Sec. 3204. Low-income housing tax credit
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Subsection
(h)of section 42 is amended to read as follows: The qualified basis of any building which is taken into account under subsection
(a)for any taxable year shall not exceed the limitation amount allocated to such building under this subsection. Except in the case of an allocation which meets the requirements of subparagraph (C), (D), (E), or (F), an allocation shall be taken into account under subparagraph
(A)only if it is made not later than the close of the calendar year in which the building is placed in service. An allocation meets the requirements of this subparagraph if there is a binding commitment (not later than the close of the calendar year in which the building is placed in service) by the housing credit agency to allocate a specified limitation amount to such building beginning in a specified later taxable year. An allocation meets the requirements of this subparagraph if such allocation is made not later than the close of the calendar year in which ends the taxable year to which it will 1st apply but only to the extent the amount of such allocation does not exceed the limitation under clause (ii). The limitation under this clause is the excess of— the qualified basis of such building as of the close of the 1st taxable year to which such allocation will apply, over the qualified basis of such building as of the close of the 1st taxable year to which the most recent prior allocation with respect to such building applied. Notwithstanding clause (i), the full amount of the allocation shall be taken into account under paragraph (2). An allocation meets the requirements of this subparagraph if such allocation is made with respect to a qualified building which is placed in service not later than the close of the second calendar year following the calendar year in which the allocation is made. For purposes of clause (i), the term qualified building means any building which is part of a project if the taxpayer's basis in such project (as of the date which is 1 year after the date that the allocation was made) is more than 10 percent of the taxpayer's reasonably expected basis in such project (as of the close of the second calendar year referred to in clause (i)). Such term does not include any existing building unless a credit is allowable under subsection
(e)for rehabilitation expenditures paid or incurred by the taxpayer with respect to such building for a taxable year ending during the second calendar year referred to in clause
(i)or the prior taxable year. In the case of a project which includes (or will include) more than 1 building, an allocation meets the requirements of this subparagraph if— the allocation is made to the project for a calendar year during the project period, the allocation only applies to buildings placed in service during or after the calendar year for which the allocation is made, and the portion of such allocation which is allocated to any building in such project is specified not later than the close of the calendar year in which the building is placed in service. For purposes of clause (i), the term project period means the period— beginning with the 1st calendar year for which an allocation may be made for the 1st building placed in service as part of such project, and ending with the calendar year the last building is placed in service as part of such project. Any limitation amount allocated to any building for any calendar year— shall apply to such building for all taxable years in the compliance period ending during or after such calendar year, and shall reduce the aggregate limitation amount of the allocating agency only for such calendar year. The limitation amount which a housing credit agency may allocate for any calendar year is the portion of the State limitation allocated under this paragraph for such calendar year to such agency. Except as provided in subparagraph (F), the State limitation for each calendar year shall be allocated to the housing credit agency of such State. If there is more than 1 housing credit agency of a State, all such agencies shall be treated as a single agency. The State limitation applicable to any State for any calendar year shall be an amount equal to the sum of— the unused State limitation (if any) of such State for the preceding calendar year, the greater of— $31.20 multiplied by the State population, or $36,300,000, plus the amount of State limitation returned in the calendar year. For purposes of subparagraph (C)(i), the unused State limitation for any calendar year is the excess (if any) of the sum of the amounts described in clauses
(ii)and
(iii)of subparagraph
(C)over the aggregate limitation amount allocated for such year. For purposes of subparagraph (C)(iii), the amount of State limitation returned in the calendar year equals the limitation amount previously allocated within the State to any project— which fails to meet the 10 percent test under paragraph (1)(E)(ii) on a date after the close of the calendar year in which the allocation was made, which does not become a qualified low-income housing project within the period required by this section or the terms of the allocation, or with respect to which an allocation is cancelled by mutual consent of the housing credit agency and the allocation recipient. For purposes of this paragraph, a State may by law provide (or a Governor of a State may proclaim) a different formula for allocating the State limitation among the State housing credit agencies in such State. For purposes of this paragraph, determinations of the population of any State shall be made with respect to any calendar year on the basis of the most recent census estimate of the resident population of such State released by the Bureau of Census before the beginning of such calendar year. In the case of a calendar year after 2015, the dollar amounts in subparagraph (C)(ii) shall each be increased by an amount equal to— such dollar amount, multiplied by the cost-of-living adjustment determined under section 1(c)(2)(A) for such calendar year, determined by substituting calendar year 2014 for calendar year 2012 in clause
