Frank Adelmann Manufactured Housing Community Sustainability Act

I 116TH CONGRESS 1ST SESSION H. R. 2832 To amend the Internal Revenue Code of 1986 to allow a business credit for gain from the sale of real property for use as a manufactured home community, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MAY 17, 2019 Ms. OMAR (for herself, Ms. LEE of California, Mr. NEGUSE, Mr. POCAN, Mr. PAPPAS, Ms. KUSTER of New Hampshire, Mr. DEFAZIO, and Mr. KHANNA) introduced the following bill; which was referred to the Com- mittee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to allow a business credit for gain from the sale of real property for use as a manufactured home community, 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 ‘‘Frank Adelmann Man- 4 ufactured Housing Community Sustainability Act’’. 5 SEC. 2. FINDINGS. 6 The Congress finds that— 7 VerDate Sep 11 2014 01:22 May 30, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2832.IH H2832 kjohnson on DSK79L0C42 with BILLS 2 •HR 2832 IH (1) more than 17 million people live in manu- 1 factured homes, benefitting from high-quality afford- 2 able homes that can provide them stability; 3 (2) owners of manufactured homes are dis- 4 proportionately low-income households: in 2013, the 5 median annual household income for those living in 6 manufactured housing was $28,400; 7 (3) about 75 percent of manufactured home 8 households earn less than $50,000; 9 (4) over 10 percent of United States veterans 10 live in manufactured homes; 11 (5) in the late 1990s, manufactured housing 12 represented two-thirds of the new affordable housing 13 produced in the United States, and it remains the 14 largest source of unsubsidized affordable housing in 15 the country; 16 (6) as of 2015, the average cost per square foot 17 for a new manufactured home was $48, less than 18 half the $101 per square foot of the structure-only 19 cost of a new site-built home; 20 (7) in 2009, 43 percent of all new homes that 21 sold for less than $150,000 were manufactured 22 homes; 23 (8) manufactured homes accounts for 23 per- 24 cent of new home sales under $200,000; 25 VerDate Sep 11 2014 01:22 May 30, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2832.IH H2832 kjohnson on DSK79L0C42 with BILLS 3 •HR 2832 IH (9) more than 50,000 manufactured home com- 1 munities, or ‘‘mobile home parks’’, exist throughout 2 the United States; 3 (10) more than 2.9 million manufactured homes 4 are placed in manufactured home communities; 5 (11) manufactured home communities provide 6 critical affordable housing but receive very little 7 local, State, or Federal funds subsidizing the cost of 8 these homes; 9 (12) manufactured home owners in commu- 10 nities may own the home, but they do not own the 11 land under their homes, leaving them vulnerable to 12 rent increases, arbitrary rule enforcement, and even 13 closure of the community if the community owner 14 decides to convert the land to some other use; 15 (13) eviction or closure of manufactured home 16 communities is very disruptive to residents who may 17 be unable to pay the thousands of dollars it takes to 18 move their home or even find a new location for 19 their home; 20 (14) in the past two decades, a national net- 21 work of housing providers has helped residents pur- 22 chase and own the land and manage the community 23 in order to preserve a crucial source of affordable 24 housing; 25 VerDate Sep 11 2014 01:22 May 30, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2832.IH H2832 kjohnson on DSK79L0C42 with BILLS 4 •HR 2832 IH (15) nationwide, there are more than 1,000 of 1 these stable, permanent ownership cooperatives or 2 nonprofit-owned developments in more than a dozen 3 States; 4 (16) members continue to own their own homes 5 individually and an equal share of the land beneath 6 the entire neighborhood where everyone has a say in 7 the way the resident-owned community is run, and 8 major decisions are made by democratic vote by a 9 member-elected board of directors; 10 (17) in New Hampshire, more than 20 percent 11 of manufactured home communities are owned by 12 residents; 13 (18) in Vermont, Massachusetts, Rhode Island, 14 Washington, Oregon, and Minnesota, resident-owned 15 cooperatives and nonprofit ownership have flour- 16 ished; 17 (19) nationwide, only 2 percent of all manufac- 18 tured home communities are resident- or nonprofit- 19 owned; 20 (20) owners are frequently reluctant to sell the 21 community because they would prefer to pass the 22 property on to their heirs tax free and avoid capital 23 gains taxes; 24 VerDate Sep 11 2014 01:22 May 30, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2832.IH H2832 kjohnson on DSK79L0C42 with BILLS 5 •HR 2832 IH (21) when the owner dies, the heirs frequently 1 sell the community to the highest bidder resulting in 2 displacement for dozens and sometimes hundreds of 3 families; and 4 (22) a Federal tax benefit needs to be estab- 5 lished to induce owners to sell to residents they have 6 known for decades or to nonprofit organizations in 7 order to preserve the community for years to come. 8 SEC. 3. TAX CREDIT FOR MANUFACTURED HOME COMMU- 9 NITY SALE TO RESIDENTS OR NONPROFIT 10 ENTITY. 