SenateS. 5625119th Congress
Affordable Housing Construction Act
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[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 5625 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
2d Session
S. 5625
To amend the Internal Revenue Code of 1986 to enhance the low-income
housing tax credit, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 30, 2026
Mr. Whitehouse (for himself and Mr. Reed) 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 enhance the low-income
housing tax credit, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Affordable Housing Construction
Act''.
SEC. 2. INCREASE IN STATE HOUSING CREDIT CEILING.
(a) In General.--Section 42(h)(3)(C)(ii) of the Internal Revenue
Code of 1986 is amended--
(1) by striking ``$1.75'' in subclause (I) and inserting
``$9.79'', and
(2) by striking ``$2,000,000'' in subclause (II) and
inserting ``$11,340,000''.
(b) Inflation Adjustments.--Section 42(h)(3)(H) is amended--
(1) by striking ``In the case of a calendar year after
2002, the $2,000,000 and $1.75 amounts in subparagraph (C)'' in
clause (i) and inserting ``In the case of a calendar year after
2027, the $11,340,000 and $9.79 amounts in subparagraph (C)'',
(2) by striking ``calendar year 2001'' in clause (i)(II)
and inserting ``calendar year 2026'',
(3) by striking ``$2,000,000'' in clause (ii)(I) and
inserting ``$11,340,000'', and
(4) by striking ``$1.75'' in clause (ii)(II) and inserting
``$9.79''.
(c) Effective Date.--The amendments made by this section shall
apply to calendar years beginning after December 31, 2026.
SEC. 3. INCREASED CREDIT AMOUNTS AND CREDIT ALLOCATION SET-ASIDES FOR
CERTAIN BUILDINGS.
(a) Increased Credit Amounts.--
(1) In general.--Section 42(d)(5) of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
subparagraphs:
``(C) Increase in credit for prevailing wage
buildings.--
``(i) In general.--In the case of any
building which pays applicable laborers at
rates not less than the prevailing rates for
construction, alteration, or repair of a
similar character in the locality in which such
facility is located as most recently determined
by the Secretary of Labor, in accordance with
subchapter IV of chapter 31 of title 40, United
States Code, and which is designated by the
housing credit agency as requiring the increase
in credit under this subparagraph in order for
such payments to be financially feasible as
part of a qualified low-income housing
project--
``(I) in the case of a new
building, the eligible basis of such
building shall be increased by 50
percent of such basis determined
without regard to this subparagraph and
subparagraphs (B), (D), (E), (F), and
(G), and
``(II) in the case of an existing
building, the rehabilitation
expenditures taken into account under
subsection (e) shall be increased by 50
percent of such expenditures determined
without regard to this subparagraph and
subparagraphs (B), (D), (E), (F), and
(G).
``(ii) Applicable laborers.--For purposes
of this clause, the term `applicable laborers'
means, with respect to any building, any
laborers employed by the taxpayer, or any
contractor or subcontractor, in the
construction, alteration, or repair of the
building.
``(D) Increase in credit for buildings powered by
renewable energy.--
``(i) In general.--In the case of any
building which utilizes renewable energy (as
defined in section 203(b)(2) of the Energy
Policy Act of 2005), and which is designated by
the housing credit agency as requiring the
increase in credit under this subparagraph in
order for such renewable energy use to be
financially feasible as part of a qualified
low-income housing project--
``(I) in the case of a new
building, the eligible basis of such
building shall be increased by the
applicable percentage of such basis
determined without regard to this
subparagraph and subparagraphs (B),
(C), (E), (F), and (G), and
``(II) in the case of an existing
building, the rehabilitation
expenditures taken into account under
subsection (e) shall be increased by
the applicable percentage of such
expenditures determined without regard
to this subparagraph and subparagraphs
(B), (C), (E), (F), and (G).
``(ii) Applicable percentage.--For purposes
of this subparagraph, the applicable percentage
is 50 percent of the percentage of the energy
utilized by such building which is from
renewable energy (as so defined).
``(E) Increase in credit for buildings near public
transportation.--
``(i) In general.--In the case of any
building which is located in a public
transportation zone and which is designated by
the housing credit agency as requiring the
increase in credit under this subparagraph in
order for such building to be financially
feasible as part of a qualified low-income
housing project--
``(I) in the case of a new
building, the eligible basis of such
building shall be increased by 25
percent of such basis determined
without regard to this subparagraph and
subparagraphs (B), (C), (D), (F), and
(G), and
``(II) in the case of an existing
building, the rehabilitation
expenditures taken into account under
subsection (e) shall be increased by 25
percent of such expenditures determined
without regard to this subparagraph and
subparagraphs (B), (C), (D), (F), and
(G).
