‘‘(B) APPLICABLE FRACTION.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), the term ‘applicable
fraction’ means the smaller of the unit
fraction or the floor space fraction.
‘‘(ii) UNIT FRACTION.—For purposes
of clause (i), the term ‘unit fraction’ means
the fraction—
‘‘(I) the numerator of which is
the number of low-to-moderate income
units in the building, and
‘‘(II) the denominator of which is
the number of all units (whether or
not occupied) in such building.
‘‘(iii) FLOOR SPACE FRACTION.—For
purposes of clause (i), the term ‘floor space
fraction’ means the fraction—
‘‘(I) the numerator of which is
the total floor space of the low-to-
moderate income units in such build-
ing, and
‘‘(II) the denominator of which is
the total floor space of all units
(whether or not occupied) in such
building.
‘‘(C) ELIGIBLE BASIS.—
‘‘(i) IN GENERAL.—The eligible basis
of any qualified low-to-moderate income
building for any taxable year shall be de-
termined under rules similar to the rules
under section 42(d), except that—
‘‘(I) the determination of the ad-
justed basis of any building shall be
made as of the beginning of the credit
period, and
‘‘(II) such basis shall include de-
velopment costs properly attributable
to such building.
‘‘(ii) 
DEVELOPMENT
COSTS.—For
purposes of clause (i)(II), the term ‘devel-
opment costs’ includes—
‘‘(I) site preparation costs,
‘‘(II) State and local impact fees,
‘‘(III) 
reasonable 
development
costs,
‘‘(IV) professional fees related to
basis items,
‘‘(V) construction financing costs
related to basis items other than land,
and
‘‘(VI) on-site and adjacent im-
provements required by State and
local governments.
‘‘(2) QUALIFIED
LOW-TO-MODERATE
INCOME
BUILDING.—The term ‘qualified low-to-moderate in-
come building’ means any building which is part of
a qualified low-to-moderate income development
project at all times during the period—
‘‘(A) beginning on the 1st day in the com-
pliance period on which such building is part of
such a development project, and
‘‘(B) ending on the last day of the compli-
ance period with respect to such building.
‘‘(d) REHABILITATION EXPENDITURES TREATED AS
SEPARATE NEW BUILDING.—Rehabilitation expenditures
paid or incurred by the taxpayer with respect to any build-
ing shall be treated for purposes of this section as a sepa-
rate new building under the rules of section 42(e).
‘‘(e) 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 the taxable year in which the
building (or a low-to-moderate income unit in such
building) is first sold by the taxpayer to a low-to
moderate income individual after being placed in
service.
‘‘(2) SPECIAL RULE FOR 1ST YEAR OF CREDIT
PERIOD.—
‘‘(A) IN GENERAL.—The credit allowable
under subsection (a) with respect to any build-
ing for the 1st taxable year of the credit period
shall be determined by substituting for the ap-
plicable 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 AL-
LOWED IN 11TH YEAR.—Any reduction by rea-
son of subparagraph (A) in the credit allowable
(without regard to subparagraph (A)) for the
1st taxable year of the credit period shall be al-
lowable under subsection (a) for the 1st taxable
year following the credit period.
‘‘(3) CREDIT PERIOD FOR EXISTING BUILDINGS
NOT
TO
BEGIN
BEFORE
REHABILITATION
CREDIT
ALLOWED.—The credit period for an existing build-
ing shall not begin before the 1st taxable year of the
credit period for rehabilitation expenditures with re-
spect to the building.
‘‘(f) QUALIFIED LOW-TO-MODERATE INCOME DE-
VELOPMENT PROJECT.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified low-to-
moderate income development project’ means any
development project of 1 or more for qualified low-
to-moderate income buildings located in an area if
40 percent or more of the residential units in such
development project are occupied and owned by indi-
viduals whose income is 100 percent or less of area
median gross income.
‘‘(2) TREATMENT OF UNITS OCCUPIED BY INDI-
VIDUALS WHOSE INCOMES RISE ABOVE LIMIT.—Not-
withstanding an increase in the income of the occu-
pants of a low-to-moderate income unit above the in-
come limitation applicable under paragraph (2) or
(3), such unit shall continue to be treated as a low-
to-moderate income unit if the income of such occu-
pants initially met such income limitation and such
unit continues to be so restricted.
‘‘(3) CERTAIN
RULES
MADE
APPLICABLE.—
Paragraphs (3), (5), (7), and (8) of section 42(g)
shall apply for purposes of determining whether any
development project is a qualified low-to-moderate
income development project.
