text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Low-Income Housing Preservation Act 
  of 1995''.
  
  SEC. 2. 15-YEAR RECOVERY PERIOD.
  
      (a) General Rule.--Subsection (c) of section 168 of the Internal 
  Revenue Code of 1986 (relating to applicable recovery period) is 
  amended--
              (1) by striking ``as provided in paragraph (2)'' in 
          paragraph (1) and inserting ``as otherwise provided in this 
          subsection'',
              (2) by redesignating paragraph (2) as paragraph (3), and
              (3) by inserting after paragraph (1) the following new 
          paragraph:
              ``(2) Low-income housing.--In the case of any residential 
          rental property which is part of a qualified low-income housing 
          project (as defined in subsection (i)(14)), the applicable 
          recovery period shall be 15 years.''
      (b) Qualified Low-Income Housing Project.--Subsection (i) of 
  section 168 of such Code is amended by adding at the end the following 
  new paragraph:
              ``(14) Qualified low-income housing project.--
                      ``(A) In general.--For purposes of this section, 
                  the term `qualified low-income housing project' means 
                  any project for residential rental property if--
                              ``(i) such project is assisted under a 
                          specified HUD program,
                              ``(ii) 50 percent or more of the 
                          residential units in such project--
                                      ``(I) in the case of a project 
                                  described in clause (i) or (ii) of 
                                  subparagraph (C), are occupied by 
                                  individuals whose income (at the time 
                                  of their initial occupancy in such 
                                  project) was less than 80 percent of 
                                  the area median gross income (as of 
                                  such time), or
                                      ``(II) in the case of a project 
                                  described in clause (iii) or (iv) of 
                                  subparagraph (C), are units with 
                                  respect to which rental assistance is 
                                  provided under section 8 of the United 
                                  States Housing Act of 1937 (42 U.S.C. 
                                  1437f),
                              ``(iii) such project was originally placed 
                          in service at least 10 years before the 
                          taxpayer acquired an interest in such project,
                              ``(iv) such project is substantially 
                          rehabilitated,
                              ``(v) the taxpayer acquired such taxpayer's 
                          interest in such project by purchase, and
                              ``(vi) such project was not previously 
                          placed in service by the taxpayer or by any 
                          person who was a related person (as defined in 
                          section 42(d)(2)(D)(iii)) with respect to the 
                          taxpayer as of the time previously 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) section 47 (relating to 
                          rehabilitation credit),
                              ``(iii) the Low-Income Housing Preservation 
                          and Resident Homeownership Act of 1990 (12 
                          U.S.C. 4101 et seq.), or
                              ``(iv) the Emergency Low-Income Housing 
                          Preservation Act of 1987 pursuant to section 
                          604 of the Cranston-Gonzalez National 
                          Affordable Housing Act (12 U.S.C. 4101 note).
                      ``(C) Specified hud programs.--For purposes of 
                  subparagraph (A), a project is assisted under a 
                  specified HUD program if such project was financed by a 
                  loan or mortgage which--
                              ``(i) is insured or held by the Secretary 
                          of Housing and Urban Development under section 
                          221(d)(3) of the National Housing Act (12 
                          U.S.C. 1715l(d)(3)) 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 (12 U.S.C. 1715z-1),
                              ``(iii) is insured or held by such 
                          Secretary under section 221(d)(3) of such Act 
                          and receiving assistance under section 8 of the 
                          United States Housing Act of 1937 (42 U.S.C. 
                          1437f), or
                              ``(iv) is insured or held by such Secretary 
                          under section 221(d)(4) of the National Housing 
                          Act.
                      ``(D) Substantially rehabilitated.--
                              ``(i) In general.--For purposes of 
                          subparagraph (A), a project is substantially 
                          rehabilitated if the amount of the 
                          rehabilitation expenditures with respect to 
                          such project during the 24-month period 
                          beginning on the date the taxpayer acquired his 
                          interest in such project equals or exceeds 10 
                          percent of the aggregate adjusted bases (as of 
                          the beginning of such 24-month period) of the 
                          residential rental property which is part of 
                          such project.
                              ``(ii) Rehabilitation expenditures.--
                                      ``(I) In general.--For purposes of 
                                  clause (i), the term `rehabilitation 
                                  expenditures' means amounts chargeable 
                                  to capital account and incurred for 
                                  property (or additions or improvements 
                                  to property) of a character subject to 
                                  the allowance for depreciation in 
                                  connection with the rehabilitation of a 
                                  building. Such term shall not include 
                                  the cost of acquiring the building (or 
                                  any interest therein).
                                      ``(II) Special rule.--An 
                                  expenditure 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 
                                  sentence, 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 individuals and area median 
                  gross income shall be determined as provided in section 
                  142(d)(2)(B).
                      ``(F) Purchase.--For purposes of subparagraph (A), 
                  the term `purchase' has the meaning given to such term 
                  by section 179(d)(2); except that such term shall not 
                  include 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.
                      ``(G) Treatment of units occupied by individuals 
                  whose incomes rise above limit.--
                              ``(i) In general.--Except as provided in 
                          clause (ii), notwithstanding an increase in the 
                          income of the occupants of a low-income unit 
                          above the income limitation applicable under 
                          subparagraph (A)(ii), such unit shall continue 
                          to be treated as a low-income unit if the 
                          income of such occupants initially met such 
                          income limitation.
                              ``(ii) Next available unit must be rented 
                          to low-income tenant if income rises above 140 
                          percent of income limit.--If the income of the 
                          occupants of the unit increases above 140 
                          percent of the income limitation applicable 
                          under subparagraph (A)(ii), clause (i) shall 
                          cease to apply to any such unit if any 
                          residential unit in the project (of a size 
                          comparable to, or smaller than, such unit) is 
                          occupied by a new resident whose income exceeds 
                          such income limitation. In the case of a 
                          project described in section 142(d)(4)(B), the 
                          preceding sentence shall be applied by 
                          substituting `170 percent' for `140 percent' 
                          and by substituting `any low-income unit in the 
                          project is occupied by a new resident whose 
                          income exceeds 40 percent of area median gross 
                          income' for `any residential unit in the 
                          project (of a size comparable to, or smaller 
                          than, such unit) is occupied by a new resident 
                          whose income exceeds such income limitation'.
                      ``(H) Recapture rules.--
                              ``(i) Substantially rehabilitation 
                          requirements.--If the requirements of 
                          subparagraph (D) are not satisfied with respect 
                          to any project--
                                      ``(I) such project shall not be 
                                  treated as a qualified low-income 
                                  housing project for any period 
                                  (including periods before the close of 
                                  the 24-month period set forth in 
                                  subparagraph (D)(i)), and
                                      ``(II) the statutory period for the 
                                  assessment of any deficiency 
                                  attributable to the failure of the 
                                  project to meet such requirements shall 
                                  not expire before the date prescribed 
                                  by section 6501 for the assessment of a 
                                  deficiency for the taxable year in 
                                  which the 24-month period set forth in 
                                  subparagraph (D)(i) ends.
                              ``(ii) Cross Reference.--
  
