Neighborhood Homes Investment Act

II 117TH CONGRESS 1ST SESSION S. 98 To amend the Internal Revenue Code of 1986 to allow a credit against tax for neighborhood revitalization, and for other purposes. IN THE SENATE OF THE UNITED STATES JANUARY 28, 2021 Mr. CARDIN (for himself, Mr. PORTMAN, Mr. COONS, Mr. YOUNG, Mr. BROWN, and Mr. SCOTT of South Carolina) 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 allow a credit against tax for neighborhood revitalization, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Neighborhood Homes 4 Investment Act’’. 5 SEC. 2. NEIGHBORHOOD HOMES CREDIT. 6 (a) IN GENERAL.—Subpart D of part IV of sub- 7 chapter A of chapter 1 of the Internal Revenue Code of 8 VerDate Sep 11 2014 19:09 Feb 09, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S98.IS S98 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 98 IS 1986 is amended by inserting after section 42 the fol- 1 lowing new section: 2 ‘‘SEC. 42A. NEIGHBORHOOD HOMES CREDIT. 3 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec- 4 tion 38, the amount of the neighborhood homes credit de- 5 termined under this section for a taxable year for a quali- 6 fied project shall be, with respect to each qualified resi- 7 dence that is part of such qualified project and that expe- 8 riences a qualified completion event during such taxable 9 year, an amount equal to— 10 ‘‘(1) in the case of an affordable sale, with re- 11 spect to the seller, the excess of— 12 ‘‘(A) the qualified development cost in- 13 curred by such seller for such qualified resi- 14 dence, over 15 ‘‘(B) the sale price of such qualified resi- 16 dence, or 17 ‘‘(2) in the case of any other qualified comple- 18 tion event, with respect to a taxpayer other than the 19 owner of the qualified residence (or a related person 20 with respect to such owner), the excess of— 21 ‘‘(A) the development cost incurred by 22 such taxpayer for such qualified residence, over 23 ‘‘(B) the amount received by such taxpayer 24 as payment for such rehabilitation. 25 VerDate Sep 11 2014 19:09 Feb 09, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S98.IS S98 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 98 IS ‘‘(b) LIMITATIONS.— 1 ‘‘(1) AMOUNT.—The amount determined under 2 subsection (a) with respect to a qualified residence 3 shall not exceed 35 percent of the lesser of— 4 ‘‘(A) the qualified development cost, or 5 ‘‘(B) 80 percent of the national median 6 sale price for new homes (as determined pursu- 7 ant to the most recent census data available as 8 of the date on which the neighborhood homes 9 credit agency makes an allocation for the quali- 10 fied project). 11 ‘‘(2) ALLOCATIONS.— 12 ‘‘(A) IN GENERAL.—The amount deter- 13 mined under subsection (a) with respect to a 14 qualified residence that is part of a qualified 15 project and that experiences a qualified comple- 16 tion event shall not exceed the excess of— 17 ‘‘(i) the amount determined under 18 subparagraph (B), over 19 ‘‘(ii) the amounts previously deter- 20 mined under subsection (a) with respect to 21 such qualified project. 22 ‘‘(B) ALLOCATION AMOUNT.—The amount 23 determined under this paragraph with respect 24 to a qualified residence that is part of a quali- 25 VerDate Sep 11 2014 19:09 Feb 09, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S98.IS S98 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 98 IS fied project and that experiences a qualified 1 completion event is the least of— 2 ‘‘(i) the amount allocated to such 3 project by the neighborhood homes credit 4 agency under this section, 5 ‘‘(ii) pursuant to subparagraph (C), 6 the amount such agency determines at the 7 time of the qualified completion event is 8 necessary to ensure the financial feasibility 9 of the project, or 10 ‘‘(iii) in the case of a qualified com- 11 pletion event that occurs after the 5-year 12 period beginning on the date of the alloca- 13 tion referred to in clause (i), $0. 14 ‘‘(C) FINANCIAL FEASIBILITY.—For pur- 15 poses of subparagraph (B)(ii), the neighborhood 16 homes credit agency shall consider— 17 ‘‘(i) the sources and uses of funds and 18 the total financing planned for the quali- 19 fied project, 20 ‘‘(ii) any proceeds or receipts expected 21 to be generated by reason of tax benefits, 22 ‘‘(iii) the percentage of the amount al- 23 located to such project under this section 24 VerDate Sep 11 2014 19:09 Feb 09, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S98.IS S98 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 98 IS used for project costs other than the cost 1 of intermediaries, and 2 ‘‘(iv) the reasonableness of the devel- 3 opmental costs and fees of the qualified 4 project. 5 ‘‘(c) QUALIFIED DEVELOPMENT COST.—For pur- 6 poses of this section— 7 ‘‘(1) IN GENERAL.