Rural Housing Tax Credit Act of 2003

Mr. DAVIS of Alabama (for himself, Mr. LEACH, Mr. ROSS, Mr. HINOJOSA, and Mr. LUCAS of Kentucky) 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 a first time homebuyer credit for the purchase of principal residences located in rural areas.

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 `Rural Housing Tax Credit Act of 2003'.

SEC. 2. CREDIT FOR PURCHASE OF PRINCIPAL RESIDENCES BY FIRST-TIME RURAL HOMEBUYERS.

(a) IN GENERAL- Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by inserting after section 25B the following:

`SEC. 25C. PURCHASE OF PRINCIPAL RESIDENCES BY FIRST-TIME RURAL HOMEBUYERS.

`(a) ALLOWANCE OF CREDIT- In the case of an individual who is a first-time homebuyer of a principal residence in a rural area during any taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the lesser of--

`(1) 10 percent of the purchase price of the residence, or

`(2) $5,000.

`(b) LIMITATIONS-

`(1) LIMITATION BASED ON ADJUSTED GROSS INCOME-

`(A) IN GENERAL- The amount allowed as a credit under subsection (a) for any taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to such amount as--

`(i) the excess of--

`(I) the taxpayer's modified adjusted gross income for such taxable year, over

`(II) $30,000 ($60,000 in the case of a joint return), bears to

`(ii) $10,000 ($20,000 in the case of a joint return).

`(B) MODIFIED ADJUSTED GROSS INCOME- For purposes of subparagraph (A), the term `modified adjusted gross income' means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.

`(2) LIMITATION BASED ON AMOUNT OF TAX- The credit allowed under subsection (a) for any taxable year shall not exceed the excess of--

`(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

`(B) the sum of the credits allowable under this subpart (other than this section and section 23) and section 27 for the taxable year.

`(3) MARRIED INDIVIDUALS FILING JOINTLY- In the case of a husband and wife who file a joint return, the credit under this section is allowable only if the residence is a qualified residence with respect to both the husband and wife, and the amount specified under subsection (a)(2) shall apply to the joint return.

`(4) MARRIED INDIVIDUALS FILING SEPARATELY- In the case of a married individual filing a separate return, subsection (a)(2) shall be applied by substituting `$2,500' for `$5,000'.

`(5) OTHER TAXPAYERS- If 2 or more individuals who are not married purchase a qualified residence, 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 $5,000.

`(c) DEFINITIONS- For purposes of this section--

`(1) RURAL AREA- The term `rural area' has the meaning given such term by section 520 of the Housing Act of 1949.

`(2) FIRST-TIME HOMEBUYER- The term `first-time homebuyer' has the meaning given such term by section 72(t)(8)(D)(i).

`(3) PRINCIPAL RESIDENCE- The term `principal residence' has the same meaning as when used in section 121.

`(4) PURCHASE AND PURCHASE PRICE- The terms `purchase' and `purchase price' have the meanings provided by section 1400C(e).

`(d) CARRYFORWARD OF UNUSED CREDIT- If the credit allowable under subsection (a) for any taxable year exceeds the limitation imposed by subsection (b)(2) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section and section 23), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.

`(e) REPORTING- If the Secretary requires information reporting under section 6045 by a person described in subsection (e)(2) thereof to verify the eligibility of taxpayers for the credit allowable by this section, the exception provided by section 6045(e)(5) shall not apply.

`(f) RECAPTURE OF CREDIT IN CASE OF CERTAIN SALES-

`(1) IN GENERAL- Except as provided in paragraph (5), if the taxpayer--

`(A) fails to use a qualified residence as the principal residence of the taxpayer, or

`(B) disposes of a qualified residence,

with respect to the purchase of which a credit was allowed under subsection (a) at any time within 5 years after the date the taxpayer acquired the property, then the tax imposed under this chapter for the taxable year in which the disposition occurs is increased by the credit recapture amount.

