Affordable Housing Credit Improvement Act of 2019

II 116TH CONGRESS 1ST SESSION S. 1703 To amend the Internal Revenue Code of 1986 to reform the low-income housing credit, and for other purposes. IN THE SENATE OF THE UNITED STATES JUNE 4, 2019 Ms. CANTWELL (for herself, Mr. YOUNG, Mr. WYDEN, and Mr. ISAKSON) in- troduced the following bill; which was read twice and referred to the Com- mittee on Finance A BILL To amend the Internal Revenue Code of 1986 to reform the low-income housing credit, 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; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Affordable Housing Credit Improvement Act of 2019’’. 5 (b) TABLE OF CONTENTS.—The table of contents for 6 this Act is as follows: 7 Sec. 1. Short title; table of contents. TITLE I—REFORM OF STATE ALLOCATION FORMULAS Sec. 101. Increases in State allocations. TITLE II—REFORMS RELATING TO TENANT ELIGIBILITY VerDate Sep 11 2014 17:57 Jun 06, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\S1703.IS S1703 pamtmann on DSKBFK8HB2PROD with BILLS 2 •S 1703 IS Sec. 201. Average income test applicability to exempt facility bonds. Sec. 202. Codification of rules relating to increased tenant income. Sec. 203. Modification of student occupancy rules. Sec. 204. Tenant voucher payments taken into account as rent for certain pur- poses. Sec. 205. Requirement that low-income housing credit-supported housing pro- tect victims of domestic abuse. Sec. 206. Clarification of general public use requirement relating to veterans, etc. TITLE III—CREDIT RATE AND OTHER RULES RELATING TO CREDIT ELIGIBILITY AND DETERMINATION Sec. 301. Minimum credit rate. Sec. 302. Reconstruction or replacement period after casualty loss. Sec. 303. Modification and clarification of rights relating to building purchase. Sec. 304. Modification of previous ownership rules; limitation on acquisition basis. Sec. 305. Certain relocation costs taken into account as rehabilitation expendi- tures. Sec. 306. Repeal of qualified census tract population cap. Sec. 307. Determination of community revitalization plan to be made by hous- ing credit agency. Sec. 308. Prohibition of local approval and contribution requirements. Sec. 309. Increase in credit for certain projects designated to serve extremely low-income households. Sec. 310. Increase in credit for bond-financed projects designated by State agency. Sec. 311. Elimination of basis reduction for low-income housing properties re- ceiving certain energy benefits. Sec. 312. Restriction of planned foreclosures. Sec. 313. Increase of population cap for difficult development areas. Sec. 314. Increased cost oversight and accountability. TITLE IV—REFORMS RELATING TO NATIVE AMERICAN ASSISTANCE Sec. 401. Selection criteria under qualified allocation plans. Sec. 402. Inclusion of Indian areas as difficult development areas for purposes of certain buildings. TITLE V—REFORMS RELATING TO RURAL ASSISTANCE Sec. 501. Inclusion of rural areas as difficult development areas. Sec. 502. Uniform income eligibility for rural projects. TITLE VI—EXEMPT FACILITY BONDS Sec. 601. Revision and clarification of the treatment of refunding issues. TITLE VII—AFFORDABLE HOUSING TAX CREDIT Sec. 701. Affordable housing tax credit. VerDate Sep 11 2014 17:57 Jun 06, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6211 E:\BILLS\S1703.IS S1703 pamtmann on DSKBFK8HB2PROD with BILLS 3 •S 1703 IS TITLE I—REFORM OF STATE 1 ALLOCATION FORMULAS 2 SEC. 101. INCREASES IN STATE ALLOCATIONS. 3 (a) PHASE-IN OF INCREASES.— 4 (1) IN GENERAL.