Internal Revenue Code:Sec. 42. Low-income housing credit

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Contents


Location in Internal Revenue Code


     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle A - Income Taxes
       CHAPTER 1 - NORMAL TAXES AND SURTAXES
        Subchapter A - Determination of Tax Liability
         PART IV - CREDITS AGAINST TAX
          Subpart D - Business Related Credits
        

Statute

    Sec. 42. Low-income housing credit
 
    (a) In general
      For purposes of section 38, the amount of the low-income housing
    credit determined under this section for any taxable year in the
    credit period shall be an amount equal to -
        (1) the applicable percentage of
        (2) the qualified basis of each qualified low-income building.
    (b) Applicable percentage: 70 percent present value credit for
        certain new buildings; 30 percent present value credit for
        certain other buildings
      For purposes of this section -
      (1) Building placed in service during 1987
        In the case of any qualified low-income building placed in
      service by the taxpayer during 1987, the term ''applicable
      percentage'' means -
          (A) 9 percent for new buildings which are not federally
        subsidized for the taxable year, or
          (B) 4 percent for -
            (i) new buildings which are federally subsidized for the
          taxable year, and
            (ii) existing buildings.
      (2) Buildings placed in service after 1987
        (A) In general
          In the case of any qualified low-income building placed in
        service by the taxpayer after 1987, the term ''applicable
        percentage'' means the appropriate percentage prescribed by the
        Secretary for the earlier of -
            (i) the month in which such building is placed in service,
          or
            (ii) at the election of the taxpayer -
              (I) the month in which the taxpayer and the housing
            credit agency enter into an agreement with respect to such
            building (which is binding on such agency, the taxpayer,
            and all successors in interest) as to the housing credit
            dollar amount to be allocated to such building, or
              (II) in the case of any building to which subsection
            (h)(4)(B) applies, the month in which the tax-exempt
            obligations are issued.
        A month may be elected under clause (ii) only if the election
        is made not later than the 5th day after the close of such
        month.  Such an election, once made, shall be irrevocable.
        (B) Method of prescribing percentages
          The percentages prescribed by the Secretary for any month
        shall be percentages which will yield over a 10-year period
        amounts of credit under subsection (a) which have a present
        value equal to -
            (i) 70 percent of the qualified basis of a building
          described in paragraph (1)(A), and
            (ii) 30 percent of the qualified basis of a building
          described in paragraph (1)(B).
        (C) Method of discounting
          The present value under subparagraph (B) shall be determined
        -
            (i) as of the last day of the 1st year of the 10-year
          period referred to in subparagraph (B),
            (ii) by using a discount rate equal to 72 percent of the
          average of the annual Federal mid-term rate and the annual
          Federal long-term rate applicable under section 1274(d)(1) to
          the month applicable under clause (i) or (ii) of subparagraph
          (A) and compounded annually, and
            (iii) by assuming that the credit allowable under this
          section for any year is received on the last day of such
          year.
      (3) Cross references
          (A) For treatment of certain rehabilitation expenditures as
        separate new buildings, see subsection (e).
          (B) For determination of applicable percentage for increases
        in qualified basis after the 1st year of the credit period, see
        subsection (f)(3).
          (C) For authority of housing credit agency to limit
        applicable percentage and qualified basis which may be taken
        into account under this section with respect to any building,
        see subsection (h)(7).
    (c) Qualified basis; qualified low-income building
      For purposes of this section -
      (1) Qualified basis
        (A) Determination
          The qualified basis of any qualified low-income building for
        any taxable year is an amount equal to -
            (i) the applicable fraction (determined as of the close of
          such taxable year) of
            (ii) the eligible basis of such building (determined under
          subsection (d)(5)).
        (B) Applicable fraction
          For purposes of subparagraph (A), the term ''applicable
        fraction'' means the smaller of the unit fraction or the floor
        space fraction.
        (C) Unit fraction
          For purposes of subparagraph (B), the term ''unit fraction''
        means the fraction -
            (i) the numerator of which is the number of low-income
          units in the building, and
            (ii) the denominator of which is the number of residential
          rental units (whether or not occupied) in such building.
        (D) Floor space fraction
          For purposes of subparagraph (B), the term ''floor space
        fraction'' means the fraction -
            (i) the numerator of which is the total floor space of the
          low-income units in such building, and
            (ii) the denominator of which is the total floor space of
          the residential rental units (whether or not occupied) in
          such building.
        (E) Qualified basis to include portion of building used to
            provide supportive services for homeless
          In the case of a qualified low-income building described in
        subsection (i)(3)(B)(iii), the qualified basis of such building
        for any taxable year shall be increased by the lesser of -
            (i) so much of the eligible basis of such building as is
          used throughout the year to provide supportive services
          designed to assist tenants in locating and retaining
          permanent housing, or
            (ii) 20 percent of the qualified basis of such building
          (determined without regard to this subparagraph).
      (2) Qualified low-income building
        The term ''qualified low-income building'' means any building -
          (A) which is part of a qualified low-income housing project
        at all times during the period -
            (i) beginning on the 1st day in the compliance period on
          which such building is part of such a project, and
            (ii) ending on the last day of the compliance period with
          respect to such building, and
          (B) to which the amendments made by section 201(a) of the Tax
        Reform Act of 1986 apply.
      Such term does not include any building with respect to which
      moderate rehabilitation assistance is provided, at any time
      during the compliance period, under section 8(e)(2) (FOOTNOTE 1)
      of the United States Housing Act of 1937 (other than assistance
      under the McKinney-Vento Homeless Assistance Act (as in effect on
      the date of the enactment of this sentence)).
       (FOOTNOTE 1) See References in Text note below.
    (d) Eligible basis
      For purposes of this section -
      (1) New buildings
        The eligible basis of a new building is its adjusted basis as
      of the close of the 1st taxable year of the credit period.
      (2) Existing buildings
        (A) In general
          The eligible basis of an existing building is -
            (i) in the case of a building which meets the requirements
          of subparagraph (B), its adjusted basis as of the close of
          the 1st taxable year of the credit period, and
            (ii) zero in any other case.
        (B) Requirements
          A building meets the requirements of this subparagraph if -
            (i) the building is acquired by purchase (as defined in
          section 179(d)(2)),
            (ii) there is a period of at least 10 years between the
          date of its acquisition by the taxpayer and the later of -
              (I) the date the building was last placed in service, or
              (II) the date of the most recent nonqualified substantial
            improvement of the building,
            (iii) the building was not previously placed in service by
          the taxpayer or by any person who was a related person with
          respect to the taxpayer as of the time previously placed in
          service, and
            (iv) except as provided in subsection (f)(5), a credit is
          allowable under subsection (a) by reason of subsection (e)
          with respect to the building.
        (C) Adjusted basis
          For purposes of subparagraph (A), the adjusted basis of any
        building shall not include so much of the basis of such
        building as is determined by reference to the basis of other
        property held at any time by the person acquiring the building.
        (D) Special rules for subparagraph (B)
          (i) Nonqualified substantial improvement
            For purposes of subparagraph (B)(ii) -
            (I) In general
              The term ''nonqualified substantial improvement'' means
            any substantial improvement if section 167(k) (as in effect
            on the day before the date of the enactment of the Revenue
            Reconciliation Act of 1990) was elected with respect to
            such improvement or section 168 (as in effect on the day
            before the date of the enactment of the Tax Reform Act of
            1986) applied to such improvement.
            (II) Date of substantial improvement
              The date of a substantial improvement is the last day of
            the 24-month period referred to in subclause (III).
            (III) Substantial improvement
              The term ''substantial improvement'' means the
            improvements added to capital account with respect to the
            building during any 24-month period, but only if the sum of
            the amounts added to such account during such period equals
            or exceeds 25 percent of the adjusted basis of the building
            (determined without regard to paragraphs (2) and (3) of
            section 1016(a)) as of the 1st day of such period.
          (ii) Special rules for certain transfers
            For purposes of determining under subparagraph (B)(ii) when
          a building was last placed in service, there shall not be
          taken into account any placement in service -
              (I) in connection with the acquisition of the building in
            a transaction in which the basis of the building in the
            hands of the person acquiring it is determined in whole or
            in part by reference to the adjusted basis of such building
            in the hands of the person from whom acquired,
              (II) by a person whose basis in such building is
            determined under section 1014(a) (relating to property
            acquired from a decedent),
              (III) by any governmental unit or qualified nonprofit
            organization (as defined in subsection (h)(5)) if the
            requirements of subparagraph (B)(ii) are met with respect
            to the placement in service by such unit or organization
            and all the income from such property is exempt from
            Federal income taxation,
              (IV) by any person who acquired such building by
            foreclosure (or by instrument in lieu of foreclosure) of
            any purchase-money security interest held by such person if
            the requirements of subparagraph (B)(ii) are met with
            respect to the placement in service by such person and such
            building is resold within 12 months after the date such
            building is placed in service by such person after such
            foreclosure, or
              (V) of a single-family residence by any individual who
            owned and used such residence for no other purpose than as
            his principal residence.
          (iii) Related person, etc.
            (I) Application of section 179
              For purposes of subparagraph (B)(i), section 179(d) shall
            be applied by substituting ''10 percent'' for ''50
            percent'' in section (FOOTNOTE 2) 267(b) and 707(b) and in
            section 179(d)(7).
       (FOOTNOTE 2) So in original.  Probably should be ''sections''.
            (II) Related person
              For purposes of subparagraph (B)(iii), a person
            (hereinafter in this subclause referred to as the ''related
            person'') is related to any person if the related person
            bears a relationship to such person specified in section
            267(b) or 707(b)(1), or the related person and such person
            are engaged in trades or businesses under common control
            (within the meaning of subsections (a) and (b) of section
            52). For purposes of the preceding sentence, in applying
            section 267(b) or 707(b)(1), ''10 percent'' shall be
            substituted for ''50 percent''.
      (3) Eligible basis reduced where disproportionate standards for
          units
        (A) In general
          Except as provided in subparagraph (B), the eligible basis of
        any building shall be reduced by an amount equal to the portion
        of the adjusted basis of the building which is attributable to
        residential rental units in the building which are not
        low-income units and which are above the average quality
        standard of the low-income units in the building.
        (B) Exception where taxpayer elects to exclude excess costs
          (i) In general
            Subparagraph (A) shall not apply with respect to a
          residential rental unit in a building which is not a
          low-income unit if -
              (I) the excess described in clause (ii) with respect to
            such unit is not greater than 15 percent of the cost
            described in clause (ii)(II), and
              (II) the taxpayer elects to exclude from the eligible
            basis of such building the excess described in clause (ii)
            with respect to such unit.
          (ii) Excess
            The excess described in this clause with respect to any
          unit is the excess of -
              (I) the cost of such unit, over
              (II) the amount which would be the cost of such unit if
            the average cost per square foot of low-income units in the
            building were substituted for the cost per square foot of
            such unit.
         The Secretary may by regulation provide for the determination
          of the excess under this clause on a basis other than square
          foot costs.
      (4) Special rules relating to determination of adjusted basis
        For purposes of this subsection -
        (A) In general
          Except as provided in subparagraphs (B) and (C), the adjusted
        basis of any building shall be determined without regard to the
        adjusted basis of any property which is not residential rental
        property.
        (B) Basis of property in common areas, etc., included
          The adjusted basis of any building shall be determined by
        taking into account the adjusted basis of property (of a
        character subject to the allowance for depreciation) used in
        common areas or provided as comparable amenities to all
        residential rental units in such building.
        (C) Inclusion of basis of property used to provide services for
            certain nontenants
          (i) In general
            The adjusted basis of any building located in a qualified
          census tract (as defined in paragraph (5)(C)) shall be
          determined by taking into account the adjusted basis of
          property (of a character subject to the allowance for
          depreciation and not otherwise taken into account) used
          throughout the taxable year in providing any community
          service facility.
          (ii) Limitation
            The increase in the adjusted basis of any building which is
          taken into account by reason of clause (i) shall not exceed
          10 percent of the eligible basis of the qualified low-income
          housing project of which it is a part.  For purposes of the
          preceding sentence, all community service facilities which
          are part of the same qualified low-income housing project
          shall be treated as one facility.
          (iii) Community service facility
            For purposes of this subparagraph, the term ''community
          service facility'' means any facility designed to serve
          primarily individuals whose income is 60 percent or less of
          area median income (within the meaning of subsection
          (g)(1)(B)).
        (D) No reduction for depreciation
          The adjusted basis of any building shall be determined
        without regard to paragraphs (2) and (3) of section 1016(a).
      (5) Special rules for determining eligible basis
        (A) Eligible basis reduced by Federal grants
          If, during any taxable year of the compliance period, a grant
        is made with respect to any building or the operation thereof
        and any portion of such grant is funded with Federal funds
        (whether or not includible in gross income), the eligible basis
        of such building for such taxable year and all succeeding
        taxable years shall be reduced by the portion of such grant
        which is so funded.
        (B) Eligible basis not to include expenditures where section
            167(k) elected
          The eligible basis of any building shall not include any
        portion of its adjusted basis which is attributable to amounts
        with respect to which an election is made under section 167(k)
        (as in effect on the day before the date of the enactment of
        the Revenue Reconciliation Act of 1990).
        (C) Increase in credit for buildings in high cost areas
          (i) In general
            In the case of any building located in a qualified census
          tract or difficult development area which is designated for
          purposes of this subparagraph -
              (I) in the case of a new building, the eligible basis of
            such building shall be 130 percent of such basis determined
            without regard to this subparagraph, and
              (II) in the case of an existing building, the
            rehabilitation expenditures taken into account under
            subsection (e) shall be 130 percent of such expenditures
            determined without regard to this subparagraph.
          (ii) Qualified census tract
            (I) In general
              The term ''qualified census tract'' means any census
            tract which is designated by the Secretary of Housing and
            Urban Development and, for the most recent year for which
            census data are available on household income in such
            tract, either in which 50 percent or more of the households
            have an income which is less than 60 percent of the area
            median gross income for such year or which has a poverty
            rate of at least 25 percent.  If the Secretary of Housing
            and Urban Development determines that sufficient data for
            any period are not available to apply this clause on the
            basis of census tracts, such Secretary shall apply this
            clause for such period on the basis of enumeration
            districts.
            (II) Limit on MSA's designated
              The portion of a metropolitan statistical area which may
            be designated for purposes of this subparagraph shall not
            exceed an area having 20 percent of the population of such
            metropolitan statistical area.
            (III) Determination of areas
              For purposes of this clause, each metropolitan
            statistical area shall be treated as a separate area and
            all nonmetropolitan areas in a State shall be treated as 1
            area.
          (iii) Difficult development areas
            (I) In general
              The term ''difficult development areas'' means any area
            designated by the Secretary of Housing and Urban
            Development as an area which has high construction, land,
            and utility costs relative to area median gross income.
            (II) Limit on areas designated
              The portions of metropolitan statistical areas which may
            be designated for purposes of this subparagraph shall not
            exceed an aggregate area having 20 percent of the
            population of such metropolitan statistical areas.  A
            comparable rule shall apply to nonmetropolitan areas.
          (iv) Special rules and definitions
            For purposes of this subparagraph -
              (I) population shall be determined on the basis of the
            most recent decennial census for which data are available,
              (II) area median gross income shall be determined in
            accordance with subsection (g)(4),
              (III) the term ''metropolitan statistical area'' has the
            same meaning as when used in section 143(k)(2)(B), and
              (IV) the term ''nonmetropolitan area'' means any county
            (or portion thereof) which is not within a metropolitan
            statistical area.
      (6) Credit allowable for certain federally-assisted buildings
          acquired during 10-year period described in paragraph
          (2)(B)(ii)
        (A) In general
          On application by the taxpayer, the Secretary (after
        consultation with the appropriate Federal official) may waive
        paragraph (2)(B)(ii) with respect to any federally-assisted
        building if the Secretary determines that such waiver is
        necessary -
            (i) to avert an assignment of the mortgage secured by
          property in the project (of which such building is a part) to
          the Department of Housing and Urban Development or the
          Farmers Home Administration, or
            (ii) to avert a claim against a Federal mortgage insurance
          fund (or such Department or Administration) with respect to a
          mortgage which is so secured.
        The preceding sentence shall not apply to any building
        described in paragraph (7)(B).
        (B) Federally-assisted building
          For purposes of subparagraph (A), the term
        ''federally-assisted building'' means any building which is
        substantially assisted, financed, or operated under -
            (i) section 8 of the United States Housing Act of 1937,
            (ii) section 221(d)(3) or 236 of the National Housing Act,
          or
            (iii) section 515 of the Housing Act of 1949,
        as such Acts are in effect on the date of the enactment of the
        Tax Reform Act of 1986.
        (C) Low-income buildings where mortgage may be prepaid
          A waiver may be granted under subparagraph (A) (without
        regard to any clause thereof) with respect to a
        federally-assisted building described in clause (ii) or (iii)
        of subparagraph (B) if -
            (i) the mortgage on such building is eligible for
          prepayment under subtitle B of the Emergency Low Income
          Housing Preservation Act of 1987 or under section 502(c) of
          the Housing Act of 1949 at any time within 1 year after the
          date of the application for such a waiver,
            (ii) the appropriate Federal official certifies to the
          Secretary that it is reasonable to expect that, if the waiver
          is not granted, such building will cease complying with its
          low-income occupancy requirements, and
            (iii) the eligibility to prepay such mortgage without the
          approval of the appropriate Federal official is waived by all
          persons who are so eligible and such waiver is binding on all
          successors of such persons.
        (D) Buildings acquired from insured depository institutions in
            default
          A waiver may be granted under subparagraph (A) (without
        regard to any clause thereof) with respect to any building
        acquired from an insured depository institution in default (as
        defined in section 3 of the Federal Deposit Insurance Act) or
        from a receiver or conservator of such an institution.
        (E) Appropriate Federal official
          For purposes of subparagraph (A), the term ''appropriate
        Federal official'' means -
            (i) the Secretary of Housing and Urban Development in the
          case of any building described in subparagraph (B) by reason
          of clause (i) or (ii) thereof, and
            (ii) the Secretary of Agriculture in the case of any
          building described in subparagraph (B) by reason of clause
          (iii) thereof.
      (7) Acquisition of building before end of prior compliance period
        (A) In general
          Under regulations prescribed by the Secretary, in the case of
        a building described in subparagraph (B) (or interest therein)
        which is acquired by the taxpayer -
            (i) paragraph (2)(B) shall not apply, but
            (ii) the credit allowable by reason of subsection (a) to
          the taxpayer for any period after such acquisition shall be
          equal to the amount of credit which would have been allowable
          under subsection (a) for such period to the prior owner
          referred to in subparagraph (B) had such owner not disposed
          of the building.
        (B) Description of building
          A building is described in this subparagraph if -
            (i) a credit was allowed by reason of subsection (a) to any
          prior owner of such building, and
            (ii) the taxpayer acquired such building before the end of
          the compliance period for such building with respect to such
          prior owner (determined without regard to any disposition by
          such prior owner).
    (e) Rehabilitation expenditures treated as separate new building
      (1) In general
        Rehabilitation expenditures paid or incurred by the taxpayer
      with respect to any building shall be treated for purposes of
      this section as a separate new building.
      (2) Rehabilitation expenditures
        For purposes of paragraph (1) -
        (A) In general
          The term ''rehabilitation expenditures'' means amounts
        chargeable to capital account and incurred for property (or
        additions or improvements to property) of a character subject
        to the allowance for depreciation in connection with the
        rehabilitation of a building.
        (B) Cost of acquisition, etc, (FOOTNOTE 3) not included
       (FOOTNOTE 3) So in original.  Probably should be ''etc.,''.
          Such term does not include the cost of acquiring any building
        (or interest therein) or any amount not permitted to be taken
        into account under paragraph (3) or (4) of subsection (d).
      (3) Minimum expenditures to qualify
        (A) In general
          Paragraph (1) shall apply to rehabilitation expenditures with
        respect to any building only if -
            (i) the expenditures are allocable to 1 or more low-income
          units or substantially benefit such units, and
            (ii) the amount of such expenditures during any 24-month
          period meets the requirements of whichever of the following
          subclauses requires the greater amount of such expenditures:
              (I) The requirement of this subclause is met if such
            amount is not less than 10 percent of the adjusted basis of
            the building (determined as of the 1st day of such period
            and without regard to paragraphs (2) and (3) of section
            1016(a)).
              (II) The requirement of this subclause is met if the
            qualified basis attributable to such amount, when divided
            by the number of low-income units in the building, is
            $3,000 or more.
        (B) Exception from 10 percent rehabilitation
          In the case of a building acquired by the taxpayer from a
        governmental unit, at the election of the taxpayer,
        subparagraph (A)(ii)(I) shall not apply and the credit under
        this section for such rehabilitation expenditures shall be
        determined using the percentage applicable under subsection
        (b)(2)(B)(ii).
        (C) Date of determination
          The determination under subparagraph (A) shall be made as of
        the close of the 1st taxable year in the credit period with
        respect to such expenditures.
      (4) Special rules
        For purposes of applying this section with respect to
      expenditures which are treated as a separate building by reason
      of this subsection -
          (A) such expenditures shall be treated as placed in service
        at the close of the 24-month period referred to in paragraph
        (3)(A), and
          (B) the applicable fraction under subsection (c)(1) shall be
        the applicable fraction for the building (without regard to
        paragraph (1)) with respect to which the expenditures were
        incurred.
      Nothing in subsection (d)(2) shall prevent a credit from being
      allowed by reason of this subsection.
      (5) No double counting
        Rehabilitation expenditures may, at the election of the
      taxpayer, be taken into account under this subsection or
      subsection (d)(2)(A)(i) but not under both such subsections.
      (6) Regulations to apply subsection with respect to group of
          units in building
        The Secretary may prescribe regulations, consistent with the
      purposes of this subsection, treating a group of units with
      respect to which rehabilitation expenditures are incurred as a
      separate new building.
    (f) Definition and special rules relating to credit period
      (1) Credit period defined
        For purposes of this section, the term ''credit period'' means,
      with respect to any building, the period of 10 taxable years
      beginning with -
          (A) the taxable year in which the building is placed in
        service, or
          (B) at the election of the taxpayer, the succeeding taxable
        year,
      but only if the building is a qualified low-income building as of
      the close of the 1st year of such period.  The election under
      subparagraph (B), once made, shall be irrevocable.
      (2) Special rule for 1st year of credit period
        (A) In general
          The credit allowable under subsection (a) with respect to any
        building for the 1st taxable year of the credit period shall be
        determined by substituting for the applicable fraction under
        subsection (c)(1) the fraction -
            (i) the numerator of which is the sum of the applicable
          fractions determined under subsection (c)(1) as of the close
          of each full month of such year during which such building
          was in service, and
            (ii) the denominator of which is 12.
        (B) Disallowed 1st year credit allowed in 11th year
          Any reduction by reason of subparagraph (A) in the credit
        allowable (without regard to subparagraph (A)) for the 1st
        taxable year of the credit period shall be allowable under
        subsection (a) for the 1st taxable year following the credit
        period.
      (3) Determination of applicable percentage with respect to
          increases in qualified basis after 1st year of credit period
        (A) In general
          In the case of any building which was a qualified low-income
        building as of the close of the 1st year of the credit period,
        if -
            (i) as of the close of any taxable year in the compliance
          period (after the 1st year of the credit period) the
          qualified basis of such building exceeds
            (ii) the qualified basis of such building as of the close
          of the 1st year of the credit period,
        the applicable percentage which shall apply under subsection
        (a) for the taxable year to such excess shall be the percentage
        equal to 2/3 of the applicable percentage which (after the
        application of subsection (h)) would but for this paragraph
        apply to such basis.
        (B) 1st year computation applies
          A rule similar to the rule of paragraph (2)(A) shall apply to
        any increase in qualified basis to which subparagraph (A)
        applies for the 1st year of such increase.
      (4) Dispositions of property
        If a building (or an interest therein) is disposed of during
      any year for which credit is allowable under subsection (a), such
      credit shall be allocated between the parties on the basis of the
      number of days during such year the building (or interest) was
      held by each.  In any such case, proper adjustments shall be made
      in the application of subsection (j).
      (5) Credit period for existing buildings not to begin before
          rehabilitation credit allowed
        (A) In general
          The credit period for an existing building shall not begin
        before the 1st taxable year of the credit period for
        rehabilitation expenditures with respect to the building.
        (B) Acquisition credit allowed for certain buildings not
            allowed a rehabilitation credit
          (i) In general
            In the case of a building described in clause (ii) -
              (I) subsection (d)(2)(B)(iv) shall not apply, and
              (II) the credit period for such building shall not begin
            before the taxable year which would be the 1st taxable year
            of the credit period for rehabilitation expenditures with
            respect to the building under the modifications described
            in clause (ii)(II).
          (ii) Building described
            A building is described in this clause if -
              (I) a waiver is granted under subsection (d)(6)(C) with
            respect to the acquisition of the building, and
              (II) a credit would be allowed for rehabilitation
            expenditures with respect to such building if subsection
            (e)(3)(A)(ii)(I) did not apply and if subsection
            (e)(3)(A)(ii)(II) were applied by substituting ''$2,000''
            for ''$3,000''.
    (g) Qualified low-income housing project
      For purposes of this section -
      (1) In general
        The term ''qualified low-income housing project'' means any
      project for residential rental property if the project meets the
      requirements of subparagraph (A) or (B) whichever is elected by
      the taxpayer:
        (A) 20-50 test
          The project meets the requirements of this subparagraph if 20
        percent or more of the residential units in such project are
        both rent-restricted and occupied by individuals whose income
        is 50 percent or less of area median gross income.
        (B) 40-60 test
          The project meets the requirements of this subparagraph if 40
        percent or more of the residential units in such project are
        both rent-restricted and occupied by individuals whose income
        is 60 percent or less of area median gross income.
      Any election under this paragraph, once made, shall be
      irrevocable.  For purposes of this paragraph, any property shall
      not be treated as failing to be residential rental property
      merely because part of the building in which such property is
