tender of the initial premium charge and such other charges as the Commissioner may require that the mortgage complies with the provisions of this title, such mortgage may be accepted for insurance by indorsement or otherwise as the Commissioner may prescribe; but no mortgage shall be accepted for insurance under this subchapter unless the Commissioner finds that the project with respect to which the mortgage is executed is an acceptable risk in view of the shortage of housing referred to in this section. In the event that the principal obligation of any mortgage accepted for insurance under this title is paid in full prior to the maturity date, the Commissioner is further authorized in his discretion to require the payment by the mortgagee of an adjusted premium charge in such amount as the Commissioner determines to be equitable but not in excess of the aggregate amount of the premium charges that the mortgagee would otherwise have been required to pay if the mortgage had continued to be insured under this title until such maturity date; and in the event that the principal obligation is paid in full as herein set forth, the Commissioner is authorized to refund to the mortgagee for the account of the mortgagor all, or such portion as he shall determine to be equitable, of the current unearned premium charges theretofore paid.

"(d) The failure of the mortgagor to make any payment due under or provided to be paid by the terms of a mortgage insured under this title shall be considered a default under such mortgage, and if (A), in the opinion of the Commissioner, such default occurred by reason of the deactivation of, or substantial curtailment of activities at, the military installation in the area of which the property is located, and (B) such default continues for a period of thirty days, the mortgagee shall be entitled to receive the benefits of the insurance as hereinafter provided, upon assignment, transfer, and delivery to the Commissioner, withi a period and in accordance with rules and regulations to be prescribed by the Commissioner of (1) all rights and interest arising under the mortgage so in default (2) all claims of the mortgagee against the mortgagors or others, arising out of the mortgage transaction; (3) all policies of title or other insurance or surety bonds or other guaranties and any and all claims thereunder; (4) any balance of the mortgage loan not advanced to the mortgagor; (5) any cash or property held by the mortgagee, or to which it is entitled, as deposits made for the account of the mortgagor and which have not been applied in reduction of the principal of the mortgage indebtedness; and (6) all records, documents, books, papers, and accounts relating to the mortgage transaction. Upon such assignment, transfer, and delivery the obligation of the mortgagee to pay the premium charges for mortgage insurance shall cease, and the Commissioner shall, subject to the cash adjustment provided for in subsection (c) of this section, issue to the mortgagee debentures having a total face value equal to the value of the mortgage, and a certificate of claim as hereinafter provided. For the purposes of this subsection, the value of the mortgage shall be determined in accordance with rules and regulations prescribed by the Commissioner, by adding to the amount of the original principal obligation of the mortgage which was unpaid on the date of default, the amount the mortgagee may have paid for (A) taxes, special assesments, and water rates, which are liens prior to the mortgage; (B) insurance on the property; and (C) reasonable expenses for the completion and preservation of the property and any mortgage insurance premiums paid after default; less the sum of (i) an amount equivalent to 1 per centum of the unpaid amount of such principal obligation on the date of default; (ii) any amount received on account of the mortgage after such date; and (iii) any net income received by the mortgagee from the property after such date: Provided, That the mortgagee in the event of a default under the mortgage may, at its option and in accordance with regulations of, and in a period to be determined by the Commissioner, proceed to foreclose on and obtain possession of or otherwise acquire such property from the mortgagor after default, and receive the benefits of the insurance as herein provided, upon (1) the prompt conveyance to the Commissioner of title to the property which meets the requirements of the rules and regulations of the Commissioner in force at the time the mortgage was insured, and which is evidenced in the manner prescribed by such rules and regulations; and (2) the assignment to him of all claims of the mortgagee against the mortgagor or others, arising out of the mortgage transaction or foreclosure proceedings, except such claims that may have been released with the consent of the Commissioner. Upon such conveyance and assignment, the obligation of the mortgagee to pay the premium charges for insurance shall cease and the mortgagee shall be entitled to receive the benefits of the insurance as provided in this

subsection, except that in such event the 1 per centum deduction, set out in (i) hereof. shall not apply.

