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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2713 Introduced in House (IH)]

  1st Session
                                H. R. 2713

 To amend the Internal Revenue Code of 1986 to provide additional tax 
  incentives to stimulate economic growth in depressed areas, and for 
                            other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            December 5, 1995

 Mr. Riggs (for himself, Mr. English of Pennsylvania, Mr. Ensign, Mr. 
    Cox of California, Mr. Talent, Mr. Stockman, and Mr. Flanagan) 
 introduced the following bill; which was referred to the Committee on 
Ways and Means, and in addition to the Committees on the Judiciary and 
    Banking and Financial Services, for a period to be subsequently 
   determined by the Speaker, in each case for consideration of such 
 provisions as fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL

 
 To amend the Internal Revenue Code of 1986 to provide additional tax 
  incentives to stimulate economic growth in depressed areas, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Enhanced 
Enterprise Zones Act of 1995''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.
Sec. 2. Findings and purpose.
                    TITLE I--FEDERAL TAX INCENTIVES

Sec. 101. Amendments to subchapter U.
Sec. 102. Commercial revitalization tax credit.
                    TITLE II--REGULATORY FLEXIBILITY

Sec. 201. Definition of small entities in empowerment zones and 
                            enterprise communities for analysis of 
                            regulatory functions.
Sec. 202. Waiver or modification of agency rules in empowerment zones 
                            and enterprise communities.
      TITLE III--RESIDENT MANAGEMENT AND HOMEOWNERSHIP INCENTIVES

Sec. 301. Enterprise zone opportunity grants.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress makes the following findings:
            (1) Many of the Nation's urban centers are places with high 
        levels of poverty, high rates of welfare dependency, high crime 
        rates, poor schools, and joblessness.
            (2) Federal tax incentives and regulatory reforms can 
        encourage economic growth, job creation and small business 
        formation in many urban centers.
            (3) Encouraging private sector investment in America's 
        economically distressed urban and rural areas is essential to 
        breaking the cycle of poverty and the related ills of crime, 
        drug abuse, illiteracy, welfare dependency, and unemployment.
            (4) The provisions creating empowerment zones that were 
        enacted in 1993 should be enhanced by providing incentives to 
        increase entrepreneurial growth, capital formation, job 
        creation, educational opportunities, and homeownership in 
        designated enterprise communities and empowerment zones.
    (b) Purpose.--The purpose of this Act is to increase job creation, 
small business expansion and formation, educational opportunities, and 
homeownership in economically depressed areas by providing Federal tax 
incentives, regulatory reforms, school reform pilot projects, and 
homeownership incentives.

                    TITLE I--FEDERAL TAX INCENTIVES

SEC. 101. AMENDMENTS TO SUBCHAPTER U.

    (a) In General.--Subchapter U of chapter 1 (relating to designation 
and treatment of empowerment zones, enterprise communities, and rural 
development investment areas) is amended--
            (1) by redesignating part IV as part V,
            (2) by redesignating section 1397D as section 1397F, and
            (3) by inserting after part III the following new part:

 ``PART IV--ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES AND ENTERPRISE 
                              COMMUNITIES

                              ``Sec. 1397D. Empowerment zone and 
                                        enterprise community capital 
                                        gain.
                              ``Sec. 1397E. Empowerment zone and 
                                        enterprise community stock.

``SEC. 1397D. EMPOWERMENT ZONE AND ENTERPRISE COMMUNITY CAPITAL GAIN.

