,,ii #aaeth ,,congress #b;d ,session ,s4 #ccfe ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,august #bb1 #bjah,mr4 ,wyden introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to provide a credit for middle-income housing1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,middle-,income ,housing ,tax ,credit ,act of #bjah4 #b4 ,sense of the ,senate relating to the low-income housing tax credit 7a7 ,findings ,the ,senate makes the following findings3 7#a7 ,the low-income housing tax credit under section #db of the ,internal ,revenue ,code of #aihf is one of the ,federal ,government's primary policy tools for encouraging the development and rehabilitation of affordable rental housing4 7#b7 ,since #aihf1 when the low-income housing tax credit was first enacted1 the credit has financed about #c1jjj1jjj affordable homes in the ,united ,states for roughly #g1jjj1jjj households4 ,in ,oregon1 the program has financed nearly #dj1jjj affordable homes1 providing housing to over #ib1jjj low-income households4 7#c7 ,while the low-income housing tax credit has been remarkably successful1 the ,nation still faces an affordable housing crisis4 ,today1 more than #a in #d renter households in the ,united ,states--roughly #aa1ajj1jjj--spend more than half of their income on rent1 leaving too little for other necessities like food1 medical care1 and transportation4 ,meanwhile1 only #a in #d eligible low-income households receives any housing assistance1 and we continue to lose affordable housing from our ,nation's stock4 ,in ,oregon1 a minimum wage worker has to work #gb hours per week to afford a modest one-bedroom apartment4 7#d7 ,in ,oregon1 where housing affordability is an acute problem1 demand for low-income housing tax credits exceeds supply by more than #b to #a4 7#e7 ,in ,march of #bjag1 the ,affordable ,housing ,credit ,improvement ,act of #bjag was introduced to expand the supply of greatly needed affordable housing4 ,among other provisions1 the ,affordable ,housing ,credit ,improvement ,act of #bjag would strengthen the low income housing tax credit by increasing the annual per capita credit allocation and small ,state minimum by #ej percent1 phased in over #e years4 ,in ,march #bjah1 several provisions of the ,affordable ,housing ,credit ,improvement ,act of #bjag were enacted as part of the ,consolidated ,appropriations ,act1 #bjah 7,public ,law #aae-ada74 7b7 ,sense of the ,senate ,it is the sense of the ,senate that-- 7#a7 the low-income housing tax credit under section #db of the ,internal ,revenue ,code of #aihf is a critically important ,federal ,government policy tool to encourage the production of affordable housing for low-income families2 and 7#b7 ,congress should further improve and enhance the low-income housing tax credit by passing the remaining provisions of the ,affordable ,housing ,credit ,improvement ,act of #bjag4 #c4 ,middle-income housing tax credit 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting after section #db the following new section3 #db;,a4 ,middle-income housing credit 7a7 ,in general ,for purposes of section #ch1 the amount of the middle-income housing credit determined under this section for any taxable year in the credit period shall be an amount equal to-- 7#a7 the applicable percentage of 7#b7 the qualified basis of each qualified middle-income building4 7b7 ,applicable percentage 7#a7 ,determination of applicable percentage ,for purposes of this section-- 7,a7 ,in general ,the term applicable percentage means1 with respect to any building1 the appropriate percentage prescribed by the ,secretary for the earlier of-- 7i7 the month in which such building is placed in service1 or 7ii7 at the election of the taxpayer1 the month in which the taxpayer and the housing credit agency enter into an agreement with respect to such building 7which is binding on such agency1 the taxpayer1 and all successors in interest7 as to the housing credit dollar amount to be allocated to such building4 ,a month may be elected under clause 7ii7 only if the election is made not later than the #eth day after the close of such month4 ,such an election1 once made1 shall be irrevocable4 7,b7 ,method of prescribing percentages ,the percentages prescribed by the ,secretary for any month shall be percentages which will yield over a #ae-year period amounts of credit under subsection 7a7 which have a present value equal to #ej percent of the qualified basis of a new building4 7,c7 ,method of discounting ,the present value under subparagraph 7,b7 shall be determined-- 7i7 as of the last day of the #ast year of the #ae-year period referred to in subparagraph 7,b71 7ii7 by using a discount rate equal to #gb percent of the average of the annual ,federal mid-term rate and the annual ,federal long-term rate applicable under section #abgd7;d77#a7 to the month applicable under clause 7i7 or 7ii7 of subparagraph 7,a7 and compounded annually1 and 7iii7 by assuming that the credit allowable under this section for any year is received on the last day of such year4 7#b7 ,minimum credit rate ,the applicable percentage for any building shall not be less than #e percent4 7#c7 ,cross references 7,a7 ,for treatment of certain rehabilitation expenditures as separate new buildings1 see subsection 7e74 7,b7 ,for determination of applicable percentage for increases in qualified basis after the #ast year of the credit period1 see subsection 7f77#c74 7,c7 ,for authority of housing credit agency to limit applicable percentage and qualified basis which may be taken into account under this section with respect to any building1 see subsection 7h77#f74 7c7 ,qualified basis2 qualified middle-,income building ,for purposes of this section-- 7#a7 ,qualified basis 7,a7 ,determination ,the qualified basis of any qualified middle-income building for any taxable year is an amount equal to-- 7i7 the applicable fraction 7determined as of the close of such taxable year7 of 7ii7 the eligible basis of such building 7determined under subsection 7d774 7,b7 ,applicable fraction ,for purposes of subparagraph 7,a71 the term applicable fraction means the smaller of the unit fraction or the floor space fraction4 7,c7 ,unit fraction ,for purposes of subparagraph 7,b71 the term unit fraction means the fraction-- 7i7 the numerator of which is the number of middle-income units in the building1 and 7ii7 the denominator of which is the number of residential rental units 7whether or not occupied7 in such building4 7,d7 ,floor space fraction ,for purposes of subparagraph 7,b71 the term floor space fraction means the fraction-- 7i7 the numerator of which is the total floor space of the middle-income units in such building1 and 7ii7 the denominator of which is the total floor space of the residential rental units 7whether or not occupied7 in such building4 7#b7 ,qualified middle-income building ,the term qualified middle-income building means any building which is part of a qualified middle-income housing project at all times during the period-- 7,a7 beginning on the #ast day in the credit period on which such building is part of such a project1 and 7,b7 ending on the last day of the credit period with respect to such building4 7d7 ,eligible basis ,for purposes of this section-- 7#a7 ,new buildings ,the eligible basis of a new building is its adjusted basis as of the close of the #ast taxable year of the credit period4 7#b7 ,existing buildings 7,a7 ,in general ,the eligible basis of an existing building is-- 7i7 in the case of a building which meets the requirements of subparagraph 7,b71 its adjusted basis as of the close of the #ast taxable year of the credit period1 and 7ii7 zero in any other case4 7,b7 ,requirements ,a building meets the requirements of this subparagraph if-- 7i7 the building is acquired by purchase 7as defined in section #agi7;d77#b771 7ii7 there is a period of at least #aj years between the date of its acquisition by the taxpayer and the date the building was last placed in service1 7iii7 the building was not previously placed in service by the taxpayer or by any person who was a related person with respect to the taxpayer as of the time previously placed in service1 and 7iv7 except as provided in subsection 7f77#e71 a credit is allowable under subsection 7a7 by reason of subsection 7e7 with respect to the building4 7,c7 ,adjusted basis ,for purposes of subparagraph 7,a71 the adjusted basis of any building shall not include so much of the basis of such building as is determined by reference to the basis of other property held at any time by the person acquiring the building4 7,d7 ,special rules 7i7 ,special rules for certain transfers ,for purposes of determining under subparagraph 7,b77ii7 when a building was last placed in service1 there shall not be taken into account any placement in service-- 7,i7 in connection with the acquisition of the building in a transaction in which the basis of the building in the hands of the person