``(ii) Public transportation zone.--For
purposes of this subparagraph, a building is
located in a public transportation zone if--
``(I) the building is within one-
half mile of an existing commuter rail,
light rail, or subway station,
``(II) the building is within one-
quarter mile of one or more existing
public bus stops, or
``(III) the building is located in
a census tract--
``(aa) designated by the
Administrator of the
Environmental Protection Agency
as having above average
walkability, or
``(bb) which is adjacent to
2 or more such census tracts
described in item (aa).
``(F) Increase in credit for buildings serving
households with people with disabilities.--
``(i) In general.--In the case of any
building which has low-income units that meet
the applicable design standards for occupancy
by persons with mental, physical, sensory, or
developmental disabilities, and which is
designated by the housing credit agency as
requiring the increase in credit under this
subparagraph in order for such building to be
financially feasible as part of a qualified
low-income housing project--
``(I) in the case of a new
building, the eligible basis of such
building shall be increased by the
applicable percentage of such basis
determined without regard to this
subparagraph and subparagraphs (B),
(C), (D), (E), and (G), and
``(II) in the case of an existing
building, the rehabilitation
expenditures taken into account under
subsection (e) shall be increased by
the applicable percentage of such
expenditures determined without regard
to this subparagraph and subparagraphs
(B), (C), (D), (E), and (G).
``(ii) Design standards.--For purposes of
clause (i), the term `applicable design
standards' means the principles and standards
of adaptable design as detailed in the Uniform
Federal Accessibility Standards, or any
successor standard designated by the Secretary.
``(iii) Applicable percentage.--For
purposes of this subparagraph, the term
`applicable percentage' means the number of
percentage points (not to exceed 50 percentage
points) by which--
``(I) the ratio (expressed as a
percentage and rounded to the nearest
percent) of the number of low-income
units in the building that meet the
applicable design standards for
occupancy by persons with mental,
physical, sensory, or developmental
disabilities bears to the total number
of units in the building, exceeds
``(II) 5 percentage points.
``(G) Increase in credit for buildings serving
extremely low-income families.--
``(i) In general.--In the case of any
building in which 20 percent of the units are
occupied by extremely low-income families and
which is designated by the housing credit
agency as requiring the increase in credit
under this subparagraph in order for such
building to be financially feasible as part of
a qualified low-income housing project--
``(I) in the case of a new
building, the eligible basis of such
building shall be increased by 50
percent of such basis determined
without regard to this subparagraph and
subparagraphs (B), (C), (D), (E), and
(F), and
``(II) in the case of an existing
building, the rehabilitation
expenditures taken into account under
subsection (e) shall be increased by 50
percent of such expenditures determined
without regard to this subparagraph and
subparagraphs (B), (C), (D), (E), and
(F).
``(ii) Extremely low-income families.--For
purposes of this subparagraph, the term
`extremely low-income families' means families
whose annual incomes do not exceed 30 percent
of the area median gross income, as determined
in consultation with the Secretary of Health
and Human Services.
``(H) Limitation.--Notwithstanding subparagraphs
(B), (C), (D), (E), (F), and (G)--
``(i) the eligible basis of any building
shall not exceed an amount equal to 250 percent
of such basis determined without regard to
subparagraphs (B), (C), (D), (E), (F), and (G),
and
``(ii) the rehabilitation expenditures
taken into account under subsection (e) shall
not exceed 250 percent of such expenditures
determined without regard to subparagraphs (B),
(C), (D), (E), (F), and (G).''.
(2) Conforming amendments.--Section 42(d)(5)(B)(i) of such
Code is amended--
(A) by striking ``shall be 130 percent of'' each
place it appears in subclauses (I) and (II) and
inserting ``shall be increased by 30 percent of'', and
(B) by striking ``this subparagraph'' each place it
appears in subclauses (I) and (II) and inserting ``this
subparagraph and subparagraphs (B), (C), (D), (E), (F),
and (G)''.
(3) Effective date.--The amendments made by this subsection
shall apply to buildings placed in service after the date of
the enactment of this Act.
(b) Set-Aside for Certain Projects.--
(1) In general.--Section 42(h) of the Internal Revenue Code
of 1986 is amended by adding at the end the following new
paragraph:
``(9) Portion of state ceiling set-aside for certain
projects.--
``(A) In general.--Not more than two-thirds of the
State housing credit ceiling for any State for any
calendar year shall be allocated to projects other than
qualified low-income housing projects described in
subparagraphs (C), (D), (E), (F), and (G) of subsection
(d)(5).
