I

104TH CONGRESS

2D SESSION H. R. 3467

To amend the Internal Revenue Code of 1986 to allow the designation

of renewal communities, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 16, 1996

Mr. WATTS of Oklahoma (for himself, Mr. TALENT, Mrs. MYRICK, Mr. ENGLISH of Pennsylvania, Mr. WELDON of Florida, Mr. KNOLLENBERG, Mr.

KOLBE, Mr. RIGGS, Mr. CHABOT, Mr. CHAMBLISS, Mr. COBURN, Mr.

FLANAGAN, Mr. GUTKNECHT, Mr. LARGENT, Mr. LATOURETTE, Mr.

NORWOOD, Mrs. SEASTRAND, Mr. SOUDER, Mr. STOCKMAN, Mr.

THORNBERRY, Mr. WELLER, Mr. WICKER, Mr. BAKER of Louisiana, Mr.

BALLENGER, Mr. BARTLETT of Maryland, Mr. BARTON of Texas, Mr.

BLUTE, Mr. BURTON of Indiana, Mr. CALVERT, Mr. DOOLITTLE, Mr.

DORNAN, Mr. EMERSON, Mr. HASTERT, Mr. HAYES, Mr. HOEKSTRA, Mr.

HOKE, Mr. HUTCHINSON, Mr. KING, Mr. KINGSTON, Mr. LEWIS of Kentucky, Mr. LINDER, Mr. MCCRERY, Mr. SHAYS, Mr. WAMP, Mr.

MCINTOSH, Mr. DELAY, and Mr. TAYLOR of North Carolina) introduced

the following bill; which was referred to the Committee on Ways and

Means, and in addition to the Committees on Economic and Educational

Opportunities, Banking and Financial Services, and Commerce, 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 allow the

designation of renewal communities, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

2 (a) SHORT TITLE.—This Act may be cited as ‘‘Sav3 ing Our Children: The American Community Renewal Act

4 of 1996’’.

5 (b) TABLE OF CONTENTS.—The table of contents for

6 this Act is as follows:

Sec. 1. Short title and table of contents.

Sec. 2. Findings and purpose.

TITLE I—DESIGNATION AND TREATMENT OF RENEWAL

COMMUNITIES

Sec. 101. Short title.

Sec. 102. Statement of purpose.

Sec. 103. Designation and treatment of renewal communities.

Sec. 104. Evaluation and reporting requirements.

Sec. 105. Interaction with other Federal programs.

Sec. 106. Deduction for contributions to family development accounts allowable

whether or not taxpayer itemizes.

Sec. 107. Allowance of commercial revitalization credit.

Sec. 108. Conforming and clerical amendments.

TITLE II—ADDITIONAL TAX PROVISIONS

Sec. 201. Work opportunity tax credit.

Sec. 202. Credit for certain charitable contributions.

Sec. 203. Deduction for charitable contributions to be allowed to individuals

who do not itemize deductions.

TITLE III—PREVENTION AND TREATMENT OF SUBSTANCE

ABUSE

Sec. 301. Prevention and treatment of substance abuse; services provided

through religious organizations.

TITLE IV—LOW-INCOME EDUCATIONAL OPPORTUNITY

SCHOLARSHIP PROGRAM

Sec. 401. Short title.

Sec. 402. Findings; precedents.

Sec. 403. Purposes.

Sec. 404. Plan submission; requirements.

Sec. 405. Uses of funds.

Sec. 406. Scholarship program.

Sec. 407. Allocation of funds among renewal communities.

Sec. 408. Parental right of choice in education.

Sec. 409. Eligible schools.

Sec. 410. Administration of program and treatment of funds.

Sec. 411. Contributions to scholarship program from other sources.

Sec. 412. Use of excess funds for additional educational purposes.
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Sec. 413. Evaluation.

Sec. 414. Effect on other programs.

Sec. 415. Judicial review.

Sec. 416. Definitions.

Sec. 417. Authorization of appropriations.

TITLE V—ADDITIONAL INCENTIVES FOR RENEWAL

COMMUNITIES

Sec. 501. CRA credit for investments in community development organizations

located in renewal communities.

Sec. 502. FDA user fee amendment.

1 SEC. 2. FINDINGS AND PURPOSE.

2 (a) FINDINGS.—The Congress makes the following

3 findings:

4 (1) Many of the Nation’s urban centers are

5 places with high levels of poverty, high rates of wel6 fare dependency, high crime rates, poor schools, and

7 joblessness.

8 (2) Federal tax incentives and regulatory re9 forms can encourage economic growth, job creation,

10 and small business formation in many urban centers.

11 (3) Encouraging private sector investment in

12 America’s economically distressed urban and rural

13 areas is essential to breaking the cycle of poverty

14 and the related ills of crime, drug abuse, illiteracy,

15 welfare dependency, and unemployment.

16 (b) PURPOSE.—The purpose of this Act is to increase

17 job creation, small business expansion and formation, edu18 cational opportunities, and homeownership, and to foster

19 moral renewal, in economically depressed areas by provid-
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1 ing Federal tax incentives, regulatory reforms, school re2 form pilot projects, and homeownership incentives.

3 TITLE I—DESIGNATION AND

4 TREATMENT OF RENEWAL

5 COMMUNITIES

6 SEC. 101. SHORT TITLE.

7 This title may be cited as the ‘‘Renewing American

8 Communities Act of 1996’’.

9 SEC. 102. STATEMENT OF PURPOSE.

10 It is the purpose of this title to provide for the estab11 lishment of renewal communities in order to stimulate the

12 creation of new jobs, particularly for disadvantaged work13 ers and long-term unemployed individuals, and to promote

14 revitalization of economically distressed areas primarily by

15 providing or encouraging—

16 (1) tax relief at the Federal, State, and local

17 levels;

18 (2) regulatory relief at the Federal, State, and

19 local levels; and

20 (3) improved local services and an increase in

21 the economic stake of renewal community residents

22 in their own community and its development, par23 ticularly through the increased involvement of pri24 vate, local, and neighborhood organizations.
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1 SEC. 103. DESIGNATION AND TREATMENT OF RENEWAL

2 COMMUNITIES.

3 (a) IN GENERAL.—Chapter 1 of the Internal Reve4 nue Code of 1986 is amended by adding at the end the

5 following new subchapter:

6 ‘‘Subchapter W—Renewal Communities

‘‘Part I. Designation.

‘‘Part II. Renewal community capital gain and stock.

‘‘Part III. Family development accounts.

‘‘Part IV. Additional Incentives.

7 ‘‘PART I—DESIGNATION

‘‘Sec. 1400. Designation of Renewal Communities.

8 ‘‘SEC. 1400. DESIGNATION OF RENEWAL COMMUNITIES.

9 ‘‘(a) DESIGNATION.—

10 ‘‘(1) DEFINITIONS.—For purposes of this title,

11 the term ‘renewal community’ means any area—

12 ‘‘(A) which is nominated by one or more

13 local governments and the State or States in

14 which it is located for designation as a renewal

15 community (hereinafter in this section referred

16 to as a ‘nominated area’), and

17 ‘‘(B) which the Secretary of Housing and

18 Urban Development, after consultation with—

19 ‘‘(i) the Secretaries of Agriculture,

20 Commerce, Labor, and the Treasury; the

21 Director of the Office of Management and
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1 Budget; and the Administrator of the

2 Small Business Administration, and

3 ‘‘(ii) in the case of an area on an In4 dian reservation, the Secretary of the Inte5 rior,

6 designates as a renewal community.

7 ‘‘(2) NUMBER OF DESIGNATIONS.—

8 ‘‘(A) IN GENERAL.—The Secretary of

9 Housing and Urban Development may des10 ignate not more than 100 nominated areas as

11 renewal communities.

12 ‘‘(B) MINIMUM DESIGNATION IN RURAL

13 AREAS.—Of the areas designated under para14 graph (1), at least 10 percent must be areas—

15 ‘‘(i) which are within a local govern16 ment jurisdiction or jurisdictions with a

17 population of less than 50,000 (as deter18 mined under the most recent census data

19 available),

20 ‘‘(ii) which are outside of a metropoli21 tan statistical area (within the meaning of

22 section 143(k)(2)(B)), or

23 ‘‘(iii) which are determined by the

24 Secretary of Housing and Urban Develop-
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1 ment, after consultation with the Secretary

2 of Commerce, to be rural areas.

3 ‘‘(C) ADDITIONAL DESIGNATIONS TO RE4 PLACE REVOKED DESIGNATIONS.—

5 ‘‘(i) IN GENERAL.—The Secretary of

6 Housing and Urban Development may des7 ignate one additional area under subpara8 graph (A) to replace each area for which

9 the designation is revoked under subsection

10 (b)(2), but in no event may more than 100

11 areas designated under this subsection

12 bear designations as renewal communities

13 at any time.

14 ‘‘(ii) EXTENSION OF TIME LIMIT ON

15 DESIGNATIONS.—In the case of any des16 ignation made under this subparagraph,

17 paragraph (4)(B) shall be applied by sub18 stituting ‘36-month’ for ‘24-month’.

19 ‘‘(3) AREAS DESIGNATED BASED SOLELY ON

20 DEGREE OF POVERTY, ETC.—

21 ‘‘(A) IN GENERAL.—Except as otherwise

22 provided in this section, the nominated areas

23 designated as renewal communities under this

24 subsection shall be those nominated areas with

25 the highest average ranking with respect to the
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1 criteria described in subparagraphs (C), (D),

2 and (E) of subsection (c)(3). For purposes of

3 the preceding sentence, an area shall be ranked

4 within each such criterion on the basis of the

5 amount by which the area exceeds such cri6 terion, with the area which exceeds such cri7 terion by the greatest amount given the highest

8 ranking.

9 ‘‘(B) EXCEPTION WHERE INADEQUATE

10 COURSE OF ACTION, ETC.—An area shall not be

11 designated under subparagraph (A) if the Sec12 retary of Housing and Urban Development de13 termines that the course of action described in

14 subsection (d)(2) with respect to such area is

15 inadequate.

16 ‘‘(C) SEPARATE APPLICATION TO RURAL

17 AND OTHER AREAS.—Subparagraph (A) shall

18 be applied separately with respect to areas de19 scribed in paragraph (2)(B) and to other areas.

20 ‘‘(4) LIMITATION ON DESIGNATIONS.—

21 ‘‘(A) PUBLICATION OF REGULATIONS.—

22 The Secretary of Housing and Urban Develop23 ment shall prescribe by regulation no later than

24 4 months after the date of the enactment of
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1 this section, after consultation with the officials

2 described in paragraph (1)(B)—

3 ‘‘(i) the procedures for nominating an

4 area under paragraph (1)(A),

5 ‘‘(ii) the parameters relating to the

6 size and population characteristics of a re7 newal community, and

8 ‘‘(iii) the manner in which nominated

9 areas will be evaluated based on the cri10 teria specified in subsection (d).

11 ‘‘(B) TIME LIMITATIONS.—The Secretary

12 of Housing and Urban Development may des13 ignate nominated areas as renewal communities

14 only during the 24-month period beginning on

15 the first day of the first month following the

16 month in which the regulations described in

17 subparagraph (A) are prescribed.

18 ‘‘(C) PROCEDURAL RULES.—The Secretary

19 of Housing and Urban Development shall not

20 make any designation of a nominated area as a

21 renewal community under paragraph (2) un22 less—

23 ‘‘(i) the local governments and the

24 State in which the nominated area is lo25 cated have the authority—
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1 ‘‘(I) to nominate such area for

2 designation as a renewal community,

3 ‘‘(II) to make the State and local

4 commitments described in subsection

5 (d), and

6 ‘‘(III) to provide assurances sat7 isfactory to the Secretary of Housing

8 and Urban Development that such

9 commitments will be fulfilled,

10 ‘‘(ii) a nomination regarding such

11 area is submitted in such a manner and in

12 such form, and contains such information,

13 as the Secretary of Housing and Urban

14 Development shall by regulation prescribe,

15 and

16 ‘‘(iii) the Secretary of Housing and

17 Urban Development determines that any

18 information furnished is reasonably accu19 rate.

20 ‘‘(5) NOMINATION PROCESS FOR INDIAN RES21 ERVATIONS.—For purposes of this subchapter, in

22 the case of a nominated area on an Indian reserva23 tion, the reservation governing body (as determined

24 by the Secretary of the Interior) shall be treated as
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1 being both the State and local governments with re2 spect to such area.

3 ‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF4 FECT.—

5 ‘‘(1) IN GENERAL.—Any designation of an area

6 as a renewal community shall remain in effect dur7 ing the period beginning on the date of the designa8 tion and ending on the earliest of—

9 ‘‘(A) December 31 of the 7th calendar year

10 following the calendar year in which such date

11 occurs,

12 ‘‘(B) the termination date designated by

13 the State and local governments in their nomi14 nation pursuant to subsection (a)(4)(C)(ii), or

15 ‘‘(C) the date the Secretary of Housing

16 and Urban Development revokes such designa17 tion under paragraph (2).

18 ‘‘(2) REVOCATION OF DESIGNATION.—The Sec19 retary of Housing and Urban Development may,

20 after—

21 ‘‘(A) consultation with the officials de22 scribed in subsection (a)(1)(B) (and the Sec23 retary of Education if notification required

24 under section 404 of the Low-Income Edu-
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1 cational Opportunity Scholarship Act of 1996 is

2 received), and

3 ‘‘(B) a hearing on the record involving offi4 cials of the State or local government involved

5 (or both, if applicable),

6 revoke the designation of an area if the Secretary of

7 Housing and Urban Development determines that

8 the local government or State in which the area is

9 located is not complying substantially with the State

10 or local commitments, respectively, described in sub11 section (d).

12 ‘‘(c) AREA AND ELIGIBILITY REQUIREMENTS.—

13 ‘‘(1) IN GENERAL.—The Secretary of Housing

14 and Urban Development may designate any nomi15 nated area as a renewal community under subsection

16 (a) only if the area meets the requirements of para17 graphs (2) and (3) of this subsection.

18 ‘‘(2) AREA REQUIREMENTS.—A nominated area

19 meets the requirements of this paragraph if—

20 ‘‘(A) the area is within the jurisdiction of

21 a local government,

22 ‘‘(B) the boundary of the area is continu23 ous, and

24 ‘‘(C) the area—
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1 (i) has a population, as determined by

2 the most recent census data available, of at

3 least—

4 ‘‘(I) 4,000 if any portion of such

5 area (other than a rural area de6 scribed in subsection (a)(2)(B)(i)) is

7 located within a metropolitan statis8 tical area (within the meaning of sec9 tion 143(k)(2)(B)) which has a popu10 lation of 50,000 or greater, or

11 ‘‘(II) 1,000 in any other case, or

12 ‘‘(ii) is entirely within an Indian res13 ervation (as determined by the Secretary of

14 the Interior).

15 ‘‘(3) ELIGIBILITY REQUIREMENTS.—A nomi16 nated area meets the requirements of this paragraph

17 if the State and the local governments in which it

18 is located certify (and the Secretary of Housing and

19 Urban Development, after such review of supporting

20 data as he deems appropriate, accepts such certifi21 cation) that—

22 ‘‘(A) the area is one of pervasive poverty,

23 unemployment, and general distress,

24 ‘‘(B) the area is located wholly within the

25 jurisdiction of a local government which is eligi-
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1 ble for Federal assistance under section 119 of

2 the Housing and Community Development Act

3 of 1974, as in effect on the date of the enact4 ment of this section,

5 ‘‘(C) the unemployment rate in the area,

6 as determined by the appropriate available

data, was at least 11 7 ⁄2 times the national unem8 ployment rate for the period to which such data

9 relate,

10 ‘‘(D) the poverty rate (as determined by

11 the most recent census data available) for each

12 population census tract (or where not tracted,

13 the equivalent county division as defined by the

14 Bureau of the Census for the purpose of defin15 ing poverty areas) within the area was at least

16 20 percent for the period to which such data re17 late, and

18 ‘‘(E) at least 70 percent of the households

19 living in the area have incomes below 80 per20 cent of the median income of households within

21 the jurisdiction of the local government (deter22 mined in the same manner as under section

23 119(b)(2) of the Housing and Community De24 velopment Act of 1974).
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1 ‘‘(d) REQUIRED STATE AND LOCAL COMMIT2 MENTS.—

3 ‘‘(1) IN GENERAL.—The Secretary of Housing

4 and Urban Development may designate any nomi5 nated area as a renewal community under subsection

6 (a) only if—

7 ‘‘(A) the local government and the State in

8 which the area is located agree in writing that,

9 during any period during which the area is a

10 renewal community, such governments will—

11 ‘‘(i) follow a specified course of action

12 which meets the requirements of para13 graph (2) and is designed to reduce the

14 various burdens borne by employers or em15 ployees in such area, and

16 ‘‘(ii) comply with the requirements of

17 the Low-Income Educational Opportunity

18 Scholarship Act of 1996, and

19 ‘‘(B) the economic growth promotion re20 quirements of paragraph (3) are met.

21 ‘‘(2) COURSE OF ACTION.—

22 ‘‘(A) IN GENERAL.—A course of action

23 meets the requirements of this paragraph if

24 such course of action is a written document,

25 signed by a State (or local government) and
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1 neighborhood organizations, which evidences a

2 partnership between such State or government

3 and community-based organizations and which

4 commits each signatory to specific and measur5 able goals, actions, and timetables. Such course

6 of action shall include at least five of the follow7 ing:

8 ‘‘(i) A reduction of tax rates or fees

9 applying within the renewal community.

10 ‘‘(ii) An increase in the level of effi11 ciency of local services within the renewal

12 community.

13 ‘‘(iii) Crime reduction strategies, such

14 as crime prevention (including the provi15 sion of such services by nongovernmental

16 entities).

17 ‘‘(iv) Actions to reduce, remove, sim18 plify, or streamline governmental require19 ments applying within the renewal commu20 nity.

21 ‘‘(v) Involvement in the program by

22 private entities, organizations, neighbor23 hood organizations, and community

24 groups, particularly those in the renewal

25 community, including a commitment from
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1 such private entities to provide jobs and

2 job training for, and technical, financial, or

3 other assistance to, employers, employees,

4 and residents from the renewal community.

5 ‘‘(vi) State or local income tax bene6 fits for fees paid for services performed by

7 a nongovernmental entity which were for8 merly performed by a governmental entity.

9 ‘‘(vii) The gift (or sale at below fair

10 market value) of surplus realty (such as

11 land, homes, and commercial or industrial

12 structures) in the renewal community to

13 neighborhood organizations, community de14 velopment corporations, or private compa15 nies.

16 ‘‘(B) RECOGNITION OF PAST EFFORTS.—

17 For purposes of this section, in evaluating the

18 course of action agreed to by any State or local

19 government, the Secretary of Housing and

20 Urban Development shall take into account the

21 past efforts of such State or local government

22 in reducing the various burdens borne by em23 ployers and employees in the area involved.

24 ‘‘(3) ECONOMIC GROWTH PROMOTION REQUIRE25 MENTS.—The economic growth promotion require-
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1 ments of this paragraph are met with respect to a

2 nominated area if the local government and the

3 State in which such area is located certify in writing

4 that such government and State, respectively, have

5 repealed or otherwise will not enforce within the

6 area, if such area is designated as a renewal commu7 nity—

8 (A) licensing requirements for occupations

9 that do not ordinarily require a professional de10 gree,

11 (B) zoning restrictions on home-based

12 businesses which do not create a public nui13 sance,

14 (C) permit requirements for street vendors

15 who do not create a public nuisance,

16 (D) zoning or other restrictions that im17 pede the formation of schools or child care cen18 ters, and

19 (E) franchises or other restrictions on

20 competition for businesses providing public

21 services, including but not limited to taxicabs,

22 jitneys, cable television, or trash hauling,

23 except to the extent that such regulation of busi24 nesses and occupations is necessary for and well-tai25 lored to the protection of health and safety.
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1 ‘‘(e) SPECIAL RULES FOR EMPOWERMENT ZONES

2 AND ENTERPRISE COMMUNITIES DESIGNATED AS RE3 NEWAL COMMUNITIES.—

4 ‘‘(1) IN GENERAL.—Any empowerment zone or

5 enterprise community which is designated as a re6 newal community under this section shall be treated

7 as if its designation as an empowerment zone or en8 terprise community ended (except as provided in

9 paragraph (2)) on the date of such designation as a

10 renewal community.