acquiring it is determined in whole or in part by reference to the adjusted basis of such building in the hands of the person from whom acquired1 7,,ii7 by a person whose basis in such building is determined under section #ajad7;a7 7relating to property acquired from a decedent71 7,,iii7 by any governmental unit or qualified nonprofit organization if the requirements of subparagraph 7,b77ii7 are met with respect to the placement in service by such unit or organization and all the income from such property is exempt from ,federal income taxation1 7,,iv7 by any person who acquired such building by foreclosure 7or by instrument in lieu of foreclosure7 of any purchase-money security interest held by such person if the requirements of subparagraph 7,b77ii7 are met with respect to the placement in service by such person and such building is resold within #ab months after the date such building is placed in service by such person after such foreclosure1 or 7,v7 of a single-family residence by any individual who owned and used such residence for no other purpose than as his principal residence4 7ii7 ,related person ,for purposes of subparagraph 7,b77iii71 a person 7hereinafter in this subclause referred to as the related person7 is related to any person if the related person bears a relationship to such person specified in section #bfg7;b7 or #gjg7;b77#a71 or the related person and such person are engaged in trades or businesses under common control 7within the meaning of subsections 7a7 and 7b7 of section #eb74 7#c7 ,special rules relating to determination of adjusted basis ,for purposes of this subsection-- 7,a7 ,in general ,except as provided in subparagraph 7,b71 the adjusted basis of any building shall be determined without regard to the adjusted basis of any property which is not residential rental property4 7,b7 ,basis of property in common areas1 etc41 included 7i7 ,in general ,except as provided in clause 7ii71 the adjusted basis of any building shall be determined by taking into account the adjusted basis of property 7of a character subject to the allowance for depreciation7 used in common areas or provided as comparable amenities to all residential rental units in such building4 7ii7 ,special rule ,in the case of any building for which the low-income housing tax credit is allowable under section #db1 the adjusted basis of the building under this section shall be determined without regard to property used in common areas or provided as comparable amenities to all residential rental units in such building4 7,c7 ,no reduction for depreciation ,the adjusted basis of any building shall be determined without regard to paragraphs 7#b7 and 7#c7 of section #ajaf7;a74 7#d7 ,credit allowable for certain buildings acquired during #aj-year period described in paragraph 7#b77;b77ii7 ,on application by the taxpayer1 the ,secretary may waive paragraph 7#b77;,b77ii7 with respect to any building acquired from an insured depository institution in default 7as defined in section #c of the ,federal ,deposit ,insurance ,act7 or from a receiver or conservator of such an institution4 7#e7 ,acquisition of building before end of prior credit period 7,a7 ,in general ,under regulations prescribed by the ,secretary1 in the case of a building described in subparagraph 7,b7 7or interest therein7 which is acquired by the taxpayer-- 7i7 paragraph 7#b77;,b7 shall not apply1 but 7ii7 the credit allowable by reason of subsection 7a7 to the taxpayer for any period after such acquisition shall be equal to the amount of credit which would have been allowable under subsection 7a7 for such period to the prior owner referred to in subparagraph 7,b7 had such owner not disposed of the building4 7,b7 ,description of building ,a building is described in this subparagraph if-- 7i7 a credit was allowed by reason of subsection 7a7 to any prior owner of such building1 and 7ii7 the taxpayer acquired such building before the end of the credit period for such building with respect to such prior owner 7determined without regard to any disposition by such prior owner74 7e7 ,rehabilitation expenditures treated as separate new building 7#a7 ,in general ,rehabilitation expenditures paid or incurred by the taxpayer with respect to any building shall be treated for purposes of this section as a separate new building4 7#b7 ,rehabilitation expenditures ,for purposes of paragraph 7#a7-- 7,a7 ,in general ,the term rehabilitation expenditures means amounts chargeable to capital account and incurred for property 7or additions or improvements to property7 of a character subject to the allowance for depreciation in connection with the rehabilitation of a building4 7,b7 ,cost of acquisition1 etc41 ,not included ,such term does not include the cost of acquiring any building 7or interest therein7 or any amount not permitted to be taken into account under paragraph 7#c7 of subsection 7d74 7,c7 ,certain relocation costs ,in the case of a rehabilitation of a building to which section #bhj;,b does not apply1 costs relating to the relocation of occupants1 including-- 7i7 amounts paid to occupants1 7ii7 amounts paid to third parties for services relating to such relocation1 and 7iii7 amounts paid for temporary housing for occupants1 shall be treated as chargeable to capital account and taken into account as rehabilitation expenditures4 7#c7 ,minimum expenditures to qualify 7,a7 ,in general ,paragraph 7#a7 shall apply to rehabilitation expenditures with respect to any building only if-- 7i7 the expenditures are allocable to #a or more middle-income units or substantially benefit such units1 and 7ii7 the amount of such expenditures during any #bd-month period meets the requirements of whichever of the following subclauses requires the greater amount of such expenditures3 7,i7 ,the requirement of this subclause is met if such amount is not less than #bj percent of the adjusted basis of the building 7determined as of the #ast day of such period and without regard to paragraphs 7#b7 and 7#c7 of section #ajaf7;a774 7,,ii7 ,the requirement of this subclause is met if the qualified basis attributable to such amount1 when divided by the number of middle-income units in the building1 is equal to or greater than the dollar amount in effect under section #db7;e77#c77;,a77ii77,,ii7 for the calendar year in which such expenditures are treated as placed in service under paragraph 7#d74 7,b7 ,date of determination ,the determination under subparagraph 7,a7 shall be made as of the close of the #ast taxable year in the credit period with respect to such expenditures4 7#d7 ,special rules ,for purposes of applying this section with respect to expenditures which are treated as a separate building by reason of this subsection-- 7,a7 such expenditures shall be treated as placed in service at the close of the #bd-month period referred to in paragraph 7#c77;,a71 and 7,b7 the applicable fraction under subsection 7c77#a7 shall be the applicable fraction for the building 7without regard to paragraph 7#a77 with respect to which the expenditures were incurred4 ,nothing in subsection 7d77#b7 shall prevent a credit from being allowed by reason of this subsection4 7#e7 ,no double counting ,rehabilitation expenditures may1 at the election of the taxpayer1 be taken into account under this subsection or subsection 7d77#b77;,a77i7 but not under both such subsections4 7#f7 ,regulations to apply subsection with respect to group of units in building ,the ,secretary may prescribe regulations1 consistent with the purposes of this subsection1 treating a group of units with respect to which rehabilitation expenditures are incurred as a separate new building4 7f7 ,definition and special rules relating to credit period 7#a7 ,credit period defined ,for purposes of this section1 the term credit period means1 with respect to any building1 the period of #ae taxable years beginning with-- 7,a7 the taxable year in which the building is placed in service1 or 7,b7 at the election of the taxpayer1 the succeeding taxable year1 but only if the building is a qualified middle-income building as of the close of the #ast year of such period4 ,the election under subparagraph 7,b71 once made1 shall be irrevocable4 7#b7 ,special rule for #ast year of credit period 7,a7 ,in general ,the credit allowable under subsection 7a7 with respect to any building for the #ast taxable year of the credit period shall be determined by substituting for the applicable fraction under subsection 7c77#a7 the fraction-- 7i7 the numerator of which is the sum of the applicable fractions determined under subsection 7c77#a7 as of the close of each full month of such year during which such building was in service1 and 7ii7 the denominator of which is #ab4 7,b7 ,disallowed #ast-year credit allowed in #afth year ,any reduction by reason of subparagraph 7,a7 in the credit allowable 7without regard to subparagraph 7,a77 for the #ast taxable year of the credit period shall be