(E) to pay dividends, if the borrower is a limited dividend corporation, at a rate which is not in excess of 6 per centum per annum: Provided, That if in any year the corporation is unable to pay dividends at the rate agreed to hereunder, dividends may be paid out of surplus earned in any subsequent year at a rate in excess of that agreed to but only to the extent necessary to give stockholders a return on their investment (not including any allowance for interest) equal to that which they would have received if dividends had been paid consecutively at the approved rate; and

(F) to comply with such other terms and conditions as the local housing agency determines to be necessary or desirable to carry out the purposes of this Act; and

(3) in the case of a cooperative ownership housing corporation, prior to the receipt of any proceeds of any such mortgage loan, the subscribers of such cooperative borrower shall be equal to such percentage of the number of subscribers proposed to be served by the housing project as may be determined by the local housing agency.

(b) Any such mortgage loan shall involve a principal obligation in an amount (1) not exceeding the development cost of the housing project as determined by the local housing agency, and (2) not exceeding the amount such agency shall have determined to be the maximum within which the project must be constructed in order that it may be made available for the sale or rental to families of low income at prices, rentals, or charges within their means: Provided, That in the case of a borrower other than a nonprofit corporation the principal obligation of any such mortgage loan shall not exceed 80 per centum (90 per centum in the case of a limited dividend corporation) of the cost referred to in clause (1) and of the amount referred to in clause (2). No such loan shall be made unless the mortgagor has agreed to certify the cost to the local housing agency in the manner provided by section 227 of the National Housing Act for mortgage insurance.

(c) (1) If any such mortgage loan made to any eligible borrower involves a principal obligation which is less than that authorized under subsection (b) of this section, and the borrower proposes to raise additional funds through sources other than the local housing agency to be secured through insured or guaranteed mortgages, debentures, bonds, or otherwise, the total mortgage loan and such other borrowing shall not exceed in the aggregate the maximum principal obligation authorized under subsection (b), and the rights of such agency under any such mortgage loan shall not be subordinate to the rights of any other creditor supplying such additional funds.

(2) Any such mortgage loan may be made to an eligible borrower involving a principal obligation which is less than that authorized under subsection (b) of this section, to represent part of the obligation secured by a single mortgage with equal priorities, when the remainder of the funds obligated under such single mortgage are secured from State or local government funds, and the total mortgage loan and any other borrowing under the provisions of paragraph (1) of this subsection does not exceed in the aggregate the maximum principal obligation authorized under subsection (b) of this section.

(d) Any such mortgage loan shall provide for complete amortization within a period of fifty years by periodic payments upon such terms, including a program providing for level payments of principal and interest, as the local housing agency shall prescribe, and shall bear interest, on the amount of the principal obligation of such mortgage loan outstanding at any time, at a fixed rate, based on the cost to such agency of capital investment and borrowings from the private market, plus not more than one-half of 1 per centum. In the event of the refinancing of the loan (within such period as the local housing agency shall prescribe), if the cost to such agency of capital investment and borrowings from the private market makes necessary an increase in the rate of interest which, pursuant to this subsection, such agency is required to charge on the mortgage loan, the amortization period may be extended to a date not later than sixty years after the date of the original mortgage: Provided, That no such extension shall be made unless such agency determines that the increase otherwise resulting in the rents or charges for the dwellings in the housing project would adversely affect the stability of such housing project. The mortgage loan may, in the discretion of such agency, include provision for the deferment of payments of principal and interest thereunder: Provided further, That such deferments shall

not in the aggregate result in an extension of the maturity of the mortgage for a period of more than three years nor shall any such deferments result in an extension of the maturity of the mortgage for more than three years beyond the mortgage maturity otherwise authorized herein.

(e) Subject to the provisions of this section, any such mortgage loan shall be in such form, contain such provision as to security, repayment, and redemption, and be subject to such other terms and conditions as the local housing agency shall determine: Provided, That in the case of any cooperative mortgagor, the mortgage loan shall contain provisions requiring that such borrower have. to the extent permitted by State and local law, a priority for the purchase of the interest of each of its members in the dwelling of such member in the event of sale of such interest.

(f) The borrower under any such loan may, with the consent of the local housing agency, pledge the contract or commitment of such agency to make a mortgage loan hereunder as security for a loan of construction funds from other sources.

