To amend the Internal Revenue Code of 1986 to allow a credit against tax for qualified equity investments in companies affected by Hurricane Katrina.

Summary: Americans Helping Americans Tax Credit Act of 2005 - Amends the Internal Revenue Code to allow until 2008 a tax credit for investment in businesses located in the Hurricane Katrina disaster area.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Americans Helping Americans Tax 
Credit Act of 2005''.

SEC. 2. KATRINA INVESTMENT TAX CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business related credits) is amended by adding at the end 
the following new section:

``SEC. 45N. KATRINA INVESTMENT TAX CREDIT.

    ``(a) General Rule.--For purposes of section 38, in the case of a 
recovery area company, the Katrina investment tax credit determined 
under this section for the taxable year is an amount equal to 25 
percent of the amount of the qualified equity investments made by the 
recovery area company during the taxable year.
    ``(b) Qualified Equity Investment.--For purposes of this section--
            ``(1) In general.--The term `qualified equity investment' 
        means--
                    ``(A) the transfer of cash, cash equivalents, or 
                other property in exchange for stock or capital 
                interest in a recovery area company, and
                    ``(B) the cost of any qualified property acquired 
                by a recovery area company to be used in its trade or 
                business.
            ``(2) Recovery area company.--The term `recovery area 
        company' means a domestic corporation or partnership--
                    ``(A) the principal place of business of which is 
                physically located in an area determined by the 
                President before October 15, 2005, to warrant 
                individual or individual and public assistance from the 
                Federal Government under the Robert T. Stafford 
                Disaster Relief and Emergency Assistance Act by reason 
                of Hurricane Katrina,
                    ``(B) at least 50 percent of the gross income of 
                which is derived from the conduct of business in such 
                area or the coastal waters adjacent thereto,
                    ``(C) a substantial portion of the use of the 
                tangible personal property of such entity (whether 
                owned or leased) is within such area or the coastal 
                waters adjacent thereto, and
                    ``(D) a substantial portion of the services 
                performed by such entity or by its employees are 
                performed in such area or in the coastal waters 
                adjacent thereto.
            ``(3) Qualified property.--The term `qualified property' 
        means section 1245 property (as defined in section 1245(a)(3)).
    ``(c) Recapture of Credit.--
            ``(1) In general.--If, at any time during the 5-year period 
        beginning on the date on which a qualified equity investment in 
        a recovery area company is made, there is a recapture event 
        with respect to such investment, then the tax imposed by this 
        chapter for the taxable year in which such event occurs shall 
        be increased by the credit recapture amount.
            ``(2) Credit recapture amount.--For purposes of paragraph 
        (1), the credit recapture amount is an amount equal to the 
        applicable percentage of an amount equal to the sum of--
                    ``(A) the aggregate decrease in the credits allowed 
                to the taxpayer under section 38 for all prior taxable 
                years which would have resulted if no credit had been 
                determined under this section with respect to such 
                investment, plus
                    ``(B) interest at the underpayment rate established 
                under section 6621 on the amount determined under 
                subparagraph (A) for each prior taxable year for the 
                period beginning on the due date for filing the return 
                for the prior taxable year involved.
        No deduction shall be allowed under this chapter for interest 
        described in subparagraph (B).
            ``(3) Applicable percentage.--For purposes of paragraph 
        (2), the applicable percentage is--
                    ``(A) in the case of a recapture event that occurs 
                within 1 year after the date that the qualified equity 
                investment is made, 100 percent,
                    ``(B) in the case of a recapture event that occurs 
                within 2 years after such date, 80 percent,
                    ``(C) in the case of a recapture event that occurs 
                within 3 years after such date, 60 percent,
                    ``(D) in the case of a recapture event that occurs 
                within 4 years after such date, 40 percent, and
                    ``(E) in the case of a recapture event that occurs 
                within 5 years after such date, 20 percent.
            ``(4) Recapture event.--For purposes of this subsection, 
        there is a recapture event with respect to a qualified equity 
        investment if--
                    ``(A) the recovery area company that made such 
                investment ceases to be a recovery area company,
                    ``(B) the qualified equity investment is redeemed 
                by the recovery area company that made such investment, 
                or
                    ``(C) the qualified property acquired by a recovery 
                area company ceases to be used by the recovery area 
                company in its trade or business or such property is 
                sold or otherwise disposed of by the recovery area 
                company.
    ``(d) Credit May Be Transferred.--
            ``(1) In general.--Nothing in any law or rule of law shall 
        be construed to limit the transferability of the credit allowed 
        by this section through sale or repurchase agreements.
            ``(2) Transferred credit excluded from gross income.--The 
        amount of a credit that is transferred through sale or 
        repurchase agreements pursuant to this section shall not be 
        included in gross income by the taxpayer to whom the credit is 
        transferred.
    ``(e) Termination.--This section shall not apply to qualified 
equity investments made after December 31, 2007.''.
    (b) Credit Made Part of General Business Credit.--Subsection (b) of 
section 38 of such Code is amended by striking ``and'' at the end of 
paragraph (25), by striking the period at the end of paragraph (26) and 
inserting ``, and'', and by adding at the end the following new 
paragraph:
            ``(27) the Katrina investment tax credit determined under 
        section 45N(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

``Sec. 45N. Katrina investment tax credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to qualified equity investments made after September 1, 2005, in 
taxable years ending after such date.