‘‘(4) EXTENDED USE PERIOD.—The term ‘ex-
tended use period’ means the period beginning on 
the date of sale and ending on the earlier of— 
‘‘(A) 30 years after the close of the sale, 
or 
‘‘(B) the date that the property is acquired 
by foreclosure (or instrument in lieu of fore-
closure). 
Subparagraph (B) shall not apply if the Secretary 
determines that the acquisition described therein is 
part of an arrangement with the owner a purpose of 
which is to terminate the extended use period. 
‘‘(d) ELIGIBLE
MULTIFAMILY
HOUSING
PROP-
ERTY.—For purposes of this section, the term ‘eligible 
multifamily housing property’ means any section 1250 
property (as defined in section 1250(c))— 
‘‘(1) which is assisted under section 221(d)(3) 
or section 236 of the National Housing Act (or fi-
nanced or assisted by direct loan or tax abatement 
under similar provisions of State or local laws) and 
with respect to which the owner is subject to the re-
strictions described in section 1039(b)(1)(B) (as in 
effect on the day before the date of the enactment 
of the Revenue Reconciliation Act of 1990),
‘‘(2) which is described in section 512(2)(B) of 
the Multifamily Assisted Housing Reform and Af-
fordability Act of 1997 (42 U.S.C. 1437f note), 
‘‘(3) with respect to which a loan is made or in-
sured under title V of the Housing Act of 1949, or 
‘‘(4) which either received an allocation of low- 
income housing tax credit pursuant to paragraph (1) 
of section 42(h) or was exempted from such para-
graph by paragraph (4) of such section. 
‘‘(e) PRESERVATION ENTITY.—For purposes of this 
section, the term ‘preservation entity’ means a housing 
credit agency or an organization approved by a housing 
credit agency that has the capacity and commitment to 
successfully acquire and preserve eligible multifamily 
housing property. An organization shall not be treated as 
a preservation entity with respect to any taxpayer if such 
organization is related (as defined in section 267) to such 
taxpayer. 
‘‘(f) RESPONSIBILITIES OF HOUSING CREDIT AGEN-
CY.—The housing credit agency (or an agent or other pri-
vate contractor of such agency) shall— 
‘‘(1) determine whether the preservation enti-
ty’s plan for rehabilitation (if any) and operation of 
the eligible multifamily housing property is viable for 
no less than 30 years,
‘‘(2) monitor the affordability and use restric-
tions for the eligible multifamily housing property, 
and 
‘‘(3) notify the Internal Revenue Service as to 
any portion of such property which is out of compli-
ance. 
‘‘(g) RECAPTURE FOR NONCOMPLIANCE.—If the Sec-
retary determines that all or a portion of the multifamily 
housing property acquired by a preservation entity in a 
transfer to which subsection (a) applied is out of compli-
ance with the requirements of this section, the preserva-
tion entity’s tax imposed under this chapter for the taxable 
year shall be increased by (or if such entity is not other-
wise subject to tax under this chapter, there shall be im-
posed on such entity a tax equal to) 12.5 percent of the 
amount which bears the same ratio to the amount certified 
under subsection (c)(3)(C) with respect to such property 
as such entity’s share of the portion of such property 
which is out of compliance bears to the entire property. 
The amount otherwise determined under this subsection 
(without regard to this sentence) shall be reduced by the 
product of 3.33% of such amount, multiplied by the num-
ber of years after the qualified sale or exchange that the 
property was in compliance with the requirements of this 
section.
‘‘(h) COORDINATION WITH SECTION 1250.—In the 
case of a qualified sale or exchange of eligible multifamily 
housing property a portion of the gain from which is treat-
ed as ordinary income under section 1250, such portion 
of the gain shall be excluded from gross income under sub-
section (a) before any remaining portion of such gain.’’. 
(b) APPLICATION OF 25 PERCENT CAPITAL GAINS 
RATE.—Clause (i) of section 1(h)(6)(A) of the Internal 
Revenue Code of 1986 is amended to read as follows: 
‘‘(i) the sum of— 
‘‘(I) the amount of long-term 
capital gain (not otherwise treated as 
ordinary income) which would be 
treated as ordinary income if section 
1250(b)(1) included all depreciation 
and the applicable percentage under 
section 1250(a) were 100 percent, and 
‘‘(II) the amount of long-term 
capital gain (not otherwise excluded 
from gross income) which would be 
excluded from gross income under sec-
tion 1203 if subsection (b) thereof did 
not apply, over’’. 
(c) CONFORMING AMENDMENTS.—