person who was a related person (as de-
fined in section 42(d)(2)(D)(iii)) with re-
spect to the taxpayer as of the time pre-
viously placed in service.
‘‘(B) DENIAL
OF
DOUBLE
BENEFIT.—A
project shall not be treated as a qualified low-
income housing project if the taxpayer (or any
other person holding an interest in such
project) claims any benefits with respect to
such project under—
‘‘(i) section 42 (relating to low-income
housing credit),
‘‘(ii) the Low-Income Housing Preser-
vation and Resident Homeownership Act of
1990, or
‘‘(iii) the Emergency Low-Income
Housing Preservation Act of 1987 pursu-
ant to section 604 of the Cranston-Gon-
zalez National Affordable Housing Act.
‘‘(C) SPECIFIED
HUD
PROGRAMS.—For
purposes of subparagraph (A), a project is as-
sisted under a specified HUD program if such
project was financed by a loan or mortgage
which—
‘‘(i) is insured or held by the Sec-
retary of Housing and Urban Development
under section 221(d)(3) of the National
Housing Act and bears interest at a rate
determined under the proviso of section
221(d)(5) of such Act,
‘‘(ii) is insured, assisted, or held by
such Secretary or a State or State agency
under section 236 of such Act,
‘‘(iii) is insured or held by such Sec-
retary under section 221(d)(3) of such Act
and receiving assistance under section 8 of
the United States Housing Act of 1937, or
‘‘(iv) is insured or held by such Sec-
retary under section 221(d)(4) of the Na-
tional Housing Act.
‘‘(D) SUBSTANTIALLY REHABILITATED.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), a project is substan-
tially rehabilitated if the amount of the re-
habilitation expenditures with respect to
such project during the 24-month period
beginning on the date the taxpayer ac-
quired his interest in such project equals
or exceeds 10 percent of the aggregate ad-
justed bases (as of the beginning of such
24-month period) of the residential rental
property which is part of such project.
‘‘(ii) 
REHABILITATION
EXPENDI-
TURES.—
‘‘(I) IN GENERAL.—For purposes
of clause (i), the term ‘rehabilitation
expenditures’ means amounts charge-
able to capital account and incurred
for property (or additions or improve-
ments to property) of a character sub-
ject to the allowance for depreciation
in connection with the rehabilitation
of a building. Such term shall not in-
clude the cost of acquiring the build-
ing (or any interest therein).
‘‘(II) SPECIAL
RULE.—An ex-
penditure may be taken into account
only if it benefits the low-income units
in the project at least in proportion to
the total number of units in such
project which are low-income units.
For purposes of the preceding sen-
tence, the term ‘low-income units’
means units with respect to which the
requirements of subparagraph (A)(ii)
are met.
‘‘(E) 
INCOME
DETERMINATIONS.—For
purposes of subparagraph (A), income of indi-
viduals and area median gross income shall be
determined as provided in section 142(d)(2)(B).
‘‘(F) PURCHASE.—For purposes of sub-
paragraph (A), the term ‘purchase’ has the
meaning given to such term by section
179(d)(2); except that such term shall not in-
clude any acquisition where the basis of the
property acquired is determined in whole or in
part by reference to the basis of other property
held at any time by the person acquiring the
property.’’
SEC. 3. EXEMPTION FROM PASSIVE LOSS LIMITATIONS.
Section 469 of the Internal Revenue Code of 1986
(relating to limitation on passive activity losses and cred-
its) is amended—
(1) by redesignating subsections (j), (k), (l),
and (m) as subsections (k), (l), (m), and (n), respec-
tively, and
(2) by inserting after subsection (i) the follow-
ing new subsection:
‘‘(j) $50,000 OFFSET FOR CERTAIN LOW-INCOME
HOUSING ACTIVITIES.—
‘‘(1) IN
GENERAL.—Subsection (a) shall not
apply to that portion of the passive activity loss for
any taxable year which is attributable to rental ac-
tivities with respect to residential rental property
which is part of a qualified low-income housing
project (as defined in section 168(i)(14)).
‘‘(2) DOLLAR
LIMITATION.—The aggregate
amount to which paragraph (1) applies for any tax-
able year shall not exceed $50,000 ($25,000 in the
case if a separate return by a married individual).
‘‘(3) COORDINATION WITH SUBSECTION (i).—
This subsection shall be applied before the applica-
tion of subsection (i).’’
SEC. 4. MINIMUM TAX TREATMENT.
(a) GENERAL RULE.—Paragraph (1) of section 56(a)
of the Internal Revenue Code of 1986 (relating to depre-
ciation deduction) is amended—
(1) by redesignating subparagraphs (C) and
(D) as subparagraphs (D) and (E), respectively, and
(2) by inserting after subparagraph (B) the fol-
lowing new subparagraph:
‘‘(C) SPECIAL RULE FOR CERTAIN LOW-IN-
COME HOUSING PROJECTS.—In the case of resi-
dential rental property which is part of a quali-
fied low-income housing project (as defined in
section 168(i)(14))—
‘‘(i) the depreciation deduction with
respect to 50 percent of the adjusted basis
of such property shall be determined as
provided in subparagraph (A), and
‘‘(ii) the depreciation deduction with
respect to the other 50 percent of such ad-
justed basis shall be determined under the
method applicable in computing the regu-
lar tax.’’
(b) CONFORMING AMENDMENT.—Clause (i) of sec-
tion 56(g)(4)(A) of such Code is amended by inserting be-
fore the period at the end thereof the following: ‘‘or, if
applicable, the rules of subsection (a)(1)(C)’’.
SEC. 5. EFFECTIVE DATE.
The amendments made by this section shall apply to
property placed in service after December 31, 1993.
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