    ``(a) General Rule.--Gross income does not include any qualified 
capital gain recognized on the sale or exchange of a qualified zone 
asset held for more than 5 years.
    ``(b) Qualified Zone Asset.--For purposes of this section--
            ``(1) In general.--The term `qualified zone asset' means--
                    ``(A) any qualified zone stock,
                    ``(B) any qualified zone business property, and
                    ``(C) any qualified zone partnership interest.
            ``(2) Qualified zone stock.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `qualified zone stock' means 
                any stock in a domestic corporation if--
                            ``(i) such stock is acquired by the 
                        taxpayer on original issue from the corporation 
                        solely in exchange for cash,
                            ``(ii) as of the time such stock was 
                        issued, such corporation was an enterprise zone 
                        business (or, in the case of a new corporation, 
                        such corporation was being organized for 
                        purposes of being an enterprise zone business), 
                        and
                            ``(iii) during substantially all of the 
                        taxpayer's holding period for such stock, such 
                        corporation qualified as an enterprise zone 
                        business.
                    ``(B) Exclusion of stock for which deduction under 
                section 1397e allowed.--The term `qualified zone stock' 
                shall not include any stock the basis of which is 
                reduced under section 1397E.
                    ``(C) Redemptions.--The term `qualified zone stock' 
                shall not include any stock acquired from a corporation 
                which made a substantial stock redemption or 
                distribution (without a bona fide business purpose 
therefor) in an attempt to avoid the purposes of this section.
            ``(3) Qualified zone business property.--
                    ``(A) In general.--The term `qualified zone 
                business property' means tangible property if--
                            ``(i) such property was acquired by the 
                        taxpayer by purchase (as defined in section 
                        179(d)(2)) after the date on which the 
                        designation of the empowerment zone or 
                        enterprise community took effect,
                            ``(ii) the original use of such property in 
                        the empowerment zone or enterprise community 
                        commences with the taxpayer, and
                            ``(iii) during substantially all of the 
                        taxpayer's holding period for such property, 
                        substantially all of the use of such property 
                        was in an enterprise zone business of the 
                        taxpayer.
                    ``(B) Special rule for substantial improvements.--
                            ``(i) In general.--The requirements of 
                        clauses (i) and (ii) of subparagraph (A) shall 
                        be treated as satisfied with respect to--
                                    ``(I) property which is 
                                substantially improved by the taxpayer, 
                                and
                                    ``(II) any land on which such 
                                property is located.
                            ``(ii) Substantial improvement.--For 
                        purposes of clause (i), property shall be 
                        treated as substantially improved by the 
                        taxpayer if, during any 24-month period 
                        beginning after the date on which the 
                        designation of the empowerment zone or 
                        enterprise community took effect, additions to 
                        basis with respect to such property in the 
                        hands of the taxpayer exceed the greater of--
                                    ``(I) an amount equal to the 
                                adjusted basis at the beginning of such 
                                24-month period in the hands of the 
                                taxpayer, or
                                    ``(II) $5,000.
                    ``(C) Limitation on land.--The term `qualified zone 
                business property' shall not include land which is not 
                an integral part of an enterprise zone business.
            ``(4) Qualified zone partnership interest.--The term 
        `qualified zone partnership interest' means any interest in a 
        partnership if--
                    ``(A) such interest is acquired by the taxpayer 
                from the partnership solely in exchange for cash,
                    ``(B) as of the time such interest was acquired, 
                such partnership was an enterprise zone business (or, 
                in the case of a new partnership, such partnership was 
                being organized for purposes of being an enterprise 
                zone business), and
                    ``(C) during substantially all of the taxpayer's 
                holding period for such interest, such partnership 
                qualified as an enterprise zone business.
        A rule similar to the rule of paragraph (2)(C) shall apply for 
        purposes of this paragraph.
            ``(5) Treatment of subsequent purchasers.--The term 
        `qualified zone asset' includes any property which would be a 
        qualified zone asset but for paragraph (2)(A)(i), (3)(A)(ii), 
        or (4)(A) in the hands of the taxpayer if such property was a 
        qualified zone asset in the hands of all prior holders.
            ``(6) 10-year safe harbor.--If any property ceases to be a 
        qualified zone asset by reason of paragraph (2)(A)(iii), 
        (3)(A)(iii), or (4)(C) after the 10-year period beginning on 
        the date the taxpayer acquired such property, such property 
        shall continue to be treated as meeting the requirements of 
        such paragraph; except that the amount of gain to which 
        subsection (a) applies on any sale or exchange of such property 
        shall not exceed the amount which would be qualified capital 
        gain had such property been sold on the date of such cessation.
            ``(7) Treatment of zone terminations.--The termination of 
        any designation of an area as an empowerment zone or enterprise 
        community shall be disregarded for purposes of determining 
        whether any property is a qualified zone asset.