      located is used for purposes other than residential rental
      purposes.
      (2) Rent-restricted units
        (A) In general
          For purposes of paragraph (1), a residential unit is
        rent-restricted if the gross rent with respect to such unit
        does not exceed 30 percent of the imputed income limitation
        applicable to such unit.  For purposes of the preceding
        sentence, the amount of the income limitation under paragraph
        (1) applicable for any period shall not be less than such
        limitation applicable for the earliest period the building
        (which contains the unit) was included in the determination of
        whether the project is a qualified low-income housing project.
        (B) Gross rent
          For purposes of subparagraph (A), gross rent -
            (i) does not include any payment under section 8 of the
          United States Housing Act of 1937 or any comparable rental
          assistance program (with respect to such unit or occupants
          thereof),
            (ii) includes any utility allowance determined by the
          Secretary after taking into account such determinations under
          section 8 of the United States Housing Act of 1937,
            (iii) does not include any fee for a supportive service
          which is paid to the owner of the unit (on the basis of the
          low-income status of the tenant of the unit) by any
          governmental program of assistance (or by an organization
          described in section 501(c)(3) and exempt from tax under
          section 501(a)) if such program (or organization) provides
          assistance for rent and the amount of assistance provided for
          rent is not separable from the amount of assistance provided
          for supportive services, and
            (iv) does not include any rental payment to the owner of
          the unit to the extent such owner pays an equivalent amount
          to the Farmers' Home Administration under section 515 of the
          Housing Act of 1949.
        For purposes of clause (iii), the term ''supportive service''
        means any service provided under a planned program of services
        designed to enable residents of a residential rental property
        to remain independent and avoid placement in a hospital,
        nursing home, or intermediate care facility for the mentally or
        physically handicapped.  In the case of a single-room occupancy
        unit or a building described in subsection (i)(3)(B)(iii), such
        term includes any service provided to assist tenants in
        locating and retaining permanent housing.
        (C) Imputed income limitation applicable to unit
          For purposes of this paragraph, the imputed income limitation
        applicable to a unit is the income limitation which would apply
        under paragraph (1) to individuals occupying the unit if the
        number of individuals occupying the unit were as follows:
            (i) In the case of a unit which does not have a separate
          bedroom, 1 individual.
            (ii) In the case of a unit which has 1 or more separate
          bedrooms, 1.5 individuals for each separate bedroom.
        In the case of a project with respect to which a credit is
        allowable by reason of this section and for which financing is
        provided by a bond described in section 142(a)(7), the imputed
        income limitation shall apply in lieu of the otherwise
        applicable income limitation for purposes of applying section
        142(d)(4)(B)(ii).
        (D) Treatment of units occupied by individuals whose incomes
            rise above limit
          (i) In general
            Except as provided in clause (ii), notwithstanding an
          increase in the income of the occupants of a low-income unit
          above the income limitation applicable under paragraph (1),
          such unit shall continue to be treated as a low-income unit
          if the income of such occupants initially met such income
          limitation and such unit continues to be rent-restricted.
          (ii) Next available unit must be rented to low-income tenant
              if income rises above 140 percent of income limit
            If the income of the occupants of the unit increases above
          140 percent of the income limitation applicable under
          paragraph (1), clause (i) shall cease to apply to such unit
          if any residential rental unit in the building (of a size
          comparable to, or smaller than, such unit) is occupied by a
          new resident whose income exceeds such income limitation.  In
          the case of a project described in section 142(d)(4)(B), the
          preceding sentence shall be applied by substituting ''170
          percent'' for ''140 percent'' and by substituting ''any
          low-income unit in the building is occupied by a new resident
          whose income exceeds 40 percent of area median gross income''
          for ''any residential unit in the building (of a size
          comparable to, or smaller than, such unit) is occupied by a
          new resident whose income exceeds such income limitation''.
        (E) Units where Federal rental assistance is reduced as
            tenant's income increases
          If the gross rent with respect to a residential unit exceeds
        the limitation under subparagraph (A) by reason of the fact
        that the income of the occupants thereof exceeds the income
        limitation applicable under paragraph (1), such unit shall,
        nevertheless, be treated as a rent-restricted unit for purposes
        of paragraph (1) if -
            (i) a Federal rental assistance payment described in
          subparagraph (B)(i) is made with respect to such unit or its
          occupants, and
            (ii) the sum of such payment and the gross rent with
          respect to such unit does not exceed the sum of the amount of
          such payment which would be made and the gross rent which
          would be payable with respect to such unit if -
              (I) the income of the occupants thereof did not exceed
            the income limitation applicable under paragraph (1), and
              (II) such units were rent-restricted within the meaning
            of subparagraph (A).
        The preceding sentence shall apply to any unit only if the
        result described in clause (ii) is required by Federal statute
        as of the date of the enactment of this subparagraph and as of
        the date the Federal rental assistance payment is made.
      (3) Date for meeting requirements
        (A) In general
          Except as otherwise provided in this paragraph, a building
        shall be treated as a qualified low-income building only if the
        project (of which such building is a part) meets the
        requirements of paragraph (1) not later than the close of the
        1st year of the credit period for such building.
        (B) Buildings which rely on later buildings for qualification
          (i) In general
            In determining whether a building (hereinafter in this
          subparagraph referred to as the ''prior building'') is a
          qualified low-income building, the taxpayer may take into
          account 1 or more additional buildings placed in service
          during the 12-month period described in subparagraph (A) with
          respect to the prior building only if the taxpayer elects to
          apply clause (ii) with respect to each additional building
          taken into account.
          (ii) Treatment of elected buildings
            In the case of a building which the taxpayer elects to take
          into account under clause (i), the period under subparagraph
          (A) for such building shall end at the close of the 12-month
          period applicable to the prior building.
          (iii) Date prior building is treated as placed in service
            For purposes of determining the credit period and the
          compliance period for the prior building, the prior building
          shall be treated for purposes of this section as placed in
          service on the most recent date any additional building
          elected by the taxpayer (with respect to such prior building)
          was placed in service.
        (C) Special rule
          A building -
            (i) other than the 1st building placed in service as part
          of a project, and
            (ii) other than a building which is placed in service
          during the 12-month period described in subparagraph (A) with
          respect to a prior building which becomes a qualified
          low-income building,
        shall in no event be treated as a qualified low-income building
        unless the project is a qualified low-income housing project
        (without regard to such building) on the date such building is
        placed in service.
        (D) Projects with more than 1 building must be identified
          For purposes of this section, a project shall be treated as
        consisting of only 1 building unless, before the close of the
        1st calendar year in the project period (as defined in
        subsection (h)(1)(F)(ii)), each building which is (or will be)
        part of such project is identified in such form and manner as
        the Secretary may provide.
      (4) Certain rules made applicable
        Paragraphs (2) (other than subparagraph (A) thereof), (3), (4),
      (5), (6), and (7) of section 142(d), and section 6652(j), shall
      apply for purposes of determining whether any project is a
      qualified low-income housing project and whether any unit is a
      low-income unit; except that, in applying such provisions for
      such purposes, the term ''gross rent'' shall have the meaning
      given such term by paragraph (2)(B) of this subsection.
      (5) Election to treat building after compliance period as not
          part of a project
        For purposes of this section, the taxpayer may elect to treat
      any building as not part of a qualified low-income housing
      project for any period beginning after the compliance period for
      such building.
      (6) Special rule where de minimis equity contribution
        Property shall not be treated as failing to be residential
      rental property for purposes of this section merely because the
      occupant of a residential unit in the project pays (on a
      voluntary basis) to the lessor a de minimis amount to be held
      toward the purchase by such occupant of a residential unit in
      such project if -
          (A) all amounts so paid are refunded to the occupant on the
        cessation of his occupancy of a unit in the project, and
          (B) the purchase of the unit is not permitted until after the
        close of the compliance period with respect to the building in
        which the unit is located.
      Any amount paid to the lessor as described in the preceding
      sentence shall be included in gross rent under paragraph (2) for
      purposes of determining whether the unit is rent- restricted.
      (7) Scattered site projects
        Buildings which would (but for their lack of proximity) be
      treated as a project for purposes of this section shall be so
      treated if all of the dwelling units in each of the buildings are
      rent-restricted (within the meaning of paragraph (2)) residential
      rental units.
      (8) Waiver of certain de minimis errors and recertifications
        On application by the taxpayer, the Secretary may waive -
          (A) any recapture under subsection (j) in the case of any de
        minimis error in complying with paragraph (1), or
          (B) any annual recertification of tenant income for purposes
        of this subsection, if the entire building is occupied by
        low-income tenants.
    (h) Limitation on aggregate credit allowable with respect to
        projects located in a State
      (1) Credit may not exceed credit amount allocated to building
        (A) In general
          The amount of the credit determined under this section for
        any taxable year with respect to any building shall not exceed
        the housing credit dollar amount allocated to such building
        under this subsection.
        (B) Time for making allocation
          Except in the case of an allocation which meets the
        requirements of subparagraph (C), (D), (E), or (F), an
        allocation shall be taken into account under subparagraph (A)
        only if it is made not later than the close of the calendar
        year in which the building is placed in service.
        (C) Exception where binding commitment
          An allocation meets the requirements of this subparagraph if
        there is a binding commitment (not later than the close of the
        calendar year in which the building is placed in service) by
        the housing credit agency to allocate a specified housing
        credit dollar amount to such building beginning in a specified
        later taxable year.
        (D) Exception where increase in qualified basis
          (i) In general
            An allocation meets the requirements of this subparagraph
          if such allocation is made not later than the close of the
          calendar year in which ends the taxable year to which it will
          1st apply but only to the extent the amount of such
          allocation does not exceed the limitation under clause (ii).
          (ii) Limitation
            The limitation under this clause is the amount of credit
          allowable under this section (without regard to this
          subsection) for a taxable year with respect to an increase in
          the qualified basis of the building equal to the excess of -
              (I) the qualified basis of such building as of the close
            of the 1st taxable year to which such allocation will
            apply, over
              (II) the qualified basis of such building as of the close
            of the 1st taxable year to which the most recent prior
            housing credit allocation with respect to such building
            applied.
          (iii) Housing credit dollar amount reduced by full allocation
            Notwithstanding clause (i), the full amount of the
          allocation shall be taken into account under paragraph (2).
        (E) Exception where 10 percent of cost incurred
          (i) In general
            An allocation meets the requirements of this subparagraph
          if such allocation is made with respect to a qualified
          building which is placed in service not later than the close
          of the second calendar year following the calendar year in
          which the allocation is made.
          (ii) Qualified building
            For purposes of clause (i), the term ''qualified building''
          means any building which is part of a project if the
          taxpayer's basis in such project (as of the later of the date
          which is 6 months after the date that the allocation was made
          or the close of the calendar year in which the allocation is
          made) is more than 10 percent of the taxpayer's reasonably
          expected basis in such project (as of the close of the second
          calendar year referred to in clause (i)). Such term does not
          include any existing building unless a credit is allowable
          under subsection (e) for rehabilitation expenditures paid or
          incurred by the taxpayer with respect to such building for a
          taxable year ending during the second calendar year referred
          to in clause (i) or the prior taxable year.
        (F) Allocation of credit on a project basis
          (i) In general
            In the case of a project which includes (or will include)
          more than 1 building, an allocation meets the requirements of
          this subparagraph if -
              (I) the allocation is made to the project for a calendar
            year during the project period,
              (II) the allocation only applies to buildings placed in
            service during or after the calendar year for which the
            allocation is made, and
              (III) the portion of such allocation which is allocated
            to any building in such project is specified not later than
            the close of the calendar year in which the building is
            placed in service.
          (ii) Project period
            For purposes of clause (i), the term ''project period''
          means the period -
              (I) beginning with the 1st calendar year for which an
            allocation may be made for the 1st building placed in
            service as part of such project, and
              (II) ending with the calendar year the last building is
            placed in service as part of such project.
      (2) Allocated credit amount to apply to all taxable years ending
          during or after credit allocation year
        Any housing credit dollar amount allocated to any building for
      any calendar year -
          (A) shall apply to such building for all taxable years in the
        compliance period ending during or after such calendar year,
        and
          (B) shall reduce the aggregate housing credit dollar amount
        of the allocating agency only for such calendar year.
      (3) Housing credit dollar amount for agencies
        (A) In general
          The aggregate housing credit dollar amount which a housing
        credit agency may allocate for any calendar year is the portion
        of the State housing credit ceiling allocated under this
        paragraph for such calendar year to such agency.
        (B) State ceiling initially allocated to State housing credit
            agencies
          Except as provided in subparagraphs (D) and (E), the State
        housing 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.
        (C) State housing credit ceiling
          The State housing credit ceiling applicable to any State for
        any calendar year shall be an amount equal to the sum of -
            (i) the unused State housing credit ceiling (if any) of
          such State for the preceding calendar year,
            (ii) the greater of -
              (I) $1.75 ($1.50 for 2001) multiplied by the State
            population, or
              (II) $2,000,000,
            (iii) the amount of State housing credit ceiling returned
          in the calendar year, plus
            (iv) the amount (if any) allocated under subparagraph (D)
          to such State by the Secretary.
        For purposes of clause (i), the unused State housing credit
        ceiling for any calendar year is the excess (if any) of the sum
        of the amounts described in clauses (ii) through (iv) over the
        aggregate housing credit dollar amount allocated for such
        year.  For purposes of clause (iii), the amount of State
        housing credit ceiling returned in the calendar year equals the
        housing credit dollar amount previously allocated within the
        State to any project which fails to meet the 10 percent test
        under paragraph (1)(E)(ii) on a date after the close of the
        calendar year in which the allocation was made or which does
        not become a qualified low-income housing project within the
        period required by this section or the terms of the allocation
        or to any project with respect to which an allocation is
        cancelled by mutual consent of the housing credit agency and
        the allocation recipient.
        (D) Unused housing credit carryovers allocated among certain
            States
          (i) In general
            The unused housing credit carryover of a State for any
          calendar year shall be assigned to the Secretary for
          allocation among qualified States for the succeeding calendar
          year.
          (ii) Unused housing credit carryover
            For purposes of this subparagraph, the unused housing
          credit carryover of a State for any calendar year is the
          excess (if any) of -
              (I) the unused State housing credit ceiling for the year
            preceding such year, over
              (II) the aggregate housing credit dollar amount allocated
            for such year.
          (iii) Formula for allocation of unused housing credit
              carryovers among qualified States
            The amount allocated under this subparagraph to a qualified
          State for any calendar year shall be the amount determined by
          the Secretary to bear the same ratio to the aggregate unused
          housing credit carryovers of all States for the preceding
          calendar year as such State's population for the calendar
          year bears to the population of all qualified States for the
          calendar year.  For purposes of the preceding sentence,
          population shall be determined in accordance with section
          146(j).
          (iv) Qualified State
            For purposes of this subparagraph, the term ''qualified
          State'' means, with respect to a calendar year, any State -
              (I) which allocated its entire State housing credit
            ceiling for the preceding calendar year, and
              (II) for which a request is made (not later than May 1 of
            the calendar year) to receive an allocation under clause
            (iii).
        (E) Special rule for States with constitutional home rule
            cities
          For purposes of this subsection -
          (i) In general
            The aggregate housing credit dollar amount for any
          constitutional home rule city for any calendar year shall be
          an amount which bears the same ratio to the State housing
          credit ceiling for such calendar year as -
              (I) the population of such city, bears to
              (II) the population of the entire State.
          (ii) Coordination with other allocations
            In the case of any State which contains 1 or more
          constitutional home rule cities, for purposes of applying
          this paragraph with respect to housing credit agencies in
          such State other than constitutional home rule cities, the
          State housing credit ceiling for any calendar year shall be
          reduced by the aggregate housing credit dollar amounts
          determined for such year for all constitutional home rule
          cities in such State.
          (iii) Constitutional home rule city
            For purposes of this paragraph, the term ''constitutional
          home rule city'' has the meaning given such term by section
          146(d)(3)(C).
        (F) State may provide for different allocation
          Rules similar to the rules of section 146(e) (other than
        paragraph (2)(B) thereof) shall apply for purposes of this
        paragraph.
        (G) Population
          For purposes of this paragraph, population shall be
        determined in accordance with section 146(j).
        (H) Cost-of-living adjustment
          (i) In general
            In the case of a calendar year after 2002, the $2,000,000
          and $1.75 amounts in subparagraph (C) shall each be increased
          by an amount equal to -
              (I) such dollar amount, multiplied by
              (II) the cost-of-living adjustment determined under
            section 1(f)(3) for such calendar year by substituting
            ''calendar year 2001'' for ''calendar year 1992'' in
            subparagraph (B) thereof.
          (ii) Rounding
            (I) In the case of the $2,000,000 amount, any increase
          under clause (i) which is not a multiple of $5,000 shall be
          rounded to the next lowest multiple of $5,000.
            (II) In the case of the $1.75 amount, any increase under
          clause (i) which is not a multiple of 5 cents shall be
          rounded to the next lowest multiple of 5 cents.
      (4) Credit for buildings financed by tax-exempt bonds subject to
          volume cap not taken into account
        (A) In general
          Paragraph (1) shall not apply to the portion of any credit
        allowable under subsection (a) which is attributable to
        eligible basis financed by any obligation the interest on which
        is exempt from tax under section 103 if -
            (i) such obligation is taken into account under section
          146, and
            (ii) principal payments on such financing are applied
          within a reasonable period to redeem obligations the proceeds
          of which were used to provide such financing.
        (B) Special rule where 50 percent or more of building is
            financed with tax-exempt bonds subject to volume cap
          For purposes of subparagraph (A), if 50 percent or more of
        the aggregate basis of any building and the land on which the
        building is located is financed by any obligation described in
        subparagraph (A), paragraph (1) shall not apply to any portion
        of the credit allowable under subsection (a) with respect to
        such building.
      (5) Portion of State ceiling set-aside for certain projects
          involving qualified nonprofit organizations
        (A) In general
          Not more than 90 percent of the State housing credit ceiling
        for any State for any calendar year shall be allocated to
        projects other than qualified low-income housing projects
        described in subparagraph (B).
        (B) Projects involving qualified nonprofit organizations
          For purposes of subparagraph (A), a qualified low-income
        housing project is described in this subparagraph if a
        qualified nonprofit organization is to own an interest in the
        project (directly or through a partnership) and materially
        participate (within the meaning of section 469(h)) in the
        development and operation of the project throughout the
        compliance period.
        (C) Qualified nonprofit organization
          For purposes of this paragraph, the term ''qualified
        nonprofit organization'' means any organization if -
            (i) such organization is described in paragraph (3) or (4)
          of section 501(c) and is exempt from tax under section
          501(a),
            (ii) such organization is determined by the State housing
          credit agency not to be affiliated with or controlled by a
          for-profit organization; (FOOTNOTE 4) and
       (FOOTNOTE 4) So in original.  The semicolon probably should be a
    comma.
            (iii) 1 of the exempt purposes of such organization
          includes the fostering of low-income housing.
        (D) Treatment of certain subsidiaries
          (i) In general
            For purposes of this paragraph, a qualified nonprofit
          organization shall be treated as satisfying the ownership and
          material participation test of subparagraph (B) if any
          qualified corporation in which such organization holds stock
          satisfies such test.
          (ii) Qualified corporation
            For purposes of clause (i), the term ''qualified
          corporation'' means any corporation if 100 percent of the
          stock of such corporation is held by 1 or more qualified
          nonprofit organizations at all times during the period such
          corporation is in existence.
        (E) State may not override set-aside
          Nothing in subparagraph (F) of paragraph (3) shall be
        construed to permit a State not to comply with subparagraph (A)
        of this paragraph.
      (6) Buildings eligible for credit only if minimum long-term
          commitment to low-income housing
        (A) In general
          No credit shall be allowed by reason of this section with
        respect to any building for the taxable year unless an extended
        low-income housing commitment is in effect as of the end of
        such taxable year.
        (B) Extended low-income housing commitment
          For purposes of this paragraph, the term ''extended
        low-income housing commitment'' means any agreement between the
        taxpayer and the housing credit agency -
            (i) which requires that the applicable fraction (as defined
          in subsection (c)(1)) for the building for each taxable year
          in the extended use period will not be less than the
          applicable fraction specified in such agreement and which
          prohibits the actions described in subclauses (I) and (II) of
          subparagraph (E)(ii),
            (ii) which allows individuals who meet the income
          limitation applicable to the building under subsection (g)
          (whether prospective, present, or former occupants of the
          building) the right to enforce in any State court the
          requirement and prohibitions of clause (i),
            (iii) which prohibits the disposition to any person of any
          portion of the building to which such agreement applies
          unless all of the building to which such agreement applies is
          disposed of to such person,
            (iv) which prohibits the refusal to lease to a holder of a
          voucher or certificate of eligibility under section 8 of the
          United States Housing Act of 1937 because of the status of
          the prospective tenant as such a holder,
            (v) which is binding on all successors of the taxpayer, and
            (vi) which, with respect to the property, is recorded
          pursuant to State law as a restrictive covenant.
        (C) Allocation of credit may not exceed amount necessary to
            support commitment
          (i) In general
            The housing credit dollar amount allocated to any building
          may not exceed the amount necessary to support the applicable
          fraction specified in the extended low-income housing
          commitment for such building, including any increase in such
          fraction pursuant to the application of subsection (f)(3) if
          such increase is reflected in an amended low-income housing
          commitment.
          (ii) Buildings financed by tax-exempt bonds
            If paragraph (4) applies to any building the amount of
          credit allowed in any taxable year may not exceed the amount
          necessary to support the applicable fraction specified in the
          extended low-income housing commitment for such building.
          Such commitment may be amended to increase such fraction.
        (D) Extended use period
          For purposes of this paragraph, the term ''extended use
        period'' means the period -
            (i) beginning on the 1st day in the compliance period on
          which such building is part of a qualified low-income housing
          project, and
            (ii) ending on the later of -
              (I) the date specified by such agency in such agreement,
            or
              (II) the date which is 15 years after the close of the
            compliance period.
        (E) Exceptions if foreclosure or if no buyer willing to
            maintain low-income status
          (i) In general
            The extended use period for any building shall terminate -
              (I) on the date the building is acquired by foreclosure
            (or instrument in lieu of foreclosure) unless the Secretary
            determines that such acquisition is part of an arrangement
            with the taxpayer a purpose of which is to terminate such
            period, or
              (II) on the last day of the period specified in
            subparagraph (I) if the housing credit agency is unable to
            present during such period a qualified contract for the
            acquisition of the low-income portion of the building by
            any person who will continue to operate such portion as a
            qualified low-income building.
         Subclause (II) shall not apply to the extent more stringent
          requirements are provided in the agreement or in State law.
          (ii) Eviction, etc. of existing low-income tenants not
              permitted
            The termination of an extended use period under clause (i)
          shall not be construed to permit before the close of the
          3-year period following such termination -
              (I) the eviction or the termination of tenancy (other
            than for good cause) of an existing tenant of any
            low-income unit, or
              (II) any increase in the gross rent with respect to such
            unit not otherwise permitted under this section.
        (F) Qualified contract
          For purposes of subparagraph (E), the term ''qualified
        contract'' means a bona fide contract to acquire (within a
        reasonable period after the contract is entered into) the
        nonlow-income portion of the building for fair market value and
        the low-income portion of the building for an amount not less
        than the applicable fraction (specified in the extended
        low-income housing commitment) of -
            (i) the sum of -
              (I) the outstanding indebtedness secured by, or with
            respect to, the building,
              (II) the adjusted investor equity in the building, plus
              (III) other capital contributions not reflected in the
            amounts described in subclause (I) or (II), reduced by
            (ii) cash distributions from (or available for distribution
          from) the project.
        The Secretary shall prescribe such regulations as may be
        necessary or appropriate to carry out this paragraph, including
        regulations to prevent the manipulation of the amount
        determined under the preceding sentence.
        (G) Adjusted investor equity
          (i) In general
            For purposes of subparagraph (E), the term ''adjusted
          investor equity'' means, with respect to any calendar year,
          the aggregate amount of cash taxpayers invested with respect
          to the project increased by the amount equal to -
              (I) such amount, multiplied by
              (II) the cost-of-living adjustment for such calendar
            year, determined under section 1(f)(3) by substituting the
            base calendar year for ''calendar year 1987''.
         An amount shall be taken into account as an investment in the
          project only to the extent there was an obligation to invest
          such amount as of the beginning of the credit period and to
          the extent such amount is reflected in the adjusted basis of
          the project.
          (ii) Cost-of-living increases in excess of 5 percent not
              taken into account
            Under regulations prescribed by the Secretary, if the CPI
          for any calendar year (as defined in section 1(f)(4)) exceeds
          the CPI for the preceding calendar year by more than 5
          percent, the CPI for the base calendar year shall be
          increased such that such excess shall never be taken into
          account under clause (i).
          (iii) Base calendar year
            For purposes of this subparagraph, the term ''base calendar
          year'' means the calendar year with or within which the 1st
          taxable year of the credit period ends.
        (H) Low-income portion
          For purposes of this paragraph, the low-income portion of a
        building is the portion of such building equal to the
        applicable fraction specified in the extended low-income
        housing commitment for the building.
        (I) Period for finding buyer
          The period referred to in this subparagraph is the 1-year
        period beginning on the date (after the 14th year of the
        compliance period) the taxpayer submits a written request to
        the housing credit agency to find a person to acquire the
        taxpayer's interest in the low-income portion of the building.
        (J) Effect of noncompliance