"(e) Debentures issued under this title 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 Commissioner with the approval of the Secretary of the Treasury and may be in coupon or registered form. Any difference between the value of the mortgage determined as herein provided and the aggregate face value of the debentures issued, not to exceed $50, shall be adjusted by the payment of cash by the Commissioner to the mortgagee from the Military Housing Insurance Fund.. "(f) Debentures issued under this section upon the assignment of an insured mortgage to the Commissioner shall be executed in the name of the Military Housing Insurance Fund as obligor, shall be signed by the Commissioner, by either his written or engraved signature, and shall be negotiable. All such debentures shall be dated as of the date of default as determined in accordance with subsection (d) of this section, and shall bear interest from such date at a rate determined by the Commissioner with the approval of the Secretary of the Treasury, at the time the mortgage was accepted for insurance, but not to exceed 3 per centum per annum, payable semiannually on the first day of January and the first day of July of each year, and shall mature ten years after the date thereof. Such debentures shall be exempt, both as to principal and interest, from all taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by the District of Columbia, or by any State, county, municipality, or local taxing authority. They shall be paid out of the Military Housing Insurance Fund, which shall be primarily liable therefor, and they 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 debentures. In the event the Military Housing Insurance Fund fails to pay upon demand, when due, the principal of or interest on any debentures so guaranteed, the Secretary of the Treasury shall pay to the holders the amount thereof which is hereby authorized to be appropriated, and thereupon to the extent of the amount so paid the Secretary of the Treasury shall succeed to all the rights of the holders of such debentures.

"(g) The certificate of claim issued by the Commissioner to any mortgagee shall be for an amount which the Commissioner determines to be sufficient, when added to the face value of the debentures issued and the cash adjustment paid to the mortgagee, to equal the amount which the mortgagee would have received if, at the time of the conveyance to the Commissioner of the property covered by the mortgage, the mortgagor had redeemed the property and paid in full all obligations under the mortgage and a reasonable amount for necessary expenses incurred by the mortgagee in connection with the foreclosure proceedings, for the acquisition of the mortgaged property otherwise, and the conveyance thereof to the Commissioner. The amount to which the holder of any such certificate shall be entitled shall be determined as provided in subsection (h). "(h) If the net amount realized from any property conveyed to the Commissioner under this section and the claim assigned therewith, after deducting all expenses incurred by the Commissioner in handling, dealing with, and disposing of such property and in collecting such claims, exceeds the face value of the debentures issued and the cash paid in exchange for such property plus all interest paid on such debentures, such excess shall be divided as follows:

"(1) If such excess is greater than the total amount payable under the certificate of claim issued in connection with such property, the Commissioner shall pay to the holder of such certificate the full amount so payable, and any excess remaining thereafter shall be paid to the mortgagor of such property; and

"(2) If such excess is equal to or less than the total amount payable under such certificate of claim, the Commissioner shall pay to the holder of such certificate the full amount of such excess.

"(i) Notwithstanding any other provision of law relating to the acquisition, handling, or disposal of real property by the United States, the Commissioner shall have power to deal with, complete, rent, renovate, modernize, insure, make contracts or establish suitable agencies for the management of, or sell for cash or credit, in his discretion, any properties conveyed to him in exchange for debentures and certificates of claim as provided in this section; and notwithstanding any other provision of law, the Commissioner shall also have power to pursue to final collection, by way of compromise or otherwise, all claims

against mortgagors assigned by mortgagees to the Commissioner as provided in this section, except that no suit or action shall be commenced by the Commissioner against any such mortgagor on account of any claim so assigned unless such suit or action is commenced within six months after the assignment of such claim to the Commissioner, or within six months after the last payment was made to the Commissioner with respect to the claim so assigned, whichever is later: Provided, That section 3709 of the Revised Statutes shall not be construed to apply to any contract for hazard insurance, or to any purchase or contract for services or supplies on account of such property if the amount thereof does exceed $1,000.

"(j) No mortgagee or mortgagor shall have, and no certificate of claim shall be construed to give to any mortgagee or mortgagor, any right or interest in any property conveyed to the Commissioner or in any claim assigned to him; nor shall the Commissioner owe any duty to any mortgagee or mortgagor with respect to the handling or disposal of any such property or the collection of any such claim.