    ``(c) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualified capital gain.--Except as otherwise provided 
        in this subsection, the term `qualified capital gain' means any 
        long-term capital gain recognized on the sale or exchange of a 
        qualified zone asset held for more than 5 years.
            ``(2) Certain gain on real property not qualified.--The 
        term `qualified capital gain' shall not include any gain which 
        would be treated as ordinary income under section 1250 if 
        section 1250 applied to all depreciation rather than the 
        additional depreciation.
            ``(3) Gain attributable to periods after termination of 
        zone designation not qualified.--The term `qualified capital 
        gain' shall not include any gain attributable to periods after 
        the termination of any designation of an area as an empowerment 
        zone or enterprise community.
            ``(4) Related party transactions.--The term `qualified 
        capital gain' shall not include any gain attributable, directly 
        or indirectly, in whole or in part, to a transaction with a 
        related person.
            ``(5) Enterprise zone business.--The term `enterprise zone 
        business' has the meaning given such term by section 
        1394(b)(3), except that, in applying section 1394(b)(3), the 
        term `qualified business' shall not include any trade or 
        business of producing property of a character subject to the 
        allowance for depletion under section 611.
    ``(d) Treatment of Pass-Thru Entities.--
            ``(1) Sales and exchanges.--Gain on the sale or exchange of 
        an interest in a pass-thru entity held by the taxpayer (other 
        than an interest in an entity which was an enterprise zone 
        business during substantially all of the period the taxpayer 
        held such interest) for more than 5 years shall be treated as 
gain described in subsection (a) to the extent such gain is 
attributable to amounts which would be qualified capital gain on 
qualified zone assets (determined as if such assets had been sold on 
the date of the sale or exchange) held by such entity for more than 5 
years and throughout the period the taxpayer held such interest. A rule 
similar to the rule of paragraph (2)(C) shall apply for purposes of the 
preceding sentence.
            ``(2) Income inclusions.--
                    ``(A) In general.--Any amount included in income by 
                reason of holding an interest in a pass-thru entity 
                (other than an entity which was an enterprise zone 
                business during substantially all of the period the 
                taxpayer held the interest to which such inclusion 
                relates) shall be treated as gain described in 
                subsection (a) if such amount meets the requirements of 
                subparagraph (B).
                    ``(B) Requirements.--An amount meets the 
                requirements of this subparagraph if--
                            ``(i) such amount is attributable to 
                        qualified capital gain recognized on the sale 
                        or exchange by the pass-thru entity of property 
                        which is a qualified zone asset in the hands of 
                        such entity and which was held by such entity 
                        for the period required under subsection (a), 
                        and
                            ``(ii) such amount is includible in the 
                        gross income of the taxpayer by reason of the 
                        holding of an interest in such entity which was 
                        held by the taxpayer on the date on which such 
                        pass-thru entity acquired such asset and at all 
                        times thereafter before the disposition of such 
                        asset by such pass-thru entity.
                    ``(C) Limitation based on interest originally held 
                by taxpayer.--Subparagraph (A) shall not apply to any 
                amount to the extent such amount exceeds the amount to 
                which subparagraph (A) would have applied if such 
                amount were determined by reference to the interest the 
                taxpayer held in the pass-thru entity on the date the 
                qualified zone asset was acquired.
            ``(3) Pass-thru entity.--For purposes of this subsection, 
        the term `pass-thru entity' means--
                    ``(A) any partnership,
                    ``(B) any S corporation,
                    ``(C) any regulated investment company, and
                    ``(D) any common trust fund.
    ``(e) Sales and Exchanges of Interests in Partnerships and S 
Corporations Which Are Qualified Zone Businesses.--In the case of the 
sale or exchange of an interest in a partnership, or of stock in an S 
corporation, which was an enterprise zone business during substantially 
all of the period the taxpayer held such interest or stock, the amount 
of qualified capital gain shall be determined without regard to--
            ``(1) any intangible, and any land, which is not an 
        integral part of any qualified business (as defined in section 
        1397B(b) except that references to empowerment zones shall be 
        treated as including references to enterprise communities), and
            ``(2) gain attributable to periods before the designation 
        of an area as an empowerment zone or enterprise community.
    ``(f) Certain Tax-Free and Other Transfers.--For purposes of this 
section--
            ``(1) In general.--In the case of a transfer of a qualified 
        zone asset to which this subsection applies, the transferee 
        shall be treated as--
                    ``(A) having acquired such asset in the same manner 
                as the transferor, and
                    ``(B) having held such asset during any continuous 
                period immediately preceding the transfer during which 
                it was held (or treated as held under this subsection) 
                by the transferor.
            ``(2) Transfers to which subsection applies.--This 
        subsection shall apply to any transfer--
                    ``(A) by gift,
                    ``(B) at death, or
                    ``(C) from a partnership to a partner thereof of a 
                qualified zone asset with respect to which the 
                requirements of subsection (d)(2) are met at the time 
                of the transfer (without regard to the 5-year holding 
                requirement).
            ``(3) Certain rules made applicable.--Rules similar to the 
        rules of section 1244(d)(2) shall apply for purposes of this 
        section.