          If, during a taxable year, there is a determination that an
        extended low-income housing agreement was not in effect as of
        the beginning of such year, such determination shall not apply
        to any period before such year and subparagraph (A) shall be
        applied without regard to such determination if the failure is
        corrected within 1 year from the date of the determination.
        (K) Projects which consist of more than 1 building
          The application of this paragraph to projects which consist
        of more than 1 building shall be made under regulations
        prescribed by the Secretary.
      (7) Special rules
        (A) Building must be located within jurisdiction of credit
            agency
          A housing credit agency may allocate its aggregate housing
        credit dollar amount only to buildings located in the
        jurisdiction of the governmental unit of which such agency is a
        part.
        (B) Agency allocations in excess of limit
          If the aggregate housing credit dollar amounts allocated by a
        housing credit agency for any calendar year exceed the portion
        of the State housing credit ceiling allocated to such agency
        for such calendar year, the housing credit dollar amounts so
        allocated shall be reduced (to the extent of such excess) for
        buildings in the reverse of the order in which the allocations
        of such amounts were made.
        (C) Credit reduced if allocated credit dollar amount is less
            than credit which would be allowable without regard to
            placed in service convention, etc.
          (i) In general
            The amount of the credit determined under this section with
          respect to any building shall not exceed the clause (ii)
          percentage of the amount of the credit which would (but for
          this subparagraph) be determined under this section with
          respect to such building.
          (ii) Determination of percentage
            For purposes of clause (i), the clause (ii) percentage with
          respect to any building is the percentage which -
              (I) the housing credit dollar amount allocated to such
            building bears to
              (II) the credit amount determined in accordance with
            clause (iii).
          (iii) Determination of credit amount
            The credit amount determined in accordance with this clause
          is the amount of the credit which would (but for this
          subparagraph) be determined under this section with respect
          to the building if -
              (I) this section were applied without regard to
            paragraphs (2)(A) and (3)(B) of subsection (f), and
              (II) subsection (f)(3)(A) were applied without regard to
            ''the percentage equal to 2/3 of''.
        (D) Housing credit agency to specify applicable percentage and
            maximum qualified basis
          In allocating a housing credit dollar amount to any building,
        the housing credit agency shall specify the applicable
        percentage and the maximum qualified basis which may be taken
        into account under this section with respect to such building.
        The applicable percentage and maximum qualified basis so
        specified shall not exceed the applicable percentage and
        qualified basis determined under this section without regard to
        this subsection.
      (8) Other definitions
        For purposes of this subsection -
        (A) Housing credit agency
          The term ''housing credit agency'' means any agency
        authorized to carry out this subsection.
        (B) Possessions treated as States
          The term ''State'' includes a possession of the United
        States.
    (i) Definitions and special rules
      For purposes of this section -
      (1) Compliance period
        The term ''compliance period'' means, with respect to any
      building, the period of 15 taxable years beginning with the 1st
      taxable year of the credit period with respect thereto.
      (2) Determination of whether building is federally subsidized
        (A) In general
          Except as otherwise provided in this paragraph, for purposes
        of subsection (b)(1), a new building shall be treated as
        federally subsidized for any taxable year if, at any time
        during such taxable year or any prior taxable year, there is or
        was outstanding any obligation the interest on which is exempt
        from tax under section 103, or any below market Federal loan,
        the proceeds of which are or were used (directly or indirectly)
        with respect to such building or the operation thereof.
        (B) Election to reduce eligible basis by balance of loan or
            proceeds of obligations
          A loan or tax-exempt obligation shall not be taken into
        account under subparagraph (A) if the taxpayer elects to
        exclude from the eligible basis of the building for purposes of
        subsection (d) -
            (i) in the case of a loan, the principal amount of such
          loan, and
            (ii) in the case of a tax-exempt obligation, the proceeds
          of such obligation.
        (C) Special rule for subsidized construction financing
          Subparagraph (A) shall not apply to any tax-exempt obligation
        or below market Federal loan used to provide construction
        financing for any building if -
            (i) such obligation or loan (when issued or made)
          identified the building for which the proceeds of such
          obligation or loan would be used, and
            (ii) such obligation is redeemed, and such loan is repaid,
          before such building is placed in service.
        (D) Below market Federal loan
          For purposes of this paragraph, the term ''below market
        Federal loan'' means any loan funded in whole or in part with
        Federal funds if the interest rate payable on such loan is less
        than the applicable Federal rate in effect under section
        1274(d)(1) (as of the date on which the loan was made).  Such
        term shall not include any loan which would be a below market
        Federal loan solely by reason of assistance provided under
        section 106, 107, or 108 of the Housing and Community
        Development Act of 1974 (as in effect on the date of the
        enactment of this sentence).
        (E) Buildings receiving HOME assistance or Native American
            housing assistance
          (i) In general
            Assistance provided under the HOME Investment Partnerships
          Act (as in effect on the date of the enactment of this
          subparagraph) or the Native American Housing Assistance and
          Self-Determination Act of 1996 (25 U.S.C. 4101 et seq.) (as
          in effect on October 1, 1997) with respect to any building
          shall not be taken into account under subparagraph (D) if 40
          percent or more of the residential units in the building are
          occupied by individuals whose income is 50 percent or less of
          area median gross income.  Subsection (d)(5)(C) shall not
          apply to any building to which the preceding sentence
          applies.
          (ii) Special rule for certain high-cost housing areas
            In the case of a building located in a city described in
          section 142(d)(6), clause (i) shall be applied by
          substituting ''25 percent'' for ''40 percent''.
      (3) Low-income unit
        (A) In general
          The term ''low-income unit'' means any unit in a building if
        -
            (i) such unit is rent-restricted (as defined in subsection
          (g)(2)), and
            (ii) the individuals occupying such unit meet the income
          limitation applicable under subsection (g)(1) to the project
          of which such building is a part.
        (B) Exceptions
          (i) In general
            A unit shall not be treated as a low-income unit unless the
          unit is suitable for occupancy and used other than on a
          transient basis.
          (ii) Suitability for occupancy
            For purposes of clause (i), the suitability of a unit for
          occupancy shall be determined under regulations prescribed by
          the Secretary taking into account local health, safety, and
          building codes.
          (iii) Transitional housing for homeless
            For purposes of clause (i), a unit shall be considered to
          be used other than on a transient basis if the unit contains
          sleeping accommodations and kitchen and bathroom facilities
          and is located in a building -
              (I) which is used exclusively to facilitate the
            transition of homeless individuals (within the meaning of
            section 103 of the McKinney-Vento Homeless Assistance Act
            (42 U.S.C. 11302), as in effect on the date of the
            enactment of this clause) to independent living within 24
            months, and
              (II) in which a governmental entity or qualified
            nonprofit organization (as defined in subsection (h)(5))
            provides such individuals with temporary housing and
            supportive services designed to assist such individuals in
            locating and retaining permanent housing.
          (iv) Single-room occupancy units
            For purposes of clause (i), a single-room occupancy unit
          shall not be treated as used on a transient basis merely
          because it is rented on a month-by-month basis.
        (C) Special rule for buildings having 4 or fewer units
          In the case of any building which has 4 or fewer residential
        rental units, no unit in such building shall be treated as a
        low-income unit if the units in such building are owned by -
            (i) any individual who occupies a residential unit in such
          building, or
            (ii) any person who is related (as defined in subsection
          (d)(2)(D)(iii)) to such individual.
        (D) Certain students not to disqualify unit
          A unit shall not fail to be treated as a low-income unit
        merely because it is occupied -
            (i) by an individual who is -
              (I) single parents and their 
            children and such parents are not 
            dependents (as defined in section 152, 
            determined without regard to subsections 
            (b)(1), (b)(2), and (d)(1)(B) thereof) 
            of another individual and such children 
            are not dependents (as so defined) of 
            another individual other than a parent 
            of such children, or
              (II) enrolled in a job training program receiving
            assistance under the Job Training Partnership Act or under
            other similar Federal, State, or local laws, or
            (ii) entirely by full-time students if such students are -
              (I) single parents and their children and such parents
            and children are not dependents (as defined in section 152, 
            determined without regard to subsections (b)(1), (b)(2), and 
           (d)(1)(B) thereof) of another individual, or
              (II) married and file a joint return.
        (E) Owner-occupied buildings having 4 or fewer units eligible
            for credit where development plan
          (i) In general
            Subparagraph (C) shall not apply to the acquisition or
          rehabilitation of a building pursuant to a development plan
          of action sponsored by a State or local government or a
          qualified nonprofit organization (as defined in subsection
          (h)(5)(C)).
          (ii) Limitation on credit
            In the case of a building to which clause (i) applies, the
          applicable fraction shall not exceed 80 percent of the unit
          fraction.
          (iii) Certain unrented units treated as owner-occupied
            In the case of a building to which clause (i) applies, any
          unit which is not rented for 90 days or more shall be treated
          as occupied by the owner of the building as of the 1st day it
          is not rented.
      (4) New building
        The term ''new building'' means a building the original use of
      which begins with the taxpayer.
      (5) Existing building
        The term ''existing building'' means any building which is not
      a new building.
      (6) Application to estates and trusts
        In the case of an estate or trust, the amount of the credit
      determined under subsection (a) and any increase in tax under
      subsection (j) shall be apportioned between the estate or trust
      and the beneficiaries on the basis of the income of the estate or
      trust allocable to each.
      (7) Impact of tenant's right of 1st refusal to acquire property
        (A) In general
          No Federal income tax benefit shall fail to be allowable to
        the taxpayer with respect to any qualified low-income building
        merely by reason of a right of 1st refusal held by the tenants
        (in cooperative form or otherwise) or resident management
        corporation of such building or by a qualified nonprofit
        organization (as defined in subsection (h)(5)(C)) or government
        agency to purchase the property after the close of the
        compliance period for a price which is not less than the
        minimum purchase price determined under subparagraph (B).
        (B) Minimum purchase price
          For purposes of subparagraph (A), the minimum purchase price
        under this subparagraph is an amount equal to the sum of -
            (i) the principal amount of outstanding indebtedness
          secured by the building (other than indebtedness incurred
          within the 5-year period ending on the date of the sale to
          the tenants), and
            (ii) all Federal, State, and local taxes attributable to
          such sale.
        Except in the case of Federal income taxes, there shall not be
        taken into account under clause (ii) any additional tax
        attributable to the application of clause (ii).
    (j) Recapture of credit
      (1) In general
        If -
          (A) as of the close of any taxable year in the compliance
        period, the amount of the qualified basis of any building with
        respect to the taxpayer is less than
          (B) the amount of such basis as of the close of the preceding
        taxable year,
      then the taxpayer's tax under this chapter for the taxable year
      shall be increased by the credit recapture amount.
      (2) Credit recapture amount
        For purposes of paragraph (1), the credit recapture amount is
      an amount equal to the sum of -
          (A) the aggregate decrease in the credits allowed to the
        taxpayer under section 38 for all prior taxable years which
        would have resulted if the accelerated portion of the credit
        allowable by reason of this section were not allowed for all
        prior taxable years with respect to the excess of the amount
        described in paragraph (1)(B) over the amount described in
        paragraph (1)(A), plus
          (B) interest at the overpayment rate established under
        section 6621 on the amount determined under subparagraph (A)
        for each prior taxable year for the period beginning on the due
        date for filing the return for the prior taxable year involved.
      No deduction shall be allowed under this chapter for interest
      described in subparagraph (B).
      (3) Accelerated portion of credit
        For purposes of paragraph (2), the accelerated portion of the
      credit for the prior taxable years with respect to any amount of
      basis is the excess of -
          (A) the aggregate credit allowed by reason of this section
        (without regard to this subsection) for such years with respect
        to such basis, over
          (B) the aggregate credit which would be allowable by reason
        of this section for such years with respect to such basis if
        the aggregate credit which would (but for this subsection) have
        been allowable for the entire compliance period were allowable
        ratably over 15 years.
      (4) Special rules
        (A) Tax benefit rule
          The tax for the taxable year shall be increased under
        paragraph (1) only with respect to credits allowed by reason of
        this section which were used to reduce tax liability.  In the
        case of credits not so used to reduce tax liability, the
        carryforwards and carrybacks under section 39 shall be
        appropriately adjusted.
        (B) Only basis for which credit allowed taken into account
          Qualified basis shall be taken into account under paragraph
        (1)(B) only to the extent such basis was taken into account in
        determining the credit under subsection (a) for the preceding
        taxable year referred to in such paragraph.
        (C) No recapture of additional credit allowable by reason of
            subsection (f)(3)
          Paragraph (1) shall apply to a decrease in qualified basis
        only to the extent such decrease exceeds the amount of
        qualified basis with respect to which a credit was allowable
        for the taxable year referred to in paragraph (1)(B) by reason
        of subsection (f)(3).
        (D) No credits against tax
          Any increase in tax under this subsection shall not be
        treated as a tax imposed by this chapter for purposes of
        determining the amount of any credit under this chapter.
        (E) No recapture by reason of casualty loss
          The increase in tax under this subsection shall not apply to
        a reduction in qualified basis by reason of a casualty loss to
        the extent such loss is restored by reconstruction or
        replacement within a reasonable period established by the
        Secretary.
        (F) No recapture where de minimis changes in floor space
          The Secretary may provide that the increase in tax under this
        subsection shall not apply with respect to any building if -
            (i) such increase results from a de minimis change in the
          floor space fraction under subsection (c)(1), and
            (ii) the building is a qualified low-income building after
          such change.
      (5) Certain partnerships treated as the taxpayer
        (A) In general
          For purposes of applying this subsection to a partnership to
        which this paragraph applies -
            (i) such partnership shall be treated as the taxpayer to
          which the credit allowable under subsection (a) was allowed,
            (ii) the amount of such credit allowed shall be treated as
          the amount which would have been allowed to the partnership
          were such credit allowable to such partnership,
            (iii) paragraph (4)(A) shall not apply, and
            (iv) the amount of the increase in tax under this
          subsection for any taxable year shall be allocated among the
          partners of such partnership in the same manner as such
          partnership's taxable income for such year is allocated among
          such partners.
        (B) Partnerships to which paragraph applies
          This paragraph shall apply to any partnership which has 35 or
        more partners unless the partnership elects not to have this
        paragraph apply.
        (C) Special rules
          (i) Husband and wife treated as 1 partner
            For purposes of subparagraph (B)(i), a husband and wife
          (and their estates) shall be treated as 1 partner.
          (ii) Election irrevocable
            Any election under subparagraph (B), once made, shall be
          irrevocable.
      (6) No recapture on disposition of building (or interest therein)
          where bond posted
        In the case of a disposition of a building or an interest
      therein, the taxpayer shall be discharged from liability for any
      additional tax under this subsection by reason of such
      disposition if -
          (A) the taxpayer furnishes to the Secretary a bond in an
        amount satifactory (FOOTNOTE 5) to the Secretary and for the
        period required by the Secretary, and
       (FOOTNOTE 5) So in original.  Probably should be
    ''satisfactory''.
          (B) it is reasonably expected that such building will
        continue to be operated as a qualified low-income building for
        the remaining compliance period with respect to such building.
    (k) Application of at-risk rules
      For purposes of this section -
      (1) In general
        Except as otherwise provided in this subsection, rules similar
      to the rules of section 49(a)(1) (other than subparagraphs
      (D)(ii)(II) and (D)(iv)(I) thereof), section 49(a)(2), and
      section 49(b)(1) shall apply in determining the qualified basis
      of any building in the same manner as such sections apply in
      determining the credit base of property.
      (2) Special rules for determining qualified person
        For purposes of paragraph (1) -
        (A) In general
          If the requirements of subparagraphs (B), (C), and (D) are
        met with respect to any financing borrowed from a qualified
        nonprofit organization (as defined in subsection (h)(5)), the
        determination of whether such financing is qualified commercial
        financing with respect to any qualified low-income building
        shall be made without regard to whether such organization -
            (i) is actively and regularly engaged in the business of
          lending money, or
            (ii) is a person described in section 49(a)(1)(D)(iv)(II).
        (B) Financing secured by property
          The requirements of this subparagraph are met with respect to
        any financing if such financing is secured by the qualified
        low-income building, except that this subparagraph shall not
        apply in the case of a federally assisted building described in
        subsection (d)(6)(B) if -
            (i) a security interest in such building is not permitted
          by a Federal agency holding or insuring the mortgage secured
          by such building, and
            (ii) the proceeds from the financing (if any) are applied
          to acquire or improve such building.. (FOOTNOTE 6)
       (FOOTNOTE 6) So in original.
        (C) Portion of building attributable to financing
          The requirements of this subparagraph are met with respect to
        any financing for any taxable year in the compliance period if,
        as of the close of such taxable year, not more than 60 percent
        of the eligible basis of the qualified low-income building is
        attributable to such financing (reduced by the principal and
        interest of any governmental financing which is part of a
        wrap-around mortgage involving such financing).
        (D) Repayment of principal and interest
          The requirements of this subparagraph are met with respect to
        any financing if such financing is fully repaid on or before
        the earliest of -
            (i) the date on which such financing matures,
            (ii) the 90th day after the close of the compliance period
          with respect to the qualified low-income building, or
            (iii) the date of its refinancing or the sale of the
          building to which such financing relates.
        In the case of a qualified nonprofit organization which is not
        described in section 49(a)(1)(D)(iv)(II) with respect to a
        building, clause (ii) of this subparagraph shall be applied as
        if the date described therein were the 90th day after the
        earlier of the date the building ceases to be a qualified
        low-income building or the date which is 15 years after the
        close of a compliance period with respect thereto.
      (3) Present value of financing
        If the rate of interest on any financing described in paragraph
      (2)(A) is less than the rate which is 1 percentage point below
      the applicable Federal rate as of the time such financing is
      incurred, then the qualified basis (to which such financing
      relates) of the qualified low-income building shall be the
      present value of the amount of such financing, using as the
      discount rate such applicable Federal rate.  For purposes of the
      preceding sentence, the rate of interest on any financing shall
      be determined by treating interest to the extent of government
      subsidies as not payable.
      (4) Failure to fully repay
        (A) In general
          To the extent that the requirements of paragraph (2)(D) are
        not met, then the taxpayer's tax under this chapter for the
        taxable year in which such failure occurs shall be increased by
        an amount equal to the applicable portion of the credit under
        this section with respect to such building, increased by an
        amount of interest for the period -
            (i) beginning with the due date for the filing of the
          return of tax imposed by chapter 1 for the 1st taxable year
          for which such credit was allowable, and
            (ii) ending with the due date for the taxable year in which
          such failure occurs,
        determined by using the underpayment rate and method under
        section 6621.
        (B) Applicable portion
          For purposes of subparagraph (A), the term ''applicable
        portion'' means the aggregate decrease in the credits allowed
        to a taxpayer under section 38 for all prior taxable years
        which would have resulted if the eligible basis of the building
        were reduced by the amount of financing which does not meet
        requirements of paragraph (2)(D).
        (C) Certain rules to apply
          Rules similar to the rules of subparagraphs (A) and (D) of
        subsection (j)(4) shall apply for purposes of this subsection.
    (l) Certifications and other reports to Secretary
      (1) Certification with respect to 1st year of credit period
        Following the close of the 1st taxable year in the credit
      period with respect to any qualified low-income building, the
      taxpayer shall certify to the Secretary (at such time and in such
      form and in such manner as the Secretary prescribes) -
          (A) the taxable year, and calendar year, in which such
        building was placed in service,
          (B) the adjusted basis and eligible basis of such building as
        of the close of the 1st year of the credit period,
          (C) the maximum applicable percentage and qualified basis
        permitted to be taken into account by the appropriate housing
        credit agency under subsection (h),
          (D) the election made under subsection (g) with respect to
        the qualified low-income housing project of which such building
        is a part, and
          (E) such other information as the Secretary may require.
      In the case of a failure to make the certification required by
      the preceding sentence on the date prescribed therefor, unless it
      is shown that such failure is due to reasonable cause and not to
      willful neglect, no credit shall be allowable by reason of
      subsection (a) with respect to such building for any taxable year
      ending before such certification is made.
      (2) Annual reports to the Secretary
        The Secretary may require taxpayers to submit an information
      return (at such time and in such form and manner as the Secretary
      prescribes) for each taxable year setting forth -
          (A) the qualified basis for the taxable year of each
        qualified low-income building of the taxpayer,
          (B) the information described in paragraph (1)(C) for the
        taxable year, and
          (C) such other information as the Secretary may require.
      The penalty under section 6652(j) shall apply to any failure to
      submit the return required by the Secretary under the preceding
      sentence on the date prescribed therefor.
      (3) Annual reports from housing credit agencies
        Each agency which allocates any housing credit amount to any
      building for any calendar year shall submit to the Secretary (at
      such time and in such manner as the Secretary shall prescribe) an
      annual report specifying -
          (A) the amount of housing credit amount allocated to each
        building for such year,
          (B) sufficient information to identify each such building and
        the taxpayer with respect thereto, and
          (C) such other information as the Secretary may require.
      The penalty under section 6652(j) shall apply to any failure to
      submit the report required by the preceding sentence on the date
      prescribed therefor.
    (m) Responsibilities of housing credit agencies
      (1) Plans for allocation of credit among projects
        (A) In general
          Notwithstanding any other provision of this section, the
        housing credit dollar amount with respect to any building shall
        be zero unless -
            (i) such amount was allocated pursuant to a qualified
          allocation plan of the housing credit agency which is
          approved by the governmental unit (in accordance with rules
          similar to the rules of section 147(f)(2) (other than
          subparagraph (B)(ii) thereof)) of which such agency is a
          part,
            (ii) such agency notifies the chief executive officer (or
          the equivalent) of the local jurisdiction within which the
          building is located of such project and provides such
          individual a reasonable opportunity to comment on the
          project,
            (iii) a comprehensive market study of the housing needs of
          low-income individuals in the area to be served by the
          project is conducted before the credit allocation is made and
          at the developer's expense by a disinterested party who is
          approved by such agency, and
            (iv) a written explanation is available to the general
          public for any allocation of a housing credit dollar amount
          which is not made in accordance with established priorities
          and selection criteria of the housing credit agency.
        (B) Qualified allocation plan
          For purposes of this paragraph, the term ''qualified
        allocation plan'' means any plan -
            (i) which sets forth selection criteria to be used to
          determine housing priorities of the housing credit agency
          which are appropriate to local conditions,
            (ii) which also gives preference in allocating housing
          credit dollar amounts among selected projects to -
              (I) projects serving the lowest income tenants,
              (II) projects obligated to serve qualified tenants for
            the longest periods, and (FOOTNOTE 7)
       (FOOTNOTE 7) So in original.
              (III) projects which are located in qualified census
            tracts (as defined in subsection (d)(5)(C)) and the
            development of which contributes to a concerted community
            revitalization plan, and (FOOTNOTE 8)
       (FOOTNOTE 8) So in original.  Probably should be followed by
    ''and''.
            (iii) which provides a procedure that the agency (or an
          agent or other private contractor of such agency) will follow
          in monitoring for noncompliance with the provisions of this
          section and in notifying the Internal Revenue Service of such
          noncompliance which such agency becomes aware of and in
          monitoring for noncompliance with habitability standards
          through regular site visits.
        (C) Certain selection criteria must be used
          The selection criteria set forth in a qualified allocation
        plan must include
            (i) project location,
            (ii) housing needs characteristics,
            (iii) project characteristics, including whether the
          project includes the use of existing housing as part of a
          community revitalization plan,
            (iv) sponsor characteristics,
            (v) tenant populations with special housing needs,
            (vi) public housing waiting lists,
            (vii) tenant populations of individuals with children, and
            (viii) projects intended for eventual tenant ownership.
        (D) Application to bond financed projects
          Subsection (h)(4) shall not apply to any project unless the
        project satisfies the requirements for allocation of a housing
        credit dollar amount under the qualified allocation plan
        applicable to the area in which the project is located.
      (2) Credit allocated to building not to exceed amount necessary
          to assure project feasibility
        (A) In general
          The housing credit dollar amount allocated to a project shall
        not exceed the amount the housing credit agency determines is
        necessary for the financial feasibility of the project and its
        viability as a qualified low-income housing project throughout
        the credit period.
        (B) Agency evaluation
          In making the determination under subparagraph (A), the
        housing credit agency shall consider -
            (i) the sources and uses of funds and the total financing
          planned for the project,
            (ii) any proceeds or receipts expected to be generated by
          reason of tax benefits,
            (iii) the percentage of the housing credit dollar amount
          used for project costs other than the cost of intermediaries,
          and
            (iv) the reasonableness of the developmental and
          operational costs of the project.
        Clause (iii) shall not be applied so as to impede the
        development of projects in hard-to-develop areas.  Such a
        determination shall not be construed to be a representation or
        warranty as to the feasibility or viability of the project.
        (C) Determination made when credit amount applied for and when
            building placed in service
          (i) In general
            A determination under subparagraph (A) shall be made as of
          each of the following times:
              (I) The application for the housing credit dollar amount.
              (II) The allocation of the housing credit dollar amount.
              (III) The date the building is placed in service.
          (ii) Certification as to amount of other subsidies
            Prior to each determination under clause (i), the taxpayer
          shall certify to the housing credit agency the full extent of
          all Federal, State, and local subsidies which apply (or which
          the taxpayer expects to apply) with respect to the building.
        (D) Application to bond financed projects
          Subsection (h)(4) shall not apply to any project unless the
        governmental unit which issued the bonds (or on behalf of which
        the bonds were issued) makes a determination under rules
        similar to the rules of subparagraphs (A) and (B).
    (n) Regulations
      The Secretary shall prescribe such regulations as may be
    necessary or appropriate to carry out the purposes of this section,
    including regulations -
        (1) dealing with -
          (A) projects which include more than 1 building or only a
        portion of a building,
          (B) buildings which are placed in service in portions,
        (2) providing for the application of this section to short
      taxable years,
        (3) preventing the avoidance of the rules of this section, and
        (4) providing the opportunity for housing credit agencies to
      correct administrative errors and omissions with respect to
      allocations and record keeping within a reasonable period after
      their discovery, taking into account the availability of
      regulations and other administrative guidance from the Secretary.
 

