26 USC 469 - Passive activity losses and credits limited

1 So in original. Probably should be “or”.

Editorial Notes

Amendments

2021—Subsec. (i)(3)(E)(ii). Puspan. L. 117–2 substituted “85(c), 135, and 137” for “135 and 137”.

2020—Subsec. (i)(3)(E)(iii). Puspan. L. 116–260 struck out “222,” after “221,”.

2018—Subsecs. (c)(3)(B), (d)(2)(A)(ii). Puspan. L. 115–141, § 401(d)(1)(D)(ii), substituted “27” for “27(a)”.

Subsec. (i)(3)(C). Puspan. L. 115–141, § 401(d)(5)(B)(i), redesignated subpar. (D) as (C) and struck out former subpar. (C). Prior to amendment, text of subpar. (C) read as follows: “Subparagraph (A) shall not apply to any portion of the passive activity loss for any taxable year which is attributable to the commercial revitalization deduction under section 1400I.”

Subsec. (i)(3)(D). Puspan. L. 115–141, § 401(d)(5)(B)(i), (ii), redesignated subpar. (E) as (D) and amended it generally. Prior to amendment, subpar. related to ordering rules to reflect exceptions and separate phase-outs. Former subpar. (D) redesignated (C).

Subsec. (i)(3)(E), (F). Puspan. L. 115–141, § 401(d)(5)(B)(i), redesignated subpar. (F) as (E). Former subpar. (E) redesignated (D).

Subsec. (i)(6)(B). Puspan. L. 115–141, § 401(d)(5)(B)(iii)(I), substituted “or rehabilitation credit” for “, rehabilitation credit, or commercial revitalization deduction” in span.

Subsec. (i)(6)(B)(iii). Puspan. L. 115–141, § 401(d)(5)(B)(iii)(II)–(IV), struck out cl. (iii) which read as follows: “any deduction under section 1400I (relating to commercial revitalization deduction).”

2017—Subsec. (i)(3)(F)(iii). Puspan. L. 115–97, § 14202(span)(3), substituted “222, and 250” for “and 222”.

Puspan. L. 115–97, § 13305(span)(1), struck out “199,” after “sections”.

2014—Subsec. (e)(4). Puspan. L. 113–295, § 221(a)(41)(G), struck out “, 244,” after “section 243”.

Subsec. (m). Puspan. L. 113–295, § 221(a)(60)(A), struck out subsec. (m) which related to a phase-in of disallowance of losses and credits for interest held before the date of enactment of the Tax Reform Act of 1986.

2004—Subsec. (i)(3)(F)(iii). Puspan. L. 108–357, § 102(d)(5), inserted “199,” before “219,”.

Subsec. (k)(4). Puspan. L. 108–357, § 331(g), added par. (4).

2002—Subsec. (i)(3)(E)(ii) to (iv). Puspan. L. 107–147 added cls. (ii) to (iv) and struck out former cls. (ii) to (iv) which read as follows:

“(ii) second to the portion of the passive activity credit to which subparagraph (B) or (D) does not apply,

“(iii) third to the portion of such credit to which subparagraph (B) applies,

“(iv) fourth to the portion of such loss to which subparagraph (C) applies, and”.

2001—Subsec. (i)(3)(F)(iii). Puspan. L. 107–16 substituted “, 221, and 222” for “and 221”.

2000—Subsec. (i)(3)(C) to (F). Puspan. L. 106–554, § 1(a)(7) [title I, § 101(span)(1), (2)], added subpar. (C), redesignated former subpars. (C) to (E) as (D) to (F), respectively, and generally amended span and text of subpar. (E), as redesignated. Prior to amendment, text read as follows: “If subparagraph (B) or (C) applies for any taxable year, paragraph (1) shall be applied—

“(i) first to the passive activity loss,

“(ii) second to the portion of the passive activity credit to which subparagraph (B) or (C) does not apply,

“(iii) third to the portion of such credit to which subparagraph (B) applies, and

“(iv) then to the portion of such credit to which subparagraph (C) applies.”

Subsec. (i)(6)(B). Puspan. L. 106–554, § 1(a)(7) [title I, § 101(span)(3)(B)], substituted “, rehabilitation credit, or commercial revitalization deduction” for “or rehabilitation credit” in span.