11 (a) IN GENERAL.—Subpart D of part IV of sub- 12 chapter A of chapter 1 of the Internal Revenue Code of 13 1986 (relating to business related credits) is amended by 14 adding at the end the following new section: 15 ‘‘SEC. 45T. MANUFACTURED HOME COMMUNITY SALE TO 16 RESIDENTS OR NONPROFIT ENTITY. 17 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec- 18 tion 38, the manufactured home community sale credit de- 19 termined under this section for any taxable year is an 20 amount equal to 75 percent of the qualified gain received 21 by the taxpayer during the taxable year. 22 ‘‘(b) DEFINITIONS.—For purposes of this section— 23 ‘‘(1) QUALIFIED GAIN.—The term ‘qualified 24 gain’ means gain from the sale or exchange of real 25 VerDate Sep 11 2014 01:22 May 30, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2832.IH H2832 kjohnson on DSK79L0C42 with BILLS 6 •HR 2832 IH property to a qualified manufactured home commu- 1 nity cooperative or corporation if— 2 ‘‘(A) the real property is acquired for use 3 as a manufactured home community, and 4 ‘‘(B) the requirements of paragraph (2) 5 are met. 6 ‘‘(2) REQUIREMENTS.—The requirements of 7 this paragraph are met if— 8 ‘‘(A) the seller (or any related person) 9 owned the property for not less than the 2-year 10 period ending before the sale or exchange, and 11 ‘‘(B) the property is transferred subject to 12 a binding covenant that the property will be 13 used as a manufactured home community for a 14 term of not less than 50 years (or, in the case 15 of a manufactured home community located in 16 a State the laws of which restrict such covenant 17 to a lesser term, the maximum permissible term 18 allowed under such State laws). 19 ‘‘(3) MANUFACTURED HOME COMMUNITY.—The 20 term ‘manufactured home community’ means a com- 21 munity comprised primarily of manufactured homes 22 used solely for residential purposes and owned by a 23 manufactured home community cooperative or cor- 24 poration. 25 VerDate Sep 11 2014 01:22 May 30, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2832.IH H2832 kjohnson on DSK79L0C42 with BILLS 7 •HR 2832 IH ‘‘(4) MANUFACTURED HOME COMMUNITY COOP- 1 ERATIVE OR CORPORATION.— 2 ‘‘(A) IN GENERAL.—The term ‘qualified 3 manufactured home community cooperative or 4 corporation’ means a cooperative or a nonprofit 5 corporation established pursuant to the laws of 6 the State in which the property used as a man- 7 ufactured home community is located and 8 which— 9 ‘‘(i) in the case of a community owned 10 by a nonprofit corporation whose member- 11 ship interests are sold on a nonappre- 12 ciating basis, has only one class of mem- 13 bership consisting of residents, and 14 ‘‘(ii) in the case of a community 15 owned by a cooperative, has no more than 16 two classes of membership, which includes 17 both members and a tax-exempt organiza- 18 tion actively engaged in supporting afford- 19 able housing and resident-owned manufac- 20 tured home communities. 21 ‘‘(B) GOVERNANCE.—An entity shall not 22 be treated as a qualified manufactured home 23 community cooperative or corporation for pur- 24 poses of subparagraph (A) unless governance of 25 VerDate Sep 11 2014 01:22 May 30, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2832.IH H2832 kjohnson on DSK79L0C42 with BILLS 8 •HR 2832 IH the entity is carried out by members elected to 1 a board of directors with voting structured eq- 2 uitably among all members. 3 ‘‘(C) MEMBER.—The term ‘member’ 4 means— 5 ‘‘(i) an individual— 6 ‘‘(I) has attained the age of 18, 7 ‘‘(II) is entitled by reason of the 8 individual’s membership interest to 9 execute an occupancy agreement with 10 the manufactured home community 11 cooperative nonprofit with respect to 12 one site in the manufactured home 13 community for the purposes of situ- 14 ating a manufactured home owned by 15 the member or, as permitted by the 16 manufactured community cooperative 17 or corporation, the member’s trust or 18 other entity, and 19 ‘‘(III) is a resident of the manu- 20 factured home community, and 21 ‘‘(ii) a tax exempt organization. 22 ‘‘(5) MEMBERSHIP INTEREST.