Low Income Community Development Tax Credit Act of 1995

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Low Income Community Development Tax 
Credit Act of 1995''.

SEC. 2. CREDIT FOR NONRESIDENTIAL BUILDINGS CONSTRUCTED OR RENOVATED IN 
              DISTRESSED AREAS.

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

``SEC. 45C. CREDIT FOR NONRESIDENTIAL BUILDINGS IN DISTRESSED AREAS.

    ``(a) In General.--For purposes of section 38, the amount of the 
distressed area building credit determined under this section for any 
taxable year in the credit period shall be an amount equal to--
            ``(1) the applicable percentage of
            ``(2) the eligible basis of each qualified distressed area 
        building.
    ``(b) Applicable Percentage: 70 Percent Present Value Credit for 
Certain New Buildings; 30 Percent Present Value Credit for Certain 
Other Buildings.--For purposes of this section--
            ``(1) In general.--The term `applicable percentage' means 
        the appropriate percentage prescribed by the Secretary for the 
        earlier of--
                    ``(A) the month in which such building is placed in 
                service, or
                    ``(B) at the election of the taxpayer--
                            ``(i) the month in which the taxpayer and 
                        the credit allocating agency enter into an 
                        agreement with respect to such building (which 
                        is binding on such agency, the taxpayer, and 
                        all successors in interest) as to the building 
                        credit dollar amount to be allocated to such 
                        building, or
                            ``(ii) in the case of any building to which 
                        the rules of section 42(h)(4)(B) apply, the 
                        month in which the tax-exempt obligations are 
                        issued.
        A month may be elected under clause (ii) only if the election 
        is made not later than the 5th day after the close of such 
        month. Such an election, once made, shall be irrevocable.
            ``(2) Method of prescribing percentages.--
                    ``(A) In general.--The percentages prescribed by 
                the Secretary for any month shall be percentages which 
                will yield over a 10-year period amounts of credit 
                under subsection (a) which have a present value equal 
                to--
                            ``(i) 70 percent of the eligible basis of a 
                        new building, and
                            ``(ii) 30 percent of the eligible basis of 
                        an existing building.
                    ``(B) Increased credit for buildings in more 
                distressed areas.--In the case of buildings located in 
                a census tract which would be a distressed area if `50 
                percent' were substituted for `80 percent' in 
                subsection (c)(2), subparagraph (A) shall be applied by 
                substituting `75 percent' for `70 percent' and `35 
                percent' for `30 percent'.
    ``(c) Qualified Distressed Area Building; Distressed Area.--For 
purposes of this section--
            ``(1) Qualified distressed area building.--The term 
        `qualified distressed area building' means any building (other 
        than residential rental property) which, when placed in 
        service, is located in a distressed area.
            ``(2) Distressed area.--The term `distressed area' means 
        any census tract in which, for the most recent year for which 
        census data are available on household income in such tract, 70 
        percent or more of the households have an income which is 80 
        percent or less of the area median gross income (within the 
        meaning of section 142(d)) for such year.
    ``(d) Eligible basis.--For purposes of this section, the eligible 
basis of any building shall be determined under the rules of paragraphs 
(1) and (2) of section 42(d).
    ``(e) Rehabilitation expenditures treated as separate new 
building.--
            ``(1) In general.--Rehabilitation expenditures paid or 
        incurred by the taxpayer with respect to any building shall be 
        treated for purposes of this section as a separate new 
        building.
            ``(2) Rehabilitation expenditures.--For purposes of 
        paragraph (1)--
                    ``(A) In general.--The term `rehabilitation 
                expenditures' means amounts chargeable to capital 
                account and incurred for property (or additions or 
                improvements to property) of a character subject to the 
                allowance for depreciation in connection with the 
                rehabilitation of a building.
                    ``(B) Cost of acquisition, etc., not included.--
                Such term does not include the cost of acquiring any 
                building (or interest therein).
            ``(3) Minimum expenditures to qualify.--
                    ``(A) In general.--Paragraph (1) shall apply to 
                rehabilitation expenditures with respect to any 
                building only if the amount of such expenditures during 
                any 24-month period is not less than 10 percent of the 
                adjusted basis of the building (determined as of the 
                1st day of such period and without regard to paragraphs 
                (2) and (3) of section 1016(a)).
                    ``(B) Date of determination.--The determination 
                under subparagraph (A) shall be made as of the close of 
                the 1st taxable year in the credit period with respect 
                to such expenditures.
            ``(4) Special rules.--Rules similar to the rules of 
        paragraph (4)(A) and (5) of section 42(e) shall apply for 
        purposes of this subsection.
    ``(f) Definition and Special Rules Relating to Credit Period.--
            ``(1) Credit period defined.--For purposes of this section, 