Subsec. (i)(6)(B)(iii). Puspan. L. 106–554, § 1(a)(7) [title I, § 101(span)(3)(A)], added cl. (iii).

1998—Subsec. (i)(3)(E)(iii). Puspan. L. 105–277 amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: “any amount allowable as a deduction under section 219, and”.

1996—Subsec. (c)(3)(B). Puspan. L. 104–188, § 1704(d)(1), inserted at end “If the preceding sentence applies to the net income from any property for any taxable year, any credits allowable under subpart B (other than section 27(a)) or D of part IV of subchapter A for such taxable year which are attributable to such property shall be treated as credits not from a passive activity to the extent the amount of such credits does not exceed the regular tax liability of the taxpayer for the taxable year which is allocable to such net income.”

Subsec. (g)(1)(A). Puspan. L. 104–188, § 1704(e)(1), reenacted span without change and amended text generally. Prior to amendment, text read as follows: “If all gain or loss realized on such disposition is recognized, the excess of—

“(i) the sum of—

“(I) any loss from such activity for such taxable year (determined after application of subsection (span)), plus

“(II) any loss realized on such disposition, over

“(ii) net income or gain for such taxable year from all passive activities (determined without regard to losses described in clause (i)),

shall be treated as a loss which is not from a passive activity.”

Subsec. (i)(3)(E)(ii). Puspan. L. 104–188, § 1807(c)(4), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “the amount excludable from gross income under section 135,”.

1993—Subsec. (c)(2). Puspan. L. 103–66, § 13143(span)(1), substituted “Except as provided in paragraph (7), the” for “The”.

Subsec. (c)(7). Puspan. L. 103–66, § 13143(a), added par. (7).

Subsec. (i)(3)(E)(iv). Puspan. L. 103–66, § 13143(span)(2), inserted “or any loss allowable by reason of subsection (c)(7)” after “loss”.

1990—Subsec. (i)(3)(B), (6)(B)(ii). Puspan. L. 101–508, § 11813(span)(16)(A), substituted “rehabilitation credit determined under section 47” for “rehabilitation investment credit (within the meaning of section 48(o))”.

Subsec. (k)(1). Puspan. L. 101–508, § 11813(span)(16)(B), substituted “rehabilitation credit determined under section 47” for “rehabilitation investment credit (within the meaning of section 48(o))”.

Subsec. (m)(3)(A). Puspan. L. 101–508, § 11704(a)(6), substituted “pre-enactment” for “preenactment”.

1989—Subsec. (i)(3)(B), (C). Puspan. L. 101–239 added subpars. (B) and (C) and struck out former subpars. (B) and (C) which read as follows:

“(B) Special phase-out of low-income housing and rehabilitation credits.—In the case of any portion of the passive activity credit for any taxable year which is attributable to any credit to which paragraph (6)(B) applies, subparagraph (A) shall be applied by substituting ‘$200,000’ for ‘$100,000’.

“(C) Ordering rule to reflect separate phase-outs.—If subparagraph (B) applies for any taxable year, paragraph (1) shall be applied—

“(i) first to the passive activity loss,

“(ii) second to the portion of the passive activity credit to which subparagraph (B) does not apply, and

“(iii) then to the portion of such credit to which subparagraph (B) applies.”

Subsec. (i)(3)(D), (E). Puspan. L. 101–239 added subpar. (D) and redesignated former subpar. (D) as (E).

1988—Subsec. (e)(1)(A)(ii). Puspan. L. 100–647, § 1005(a)(1), inserted “not derived in the ordinary course of a trade or business which is” after “gain or loss”.

Subsec. (g)(1)(A). Puspan. L. 100–647, § 1005(a)(2)(A), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “If all gain or loss realized on such disposition is recognized, any loss from such activity which has not previously been allowed as a deduction (and in the case of a passive activity for the taxable year, any loss realized on such disposition) shall not be treated as a passive activity loss and shall be allowable as a deduction against income in the following order:

“(i) Income or gain from the passive activity for the taxable year (including any gain recognized on the disposition).

“(ii) Net income or gain for the taxable year from all passive activities.

“(iii) Any other income or gain.”