"SEC. 804. (a) Moneys in the Military Housing Insurance Fund not needed for current operations under this title shall be deposited with the Treasurer of the United States to the credit of the Military Housing Insurance Fund, or invested in bonds or other obligations of, or in bonds or other obligations guaranteed as to principal and interest by, the United States. The Commissioner may, with the approval of the Secretary of the Treasury, purchase in the open market debentures issued under the provisions of this title. Such purchases shall be made at a price which will provide an investment yield of not less than the yield obtainable from other investments authorized by this section. Debentures so purchased shall be cancelled and not reissued.

"(b) Premium charges, adjusted premium charges, and appraisal and other fees, received on account of the insurance of any mortgage accepted for insurance under this title, the receipts derived from the property covered by such mortgage, and claims assigned to the Commissioner in connection therewith shall be credited to the Military Housing Insurance Fund. The principal of and interest paid and to be paid on debentures issued under this subchapter, cast adjustments, and expenses incurred in the handling, management, renovation, and disposal of properties acquired under this title shall be charged to the Military Housing Insurance Fund.

"SEC. 805. Nothing in this title shall be construed to exempt any real property acquired and held by the Commissioner under this title from taxation by any State or political subdivision thereof, to the same extent, according to its value, as other real property is taxed.

"SEC. 806. The Commissioner is authorized and directed to make such rules and regulations as may be necessary to carry out the provisions of this title." SEC. 2. Paragraph (1) of section 301 (a) of the National Housing Act, as amended, is amended

(a) By striking out "or section 603" and inserting in lieu thereof a comma and the following: "section 603, or section 803"; and

(b) By inserting after the words "no mortgage," where they appear at the beginning of subparagraph "(E)," the words "insured under section 204 or section 603 of this Act or guaranteed under section 501, 502, or 505 (a) of the Servicemen's Readjustment Act of 1944, as amended,”.

SEC. 3. (a) The Internal Revenue Code is amended by inserting therein, immediately after the heading preceding section 111, the following new section: "SEC. 110. AMORTIZATION DEDUCTION

"(a) GENERAL RULE.-Every person, at his election, shall be entitled to a deduction with respect to the amortization of the adjusted basis (for determining gain) of any military housing facility (as defined in subsection (d)) based on an amortization period of one hundred and twenty months. Such amortization deduction shall be an amount, with respect to each month of such period within the taxable year, equal to the adjusted basis of the facility at the end of such month divided by the number of months (including the month for which the deduction is computed) remaining in the period. Such adjusted basis at the end of the month shall be computed without regard to the amortization deduction for such month. The amortization deduction above provided with respect to any month shall be in lieu of the deduction with respect to such facility for such month provided by section 23 (1), relating to exhaustion, wear and tear, and obsolescence. The one-hundred-and-twenty-month period shall begin as to any such facility, at the election of the taxpayer, with the month following the month in which the facility was completed, or with the succeeding taxable year.

"(b) ELECTION OF AMORTIZATION.-The election of the taxpayer to take the amortization deduction shall be made only by a statement to that effect in its return for the taxable year in which the facility was completed. The election shall be irrevocable.

"(c) TERMINATION OF AMORTIZATION PERIOD.-Upon the termination of the sixtymonth period, the taxpayer shall be allowed the deduction provided under section 23 (1), beginning with the first month as to which the amortization deduction is not applicable, and the taxpayer shall not be entitled to any further amortization deductions with respect to the military housing facility.

"(d) DEFINITION OF MILITARY HOUSING FACILITY.-As used in this section the term 'military housing facility' means any property the necessity for which shall have been certified by the Secretary of the Army in accordance with section 803 (b) (2) of the National Housing Act, as amended.

"(e) TAXABILITY ON SALE OF MILITARY HOUSING FACILITY.-Anything to the contrary in this title notwithstanding, any gain realized upon the sale or other disposition of any property with respect to which any amortization deduction has been claimed shall to the extent of any such amortization deduction be considered gain recognized and taxable as ordinary income.

"(f) LIFE TENANT AND REMAINDERMAN.-In the case of property held by one person for life with remainder to another person, the deduction shall be computed as if the life tenant were the absolute owner of the property and shall be allowable to the life tenant."

