Manufactured Housing Community Sustainability Act of 2019

II 116TH CONGRESS 1ST SESSION S. 2571 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 SENATE OF THE UNITED STATES SEPTEMBER 26, 2019 Mrs. SHAHEEN (for herself and Ms. SMITH) 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 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 ‘‘Manufactured Housing 4 Community Sustainability Act of 2019’’. 5 SEC. 2. FINDINGS. 6 The Congress finds that— 7 VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2571.IS S2571 kjohnson on DSK79L0C42 with BILLS 2 •S 2571 IS (1) more than 17,000,000 people live in manu- 1 factured homes and benefit from high-quality afford- 2 able homes which provide stability; 3 (2) owners of manufactured homes have dis- 4 proportionately low-income households, and in 2013, 5 the median annual household income for living in 6 manufactured housing was $28,400; 7 (3) approximately 75 percent of manufactured 8 home households earn less than $50,000 per year; 9 (4) more than 10 percent of veterans in the 10 United States live in manufactured homes; 11 (5) in late 1990, manufactured housing rep- 12 resented 2⁄3 of the new affordable housing produced 13 in the United States and remains a significant 14 source of unsubsidized affordable housing in the 15 United States; 16 (6) in 2015, the average cost per square foot 17 for a new manufactured home was 48 dollars, less 18 than half of the cost per square foot for a new-site 19 built, structure-only home, which was $101; 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 account for 23 percent 24 of new home sales under $200,000; 25 VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2571.IS S2571 kjohnson on DSK79L0C42 with BILLS 3 •S 2571 IS (9) more than 50,000 manufactured home com- 1 munities, also referred to as ‘‘mobile home parks’’, 2 exist throughout the United States; 3 (10) more than 2,900,000 manufactured homes 4 are placed in manufactured home communities; 5 (11) manufactured home communities provide 6 critical affordable housing, but receive very little 7 Federal, State, or local funds to subsidize the cost 8 of manufactured homes; 9 (12) manufactured home owners in such com- 10 munities may own the home, but they do not own 11 the land under the home, which leaves the home 12 owners vulnerable to rent increases, arbitrary rule 13 enforcement, and in the case of a manufactured 14 home community owner converting the land to some 15 other use, community closure; 16 (13) an eviction or closure of a manufactured 17 home community is very disruptive to a resident who 18 may be unable to pay the thousands of dollars it 19 takes to move the manufactured home or find a new 20 location for the manufactured home; 21 (14) in an effort to preserve a crucial source of 22 affordable housing within the past two decades, a 23 national network of housing providers has helped 24 residents purchase and own the land under the man- 25 VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2571.IS S2571 kjohnson on DSK79L0C42 with BILLS 4 •S 2571 IS ufactured home community, and manage the manu- 1 factured home community; 2 (15) nationwide, there are more than 1,000 sta- 3 ble, permanent ownership cooperatives or nonprofit- 4 owned developments in more than a dozen States; 5 (16) members of manufactured home commu- 6 nities continue to own such homes individually, own 7 an equal share of the land beneath the entire manu- 8 factured home community, participate in the gov- 9 erning of the community, and elect a board of direc- 10 tors who make major decisions within the manufac- 11 tured home community by a democratic vote; 12 (17) in New Hampshire, more than 30 percent 13 of manufactured home communities are owned by 14 residents; 15 (18) resident-owned cooperatives and nonprofit 16 owned communities have also flourished in Vermont, 17 Massachusetts, Rhode Island, Washington, Oregon, 18 and Minnesota; 19 (19) nationwide, only 2 percent of all manufac- 20 tured home communities are resident or nonprofit- 21 owned; 22 (20) manufactured home community owners 23 often prefer to devise such property tax free, rather 24 VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2571.IS S2571 kjohnson on DSK79L0C42 with BILLS 5 •S 2571 IS than selling the community, in order to avoid capital 1 gain taxes; 2 (21) when the owner of a manufactured home 3 community dies, the heirs of the owner frequently 4 sell the community to the highest bidder which re- 5 sults in displacement for dozens and sometimes hun- 6 dreds of families; and 7 (22) in order to preserve manufactured home 8 communities in the future, a Federal tax benefit 9 should be established to induce manufactured home 10 community owners to sell such properties to resi- 11 dents that the owners have known for decades, or to 12 nonprofit organizations. 