(g) With respect to any such loan, the local housing agency may charge to the borrower (in addition to any interest charges) an amount not exceeding one-half of 1 per centum of the principal amount of the mortgage loan for inspection and other services during the construction of any housing project. Such agency may also charge to an applicant for any such mortgage loan a reasonable fee for the cost of processing applications, which shall be payable by the applicant whether or not such application is approved. If the borrower proposes to raise additional funds through sources other than the local housing agency to be secured through insured or guaranteed mortgages, debentures, bonds, or otherwise, the inspection charge herein authorized shall be computed on the total amount borrowed from such agency and such other sources for the construction of such project. Such service charges may be included as a part of the development cost of the project and may be payable from the proceeds of any mortgage loan or advances thereon. (h) (1) Each recipient of any such mortgage loan shall keep such records as the local housing agency shall prescribe, including records which fully disclose the amount and disposition by such recipient of the proceeds of such mortgage loan, the total cost of the housing project in connection with which such loan is made, and the amount and nature of that portion of the cost of the project or underaking supplied by other sources, and such other records as will facilitate an effective audit.

(2) The Secretary and the Comptroller General of the United States, or any of their duly authorized representatives, shall have access for the purpose of audit and examination to any books, documents, papers, and records of the local housing agency and of eligible borrowers that are pertinent to any such mortgage loans. (i) After the expiration of twenty years from the date of the original obligation under any such mortgage loan, a borrower may relieve itself of further supervisions by the local public housing agency upon repayment of the mortgage loan and of such portion of the value of any tax abatement as may have been granted it by any State or local government and to which such government does not at such time waive the rights of repayment.

DEFAULTS

SEC. 5. (a) In the event any local housing agency shall fail to make any payment of principal and/or interest due on any obligation guaranteed under this Act, and such default continues for a period of thirty days, the holder of such obligation shall be entitled to receive debentures (in principal amount equal to the unpaid principal of the defaulted obligation plus any interest due and unpaid thereon) upon assignment, transfer, and delivery to the Secretary, within a period and in accordance with rules and regulations to be prescribed by the Secretary, of the obligation in default.

(b) Debentures issued under this section shall be executed in the name of Guarantee Loan Fund (established pursuant to subsection (d)) as obligor, shall be signed by the Secretary by either his written or engraved signature, and shall be negotiable. Such debentures shall be negotiable, and shall bear interest at a rate determined by the Secretary, with the approval of the Secretary of the Treasury, at the time the defaulted obligation was issued, but not to exceed the rate of interest applicable to the defaulted obligation, or the going Federal rate, whichever is the lower, payable semiannually on the 1st day of January and on the 1st day of July of each year, and shall mature three years after the 1st day of

July following the maturity date of the defaulted obligation in exchange for which such debentures were issued. Such debentures shall be paid out of the Guarantee Loan Fund which shall be primarily liable therefor, and shall be fully and unconditionally guaranteed as to principal and interest by the United States, and such guaranty shall be expressed on the face of the debenture. In the event there is a failure to pay upon demand when due, the principal of, or interest on, any debenture so guaranteed, the Secretary of the Treasury shall pay to the holder or holders the amount thereof which is hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, and thereupon, to the extent of the amount so paid, the Secretary of the Treasury shall succeed to all the rights of the holder or holders of such debentures.

(c) Debentures issued under this section shall be in such form and denominations in multiples of $50, shall be subject to such terms and conditions, and shall include such provisions for redemption, if any, as may be prescribed by the Secretary, with the approval of the Secretary of the Treasury, and may be in coupon or registered form. Any difference between the amount of debentures to which the holder of the defaulted obligation is entitled under this section and the aggregate principal amount of the debentures issued, not to exceed $50, shall be adjusted by the payment of cash by the Secretary. The Secretary may, with the approval of the Secretary of the Treasury, purchase in the open market debentures issued under this section. Debentures so purchased shall be canceled and not reissued.

(d) There is hereby established in the Treasury of the United States a Guarantee Loan Fund which shall be used by the Secretary to meet obligations arising out of guarantees entered into under the provisions of this Act. There shall be deposited in such fund receipts in the form of fees or charges made in connection with the guarantee of obligations under this Act. Moneys in such fund not needed for current operations shall be invested in direct obligations of the United States or obligations guaranteed by the United States.

