(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 per 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.—In 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 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)).

(f) BASIS ADJUSTMENT.—For purposes of this title, 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 section) result from such expenditure shall be reduced by the amount of the credit so determined.

REGULATIONS.—The Secretary shall issue regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section.