        the term `credit period' means, with respect to any building, 
        the period of 10 taxable years beginning with--
                    ``(A) the taxable year in which the building is 
                placed in service, or
                    ``(B) at the election of the taxpayer, the 
                succeeding taxable year,
        but only if the building is a qualified distressed area 
        building as of the close of the 1st year of such period. The 
        election under subparagraph (B), once made, shall be 
        irrevocable.
            ``(2) Special rules.--Rules similar to the rules of 
        paragraphs (3), (4), and (5) of section 42(f) shall apply for 
        purposes of this subsection.
    ``(g) Limitation on Aggregate Credit Allowable With Respect To 
Buildings Located in a State.--
            ``(1) Credit may not exceed credit amount allocated to 
        building.--
                    ``(A) In general.--The amount of the credit 
                determined under this section for any taxable year with 
                respect to any building shall not exceed the distressed 
                area building credit dollar amount allocated to such 
                building under this subsection.
                    ``(B) Time for making allocation.--Rules similar to 
                the rules of subparagraphs (B) through (F) of section 
                42(h)(1) shall apply for purposes of this paragraph.
            ``(2) Allocated credit amount to apply to all taxable years 
        ending during or after credit allocation year.--Any distressed 
        area building credit dollar amount allocated to any building 
        for any calendar year--
                    ``(A) shall apply to such building for all taxable 
                years in the credit period ending during or after such 
                calendar year, and
                    ``(B) shall reduce the aggregate distressed area 
                building credit dollar amount of the credit allocating 
                agency only for such calendar year.
            ``(3) Distress area building credit dollar amount for 
        agencies.--
                    ``(A) In general.--The aggregate distressed area 
                building credit dollar amount which a credit agency may 
                allocate for any calendar year is the portion of the 
                State distressed area building credit ceiling allocated 
                under this paragraph for such calendar year to such 
                agency.
                    ``(B) State ceiling initially allocated to State 
                housing credit agencies.--The State distressed area 
                building credit ceiling for each calendar year shall be 
                allocated to the housing credit agency of such State. 
                If there is more than 1 housing credit agency of a 
                State, all such agencies shall be treated as a single 
                agency.
                    ``(C) State distressed area building credit 
                ceiling.--The State distressed area building credit 
                ceiling applicable to any State for any calendar year 
                shall be an amount equal to the sum of--
                            ``(i) $1.25 multiplied by the State 
                        population,
                            ``(ii) the unused State distressed area 
                        building credit ceiling (if any) of such State 
                        for the preceding calendar year,
                            ``(iii) the amount of State distressed area 
                        building credit ceiling returned in the 
                        calendar year, plus
                            ``(iv) the amount (if any) allocated under 
                        subparagraph (D) to such State by the 
                        Secretary.
                For purposes of clause (ii), the unused State 
                distressed area building credit ceiling for any 
                calendar year is the excess (if any) of the sum of the 
                amounts described in clauses (i) and (iii) over the 
                aggregate distressed area building credit dollar amount 
                allocated for such year.
                    ``(D) Unused credit carryovers allocated among 
                certain states.--Rules similar to the rules of section 
                42(h)(2)(D) shall apply for purposes of this paragraph.
            ``(4) Other rules to apply.--Rules similar to the rules of 
        subparagraphs (E), (F), and (G) of section 42(h)(2), and 
        paragraphs (4), (5), and (7) of section 42(h), shall apply for 
        purposes of this subsection.
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) Credit allocating agency.--The term `credit 
                allocating agency' means any agency authorized to carry 
                out this subsection.
                    ``(B) Possessions treated as states.--The term 
                `State' includes a possession of the United States.
    ``(h) Definitions and special rules.--For purposes of this section 
--
            ``(1) New building.--The term `new building' means a 
        building the original use of which begins with the taxpayer.
            ``(2) Existing building.--The term `existing building' 
        means any building which is not a new building.
            ``(3) Application to estates and trusts.--In the case of an 
        estate or trust, the amount of the credit determined under 
        subsection (a) shall be apportioned between the estate or trust 
        and the beneficiaries on the basis of the income of the estate 
        or trust allocable to each.
    ``(i) Application of At-Risk Rules.--Rules similar to the rules of 
section 42(j) shall apply for purposes of this section.
    ``(j) Certifications and Other Reports to Secretary.--
            ``(1) Certification with respect to 1st year of credit 
        period.--Following the close of the 1st taxable year in the 
        credit period with respect to any qualified distressed area 
