Affordable Housing Credit Improvement Act of 2023

II 118TH CONGRESS 1ST SESSION S. 1557 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 MAY 11, 2023 Ms. CANTWELL (for herself, Mr. YOUNG, Mr. WYDEN, and Mrs. BLACKBURN) 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 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 2023’’. 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 21:51 May 23, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\S1557.IS S1557 kjohnson on DSK79L0C42PROD with BILLS 2 •S 1557 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—RULES RELATING TO CREDIT ELIGIBILITY AND DETERMINATION Sec. 301. Reconstruction or replacement period after casualty loss. Sec. 302. Modification of previous ownership rules; limitation on acquisition basis. Sec. 303. Certain relocation costs taken into account as rehabilitation expendi- tures. Sec. 304. Repeal of qualified census tract population cap. Sec. 305. Determination of community revitalization plan to be made by hous- ing credit agency. Sec. 306. Prohibition of local approval and contribution requirements. Sec. 307. Increase in credit for certain projects designated to serve extremely low-income households. Sec. 308. Increase in credit for bond-financed projects designated by State agency. Sec. 309. Elimination of basis reduction for low-income housing properties en- ergy efficient commercial building deduction. Sec. 310. Restriction of planned foreclosures. Sec. 311. Increase of population cap for difficult development areas. Sec. 312. Increased cost oversight and accountability. Sec. 313. Tax-exempt bond financing requirement. 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. TITLE VIII—DATA AND TRANSPARENCY Sec. 801. Sense of Congress. VerDate Sep 11 2014 21:51 May 23, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6211 E:\BILLS\S1557.IS S1557 kjohnson on DSK79L0C42PROD with BILLS 3 •S 1557 IS TITLE I—REFORM OF STATE 1 ALLOCATION FORMULAS 2 SEC. 101. INCREASES IN STATE ALLOCATIONS. 3 (a) IN GENERAL.—Clause (ii) of section 42(h)(3)(C) 4 of the Internal Revenue Code is amended— 5 (1) in subclause (I), by striking ‘‘$1.75’’ and 6 inserting ‘‘the per capita amount’’, and 7 (2) in subclause (II), by striking ‘‘$2,000,000’’ 8 and inserting ‘‘the minimum amount’’. 9 (b) PER CAPITA AMOUNT; MINIMUM AMOUNT.—Sec- 10 tion 42(h)(3) of the Internal Revenue Code of 1986 is 11 amended by striking subparagraphs (H) and (I) and in- 12 serting the following: 13 ‘‘(H) PER CAPITA AMOUNT.—For purposes 14 of subparagraph (C)(ii)(I), the per capita 15 amount shall be determined as follows: 16 ‘‘(i) CALENDAR YEAR 2023.—For cal- 17 endar year, 2023, the per capita amount is 18 $3.90. 19 ‘‘(ii) CALENDAR YEAR 2024.—For cal- 20 endar year 2024, the per capita amount is 21 the product of— 22 ‘‘(I) 1.25, and 23 VerDate Sep 11 2014 21:51 May 23, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557 kjohnson on DSK79L0C42PROD with BILLS 4 •S 1557 IS ‘‘(II) the dollar amount under 1 clause (i) increased by an amount 2 equal to— 3 ‘‘(aa) such dollar amount, 4 multiplied by 5 ‘‘(bb) the cost-of-living ad- 6 justment determined under sec- 7 tion 1(f)(3) for such calendar 8 year, determined by substituting 9 ‘calendar year 2022’ for ‘cal- 10 endar year 2016’ in subpara- 11 graph (A)(ii) thereof. 12 If the amount determined after appli- 13 cation of the preceding sentence is not 14 a multiple of $5,000, such amount 15 shall be rounded to the next lowest 16 multiple of $5,000. 17 ‘‘(iii) CALENDAR YEARS AFTER 18 2024.—In the case of any calendar year 19 after 2024, the per capita amount is the 20 dollar amount determined under clause (ii) 21 increased by an amount equal to— 22 ‘‘(I) such dollar amount, multi- 23 plied by 24 VerDate Sep 11 2014 21:51 May 23, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557 kjohnson on DSK79L0C42PROD with BILLS 5 •S 1557 IS ‘‘(II) the cost-of-living adjust- 1 ment determined under section 1(f)(3) 2 for such calendar year, determined by 3 substituting ‘calendar year 2023’ for 4 ‘calendar year 2016’ in subparagraph 5 (A)(ii) thereof. 6 Any amount increased under the preceding 7 sentence which is not a multiple of 5 cents 8 shall be rounded to the next lowest mul- 9 tiple of 5 cents. 10 ‘‘(I) MINIMUM AMOUNT.