PROTECTION OF LABOR STANDARDS

SEC. 6. All laborers and mechanics employed by contractors or subcontractors on housing projects the financing of which is assisted under this Act shall be paid wages at rates not less than those prevailing on similar construction in the locality as determined by the Secretary of Labor in accordance with the Davis-Bacon Act, as amended (40 U.S.C. 276a-276a-5). No such project shall be approved without first obtaining adequate assurance that these labor standards will be maintained upon the construction work. The Secretary of Labor shall have, with respect to the labor standards specified in this provision, the authority and functions set forth in Reorganization Plan Numbered 14 or 1950 (15 F.R. 3176; 64 Stat. 1267; 5 U.S.C. 133z-15), and section 2 of the Act of June 13, 1934, as amended (48 Stat. 948, as amended; 40 U.S.C. 276c).

AMENDMENTS OF OTHER ACTS

SEC. 7. (a) The sixth sentence of paragraph seventh of section 5136 of the Revised Statutes, as amended (12 U.S.C. 24), is amended by inserting before the comma after the words "or obligations, participations, or other instruments of or issued by the Federal National Mortgage Association" the following: "or obligations guaranteed by the Secretary of Housing and Urban Development pursuant to section 3 of the Low-Income Housing Act of 1967".

(b) Section 5200 of the Revised Statutes, as amended (12 U.S.C. 84), is amended by adding at the end thereof the following:

"(14) Obligations of a local housing agency (as defined in section 8(2) of the Low-Income Housing Act of 1967), which are guaranteed by the Housing and Home Finance Administrator pursuant to section 3 of such Act, shall not be subject to any limitation based upon such capital and surplus."

DEFINITIONS

SEC. 8. As used in this Act, the term

(1) "Secretary" means the Secretary of Housing and Urban Development. (2) "Local housing agency" means any public corporation authorized to carry out, and created or designed by or pursuant to State law for the purpose of carrying out, the financing of the development of housing, including housing for low-income families.

(3) "Families of low income" means any family or individual who has an income below the maximum amount which can be established in the area, pursuant to the limitations prescribed in sections 2(2) and 15(7) (b) (ii) of the United States Housing Act of 1937, for occupancy in public housing dwellings. (4) "Eligible borrower" or "borrower" means (1) a private nonprofit corporation, a limited dividend corporation, or a nonprofit cooperative ownership housing corporation, or (2) any other private corporation approved by a local housing agency as qualified to provide by rehabilitation or construction housing in furtherance of the purposes of this Act.

(5) "Corporation" means either a corporation or a trust and references to members of such corporations shall with respect to trusts mean the beneficiaries thereof.

(6) "Housing project" means a project (including all property, real and personal, contracts, rights, and choses in action acquired, owned, or held by a borrower in connection therewith) of a borrower designed and used primarily for the purpose of providing dwellings; but nothing herein shall be construed as prohibiting the inclusion in a housing project of such stores, offices, or other commercial facilities, recreational or community facilities, or other nondwelling facilities as are necessary appurtenances to such housing project.

(7) "Development cost" means (A) the amount of the reasonable costs incurred by the borrower in, and necessary for, carrying out all works and undertakings for the development of a housing project and shall include the cost of all necessary surveys, plans and specifications, architectural, engineering, or other special services, land acquisition, site preparation, construction and equipment, interest incurred during the development of the housing project up to the time of completion, initial working capital for the administration of the housing project, necessary expenses (including any initial operating deficit) in connection with the initial occupancy of the housing project, and the cost of such other items as the local housing agency shall determine to be necessary for the development of the housing project, less net rents and other net income received from the housing project prior to the time of its completion, as determined by such agency, or (B) the cost, as approved by the local housing agency, incurred by the borrower in, and necessary for the acquisition of, a housing project developed with a loan guaranteed under this Act. For the purposes of this paragraph, the local housing agency shall consider in determining the reasonable cost of land acquisition the effect of local assistance for assembling and clearing the site and securing title thereto as provided in section 1(b) of this Act.

(8) "Mortgage" or "mortgage loan” means a first mortgage on real estate, in fee simple, or on a leasehold (A) under a lease for not less than ninety-nine years which is renewable or (B) under a lease having a period of not less than seventy-five years to run from the date the mortgage was executed; and the term "first mortgage" means such classes of first liens as are commonly given to secure advances on, or the unpaid purchase price of, real estate, under the laws of the State in which the real estate is located, together with the credit instruments, if any, secured thereby.

