),
(iii), and (iv) as clauses (iii), (iv), and (v), respectively, and by
inserting after clause (i) the following new clause:
`(ii) the credit determined under section 42(a),'.
(b) Effective Date- The amendments made by this subsection shall apply
to taxable years beginning after the date of the enactment of this Act.
SEC. 303. INTEREST ON QUALIFIED MORTGAGE BONDS, QUALIFIED VETERANS'
MORTGAGE BONDS, AND QUALIFIED RESIDENTIAL RENTAL PROJECT EXEMPT FACILITY
BONDS EXEMPT FROM ALTERNATIVE MINIMUM TAX.
(a) In General- Clause (ii) of section 57(a)(5)(C) (relating to exception
for qualified 501(c)(3) bonds) is amended to read as follows:
`(ii) EXCEPTION FOR CERTAIN BONDS- For purposes of clause (i),
the term `private activity bond' shall not include--
`(I) any qualified 501(c)(3) bond (as defined in section 145);
`(II) any qualified mortgage bond (as defined in section 143(a));
`(III) any qualified veterans' mortgage bond (as defined in
section 143(b)); and
`(IV) any exempt facility bond (as defined in section 142(a))
issued as part of an issue 95 percent or more of the net proceeds
of which are to be used to provide qualified residential rental
projects (as defined in section 142(d)).'.
(b) Effective Date- The amendment made by this section shall apply to
bonds originally issued after the date of the enactment of this Act.
TITLE IV--HELP PRESERVE EXISTING AFFORDABLE HOUSING
SEC. 401. REPEAL OF 10-YEAR RULE FOR ACQUISITION HOUSING CREDITS.
(a) In General- Subparagraph (B) of section 42(d)(2) (relating to existing
buildings) is amended by striking clause (ii) and by redesignating clauses
(iii) and (iv) as clauses (ii) and (iii), respectively.
(b) Conforming Amendment- Section 42(d) is amended by striking paragraph
(6) and by redesignating paragraph (7) as paragraph (6).
SEC. 402. MODIFICATION OF RELATED PERSON RULE FOR AFFORDABLE HOUSING
CREDIT.
(a) In General- Clause (iii) of section 42(d)(2)(D) (related to related
person, etc.) is amended to read as follows:
`(iii) RELATED PERSON- For purposes of subparagraph (B)(iii),
a person (hereinafter in this subclause 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.'.
(b) Effective Date- The amendment made by this subsection shall take
effect on the date of the enactment of this Act.
TITLE V--SIMPLIFY ADMINISTRATION OF THE HOUSING CREDIT PROGRAM
SEC. 501. ELIMINATION OF CERTAIN ANNUAL RECERTIFICATIONS OF TENANT
INCOMES.
Paragraph (8) of section 42(g) (relating to qualified low-income housing
project) is amended--
(1) by striking `may waive' in the mater preceding subparagraph (A);
(2) by inserting `may waive' before `any recapture' in subparagraph
(A); and
(3) by inserting `shall waive' before `any annual recertification'
in subparagraph (B).
TITLE VI--CONFORM MULTIFAMILY HOUSING BOND RULES TO HOUSING CREDIT
RULES
SEC. 601. COORDINATION OF CERTAIN RULES APPLICABLE TO AFFORDABLE HOUSING
CREDIT AND QUALIFIED RESIDENTIAL RENTAL PROJECT EXEMPT FACILITY BONDS.
(a) Determination of Next Available Unit- Paragraph (3) of section 142(d)
(relating to current income determinations) is amended by adding at
the end the following new subparagraph:
`(C) EXCEPTION FOR PROJECTS WITH RESPECT TO WHICH AFFORDABLE HOUSING
CREDIT IS ALLOWED- In the case of a project with respect to which
credit is allowed under section 42, the second sentence of subparagraph
(B) shall be applied by substituting `building (within the meaning
of section 42)' for `project'.'.
(b) Students- Paragraph (2) of section 142(d) (relating to definitions
and special rules) is amended by adding at the end the following new
subparagraph:
`(C) STUDENTS- Students (as defined in section 152(f)(2)) shall
not be treated as satisfying the requirements of subparagraph (A)
or (B) of paragraph (1) except under rules similar to the rules
of 42(i)(3)(D).'.
(c) Single-Room Occupancy Units- Paragraph (2) of section 142(d) (relating
to definitions and special rules), as amended by this Act, is further
amended by adding at the end the following new subparagraph:
`(D) SINGLE-ROOM OCCUPANCY UNITS- A unit shall not fail to be treated
as a residential unit merely because such unit is a single-room
occupancy unit (within the meaning of section 42).'.
(d) Effective Date- The amendments made by this section shall apply
to determinations of the status of qualified residential rental projects
for periods beginning after the date of the enactment of this Act, with
respect to bonds issued before, on, or after such date.
TITLE VII--IMPROVE THE MORTGAGE REVENUE BOND PROGRAM
SEC. 701. SPECIAL RULE FOR USE OF MORTGAGE BONDS FOR DISASTER VICTIMS,
SINGLE PARENTS, AND HOMEMAKERS.
(a) In General- Paragraph (2) of section 143(d) (relating to exceptions
to 3-year requirement) is amended by striking `and' at the end of subparagraph
(C) and by inserting after subparagraph (D) the following new subparagraphs:
`(E) financing of residences for individuals with an ownership interest
in a principal residence which--
`(i) is located in an area with respect to which a major disaster
has been declared by the President under section 401 of the Robert
T. Stafford Disaster Relief and Emergency Assistance Act, and
`(ii) has been rendered uninhabitable by reason of the major disaster,
`(F) financing of residences for individuals who--
`(i) are not married, and
`(ii) have one or more qualifying children (within the meaning
of section 152), and
`(G) financing of residences for displaced homemakers,'.
(b) Displaced Homemakers- Section 143(d) is amended by adding at the
end the following new paragraph:
`(4) DISPLACED HOMEMAKER- For purposes of paragraph (2)(G), the term
`displaced homemaker' means any individual who is--
`(A) over 18 years of age,
`(B) is not employed or underemployed and is experiencing difficulty
in obtaining or upgrading employment, and
`(C) has not worked full-time full-year in the labor force for a
number of years before the date on which financing for a residence
is supplied, but has, during such years, worked primarily without
remuneration to care for the home and family.'.
(c) Effective Date- The amendments made by this section shall apply
to bonds issued after the date of the enactment of this Act.
SEC. 702. REPEAL OF REQUIRED USE OF CERTAIN PRINCIPAL REPAYMENTS ON
QUALIFIED MORTGAGE ISSUES TO REDEEM BONDS.
(a) In General- Subparagraph (A) of section 143(a)(2) (relating to qualified
mortgage issue defined) is amended by inserting `and' at the end of
clause (ii), by striking `, and' at the end of clause (iii) and inserting
a period, and by striking clause (iv) and the last sentence.
(b) Conforming Amendment- Clause (ii) of section 143(a)(2)(D) is amended
by striking `(and clause (iv) of subparagraph (A))'.
(c) Effective Date- The amendments made by this section shall apply
to repayments received after the date of the enactment of this Act.
TITLE VIII--EFFECTIVE DATE
SEC. 801. EFFECTIVE DATE.
Except as otherwise provided in this Act, the amendments made by this
Act shall apply to--
(1) housing credit dollar amounts allocated after the date of the
enactment of this Act, and
(2) buildings placed in service after such date to the extent paragraph
(1) of section 42(h) of the Internal Revenue Code of 1986 does not
apply to such building by reason of paragraph (4) thereof, but only
with respect to bonds issued after such date.
END
