Neighborhood Homes Investment Act

II 118TH CONGRESS 1ST SESSION S. 657 To amend the Internal Revenue Code of 1986 to establish a tax credit for neighborhood revitalization, and for other purposes. IN THE SENATE OF THE UNITED STATES MARCH 6, 2023 Mr. CARDIN (for himself, Mr. YOUNG, Mr. WYDEN, Mr. MORAN, and Mr. BROWN) 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 establish a tax credit 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. FINDINGS AND SENSE OF CONGRESS. 6 (a) FINDINGS.—Congress finds the following: 7 (1) Experts have determined that it could take 8 nearly a decade to address the housing shortage in 9 VerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657 DMWilson on DSKJM0X7X2PROD with BILLS 2 •S 657 IS the United States, in large part due to increasing 1 housing prices and decreased housing inventory. 2 (2) The housing supply shortage disproportion- 3 ately impacts low-income and distressed commu- 4 nities. 5 (3) Homeownership is a primary source of 6 household wealth and neighborhood stability. Many 7 distressed communities have low rates of homeown- 8 ership and lack quality, affordable starter homes. 9 (4) Housing revitalization in distressed commu- 10 nities is prevented by the value gap, the difference 11 between the price to rehabilitate a home and the sale 12 value of the home. 13 (5) The Neighborhood Homes Investment Act 14 can address the value gap to increase housing reha- 15 bilitation in distressed communities. 16 (6) The Neighborhood Homes Investment Act 17 has the potential to generate 500,000 homes over 10 18 years, $125,000,000,000 of total development activ- 19 ity, over 800,000 jobs in construction and construc- 20 tion-related industries, and over $35,000,000,000 in 21 Federal, state, and local tax revenues. 22 (b) SENSE OF CONGRESS.—It is the sense of Con- 23 gress that the neighborhood homes credit (as added under 24 VerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657 DMWilson on DSKJM0X7X2PROD with BILLS 3 •S 657 IS section 3 of this Act) should be an activity administered 1 in a manner which— 2 (1) is consistent with the Fair Housing Act of 3 1968 (42 U.S.C. 3601 et seq.); 4 (2) empowers residents in eligible communities; 5 and 6 (3) revitalizes distressed neighborhoods. 7 SEC. 3. NEIGHBORHOOD HOMES CREDIT. 8 (a) IN GENERAL.—Subpart D of part IV of sub- 9 chapter A of chapter 1 of the Internal Revenue Code of 10 1986 is amended by inserting after section 42 the fol- 11 lowing new section: 12 ‘‘SEC. 42A. NEIGHBORHOOD HOMES CREDIT. 13 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec- 14 tion 38, the neighborhood homes credit determined under 15 this section for the taxable year is, with respect to each 16 qualified residence sold by the taxpayer during such tax- 17 able year in an affordable sale, the lesser of— 18 ‘‘(1) an amount equal to— 19 ‘‘(A) the excess (if any) of— 20 ‘‘(i) the reasonable development costs 21 paid or incurred by the taxpayer with re- 22 spect to such qualified residence, over 23 ‘‘(ii) the sale price of such qualified 24 residence (reduced by any reasonable ex- 25 VerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657 DMWilson on DSKJM0X7X2PROD with BILLS 4 •S 657 IS penses paid or incurred by the taxpayer in 1 connection with such sale), or 2 ‘‘(B) if the neighborhood homes credit 3 agency determines it is necessary to ensure fi- 4 nancial feasibility, an amount not to exceed 120 5 percent of the amount under subparagraph (A), 6 ‘‘(2) 35 percent of the eligible development 7 costs paid or incurred by the taxpayer with respect 8 to such qualified residence, or 9 ‘‘(3) 28 percent of the national median sale 10 price for new homes (as determined pursuant to the 11 most recent census data available as of the date on 12 which the neighborhood homes credit agency makes 13 an allocation for the qualified project). 14 ‘‘(b) DEVELOPMENT COSTS.—For purposes of this 15 section— 16 ‘‘(1) REASONABLE DEVELOPMENT COSTS.— 17 ‘‘(A) IN GENERAL.—The term ‘reasonable 18 development costs’ means amounts paid or in- 19 curred for the acquisition of buildings and land, 20 construction, substantial rehabilitation, demoli- 21 tion of structures, or environmental remedi- 22 ation, to the extent that the neighborhood 23 homes credit agency determines that such 24 amounts meet the standards specified pursuant 25 VerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657 DMWilson on DSKJM0X7X2PROD with BILLS 5 •S 657 IS to subsection (f)(1)(C) (as of the date on which 1 construction or substantial rehabilitation is sub- 2 stantially complete, as determined by such 3 agency) and are necessary to ensure the finan- 4 cial feasibility of such qualified residence. 