26 USC 25 - Interest on certain home mortgages

View all text of Subpart A [§ 21 - § 26]

§ 25. Interest on certain home mortgages

(a) Allowance of credit

(1) In generalThere shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the product of—

(A) the certificate credit rate, and

(B) the interest paid or accrued by the taxpayer during the taxable year on the remaining principal of the certified indebtedness amount.

(2) Limitation where credit rate exceeds 20 percent

(A) In general

(B) Special rule where 2 or more persons hold interests in residence

(b) Certificate credit rate; certified indebtedness amountFor purposes of this section—

(1) Certificate credit rate

(2) Certified indebtedness amountThe term “certified indebtedness amount” means the amount of indebtedness which is—

(A) incurred by the taxpayer—

(i) to acquire the principal residence of the taxpayer,

(ii) as a qualified home improvement loan (as defined in section 143(k)(4)) with respect to such residence, or

(iii) as a qualified rehabilitation loan (as defined in section 143(k)(5)) with respect to such residence, and

(B) specified in the mortgage credit certificate.

(1) Mortgage credit certificateThe term “mortgage credit certificate” means any certificate which—

(A) is issued under a qualified mortgage credit certificate program by the State or political subdivision having the authority to issue a qualified mortgage bond to provide financing on the principal residence of the taxpayer,

(B) is issued to the taxpayer in connection with the acquisition, qualified rehabilitation, or qualified home improvement of the taxpayer’s principal residence,

(i) the certificate credit rate, and

(ii) the certified indebtedness amount, and

(D) is in such form as the Secretary may prescribe.

(2) Qualified mortgage credit certificate program

(A) In generalThe term “qualified mortgage credit certificate program” means any program—

(i) which is established by a State or political subdivision thereof for any calendar year for which it is authorized to issue qualified mortgage bonds,

(ii) under which the issuing authority elects (in such manner and form as the Secretary may prescribe) not to issue an amount of private activity bonds which it may otherwise issue during such calendar year under section 146,

(iii) under which the indebtedness certified by mortgage credit certificates meets the requirements of the following subsections of section 143 (as modified by subparagraph (B) of this paragraph):(I) subsection (c) (relating to residence requirements),(II) subsection (d) (relating to 3-year requirement),(III) subsection (e) (relating to purchase price requirement),(IV) subsection (f) (relating to income requirements),(V) subsection (h) (relating to portion of loans required to be placed in targeted areas), and(VI) paragraph (1) of subsection (i) (relating to other requirements),

(iv) under which no mortgage credit certificate may be issued with respect to any residence any of the financing of which is provided from the proceeds of a qualified mortgage bond or a qualified veterans’ mortgage bond,

(v) except to the extent provided in regulations, which is not limited to indebtedness incurred from particular lenders,

(vi) except to the extent provided in regulations, which provides that a mortgage credit certificate is not transferrable, and

(vii) if the issuing authority allocates a block of mortgage credit certificates for use in connection with a particular development, which requires the developer to furnish to the issuing authority and the homebuyer a certificate that the price for the residence is no higher than it would be without the use of a mortgage credit certificate.

Under regulations, rules similar to the rules of subparagraphs (B) and (C) of section 143(a)(2) shall apply to the requirements of this subparagraph.

(B) Modifications of section 143Under regulations prescribed by the Secretary, in applying section 143 for purposes of subclauses (II), (IV), and (V) of subparagraph (A)(iii)—

(i) each qualified mortgage certificate credit program shall be treated as a separate issue,

(ii) the product determined by multiplying—(I) the certified indebtedness amount of each mortgage credit certificate issued under such program, by(II) the certificate credit rate specified in such certificate,

shall be treated as proceeds of such issue and the sum of such products shall be treated as the total proceeds of such issue, and

(iii) paragraph (1) of section 143(d) shall be applied by substituting “100 percent” for “95 percent or more”.

Clause (iii) shall not apply if the issuing authority submits a plan to the Secretary for administering the 95-percent requirement of section 143(d)(1) and the Secretary is satisfied that such requirement will be met under such plan.

(d) Determination of certificate credit rateFor purposes of this section—

(1) In general

(2) Aggregate limit on certificate credit rates

(A) In generalIn the case of each qualified mortgage credit certificate program, the sum of the products determined by multiplying—

(i) the certified indebtedness amount of each mortgage credit certificate issued under such program, by

(ii) the certificate credit rate with respect to such certificate,

shall not exceed 25 percent of the nonissued bond amount.

(B) Nonissued bond amount

(e) Special rules and definitionsFor purposes of this section—

(1) Carryforward of unused credit

(A) In general

(B) LimitationThe amount of the unused credit which may be taken into account under subparagraph (A) for any taxable year shall not exceed the amount (if any) by which the applicable tax limit for such taxable year exceeds the sum of—

(i) the credit allowable under subsection (a) for such taxable year determined without regard to this paragraph, and

(ii) the amounts which, by reason of this paragraph, are carried to such taxable year and are attributable to taxable years before the unused credit year.