11 ‘‘(2) ENTERPRISE ZONE FACILITY BONDS.—In

12 the case of an empowerment zone or enterprise com13 munity described in paragraph (1), designation as

14 an empowerment zone or enterprise community shall

15 be treated as ended, for purposes of applying section

16 1394, with respect to obligations issued after the

17 date of designation as a renewal community, except

18 that designation as an empowerment zone or enter19 prise community shall not be treated as ended with

20 respect to any obligation (or series of obligations) is21 sued to refund an obligation issued before such date,

22 if the refunding obligation meets the requirements of

23 subclauses (I), (II), and (III) of section

24 144(a)(12)(A)(ii).
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1 ‘‘(f) DEFINITIONS.—For purposes of this sub2 chapter—

3 ‘‘(1) GOVERNMENTS.—If more than one govern4 ment seeks to nominate an area as a renewal com5 munity, any reference to, or requirement of, this sec6 tion shall apply to all such governments.

7 ‘‘(2) STATE.—The term ‘State’ includes Puerto

8 Rico, the Virgin Islands of the United States, Guam,

9 American Samoa, the Northern Mariana Islands,

10 and any other possession of the United States.

11 ‘‘(3) LOCAL GOVERNMENT.—The term ‘local

12 government’ means—

13 ‘‘(A) any county, city, town, township, par14 ish, village, or other general purpose political

15 subdivision of a State,

16 ‘‘(B) any combination of political subdivi17 sions described in subparagraph (A) recognized

18 by the Secretary of Housing and Urban Devel19 opment, and

20 ‘‘(C) the District of Columbia.

21 ‘‘PART II—RENEWAL COMMUNITY CAPITAL GAIN

22 AND STOCK

‘‘Sec. 1400A. Renewal community capital gain.

‘‘Sec. 1400B. Renewal community stock.

‘‘Sec. 1400C. Renewal community business defined.
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1 ‘‘SEC. 1400A. RENEWAL COMMUNITY CAPITAL GAIN.

2 ‘‘(a) GENERAL RULE.—Gross income does not in3 clude any qualified capital gain recognized on the sale or

4 exchange of a qualified community asset held for more

5 than 5 years.

6 ‘‘(b) QUALIFIED COMMUNITY ASSET.—For purposes

7 of this section—

8 ‘‘(1) IN GENERAL.—The term ‘qualified com9 munity asset’ means—

10 ‘‘(A) any qualified community stock,

11 ‘‘(B) any qualified community business

12 property, and

13 ‘‘(C) any qualified community partnership

14 interest.

15 ‘‘(2) QUALIFIED COMMUNITY STOCK.—

16 ‘‘(A) IN GENERAL.—Except as provided in

17 subparagraph (B), the term ‘qualified commu18 nity stock’ means any stock in a domestic cor19 poration if—

20 ‘‘(i) such stock is acquired by the tax21 payer on original issue from the corpora22 tion solely in exchange for cash,

23 ‘‘(ii) as of the time such stock was is24 sued, such corporation was a renewal com25 munity business (or, in the case of a new

26 corporation, such corporation was being or-
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1 ganized for purposes of being a renewal

2 community business), and

3 ‘‘(iii) during substantially all of the

4 taxpayer’s holding period for such stock,

5 such corporation qualified as a renewal

6 community business.

7 ‘‘(B) EXCLUSION OF STOCK FOR WHICH

8 DEDUCTION UNDER SECTION 1400B AL9 LOWED.—The term ‘qualified community stock’

10 shall not include any stock the basis of which

11 is reduced under section 1400B.

12 ‘‘(C) REDEMPTIONS.—The term ‘qualified

13 community stock’ shall not include any stock

14 acquired from a corporation which made a sub15 stantial stock redemption or distribution (with16 out a bona fide business purpose therefor) in an

17 attempt to avoid the purposes of this section.

18 ‘‘(3) QUALIFIED COMMUNITY BUSINESS PROP19 ERTY.—

20 ‘‘(A) IN GENERAL.—The term ‘qualified

21 community business property’ means tangible

22 property if—

23 ‘‘(i) such property was acquired by

24 the taxpayer by purchase (as defined in

25 section 179(d)(2)) after the date on which
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1 the designation of the renewal community

2 took effect,

3 ‘‘(ii) the original use of such property

4 in the renewal community commences with

5 the taxpayer, and

6 ‘‘(iii) during substantially all of the

7 taxpayer’s holding period for such prop8 erty, substantially all of the use of such

9 property was in a renewal community busi10 ness of the taxpayer.

11 ‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM12 PROVEMENTS.—

13 ‘‘(i) IN GENERAL.—The requirements

14 of clauses (i) and (ii) of subparagraph (A)

15 shall be treated as satisfied with respect

16 to—

17 ‘‘(I) property which is substan18 tially improved by the taxpayer, and

19 ‘‘(II) any land on which such

20 property is located.

21 ‘‘(ii) SUBSTANTIAL IMPROVEMENT.—

22 For purposes of clause (i), property shall

23 be treated as substantially improved by the

24 taxpayer only if, during any 24-month pe25 riod beginning after the date on which the
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1 designation of the renewal community took

2 effect, additions to basis with respect to

3 such property in the hands of the taxpayer

4 exceed the greater of—

5 ‘‘(I) an amount equal to the ad6 justed basis at the beginning of such

7 24-month period in the hands of the

8 taxpayer, or

9 ‘‘(II) $5,000.

10 ‘‘(C) LIMITATION ON LAND.—The term

11 ‘qualified community business property’ shall

12 not include land which is not an integral part

13 of a renewal community business.

14 ‘‘(4) QUALIFIED COMMUNITY PARTNERSHIP IN15 TEREST.—The term ‘qualified community partner16 ship interest’ means any interest in a partnership

17 if—

18 ‘‘(A) such interest is acquired by the tax19 payer from the partnership solely in exchange

20 for cash,

21 ‘‘(B) as of the time such interest was ac22 quired, such partnership was a renewal commu23 nity business (or, in the case of a new partner24 ship, such partnership was being organized for
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1 purposes of being a renewal community busi2 ness), and

3 ‘‘(C) during substantially all of the tax4 payer’s holding period for such interest, such

5 partnership qualified as a renewal community

6 business.

7 A rule similar to the rule of paragraph (2)(C) shall

8 apply for purposes of this paragraph.

9 ‘‘(5) TREATMENT OF SUBSEQUENT PUR10 CHASERS.—The term ‘qualified community asset’ in11 cludes any property which would be a qualified com12 munity asset but for paragraph (2)(A)(i), (3)(A)(ii),

13 or (4)(A) in the hands of the taxpayer if such prop14 erty was a qualified community asset in the hands

15 of all prior holders.

16 ‘‘(6) 10-YEAR SAFE HARBOR.—If any property

17 ceases to be a qualified community asset by reason

18 of paragraph (2)(A)(iii), (3)(A)(iii), or (4)(C) after

19 the 10-year period beginning on the date the tax20 payer acquired such property, such property shall

21 continue to be treated as meeting the requirements

22 of such paragraph; except that the amount of gain

23 to which subsection (a) applies on any sale or ex24 change of such property shall not exceed the amount
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1 which would be qualified capital gain had such prop2 erty been sold on the date of such cessation.

3 ‘‘(7) TREATMENT OF COMMUNITY DESIGNATION

4 TERMINATIONS.—The termination of any designa5 tion of an area as a renewal community shall be dis6 regarded for purposes of determining whether any

7 property is a qualified community asset.

8 ‘‘(c) OTHER DEFINITIONS AND SPECIAL RULES.—

9 For purposes of this section—

10 ‘‘(1) QUALIFIED CAPITAL GAIN.—Except as

11 otherwise provided in this subsection, the term

12 ‘qualified capital gain’ means any long-term capital

13 gain recognized on the sale or exchange of a quali14 fied community asset held for more than 5 years

15 (determined without regard to any period before the

16 designation of the renewal community).

17 ‘‘(2) CERTAIN GAIN ON REAL PROPERTY NOT

18 QUALIFIED.—The term ‘qualified capital gain’ shall

19 not include any gain which would be treated as ordi20 nary income under section 1250 if section 1250 ap21 plied to all depreciation rather than the additional

22 depreciation.

23 ‘‘(3) GAIN ATTRIBUTABLE TO PERIODS AFTER

24 TERMINATION OF COMMUNITY DESIGNATION NOT

25 QUALIFIED.—The term ‘qualified capital gain’ shall
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1 not include any gain attributable to periods after the

2 termination of any designation of an area as a re3 newal community.

4 ‘‘(4) RELATED PARTY TRANSACTIONS.—The

5 term ‘qualified capital gain’ shall not include any

6 gain attributable, directly or indirectly, in whole or

7 in part, to a transaction with a related person. For

8 purposes of this paragraph, persons are related to

9 each other if such persons are described in section

10 267(b) or 707(b)(1).

11 ‘‘(d) TREATMENT OF PASS-THRU ENTITIES.—

12 ‘‘(1) SALES AND EXCHANGES.—Gain on the

13 sale or exchange of an interest in a pass-thru entity

14 held by the taxpayer (other than an interest in an

15 entity which was a renewal community business dur16 ing substantially all of the period the taxpayer held

17 such interest) for more than 5 years shall be treated

18 as gain described in subsection (a) to the extent

19 such gain is attributable to amounts which would be

20 qualified capital gain on qualified community assets

21 (determined as if such assets had been sold on the

22 date of the sale or exchange) held by such entity for

23 more than 5 years (determined without regard to

24 any period before the date of the designation of the

25 renewal community) and throughout the period the
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1 taxpayer held such interest. A rule similar to the

2 rule of paragraph (2)(C) shall apply for purposes of

3 the preceding sentence.

4 ‘‘(2) INCOME INCLUSIONS.—

5 ‘‘(A) IN GENERAL.—Any amount included

6 in income by reason of holding an interest in a

7 pass-thru entity (other than an entity which

8 was a renewal community business during sub9 stantially all of the period the taxpayer held the

10 interest to which such inclusion relates) shall be

11 treated as gain described in subsection (a) if

12 such amount meets the requirements of sub13 paragraph (B).

14 ‘‘(B) REQUIREMENTS.—An amount meets

15 the requirements of this subparagraph if—

16 ‘‘(i) such amount is attributable to

17 qualified capital gain recognized on the

18 sale or exchange by the pass-thru entity of

19 property which is a qualified community

20 asset in the hands of such entity and

21 which was held by such entity for the pe22 riod required under subsection (a), and

23 ‘‘(ii) such amount is includible in the

24 gross income of the taxpayer by reason of

25 the holding of an interest in such entity
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1 which was held by the taxpayer on the date

2 on which such pass-thru entity acquired

3 such asset and at all times thereafter be4 fore the disposition of such asset by such

5 pass-thru entity.

6 ‘‘(C) LIMITATION BASED ON INTEREST

7 ORIGINALLY HELD BY TAXPAYER.—Subpara8 graph (A) shall not apply to any amount to the

9 extent such amount exceeds the amount to

10 which subparagraph (A) would have applied if

11 such amount were determined by reference to

12 the interest the taxpayer held in the pass-thru

13 entity on the date the qualified community

14 asset was acquired.

15 ‘‘(3) PASS-THRU ENTITY.—For purposes of this

16 subsection, the term ‘pass-thru entity’ means—

17 ‘‘(A) any partnership,

18 ‘‘(B) any S corporation,

19 ‘‘(C) any regulated investment company,

20 and

21 ‘‘(D) any common trust fund.

22 ‘‘(e) SALES AND EXCHANGES OF INTERESTS IN

23 PARTNERSHIPS AND S CORPORATIONS WHICH ARE

24 QUALIFIED COMMUNITY BUSINESSES.—In the case of the

25 sale or exchange of an interest in a partnership, or of
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1 stock in an S corporation, which was a renewal community

2 business during substantially all of the period the taxpayer

3 held such interest or stock, the amount of qualified capital

4 gain shall be determined without regard to—

5 ‘‘(1) any intangible, and any land, which is not

6 an integral part of any qualified business entity (as

7 defined in section 1400C(b)), and

8 ‘‘(2) gain attributable to periods before the des9 ignation of an area as a renewal community.

10 ‘‘(f) CERTAIN TAX-FREE AND OTHER TRANSFERS.—

11 For purposes of this section—

12 ‘‘(1) IN GENERAL.—In the case of a transfer of

13 a qualified community asset to which this subsection

14 applies, the transferee shall be treated as—

15 ‘‘(A) having acquired such asset in the

16 same manner as the transferor, and

17 ‘‘(B) having held such asset during any

18 continuous period immediately preceding the

19 transfer during which it was held (or treated as

20 held under this subsection) by the transferor.

21 ‘‘(2) TRANSFERS TO WHICH SUBSECTION AP22 PLIES.—This subsection shall apply to any trans23 fer—

24 ‘‘(A) by gift,

25 ‘‘(B) at death, or
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1 ‘‘(C) from a partnership to a partner

2 thereof, of a qualified community asset with re3 spect to which the requirements of subsection

4 (d)(2) are met at the time of the transfer (with5 out regard to the 5-year holding requirement).

6 ‘‘(3) CERTAIN RULES MADE APPLICABLE.—

7 Rules similar to the rules of section 1244(d)(2) shall

8 apply for purposes of this section.

9 ‘‘SEC. 1400B. RENEWAL COMMUNITY STOCK.

10 ‘‘(a) GENERAL RULE.—At the election of any individ11 ual, the aggregate amount paid by such taxpayer during

12 the taxable year for the purchase of renewal community

13 stock shall be allowed as a deduction.

14 ‘‘(b) LIMITATIONS.—

15 ‘‘(1) CEILING.—

16 ‘‘(A) IN GENERAL.—The maximum

17 amount allowed as a deduction under subsection

18 (a) to a taxpayer shall not exceed—

19 ‘‘(i) $100,000 for any taxable year,

20 and

21 ‘‘(ii) when added to the aggregate

22 amount allowed as a deduction under this

23 section in all prior years, $500,000.
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1 ‘‘(B) EXCESS AMOUNTS.—If the amount

2 otherwise deductible by any person under sub3 section (a) exceeds the limitation under—

4 ‘‘(i) subparagraph (A)(i), the amount

5 of such excess shall be treated as an

6 amount paid in the next taxable year, and

7 ‘‘(ii) subparagraph (A), the deduction

8 allowed for any taxable year shall be allo9 cated proportionately among the renewal

10 community stock purchased by such person

11 on the basis of the respective purchase

12 prices per share.

13 ‘‘(2) RELATED PERSONS.—The taxpayer and

14 members of the taxpayer’s family shall be treated as

15 one person for purposes of paragraph (1) and the

16 limitations contained in such paragraph shall be al17 located among the taxpayer and such members in

18 accordance with their respective purchases of re19 newal community stock. For purposes of this para20 graph, an individual’s family includes only such indi21 vidual’s spouse and minor children.

22 ‘‘(3) PARTIAL TAXABLE YEAR.—If designation

23 of an area as a renewal community occurs, expires,

24 or is revoked pursuant to section 1400 on a date

25 other than the first or last day of the taxable year
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1 of the taxpayer, or in the case of a short taxable

2 year, the limitations specified in paragraph (1) shall

3 be adjusted on a pro rata basis (based upon the

4 number of days).

5 ‘‘(c) RENEWAL COMMUNITY STOCK.—For purposes

6 of this section—

7 ‘‘(1) IN GENERAL.—The term ‘renewal commu8 nity stock’ means stock of a corporation if—

9 ‘‘(A) such stock is acquired on original

10 issue from the corporation, and

11 ‘‘(B) such corporation is, at the time of

12 such issuance, a qualified renewal community

13 issuer.

14 ‘‘(2) PROCEEDS MUST BE INVESTED IN QUALI15 FIED RENEWAL COMMUNITY PROPERTY.—

16 ‘‘(A) IN GENERAL.—Such term shall in17 clude such stock only to the extent that the pro18 ceeds of such issuance are used by such issuer

19 during the 12-month period beginning on the

20 date of issuance to purchase (as defined in sec21 tion 179(d)(2)) qualified renewal community

22 property.

23 ‘‘(B) QUALIFIED RENEWAL COMMUNITY

24 PROPERTY.—For purposes of this section, the

25 term ‘qualified renewal community property’
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1 means property to which section 168 applies (or

2 would apply but for section 179)—

3 ‘‘(i) the original use of which com4 mences in a renewal community with the

5 issuer, and

6 ‘‘(ii) substantially all of the use of

7 which is in such renewal community.

8 ‘‘(3) REDEMPTIONS.—The term ‘renewal com9 munity stock’ shall not include any stock acquired

10 from a corporation which made a substantial stock

11 redemption or distribution (without a bona fide busi12 ness purpose therefor) in an attempt to avoid the

13 purposes of this section.

14 ‘‘(d) QUALIFIED RENEWAL COMMUNITY ISSUER.—

15 For purposes of this section, the term ‘qualified renewal

16 community issuer’ means any domestic C corporation if—

17 ‘‘(1) such corporation is a corporation described

18 in section 1400C(b) or, in the case of a new corpora19 tion, such corporation is being organized for pur20 poses of being such a corporation,

21 ‘‘(2) such corporation does not have more than

22 one class of stock,

23 ‘‘(3) the sum of—

24 ‘‘(A) the money,
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1 ‘‘(B) the aggregate unadjusted bases of

2 property owned by such corporation, and

3 ‘‘(C) the value of property leased to the

4 corporation (as determined under regulations

5 prescribed by the Secretary),

6 does not exceed $50,000,000, and

7 ‘‘(4) more than 20 percent of the total voting

8 power, and 20 percent of the total value, of the

9 stock of such corporation is owned directly by indi10 viduals or estates or indirectly by individuals

11 through partnerships or trusts.

12 The determination under paragraph (3) shall be made as

13 of the time of issuance of the stock in question but shall

14 include amounts received for such stock.

15 ‘‘(e) DISPOSITIONS OF STOCK.—

16 ‘‘(1) BASIS REDUCTION.—For purposes of this

17 title, the basis of any renewal community stock shall

18 be reduced by the amount of the deduction allowed

19 under this section with respect to such stock.

20 ‘‘(2) DEDUCTION RECAPTURED AS ORDINARY

21 INCOME.—For purposes of section 1245—

22 ‘‘(A) any stock the basis of which is re23 duced under paragraph (1) (and any other

24 property the basis of which is determined in

25 whole or in part by reference to the adjusted
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1 basis of such stock) shall be treated as section

2 1245 property, and

3 ‘‘(B) any reduction under paragraph (1)

4 shall be treated as a deduction allowed for de5 preciation.

6 If an exchange of any stock described in paragraph

7 (1) qualifies under section 354(a), 355(a), or

8 356(a), the amount of gain recognized under section

9 1245 by reason of this paragraph shall not exceed

10 the amount of gain recognized in the exchange (de11 termined without regard to this paragraph).

12 ‘‘(3) CERTAIN EVENTS TREATED AS DISPOSI13 TIONS.—For purposes of determining the amount

14 treated as ordinary income under section 1245 by

15 reason of paragraph (2), paragraph (3) of section

16 1245(b) (relating to certain tax-free transactions)

17 shall not apply.