5 ‘‘(B) CONSIDERATIONS IN MAKING DETER- 6 MINATION.—In making the determination under 7 subparagraph (A), the neighborhood homes 8 credit agency shall consider— 9 ‘‘(i) the sources and uses of funds and 10 the total financing, 11 ‘‘(ii) any proceeds or receipts gen- 12 erated or expected to be generated by rea- 13 son of tax benefits, and 14 ‘‘(iii) the reasonableness of the devel- 15 opmental costs and fees. 16 ‘‘(2) ELIGIBLE DEVELOPMENT COSTS.—The 17 term ‘eligible development costs’ means the amount 18 which would be reasonable development costs if the 19 amounts taken into account as paid or incurred for 20 the acquisition of buildings and land did not exceed 21 75 percent of such costs determined without regard 22 to any amount paid or incurred for the acquisition 23 of buildings and land. 24 VerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657 DMWilson on DSKJM0X7X2PROD with BILLS 6 •S 657 IS ‘‘(3) SUBSTANTIAL REHABILITATION.—The 1 term ‘substantial rehabilitation’ means amounts paid 2 or incurred for rehabilitation of a qualified residence 3 if such amounts exceed the greater of— 4 ‘‘(A) $20,000, or 5 ‘‘(B) 20 percent of the amounts paid or in- 6 curred by the taxpayer for the acquisition of 7 buildings and land with respect to such quali- 8 fied residence. 9 ‘‘(4) CONSTRUCTION AND REHABILITATION 10 ONLY AFTER ALLOCATION TAKEN INTO ACCOUNT.— 11 ‘‘(A) IN GENERAL.—The terms ‘reasonable 12 development costs’ and ‘eligible development 13 costs’ shall not include any amount paid or in- 14 curred before the date on which an allocation is 15 made to the taxpayer under subsection (e) with 16 respect to the qualified project of which the 17 qualified residence is part unless such amount 18 is paid or incurred for the acquisition of build- 19 ings or land. 20 ‘‘(B) LAND AND BUILDING ACQUISITION 21 COSTS.—Amounts paid or incurred for the ac- 22 quisition of buildings or land shall be included 23 under paragraph (A) only if paid or incurred 24 not more than 3 years before the date on which 25 VerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657 DMWilson on DSKJM0X7X2PROD with BILLS 7 •S 657 IS the allocation referred to in subparagraph (A) 1 is made. If the taxpayer acquired any building 2 or land from an entity (or any related party to 3 such entity) that holds an ownership interest in 4 the taxpayer, then such entity must also have 5 acquired such property within such 3-year pe- 6 riod, and the acquisition cost included under 7 subparagraph (A) with respect to the taxpayer 8 shall not exceed the amount such entity paid or 9 incurred to acquire such property. 10 ‘‘(c) QUALIFIED RESIDENCE.—For purposes of this 11 section— 12 ‘‘(1) IN GENERAL.—The term ‘qualified resi- 13 dence’ means a residence that— 14 ‘‘(A) is real property affixed on a perma- 15 nent foundation, 16 ‘‘(B) is— 17 ‘‘(i) a house which is comprised of 4 18 or fewer residential units, 19 ‘‘(ii) a condominium unit, or 20 ‘‘(iii) a house or an apartment owned 21 by a cooperative housing corporation (as 22 defined in section 216(b)), 23 ‘‘(C) is part of a qualified project with re- 24 spect to which the neighborhood homes credit 25 VerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657 DMWilson on DSKJM0X7X2PROD with BILLS 8 •S 657 IS agency has made an allocation under subsection 1 (e), and 2 ‘‘(D) is located in a qualified census tract 3 (determined as of the date of such allocation). 4 ‘‘(2) QUALIFIED CENSUS TRACT.— 5 ‘‘(A) IN GENERAL.—The term ‘qualified 6 census tract’ means a census tract— 7 ‘‘(i) which— 8 ‘‘(I) has a median family income 9 which does not exceed 80 percent of 10 the median family income for the ap- 11 plicable area, 12 ‘‘(II) has a poverty rate that is 13 not less than 130 percent of the pov- 14 erty rate of the applicable area, and 15 ‘‘(III) has a median value for 16 owner-occupied homes that does not 17 exceed the median value for owner-oc- 18 cupied homes in the applicable area, 19 ‘‘(ii) which— 20 ‘‘(I) is located in a city which has 21 a population of not less than 50,000 22 and such city has a poverty rate that 23 is not less than 150 percent of the 24 poverty rate of the applicable area, 25 VerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657 DMWilson on DSKJM0X7X2PROD with BILLS 9 •S 657 IS ‘‘(II) has a median family income 1 which does not exceed the median 2 family income for the applicable area, 3 and 4 ‘‘(III) has a median value for 5 owner-occupied homes that does not 6 exceed 80 percent of the median value 7 for owner-occupied homes in the ap- 8 plicable area, 9 ‘‘(iii) which— 10 ‘‘(I) is