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S. 3364 - First-Time Homebuyer Credit Act of 2018

Sponsor: Ron Wyden (D)
Introduced: 2018-08-22
Bill Status: Read twice and referred to the Committee on Finance.
 

First-Time Homebuyer Credit Act of 2018

This bill amends the Internal Revenue Code to extend and modify the first-time homebuyer tax credit, which expired in 2010.

The bill allows a refundable tax credit for first-time homebuyers of a principal residence in the United States who are at least 18 years of age and not claimed as a dependent by another taxpayer. The credit is equal to 2.5% of the purchase price of the residence, subject to a $10,000 limitation and limits based on the purchase price of the home and the adjusted gross income of the taxpayer.

A taxpayer that purchases and disposes of a residence in the same taxable year is not eligible for the credit. Taxpayers that dispose of the residence within five years of claiming the credit are liable for additional taxes based on a specified recapture percentage of the amount of the credit that was allowed. The bill includes several exceptions for a disposal that occurs after circumstances such as a death, divorce, involuntary conversion of the residence, relocation of a military duty station, or changes in employment or health status.

Full Text


115th CONGRESS
2d Session
S. 3364


    To amend the Internal Revenue Code of 1986 to create a refundable first-time homebuyer tax credit.


IN THE SENATE OF THE UNITED STATES

August 22, 2018

    Mr. Wyden introduced the following bill; which was read twice and referred to the Committee on Finance


A BILL

    To amend the Internal Revenue Code of 1986 to create a refundable first-time homebuyer tax credit.

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 “First-Time Homebuyer Credit Act of 2018”.

SEC. 2. First-time homebuyer refundable credit.

(a) In general.—Section 36 of the Internal Revenue Code of 1986 is amended to read as follows:

“SEC. 36. First-time homebuyer refundable credit.

“(a) Allowance of credit.—In the case of an individual who is a first-time homebuyer of a principal residence in the United States during a taxable year, there shall be allowed as a credit against the tax imposed by this subtitle for such taxable year an amount equal to 2.5 percent of the purchase price of the residence.

“(b) Limitations; special rules based on marital and filing status.—

“(1) DOLLAR LIMITATION.—The credit allowed under subsection (a) shall not exceed $10,000.

“(2) LIMITATION BASED ON PURCHASE PRICE.—The amount allowable as a credit under subsection (a) (determined without regard to this paragraph and paragraph (3), and after the application of paragraph (1)) for the taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so allowable as—

“(A) the excess (if any) of—

“(i) the purchase price of the residence, over

“(ii) $600,000, bears to

“(B) $100,000.

“(3) LIMITATION BASED ON MODIFIED ADJUSTED GROSS INCOME.—

“(A) IN GENERAL.—The amount allowable as a credit under subsection (a) (determined without regard to this paragraph and after the application of paragraphs (1) and (2)) for the taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so allowable as—

“(i) the excess (if any) of—

“(I) the taxpayer's modified adjusted gross income for such taxable year, over

“(II) $80,000 ($160,000 in the case of a joint return), bears to

“(ii) $20,000.

“(B) MODIFIED ADJUSTED GROSS INCOME.—For purposes of subparagraph (A), the term ‘modified adjusted gross income’ means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.

“(4) AGE LIMITATION.—No credit shall be allowed under subsection (a) with respect to the purchase of any residence for a taxable year if—

“(A) the taxpayer has not attained age 18 as of the date of such purchase, or

“(B) a deduction under section 151 with respect to the taxpayer is allowable to another taxpayer for the taxable year.

In the case of a taxpayer who is married, the taxpayer shall be treated as meeting the age requirement of subparagraph (A) if the taxpayer or the taxpayer's spouse meets such age requirement.

“(5) MULTIPLE PURCHASERS.—If two or more individuals who are not married purchase a principal residence, the amount of the credit under subsection (a) shall be allocated among such individuals in such manner as the Secretary may prescribe by taking into account the requirements of paragraphs (2) and (3), except that the total amount of the credits allowed to all such individuals shall not exceed $10,000.

“(6) MARRIED COUPLES MUST FILE JOINT RETURN.—If an individual is married at the close of the taxable year, the credit shall be allowed under subsection (a) only if the individual and the individual's spouse file a joint return for the taxable year.

