Passive Activity Credit Law and Legal Definition
“The term 'passive activity credit' means the amount (if any) by which--
(A) the sum of the credits from all passive activities allowable for the taxable year under--
(i) subpart D of part IV of subchapter A [26 USCS §§ 38 et seq.], or
(ii) subpart B (other than section 27(a)) of such part IV [26 USCS §§ 27 et seq. (other than 26 USCS § 27(a)], exceeds
(B) the regular tax liability of the taxpayer for the taxable year allocable to all passive activities.” (26 USCS § 469)