allowable under subsection 7a7 for the #ast taxable year following the credit period4 7#c7 ,determination of applicable percentage with respect to increases in qualified basis after #ast year of credit period 7,a7 ,in general ,in the case of any building which was a qualified middle-income building as of the close of the #ast year of the credit period1 if-- 7i7 as of the close of any taxable year in the credit period 7after the #ast year of such period7 the qualified basis of such building exceeds 7ii7 the qualified basis of such building as of the close of the #ast year of the credit period1 the applicable percentage which shall apply under subsection 7a7 for the taxable year to such excess shall be the percentage equal to #b_/c of the applicable percentage which 7after the application of subsection 7h77 would but for this paragraph apply to such basis4 7,b7 #ast year computation applies ,a rule similar to the rule of paragraph 7#b77;,a7 shall apply to any increase in qualified basis to which subparagraph 7,a7 applies for the #ast year of such increase4 7#d7 ,dispositions of property ,if a building 7or an interest therein7 is disposed of during any year for which credit is allowable under subsection 7a71 such credit shall be allocated between the parties on the basis of the number of days during such year the building 7or interest7 was held by each4 7#e7 ,credit period for existing buildings not to begin before rehabilitation credit allowed 7,a7 ,in general ,the credit period for an existing building shall not begin before the #ast taxable year of the credit period for rehabilitation expenditures with respect to the building4 7,b7 ,acquisition credit allowed for certain buildings not allowed a rehabilitation credit 7i7 ,in general ,in the case of a building described in clause 7ii7-- 7,i7 subsection 7d77#b77;,b77iv7 shall not apply1 and 7,,ii7 the credit period for such building shall not begin before the taxable year which would be the #ast taxable year of the credit period for rehabilitation expenditures with respect to the building under the modifications described in clause 7ii77,,ii74 7ii7 ,building described ,a building is described in this clause if-- 7,i7 a waiver is granted under subsection 7d77#d7 with respect to the acquisition of the building1 and 7,,ii7 a credit would be allowed for rehabilitation expenditures with respect to such building if subsection 7e77#c77;,a77ii77,i7 did not apply and if the dollar amount in effect under subsection 7e77#c77;,a77ii77,,ii7 were two-thirds of such amount4 7g7 ,qualified middle-,income housing project ,for purposes of this section-- 7#a7 ,in general ,the term qualified middle-income housing project means any project for residential rental property if-- 7,a7 #fj percent or more of the residential units in such project are both rent-restricted and occupied by individuals whose income is #ajj percent or less of area median gross income1 and 7,b7 such project is not federally subsidized and is not financed with the proceeds of any federally funded grant4 ,for purposes of subparagraph 7,a71 residential units in a building which is not a qualified middle-income building by reason of subsection 7c77#b77;,b7 shall not be taken into account4 7#b7 ,rent-restricted units 7,a7 ,in general ,for purposes of paragraph 7#a71 a residential unit is rent-restricted if the gross rent with respect to such unit does not exceed #cj percent of the imputed income limitation applicable to such unit4 ,for purposes of the preceding sentence1 the amount of the income limitation under paragraph 7#a7 applicable for any period shall not be less than such limitation applicable for the earliest period the building 7which contains the unit7 was included in the determination of whether the project is a qualified middle-income housing project4 7,b7 ,gross rent ,for purposes of subparagraph 7,a71 gross rent-- 7i7 includes any utility allowance determined by the ,secretary after taking into account such determinations under section #h of the ,united ,states ,housing ,act of #aicg1 7ii7 does not include any fee for a supportive service which is paid to the owner of the unit 7on the basis of the middle-income status of the tenant of the unit7 by any governmental program of assistance 7or by an organization described in section #eja7;c77#c7 and exempt from tax under section #eja7;a77 if such program 7or organization7 provides assistance for rent and the amount of assistance provided for rent is not separable from the amount of assistance provided for supportive services1 and 7iii7 does not include any rental payment to the owner of the unit to the extent such owner pays an equivalent amount to the ,farmers' ,home ,administration under section #eae of the ,housing ,act of #aidi4 ,for purposes of clause 7ii71 the term supportive service means any service provided under a planned program of services designed to enable residents of a residential rental property to remain independent and avoid placement in a hospital1 nursing home1 or intermediate care facility for the mentally or physically handicapped4 7,c7 ,imputed income limitation applicable to unit ,for purposes of this paragraph1 the imputed income limitation applicable to a unit is the income limitation which would apply under paragraph 7#a7 to individuals occupying the unit if the number of individuals occupying the unit were as follows3 7i7 ,in the case of a unit which does not have a separate bedroom1 #a individual4 7ii7 ,in the case of a unit which has #a or more separate bedrooms1 #a4e individuals for each separate bedroom4 7,d7 ,treatment of units occupied by individuals whose incomes rise above limit 7i7 ,in general ,except as provided in clause 7ii71 notwithstanding an increase in the income of the occupants of a middle-income unit above the income limitation applicable under paragraph 7#a71 such unit shall continue to be treated as a middle-income unit if the income of such occupants initially met such income limitation and such unit continues to be rent-restricted4 7ii7 ,next available unit must be rented to middle-income tenant if income rises above #adj percent of income limit ,if the income of the occupants of the unit increases above #adj percent of the income limitation applicable under paragraph 7#a71 clause 7i7 shall cease to apply to such unit if any residential rental unit in the building 7of a size comparable to1 or smaller than1 such unit7 is occupied by a new resident whose income exceeds such income limitation4 7#c7 ,date for meeting requirements 7,a7 ,in general ,except as otherwise provided in this paragraph1 a building shall be treated as a qualified middle-income building only if the project 7of which such building is a part7 meets the requirements of paragraph 7#a7 not later than the close of the #ast year of the credit period for such building4 7,b7 ,buildings which rely on later buildings for qualification 7i7 ,in general ,in determining whether a building 7hereinafter in this subparagraph referred to as the prior building7 is a qualified middle-income building1 the taxpayer may take into account #a or more additional buildings placed in service during the #ab-month period described in subparagraph 7,a7 with respect to the prior building only if the taxpayer elects to apply clause 7ii7 with respect to each additional building taken into account4 7ii7 ,treatment of elected buildings ,in the case of a building which the taxpayer elects to take into account under clause 7i71 the period under subparagraph 7,a7 for such building shall end at the close of the #ab-month period applicable to the prior building4 7iii7 ,date prior building is treated as placed in service ,for purposes of determining the credit period for the prior building1 the prior building shall be treated for purposes of this section as placed in service on the most recent date any additional building elected by the taxpayer 7with respect to such prior building7 was placed in service4 7,c7 ,special rule ,a building-- 7i7 other than the #ast building placed in service as part of a project1 and 7ii7 other than a building which is placed in service during the #ab-month period described in subparagraph 7,a7 with respect to a prior building which becomes a qualified middle-income building1 shall in no event be treated as a qualified middle-income building unless the project is a qualified middle-income housing project 7without regard to such building7 on the date such building is placed in service4 7,d7 ,projects with more than #a building must be identified ,for purposes of this section1 a project shall be treated as consisting of only #a building unless1 before the close of the #ast calendar year in the project period 7as defined in subsection 7h77#a77;,f77ii771 each building which is 7or will be7 part of such project is identified in such form and manner as the ,secretary may provide4 7#d7 ,certain rules made applicable ,paragraphs 7#b7 7other than subparagraph 7,a7 