18 ‘‘(4) INTEREST CHARGED IF DISPOSITION

19 WITHIN 5 YEARS OF PURCHASE.—

20 ‘‘(A) IN GENERAL.—If—

21 ‘‘(i) a taxpayer disposes of any re22 newal community stock with respect to

23 which a deduction was allowed under sub24 section (a) (or any other property the basis

25 of which is determined in whole or in part
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1 by reference to the adjusted basis of such

2 stock) before the end of the 5-year period

3 beginning on the date such stock was pur4 chased by the taxpayer, and

5 ‘‘(ii) section 1245(a) applies to such

6 disposition by reason of paragraph (2),

7 then the tax imposed by this chapter for the

8 taxable year in which such disposition occurs

9 shall be increased by the amount determined

10 under subparagraph (B).

11 ‘‘(B) INCREASE AMOUNT.—For purposes

12 of subparagraph (A), the amount of the in13 crease shall be equal to the amount of interest

14 (determined at the rate applicable under section

15 6621(a)(2)) that would accrue—

16 ‘‘(i) during the period beginning on

17 the date the stock was purchased by the

18 taxpayer and ending on the date of such

19 disposition by the taxpayer, and

20 ‘‘(ii) on an amount equal to the aggre21 gate decrease in tax of the taxpayer result22 ing from the deduction allowed under sub23 section (a) of this section with respect to

24 such stock.
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1 ‘‘(C) SPECIAL RULE.—Any increase in tax

2 under subparagraph (A) shall not be treated as

3 a tax imposed by this chapter for purposes of—

4 ‘‘(i) determining the amount of any

5 credit allowable under this chapter, and

6 ‘‘(ii) determining the amount of the

7 tax imposed by section 55.

8 ‘‘(f) DISQUALIFICATION.—

9 ‘‘(1) ISSUER CEASES TO QUALIFY.—If, during

10 the 10-year period beginning on the date renewal

11 community stock was purchased by the taxpayer, the

12 issuer of such stock ceases to be a qualified renewal

13 community issuer (determined without regard to

14 subsection (d)(3)), then notwithstanding any provi15 sion of this subtitle other than paragraph (2), the

16 taxpayer shall be treated for purposes of subsection

17 (e) as disposing of such stock (and any other prop18 erty the basis of which is determined in whole or in

19 part by reference to the adjusted basis of such

20 stock) during the taxable year during which such

21 cessation occurs at its fair market value as of the

22 1st day of such taxable year.

23 ‘‘(2) CESSATION OF RENEWAL COMMUNITY STA24 TUS NOT TO CAUSE RECAPTURE.—A corporation

25 shall not fail to be treated as a qualified renewal
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1 community issuer for purposes of paragraph (1)

2 solely by reason of the termination or revocation of

3 a designation as a renewal community, as the case

4 may be.

5 ‘‘(g) OTHER SPECIAL RULES.—

6 ‘‘(1) APPLICATION OF LIMITS TO PARTNER7 SHIPS AND S CORPORATIONS.—In the case of a part8 nership or an S corporation, the limitations under

9 subsection (b) shall apply at the partner and share10 holder level and shall not apply at the partnership

11 or corporation level.

12 ‘‘(2) DEDUCTION NOT ALLOWED TO ESTATES

13 AND TRUSTS.—Estates and trusts shall not be treat14 ed as individuals for purposes of this section.

15 ‘‘SEC. 1400C. RENEWAL COMMUNITY BUSINESS DEFINED.

16 ‘‘(a) IN GENERAL.—For purposes of this part, the

17 term ‘renewal community business’ means—

18 ‘‘(1) any qualified business entity, and

19 ‘‘(2) any qualified proprietorship.

20 Such term shall include any trades or businesses which

21 would qualify as a renewal community business if such

22 trades or businesses were separately incorporated. Such

23 term shall not include any trade or business of producing

24 property of a character subject to the allowance for deple25 tion under section 611.
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1 ‘‘(b) QUALIFIED BUSINESS ENTITY.— For purposes

2 of this section, the term ‘qualified business entity’ means,

3 with respect to any taxable year, any corporation or part4 nership if for such year—

5 ‘‘(1) every trade or business of such entity is

6 the active conduct of a qualified business within a

7 renewal community,

8 ‘‘(2) at least 80 percent of the total gross in9 come of such entity is derived from the active con10 duct of such business,

11 ‘‘(3) substantially all of the use of the tangible

12 property of such entity (whether owned or leased) is

13 within a renewal community,

14 ‘‘(4) substantially all of the intangible property

15 of such entity is used in, and exclusively related to,

16 the active conduct of any such business,

17 ‘‘(5) substantially all of the services performed

18 for such entity by its employees are performed in a

19 renewal community,

20 ‘‘(6) at least 35 percent of its employees are

21 residents of a renewal community,

22 ‘‘(7) less than 5 percent of the average of the

23 aggregate unadjusted bases of the property of such

24 entity is attributable to collectibles (as defined in

25 section 408(m)(2)) other than collectibles that are
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1 held primarily for sale to customers in the ordinary

2 course of such business, and

3 ‘‘(8) less than 5 percent of the average of the

4 aggregate unadjusted bases of the property of such

5 entity is attributable to nonqualified financial prop6 erty.

7 ‘‘(c) QUALIFIED PROPRIETORSHIP.—For purposes of

8 this section, the term ‘qualified proprietorship’ means,

9 with respect to any taxable year, any qualified business

10 carried on by an individual as a proprietorship if for such

11 year—

12 ‘‘(1) at least 80 percent of the total gross in13 come of such individual from such business is de14 rived from the active conduct of such business in a

15 renewal community,

16 ‘‘(2) substantially all of the use of the tangible

17 property of such individual in such business (wheth18 er owned or leased) is within a renewal community,

19 ‘‘(3) substantially all of the intangible property

20 of such business is used in, and exclusively related

21 to, the active conduct of such business,

22 ‘‘(4) substantially all of the services performed

23 for such individual in such business by employees of

24 such business are performed in a renewal commu25 nity,
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1 ‘‘(5) at least 35 percent of such employees are

2 residents of a renewal community,

3 ‘‘(6) less than 5 percent of the average of the

4 aggregate unadjusted bases of the property of such

5 individual which is used in such business is attrib6 utable to collectibles (as defined in section

7 408(m)(2)) other than collectibles that are held pri8 marily for sale to customers in the ordinary course

9 of such business, and

10 ‘‘(7) less than 5 percent of the average of the

11 aggregate unadjusted bases of the property of such

12 individual which is used in such business is attrib13 utable to nonqualified financial property.

14 For purposes of this subsection, the term ‘employee’ in15 cludes the proprietor.

16 ‘‘(d) QUALIFIED BUSINESS.—For purposes of this

17 section—

18 ‘‘(1) IN GENERAL.—Except as otherwise pro19 vided in this subsection, the term ‘qualified business’

20 means any trade or business.

21 ‘‘(2) RENTAL OF REAL PROPERTY.—The rental

22 to others of real property located in a renewal com23 munity shall be treated as a qualified business if and

24 only if—
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1 ‘‘(A) the property is not residential rental

2 property (as defined in section 168(e)(2)), and

3 ‘‘(B) at least 50 percent of the gross rental

4 income from the real property is from renewal

5 community businesses.

6 ‘‘(3) RENTAL OF TANGIBLE PERSONAL PROP7 ERTY.—The rental to others of tangible personal

8 property shall be treated as a qualified business if

9 and only if substantially all of the rental of such

10 property is by renewal community businesses or by

11 residents of a renewal community.

12 ‘‘(4) TREATMENT OF BUSINESS HOLDING IN13 TANGIBLES.—The term ‘qualified business’ shall not

14 include any trade or business consisting predomi15 nantly of the development or holding of intangibles

16 for sale or license.

17 ‘‘(5) CERTAIN BUSINESSES EXCLUDED.—The

18 term ‘qualified business’ shall not include—

19 ‘‘(A) any trade or business consisting of

20 the operation of any facility described in section

21 144(c)(6)(B), and

22 ‘‘(B) any trade or business the principal

23 activity of which is farming (within the meaning

24 of subparagraphs (A) or (B) of section
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1 2032A(e)(5)), but only if, as of the close of the

2 preceding taxable year, the sum of—

3 ‘‘(i) the aggregate unadjusted bases

4 (or, if greater, the fair market value) of

5 the assets owned by the taxpayer which are

6 used in such a trade or business, and

7 ‘‘(ii) the aggregate value of assets

8 leased by the taxpayer which are used in

9 such a trade or business,

10 exceeds $500,000.

11 ‘‘(6) CONTROLLED GROUPS.—For purposes of

12 paragraph (5)(B), all persons treated as a single em13 ployer under subsection (a) or (b) of section 52 shall

14 be treated as a single taxpayer.

15 ‘‘(e) NONQUALIFIED FINANCIAL PROPERTY.—For

16 purposes of this section, the term ‘nonqualified financial

17 property’ means debt, stock, partnership interests, op18 tions, futures contracts, forward contracts, warrants, no19 tional principal contracts, annuities, and other similar

20 property specified in regulations; except that such term

21 shall not include—

22 ‘‘(1) reasonable amounts of working capital

23 held in cash, cash equivalents, or debt instruments

24 with a term of 18 months or less, or
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1 ‘‘(2) debt instruments described in section

2 1221(4).

3 ‘‘PART III—FAMILY DEVELOPMENT ACCOUNTS

‘‘Sec. 1400D. Family development accounts.

‘‘Sec. 1400E. Demonstration program to provide matching contributions to family development accounts in certain

renewal communities.

‘‘Sec. 1400F. Designation of earned income tax credit payments

for deposit to family development account.

4 ‘‘SEC. 1400D. FAMILY DEVELOPMENT ACCOUNTS FOR RE5 NEWAL COMMUNITY EITC RECIPIENTS.

6 ‘‘(a) ALLOWANCE OF DEDUCTION.—

7 ‘‘(1) IN GENERAL.—There shall be allowed as a

8 deduction—

9 ‘‘(A) in the case of a qualified individual,

10 the amount paid in cash for the taxable year by

11 such individual to any family development ac12 count for such individual’s benefit, and

13 ‘‘(B) in the case of any person other than

14 a qualified individual, the amount paid in cash

15 for the taxable year by such person to any fam16 ily development account for the benefit of a

17 qualified individual.

18 No deduction shall be allowed under this paragraph

19 for any amount deposited in a family development

20 account under section 1400E (relating to dem21 onstration program to provide matching amounts in

22 renewal communities).
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1 ‘‘(2) LIMITATION.—

2 ‘‘(A) IN GENERAL.—The amount allowable

3 as a deduction to any individual for any taxable

4 year by reason of paragraph (1)(A) shall not

5 exceed the lesser of—

6 ‘‘(i) $2,000, or

7 ‘‘(ii) an amount equal to the com8 pensation includible in the individual’s

9 gross income for such taxable year.

10 ‘‘(B) PERSONS DONATING TO FAMILY DE11 VELOPMENT ACCOUNTS OF OTHERS.—The

12 amount allowable as a deduction to any person

13 for any taxable year by reason of paragraph

14 (1)(B) shall not exceed $1,000 with respect to

15 any qualified individual.

16 ‘‘(3) SPECIAL RULES FOR CERTAIN MARRIED

17 INDIVIDUALS.—

18 ‘‘(A) IN GENERAL.—In the case of any in19 dividual with respect to whom a deduction is

20 otherwise allowable under paragraph (1)(A)—

21 ‘‘(i) who files a joint return for a tax22 able year, and

23 ‘‘(ii) whose spouse is a qualified indi24 vidual and—
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1 ‘‘(I) has no compensation (deter2 mined without regard to section 911)

3 for the taxable year, or

4 ‘‘(II) elects to be treated for pur5 poses of paragraph (2)(A)(ii) as hav6 ing no compensation for the taxable

7 year,

8 there shall be allowed as a deduction any

9 amount paid in cash for the taxable year by the

10 individual to a family development account es11 tablished for the benefit of the spouse of the in12 dividual.

13 ‘‘(B) LIMITATION.—The amount allowable

14 as a deduction under subparagraph (A) shall

15 not exceed the excess of—

16 ‘‘(i) the lesser of—

17 ‘‘(I) $2,250, or

18 ‘‘(II) an amount equal to the

19 compensation includible in the individ20 ual’s gross income for the taxable

21 year, over

22 ‘‘(ii) the amount allowable as a deduc23 tion under paragraph (1) for the taxable

24 year.
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1 In no event shall the amount allowable as a de2 duction under subparagraph (A) exceed $2,000.

3 ‘‘(4) ROLLOVERS.—No deduction shall be al4 lowed under this section with respect to any rollover

5 contribution.

6 ‘‘(b) TAX TREATMENT OF DISTRIBUTIONS.—

7 ‘‘(1) INCLUSION OF AMOUNTS IN GROSS IN8 COME.—Except as otherwise provided in this sub9 section, any amount paid or distributed out of a

10 family development account shall be included in

11 gross income by the payee or distributee, as the case

12 may be.

13 ‘‘(2) EXCLUSION OF QUALIFIED FAMILY DEVEL14 OPMENT DISTRIBUTIONS.—Paragraph (1) shall not

15 apply to any qualified family development distribu16 tion.

17 ‘‘(3) SPECIAL RULES.—Rules similar to the

18 rules of paragraphs (4) and (5) of section 408(d)

19 shall apply for purposes of this section.

20 ‘‘(c) QUALIFIED FAMILY DEVELOPMENT DISTRIBU21 TION.—For purposes of this section—

22 ‘‘(1) IN GENERAL.—The term ‘qualified family

23 development distribution’ means any amount paid or

24 distributed out of a family development account

25 which would otherwise be includible in gross income,
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1 to the extent that such payment or distribution is

2 used exclusively to pay qualified family development

3 expenses for the holder of the account or the spouse

4 or dependent (as defined in section 152) of such

5 holder.

6 ‘‘(2) QUALIFIED FAMILY DEVELOPMENT EX7 PENSES.—The term ‘qualified family development

8 expenses’ means any of the following:

9 ‘‘(A) Qualified postsecondary educational

10 expenses.

11 ‘‘(B) First-home purchase costs.

12 ‘‘(C) Qualified business capitalization

13 costs.

14 ‘‘(D) Qualified medical expenses.

15 ‘‘(E) Qualified rollovers.

16 ‘‘(3) QUALIFIED POSTSECONDARY EDU17 CATIONAL EXPENSES.—

18 ‘‘(A) IN GENERAL.—The term ‘qualified

19 postsecondary educational expenses’ means

20 postsecondary educational expenses paid to an

21 eligible educational institution.

22 ‘‘(B) POST-SECONDARY EDUCATIONAL EX23 PENSES.—The term ‘post-secondary educational

24 expenses’ means tuition, fees, room, board,

25 books, supplies, and equipment required for the
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1 enrollment or attendance of a student at an eli2 gible educational institution.

3 ‘‘(C) ELIGIBLE EDUCATIONAL INSTITU4 TION.—The term ‘eligible educational institu5 tion’ means the following:

6 ‘‘(i) INSTITUTION OF HIGHER EDU7 CATION.—An institution described in sec8 tion 481(a)(1) or 1201(a) of the Higher

9 Education Act of 1965 (20 U.S.C.

10 1088(a)(1), 1141(a)), as such sections are

11 in effect on the date of the enactment of

12 this section.

13 ‘‘(ii) POSTSECONDARY VOCATIONAL

14 EDUCATION SCHOOL.—An area vocational

15 education school (as defined in subpara16 graph (C) or (D) of section 521(4) of the

17 Carl D. Perkins Vocational and Applied

18 Technology Education Act (20 U.S.C.

19 2471(4))) which is in any State (as defined

20 in section 521(33) of such Act), as such

21 sections are in effect on the date of the en22 actment of this section.

23 ‘‘(D) COORDINATION WITH SAVINGS BOND

24 PROVISIONS.—The amount of qualified post25 secondary educational expenses for any taxable
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1 year shall be reduced by any amount excludable

2 from gross income under section 135.

3 ‘‘(4) FIRST-HOME PURCHASE COSTS.—

4 ‘‘(A) IN GENERAL.—The term ‘first-home

5 purchase costs’ means qualified acquisition

6 costs with respect to a qualified principal resi7 dence for a qualified first-time homebuyer.

8 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

9 The term ‘qualified acquisition costs’ means the

10 costs of acquiring, constructing, or reconstruct11 ing a residence. Such term includes any usual

12 or reasonable settlement, financing, or other

13 closing costs.

14 ‘‘(C) QUALIFIED PRINCIPAL RESIDENCE.—

15 The term ‘qualified principal residence’ means a

16 principal residence (within the meaning of sec17 tion 1034), the qualified acquisition costs of

18 which do not exceed 100 percent of the average

19 area purchase price applicable to such residence

20 (determined in accordance with paragraphs (2)

21 and (3) of section 143(e)).

22 ‘‘(D) QUALIFIED FIRST-TIME HOME23 BUYER.—

24 ‘‘(i) IN GENERAL.—The term ‘quali25 fied first-time homebuyer’ means an indi-
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1 vidual if such individual (and, in the case

2 of a married individual, the individual’s

3 spouse) has no present ownership interest

4 in a principal residence during the 3-year

5 period ending on the date of acquisition of

6 the principal residence to which this sub7 section applies.

8 ‘‘(ii) DATE OF ACQUISITION.—The

9 term ‘date of acquisition’ means the date

10 on which a binding contract to acquire,

11 construct, or reconstruct the principal resi12 dence to which this subsection applies is

13 entered into.

14 ‘‘(5) QUALIFIED BUSINESS CAPITALIZATION

15 COSTS.—

16 ‘‘(A) IN GENERAL.—The term ‘qualified

17 business capitalization costs’ means qualified

18 expenditures for the capitalization of a qualified

19 business pursuant to a qualified plan.

20 ‘‘(B) QUALIFIED EXPENDITURES.—The

21 term ‘qualified expenditures’ means expendi22 tures included in a qualified plan, including

23 capital, plant, equipment, working capital, and

24 inventory expenses.
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1 ‘‘(C) QUALIFIED BUSINESS.—The term

2 ‘qualified business’ means any business that

3 does not contravene any law or public policy (as

4 determined by the Secretary).

5 ‘‘(D) QUALIFIED PLAN.—The term ‘quali6 fied plan’ means a business plan which—

7 ‘‘(i) is approved by a financial institu8 tion, or by a nonprofit loan fund having

9 demonstrated fiduciary integrity,

10 ‘‘(ii) includes a description of services

11 or goods to be sold, a marketing plan, and

12 projected financial statements, and

13 ‘‘(iii) may require the eligible individ14 ual to obtain the assistance of an experi15 enced entrepreneurial advisor.

16 ‘‘(6) QUALIFIED MEDICAL EXPENSES.—The

17 term ‘qualified medical expenses’ means any amount

18 paid during the taxable year, not compensated for by

19 insurance or otherwise, for medical care (as defined

20 in section 213(d)) of the taxpayer, his spouse, or his

21 dependent (as defined in section 152).

22 ‘‘(7) QUALIFIED ROLLOVERS.—The term ‘quali23 fied rollover’ means any amount paid from a family

24 development account of a taxpayer into another such

25 account established for the benefit of—
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1 ‘‘(A) such taxpayer, or

2 ‘‘(B) any qualified individual who is—

3 ‘‘(i) the spouse of such taxpayer, or

4 ‘‘(ii) any dependent (as defined in sec5 tion 152) of the taxpayer.

6 Rules similar to the rules of section 408(d)(3) shall

7 apply for purposes of this paragraph.

8 ‘‘(d) TAX TREATMENT OF ACCOUNTS.—

9 ‘‘(1) IN GENERAL.—Any family development ac10 count is exempt from taxation under this subtitle

11 unless such account has ceased to be a family devel12 opment account by reason of paragraph (2). Not13 withstanding the preceding sentence, any such ac14 count is subject to the taxes imposed by section 511

15 (relating to imposition of tax on unrelated business

16 income of charitable, etc., organizations).