Subsec. (g)(1)(C). Puspan. L. 100–647, § 1005(a)(2)(B), substituted “Income from prior years” for “Coordination with section 1211” in span and amended text generally. Prior to amendment, text read as follows: “In the case of any loss realized on the disposition of an interest in a passive activity, section 1211 shall be applied before subparagraph (A) is applied.”

Subsec. (g)(2)(A). Puspan. L. 100–647, § 1005(a)(3), substituted “paragraph (1)(A)” for “paragraph (1)” and “to losses described in paragraph (1)(A)” for “to such losses”.

Subsec. (g)(3). Puspan. L. 100–647, § 1005(a)(4), substituted “(realized or to be realized” for “realized (or to be realized)” and “is completed)” for “is completed”.

Subsec. (h)(4). Puspan. L. 100–647, § 1005(a)(5), inserted “only” before “if”.

Subsec. (i)(1). Puspan. L. 100–647, § 1005(a)(6), substituted “in such taxable year (and if any portion of such loss or credit arose in another taxable year, in such other taxable year)” for “in the taxable year in which such portion of such loss or credit arose”.

Subsec. (i)(3)(D). Puspan. L. 100–647, § 6009(c)(3), added cl. (ii) and redesignated former cls. (ii) and (iii) as (iii) and (iv), respectively.

Subsec. (i)(6)(C). Puspan. L. 100–647, § 1005(a)(7), substituted “Except as provided in regulations, no” for “No”.

Subsec. (j)(6)(A). Puspan. L. 100–647, § 1005(a)(8), inserted “with respect to which a deduction has not been allowed by reason of subsection (a)” after “to such interest”.

Subsec. (j)(10), (11). Puspan. L. 100–647, § 1005(a)(9), added pars. (10) and (11).

Subsec. (j)(12). Puspan. L. 100–647, § 1005(a)(11), added par. (12).

Subsec. (k)(3). Puspan. L. 100–647, § 2004(g), added par. (3).

Subsec. (m). Puspan. L. 100–647, § 1005(a)(12), substituted “interest” for “interests” in span.

Subsec. (m)(1). Puspan. L. 100–647, § 1005(a)(12), added par. (1) and struck out former par. (1) which read as follows: “In the case of any passive activity loss or credit for any taxable year beginning in calendar years 1987 through 1990 which—

“(A) is attributable to a pre-enactment interest, but

“(B) is not attributable to a carryforward to such taxable year of any loss or credit which was disallowed under this section for a preceding taxable year,

there shall be disallowed under subsection (a) only the applicable percentage of the amount which (but for this subsection) would have been disallowed under subsection (a) for such taxable year.”

Subsec. (m)(2). Puspan. L. 100–647, § 1005(a)(12), added par. (2) and struck out former par. (2) which resulted in substituting “65”, “40”, “20”, and “10” for “35”, “60”, “80”, and “90”, respectively, in second column.

Subsec. (m)(3)(A). Puspan. L. 100–647, § 1005(a)(12), added subpar. (A) and struck out former subpar. (A) which read as follows: “The portion of the passive activity loss for any taxable year which is attributable to pre-enactment interests shall be equal to the lesser of—

“(i) the passive activity loss for such taxable year, or

“(ii) the passive activity loss for such taxable year determined by taking into account only pre-enactment interests.

For purposes of this subparagraph, the deduction equivalent (within the meaning of subsection (j)(5)) of a passive activity credit shall be taken into account.”

1987—Subsecs. (k) to (m). Puspan. L. 100–203 added subsec. (k) and redesignated former subsecs. (k) and (l) as (l) and (m), respectively.

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Amendment by Puspan. L. 117–2 applicable to taxable years beginning after Dec. 31, 2019, see section 9042(c) of Puspan. L. 117–2, set out as a note under section 74 of this title.

Effective Date of 2020 Amendment

Amendment by Puspan. L. 116–260 applicable to taxable years beginning after Dec. 31, 2020, see section 104(c) of div. EE of Puspan. L. 116–260, set out as a note under section 25A of this title.

Effective Date of 2017 Amendment

Amendment by section 13305(span)(1) of Puspan. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, except as provided by transition rule, see section 13305(c) of Puspan. L. 115–97, set out as a note under section 74 of this title.