13 SEC. 3. TAX CREDIT FOR MANUFACTURED HOME COMMU- 14 NITY SALE TO RESIDENTS OR NONPROFIT 15 ENTITY. 16 (a) IN GENERAL.—Subpart D of part IV of sub- 17 chapter A of chapter 1 of the Internal Revenue Code of 18 1986 (relating to business related credits) is amended by 19 adding at the end the following new section: 20 ‘‘SEC. 45T. MANUFACTURED HOME COMMUNITY SALE TO 21 RESIDENTS OR NONPROFIT ENTITY. 22 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec- 23 tion 38, the manufactured home community sale credit de- 24 termined under this section for any taxable year is an 25 VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2571.IS S2571 kjohnson on DSK79L0C42 with BILLS 6 •S 2571 IS amount equal to 75 percent of the qualified gain received 1 by the taxpayer during the taxable year. 2 ‘‘(b) DEFINITIONS.—For purposes of this section— 3 ‘‘(1) QUALIFIED GAIN.—The term ‘qualified 4 gain’ means gain from the sale or exchange of real 5 property to a qualified manufactured home commu- 6 nity cooperative or corporation if— 7 ‘‘(A) the real property is acquired for use 8 as a manufactured home community, 9 ‘‘(B) the seller (or any related person) 10 owned the property for the entire 2-year period 11 ending on the day before the sale or exchange, 12 and 13 ‘‘(C) the property is transferred subject to 14 a binding covenant that the property will be 15 used as a manufactured home community for 16 not less than 50 years (or, in the case of a 17 manufactured home community located in a 18 State the laws of which restrict such covenant 19 to a lesser term, the maximum permissible term 20 allowed under such State laws). 21 ‘‘(2) MANUFACTURED HOME COMMUNITY.—The 22 term ‘manufactured home community’ means a com- 23 munity comprised primarily of manufactured homes 24 used solely for residential purposes and owned by a 25 VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2571.IS S2571 kjohnson on DSK79L0C42 with BILLS 7 •S 2571 IS manufactured home community cooperative or cor- 1 poration. 2 ‘‘(3) QUALIFIED MANUFACTURED HOME COM- 3 MUNITY COOPERATIVE OR CORPORATION.— 4 ‘‘(A) IN GENERAL.—The term ‘qualified 5 manufactured home community cooperative or 6 corporation’ means a cooperative or a nonprofit 7 corporation established pursuant to the laws of 8 the State in which the property used as a man- 9 ufactured home community is located, and 10 which— 11 ‘‘(i) in the case of a community owned 12 by a nonprofit corporation whose member- 13 ship interests are sold on a nonappre- 14 ciating basis, has only 1 class of member- 15 ship and such class consists solely of resi- 16 dents, and 17 ‘‘(ii) in the case of a community 18 owned by a cooperative, has not more than 19 2 classes of membership, and such classes 20 consist solely of residents and a tax-exempt 21 organization. 22 ‘‘(B) GOVERNANCE.—An entity shall not 23 be treated as a qualified manufactured home 24 community cooperative or corporation unless 25 VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2571.IS S2571 kjohnson on DSK79L0C42 with BILLS 8 •S 2571 IS governance of the entity is carried out by mem- 1 bers elected to a board of directors with voting 2 structured equitably among all members. 3 ‘‘(C) MEMBER.—The term ‘member’ 4 means— 5 ‘‘(i) an individual who— 6 ‘‘(I) has attained the age of 18, 7 ‘‘(II) is entitled to be a member 8 by reason of— 9 ‘‘(aa) the membership inter- 10 est of the individual to execute 11 an occupancy agreement with the 12 manufactured home community 13 cooperative nonprofit with re- 14 spect to a site in the manufac- 15 tured home community in order 16 to establish a manufactured 17 home which is owned by the indi- 18 vidual, or 19 ‘‘(bb) permission from the 20 manufactured community cooper- 21 ative or corporation, the mem- 22 ber’s trust, or other entity, and 23 ‘‘(III) is a resident of the manu- 24 factured home community, and 25 VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2571.IS S2571 kjohnson on DSK79L0C42 with BILLS 9 •S 2571 IS ‘‘(ii) a tax exempt organization. 1 ‘‘(4) MEMBERSHIP INTEREST.—The term 2 ‘membership interest’ means— 3 ‘‘(A) an ownership interest in a manufac- 4 tured home community cooperative or corpora- 5 tion, or 6 ‘‘(B) a membership interest in a manufac- 7 tured home community nonprofit corporation. 8 ‘‘(5) MANUFACTURED HOME.