17 ‘‘(2) LOSS OF EXEMPTION IN CASE OF PROHIB18 ITED TRANSACTIONS.—For purposes of this section,

19 rules similar to the rules of section 408(e) shall

20 apply.

21 ‘‘(e) FAMILY DEVELOPMENT ACCOUNT.—For pur22 poses of this title, the term ‘family development account’

23 means a trust created or organized in the United States

24 for the exclusive benefit of a qualified individual or his
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1 beneficiaries, but only if the written governing instrument

2 creating the trust meets the following requirements:

3 ‘‘(1) Except in the case of a qualified rollover

4 (as defined in subsection (c)(7))—

5 ‘‘(A) no contribution will be accepted un6 less it is in cash, and

7 ‘‘(B) contributions will not be accepted for

8 the taxable year in excess of $2,000 (deter9 mined without regard to any contribution made

10 under section 1400E (relating to demonstration

11 program to provide matching amounts in re12 newal communities)).

13 ‘‘(2) The trustee is a bank (as defined in sec14 tion 408(n)) or such other person who demonstrates

15 to the satisfaction of the Secretary that the manner

16 in which such other person will administer the trust

17 will be consistent with the requirements of this sec18 tion.

19 ‘‘(3) No part of the trust funds will be invested

20 in life insurance contracts.

21 ‘‘(4) The interest of an individual in the bal22 ance in his account is nonforfeitable.

23 ‘‘(5) The assets of the trust will not be commin24 gled with other property except in a common trust

25 fund or common investment fund.
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1 ‘‘(6) Under regulations prescribed by the Sec2 retary, rules similar to the rules of section 401(a)(9)

3 and the incidental death benefit requirements of sec4 tion 401(a) shall apply to the distribution of the en5 tire interest of an individual for whose benefit the

6 trust is maintained.

7 ‘‘(f) QUALIFIED INDIVIDUAL.—For purposes of this

8 section, the term ‘qualified individual’ means, for any tax9 able year, an individual—

10 ‘‘(1) who is a bona fide resident of a renewal

11 community throughout the taxable year, and

12 ‘‘(2) to whom a credit was allowed under sec13 tion 32 for the preceding taxable year.

14 ‘‘(g) OTHER DEFINITIONS AND SPECIAL RULES.—

15 ‘‘(1) COMPENSATION.—The term ‘compensa16 tion’ has the meaning given such term by section

17 219(f)(1).

18 ‘‘(2) MARRIED INDIVIDUALS.—The maximum

19 deduction under subsection (a) shall be computed

20 separately for each individual, and this section shall

21 be applied without regard to any community prop22 erty laws.

23 ‘‘(3) TIME WHEN CONTRIBUTIONS DEEMED

24 MADE.—For purposes of this section, a taxpayer

25 shall be deemed to have made a contribution to a
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1 family development account on the last day of the

2 preceding taxable year if the contribution is made

3 on account of such taxable year and is made not

4 later than the time prescribed by law for filing the

5 return for such taxable year (not including exten6 sions thereof).

7 ‘‘(4) EMPLOYER PAYMENTS.—For purposes of

8 this title, any amount paid by an employer to a fam9 ily development account shall be treated as payment

10 of compensation to the employee (other than a self11 employed individual who is an employee within the

12 meaning of section 401(c)(1)) includible in his gross

13 income in the taxable year for which the amount was

14 contributed, whether or not a deduction for such

15 payment is allowable under this section to the em16 ployee.

17 ‘‘(5) ZERO BASIS.—The basis of an individual

18 in any family development account of such individual

19 shall be zero.

20 ‘‘(6) CUSTODIAL ACCOUNTS.—For purposes of

21 this section, a custodial account shall be treated as

22 a trust if the assets of such account are held by a

23 bank (as defined in section 408(n)) or another per24 son who demonstrates, to the satisfaction of the Sec25 retary, that the manner in which such person will
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•HR 3467 IH

1 administer the account will be consistent with the re2 quirements of this section, and if the custodial ac3 count would, except for the fact that it is not a

4 trust, constitute a family development account de5 scribed in this section. For purposes of this title, in

6 the case of a custodial account treated as a trust by

7 reason of the preceding sentence, the custodian of

8 such account shall be treated as the trustee thereof.

9 ‘‘(7) REPORTS.—The trustee of a family devel10 opment account shall make such reports regarding

11 such account to the Secretary and to the individual

12 for whom the account is maintained with respect to

13 contributions (and the years to which they relate),

14 distributions, and such other matters as the Sec15 retary may require under regulations. The reports

16 required by this paragraph—

17 ‘‘(A) shall be filed at such time and in

18 such manner as the Secretary prescribes in

19 such regulations, and

20 ‘‘(B) shall be furnished to individuals—

21 ‘‘(i) not later than January 31 of the

22 calendar year following the calendar year

23 to which such reports relate, and

24 ‘‘(ii) in such manner as the Secretary

25 prescribes in such regulations.
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1 ‘‘(8) INVESTMENT IN COLLECTIBLES TREATED

2 AS DISTRIBUTIONS.—Rules similar to the rules of

3 section 408(m) shall apply for purposes of this sec4 tion.

5 ‘‘(h) PENALTY FOR DISTRIBUTIONS NOT USED FOR

6 QUALIFIED FAMILY DEVELOPMENT EXPENSES.—

7 ‘‘(1) IN GENERAL.—If any amount is distrib8 uted from a family development account and is not

9 used exclusively to pay qualified family development

10 expenses for the holder of the account or the spouse

11 or dependent (as defined in section 152) of such

12 holder, the tax imposed by this chapter for the tax13 able year of such distribution shall be increased by

14 the sum of—

15 ‘‘(A) 100 percent of the portion of such

16 amount which is includible in gross income and

17 is attributable to amounts contributed under

18 section 1400E (relating to demonstration pro19 gram to provide matching amounts in renewal

20 communities), and

21 ‘‘(B) 10 percent of the portion of such

22 amount which is includible in gross income and

23 is not described in paragraph (1).

24 For purposes of this subsection, the portion of a dis25 tributed amount which is attributable to amounts
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1 contributed under section 1400E is the amount

2 which bears the same ratio to the distributed

3 amount as the aggregate amount contributed under

4 section 1400E to all family development accounts of

5 the individual bears to the aggregate amount con6 tributed to such accounts from all sources.

7 ‘‘(2) EXCEPTION FOR CERTAIN DISTRIBU8 TIONS.—Paragraph (1) shall not apply to distribu9 tions which are—

10 ‘‘(A) made on or after the date on which

the account holder attains age 591 11 ⁄2,

12 ‘‘(B) made pursuant to subsection (e)(6),

13 ‘‘(C) made to a beneficiary (or the estate

14 of the account holder) on or after the death of

15 the account holder, or

16 ‘‘(D) attributable to the account holder’s

17 being disabled within the meaning of section

18 72(m)(7).

19 ‘‘SEC. 1400E. DEMONSTRATION PROGRAM TO PROVIDE

20 MATCHING CONTRIBUTIONS TO FAMILY DE21 VELOPMENT ACCOUNTS IN CERTAIN RE22 NEWAL COMMUNITIES.

23 ‘‘(a) DESIGNATION.—
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1 ‘‘(1) DEFINITIONS.—For purposes of this sec2 tion, the term ‘FDA matching demonstration area’

3 means any renewal community—

4 ‘‘(A) which is nominated under this section

5 by each of the local governments and States

6 which nominated such community for designa7 tion as a renewal community under section

8 1400(a)(1)(A), and

9 ‘‘(B) which the Secretary of Housing and

10 Urban Development, after consultation with—

11 ‘‘(i) the Secretaries of Agriculture,

12 Commerce, Labor, and the Treasury, the

13 Director of the Office of Management and

14 Budget, and the Administrator of the

15 Small Business Administration, and

16 ‘‘(ii) in the case of a community on an

17 Indian reservation, the Secretary of the In18 terior,

19 designates as an FDA matching demonstration

20 area.

21 ‘‘(2) NUMBER OF DESIGNATIONS.—

22 ‘‘(A) IN GENERAL.—The Secretary of

23 Housing and Urban Development may des24 ignate not more than 25 renewal communities

25 as FDA matching demonstration areas.
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1 ‘‘(B) MINIMUM DESIGNATION IN RURAL

2 AREAS.—Of the areas designated under para3 graph (1), at least 2 must be areas described in

4 section 1400(a)(2)(B).

5 ‘‘(3) LIMITATIONS ON DESIGNATIONS.—

6 ‘‘(A) PUBLICATION OF REGULATIONS.—

7 The Secretary of Housing and Urban Develop8 ment shall prescribe by regulation no later than

9 4 months after the date of the enactment of

10 this section, after consultation with the officials

11 described in paragraph (1)(B)—

12 ‘‘(i) the procedures for nominating a

13 renewal community under paragraph

14 (1)(A) (including procedures for coordinat15 ing such nomination with the nomination

16 of an area for designation as a renewal

17 community under section 1400), and

18 ‘‘(ii) the manner in which nominated

19 renewal communities will be evaluated for

20 purposes of this section.

21 ‘‘(B) TIME LIMITATIONS.—The Secretary

22 of Housing and Urban Development may des23 ignate renewal communities as FDA matching

24 demonstration areas only during the 24-month

25 period beginning on the first day of the first
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1 month following the month in which the regula2 tions described in subparagraph (A) are pre3 scribed.

4 (4) DESIGNATION BASED ON DEGREE OF POV5 ERTY, ETC.—The rules of section 1400(a)(3) shall

6 apply for purposes of designations of FDA matching

7 demonstration areas under this section.

8 ‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF9 FECT.—Any designation of a renewal community as an

10 FDA matching demonstration area shall remain in effect

11 during the period beginning on the date of such designa12 tion and ending on the date on which such area ceases

13 to be a renewal community.

14 ‘‘(c) MATCHING CONTRIBUTIONS TO FAMILY DEVEL15 OPMENT ACCOUNTS.—

16 ‘‘(1) IN GENERAL.—Not less than once each

17 taxable year, the Secretary shall deposit (to the ex18 tent provided in appropriation Acts) into a family

19 development account of each qualified individual (as

20 defined in section 1400D(f)) who is a resident

21 throughout the taxable year of an FDA matching

22 demonstration area an amount equal to the sum of

23 the amounts deposited into all of the family develop24 ment accounts of such individual during such tax-
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1 able year (determined without regard to any amount

2 contributed under this section).

3 ‘‘(2) LIMITATIONS.—

4 ‘‘(A) ANNUAL LIMIT.—The Secretary shall

5 not deposit more than $1000 under paragraph

6 (1) with respect to any individual for any tax7 able year.

8 ‘‘(B) AGGREGATE LIMIT.—The Secretary

9 shall not deposit more than $2000 under para10 graph (1) with respect to any individual.

11 ‘‘(3) EXCLUSION FROM INCOME.—Except as

12 provided in section 1400D, gross income shall not

13 include any amount deposited into a family develop14 ment account under paragraph (1).

15 ‘‘SEC. 1400F. DESIGNATION OF EARNED INCOME TAX CRED16 IT PAYMENTS FOR DEPOSIT TO FAMILY DE17 VELOPMENT ACCOUNT.

18 ‘‘(a) IN GENERAL.—With respect to the return of any

19 qualified individual (as defined in section 1400D(f)) for

20 the taxable year of the tax imposed by this chapter, such

21 individual may designate that a specified portion (not less

22 than $1) of any overpayment of tax for such taxable year

23 which is attributable to the earned income tax credit shall

24 be deposited by the Secretary into a family development
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1 account of such individual. The Secretary shall so deposit

2 such portion designated under this subsection.

3 ‘‘(b) MANNER AND TIME OF DESIGNATION.—A des4 ignation under subsection (a) may be made with respect

5 to any taxable year—

6 ‘‘(1) at the time of filing the return of the tax

7 imposed by this chapter for such taxable year, or

8 ‘‘(2) at any other time (after the time of filing

9 the return of the tax imposed by this chapter for

10 such taxable year) specified in regulations prescribed

11 by the Secretary.

12 Such designation shall be made in such manner as the

13 Secretary prescribes by regulations.

14 ‘‘(c) PORTION ATTRIBUTABLE TO EARNED INCOME

15 TAX CREDIT.—For purposes of subsection (a), an over16 payment for any taxable year shall be treated as attrib17 utable to the earned income tax credit to the extent that

18 such overpayment does not exceed the credit allowed to

19 the taxpayer under section 32 for such taxable year.

20 ‘‘(d) OVERPAYMENTS TREATED AS REFUNDED.—

21 For purposes of this title, any portion of an overpayment

22 of tax designated under subsection (a) shall be treated as

23 being refunded to the taxpayer as of the last date pre24 scribed for filing the return of tax imposed by this chapter
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1 (determined without regard to extensions) or, if later, the

2 date the return is filed.

3 ‘‘PART IV—ADDITIONAL INCENTIVES

‘‘Sec. 1400G. Commercial revitalization credit.

‘‘Sec. 1400H. Increase in expensing under section 179.

4 ‘‘SEC. 1400G. COMMERCIAL REVITALIZATION TAX CREDIT.

5 ‘‘(a) GENERAL RULE.—For purposes of section 46,

6 except as provided in subsection (e), the commercial revi7 talization credit for any taxable year is an amount equal

8 to the applicable percentage of the qualified revitalization

9 expenditures with respect to any qualified revitalization

10 building.

11 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of

12 this section—

13 ‘‘(1) IN GENERAL.—The term ‘applicable per14 centage’ means—

15 ‘‘(A) 20 percent for the taxable year in

16 which a qualified revitalization building is

17 placed in service, or

18 ‘‘(B) at the election of the taxpayer, 5 per19 cent for each taxable year in the credit period.

20 The election under subparagraph (B), once made,

21 shall be irrevocable.

22 ‘‘(2) CREDIT PERIOD.—

23 ‘‘(A) IN GENERAL.—The term ‘credit pe24 riod’ means, with respect to any building, the
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1 period of 10 taxable years beginning with the

2 taxable year in which the building is placed in

3 service.

4 ‘‘(B) APPLICABLE RULES.—Rules similar

5 to the rules under paragraphs (2) and (4) of

6 section 42(f) shall apply.

7 ‘‘(c) QUALIFIED REVITALIZATION BUILDINGS AND

8 EXPENDITURES.—For purposes of this section—

9 ‘‘(1) QUALIFIED REVITALIZATION BUILDING.—

10 The term ‘qualified revitalization building’ means

11 any building (and its structural components) if—

12 ‘‘(A) such building is located in a renewal

13 community and is placed in service after the

14 designation of such renewal community under

15 section 1400,

16 ‘‘(B) a commercial revitalization credit

17 amount is allocated to the building under sub18 section (e), and

19 ‘‘(C) depreciation (or amortization in lieu

20 of depreciation) is allowable with respect to the

21 building.

22 ‘‘(2) QUALIFIED REVITALIZATION EXPENDI23 TURE.—
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1 ‘‘(A) IN GENERAL.—The term ‘qualified

2 revitalization expenditure’ means any amount

3 properly chargeable to capital account—

4 ‘‘(i) for property for which deprecia5 tion is allowable under section 168 and

6 which is—

7 ‘‘(I) nonresidential real property,

8 or

9 ‘‘(II) an addition or improvement

10 to property described in subclause (I),

11 ‘‘(ii) in connection with the construc12 tion or substantial rehabilitation or recon13 struction of a qualified revitalization build14 ing, or

15 ‘‘(iii) for the acquisition of land in

16 connection with the qualified revitalization

17 building.

18 ‘‘(B) DOLLAR LIMITATION.—The aggre19 gate amount which may be treated as qualified

20 revitalization expenditures with respect to any

21 qualified revitalization building for any taxable

22 year shall not exceed the excess of—

23 ‘‘(i) $10,000,000, reduced by

24 ‘‘(ii) any such expenditures with re25 spect to the building taken into account by
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1 the taxpayer or any predecessor in deter2 mining the amount of the credit under this

3 section for all preceding taxable years.

4 ‘‘(C) CERTAIN EXPENDITURES NOT IN5 CLUDED.—The term ‘qualified revitalization ex6 penditure’ does not include—

7 ‘‘(i) STRAIGHT LINE DEPRECIATION

8 MUST BE USED.—Any expenditure (other

9 than with respect to land acquisitions) with

10 respect to which the taxpayer does not use

11 the straight line method over a recovery

12 period determined under subsection (c) or

13 (g) of section 168. The preceding sentence

14 shall not apply to any expenditure to the

15 extent the alternative depreciation system

16 of section 168(g) applies to such expendi17 ture by reason of subparagraph (B) or (C)

18 of section 168(g)(1).

19 ‘‘(ii) ACQUISITION COSTS.—The costs

20 of acquiring any building or interest there21 in and any land in connection with such

22 building to the extent that such costs ex23 ceed 30 percent of the qualified revitaliza24 tion expenditures determined without re25 gard to this clause.
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1 ‘‘(iii) OTHER CREDITS.—Any expendi2 ture which the taxpayer may take into ac3 count in computing any other credit allow4 able under this title unless the taxpayer

5 elects to take the expenditure into account

6 only for purposes of this section.

7 ‘‘(5) SUBSTANTIAL REHABILITATION OR RE8 CONSTRUCTION.—For purposes of this subsection, a

9 rehabilitation or reconstruction shall be treated as a

10 substantial rehabilitation or reconstruction only if

11 the qualified revitalization expenditures in connec12 tion with the rehabilitation or reconstruction exceed

13 25 percent of the fair market value of the building

14 (and its structural components) immediately before

15 the rehabilitation or reconstruction.

16 ‘‘(d) WHEN EXPENDITURES TAKEN INTO AC17 COUNT.—

18 ‘‘(1) IN GENERAL.—Qualified revitalization ex19 penditures with respect to any qualified revitaliza20 tion building shall be taken into account for the tax21 able year in which the qualified revitalization build22 ing is placed in service. For purposes of the preced23 ing sentence, a substantial rehabilitation or recon24 struction of a building shall be treated as a separate

25 building.
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1 ‘‘(2) PROGRESS EXPENDITURE PAYMENTS.—

2 Rules similar to the rules of subsections (b)(2) and

3 (d) of section 47 shall apply for purposes of this sec4 tion.

5 ‘‘(e) LIMITATION ON AGGREGATE CREDITS ALLOW6 ABLE WITH RESPECT TO BUILDINGS LOCATED IN A

7 STATE.—

8 ‘‘(1) IN GENERAL.—The amount of the credit

9 determined under this section for any taxable year

10 with respect to any building shall not exceed the

11 commercial revitalization credit amount (in the case

12 of an amount determined under subsection

13 (b)(1)(B), the present value of such amount as de14 termined under the rules of section 42(b)(2)(C)) al15 located to such building under this subsection by the

16 commercial revitalization credit agency. Such alloca17 tion shall be made at the same time and in the same

18 manner as under paragraphs (1) and (7) of section

19 42(h).

20 ‘‘(2) COMMERCIAL REVITALIZATION CREDIT

21 AMOUNT FOR AGENCIES.—

22 ‘‘(A) IN GENERAL.—The aggregate com23 mercial revitalization credit amount which a

24 commercial revitalization credit agency may al25 locate for any calendar year is the amount of
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1 the State commercial revitalization credit ceil2 ing determined under this paragraph for such

3 calendar year for such agency.

4 ‘‘(B) STATE COMMERCIAL REVITALIZATION

5 CREDIT CEILING.—

6 ‘‘(i) IN GENERAL.—The State com7 mercial revitalization credit ceiling applica8 ble to any State for any calendar year is

9 $2,000,000 for each renewal community in

10 the State.

11 ‘‘(ii) SPECIAL RULE WHERE COMMU12 NITY LOCATED IN MORE THAN 1 STATE.—

13 If a renewal community is located in more

14 than 1 State, a State’s share of the

15 amount specified in clause (i) with respect

16 to such community shall be an amount

17 that bears the same ratio to $2,000,000 as

18 the population in the State bears to the

19 population in all States in which such com20 munity is located.

