Commercial Revitalization Tax Act of 1995

Summary: Commercial Revitalization Tax Act of 1995 - Amends the Internal Revenue Code to allow an investment tax credit equal to a percentage of expenditures for depreciable property in connection with the rehabilitation or reconstruction of a nonresidential building located in:  (1) an empowerment zone or enterprise community; (2) an area established pursuant to a consolidated planning process for the use of Federal housing and community development funds; or (3) a low-income commercial revitalization district specially designated by a State or local government which is not primarily a nonresidential central business district.  Requires, for qualification of such expenditures, that they exceed 25 percent of the fair market value of the building before rehabilitation. 
Imposes a State ceiling on the availability of the credit.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Commercial Revitalization Tax Act of 
1995''.

SEC. 2. COMMERCIAL REVITALIZATION TAX CREDIT.

    (a) Allowance of Credit.--Section 46 of the Internal Revenue Code 
of 1986 (relating to investment credit) is amended by striking ``and'' 
at the end of paragraph (2), by striking the period at the end of 
paragraph (3) and inserting ``, and'', and by adding at the end the 
following new paragraph:
            ``(4) the commercial revitalization credit.''
    (b) Commercial Revitalization Credit.--Subpart E of part IV of 
subchapter A of chapter 1 of the Internal Revenue Code of 1986 
(relating to rules for computing investment credit) is amended by 
inserting after section 48 the following new section:

``SEC. 48A. COMMERCIAL REVITALIZATION CREDIT.