Sources

    (Added Pub. L. 99-514, title II, Sec. 252(a), Oct. 22, 1986, 100
    Stat. 2189; amended Pub. L. 99-509, title VIII, Sec. 8072(a), Oct.
    21, 1986, 100 Stat. 1964; Pub. L. 100-647, title I, Sec.
    1002(l)(1)-(25), (32), 1007(g)(3)(B), title IV, Sec. 4003(a),
    (b)(1), (3), 4004(a), Nov. 10, 1988, 102 Stat. 3373-3381, 3435,
    3643, 3644; Pub. L. 101-239, title VII, Sec. 7108(a)(1),
    (b)-(e)(2), (f)-(m), (n)(2)-(q), 7811(a), 7831(c),
    7841(d)(13)-(15), Dec. 19, 1989, 103 Stat. 2306-2321, 2406, 2426,
    2429; Pub. L. 101-508, title XI, Sec. 11407(a)(1), (b)(1)-(9),
    11701(a)(1)-(3)(A), (4), (5)(A), (6)-(10), 11812(b)(3),
    11813(b)(3), Nov. 5, 1990, 104 Stat. 1388-474, 1388-475, 1388-505
    to 1388-507, 1388-535, 1388-551; Pub. L. 102-227, title I, Sec.
    107(a), Dec. 11, 1991, 105 Stat. 1687; Pub. L. 103-66, title XIII,
    Sec. 13142(a)(1), (b)(1)-(5), Aug. 10, 1993, 107 Stat. 437-439;
    Pub. L. 104-188, title I, Sec. 1704(t)(53), (64), Aug. 20, 1996,
    110 Stat. 1890; Pub. L. 105-206, title VI, Sec. 6004(g)(5), July
    22, 1998, 112 Stat. 796; Pub. L. 106-400, Sec. 2, Oct. 30, 2000,
    114 Stat. 1675; Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec.
    131(a)-(c), 132-136), Dec. 21, 2000, 114 Stat. 2763, 2763A-610 to
    2763A-613.)
 