—The term ‘man- 9 ufactured home’ means a structure which is trans- 10 portable in one or more sections, which— 11 ‘‘(A) in traveling mode, is 8 body feet or 12 more in width and 40 body feet or more in 13 length, or, when erected on site, is 320 square 14 feet or more, 15 ‘‘(B) is built on a permanent chassis and 16 designed to be used as a dwelling (with or with- 17 out a permanent foundation when connected to 18 required utilities) and includes plumbing, heat- 19 ing, and electrical heating systems, and 20 ‘‘(C) in the case of a structure manufac- 21 tured after June 15, 1976, is certified as meet- 22 ing the Manufactured Home Construction and 23 Safety Standards issued under the National 24 Manufactured Housing Construction and Safety 25 VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2571.IS S2571 kjohnson on DSK79L0C42 with BILLS 10 •S 2571 IS Standards Act of 1974 (42 U.S.C. 5401 et 1 seq.) by the Department of Housing and Urban 2 Development and displays a label of such cer- 3 tification on the exterior of each transportable 4 section. 5 ‘‘(c) SPECIAL RULES.— 6 ‘‘(1) RELATED PERSON.—For purposes of sub- 7 section (b)(1)(B), a person is related to the seller 8 if— 9 ‘‘(A) such person bears a relationship to 10 the seller as specified in section 267(b) or 11 707(b)(1), or 12 ‘‘(B) such person and the seller are en- 13 gaged in trades or businesses under common 14 control within the meanings of subsections (a) 15 and (b) of section 52. 16 ‘‘(2) ELECTION BY BOTH SELLER AND 17 BUYER.—The credit is allowable under this section 18 only if— 19 ‘‘(A) both the seller and the purchaser of 20 the real property execute an affidavit rep- 21 resenting that the sale meets the requirements 22 of subsection (b)(1), and the purchaser ac- 23 knowledges liability for the recapture of the 24 VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2571.IS S2571 kjohnson on DSK79L0C42 with BILLS 11 •S 2571 IS credit under subsection (d) in case of any viola- 1 tion described in such subsection, 2 ‘‘(B) the purchaser of the real property 3 records the affidavit, and 4 ‘‘(C) the affidavit is referenced in the deed 5 to the real property. 6 ‘‘(3) REQUIREMENT.—The seller shall include a 7 copy of the affidavit representing the sale with the 8 return of tax. 9 ‘‘(d) TAX UPON VIOLATION OF COVENANT.—There 10 is imposed a tax on the buyer for a violation of the cov- 11 enant specified in subsection (b)(1)(C). The amount of 12 such tax shall be 20 percent of the net proceeds after set- 13 tlement for the sale or exchange of the real property re- 14 ferred to in subsection (b)(1). For purposes of section 15 501(a), the tax imposed by this subsection shall not be 16 treated as a tax imposed by this subtitle. 17 ‘‘(e) REGULATIONS.—The Secretary shall issue such 18 regulations or other guidance as may be necessary to carry 19 out this section, including the recapture under subsection 20 (d).’’. 21 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI- 22 NESS CREDIT.— 23 Section 38(b) of the Internal Revenue Code of 24 1986 is amended— 25 VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S2571.IS S2571 kjohnson on DSK79L0C42 with BILLS 12 •S 2571 IS (1) by striking ‘‘plus’’ at the end of paragraph 1 (31); 2 (2) by striking the period at the end of para- 3 graph (32) and inserting ‘‘, plus’’; and 4 (3) by adding at the end the following new 5 paragraph: 6 ‘‘(33) the manufactured home community sale 7 credit determined under section 45T(a).’’. 8 (c) CONFORMING AMENDMENTS.— 9 (1) Subsection (c) of section 196 of the Internal 10 Revenue Code of 1986 is amended— 11 (A) by striking ‘‘and’’ at the end of para- 12 graph (13); 13 (B) by striking the period at the end of 14 paragraph (14) and inserting ‘‘, and’’; and 15 (C) by adding at the end the following new 16 paragraph: 17 ‘‘(15) the manufactured home community sale 18 credit determined under section 45T(a).’’. 19 (2) The table of sections for subpart D of part 20 IV of subchapter A of chapter 1 of such the Internal 21 Revenue Code of 1986 is amended by adding at the 22 end the following new item: 23 ‘‘Sec. 45T. Manufactured home community sale to residents or nonprofit enti- ty.’’. VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6211 E:\BILLS\S2571.IS S2571 kjohnson on DSK79L0C42 with BILLS 13 •S 2571 IS (d) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to taxable years beginning after 2 December 31, 2019. 3 Æ VerDate Sep 11 2014 01:41 Oct 05, 2019 Jkt 099200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6301 E:\BILLS\S2571.IS S2571 kjohnson on DSK [Text truncated for display. Full text available on Congress.gov.]