To amend the Internal Revenue Code of 1986 to provide an investment tax credit for Stage 3 aircraft.

SECTION 1. INVESTMENT CREDIT FOR STAGE 3 AIRCRAFT MODIFICATIONS.

    (a) Allowance of Credit.--Section 46 of the Internal Revenue Code 
of 1986 (relating to amount of 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 stage 3 aircraft modification credit.''
    (b) Amount of Credit.--Section 48 of such Code is amended by adding 
at the end the following new subsection:
    ``(c) Stage 3 Aircraft Modification Credit.--
            ``(1) In general.--For purposes of section 46, the stage 3 
        aircraft modification credit is the stage 3 aircraft 
        modification percentage of the basis of each stage 3 aircraft 
        modification property placed in service during the taxable 
        year.
            ``(2) Stage 3 aircraft modification percentage.--The stage 
        3 aircraft modification percentage is 10 percent.
            ``(3) Qualified stage 3 aircraft modification property.--
        For purposes of this subpart--
                    ``(A) In general.--The term `qualified stage 3 
                aircraft modification property' means tangible 
                property--
                            ``(i) which is an integral part of and 
                        modification of a nonstage 3 aircraft 
                        (including the installation of different 
                        engines or the retrofit of the existing engines 
                        with sound attenuation devices),
                            ``(ii) which is certificated by the Federal 
                        Aviation Administration and is made to qualify 
                        the aircraft for the stage 3 noise level 
                        requirements, and
                            ``(iii) the original use of which begins 
                        with the taxpayer.
                    ``(B) Stage 3 noise level.--The term `stage 3 noise 
                level' has the meaning given such term by section 
                36.1(f)(5) of title 14, Code of Regulations (as in 
                effect on February 15, 1993).
                    ``(C) Nonstage 3 aircraft.--The term `nonstage 3 
                aircraft' means an aircraft with a maximum gross 
                takeoff weight in excess of 75,000 pounds which did not 
                meet the stage 3 noise level requirements before the 
                stage 3 aircraft modification property was installed.
            ``(4) Special rule for certain purchases and leases.--For 
        purposes of paragraph (3)(A)(iii), a qualified stage 3 aircraft 
        modification property shall be treated as originally placed in 
        service by a person if it is sold to such person or is leased 
        by such person within 3 months of the date such modifications 
        are made.''
    (c) Stage 3 Aircraft Modification Credit Allowable Against Regular 
Tax and Alternative Minimum Tax.--Subsection (c) of section 38 of such 
Code (relating to limitation based on amount of tax) is amended by 
adding at the end the following new paragraph:
            ``(3) Special rules for stage 3 aircraft modification 
        credit.--
                    ``(A) Liability for tax.--In the case of the stage 
                3 aircraft modification credit, the credit allowable 
                under subsection (a) for any taxable year shall not 
                exceed the excess (if any) of--
                            ``(i) the sum of--
                                    ``(I) the taxpayer's tentative 
                                minimum tax liability under section 
                                55(b) for such taxable year determined 
                                without regard to the stage 3 aircraft 
                                modification credit, plus
                                    ``(II) the taxpayer's regular tax 
                                liability for such taxable year (as 
                                defined in section 26(b)), over
                            ``(ii) the sum of the credits allowable 
                        against the taxpayer's regular tax liability 
                        under part IV (other than section 34 and the 
                        stage 3 aircraft modification credit).
                    ``(B) Application of the credit.--Each of the 
                following amounts shall be reduced by the full amount 
                of the credit determined under subparagraph (A):
                            ``(i) the taxpayer's tentative minimum tax 
                        under section 55(b) for the taxable year, and
                            ``(ii) the taxpayer's regular tax liability 
                        (as defined in section 26(b)) reduced by the 
                        sum of the credits allowable under part IV 
                        (other than section 34 and the stage 3 aircraft 
                        modification credit).
        If the amount of the credit determined under subparagraph (A) 
        exceeds the amount described in clause (ii) of subparagraph 
        (B), then the excess shall be deemed to be the adjusted net 
        minimum tax for such taxable year for purposes of section 53.''
    (d) Technical and Conforming Amendments.--
            (1) Paragraph (1) of section 38(c) of such Code is amended 
        by striking ``The credit'' and inserting ``Except as provided 
        in paragraph (3), the credit''.
            (2) Paragraph (2) of section 55(c) of such Code is 
        amended--
                    (A) by striking ``For provisions'' and inserting 
                ``(A) For provisions'', and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(B) For provisions allowing the stage 3 aircraft 
                modification credit against the tax imposed by this 
                section, see section 38(c)(3).''
            (3) Section 49(a)(1)(C) 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 stage 3 
                        aircraft modification property.''
            (4)(A) The section heading for section 48 of such Code is 
        amended to read as follows:

``SEC. 48. OTHER CREDITS.''

            (B) The table of sections for subpart E of part IV of 
        subchapter A of chapter 1 of such Code is amended by striking 
        the item relating to section 48 and inserting the following:

                              ``Sec. 48. Other credits.''
    (e) Effective Date.--The amendments made by this section apply to 
stage 3 aircraft modification property completed after December 31, 
1991, and placed in service after December 31, 1991, and before January 
1, 1997.

Summary: Amends the Internal Revenue Code to allow businesses an investment tax credit for costs incurred for noise modification of aircraft from stage 2 levels to stage 3 levels. Allows such credit against the regular tax and alternative minimum tax.