“(c) Definitions.—For purposes of this section—

“(1) FIRST-TIME HOMEBUYER.—

“(A) IN GENERAL.—The term ‘first-time homebuyer’ means any individual who acquires a principal residence by purchase if such individual (and, if married, such individual's spouse)—

“(i) has not claimed any credit or deduction under this title for any previous taxable year with respect to the purchase or ownership of any residence or residential real estate (including for any expenditures relating to the placing in service of any property on, in connection with, or for use in such a residence or real estate), and

“(ii) attests under penalty of perjury that—

“(I) the individual (and, if married, the individual's spouse) has not owned a principal residence at any time prior to the purchase of the principal residence to which this section applies, and

“(II) the principal residence to which this section applies was not acquired from a person related to such individual or spouse.

“(B) WAIVER IN CASE OF CERTAIN CHANGES IN STATUS.—The Secretary may, in such manner as the Secretary may prescribe, waive the requirements of subparagraph (A) for a taxable year in the case of an individual who is not eligible to file a joint return for the taxable year, and who was married at the time the individual or the individual's former spouse purchased a previous residence.

“(2) PRINCIPAL RESIDENCE.—The term ‘principal residence’ has the same meaning as when used in section 121.

“(3) PURCHASE.—

“(A) IN GENERAL.—The term ‘purchase’ means any acquisition, but only if—

“(i) the property is not acquired from a person related to the person acquiring such property (or, if either such person is married, such individual's spouse), and

“(ii) the basis of the property in the hands of the person acquiring such property is not determined—

“(I) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or

“(II) under section 1014(a).

“(B) CONSTRUCTION.—A residence which is constructed by the taxpayer shall be treated as purchased by the taxpayer on the date the taxpayer first occupies such residence.

“(4) PURCHASE PRICE.—The term ‘purchase price’ means the adjusted basis (without regard to any reduction under section 1016(a)(38)) of the principal residence on the date such residence is purchased.

“(5) RELATED PERSONS.—A person shall be treated as related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b) (but, in applying subsections (b) and (c) of section 267 for purposes of this section, paragraph (4) of section 267(c) shall be treated as providing that the family of an individual shall include only the individual's spouse, ancestors, lineal descendants, and spouse's ancestors and lineal descendants).

“(6) MARITAL STATUS.—An individual's marital status shall be determined in accordance with section 7703.

“(d) Denial and recapture rules in case of disposal of residence within 5 taxable years.—

“(1) DENIAL OF CREDIT IN CASE OF DISPOSAL WITHIN TAXABLE YEAR.—No credit under subsection (a) shall be allowed to any taxpayer for any taxable year with respect to the purchase of a residence if the taxpayer disposes of such residence (or such residence ceases to be the principal residence of the taxpayer (and, if married, the taxpayer's spouse)) before the close of such taxable year.

“(2) PARTIAL RECAPTURE.—

“(A) IN GENERAL.—Except as provided in subparagraph (D), if the taxpayer disposes of the residence with respect to which a credit was allowed under subsection (a) (or such residence ceases to be the principal residence of the taxpayer (and, if married, the taxpayer's spouse)) during the 4-taxable-year period beginning with the taxable year immediately following the credit year, the tax imposed by this chapter for the taxable year in which such disposal (or cessation) occurs shall be increased by an amount equal to the recapture percentage of the amount of the credit so allowed.

“(B) CREDIT YEAR.—For purposes of subparagraph (A), the term ‘credit year’ means the taxable year in which the credit under subsection (a) was allowed.

“(C) RECAPTURE PERCENTAGE.—For purposes of subparagraph (A), the recapture percentage with respect to any disposal or cessation described in such subparagraph shall be determined in accordance with the following table:


If the disposal or cessationThe recapture
 occurs in:percentage is:
The 1st taxable year beginning after the credit year 80 percent
The 2nd taxable year beginning after the credit year 60 percent
The 3rd taxable year beginning after the credit year40 percent
The 4th taxable year beginning after the credit year20 percent.

“(D) EXCEPTIONS.—This paragraph shall not apply in the case of a disposal or cessation described in subparagraph (A) which occurs after or incident to any of the following:

“(i) Death of the taxpayer or the taxpayer's spouse.