—The term ‘qualified devel- 8 opment cost’ means, with respect to a qualified resi- 9 dence, so much of the allowable development cost as 10 the neighborhood homes credit agency certifies, at 11 the time of the completion event, meets the stand- 12 ards promulgated under subsection (h)(1)(C). 13 ‘‘(2) ALLOWABLE DEVELOPMENT COST.—The 14 term ‘allowable development cost’ means— 15 ‘‘(A) the cost of construction, substantial 16 rehabilitation, demolition of any structure, and 17 environmental remediation, and 18 ‘‘(B) in the case of an affordable sale, so 19 much of the cost of acquiring buildings and 20 land as does not exceed an amount equal to 75 21 percent of the costs described in subparagraph 22 (A). 23 ‘‘(3) CONDOMINIUM AND COOPERATIVE HOUS- 24 ING UNITS.—In the case of a qualified residence de- 25 VerDate Sep 11 2014 19:09 Feb 09, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S98.IS S98 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 98 IS scribed in subparagraph (B) or (C) of subsection 1 (f)(1), the allowable development cost of such quali- 2 fied residence shall be an amount equal to the total 3 allowable development cost of the entire condo- 4 minium or cooperative housing property in which 5 such qualified residence is located, multiplied by a 6 fraction— 7 ‘‘(A) the numerator of which is the total 8 floor space of such qualified residence, and 9 ‘‘(B) the denominator of which is the total 10 floor space of all residences within such prop- 11 erty. 12 ‘‘(d) QUALIFIED PROJECT.—For purposes of this 13 section, the term ‘qualified project’ means a project that— 14 ‘‘(1) a neighborhood homes credit agency cer- 15 tifies will build or substantially rehabilitate one or 16 more qualified residences located in one or more 17 qualified census tracts, and 18 ‘‘(2) is designated by such agency as a qualified 19 project under this section and is allocated (before 20 such building or substantial rehabilitation begins) a 21 portion of the amount allocated to such agency 22 under subsection (g). 23 ‘‘(e) QUALIFIED CENSUS TRACT.—For purposes of 24 this section— 25 VerDate Sep 11 2014 19:09 Feb 09, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S98.IS S98 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 98 IS ‘‘(1) IN GENERAL.—The term ‘qualified census 1 tract’ means a census tract— 2 ‘‘(A) with— 3 ‘‘(i) a median gross income which 4 does not exceed 80 percent of the applica- 5 ble area median gross income, 6 ‘‘(ii) a poverty rate that is not less 7 than 130 percent of the applicable area 8 poverty rate, and 9 ‘‘(iii) a median value for owner-occu- 10 pied homes that does not exceed applicable 11 area median value for owner-occupied 12 homes, 13 ‘‘(B) which is located in a city with a pop- 14 ulation of not less than 50,000 and a poverty 15 rate that is not less than 150 percent of the ap- 16 plicable area poverty rate, and which has— 17 ‘‘(i) a median gross income which 18 does not exceed the applicable area median 19 gross income, and 20 ‘‘(ii) a median value for owner-occu- 21 pied homes that does not exceed 80 per- 22 cent of the applicable area median value 23 for owner-occupied homes, or 24 VerDate Sep 11 2014 19:09 Feb 09, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S98.IS S98 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 98 IS ‘‘(C) which is located in a nonmetropolitan 1 county and which has— 2 ‘‘(i) a median gross income which 3 does not exceed the applicable area median 4 gross income, and 5 ‘‘(ii) been designated by a neighbor- 6 hood homes credit agency under this 7 clause. 8 ‘‘(2) ADDITIONAL CENSUS TRACTS FOR SUB- 9 STANTIAL REHABILITATION.—In the case of a quali- 10 fied residence that is intended for substantial reha- 11 bilitation described in subsection (f)(5)(B), the term 12 ‘qualified census tract’ includes a census tract that 13 meets the requirements of paragraph (1)(A), without 14 regard to clause (iii), and that is designated by the 15 neighborhood homes credit agency under this para- 16 graph. 17 ‘‘(3) LIST OF QUALIFIED CENSUS TRACTS.— 18 The Secretary of Housing and Urban Development 19 shall, for each year, make publicly available a list of 20 qualified census tracts under— 21 ‘‘(A) on a combined basis, subparagraphs 22 (A) and (B) of paragraph (1), 23 ‘‘(B) subparagraph (C) of such paragraph, 24 and 25 VerDate Sep 11 2014 19:09 Feb 09, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S98.IS S98 pamtmann on DSKBC07HB2PROD with BILLS 9 •S 98 IS ‘‘(C) paragraph (2). 1 ‘‘(f) OTHER DEFINITIONS.—For purposes of this sec- 2 tion— 3 ‘‘(1) QUALIFIED RESIDENCE.—The term ‘quali- 4 fied residence’ means a residence that consists of— 5 ‘‘(A) a single-family home containing 4 or 6 fewer residential units, 7 ‘‘(B) a condominium unit, or 8 ‘‘(C) a house or an apartment owned by a 9 cooperative housing corporation (as defined in 10 section 216(b)). 11 ‘‘(2) AFFORDABLE SALE.— 12 ‘‘(A) IN GENERAL.