Protecting American Homes from Hedge Funds Act

Summary

This legislation is called the Protecting American Homes from Hedge Funds Act. It is being reviewed by a committee.

Full bill text

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9657 Introduced in House (IH)]

<DOC>

119th CONGRESS
2d Session
H. R. 9657

To impose an excise tax on the failure of certain hedge funds owning
excess single-family residences to dispose of such residences, and for
other purposes.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

July 13, 2026

Mr. Smith of Washington (for himself, Mr. Khanna, Ms. Williams of
Georgia, and Ms. Sanchez) introduced the following bill; which was
referred to the Committee on Ways and Means, and in addition to the
Committee on Financial Services, for a period to be subsequently
determined by the Speaker, in each case for consideration of such
provisions as fall within the jurisdiction of the committee concerned

_______________________________________________________________________

A BILL

To impose an excise tax on the failure of certain hedge funds owning
excess single-family residences to dispose of such residences, and for
other purposes.

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Protecting American Homes from Hedge
Funds Act''.

SEC. 2. EXCISE TAX ON CERTAIN TAXPAYERS FAILING TO SELL EXCESS SINGLE-
FAMILY RESIDENCES.

(a) In General.--Subtitle D of the Internal Revenue Code of 1986 is
amended by adding at the end the following new chapter:

``CHAPTER 50B--EXCESS SINGLE-FAMILY RESIDENCES

``Sec. 5000E. Newly acquired single-family residences.
``Sec. 5000F. Excess single-family residences.
``Sec. 5000G. Definitions and other special rules.

``SEC. 5000E. NEWLY ACQUIRED SINGLE-FAMILY RESIDENCES.

``(a) In General.--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.
``(b) Newly Acquired Single-Family 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.

``SEC. 5000F. EXCESS SINGLE-FAMILY RESIDENCES.

``(a) In General.--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.
``(b) Requirement.--
``(1) In general.--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.
``(2) Special rule for certain sales.--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.
``(c) Maximum Permissible Units.--The maximum permissible units
with respect to any applicable taxpayer for any taxable year shall be
determined as follows:

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

``(d) Definitions.--For purposes of this section--
``(1) Applicable single-family residence.--The term
`applicable single-family residence' means any single-family
residence which was acquired on or before the applicable date.
``(2) Applicable date.--
``(A) In general.--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.
``(B) Taxpayers changing status.--
``(i) In general.--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.
``(ii) Applicable taxpayer described.--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.
``(3) Hedge fund taxpayer.--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.

``SEC. 5000G. DEFINITIONS AND OTHER SPECIAL RULES.

``(a) Applicable Taxpayer.--For purposes of this chapter--
``(1) In general.--The term `applicable taxpayer' means any
person which--
``(A) manages funds pooled from investors, and
``(B) is a fiduciary with respect to such
investors.
``(2) Exceptions.--The term `applicable taxpayer' shall not
include any organization primarily engaged in the construction
or rehabilitation of single-family residences.
``(b) Single-Family Residence.--For purposes of this chapter--
``(1) In general.--The term `single-family residence' means
a residential property consisting of 1-to-4 dwelling units.
``(2) Exceptions.--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.
``(c) Acquisition; Ownership.--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.
``(d) Disqualified Sale.--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.
``(e) Aggregation Rules.--
``(1) In general.--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.
``(2) Modifications.--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)).
``(3) Component member.--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).
``(f) Reporting.--
``(1) In general.--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.
``(2) Failure to report.--
``(A) In general.--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.
``(B) Reasonable cause waiver.--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.
``(C) Treatment of penalty.--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.''.
(b) Tax Form.--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)).
(c) Certification.--
(1) In general.--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.
(2) Form of certification.--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.
(3) Definitions.--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.
(d) Clerical Amendment.--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:

``Chapter 50B--Excess Single-family Residences''.

(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of enactment of this
Act.

SEC. 3. USE OF TAX REVENUES FOR DOWN PAYMENT ASSISTANCE GRANTS.

(a) Establishment of Housing Downpayment Trust Fund.--
(1) In general.--Subchapter A of chapter 98 of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new section:

``SEC. 9512. HOUSING DOWNPAYMENT TRUST FUND.

``(a) Creation of Trust Fund.--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).
``(b) Transfers to Trust Fund.--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.
``(c) Expenditures From Trust Fund.--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.''.
(2) Clerical amendment.--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:

``Sec. 9512. Housing Downpayment Trust Fund.''.
(b) Grants Program for Down Payment Assistance Programs.--
(1) Establishment.--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.
(2) Priority.--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).

SEC. 4. DISALLOWANCE OF MORTGAGE INTEREST AND DEPRECIATION IN
CONNECTION WITH SINGLE FAMILY RESIDENCES OWNED BY COVERED
TAXPAYERS.

(a) Mortgage Interest.--
(1) In general.--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:
``(n) Certain Interest Paid by Covered Taxpayers.--
``(1) In general.--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.
``(2) Definitions.--For purposes of this subsection--
``(A) Acquisition indebtedness.--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.
``(B) Single-family resident.--The term `single-
family residence' has the meaning given such term under
section 5000G(b).
``(C) Ownership.--The rules of section 5000G(c)
shall apply for purposes of determining ownership.''.
(2) Effective date.--The amendments made by this subsection
shall apply to indebtedness incurred in taxable years beginning
after the date of the enactment of this Act.
(b) Depreciation.--
(1) In general.--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:
``(i) Deduction Disallowed for Disqualified Single Family Property
Owners.--
``(1) In general.--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.
``(2) Definitions.--For purposes of this subsection--
``(A) Single-family resident.--The term `single-
family residence' has the meaning given such term under
section 5000G(b).
``(B) Ownership.--The rules of section 5000G(c)
shall apply for purposes of determining ownership.''.
(2) Effective date.--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.

SEC. 5. PROHIBITIONS ON FEDERAL MORTGAGE ASSISTANCE.

(a) Fannie Mae and Freddie Mac.--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:

``SEC. 1329. PROHIBITION RELATING TO SPECIFIED LARGE INVESTORS.

``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).''.
(b) Ginnie Mae.--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).''.
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Protecting American Homes from Hedge Funds Act

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