``SEC. 1397E. EMPOWERMENT ZONE AND ENTERPRISE COMMUNITY STOCK.

    ``(a) General Rule.--At the election of any individual, the 
aggregate amount paid by such taxpayer during the taxable year for the 
purchase of enterprise zone stock on the original issue of such stock 
by a qualified issuer shall be allowed as a deduction.
    ``(b) Limitations.--
            ``(1) Ceiling.--
                    ``(A) In general.--The maximum amount allowed as a 
                deduction under subsection (a) to a taxpayer shall not 
                exceed--
                            ``(i) $100,000 for any taxable year, and
                            ``(ii) when added to the aggregate amount 
                        allowed as a deduction under this section in 
                        all prior years, $500,000.
                    ``(B) Excess amounts.--If the amount otherwise 
                deductible by any person under subsection (a) exceeds 
                the limitation under--
                            ``(i) subparagraph (A)(i), the amount of 
                        such excess shall be treated as an amount paid 
                        in the next taxable year, and
                            ``(ii) subparagraph (A), the deduction 
                        allowed for any taxable year shall be allocated 
                        proportionately among the enterprise zone stock 
                        purchased by such person on the basis of the 
                        respective purchase prices per share.
            ``(2) Related person.--The taxpayer and members of the 
        taxpayer's family shall be treated as one person for purposes 
        of paragraph (1) and the limitations contained in such 
        paragraph shall be allocated among the taxpayer and such 
        members in accordance with their respective purchases of 
        enterprise zone stock. For purposes of this paragraph, an 
        individual's family includes only such individual's spouse and 
        minor children.
            ``(3) Partial taxable year.--If designation of an area as 
        an empowerment zone or enterprise community occurs, expires, or 
        is revoked pursuant to section 1391 on a date other than the 
        first or last day of the taxable year of the taxpayer, or in 
        the case of a short taxable year, the limitations specified in 
        paragraph (1) shall be adjusted on a pro rata basis (based upon 
        the number of days).
    ``(c) Enterprise Zone Stock.--For purposes of this section--
            ``(1) In general.--The term `enterprise zone stock' means 
        stock of a corporation if--
                    ``(A) such stock is acquired on original issue from 
                the corporation, and
                    ``(B) such corporation is, at the time of issue, a 
                qualified enterprise zone issuer.
            ``(2) Proceeds must be invested in qualified enterprise 
        zone property.--
                    ``(A) In general.--Such term shall include such 
                stock only to the extent that the proceeds of such 
                issuance are used by such issuer during the 12-month 
                period beginning on the date of issuance to purchase 
                (as defined in section 179(d)(2)) qualified enterprise 
                zone property.
                    ``(B) Qualified enterprise zone property.--For 
                purposes of this section, the term `qualified 
                enterprise zone property' means property to which 
                section 168 applies (or would apply but for section 
                179)--
                            ``(i) the original use of which commences 
                        in an empowerment zone or enterprise community 
                        with the issuer, and
                            ``(ii) substantially all of the use of 
                        which is in such empowerment zone or enterprise 
                        community.
            ``(3) Redemptions.--The term `enterprise zone stock' shall 
        not include any stock acquired from a corporation which made a 
        substantial stock redemption or distribution (without a bona 
        fide business purpose therefor) in an attempt to avoid the 
        purposes of this section.
    ``(d) Qualified Enterprise Zone Issuer.--For purposes of this 
section, the term `qualified enterprise zone issuer' means any domestic 
C corporation if--
            ``(1) such corporation is a corporation described in 
        section 1397B(b) (except that in applying such section the 
        references to empowerment zones shall be treated as including 
        references to enterprise communities) or, in the case of a new 
        corporation, such corporation is being organized for purposes 
        of being such a corporation,
            ``(2) such corporation does not have more than one class of 
        stock,
            ``(3) the sum of--
                    ``(A) the money,
                    ``(B) the aggregate unadjusted bases of property 
                owned by such corporation, and
                    ``(C) the value of property leased to the 
                corporation (as determined under regulations prescribed 
                by the Secretary),
        does not exceed $50,000,000, and
            ``(4) more than 20 percent of the total voting power, and 
        20 percent of the total value, of the stock of such corporation 
        is owned directly by individuals or estates or indirectly by 
        individuals through partnerships or trusts.
The determination under paragraph (3) shall be made as of the time of 
issuance of the stock in question but shall include amounts received 
for such stock.
    ``(e) Dispositions of Stock.--
            ``(1) Basis reduction.--For purposes of this title, the 
        basis of any enterprise zone stock shall be reduced by the 
        amount of the deduction allowed under this section with respect 
        to such stock.
            ``(2) Deduction recaptured as ordinary income.--For 
        purposes of section 1245--
                    ``(A) any stock the basis of which is reduced under 