``(B) State may not override set-aside.--Nothing in
subparagraph (F) of paragraph (3) shall be construed to
permit a State not to comply with subparagraph (A) of
this paragraph.''.
(2) Effective date.--The amendments made by this subsection
shall apply to calendar years beginning after the date of the
enactment of this Act.
SEC. 4. TAX-EXEMPT BOND FINANCING REQUIREMENT.
(a) In General.--Section 42(h)(4) of the Internal Revenue Code of
1986 is amended--
(1) in subparagraph (B)(ii)(I)--
(A) by striking ``obligations described in
subparagraph (A)'' and inserting ``qualified
obligations'', and
(B) by striking ``25 percent'' and inserting ``15
percent'', and
(2) by adding at the end the following new subparagraph:
``(C) Qualified obligation.--For purposes of
subparagraph (B)(ii), the term `qualified obligation'
means an obligation which is described in subparagraph
(A) and which is part of an issue the issue date of
which is before January 1, 2028.''.
(b) Effective Date.--
(1) In general.--The amendment made by this section shall
apply to buildings placed in service in taxable years beginning
after December 31, 2025.
(2) Rehabilitation expenditures treated as separate new
building.--In the case of any building with respect to which
any expenditures are treated as a separate new building under
section 42(e) of the Internal Revenue Code of 1986, for
purposes of paragraph (1), both the existing building and the
separate new building shall be treated as having been placed in
service on the date such expenditures are treated as placed in
service under section 42(e)(4) of such Code.
SEC. 5. MODIFICATION OF EXTENDED USE PERIOD.
(a) In General.--Section 42(h)(6)(D)(ii)(II) of the Internal
Revenue Code of 1986 is amended by striking ``15 years'' and inserting
``35 years''.
(b) Effective Date.--The amendment made by this section shall apply
to agreements entered into in taxable years beginning after the date of
the enactment of this Act.
SEC. 6. REPEAL OF QUALIFIED CONTRACT OPTION.
(a) Termination of Option for Certain Buildings.--
(1) In general.--Subclause (II) of section 42(h)(6)(E)(i)
of the Internal Revenue Code of 1986 is amended by inserting
``in the case of a building described in clause (iii),'' before
``on the last day''.
(2) Buildings described.--Subparagraph (E) of section
42(h)(6) of such Code is amended by adding at the end the
following new clause:
``(iii) Buildings described.--A building
described in this clause is a building--
``(I) which received its allocation
of housing credit dollar amount before
January 1, 2027, or
``(II) in the case of a building
any portion of which is financed as
described in paragraph (4), and which
received before January 1, 2027, under
the rules of paragraphs (1) and (2) of
subsection (m), a determination from
the issuer of the tax-exempt bonds or
the housing credit agency that the
building would be eligible under the
qualified allocation plan to receive an
allocation of housing credit dollar
amount or that the credits to be earned
are necessary for financial feasibility
of the project and its viability as a
qualified low-income housing project
throughout the credit period.''.
(b) Rules Relating to Existing Projects.--Subparagraph (F) of
section 42(h)(6) of the Internal Revenue Code of 1986 is amended by
striking ``the nonlow-income portion'' and all that follows and
inserting ``the nonlow-income portion and the low-income portion of the
building for fair market value (determined by the housing credit agency
by taking into account the rent restrictions required for the low-
income portion of the building to continue to meet the standards of
paragraphs (1) and (2) of subsection (g)). The Secretary shall
prescribe such regulations as may be necessary or appropriate to carry
out this paragraph.''.
(c) Conforming Amendments.--
(1) Paragraph (6) of section 42(h) of the Internal Revenue
Code of 1986 is amended by striking subparagraph (G) and by
redesignating subparagraphs (H), (I), (J), and (K) as
subparagraphs (G), (H), (I), and (J), respectively.
(2) Subclause (II) of section 42(h)(6)(E)(i) of such Code,
as amended by subsection (a), is further amended by striking
``subparagraph (I)'' and inserting ``subparagraph (H)''.
(d) Technical Amendment.--Subparagraph (I) of section 42(h)(6) of
the Internal Revenue Code of 1986, as redesignated by subsection (c),
is amended by striking ``agreement'' and inserting ``commitment''.
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall take effect on the date
of the enactment of this Act.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to buildings with respect to which a written
request described in section 42(h)(6)(H) of the Internal
Revenue Code of 1986, as redesignated by subsection (c), is
submitted after the date of the enactment of this Act.
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