102 STAT. 3378 PUBLIC LAW 100-647—NOV. 10, 1988

"(i) IN GENERAL.—An allocation meets the require-
ments of this subparagraph if such allocation is made
not later than the close of the calendar year in which
ends the taxable year to which it will 1st apply but only
to the extent the amount of such allocation does not
exceed the limitation under clause (ii).

"(ii) LIMITATION.—The limitation under this clause is
the amount of credit allowable under this section (with-
out regard to this subsection) for a taxable year with
respect to an increase in the qualified basis of the
building equal to the excess of—

' (I) the qualified basis of such building as of the
close of the 1st taxable year to which such alloca-
tion will apply, over

"(II) the qualified basis of such building as of the
close of the 1st taxable year to which the most
recent prior housing credit allocation with respect
to such building applied.

"(iii) HOUSING CREDIT DOLLAR AMOUNT REDUCED BY
FULL ALLOCATION.—Notwithstanding clause (i), the full
amount of the allocation shall be taken into account
under paragraph (2)."

(B) Clause (ii) of section 42(h)(6)(B) of the 1986 Code is hereby
repealed.

(15) Subparagraph (A) of section 42(hX4) of the 1986 Code is
amended by striking out "financed" and all that follows and
inserting in lieu thereof "financed by any obligation the interest
on which is exempt from tax under section 103 if—

"(i) such obligation is taken into account under sec-
tion 146, and

"(ii) principal payments on such financing are ap-
plied within a reasonable period to redeem obligations
the proceeds of which were used to provide such financ-
ing/'

(16) Paragraph (5) of section 42(h) of the 1986 Code is amended
by redesignating subparagraph (D) as subparagraph (E) and by
inserting after subparagraph (C) the following new subpara-
graph:

"(D) TREATMENT OF CERTAIN SUBSIDIARIES.—

"(i) IN GENERAL.—For purposes of this paragraph, a
qualified nonprofit organization shall be treated as
satisfying the material participation test of subpara-
graph (B) if any qualified corporation in which such
organization holds stock satisfies such test.

'(ii) QUALIFIED CORPORATION.—For purposes of clause
(ii), the term 'qualified corporation* means any corpora-
tion if 100 percent of the stock of such corporation is
held by 1 or more qualified nonprofit organizations at
all times during the period such corporation is in
existence."

(17) Subparagraph (D) of section 42(hX6) of the 1986 Code is
amended to read as follows:

"(D) CREDIT REDUCED IF ALLOCATED CREDIT DOLLAR

AMOUNT IS LESS THAN CREDIT WHICH WOULD BE ALLOWABLE
WITHOUT REGARD TO PLACED IN SERVICE CONVENTION, ETC.—

"(i) IN GENERAL,—The amount of the credit deter-
mined under this section with respect to any building