References in Text

                             REFERENCES IN TEXT
      Section 8 of the United States Housing Act of 1937, referred to
    in subsecs. (c)(2), (d)(6)(B)(i), (g)(2)(B), and (h)(6)(B)(iv), is
    classified to section 1437f of Title 42, The Public Health and
    Welfare. Section 8(e)(2) of the Act was repealed by Pub. L.
    101-625, title II, Sec. 289(b)(1), Nov. 28, 1990, 104 Stat. 4128,
    effective Oct. 1, 1991, but to remain in effect with respect to
    single room occupancy dwellings as authorized by subchapter IV
    (Sec. 11361 et seq.) of chapter 119 of Title 42. See section
    12839(b) of Title 42.
      The McKinney-Vento Homeless Assistance Act, referred to in
    subsec. (c)(2), is Pub. L. 100-77, July 22, 1987, 101 Stat. 482, as
    amended, which is classified principally to chapter 119 (Sec. 11301
    et seq.) of Title 42, The Public Health and Welfare. For complete
    classification of this Act to the Code, see Short Title note set
    out under section 11301 of Title 42 and Tables.
      The date of the enactment of this sentence, referred to in
    subsec. (c)(2), is the date of the enactment of Pub. L. 101-508,
    which was approved Nov. 5, 1990.
      Section 201(a) of the Tax Reform Act of 1986, referred to in
    subsec. (c)(2)(B), is section 201(a) of Pub. L. 99-514, which
    amended section 168 of this title generally.
      The date of the enactment of the Tax Reform Act of 1986, referred
    to in subsec. (d)(2)(D)(i)(I), (6)(B), is the date of enactment of
    Pub. L. 99-514, which was approved Oct. 22, 1986.
      The date of the enactment of the Revenue Reconciliation Act of
    1990, referred to in subsec. (d)(2)(D)(i)(I), (5)(B), is the date
    of the enactment of Pub. L. 101-508, which was approved Nov. 5,
    1990.
      Sections 221(d)(3) and 236 of the National Housing Act, referred
    to in subsec. (d)(6)(B)(ii), are classified to sections 1715l(d)(3)
    and 1715z-1, respectively, of Title 12, Banks and Banking.
      Sections 515 and 502(c) of the Housing Act of 1949, referred to
    in subsecs. (d)(6)(B)(iii), (C)(i) and (g)(2)(B)(iv), are
    classified to sections 1485 and 1472(c), respectively, of Title 42,
    The Public Health and Welfare.
      The Emergency Low Income Housing Preservation Act of 1987,
    referred to in subsec. (d)(6)(C)(i), now the Low-Income Housing
    Preservation and Resident Homeownership Act of 1990, is title II of
    Pub. L. 100-242, Feb. 5, 1988, 101 Stat. 1877, as amended.
    Subtitle B of title II, which was formerly set out as a note under
    section 1715l of Title 12, Banks and Banking, and which amended
    section 1715z-6 of Title 12, was amended generally by Pub. L.
    101-625 and is classified to chapter 42 (Sec. 4101 et seq.) of
    Title 12. For complete classification of this Act to the Code, see
    Short Title note set out under section 4101 of Title 12 and Tables.
      Section 3 of the Federal Deposit Insurance Act, referred to in
    subsec. (d)(6)(D), is classified to section 1813 of Title 12.
      The date of the enactment of this subparagraph, referred to in
    subsec. (g)(2)(E), is the date of enactment of Pub. L. 100-647,
    which was approved Nov. 10, 1988.
      Sections 106, 107, and 108 of the Housing and Community
    Development Act of 1974 (as in effect on the date of the enactment
    of this sentence), referred to in subsec. (i)(2)(D), are classified
    to sections 5306, 5307, and 5308 of Title 42, The Public Health and
    Welfare, as in effect on the date of enactment of Pub. L. 101-239,
    which was approved Dec. 19, 1989.
      The HOME Investment Partnerships Act (as in effect on the date of
    the enactment of this subparagraph), referred to in subsec.
    (i)(2)(E)(i), is title II of Pub. L. 101-625, Nov. 28, 1990, 104
    Stat. 4094, as in effect on the date of enactment of Pub. L.
    103-66, which was approved Aug. 10, 1993. Title II of Pub. L.
    101-625 is classified principally to subchapter II (Sec. 12721 et
    seq.) of chapter 130 of Title 42. For complete classification of
    this Act to the Code, see Short Title note set out under section
    12701 of Title 42 and Tables.
      The Native American Housing Assistance and Self-Determination Act
    of 1996, referred to in subsec. (i)(2)(E)(i), is Pub. L. 104-330,
    Oct. 26, 1996, 110 Stat. 4016, as amended, which is classified
    principally to chapter 43 (Sec. 4101 et seq.) of Title 25, Indians.
    For complete classification of this Act to the Code, see Short
    Title note set out under section 4101 of Title 25 and Tables.
      The date of the enactment of this clause, referred to in subsec.
    (i)(3)(B)(iii)(I), is date of enactment of Pub. L. 101-239, which
    was approved Dec. 19, 1989.
      The Social Security Act, referred to in subsec. (i)(3)(D)(i)(I),
    is act Aug. 14, 1935, ch. 531, 49 Stat. 620, as amended.  Title IV
    of the Act is classified generally to subchapter IV (Sec. 601 et
    seq.) of chapter 7 of Title 42, The Public Health and Welfare. For
    complete classification of this Act to the Code, see section 1305
    of Title 42 and Tables.
      The Job Training Partnership Act, referred to in subsec.
    (i)(3)(D)(i)(II), is Pub. L. 97-300, Oct. 13, 1982, 96 Stat. 1322,
    which was classified generally to chapter 19 (Sec. 1501 et seq.) of
    Title 29, Labor, and was repealed by Pub. L. 105-220, title I, Sec.
    199(b)(2), (c)(2)(B), Aug. 7, 1998, 112 Stat. 1059, effective July
    1, 2000. Pursuant to section 2940(b) of Title 29, references to a
    provision of the Job Training Partnership Act, effective Aug. 7,
    1998, are deemed to refer to that provision or the corresponding
    provision of the Workforce Investment Act of 1998, Pub. L. 105-220,
    Aug. 7, 1998, 112 Stat. 936, and effective July 1, 2000, are deemed
    to refer to the corresponding provision of the Workforce Investment
    Act of 1998. For complete classification of the Job Training
    Partnership Act to the Code, see Tables. For complete
    classification of the Workforce Investment Act of 1998 to the Code,
    see Short Title note set out under section 9201 of Title 20,
    Education, and Tables.
 

Miscellaneous

                              PRIOR PROVISIONS
      A prior section 42, added Pub. L. 94-12, title II, Sec. 203(a),
    Mar. 29, 1975, 89 Stat. 29; amended Pub. L. 94-164, Sec. 3(a)(1),
    Dec. 23, 1975, 89 Stat. 972; Pub. L. 94-455, title IV, Sec.
    401(a)(2)(A), (B), title V, Sec. 503(b)(4), title XIX, Sec.
    1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1555, 1562, 1834; Pub. L.
    95-30, title I, Sec. 101(c), May 23, 1977, 91 Stat. 132, which
    related to general tax credit allowed to individuals in an amount
    equal to the greater of (1) 2% of taxable income not exceeding
    $9,000 or (2) $35 multiplied by each exemption the taxpayer was
    entitled to, expired Dec. 31, 1978, pursuant to the terms of: (1)
    Pub. L. 94-12, Sec. 209(a) as amended by Pub. L. 94-164, Sec. 2(e),
    set out as an Effective and Termination Dates of 1975 Amendment
    note under section 56 of this title; (2) Pub. L. 94-164, Sec. 3(b),
    as amended by Pub. L. 94-455, Sec. 401(a)(1) and Pub. L. 95-30,
    Sec. 103(a); and (3) Pub. L. 94-455, Sec. 401(e), as amended by
    Pub. L. 95-30, Sec. 103(c) and Pub. L. 95-600, title I, Sec.
    103(b), Nov. 6, 1978, 92 Stat. 2771, set out as an Effective and
    Termination Dates of 1976 Amendment note under section 32 of this
    title.
      Another prior section 42 was renumbered section 35 of this title.

                                 AMENDMENTS

     2007 - PL 110-142
SEC. 6. CLARIFICATION OF STUDENT HOUSING ELIGIBLE FOR LOW-INCOME HOUSING 
            CREDIT.
    (a) In General.--Subclause (I) of section 42(i)(3)(D)(ii) of the 
Internal Revenue Code of <<NOTE: 26 USC 42.>> 1986 (relating to certain 
students not to disqualify unit) is amended to read as follows:
                                    ``(I) single parents and their 
                                children and such parents are not 
                                dependents (as defined in section 152, 
                                determined without regard to subsections 
                                (b)(1), (b)(2), and (d)(1)(B) thereof) 
                                of another individual and such children 
                                are not dependents (as so defined) of 
                                another individual other than a parent 
                                of such children, or.''.

     2004 - Pub.L.108-311,Sec.408(a)(3) made clerical amendments
     to Sec.42(d)(2)(D)(iii)(I) by striking "section 179(b)(7)"
     and inserting "section 179(d)(7)".
     2004 - Pub. L. 108-311 Sec 207(8), amends Section 42(i)(3)(D)(ii)(I)
     by inserting ``, determined without regard to subsections (b)(1), 
    (b)(2), and (d)(1)(B) thereof'' after ``section 152''

