Urban Entrepreneurial Opportunities Act

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Urban Entrepreneurial Opportunities 
Act''.

SEC. 2. TAX INCENTIVES FOR URBAN ENTREPRENEURIAL OPPORTUNITY FINANCING 
              SUBSIDIARIES.

    (a) General Rule.--Part VIII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to special deductions for 
corporations) is amended by adding at the end thereof the following new 
subpart:

   ``Subpart B--Tax Incentives for Urban Entrepreneurial Opportunity 
                         Financing Subsidiaries

                              ``Sec. 251. Deduction for equity 
                                        contributions to urban 
                                        entrepreneurial opportunity 
                                        financing subsidiaries.
                              ``Sec. 252. Overall limitation on 
                                        deductions.
                              ``Sec. 253. Definitions and special 
                                        rules.

``SEC. 251. DEDUCTION FOR EQUITY CONTRIBUTIONS TO URBAN ENTREPRENEURIAL 
              OPPORTUNITY FINANCING SUBSIDIARIES.

    ``(a) General Rule.--In the case of a qualified contributing 
corporation, there shall be allowed as a deduction an amount equal to 
the equity contributions made by such corporation to an urban 
entrepreneurial opportunity financing subsidiary of such corporation. 
Such deduction shall be allowed for the taxable year of the 
contributing corporation in which the equity contribution is used by 
the subsidiary in making qualified enterprise zone business loans.
    ``(b) Limitation.--The amount allowed as a deduction under 
subsection (a) to any qualified contributing corporation for any 
taxable year shall not exceed the lesser of--
            ``(1) $10,000,000, or
            ``(2) the portion of the program limitation allocated to 
        such corporation under section 252 to the extent the amount so 
        allocated was not used in a prior taxable year.
    ``(c) Equity Contribution.--For purposes of this section, the term 
`equity contribution' means--
            ``(1) any amount paid in cash for stock in an urban 
        entrepreneurial opportunity financing subsidiary of the 
        corporation if such stock is acquired at its original issuance, 
        and
            ``(2) any contribution in cash to the capital of an urban 
        entrepreneurial opportunity financing subsidiary of the 
        corporation.
    ``(d) Recapture Provisions.--
            ``(1) Basis adjustment.--The adjusted basis of any stock 
        held by a corporation in an urban entrepreneurial opportunity 
        financing subsidiary of such corporation shall be reduced by 
        the amount allowed as a deduction under subsection (a) in 
        connection with the acquisition of such stock. No increase in 
        the basis of any such stock shall be made on account of any 
        contribution to the capital of such subsidiary for which a 
        deduction is allowed under subsection (a).
            ``(2) Ordinary income recapture.--Any gain recognized on 
        the sale or other disposition by a corporation of stock in an 
        urban entrepreneurial opportunity financing subsidiary of such 
        corporation shall be treated as ordinary income.
            ``(3) Certain events treated as dispositions.--If any urban 
        entrepreneurial opportunity financing subsidiary of a 
        corporation ceases to qualify as an urban entrepreneurial 
        opportunity financing subsidiary with respect to such 
        corporation, such corporation shall recognize gain as if it 
        sold its stock in such subsidiary for an amount equal to its 
        fair market value immediately before such cessation.

``SEC. 252. OVERALL LIMITATION ON DEDUCTIONS.

    ``(a) General Rule.--The Secretary of Housing and Urban Development 
shall allocate the program limitation among the qualified contributing 
corporations submitting applications to such Secretary for allocations 
under this section.
    ``(b) Program Limitation.--The program limitation is $250,000,000.
    ``(c) Method of Making Allocations.--The Secretary of Housing and 
Urban Development shall prescribe regulations setting forth the 
procedures for making allocations under this section. Such procedures 
shall--
            ``(1) include the criteria used in selecting the 
        corporations to which the allocations are made, and
            ``(2) be designed to ensure a reasonable availability, on a 
        geographical basis, of the benefits of this subpart.

``SEC. 253. DEFINITIONS AND SPECIAL RULES.

