Thanks for the responses.
I think either/or was the answer given in post #2 and post #3
Based on those responses as well as others I am persuaded that from a code perspective 240.21(B)(2) and 240.21(B)(5) are mutually exclusive. And further persuaded in general that as that as soon as the conditions of one tap rule are met the arrangement is NEC compliant.
However, from a design perspective the adequacy of design must be considered in addition to compliance with the code. It still seems that the minimum ampacity should be considered because the outside tap conductor is less than 25 feet. As noted above, the only reason that specifying #2 conductor under 240.21(B)(5) is an option is because the tap is "located outside the building or structure, except at the point of load termination." If we consider that if the same tap was located completely inside the building then 240.21(B)(5) could not apply and a 1/0 AWG would be required under 240.21(B)(2) without question. It strikes me that the minimum ampacity provision for tap conductor less than 25 feet is there in the code for a reason. (My suspicion is that the 1/3 minimum ampacity requirement is intended to ensure a tap has an adequate thermal damage curve during a short-circuit condition the upstream feeder OCPD must open for. Perhaps someone could provide the technical basis behind the 1/3 * upsream OCPD requirement.) It seems that if a 1/0 AWG were specified above the 2 AWG the reason could not be that both 240.21(B)(2) and 240.21(B)(5) are applicable, but rather based on design discretion the minimum ampacity for tap conductor less than 25 feet is required in addition to 240.21(B)(5) requirements to ensure adequacy.
Tap rules are basically permissions, whatever rule is lesser restrictive that can also meet the needs of the application can apply, sometimes more than one rule can be complied with, does it really matter which one you applied if both are able to be met?
If both 240.21(B)(2) and 240.21(B)(5) rules were able to be met it would not matter which was applied. But to know that both rules are able to be met means that the requirements of both rules must first have been considered. The case here is where either 240.21(B)(2) or 240.21(B)(5) could potentially apply based on the application, but if 240.21(B)(2) were applied the 1/3 minimum ampacity requirement would not be met.
Once you enter a building you are no longer an outside tap . . .
240.21(B)(5) indicates that an outside tap conductor is one that complies with all the listed conditions and is "located outside of a building or structure,
except at the point of load termination." Based on the I would slightly differ from the view that an outside tap conductor is no longer classified as one upon entering the building and would submit that once a conductor meets the conditions to be an outside tap conductor it would remain one until it terminated into a single OCPD inside the building.
. . . though but at same time there is not so specific wording in code of just how far one can enter before you must have an overcurrent protection device. . . . I still think art 225 will require it to be "nearest to point of entrance" or however your AHJ determines what that may mean.
I would agree that for an outside tap conductor coming into a building the OCPD is required "nearest the point of entrance" and the AHJ would determine what that may mean, but I am not certain that Article 225 would be applicable to an outside tap conductor. It seems that once classified as an outside tap conductor under 240.21(B)(5) then that provision would only apply. Because 240.21(B)(5) does not reference Article 225, I am not sure I see how Article 225 becomes applicable. This seems to go back to mutual exclusivity---can we apply
both 240.21(B)(5)
and Article 225? I would submit the "nearest the point of entrance" is a requirement not under Article 225 but rather under 240.21(B)(5) condition (4)(b) or (4)(c). Condition (4)(b) would require that the disconnecting means (which under condition 3 contains the OCPD or is immediately adjacent to it) for the tap conductors is installed at a readily accessible location . . . inside, nearest the point of entrance of the tap conductors." Or, condition (4)(c) that alternatively allows the tap conductors to be "installed in accordance with 230.6, nearest the point of entrance of the tap conductors."