(2) Indebtedness not treated as certified where certain requirements not in fact met

(3) Period for which certificate in effect

(A) In generalExcept as provided in subparagraph (B), a mortgage credit certificate shall be treated as in effect with respect to interest attributable to the period—

(i) beginning on the date such certificate is issued, and

(ii) ending on the earlier of the date on which—(I) the certificate is revoked by the issuing authority, or(II) the residence to which such certificate relates ceases to be the principal residence of the individual to whom the certificate relates.

(B) Certificate invalid unless indebtedness incurred within certain period

(4) Reissuance of mortgage credit certificates

(5) Public notice that certificates will be issuedAt least 90 days before any mortgage credit certificate is to be issued after a qualified mortgage credit certificate program, the issuing authority shall provide reasonable public notice of—

(A) the eligibility requirements for such certificate,

(B) the methods by which such certificates are to be issued, and

(6) Interest paid or accrued to related persons

(7) Principal residence

(8) Qualified rehabilitation and home improvement

(A) Qualified rehabilitation

(B) Qualified home improvement

(9) Qualified mortgage bond

(10) Manufactured housing

(f) Reduction in aggregate amount of qualified mortgage bonds which may be issued where certain requirements not met

(1) In general

(2) Correction amount

(A) In general

(B) Excess credit amount

(i) In generalFor purposes of subparagraph (A)(ii), the term “excess credit amount” means the excess of—(I) the credit amount for any mortgage credit certificate program, over(II) the amount which would have been the credit amount for such program had such program met the requirements of paragraph (2) of subsection (d).

(ii) Credit amount

(3) Special rule for States having constitutional home rule cities

(4) Exception where certification program

(5) Waiver

(g) Reporting requirementsEach person who makes a loan which is a certified indebtedness amount under any mortgage credit certificate shall file a report with the Secretary containing—

(1) the name, address, and social security account number of the individual to which the certificate was issued,

(2) the certificate’s issuer, date of issue, certified indebtedness amount, and certificate credit rate, and

(3) such other information as the Secretary may require by regulations.

Each person who issues a mortgage credit certificate shall file a report showing such information as the Secretary shall by regulations prescribe. Any such report shall be filed at such time and in such manner as the Secretary may require by regulations.

(h) Regulations; contracts

(1) Regulations

(2) Contracts

(i) Recapture of portion of Federal subsidy from use of mortgage credit certificates

(Added Pub. L. 98–369, div. A, title VI, § 612(a), July 18, 1984, 98 Stat. 905; amended Pub. L. 99–514, title XIII, § 1301(f), title XVIII, §§ 1862(a)–(d)(1), 1899A(1), Oct. 22, 1986, 100 Stat. 2655, 2883, 2884, 2958; Pub. L. 100–647, title I, § 1013(a)(25), (26), title IV, § 4005(a)(2), (g)(7), Nov. 10, 1988, 102 Stat. 3543, 3645, 3651; Pub. L. 101–239, title VII, § 7104(b), Dec. 19, 1989, 103 Stat. 2305; Pub. L. 101–508, title XI, § 11408(b), Nov. 5, 1990, 104 Stat. 1388–477; Pub. L. 102–227, title I, § 108(b), Dec. 11, 1991, 105 Stat. 1688; Pub. L. 103–66, title XIII, § 13141(b), Aug. 10, 1993, 107 Stat. 436; Pub. L. 104–188, title I, § 1807(c)(1), Aug. 20, 1996, 110 Stat. 1902; Pub. L. 105–34, title III, § 312(d)(1), Aug. 5, 1997, 111 Stat. 839; Pub. L. 105–206, title VI, § 6008(d)(7), July 22, 1998, 112 Stat. 812; Pub. L. 107–16, title II, § 201(b)(2)(F), title VI, § 618(b)(2)(B), June 7, 2001, 115 Stat. 46, 108; Pub. L. 109–58, title XIII, § 1335(b)(2), Aug. 8, 2005, 119 Stat. 1036; Pub. L. 109–135, title IV, § 402(i)(3)(C), (4), Dec. 21, 2005, 119 Stat. 2613, 2615; Pub. L. 110–343, div. B, title II, § 205(d)(1)(B), Oct. 3, 2008, 122 Stat. 3838; Pub. L. 111–5, div. B, title I, §§ 1004(b)(2), 1142(b)(1)(B), 1144(b)(1)(B), Feb. 17, 2009, 123 Stat. 314, 330, 332; Pub. L. 111–148, title X, § 10909(b)(2)(B), (c), Mar. 23, 2010, 124 Stat. 1023; Pub. L. 111–312, title I, § 101(b)(1), Dec. 17, 2010, 124 Stat. 3298; Pub. L. 112–240, title I, § 104(c)(2)(C), Jan. 2, 2013, 126 Stat. 2322; Pub. L. 115–141, div. U, title IV, § 401(d)(4)(B)(ii), Mar. 23, 2018, 132 Stat. 1209.)