To amend the Internal Revenue Code of 1986 to expand the incentives for the environmental cleanup of certain contaminated industrial sites designated as brownfields.

Summary: Amends the Internal Revenue Code to allow a limited credit to holders of qualified brownfields cleanup bonds. Sets a national limit on the amount of such bonds and provides for allocation among the States.

SECTION 1. CREDIT TO HOLDERS OF QUALIFIED BROWNFIELDS CLEANUP BONDS.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 30B. CREDIT TO HOLDERS OF QUALIFIED BROWNFIELDS CLEANUP BONDS.

    ``(a) Allowance of Credit.--In the case of a taxpayer who holds a 
qualified brownfields cleanup bond on a credit allowance date of such 
bond which occurs during the taxable year, there shall be allowed as a 
credit against the tax imposed by this chapter for such taxable year an 
amount equal to the sum of the credits determined under subsection (b) 
with respect to credit allowance dates during such year on which the 
taxpayer holds such bond.
    ``(b) Amount of Credit.--
            ``(1) In general.--The amount of the credit determined 
        under this subsection with respect to any credit allowance date 
        for a qualified brownfields cleanup bond is 25 percent of the 
        annual credit determined with respect to such bond.
            ``(2) Annual credit.--The annual credit determined with 
        respect to any qualified brownfields cleanup bond is the 
        product of--
                    ``(A) the applicable credit rate, multiplied by
                    ``(B) the outstanding face amount of the bond.
            ``(3) Applicable credit rate.--For purposes of paragraph 
        (1), the applicable credit rate with respect to an issue is the 
        rate equal to an average market yield (as of the day before the 
        date of issuance of the issue) on outstanding long-term 
        corporate debt obligations (determined under regulations 
        prescribed by the Secretary).
            ``(4) Special rule for issuance and redemption.--In the 
        case of a bond which is issued during the 3-month period ending 
        on a credit allowance date, the amount of the credit determined 
        under this subsection with respect to such credit allowance 
        date shall be a ratable portion of the credit otherwise 
        determined based on the portion of the 3-month period during 
        which the bond is outstanding. A similar rule shall apply when 
        the bond is redeemed.
    ``(c) Qualified Brownfields Cleanup Bond.--For purposes of this 
section--
            ``(1) In general.--The term `qualified brownfields cleanup 
        bond' means any bond issued as part of an issue if--
                    ``(A) 95 percent or more of the proceeds of such 
                issue are to be used for the abatement or control of 
                hazardous substances at a qualified contaminated site,
                    ``(B) the bond is issued by a State or local 
                government within the jurisdiction of which such site 
                is located,
                    ``(C) the issuer designates such bond for purposes 
                of this section, and
                    ``(D) the term of each bond which is part of such 
                issue does not exceed 15 years.
            ``(2) Limitation on amount of bonds designated.--The 
        maximum aggregate face amount of bonds issued during any 
        calendar year which may be designated under paragraph (1) by 
        any issuer shall not exceed the limitation amount allocated 
        under paragraph (3) for such calendar year to such issuer.
            ``(3) National limitation on amount of bonds designated.--
        There is a national qualified brownfields cleanup bond 
        limitation for each calendar year. Such limitation is--
                    ``(A) $100,000,000 for 2002, and
                    ``(B) $150,000,000 for 2003.
            ``(4) Allocation of limitation among states.--The 
        limitation applicable under paragraph (3) for any calendar year 
        shall be allocated among the States by the Secretary of the 
        Treasury.
            ``(5) Carryover of unused limitation.--If for any calendar 
        year--
                    ``(A) the amount allocated under paragraph (4) to 
                any State, exceeds
                    ``(B) the amount of bonds issued during such year 
                which are designated under paragraph (1) pursuant to 
                such allocation,
        the limitation amount under paragraph (4) for such State for 
        the following calendar year shall be increased by the amount of 
        such excess.
            ``(6) Bond to be paid back from any tax revenue increase.--
        A bond shall not be treated as a qualified brownfields cleanup 
        bond unless any increase in real property tax revenues 
        (attributable to increases in assessed value) by reason of the 
        carrying out of the purposes described in paragraph (1)(A) is 
        reserved exclusively for debt service on the issue referred to 
        in paragraph (1) (and similar issues) to the extent such 
        increase does not exceed such debt service.
    ``(d) Limitation Based on Amount of Tax.--
            ``(1) In general.--The credit allowed under subsection (a) 
        for any taxable year shall not exceed the excess of--