Amendment by section 14202(span)(3) of Puspan. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 14202(c) of Puspan. L. 115–97, set out as a note under section 172 of this title.

Effective Date of 2014 Amendment

Amendment by section 221(a)(41)(G) of Puspan. L. 113–295 not applicable to preferred stock issued before Oct. 1, 1942 (determined in the same manner as under section 247 of this title as in effect before its repeal by Puspan. L. 113–295), see section 221(a)(41)(K) of Puspan. L. 113–295, set out as a note under section 172 of this title.

Except as otherwise provided in section 221(a) of Puspan. L. 113–295, amendment by Puspan. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(span) of Puspan. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2004 Amendment

Amendment by section 102(d)(5) of Puspan. L. 108–357 applicable to taxable years beginning after Dec. 31, 2004, see section 102(e) of Puspan. L. 108–357, set out as a note under section 56 of this title.

Puspan. L. 108–357, title III, § 331(h), Oct. 22, 2004, 118 Stat. 1477, provided that: “The amendments made by this section [amending this section and sections 851 and 7704 of this title] shall apply to taxable years beginning after the date of the enactment of this Act [Oct. 22, 2004].”

Effective Date of 2002 Amendment

Amendment by Puspan. L. 107–147 effective as if included in the provisions of the Community Renewal Tax Relief Act of 2000 [H.R. 5662, as enacted by Puspan. L. 106–554], to which such amendment relates, see section 412(e) of Puspan. L. 107–147, set out as a note under section 151 of this title.

Effective Date of 2001 Amendment

Amendment by Puspan. L. 107–16 applicable to payments made in taxable years beginning after Dec. 31, 2001, see section 431(d) of Puspan. L. 107–16, set out as a note under section 62 of this title.

Effective Date of 1998 Amendment

Amendment by Puspan. L. 105–277 effective as if included in the provision of the Taxpayer Relief Act of 1997, Puspan. L. 105–34, to which such amendment relates, see section 4003(l) of Puspan. L. 105–277, set out as a note under section 86 of this title.

Effective Date of 1996 Amendment

Puspan. L. 104–188, title XVII, § 1704(d)(2), Aug. 20, 1996, 110 Stat. 1878, provided that: “The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after December 31, 1986.”

Puspan. L. 104–188, title XVII, § 1704(e)(2), Aug. 20, 1996, 110 Stat. 1879, provided that: “The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after December 31, 1986.”

Amendment by section 1807(c)(4) of Puspan. L. 104–188 applicable to taxable years beginning after Dec. 31, 1996, see section 1807(e) of Puspan. L. 104–188, set out as an Effective Date note under section 23 of this title.

Effective Date of 1993 Amendment

Puspan. L. 103–66, title XIII, § 13143(c), Aug. 10, 1993, 107 Stat. 441, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1993.”

Effective Date of 1990 Amendment

Amendment by section 11813(span)(16) of Puspan. L. 101–508 applicable to property placed in service after Dec. 31, 1990, but not applicable to any transition property (as defined in section 49(e) of this title), any property with respect to which qualified progress expenditures were previously taken into account under section 46(d) of this title, and any property described in section 46(span)(2)(C) of this title, as such sections were in effect on Nov. 4, 1990, see section 11813(c) of Puspan. L. 101–508, set out as a note under section 45K of this title.

Effective Date of 1989 Amendment

Puspan. L. 101–239, title VII, § 7109(span), Dec. 19, 1989, 103 Stat. 2322, provided that:

“(1)In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to property placed in service after December 31, 1989, in taxable years ending after such date.

“(2)Special rule where interest held in pass-thru entity.—In the case of a taxpayer who holds an indirect interest in property described in paragraph (1), the amendments made by this section shall apply only if such interest is acquired after December 31, 1989.”

Effective Date of 1988 Amendment

Amendment by section 1005(a)(1)–(9), (11), (12) of Puspan. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Puspan. L. 99–514, to which such amendment relates, see section 1019(a) of Puspan. L. 100–647, set out as a note under section 1 of this title.

Amendment by section 2004(g) of Puspan. L. 100–647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Puspan. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Puspan. L. 100–647, set out as a note under section 56 of this title.