21 ‘‘(iii) OTHER SPECIAL RULES.—Rules

22 similar to the rules of subparagraphs (D),

23 (E), (F), and (G) of section 42(h)(3) shall

24 apply for purposes of this subsection.
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1 ‘‘(C) COMMERCIAL REVITALIZATION CRED2 IT AGENCY.—For purposes of this section, the

3 term ‘commercial revitalization credit agency’

4 means any agency authorized by a State to

5 carry out this section.

6 ‘‘(f) RESPONSIBILITIES OF COMMERCIAL REVITAL7 IZATION CREDIT AGENCIES.—

8 ‘‘(1) PLANS FOR ALLOCATION.—Notwithstand9 ing any other provision of this section, the commer10 cial revitalization credit amount with respect to any

11 building shall be zero unless—

12 ‘‘(A) such amount was allocated pursuant

13 to a qualified allocation plan of the commercial

14 revitalization credit agency which is approved

15 (in accordance with rules similar to the rules of

16 section 147(f)(2) (other than subparagraph

17 (B)(ii) thereof)) by the governmental unit of

18 which such agency is a part, and

19 ‘‘(B) such agency notifies the chief execu20 tive officer (or its equivalent) of the local juris21 diction within which the building is located of

22 such allocation and provides such individual a

23 reasonable opportunity to comment on the allo24 cation.
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1 ‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur2 poses of this subsection, the term ‘qualified alloca3 tion plan’ means any plan—

4 ‘‘(A) which sets forth selection criteria to

5 be used to determine priorities of the commer6 cial revitalization credit agency which are ap7 propriate to local conditions,

8 ‘‘(B) which considers—

9 ‘‘(i) the degree to which a project con10 tributes to the implementation of a strate11 gic plan that is devised for a renewal com12 munity through a citizen participation

13 process,

14 ‘‘(ii) the amount of any increase in

15 permanent, full-time employment by reason

16 of any project, and

17 ‘‘(iii) the active involvement of resi18 dents and nonprofit groups within the re19 newal community, and

20 ‘‘(C) which provides a procedure that the

21 agency (or its agent) will follow in monitoring

22 compliance with this section.

23 ‘‘(g) TERMINATION.—This section shall not apply to

24 any building placed in service after December 31, 2002.
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1 ‘‘SEC. 1400H. INCREASE IN EXPENSING UNDER SECTION 179.

2 ‘‘(a) GENERAL RULE.—In the case of a renewal com3 munity business (as defined in section 1400C), for pur4 poses of section 179—

5 ‘‘(1) the limitation under section 179(b)(1)

6 shall be increased by the lesser of—

7 ‘‘(A) $35,000, or

8 ‘‘(B) the cost of section 179 property

9 which is qualified renewal property placed in

10 service during the taxable year, and

11 ‘‘(2) the amount taken into account under sec12 tion 179(b)(2) with respect to any section 179 prop13 erty which is qualified renewal property shall be 50

14 percent of the cost thereof.

15 ‘‘(b) RECAPTURE.—Rules similar to the rules under

16 section 179(d)(10) shall apply with respect to any quali17 fied renewal property which ceases to be used in a renewal

18 community by an renewal community business.

19 ‘‘(c) QUALIFIED RENEWAL PROPERTY.—

20 ‘‘(1) GENERAL RULE.—For purposes of this

21 section—

22 ‘‘(A) IN GENERAL.—The term ‘qualified

23 renewal property’ means any property to which

24 section 168 applies (or would apply but for sec25 tion 179) if—
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1 ‘‘(i) such property was acquired by

2 the taxpayer by purchase (as defined in

3 section 179(d)(2)) after the date on which

4 the designation of the renewal community

5 took effect,

6 ‘‘(ii) the original use of which in a re7 newal community commences with the tax8 payer, and

9 ‘‘(iii) substantially all of the use of

10 which is in a renewal community and is in

11 the active conduct of a qualified business

12 (as defined in section 1400C(d)) by the

13 taxpayer in such renewal community.

14 ‘‘(B) SPECIAL RULE FOR SUBSTANTIAL

15 RENOVATIONS.—In the case of any property

16 which is substantially renovated by the tax17 payer, the requirements of clauses (i) and (ii)

18 of subparagraph (A) shall be treated as satis19 fied. For purposes of the preceding sentence,

20 property shall be treated as substantially ren21 ovated by the taxpayer only if, during any 24-

22 month period beginning after the date on which

23 the designation of the renewal community took

24 effect, additions to basis with respect to such

25 property in the hands of the taxpayer exceed
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1 the greater of (i) an amount equal to the ad2 justed basis at the beginning of such 24-month

3 period in the hands of the taxpayer, or (ii)

4 $5,000.

5 ‘‘(2) SPECIAL RULES FOR SALE-LEASEBACKS.—

6 For purposes of paragraph (1)(A)(ii), if property is

7 sold and leased back by the taxpayer within 3

8 months after the date such property was originally

9 placed in service, such property shall be treated as

10 originally placed in service not earlier than the date

11 on which such property is used under the lease12 back.’’

13 SEC. 104. EVALUATION AND REPORTING REQUIREMENTS.

14 Not later than the close of the fourth calendar year

15 after the year in which the Secretary of Housing and

16 Urban Development first designates an area as a renewal

17 community under section 1400 of the Internal Revenue

18 Code of 1986, and at the close of each fourth calendar

19 year thereafter, such Secretary shall prepare and submit

20 to the Congress a report on the effects of such designa21 tions in accomplishing the purposes of this Act.

22 SEC. 105. INTERACTION WITH OTHER FEDERAL PROGRAMS.

23 (a) TAX REDUCTIONS.—Any reduction of taxes, with

24 respect to any renewal community designated under sec25 tion 1400 of the Internal Revenue Code of 1986 (as added
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1 by this title), under any plan of action under section

2 1400(d) of such Code shall be disregarded in determining

3 the eligibility of a State or local government for, or the

4 amount or extent of, any assistance or benefits under any

5 law of the United States (other than subchapter W of

6 chapter 1 of such Code).

7 (b) COORDINATION WITH RELOCATION ASSIST8 ANCE.—The designation of a renewal community under

9 section 1400 of such Code (as added by this title) shall

10 not—

11 (1) constitute approval of a Federal or Feder12 ally assisted program or project (within the meaning

13 of the Uniform Relocation Assistance and Real

14 Property Acquisition Policies Act of 1970 (42

15 U.S.C. 4601 et seq.)), or

16 (2) entitle any person displaced from real prop17 erty located in such community to any rights or any

18 benefits under such Act.

19 (c) RENEWAL COMMUNITIES TREATED AS LABOR

20 SURPLUS AREAS.—Any area which is designated as a re21 newal community under section 1400 of such Code (as

22 added by this title) shall be treated for all purposes under

23 Federal law as a labor surplus area.
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1 SEC. 106. DEDUCTION FOR CONTRIBUTIONS TO FAMILY DE2 VELOPMENT ACCOUNTS ALLOWABLE WHETH3 ER OR NOT TAXPAYER ITEMIZES.

4 Subsection (a) of section 62 of the Internal Revenue

5 Code of 1986 (relating to adjusted gross income defined)

6 is amended by inserting after paragraph (15) the following

7 new paragraph:

8 ‘‘(16) FAMILY DEVELOPMENT ACCOUNTS.—The

9 deduction allowed by section 1400D.’’

10 SEC. 107. ALLOWANCE OF COMMERCIAL REVITALIZATION

11 CREDIT.

12 Section 46 of the Internal Revenue Code of 1986 (re13 lating to investment credit) is amended by striking ‘‘and’’

14 at the end of paragraph (2), by striking the period at the

15 end of paragraph (3) and inserting ‘‘, and’’, and by adding

16 at the end the following new paragraph:

17 ‘‘(4) the commercial revitalization credit pro18 vided under section 1400G.’’

19 SEC. 108. CONFORMING AND CLERICAL AMENDMENTS.

20 (a) BASIS ADJUSTMENT FOR CERTAIN STOCK.—Sub21 section (a) of section 1016 of the Internal Revenue Code

22 of 1986 (relating to adjustments to basis) is amended by

23 striking ‘‘and’’ at the end of paragraph (24), by striking

24 the period at the end of paragraph (25) and inserting ‘‘,

25 and’’; and by adding at the end the following new para26 graph:
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1 ‘‘(26) to the extent provided in section

2 1400B(e), in the case of stock with respect to which

3 a deduction was allowed or allowable under section

4 1400B(a).’’

5 (b) TAX ON EXCESS CONTRIBUTIONS.—

6 (1) TAX IMPOSED.—Subsection (a) of section

7 4973 of such Code is amended by striking ‘‘or’’ at

8 the end of paragraph (1), adding ‘‘or’’ at the end of

9 paragraph (2), and inserting after paragraph (2) the

10 following new paragraph:

11 ‘‘(3) a family development account (within the

12 meaning of section 1400D(e)),’’

13 (2) EXCESS CONTRIBUTIONS.—Section 4973 of

14 such Code is amended by adding at the end the fol15 lowing new subsection:

16 ‘‘(d) FAMILY DEVELOPMENT ACCOUNTS.—For pur17 poses of this section, in the case of a family development

18 account, the term ‘excess contributions’ means the sum

19 of—

20 ‘‘(1) the excess (if any) of—

21 ‘‘(A) the amount contributed for the tax22 able year to the account (other than a qualified

23 rollover, as defined in section 1400D(c)(7), or

24 a contribution under section 1400E), over
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1 ‘‘(B) the amount allowable as a deduction

2 under section 1400D for such contributions,

3 and

4 ‘‘(2) the amount determined under this sub5 section for the preceding taxable year reduced by the

6 sum of—

7 ‘‘(A) the distributions out of the account

8 for the taxable year which were included in the

9 gross income of the payee under section

10 1400D(b)(1),

11 ‘‘(B) the distributions out of the account

12 for the taxable year to which rules similar to

13 the rules of section 408(d)(5) apply by reason

14 of section 1400D(b)(3), and

15 ‘‘(C) the excess (if any) of the maximum

16 amount allowable as a deduction under section

17 1400D for the taxable year over the amount

18 contributed to the account for the taxable year

19 (other than a contribution under section

20 1400E).

21 For purposes of this subsection, any contribution which

22 is distributed from the family development account in a

23 distribution to which rules similar to the rules of section

24 408(d)(4) apply by reason of section 1400D(b)(3) shall

25 be treated as an amount not contributed.’’
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1 (3) HEADING.—The heading of section 4973 of

2 such Code is amended by inserting ‘‘FAMILY DE3 VELOPMENT ACCOUNTS,’’ after ‘‘CONTRACTS,’’.

4 (c) TAX ON PROHIBITED TRANSACTIONS.—Section

5 4975 of such Code is amended—

6 (1) by adding at the end of subsection (c) the

7 following new paragraph:

8 ‘‘(4) SPECIAL RULE FOR FAMILY DEVELOP9 MENT ACCOUNTS.—An individual for whose benefit a

10 family development account is established and any

11 contributor to such account shall be exempt from the

12 tax imposed by this section with respect to any

13 transaction concerning such account (which would

14 otherwise be taxable under this section) if, with re15 spect to such transaction, the account ceases to be

16 a family development account by reason of the appli17 cation of section 1400D(d)(2) to such account.’’,

18 and

19 (2) by inserting ‘‘, a family development ac20 count described in section 1400D(e),’’ in subsection

21 (e)(1) after ‘‘described in section 408(a)’’.

22 (d) INFORMATION RELATING TO CERTAIN TRUSTS

23 AND ANNUITY PLANS.—Subsection (c) of section 6047 of

24 such Code is amended—
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1 (1) by inserting ‘‘or section 1400D’’ after ‘‘sec2 tion 219’’, and

3 (2) by inserting ‘‘, of any family development

4 account described in section 1400D(e),’’, after ‘‘sec5 tion 408(a)’’.

6 (e) INSPECTION OF APPLICATIONS FOR TAX EXEMP7 TION.—Clause (i) of section 6104(a)(1)(B) of such Code

8 is amended by inserting ‘‘a family development account

9 described in section 1400D(e),’’ after ‘‘section 408(a),’’.

10 (f) FAILURE TO PROVIDE REPORTS ON FAMILY DE11 VELOPMENT ACCOUNTS.—Section 6693 of such Code is

12 amended—

13 (1) by inserting ‘‘OR ON FAMILY DEVELOP14 MENT ACCOUNTS’’ after ‘‘ANNUITIES’’ in the

15 heading of such section, and

16 (2) by adding at the end of subsection (a) the

17 following new sentence: ‘‘The person required by sec18 tion 1400D(g)(7) to file a report regarding a family

19 development account at the time and in the manner

20 required by such section shall pay a penalty of $50

21 for each failure unless it is shown that such failure

22 is due to reasonable cause.’’

23 (g) CONFORMING AMENDMENTS REGARDING COM24 MERCIAL REVITALIZATION CREDIT.—
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1 (1) Section 39(d) of such Code is amended by

2 adding at the end the following new paragraph:

3 ‘‘(7) NO CARRYBACK OF SECTION 1400G CREDIT

4 BEFORE DATE OF ENACTMENT.—No portion of the

5 unused business credit for any taxable year which is

6 attributable to any commercial revitalization credit

7 determined under section 1400G may be carried

8 back to a taxable year ending before the date of the

9 enactment of section 1400G.’’

10 (2) Subparagraph (B) of section 48(a)(2) of

11 such Code is amended by inserting ‘‘or commercial

12 revitalization’’ after ‘‘rehabilitation’’ each place it

13 appears in the text and heading.

14 (3) Subparagraph (C) of section 49(a)(1) of

15 such Code is amended by striking ‘‘and’’ at the end

16 of clause (ii), by striking the period at the end of

17 clause (iii) and inserting ‘‘, and’’, and by adding at

18 the end the following new clause:

19 ‘‘(iv) the portion of the basis of any

20 qualified revitalization building attributable

21 to qualified revitalization expenditures.’’

22 (4) Paragraph (2) of section 50(a) of such Code

23 is amended by inserting ‘‘or 1400G(d)(2)’’ after

24 ‘‘section 47(d)’’ each place it appears.
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1 (5) Subparagraph (A) of section 50(b)(2) of

2 such Code is amended by inserting ‘‘or qualified re3 vitalization building (respectively)’’ after ‘‘qualified

4 rehabilitated building’’.

5 (6) Subparagraph (B) of section 50(a)(2) of

6 such Code is amended by adding at the end the fol7 lowing new sentence: ‘‘A similar rule shall apply for

8 purposes of section 1400G.’’

9 (7) Paragraph (2) of section 50(b) of such Code

10 is amended by striking ‘‘and’’ at the end of subpara11 graph (C), by striking the period at the end of sub12 paragraph (D) and inserting ‘‘; and’’, and by adding

13 at the end the following new subparagraph:

14 ‘‘(E) a qualified revitalization building (as

15 defined in section 1400G) to the extent of the

16 portion of the basis which is attributable to

17 qualified revitalization expenditures (as defined

18 in section 1400G).’’

19 (8) Subparagraph (C) of section 50(b)(4) of

20 such Code is amended—

21 (A) by inserting ‘‘or commercial revitaliza22 tion’’ after ‘‘rehabilitated’’ in the text and head23 ing, and

24 (B) by inserting ‘‘or commercial revitaliza25 tion’’ after ‘‘rehabilitation’’.
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1 (9) Subparagraph (C) of section 469(i)(3) is

2 amended—

3 (A) by inserting ‘‘or section 1400G’’ after

4 ‘‘section 42’’; and

5 (B) by striking ‘‘CREDIT’’ in the heading

6 and inserting ‘‘AND COMMERCIAL REVITALIZA7 TION CREDITS’’.

8 (h) CLERICAL AMENDMENTS.—

9 (1) The table of subchapters for chapter 1 of

10 the Internal Revenue Code of 1986 is amended by

11 adding at the end the following new item:

‘‘Subchapter W. Renewal Communities.’’

12 (2) The table of sections for chapter 43 of such

13 Code is amended by striking the item relating to sec14 tion 4973 and inserting the following new item:

‘‘Sec. 4973. Tax on excess contributions to individual retirement

accounts, certain section 403(b) contracts, family

development accounts, and certain individual retirement annuities.’’

15 (3) The table of sections for part I of sub16 chapter B of chapter 68 of such Code is amended

17 by striking the item relating to section 6693 and in18 serting the following new item:

‘‘Sec. 6693. Failure to provide reports on individual retirement

accounts or annuities or on family development accounts; overstatement of designated nondeductible

contributions.’’
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1 TITLE II—ADDITIONAL TAX

2 PROVISIONS

3 SEC. 201. WORK OPPORTUNITY TAX CREDIT.

4 (a) AMOUNT OF CREDIT.—Subsection (a) of section

5 51 (relating to amount of credit) is amended by striking

6 ‘‘40 percent’’ and inserting ‘‘35 percent’’.

7 (b) MEMBERS OF TARGETED GROUPS.—Subsection

8 (d) of section 51 is amended to read as follows:

9 ‘‘(d) MEMBERS OF TARGETED GROUPS.—For pur10 poses of this subpart—

11 ‘‘(1) IN GENERAL.—An individual is a member

12 of a targeted group if such individual is—

13 ‘‘(A) a qualified IV–A recipient,

14 ‘‘(B) a qualified veteran,

15 ‘‘(C) a qualified ex-felon,

16 ‘‘(D) a high-risk youth,

17 ‘‘(E) a vocational rehabilitation referral,

18 ‘‘(F) a qualified summer youth employee,

19 or

20 ‘‘(G) a qualified food stamp recipient.

21 ‘‘(2) QUALIFIED IV–A RECIPIENT.—

22 ‘‘(A) IN GENERAL.—The term ‘qualified

23 IV–A recipient’ means any individual who is

24 certified by the designated local agency as being

25 a member of a family receiving assistance under
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1 an IV–A program for at least a 9-month period

2 ending during the 9-month period ending on the

3 hiring date.

4 ‘‘(B) IV–A PROGRAM.—For purposes of

5 this paragraph, the term ‘IV–A program’ means

6 any program providing assistance under a State

7 plan approved under part A of title IV of the

8 Social Security Act (relating to assistance for

9 needy families with minor children) and any

10 successor of such program.

11 ‘‘(3) QUALIFIED VETERAN.—

12 ‘‘(A) IN GENERAL.—The term ‘qualified

13 veteran’ means any veteran who is certified by

14 the designated local agency as being—

15 ‘‘(i) a member of a family receiving

16 assistance under an IV–A program (as de17 fined in paragraph (2)(B)) for at least a 9-

18 month period ending during the 12-month

19 period ending on the hiring date, or

20 ‘‘(ii) a member of a family receiving

21 assistance under a food stamp program

22 under the Food Stamp Act of 1977 for at

23 least a 3-month period ending during the

24 12-month period ending on the hiring date.
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1 ‘‘(B) VETERAN.—For purposes of subpara2 graph (A), the term ‘veteran’ means any indi3 vidual who is certified by the designated local

4 agency as—

5 ‘‘(i)(I) having served on active duty

6 (other than active duty for training) in the

7 Armed Forces of the United States for a

8 period of more than 180 days, or

9 ‘‘(II) having been discharged or re10 leased from active duty in the Armed

11 Forces of the United States for a service12 connected disability, and

13 ‘‘(ii) not having any day during the

14 60-day period ending on the hiring date

15 which was a day of extended active duty in

16 the Armed Forces of the United States.

17 For purposes of clause (ii), the term ‘extended

18 active duty’ means a period of more than 90

19 days during which the individual was on active

20 duty (other than active duty for training).

