Overview
Title
To amend the Internal Revenue Code of 1986 to allow a business credit for gain from the sale of real property for use as a manufactured home community, and for other purposes.
ELI5 AI
The Manufactured Housing Community Sustainability Act of 2024 wants to help people keep their homes affordable by giving special tax breaks to owners who sell their land to groups that promise to keep it as a community of manufactured homes for a long time. It's like giving a big thank-you gift to those who sell their land in a way that helps people have nice places to live.
Summary AI
The Manufactured Housing Community Sustainability Act of 2024 aims to amend the Internal Revenue Code to offer a business tax credit for the sale of real property used as a manufactured home community. The bill highlights the importance of manufactured home communities in providing affordable housing for low-income individuals and proposes a 75% credit on qualified gains from property sales to resident-owned cooperatives or nonprofit organizations. It also outlines residency and community ownership requirements and establishes regulations to ensure these communities remain affordable and are not subject to sudden changes or closures. This initiative is intended to preserve these communities and support wealth-building opportunities for low-income homeowners.
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AnalysisAI
General Summary
The proposed legislation, cited as the "Manufactured Housing Community Sustainability Act of 2024," aims to amend the Internal Revenue Code of 1986. It seeks to provide a significant tax credit for owners of real property who sell their land to residents or nonprofit entities to be used as manufactured home communities. The goal is to encourage the retention of affordable housing options by transferring ownership to those most invested in such communities—the residents themselves or nonprofit organizations committed to long-term affordability. By doing this, the bill intends to foster security and potential wealth-building opportunities for low-income families that often reside in manufactured homes.
Summary of Significant Issues
Several issues accompany the bill:
Tax Credit Provisions: The tax credit of 75% on qualified gains could selectively benefit a limited group of sellers who can meet specific criteria, possibly leading to an inequitable distribution of benefits.
Covenant Term Conditions: The mandate that properties remain as manufactured home communities for at least 50 years might conflict with state laws and deter potential participation due to its restrictive nature.
Ambiguities in Definitions: Terms such as "qualified gain" and "related person" lack precision, which could lead to confusion and require parties to seek legal assistance to navigate compliance.
Complicated Affidavit Process: The requirement for both sellers and purchasers to complete and record affidavits is seen as cumbersome and could deter transactions due to its complexity.
Punitive Tax Penalties: The imposition of a 20% penalty tax for violating use covenants might discourage sales to residents or nonprofits, as potential buyers could perceive this as overly harsh without providing clear enforcement guidelines.
Impact on the Public
Broadly, the bill could make a substantial positive impact on maintaining affordable housing, a pressing issue in many areas across the United States. It provides a mechanism to stabilize housing costs for residents of manufactured home communities, thus supporting low-income households. If successful, it could reduce the vulnerability of families facing potential displacement due to rent hikes or community closures.
However, the bill's complexity may also hinder its effectiveness. The uncertainties and potential legal complexities surrounding the specific terms and processes could discourage sellers and buyers from participating. This hesitancy could ultimately limit the bill's reach and effectiveness in promoting resident ownership and long-term affordability.
Impact on Specific Stakeholders
Positive Impacts:
Residents of Manufactured Home Communities: They stand to gain significantly through increased security of tenure and the potential for wealth-building through cooperative ownership. Such ownership could reduce destabilizing rent hikes and offer a more participatory governance model for their communities.
Nonprofit Organizations: Entities focused on housing may find new opportunities to secure properties needing preservation as affordable housing, furthering their mission and extending their support to more families.
Negative Impacts:
Property Owners: Some may find the stipulations around the tax credit too restrictive, thereby preferring alternative transactions that do not involve cooperatives or nonprofits.
State Governance: Potential friction with state laws concerning land use covenants might arise, leading to regulatory conflicts and requiring adjustments in some jurisdictions to align with the new federal incentives.
In summary, while the bill promotes an important social cause by aiming to increase affordable housing security, its impact depends heavily on addressing current gaps and ambiguities, balancing federal objectives with state realities, and ensuring processes are streamlined for user ease.
Financial Assessment
The proposed Manufactured Housing Community Sustainability Act of 2024 introduces several financial elements related to the tax treatment of sales involving manufactured home communities. The bill seeks to offer a 75% tax credit on the qualified gain from the sale of real property to resident cooperatives or nonprofit entities. This initiative is primarily aimed at encouraging owners of manufactured home communities to sell their properties to residents or nonprofits committed to preserving affordable housing.