“(ii) Divorce of the taxpayer.

“(iii) Involuntary conversion of the residence (within the meaning of section 121(d)(5)(A)).

“(iv) Relocation of duty station or qualified official extended duty (as defined in section 121(d)(9)(C)) of the taxpayer or the taxpayer's spouse who is a member of the uniformed services (as defined in section 121(d)(9)(C)(ii)), a member of the Foreign Service of the United States (as defined in section 121(d)(9)(C)(iii)), or an employee of the intelligence community (as defined in section 121(d)(9)(C)(iv)).

“(v) Change of employment of the taxpayer or the taxpayer's spouse which meets the conditions of section 217(c).

“(vi) Loss of employment, health conditions, or such other unforeseen circumstances as may be specified by the Secretary.

“(e) Adjustment to basis.—For purposes of this subtitle, if a credit is allowed under this section with respect to any property, the taxpayer's basis in such property shall be reduced by the amount of the credit so allowed.

“(f) Reporting.—

“(1) IN GENERAL.—A credit shall be allowed under this section only if the following are included on the return of tax:

“(A) The individual's (and, if married, the individual's spouse's) social security number issued by the Social Security Administration.

“(B) The street address (not including a post office box) of the principal residence purchased.

“(C) The purchase price of the principal residence.

“(D) The date of purchase of the principal residence.

“(E) The closing disclosure relating to the purchase (in the case of a purchase financed by a mortgage).

“(2) REPORTING OF REAL ESTATE TRANSACTIONS.—If the Secretary requires information reporting under section 6045 by a person described in subsection (e)(2) thereof to verify the eligibility of taxpayers for the credit allowable by this section, the exception provided by section 6045(e)(5) shall not apply.”.

(b) Conforming amendment relating to basis adjustment.—Subsection (a) of section 1016 of the Internal Revenue Code of 1986 is amended—

(1) by striking “and” at the end of paragraph (36),

(2) by striking the period at the end of paragraph (37) and inserting “, and”, and

(3) by adding at the end the following new paragraph:

“(38) to the extent provided in section 36(e).”.

(c) Conforming amendment.—Section 26(b)(2) of the Internal Revenue Code of 1986 is amended by striking subparagraph (W) and by redesignating subparagraphs (X) and (Y) as subparagraphs (W) and (X), respectively.

(d) Clerical amendment.—The item relating to section 36 in the table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended to read as follows:

(e) Authority To treat claim of credit as error, etc.—Subparagraph (N) of section 6213(g)(2) of the Internal Revenue Code of 1986 is amended to read as follows:

“(N) in the case of a return claiming the credit under section 36—

“(i) the omission of a social security number required under section 36(f)(1)(A),

“(ii) the inclusion of a social security number so required if—

“(I) the claim of the credit on the return reflects the treatment of such individual as being of an age different from the individual's age based on such social security number, or

“(II) except as provided in section 36(c)(1)(B), such social security number has been included (other than as a dependent for purposes of section 151) on a return for any previous taxable year claiming any credit or deduction described in section 36(c)(1)(A)(i),

“(iii) the omission of any other required information or documentation described in section 36(f)(1), including the inclusion of a post office box instead of a street address for the purchased residence,

“(iv) the inclusion of any information or documentation described in clause (iii) if such information or documentation does not support a valid claim for the credit, or

“(v) a claim of such credit for a taxable year with respect to the purchase of a residence made after the last day of such taxable year, or”.

(f) IRS recordkeeping.—Notwithstanding the limitations on assessment and collection under section 6501 of the Internal Revenue Code of 1986, the Commissioner of Internal Revenue shall maintain in perpetuity records of returns and return information (as defined in section 6103(b)(2) of such Code) of any taxpayer claiming the credit under section 36 of such Code (as amended by this section) for the taxable year in which such credit is claimed and succeeding taxable years. The Commissioner may, in the Commissioner's discretion, discard such records within a reasonable amount of time after the death of such taxpayer (and, if married, the taxpayer's spouse).

(g) Effective date.—The amendments made by this section shall apply to residences purchased in taxable years beginning after December 31, 2018.


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