—The term 23 ‘membership interest’ means an ownership interest 24 in a manufactured home community cooperative or 25 VerDate Sep 11 2014 01:22 May 30, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2832.IH H2832 kjohnson on DSK79L0C42 with BILLS 9 •HR 2832 IH corporation or a membership interest in a manufac- 1 tured home community nonprofit corporation. 2 ‘‘(6) MANUFACTURED HOME.—The term ‘man- 3 ufactured home’ means a structure, transportable in 4 one or more sections, which— 5 ‘‘(A) in the traveling mode, is 8 body feet 6 or more in width and 40 body feet or more in 7 length, or when erected on site, is 320 square 8 feet or more, 9 ‘‘(B) is built on a permanent chassis and 10 designed to be used as a dwelling (with or with- 11 out a permanent foundation when connected to 12 required utilities) and includes plumbing, heat- 13 ing, and electrical heating systems, and 14 ‘‘(C) in the case of a structure manufac- 15 tured after June 15, 1976, is certified as meet- 16 ing the Manufactured Home Construction and 17 Safety Standards issued under the National 18 Manufactured Housing Construction and Safety 19 Standards Act of 1974 (42 U.S.C. 5401–5426) 20 by the Department of Housing and Urban De- 21 velopment and displays a label of such certifi- 22 cation on the exterior of each transportable sec- 23 tion. 24 ‘‘(c) SPECIAL RULES.— 25 VerDate Sep 11 2014 01:22 May 30, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2832.IH H2832 kjohnson on DSK79L0C42 with BILLS 10 •HR 2832 IH ‘‘(1) RELATED PERSON.—For purposes of sub- 1 section (b)(2)(A), a person (hereafter in this sub- 2 paragraph referred to as the ‘related person’) is re- 3 lated to the seller if— 4 ‘‘(A) the related person bears a relation- 5 ship to the seller specified in section 267(b) or 6 707(b)(1), or 7 ‘‘(B) the related person and the seller are 8 engaged in trades or businesses under common 9 control (within the meaning of subsections (a) 10 and (b) of section 52). 11 ‘‘(2) ELECTION BY BOTH SELLER AND 12 BUYER.—The credit is allowable under this section 13 only if— 14 ‘‘(A) elected by both the seller and the 15 buyer of the real property and evidenced by an 16 affidavit executed by both parties, and 17 ‘‘(B) the buyer of the real property records 18 the affidavit and the affidavit is referenced in 19 its deed to the real property. 20 The seller shall elect the credit under this section on 21 its return of tax. 22 ‘‘(d) TAX UPON VIOLATION OF COVENANT.—There 23 is imposed a tax on the buyer for a violation of the cov- 24 enant specified in subsection (b)(2)(B). The amount of 25 VerDate Sep 11 2014 01:22 May 30, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2832.IH H2832 kjohnson on DSK79L0C42 with BILLS 11 •HR 2832 IH such tax shall be 20 percent of the net proceeds after set- 1 tlement for the sale or exchange of the real property re- 2 ferred to in subsection (b)(2). For purposes of section 3 501(a), the tax imposed by this subsection shall not be 4 treated as a tax imposed by this subtitle. 5 ‘‘(e) REGULATIONS.—The Secretary shall issue such 6 regulations or other guidance as may be necessary to carry 7 out this section, including the recapture of the tax benefit 8 under this section in any case in which the real property 9 described in subsection (b) is not used as a manufactured 10 home community for at least 50 years.’’. 11 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI- 12 NESS CREDIT.—Section 38(b) of such Code is amended 13 by striking ‘‘plus’’ at the end of paragraph (31), by strik- 14 ing the period at the end of paragraph (32) and inserting 15 ‘‘, plus’’, and by adding at the end the following new para- 16 graph: 17 ‘‘(33) the manufactured home community sale 18 credit determined under section 45T(a).’’. 19 (c) CONFORMING AMENDMENTS.— 20 (1) Subsection (c) of section 196 of such Code 21 is amended by striking ‘‘and’’ at the end of para- 22 graph (13), by striking the period at the end of 23 paragraph (14) and inserting ‘‘, and’’, and by add- 24 ing at the end the following new paragraph: 25 VerDate Sep 11 2014 01:22 May 30, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2832.IH H2832 kjohnson on DSK79L0C42 with BILLS 12 •HR 2832 IH ‘‘(15) the manufactured home community sale 1 credit determined under section 45T(a).’’. 2 (2) The table of sections for subpart D of part 3 IV of subchapter A of chapter 1 of such Code is 4 amended by adding at the end the following new 5 item: 6 ‘‘Sec. 45T. Manufactured home community sale to residents or nonprofit enti- ty.’’. (d) EFFECTIVE DATE.—The amendments made by 7 this section shall apply to taxable years beginning after 8 December 31, 2019. 9 Æ VerDate Sep 11 2014 01:22 May 30, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6301 E:\BILLS\H2832.IH H2832 kjohnson on DSK79L0C42 with BILLS