        building, the taxpayer shall certify to the Secretary (at such 
        time and in such form and in such manner as the Secretary 
        prescribes)--
                    ``(A) the taxable year, and calendar year, in which 
                such building was placed in service,
                    ``(B) the adjusted basis and eligible basis of such 
                building as of the close of the 1st year of the credit 
                period,
                    ``(C) the maximum applicable percentage and 
                eligible basis permitted to be taken into account by 
                the appropriate credit allocating agency, and
                    ``(D) such other information as the Secretary may 
                require.
        In the case of a failure to make the certification required by 
        the preceding sentence on the date prescribed therefor, unless 
        it is shown that such failure is due to reasonable cause and 
        not to willful neglect, no credit shall be allowable by reason 
        of subsection (a) with respect to such building for any taxable 
        year ending before such certification is made.
            ``(2) Reports to the secretary.--The Secretary may require 
        taxpayers and credit allocating agencies to submit such reports 
        as the Secretary determines necessary or appropriate to carry 
        out the purposes of this section.
    ``(k) Credit Allocated to Building Not to Exceed Amount Necessary 
To Assure Project Feasibility.--
            ``(1) In general.--The distressed area building credit 
        dollar amount allocated to a building shall not exceed the 
        amount the credit allocating agency determines is necessary for 
        the financial feasibility of the building throughout the credit 
        period.
            ``(2) Agency evaluation.--In making the determination under 
        paragraph (1), the credit allocating agency shall consider--
                    ``(A) the sources and uses of funds and the total 
                financing planned for the building,
                    ``(B) any proceeds or receipts expected to be 
                generated by reason of tax benefits, and
                    ``(C) the percentage of the distressed area 
                building credit dollar amount used for building costs 
                other than the cost of intermediaries.
        Subparagraph (C) shall not be applied so as to impede the 
        development of buildings in hard-to-develop areas. Such a 
        determination shall not be construed to be a representation or 
        warranty as to the feasibility or viability of the building.
            ``(3) Determination made when credit amount applied for and 
        when building placed in service.--
                    ``(A) In general.--A determination under paragraph 
                (1) shall be made as of each of the following times:
                            ``(i) The application for the distressed 
                        area building credit dollar amount.
                            ``(ii) The allocation of the distressed 
                        area building credit dollar amount.
                            ``(iii) The date the building is placed in 
                        service.
                    ``(B) Certification as to amount of other 
                subsidies.--Prior to each determination under 
                subparagraph (A), the taxpayer shall certify to the 
                credit allocating agency the full extent of all 
                Federal, State, and local subsidies which apply (or 
                which the taxpayer expects to apply) with respect to 
                the building.
    ``(l) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''
    (b) Credit To Be Part of General Business Credit.--
            (1) Subsection (b) of section 38 of such Code is amended by 
        striking ``plus'' at the end of paragraph (10), by striking the 
        period at the end of paragraph (11) and inserting ``, plus'', 
        and by adding at the end the following new paragraph:
            ``(12) the distressed area building credit determined under 
        section 45C(a).''
            (2) Subsection (d) of section 39 of such Code is amended by 
        adding at the end the following new paragraph:
            ``(7) Distressed area building credit.--No portion of the 
        unused business credit which is attributable to the credit 
        determined under section 45C (relating to distressed area 
        building credit) may be carried to any taxable year ending 
        before January 1, 1996.''
            (3) Subsection (c) of section 196 of such Code (relating to 
        deduction for certain unused business credits) is amended by 
        striking ``and'' at the end of paragraph (6), by striking the 
        period at the end of paragraph (7) and inserting ``, and'', and 
        by adding at the end the following new paragraph:
            ``(8) the distressed area building credit determined under 
        section 45C(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. 45C. Credit for nonresidential 
                                        buildings in distressed 
                                        areas.''
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 1995.

Summary: Low Income Community Development Tax Credit Act of 1995 - Amends the Internal Revenue Code to allow, as part of the general business credit, a tax credit for placing a nonresidential building in service in a distressed area, with a greater credit allowed for a new building than an existing building. Provides for calculation of the basis of such buildings according to the rules governing the low-income housing credit. Defines a distressed area as one in which at least 70 percent of the households have an income that is no more than 80 percent of the area median gross income. Increases the credit with respect to buildings in areas in which income is lower. Treats rehabilitation expenditures, provided they are above a certain threshold, as a separate new building. Imposes an annual State distressed area building credit ceiling.