thereof71 7#c71 and 7#g7 of section #adb7;d71 and section #ffeb7;j71 shall apply for purposes of determining whether any project is a qualified middle-income housing project and whether any unit is a middle-income unit2 except that1 in applying such provisions for such purposes-- 7,a7 the term gross rent shall have the meaning given such term by paragraph 7#b77;,b7 of this subsection1 and 7,b7 the term applicable income limit means the limitation under paragraph 7#a7 of this subsection4 7#e7 ,election to treat building after credit period as not part of a project ,for purposes of this section1 the taxpayer may elect to treat any building as not part of a qualified middle-income housing project for any period beginning after the credit period for such building4 7#f7 ,special rule where de minimis equity contribution ,property shall not be treated as failing to be residential rental property for purposes of this section merely because the occupant of a residential unit in the project pays 7on a voluntary basis7 to the lessor a de minimis amount to be held toward the purchase by such occupant of a residential unit in such project if-- 7,a7 all amounts so paid are refunded to the occupant on the cessation of his occupancy of a unit in the project1 and 7,b7 the purchase of the unit is not permitted until after the close of the credit period with respect to the building in which the unit is located4 ,any amount paid to the lessor as described in the preceding sentence shall be included in gross rent under paragraph 7#b7 for purposes of determining whether the unit is rent-restricted4 7#g7 ,scattered site projects ,buildings which would 7but for their lack of proximity7 be treated as a project for purposes of this section shall be so treated if all of the dwelling units in each of the buildings are rent-restricted 7within the meaning of paragraph 7#b77 residential rental units4 7#h7 ,waiver of certain recertifications ,on application by the taxpayer1 the ,secretary may waive any annual recertification of tenant income for purposes of this subsection1 if the entire building is occupied by middle-income tenants4 7#i7 ,clarification of general public use requirement ,a project does not fail to meet the general public use requirement solely because of occupancy restrictions or preferences that favor tenants-- 7,a7 with special needs1 or 7,b7 who are members of a specified group under a ,federal program or ,state program or policy that supports housing for such a specified group4 7h7 ,limitation on aggregate credit allowable with respect to projects located in a ,state 7#a7 ,credit may not exceed credit amount allocated to building 7,a7 ,in general ,the amount of the credit determined under this section for any taxable year with respect to any building shall not exceed the housing credit dollar amount allocated to such building under this subsection4 7,b7 ,time for making allocation ,except in the case of an allocation which meets the requirements of subparagraph 7,c71 7,d71 7,e71 or 7,f71 an allocation shall be taken into account under subparagraph 7,a7 only if it is made not later than the close of the calendar year in which the building is placed in service4 7,c7 ,exception where binding commitment ,an allocation meets the requirements of this subparagraph if there is a binding commitment 7not later than the close of the calendar year in which the building is placed in service7 by the housing credit agency to allocate a specified housing credit dollar amount to such building beginning in a specified later taxable year4 7,d7 ,exception where increase in qualified basis 7i7 ,in general ,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 #ast apply but only to the extent the amount of such allocation does not exceed the limitation under clause 7ii74 7ii7 ,limitation ,the limitation under this clause is the amount of credit allowable under this section 7without regard to this subsection7 for a taxable year with respect to an increase in the qualified basis of the building equal to the excess of-- 7,i7 the qualified basis of such building as of the close of the #ast taxable year to which such allocation will apply1 over 7,,ii7 the qualified basis of such building as of the close of the #ast taxable year to which the most recent prior housing credit allocation with respect to such building applied4 7iii7 ,housing credit dollar amount reduced by full allocation ,notwithstanding clause 7i71 the full amount of the allocation shall be taken into account under paragraph 7#b74 7,e7 ,exception where #aj percent of cost incurred 7i7 ,in general ,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 made4 7ii7 ,qualified building ,for purposes of clause 7i71 the term qualified building means any building which is part of a project if the taxpayer's basis in such project 7as of the date which is #a year after the date that the allocation was made7 is more than #aj percent of the taxpayer's reasonably expected basis in such project 7as of the close of the second calendar year referred to in clause 7i774 ,such term does not include any existing building unless a credit is allowable under subsection 7e7 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 7i7 or the prior taxable year4 7,f7 ,allocation of credit on a project basis 7i7 ,in general ,in the case of a project which includes 7or will include7 more than #a building1 an allocation meets the requirements of this subparagraph if-- 7,i7 the allocation is made to the project for a calendar year during the project period1 7,,ii7 the allocation only applies to buildings placed in service during or after the calendar year for which the allocation is made1 and 7,,iii7 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 service4 7ii7 ,project period ,for purposes of clause 7i71 the term project period means the period-- 7,i7 beginning with the #ast calendar year for which an allocation may be made for the #ast building placed in service as part of such project1 and 7,,ii7 ending with the calendar year the last building is placed in service as part of such project4 7#b7 ,allocated credit amount to apply to all taxable years ending during or after credit allocation year ,any housing credit dollar amount allocated to any building for any calendar year-- 7,a7 shall apply to such building for all taxable years in the credit period ending during or after such calendar year1 and 7,b7 shall reduce the aggregate housing credit dollar amount of the allocating agency only for such calendar year4 7#c7 ,housing credit dollar amount for agencies 7,a7 ,in general ,the aggregate housing credit dollar amount which a housing credit agency may allocate for any calendar year is the portion of the ,state housing credit ceiling allocated under this paragraph for such calendar year to such agency4 7,b7 ,state ceiling initially allocated to ,state housing credit agencies ,except as provided in subparagraph 7,d71 the ,state housing credit ceiling for each calendar year shall be allocated to the housing credit agency of such ,state4 ,if there is more than #a housing credit agency of a ,state1 all such agencies shall be treated as a single agency4 7,c7 ,state housing credit ceiling ,the ,state housing credit ceiling applicable to any ,state for any calendar year shall be an amount equal to the sum of-- 7i7 the greater of-- 7,i7 #a4jj multiplied by the ,state population1 or 7,,ii7 #a1adj1jjj1 plus 7ii7 the amount of ,state housing credit ceiling returned in the calendar year4 ,for purposes of clause 7ii71 the amount of ,state housing credit ceiling returned in the calendar year equals the housing credit dollar amount previously allocated within the ,state to any project which fails to meet the #aj percent test under paragraph 7#a77;,e77ii7 on a date after the close of the calendar year in which the allocation was made or which does not become a qualified middle-income housing project within the period required by this section or the terms of the allocation or to any project with respect to which an allocation is cancelled by mutual consent of the housing credit agency and the allocation recipient4 7,d7 ,state may provide for different allocation ,rules similar to the rules of section #adf7;e7 7other than paragraph 7#b77;,b7 thereof7 shall apply for purposes of this paragraph4 7,e7 ,population ,for purposes of this paragraph1 population shall be determined in accordance with section #adf7;j74 7,f7 ,cost-of-living adjustment 7i7 ,in general ,in the case of a calendar year after #bjai1 the #a1adj1jjj and #a4jj amounts in subparagraph 7,c7 shall each be increased by an amount equal to-- 7,i7 such dollar amount1 multiplied by 7,,ii7 the cost-of-living adjustment determined under section #a7;f77#c7 for such calendar year by substituting calendar year #bjah for calendar year #bjaf in subparagraph 7,a77ii7 thereof4 7ii7 ,rounding 7,i7 ,in the case of the #a1adj1jjj amount1 any increase under clause 7i7 which is not