Affordable Housing Bond Enhancement Act
- Bill Number
- H.R. 7414
- Origin Chamber
- House
- Congress
- 119th Congress, Session 2
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2026-02-09: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-05-08T08:05:47Z
AI-Generated Summary
Purpose of the Legislation
The Affordable Housing Bond Enhancement Act (H.R. 7414) aims to expand access to affordable housing by amending the Internal Revenue Code of 1986. It enhances the use of tax-exempt mortgage revenue bonds and mortgage credit certificates, which are financial tools that allow state and local governments to issue bonds to finance home purchases, improvements, and refinancings at lower interest rates for low- and moderate-income buyers.
Key Provisions
- Reporting Requirements for Bond Usage (Sec. 2): Requires the Secretary of the Treasury to submit annual reports to congressional committees detailing each state's bond issuance limits (known as the "state ceiling"), unused carryforward amounts (unused bond authority carried over from prior years), bonds issued for various purposes (including housing), and expired or unused authority. Issuers must submit reports electronically, and the Treasury can share this data with Congress.
- Use of Carryforward Bond Authority (Sec. 3): Allows state and local issuing authorities (entities like housing finance agencies that issue bonds) to transfer unused bond authority to other authorities within the same state or redesignate it for qualified mortgage bonds, mortgage credit certificates, or certain exempt facility bonds (for housing projects). States can enact laws to regulate these transfers. This applies to elections made after December 31, 2025.
- Elimination of Refinancing Limitation for Mortgage Revenue Bonds (Sec. 4): Removes restrictions on refinancing existing mortgages for homeowners who still qualify as principal residents and meet income limits. For these refinancings, acquisition cost rules and certain other limits do not apply; instead, the home's current market value is used. Applies to loans made on or after enactment.
- Increase in Financing Limit for Qualified Home Improvement Loans (Sec. 5): Raises the maximum loan amount for home improvements financed by mortgage revenue bonds from $15,000 to $75,000. This limit will adjust annually for inflation starting after 2026, based on cost-of-living changes. Applies to loans made after the year of enactment.
- Revision of Recapture Tax for Mortgage Revenue Bonds (Sec. 6): Changes the tax that recaptures (reclaims) federal tax benefits if a homeowner's income rises too quickly after getting a bond-financed mortgage. Shortens the monitoring period from 9 years to 5 years and adjusts the "holding period percentage" (a factor that determines how much tax is owed based on how long the homeowner has held the property). If the mortgage is fully paid off early, no further recapture applies. Applies to tax years after December 31, 2025.
- Modifying Calculation of Credit for Interest Paid on Certified Indebtedness (Sec. 7): Updates rules for mortgage credit certificates, which give taxpayers a direct tax credit (up to a percentage of mortgage interest paid). Allows issuers to set credit rates between 1% and 5%, with flexibility to vary rates annually. Simplifies credit calculations and removes a prior cap on rates over 20%. Applies to certificates issued starting two years after enactment.
- Extension of Period for Mortgage Credit Certificate to Be in Effect (Sec. 8): Extends the timeframe for using unused bond authority linked to mortgage credit certificates from the second to the fourth calendar year. Applies to determinations after December 31, 2025.
- Extension of Period to Revoke Election to Issue Mortgage Credit Certificates (Sec. 9): Gives issuers up to the end of the following calendar year to revoke or reduce their election to issue mortgage credit certificates instead of bonds. Includes rules to align with carryforward limits. Applies to elections after December 31, 2025.
- Adjustment of Public Notice Requirement (Sec. 10): Shortens the required public notice period for issuing mortgage credit certificates from 90 days to 30 days. Applies to notices after December 31, 2025.
- Elimination of Lender Reporting Requirement (Sec. 11): Removes the obligation for lenders to report details on mortgage credit certificate loans to the IRS; shifts this to issuers only. Takes effect upon enactment.
Significant Changes to Existing Law
- Expands flexibility in using and transferring unused bond authority, previously more rigid and limited to three years without easy intra-state movement.
- Increases loan limits and shortens recapture periods, making programs more homeowner-friendly compared to prior caps and longer monitoring.
- Simplifies reporting and credit calculations, reducing administrative burdens while enhancing transparency through mandatory congressional reports.
- All changes target Sections 25, 143, 146, 149, and 6103 of the Internal Revenue Code, focusing on private activity bonds (tax-exempt bonds for specific public purposes like housing).
Potential Impacts
- On Citizens: Low- and moderate-income homebuyers could access more affordable financing for purchases, refinancings, and improvements, potentially increasing homeownership and property upgrades. Tax credits become easier to claim, providing direct financial relief.
- On Government Agencies: State and local housing agencies gain more tools to allocate bond authority efficiently, reducing waste from expired limits. The Treasury Department faces added reporting duties but benefits from electronic submissions. Congressional committees receive better data for oversight.
- On International Relations: No direct impact, as the bill focuses on domestic tax policy for U.S. housing.
Main Stakeholders Affected
- Issuing Authorities: State and local governments or agencies that issue bonds and certificates; they benefit from greater flexibility and reduced reporting.
- Homebuyers and Homeowners: Primarily low- to moderate-income individuals qualifying for these programs; they gain easier access to low-interest loans and tax credits.
- Lenders and Financial Institutions: Mortgage providers see simplified rules but lose some reporting requirements, potentially streamlining operations.
- Taxpayers and IRS: Broader use of tax-exempt bonds may slightly reduce federal tax revenue, while the IRS handles adjusted recapture taxes and disclosures.
- Congressional Committees: Banking, Housing, Financial Services, Ways and Means, and Finance committees receive enhanced reporting for policy monitoring.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens the tax code's role in promoting affordable housing without altering core eligibility (e.g., income and residence tests remain). Inflation adjustments ensure long-term viability, but could lead to disputes over state-level transfer rules if not clearly defined.
- Constitutional: No major issues; amendments align with Congress's taxing and spending powers under Article I. Enhances federalism by allowing states to direct bond usage, respecting local control.
- Political: Supports bipartisan housing affordability goals (introduced by representatives from both parties), potentially aiding urban and rural development. May face debate over tax expenditure costs (foregone revenue from exemptions), but promotes equity without new spending.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (2)
Rep. Moore, Gwen [D-WI-4], Rep. Vindman, Eugene Simon [D-VA-7]
Recent Actions
- 2026-02-09: Referred to the House Committee on Ways and Means.
- 2026-02-09: Introduced in House
- 2026-02-09: Introduced in House
Bill Versions
- Affordable Housing Bond Enhancement Act — issued 2026-02-09 — PDF (15 pages)