                paragraph (1) (and any other property the basis of 
                which is determined in whole or in part by reference to 
                the adjusted basis of such stock) shall be treated as 
                section 1245 property, and
                    ``(B) any reduction under paragraph (1) shall be 
                treated as a deduction allowed for depreciation.
        If an exchange of any stock described in paragraph (1) 
        qualifies under section 354(a), 355(a), or 356(a), the amount 
        of gain recognized under section 1245 by reason of this 
        paragraph shall not exceed the amount of gain recognized in the 
        exchange (determined without regard to this paragraph).
            ``(3) Certain events treated as dispositions.--For purposes 
        of determining the amount treated as ordinary income under 
        section 1245 by reason of paragraph (2), paragraph (3) of 
        section 1245(b) (relating to certain tax-free transactions) 
        shall not apply.
            ``(4) Interest charged if disposition within 5 years of 
        purchase.--
                    ``(A) In general.--If--
                            ``(i) a taxpayer disposes of any enterprise 
                        zone stock with respect to which a deduction 
                        was allowed under subsection (a) (or any other 
                        property the basis of which is determined in 
                        whole or in part by reference to the adjusted 
                        basis of such stock) before the end of the 5-
                        year period beginning on the date such stock 
                        was purchased by the taxpayer, and
                            ``(ii) section 1245(a) applies to such 
                        disposition by reason of paragraph (2),
                then the tax imposed by this chapter for the taxable 
                year in which such disposition occurs shall be 
increased by the amount determined under subparagraph (B).
                    ``(B) Additional amount.--For purposes of 
                subparagraph (A), the additional amount shall be equal 
                to the amount of interest (determined at the rate 
                applicable under section 6621(a)(2)) that would 
                accrue--
                            ``(i) during the period beginning on the 
                        date the stock was purchased by the taxpayer 
                        and ending on the date of such disposition by 
                        the taxpayer, and
                            ``(ii) on an amount equal to the aggregate 
                        decrease in tax of the taxpayer resulting from 
                        the deduction allowed under this subsection (a) 
                        with respect to such stock.
                    ``(C) Special rule.--Any increase in tax under 
                subparagraph (A) shall not be treated as a tax imposed 
                by this chapter for purposes of--
                            ``(i) determining the amount of any credit 
                        allowable under this chapter, and
                            ``(ii) determining the amount of the tax 
                        imposed by section 55.
    ``(f) Disqualification.--
            ``(1) Issuer ceases to qualify.--If, during the 10-year 
        period beginning on the date enterprise zone stock was 
        purchased by the taxpayer, the issuer of such stock ceases to 
        be a qualified enterprise zone issuer (determined without 
        regard to subsection (d)(3)), then notwithstanding any 
        provision of this subtitle other than paragraph (2), the 
        taxpayer shall be treated for purposes of subsection (e) as 
        disposing of such stock (and any other property the basis of 
        which is determined in whole or in part by reference to the 
        adjusted basis of such stock) during the taxable year during 
        which such cessation occurs at its fair market value as of the 
        1st day of such taxable year.
            ``(2) Cessation of enterprise zone status not to cause 
        recapture.--A corporation shall not fail to be treated as a 
        qualified enterprise zone issuer for purposes of paragraph (1) 
        solely by reason of the termination or revocation of a 
        designation as an empowerment zone or enterprise community, as 
        the case may be.
    ``(g) Other Special Rules.--
            ``(1) Application of limits to partnerships and s 
        corporations.--In the case of a partnership or an S 
        corporation, the limitations under subsection (b) shall apply 
        at the partner and shareholder level and shall not apply at the 
        partnership or corporation level.
            ``(2) Deduction not allowed to estates and trusts.--Estates 
        and trusts shall not be treated as individuals for purposes of 
        this section.''
    (b) Additional Expensing.--Section 1397A (relating to increase in 
expensing under section 179) is amended--
            (1) in subparagraph (A) of subsection (a)(1), by striking 
        ``$20,000'' and inserting ``$35,000'', and
            (2) by adding at the end the following new subsection:
    ``(c) Enterprise Zone Business.--For purposes of this section, the 
term `enterprise zone business' has the meaning given such term by 
section 1397B, except that in applying such section references to 
empowerment zones shall be treated as including references to 
enterprise communities.''
    (c) Technical Amendment.--Subsection (a) of section 1016 (relating 
to adjustments to basis) is amended by striking ``and'' at the end of 
paragraph (24), by striking the period at the end of paragraph (25) and 
inserting ``, and''; and by adding at the end the following new 
paragraph:
            ``(26) to the extent provided in section 1397E(b), in the 
        case of stock with respect to which a deduction was allowed or 
        allowable under section 1397E(a).''
    (d) Clerical and Conforming Amendments.--
            (1) The table of parts for subchapter U is amended by 
        striking the item relating to part IV and inserting the 
        following new items:

