(3) to deny business-related tax deductions
claimed by owners of low-income rental housing
units who consistently violate State and local health,
safety, and building codes by maintaining sub-
standard rental housing units, and
(4) to exempt from the passive loss limitation
certain deductions relating to low-income housing.
SEC. 3. IMPROVEMENTS IN LOW-INCOME HOUSING CREDIT.
(a) PERMANENT EXTENSION.—Section 42 of the In-
ternal Revenue Code of 1986 is amended by striking sub-
section (o) (relating to termination).
(b) INCREASE
IN CREDIT
FOR FEDERALLY SUB-
SIDIZED NEW BUILDINGS.—Paragraph (1) of section
42(b) of such Code (relating to value of low-income hous-
ing credit) is amended—
(1) in subparagraph (A), by striking ‘‘which are
not federally subsidized for the taxable year’’, and
(2) in subparagraph (B), by striking the dash
and all that follows through ‘‘(ii)’’.
(c) EXEMPTION FROM PASSIVE LOSS LIMITATION.—
Clause (i) of section 469(d)(2)(A) of such Code (relating
to passive activity losses) is amended by inserting ‘‘(other
than section 42)’’ after ‘‘subpart D’’.
(d) EFFECTIVE DATES.—
(1) EXTENSION.—The amendment made by
subsection (a) shall apply to calendar years after
1991.
(2) MODIFICATIONS.—The amendments made
by subsections (b) and (c) shall apply to property
placed in service after December 31, 1992.
SEC. 4. ACCELERATED DEPRECIATION SCHEDULE FOR
QUALIFIED RENTAL HOUSING.
(a) IN GENERAL.—Paragraph (1) of section 168(c)
of the Internal Revenue Code of 1986 (relating to depre-
ciation recovery period) is amended by striking the item
relating to residential rental property and inserting the
following:
‘‘Low-income residential rental property ..................................
20 years
Other residential rental property ........................................
27.5 years’’.
(b) DEFINITIONS.—Paragraph (2) of section 168(e)
of such Code (relating to classification of property for de-
preciation) is amended by adding at the end the following
new subparagraphs:
‘‘(C) LOW-INCOME
RESIDENTIAL
RENTAL
PROPERTY.—The term ‘low-income residential
rental property’ means residential rental prop-
erty which is a qualified low-income housing
project (within the meaning of section 42(g)).
‘‘(D) OTHER RESIDENTIAL RENTAL PROP-
ERTY.—The term ‘other residential rental prop-
erty’ means residential rental property which is
not low-income residential rental property.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 1992.
SEC. 5. DISALLOWANCE OF DEDUCTIONS FOR EXPENSES
RELATING TO SUBSTANDARD RENTAL HOUS-
ING.
(a) IN GENERAL.—Part IX of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items not deductible) is amended by adding at the end
the following new section:
‘‘SEC. 280I. EXPENSES RELATING TO SUBSTANDARD RENT-
AL HOUSING.
‘‘(a) GENERAL RULE.—No deduction (including any
deduction for depreciation or amortization) shall be al-
lowed under this chapter for any expense relating to a
rental dwelling unit by any taxpayer who derives rental
income from the unit, unless the unit is suitable for occu-
pancy.
‘‘(b) SUITABILITY FOR OCCUPANCY.—For purposes
of subsection (a), the suitability of a rental dwelling unit
for occupancy shall be determined under regulations pre-
scribed by the Secretary taking into account local health,
safety, and building codes.’’
(b) CONFORMING AMENDMENT.—The table of sec-
tions for such part IX is amended by adding at the end
the following new item:
‘‘Sec. 280I. Expenses relating to substandard rental housing.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 1992.
SEC. 6. EXEMPTION FROM PASSIVE LOSS LIMITATION FOR
CERTAIN DEDUCTIONS RELATING TO QUALI-
FIED RENTAL HOUSING.
(a) IN GENERAL.—Subsection (e) of section 469 of
the Internal Revenue Code of 1986 (relating to special
rules for determining income or loss from a passive activ-
ity) is amended by adding at the end the following new
paragraph:
‘‘(5) SPECIAL RULES FOR DEDUCTIONS ALLOW-
ABLE FOR TAXES, INTEREST, AND TRADE OR BUSI-
NESS EXPENSES WITH RESPECT TO RENTAL REAL
ESTATE ACTIVITIES IN WHICH TAXPAYER ACTIVELY
OR MATERIALLY PARTICIPATES.—
‘‘(A) IN
GENERAL.—Subsection (a) shall
not apply to any amount allowable as a deduc-
tion under section 162, 163, or 164 (deter-
mined without regard to this section) for
amounts paid during the taxable year with re-
spect to qualified rental real estate activities of
the taxpayer.
‘‘(B) APPLICATION OF SECTION TO OTHER
DEDUCTIONS.—The income from qualified rent-
al real estate activities of the taxpayer shall be
reduced (but not below zero) by the amount to
which subsection (a) does not apply by reason
of subparagraph (A) for purposes of determin-
ing whether subsection (a) applies to other de-
ductions with respect to such activities.
‘‘(C) QUALIFIED
RENTAL
REAL
ESTATE
ACTIVITY.—For purposes of this paragraph, the
term ‘qualified real estate activity’ means any
rental real estate activity relating to a qualified
low-income housing project (within the meaning
of section 42(g)) with respect to which during
the taxable year the taxpayer—
‘‘(i) actively participates (within the
meaning of subsection (i)(6)), or
‘‘(ii) materially participates (within
the meaning of subsection (h)).’’
(b) TECHNICAL AMENDMENT.—Paragraph (4) of
section 469(j) of such Code (relating to allocation of pas-
sive activity loss and credit) is amended by striking ‘‘and
the passive activity credit (and the $25,000 amount under
subsection (i))’’ and inserting the following: ‘‘, the passive
activity credit, the $25,000 amount under subsection (i),
and the amount to which subsection (a) does not apply
by reason of subsection (e)(5)(A)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1992.
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