21 ‘‘(4) QUALIFIED EX-FELON.—The term ‘quali22 fied ex-felon’ means any individual who is certified

23 by the designated local agency—
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1 ‘‘(A) as having been convicted of a felony

2 under any statute of the United States or any

3 State,

4 ‘‘(B) as having a hiring date which is not

5 more than 1 year after the last date on which

6 such individual was so convicted or was released

7 from prison, and

8 ‘‘(C) as being a member of a family which

9 had an income during the 6 months imme10 diately preceding the earlier of the month in

11 which such income determination occurs or the

12 month in which the hiring date occurs, which,

13 on an annual basis, would be 70 percent or less

14 of the Bureau of Labor Statistics lower living

15 standard.

16 Any determination under subparagraph (C) shall be

17 valid for the 45-day period beginning on the date

18 such determination is made.

19 ‘‘(5) HIGH-RISK YOUTH.—

20 ‘‘(A) IN GENERAL.—The term ‘high-risk

21 youth’ means any individual who is certified by

22 the designated local agency—

23 ‘‘(i) as having attained age 18 but not

24 age 25 on the hiring date, and
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1 ‘‘(ii) as having his principal place of

2 abode within a renewal community.

3 ‘‘(B) YOUTH MUST CONTINUE TO RESIDE

4 IN RENEWAL COMMUNITY.—In the case of a

5 high-risk youth, the term ‘qualified wages’ shall

6 not include wages paid or incurred for services

7 performed while such youth’s principal place of

8 abode is outside a renewal community.

9 ‘‘(6) VOCATIONAL REHABILITATION REFER10 RAL.—The term ‘vocational rehabilitation referral’

11 means any individual who is certified by the des12 ignated local agency as—

13 ‘‘(A) having a physical or mental disability

14 which, for such individual, constitutes or results

15 in a substantial handicap to employment, and

16 ‘‘(B) having been referred to the employer

17 upon completion of (or while receiving) rehabili18 tative services pursuant to—

19 ‘‘(i) an individualized written rehabili20 tation plan under a State plan for voca21 tional rehabilitation services approved

22 under the Rehabilitation Act of 1973, or

23 ‘‘(ii) a program of vocational rehabili24 tation carried out under chapter 31 of title

25 38, United States Code.
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1 ‘‘(7) QUALIFIED SUMMER YOUTH EMPLOYEE.—

2 ‘‘(A) IN GENERAL.—The term ‘qualified

3 summer youth employee’ means any individ4 ual—

5 ‘‘(i) who performs services for the em6 ployer between May 1 and September 15,

7 ‘‘(ii) who is certified by the designated

8 local agency as having attained age 16 but

9 not 18 on the hiring date (or if later, on

10 May 1 of the calendar year involved),

11 ‘‘(iii) who has not been an employee

12 of the employer during any period prior to

13 the 90-day period described in subpara14 graph (B)(i), and

15 ‘‘(iv) who is certified by the des16 ignated local agency as having his principal

17 place of abode within a renewal commu18 nity.

19 ‘‘(B) SPECIAL RULES FOR DETERMINING

20 AMOUNT OF CREDIT.—For purposes of applying

21 this subpart to wages paid or incurred to any

22 qualified summer youth employee—

23 ‘‘(i) subsection (b)(2) shall be applied

24 by substituting ‘any 90-day period between

25 May 1 and September 15’ for ‘the 1-year
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1 period beginning with the day the individ2 ual begins work for the employer’, and

3 ‘‘(ii) subsection (b)(3) shall be applied

4 by substituting ‘$3,000’ for ‘$6,000’.

5 The preceding sentence shall not apply to an in6 dividual who, with respect to the same em7 ployer, is certified as a member of another tar8 geted group after such individual has been a

9 qualified summer youth employee.

10 ‘‘(C) YOUTH MUST CONTINUE TO RESIDE

11 IN RENEWAL COMMUNITY.—Paragraph (5)(B)

12 shall apply for purposes of this paragraph.

13 ‘‘(8) QUALIFIED FOOD STAMP RECIPIENT.—The

14 term ‘qualified food stamp recipient’ means any indi15 vidual who is certified by the designated local agen16 cy—

17 ‘‘(A) as having attained age 18 but not age

18 25 on the hiring date, and

19 ‘‘(B) as being a member of a family receiv20 ing assistance under a food stamp program

21 under the Food Stamp Act of 1977 for at least

22 a 3-month period ending during the 12-month

23 period ending on the hiring date.
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1 ‘‘(9) HIRING DATE.—The term ‘hiring date’

2 means the day the individual is hired by the em3 ployer.

4 ‘‘(10) DESIGNATED LOCAL AGENCY.—The term

5 ‘designated local agency’ means a State employment

6 security agency established in accordance with the

7 Act of June 6, 1933, as amended (29 U.S.C.

8 4949n).

9 ‘‘(11) SPECIAL RULES FOR CERTIFICATIONS.—

10 ‘‘(A) IN GENERAL.—An individual shall

11 not be treated as a member of a targeted group

12 unless—

13 ‘‘(i) on or before the day on which

14 such individual begins work for the em15 ployer, the employer has received a certifi16 cation from a designated local agency that

17 such individual is a member of a targeted

18 group, or

19 ‘‘(ii)(I) on or before the day the indi20 vidual is offered employment with the em21 ployer, a pre-screening notice is completed

22 by the employer with respect to such indi23 vidual, and

24 ‘‘(II) not later than the 14th day after

25 the individual begins work for the em-
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1 ployer, the employer submits such notice,

2 signed by the employer and the individual

3 under penalties of perjury, to the des4 ignated local agency as part of a written

5 request for such a certification from such

6 agency.

7 For purposes of this paragraph, the term ‘pre8 screening notice’ means a document (in such

9 form as the Secretary shall prescribe) which

10 contains information provided by the individual

11 on the basis of which the employer believes that

12 the individual is a member of a targeted group.

13 ‘‘(B) INCORRECT CERTIFICATIONS.—If—

14 ‘‘(i) an individual has been certified

15 by a designated local agency as a member

16 of a targeted group, and

17 ‘‘(ii) such certification is incorrect be18 cause it was based on false information

19 provided by such individual,

20 the certification shall be revoked and wages

21 paid by the employer after the date on which

22 notice of revocation is received by the employer

23 shall not be treated as qualified wages.

24 ‘‘(C) EXPLANATION OF DENIAL OF RE25 QUEST.—If a designated local agency denies a
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1 request for certification of membership in a tar2 geted group, such agency shall provide to the

3 person making such request a written expla4 nation of the reasons for such denial.’’

5 (c) MINIMUM EMPLOYMENT PERIOD.—Paragraph

6 (3) of section 51(i) (relating to certain individuals ineli7 gible) is amended to read as follows:

8 ‘‘(3) INDIVIDUALS NOT MEETING MINIMUM EM9 PLOYMENT PERIOD.—No wages shall be taken into

10 account under subsection (a) with respect to any in11 dividual unless such individual either—

12 ‘‘(A) is employed by the employer at least

13 180 days (20 days in the case of a qualified

14 summer youth employee), or

15 ‘‘(B) has completed at least 250 hours

16 (120 hours in the case of a qualified summer

17 youth employee) of services performed for the

18 employer.’’

19 (d) TERMINATION PERIOD.—Paragraph (4) of sec20 tion 51(c) (relating to wages defined) is amended to read

21 as follows:

22 ‘‘(4) TERMINATION PERIOD.—The term ‘wages’

23 shall not include any amount paid or incurred to an

24 individual who begins work for the employer after

25 December 31, 1994, and before January 1, 1996.’’
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1 (e) REDESIGNATION OF CREDIT.—

2 (1) Sections 38(b)(2) and 51(a) are each

3 amended by striking ‘‘targeted jobs credit’’ and in4 serting ‘‘work opportunity credit’’.

5 (2) The subpart heading for subpart F of part

6 IV of subchapter A of chapter 1 is amended by

7 striking ‘‘Targeted Jobs Credit’’ and inserting

8 ‘‘Work Opportunity Credit’’.

9 (3) The table of subparts for such part IV is

10 amended by striking ‘‘targeted jobs credit’’ and in11 serting ‘‘work opportunity credit’’.

12 (4) The heading for paragraph (3) of section

13 1396(c) is amended by striking ‘‘TARGETED JOBS

14 CREDIT’’ and inserting ‘‘WORK OPPORTUNITY CRED15 IT’’.

16 (f) TECHNICAL AMENDMENT.—Paragraph (1) of sec17 tion 51(c) is amended by striking ‘‘, subsection

18 (d)(8)(D),’’.

19 (g) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to individuals who begin work for

21 the employer after December 31, 1995.

22 SEC. 202. CREDIT FOR CERTAIN CHARITABLE CONTRIBU23 TIONS.

24 (a) IN GENERAL.—Subpart A of part IV of sub25 chapter A of chapter 1 of the Internal Revenue Code of
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1 1986 (relating to nonrefundable personal credits) is

2 amended by adding at the end the following new section:

3 ‘‘SEC. 26A. CREDIT FOR CERTAIN CHARITABLE CONTRIBU4 TIONS.

5 ‘‘(a) IN GENERAL.—In the case of an individual,

6 there shall be allowed as a credit against the tax imposed

7 by this chapter for the taxable year an amount equal to

8 75 percent of the qualified charitable contributions which

9 are paid by the taxpayer during the taxable year.

10 ‘‘(b) LIMITATION.—The credit allowed by subsection

11 (a) for the taxable year shall not exceed $200 ($400 in

12 the case of a joint return).

13 ‘‘(c) QUALIFIED CHARITABLE CONTRIBUTION.—For

14 purposes of this section, the term ‘qualified charitable con15 tribution’ means any charitable contribution (as defined

16 in section 170(c)) made in cash to a qualified charity aid17 ing the poor.

18 ‘‘(d) QUALIFIED CHARITY AIDING THE POOR.—

19 ‘‘(1) IN GENERAL.—For purposes of this sec20 tion, the term ‘qualified charity aiding the poor’

21 means, for any taxable year, any organization de22 scribed in section 501(c)(3) and exempt from tax

23 under section 501(a)—
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1 ‘‘(A) which is certified by the Secretary as

2 meeting the requirements of paragraphs (2),

3 (3), and (4),

4 ‘‘(B) which is organized under the laws of

5 the United States or of any State in which the

6 organization is qualified to operate, and

7 ‘‘(C) which is required, or elects to be

8 treated as being required, to file returns under

9 section 6033.

10 ‘‘(2) CHARITY MUST PRIMARILY ASSIST POOR

11 INDIVIDUALS.—

12 ‘‘(A) IN GENERAL.—An organization meets

13 the requirements of this paragraph only if the

14 predominant activity of such organization is the

15 provision of direct services to individuals whose

16 annual incomes generally do not exceed 185

17 percent of the official poverty line (as defined

18 by the Office of Management and Budget).

19 ‘‘(B) FOOD AID AND HOMELESS SHEL20 TERS.—Except as otherwise provided in regula21 tions, for purposes of subparagraph (A), serv22 ices to individuals in the form of—

23 ‘‘(i) temporary donations of food or

24 meals, or
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1 ‘‘(ii) temporary shelter to homeless in2 dividuals,

3 shall be treated as provided to individuals de4 scribed in subparagraph (A) if the location and

5 operation of such services are such that the

6 service provider may reasonably conclude that

7 the beneficiaries of such services are predomi8 nantly individuals described in subparagraph

9 (A).

10 ‘‘(3) EXPENDITURES FOR CHARITABLE SERV11 ICES TO THE POOR.—

12 ‘‘(A) IN GENERAL.—An organization meets

13 the requirements of this paragraph only if for

14 the immediately preceding taxable year (and the

15 Secretary reasonably expects that for the cur16 rent taxable year), except as provided in sub17 paragraph (B), all annual expenditures of the

18 organization are used to provide the direct serv19 ices referred to in paragraph (2).

20 ‘‘(B) PERMISSIBLE EXPENDITURES FOR

21 ADMINISTRATION AND FUNDRAISING.—An orga22 nization shall not be treated as failing to meet

23 the requirements of subparagraph (A) with re24 spect to any taxable year by reason of the fact

25 that 25 percent or less of the annual aggregate
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1 expenditures of the organization for such tax2 able year are—

3 ‘‘(i) administrative expenditures in

4 support of direct services referred to in

5 paragraph (2), and

6 ‘‘(ii) expenditures for purposes of

7 fundraising on behalf of the organization

8 providing direct services referred to in

9 paragraph (2).

10 ‘‘(4) LIMITATION ON POLITICAL ACTIVITY.—An

11 organization meets the requirements of this para12 graph only if for the immediately preceding taxable

13 year (and the Secretary reasonably expects that for

14 the current taxable year) the organization does not

15 engage in any of the following:

16 ‘‘(A) Activity for the purpose of influencing

17 legislation.

18 ‘‘(B) Litigation on behalf of any individual

19 referred to in paragraph (2).

20 ‘‘(C) Voter registration, political organiz21 ing, public policy advocacy, or public policy re22 search.

23 ‘‘(5) SPECIAL RULE FOR NEW ORGANIZA24 TIONS.—In the case of an organization which has no

25 preceding taxable year, paragraphs (3) and (4) shall
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1 be applied without regard to the words ‘for the im2 mediately preceding taxable year’.

3 ‘‘(e) TIME WHEN CONTRIBUTIONS DEEMED

4 MADE.—For purposes of this section, at the election of

5 the taxpayer, a contribution which is made not later than

6 the time prescribed by law for filing the return for the

7 taxable year (not including extensions thereof) shall be

8 treated as made on the last day of such taxable year.

9 ‘‘(f) COORDINATION WITH DEDUCTION FOR CHARI10 TABLE CONTRIBUTIONS.—

11 ‘‘(1) CREDIT IN LIEU OF DEDUCTION.—The

12 credit provided by subsection (a) for any qualified

13 charitable contribution shall be in lieu of any deduc14 tion otherwise allowable under this chapter for such

15 contribution.

16 ‘‘(2) ELECTION TO HAVE SECTION NOT

17 APPLY.—A taxpayer may elect for any taxable year

18 to have this section not apply.’’

19 (b) PUBLIC INSPECTION OF ANNUAL RETURNS.—

20 Subsection (e) of section 6104 of such Code (relating to

21 public inspection of certain annual returns and applica22 tions for exemption) is amended by adding at the end the

23 following new paragraph:
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1 ‘‘(3) CHARITIES RECEIVING CREDITABLE CON2 TRIBUTIONS REQUIRED TO PROVIDE COPIES OF AN3 NUAL RETURN.—

4 ‘‘(A) IN GENERAL.—Every qualified char5 ity aiding the poor (as defined in section

6 26A(d)) shall, upon request of an individual

7 made at an office where such organization’s an8 nual return filed under section 6033 is required

9 under paragraph (1) to be available for inspec10 tion, provide a copy of such return to such indi11 vidual without charge other than a reasonable

12 fee for any reproduction and mailing costs. If

13 the request is made in person, such copies shall

14 be provided immediately and, if made other

15 than in person, shall be provided within 30

16 days.

17 ‘‘(B) PERIOD OF AVAILABILITY.—Subpara18 graph (A) shall apply only during the 3-year pe19 riod beginning on the filing date (as defined in

20 paragraph (1)(D)) of the return requested.’’

21 (c) CLERICAL AMENDMENT.—The table of sections

22 for subpart A of part IV of subchapter A of chapter 1

23 of such Code is amended by adding at the end the follow24 ing new item:

‘‘Sec. 26A. Credit for certain charitable contributions.’’
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to contributions made after the

3 date of the enactment of this Act.

4 SEC. 203. DEDUCTION FOR CHARITABLE CONTRIBUTIONS

5 TO BE ALLOWED TO INDIVIDUALS WHO DO

6 NOT ITEMIZE DEDUCTIONS.

7 (a) IN GENERAL.—Section 170 of the Internal Reve8 nue Code of 1986 (relating to charitable, etc., contribu9 tions and gifts) is amended by redesignating subsection

10 (m) as subsection (n) and by inserting after subsection

11 (l) the following new subsection:

12 ‘‘(m) DEDUCTION FOR INDIVIDUALS NOT ITEMIZING

13 DEDUCTIONS.—In the case of an individual who does not

14 itemize deductions for the taxable year, the amount allow15 able under subsection (a) for the taxable year shall be

16 taken into account as a direct charitable deduction under

17 section 63.’’

18 (b) DIRECT CHARITABLE DEDUCTION.—

19 (1) IN GENERAL.—Subsection (b) of section 63

20 of such Code is amended by striking ‘‘and’’ at the

21 end of paragraph (1), by striking the period at the

22 end of paragraph (2) and inserting ‘‘, and’’, and by

23 adding at the end the following new paragraph:

24 ‘‘(3) the deduction for charitable contributions

25 under section 170(m).’’
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1 (2) CONFORMING AMENDMENT.—Subsection (d)

2 of section 63 of such Code is amended by striking

3 ‘‘and’’ at the end of paragraph (1), by striking the

4 period at the end of paragraph (2) and inserting ‘‘,

5 and’’, and by adding at the end the following new

6 paragraph:

7 ‘‘(3) the deduction for charitable contributions

8 under section 170(m).’’

9 (c) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to taxable years beginning after

11 December 31, 1995.

12 TITLE IV—LOW-INCOME EDU13 CATIONAL OPPORTUNITY

14 SCHOLARSHIP PROGRAM

15 SEC. 401. SHORT TITLE.

16 This title may be cited as the ‘‘Low-Income Edu17 cational Opportunity Act of 1996’’.

18 SEC. 402. FINDINGS; PRECEDENTS.

19 (a) FINDINGS.—The Congress finds the following:

20 (1) Significant improvements in the education

21 of educationally deprived children can be accom22 plished by—

23 (A) increasing educational opportunities

24 for these children by expanding the range of

25 educational choices that best meet their needs;
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1 (B) fostering diversity and competition

2 among school programs for these children;

3 (C) providing the families of these children

4 more of the educational choices already avail5 able to affluent families; and

6 (D) enhancing the quality of American

7 education in general by increasing parental in8 volvement in the program and the direction of

9 the education of these children.

10 (2) Costs are often much lower in private

11 schools than corresponding costs in schools operated

12 solely by the Government.

13 (3) Not all children are alike and therefore

14 there is no one school or program that fits the needs

15 of all children.

16 (4) The formation of sound values and moral

17 character is crucial to helping young people escape

18 from lives of poverty, family break-up, drug abuse,

19 crime, and school failure.

20 (5) In addition to offering knowledge and skills,

21 education should positively contribute to the forma22 tion of the internal norms and values which are vital

23 to a child’s success in life and to the well being of

24 society.
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1 (6) Schools should help to provide young people

2 with a sound moral foundation which is consistent

3 with the values of their parents. To find such a

4 school, parents need a full range of choice to deter5 mine where their children can best be educated.

6 (b) PRECEDENTS.—The United States Supreme

7 Court has determined that programs giving parents choice

8 and increased input in their children’s education, includ9 ing the choice of a religious education, do not violate the

10 constitution. The Court has held that as long as the bene11 ficiary, not the Government, decides where education

12 funds will be spent on such individual’s behalf, Govern13 ment funds can be used for education in a religious insti14 tution because the Government has neither advanced nor

15 hindered a particular religion and therefore has not vio16 lated the establishment clause of the first amendment. Su17 preme Court precedents include—

18 (1) Wisconsin v. Yoder, 406 U.S. 205; Pierce v.

