MODIFICATIONS TO DEFINITION OF ELIGIBLE BASIS.

SEC. 3003. MODIFICATIONS TO DEFINITION OF ELIGIBLE BASIS.(a) Increase in Credit for Certain State Designated Buildings.—Subparagraph (C) of section 42(d)(5) (relating to increase in credit for buildings in high cost areas), before redesignation under subsection (g), is amended by adding at the end the following new clause:“(v) Buildings designated by state housing credit agency.—Any building which is designated by the State housing credit agency as requiring the increase in credit under this subparagraph in order for such building to be financially feasible as part of a qualified low-income housing project shall be treated for purposes of this subparagraph as located in a difficult development area which is designated for purposes of this subparagraph. The preceding sentence shall not apply to any building if paragraph (1) of subsection (h) does not apply to any portion of the eligible basis of such building by reason of paragraph (4) of such subsection.”.(b) Modification to Rehabilitation Requirements.—(1) In general.—Clause (ii) of section 42(e)(3)(A) is amended—(A) by striking “10 percent” in subclause (I) and inserting “20 percent”, and(B) by striking “$3,000” in subclause (II) and inserting “$6,000”.(2) Inflation adjustment.—Paragraph (3) of section 42(e) is amended by adding at the end the following new subparagraph:“(D) Inflation adjustment.—In the case of any expenditures which are treated under paragraph (4) as placed in service during any calendar year after 2009, the $6,000 amount in subparagraph (A)(ii)(II) shall be increased by an amount equal to—“(i) such dollar amount, multiplied by122 STAT. 2881“(ii) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting ‘calendar year 2008’ for ‘calendar year 1992’ in subparagraph (B) thereof.Any increase under the preceding sentence which is not a multiple of $100 shall be rounded to the nearest multiple of $100.”.(3) Conforming amendment.—Subclause (II) of section 42(f)(5)(B)(ii) is amended by striking “if subsection (e)(3)(A)(ii)(II)” and all that follows and inserting “if the dollar amount in effect under subsection (e)(3)(A)(ii)(II) were two-thirds of such amount.”.(c) Increase in Allowable Community Service Facility Space for Small Projects.—Clause (ii) of section 42(d)(4)(C) (relating to limitation) is amended by striking “10 percent of the eligible basis of the qualified low-income housing project of which it is a part. For purposes of” and inserting “the sum of—“(I) 25 percent of so much of the eligible basis of the qualified low-income housing project of which it is a part as does not exceed $15,000,000, plus“(II) 10 percent of so much of the eligible basis of such project as is not taken into account under subclause (I).For purposes of”.(d) Clarification of Treatment of Federal Grants.—Subparagraph (A) of section 42(d)(5) is amended to read as follows:“(A) Federal grants not taken into account in determining eligible basis.—The eligible basis of a building shall not include any costs financed with the proceeds of a federally funded grant.”.(e) Simplification of Related Party Rules.—Clause (iii) of section 42(d)(2)(D), before redesignation under subsection (g)(2), is amended—(1) by striking all that precedes subclause (II),(2) by redesignating subclause (II) as clause (iii) and moving such clause two ems to the left, and(3) by striking the last sentence thereof.(f) Exception to 10-Year Nonacquisition Period for Existing Buildings Applicable to Federally- or State-Assisted Buildings.—Paragraph (6) of section 42(d) is amended to read as follows:“(6) Credit allowable for certain buildings acquired during 10-year period described in paragraph (2)(B)(ii).—“(A) In general.—Paragraph (2)(B)(ii) shall not apply to any federally- or State-assisted building.“(B) Buildings acquired from insured depository institutions in default.—On application by the taxpayer, the Secretary may waive paragraph (2)(B)(ii) with respect to any building acquired from an insured depository institution in default (as defined in section 3 of the Federal Deposit Insurance Act) or from a receiver or conservator of such an institution.“(C) Federally- or state-assisted building.—For purposes of this paragraph—“(i) Federally-assisted building.—The term ‘federally-assisted building’ means any building which is 122 STAT. 2882 substantially assisted, financed, or operated under section 8 of the United States Housing Act of 1937, section 221(d)(3), 221(d)(4), or 236 of the National Housing Act, section 515 of the Housing Act of 1949, or any other housing program administered by the Department of Housing and Urban Development or by the Rural Housing Service of the Department of Agriculture.“(ii) State-assisted building.—The term ‘State-assisted building’ means any building which is substantially assisted, financed, or operated under any State law similar in purposes to any of the laws referred to in clause (i).”.(g) Repeal of Deadwood.—(1) Clause (ii) of section 42(d)(2)(B) is amended by striking “the later of—” and all that follows and inserting “the date the building was last placed in service,”.(2) Subparagraph (D) of section 42(d)(2) is amended by striking clause (i) and by redesignating clauses (ii) and (iii) as clauses (i) and (ii), respectively.(3) Paragraph (5) of section 42(d) is amended by striking subparagraph (B) and by redesignating subparagraph (C) as subparagraph (B).(h) Effective Date.—(1) In general.—Except as otherwise provided in paragraph (2), the amendments made by this subsection shall apply to buildings placed in service after the date of the enactment of this Act.(2) Rehabilitation requirements.—(A) In general.—The amendments made by subsection (b) shall apply to buildings with respect to which housing credit dollar amounts are allocated after the date of the enactment of this Act.(B) Buildings not subject to allocation limits.—To the extent paragraph (1) of section 42(h) of the Internal Revenue Code of 1986 does not apply to any building by reason of paragraph (4) thereof, the amendments made by subsection (b) shall apply buildings financed with bonds issued pursuant to allocations made after the date of the enactment of this Act.