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103D CONGRESS

1ST SESSION H. R. 1406

To amend the Internal Revenue Code of 1986 with respect to the treatment

of the rehabilitation credit under the passive activity limitation.

IN THE HOUSE OF REPRESENTATIVES

MARCH 18, 1993

Mrs. KENNELLY (for herself, Mr. SHAW, Mr. ANDREWS of Texas, Mr. MATSUI, and Mr. GEPHARDT) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 with respect

to the treatment of the rehabilitation credit under the

passive activity limitation.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. TREATMENT OF REHABILITATION CREDIT

4 UNDER PASSIVE ACTIVITY LIMITATIONS.

5 (a) GENERAL RULE.—Paragraphs (2) and (3) of sec6 tion 469(i) of the Internal Revenue Code of 1986 (relating

7 to $25,000 offset for rental real estate activities) are

8 amended to read as follows:

9 ‘‘(2) DOLLAR LIMITATIONS.—
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1 ‘‘(A) IN GENERAL.—Except as otherwise

2 provided in this paragraph, the aggregate

3 amount to which paragraph (1) applies for any

4 taxable year shall not exceed $25,000 reduced

5 (but not below zero) by 50 percent of the

6 amount (if any) by which the adjusted gross in7 come of the taxpayer for the taxable year ex8 ceeds $100,000.

9 ‘‘(B) PHASEOUT NOT APPLICABLE TO

10 LOW-INCOME HOUSING CREDIT.—In the case of

11 the portion of the passive activity credit for any

12 taxable year which is attributable to any credit

13 determined under section 42—

14 ‘‘(i) subparagraph (A) shall not apply,

15 and

16 ‘‘(ii) paragraph (1) shall not apply to

17 the extent that the deduction equivalent of

18 such portion exceeds—

19 ‘‘(I) 25,000, reduced by

20 ‘‘(II) the aggregate amount of

21 the passive activity loss (and the de22 duction equivalent of any passive ac23 tivity credit which is not so attrib24 utable and is not attributable to the

25 rehabilitation credit determined under
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1 section 47) to which paragraph (1)

2 applies after the application of sub3 paragraph (A).

4 ‘‘(C) $65,000 LIMIT FOR REHABILITATION

5 CREDITS.—In the case of the portion of the

6 passive activity credit for any taxable year

7 which is attributable to the rehabilitation credit

8 determined under section 47—

9 ‘‘(i) subparagraph (A) shall not apply,

10 and

11 ‘‘(ii) paragraph (1) shall not apply to

12 the extent that the deduction equivalent of

13 such portion exceeds—

14 ‘‘(I) $65,000, reduced by

15 ‘‘(II) the aggregate amount of

16 the passive activity loss (and the de17 duction equivalent of any passive ac18 tivity credit which is not so attrib19 utable) to which paragraph (1) applies

20 for the taxable year after the applica21 tion of subparagraphs (A) and (B).

22 ‘‘(3) ADJUSTED GROSS INCOME.—For purposes

23 of paragraph (2)(A), adjusted gross income shall be

24 determined without regard to—
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1 ‘‘(A) any amount includable in gross in2 come under section 86,

3 ‘‘(B) any amount excludable from gross in4 come under section 135,

5 ‘‘(C) any amount allowable as a deduction

6 under section 219, and

7 ‘‘(D) any passive activity loss.’’

8 (b) CONFORMING AMENDMENTS.—

9 (1) Subparagraph (B) of section 469(i)(4) of

10 such Code is amended to read as follows:

11 ‘‘(B) REDUCTION FOR SURVIVING

12 SPOUSE’S EXEMPTION.—For purposes of sub13 paragraph (A), the $25,000 amounts under

14 paragraph (2)(A) and (2)(B)(ii) and the

15 $65,000 amount under paragraph (2)(C)(ii)

16 shall each be reduced by the amount of the ex17 emption under paragraph (1) (determined with18 out regard to the reduction contained in para19 graph (2)(A)) which is allowable to the surviv20 ing spouse of the decedent for the taxable year

21 ending with or within the taxable year of the es22 tate.’’

23 (2) Subparagraph (A) of section 469(i)(5) of

24 such Code is amended by striking clauses (i), (ii),

25 and (iii) and inserting the following:
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1 ‘‘(i) ‘$12,500’ for ‘$25,000’ in sub2 paragraphs (A) and (B)(ii) of paragraph

3 (2),

4 ‘‘(ii) ‘$50,000’ for ‘$100,000’ in para5 graph (2)(A)’’, and

6 ‘‘(iii) ‘$32,500’ for ‘$65,000’ in para7 graph (2)(C)(ii).’’

8 (3) The subsection heading for subsection (i) of

9 section 469 of such Code is amended by striking

10 ‘‘$25,000’’.

11 (c) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to property placed in service after

13 December 31, 1992, in taxable years ending after such

14 date.

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