To amend the Internal Revenue Code of 1986 to provide for the use of redevelopment bonds for environmental remediation.

Summary: Amends the Internal Revenue Code to allow the use of tax-exempt redevelopment bonds for the costs of environmental remediation. Defines "environmental remediation" as: (1) abatement or control of hazardous substances; (2) demolition of existing contaminated structures, permit fees necessary for remediation, and environmental audits; (3) health assessments or health effects studies related to a contaminated site; and (4) remediation of off-site contamination caused by activity on a contaminated site. Denies an income tax deduction for interest paid on redevelopment bonds for environmental remediation if the Administrator of the Environmental Protection Agency determines that a remediation plan financed with redevelopment bonds was not satisfactorily completed.

SECTION 1. USE OF REDEVELOPMENT BONDS FOR ENVIRONMENTAL REMEDIATION.

    (a) Environmental Remediation Included as Redevelopment Purpose.--
Subparagraph (A) of section 144(c)(3) of the Internal Revenue Code of 
1986 (relating to redevelopment purposes) is amended by striking 
``and'' at the end of clause (iii), by striking the period at the end 
of clause (iv) and inserting ``, and'', and by adding at the end the 
following new clause:
                            ``(v) the costs of environmental 
                        remediation (as defined in paragraph (9)(B)) 
                        with respect to a qualified contaminated site 
                        (as defined in paragraph (9)(C)) if such costs 
                        are incurred pursuant to an environmental 
                        remediation plan which was approved by the 
                        Administrator of the Environmental Protection 
                        Agency or by the head of any State or local 
                        government agency designated by the 
                        Administrator to carry out the Administrator's 
                        functions under this clause.''.
    (b) Certain Requirements not to Apply to Redevelopment Bonds for 
Environmental Remediation.--Subsection (c) of section 144 of such Code 
is amended by adding at the end the following new paragraph:
            ``(9) Redevelopment bonds for environmental remediation.--
        For purposes of clause (v) of paragraph (3)(A)--
                    ``(A) Certain requirements not to apply.--In the 
                case of any bond issued as part of an issue 95 percent 
                or more of the proceeds of which are to finance costs 
                referred to in paragraph (3)(A)(v)--
                            ``(i) paragraph (2)(A)(i) shall not apply,
                            ``(ii) paragraph (2)(A)(ii) shall not apply 
                        to any issue issued by the governing body 
                        described in paragraph (4)(A) with respect to 
                        the area which includes the site,
                            ``(iii) the requirement of paragraph 
                        (2)(B)(ii) shall be treated as met if--
                                    ``(I) the payment of the principal 
                                and interest on such issue is secured 
                                by taxes imposed by a governmental 
                                unit, or
                                    ``(II) such issue is approved by 
                                the applicable elected representative 
                                (as defined in section 147(f)(2)(E)) of 
                                the governmental unit which issued such 
                                issue (or on behalf of which such issue 
                                was issued),
                            ``(iv) subparagraphs (C) and (D) of 
                        paragraph (2) shall not apply,
                            ``(v) subparagraphs (C) and (D) of 
                        paragraph (4) shall not apply, and
                            ``(vi) if the real property referred to in 
                        clause (iii) of paragraph (3)(A) is 1 or more 
                        dwelling units, such clause shall apply only if 
                        the requirements of section 142(d) or 143 (as 
                        the case may be) are met with respect to such 
                        units.
                    ``(B) Environmental remediation.--The term 
                `environmental remediation' means--
                            ``(i) abatement or control of hazardous 
                        substances (as defined by section 101 of the 
                        Comprehensive Environmental Response, 
                        Compensation, and Liability Act of 1980 (42 
                        U.S.C. 9601)),
                            ``(ii) demolition of existing contaminated 
                        structures, permit fees necessary for 
                        remediation, and environmental audits,
                            ``(iii) health assessments or health 
                        effects studies related to the site, and
                            ``(iv) remediation of off-site 
                        contamination caused by activity on the site 
                        (other than remediation activities of a type 
                        permitted for the site).
                    ``(C) Qualified contaminated site.--The term 
                `qualified contaminated site' means any contaminated 
                site if--
                            ``(i) the condition of the contaminated 
                        site is such that without funding under this 
                        section redevelopment is unlikely,
                            ``(ii) the contaminated site has not been 
                        in productive use for at least 1 year before 
                        such funding,
                            ``(iii) there is a strong likelihood of 
                        redevelopment of the site for industrial or 
                        commercial use that will result in creation of 
                        jobs and expansion of the tax base, and
                            ``(iv) environmental remediation and 
                        redevelopment are likely to be completed within 
                        a reasonable period of time.''.
    (c) Penalty for Failure to Satisfactorily Complete Remediation 
Plan.--Subsection (b) of section 150 of such Code is amended by adding 
at the end thereof the following new paragraph:
            ``(7) Qualified contaminated site remediation bonds.--In 
        the case of financing provided for costs described in section 
        144(c)(3)(A)(v), no deduction shall be allowed under this 
        chapter for interest on such financing during any period during 
        which there is a determination by the Administrator of the 
        Environmental Protection Agency (or by the head of any State or 
        local government agency designated by the Administrator to 
        carry out the Administrator's functions under this paragraph) 
        that the remediation plan under which such costs were incurred 
        was not satisfactorily completed.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to bonds issued after the date of the enactment of this Act.