Starter home construction credit

(a) In general Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: 45U. Starter home construction credit (a) In general For the purposes of section 38, the starter home construction credit determined under this section for any taxable year is an amount equal to 15 percent of the qualified home construction costs of the taxpayer for the taxable year. (b) Limitation The amount allowable as a credit under subsection (a) to any taxpayer for any taxable year shall not exceed the amount allocated to such taxpayer for the calendar year in which such taxable year ends under subsection (d). (c) Increase for first-Time homebuyer ln the case of a unit of housing sold to a first-time homebuyer (as defined in section 36(g)(1)), subsection (a) shall be applied by substituting 30 percent for 15 percent. (d) Qualified home construction costs For purposes of this section, the term qualified home construction costs means, with respect to a taxable year, amounts paid or incurred by the taxpayer for labor and material costs to construct a unit of housing placed in service during such taxable year— (1) the total square footage of which does not exceed 1200 feet, and (2) the sale price of which does not exceed 80 percent of the area median home price. (e) Allocation.— (1) In general The aggregate starter home construction credit dollar amount which a housing credit agency may allocate for any calendar year is the portion of the State starter home construction credit ceiling allocated under this paragraph for such calendar year to such agency. (2) State ceiling initially allocated to state housing credit agencies The State starter home construction credit ceiling for each calendar year shall be allocated to the housing credit agency of such State. If there is more than 1 housing credit agency of a State, all such agencies shall be treated as a single agency. (3) State starter home credit ceiling The State starter home credit ceiling applicable to any State for any calendar year shall be an amount equal to the sum of— (A) the unused State housing credit ceiling (if any) of such State for the preceding calendar year, plus (B) $30 multiplied by the population of the State (determined in accordance with section 146(j)). (4) Housing credit agency For purposes of this subsection, the term housing credit agency has the meaning given in section 42(h)(8)(A). (5) Inflation adjustment (A) In general ln the case of any taxable year beginning after 2025, the dollar amount in paragraph (3)(B) shall be increased by an amount equal to— (i) such dollar amount, multiplied by (ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2023 for calendar year 2016 in subparagraph (A)(ii) thereof. (B) Rounding lf any increase under subparagraph (A) is not a multiple of $5, such increase shall be rounded to the nearest multiple of $5. (f) Basis adjustment For purposes of this subtitle, if a credit is allowed under this section in connection with any expenditure for any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so determined. (g) Regulations The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section.. (b) Credit To be part of general business credit Section 38(b) of such Code is amended by striking plus at the end of paragraph (32), by striking the period at the end of paragraph (33) and inserting, plus, and by adding at the end the following new paragraph: (34) the starter home construction credit determined under section 45U(a).. (c) Clerical amendment The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 45T the following new item: Sec. 45U. Starter home construction credit.. (d) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this section.