`(2) CREDIT RECAPTURE AMOUNT- For purposes of paragraph (1), the credit recapture amount is an amount equal to the sum of--

`(A) the applicable recapture percentage of the amount of the credit allowed to the taxpayer under this section, plus

`(B) interest at the overpayment rate established under section 6621 on the amount determined under subparagraph (A) for each prior taxable year for the period beginning on the due date for filing the return for the prior taxable year involved.

No deduction shall be allowed under this chapter for interest described in subparagraph (B).

`(3) Applicable recapture percentage-

`(A) IN GENERAL- For purposes of this subsection, the applicable recapture percentage shall be determined from the following table:

--The applicable

--recapture

`If the sale occurs in:

--percentage is:

Year 1

--100

Year 2

--80

Year 3

--60

Year 4

--40

Year 5

--20

Years 6 and thereafter

--0.

`(B) YEARS- For purposes of subparagraph (A), year 1 shall begin on the first day of the taxable year in which the purchase of the qualified residence described in subsection (a) occurs.

`(4) NO CREDITS AGAINST TAX- Any increase in tax under this subsection shall not be treated as a tax imposed by this chapter for purposes of determining the amount of any credit under this chapter or for purposes of section 55.

`(5) DEATH OF OWNER; CASUALTY LOSS; INVOLUNTARY CONVERSION; ETC- The provisions of paragraph (1) do not apply to--

`(A) a disposition of a qualified residence made on account of the death of any individual having a legal or equitable interest therein occurring during the 5-year period to which reference is made under paragraph (1),

`(B) a disposition of the old qualified residence if it is substantially or completely destroyed by a casualty described in section 165(c)(3) or compulsorily or involuntarily converted (within the meaning of section 1033(a)), or

`(C) a disposition pursuant to a settlement in a divorce or legal separation proceeding where the qualified residence is sold or the other spouse retains such residence.

`(g) 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.'.

(b) CONFORMING AMENDMENTS-

(1) Subsection (a) of section 1016 of such Code (relating to general rule for adjustments to basis) is amended by striking `and' at the end of paragraph (27), by striking the period at the end of paragraph (28) and inserting `, and', and by adding at the end the following new paragraph:

`(29) in the case of a residence with respect to which a credit was allowed under section 25C, to the extent provided in section 25C(g).'.

(2) Section 24(b)(3)(B), as added by the Economic Growth and Tax Relief Reconciliation Act of 2001, is amended by striking `23 and 25B' and inserting `23, 25B, and 25C'.

(3) Section 25(e)(1)(C) is amended by striking `23 and 1400C' and by inserting `23, 25C, and 1400C'.

(4) Section 25(e)(1)(C), as amended by the Economic Growth and Tax Relief Reconciliation Act of 2001, is amended by inserting `25C,' after `25B,'.

(5) Section 25B, as added by the Economic Growth and Tax Relief Reconciliation Act of 2001, is amended by striking `section 23' and inserting `sections 23 and 25C'.

(6) Section 26(a)(1), as amended by the Economic Growth and Tax Relief Reconciliation Act of 2001, is amended by striking `and 25B' and inserting `25B, and 25C'.

(7) Section 1400C(d) is amended by inserting `and section 25C' after `this section'.

(8) Section 1400C(d), as amended by the Economic Growth and Tax Relief Reconciliation Act of 2001, is amended by striking `and 25B' and inserting `25B, and 25C'.

(9) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting before the item relating to section 26 the following:

`Sec. 25C. Purchase of principal residences by first-time rural homebuyers.'.

(1) IN GENERAL- The amendments made by subsections (a) and (b)(9) shall apply to purchases after the date of the enactment of this Act, in taxable years ending after such date.

(2) TEMPORARY CONFORMING AMENDMENTS- The amendments made by paragraphs (1), (3), and (7) of subsection (b) shall apply to taxable years ending before January 1, 2004.

(3) PERMANENT CONFORMING AMENDMENTS- The amendments made by paragraphs (2), (4), (5), (6), (7), and (8) of subsection (b) shall apply to taxable years beginning after December 31, 2003.

END