S 1318 ISCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to provide an incentive to preserve affordable housing in multifamily housing units which are sold or exchanged.CommentsClose CommentsPermalink

May 7, 2007

Mr. SCHUMER (for himself, Mr. SMITH, Mr. BOND, Mr. REED, Mrs. MURRAY, Mr. CARDIN, and Ms. SNOWE) introduced the following bill; which was read twice and referred to the Committee on FinanceCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to provide an incentive to preserve affordable housing in multifamily housing units which are sold or exchanged.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the `Affordable Housing Preservation Act of 2007'.CommentsClose CommentsPermalink

SEC. 2. EXCLUSION OF GAIN FROM SALES OF AFFORDABLE HOUSING WHICH IS ATTRIBUTABLE TO DEPRECIATION.

(a) In General- Part I of subchapter P of chapter 1 of the Internal Revenue Code of 1986 (relating to treatment of capital gains) is amended by inserting after section 1202 the following new section:CommentsClose CommentsPermalink

`SEC. 1203. EXCLUSION OF GAIN FROM QUALIFIED SALES OF MULTIFAMILY HOUSING.

`(a) In General- Gross income shall not include gain from the qualified sale or exchange of eligible multifamily housing property.CommentsClose CommentsPermalink





`(b) Exclusion Limited to Depreciation- The amount of gain excluded from gross income under subsection (a) with respect to any property shall not exceed the depreciation adjustments (as defined in section 1250(b)(3)) in respect of such property.CommentsClose CommentsPermalink





`(c) Qualified Sale or Exchange- For purposes of this section--CommentsClose CommentsPermalink





`(1) IN GENERAL- The term `qualified sale or exchange' means a sale of eligible multifamily housing property to or an exchange of such property with a preservation entity which agrees to maintain affordability and use restrictions regarding the property that are--CommentsClose CommentsPermalink





`(A) for a term of not less than the extended use period,CommentsClose CommentsPermalink





`(B) legally enforceable, andCommentsClose CommentsPermalink





`(C) consistent with the requirements of paragraph (2).CommentsClose CommentsPermalink





Such restrictions shall be binding on all successors of the preservation entity and shall be recorded as a restrictive covenant on the property pursuant to State law.CommentsClose CommentsPermalink





`(2) AFFORDABILITY AND USE RESTRICTIONS-CommentsClose CommentsPermalink





`(A) IN GENERAL- Affordability and use restrictions regarding a property are consistent with this paragraph if--CommentsClose CommentsPermalink





`(i) in the case of property with respect to which assistance described in subsection (d) is still in effect (as determined by the Secretary), such property satisfies the affordability and use restrictions in connection with such assistance, orCommentsClose CommentsPermalink





`(ii) in the case of any other property, such property is maintained as affordable housing.CommentsClose CommentsPermalink





`(B) AFFORDABLE HOUSING- The term `affordable housing' means housing which would be a qualified low-income housing project (as defined in section 42(g)) if subparagraph (A) of section 42(g)(1) did not apply and subparagraph (B) of such section were applied by substituting `51 percent' for `40 percent'. Eligible multifamily housing property shall not fail to be treated as affordable housing solely because residents of such property (while such property was described in subparagraph (A)(i)) continue to reside in such property.CommentsClose CommentsPermalink





`(3) CERTIFICATION BY PROGRAM ADMINISTRATOR- The term `qualified sale or exchange' shall not include any sale or exchange of property unless the housing agency certifies--CommentsClose CommentsPermalink





`(A) that the transferee with respect to such property is a qualified preservation entity,CommentsClose CommentsPermalink





`(B) that affordability and use restrictions will be maintained with respect to such property during the extended use period,CommentsClose CommentsPermalink





`(C) that new capital will be expended that restores the condition of the property and funds adequate reserves, andCommentsClose CommentsPermalink





`(D) the amount of gain which the transferor will be allowed to exclude from gross income under subsection (a) (determined at the entity level in the case of a partnership or S corporation).CommentsClose CommentsPermalink





`(4) EXTENDED USE PERIOD- The term `extended use period' means the period beginning on the date of sale and ending on the earlier of--CommentsClose CommentsPermalink





`(A) 30 years after the close of the sale, orCommentsClose CommentsPermalink





`(B) the date that the property is acquired by foreclosure (or instrument in lieu of foreclosure).CommentsClose CommentsPermalink





Subparagraph (B) shall not apply if the Secretary determines that the acquisition described therein is part of an arrangement with the owner a purpose of which is to terminate the extended use period.CommentsClose CommentsPermalink