—Clause (ii) of section 5 42(h)(3)(C) of the Internal Revenue Code of 1986 6 is amended— 7 (A) by striking ‘‘$1.75’’ in subclause (I) 8 and inserting ‘‘the per capita dollar amount’’, 9 and 10 (B) by striking ‘‘$2,000,000’’ in subclause 11 (II) and inserting ‘‘the minimum ceiling 12 amount’’. 13 (2) PER CAPITA DOLLAR AMOUNT; MINIMUM 14 CEILING AMOUNT.—Subparagraph (I) of section 15 42(h)(3) of such Code is amended to read as follows: 16 ‘‘(I) PER CAPITA DOLLAR AMOUNT; MIN- 17 IMUM CEILING AMOUNT.—For purposes of this 18 paragraph— 19 ‘‘(i) PER CAPITA DOLLAR AMOUNT.— 20 The per capita dollar amount is— 21 ‘‘(I) for calendar year 2019, 22 $2.76, 23 ‘‘(II) for calendar year 2020, 24 $3.10, 25 VerDate Sep 11 2014 17:57 Jun 06, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1703.IS S1703 pamtmann on DSKBFK8HB2PROD with BILLS 4 •S 1703 IS ‘‘(III) for calendar year 2021, 1 $3.49, 2 ‘‘(IV) for calendar year 2022, 3 $3.93, 4 ‘‘(V) for calendar year 2023, 5 $4.42, and 6 ‘‘(VI) $4.96 thereafter. 7 ‘‘(ii) MINIMUM CEILING AMOUNT.— 8 The minimum ceiling amount is— 9 ‘‘(I) for calendar year 2019, 10 $3,166,875, 11 ‘‘(II) for calendar year 2020, 12 $3,565,496, 13 ‘‘(III) for calendar year 2021, 14 $4,010,213, 15 ‘‘(IV) for calendar year 2022, 16 $4,510,487, 17 ‘‘(V) for calendar year 2023, 18 $5,073,171, and 19 ‘‘(VI) $5,700,468 thereafter.’’. 20 (3) MODIFICATION OF COST-OF-LIVING ADJUST- 21 MENT.—Subparagraph (H) of section 42(h)(3) of 22 such Code is amended— 23 (A) by striking ‘‘2002’’ in clause (i) and 24 inserting ‘‘2019’’, 25 VerDate Sep 11 2014 17:57 Jun 06, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1703.IS S1703 pamtmann on DSKBFK8HB2PROD with BILLS 5 •S 1703 IS (B) by striking ‘‘the $2,000,000 and $1.75 1 amounts in subparagraph (C)’’ in clause (i) and 2 inserting ‘‘the dollar amounts applicable to such 3 calendar year under clauses (i) and (ii) of sub- 4 paragraph (I)’’, 5 (C) by striking ‘‘2001’’ in clause (i)(II) 6 and inserting ‘‘2018’’, 7 (D) by striking ‘‘$2,000,000’’ in clause 8 (ii)(I) and inserting ‘‘minimum ceiling’’, and 9 (E) by striking ‘‘$1.75’’ in clause (ii)(II) 10 and inserting ‘‘per capita dollar’’. 11 (4) EFFECTIVE DATE.—The amendments made 12 by this subsection shall apply to calendar years be- 13 ginning after December 31, 2019. 14 (b) PERMANENT INCREASES.— 15 (1) IN GENERAL.—Clause (ii) of section 16 42(h)(3)(C) of the Internal Revenue Code of 1986, 17 as amended by subsection (a)(1), is amended— 18 (A) by striking ‘‘the per capita dollar 19 amount’’ in subclause (I) and inserting 20 ‘‘$4.96’’, and 21 (B) by striking ‘‘the minimum ceiling 22 amount’’ in subclause (II) and inserting 23 ‘‘$5,700,468’’. 24 VerDate Sep 11 2014 17:57 Jun 06, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1703.IS S1703 pamtmann on DSKBFK8HB2PROD with BILLS 6 •S 1703 IS (2) CONFORMING AMENDMENT.—Paragraph (3) 1 of section 42(h) of such Code is amended by striking 2 subparagraph (I), as amended by subsection (a)(2). 3 (3) COST-OF-LIVING ADJUSTMENT.—Subpara- 4 graph (H) of section 42(h)(3) of such Code, as 5 amended by subsection (a)(3), is amended— 6 (A) by striking ‘‘the dollar amounts appli- 7 cable to such calendar year under clauses (i) 8 and (ii) of subparagraph (I)’’ in clause (i) and 9 inserting ‘‘the $5,700,468 and $4.96 amounts 10 in subparagraph (C)’’, 11 (B) by striking ‘‘minimum ceiling’’ in 12 clause (ii)(I) and inserting ‘‘$5,700,468’’, and 13 (C) by striking ‘‘per capita dollar’’ in 14 clause (ii)(II) and inserting ‘‘$4.96’’. 15 (4) EFFECTIVE DATE.—The amendments made 16 by this subsection shall apply to calendar years be- 17 ginning after December 31, 2024. 18 TITLE II—REFORMS RELATING 19 TO TENANT ELIGIBILITY 20 SEC. 201. AVERAGE INCOME TEST APPLICABILITY TO EX- 21 EMPT FACILITY BONDS. 