—For purposes of 11 subparagraph (C)(ii)(II), the minimum amount 12 shall be determined as follows: 13 ‘‘(i) CALENDAR YEAR 2023.—For cal- 14 endar year, 2023, the minimum amount is 15 $4,495,000. 16 ‘‘(ii) CALENDAR YEAR 2024.—For cal- 17 endar year 2024, the minimum amount is 18 the product of— 19 ‘‘(I) 1.25, and 20 ‘‘(II) the dollar amount under 21 clause (i) increased by an amount 22 equal to— 23 ‘‘(aa) such dollar amount, 24 multiplied by 25 VerDate Sep 11 2014 21:51 May 23, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557 kjohnson on DSK79L0C42PROD with BILLS 6 •S 1557 IS ‘‘(bb) the cost-of-living ad- 1 justment determined under sec- 2 tion 1(f)(3) for such calendar 3 year, determined by substituting 4 ‘calendar year 2022’ for ‘cal- 5 endar year 2016’ in subpara- 6 graph (A)(ii) thereof. 7 If the amount determined after appli- 8 cation of the preceding sentence is not 9 a multiple of 5 cents, such amount 10 shall be rounded to the next lowest 11 multiple of 5 cents. 12 ‘‘(iii) CALENDAR YEARS AFTER 13 2024.—In the case of any calendar year 14 after 2024, the minimum amount is the 15 dollar amount determined under clause (ii) 16 increased by an amount equal to— 17 ‘‘(I) such dollar amount, multi- 18 plied by 19 ‘‘(II) the cost-of-living adjust- 20 ment determined under section 1(f)(3) 21 for such calendar year, determined by 22 substituting ‘calendar year 2023’ for 23 ‘calendar year 2016’ in subparagraph 24 (A)(ii) thereof. 25 VerDate Sep 11 2014 21:51 May 23, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557 kjohnson on DSK79L0C42PROD with BILLS 7 •S 1557 IS Any amount increased under the preceding 1 sentence which is not a multiple of $5,000 2 shall be rounded to the next lowest mul- 3 tiple of $5,000.’’. 4 (c) EFFECTIVE DATE.—The amendments made by 5 this section shall apply to calendar years beginning after 6 December 31, 2022. 7 TITLE II—REFORMS RELATING 8 TO TENANT ELIGIBILITY 9 SEC. 201. AVERAGE INCOME TEST APPLICABILITY TO EX- 10 EMPT FACILITY BONDS. 11 (a) IN GENERAL.—Paragraph (1) of section 142(d) 12 of the Internal Revenue Code of 1986 is amended— 13 (1) by striking ‘‘(A) or (B)’’ and inserting ‘‘(A), 14 (B), or (C)’’, and 15 (2) by inserting after subparagraph (B) the fol- 16 lowing new subparagraph: 17 ‘‘(C) AVERAGE INCOME TEST.—A project 18 meets the requirements of this subparagraph if 19 it meets the minimum requirements of section 20 42(g)(1)(C).’’. 21 (b) EFFECTIVE DATE.—The amendments made by 22 this section shall apply to elections made under section 23 142(d)(1) of the Internal Revenue Code of 1986 after 24 March 23, 2018. 25 VerDate Sep 11 2014 21:51 May 23, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557 kjohnson on DSK79L0C42PROD with BILLS 8 •S 1557 IS SEC. 202. CODIFICATION OF RULES RELATING TO IN- 1 CREASED TENANT INCOME. 2 (a) IN GENERAL.—Clause (i) of section 42(g)(2)(D) 3 of the Internal Revenue Code of 1986 is amended by strik- 4 ing ‘‘clauses (ii), (iii), and (iv)’’ and all that follows and 5 inserting ‘‘clauses (ii), (iii), (iv), and (vi), notwithstanding 6 an increase in the income of the occupants above the in- 7 come limitation applicable under paragraph (1)— 8 ‘‘(I) a low-income unit shall con- 9 tinue to be treated as a low-income 10 unit if the income of such occupants 11 initially was 60 percent or less of area 12 median gross income and such unit 13 continues to be rent-restricted, and 14 ‘‘(II) a unit to which, at the time 15 of initial occupancy by such occu- 16 pants, any Federal, State, or local 17 government income restriction ap- 18 plied, and which subsequently becomes 19 part of a building with respect to 20 which rehabilitation expenditures are 21 taken into account under subsection 22 (e), shall be treated as a low-income 23 unit if the income of such occupants 24 initially was 60 percent or less of area 25 median gross income and does not ex- 26 VerDate Sep 11 2014 21:51 May 23, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557 kjohnson on DSK79L0C42PROD with BILLS 9 •S 1557 IS ceed 120 percent of area median gross 1 income as of the date of acquisition of 2 the property by the taxpayer.’’. 3 (b) EXCEPTION.—Subparagraph (D) of section 4 42(g)(2) of the Internal Revenue Code of 1986, as amend- 5 ed by this Act, is further amended by adding at the end 6 the following new clause: 7 ‘‘(vi) EXCEPTION TO RULE RELATING 8 TO INCREASED TENANT INCOME.