a multiple of #e1jjj shall be rounded to the next lowest multiple of #e1jjj4 7,,ii7 ,in the case of the #a4jj amount1 any increase under clause 7i7 which is not a multiple of #e cents shall be rounded to the next lowest multiple of #e cents4 7#d7 ,portion of ,state ceiling set-aside for certain projects involving qualified nonprofit organizations 7,a7 ,in general ,not more than #ij percent of the ,state housing credit ceiling 7determined without regard to paragraph 7#g77 for any ,state for any calendar year shall be allocated to projects other than qualified middle-income housing projects described in subparagraph 7,b74 7,b7 ,projects involving qualified nonprofit organizations ,for purposes of subparagraph 7,a71 a qualified middle-income housing project is described in this subparagraph if a qualified nonprofit organization is to own an interest in the project 7directly or through a partnership7 and materially participate 7within the meaning of section #dfi7;h77 in the development and operation of the project throughout the credit period4 7,c7 ,qualified nonprofit organization ,for purposes of this paragraph1 the term qualified nonprofit organization means any organization if-- 7i7 such organization is described in paragraph 7#c7 or 7#d7 of section #eja7;c7 and is exempt from tax under section #eja7;a71 7ii7 such organization is determined by the ,state housing credit agency not to be affiliated with or controlled by a for-profit organization2 and 7iii7 one of the exempt purposes of such organization includes the fostering of middle-income housing4 7,d7 ,treatment of certain subsidiaries 7i7 ,in general ,for purposes of this paragraph1 a qualified nonprofit organization shall be treated as satisfying the ownership and material participation test of subparagraph 7,b7 if any qualified corporation in which such organization holds stock satisfies such test4 7ii7 ,qualified corporation ,for purposes of clause 7i71 the term qualified corporation means any corporation if #ajj percent of the stock of such corporation is held by #a or more qualified nonprofit organizations at all times during the period such corporation is in existence4 7,e7 ,state may not override set-aside ,nothing in subparagraph 7,e7 of paragraph 7#c7 shall be construed to permit a ,state not to comply with subparagraph 7,a7 of this paragraph4 7#e7 ,buildings eligible for credit only if minimum long-term commitment to middle-income housing 7,a7 ,in general ,no credit shall be allowed by reason of this section with respect to any building for the taxable year unless an extended middle-income housing commitment is in effect as of the end of such taxable year4 7,b7 ,extended middle-income housing commitment ,for purposes of this paragraph1 the term extended middle-income housing commitment means any agreement between the taxpayer and the housing credit agency-- 7i7 which requires that the applicable fraction 7as defined in subsection 7c77#a77 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 7,i7 and 7,,ii7 of subparagraph 7,e77ii71 7ii7 which allows individuals who meet the income limitation applicable to the building under subsection 7g7 7whether prospective1 present1 or former occupants of the building7 the right to enforce in any ,state court the requirement and prohibitions of clause 7i71 7iii7 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 person1 7iv7 which prohibits the refusal to lease to a holder of a voucher or certificate of eligibility under section #h of the ,united ,states ,housing ,act of #aicg because of the status of the prospective tenant as such a holder1 7v7 which is binding on all successors of the taxpayer1 and 7vi7 which1 with respect to the property1 is recorded pursuant to ,state law as a restrictive covenant4 7,c7 ,allocation of credit may not exceed amount necessary to support commitment ,the housing credit dollar amount allocated to any building may not exceed the amount necessary to support the applicable fraction specified in the extended middle-income housing commitment for such building1 including any increase in such fraction pursuant to the application of subsection 7f77#c7 if such increase is reflected in an amended middle-income housing commitment4 7,d7 ,extended use period ,for purposes of this paragraph1 the term extended use period means the period-- 7i7 beginning on the #ast day in credit period on which such building is part of a qualified middle-income housing project1 and 7ii7 ending on the later of-- 7,i7 the date specified by such agency in such agreement1 or 7,,ii7 the date which is #ae years after the close of the credit period4 7,e7 ,exceptions if foreclosure or if no buyer willing to maintain middle-income status 7i7 ,in general ,the extended use period for any building shall terminate-- 7,i7 on the date the building is acquired by foreclosure 7or instrument in lieu of foreclosure7 unless the ,secretary determines that such acquisition is part of an arrangement with the taxpayer a purpose of which is to terminate such period1 or 7,,ii7 on the last day of the period specified in subparagraph 7,i7 if the housing credit agency is unable to present during such period a qualified contract for the acquisition of the middle-income portion of the building by any person who will continue to operate such portion as a qualified middle-income building4 ,subclause 7,,ii7 shall not apply to the extent more stringent requirements are provided in the agreement or in ,state law4 7ii7 ,eviction1 etc4 of existing middle-income tenants not permitted ,the termination of an extended use period under clause 7i7 shall not be construed to permit before the close of the #c-year period following such termination-- 7,i7 the eviction or the termination of tenancy 7other than for good cause7 of an existing tenant of any middle-income unit1 or 7,,ii7 any increase in the gross rent with respect to such unit not otherwise permitted under this section4 7,f7 ,qualified contract ,for purposes of subparagraph 7,e71 the term qualified contract means a bona fide contract to acquire 7within a reasonable period after the contract is entered into7 the nonmiddle-income portion of the building for fair market value and the middle-income portion of the building for an amount not less than the applicable fraction 7specified in the extended middle-income housing commitment7 of-- 7i7 the sum of-- 7,i7 the outstanding indebtedness secured by1 or with respect to1 the building1 7,,ii7 the adjusted investor equity in the building1 plus 7,,iii7 other capital contributions not reflected in the amounts described in subclause 7,i7 or 7,,ii71 reduced by 7ii7 cash distributions from 7or available for distribution from7 the project4 ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out this paragraph1 including regulations to prevent the manipulation of the amount determined under the preceding sentence4 7,g7 ,adjusted investor equity 7i7 ,in general ,for purposes of subparagraph 7,f71 the term adjusted investor equity means1 with respect to any calendar year1 the aggregate amount of cash taxpayers invested with respect to the project increased by the amount equal to-- 7,i7 such amount1 multiplied by 7,,ii7 the cost-of-living adjustment for such calendar year1 determined under section #a7;f77#c7 by substituting the base calendar year for calendar year #aihg4 ,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 project4 7ii7 ,cost-of-living increases in excess of #e percent not taken into account ,under regulations prescribed by the ,secretary1 if the ,,cpi for any calendar year 7as defined in section #a7;f77#d77 exceeds the ,,cpi for the preceding calendar year by more than #e percent1 the ,,cpi for the base calendar year shall be increased such that such excess shall never be taken into account under clause 7i74 7iii7 ,base calendar year ,for purposes of this subparagraph1 the term base calendar year means the calendar year with or within which the #ast taxable year of the credit period ends4 7,h7 ,middle-income portion ,for purposes of this paragraph1 the middle-income portion of a building is the portion of such building equal to the applicable fraction specified in the extended middle-income housing commitment for the building4 7,i7 ,period for finding buyer ,the period referred to in this subparagraph is the #a-year period beginning on the date 7after the #adth year of the credit period7 the taxpayer submits a written request to the housing credit agency to find a person to acquire the taxpayer's interest in the middle-income portion of the building4 7,j7 ,effect of noncompliance ,if1 during a taxable year1 there is a determination that an extended middle-income housing agreement was not in effect as of the beginning of such year1 such determination shall not apply to any period before such year and subparagraph 7,a7 shall be applied without regard to such determination if the failure is corrected within #a year from the date of the