“A bill to amend the Internal Revenue Code of 1986 to deny interest and depreciation deductions for certain taxpayers, and for other purposes.”
No CRS summary available for this bill.
This section amends Section 163 of the Internal Revenue Code of 1986 (IRC) by inserting new subsection (n) to disallow the deduction for interest paid or accrued in connection with (1) applicable residential property in which an institutional investment entity holds a majority interest (directly or indirectly), or (2) single-family residential property in which a large owner holds a majority interest (directly or indirectly). The disallowance does not apply in the following cases: (1) interest paid or accrued in the taxable year in which applicable residential property is sold to an individual for use as their principal residence (within the meaning of IRC §121) or to a qualified nonprofit organization (i.e., a nonprofit with a principal purpose of creating, developing, or preserving affordable housing, including community development corporations (as defined in 12 U.S.C. §1715z–11a(b)), community housing development organizations (as defined in 42 U.S.C. §12704), land banks, community land trusts, and subsidiaries of public housing agencies); (2) interest paid or accrued by the builder of new single-family residential property (original use beginning after December 31, 2023) during the five taxable years beginning with the year the property is placed in service; (3) interest paid or accrued with respect to new multi-family residential property (i.e., applicable residential property with five or more dwelling units, original use beginning after December 31, 2023) constructed by the eligible taxpayer; or (4) interest paid or accrued on debt incurred primarily to substantially rehabilitate previously uninhabitable applicable residential property (i.e., property not fit for human occupancy, with serious health/safety defects, or failing local building codes) during the five taxable years beginning with the year such debt is originally paid or accrued.
This section disallows depreciation deductions under section 167 for (1) applicable residential property (i.e., certain multifamily rental housing and related on-site improvements, as described in section 163(n)(7)(C)) in which an institutional investment entity holds a majority interest and (2) single-family residential property (i.e., certain single-family rental housing and related on-site improvements, as described in section 163(n)(7)(D)) in which a large owner holds a majority interest, with terms defined and exceptions (e.g., for certain smaller properties and owner-occupied units) applying as under section 163(n). The provision applies to taxable years beginning after enactment.
This section prohibits covered federal entities (i.e., Department of Housing and Urban Development including FHA and Ginnie Mae, Department of Veterans Affairs, Department of Agriculture, Fannie Mae, Freddie Mac, and other federal agencies disposing of covered residential property) from selling or otherwise disposing of Federally backed mortgage loans or covered residential properties (i.e., residential real property or manufactured housing communities, excluding federally assisted housing or properties using section 42 low-income housing tax credits) to large owners or institutional investment entities (i.e., as defined in new IRC section 163(n)(7)), including nonperforming or re-performing loans, foreclosed homes, or real estate-owned properties. It further prohibits such entities from issuing, insuring, guaranteeing, or securitizing mortgage loans to those buyers unless for construction or rehabilitation of housing with affordability use restrictions or refinances of such housing that preserve those restrictions (not applicable to pre-enactment loans).
This section defines, for purposes of the section, "heir property" (i.e., residential property held by multiple heirs as tenants in common due to intestacy) and "qualified homebuyer" (i.e., a first-time, first-generation homebuyer, as self-attested, with household income not exceeding 120% of area median income or, in high-cost areas, 140% of area median income, excluding heir property from prior ownership counts). For FY2026 and each fiscal year thereafter, this section appropriates to the Secretary of Housing and Urban Development (HUD) amounts equal to percentages of savings (as estimated by the Secretary of the Treasury) from limits on deductions under new IRC §§163(n) and 167(i): (1) 80% for the HOME Investment Partnerships program (i.e., formula grants to states and units of general local government for affordable housing development), allocated per the program's formula but exempt from consolidated planning requirements under 42 U.S.C. 12771, for (A) acquisition of affordable housing and associated rehabilitation or preservation and (B) 60% of the 80% for new construction of affordable housing, with at least half of such amount for extremely low-income households; and (2) 20% to establish a fund providing grants to qualified homebuyers of up to the greater of $20,000 or 10% of the purchase price for down payments, closing costs, and interest rate buydowns on owner-occupied primary residences.
This section defines residential property (i.e., property zoned or intended for use as a dwelling, excluding short-term lodging), investment rental property (i.e., real property held solely for rental or investment, not rented to affiliates except for management), and place of short-term lodging (e.g., hotels advertising nightly rates); deems all acquisitions of residential property by a person in a calendar year a single acquisition for premerger notification thresholds under Section 7A(a) of the Clayton Act (15 U.S.C. 18a(a)) (Hart-Scott-Rodino Act); and removes the exemption under Section 7A(c)(1) for acquisitions of residential or investment rental property (including via REITs) unless solely for an individual's personal use. It further directs the Federal Trade Commission (FTC), with Department of Justice (DOJ) Antitrust Division concurrence, to amend regulations in 16 C.F.R. pt. 802 to conform to these changes, rescind related exemptions under Section 7A(d)(2)(B), and issue rules on notification forms and information for such aggregated acquisitions. (Thus, large real estate investors must file premerger notifications with FTC and DOJ upon cumulatively reaching HSR size-of-transaction or size-of-person thresholds for residential property in a year, enabling antitrust review of housing market concentration.) This section states the sense of Congress that market concentration indicates merger risks, citing United States v. Philadelphia National Bank; and directs DOJ and FTC to presume that any residential property acquisition increasing the acquirer's relevant market share above 30% violates the antitrust laws (as defined in 15 U.S.C. 12(a)) and constitutes an unfair method of competition under Section 5 of the FTC Act (15 U.S.C. 45). (The presumption does not limit its use in other markets or imply sub-30% shares are lawful.)