Protecting American Homes from Hedge Funds Act

Subtitle D of the Internal Revenue Code of 1986 is amended by adding at the end the following new chapter:

In the case of an applicable taxpayer, there is hereby imposed a tax on the acquisition of any newly acquired single-family residence equal to 50 percent of the fair market value of such residence.

For purposes of this section, the term newly acquired single-family residence means any single-family residence which was acquired by the taxpayer in any taxable year which begins after the date of the enactment of this chapter.

In the case of an applicable taxpayer who fails to meet the requirements of subsection (b), there is hereby imposed a tax equal to the product of—

(1) $50,000, and

(2) the excess of—

(A) the number of applicable single-family residences owned by the taxpayer as of the last day of the taxable year, over

(B) the sum of—

(i) 50 (zero in the case of any hedge fund taxpayer), plus

(ii) the maximum permissible units for the taxable year.

An applicable taxpayer meets the requirement of this subsection for any taxable year if the number of applicable single-family residences owned by the taxpayer as of the last day of the taxable year is equal to or less than the maximum permissible units determined with respect to such taxpayer for such taxable year.

For purposes of applying paragraph (1), a single-family residence which is sold or transferred in a disqualified sale during the taxable year shall be treated as a single-family residence which is owned by the applicable taxpayer as of the last day of such taxable year.

The maximum permissible units with respect to any applicable taxpayer for any taxable year shall be determined as follows: In the case of— The maximum permissible units for a hedge fund taxpayer is— The maximum permissible units for any other applicable taxpayer is— the first full taxable year beginning after the applicable date... 90 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date 50 plus 90 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date the second taxable year beginning after the applicable date... 80 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date 50 plus 80 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date the third taxable year beginning after the applicable date... 70 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date 50 plus 70 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date the fourth taxable year beginning after the applicable date... 60 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date 50 plus 60 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date the fifth taxable year beginning after the applicable date... 50 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date 50 plus 50 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date the sixth taxable year beginning after the applicable date... 40 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date 50 plus 40 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date the seventh taxable year beginning after the applicable date... 30 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date 50 plus 30 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date the eighth taxable year beginning after the applicable date... 20 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date 50 plus 20 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date the ninth taxable year beginning after the applicable date... 10 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date 50 plus 10 percent of the number of applicable single-family residences owned by the taxpayer on the applicable date any taxable year beginning more than 9 years after the applicable date... 0 50.

For purposes of this section—

The term applicable single-family residence means any single-family residence which was acquired on or before the applicable date.

The term applicable date means—

(i) the last day of the first full taxable year ending on or after the date of the enactment of this chapter, or

(ii) in the case of any taxpayer described in subparagraph (B), the date provided in such subparagraph.

In the case of any applicable taxpayer described in clause (ii), the applicable date means the last day of the taxable year immediately preceding the taxable year in which the taxpayer is described in such clause.

An applicable taxpayer is described in this clause with respect to any taxable year if—

(I) such taxpayer was not a hedge fund taxpayer for the preceding taxable year, and

(II) such taxpayer is a hedge fund taxpayer for such taxable year.

For purposes of this subsection, the term hedge fund taxpayer means, with respect to any taxable year, any applicable taxpayer which has $50,000,000 or more in net value or assets under management on any day during the taxable year.

For purposes of this chapter—

The term applicable taxpayer means any person which—

(A) manages funds pooled from investors, and

(B) is a fiduciary with respect to such investors.

The term applicable taxpayer shall not include any organization primarily engaged in the construction or rehabilitation of single-family residences.

For purposes of this chapter—

The term single-family residence means a residential property consisting of 1-to-4 dwelling units.

Such term shall not include—

(A) any single-family residence that is—

(i) not rented or leased, and

(ii) used as the principal residence (within the meaning of section 121) of any person who has an ownership interest in the applicable taxpayer, or

(B) any single-family residence constructed, acquired, or operated with Federal appropriated funding sources.

For purposes of this chapter, an applicable taxpayer shall be treated—

(1) as acquiring a single-family residence if the applicable taxpayer acquires a majority ownership interest in the single-family residence, regardless of the percentage of that ownership interest, and

(2) as owning a single-family residence if the applicable taxpayer owns a majority ownership interest in the single-family residence, regardless of the percentage of that ownership interest.

For purposes of this chapter, the term disqualified sale means any sale or transfer to—

(1) a corporation or other entity engaged in a trade or business, or

(2) an individual who owns any other single-family residence at the time of such sale or transfer.

For purposes of this chapter, all persons which are treated as a single employer under subsections (a) and (b) of section 52 shall be treated as a single person.

For purposes of this subsection—

(A) section 52(a) shall be applied by substituting component members for members, and

(B) for purposes of applying section 52(b), the term trade or business shall include any activity treated as a trade or business under paragraph (5) or (6) of section 469(c) (determined without regard to the phrase To the extent provided in regulations in such paragraph (6)).

For purposes of this paragraph, the term component member has the meaning given such term by section 1563(b), except that the determination shall be made without regard to section 1563(b)(2).