determination4 7,k7 ,projects which consist of more than #a building ,the application of this paragraph to projects which consist of more than #a building shall be made under regulations prescribed by the ,secretary4 7#f7 ,special rules 7,a7 ,building must be located within jurisdiction of credit agency ,a housing credit agency may allocate its aggregate housing credit dollar amount only to buildings located in the jurisdiction of the governmental unit of which such agency is a part4 7,b7 ,agency allocations in excess of limit ,if the aggregate housing credit dollar amounts allocated by a housing credit agency for any calendar year exceed the portion of the ,state housing credit ceiling allocated to such agency for such calendar year1 the housing credit dollar amounts so allocated shall be reduced 7to the extent of such excess7 for buildings in the reverse of the order in which the allocations of such amounts were made4 7,c7 ,credit reduced if allocated credit dollar amount is less than credit which would be allowable without regard to placed in service convention1 etc 7i7 ,in general ,the amount of the credit determined under this section with respect to any building shall not exceed the clause 7ii7 percentage of the amount of the credit which would 7but for this subparagraph7 be determined under this section with respect to such building4 7ii7 ,determination of percentage ,for purposes of clause 7i71 the clause 7ii7 percentage with respect to any building is the percentage which-- 7,i7 the housing credit dollar amount allocated to such building bears to 7,,ii7 the credit amount determined in accordance with clause 7iii74 7iii7 ,determination of credit amount ,the credit amount determined in accordance with this clause is the amount of the credit which would 7but for this subparagraph7 be determined under this section with respect to the building if-- 7,i7 this section were applied without regard to paragraphs 7#b77;,a7 and 7#c77;,b7 of subsection 7f71 and 7,,ii7 subsection 7f77#c77;,a7 were applied without regard to the percentage equal to #b_/c of4 7,d7 ,housing credit agency to specify applicable percentage and maximum qualified basis ,in allocating a housing credit dollar amount to any building1 the housing credit agency shall specify the applicable percentage and the maximum qualified basis which may be taken into account under this section with respect to such building4 ,the applicable percentage and maximum qualified basis so specified shall not exceed the applicable percentage and qualified basis determined under this section without regard to this subsection4 7#g7 ,increase in ,state ceiling dedicated to certain rural development projects 7,a7 ,in general ,the ,state housing credit ceiling for any calendar year shall be increased by an amount equal to #e percent of the amount determined under paragraph 7#c77;,c77i74 7,b7 ,use of increased amount ,the amount of the increase under subparagraph 7,a7 for any calendar year may only be allocated to buildings located in a nonmetropolitan area 7as defined in section #db7;d77#e77;,b77iv77,,iv7 which is designated by the ,secretary of ,housing and ,urban ,development as a difficult development area 7as defined in section #db7;d77#e77;,b77iii774 7#h7 ,other definitions ,for purposes of this subsection-- 7,a7 ,housing credit agency ,the term housing credit agency means any agency authorized to carry out this subsection4 7,b7 ,possessions treated as ,states ,the term ,state includes a possession of the ,united ,states4 7i7 ,definitions and special rules ,for purposes of this section-- 7#a7 ,middle-income unit 7,a7 ,in general ,the term middle-income unit means any unit in a building if-- 7i7 such unit is rent-restricted 7as defined in subsection 7g77#b771 and 7ii7 the individuals occupying such unit meet the income limitation applicable under subsection 7g77#a7 to the project of which such building is a part4 7,b7 ,exceptions 7i7 ,exclusion of low-income units ,a unit shall not be treated as a middle-income unit if such unit is a low-income unit 7as defined under section #db7;i77#c774 7ii7 ,unit must be suitable for permanent occupancy 7,i7 ,in general ,a unit shall not be treated as a middle-income unit unless the unit is suitable for occupancy and used other than on a transient basis4 7,,ii7 ,suitability for occupancy ,for purposes of subclause 7,i71 the suitability of a unit for occupancy shall be determined under regulations prescribed by the ,secretary taking into account local health1 safety1 and building codes4 7,,iii7 ,single-room occupancy units ,for purposes of subclause 7,i71 a single-room occupancy unit shall not be treated as used on a transient basis merely because it is rented on a month-by-month basis4 7,c7 ,special rule for buildings having #d or fewer units ,in the case of any building which has #d or fewer residential rental units1 no unit in such building shall be treated as a middle-income unit if the units in such building are owned by-- 7i7 any individual who occupies a residential unit in such building1 or 7ii7 any person who is related 7as defined in subsection 7d77#b77;,d77ii77 to such individual4 7,d7 ,rules relating to students 7i7 ,in general ,a unit occupied solely by individuals who-- 7,i7 have not attained age #bd1 and 7,,ii7 are enrolled in a full-time course of study at an institution of higher education 7as defined in section #ccjd7;f771 shall not be treated as a middle-income unit4 7ii7 ,exceptions ,clause 7i7 shall not apply to a unit occupied by an individual who-- 7,i7 is married1 7,,ii7 is a person with disabilities 7as defined in section #c7;b77#c77;,e7 of the ,united ,states ,housing ,act of #aicg71 7,,iii7 is a veteran 7as defined in section #aja7b7 of title #ch1 ,united ,states ,code71 7,,iv7 has one or more qualifying children 7as defined in section #aeb7;c771 or 7,v7 meets the income limitation applicable under subsection 7g77#a7 to the project of which the building is a part and is1 or was immediately prior to attaining the age of majority-- 7aa7 an emancipated minor or in legal guardianship as determined by a court of competent jurisdiction in the individual's ,state of legal residence1 7bb7 under the care and placement responsibility of the ,state agency responsible for administering a plan under part ,b or part ,e of title ,,iv of the ,social ,security ,act1 or 7cc7 was an unaccompanied youth 7within the meaning of section #gbe7f7 of the ,mc,kinney-,vento ,homeless ,assistance ,act 7#db ,u4,s4,c4 #aadcd;a7#f777 or a homeless child or youth 7within the meaning of section #gbe7b7 of such ,act 7#db ,u4,s4,c4 #aadcd;a7#b7774 7,e7 ,owner-occupied buildings having #d or fewer units eligible for credit where development plan 7i7 ,in general ,subparagraph 7,c7 shall not apply to the acquisition or rehabilitation of a building pursuant to a development plan of action sponsored by a ,state or local government or a qualified nonprofit organization4 7ii7 ,limitation on credit ,in the case of a building to which clause 7i7 applies1 the applicable fraction shall not exceed #hj percent of the unit fraction4 7iii7 ,certain unrented units treated as owner-occupied ,in the case of a building to which clause 7i7 applies1 any unit which is not rented for #ij days or more shall be treated as occupied by the owner of the building as of the #ast day it is not rented4 7#b7 ,new building ,the term new building means a building the original use of which begins with the taxpayer4 7#c7 ,existing building ,the term existing building means any building which is not a new building4 7#d7 ,application to estates and trusts ,in the case of an estate or trust1 the amount of the credit determined under subsection 7a7 shall be apportioned between the estate or trust and the beneficiaries on the basis of the income of the estate or trust allocable to each4 7#e7 ,impact of tenant's option to acquire property 7,a7 ,in general ,no ,federal income tax benefit shall fail to be allowable to the taxpayer with respect to any qualified middle-income building merely by reason of an option held by the tenants 7in cooperative form or otherwise7 or resident management corporation of such building or by a qualified nonprofit organization or government agency to purchase the property or a partnership interest relating to the property after the close of the credit period for a price which is not less than the minimum purchase price determined under subparagraph 7,b74 7,b7 ,minimum purchase price ,for purposes of subparagraph 7,a71 the minimum purchase price under this subparagraph is an amount equal to the sum of-- 7i7 the principal amount of outstanding indebtedness secured by the building 7other than indebtedness incurred within the #e-year period ending on the date of the sale to the tenants71 and 7ii7 all ,federal1 ,state1 and local taxes attributable to such sale4 ,except in the case of ,federal income taxes1 there shall not be taken into account under clause 7ii7 any