(9) "Real estate" includes lands, lands and improvements, lands under water, waterfront property, the water of any lake, pond, or stream, and the air space over and above any of the foregoing.

(10) "Veteran" means any person who (A) has served in the active military or naval service of the United States for a period of more than ninety days any part of which occurred (i) on or after April 6, 1917, and prior to November 11, 1918, (ii) on or after September 6, 1940, and prior to July 26, 1947, or (iii) on or after June 27, 1950, and (B) was discharged or released therefrom under conditions other than dishonorable, or who, having served for less than ninety days during any of the foregoing periods, was discharged or released from active duty for a service-connected disability.

(11) "State" means any of the several States, the District of Columbia, the Commonwealth of Puerto Rico, and possessions of the United States.

(12) "Going Federal rate" means the annual rate of interest (or, if there shall be two or more such rates of interest, the highest thereof) specified in the most recently issued bonds of the Federal Government having a maturity of ten years or more.

ANNUAL REPORT

SEC. 9. The Secretary shall include in his annual report, required under section 802 (a) of the Housing Act of 1954, a comprehensive statement with respect to the administration of this Act.

SHORT TITLE

SEC. 10. This Act may be cited as the "Low-Income Housing Guarantee Act of 1967".

[S. 1199, 90th Cong., first sess.]

A BILL To amend the Internal Revenue Code of 1954 to provide tax incentives for the rehabilitation of rental housing for low-income families

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1954 (relating to itemized deductions for individuals and corporations) is amended by adding at the end thereof the following new section:

"SEC. 183. EXPENDITURES FOR REHABILITATION OF LOW-INCOME RENTAL HOUSING.

"(a) DEDUCTION OF 20 PERCENT OF EXPENDITURES.-Any taxpayer who pays or incurs allowable rehabilitation expenditures with respect to any qualified rental housing property during the taxable year may, at his election, treat an amount not in excess of 20 percent of such expenditures as expenses which are not chargeable to capital account. The expenditures so treated shall be allowed as a deduction. No election may be made under this subsection with respect to allowable rehabilitation expenditures which are paid or incurred for section 179 property if an election under section 179 is made with respect to such property. “(b) AMORTIZATION IN LIEU OF DEPRECIATION.-Any taxpayer who pays or incurs allowable rehabilitation expenditures with respect to any qualified rental housing property during the taxable year may, at his election, treat such expenditures as deferred expenses. If an election is made under subsection (a) with respect to part of such expenditures, the taxpayer may elect to treat the remaining part of such expenditures as deferred expenses. In computing taxable income, such deferred expenses shall be allowed as a deduction ratably over a period of 60 months beginning with the first month for which a deduction under section 167 would (without regard to this subsection) be allowable. The amortization deduction provided by this subsection for allowable rehabilitation expenditures with respect to any month shall be in lieu of the depreciation deduction for such month provided by section 167.

"(c) ELECTIONS.

"(1) TIME AND MANNER.-The elections provided by subsections (a) and (b) shall be made with respect to any allowable rehabilitation expenditures not later than the time prescribed by law (including extensions thereof) for filing the return for the taxable year in which such expenditures are paid or incurred. Such elections shall be made in such manner as the Secretary or his delegate shall prescribe by regulations.

“(2) REVOCATION.-An election under subsection (a) may not be revoked except with the consent of the Secretary or his delegate. Under regulations prescribed by the Secretary or his delegate, an election under subsection (b) may be revoked at any time before the expiration of the 60-month amortization period, effective at the beginning of any month specified by the taxpayer in his notice of revocation. An election under subsection (b) may not be revoked after the expiration of the 60-month amortization period, except with the consent of the Secretary or his delegate. "(d) DEFINITIONS.

"(1) ALLOWABLE REHABILITATION EXPENDITURES.-For purposes of this section, the term 'allowable rehabilitation expenditures' means those expenditures, properly chargeable to capital account, which are paid or incurred before December 31, 1970, for the improvement of qualified rental housing property and which the Secretary of Housing and Urban Development certifies are attributable to fulfilling standards, prescribed by him for purposes of this section, of suitable rental housing for low-income families. Such term does not include so much of any expenditure paid or incurred as the result of attempting to cure any recorded violation imposed by the laws and ordinances of the State and local political subdivision in which such property is located, or imposed by the regulations of any agency of such State or