                              ``Part IV. Additional incentives for 
                                        empowerment zones and 
                                        enterprise communities.
                              ``Part V.  Regulations.''
            (2) The table of sections for part V of subchapter U of 
        chapter 1, as redesignated by subsection (a)(1), is amended by 
        redesignating the item relating to section 1397D as section 
        1397F.
            (3) Section 1397F, as so redesignated, is amended by 
        striking ``and III'' each place it appears and inserting ``, 
        III, and IV''.
    (e) Effective Date.--The amendments made by this section apply to 
taxable years beginning after December 31, 1995.

SEC. 102. 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 property 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 an empowerment 
        zone or enterprise community designated under subchapter U.
            ``(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 amount of the State commercial 
                revitalization credit ceiling determined 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 $2,000,000 for 
                        each empowerment zone and enterprise community 
                        in the State designated under subchapter U.
                            ``(ii) Special rule where zone or community 
                        located in more than 1 state.--If an 
                        empowerment zone or enterprise community is 
                        located in more than 1 State, a State's share 
                        of the amount specified in clause (i) with 
                        respect to such zone or community shall be an 
                        amount that bears the same ratio to $2,000,000 
                        as the population in the State bears to the 
                        population in all States in which such zone or 
                        community is located.
                            ``(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) 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.
    ``(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.''
    (c) 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''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 1995.

                    TITLE II--REGULATORY FLEXIBILITY

SEC. 201. DEFINITION OF SMALL ENTITIES IN EMPOWERMENT ZONES AND 
              ENTERPRISE COMMUNITIES FOR ANALYSIS OF REGULATORY 
              FUNCTIONS.

    Section 601 of title 5, United States Code, is amended--
            (1) by striking ``and'' at the end of paragraph (5); and
            (2) by striking paragraph (6) and inserting the following:
            ``(6) the term `small entity' means--
                    ``(A) a small business, small organization, or 
                small governmental jurisdiction defined in paragraphs 
                (3), (4), and (5) of this section; and
                    ``(B)(i) any enterprise zone business (as defined 
                by section 1394(b)(3) of the Internal Revenue Code of 
                1986);
                    ``(ii) any unit of government that nominated an 
                area which the appropriate Secretary designates as an 
                empowerment zone or enterprise community (within the 
                meaning of section 1391 of the Internal Revenue Code of 
                1986) that has a rule pertaining to the carrying out of 
                any project, activity, or undertaking within such zone 
                or community; and
                    ``(iii) any not-for-profit enterprise carrying out 
                a significant portion of its activities within such a 
                zone or community.
        For purposes of subparagraph (B)(ii), the term `appropriate 
        Secretary' has the meaning given such term by section 
        1393(a)(1) of the Internal Revenue Code of 1986.''

SEC. 202. WAIVER OR MODIFICATION OF AGENCY RULES IN EMPOWERMENT ZONES 
              AND ENTERPRISE COMMUNITIES.