additional tax attributable to the application of clause 7ii74 ,in the case of a purchase of a partnership interest1 the minimum purchase price is an amount equal to such interest's ratable share of the amount determined under the first sentence of this subparagraph4 7#f7 ,treatment of rural projects ,for purposes of this section1 in the case of any project for residential rental property located in a rural area 7as defined in section #ebj of the ,housing ,act of #aidi71 any income limitation measured by reference to area median gross income shall be measured by reference to the greater of area median gross income or national non-metropolitan median income4 7#g7 ,determination of whether building is ,federally subsidized 7,a7 ,in general ,except as otherwise provided in this paragraph1 for purposes of subsection 7g77#a71 a project shall be treated as ,federally subsidized for any taxable year if1 at any time during such taxable year or any prior taxable year1 there is or was outstanding any obligation the interest on which is exempt from tax under section #ajc the proceeds of which are or were used 7directly or indirectly7 with respect to such project or the operation thereof4 7,b7 ,special rule for subsidized construction financing ,subparagraph 7,a7 shall not apply to any tax-exempt obligation used to provide construction financing for any building if-- 7i7 such obligation 7when issued7 identified the building for which the proceeds of such obligation would be used1 and 7ii7 such obligation is redeemed before such building is placed in service4 7#h7 ,reduction in basis ,in the case of any building for which a credit is allowable under this section and section #db1 the basis of the building shall be reduced by the amount of such credit allowed under subsection 7a74 7j7 ,application of at-,risk rules ,for purposes of this section-- 7#a7 ,in general ,except as otherwise provided in this subsection1 rules similar to the rules of section #di7;a77#a7 7other than subparagraphs 7,d77ii77,,ii7 and 7,d77iv77,i7 thereof71 section #di7;a77#b71 and section #di7;b77#a7 shall apply in determining the qualified basis of any building in the same manner as such sections apply in determining the credit base of property4 7#b7 ,special rules for determining qualified person ,for purposes of paragraph 7#a7-- 7,a7 ,in general ,if the requirements of subparagraphs 7,b71 7,c71 and 7,d7 are met with respect to any financing borrowed from a qualified nonprofit organization1 the determination of whether such financing is qualified commercial financing with respect to any qualified middle-income building shall be made without regard to whether such organization-- 7i7 is actively and regularly engaged in the business of lending money1 or 7ii7 is a person described in section #di7;a77#a77;,d77iv77,,ii74 7,b7 ,financing secured by property ,the requirements of this subparagraph are met with respect to any financing if such financing is secured by the qualified middle-income building1 except that this subparagraph shall not apply in the case of a federally assisted building described in subsection 7d77#e77;,b7 if-- 7i7 a security interest in such building is not permitted by a ,federal agency holding or insuring the mortgage secured by such building1 and 7ii7 the proceeds from the financing 7if any7 are applied to acquire or improve such building4 7,c7 ,portion of building attributable to financing ,the requirements of this subparagraph are met with respect to any financing for any taxable year in the credit period if1 as of the close of such taxable year1 not more than #fj percent of the eligible basis of the qualified middle-income building is attributable to such financing 7reduced by the principal and interest of any governmental financing which is part of a wrap-around mortgage involving such financing74 7,d7 ,repayment of principal and interest ,the requirements of this subparagraph are met with respect to any financing if such financing is fully repaid on or before the earliest of-- 7i7 the date on which such financing matures1 7ii7 the #ijth day after the close of the credit period with respect to the qualified middle-income building1 or 7iii7 the date of its refinancing or the sale of the building to which such financing relates4 ,in the case of a qualified nonprofit organization which is not described in section #di7;a77#a77;,d77iv77,,ii7 with respect to a building1 clause 7ii7 of this subparagraph shall be applied as if the date described therein were the #ijth day after the earlier of the date the building ceases to be a qualified middle-income building or the date which is #ae years after the close of a credit period with respect thereto4 7#c7 ,present value of financing ,if the rate of interest on any financing described in paragraph 7#b77;,a7 is less than the rate which is #a percentage point below the applicable ,federal rate as of the time such financing is incurred1 then the qualified basis 7to which such financing relates7 of the qualified middle-income building shall be the present value of the amount of such financing1 using as the discount rate such applicable ,federal rate4 ,for purposes of the preceding sentence1 the rate of interest on any financing shall be determined by treating interest to the extent of government subsidies as not payable4 7#d7 ,failure to fully repay 7,a7 ,in general ,to the extent that the requirements of paragraph 7#b77;,d7 are not met1 then the taxpayer's tax under this chapter for the taxable year in which such failure occurs shall be increased by an amount equal to the applicable portion of the credit under this section with respect to such building1 increased by an amount of interest for the period-- 7i7 beginning with the due date for the filing of the return of tax imposed by chapter #a for the #ast taxable year for which such credit was allowable1 and 7ii7 ending with the due date for the taxable year in which such failure occurs1 determined by using the underpayment rate and method under section #ffba4 7,b7 ,applicable portion ,for purposes of subparagraph 7,a71 the term applicable portion means the aggregate decrease in the credits allowed to a taxpayer under section #ch for all prior taxable years which would have resulted if the eligible basis of the building were reduced by the amount of financing which does not meet requirements of paragraph 7#b77;,d74 7,c7 ,certain rules to apply ,rules similar to the rules of subparagraphs 7,a7 and 7,d7 of section #db7;j77#d7 shall apply for purposes of this subsection4 7k7 ,certifications and other reports to ,secretary 7#a7 ,certification with respect to #ast year of credit period ,following the close of the #ast taxable year in the credit period with respect to any qualified middle-income building1 the taxpayer shall certify to the ,secretary 7at such time and in such form and in such manner as the ,secretary prescribes7-- 7,a7 the taxable year1 and calendar year1 in which such building was placed in service1 7,b7 the adjusted basis and eligible basis of such building as of the close of the #ast year of the credit period1 7,c7 the maximum applicable percentage and qualified basis permitted to be taken into account by the appropriate housing credit agency under subsection 7h71 and 7,d7 such other information as the ,secretary may require4 ,in the case of a failure to make the certification required by the preceding sentence on the date prescribed therefor1 unless it is shown that such failure is due to reasonable cause and not to willful neglect1 no credit shall be allowable by reason of subsection 7a7 with respect to such building for any taxable year ending before such certification is made4 7#b7 ,annual reports to the ,secretary ,the ,secretary may require taxpayers to submit an information return 7at such time and in such form and manner as the ,secretary prescribes7 for each taxable year setting forth-- 7,a7 the qualified basis for the taxable year of each qualified middle-income building of the taxpayer1 7,b7 the information described in paragraph 7#a77;,c7 for the taxable year1 and 7,c7 such other information as the ,secretary may require4 ,the penalty under section #ffeb7;j7 shall apply to any failure to submit the return required by the ,secretary under the preceding sentence on the date prescribed therefor4 7#c7 ,annual reports from housing credit agencies ,each agency which allocates any housing credit amount to any building for any calendar year shall submit to the ,secretary 7at such time and in such manner as the ,secretary shall prescribe7 an annual report specifying-- 7,a7 the amount of housing credit amount allocated to each building for such year1 7,b7 sufficient information to identify each such building and the taxpayer with respect thereto1 and 7,c7 such other information as the ,secretary may require4 ,the penalty under section #ffeb7;j7 shall apply to any failure to submit the report required by the preceding sentence on the