Affordable Housing Preservation Tax Relief Act of 2005 - Amends the Internal Revenue to exclude from gross income gain from the sale or exchange of certain multifamily housing property to a housing credit agency or related organization (preservation entity) that agrees to maintain certain affordability and use restrictions for such property. Limits the excludable amount of such gain to the depreciation adjustments for such property.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3715 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 3715
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.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 8, 2005
Mr. Ramstad (for himself and Mr. Cardin) introduced the following bill;
which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
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.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Affordable Housing Preservation Tax
Relief Act of 2005''.
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:
``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.
``(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.
``(c) Qualified Sale or Exchange.--For purposes of this section--
``(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--
``(A) for a term of not less than the extended use
period,
``(B) legally enforceable, and
``(C) consistent with the requirements of paragraph
(2).
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.
``(2) Affordability and use restrictions.--
``(A) In general.--Affordability and use
restrictions regarding a property are consistent with
this paragraph if--
``(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, or
``(ii) in the case of any other property,
such property is maintained as affordable
housing.
``(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.
``(3) Certification by program administrator.--The term
`qualified sale or exchange' shall not include any sale or
exchange of property unless the housing credit agency
certifies--
``(A) that the transferee with respect to such
property is a qualified preservation entity,
``(B) that affordability and use restrictions will
be maintained with respect to such property during the
extended use period, and
``(C) 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).
``(4) Extended use period.--The term `extended use period'
means the period beginning on the date of sale and ending on
the earlier of--
``(A) 30 years after the close of the sale, or
``(B) the date that the property is acquired by
foreclosure (or instrument in lieu of foreclosure).
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.
``(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))--
``(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),
``(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),
``(3) with respect to which a loan is made or insured under
title V of the Housing Act of 1949, or
``(4) which either received an allocation of low-income
housing tax credit pursuant to paragraph (1) of section 42(h)
or was exempted from such paragraph by paragraph (4) of such
section.
``(e) Preservation Entity.--For purposes of this section, the term
`preservation entity' means a housing credit agency or an organization
approved by a housing credit 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.
``(f) Responsibilities of Housing Credit Agency.--The housing
credit agency (or an agent or other private contractor of such agency)
shall--
``(1) determine whether the preservation entity's plan for
rehabilitation (if any) and operation of the eligible
multifamily housing property is viable for no less than 30
years,
``(2) monitor the affordability and use restrictions for
the eligible multifamily housing property, and
``(3) notify the Internal Revenue Service as to any portion
of such property which is out of compliance.
``(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% 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.
``(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.''.
(b) Application of 25 Percent Capital Gains Rate.--Clause (i) of
section 1(h)(6)(A) of the Internal Revenue Code of 1986 is amended to
read as follows:
``(i) the sum of--
``(I) the amount of long-term
capital gain (not otherwise treated as
ordinary income) which would be treated
as ordinary income if section
1250(b)(1) included all depreciation
and the applicable percentage under
section 1250(a) were 100 percent, and
``(II) the amount of long-term
capital gain (not otherwise excluded
from gross income) which would be
excluded from gross income under
section 1203 if subsection (b) thereof
did not apply, over''.
(c) Conforming Amendments.--
(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''.
(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.''
(3) Paragraph (3) of section 643(a) of such Code is amended
by striking ``section 1202'' and inserting ``sections 1202 and
1203''.
(4) Paragraph (4) of section 691(c) of such Code is amended
by inserting ``1203,'' after ``1202,''.
(5) Paragraph (2) of section 871(a) of such Code is amended
by inserting ``and 1203'' after ``section 1202''.
(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:
``Sec. 1203. Exclusion of gain from qualified sales of multifamily
housing.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2005.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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