(ii)thereof. In the case of the dollar amount in subparagraph (C)(ii)(I), any increase under clause
(i)which is not a multiple of 20 cents shall be rounded to the next lowest multiple of 20 cents. In the case of the dollar amount in subparagraph (C)(ii)(II), any increase under clause
(i)which is not a multiple of $100,000 shall be rounded to the next lowest multiple of $100,000. Not more than 90 percent of the State limitation for any State for any calendar year shall be allocated to projects other than qualified low-income housing projects described in subparagraph (B). For purposes of subparagraph (A), a qualified low-income housing project is described in this subparagraph if a qualified nonprofit organization is to own an interest in the project (directly or through a partnership) and materially participate (within the meaning of section 469(h)) in the development and operation of the project throughout the credit period. For purposes of this paragraph, the term qualified nonprofit organization means any organization if— such organization is described in paragraph
(3)or
(4)of section 501(c) and is exempt from tax under section 501(a), such organization is determined by the State housing credit agency not to be affiliated with or controlled by a for-profit organization; and 1 of the exempt purposes of such organization includes the fostering of low-income housing. For purposes of this paragraph, a qualified nonprofit organization shall be treated as satisfying the ownership and material participation test of subparagraph
(B)if any qualified corporation in which such organization holds stock satisfies such test. For purposes of clause (i), the term qualified corporation means any corporation if 100 percent of the stock of such corporation is held by 1 or more qualified nonprofit organizations at all times during the period such corporation is in existence. Nothing in subparagraph
(F)of paragraph
(3)shall be construed to permit a State not to comply with subparagraph
(A)of this paragraph. No credit shall be allowed by reason of this section with respect to any building for the taxable year unless an extended low-income housing commitment is in effect as of the end of such taxable year. For purposes of this paragraph, the term extended low-income housing commitment means any agreement between the taxpayer and the housing credit agency— which requires that the applicable fraction (as defined in subsection (c)(1)) for the building for each taxable year in the extended use period will not be less than the applicable fraction specified in such agreement and which prohibits the actions described in subclauses
(I)and
(II)of subparagraph (E)(ii), which allows individuals who meet the income limitation applicable to the building under subsection
(g)(whether prospective, present, or former occupants of the building) the right to enforce in any State court the requirement and prohibitions of clause (i), which prohibits the disposition to any person of any portion of the building to which such agreement applies unless all of the building to which such agreement applies is disposed of to such person, which prohibits the refusal to lease to a holder of a voucher or certificate of eligibility under section 8 of the United States Housing Act of 1937 because of the status of the prospective tenant as such a holder, which is binding on all successors of the taxpayer, and which, with respect to the property, is recorded pursuant to State law as a restrictive covenant. The limitation amount allocated to any building may not exceed the amount necessary to support the applicable fraction specified in the extended low-income housing commitment for such building. For purposes of this paragraph, the term extended use period means the period— beginning on the 1st day in the credit period on which such building is part of a qualified low-income housing project, and ending on the later of— the date specified by such agency in such agreement, or the date which is 15 years after the close of the credit period. The extended use period for any building shall terminate— on the date the building is acquired by foreclosure (or instrument in lieu of foreclosure) unless the Secretary determines that such acquisition is part of an arrangement with the taxpayer a purpose of which is to terminate such period, or on the last day of the period specified in subparagraph
(I)if the housing credit agency is unable to present during such period a qualified contract for the acquisition of the low-income portion of the building by any person who will continue to operate such portion as a qualified low-income building. Subclause
(II)shall not apply to the extent more stringent requirements are provided in the agreement or in State law. The termination of an extended use period under clause
(i)shall not be construed to permit before the close of the 3-year period following such termination— the eviction or the termination of tenancy (other than for good cause) of an existing tenant of any low-income unit, or any increase in the gross rent with respect to such unit not otherwise permitted under this section. For purposes of subparagraph (E), the term qualified contract means a bona fide contract to acquire (within a reasonable period after the contract is entered into) the nonlow-income portion of the building for fair market value and the low-income portion of the building for an amount not less than the applicable fraction (specified in the extended low-income housing commitment) of— the sum of— the outstanding indebtedness secured by, or with respect to, the building, the adjusted investor equity in the building, plus other capital contributions not reflected in the amounts described in subclause
(I)or (II), reduced by cash distributions from (or available for distribution from) the project. The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out this paragraph, including regulations to prevent the manipulation of the amount determined under the preceding sentence. For purposes of subparagraph (F), the term adjusted investor equity means, with respect to any calendar year, the aggregate amount of cash taxpayers invested with respect to the project increased by the amount equal to— such amount, multiplied by the cost-of-living adjustment for such calendar year, determined under section 1(c)(2)(A) by substituting the base calendar year for calendar year 2012 in clause