                    ``(A) the sum of the regular tax liability (as 
                defined in section 26(b)) plus the tax imposed by 
                section 55, over
                    ``(B) the sum of the credits allowable under part 
                IV of subchapter A (other than subpart C thereof, 
                relating to refundable credits).
            ``(2) Carryover of unused credit.--If the credit allowable 
        under subsection (a) exceeds the limitation imposed by 
        paragraph (1) for such taxable year, such excess shall be 
        carried to the succeeding taxable year and added to the credit 
        allowable under subsection (a) for such taxable year.
    ``(e) Other Definitions.--For purposes of this section--
            ``(1) Credit allowance date.--The term `credit allowance 
        date' means--
                    ``(A) March 15,
                    ``(B) June 15,
                    ``(C) September 15, and
                    ``(D) December 15.
        Such term includes the last day on which the bond is 
        outstanding.
            ``(2) Bond.--The term `bond' includes any obligation.
            ``(3) State.--The term `State' includes the District of 
        Columbia and any possession of the United States.
            ``(4) Qualified contaminated site.--The term `qualified 
        contaminated site' means a brownfield site designated by the 
        Administrator of the Environmental Protection Agency.
            ``(5) Hazardous substance.--The term `hazardous substance' 
        has the meaning provided by section 198(d).
    ``(f) Credit Included in Gross Income.--Gross income includes the 
amount of the credit allowed to the taxpayer under this section 
(determined without regard to subsection (d)) and the amount so 
included shall be treated as interest income.
    ``(g) Bonds Held by Regulated Investment Companies.--If any 
qualified brownfields cleanup bond is held by a regulated investment 
company, the credit determined under subsection (a) shall be allowed to 
shareholders of such company under procedures prescribed by the 
Secretary.
    ``(h) Credits May Be Stripped.--Under regulations prescribed by the 
Secretary--
            ``(1) In general.--There may be a separation (including at 
        issuance) of the ownership of a qualified brownfields cleanup 
        bond and the entitlement to the credit under this section with 
        respect to such bond. In case of any such separation, the 
        credit under this section shall be allowed to the person who on 
        the credit allowance date holds the instrument evidencing the 
        entitlement to the credit and not to the holder of the bond.
            ``(2) Certain rules to apply.--In the case of a separation 
        described in paragraph (1), the rules of section 1286 shall 
        apply to the qualified brownfields cleanup bond as if it were a 
        stripped bond and to the credit under this section as if it 
        were a stripped coupon.
    ``(i) Treatment for Estimated Tax Purposes.--Solely for purposes of 
sections 6654 and 6655, the credit allowed by this section to a 
taxpayer by reason of holding a qualified brownfields cleanup bond on a 
credit allowance date shall be treated as if it were a payment of 
estimated tax made by the taxpayer on such date.
    ``(j) Credit May Be Transferred.--Nothing in any law or rule of law 
shall be construed to limit the transferability of the credit allowed 
by this section through sale and repurchase agreements.
    ``(k) Reporting.--Issuers of qualified brownfields cleanup bonds 
shall submit reports similar to the reports required under section 
149(e).''
    (b) Reporting.--Subsection (d) of section 6049 of such Code 
(relating to returns regarding payments of interest) is amended by 
adding at the end the following new paragraph:
            ``(8) Reporting of credit on qualified brownfields cleanup 
        bonds.--
                    ``(A) In general.--For purposes of subsection (a), 
                the term `interest' includes amounts includible in 
                gross income under section 30B(f) and such amounts 
                shall be treated as paid on the credit allowance date 
                (as defined in section 30B(e)(1)).
                    ``(B) Reporting to corporations, etc.--Except as 
                otherwise provided in regulations, in the case of any 
                interest described in subparagraph (A) of this 
                paragraph, subsection (b)(4) of this section shall be 
                applied without regard to subparagraphs (A), (H), (I), 
                (J), (K), and (L)(i).
                    ``(C) Regulatory authority.--The Secretary may 
                prescribe such regulations as are necessary or 
                appropriate to carry out the purposes of this 
                paragraph, including regulations which require more 
                frequent or more detailed reporting.''
    (c) Conforming Amendment.--The table of sections for subpart B of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

                              ``Sec. 30B. Credit to holders of 
                                        qualified public brownfields 
                                        cleanup bonds.''
    (d) Effective Date.--The amendments made by this section shall 
apply to obligations issued after December 31, 2001.