      2000 - Subsec. (c)(2). Pub. L. 106-400 substituted
    ''McKinney-Vento Homeless Assistance Act'' for ''Stewart B.
    McKinney Homeless Assistance Act'' in concluding provisions.
      Subsec. (d)(4)(A). Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec.
    134(a)(1)), substituted ''subparagraphs (B) and (C)'' for
    ''subparagraph (B)''.
      Subsec. (d)(4)(C), (D). Pub. L. 106-554, Sec. 1(a)(7) (title I,
    Sec. 134(a)(2), (3)), added subpar. (C) and redesignated former
    subpar. (C) as (D).
      Subsec. (d)(5)(C)(ii)(I). Pub. L. 106-554, Sec. 1(a)(7) (title I,
    Sec. 135(b)), in first sentence, inserted ''either'' before ''in
    which 50 percent'' and ''or which has a poverty rate of at least 25
    percent'' before period at end.
      Subsec. (h)(1)(E)(ii). Pub. L. 106-554, Sec. 1(a)(7) (title I,
    Sec. 135(a)(1)), in first sentence, substituted ''(as of the later
    of the date which is 6 months after the date that the allocation
    was made or the close of the calendar year in which the
    allocation'' for ''(as of the close of the calendar year in which
    the allocation''.
      Subsec. (h)(3)(C). Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec.
    136(b)), which directed the substitution of ''clauses (i) through
    (iv)'' for ''clauses (i) and (iii)'' in the first sentence of
    concluding provisions, could not be executed because the words
    ''clauses (i) and (iii)'' did not appear subsequent to the
    amendment by Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec.
    131(c)(1)(B)). See below.
      Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec. 135(a)(2)), in last
    sentence of concluding provisions, substituted ''project which
    fails to meet the 10 percent test under paragraph (1)(E)(ii) on a
    date after the close of the calendar year in which the allocation
    was made or which'' for ''project which''.
      Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec. 131(c)(1)), in first
    sentence of concluding provisions, substituted ''clause (i)'' for
    ''clause (ii)'' and ''clauses (ii)'' for ''clauses (i)''.
      Subsec. (h)(3)(C)(i), (ii). Pub. L. 106-554, Sec. 1(a)(7) (title
    I, Sec. 131(a)), amended cls. (i) and (ii) generally.  Prior to
    amendment, cls. (i) and (ii) read as follows:
      ''(i) $1.25 multiplied by the State population,
      ''(ii) the unused State housing credit ceiling (if any) of such
    State for the preceding calendar year,''.
      Subsec. (h)(3)(D)(ii). Pub. L. 106-554, Sec. 1(a)(7) (title I,
    Sec. 136(a)), substituted ''the excess (if any) of - '' for ''the
    excess (if any) of the unused State housing credit ceiling for such
    year (as defined in subparagraph (C)(i)) over the excess (if any)
    of - '' in introductory provisions, added subcls. (I) and (II), and
    struck out former subcls. (I) and (II) which read as follows:
      ''(I) the aggregate housing credit dollar amount allocated for
    such year, over
      ''(II) the sum of the amounts described in clauses (ii) and (iii)
    of subparagraph (C).''
      Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec. 131(c)(2)),
    substituted ''subparagraph (C)(i)'' for ''subparagraph (C)(ii)'' in
    introductory provisions and ''clauses (ii)'' for ''clauses (i)'' in
    subcl. (II).
      Subsec. (h)(3)(H). Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec.
    131(b)), added subpar. (H).
      Subsec. (i)(2)(E). Pub. L. 106-554, Sec. 1(a)(7) (title I, Sec.
    134(b)(2)), inserted ''or Native American housing assistance''
    after ''HOME assistance'' in heading.
      Subsec. (i)(2)(E)(i). Pub. L. 106-554, Sec. 1(a)(7) (title I,
    Sec. 134(b)(1)), inserted ''or the Native American Housing
    Assistance and Self-Determination Act of 1996 (25 U.S.C. 4101 et
    seq.) (as in effect on October 1, 1997)'' after ''this
    subparagraph)''.
      Subsec. (i)(3)(B)(iii)(I). Pub. L. 106-400 substituted
    ''McKinney-Vento Homeless Assistance Act'' for ''Stewart B.
    McKinney Homeless Assistance Act''.
      Subsec. (m)(1)(A)(iii), (iv). Pub. L. 106-554, Sec. 1(a)(7)
    (title I, Sec. 133(a)), added cls. (iii) and (iv).
      Subsec. (m)(1)(B)(ii)(III). Pub. L. 106-554, Sec. 1(a)(7) (title
    I, Sec. 132(b)), added subcl. (III).
      Subsec. (m)(1)(B)(iii). Pub. L. 106-554, Sec. 1(a)(7) (title I,
    Sec. 133(b)), inserted ''and in monitoring for noncompliance with
    habitability standards through regular site visits'' before period
    at end.
      Subsec. (m)(1)(C)(iii). Pub. L. 106-554, Sec. 1(a)(7) (title I,
    Sec. 132(a)(1)), inserted '', including whether the project
    includes the use of existing housing as part of a community
    revitalization plan'' before comma at end.
      Subsec. (m)(1)(C)(v) to (viii). Pub. L. 106-554, Sec. 1(a)(7)
    (title I, Sec. 132(a)(2)), added cls. (v) to (viii) and struck out
    former cls. (v) to (vii) which read as follows:
      ''(v) participation of local tax-exempt organizations,
      ''(vi) tenant populations with special housing needs, and
      ''(vii) public housing waiting lists.''
      1998 - Subsec. (j)(4)(D). Pub. L. 105-206 substituted ''this
    chapter'' for ''subpart A, B, D, or G of this part''.
      1996 - Subsec. (c)(2). Pub. L. 104-188, Sec. 1704(t)(64), struck
    out ''of 1988'' after ''Homeless Assistance Act''.
      Subsec. (d)(5)(B). Pub. L. 104-188, Sec. 1704(t)(53), provided
    that section 11812(b)(3) of Pub. L. 101-508 shall be applied by not
    executing the amendment therein to the heading of subsec. (d)(5)(B)
    of this section.  See 1990 Amendment note below.
      1993 - Subsec. (g)(8). Pub. L. 103-66, Sec. 13142(b)(3), added
    par. (8).
      Subsec. (h)(6)(B)(iv) to (vi). Pub. L. 103-66, Sec. 13142(b)(4),
    added cl. (iv) and redesignated former cls. (iv) and (v) as (v) and
    (vi), respectively.
      Subsec. (i)(2)(E). Pub. L. 103-66, Sec. 13142(b)(5), added
    subpar. (E).
      Subsec. (i)(3)(D). Pub. L. 103-66, Sec. 13142(b)(2), amended
    heading and text of subpar. (D) generally.  Prior to amendment,
    text read as follows: ''A unit shall not fail to be treated as a
    low-income unit merely because it is occupied by an individual who
    is -
        ''(i) a student and receiving assistance under title IV of the
      Social Security Act, or
        ''(ii) enrolled in a job training program receiving assistance
      under the Job Training Partnership Act or under other similar
      Federal, State, or local laws.''
      Subsec. (m)(2)(B)(iv). Pub. L. 103-66, Sec. 13142(b)(1), added
    cl. (iv).
      Subsec. (o). Pub. L. 103-66, Sec. 13142(a)(1), struck out subsec.
    (o) which provided that subsec. (h)(3)(C)(i) would not apply to any
    amount allocated after June 30, 1992, and that subsec. (h)(4) would
    not apply to any building placed in service after June 30, 1992,
    with an exception for bond-financed buildings in progress.
      1991 - Subsec. (o)(1). Pub. L. 102-227, Sec. 107(a)(1), struck
    out '', for any calendar year after 1991'' after ''paragraph (2)''
    in introductory provisions, inserted ''to any amount allocated
    after June 30, 1992'' before comma at end of subpar. (A), and
    substituted ''June 30, 1992'' for ''1991'' in subpar. (B).
      Subsec. (o)(2). Pub. L. 102-227, Sec. 107(a)(2), substituted
    ''July 1, 1992'' for ''1992'' in introductory provisions and
    subpar. (A), ''June 30, 1992'' for ''December 31, 1991'' and ''June
    30, 1994'' for ''December 31, 1993'' in subpar. (B), and ''July 1,
    1994'' for ''January 1, 1994'' in subpar. (C).
      1990 - Subsec. (b)(1). Pub. L. 101-508, Sec. 11701(a)(1)(B),
    struck out at end ''A building shall not be treated as described in
    subparagraph (B) if, at any time during the credit period, moderate
    rehabilitation assistance is provided with respect to such building
    under section 8(e)(2) of the United States Housing Act of 1937.''
      Subsec. (c)(2). Pub. L. 101-508, Sec. 11701(a)(1)(A), inserted at
    end ''Such term does not include any building with respect to which
    moderate rehabilitation assistance is provided, at any time during
    the compliance period, under section 8(e)(2) of the United States
    Housing Act of 1937.''
      Pub. L. 101-508, Sec. 11407(b)(5)(A), inserted before period at
    end of last sentence ''(other than assistance under the Stewart B.
    McKinney Homeless Assistance Act of 1988 (as in effect on the date
    of the enactment of this sentence))''.
      Subsec. (d)(2)(D)(i)(I). Pub. L. 101-508, Sec. 11812(b)(3),
    inserted ''(as in effect on the day before the date of the
    enactment of the Revenue Reconciliation Act of 1990)'' after
    ''section 167(k).''
      Subsec. (d)(2)(D)(ii)(V). Pub. L. 101-508, Sec. 11407(b)(8),
    added subcl. (V).
      Subsec. (d)(5)(B). Pub. L. 101-508, Sec. 11812(b)(3), which
    directed the insertion of ''(as in effect on the day before the
    date of the enactment of the Revenue Reconciliation Act of 1990)''
    after ''section 167(k)'', was executed to the text, and not the
    heading, of subpar. (B). See 1996 Amendment note above.
      Subsec. (d)(5)(C)(ii)(I). Pub. L. 101-508, Sec. 11407(b)(4),
    inserted at end ''If the Secretary of Housing and Urban Development
    determines that sufficient data for any period are not available to
    apply this clause on the basis of census tracts, such Secretary
    shall apply this clause for such period on the basis of enumeration
    districts.''
      Pub. L. 101-508, Sec. 11701(a)(2)(B), inserted before period at
    end ''for such year''.
      Pub. L. 101-508, Sec. 11701(a)(2)(A), which directed the
    insertion of ''which is designated by the Secretary of Housing and
    Urban Development and, for the most recent year for which census
    data are available on household income in such tract,'' after
    ''census tract'', was executed by making the insertion after ''any
    census tract'' to reflect the probable intent of Congress.
      Subsec. (g)(2)(B)(iv). Pub. L. 101-508, Sec. 11407(b)(3), added
    cl. (iv).
      Subsec. (g)(2)(D)(i). Pub. L. 101-508, Sec. 11701(a)(3)(A),
    inserted before period at end ''and such unit continues to be
    rent-restricted''.
      Subsec. (g)(2)(D)(ii). Pub. L. 101-508, Sec. 11701(a)(4),
    inserted at end ''In the case of a project described in section
    142(d)(4)(B), the preceding sentence shall be applied by
    substituting '170 percent' for '140 percent' and by substituting
    'any low-income unit in the building is occupied by a new resident
    whose income exceeds 40 percent of area median gross income' for
    'any residential unit in the building (of a size comparable to, or
    smaller than, such unit) is occupied by a new resident whose income
    exceeds such income limitation'.''
      Subsec. (g)(3)(A). Pub. L. 101-508, Sec. 11701(a)(5)(A),
    substituted ''the 1st year of the credit period for such building''
    for ''the 12-month period beginning on the date the building is
    placed in service''.
      Subsec. (h)(3)(C). Pub. L. 101-508, Sec. 11701(a)(6)(A),
    substituted ''the sum of the amounts described in clauses (i) and
    (iii)'' for ''the amount described in clause (i)'' in second
    sentence.
      Subsec. (h)(3)(D)(ii)(II). Pub. L. 101-508, Sec. 11701(a)(6)(B),
    substituted ''the sum of the amounts described in clauses (i) and
    (iii)'' for ''the amount described in clause (i)''.
      Subsec. (h)(5)(B). Pub. L. 101-508, Sec. 11407(b)(9)(A), inserted
    ''own an interest in the project (directly or through a
    partnership) and'' after ''nonprofit organization is to''.
      Subsec. (h)(5)(C)(i) to (iii). Pub. L. 101-508, Sec.
    11407(b)(9)(B), added cl. (ii) and redesignated former cl. (ii) as
    (iii).
      Subsec. (h)(5)(D)(i). Pub. L. 101-508, Sec. 11407(b)(9)(C),
    inserted ''ownership and'' before ''material participation''.
      Subsec. (h)(6)(B)(i). Pub. L. 101-508, Sec. 11701(a)(7)(A),
    inserted before comma at end ''and which prohibits the actions
    described in subclauses (I) and (II) of subparagraph (E)(ii)''.
      Subsec. (h)(6)(B)(ii). Pub. L. 101-508, Sec. 11701(a)(7)(B),
    substituted ''requirement and prohibitions'' for ''requirement''.
      Subsec. (h)(6)(B)(iii) to (v). Pub. L. 101-508, Sec.
    11701(a)(8)(A), added cl. (iii) and redesignated former cls. (iii)
    and (iv) as (iv) and (v), respectively.
      Subsec. (h)(6)(E)(i)(I). Pub. L. 101-508, Sec. 11701(a)(9),
    inserted before comma ''unless the Secretary determines that such
    acquisition is part of an arrangement with the taxpayer a purpose
    of which is to terminate such period''.
      Subsec. (h)(6)(E)(ii)(II). Pub. L. 101-508, Sec. 11701(a)(8)(C),
    inserted before period at end ''not otherwise permitted under this
    section''.
      Subsec. (h)(6)(F). Pub. L. 101-508, Sec. 11701(a)(8)(D), inserted
    ''the nonlow-income portion of the building for fair market value
    and'' before ''the low-income portion'' in introductory provisions.
      Subsec. (h)(6)(J) to (L). Pub. L. 101-508, Sec. 11701(a)(8)(B),
    redesignated subpars. (K) and (L) as (J) and (K), respectively, and
    struck out former subpar. (J) which related to sales of less than
    the low-income portions of a building.
      Subsec. (i)(3)(D). Pub. L. 101-508, Sec. 11407(b)(6), substituted
    ''Certain students'' for ''Students in government-supported job
    training programs'' in heading and amended text generally.  Prior
    to amendment, text read as follows: ''A unit shall not fail to be
    treated as a low-income unit merely because it is occupied by an
    individual who is enrolled in a job training program receiving
    assistance under the Job Training Partnership Act or under other
    similar Federal, State, or local laws.''
      Subsec. (i)(7). Pub. L. 101-508, Sec. 11701(a)(10), redesignated
    par. (8) as (7).
      Subsec. (i)(7)(A). Pub. L. 101-508, Sec. 11407(b)(1), substituted
    ''the tenants (in cooperative form or otherwise) or resident
    management corporation of such building or by a qualified nonprofit
    organization (as defined in subsection (h)(5)(C)) or government
    agency'' for ''the tenants of such building''.
      Subsec. (i)(8). Pub. L. 101-508, Sec. 11701(a)(10), redesignated
    par. (8) as (7).
      Subsec. (k)(1). Pub. L. 101-508, Sec. 11813(b)(3)(A), substituted
    ''49(a)(1)'' for ''46(c)(8)'', ''49(a)(2)'' for ''46(c)(9)'', and
    ''49(b)(1)'' for ''47(d)(1)''.
      Subsec. (k)(2)(A)(ii), (D). Pub. L. 101-508, Sec. 11813(b)(3)(B),
    substituted ''49(a)(1)(D)(iv)(II)'' for ''46(c)(8)(D)(iv)(II)''.
      Subsec. (m)(1)(B)(ii) to (iv). Pub. L. 101-508, Sec.
    11407(b)(7)(B), redesignated cls. (iii) and (iv) as (ii) and (iii),
    respectively, and struck out former cl. (ii) which read as follows:
    ''which gives the highest priority to those projects as to which
    the highest percentage of the housing credit dollar amount is to be
    used for project costs other than the cost of intermediaries unless
    granting such priority would impede the development of projects in
    hard-to-develop areas,''.
      Pub. L. 101-508, Sec. 11407(b)(2), amended cl. (iv) generally.
    Prior to amendment, cl. (iv) read as follows: ''which provides a
    procedure that the agency will follow in notifying the Internal
    Revenue Service of noncompliance with the provisions of this
    section which such agency becomes aware of.''
      Subsec. (m)(2)(B). Pub. L. 101-508, Sec. 11407(b)(7)(A), added
    cl. (iii) and inserted provision that cl. (iii) not be applied so
    as to impede the development of projects in hard-to-develop areas.
      Subsec. (o)(1). Pub. L. 101-508, Sec. 11407(a)(1)(A), substituted
    ''1991'' for ''1990'' wherever appearing.
      Subsec. (o)(2). Pub. L. 101-508, Sec. 11407(a)(1)(B), added par.
    (2) and struck out former par. (2) which read as follows: ''For
    purposes of paragraph (1)(B), a building shall be treated as placed
    in service before 1990 if -
        ''(A) the bonds with respect to such building are issued before
      1990,
        ''(B) such building is constructed, reconstructed, or
      rehabilitated by the taxpayer,
        ''(C) more than 10 percent of the reasonably anticipated cost
      of such construction, reconstruction, or rehabilitation has been
      incurred as of January 1, 1990, and some of such cost is incurred
      on or after such date, and
        ''(D) such building is placed in service before January 1,
      1992.''
      1989 - Subsec. (b)(1). Pub. L. 101-239, Sec. 7108(h)(5), inserted
    at end ''A building shall not be treated as described in
    subparagraph (B) if, at any time during the credit period, moderate
    rehabilitation assistance is provided with respect to such building
    under section 8(e)(2) of the United States Housing Act of 1937.''
      Subsec. (b)(3)(C). Pub. L. 101-239, Sec. 7108(c)(2), which
    directed amendment of subpar. (C) by substituting ''subsection
    (h)(7)'' for ''subsection (h)(6))'', was executed by substituting
    ''subsection (h)(7)'' for ''subsection (h)(6)'', as the probable
    intent of Congress.
      Subsec. (c)(1)(E). Pub. L. 101-239, Sec. 7108(i)(2), added
    subpar. (E).
      Subsec. (d)(1). Pub. L. 101-239, Sec. 7108(l)(1), inserted ''as
    of the close of the 1st taxable year of the credit period'' before
    period at end.
      Subsec. (d)(2)(A). Pub. L. 101-239, Sec. 7108(l)(2), substituted
    ''subparagraph (B), its adjusted basis as of the close of the 1st
    taxable year of the credit period, and'' for ''subparagraph (B),
    the sum of -
        ''(I) the portion of its adjusted basis attributable to its
      acquisition cost, plus
        ''(II) amounts chargeable to capital account and incurred by
      the taxpayer (before the close of the 1st taxable year of the
      credit period for such building) for property (or additions or
      improvements to property) of a character subject to the allowance
      for depreciation, and''.
      Subsec. (d)(2)(B)(iv). Pub. L. 101-239, Sec. 7108(d)(1), added
    cl. (iv).
      Subsec. (d)(2)(C). Pub. L. 101-239, Sec. 7108(l)(3)(A),
    substituted ''Adjusted basis'' for ''Acquisition cost'' in heading
    and ''adjusted basis'' for ''cost'' in text.
      Subsec. (d)(5). Pub. L. 101-239, Sec. 7108(l)(3)(B), substituted
    ''Special rules for determining eligible basis'' for ''Eligible
    basis determined when building placed in service'' in heading.
      Subsec. (d)(5)(A). Pub. L. 101-239, Sec. 7108(l)(3)(B),
    redesignated subpar. (B) as (A) and struck out former subpar. (A)