19 Society of Sisters, 268 U.S. 510; Meyer v. Ne20 braska, 262 U.S. 390 which held that parents have

21 the primary role in and are the primary decision

22 makers in all areas regarding the education and up23 bringing of their children;

24 (2) Mueller v. Allen, 463 U.S. 388 which de25 clared a Minnesota tax deduction program that pro-
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1 vided State income tax benefits for educational ex2 penditures by parents, including tuition in religiously

3 affiliated schools, constitutional;

4 (3) Witters v. Department of Services for the

5 Blind, 474 U.S. 481 in which the Court ruled unani6 mously that public funds for the vocational training

7 of the blind could be used at a Bible college for min8 istry training;

9 (4) Zobrest v. Catalina Foothills School District

10 (113 S. Ct. 2462) which held that a deaf child could

11 receive an interpreter, paid for by the Government,

12 in a private religiously affiliated school under the In13 dividuals With Disabilities Education Act. The case

14 held that providing an interpreter in a religiously af15 filiated school did not violate the establishment

16 clause.

17 SEC. 403. PURPOSES.

18 The purposes of this title are the following:

19 (1) To assist renewal communities—

20 (A) in giving children from low-income

21 families more choices in selecting elementary

22 and secondary schools that children from

23 wealthier families already have;

24 (B) in improving schools and other aca25 demic programs by financially enhancing the
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1 consumer power of low-income families to

2 choose the schools and programs that they de3 termine best fit the needs of their children;

4 (C) in engaging low-income parents more

5 fully in their children’s schooling;

6 (D) in providing low income parents with

7 a wide range of choice in selecting a school for

8 their children, including public schools, private

9 schools, and private religious schools, without

10 promoting or discriminating against the choice

11 of a particular type of school; and

12 (E) in combating crime, drugs, and illegit13 imacy in low-income communities by encourag14 ing the restoration of moral character.

15 (2) To demonstrate the effects of State and

16 local programs that give low-income families more of

17 the choices in schools (public, private, or religious)

18 that wealthier families already have.

19 SEC. 404. PLAN SUBMISSION; REQUIREMENTS.

20 (a) IN GENERAL.—A community designated as a re21 newal community under section 1400 of the Internal Reve22 nue Code of 1986 shall submit a plan to the Secretary

23 not later than 60 days after receiving such designation.

24 Such plan shall include the following:
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1 (1) A designation of a public or private office,

2 agency, or organization that will be responsible for

3 the establishment and operation of the scholarship

4 program and for the distribution of assistance to

5 parents.

6 (2) A description of the actions to be taken by

7 the State or renewal community to increase edu8 cational options for low-income children, including—

9 (A) public school choice programs;

10 (B) private school choice programs;

11 (C) quasi-public or charter school pro12 grams; and

13 (D) programs privatizing services such as

14 transportation, administration, or food prepara15 tion or distribution.

16 (3) A description of State and local funds (in17 cluding tax benefits) and non-governmental funds, if

18 any, that will be available to supplement scholarship

19 funds provided under this title.

20 (4) A description of the procedures the appli21 cant will use, including timely and meaningful con22 sultation with private school officials, to encourage

23 public and private elementary and secondary schools

24 to participate in the program and to ensure maxi25 mum educational choices for the parents of eligible
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1 children and for other children residing in the re2 newal community.

3 (5) A description of how the applicant will in4 form parents and schools of the scholarship program

5 and of the choices available to parents under such

6 program.

7 (6) A description of procedures the applicant

8 will use to determine which eligible children will re9 ceive assistance.

10 (7) An assurance that the applicant will main11 tain such records relating to the scholarship pro12 gram as the Secretary may require and will comply

13 with the Secretary’s reasonable requests for informa14 tion about the program.

15 (b) REQUIREMENTS.—In addition to the require16 ments described in subsection (a), a community that is

17 designated as a renewal community shall establish and op18 erate a Low-Income Educational Opportunity Scholarship

19 program (referred to in this title as ‘‘scholarship pro20 gram’’) and distribute scholarships to parents during the

21 first school year beginning on or after the 90th day follow22 ing the day of such designation. Such program shall meet

23 the following requirements:

24 (1) To provide a choice of schools to families

25 with children who reside in the renewal community.
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1 (2) To provide assistance to parents of eligible

2 children to attend public and private elementary and

3 secondary schools, including religious schools that

4 serve the designated renewal community.

5 (3) To allow all or any lawfully operating public

6 and private elementary or secondary schools, includ7 ing religious schools that serve the renewal commu8 nity to participate in a scholarship program under

9 this title if such a school so chooses, subject to the

10 qualifications specified in section 409.

11 (c) COMPLIANCE.—The Secretary shall notify the

12 Secretary of Housing and Urban Development if a renewal

13 community fails to comply with the requirements of sub14 sections (a) or (b). Upon such notification, the Secretary

15 of Housing and Urban Development may begin a review

16 for possible revocation of renewal community designation.

17 SEC. 405. USES OF FUNDS.

18 A community that receives renewal community des19 ignation under section 1400 of the Internal Revenue Code

20 of 1986 shall use funds received under this title—

21 (1) to provide for scholarships to assist in the

22 payment of tuition and fees at a scholarship school

23 selected by the parents of an eligible child, and to

24 pay the reasonable costs of transportation of eligible

25 children to scholarship or alternative public schools;
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1 (2) not to exceed 10 percent, to pay the cost of

2 administering the educational opportunity scholar3 ship program; or

4 (3) in accordance with section 412, if an excess

5 amount of funds are available, to pay for the edu6 cation of children from low-income families attend7 ing public schools.

8 SEC. 406. SCHOLARSHIP PROGRAM.

9 (a) ELIGIBLE CHILDREN.—From the amounts made

10 available under this title, each renewal community shall

11 provide, to the extent practicable, assistance to a parent

12 who has applied for assistance and has a child who—

13 (1) is a member of a family that has a total

14 family income that does not exceed 185 percent of

15 the poverty line;

16 (2) resides in the renewal community; and

17 (3)(A) seeks to attend an alternative public ele18 mentary or secondary school that participates in the

19 scholarship program; or

20 (B) seeks to attend a private or religious ele21 mentary or secondary school that participates in the

22 scholarship program.

23 (b) SELECTION AMONG ELIGIBLE CHILDREN.—

24 (1) IN GENERAL.—In the event that a renewal

25 community has insufficient funds to provide assist-
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1 ance to all eligible children whose parents have ap2 plied for assistance, the renewal community may se3 lect students according to—

4 (A) random selection;

5 (B) the date of the parents’ application for

6 assistance with preference given to parents who

7 applied earlier; or

8 (C) any other selection criteria developed

9 by the renewal community, subject to the limi10 tations provided in subsection (c).

11 (2) PRIORITY.—A renewal community shall give

12 priority to a parent for a student who received as13 sistance pursuant to this title during the preceding

14 school year.

15 (c) CRITERIA FOR SELECTION.—The renewal com16 munity may choose any criteria it wishes in order to make

17 the selection described in subsection (b), except that such

18 criteria shall not—

19 (1) discriminate on the basis of race or religion;

20 (2) discriminate on the basis of the school or

21 type of school selected by the parent; or

22 (3) discriminate against an eligible child be23 cause the parent of the child has chosen to receive

24 a scholarship to attend an eligible private school

25 under section 408(b)(1) of this title rather than
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1 transportation assistance to attend an alternative

2 public school under section 408(b)(2).

3 (d) VALUE OF EACH SCHOLARSHIP.—The renewal

4 community shall determine the value of scholarships pro5 vided each semester within the renewal community, except

6 that the value of a scholarship provided by a renewal com7 munity shall not be less than the minimum value specified

8 in paragraph (1) and shall not exceed the maximum value

9 specified in paragraph (2).

10 (1) MINIMUM VALUE.—The minimum value of

11 a scholarship for a semester shall be the lesser of—

12 (A) 60 percent of the average per pupil

13 cost per semester in the public school system or

14 systems in the renewal community in the pre15 ceding school year; or

16 (B) the regular tuition and education fees

17 charged per semester by the scholarship school

18 chosen by the parent.

19 (2) MAXIMUM VALUE.—The maximum value of

20 a scholarship for a semester shall be the average per

21 pupil cost per semester in the public school system

22 or systems in the renewal community in the preced23 ing school year.

24 (3) DISABILITY.—If a student has a disability,

25 the average per pupil cost per semester in the public
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1 school system or systems in the renewal community

2 in the preceding year shall be calculated using the

3 same cost for students with the same special needs

4 or handicapped category for such period of time.

5 (e) USE OF SCHOLARSHIPS, TRANSPORTATION AS6 SISTANCE.—Funds used to provide assistance to a parent

7 may be used by a parent only to pay for tuition and fees

8 or transportation costs at participating schools.

9 SEC. 407. ALLOCATION OF FUNDS AMONG RENEWAL COM10 MUNITIES.

11 (a) IN GENERAL.—The funds authorized under sec12 tion 417 shall be allocated to each renewal community by

13 the Secretary of the Treasury as follows:

14 (1) 80 percent shall be allocated among renewal

15 communities according to the formula provided in

16 subsection (b).

17 (2) 20 percent shall be allocated among renewal

18 communities according to the formula provided in

19 subsection (c).

20 (b) BASIC FUNDING ALLOCATION.—Each renewal

21 community, except as provided in subsection (d), shall re22 ceive a percentage of the funds provided under subsection

23 (a)(1) based on—
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1 (1) the number of children from low-income

2 families who reside in an individual renewal commu3 nity; divided by

4 (2) the total number of children from low-in5 come families who reside in renewal communities na6 tionwide.

7 (c) ADDITIONAL MATCHING FUNDS.—Each renewal

8 community shall receive a percentage of funds under sub9 section (a)(2) based on—

10 (1) the total value of matching contributions for

11 scholarships provided from local governmental,

12 State, or private charitable sources within a renewal

13 community; divided by

14 (2) the total value of matching contributions for

15 scholarships provided from local governmental,

16 State, or private charitable sources in all renewal

17 communities nationwide.

18 (d) POSSIBLE EXCEPTION.—Notwithstanding sub19 section (b), if Puerto Rico or communities in Puerto Rico

20 are designated as renewal communities, such renewal com21 munities, in aggregate, shall receive not more than the

22 percentage of funds that Puerto Rico received under title

23 I of the Elementary and Secondary Education Act of 1965

24 during fiscal year 1995.
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1 SEC. 408. PARENTAL RIGHT OF CHOICE IN EDUCATION.

2 (a) IN GENERAL.—Parents of each child who receives

3 assistance under this title shall be given a range of choice

4 of public and private elementary and secondary schools,

5 including religious schools that serve such community.

6 (b) TYPES OF ASSISTANCE.—The type of assistance

7 provided to the parent of a child selected to participate

8 in the scholarship program shall be determined by the type

9 of school to which the parent selects to send the child.

10 (1) SCHOLARSHIP SCHOOL.—If the parent

11 elects to have a child attend a private scholarship

12 school, described in section 409, the parent—

13 (A) shall receive a scholarship to be used

14 to pay tuition and other fees at the school; and

15 (B) shall receive direct or indirect trans16 portation assistance.

17 (2) ALTERNATIVE PUBLIC SCHOOL.—If the par18 ent elects to have the child attend an alternative

19 pubic school, the parent shall receive direct or indi20 rect transportation assistance.

21 (c) NO GUARANTEE OF ADMISSION.—Eligible chil22 dren whose parents have applied to receive a scholarship

23 under this title shall be subject to the admission criteria

24 of each scholarship school or alternative public school and

25 nothing in this title shall be construed to guarantee the
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1 right of an eligible child to attend any scholarship school

2 or alternative public school.

3 (d) LIMITATION ON NUMBER OF CHILDREN AS4 SISTED.—The number of eligible children to receive assist5 ance from a renewal community shall be determined by

6 the funds available to such renewal community from—

7 (1) the Federal funds provided under this title;

8 and

9 (2) other funds provided by public and private

10 sources.

11 (e) PARENTAL NOTIFICATION.—

12 (1) IN GENERAL.—Each renewal community

13 shall provide timely notice of the scholarship pro14 gram to parents of eligible children residing in the

15 area and to the schools. At a minimum, such notice

16 shall—

17 (A) describe the educational opportunity

18 scholarship program;

19 (B) describe the eligibility requirements for

20 scholarships;

21 (C) describe the selection procedures to be

22 used if the number of eligible children seeking

23 to participate in the program exceeds the num24 ber that can be accommodated in the program;
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1 (D) provide information about alternative

2 public schools and scholarship schools, including

3 information about any admission requirements

4 or criteria for each school participating in the

5 scholarship program; and

6 (E) include the procedures and a schedule

7 for parents to apply for their eligible children to

8 participate in the program.

9 (2) NOTIFICATION METHODS.—Each renewal

10 community is encouraged to use a variety of means

11 to provide information to parents in the community,

12 including direct distribution, mail, distribution of

13 materials in publicly frequented places, public adver14 tisements, and cooperative efforts with local commu15 nity groups.

16 (f) INFORMATION.—Renewal communities, upon re17 quest by any and all schools eligible to become scholarship

18 schools, shall fully cooperate with such schools in a timely

19 and reasonable manner to provide information prepared

20 by the school regarding school choice to parents of eligible

21 children. Such information shall include, at a minimum,

22 materials prepared by the school regarding the scholarship

23 program, selection of schools, and the school itself.
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1 SEC. 409. ELIGIBLE SCHOOLS.

2 (a) STANDARDS.—Each private school located in the

3 renewal community or within a reasonable transportation

4 distance of such community is eligible to redeem scholar5 ships and to become a scholarship school if—

6 (1) the school complies with the antidiscrimina7 tion provisions of section 601 of title VI of the Civil

8 Rights Act of 1964 (42 U.S.C. 2000) and does not

9 discriminate on the basis of race;

10 (2) the school satisfies requirements established

11 by State and local governments, where applicable,

12 for curriculum and facilities which applied to private

13 schools for the area in which the school is located as

14 of January 1, 1996; and

15 (3) the school meets the health and safety

16 standards which applied to private schools as of Jan17 uary 1, 1996, for the community in which the school

18 is located.

19 (b) LIMITS ON THE REGULATION OF SCHOOLS.—Any

20 regulation of a scholarship school shall be subject to the

21 following limitations:

22 (1) No additional requirements, regulations, or

23 burdensome paperwork other than those in effect on

24 the date of the enactment of this Act or as set forth

25 or referenced in this title may be imposed upon

26 scholarship schools.
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1 (2) Students who have been enrolled in a schol2 arship school in the preceding school year may be

3 given an admissions preference over new students

4 who apply.

5 (3) No requirements or regulations may pro6 hibit or limit the authority of scholarship schools to

7 provide religious instruction or education.

8 (4) Scholarship schools shall be protected by

9 the rights granted in the Religious Freedom Res10 toration Act of 1993.

11 (5) Except for the limitation concerning dis12 crimination on the basis of race expressed in sub13 section (a)(1), any school operated by a religious or14 ganization may require its employees to—

15 (A) adhere to the religious tenets and

16 teachings of such organization; and

17 (B) follow any rules of behavior devised by

18 the organization.

19 (6) No requirement and regulation shall pro20 hibit a scholarship school from—

21 (A) admitting students of a single gender;

22 (B) operating classes which are separated

23 on the basis of gender; or
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1 (C) employing teaching personnel whose

2 gender the school deems appropriate in the edu3 cation of certain categories of students.

4 (c) INELIGIBLE SCHOOLS.—Notwithstanding any

5 other provision of this title, a school that advocates crimi6 nal behavior or which is operated by an organization which

7 advocates criminal behavior is ineligible to participate in

8 the program authorized by this title.

9 SEC. 410. ADMINISTRATION OF PROGRAM AND TREATMENT

10 OF FUNDS.

11 (a) FUNDS NOT AID TO INSTITUTIONS.—The funds

12 provided for a scholarship under this title is an award of

13 aid to a family, not to a school or institution. Use of a

14 scholarship or transportation assistance shall not con15 stitute Federal financial aid or assistance to a school, nor

16 shall it invoke any regulation of an activity beyond the

17 regulations explicitly referred to or provided for in this

18 title.

19 (b) TREATMENT OF GRANT FUNDS.—A Federal,

20 State, or local agency may not take into account, in any

21 year, Federal funds provided to a renewal community,

22 school, or to the parents of any child under this title in

23 determining whether to provide any other funds from Fed24 eral, State, or local resources, or in determining the

25 amount of such assistance.
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1 (c) NO AUTHORIZATION OF FEDERAL REGULATION

2 OF EDUCATION.—Nothing in this Act shall be construed

3 to authorize the Secretary to exercise any direction, super4 vision, or control over the curriculum, program of instruc5 tion, administration, or personnel of any educational insti6 tution or school participating in a program under this

7 title.

8 (d) PROHIBITION ON STATE DISCRIMINATION IN USE

9 OF FUNDS.—A State constitution or State law shall not

10 be construed to prohibit the expenditure of any Federal

11 funds provided under this title in or by a religious institu12 tion. If a State law or constitution does not allow the ex13 penditure of State or local public funds in or by religious

14 organizations, the renewal community shall segregate Fed15 eral funds from State or other public funds for purposes

16 of providing assistance administering the educational op17 portunity scholarship program.

18 (e) REGULATION OF SCHOOLS NOT RECEIVING

19 SCHOLARSHIPS.—A rule or requirement established for

20 scholarship schools shall not apply to a private school that

21 chooses not to become a scholarship school.

22 (f) SCHOLARSHIPS NOT DEEMED INCOME.—Funds

23 used to provide scholarships shall not be deemed income

24 of the parents for Federal income tax purposes or for de25 termining eligibility for any other Federal programs.
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1 SEC. 411. CONTRIBUTIONS TO SCHOLARSHIP PROGRAM

2 FROM OTHER SOURCES.

3 (a) IN GENERAL.—The renewal community is en4 couraged to seek or provide additional funds for scholar5 ships and transportation assistance from other sources, in6 cluding—

7 (1) local government funds;

8 (2) State government funds;

9 (3) contributions from private businesses; and

10 (4) contributions from private charitable orga11 nizations.

12 (b) PARENTAL PAYMENTS NOT COUNTED AS MATCH13 ING CONTRIBUTIONS.—For purposes of section 407(c),

14 payments of tuition and education fees by parents of eligi15 ble children shall not be considered matching contribu16 tions.

17 SEC. 412. USE OF EXCESS FUNDS FOR ADDITIONAL EDU18 CATIONAL PURPOSES.

19 (a) IN GENERAL.—If any funds remain after a re20 newal community has provided scholarships to all eligible

21 children whose parents have applied for assistance in ac22 cordance with this title, the community may use such ex23 cess funds for the general education of children from low24 income families who attend public schools within the re25 newal community, subject to the limitation in subsection

26 (b).
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1 (b) LIMITATION.—A renewal community may not use

2 excess funds for the purposes described in subsection (a)

3 if the Secretary determines that the community—

4 (1) has failed to fully inform the parents or

5 guardians of eligible children of—

6 (A) the availability of scholarships; and

7 (B) the full range of choices of schools

8 available;

9 (2) has in any way discouraged or impeded par10 ents of eligible children from using scholarships;

11 (3) has in any way discouraged or impeded eli12 gible schools from receiving scholarships; or

13 (4) has unreasonably hindered the establish14 ment of new private schools within the renewal com15 munity.

16 (c) FORFEITURE OF SURPLUS FUNDS.—In the event

17 that the Secretary determines that a renewal community

18 has met one or more of the conditions described in sub19 section (b), the renewal community shall return any excess

20 funds described in subsection (a) to the Treasury.

21 SEC. 413. EVALUATION.

22 (a) IN GENERAL.—The Secretary shall conduct a na23 tional evaluation of the program authorized by this title

24 not later than 2 years after such program begins and a

25 second evaluation after 4 years. Such evaluations shall—
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1 (1) assess the implementation of assisted pro2 grams and the effect on participants, schools, and

3 communities in the renewal community, including

4 parental involvement in, and satisfaction with, the

5 program and their children’s education;

6 (2) compare the educational achievement of

7 children who participate in the scholarship program

8 with the achievement of similar children who do not

9 participate in the scholarship program before, dur10 ing, and after the program;

11 (3) compare educational achievement of chil12 dren who use scholarships to attend schools other

13 than the ones they would attend in the absence of

14 the program with educational achievement of chil15 dren who attend the schools scholarship students

16 would attend in the absence of the program; and

17 (4) compare graduation rates of children who

18 use scholarships to attend schools other than the

19 schools they would attend in the absence of the pro20 gram with graduation rates of children who attend

21 the schools the scholarship students would attend in

22 the absence of the program.

