II

Calendar No. 780

106TH CONGRESS

2D SESSION H. R. 4923

IN THE SENATE OF THE UNITED STATES

JULY 26, 2000

Received

JULY 27, 2000

Read the first time

SEPTEMBER 5, 2000

Read the second time and placed on the calendar

AN ACT

To amend the Internal Revenue Code of 1986 to provide

tax incentives for the renewal of distressed communities,

to provide for nine additional empowerment zones and

increased tax incentives for empowerment zone development, to encourage investments in new markets, and

for other purposes.
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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; ETC.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Community Renewal and New Markets Act of 2000’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment

9 to, or repeal of, a section or other provision, the reference

10 shall be considered to be made to a section or other provi11 sion of the Internal Revenue Code of 1986.

12 (c) TABLE OF CONTENTS.—

Sec. 1. Short title; etc.

TITLE I—TAX INCENTIVES FOR RENEWAL COMMUNITIES

Sec. 101. Designation of and tax incentives for renewal communities.

Sec. 102. Extension of expensing of environmental remediation costs to renewal

communities; extension of termination date for renewal communities and empowerment zones.

Sec. 103. Work opportunity credit for hiring youth residing in renewal communities.

TITLE II—EXTENSION AND EXPANSION OF EMPOWERMENT

ZONE INCENTIVES

Sec. 201. Authority to designate nine additional empowerment zones.

Sec. 202. Extension of enterprise zone treatment through 2009.

Sec. 203. 20 percent employment credit for all empowerment zones

Sec. 204. Increased expensing under section 179.

Sec. 205. Higher limits on tax-exempt empowerment zone facility bonds.

Sec. 206. Nonrecognition of gain on rollover of empowerment zone investments.

Sec. 207. Increased exclusion of gain on sale of empowerment zone stock.

TITLE III—NEW MARKETS TAX CREDIT

Sec. 301. New markets tax credit.

TITLE IV—IMPROVEMENTS IN LOW-INCOME HOUSING CREDIT

Sec. 401. Modification of State ceiling on low-income housing credit.

Sec. 402. Modification of criteria for allocating housing credits among projects.

Sec. 403. Additional responsibilities of housing credit agencies.
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Sec. 404. Modifications to rules relating to basis of building which is eligible

for credit.

Sec. 405. Other modifications.

Sec. 406. Carryforward rules.

Sec. 407. Effective date.

TITLE V—PRIVATE ACTIVITY BOND VOLUME CAP

Sec. 501. Acceleration of phase-in of increase in volume cap on private activity

bonds.

TITLE VI—AMERICA’S PRIVATE INVESTMENT COMPANIES

Sec. 601. Short title.

Sec. 602. Findings and purposes.

Sec. 603. Definitions.

Sec. 604. Authorization.

Sec. 605. Selection of APICs.

Sec. 606. Operations of APICs.

Sec. 607. Credit enhancement by the Federal Government.

Sec. 608. APIC requests for guarantee actions.

Sec. 609. Examination and monitoring of APICs.

Sec. 610. Penalties.

Sec. 611. Effective date.

Sec. 612. Sunset.

TITLE VII—OTHER COMMUNITY RENEWAL AND NEW MARKETS

ASSISTANCE

Sec. 701. Transfer of unoccupied and substandard HUD-held housing to local

governments and community development corporations.

Sec. 702. Transfer of HUD assets in revitalization areas.

Sec. 703. Risk-sharing demonstration.

Sec. 704. Prevention and treatment of substance abuse; services provided

through religious organizations.

Sec. 705. New markets venture capital program.

Sec. 706. BusinessLINC grants and cooperative agreements.

1 TITLE I—TAX INCENTIVES FOR

2 RENEWAL COMMUNITIES

3 SEC. 101. DESIGNATION OF AND TAX INCENTIVES FOR RE4 NEWAL COMMUNITIES.

5 (a) IN GENERAL.—Chapter 1 is amended by adding

6 at the end the following new subchapter:

7 ‘‘Subchapter X—Renewal Communities

‘‘Part I. Designation.
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‘‘Part II. Renewal community capital gain; renewal community

business.

‘‘Part III. Additional incentives.

1 ‘‘PART I—DESIGNATION

‘‘Sec. 1400E. Designation of renewal communities.

2 ‘‘SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.