    which read as follows: ''Except as provided in subparagraphs (B)
    and (C), the eligible basis of any building for the entire
    compliance period for such building shall be its eligible basis on
    the date such building is placed in service (increased, in the case
    of an existing building which meets the requirements of paragraph
    (2)(B), by the amounts described in paragraph (2)(A)(i)(II)).''
      Subsec. (d)(5)(B). Pub. L. 101-239, Sec. 7108(l)(3)(B),
    redesignated subpar. (C) as (B). Former subpar. (B) redesignated
    (A).
      Subsec. (d)(5)(C). Pub. L. 101-239, Sec. 7108(l)(3)(B),
    redesignated subpar. (D) as (C). Former subpar. (C) redesignated
    (B).
      Pub. L. 101-239, Sec. 7811(a)(1), inserted ''section'' before
    ''167(k)'' in heading.
      Subsec. (d)(5)(D). Pub. L. 101-239, Sec. 7108(l)(3)(B),
    redesignated subpar. (D) as (C).
      Pub. L. 101-239, Sec. 7108(g), added subpar. (D).
      Subsec. (d)(6)(A)(i). Pub. L. 101-239, Sec. 7841(d)(13),
    substituted ''Farmers Home Administration'' for ''Farmers' Home
    Administration''.
      Subsec. (d)(6)(C) to (E). Pub. L. 101-239, Sec. 7108(f), added
    subpars. (C) and (D) and redesignated former subpar. (C) as (E).
      Subsec. (d)(7)(A). Pub. L. 101-239, Sec. 7831(c)(6), inserted
    ''(or interest therein)'' after ''subparagraph (B)'' in
    introductory provisions.
      Subsec. (d)(7)(A)(ii). Pub. L. 101-239, Sec. 7841(d)(14),
    substituted ''under subsection (a)'' for ''under sebsection (a)''.
      Subsec. (e)(2)(A). Pub. L. 101-239, Sec. 7841(d)(15), substituted
    ''to capital account'' for ''to captial account''.
      Subsec. (e)(3). Pub. L. 101-239, Sec. 7108(d)(3), substituted
    ''Minimum expenditures to qualify'' for ''Average of rehabilitation
    expenditures must be $2,000 or more'' in heading, added subpars.
    (A) and (B), redesignated former subpar. (B) as (C), and struck out
    former subpar. (A) which read as follows: ''Paragraph (1) shall
    apply to rehabilitation expenditures with respect to any building
    only if the qualified basis attributable to such expenditures
    incurred during any 24-month period, when divided by the low-income
    units in the building, is $2,000 or more.''
      Subsec. (e)(5). Pub. L. 101-239, Sec. 7108(l)(3)(C), substituted
    ''subsection (d)(2)(A)(i)'' for ''subsection (d)(2)(A)(i)(II)''.
      Subsec. (f)(4). Pub. L. 101-239, Sec. 7831(c)(4), added par. (4).
      Subsec. (f)(5). Pub. L. 101-239, Sec. 7108(d)(2), added par. (5).
      Subsec. (g)(2)(A). Pub. L. 101-239, Sec. 7108(e)(2), inserted at
    end ''For purposes of the preceding sentence, the amount of the
    income limitation under paragraph (1) applicable for any period
    shall not be less than such limitation applicable for the earliest
    period the building (which contains the unit) was included in the
    determination of whether the project is a qualified low-income
    housing project.''
      Pub. L. 101-239, Sec. 7108(e)(1)(B), substituted ''the imputed
    income limitation applicable to such unit'' for ''the income
    limitation under paragraph (1) applicable to individuals occupying
    such unit''.
      Subsec. (g)(2)(B). Pub. L. 101-239, Sec. 7108(h)(2), added cl.
    (iii) and concluding provisions which defined ''supportive
    service''.
      Subsec. (g)(2)(C) to (E). Pub. L. 101-239, Sec. 7108(e)(1)(A),
    added subpars. (C) and (D) and redesignated former subpar. (C) as
    (E).
      Subsec. (g)(3)(D). Pub. L. 101-239, Sec. 7108(m)(3), added
    subpar. (D).
      Subsec. (g)(4). Pub. L. 101-239, Sec. 7108(n)(2), struck out
    ''(other than section 142(d)(4)(B)(iii))'' after ''in applying such
    provisions''.
      Subsec. (g)(7). Pub. L. 101-239, Sec. 7108(h)(3), added par. (7).
      Subsec. (h)(1)(B). Pub. L. 101-239, Sec. 7108(m)(2), substituted
    ''(E), or (F)'' for ''or (E)''.
      Subsec. (h)(1)(F). Pub. L. 101-239, Sec. 7108(m)(1), added
    subpar. (F).
      Subsec. (h)(3)(C) to (G). Pub. L. 101-239, Sec. 7108(b)(1), added
    subpars. (C) and (D), redesignated former subpars. (D) to (F) as
    (E) to (G), respectively, and struck out former subpar. (C) which
    read as follows: ''The State housing credit ceiling applicable to
    any State for any calendar year shall be an amount equal to $1.25
    multiplied by the State population.''
      Subsec. (h)(4)(B). Pub. L. 101-239, Sec. 7108(j), substituted
    ''50 percent'' for ''70 percent'' in heading and in text.
      Subsec. (h)(5)(D)(ii). Pub. L. 101-239, Sec. 7811(a)(2),
    substituted ''clause (i)'' for ''clause (ii)''.
      Subsec. (h)(5)(E). Pub. L. 101-239, Sec. 7108(b)(2)(A),
    substituted ''subparagraph (F)'' for ''subparagraph (E)''.
      Subsec. (h)(6). Pub. L. 101-239, Sec. 7108(c)(1), added par. (6).
    Former par. (6) redesignated (7).
      Subsec. (h)(6)(B) to (E). Pub. L. 101-239, Sec. 7108(b)(2)(B),
    redesignated subpars. (C) to (E) as (B) to (D), respectively, and
    struck out former subpar. (B) which provided that the housing
    credit dollar amount could not be carried over to any other
    calendar year.
      Subsec. (h)(7), (8). Pub. L. 101-239, Sec. 7108(c)(1),
    redesignated pars. (6) and (7) as (7) and (8), respectively.
      Subsec. (i)(2)(D). Pub. L. 101-239, Sec. 7108(k), inserted at end
    ''Such term shall not include any loan which would be a below
    market Federal loan solely by reason of assistance provided under
    section 106, 107, or 108 of the Housing and Community Development
    Act of 1974 (as in effect on the date of the enactment of this
    sentence).''
      Subsec. (i)(3)(B). Pub. L. 101-239, Sec. 7108(i)(1), amended
    subpar. (B) generally.  Prior to amendment, subpar. (B) read as
    follows: ''A unit shall not be treated as a low-income unit unless
    the unit is suitable for occupancy (as determined under regulations
    prescribed by the Secretary taking into account local health,
    safety, and building codes) and used other than on a transient
    basis.  For purposes of the preceding sentence, a single-room
    occupancy unit shall not be treated as used on a transient basis
    merely because it is rented on a month-by-month basis.''
      Pub. L. 101-239, Sec. 7831(c)(1), inserted ''(as determined under
    regulations prescribed by the Secretary taking into account local
    health, safety, and building codes)'' after ''suitable for
    occupancy''.
      Pub. L. 101-239, Sec. 7108(h)(1), inserted at end ''For purposes
    of the preceding sentence, a single-room occupancy unit shall not
    be treated as used on a transient basis merely because it is rented
    on a month-by-month basis.''
      Subsec. (i)(3)(D). Pub. L. 101-239, Sec. 7831(c)(2), added
    subpar. (D).
      Subsec. (i)(3)(E). Pub. L. 101-239, Sec. 7108(h)(4), added
    subpar. (E).
      Subsec. (i)(6). Pub. L. 101-239, Sec. 7831(c)(3), added par. (6).
      Subsec. (i)(8). Pub. L. 101-239, Sec. 7108(q), added par. (8).
      Subsec. (k)(2)(D). Pub. L. 101-239, Sec. 7108(o), added provision
    at end relating to the applicability of cl. (ii) to qualified
    nonprofit organizations not described in section
    46(c)(8)(D)(iv)(II) with respect to a building.
      Subsec. (l)(1). Pub. L. 101-239, Sec. 7108(p), in introductory
    provisions, substituted ''Following'' for ''Not later than the 90th
    day following'' and inserted ''at such time and'' before ''in such
    form''.
      Subsec. (m). Pub. L. 101-239, Sec. 7108(o), added subsec. (m).
    Former subsec. (m) redesignated (n).
      Subsec. (m)(4). Pub. L. 101-239, Sec. 7831(c)(5), added par. (4).
      Subsec. (n). Pub. L. 101-239, Sec. 7108(o), redesignated subsec.
    (m) as (n). Former subsec. (n) redesignated (o).
      Pub. L. 101-239, Sec. 7108(a)(1), amended subsec. (n) generally.
    Prior to amendment, subsec. (n) read as follows: ''The State
    housing credit ceiling under subsection (h) shall be zero for any
    calendar year after 1989 and subsection (h)(4) shall not apply to
    any building placed in service after 1989.''
      Subsec. (o). Pub. L. 101-239, Sec. 7108(o), redesignated subsec.
    (n) as (o).
      1988 - Subsec. (b)(2)(A). Pub. L. 100-647, Sec. 1002(l)(1)(A),
    substituted ''for the earlier of - '' for ''for the month in which
    such building is placed in service'' and added cls. (i) and (ii)
    and concluding provisions.
      Subsec. (b)(2)(C)(ii). Pub. L. 100-647, Sec. 1002(l)(1)(B),
    substituted ''the month applicable under clause (i) or (ii) of
    subparagraph (A)'' for ''the month in which the building was placed
    in service''.
      Subsec. (b)(3). Pub. L. 100-647, Sec. 1002(l)(9)(B), amended par.
    (3) generally.  Prior to amendment, par. (3) read as follows: ''For
    treatment of certain rehabilitation expenditures as separate new
    buildings, see subsection (e).''
      Subsec. (c)(2)(A). Pub. L. 100-647, Sec. 1002(l)(2)(A), amended
    subpar. (A) generally.  Prior to amendment, subpar. (A) read as
    follows: ''which at all times during the compliance period with
    respect to such building is part of a qualified low-income housing
    project, and''.
      Subsec. (d)(2)(D)(ii). Pub. L. 100-647, Sec. 1002(l)(3),
    substituted ''Special rules for certain transfers'' for ''Special
    rule for nontaxable exchanges'' in heading and amended text
    generally.  Prior to amendment, text read as follows: ''For
    purposes of determining under subparagraph (B)(ii) when a building
    was last placed in service, there shall not be taken into account
    any placement in service in connection with the acquisition of the
    building in a transaction in which the basis of the building in the
    hands of the person acquiring it is determined in whole or in part
    by reference to the adjusted basis of such building in the hands of
    the person from whom aquired (sic).''
      Subsec. (d)(3). Pub. L. 100-647, Sec. 1002(l)(4), amended par.
    (3) generally.  Prior to amendment, par. (3) read as follows: ''The
    eligible basis of any building shall be reduced by an amount equal
    to the portion of the adjusted basis of the building which is
    attributable to residential rental units in the building which are
    not low-income units and which are above the average quality
    standard of the low-income units in the building.''
      Subsec. (d)(5)(A). Pub. L. 100-647, Sec. 1002(l)(6)(B),
    substituted ''subparagraphs (B) and (C)'' for ''subparagraph (B)''.
      Pub. L. 100-647, Sec. 1002(l)(5), inserted ''(increased, in the
    case of an existing building which meets the requirements of
    paragraph (2)(B), by the amounts described in paragraph
    (2)(A)(i)(II))'' before period at end.
      Subsec. (d)(5)(C). Pub. L. 100-647, Sec. 1002(l)(6)(A), added
    subpar. (C).
      Subsec. (d)(6)(A)(iii). Pub. L. 100-647, Sec. 1002(l)(7), struck
    out cl. (iii) which related to other circumstances of financial
    distress.
      Subsec. (d)(6)(B)(ii). Pub. L. 100-647, Sec. 1002(l)(8), struck
    out ''of 1934'' after ''Act''.
      Subsec. (f)(1). Pub. L. 100-647, Sec. 1002(l)(2)(B), substituted
    ''beginning with - '' for ''beginning with'' and subpars. (A) and
    (B) and concluding provisions for ''the taxable year in which the
    building is placed in service or, at the election of the taxpayer,
    the succeeding taxable year.  Such an election, once made, shall be
    irrevocable.''
      Subsec. (f)(3). Pub. L. 100-647, Sec. 1002(l)(9)(A), amended par.
    (3) generally.  Prior to amendment, par. (3) ''Special rule where
    increase in qualified basis after 1st year of credit period'' read
    as follows:
      ''(A) Credit increased. - If -
        ''(i) as of the close of any taxable year in the compliance
      period (after the 1st year of the credit period) the qualified
      basis of any building exceeds
        ''(ii) the qualified basis of such building as of the close of
      the 1st year of the credit period,
    the credit allowable under subsection (a) for the taxable year
    (determined without regard to this paragraph) shall be increased by
    an amount equal to the product of such excess and the percentage
    equal to 2/3 of the applicable percentage for such building.
      ''(B) 1st year computation applies. - A rule similar to the rule
    of paragraph (2)(A) shall apply to the additional credit allowable
    by reason of this paragraph for the 1st year in which such
    additional credit is allowable.''
      Subsec. (g)(2)(B)(i). Pub. L. 100-647, Sec. 1002(l)(10), struck
    out ''Federal'' after ''comparable''.
      Subsec. (g)(2)(C). Pub. L. 100-647, Sec. 1002(l)(11), added
    subpar. (C).
      Subsec. (g)(3). Pub. L. 100-647, Sec. 1002(l)(12), amended par.
    (3) generally, substituting subpars. (A) to (C) for former subpars.
    (A) and (B).
      Subsec. (g)(4). Pub. L. 100-647, Sec. 1002(l)(13), inserted '';
    except that, in applying such provisions (other than section
    142(d)(4)(B)(iii)) for such purposes, the term 'gross rent' shall
    have the meaning given such term by paragraph (2)(B) of this
    subsection'' before period at end.
      Subsec. (g)(6). Pub. L. 100-647, Sec. 1002(l)(32), added par.
    (6).
      Subsec. (h)(1). Pub. L. 100-647, Sec. 1002(l)(14)(A), amended
    par. (1) generally.  Prior to amendment, par. (1) read as follows:
    ''No credit shall be allowed by reason of this section for any
    taxable year with respect to any building in excess of the housing
    credit dollar amount allocated to such building under this
    subsection.  An allocation shall be taken into account under the
    preceding sentence only if it occurs not later than the earlier of
    -
        ''(A) the 60th day after the close of the taxable year, or
        ''(B) the close of the calendar year in which such taxable year
      ends.''
      Subsec. (h)(1)(B). Pub. L. 100-647, Sec. 4003(b)(1), substituted
    ''(C), (D), or (E)'' for ''(C) or (D)''.
      Subsec. (h)(1)(E). Pub. L. 100-647, Sec. 4003(a), added subpar.
    (E).
      Subsec. (h)(4)(A). Pub. L. 100-647, Sec. 1002(l)(15), substituted
    ''if - '' for ''and which is taken into account under section 146''
    and added cls. (i) and (ii).
      Subsec. (h)(5)(D), (E). Pub. L. 100-647, Sec. 1002(l)(16), added
    subpar. (D) and redesignated former subpar. (D) as (E).
      Subsec. (h)(6)(B)(ii). Pub. L. 100-647, Sec. 1002(l)(14)(B),
    struck out cl. (ii) which read as follows:
      ''(ii) Allocation may not be earlier than year in which building
    placed in service. - A housing credit agency may allocate its
    housing credit dollar amount for any calendar year only to
    buildings placed in service before the close of such calendar
    year.''
      Subsec. (h)(6)(D). Pub. L. 100-647, Sec. 1002(l)(17), amended
    subpar. (D) generally.  Prior to amendment, subpar. (D) ''Credit
    allowable determined without regard to averaging convention, etc.''
    read as follows: ''For purposes of this subsection, the credit
    allowable under subsection (a) with respect to any building shall
    be determined -
        ''(i) without regard to paragraphs (2)(A) and (3)(B) of
      subsection (f), and
        ''(ii) by applying subsection (f)(3)(A) without regard to 'the
      percentage equal to 2/3 of'.''
      Subsec. (h)(6)(E). Pub. L. 100-647, Sec. 1002(l)(18), added
    subpar. (E).
      Subsec. (i)(2)(A). Pub. L. 100-647, Sec. 1002(l)(19)(A), inserted
    ''or any prior taxable year'' after ''such taxable year'' and
    substituted ''is or was outstanding'' for ''is outstanding'' and
    ''are or were used'' for ''are used''.
      Subsec. (i)(2)(B). Pub. L. 100-647, Sec. 1002(l)(19)(B),
    substituted ''balance of loan or proceeds of obligations'' for
    ''outstanding balance of loan'' in heading and amended text
    generally.  Prior to amendment, text read as follows: ''A loan
    shall not be taken into account under subparagraph (A) if the
    taxpayer elects to exclude an amount equal to the outstanding
    balance of such loan from the eligible basis of the building for
    purposes of subsection (d).''
      Subsec. (i)(2)(C). Pub. L. 100-647, Sec. 1002(l)(19)(C), added
    subpar. (C). Former subpar. (C) redesignated (D).
      Subsec. (i)(2)(D). Pub. L. 100-647, Sec. 1002(l)(19)(C), (D),
    redesignated former subpar. (C) as (D) and substituted ''this
    paragraph'' for ''subparagraph (A)''.
      Subsec. (j)(4)(D). Pub. L. 100-647, Sec. 1007(g)(3)(B),
    substituted ''D, or G'' for ''or D''.
      Subsec. (j)(4)(F). Pub. L. 100-647, Sec. 1002(l)(20), added
    subpar. (F).
      Subsec. (j)(5)(B). Pub. L. 100-647, Sec. 4004(a), amended subpar.
    (B) generally.  Prior to amendment, subpar. (B) read as follows:
    ''This paragraph shall apply to any partnership -
        ''(i) more than 1/2 the capital interests, and more than 1/2
      the profit interests, in which are owned by a group of 35 or more
      partners each of whom is a natural person or an estate, and
        ''(ii) which elects the application of this paragraph.''
      Subsec. (j)(5)(B)(i). Pub. L. 100-647, Sec. 1002(l)(21), amended
    cl. (i) generally.  Prior to amendment, cl. (i) read as follows:
    ''which has 35 or more partners each of whom is a natural person or
    an estate, and''.
      Subsec. (j)(6). Pub. L. 100-647, Sec. 1002(l)(22), inserted ''(or
    interest therein)'' after ''disposition of building'' in heading,
    and in text inserted ''or an interest therein'' after ''of a
    building''.
      Subsec. (k)(2)(B). Pub. L. 100-647, Sec. 1002(l)(23), inserted
    before period at end '', except that this subparagraph shall not
    apply in the case of a federally assisted building described in
    subsection (d)(6)(B) if - '' and cls. (i) and (ii).
      Subsec. (l). Pub. L. 100-647, Sec. 1002(l)(24)(B), substituted
    ''Certifications and other reports to Secretary'' for
    ''Certifications to Secretary'' in heading.
      Subsec. (l)(2), (3). Pub. L. 100-647, Sec. 1002(l)(24)(A), added
    par. (2) and redesignated former par. (2) as (3).
      Subsec. (n). Pub. L. 100-647, Sec. 4003(b)(3), amended subsec.
    (n) generally, substituting a single par. for former pars. (1) and
    (2).
      Subsec. (n)(1). Pub. L. 100-647, Sec. 1002(l)(25), inserted '',
    and, except for any building described in paragraph (2)(B),
    subsection (h)(4) shall not apply to any building placed in service
    after 1989'' after ''year after 1989''.
      1986 - Subsec. (k)(1). Pub. L. 99-509 substituted ''subparagraphs
    (D)(ii)(II) and (D)(iv)(I)'' for ''subparagraph (D)(iv)(I)''.