Amendment by section 6009(c)(3) of Puspan. L. 100–647 applicable to taxable years beginning after Dec. 31, 1989, see section 6009(d) of Puspan. L. 100–647, set out as a note under section 86 of this title.

Effective Date of 1987 Amendment

Amendment by Puspan. L. 100–203 effective as if included in the amendments made by section 501 of the Tax Reform Act of 1986, Puspan. L. 99–514, see section 10212(c) of Puspan. L. 100–203, set out as a note under section 58 of this title.

Effective Date

Puspan. L. 99–514, title V, § 501(c), Oct. 22, 1986, 100 Stat. 2241, as amended by Puspan. L. 100–647, title I, § 1005(a)(10), title IV, § 4003(span)(2), Nov. 10, 1988, 102 Stat. 3388, 3644, provided that:

“(1)In general.—The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 1986.

“(2)Special rule for carryovers.—The amendments made by this section shall not apply to any loss, deduction, or credit carried to a taxable year beginning after December 31, 1986, from a taxable year beginning before January 1, 1987.

“[(3) Repealed. Puspan. L. 100–647, title IV, § 4003(span)(2), Nov. 10, 1988, 102 Stat. 3644.]

“(4)Income from sales of passive activities in taxable years beginning before january 1, 1987.—If—

“(A) gain is recognized in a taxable year beginning after December 31, 1986, from a sale or exchange of an interest in an activity in a taxable year beginning before January 1, 1987, and

“(B) such gain would have been treated as gain from a passive activity had section 469 of the Internal Revenue Code of 1986 (as added by this section) been in effect for the taxable year in which the sale or exchange occurred and for all succeeding taxable years,

then such gain shall be treated as gain from a passive activity for purposes of such section.”

Savings Provision

Amendment by section 401(d)(5)(B)(i)–(iii) of Puspan. L. 115–141 not applicable to certain qualified community assets acquired, wages paid or incurred, qualified revitalization buildings placed in service, or property acquired before Jan. 1, 2010, see section 401(d)(5)(C) of Puspan. L. 115–141, set out as a note under former section 1400E of this title.

For provisions that nothing in amendment by Puspan. L. 115–141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Puspan. L. 115–141, set out as a note under section 23 of this title.

For provisions that nothing in amendment by section 11813(span)(16) of Puspan. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(span) of Puspan. L. 101–508, set out as a note under section 45K of this title.

Amounts Attributable to Activities Subject to Limitations Under Section 469 Treated as Deduction Allocable to Such Activity

Puspan. L. 100–647, title I, § 1005(c)(11), Nov. 10, 1988, 102 Stat. 3392, provided that:

“If—

“(A) any amount was disallowed as a deduction under section 163(d) of the Internal Revenue Code of 1954 [now 1986] (as in effect on the day before the date of the enactment of the Reform Act [Oct. 22, 1986]),

“(B) such amount would (but for this paragraph) be treated as investment interest paid or accrued by the taxpayer in the taxpayer’s first taxable year beginning after December 31, 1986, and

“(C) the taxpayer makes an election under this paragraph at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe,

to the extent such amount is attributable to an activity subject to the limitations of section 469 of the 1986 Code, such amount shall not be treated as investment interest but shall be treated as a deduction allocable to such activity for such first taxable year. [Former] Subsection (m) of section 469 of the 1986 Code and section 501(c)(2) of the Reform Act [Puspan. L. 99–514, set out as an Effective Date note above] shall not apply to any amount so treated.”

Transitional Rule for Low-Income Housing

Puspan. L. 99–514, title V, § 502, Oct. 22, 1986, 100 Stat. 2241, as amended by Puspan. L. 99–509, title VIII, § 8073(a), Oct. 21, 1986, 100 Stat. 1965; Puspan. L. 100–647, title I, § 1005(span), Nov. 10, 1988, 102 Stat. 3389, provided that:

“(a)General Rule.—Any loss sustained by a qualified investor with respect to an interest in a qualified low-income housing project for any taxable year in the relief period shall not be treated as a loss from a passive activity for purposes of section 469 of the Internal Revenue Code of 1986.

