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Title II — Reforms relating to tenant eligibility

S. 548 · 115th Congress · Mar 7, 2017 · Lineage

II Reforms relating to tenant eligibility

Sec. 201 Average income test

(a)
In general— Paragraph (1) of section 42(g) of the Internal Revenue Code of 1986 is amended—
(1)
by striking “subparagraph (A) or (B)” and inserting “subparagraph (A), (B), or (C)”, and
(2)
by inserting after subparagraph (B) the following new subparagraph:

“(C) Average income test

“(i) In general—The project meets the minimum requirements of this subparagraph if 40 percent or more (25 percent or more in the case of a project described in section 142(d)(6)) of the residential units in such project are both rent-restricted and occupied by individuals whose income does not exceed the imputed income limitation designated by the taxpayer with respect to the respective unit.

“(ii) Special rules relating to income limitation—For purposes of clause (i)—

“(I) Designation—The taxpayer shall designate the imputed income limitation of each unit taken into account under such clause.

“(II) Average test—The average of the imputed income limitations designated under subclause (I) shall not exceed 60 percent of area median gross income.

“(III) 10-percent increments—The designated imputed income limitation of any unit under subclause (I) shall be 20 percent, 30 percent, 40 percent, 50 percent, 60 percent, 70 percent, or 80 percent of area median gross income.”

(b)
Rules relating to next available unit— Subparagraph (D) of section 42(g)(2) of the Internal Revenue Code of 1986 is amended—
(1)
in clause (i), by striking “clause (ii)” and inserting “clauses (ii), (iii), and (iv)”,
(2)
in clause (ii)—
(A)
by striking “If” and inserting “In the case of a project with respect to which the taxpayer elects the requirements of subparagraph (A) or (B) of paragraph (1), if”,
(B)
by striking the second sentence, and
(C)
by striking “Next available unit must be rented to low-income tenant if income rises above 140 percent of income limit” in the heading and inserting “Rental of next available unit in case of 20–50 or 40–60 test”, and
(3)
by adding at the end the following new clauses:

“(iii) Rental of next available unit in case of average income test—In the case of a project with respect to which the taxpayer elects the requirements of subparagraph (C) of paragraph (1), if the income of the occupants of the unit increases above 140 percent of the greater of—

“(I) 60 percent of area median gross income, or

“(II) the imputed income limitation designated with respect to the unit under paragraph (1)(C)(ii)(I),

“(iv) Deep rent skewed projects—In the case of a project described in section 142(d)(4)(B), clause (ii) or (iii), whichever is applicable, shall be applied by substituting “170 percent” for “140 percent”, and—

“(I) in the case of clause (ii), by substituting “any low-income unit in the building is occupied by a new resident whose income exceeds 40 percent of area median gross income” for “any residential rental unit” and all that follows in such clause, and

“(II) in the case of clause (iii), by substituting “any low-income unit in the building is occupied by a new resident whose income exceeds the lesser of 40 percent of area median gross income or the imputed income limitation designated with respect to such unit under paragraph (1)(C)(ii)(I)” for “any residential rental unit” and all that follows in such clause.

“(v) Limitation described—For purposes of clause (iii), the limitation described in this clause with respect to any unit is—

“(I) the imputed income limitation designated with respect to such unit under paragraph (1)(C)(ii)(I), in the case of a unit which was taken into account as a low-income unit prior to becoming vacant, and

“(II) the imputed income limitation which would have to be designated with respect to such unit under such paragraph in order for the project to continue to meet the requirements of paragraph (1)(C)(ii)(II), in the case of any other unit.”

(c)
Effective date— The amendments made by this section shall apply to elections made under section 42(g)(1) of the Internal Revenue Code of 1986 after the date of the enactment of this Act.

Sec. 202 Uniform income eligibility for rural projects

(a)
In general— Paragraph (8) of section 42(i) of the Internal Revenue Code of 1986 is amended by striking the second sentence.
(b)
Effective date— The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

Sec. 203 Codification of rules relating to increased tenant income

(a)
In general— Clause (i) of section 42(g)(2)(D) of the Internal Revenue Code of 1986, as amended by this Act, is amended by striking “clauses (ii), (iii), and (iv)” and all that follows and inserting “clauses (ii), (iii), (iv), and (vi), notwithstanding an increase in the income of the occupants above the income limitation applicable under paragraph (1)—

“(I) a low-income unit shall continue to be treated as a low-income unit if the income of such occupants initially was 60 percent or less of area median gross income and such unit continues to be rent-restricted, and

“(II) a unit to which, at the time of initial occupancy by such occupants, any Federal, State, or local government income restriction applied, and which subsequently becomes part of a building with respect to which rehabilitation expenditures are taken into account under subsection (e), shall be treated as a low-income unit if the income of such occupants initially was 60 percent or less of area median gross income and does not exceed 120 percent of area median gross income as of the date of acquisition of the property by the taxpayer.”

(b)
Exception— Subparagraph (D) of section 42(g)(2) of the Internal Revenue Code of 1986, as amended by this Act, is amended by adding at the end the following new clause:

“(vi) Exception to rule relating to increased tenant income—In the case of an occupant of a low-income unit who initially qualified to occupy such unit by reason of paragraph (1)(C) with an income in excess of 60 percent of area median gross income but not in excess of 80 percent of area median gross income, clause (i) shall be applied for substituting “80 percent” for “60 percent” each place it appears.”

(c)
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2016.

Sec. 204 Modification of student occupancy rules

(a)
In general— Subparagraph (D) of section 42(i)(3) of the Internal Revenue Code of 1986 is amended to read as follows:

“(D) Rules relating to students

“(i) In general—A unit occupied solely by individuals who—

“(I) have not attained age 24, and

“(II) are enrolled in a full-time course of study at an institution of higher education (as defined in section 3304(f)),

“(ii) Exception for certain Federal programs—In the case of a federally assisted building (as defined in subsection (d)(6)(C)(i)), clause (i) shall not apply to a unit the occupants of which meet all requirements applicable under the housing program described in subsection (d)(6)(C)(i) through which the building is assisted, financed, or operated.

“(iii) Other exceptions—Clause (i) shall not apply to a unit occupied by an individual who—

“(I) is married,

“(II) is a person with disabilities (as defined in section 3(b)(3)(E) of the United States Housing Act of 1937),

“(III) is a veteran (as defined in section 101(2) of title 38, United States Code),

“(IV) has one or more qualifying children (as defined in section 152(c)), or

“(V) meets the income limitation applicable under subsection (g)(1) to the project of which the building is a part and is, or was immediately prior to attaining the age of majority—

“(aa) an emancipated minor or in legal guardianship as determined by a court of competent jurisdiction in the individual's State of legal residence,

“(bb) 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 Act, or

“(cc) was an unaccompanied youth (within the meaning of section 725(6) of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11434a(6))) or a homeless child or youth (within the meaning of section 725(2) of such Act (42 U.S.C. 11434a(2))).”

(b)
Effective date— The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

Sec. 205 Tenant voucher payments taken into account as rent for certain purposes

(a)
In general— Subparagraph (B) of section 42(g)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following new sentence: “In the case of a project with respect to which the taxpayer elects the requirements of subparagraph (C) of paragraph (1), or the portion of a project to which subsection (d)(5)(C) applies, clause (i) shall not apply with respect to any tenant-based assistance (as defined in section 8(f)(7) of the United States Housing Act of 1937 (42 U.S.C. 1437f(f)(7))).”.
(b)
Effective date— The amendments made by this section shall apply to rent paid in taxable years beginning after December 31, 2017.