3 ‘‘(a) DESIGNATION.—

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

5 the term ‘renewal community’ means any area—

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

7 local governments and the State or States in

8 which it is located for designation as a renewal

9 community (hereafter in this section referred to

10 as a ‘nominated area’), and

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

12 Urban Development designates as a renewal

13 community, after consultation with—

14 ‘‘(i) the Secretaries of Agriculture,

15 Commerce, Labor, and the Treasury; the

16 Director of the Office of Management and

17 Budget, and the Administrator of the

18 Small Business Administration, and

19 ‘‘(ii) in the case of an area on an In20 dian reservation, the Secretary of the Inte21 rior.

22 ‘‘(2) NUMBER OF DESIGNATIONS.—
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1 ‘‘(A) IN GENERAL.—The Secretary of

2 Housing and Urban Development may des3 ignate not more than 40 nominated areas as re4 newal communities.

5 ‘‘(B) MINIMUM DESIGNATION IN RURAL

6 AREAS.—Of the areas designated under para7 graph (1), at least eight must be areas—

8 ‘‘(i) which are within a local govern9 ment jurisdiction or jurisdictions with a

10 population of less than 50,000,

11 ‘‘(ii) which are outside of a metropoli12 tan statistical area (within the meaning of

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

14 ‘‘(iii) which are determined by the

15 Secretary of Housing and Urban Develop16 ment, after consultation with the Secretary

17 of Commerce, to be rural areas.

18 ‘‘(3) AREAS DESIGNATED BASED ON DEGREE

19 OF POVERTY, ETC.—

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

21 provided in this section, the nominated areas

22 designated as renewal communities under this

23 subsection shall be those nominated areas with

24 the highest average ranking with respect to the

25 criteria described in subparagraphs (B), (C),
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1 and (D) of subsection (c)(3). For purposes of

2 the preceding sentence, an area shall be ranked

3 within each such criterion on the basis of the

4 amount by which the area exceeds such cri5 terion, with the area which exceeds such cri6 terion by the greatest amount given the highest

7 ranking.

8 ‘‘(B) EXCEPTION WHERE INADEQUATE

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

10 designated under subparagraph (A) if the Sec11 retary of Housing and Urban Development de12 termines that the course of action described in

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

14 inadequate.

15 ‘‘(4) LIMITATION ON DESIGNATIONS.—

16 ‘‘(A) PUBLICATION OF REGULATIONS.—

17 The Secretary of Housing and Urban Develop18 ment shall prescribe by regulation no later than

19 4 months after the date of the enactment of

20 this section, after consultation with the officials

21 described in paragraph (1)(B)—

22 ‘‘(i) the procedures for nominating an

23 area under paragraph (1)(A),
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1 ‘‘(ii) the parameters relating to the

2 size and population characteristics of a re3 newal community, and

4 ‘‘(iii) the manner in which nominated

5 areas will be evaluated based on the cri6 teria specified in subsection (d).

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

8 of Housing and Urban Development may des9 ignate nominated areas as renewal communities

10 only during the 24-month period beginning on

11 the first day of the first month following the

12 month in which the regulations described in

13 subparagraph (A) are prescribed.

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

15 of Housing and Urban Development shall not

16 make any designation of a nominated area as a

17 renewal community under paragraph (2)

18 unless—

19 ‘‘(i) the local governments and the

20 States in which the nominated area is lo21 cated have the authority—

22 ‘‘(I) to nominate such area for

23 designation as a renewal community,
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1 ‘‘(II) to make the State and local

2 commitments described in subsection

3 (d), and

4 ‘‘(III) to provide assurances sat5 isfactory to the Secretary of Housing

6 and Urban Development that such

7 commitments will be fulfilled,

8 ‘‘(ii) a nomination regarding such

9 area is submitted in such a manner and in

10 such form, and contains such information,

11 as the Secretary of Housing and Urban

12 Development shall by regulation prescribe,

13 and

14 ‘‘(iii) the Secretary of Housing and

15 Urban Development determines that any

16 information furnished is reasonably accu17 rate.

18 ‘‘(5) NOMINATION PROCESS FOR INDIAN RES19 ERVATIONS.—For purposes of this subchapter, in

20 the case of a nominated area on an Indian reserva21 tion, the reservation governing body (as determined

22 by the Secretary of the Interior) shall be treated as

23 being both the State and local governments with re24 spect to such area.
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1 ‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF2 FECT.—

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

4 as a renewal community shall remain in effect dur5 ing the period beginning on July 1, 2001, and end6 ing on the earliest of—

7 ‘‘(A) December 31, 2009,

8 ‘‘(B) the termination date designated by

9 the State and local governments in their nomi10 nation, or

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

12 and Urban Development revokes such designa13 tion.