‘‘(g) LIMITATION ON AGGREGATE CREDIT ALLOW-
ABLE WITH RESPECT TO DEVELOPMENT PROJECTS LO-
CATED IN A STATE.—
‘‘(1) CREDIT
MAY
NOT
EXCEED
CREDIT
AMOUNT ALLOCATED TO BUILDING.—The amount of
the credit determined under this section for any tax-
able year with respect to any building shall not ex-
ceed the housing credit dollar amount allocated to
such building under rules similar to the rules of sec-
tion 42(h)(1) (determined without regard to sub-
paragraph (D) thereof).
‘‘(2) ALLOCATED CREDIT AMOUNT TO APPLY
TO ALL TAXABLE YEARS ENDING DURING OR AFTER
CREDIT ALLOCATION YEAR.—Any housing credit dol-
lar amount allocated to any building for any cal-
endar year—
‘‘(A) shall apply to such building for all
taxable years in the credit 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 hous-
ing 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 cal-
endar year to such agency.
‘‘(B) STATE
CEILING
INITIALLY
ALLO-
CATED
TO
STATE
HOUSING
CREDIT
AGEN-
CIES.—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 and 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 pre-
ceding calendar year,
‘‘(ii) the greater of—
‘‘(I) $1.75 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 allo-
cated for such year. For purposes of clause (iii),
the amount of State housing credit ceiling re-
turned in the calendar year equals the housing
credit dollar amount previously allocated within
the State to any development project which fails
to meet the 10 percent test under section
42(h)(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-to-
moderate income development project within the
period required by this section or the terms of
the allocation or to any development project
with respect to which an allocation is canceled
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 hous-
ing credit carryover of a State for any cal-
endar year shall be assigned to the Sec-
retary for allocation among qualified
States for the succeeding calendar year.
‘‘(ii) UNUSED HOUSING CREDIT CAR-
RYOVER.—For purposes of this subpara-
graph, the unused housing credit carryover
of a State for any calendar year is the ex-
cess (if any) of the unused State housing
credit ceiling for such year (as defined in
subparagraph (C)(i)) over the excess (if
any) of —
‘‘(I) the unused State housing
credit ceiling for the year preceding
such year, over
‘‘(II) the aggregate housing cred-
it 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 un-
used 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 pur-
poses 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 con-
stitutional home rule city for any calendar
year shall be an amount which bears the
same ratio to the State housing credit ceil-
ing for such calendar year as—
‘‘(I) the population of such city,
bears to
‘‘(II) the population of the entire
State.
‘‘(ii) COORDINATION WITH OTHER AL-
LOCATIONS.—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
DIF-
FERENT
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, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment 
determined 
under 
section
1(f )(3) for such calendar year by sub-
stituting ‘calendar year 2001’ for ‘cal-
endar 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 mul-
tiple 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) PORTION
OF
STATE
CEILING
SET-ASIDE
FOR CERTAIN DEVELOPMENT 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 allo-
cated to development projects other than quali-
fied 
low-to-moderate 
income 
development
projects described in subparagraph (B).
‘‘(B) DEVELOPMENT PROJECTS INVOLVING
QUALIFIED
NONPROFIT
ORGANIZATIONS.—For
purposes of subparagraph (A), a qualified low-
to-moderate income development project is de-
scribed in this subparagraph if a qualified non-
profit organization is to materially participate
(within the meaning of section 469(h)) in the
development and operation of the development
project throughout the compliance period.
‘‘(C) QUALIFIED
NONPROFIT
ORGANIZA-
TION.—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
not to comply with subparagraph (A) of this
paragraph.
‘‘(5) BUILDINGS ELIGIBLE FOR CREDIT ONLY
IF MINIMUM LONG-TERM COMMITMENT TO LOW-TO-
MODERATE INCOME HOUSING.—
‘‘(A) IN GENERAL.—No credit shall be al-
lowed by reason of this section with respect to
any building for the taxable year unless a low-
to-moderate income housing commitment is in
effect as of the end of such taxable year.
‘‘(B) LOW-TO-MODERATE
INCOME
HOUS-
ING COMMITMENT.—For purposes of this para-
graph, the term ‘low-to-moderate income hous-
ing 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)(B)) for the building for each taxable
year in the compliance period will not be
less than the applicable fraction specified
in such agreement,
‘‘(ii) which allows individuals who
meet the income limitation applicable to
the building under subsection (f) (whether
prospective, present, or former occupants