22 (a) IN GENERAL.—Paragraph (1) of section 142(d) 23 of the Internal Revenue Code of 1986 is amended— 24 VerDate Sep 11 2014 17:57 Jun 06, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1703.IS S1703 pamtmann on DSKBFK8HB2PROD with BILLS 7 •S 1703 IS (1) by striking ‘‘(A) or (B)’’ and inserting ‘‘(A), 1 (B), or (C)’’, and 2 (2) by inserting after subparagraph (B) the fol- 3 lowing new subparagraph: 4 ‘‘(C) AVERAGE INCOME TEST.—A project 5 meets the requirements of this subparagraph if 6 it meets the minimum requirements of section 7 42(g)(1)(C).’’. 8 (b) EFFECTIVE DATE.—The amendments made by 9 this section shall apply to elections made under section 10 142(d)(1) of the Internal Revenue Code of 1986 after 11 March 23, 2018. 12 SEC. 202. CODIFICATION OF RULES RELATING TO IN- 13 CREASED TENANT INCOME. 14 (a) IN GENERAL.—Clause (i) of section 42(g)(2)(D) 15 of the Internal Revenue Code of 1986 is amended by strik- 16 ing ‘‘clauses (ii), (iii), and (iv)’’ and all that follows and 17 inserting ‘‘clauses (ii), (iii), (iv), and (vi), notwithstanding 18 an increase in the income of the occupants above the in- 19 come limitation applicable under paragraph (1)— 20 ‘‘(I) a low-income unit shall con- 21 tinue to be treated as a low-income 22 unit if the income of such occupants 23 initially was 60 percent or less of area 24 VerDate Sep 11 2014 17:57 Jun 06, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1703.IS S1703 pamtmann on DSKBFK8HB2PROD with BILLS 8 •S 1703 IS median gross income and such unit 1 continues to be rent-restricted, and 2 ‘‘(II) a unit to which, at the time 3 of initial occupancy by such occu- 4 pants, any Federal, State, or local 5 government income restriction ap- 6 plied, and which subsequently becomes 7 part of a building with respect to 8 which rehabilitation expenditures are 9 taken into account under subsection 10 (e), shall be treated as a low-income 11 unit if the income of such occupants 12 initially was 60 percent or less of area 13 median gross income and does not ex- 14 ceed 120 percent of area median gross 15 income as of the date of acquisition of 16 the property by the taxpayer.’’. 17 (b) EXCEPTION.—Subparagraph (D) of section 18 42(g)(2) of the Internal Revenue Code of 1986, as amend- 19 ed by this Act, is amended by adding at the end the fol- 20 lowing new clause: 21 ‘‘(vi) EXCEPTION TO RULE RELATING 22 TO INCREASED TENANT INCOME.—In the 23 case of an occupant of a low-income unit 24 who initially qualified to occupy such unit 25 VerDate Sep 11 2014 17:57 Jun 06, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1703.IS S1703 pamtmann on DSKBFK8HB2PROD with BILLS 9 •S 1703 IS by reason of paragraph (1)(C) with an in- 1 come in excess of 60 percent of area me- 2 dian gross income but not in excess of 80 3 percent of area median gross income, 4 clause (i) shall be applied for substituting 5 ‘80 percent’ for ‘60 percent’ each place it 6 appears.’’. 7 (c) EFFECTIVE DATE.—The amendments made by 8 this section shall apply to taxable years beginning after 9 December 31, 2018. 10 SEC. 203. MODIFICATION OF STUDENT OCCUPANCY RULES. 11 (a) IN GENERAL.—Subparagraph (D) of section 12 42(i)(3) of the Internal Revenue Code of 1986 is amended 13 to read as follows: 14 ‘‘(D) RULES RELATING TO STUDENTS.— 15 ‘‘(i) IN GENERAL.—A unit occupied 16 solely by individuals who— 17 ‘‘(I) have not attained age 24, 18 and 19 ‘‘(II) are enrolled in a full-time 20 course of study at an institution of 21 higher education (as defined in section 22 3304(f)), 23 shall not be treated as a low-income unit. 24 VerDate Sep 11 2014 17:57 Jun 06, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1703.IS S1703 pamtmann on DSKBFK8HB2PROD with BILLS 10 •S 1703 IS ‘‘(ii) EXCEPTION FOR CERTAIN FED- 1 ERAL PROGRAMS.