PUBLIC LAW 100-647—NOV. 10,1988 102 STAT. 3647

meaning of section 148(fX6XA)) after the close of

such period.

"(ii) EXCEPTION.—Clause (i) (and clause (iv) of
subparagraph (A)) shall not be construed to require
amounts of less than $250,000 to be used to redeem
bonds. The Secretary may by regulation treat related
issues as 1 issue for purposes of the preceding
sentence."

(f) REPAYMENTS OF FINANCING PROVIDED BY A QUALIFIED MORT-
GAGE ISSUE MUST BE USED To REDEEM BONDS.—Subparagraph (A) of
section 143(aX2) of the 1986 Code is amended by striking out "and"
at the end of clause (ii), by striking out the period at the end of
clause (iii) and inserting in lieu thereof ", and", and by adding at the
end thereof the following:

"(iv) except as provided in subparagraph (D)(ii),
repayments of principal on financing provided by the
issue are used not later than the close of the 1st
semiannual period beginning after the date the prepay-
ment (or complete repayment) is received to redeem
bonds which are part of such issue.

Clause (iv) shall not apply to amounts received within 10
years after the date of issuance of the issue (or, in the case
of refunding bond, the date of issuance of the original
bond)/'

(g) RECAPTURE OF PORTION OF FEDERAL SUBSIDY FROM USE OF
MORTGAGE BONDS AND MORTGAGE CREDIT CERTIFICATES.—

(1) IN GENERAL.—Section 143 of the 1986 Code (relating to
mortgage revenue bonds) is amended by adding at the end
thereof the following new subsection:

"(m) RECAPTURE OF PORTION OF FEDERAL SUBSIDY FROM USE OF

QUALIFIED MORTGAGE BONDS AND MORTGAGE CREDIT CERTIFICATES.—

"(1) IN GENERAL.—If, during the taxable year, any taxpayer

disposes of an interest in a residence with respect to which

there is or was any federally-subsidized indebtedness for the

payment of which the taxpayer was liable in whole or part, then

the taxpayer's tax imposed by this chapter for such taxable year

shall be increased by the recapture amount with respect to such

indebtedness.

"(2) EXCEPTIONS.—Paragraph (1) shall not apply to—
"(A) any disposition by reason of death, and
"(B) any disposition which is more than 10 years after the
testing date.

"(3) FEDERALLY-SUBSIDIZED INDEBTEDNESS.—For purposes of
this subsection—

"(A) IN GENERAL.—The term 'federally-subsidized indebt-
edness' means any indebtedness if—

"(i) financing for the indebtedness was provided in
whole or part from the proceeds of any tax-exempt
qualified mortgage bond, or

"(ii) any credit was allowed under section 25 (relating

to interest on certain home mortgages) to the taxpayer

for interest paid or incurred on such indebtedness.

"(B) EXCEPTION FOR HOME IMPROVEMENT LOANS.—Such

term shall not include any indebtedness to the extent such

indebtedness is federally-subsidized indebtedness solely by

reason of being a qualified home improvement loan (as

defined in subsection (kX4)).