    (a) In General.--Chapter 6 of title 5, United States Code, is 
amended by adding after section 612 the following new section:
``Sec. 613. Waiver or modification of agency rules in empowerment zones 
              and enterprise communities
    ``(a) Upon the written request of any government which nominated an 
area that the appropriate Secretary has designated as an empowerment 
zone or enterprise community under section 1391 of the Internal Revenue 
Code of 1986, an agency is authorized, in order to further the job 
creation, community development, or economic revitalization objectives 
with respect to such zone or community, to waive or modify all or part 
of any rule which such agency has authority to promulgate, as such rule 
pertains to the carrying out of projects, activities, or undertakings 
within such zone or community.
    ``(b) Nothing in this section shall authorize an agency to waive or 
modify any rule adopted to carry out a statute or Executive order which 
prohibits, or the purpose of which is to protect persons against, 
discrimination on the basis of race, color, religion, sex, familial 
status, national origin, age, or handicap.
    ``(c) A request under subsection (a) shall specify the rule or 
rules to be waived or modified and the change proposed, and shall 
briefly describe why the change would promote the achievement of the 
job creation, community development, or economic revitalization 
objectives of the empowerment zone or enterprise community. If such a 
request is made to any agency other than the Department of Housing and 
Urban Development or the Department of Agriculture, the requesting 
government shall send a copy of the request to the Secretary of Housing 
and Urban Development or to the Secretary of Agriculture, whichever is 
appropriate, at the time the request is made.
    ``(d) Any petition for a modification or waiver shall--
            (i) identify the requirements for which the modification or 
        waiver is sought;
            ``(ii) identify the existing or proposed business or type 
        of business to which the modification or waiver would pertain;
            ``(iii) demonstrate that the public interest which the 
        proposed change would serve in furthering such job creation, 
        community development, or economic revitalization outweighs the 
        public interest which continuation of the rule unchanged would 
        serve;
            ``(iv) demonstrate the extent to which the proposed change 
        is likely to further job creation, community development, or 
        economic revitalization within the empowerment zone or 
        enterprise community against the effect the change is likely to 
        have on the underlying purposes of applicable statutes in the 
        geographic area which would be affected by the change; and
            ``(v) demonstrate that the waiver or modification is 
        necessary because the existing rule impedes the implementation 
        of an existing or proposed business or type of business that 
        furthers job creation, community development, or 
economic revitalization.
    ``(e) The agency may approve, in its discretion, a petition upon 
determining that the petition meets the above-stated criteria. The 
agency shall not approve any request to waive or modify a rule if that 
waiver or modification would--
            ``(1) violate a statutory requirement (including any 
        requirements of the Fair Labor Standards Act of 1938 (52 Stat. 
        1060; 29 U.S.C. 201 et seq.)); or
            ``(2) be likely to present a significant risk to the public 
        health, including environmental or occupational health or 
        safety or of environmental pollution.
    ``(f) A modified rule shall be enforceable as if it were the 
issuance of an amendment to the rule being modified or waived.
    ``(g) If a request is disapproved, the agency shall inform all the 
requesting governments, and the appropriate Secretary (as defined in 
section 1393(a)(1) of the Internal Revenue Code of 1986), in writing of 
the reasons therefor and shall, to the maximum extent possible, work 
with such governments to develop an alternative, consistent with the 
standards contained in subsection (d).
    ``(h) No later than the date on which the petitioner submits the 
petition to the agency, the petitioner shall inform the public of the 
submission of such petition (including a brief description of the 
petition) through publication of a notice in newspapers of general 
circulation in the area in which the facility is located. The agency 
may authorize or require petitioners to use additional or alternative 
means of informing the public of the submission of such petitions. If 
the agency proposes to grant the petitions, the agency shall provide 
public notice and opportunity to comment. The agency shall publish a 
notice in the Federal Register stating any waiver or modification of a 
rule under this section, the time such waiver or modification takes 
effect and its duration, and the scope of the applicability of such 
waiver or modification, consistent with the Administrative Procedure 
Act requirements.
    ``(i) In the event that an agency proposes to amend a rule for 
which a waiver or modification under this section is in effect, the 
agency shall not change the waiver or modification to impose additional 
requirements unless it determines, consistent with standards contained 
in subsection (d), that such action is necessary. Such determinations 
shall be published with the proposal to amend such rule.
    ``(j) No waiver or modification of a rule under this section shall 
remain in effect with respect to an empowerment zone or enterprise 
community after the zone or community designation has expired or has 
been revoked.
    ``(k) For purposes of this section, the term `rule' means--
            ``(1) any rule as defined in section 551(4) of this title, 
        or
            ``(2) any rulemaking conducted on the record after 
        opportunity for an agency hearing pursuant to sections 556 and 
        557 of this title.''
    (b) Clerical Amendment.--The analysis for chapter 6 of title 5, 
United States Code, is amended by inserting after the item relating to 
section 612, the following new item:

``613. Waiver or modification of agency rules in empowerment zones and 
                            enterprise communities.''
    (c) Conforming Amendments.--
            (1) Section 601(2) of such title 5 is amended by inserting 
        ``(except for purposes of section 613)'' before ``means''.
            (2) Section 612 of such title 5 is amended--
                    (A) in subsection (a), by inserting ``(except 
                section 613)'' after ``chapter''; and
                    (B) in subsection (b), by inserting ``as defined in 
                section 601(2)'' before the period at the end of the 
                first sentence.