—In the case of a feder- 2 ally-assisted building (as defined in sub- 3 section (d)(6)(C)(i)), clause (i) shall not 4 apply to a unit all of the occupants of 5 which meet all applicable requirements 6 under the housing program described in 7 such subsection through which the building 8 is assisted, financed, or operated. 9 ‘‘(iii) OTHER EXCEPTIONS.—An indi- 10 vidual shall not be treated as described in 11 clause (i) if the individual— 12 ‘‘(I) is married, 13 ‘‘(II) is a person with disabilities 14 (as defined in section 3(b)(3)(E) of 15 the United States Housing Act of 16 1937), 17 ‘‘(III) is a veteran (as defined in 18 section 101(2) of title 38, United 19 States Code), 20 ‘‘(IV) has 1 or more qualifying 21 children (as defined in section 22 152(c)), 23 ‘‘(V) is or has been a victim or 24 threatened victim of domestic violence, 25 VerDate Sep 11 2014 17:57 Jun 06, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1703.IS S1703 pamtmann on DSKBFK8HB2PROD with BILLS 11 •S 1703 IS dating violence, sexual assault, or 1 stalking (as defined in section 40002 2 of the Violence Against Women Act of 3 1994), or 4 ‘‘(VI) meets the income limita- 5 tion applicable under subsection 6 (g)(1) to the project of which the 7 building is a part and is, or was im- 8 mediately prior to attaining the age of 9 majority— 10 ‘‘(aa) an emancipated minor 11 or in legal guardianship as deter- 12 mined by a court of competent 13 jurisdiction in the individual’s 14 State of legal residence, 15 ‘‘(bb) under the care and 16 placement responsibility of the 17 State agency responsible for ad- 18 ministering a plan under part B 19 or part E of title IV of the Social 20 Security Act, or 21 ‘‘(cc) an unaccompanied 22 youth (within the meaning of sec- 23 tion 725(6) of the McKinney- 24 Vento Homeless Assistance Act 25 VerDate Sep 11 2014 17:57 Jun 06, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1703.IS S1703 pamtmann on DSKBFK8HB2PROD with BILLS 12 •S 1703 IS (42 U.S.C. 11434a(6))) or a 1 homeless child or youth (within 2 the meaning of section 725(2) of 3 such Act (42 U.S.C. 4 11434a(2))).’’. 5 (b) EFFECTIVE DATE.—The amendment made by 6 this section shall apply to taxable years beginning after 7 December 31, 2019. 8 SEC. 204. TENANT VOUCHER PAYMENTS TAKEN INTO AC- 9 COUNT AS RENT FOR CERTAIN PURPOSES. 10 (a) IN GENERAL.—Subparagraph (B) of section 11 42(g)(2) of the Internal Revenue Code of 1986 is amended 12 by adding at the end the following new sentence: ‘‘In the 13 case of a project with respect to which the taxpayer elects 14 the requirements of subparagraph (C) of paragraph (1), 15 or the portion of a project to which subsection (d)(5)(C) 16 applies, clause (i) shall not apply with respect to any ten- 17 ant-based assistance (as defined in section 8(f)(7) of the 18 United States Housing Act of 1937 (42 U.S.C. 19 1437f(f)(7))).’’. 20 (b) EFFECTIVE DATE.—The amendments made by 21 this section shall apply to rent paid in taxable years begin- 22 ning after December 31, 2019. 23 VerDate Sep 11 2014 17:57 Jun 06, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1703.IS S1703 pamtmann on DSKBFK8HB2PROD with BILLS 13 •S 1703 IS SEC. 205. REQUIREMENT THAT LOW-INCOME HOUSING 1 CREDIT-SUPPORTED HOUSING PROTECT VIC- 2 TIMS OF DOMESTIC ABUSE. 3 (a) IN GENERAL.—Subparagraph (B) of section 4 42(h)(6) of the Internal Revenue Code of 19 [Text truncated for display. Full text available on Congress.gov.]