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)