Recapture of credit

(1) In general If— (A) as of the close of any taxable year in the compliance period, the amount of the qualified basis of any building with respect to the taxpayer is less than (B) the amount of such basis as of the close of the preceding taxable year, then the taxpayer’s tax under this chapter for the taxable year shall be increased by the credit recapture amount.

(2) Credit recapture amount For purposes of paragraph (1), the credit recapture amount is an amount equal to the sum of— (A) the aggregate decrease in the credits allowed to the taxpayer under section 38 for all prior taxable years which would have resulted if the accelerated portion of the credit allowable by reason of this section were not allowed for all prior taxable years with respect to the excess of the amount described in paragraph (1)(B) over the amount described in paragraph (1)(A), plus (B) interest at the overpayment rate established under section 6621 on the amount determined under subparagraph (A) for each prior taxable year for the period beginning on the due date for filing the return for the prior taxable year involved. No deduction shall be allowed under this chapter for interest described in subparagraph (B).

(3) Accelerated portion of credit For purposes of paragraph (2), the accelerated portion of the credit for the prior taxable years with respect to any amount of basis is the excess of— (A) the aggregate credit allowed by reason of this section (without regard to this subsection) for such years with respect to such basis, over (B) the aggregate credit which would be allowable by reason of this section for such years with respect to such basis if the aggregate credit which would (but for this subsection) have been allowable for the entire compliance period were allowable ratably over 15 years.

(4) Special rules (A) Tax benefit rule The tax for the taxable year shall be increased under paragraph (1) only with respect to credits allowed by reason of this section which were used to reduce tax liability. In the case of credits not so used to reduce tax liability, the carryforwards and carrybacks under section 39 shall be appropriately adjusted. (B) Only basis for which credit allowed taken into account Qualified basis shall be taken into account under paragraph (1)(B) only to the extent such basis was taken into account in determining the credit under subsection (a) for the preceding taxable year referred to in such paragraph. (C) No recapture of additional credit allowable by reason of subsection (f)(3) Paragraph (1) shall apply to a decrease in qualified basis only to the extent such decrease exceeds the amount of qualified basis with respect to which a credit was allowable for the taxable year referred to in paragraph (1)(B) by reason of subsection (f)(3). (D) No credits against tax Any increase in tax under this subsection shall not be treated as a tax imposed by this chapter for purposes of determining the amount of any credit under this chapter. (E) No recapture by reason of casualty loss The increase in tax under this subsection shall not apply to a reduction in qualified basis by reason of a casualty loss to the extent such loss is restored by reconstruction or replacement within a reasonable period established by the Secretary. (F) No recapture where de minimis changes in floor space The Secretary may provide that the increase in tax under this subsection shall not apply with respect to any building if— (i) such increase results from a de minimis change in the floor space fraction under subsection (c)(1), and (ii) the building is a qualified low-income building after such change.

(5) Certain partnerships treated as the taxpayer (A) In general For purposes of applying this subsection to a partnership to which this paragraph applies— (i) such partnership shall be treated as the taxpayer to which the credit allowable under subsection (a) was allowed, (ii) the amount of such credit allowed shall be treated as the amount which would have been allowed to the partnership were such credit allowable to such partnership, (iii) paragraph (4)(A) shall not apply, and (iv) the amount of the increase in tax under this subsection for any taxable year shall be allocated among the partners of such partnership in the same manner as such partnership’s taxable income for such year is allocated among such partners. (B) Partnerships to which paragraph applies This paragraph shall apply to any partnership which has 35 or more partners unless the partnership elects not to have this paragraph apply. (C) Special rules (i) Husband and wife treated as 1 partner For purposes of subparagraph (B)(i), a husband and wife (and their estates) shall be treated as 1 partner. (ii) Election irrevocable Any election under subparagraph (B), once made, shall be irrevocable.

(6) No recapture on disposition of building which continues in qualified use (A) In general The increase in tax under this subsection shall not apply solely by reason of the disposition of a building (or an interest therein) if it is reasonably expected that such building will continue to be operated as a qualified low-income building for the remaining compliance period with respect to such building. (B) Statute of limitations If a building (or an interest therein) is disposed of during any taxable year and there is any reduction in the qualified basis of such building which results in an increase in tax under this subsection for such taxable or any subsequent taxable year, then— (i) the statutory period for the assessment of any deficiency with respect to such increase in tax shall not expire before the expiration of 3 years from the date the Secretary is notified by the taxpayer (in such manner as the Secretary may prescribe) of such reduction in qualified basis, and (ii) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.