located in a nonmetropoli- 11 tan county, 12 ‘‘(II) has a median family income 13 which does not exceed the median 14 family income for the applicable area, 15 and 16 ‘‘(III) has been designated by a 17 neighborhood homes credit agency 18 under this clause, or 19 ‘‘(iv) which is not otherwise a quali- 20 fied census tract and is located in a dis- 21 aster area (as defined in section 22 7508A(d)(3)), but only with respect to 23 credits allocated in any period during 24 which the President of the United States 25 VerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657 DMWilson on DSKJM0X7X2PROD with BILLS 10 •S 657 IS has determined that such area warrants in- 1 dividual or individual and public assistance 2 by the Federal Government under the Rob- 3 ert T. Stafford Disaster Relief and Emer- 4 gency Assistance Act. 5 ‘‘(B) APPLICABLE AREA.—The term ‘appli- 6 cable area’ means— 7 ‘‘(i) in the case of a metropolitan cen- 8 sus tract, the metropolitan area in which 9 such census tract is located, and 10 ‘‘(ii) in the case of a census tract 11 other than a census tract described in 12 clause (i), the State. 13 ‘‘(d) AFFORDABLE SALE.—For purposes of this sec- 14 tion— 15 ‘‘(1) IN GENERAL.—The term ‘affordable sale’ 16 means a sale to a qualified homeowner of a qualified 17 residence that the neighborhood homes credit agency 18 certifies as meeting the standards promulgated 19 under subsection (f)(1)(D) for a price that does not 20 exceed— 21 ‘‘(A) in the case of any qualified residence 22 not described in subparagraph (B), (C), or (D), 23 the amount equal to the product of 4 multiplied 24 by the median family income for the applicable 25 VerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657 DMWilson on DSKJM0X7X2PROD with BILLS 11 •S 657 IS area (as determined pursuant to the most re- 1 cent census data available as of the date of the 2 contract for such sale), 3 ‘‘(B) in the case of a house comprised of 4 2 residential units, 125 percent of the amount 5 described in subparagraph (A), 6 ‘‘(C) in the case of a house comprised of 7 3 residential units, 150 percent of the amount 8 described in subparagraph (A), or 9 ‘‘(D) in the case of a house comprised of 10 4 residential units, 175 percent of the amount 11 described in subparagraph (A). 12 ‘‘(2) QUALIFIED HOMEOWNER.—The term 13 ‘qualified homeowner’ means, with respect to a 14 qualified residence, an individual— 15 ‘‘(A) who owns and uses such qualified res- 16 idence as the principal residence of such indi- 17 vidual, and 18 ‘‘(B) whose family income (determined as 19 of the date that a binding contract for the af- 20 fordable sale of such residence is entered into) 21 is 140 percent or less of the median family in- 22 come for the applicable area in which the quali- 23 fied residence is located. 24 ‘‘(e) CREDIT CEILING AND ALLOCATIONS.— 25 VerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657 DMWilson on DSKJM0X7X2PROD with BILLS 12 •S 657 IS ‘‘(1) CREDIT LIMITED BASED ON ALLOCATIONS 1 TO QUALIFIED PROJECTS.— 2 ‘‘(A) IN GENERAL.—The credit allowed 3 under subsection (a) to any taxpayer for any 4 taxable year with respect to one or more quali- 5 fied residences which are part of the same 6 qualified project shall not exceed the excess (if 7 any) of— 8 ‘‘(i) the amount allocated by the 9 neighborhood homes credit agency under 10 this paragraph to such taxpayer with re- 11 spect to such qualified project, over 12 ‘‘(ii) the aggregate amount of credit 13 allowed under subsection (a) to such tax- 14 payer with respect to qualified residences 15 which are a part of such qualified project 16 for all prior taxable years. 17 ‘‘(B) DEADLINE FOR COMPLETION.—No 18 credit shall be allowed under subsection (a) 19 with respect to any qualified residence unless 20 the affordable sale of such residence is during 21 the 5-year period beginning on the date of the 22 allocation to the qualified project of which such 23 residence is a part (or, in the case of a qualified 24 residence to which subsection (i) applies, the re- 25 VerDate Sep 11 2014 02:17 Mar 17, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S657.IS S657 DMWilson on DSKJM0X7X2PROD with BILLS 13 •S 657 IS habilitation of such residence is completed dur- 1 ing such 5-year period). 2 ‘‘(2) LIMITATIONS ON ALLOCATIONS TO QUALI- 3 FIED PROJECTS.— 4 ‘‘(A) ALLOCATIONS LIMITED BY STATE 5 NEIGHBORHOOD HOMES CREDIT CEILING.—The 6 aggregate amount allocated to taxpayers with 7 respect to qualified projects by the neighbor- 8 hood homes credit agency of any State for any 9 calendar year shall n [Text truncated for display. 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