(ii)thereof. An amount shall be taken into account as an investment in the project only to the extent there was an obligation to invest such amount as of the beginning of the credit period and to the extent such amount is reflected in the adjusted basis of the project. Under regulations prescribed by the Secretary, if the C-CPI-U for any calendar year (within the meaning of section 1(c)) exceeds the C-CPI-U for the preceding calendar year by more than 5 percent, the C-CPI-U for the base calendar year shall be increased such that such excess shall never be taken into account under clause (i). For purposes of this subparagraph, the term base calendar year means the calendar year with or within which the 1st taxable year of the credit period ends. For purposes of this paragraph, the low-income portion of a building is the portion of such building equal to the applicable fraction specified in the extended low-income housing commitment for the building. The period referred to in this subparagraph is the 1-year period beginning on the date (after the 14th year of the credit period) the taxpayer submits a written request to the housing credit agency to find a person to acquire the taxpayer’s interest in the low-income portion of the building. If, during a taxable year, there is a determination that an extended low-income housing agreement was not in effect as of the beginning of such year, such determination shall not apply to any period before such year and subparagraph
(A)shall be applied without regard to such determination if the failure is corrected within 1 year from the date of the determination. The application of this paragraph to projects which consist of more than 1 building shall be made under regulations prescribed by the Secretary. A housing credit agency may allocate its limitation amount only to buildings located in the jurisdiction of the governmental unit of which such agency is a part. If the limitation amounts allocated by a housing credit agency for any calendar year exceed the portion of the State limitation allocated to such agency for such calendar year, the limitation amounts so allocated shall be reduced (to the extent of such excess) for buildings in the reverse of the order in which the allocations of such amounts were made. The amount of the credit determined under this section with respect to any building shall not exceed the clause
(ii)percentage of the amount of the credit which would (but for this subparagraph) be determined under this section with respect to such building. For purposes of clause (i), the clause
(ii)percentage with respect to any building is the percentage which— the credit amount which would be determined under this section with respect to the building if the limitation amount allocated to such building were equal to the qualified basis of such building, bears to the credit amount determined in accordance with clause (iii). The credit amount determined in accordance with this clause is the amount of the credit which would (but for this subparagraph) be determined under this section with respect to the building if this section were applied without regard to subsection (f)(2)(A). For purposes of this subsection— The term housing credit agency means any agency authorized to carry out this subsection. The term State includes a possession of the United States. . Section 42(f) is amended by striking paragraph (3). Section 42(i)(3)(B)(iii)(II) is amended by striking subsection (h)(5) and inserting subsection (h)(4) . Section 42(i)(7)(A) is amended by striking subsection (h)(5)(C) and inserting subsection (h)(4)(C) . Section 42(i)(8) is amended by striking the last sentence. Section 42(i) is amended by striking paragraph (9). Section 42(k)(2)(A) is amended by striking subsection (h)(5) and inserting subsection (h)(4) . Section 42(l)(3) is amended by striking housing credit amount both places it appears and inserting limitation amount . Section 42(m)(1)(A) is amended by striking housing credit dollar amount both places it appears and inserting limitation amount . Section 42(m)(1)(B)(ii) is amended by striking housing credit dollar amounts and inserting limitation amounts . Section 42(m)(1) is amended by striking subparagraph (D). Subparagraphs (A), (B)(iii), (C)(i)(I), and (C)(i)(II) of section 42(m)(2) are each amended by striking housing credit dollar amount and inserting limitation amount . Section 42(m)(2) is amended by striking subparagraph (D). Section 42(f)(1) is amended by striking 10 taxable years and inserting 15 taxable years . Section 42 is amended by striking subsection (j). Section 42(d)(7) is amended— by striking in the heading thereof and inserting compliance period , and credit period by striking compliance period in subparagraph (B)(ii) and inserting credit period . Section 42(f)(4) is amended by striking the last sentence thereof. Section 42(i) is amended by striking paragraph (1). Section 42(i)(6) is amended by striking and any increase in tax under subsection
(j). Section 42(k)(4)(C) is amended to read as follows: The tax for the taxable year shall be increased under subparagraph
(A)only with respect to credits allowed by reason of this section which were used to reduce tax liability. In the case of credits not so used to reduce tax liability, the carryforwards and carrybacks under section 39 shall be appropriately adjusted. Any increase in tax under this paragraph shall not be treated as a tax imposed by this chapter for purposes of determining the amount of any credit under this chapter. . Subsection
(b)of section 42 is amended to read as follows: For purposes of this section, the term applicable percentage means with respect to any building, the appropriate percentage prescribed by the Secretary for the earlier of— the month in which such building is placed in service, or at the election of the taxpayer, the month in which the taxpayer and the housing credit agency enter into an agreement with respect to such building (which is binding on such agency, the taxpayer, and all successors in interest) as to the limitation amount to be allocated to such building. A month may be elected under subparagraph