    ``(a) General Rule.--For purposes of section 46, except as provided 
in subsection (e), the commercial revitalization credit for any taxable 
year is an amount equal to the applicable percentage of the qualified 
revitalization expenditures with respect to any qualified 
revitalization building.
    ``(b) Applicable Percentage.--For purposes of this section--
            ``(1) In general.--The term `applicable percentage' means--
                    ``(A) 20 percent, or
                    ``(B) at the election of the taxpayer, 5 percent 
                for each taxable year in the credit period.
    The election under subparagraph (B), once made, shall be 
irrevocable.
            ``(2) Credit period.--
                    ``(A) In general.--The term `credit period' means, 
                with respect to any building, the period of 10 taxable 
                years beginning with the taxable year in which the 
                building is placed in service.
                    ``(B) Applicable rules.--Rules similar to the rules 
                under paragraphs (2) and (4) of section 42(f) shall 
                apply.
    ``(c) Qualified Revitalization Buildings and Expenditures.--For 
purposes of this section--
            ``(1) Qualified revitalization building.--The term 
        `qualified revitalization building' means any building (and its 
        structural components) if--
                    ``(A) such building is located in an eligible 
                commercial revitalization area,
                    ``(B) a commercial revitalization credit amount is 
                allocated to the building under subsection (e), and
                    ``(C) depreciation (or amortization in lieu of 
                depreciation) is allowable with respect to the 
                building.
            ``(2) Qualified rehabilitation expenditure.--
                    ``(A) In general.--The term `qualified 
                rehabilitation expenditure' means any amount properly 
                chargeable to capital account--
                            ``(i) for properly for which depreciation 
                        is allowable under section 168 and which is--
                                    ``(I) nonresidential real property, 
                                or
                                    ``(II) an addition or improvement 
                                to property described in subclause (I),
                            ``(ii) in connection with the construction 
                        or substantial rehabilitation or reconstruction 
                        of a qualified revitalization building, and
                            ``(iii) for the acquisition of land in 
                        connection with the qualified revitalization 
                        building.
                    ``(B) Dollar limitation.--The aggregate amount 
                which may be treated as qualified revitalization 
                expenditures with respect to any qualified 
                revitalization building for any taxable year shall not 
                exceed $10,000,000, reduced by any such expenditures 
                with respect to the building taken into account by the 
                taxpayer or any predecessor in determining the amount 
                of the credit under this section for all preceding 
                taxable years.
                    ``(C) Certain expenditures not included.--The term 
                `qualified revitalization expenditure' does not 
                include--
                            ``(i) Straight line depreciation must be 
                        used.--Any expenditure (other than with respect 
                        to land acquisitions) with respect to which the 
                        taxpayer does not use the straight line method 
                        over a recovery period determined under 
                        subsection (c) or (g) of section 168. The 
                        preceding sentence shall not apply to any 
                        expenditure to the extent the alternative 
                        depreciation system of section 168(g) applies 
                        to such expenditure by reason of subparagraph 
                        (B) or (C) of section 168(g)(1).
                            ``(ii) Acquisition costs.--The costs of 
                        acquiring any building or interest therein and 
                        any land in connection with such building to 
                        the extent that such costs exceed 30 percent of 
                        the qualified revitalization expenditures 
                        determined without regard to this clause.
                            ``(iii) Other credits.--Any expenditure 
                        which the taxpayer may take into account in 
                        computing any other credit allowable under this 
                        part unless the taxpayer elects to take the 
                        expenditure into account only for purposes of 
                        this section.
            ``(3) Eligible commercial revitalization area.--The term 
        `eligible commercial revitalization area' means--
                    ``(A) an empowerment zone or enterprise community 
                designated under subchapter U,
                    ``(B) any area established pursuant to any 
                consolidated planning process for the use of Federal 
                housing and community development funds, and
                    ``(C) any other specially designated commercial 
                revitalization district established by any State or 
                local government, which is a low- income census tract 
                or low-income nonmetropolitan area (as defined in 
                subsection (e)(2)(C) and is not primarily a 
                nonresidential central business district.
            ``(4) Substantial rehabilitation or reconstruction.--For 
        purposes of this subsection, a rehabilitation or reconstruction 
        shall be treated as a substantial rehabilitation or 
        reconstruction only if the qualified revitalization 
        expenditures in connection with the rehabilitation or 
        reconstruction exceed 25 percent of the fair market value of 
        the building (and its structural components) immediately before 
        the rehabilitation or reconstruction.
    ``(d) When Expenditures Taken Into Account.--
            ``(1) In general.--Qualified revitalization expenditures 
        with respect to any qualified revitalization building shall be 
        taken into account for the taxable year in which the qualified 
        rehabilitated building is placed in service. For purposes of 
        the preceding sentence, a substantial rehabilitation or 
        reconstruction of a building shall be treated as a separate 
        building.
            ``(2) Progress expenditure payments.--Rules similar to the 
        rules of subsections (b)(2) and (d) of section 47 shall apply 
        for purposes of this section.
    ``(e) Limitation on Aggregate Credits Allowable With Respect to 
Buildings Located in a State.--
            ``(1) In general.--The amount of the credit determined 
        under this section for any taxable year with respect to any 
        building shall not exceed the commercial revitalization credit 
        amount (in the case of an amount determined under subsection 
        (b)(1)(B), the present value of such amount as determined under 
        the rules of section 42(b)(2)(C)) allocated to such building 
        under this subsection by the commercial revitalization credit 
        agency. Such allocation shall be made at the same time and in 
        the same manner as under paragraphs (1) and (7) of section 
        42(h).
