SECTION 1. 15-YEAR RECOVERY PERIOD FOR DEPRECIATION OF DESIGNATED LOW-
              INCOME BUILDINGS.

    (a) In General.--Subparagraph (E) of section 168(e)(3) of the 
Internal Revenue Code of 1986 (relating to 15-year property) is amended 
by striking ``and'' at the end of clause (vii), by striking the period 
at the end of clause (viii) and inserting ``, and'', and by adding at 
the end the following new clause:
                            ``(ix) any designated low-income 
                        building.''
    (b) Designated Low-Income Building.--Subsection (e) of section 168 
of such Code (relating to classification of property) is amended by 
adding at the end the following new paragraph:
            ``(8) Designated low-income building.--
                    ``(A) In general.--The term `designated low-income 
                building' means any building which is a qualified low-
                income building (as defined in section 42(c)(2)) if--
                            ``(i) no housing credit dollar amount has 
                        been allocated to such building under section 
                        42(h), and
                            ``(ii) the taxpayer has made the election 
                        described in subparagraph (B) with respect to 
                        such building.
                    ``(B) Election.--An election is described in this 
                subparagraph if made by the taxpayer at such time and 
                in such manner as the Secretary may prescribe. Any 
                election under the preceding sentence, once made, shall 
                be irrevocable.
                    ``(C) Coordination with low-income housing 
                credit.--No credit shall be allowed under section 42 
                with respect to any designated low-income building.
                    ``(D) Recapture of accelerated depreciation.--A 
                designated low-income building which ceases to be a 
                qualified low-income building (as defined in section 
                42(c)(2)) at any time during the recapture period 
                shall, under regulations prescribed by the Secretary, 
                be treated as though paragraph (3)(E)(iv) were never 
                enacted. The statutory period for the assessment of any 
                deficiency attributable to this subparagraph shall not 
                expire before the expiration of the 1-year period 
                beginning on the date the Secretary is notified by the 
                taxpayer (in such manner as the Secretary may 
                prescribe) of the change in status of such building. 
                For purposes of this subparagraph, the term `recapture 
                period' has the meaning given the term `compliance 
                period' under section 42(i)(1) except `20 taxable 
                years' shall be substituted for `15 taxable years'.''.
    (c) Alternative Depreciation System.--The table contained in 
section 168(g)(3)(B) of such Code is amended by inserting after the 
item relating to subparagraph (E)(viii) the following:

``(E)(ix)......................................................   20''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.

SEC. 2. QUALIFIED LOW-INCOME BUILDINGS NOT SUBJECT TO LIMITATION ON 
              PASSIVE ACTIVITY LOSSES AND CREDITS.

    (a) In General.--Section 469 of the Internal Revenue Code of 1986 
(relating to passive activity losses and credits limited) is amended by 
redesignating subsections (l) and (m) as subsections (m) and (n), 
respectively, and by inserting after subsection (k) the following new 
subsection:
    ``(l) Special Rule for Qualified Low-Income Buildings.--Subsection 
(a) shall not apply to that portion of the passive activity loss and 
passive activity credit for any taxable year which is attributable to 
any qualified low-income building (as defined in section 42(c)(2)).''.
    (b) Conforming Amendments.--
            (1) Paragraph (3) of section 469(i) of such Code is amended 
        by striking subparagraph (D) and by redesignating subparagraphs 
        (E) and (F) as subparagraphs (D) and (E), respectively.
            (2) Subparagraph (D) of section 469(i) of such Code (as so 
        redesignated) is amended to read as follows:
                    ``(D) Ordering rules to reflect exceptions and 
                separate phase-outs.--If subparagraph (B) or (C) 
                applies for a taxable year, paragraph (1) shall be 
                applied--
                            ``(i) first to the portion of the passive 
                        activity loss to which subparagraph (C) does 
                        not apply,
                            ``(ii) second to the portion of such loss 
                        to which subparagraph (C) applies,
                            ``(iii) third to the portion of the passive 
                        activity credit to which subparagraph (B) does 
                        not apply, and
                            ``(iv) fourth to the portion of such credit 
                        to which subparagraph (B) applies.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.
Output: Amends the Internal Revenue Code to: (1) allow a 15-year recovery period for depreciation of designated low-income buildings eligible for the low-income housing tax credit; and (2) waive limitations on passive activity losses and credits for such buildings.