                      EFFECTIVE DATE OF 2007 AMENDMENT

     2007 - PL 110-142
SEC. 6. CLARIFICATION OF STUDENT HOUSING ELIGIBLE FOR LOW-INCOME HOUSING 
            CREDIT.
    (b) Effective Date.--The <<NOTE: 26 USC 42 note.>> amendment made by 
this section shall apply to--
            (1) housing credit amounts allocated before, on, or after 
        the date of the enactment of this Act, and
            (2) buildings placed in service before, on, or after such 
        date to the extent paragraph (1) of section 42(h) of the 
        Internal Revenue Code of 1986 does not apply to any building by 
        reason of paragraph (4) thereof.

                      EFFECTIVE DATE OF 2000 AMENDMENT
      Pub. L. 106-554, Sec. 1(a)(7) (title I, subtitle D, Sec. 131(d)),
    Dec. 21, 2000, 114 Stat. 2763, 2763A-611, provided that: ''The
    amendments made by this section (amending this section) shall apply
    to calendar years after 2000.''
      Pub. L. 106-554, Sec. 1(a)(7) (title I, subtitle D, Sec. 137),
    Dec. 21, 2000, 114 Stat. 2763, 2763A-613, provided that: ''Except
    as otherwise provided in this subtitle (amending this section and
    enacting provisions set out above), the amendments made by this
    subtitle shall apply to -
        ''(1) housing credit dollar amounts allocated after December
      31, 2000; and
        ''(2) buildings placed in service after such date to the extent
      paragraph (1) of section 42(h) of the Internal Revenue Code of
      1986 does not apply to any building by reason of paragraph (4)
      thereof, but only with respect to bonds issued after such date.''
                      EFFECTIVE DATE OF 1998 AMENDMENT
      Amendment by Pub. L. 105-206 effective, except as otherwise
    provided, as if included in the provisions of the Taxpayer Relief
    Act of 1997, Pub. L. 105-34, to which such amendment relates, see
    section 6024 of Pub. L. 105-206, set out as a note under section 1
    of this title.
                      EFFECTIVE DATE OF 1993 AMENDMENT
      Section 13142(a)(2) of Pub. L. 103-66 provided that: ''The
    amendment made by paragraph (1) (amending this section) shall apply
    to periods ending after June 30, 1992.''
      Section 13142(b)(6) of Pub. L. 103-66, as amended by Pub. L.
    104-188, title I, Sec. 1703(b), Aug. 20, 1996, 110 Stat. 1875,
    provided that:
      ''(A) In general. - Except as provided in subparagraphs (B) and
    (C), the amendments made by this subsection (amending this section)
    shall apply to -
        ''(i) determinations under section 42 of the Internal Revenue
      Code of 1986 with respect to housing credit dollar amounts
      allocated from State housing credit ceilings after June 30, 1992,
      or
        ''(ii) buildings placed in service after June 30, 1992, to the
      extent paragraph (1) of section 42(h) of such Code does not apply
      to any building by reason of paragraph (4) thereof, but only with
      respect to bonds issued after such date.
      ''(B) Full-time students, waiver authority, and prohibited
    discrimination. - The amendments made by paragraphs (2), (3), and
    (4) (amending this section) shall take effect on the date of the
    enactment of this Act (Aug. 10, 1993).
      ''(C) HOME assistance. - The amendment made by paragraph (5)
    (amending this section) shall apply to periods after the date of
    the enactment of this Act.''
                      EFFECTIVE DATE OF 1991 AMENDMENT
      Section 107(b) of Pub. L. 102-227 provided that: ''The amendments
    made by this section (amending this section) shall apply to
    calendar years after 1991.''
                      EFFECTIVE DATE OF 1990 AMENDMENT
      Section 11407(a)(3) of Pub. L. 101-508 provided that: ''The
    amendments made by this subsection (amending this section and
    repealing provisions set out below) shall apply to calendar years
    after 1989.''
      Section 11407(b)(10) of Pub. L. 101-508 provided that:
      ''(A) In general. - Except as otherwise provided in this
    paragraph, the amendments made by this subsection (amending this
    section) shall apply to -
        ''(i) determinations under section 42 of the Internal Revenue
      Code of 1986 with respect to housing credit dollar amounts
      allocated from State housing credit ceilings for calendar years
      after 1990, or
        ''(ii) buildings placed in service after December 31, 1990, to
      the extent paragraph (1) of section 42(h) of such Code does not
      apply to any building by reason of paragraph (4) thereof, but
      only with respect to bonds issued after such date.
      ''(B) Tenant rights, etc. - The amendments made by paragraphs
    (1), (6), (8), and (9) (amending this section) shall take effect on
    the date of the enactment of this Act (Nov. 5, 1990).
      ''(C) Monitoring. - The amendment made by paragraph (2) (amending
    this section) shall take effect on January 1, 1992, and shall apply
    to buildings placed in service before, on, or after such date.
      ''(D) Study. - The Inspector General of the Department of Housing
    and Urban Development and the Secretary of the Treasury shall
    jointly conduct a study of the effectiveness of the amendment made
    by paragraph (5) (amending this section) in carrying out the
    purposes of section 42 of the Internal Revenue Code of 1986. The
    report of such study shall be submitted not later than January 1,
    1993, to the Committee on Ways and Means of the House of
    Representatives and the Committee on Finance of the Senate.''
      Section 11701(a)(3)(B) of Pub. L. 101-508 provided that: ''In the
    case of a building to which (but for this subparagraph) the
    amendment made by subparagraph (A) (amending this section) does not
    apply, such amendment shall apply to -
        ''(i) determinations of qualified basis for taxable years
      beginning after the date of the enactment of this Act (Nov. 5,
      1990), and
        ''(ii) determinations of qualified basis for taxable years
      beginning on or before such date except that determinations for
      such taxable years shall be made without regard to any reduction
      in gross rent after August 3, 1990, for any period before August
      4, 1990.''
      Section 11701(n) of Pub. L. 101-508 provided that: ''Except as
    otherwise provided in this section, any amendment made by this
    section (amending this section and sections 148, 163, 172, 403,
    1031, 1253, 2056, 4682, 4975, 4978B and 6038 of this title, and
    provisions set out as notes under this section and section 2040 of
    this title) shall take effect as if included in the provision of
    the Revenue Reconciliation Act of 1989 (Pub. L. 101-239, title VII)
    to which such amendment relates.''
      Section 11812(c) of Pub. L. 101-508 provided that:
      ''(1) In general. - Except as provided in paragraph (2), the
    amendments made by this section (amending this section and sections
    56, 167, 168, 312, 381, 404, 460, 642, 1016, 1250, and 7701 of this
    title) shall apply to property placed in service after the date of
    the enactment of this Act (Nov. 5, 1990).
      ''(2) Exception. - The amendments made by this section shall not
    apply to any property to which section 168 of the Internal Revenue
    Code of 1986 does not apply by reason of subsection (f)(5) thereof.
      ''(3) Exception for previously grandfather expenditures. - The
    amendments made by this section shall not apply to rehabilitation
    expenditures described in section 252(f)(5) of the Tax Reform Act
    of 1986 (Pub. L. 99-514) (as added by section 1002(l)(31) of the
    Technical and Miscellaneous Revenue Act of 1988 (see Transitional
    Rules note below)).''
      Amendment by section 11813(b)(3) of Pub. L. 101-508 applicable to
    property placed in service after Dec. 31, 1990, but not applicable
    to any transition property (as defined in section 49(e) of this
    title), any property with respect to which qualified progress
    expenditures were previously taken into account under section 46(d)
    of this title, and any property described in section 46(b)(2)(C) of
    this title, as such sections were in effect on Nov. 4, 1990, see
    section 11813(c) of Pub. L. 101-508, set out as a note under
    section 29 of this title.
                      EFFECTIVE DATE OF 1989 AMENDMENT
      Section 7108(r) of Pub. L. 101-239, as amended by Pub. L.
    101-508, title XI, Sec. 11701(a)(11), (12), Nov. 5, 1990, 104 Stat.
    1388-507; Pub. L. 104-188, title I, Sec. 1702(g)(5)(A), Aug. 20,
    1996, 110 Stat. 1873, provided that:
      ''(1) In general. - Except as otherwise provided in this
    subsection, the amendments made by this section (amending this
    section and section 142 of this title) shall apply to
    determinations under section 42 of the Internal Revenue Code of
    1986 with respect to housing credit dollar amounts allocated from
    State housing credit ceilings for calendar years after 1989.
      ''(2) Buildings not subject to allocation limits. - Except as
    otherwise provided in this subsection, to the extent paragraph (1)
    of section 42(h) of such Code does not apply to any building by
    reason of paragraph (4) thereof, the amendments made by this
    section shall apply to buildings placed in service after December
    31, 1989.
      ''(3) One-year carryover of unused credit authority, etc. - The
    amendments made by subsection (b) (amending this section) shall
    apply to calendar years after 1989, but clauses (ii), (iii), and
    (iv) of section 42(h)(3)(C) of such Code (as added by this section)
    shall be applied without regard to allocations for 1989 or any
    preceding year.
      ''(4) Additional buildings eligible for waiver of 10-year rule. -
    The amendments made by subsection (f) (amending this section) shall
    take effect on the date of the enactment of this Act (Dec. 19,
    1989).
      ''(5) Certifications with respect to 1st year of credit period. -
    The amendment made by subsection (p) (amending this section) shall
    apply to taxable years ending on or after December 31, 1989.
      ''(6) Certain rules which apply to bonds. - Paragraphs (1)(D) and
    (2)(D) of section 42(m) of such Code, as added by this section,
    shall apply to obligations issued after December 31, 1989.
      ''(7) Clarifications. - The amendments made by the following
    provisions of this section shall apply as if included in the
    amendments made by section 252 of the Tax Reform Act of 1986 (Pub.
    L. 99-514, enacting this section and amending sections 38 and 55 of
    this title):
        ''(A) Paragraph (1) of subsection (h) (relating to units rented
      on a monthly basis) (amending this section).
        ''(B) Subsection (l) (relating to eligible basis for new
      buildings to include expenditures before close of 1st year of
      credit period) (amending this section).
      ''(8) Guidance on difficult development areas and posting of bond
    to avoid recapture. - Not later than 180 days after the date of the
    enactment of this Act (Dec. 19, 1989) -
        ''(A) the Secretary of Housing and Urban Development shall
      publish initial guidance on the designation of difficult
      development areas under section 42(d)(5)(C) of such Code, as
      added by this section, and
        ''(B) the Secretary of the Treasury shall publish initial
      guidance under section 42(j)(6) of such Code (relating to no
      recapture on disposition of building (or interest therein) where
      bond posted).''
      (Pub. L. 104-188, title I, Sec. 1702(g)(5), Aug. 20, 1996, 110
    Stat. 1873, provided that:
      (''(A) Paragraph (11) of section 11701(a) of the Revenue
    Reconciliation Act of 1990 (and the amendment made by such
    paragraph) (Pub. L. 101-508, which amended section 7108(r)(2) of
    Pub. L. 101-239, set out above, by inserting ''but only with
    respect to bonds issued after such date'' before the period at the
    end of such section 7108(r)(2)) are hereby repealed, and section
    7108(r)(2) of the Revenue Reconciliation Act of 1989 (Pub. L.
    101-239) shall be applied as if such paragraph (and amendment) had
    never been enacted.
      (''(B) Subparagraph (A) shall not apply to any building if the
    owner of such building establishes to the satisfaction of the
    Secretary of the Treasury or his delegate that such owner
    reasonably relied on the amendment made by such paragraph (11).'')
      Amendment by section 7811(a) of Pub. L. 101-239 effective, except
    as otherwise provided, as if included in the provision of the
    Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647,
    to which such amendment relates, see section 7817 of Pub. L.
    101-239, set out as a note under section 1 of this title.
      Amendment by section 7831(c) of Pub. L. 101-239 effective as if
    included in the provision of the Tax Reform Act of 1986, Pub. L.
    99-514, to which such amendment relates, see section 7831(g) of
    Pub. L. 101-239, set out as a note under section 1 of this title.
                      EFFECTIVE DATE OF 1988 AMENDMENT
      Amendment by sections 1002(l)(1)-(25), (32) and 1007(g)(3)(B) of
    Pub. L. 100-647 effective, except as otherwise provided, as if
    included in the provision of the Tax Reform Act of 1986, Pub. L.
    99-514, to which such amendment relates, see section 1019(a) of
    Pub. L. 100-647, set out as a note under section 1 of this title.
      Section 4003(c) of Pub. L. 100-647 provided that: ''The
    amendments made by this section (amending this section and
    provisions set out as a note under section 469 of this title) shall
    apply to amounts allocated in calendar years after 1987.''
      Section 4004(b) of Pub. L. 100-647 provided that:
      ''(1) In general. - The amendment made by subsection (a)
    (amending this section) shall take effect as if included in the
    amendments made by section 252 of the Reform Act (section 252 of
    Pub. L. 99-514, enacting this section and amending sections 38 and
    55 of this title).
      ''(2) Period for election. - The period for electing not to have
    section 42(j)(5) of the 1986 Code apply to any partnership shall
    not expire before the date which is 6 months after the date of the
    enactment of this Act (Nov. 10, 1988).''
                      EFFECTIVE DATE OF 1986 AMENDMENT
      Section 8072(b) of Pub. L. 99-509 provided that: ''The amendment
    made by subsection (a) (amending this section) shall take effect as
    if included in the amendment made by section 252(a) of the Tax
    Reform Act of 1986 (enacting this section).''
                               EFFECTIVE DATE
      Section 252(e) of Pub. L. 99-514 provided that:
      ''(1) In general. - The amendments made by this section (enacting
    this section and amending sections 38 and 55 of this title) shall
    apply to buildings placed in service after December 31, 1986, in
    taxable years ending after such date.
      ''(2) Special rule for rehabilitation expenditures. - Subsection
    (e) of section 42 of the Internal Revenue Code of 1986 (as added by
    this section) shall apply for purposes of paragraph (1).''
                             SAVINGS PROVISION
      For provisions that nothing in amendment by sections 11812(b)(3)
    and 11813(b)(3) of Pub. L. 101-508 be construed to affect treatment
    of certain transactions occurring, property acquired, or items of
    income, loss, deduction, or credit taken into account prior to Nov.
    5, 1990, for purposes of determining liability for tax for periods
    ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101-508,
    set out as a note under section 29 of this title.
     ELECTION TO DETERMINE RENT LIMITATION BASED ON NUMBER OF BEDROOMS
                           AND DEEP RENT SKEWING
      Section 13142(c) of Pub. L. 103-66 provided that:
      ''(1) In the case of a building to which the amendments made by
    subsection (e)(1) or (n)(2) of section 7108 of the Revenue
    Reconciliation Act of 1989 (Pub. L. 101-239, amending this section)
    did not apply, the taxpayer may elect to have such amendments apply
    to such building if the taxpayer has met the requirements of the
    procedures described in section 42(m)(1)(B)(iii) of the Internal
    Revenue Code of 1986.
      ''(2) In the case of the amendment made by such subsection
    (e)(1), such election shall apply only with respect to tenants
    first occupying any unit in the building after the date of the
    election.
      ''(3) In the case of the amendment made by such subsection
    (n)(2), such election shall apply only if rents of low-income
    tenants in such building do not increase as a result of such
    election.
      ''(4) An election under this subsection may be made only during
    the 180-day period beginning on the date of the enactment of this
    Act (Aug. 10, 1993) and, once made, shall be irrevocable.''
                  ELECTION TO ACCELERATE CREDIT INTO 1990
      Section 11407(c) of Pub. L. 101-508 provided that:
      ''(1) In general. - At the election of an individual, the credit
    determined under section 42 of the Internal Revenue Code of 1986
    for the taxpayer's first taxable year ending on or after October
    25, 1990, shall be 150 percent of the amount which would (but for
    this paragraph) be so allowable with respect to investments held by
    such individual on or before October 25, 1990.
      ''(2) Reduction in aggregate credit to reflect increased 1990
    credit. - The aggregate credit allowable to any person under
    section 42 of such Code with respect to any investment for taxable
    years after the first taxable year referred to in paragraph (1)
    shall be reduced on a pro rata basis by the amount of the increased
    credit allowable by reason of paragraph (1) with respect to such
    first taxable year.  The preceding sentence shall not be construed
    to affect whether any taxable year is part of the credit,
    compliance, or extended use periods.
      ''(3) Election. - The election under paragraph (1) shall be made
    at the time and in the manner prescribed by the Secretary of the
    Treasury or his delegate, and, once made, shall be irrevocable.  In
    the case of a partnership, such election shall be made by the
    partnership.''
     EXCEPTION TO TIME PERIOD FOR MEETING PROJECT REQUIREMENTS IN ORDER
                      TO QUALIFY AS LOW-INCOME HOUSING
      Section 11701(a)(5)(B) of Pub. L. 101-508 provided that: ''In the
    case of a building to which the amendment made by subparagraph (A)
    (amending this section) does not apply, the period specified in
    section 42(g)(3)(A) of the Internal Revenue Code of 1986 (as in
    effect before the amendment made by subparagraph (A)) shall not
    expire before the close of the taxable year following the taxable
    year in which the building is placed in service.''
            STATE HOUSING CREDIT CEILING FOR CALENDAR YEAR 1990
      Section 7108(a)(2) of Pub. L. 101-239 provided that in the case
    of calendar year 1990, section 42(h)(3)(C)(i) of the Internal
    Revenue Code of 1986 be applied by substituting ''$.9375'' for
    ''$1.25'', prior to repeal by Pub. L. 101-508, title XI, Sec.
    11407(a)(2), (3), Nov. 5, 1990, 104 Stat. 1388-474, applicable to
    calendar years after 1989.
                             TRANSITIONAL RULES
      Section 252(f) of Pub. L. 99-514, as amended by Pub. L. 100-647,
    title I, Sec. 1002(l)(28)-(31), Nov. 10, 1988, 102 Stat. 3381,
    provided that:
      ''(1) Limitation to non-acrs buildings not to apply to certain
    buildings, etc. -
        ''(A) In general. - In the case of a building which is part of
      a project described in subparagraph (B) -
          ''(i) section 42(c)(2)(B) of the Internal Revenue Code of
        1986 (as added by this section) shall not apply,
          ''(ii) such building shall be treated as not federally
        subsidized for purposes of section 42(b)(1)(A) of such Code,
          ''(iii) the eligible basis of such building shall be treated,
        for purposes of section 42(h)(4)(A) of such Code, as if it were
        financed by an obligation the interest on which is exempt from
        tax under section 103 of such Code and which is taken into
        account under section 146 of such Code, and
          ''(iv) the amendments made by section 803 (enacting section
        263A of this title, amending sections 48, 267, 312, 447, 464,
        and 471 of this title, and repealing sections 189, 278, and 280
        of this title) shall not apply.
        ''(B) Project described. - A project is described in this
      subparagraph if -
          ''(i) an urban development action grant application with
        respect to such project was submitted on September 13, 1984,
          ''(ii) a zoning commission map amendment related to such
        project was granted on July 17, 1985, and
          ''(iii) the number assigned to such project by the Federal
        Housing Administration is 023-36602.
        ''(C) Additional units eligible for credit. - In the case of a
      building to which subparagraph (A) applies and which is part of a
      project which meets the requirements of subparagraph (D), for
      each low-income unit in such building which is occupied by
      individuals whose income is 30 percent or less of area median
      gross income, one additional unit (not otherwise a low-income
      unit) in such building shall be treated as a low-income unit for
      purposes of such section 42.
        ''(D) Project described. - A project is described in this
      subparagraph if -
          ''(i) rents charged for units in such project are restricted
        by State regulations,
          ''(ii) the annual cash flow of such project is restricted by
        State law,
          ''(iii) the project is located on land owned by or ground
        leased from a public housing authority,
          ''(iv) construction of such project begins on or before
        December 31, 1986, and units within such project are placed in
        service on or before June 1, 1990, and
          ''(v) for a 20-year period, 20 percent or more of the
        residential units in such project are occupied by individuals
        whose income is 50 percent or less of area median gross income.
        ''(E) Maximum additional credit. - The maximum present value of
      additional credits allowable under section 42 of such Code by
      reason of subparagraph (C) shall not exceed 25 percent of the
      eligible basis of the building.
      ''(2) Additional allocation of housing credit ceiling. -
        ''(A) In general. - There is hereby allocated to each housing
      credit agency described in subparagraph (B) an additional housing
      credit dollar amount determined in accordance with the following
      table:
 
    ---------------------------------------------------------------------
    ---------------------------------------------------------------------
                                       The additional
    ''For calendar year:               allocation is:
    1987                               $3,900,000
    1988                               $7,600,000
    1989                               $1,300,000.
                     -------------------------------
        ''(B) Housing credit agencies described. - The housing credit
      agencies described in this subparagraph are:
          ''(i) A corporate governmental agency constituted as a public
        benefit corporation and established in 1971 under the
        provisions of Article XII of the Private Housing Finance Law of
        the State.
          ''(ii) A city department established on December 20, 1979,
        pursuant to chapter XVIII of a municipal code of such city for
        the purpose of supervising and coordinating the formation and
        execution of projects and programs affecting housing within
        such city.
          ''(iii) The State housing finance agency referred to in
        subparagraph (C), but only with respect to projects described
        in subparagraph (C).
        ''(C) Project described. - A project is described in this
      subparagraph if such project is a qualified low-income housing
      project which -
          ''(i) receives financing from a State housing finance agency
        from the proceeds of bonds issued pursuant to chapter 708 of
        the Acts of 1966 of such State pursuant to loan commitments
        from such agency made between May 8, 1984, and July 8, 1986,
        and
          ''(ii) is subject to subsidy commitments issued pursuant to a
        program established under chapter 574 of the Acts of 1983 of
        such State having award dates from such agency between May 31,
        1984, and June 11, 1985.
        ''(D) Special rules. -
          ''(i) Any building -
            ''(I) which is allocated any housing credit dollar amount
          by a housing credit agency described in clause (iii) of
          subparagraph (B), and
            ''(II) which is placed in service after June 30, 1986, and
          before January 1, 1987,
     shall be treated for purposes of the amendments made by this
        section as placed in service on January 1, 1987.
          ''(ii) Section 42(c)(2)(B) of the Internal Revenue Code of
        1986 shall not apply to any building which is allocated any
        housing credit dollar amount by any agency described in
        subparagraph (B).
        ''(E) All units treated as low income units in certain cases. -
      In the case of any building -
          ''(i) which is allocated any housing credit dollar amount by
        any agency described in subparagraph (B), and
          ''(ii) which after the application of subparagraph (D)(ii) is
        a qualified low-income building at all times during any taxable
        year,
      such building shall be treated as described in section
      42(b)(1)(B) of such Code and having an applicable fraction for
      such year of 1. The preceding sentence shall apply to any
      building only to the extent of the portion of the additional
      housing credit dollar amount (allocated to such agency under
      subparagraph (A)) allocated to such building.
      ''(3) Certain projects placed in service before 1987. -
        ''(A) In general. - In the case of a building which is part of
      a project described in subparagraph (B) -
          ''(i) section 42(c)(2)(B) of such Code shall not apply,
          ''(ii) such building shall be treated as placed in service
        during the first calendar year after 1986 and before 1990 in
        which such building is a qualified low-income building
        (determined after the application of clause (i)), and
          ''(iii) for purposes of section 42(h) of such Code, such
        building shall be treated as having allocated to it a housing
        credit dollar amount equal to the dollar amount appearing in
        the clause of subparagraph (B) in which such building is
        described.
        ''(B) Project described. - A project is described in this
      subparagraph if the code number assigned to such project by the
      Farmers' Home Administration appears in the following table:
 
    ---------------------------------------------------------------------
    ---------------------------------------------------------------------
                                       The housing credit
    ''The code number is:              dollar amount is:
    (i) 49284553664                    $16,000
    (ii) 4927742022446                 $22,000
    (iii) 49270742276087               $64,000
    (iv) 490270742387293               $48,000
    (v) 4927074218234                  $32,000
    (vi) 49270742274019                $36,000
    (vii) 51460742345074               $53,000.
                     -------------------------------
        ''(C) Determination of adjusted basis. - The adjusted basis of
      any building to which this paragraph applies for purposes of
      section 42 of such Code shall be its adjusted basis as of the
      close of the taxable year ending before the first taxable year of
      the credit period for such building.
        ''(D) Certain rules to apply. - Rules similar to the rules of
      subparagraph (E) of paragraph (2) shall apply for purposes of
      this paragraph.
      ''(4) Definitions. - For purposes of this subsection, terms used
    in such subsection which are also used in section 42 of the
    Internal Revenue Code of 1986 (as added by this section) shall have
    the meanings given such terms by such section 42.
      ''(5) Transitional rule. - In the case of any rehabilitation
    expenditures incurred with respect to units located in the
    neighborhood strategy area within the community development block
    grant program in Ft. Wayne, Indiana -
        ''(A) the amendments made by this section (enacting this
      section and amending sections 38 and 55 of this title) shall not
      apply, and
        ''(B) paragraph (1) of section 167(k) of the Internal Revenue
      Code of 1986, shall be applied as if it did not contain the
      phrase 'and before January 1, 1987'.
    The number of units to which the preceding sentence applies shall
    not exceed 150.''
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 38, 39, 45D, 55, 469,
    772, 774, 1400I of this title; title 12 section 1715z-22; title 15
    sections 632, 657d; title 42 sections 1437, 1437f, 1437z-7, 1485,
    1490p-2, 12745.
 

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