Financial Offerings and Potential Impact
75% Tax Credit on Qualified Gain:
The central financial aspect of this bill is the generous 75% tax credit on the gain realized from sales that meet specific criteria. This provision aims to incentivize the sale of manufactured home community properties to entities that will maintain them as affordable housing. However, the offer of such a significant tax credit may inadvertently favor sellers who are already well-positioned to meet the bill's qualifications, potentially benefiting a narrow group of stakeholders. This raises concerns about the equitable distribution of tax incentives, which echoes one of the issues concerning potential favoritism in SEC. 45BB.
Long-Term Use Covenant:
The bill requires that the property remain a manufactured home community for at least 50 years, aligning with or constrained by state laws. While this long-term use requirement is intended to stabilize and preserve affordable housing, it might be seen as too restrictive and dissuade potential sellers or buyers. The tension between federal expectations and state regulations could present legal challenges and affect the broader financial implications of property sales and management, as highlighted in issues regarding SEC. 3 and SEC. 45BB.
Complexities in Implementation
Ambiguities in Definitions and Application Process:
There are concerns due to the lack of clear definitions for terms such as "qualified gain" and "related person." These ambiguities might complicate the transaction processes and require legal interpretation, making it more difficult for ordinary individuals to understand and benefit from these provisions without incurring additional legal costs. This complexity may impact the perceived financial benefit and accessibility of the tax credit, as reflected in SEC. 3.
Affidavit and Compliance Process:
The requirement for both sellers and buyers to execute an affidavit certifying the sale's compliance with the bill's conditions could impose additional administrative burdens. This process might deter participation due to its complexity, thereby impacting the financial attractiveness of engaging in such transactions. The execution, recording, and inclusion in the deed create multiple layers of paperwork that could reduce the appeal of the tax credit, as noted in SEC. 3 and SEC. 45BB.
Penalties and Fees
20% Tax Penalty on Violations:
The bill imposes a 20% tax penalty on buyers if the covenant to maintain the property as a manufactured home community is violated. While this is intended to ensure compliance, the severity of the penalty could discourage buyers, particularly if the enforcement and compliance mechanisms are not clearly defined. This punitive measure may seem harsh and could serve as a deterrent to legitimate buyers, potentially undermining the bill's goal of safeguarding affordable housing through cooperative ownership, as identified in SEC. 3.
Overall Context and Outdated Data
The bill relies on statistics about the cost of manufactured homes and household income, which might not entirely reflect the current market conditions. For instance, the average sales price of a new manufactured home was noted as $81,700 in 2019 and $121,300 in 2023, representing a sizeable increase. While this underscores the rising cost of housing, the absence of recent data could lead to an incomplete understanding of the financial landscape and the bill's potential effectiveness in addressing housing affordability, as noted in SEC. 2.
In conclusion, while the proposed tax incentives present significant opportunities to promote resident-owned communities, the execution of these financial incentives may face challenges related to fairness, complexity, and clarity in the legislation's application and compliance requirements.
Issues
The provision for a 75% tax credit on the qualified gain may favor sellers who can meet specific criteria, potentially benefiting a narrow group of stakeholders. This might raise concerns about equitable distribution of benefits and fairness in SEC. 45BB.
The requirement that the property remain a manufactured home community for at least 50 years (or as state laws allow) might be too restrictive and could discourage participation. This tension between federal and state regulations could cause legal and practical challenges as seen in SEC. 3 and SEC. 45BB.
The lack of clear definitions for 'qualified gain' and 'related person' can lead to ambiguity and difficulty in interpretation, potentially complicating the transaction process and making it harder for individuals to comply without legal assistance, as stated in SEC. 3.
The complexity and potential burden of the affidavit process for both sellers and buyers, including execution, recording, and referencing in the deed, could complicate transactions and deter participation, as described in SEC. 3 and SEC. 45BB.
The 20 percent tax penalty imposed on buyers for covenant violations seems punitive and could deter buyers without providing a clear framework for enforcement or compliance verification, potentially leading to disputes or avoidance of intended community sales, as highlighted in SEC. 3.
The data on manufactured home prices and income referenced in the findings might be outdated or lack context about current market conditions, causing potential misinterpretation of the housing situation and the bill's impact, as mentioned in SEC. 2.
The bill does not adequately define terms such as 'limited equity cooperatives' or 'national network,' which could lead to confusion and misapplication of the law, especially concerning qualification and governance structures, as indicated in SEC. 2.
Site fee increases are mentioned without context or additional data, which might be misleading concerning long-term trends and economic implications for homeowners, as stated in SEC. 2.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of this act states that it can be officially called the "Manufactured Housing Community Sustainability Act of 2024."
