H.R. 9870: Affordable Housing Incentives Act

This bill would change federal tax rules so that, in certain cases, a property owner who sells real estate for use as affordable housing could defer paying capital gains tax on that sale.

What the bill does

• It adds a new category to an existing tax rule for involuntary conversions, which normally lets taxpayers postpone gains when property is taken or exchanged under certain conditions.
• Under the bill, a sale or transfer of real property to a qualified housing operator would be treated like that kind of conversion if the property will be used or developed as affordable housing.
• This means the seller could, in effect, postpone recognizing gain on the sale rather than immediately paying tax on it, if the bill’s conditions are met.

Who can buy the property under this rule

The buyer or recipient must be a “qualified housing operator,” which includes:

• State, tribal, or local governments, including public housing agencies
• Tribally designated housing entities
• Community housing development organizations
• Other organizations that either:
  • have the purpose of providing affordable housing,
  • have received government grant funding for affordable housing, or
  • have owned and materially participated in a federally supported low-income housing project.

What counts as affordable housing

The property would need to be legally restricted for a 30-year period so that it stays affordable housing. The bill covers property that must be maintained as either:

• residential rental housing that meets certain federal low-income housing requirements, or
• a shelter or property eligible for assistance under the federal homeless assistance program.

Conditions the seller must meet

• The property sale price cannot exceed a qualified appraisal value.
• The seller must attach that appraisal to the tax return for the year of sale.
• The seller must notify the Treasury Department within 90 days of the transfer.

Government oversight

• The Treasury Department would have to check compliance with the affordability requirement at least every five years during the 30-year period.
• The department would enforce the rule through audits.

When it would apply

The new rule would apply only to sales and transfers made after the bill becomes law.

Relevant Companies

None found