14 ‘‘(2) REVOCATION OF DESIGNATION.—The Sec15 retary of Housing and Urban Development may re16 voke the designation under this section of an area if

17 such Secretary determines that the local government

18 or the State in which the area is located—

19 ‘‘(A) has modified the boundaries of the

20 area, or

21 ‘‘(B) is not complying substantially with,

22 or fails to make progress in achieving, the State

23 or local commitments, respectively, described in

24 subsection (d).
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1 ‘‘(3) EARLIER TERMINATION OF CERTAIN BEN2 EFITS IF EARLIER TERMINATION OF DESIGNA3 TION.—If the designation of an area as a renewal

4 community terminates before December 31, 2009—

5 ‘‘(A) the date of such termination shall be

6 substituted for ‘December 31, 2009’ in section

7 198(h) with respect to such area, and

8 ‘‘(B) the day after the date of such termi9 nation shall be substituted for ‘January 1,

10 2010’ each place it appears in sections 1400F

11 and 1400J with respect to such area.

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

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

14 and Urban Development may designate a nominated

15 area as a renewal community under subsection (a)

16 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 one or more local governments,

22 ‘‘(B) the boundary of the area is contin23 uous, and

24 ‘‘(C) the area—
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1 ‘‘(i) has a population of not more than

2 200,000 and at least—

3 ‘‘(I) 4,000 if any portion of such

4 area (other than a rural area de5 scribed in subsection (a)(2)(B)(i)) is

6 located within a metropolitan statis7 tical area (within the meaning of sec8 tion 143(k)(2)(B)) which has a popu9 lation of 50,000 or greater, or

10 ‘‘(II) 1,000 in any other case, or

11 ‘‘(ii) is entirely within an Indian res12 ervation (as determined by the Secretary of

13 the Interior).

14 ‘‘(3) ELIGIBILITY REQUIREMENTS.—A nomi15 nated area meets the requirements of this paragraph

16 if the State and the local governments in which it

17 is located certify in writing (and the Secretary of

18 Housing and Urban Development, after such review

19 of supporting data as he deems appropriate, accepts

20 such certification) that—

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

22 unemployment, and general distress;

23 ‘‘(B) the unemployment rate in the area,

24 as determined by the most recent available

data, was at least 11 25 ⁄2 times the national unem-
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1 ployment rate for the period to which such data

2 relate;

3 ‘‘(C) the poverty rate for each population

4 census tract within the nominated area is at

5 least 20 percent; and

6 ‘‘(D) in the case of an urban area, at least

7 70 percent of the households living in the area

8 have incomes below 80 percent of the median

9 income of households within the jurisdiction of

10 the local government (determined in the same

11 manner as under section 119(b)(2) of the

12 Housing and Community Development Act of

13 1974).

14 ‘‘(4) CONSIDERATION OF HIGH INCIDENCE OF

15 CRIME.—The Secretary of Housing and Urban De16 velopment shall take into account, in selecting nomi17 nated areas for designation as renewal communities

18 under this section, the extent to which such areas

19 have a high incidence of crime.

20 ‘‘(5) CONSIDERATION OF COMMUNITIES IDENTI21 FIED IN GAO STUDY.—The Secretary of Housing

22 and Urban Development shall take into account, in

23 selecting nominated areas for designation as renewal

24 communities under this section, if the area has cen25 sus tracts identified in the May 12, 1998, report of
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1 the General Accounting Office regarding the identi2 fication of economically distressed areas.

3 ‘‘(d) REQUIRED STATE AND LOCAL COMMIT4 MENTS.—

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

6 and Urban Development may designate any nomi7 nated area as a renewal community under subsection

8 (a) only if—

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

10 which the area is located agree in writing that,

11 during any period during which the area is a

12 renewal community, such governments will fol13 low a specified course of action which meets the

14 requirements of paragraph (2) and is designed

15 to reduce the various burdens borne by employ16 ers or employees in such area, and

17 ‘‘(B) the economic growth promotion re18 quirements of paragraph (3) are met.

19 ‘‘(2) COURSE OF ACTION.—

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

21 meets the requirements of this paragraph if

22 such course of action is a written document,

23 signed by a State (or local government) and

24 neighborhood organizations, which evidences a

25 partnership between such State or government
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1 and community-based organizations and which

2 commits each signatory to specific and measur3 able goals, actions, and timetables. Such course

4 of action shall include at least four of the fol5 lowing:

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

7 applying within the renewal community.

8 ‘‘(ii) An increase in the level of effi9 ciency of local services within the renewal

10 community.