(B)only if the election is made not later than the 5th day after the close of such month. Such an election, once made, shall be irrevocable. The percentages prescribed by the Secretary for any month shall be percentages which will yield over a 15-year period amounts of credit under subsection
(a)which have a present value equal to 70 percent of the qualified basis of the building. The present value under paragraph
(2)shall be determined— as of the last day of the 1st year of the 15-year period referred to in paragraph (2), by using a discount rate equal to the applicable discount percentage of the average of the annual Federal mid-term rate and the annual Federal long-term rate applicable under section 1274(d)(1) to the month applicable under subparagraph
(A)or
(B)of paragraph
(1)and compounded annually, and by assuming that the credit allowable under this section for any year is received on the last day of such year. For purposes of this paragraph, the term applicable discount percentage means, with respect to any month referred to in subparagraph (A)(ii) the number of percentage points by which 100 percent exceeds the highest rate of tax in effect under section 11 for a taxable year which begins in such month. For treatment of certain rehabilitation expenditures as separate new buildings, see subsection (e). . Section 42(d) is amended— by striking paragraphs (1), (2), and (6), and redesignating paragraphs (3), (4), (5), and
(7)as paragraphs (2), (3), (4), and (5), respectively, and by inserting before paragraph
(2)(as so redesignated) the following new paragraph: The eligible basis of any building is— in the case a new building which is not Federally subsidized for the taxable year, its adjusted basis as of the close of the 1st taxable year of the credit period, and zero in any other case. . Section 42(e) is amended— in paragraph (2)(B), by striking paragraph
(3)or
(4)and inserting paragraph
(2)or
(3). in paragraph (3), by striking subparagraph
(B)and redesignating subparagraphs
(C)and
(D)as subparagraphs
(B)and (C), respectively, in paragraph (4), by striking the last sentence thereof, and by striking paragraph
(5)and redesignating paragraph
(6)as paragraph (5). Section 42(f) is amended by striking paragraph (5). Section 42(i)(2)(A) is amended by striking for purposes of subsection (b)(1), . Section 42(i)(3) is amended— by striking (as defined in subsection (d)(2)(D)(iii)) in subparagraph (C)(ii) and inserting (within the meaning of subparagraph (F)) , and by adding at the end the following new subparagraph: For purposes of subparagraph (C), a person (hereinafter in this subparagraph referred to as the related person ) is related to any person if the related person bears a relationship to such person specified in section 267(b) or 707(b)(1), or the related person and such person are engaged in trades or businesses under common control (within the meaning of subsections
(a)and
(b)of section 52). . Section 42(i) is amended by striking paragraph (5). Section 42(k)(2)(B) is amended by striking , except that and all that follows and inserting a period. Paragraph
(4)of section 42(d), as redesignated by subsection (c)(2), is amended to read as follows: The eligible basis of a building shall not include any costs financed with the proceeds of a federally funded grant. . Paragraph
(3)of section 42(d), as redesignated by subsection (c)(2), is amended— by striking (as defined in paragraph (5)(C)) in subparagraph (C)(i), and by adding at the end the following new subparagraph: For purposes of this paragraph— The term qualified census tract means any census tract which is designated by the Secretary of Housing and Urban Development and, for the most recent year for which census data are available on household income in such tract, either in which 50 percent or more of the households have an income which is less than 60 percent of the area median gross income for such year or which has a poverty rate of at least 25 percent. If the Secretary of Housing and Urban Development determines that sufficient data for any period are not available to apply this subparagraph on the basis of census tracts, such Secretary shall apply this subparagraph for such period on the basis of enumeration districts. The portion of a metropolitan statistical area which may be designated for purposes of this subparagraph shall not exceed an area having 20 percent of the population of such metropolitan statistical area. For purposes of this subparagraph, each metropolitan statistical area shall be treated as a separate area and all nonmetropolitan areas in a State shall be treated as 1 area. . Clause
(i)of section 42(d)(5)(A), as redesignated by subsection (c)(2), is amended to read as follows: such building shall be treated as a new building, but . Section 42(g)(9) is amended— by adding or at the end of subparagraph (A), and by striking subparagraphs
(B)and
(C)and inserting the following new subparagraph: who are veterans (as defined in section 101 of title 38, United States Code). . Section 42(m)(1)(C) is amended— by adding and at the end of clause (vii), by striking the comma at the end of clause
(viii)and inserting a period, and by striking clauses
(ix)and (x). The amendments made by this section shall apply with respect to State limitation amounts determined for calendar years after 2014 (and to determinations with respect to allocations of such limitation amounts). For purposes of determining the State limitation amount for calendar year 2015 under section 42(h)(3)(C) of the Internal Revenue Code of 1986, as amended by this section, the amount described in clause
(i)of such section shall be treated as being equal to the quotient of— the amount which would be described in section 42(h)(3)(C)(i) of such Code (determined without regard to the amendments made by this section), divided by the applicable percentage determined under section 42(b)(1)(B)(i) for December 2014 (determined without regard to the amendments made by this section).