23 (b) NO AUTHORIZATION OF SCHOOL REGULATION.—

24 The responsibility to evaluate shall not be construed to

25 authorize the State or local government to exercise any
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1 direction, supervision, or control over the curriculum, pro2 gram of instruction, administration, or personnel of any

3 educational private institution or school participating in

4 a low-income educational opportunity scholarship program

5 under this title, except that the school may be required

6 to provide reasonable information to assist in the evalua7 tion of the program, including standardized tests of stu8 dent achievement, surveys of parental satisfaction with

9 their child’s education, surveys of student satisfaction, at10 tendance rates, dropout rates, and data on student’s col11 lege enrollment.

12 SEC. 414. EFFECT ON OTHER PROGRAMS.

13 Nothing in this Act shall be read to affect the applica14 bility or requirements of part B of the Individuals with

15 Disabilities Education Act.

16 SEC. 415. JUDICIAL REVIEW.

17 (a) PANEL.—In the event of a constitutional chal18 lenge to the program authorized under this title, such

19 challenge shall be tried immediately by a three judge panel

20 in the United States District Court of the District of Co21 lumbia and immediate appeal, as of right, may be had in

22 the Supreme Court of the United States.

23 (b) REQUEST TO EXPEDITE.—The Supreme Court of

24 the United States is requested to expedite an appeal re25 quested pursuant to subsection (a).
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1 SEC. 416. DEFINITIONS.

2 Except as otherwise provided, for purposes of this

3 title—

4 (1) the term ‘‘alternative public school’’ means

5 a public school other than the public school in which

6 the child normally would attend and which is within

7 reasonable transportation distance from the child’s

8 residence;

9 (2) the term ‘‘assistance’’ means either a schol10 arship, transportation assistance, or a scholarship

11 and transportation assistance provided to parents of

12 eligible children who participate in the scholarship

13 program pursuant to this title.

14 (3) the term ‘‘elementary school’’ means an in15 stitutional day or residential school that provides el16 ementary education, as determined under State law;

17 (4) the term ‘‘eligible child’’ means a child

18 whose parents qualify to receive assistance under

19 section 406;

20 (5) the term ‘‘lawfully operated elementary

21 school’’ means an institutional day or residential

22 school that provides elementary education, as deter23 mined under State law;

24 (6) the term ‘‘lawfully operated secondary

25 school’’ means an institutional day or residential

26 school that provides secondary education, as deter-
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1 mined under State law, except that such term does

2 not include any education beyond grade 12;

3 (7) the terms ‘‘Low-Income Educational Oppor4 tunity Scholarship’’ and ‘‘scholarship’’ mean a cer5 tificate awarded to a parent of an eligible child

6 under section 406 to be redeemed at a scholarship

7 school;

8 (8) the terms ‘‘local educational agency’’, ‘‘par9 ent’’, and ‘‘State educational agency’’ have the

10 meanings given such terms in section 14101 of the

11 Elementary and Secondary Education Act of 1965;

12 (9) the term ‘‘poverty level’’ means the total in13 come of a family that is at or below the Federal pov14 erty guidelines updated annually in the Federal Reg15 ister by the Department of Health and Human Serv16 ices under authority of section 673(2) of the Omni17 bus Budget Reconciliation Act of 1981 as amended;

18 (10) the term ‘‘renewal community’’ has the

19 meaning given such term in section 1400 of the In20 ternal Revenue Code of 1986;

21 (11) the term ‘‘scholarship program means a

22 program within the renewal community that provides

23 scholarships and transportation aid to eligible chil24 dren in accordance with this title.
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1 (12) the term ‘‘scholarship school’’ means a pri2 vate school that chooses to accept educational oppor3 tunity scholarships;

4 (13) the term ‘‘secondary school’’ means an in5 stitutional day or residential school that provides

6 secondary education, as determined under State law,

7 except that such term does not include any edu8 cation beyond grade 12;

9 (14) the term ‘‘Secretary’’ means the Secretary

10 of Education;

11 (15) the term ‘‘State’’ means each of the 50

12 States, the District of Columbia, and the Common13 wealth of Puerto Rico; and

14 (16) the term ‘‘transportation assistance’’

15 means direct or indirect subsidization of the costs of

16 transporting children participating in the program to

17 scholarship schools or alternative public schools.

18 SEC. 417. AUTHORIZATION OF APPROPRIATIONS.

19 There are authorized to be appropriated the following

20 sums: $200,000,000 for fiscal year 1996, $200,000,000

21 for fiscal year 1997, $200,000,000 for fiscal year 1998,

22 $400,000,000 for fiscal year 1999, $500,000,000 for fis23 cal 2000, $1,000,000,000 for fiscal year 2001, and

24 $2,500,000,000 for fiscal year 2002.
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1 TITLE III—PREVENTION AND

2 TREATMENT OF SUBSTANCE

3 ABUSE

4 SEC. 301. PREVENTION AND TREATMENT OF SUBSTANCE

5 ABUSE; SERVICES PROVIDED THROUGH RELI6 GIOUS ORGANIZATIONS.

7 Title V of the Public Health Service Act (42 U.S.C.

8 290aa et seq.) is amended by adding at the end the follow9 ing part:

10 ‘‘PART G—SERVICES PROVIDED THROUGH RELIGIOUS

11 ORGANIZATIONS

12 ‘‘SEC. 581. APPLICABILITY TO DESIGNATED PROGRAMS.

13 ‘‘(a) DESIGNATED PROGRAMS.—Subject to sub14 section (b), this part applies to each program under this

15 Act that makes awards of Federal financial assistance to

16 public or private entities for the purpose of carrying out

17 activities to prevent or treat substance abuse (in this part

18 referred to as a ‘designated program’). Designated pro19 grams include the program under subpart II of part B

20 of title XIX (relating to formula grants to the States).

21 ‘‘(b) LIMITATION.—This part does not apply to any

22 award of Federal financial assistance under a designated

23 program for a purpose other than the purpose specified

24 in subsection (a).
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1 ‘‘(c) DEFINITIONS.—For purposes of this part (and

2 subject to subsection (b)):

3 ‘‘(1) The term ‘designated award recipient’

4 means a public or private entity that has received an

5 award under a designated program (whether the

6 award is a designated direct award or a designated

7 subaward).

8 ‘‘(2) The term ‘designated direct award’ means

9 an award under a designated program that is re10 ceived directly from the Federal Government.

11 ‘‘(3) The term ‘designated subaward’ means an

12 award of financial assistance made by a non-Federal

13 entity, which award consists in whole or in part of

14 Federal financial assistance provided through an

15 award under a designated program.

16 ‘‘(4) The term ‘designated program’ has the

17 meaning given such term in subsection (a).

18 ‘‘(5) The term ‘financial assistance’ means a

19 grant, cooperative agreement, contract, or

20 voucherized assistance.

21 ‘‘(6) The term ‘program beneficiary’ means an

22 individual who receives program services.

23 ‘‘(7) The term ‘program participant’ has the

24 meaning given such term in section 582(a)(2).
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1 ‘‘(8) The term ‘program services’ means treat2 ment for substance abuse, or preventive services re3 garding such abuse, provided pursuant to an award

4 under a designated program.

5 ‘‘(9) The term ‘religious organization’ means a

6 nonprofit religious organization.

7 ‘‘(10) The term ‘voucherized assistance’

8 means—

9 ‘‘(A) a system of selecting and reimbursing

10 program services in which—

11 ‘‘(i) the beneficiary is given a docu12 ment or other authorization that may be

13 used to pay for program services;

14 ‘‘(ii) the beneficiary chooses the orga15 nization that will provide services to him or

16 her according to rules specified by the des17 ignated award recipient; and

18 ‘‘(iii) the organization selected by the

19 beneficiary is reimbursed by the designated

20 award recipient for program services pro21 vided; or

22 ‘‘(B) any other mode of financial assist23 ance to pay for program services in which the

24 program beneficiary determines the allocation
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1 of program funds through his or her selection

2 of one service provider from among alternatives.

3 ‘‘SEC. 582. RELIGIOUS ORGANIZATIONS AS PROGRAM PAR4 TICIPANTS.

5 ‘‘(a) IN GENERAL.—

6 ‘‘(1) SCOPE OF AUTHORITY.—Notwithstanding

7 any other provision of law, a religious organiza8 tion—

9 ‘‘(A) may be a designated award recipient;

10 ‘‘(B) may make designated subawards to

11 other public or nonprofit private entities (in12 cluding other religious organizations);

13 ‘‘(C) may provide for the provision of pro14 gram services to program beneficiaries through

15 the use of voucherized assistance; and

16 ‘‘(D) may be a provider of services under

17 a designated program, including a provider that

18 accepts voucherized assistance.

19 ‘‘(2) DEFINITION OF PROGRAM PARTICIPANT.—

20 For purposes of this part, the term ‘program partici21 pant’ means a public or private entity that has re22 ceived a designated direct award, or a designated

23 subaward, regardless of whether the entity provides

24 program services. Such term includes an entity

25 whose only participation in a designated program is
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1 to provide program services pursuant to the accept2 ance of voucherized assistance.

3 ‘‘(b) RELIGIOUS ORGANIZATIONS.—The purpose of

4 this section is to allow religious organizations to be pro5 gram participants on the same basis as any other non6 profit private provider without impairing the religious

7 character of such organizations, and without diminishing

8 the religious freedom of program beneficiaries.

9 ‘‘(c) NONDISCRIMINATION AGAINST RELIGIOUS OR10 GANIZATIONS.—Religious organizations are eligible to be

11 program participants on the same basis as any other non12 profit private organization so long as activities under the

13 designated programs are implemented consistent with the

14 establishment clause of the first amendment to the Con15 stitution of the United States. Neither the Federal Gov16 ernment nor a State receiving funds under such programs

17 shall discriminate against an organization that is or ap18 plies to be a program participant on the basis that the

19 organization has a religious character.

20 ‘‘(d) RELIGIOUS CHARACTER AND FREEDOM.—

21 ‘‘(1) RELIGIOUS ORGANIZATIONS.—Notwith22 standing any other provision of law, any religious or23 ganization that is a program participant shall retain

24 its independence from Federal, State, and local gov25 ernment, including such organization’s control over
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1 the definition, development, practice, and expression

2 of its religious beliefs.

3 ‘‘(2) ADDITIONAL SAFEGUARDS.—Neither the

4 Federal Government nor a State shall require a reli5 gious organization to—

6 ‘‘(A) alter its form of internal governance;

7 or

8 ‘‘(B) remove religious art, icons, scripture,

9 or other symbols;

10 in order to be a program participant.

11 ‘‘(e) RIGHTS OF PROGRAM BENEFICIARIES.—With

12 respect to an individual who is a program beneficiary or

13 a prospective program beneficiary, if the individual objects

14 to a program participant on the basis that the participant

15 is a religious organization, the following applies:

16 ‘‘(1) If the organization received a designated

17 direct award, the organization shall arrange for the

18 individual to receive program services through an al19 ternative entity.

20 ‘‘(2) If the organization received a designated

21 subaward, the non-Federal entity that made the

22 subaward shall arrange for the individual to receive

23 the program services through an alternative program

24 participant.
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1 ‘‘(3) If the organization is providing services

2 pursuant to voucherized assistance, the designated

3 award recipient that operates the voucherized assist4 ance program shall arrange for the individual to re5 ceive the program services through an alternative

6 provider.

7 ‘‘(4) Arrangements under any of paragraphs

8 (1) through (3) with an alternative entity shall pro9 vide for program services the monetary value of

10 which is not less than the monetary value of the pro11 gram services that the individual would have re12 ceived from the religious organization involved.

13 ‘‘(f) NONDISCRIMINATION IN EMPLOYMENT.—

14 ‘‘(1) IN GENERAL.—Except as provided in para15 graph (2), nothing in this section shall be construed

16 to modify or affect the provisions of any other Fed17 eral or State law or regulation that relates to dis18 crimination in employment on the basis of religion.

19 ‘‘(2) EXCEPTION.—A religious organization

20 that is a program participant may require that an

21 employee rendering programs services adhere to—

22 ‘‘(A) the religious tenets and teachings of

23 such organization; and

24 ‘‘(B) any rules of the organization regard25 ing the use of drugs or alcohol.
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1 ‘‘(g) NONDISCRIMINATION AGAINST BENE2 FICIARIES.—

3 ‘‘(1) IN GENERAL.—Except as provided in para4 graph (2) or as otherwise provided in law, a religious

5 organization that is a program participant shall not

6 in providing program services discriminate against a

7 program beneficiary on the basis of religion or reli8 gious belief.

9 ‘‘(2) LIMITATION.—A religious organization

10 that is a program participant may require a pro11 gram beneficiary who has elected in accordance with

12 subsection (e) to receive program services from such

13 organization—

14 ‘‘(A) to actively participate in religious

15 practice, worship, and instruction; and

16 ‘‘(B) to follow rules of behavior devised by

17 the organizations that are religious in content

18 or origin.

19 ‘‘(h) FISCAL ACCOUNTABILITY.—

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (2), any religious organization that is a pro22 gram participant shall be subject to the same regula23 tions as other recipients of awards of Federal finan24 cial assistance to account, in accordance with gen-
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1 erally accepting auditing principles, for the use of

2 the funds provided under such awards.

3 ‘‘(2) LIMITED AUDIT.—With respect to the

4 award involved, if a religious organization that is a

5 program participant maintains the Federal funds in

6 a separate account from non-Federal funds, then

7 only the Federal funds shall be subject to audit.

8 ‘‘SEC. 583. LIMITATIONS ON USE OF FUNDS FOR CERTAIN

9 PURPOSES.

10 ‘‘(a) IN GENERAL.—Except as provided in subsection

11 (b), no funds provided directly to an entity under a des12 ignated program shall be expended for sectarian worship

13 or instruction.

14 ‘‘(b) EXCEPTION.—Subsection (a) shall not apply to

15 assistance provided to or on behalf of a program bene16 ficiary if the beneficiary may choose where such assistance

17 is redeemed or allocated.

18 ‘‘SEC. 584. ADMINISTRATION OF PROGRAM AND TREAT19 MENT OF FUNDS.

20 ‘‘(a) FUNDS NOT AID TO INSTITUTIONS.—Financial

21 assistance under a designated program provided to or on

22 behalf of program beneficiaries is aid to the beneficiary,

23 not to the organization providing program services. The

24 receipt by a program beneficiary of program services at
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1 the facilities of the organization shall not constitute Fed2 eral financial assistance to the organization involved.

3 ‘‘(b) PROHIBITION ON STATE DISCRIMINATION IN

4 USE OF FUNDS.—No provision in any State constitution

5 or State law shall be construed to prohibit the expenditure

6 of Federal funds under a designated program in a reli7 gious facility or by a religious organization that is a pro8 gram participant. If a State law or constitution would pre9 vent the expenditure of State or local public funds in such

10 a facility or by such a State or local government, then

11 the organization shall segregate the Federal funds from

12 State or other public funds for purposes of carrying out

13 the designated program.

14 ‘‘SEC. 585. EDUCATIONAL REQUIREMENTS FOR PERSONNEL

15 IN DRUG TREATMENT PROGRAMS.

16 ‘‘(a) FINDINGS.—The Congress finds that—

17 ‘‘(1) establishing formal educational qualifica18 tion for counselors and other personnel in drug

19 treatment programs may undermine the effective20 ness of such programs; and

21 ‘‘(2) such formal educational requirements for

22 counselors and other personnel may hinder or pre23 vent the provision of needed drug treatment services.

24 ‘‘(b) LIMITATION ON EDUCATIONAL REQUIREMENTS

25 OF PERSONNEL.—
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1 ‘‘(1) TREATMENT OF RELIGIOUS EDUCATION.—

2 If any State or local government that is a program

3 participant imposes formal educational qualifications

4 on providers of program services that are religious

5 organizations, such State or local government shall

6 treat religious education and training of personnel

7 as having a critical and positive role in the delivery

8 of program services. In applying educational quali9 fications for personnel in religious organizations,

10 such State or local government shall give credit for

11 religious education and training equivalent to credit

12 given for secular course work in drug treatment or

13 any other secular subject that is of similar grade

14 level and duration.

15 ‘‘(2) RESTRICTION OF DISCRIMINATION RE16 QUIREMENTS.—

17 ‘‘(A) IN GENERAL.—Subject to paragraph

18 (1), a State or local government that is a pro19 gram participant may establish formal edu20 cational qualifications for personnel in organiza21 tions providing program services that contribute

22 to success in reducing drug use among program

23 beneficiaries.

24 ‘‘(B) EXCEPTION.—The Secretary shall

25 waive the application of any educational quali-
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1 fication imposed under subparagraph (A) for an

2 individual religious organization, if the Sec3 retary determines that—

4 ‘‘(i) the religious organization has a

5 record of prior successful drug treatment

6 for at least the preceding three years;

7 ‘‘(ii) the educational qualifications

8 have effectively barred such religious orga9 nization from becoming a program pro10 vider;

11 ‘‘(iii) the organization has applied to

12 the Secretary to waive the qualifications;

13 and

14 ‘‘(iv) the State or local government

15 has failed to demonstrate empirically that

16 the educational qualifications in question

17 are necessary to the successful operation of

18 a drug treatment program.’’.
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1 TITLE V—CRA CREDIT FOR IN2 VESTMENTS IN COMMUNITY

3 DEVELOPMENT ORGANIZA4 TIONS LOCATED IN RENEWAL

5 COMMUNITIES

6 SEC. 501. CRA CREDIT FOR INVESTMENTS IN COMMUNITY

7 DEVELOPMENT ORGANIZATIONS LOCATED IN

8 RENEWAL COMMUNITIES.

9 Section 804 of the Community Reinvestment Act of

10 1977 (12 U.S.C. 2903) is amended by adding at the end

11 the following new subsection:

12 ‘‘(c) INVESTMENTS IN CERTAIN COMMUNITY DEVEL13 OPMENT ORGANIZATIONS.—In assessing and taking into

14 account, under subsection (a), the record of a regulated

15 financial institution, the appropriate Federal financial su16 pervisory agency may consider, as a factor, investments

17 of the institution in, and capital investment, loan partici18 pation, and other ventures undertaken by the institution

19 in cooperation with, any community development organi20 zation (as defined in section 234 of the Bank Enterprise

21 Act of 1991) which is located in a renewal community (as

22 designated under section 1400 of the Internal Revenue

23 Code of 1986).’’.
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1 SEC. 502. FDA USER FEE AMENDMENT.

2 Section 736(b) of the Federal Food, Drug, and Cos3 metic Act (21 U.S.C. 379h(b)) is amended by adding at

4 the end the following:

5 ‘‘(3) RENEWAL COMMUNITY EXCEPTION.—

6 Any—

7 ‘‘(A) business which qualifies as a renewal

8 community business under section 1400C of the

9 Internal Revenue Code of 1986, or

10 ‘‘(B) any nonprofit organization,

11 which is manufacturing a drug for which a fee is re12 quired under subsection (a)(2)(A) and which was de13 veloped in a renewal community designated under

14 section 1400 of such Code or has pending an appli15 cation or supplement for a drug for which a fee is

16 required under subsection (a)(2)(B) and which was

17 developed in a renewal community designated under

18 section 1400 of such Code shall not be required to

19 pay any portion of such fee. Any business or non20 profit organization shall not be required to pay any

21 portion of the fee required under subsection

22 (a)(1)(A) for a human drug application for a drug

23 that was developed in a renewal community.’’.

Æ