—In the 9 case of an occupant of a low-income unit 10 who initially qualified to occupy such unit 11 by reason of paragraph (1)(C) with an in- 12 come in excess of 60 percent of area me- 13 dian gross income but not in excess of 80 14 percent of area median gross income, 15 clause (i) shall be applied for substituting 16 ‘80 percent’ for ‘60 percent’ each place it 17 appears.’’. 18 (c) EFFECTIVE DATE.—The amendments made by 19 this section shall apply to taxable years beginning after 20 December 31, 2022. 21 SEC. 203. MODIFICATION OF STUDENT OCCUPANCY RULES. 22 (a) IN GENERAL.—Subparagraph (D) of section 23 42(i)(3) of the Internal Revenue Code of 1986 is amended 24 to read as follows: 25 VerDate Sep 11 2014 21:51 May 23, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557 kjohnson on DSK79L0C42PROD with BILLS 10 •S 1557 IS ‘‘(D) RULES RELATING TO STUDENTS.— 1 ‘‘(i) IN GENERAL.—A unit occupied 2 solely by individuals who— 3 ‘‘(I) have not attained age 24, 4 and 5 ‘‘(II) are enrolled in a full-time 6 course of study at an institution of 7 higher education (as defined in section 8 3304(f)), 9 shall not be treated as a low-income unit. 10 ‘‘(ii) EXCEPTION FOR CERTAIN FED- 11 ERAL PROGRAMS.—In the case of a feder- 12 ally-assisted building (as defined in sub- 13 section (d)(6)(C)(i)), clause (i) shall not 14 apply to a unit all of the occupants of 15 which meet all applicable requirements 16 under the housing program described in 17 such subsection through which the building 18 is assisted, financed, or operated. 19 ‘‘(iii) OTHER EXCEPTIONS.—An indi- 20 vidual shall not be treated as described in 21 clause (i) if the individual meets the in- 22 come limitation applicable under subsection 23 (g)(1) to the project of which the building 24 is a part and— 25 VerDate Sep 11 2014 21:51 May 23, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557 kjohnson on DSK79L0C42PROD with BILLS 11 •S 1557 IS ‘‘(I) is married, 1 ‘‘(II) is a person with disabilities 2 (as defined in section 3(b)(3)(E) of 3 the United States Housing Act of 4 1937), 5 ‘‘(III) is a veteran (as defined in 6 section 101(2) of title 38, United 7 States Code), 8 ‘‘(IV) has 1 or more qualifying 9 children (as defined in section 10 152(c)), 11 ‘‘(V) is or has been a victim or 12 threatened victim of domestic violence, 13 dating violence, sexual assault, or 14 stalking (as defined in section 40002 15 of the Violence Against Women Act of 16 1994), 17 ‘‘(VI) is or has been a victim of 18 any form of human trafficking, or 19 ‘‘(VII) is, or was prior to attain- 20 ing the age of majority— 21 ‘‘(aa) an emancipated minor 22 or in legal guardianship as deter- 23 mined by a court of competent 24 VerDate Sep 11 2014 21:51 May 23, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557 kjohnson on DSK79L0C42PROD with BILLS 12 •S 1557 IS jurisdiction in the individual’s 1 State of legal residence, 2 ‘‘(bb) under the care and 3 placement responsibility of the 4 State agency responsible for ad- 5 ministering a plan under part B 6 or part E of title IV of the Social 7 Security Act, or 8 ‘‘(cc) an unaccompanied 9 youth (within the meaning of sec- 10 tion 725(6) of the McKinney- 11 Vento Homeless Assistance Act 12 (42 U.S.C. 11434a(6))) or a 13 homeless child or youth (within 14 the meaning of section 725(2) of 15 such Act (42 U.S.C. 16 11434a(2))). 17 For purposes of subclause (VI), an in- 18 dividual is or has been a victim of 19 human trafficking if such individual 20 was subjected to an act or practice de- 21 scribed in paragraph (11) or (12) of 22 section 103 of the Trafficking Victims 23 Protection Act of 2000.’’. 24 VerDate Sep 11 2014 21:51 May 23, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1557.IS S1557 kjohnson on DSK79L0C42PROD with BILLS 13 •S 1557 IS (b) EFFECTIVE DATE.—The amendment made by 1 this section shall apply to taxable years beginning after 2 December 31, 2023. 3 SEC. 204. TENANT VOUCHER PAYMENTS TAKEN INTO AC- 4 COUNT AS RENT FOR CERTAIN PURPOSES. 5 (a) IN GENERAL.—Subparagraph (B) of section 6 42(g)(2) of the Internal Revenue Code of 1986 is amended 7 by adding at the end the following new sentence: ‘‘In the 8 case of a project with respect to which the taxpayer elects 9 the require [Text truncated for display. Full text available on Congress.gov.]