date prescribed therefor4 7l7 ,responsibilities of housing credit agencies 7#a7 ,plans for allocation of credit among projects 7,a7 ,in general ,notwithstanding any other provision of this section1 the housing credit dollar amount with respect to any building shall be zero unless-- 7i7 such amount was allocated pursuant to a qualified allocation plan of the housing credit agency which is approved by the governmental unit 7in accordance with rules similar to the rules of section #db7m77#a77 of which such agency is a part1 7ii7 such agency notifies the chief executive officer 7or the equivalent7 of the local jurisdiction within which the building is located of such project and provides such individual a reasonable opportunity to comment on the project1 7iii7 a comprehensive market study of the housing needs of middle-income individuals in the area to be served by the project is conducted before the credit allocation is made and at the developer's expense by a disinterested party who is approved by such agency1 and 7iv7 a written explanation is available to the general public for any allocation of a housing credit dollar amount which is not made in accordance with established priorities and selection criteria of the housing credit agency4 7,b7 ,qualified allocation plan ,for purposes of this paragraph1 the term qualified allocation plan means any plan-- 7i7 which sets forth selection criteria to be used to determine housing priorities of the housing credit agency which are appropriate to local conditions1 7ii7 which also gives preference in allocating housing credit dollar amounts among selected projects to-- 7,i7 projects obligated to serve qualified tenants for the longest periods1 7,,ii7 projects in areas where rents are unaffordable to median income households1 7,,iii7 projects which target housing to tenants at a range of incomes between #fj and #ajj percent of area median gross income1 taking local income and market conditions into account1 and 7,,iv7 projects located near transit hubs1 and 7iii7 which provides a procedure that the agency 7or an agent or other private contractor of such agency7 will follow in monitoring for noncompliance with the provisions of this section and in notifying the ,internal ,revenue ,service of such noncompliance which such agency becomes aware of and in monitoring for noncompliance with habitability standards through regular site visits4 7,c7 ,certain selection criteria must be used ,the selection criteria set forth in a qualified allocation plan must include-- 7i7 project location1 7ii7 housing needs characteristics1 7iii7 project characteristics1 including whether the project includes the use of existing housing as part of a community revitalization plan1 7iv7 sponsor characteristics1 7v7 tenant populations with special housing needs1 7vi7 tenant populations of individuals with children1 7vii7 projects intended for eventual tenant ownership1 7viii7 the energy efficiency of the project1 and 7ix7 the historic nature of the project4 7,d7 ,certain selection criteria prohibited ,the selection criteria set forth in a qualified allocation plan shall not include a requirement of local approval or local contributions1 either as a threshold qualification requirement or as part of a point system to be considered for allocations of housing credit dollar amount4 ,this subparagraph shall not apply to the notice and opportunity to comment requirement for chief executive officers 7or the equivalent7 of local jurisdictions under subparagraph 7,a77ii74 7#b7 ,credit allocated to building not to exceed amount necessary to assure project feasibility 7,a7 ,in general ,the housing credit dollar amount allocated to a project shall not exceed the amount the housing credit agency determines is necessary for the financial feasibility of the project and its viability as a qualified middle-income housing project throughout the credit period4 7,b7 ,agency evaluation ,in making the determination under subparagraph 7,a71 the housing credit agency shall consider-- 7i7 the sources and uses of funds and the total financing planned for the project1 7ii7 any proceeds or receipts expected to be generated by reason of tax benefits1 7iii7 the percentage of the housing credit dollar amount used for project costs other than the cost of intermediaries1 and 7iv7 the reasonableness of the developmental and operational costs of the project4 ,clause 7iii7 shall not be applied so as to impede the development of projects in hard-to-develop areas4 ,such a determination shall not be construed to be a representation or warranty as to the feasibility or viability of the project4 7,c7 ,determination made when credit amount applied for and when building placed in service 7i7 ,in general ,a determination under subparagraph 7,a7 shall be made as of each of the following times3 7,i7 ,the application for the housing credit dollar amount4 7,,ii7 ,the allocation of the housing credit dollar amount4 7,,iii7 ,the date the building is placed in service4 7ii7 ,certification as to amount of other subsidies ,prior to each determination under clause 7i71 the taxpayer shall certify to the housing credit agency the full extent of all ,federal1 ,state1 and local subsidies which apply 7or which the taxpayer expects to apply7 with respect to the building4 7m7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section1 including regulations-- 7#a7 dealing with-- 7,a7 projects which include more than #a building or only a portion of a building1 7,b7 buildings which are placed in service in portions1 7#b7 providing for the application of this section to short taxable years1 7#c7 preventing the avoidance of the rules of this section1 and 7#d7 providing the opportunity for housing credit agencies to correct administrative errors and omissions with respect to allocations and record keeping within a reasonable period after their discovery1 taking into account the availability of regulations and other administrative guidance from the ,secretary4 4 7b7 ,treatment as part of general business credit ,section #ch7;b7 of the ,internal ,revenue ,code of #aihf is amended by striking plus at the end of paragraph 7#ca71 by striking the period at the end of paragraph 7#cb7 and inserting 1 plus1 and by adding at the end the following new paragraph3 7#cc7 the middle-income housing credit determined under section #db;,a7a74 4 7c7 ,unused allocations carried over to low-,income housing credit 7#a7 ,in general ,clause 7i7 of section #db7;h77#c77;,c7 of the ,internal ,revenue ,code of #aihf is amended-- 7,a7 by striking the unused and inserting the sum of-- 7,i7 the unused 1 7,b7 by inserting plus after calendar year11 and 7,c7 by adding at the end the following new subclause3 7,,ii7 the unused middle-income ,state housing credit 7if any7 of such ,state for the preceding calendar year1 4 7#b7 ,unused middle-income ,state housing credit ,the second sentence of section #db7;h77#c77;,c7 of such ,code is amended by inserting 1 and the unused middle-income ,state housing credit for any calendar year is the excess 7if any7 of the amount described in section #db;,a7h77#c77;,c7 7after application of section #db;,a7h77#g77 for such ,state over the aggregate amount of middle-income housing credit dollar amount allocated by such ,state under section #db;,a for such year after for such year4 7#c7 ,unused middle income ,state housing credit included in carryover allocation ,section #db7;h77#c77;,d77ii7 of such ,code is amended-- 7,a7 by inserting the sum of after is the excess 7if any7 of1 and 7,b7 by inserting plus the unused middle-income ,state housing credit 7as so defined7 after as defined in subparagraph 7,c77i774 7d7 ,reduction in basis ,section #ajaf7;a7 of the ,internal ,revenue ,code of #aihf is amended by striking and at the end of paragraph 7#cg71 by striking the period at the end of paragraph 7#ch7 and inserting 1 and1 and by adding at the end the following new paragraph3 7#ci7 to the extent provided in section #db;,a7i77#h74 4 7e7 ,conforming amendments 7#a7 ,section #ee7;c77#a7 of the ,internal ,revenue ,code of #aihf is amended by inserting #db;,a7j71 before #de7;e77#aa77;,c74 7#b7 ,subsections 7i77#c77;,c71 7i77#f77;,b77i71 and 7k77#a7 of section #dfi of such ,code are each amended by inserting or #db;,a after #db4 7#c7 ,section #ggb7;a7 of such ,code is amended by redesignating paragraphs 7#h71 7#i71 and 7#aj7 as paragraphs 7#i71 7#aj71 and 7#aa71 respectively1 and by inserting after paragraph 7#g7 the following new paragraph3 7#h7 the middle-income housing credit determined under section #db;,a1 4 7#d7 ,the table of sections for subpart ,d of part ,,iv of subchapter ,a of chapter #a of such ,code is amended by inserting after the item relating to section #db the following new item3 ,sec4 #db;,a4 ,middle-income housing credit4 4 7f7 ,effective date ,the amendments made by this section shall apply to taxable years ending after the date of the enactment of this ,act4