“(span)Relief Period.—For purposes of subsection (a), the term ‘relief period’ means the period beginning with the taxable year in which the investor made his initial investment in the qualified low-income housing project and ending with whichever of the following is the earliest—

“(1) the 6th taxable year after the taxable year in which the investor made his initial investment,

“(2) the 1st taxable year after the taxable year in which the investor is obligated to make his last investment, or

“(3) the taxable year preceding the 1st taxable year for which such project ceased to be a qualified low-income housing project.

“(c)Qualified Low-Income Housing Project.—For purposes of this section, the term ‘qualified low-income housing project’ means any project if—

“(1) such project meets the requirements of clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B) [of the Internal Revenue Code of 1986] as of the date placed in service and for each taxable year thereafter which begins after 1986 and for which a passive loss may be allowable with respect to such project,

“(2) the operator certifies to the Secretary of the Treasury or his delegate that such project met the requirements of paragraph (1) on the date of the enactment of this Act [Oct. 22, 1986] (or, if later, when placed in service) and annually thereafter,

“(3) such project is constructed or acquired pursuant to a binding written contract entered into on or before August 16, 1986, and

“(4) such project is placed in service before January 1, 1989.

“(d)Qualified Investor.—For purposes of this section—

“(1)In general.—The term ‘qualified investor’ means any natural person who holds (directly or through 1 or more entities) an interest in a qualified low-income housing project—

“(A) if—

“(i) in the case of a project placed in service on or before August 16, 1986, such person held an interest in such project on August 16, 1986, and such person made his initial investment after December 31, 1983, or

“(ii) in the case of a project placed in service after August 16, 1986, such person made his initial investment after December 31, 1983, and such person held an interest in such project on December 31, 1986, and

“(B) if such investor is required to make payments after December 31, 1986, of 50 percent or more of the total original obligated investment for such interest.

For purposes of subparagraph (A), a person shall be treated as holding an interest on August 16, 1986, or December 31, 1986, if on such date such person had a binding contract to acquire such interest.

“(2)Treatment of estates.—The estate of a decedent shall succeed to the treatment under this section of the decedent but only with respect to the 1st 2 taxable years of such estate ending after the date of the decedent’s death.

“(3)Special rule for certain partnerships.—In the case of any property which is held by a partnership—

“(A) which placed such property in service on or after December 31, 1985, and before August 17, 1986, and continuously held such property through the close of the taxable year for which the determination is being made, and

“(B) which was not treated as a new partnership or as terminated at any time on or after the date on which such property was placed in service and through the close of the taxable year for which the determination is being made,

paragraph (1)(A)(i) shall be applied by substituting ‘December 31, 1988’ for ‘August 16, 1986’ the 2nd place it appears.

“(4)Special rule for certain rural housing.—In the case of any interest in a qualified low-income housing project which—

“(A) is assisted under section 515 of the Housing Act of 1949 [42 U.S.C. 1485] (relating to the Farmers’ Home Administration Program), and

“(B) is located in a town with a population of less than 10,000 and which is not part of a metropolitan statistical area,

paragraph (1)(B) shall be applied by substituting ‘35 percent’ for ‘50 percent’ and subsection (span)(1) shall be applied by substituting ‘5th taxable year’ for ‘6th taxable year’. The preceding sentence shall not apply to any interest unless, on December 31, 1986, at least one-half of the number of payments required with respect to such interest remain to be paid.

“(e)Special Rules.—

“(1)Where more than 1 building in project.—If there is more than 1 building in any project, the determination of when such project is placed in service shall be based on when the 1st building in such project is placed in service.

“(2)Only cash and other property taken into account.—In determining the amount any person invests in (or is obligated to invest in) any interest, only cash and other property shall be taken into account.

“(3)Coordination with credit.—No low-income housing credit shall be determined under section 42 of the Internal Revenue Code of 1986 with respect to any project with respect to which any person has been allowed any benefit under this section.”

[Puspan. L. 99–509, title VIII, § 8073(span), Oct. 21, 1986, 100 Stat. 1965, provided that: “The amendment made by subsection (a) [amending section 502 of Puspan. L. 99–514, set out above] shall take effect as if included in section 502 of the Tax Reform Act of 1986 on the date of its enactment [Oct. 22, 1986].”]