— 13 ‘‘(i) IN GENERAL.—The term ‘afford- 14 able sale’ means a sale to a qualified home- 15 owner of a qualified residence that the 16 neighborhood homes credit agency certifies 17 as meeting the standards promulgated 18 under subsection (h)(1)(D) for a price that 19 does not exceed— 20 ‘‘(I) in the case of any qualified 21 residence not described in subclause 22 (II), (III), or (IV), the amount equal 23 to the product of 4 multiplied by the 24 applicable area median gross income, 25 VerDate Sep 11 2014 19:09 Feb 09, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S98.IS S98 pamtmann on DSKBC07HB2PROD with BILLS 10 •S 98 IS ‘‘(II) in the case of a single-fam- 1 ily home containing two residential 2 units, 125 percent of the amount de- 3 scribed in subclause (I), 4 ‘‘(III) in the case of a single-fam- 5 ily home containing three residential 6 units, 150 percent of the amount de- 7 scribed in subclause (I), or 8 ‘‘(IV) in the case of a single-fam- 9 ily home containing four residential 10 units, 175 percent of the amount de- 11 scribed in subclause (I). 12 ‘‘(ii) RELATED PERSONS.— 13 ‘‘(I) IN GENERAL.—A sale be- 14 tween related persons shall not be 15 treated as an affordable sale. 16 ‘‘(II) DEFINITION.—For pur- 17 poses of this section, a person (in this 18 clause referred to as the ‘related per- 19 son’) is related to any person if the 20 related person bears a relationship to 21 such person specified in section 22 267(b) or 707(b)(1), or the related 23 person and such person are engaged 24 in trades or businesses under common 25 VerDate Sep 11 2014 19:09 Feb 09, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S98.IS S98 pamtmann on DSKBC07HB2PROD with BILLS 11 •S 98 IS control (within the meaning of sub- 1 sections (a) and (b) of section 52). 2 For purposes of the preceding sen- 3 tence, in applying section 267(b) or 4 707(b)(1), ‘10 percent’ shall be sub- 5 stituted for ‘50 percent’. 6 ‘‘(3) APPLICABLE AREA.—The term ‘applicable 7 area’ means— 8 ‘‘(A) in the case of a metropolitan census 9 tract, the metropolitan area in which such cen- 10 sus tract is located, and 11 ‘‘(B) in the case of a census tract other 12 than a census tract described in subparagraph 13 (A), the State. 14 ‘‘(4) SUBSTANTIAL REHABILITATION.—The 15 term ‘substantial rehabilitation’ means rehabilitation 16 efforts involving qualified development costs that are 17 not less than the greater of— 18 ‘‘(A) $20,000, or 19 ‘‘(B) 20 percent of the cost of acquiring 20 buildings and land. 21 ‘‘(5) QUALIFIED COMPLETION EVENT.—The 22 term ‘qualified completion event’ means— 23 ‘‘(A) in the case of a qualified residence 24 that is built or substantially rehabilitated as 25 VerDate Sep 11 2014 19:09 Feb 09, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S98.IS S98 pamtmann on DSKBC07HB2PROD with BILLS 12 •S 98 IS part of a qualified project and sold, an afford- 1 able sale, or 2 ‘‘(B) in the case of a qualified residence 3 that is substantially rehabilitated as part of a 4 qualified project and owned by the same quali- 5 fied homeowner throughout such rehabilitation, 6 the completion of such rehabilitation (as deter- 7 mined by the neighborhood homes credit agen- 8 cy) to the standards promulgated under sub- 9 section (h)(1)(D). 10 ‘‘(6) QUALIFIED HOMEOWNER.— 11 ‘‘(A) IN GENERAL.—The term ‘qualified 12 homeowner’ means, with respect to a qualified 13 residence, an individual— 14 ‘‘(i) who owns and uses such qualified 15 residence as the principal residence of such 16 individual, and 17 ‘‘(ii) whose income is 140 percent or 18 less of the applicable area median gross in- 19 come for the location of the qualified resi- 20 dence. 21 ‘‘(B) OWNERSHIP.—For purposes of a co- 22 operative housing corporation (as such term is 23 defined in section 216(b)), a tenant-stockholder 24 VerDate Sep 11 2014 19:09 Feb 09, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S98.IS S98 pamtmann on DSKBC07HB2PROD with BILLS 13 •S 98 IS shall be treated as owning the house or apart- 1 ment which such person is entitled to occupy. 2 ‘‘(C) INCOME.—For purposes of this para- 3 graph, income shall be a determined in accord- 4 ance with section 143(f)(2) and 143(f)(4). 5 ‘‘(D) TIMING.—For purposes of this para- 6 graph, the income of a taxpayer shall be deter- 7 mined— 8 ‘‘(i) in the case of a qualified resi- 9 dence that is built or substantially rehabili- 10 tated as part of a qualified project and 11 sold, at the time a binding contract for 12 purchase is made, or 13 ‘‘(ii) in the case of a qualified resi- 14 dence that is occupied by a qualified home- 15 owner and intended to be substantially re- 16 habilitated as part of a qualified project, at 17 the time a binding contract to undertake 18 such rehabilitation is made. 19 ‘‘(7) NEIGHBORH [Text truncated for display. Full text available on Congress.gov.]