The Secretary shall require such reporting as the Secretary determines necessary or appropriate to carry out the purposes of this section, including reporting with respect to—

(A) the dates on which single-family residences owned by an applicable taxpayer were acquired by such taxpayer, and

(B) whether any person acquiring a single-family residence from an applicable taxpayer owns any other single-family residences at the time of the acquisition.

Any person who fails to report information required under paragraph (1) or who fails to include correct information in such report shall pay a penalty of $50,000.

No penalty shall be imposed under this paragraph with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect.

The penalty under this paragraph shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68.

Not later than 180 days after the date of the enactment of this Act, the Secretary of the Treasury (or the Secretary's delegate) shall publish a form to be used for calculating the amount of tax owned under chapter 50B of the Internal Revenue Code of 1986 (as added by subsection (a)).

The reporting required under section 5000G(f)(1)(B) of the Internal Revenue Code of 1986, as added by subsection (a), shall include a certification from each individual to whom a single-family residence is sold or transferred from an applicable taxpayer.

The certification required under this subsection shall be signed by the purchaser or transferee and state the following:

(A) The name and address of the purchaser or transferee.

(B) The sale is not a disqualified sale (as defined in section 5000G(d) of the Internal Revenue Code of 1986, as added by this section).

(C) The purchaser or transferee will be subject to the penalty imposed under section 5000G(f)(2) of such Code for any false certification.

Any term used in this subsection which is used in chapter 50B of the Internal Revenue Code of 1986 (as added by this section) shall have the meaning given such term under such chapter.

The table of chapters for subtitle D of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

The amendments made by this section shall apply to taxable years beginning after the date of enactment of this Act.

Subchapter A of chapter 98 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

There is established in the Treasury of the United States a trust fund to be known as the Housing Downpayment Trust Fund (hereinafter in this section referred to as the Trust Fund), consisting of such amounts as may be appropriated or credited to such Trust Fund as provided in this section and section 9602(b).

There are hereby appropriated to the Trust Fund amounts equivalent to revenues received in the Treasury from the tax imposed by sections 5000E and 5000F.

Amounts in the Trust Fund shall be available, as provided in appropriations Acts, only for grants under section 3(b) of the Protecting American Homes from Hedge Funds Act.

The table of sections for subchapter A of chapter 98 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

The Secretary of Housing and Urban Development shall establish a program under which the Secretary makes grants to State housing finance agencies to establish new or supplement existing programs that provide down payment assistance, closing costs, and interest rate buydowns, to individuals and families whose incomes do not exceed 120 percent of area median income, in connection with the purchase of a single-family home (including condominiums, homes through community land trusts, and shared-equity home ownership) within the State.

A State housing finance agency that receives a grant under this section shall give priority to individuals and families seeking assistance to purchase any single-family residence that is sold or transferred by an applicable taxpayer (as defined in section 5000G of the Internal Revenue Code of 1986, as added by section 2).

Section 163 of the Internal Revenue Code of 1986 is amended by redesignating subsection (n) as subsection (o) and by inserting after subsection (m) the following new subsection:

No deduction shall be allowed under this chapter for a taxable year with respect to interest paid or accrued on acquisition indebtedness with respect to any single-family residence if the owner of such single-family residence is liable for tax under chapter 50B for such taxable year.

For purposes of this subsection—

The term acquisition indebtedness has the meaning given such term under subsection (h)(3)(B), determined—

(i) by substituting single-family residence (as defined in section 5000E(d)) for qualified residence, and

(ii) without regard to clause (ii) thereof.

The term single-family residence has the meaning given such term under section 5000G(b).

The rules of section 5000G(c) shall apply for purposes of determining ownership.

The amendments made by this subsection shall apply to indebtedness incurred in taxable years beginning after the date of the enactment of this Act.

Section 167 of the Internal Revenue Code of 1986 is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:

No deduction shall be allowed under this section for a taxable year with respect to a single-family residence if the owner of such single-family residence is liable for tax under chapter 50B for such taxable year.

For purposes of this subsection—

The term single-family residence has the meaning given such term under section 5000G(b).

The rules of section 5000G(c) shall apply for purposes of determining ownership.

The amendments made by this subsection shall apply to property placed in service in taxable years beginning after the date of the enactment of this Act.

Subpart A of part 2 of subtitle A of title XIII of the Housing and Community Development Act of 1992 (12 U.S.C. 4541 et seq.) is amended by adding at the end the following new section:

The Director shall, by regulation, prohibit the enterprises from newly purchasing any mortgage on a single family housing or any portion thereof (or any interest in such a mortgage), and from newly lending on the security of or securitizing any such mortgage under which the mortgagee is a specified large investor (as such term is defined in of the Internal Revenue Code of 1986).

Section 302(c) of the National Housing Act (12 U.S.C. 1717(c)) is amended by adding at the end the following new paragraph:

(6) The Association may not newly guarantee the payment of principal of or interest on any trust certificate or other security based or backed by a trust or pool that contains, or purchase or acquire, any mortgage under which the mortgagee is a specified large investor (as such term is defined in section 280I(b) of the Internal Revenue Code of 1986).