      TITLE III--RESIDENT MANAGEMENT AND HOMEOWNERSHIP INCENTIVES

SEC. 301. ENTERPRISE ZONE OPPORTUNITY GRANTS.

    (a) In General.--Section 186 of the Housing and Community 
Development Act of 1992 (42 U.S.C. 12898a) is amended by striking the 
section designation and the section heading and inserting the 
following:

``SEC. 186. ENTERPRISE ZONE GRANTS.''

    (b) Statement of Purpose.--Section 186(a) of the Housing and 
Community Development Act of 1992 (42 U.S.C. 12898a(a)) is amended--
            (1) in paragraph (2), by striking ``and'' at the end;
            (2) in paragraph (3)--
                    (A) by striking ``federally approved and equivalent 
                State-approved''; and
                    (B) by striking the period at the end and inserting 
                ``; and''; and
            (3) by adding at the end the following new paragraph:
            ``(4) to encourage the development of resident management 
        corporations and resident councils in enterprise zones.''
    (c) Definitions.--Section 186(b) of the Housing and Community 
Development Act of 1992 (42 U.S.C. 12898a(b)) is amended by adding at 
the end the following new paragraphs:
            ``(7) Enterprise zone.--The term `enterprise zone' means an 
        area designated as an enterprise community or an empowerment 
        zone under section 1391 of the Internal Revenue Code of 1986.
            ``(8) Resident management corporation.--The term `resident 
        management corporation' has the same meaning as in section 
        24(h) of the United States Housing Act of 1937.''
    (d) Assistance to Nonprofit Organizations.--Section 186(c)(1) of 
the Housing and Community Development Act of 1992 (42 U.S.C. 
12898a(c)(1)) is amended to read as follows:
            ``(1) In general.--In carrying out this section, the 
        Secretary may make grants to nonprofit organizations--
                    ``(A) to carry out enterprise zone homeownership 
                opportunity programs to promote homeownership in 
                enterprise zones in accordance with this section; and
                    ``(B) to promote the development of resident 
                management corporations in enterprise zones.''
    (e) Eligible Uses of Assistance.--Section 186(d) of the Housing and 
Community Development Act of 1992 (42 U.S.C. 12898a(d)) is amended--
            (1) in paragraph (1)--
                    (A) by striking ``assistance to provide'' and 
                inserting the following: ``assistance to--
                    ``(A) provide'';
                    (B) by striking the period at the end and inserting 
                ``; and''; and
                    (C) by adding at the end the following:
                    ``(B) to promote the development of resident 
                management corporations in enterprise zones.''; and
            (2) in paragraph (2), by striking ``under this subsection'' 
        and inserting ``under paragraph (1)(A)''.
    (f) Program Requirements.--Section 186(e) of the Housing and 
Community Development Act of 1992 (42 U.S.C. 12898a(e)) is amended--
            (1) in paragraph (2), by striking ``under this section'' 
        and inserting ``under subsection (d)(1)(A)''; and
            (2) in paragraph (3), by striking ``federally approved or 
        State-approved''.
    (g) Terms and Conditions of Assistance.--Section 186(f)(2) of the 
Housing and Community Development Act of 1992 (42 U.S.C. 12898a(f)(2)) 
is amended by striking ``under this section'' and inserting ``under 
subsection (c)(1)(A)''.
    (h) Program Selection Criteria.--Section 186(g)(1) of the Housing 
and Community Development Act of 1992 (42 U.S.C. 12898a(g)(1)) is 
amended by striking ``under this section'' and inserting ``under 
subsection (d)(1)(A)''.
    (i) Authorization of Appropriations.--Section 186(i) of the Housing 
and Community Development Act of 1992 (42 U.S.C. 12898a(i)) is amended 
to read as follows:
    ``(i) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section--
            ``(1) $100,000,000 for fiscal year 1997; and
            ``(2) such sums as may be necessary for each of fiscal 
        years 1998, 1999, and 2000.''
                                 <all>
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