(b) The amendment made by subsection (a) shall be effective with respect to taxable years beginning after December 31, 1950.

Senator WHERRY. The substitute is in the nature of a perfecting bill which meets some of the requirements that had to be met by some of the Government agencies and a suggestion or two by the military.

The one amendment that had to be made, which is of primary importance, is dropping the guaranty from 100 percent to 95. I will discuss that in my statement.

Senator CAIN. The 100 percent was included in the original bill? Senator WHERRY. That is right, sir, and that now is amended to provide an insurance guaranty of 95 percent. There will be some opposition even to that, but I believe that we have offered a substitute that I am inclined to feel will be accepted-I hope so anyhow-by the Federal Housing Authority on that basis. I will give the reasons as we go along, but usually some member wants to know why a substitute bill. Well, that was one of the main provisions.

By the way, the success or failure of this bill, to my mind, hinges on that one particular feature. It is absolutely necessary that that figure of 95 percent stay in if we are to get these houses built in a private-enterprise way.

I might state why I got interested in this bill just briefly, and that is one of the reasons why I came to your distinguished chairman, Senator Maybank, chairman of this committee, and also to Senator Tydings, chairman of the Armed Services Committee, because I wanted them interested in this particular piece of legislation.

After the war, I think all of you will recall that General Spaatz. set up a program for air, and many of the States were fortunate in having an air base either left or established in their State which was a part of this air program that was to proceed as more or less a permanent air program in the States of the Union. We had many air bases. in Nebraska. It is an ideal State from many advantageous standpoints for the air service-the weather, the country. It all makes it ideal for flying.

During the war many, many bases were set up in other States, but particularly in Nebraska, with suitable runways, a lot of them 10,000

feet long. For example, the airfield at Grand Island, at Hastings, at Fairmont, at Alliance, at North Platte, at Scottsbluff. I think we had twenty-some air bases in Nebraska that were completely abandoned at the end of the war.

But General Spaatz did determine that the one base that he wanted to improve and continue was located at Kearney, Nebr., and so designated that, we felt, as a permanent installation. The town of Kearney at that time probably was maybe 12,000 or 15,000. Say 12,000. And, in order to continue that base, efforts were made by the representatives in the legislatures, both Senate and House, working hand in hand with the officials at Kearney, to see to it that that base would be made the kind of a base that they wanted, so that it might do the job that was intended by the air service.

You all know that when you place around 1,500 or 1,800 military personnel, including civilians that work for the Air Force, in a town of that size that they have to go the extra mile to provide the utilities and the facilities and the housing not only on the base but in the town to provide adequate housing for such an installation. It was with that idea in mind that they started out and attempted to make a permanent base at Kearney, Nebr.

Now, last winter, just like a streak of lightning out of the clear sky, came an order that the base at Kearney was to be closed, that the base was to be vacated as far as the air service was concerned, and personnel moved to another field.

The CHAIRMAN. Does the Senator mind being interrupted?

Senator WHERRY. No; except I would like to have whatever is said placed in the record.

The CHAIRMAN. I want the Senator to know we are rushing, at his request, to get S. 1184 before the committee, and that only this morning we got a report from the Housing Administrator who will testify following the Secretary of Air, that, with a few amendments, he has reported favorably on the bill. He says:

I have been authorized by the Director of the Bureau of the Budget to state that the objectives of the substitute measure for S. 1184, with the amendments which I am recommending to your committee, would be in accord with the program of the President.

As I stated, you will run up against these propositions in your own States, because, after all, you have to have adequate housing for these men and their families, either civilians or base personnel in these military installations. The primary reason why we lost that base at Kearney was because of the lack of adequate housing facilities.

So, that brought the thing right up to me. I felt that from a national defense proposition this should be brought to the attention of the housing committees. I came first to your distinguished chairman, and he agrees with me that while we have attempted to take care of classes of individuals in all other respects, yet there is no legislation that takes care of this particular group which is so necessary to the national defense. And I say that paying a compliment to the distinguished Senator from Washington, who I know has done his level best to get housing each and every time, you might say, that he turns around.

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