            ``(2) Commercial revitalization credit amount for 
        agencies.--
                    ``(A) In general.--The aggregate commercial 
                revitalization credit amount which a commercial 
                revitalization credit agency may allocate for any 
                calendar year is the portion of the State commercial 
                revitalization credit ceiling allocated under this 
                paragraph for such calendar year for such agency.
                    ``(B) State commercial revitalization credit 
                ceiling.--
                            ``(i) In general.--The State commercial 
                        revitalization credit ceiling applicable to any 
                        State for any calendar year is an amount which 
                        bears the same ratio to the national ceiling 
                        for the calendar year as the population of low-
                        income census tracts and low-income 
                        nonmetropolitan areas within the State bears to 
                        the population of such tracts and areas within 
                        all States.
                            ``(ii) National ceiling.--For purposes of 
                        clause (i), the national ceiling is 
                        $100,000,000 for 1996, $200,000,000 for 1997, 
                        and $400,000,000 for calendar years after 1997.
                            ``(iii) Other special rules.--Rules similar 
                        to the rules of subparagraphs (D), (E), (F), 
                        and (G) of section 42(h)(3) shall apply for 
                        purposes of this subsection.
                    ``(C) Low-income areas.-- For purposes of 
                subparagraph (B), the terms `low-income census tract' 
                and low-income nonmetropolitan area' mean a tract or 
                area in which, according to the most recent census data 
                available, at least 50 percent of residents earned no 
                more than 60 percent of the median household income for 
                the applicable Metropolitan Standard Area, Consolidated 
                Metropolitan Standard Area, or all nonmetropolitan 
                areas in the State.
                    ``(D) Commercial revitalization credit agency.--For 
                purposes of this section, the term `commercial 
                revitalization credit agency' means any agency 
                authorized by a State to carry out this section.
                    ``(E) State.--For purposes of this section, the 
                term `State' includes a possession of the United 
                States.
    ``(f) Responsibilities of Commercial Revitalization Credit 
Agencies.--
            ``(1) Plans for allocation.--Notwithstanding any other 
        provision of this section, the commercial revitalization credit 
        dollar amount with respect to any building shall be zero 
        unless--
                    ``(A) such amount was allocated pursuant to a 
                qualified allocation plan of the commercial 
                revitalization credit agency which is approved by the 
                governmental unit (in accordance with rules similar to 
                the rules of section 147(f)(2) (other than subparagraph 
                (B)(ii) thereof)) of which such agency is a part, and
                    ``(B) such agency notifies the chief executive 
                officer (or its equivalent) of the local jurisdiction 
                within which the building is located of such project 
                and provides such individual a reasonable opportunity 
                to comment on the project.
            ``(2) Qualified allocation plan.--For purposes of this 
        subsection, the term `qualified allocation plan' means any 
        plan--
                    ``(A) which sets forth selection criteria to be 
                used to determine priorities of the commercial 
                revitalization credit agency which are appropriate to 
                local conditions,
                    ``(B) which considers--
                            ``(i) the degree to which a project 
                        contributes to the implementation of a 
                        strategic plan that is devised for an eligible 
                        commercial revitalization area through a 
                        citizen participation process,
                            ``(ii) the amount of any increase in 
                        permanent, full-time employment by reason of 
                        any project, and
                            ``(iii) the active involvement of residents 
                        and nonprofit groups within the eligible 
                        commercial revitalization area, and
                    ``(C) which provides a procedure that the agency 
                (or its agent) will follow in monitoring for compliance 
                with this section.
    ``(g) Termination.--This section shall not apply to any building 
placed in service after December 31, 2000.''
    (b) Conforming Amendments.--
            (1) Section 39(d) of the Internal Revenue Code of 1986 is 
        amended by adding at the end the following new paragraph:
            ``(7) No carryback of section 48a credit before 
        enactment.--No portion of the unused business credit for any 
        taxable year which is attributable to any commercial 
        revitalization credit determined under section 48A may be 
        carried back to a taxable year ending before the date of the 
        enactment of section 48A.''
            (2) Subparagraph (B) of section 48(a)(2) of such Code is 
        amended by inserting ``or commercial revitalization'' after 
        ``rehabilitation'' each place it appears in the text and 
        heading thereof.
            (3) Subparagraph (C) of section 49(a)(1) of such Code is 
        amended by striking ``and'' at the end of clause (ii), by 
        striking the period at the end of clause (iii) and inserting 
        ``, and'', and by adding at the end the following new clause:
                            ``(iv) the basis of any qualified 
                        revitalization building attributable to 
                        qualified revitalization expenditures.''
            (4) Paragraph (2) of section 50(a) of such Code is amended 
        by inserting ``or 48A(d)(2)'' after ``section 47(d)'' each 
        place it appears.
            (5) Subparagraph (B) of section 50(a)(2) of such Code is 
        amended by adding at the end the following new sentence: ``A 
        similar rule shall apply for purposes of section 48A.''
            (6) Paragraph (2) of section 50(b) of such Code is amended 
        by striking ``and'' at the end of subparagraph (C), by striking 
        the period at the end of subparagraph (D) and inserting ``, 
        and'', and by adding at the end the following new subparagraph:
                    ``(E) a qualified revitalization building to the 
                extent of the portion of the basis which is 
                attributable to qualified revitalization 
                expenditures.''
            (7) Subparagraph (C) of section 50(b)(4) of such Code is 
        amended by inserting ``or commercial revitalization'' after 
        ``rehabilitated'' each place it appears in the text or heading 
        thereof.
            (8) Subparagraph (C) of section 469(i)(3) is amended--
                    (A) by inserting ``or section 48A'' after ``section 
                42'', and
                    (B) by striking ``credit'' in the heading and 
                inserting ``and commercial revitalization credits''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 1995.