                                  ``For treatment of subsequent failure 
  to meet other requirements after initial qualification, see paragraph 
  (5) of this subsection.''
  
  SEC. 3. EXEMPTION FROM PASSIVE LOSS LIMITATIONS.
  
      Section 469 of the Internal Revenue Code of 1986 (relating to 
  limitation on passive activity losses and credits) is amended--
              (1) by redesignating subsections (j), (k), (l), and (m) as 
          subsections (k), (l), (m), and (n), respectively, and
              (2) by inserting after subsection (i) the following 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 activities 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 taxable year shall not exceed 
          $50,000 ($25,000 in the case of a separate return by a married 
          individual).
              ``(3) Coordination with subsection (i).--This subsection 
          shall be applied before the application 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 depreciation deduction) is amended--
              (1) by redesignating subparagraphs (C) and (D) as 
          subparagraphs (D) and (E), respectively, and
              (2) by inserting after subparagraph (B) the following new 
          subparagraph:
                      ``(C) Special rule for certain low-income housing 
                  projects.--In the case of residential rental property 
                  which is part of a qualified 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 
                          adjusted basis shall be determined under the 
                          method applicable in computing the regular 
                          tax.''
      (b) Conforming Amendment.--Clause (i) of section 56(g)(4)(A) of 
  such Code is amended by inserting before the period at the end 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, 1995.
target: Low-Income Housing Preservation Act of 1995 - Amends the Internal Revenue Code to provide a 15-year recovery period for the depreciation deduction for new investments to rehabilitate qualified low-income housing projects.  Exempts $50,000 ($25,000 in the case of a separate return by a married individual) of such rehabilitation costs from the passive loss limitations. 
  Provides a special rule for computing the depreciation deduction for such housing projects.
feat_title: Low-Income Housing Preservation Act of 1995