`(d) Eligible Multifamily Housing Property- For purposes of this section, the term `eligible multifamily housing property' means any section 1250 property (as defined in section 1250(c))--CommentsClose CommentsPermalink





`(1) which is assisted under section 221(d)(3) or section 236 of the National Housing Act (or financed or assisted by direct loan or tax abatement under similar provisions of State or local laws) and with respect to which the owner is subject to the restrictions described in section 1039(b)(1)(B) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990),CommentsClose CommentsPermalink





`(2) which is described in section 512(2)(B) of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (42 U.S.C. 1437f note), orCommentsClose CommentsPermalink





`(3) with respect to which a loan is made or insured under title V of the Housing Act of 1949.CommentsClose CommentsPermalink





Such term does not include any property with respect to which a credit under section 42 was allowed to the taxpayer.CommentsClose CommentsPermalink





`(e) Preservation Entity- For purposes of this section, the term `preservation entity' means a housing agency or an organization approved by a housing agency that has the capacity and commitment to successfully acquire and preserve eligible multifamily housing property. An organization shall not be treated as a preservation entity with respect to any taxpayer if such organization is related (as defined in section 267) to such taxpayer.CommentsClose CommentsPermalink





`(f) Responsibilities of Housing Agency- The housing agency (or an agent or other private contractor of such agency) shall--CommentsClose CommentsPermalink





`(1) determine whether the preservation entity's plan for rehabilitation and operation restores the condition of the eligible multifamily housing property and is viable for no less than 30 years,CommentsClose CommentsPermalink





`(2) monitor the affordability and use restrictions for the eligible multifamily housing property, andCommentsClose CommentsPermalink





`(3) notify the Internal Revenue Service as to any portion of such property which is out of compliance.CommentsClose CommentsPermalink





`(g) Recapture for Noncompliance- If the Secretary determines that all or a portion of the multifamily housing property acquired by a preservation entity in a transfer to which subsection (a) applied is out of compliance with the requirements of this section, the preservation entity's tax imposed under this chapter for the taxable year shall be increased by (or if such entity is not otherwise subject to tax under this chapter, there shall be imposed on such entity a tax equal to) 12.5 percent of the amount which bears the same ratio to the amount certified under subsection (c)(3)(C) with respect to such property as such entity's share of the portion of such property which is out of compliance bears to the entire property. The amount otherwise determined under this subsection (without regard to this sentence) shall be reduced by the product of 3.33 percent of such amount, multiplied by the number of years after the qualified sale or exchange that the property was in compliance with the requirements of this section.CommentsClose CommentsPermalink





`(h) Coordination With Section 1250- In the case of a qualified sale or exchange of eligible multifamily housing property a portion of the gain from which is treated as ordinary income under section 1250, such portion of the gain shall be excluded from gross income under subsection (a) before any remaining portion of such gain.CommentsClose CommentsPermalink





`(i) Housing Agency- For purposes of this section, the term `housing agency' means, with respect to any eligible multifamily housing property, the State housing agency (or in the absence of a State housing agency, any Federal housing agency) which administers housing assistance with respect to such property.'.CommentsClose CommentsPermalink





(b) Conforming Amendments-CommentsClose CommentsPermalink





(1) Subparagraph (B) of section 172(d)(2) of the Internal Revenue Code of 1986 is amended by striking `section 1202' and inserting `section 1202 and 1203'.CommentsClose CommentsPermalink





(2) Paragraph (4) of section 642(c) of such Code is amended by striking the first sentence and inserting the following: `To the extent that the amount otherwise allowable as a deduction under this subsection consists of gain described in section 1202(a) or 1203(a), proper adjustment shall be made for any exclusion allowable to the estate or trust under section 1202 or section 1203, as the case may be.'.CommentsClose CommentsPermalink





(3) Paragraph (3) of section 643(a) of such Code is amended by striking `section 1202' and inserting `sections 1202 and 1203'.CommentsClose CommentsPermalink





(4) Paragraph (4) of section 691(c) of such Code is amended by inserting `1203,' after `1202,'.CommentsClose CommentsPermalink





(5) Paragraph (2) of section 871(a) of such Code is amended by inserting `and 1203' after `section 1202'.CommentsClose CommentsPermalink





(6) The table of sections for part I of subchapter P of chapter 1 of such Code is amended by inserting after the item relating to section 1202 the following new item:CommentsClose CommentsPermalink





`Sec. 1203. Exclusion of gain from qualified sales of multifamily housing.'.CommentsClose CommentsPermalink





(c) Effective Date- The amendments made by this section shall apply to sales or exchanges made after December 31, 2007.CommentsClose CommentsPermalink