    ``(a) Qualified Contributing Corporation.--For purposes of this 
subpart, the term `qualified contributing corporation' means any 
domestic corporation which is not a small business concern; except that 
such term shall not include any corporation predominantly engaged in a 
banking, insurance, finance, or similar business.
    ``(b) Urban Entrepreneurial Opportunity Financing Subsidiary.--For 
purposes of this subpart, the term `urban entrepreneurial opportunity 
financing subsidiary' means any domestic corporation--
            ``(1) all the stock of which (exclusive of directors' 
        qualifying shares) is held directly by one qualified 
        contributing corporation, and
            ``(2) all the activities of which consist of--
                    ``(A) making qualified enterprise zone business 
                loans,
                    ``(B) providing management, administrative, 
                consulting, and other support services to qualified 
                small business concerns to which such corporation has 
                made qualified enterprise zone business loans, and
                    ``(C) making temporary investments (for a period 
                not exceeding 6 months) of amounts being held for 
                purposes of making qualified enterprise zone business 
                loans.
    ``(c) Qualified Enterprise Zone Business Loans.--For purposes of 
this subpart, the term `qualified enterprise zone business loan' means 
any loan made by an urban entrepreneurial opportunity financing 
subsidiary if--
            ``(1) such loan is made to a qualified small business 
        concern and such concern is not related (within the meaning of 
        section 267(b) or 707(b)) to such subsidiary or the qualified 
        contributing corporation holding such subsidiary,
            ``(2) the proceeds of such loan are used by such qualified 
        small business concern in the active conduct of a trade or 
        business in an urban enterprise zone,
            ``(3) the urban entrepreneurial opportunity financing 
        subsidiary provides (without charge) substantial qualified 
        services to the qualified small business concern in connection 
        with such loan, except that such small business concern may 
        waive the requirements of this paragraph, and
            ``(4) the interest on such loan does not exceed--
                    ``(A) in the case of a secured loan, the prime rate 
                plus 3 percentage points, or
                    ``(B) in the case of any other loan, the prime rate 
                plus 8 percentage points.
    ``(d) Qualified Small Business Concern.--For purposes of this 
subpart, the term `qualified small business concern' means any person 
if--
            ``(1) such person is a small business concern within the 
        meaning of section 3 of the Small Business Act (15 U.S.C. 632), 
        and
            ``(2) substantially all of the activities of such person 
        are within an urban enterprise zone.
    ``(e) Other Definitions and Special Rules.--
            ``(1) Urban enterprise zone.--For purposes of this subpart, 
        the term `urban enterprise zone' means--
                    ``(A) any urban area designated as an enterprise 
                zone under any State law program, and
                    ``(B) any urban area designated as an enterprise 
                zone under Federal law.
            ``(2) Substantial qualified services.--For purposes of this 
        subpart, the term `substantial qualified services' means, with 
        respect to any loan made by an urban entrepreneurial 
        opportunity financing subsidiary, any management, 
        administrative, consulting, or other support services provided 
        to the borrower under such loan, but only if the amount of such 
        services, to be provided during the first year such loan is 
        outstanding involve at least 1,000 man-hours for each $100,000 
        principal amount of such loan.
            ``(3) Prime rate.--For purposes of this subpart--
                    ``(A) In general.--The term `prime rate' means the 
                average predominant prime rate quoted by commercial 
                banks to large businesses, as determined by the Board 
                of Governors of the Federal Reserve System.
                    ``(B) When determination made.--
                            ``(i) Except as provided in clause (ii), 
                        the determination of the prime rate shall be 
                        made as of the time the loan is made.
                            ``(ii) If the loan is a variable rate loan, 
                        the prime rate taken into account with respect 
                        to any change in rate shall be determined as of 
                        the time such change takes effect.
            ``(4) Treatment of controlled groups.--Any group of 
        corporations treated as a single employer under section 52 (a) 
        or (b) shall be treated as one corporation for purposes of this 
        subpart.
    ``(f) Employees of Borrower May Be Taken Into Account for Certain 
Purposes.--If--
            ``(1) a qualified contributing corporation has provided 
        financing through an urban entrepreneurial opportunity 
        financing subsidiary to any qualified small business concern, 
        and
            ``(2) such qualified small business concern designates such 
        subsidiary as its primary lender,
such qualified contributing corporation may treat the employees of such 
qualified small business concern as its own employees for purposes of 
determining which such qualified contributing corporation is in 
compliance with the requirements of any Federal law. A qualified small 
business concern may designate only 1 urban entrepreneurial opportunity 
financing subsidiary is its primary lender for any period.''
    (b) Clerical Amendment.--Part VIII of subchapter B of chapter 1 of 
such Code is amended by inserting after the part heading the following:

                              ``Subpart A--General provisions.
                              ``Subpart B--Tax incentives for urban 
                                        entrepreneurial opportunity 
                                        financing subsidiaries.

                   ``Subpart A--General Provisions''.

    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

Summary: Urban Entrepreneurial Opportunities Act - Amends the Internal Revenue Code to allow a deduction for equity contributions made by a corporation to an urban entrepreneurial opportunity financing subsidiary of such corporation. Requires the subsidiary to use such contribution in making qualified enterprise zone business loans to qualified small business concerns. Establishes an overall program limitation among the contributing corporations to be allocated by the Secretary of Housing and Urban Development.