2. Findings Read Opens in new tab
Summary AI
Congress finds that manufactured homes provide affordable housing for many low-income people in the U.S., with significant growth in resident-owned communities that help protect homeowners from financial risks, but only a small percentage of these communities are resident or nonprofit owned. To promote security and wealth for homeowners in these communities, a Federal tax benefit is suggested to encourage owners to sell properties to residents or nonprofit organizations committed to preserving them long term.
Money References
- Congress finds that— (1) more than 22,000,000 people live in HUD-code manufactured homes; (2) there are approximately 6,700,000 occupied manufactured homes in the United States, representing about 6 percent of the Nation’s housing stock, 9 percent of the single-family housing stock, and more than 12 percent of all new single-family homes sold in 2021; (3) owners of manufactured homes are disproportionately low-income households, and in 2020, the median annual household income for living in manufactured housing was $35,000; (4) over one-quarter of manufactured homeowners earn less than $20,000 annually, and two-thirds earn less than $50,000 annually; (5) more than half of all manufactured homes are located in rural areas around the country, and manufactured homes make up 13 percent of all occupied homes in rural and small-town communities; (6) the average sales price of a new manufactured home (excluding land) in 2019 was $81,700, and as of December 2023, that average sales price had increased to $121,300, an increase of 48.5 percent over the preceding 5 years; (7) despite this sharp increase, the average manufactured home costs roughly half the price per square foot of the average site-built home; (8) manufactured home communities provide critical affordable housing, but receive very little Federal, State, or local funds to subsidize the cost of manufactured homes; (9) an estimated 43,000 manufactured home communities, also referred to as “mobile home parks”, exist throughout the United States; (10) owners of manufactured homes in such communities may own the home, but they do not own the land under the home, which leaves the homeowners vulnerable to rent increases, dis-investment, changes in land use, and community closure; (11) an eviction or closure of a manufactured home community is very disruptive and can be financially devastating to a homeowner who may be unable to pay the thousands of dollars it takes to move the manufactured home or find a new location for the manufactured home; (12) manufactured housing where the consumer does not own the land generally does not promote wealth building via homeownership; (13) for more than a decade, in an effort to preserve a crucial source of affordable housing and aid low-income homeowners, a national network of housing providers has helped residents purchase and own the land under the manufactured home community, and manage the manufactured home community as limited equity cooperatives; (14) nationwide, there are more than 1,000 cooperative manufactured home communities, of which more than 300, located in more than 20 States, are permanently preserved as affordable communities through limited equity cooperative or nonprofit ownership; (15) members of manufactured home community cooperatives continue to own such homes individually, own an equal share of the land beneath the entire manufactured home community, participate in the governing of the community, and elect a board of directors who make major decisions within the manufactured home community by a democratic vote; (16) site fee increases in limited equity resident-owned communities average just 0.9 percent per year, compared to 5.9 percent per year in commercially owned communities; (17) in New Hampshire, more than 40 percent of manufactured home communities are owned by residents; (18) resident-owned cooperatives and nonprofit owned communities have also flourished in Colorado, Vermont, Massachusetts, Montana, Rhode Island, Washington, Oregon, and Minnesota; (19) nationwide, only 2.4 percent of all manufactured home communities are resident or nonprofit owned; (20) 19 States have adopted some protection when a community is sold, and 8 States have strong notification and resident purchase opportunities, which provide homeowners in those States an opportunity to purchase the manufactured home community when it is put up for sale; and (21) in order to preserve manufactured home communities and help low-income homeowners live securely, safely, and build wealth through homeownership in the future, a Federal tax benefit should be established to induce manufactured home community owners to sell such properties to the residents when those residents or a nonprofit commits to preserving the community long term. ---
3. Tax credit for manufactured home community sale to residents or nonprofit entity Read Opens in new tab
Summary AI
The section introduces a tax credit for the sale of manufactured home communities to residents or nonprofit organizations. To qualify, the sale must adhere to specific guidelines, including maintaining the property as a manufactured home community for at least 50 years, with provisions on governance and membership of the buying cooperative or corporation, and effective starting in taxable years after December 31, 2023.
45BB. Manufactured home community sale to residents or nonprofit entity Read Opens in new tab
Summary AI
The section provides a tax credit for selling a manufactured home community to residents or a nonprofit entity, covering 75% of the qualified gain if the property meets certain conditions: it must have been owned for at least two years prior to the sale, be used as a community for a minimum of 50 years (or the longest term state laws allow), and sold to a qualified cooperative or corporation. The buyer and seller must submit an affidavit confirming these conditions, and a penalty tax applies if the covenant is violated.