11 ‘‘(iii) Crime reduction strategies, such

12 as crime prevention (including the provi13 sion of crime prevention services by non14 governmental entities).

15 ‘‘(iv) Actions to reduce, remove, sim16 plify, or streamline governmental require17 ments applying within the renewal commu18 nity.

19 ‘‘(v) Involvement in the program by

20 private entities, organizations, neighbor21 hood organizations, and community

22 groups, particularly those in the renewal

23 community, including a commitment from

24 such private entities to provide jobs and

25 job training for, and technical, financial, or
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1 other assistance to, employers, employees,

2 and residents from the renewal community.

3 ‘‘(vi) The gift (or sale at below fair

4 market value) of surplus real property

5 (such as land, homes, and commercial or

6 industrial structures) in the renewal com7 munity to neighborhood organizations,

8 community development corporations, or

9 private companies.

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

11 For purposes of this section, in evaluating the

12 course of action agreed to by any State or local

13 government, the Secretary of Housing and

14 Urban Development shall take into account the

15 past efforts of such State or local government

16 in reducing the various burdens borne by em17 ployers and employees in the area involved.

18 ‘‘(3) ECONOMIC GROWTH PROMOTION REQUIRE19 MENTS.—The economic growth promotion require20 ments of this paragraph are met with respect to a

21 nominated area if the local government and the

22 State in which such area is located certify in writing

23 that such government and State (respectively) have

24 repealed or reduced, will not enforce, or will reduce
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1 within the nominated area at least four of the fol2 lowing:

3 ‘‘(A) Licensing requirements for occupa4 tions that do not ordinarily require a profes5 sional degree.

6 ‘‘(B) Zoning restrictions on home-based

7 businesses which do not create a public nui8 sance.

9 ‘‘(C) Permit requirements for street ven10 dors who do not create a public nuisance.

11 ‘‘(D) Zoning or other restrictions that im12 pede the formation of schools or child care cen13 ters.

14 ‘‘(E) Franchises or other restrictions on

15 competition for businesses providing public

16 services, including taxicabs, jitneys, cable tele17 vision, or trash hauling.

18 This paragraph shall not apply to the extent that

19 such regulation of businesses and occupations is nec20 essary for and well-tailored to the protection of

21 health and safety.

22 ‘‘(e) COORDINATION WITH TREATMENT OF EM23 POWERMENT ZONES AND ENTERPRISE COMMUNITIES.—

24 For purposes of this title, the designation under section

25 1391 of any area as an empowerment zone or enterprise
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1 community shall cease to be in effect as of the date that

2 the designation of any portion of such area as a renewal

3 community takes effect.

4 ‘‘(f ) DEFINITIONS AND SPECIAL RULES.—For pur5 poses of this subchapter—

6 ‘‘(1) GOVERNMENTS.—If more than one govern7 ment seeks to nominate an area as a renewal com8 munity, any reference to, or requirement of, this sec9 tion shall apply to all such governments.

10 ‘‘(2) LOCAL GOVERNMENT.—The term ‘local

11 government’ means—

12 ‘‘(A) any county, city, town, township, par13 ish, village, or other general purpose political

14 subdivision of a State, and

15 ‘‘(B) any combination of political subdivi16 sions described in subparagraph (A) recognized

17 by the Secretary of Housing and Urban Devel18 opment.

19 ‘‘(3) APPLICATION OF RULES RELATING TO

20 CENSUS TRACTS.—The rules of section 1392(b)(4)

21 shall apply.

22 ‘‘(4) CENSUS DATA.—Population and poverty

23 rate shall be determined by using 1990 census data.

24 ‘‘(g) PRIORITY FOR DISTRICT OF COLUMBIA NOMI25 NATED AREA.—For purposes of this subchapter—
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1 ‘‘(1) IN GENERAL.—Any nominated area within

2 the District of Columbia shall be treated for pur3 poses of subsection (a)(3) as having the highest av4 erage with respect to the criteria described in sub5 paragraphs (B), (C), and (D) of subsection (c)(3).

6 ‘‘(2) DATE OF DESIGNATION.—Notwithstanding

7 subsection (b)(1), the designation of a nominated

8 area within the District of Columbia as a renewal

9 community shall take effect on January 1, 2003.

10 ‘‘(3) NOMINATION.—The District of Columbia

11 shall be treated as being both a State and local gov12 ernment with respect to such area.

13 ‘‘PART II—RENEWAL COMMUNITY CAPITAL GAIN;

14 RENEWAL COMMUNITY BUSINESS

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

‘‘Sec. 1400G. Renewal community business defined.

15 ‘‘SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.

16 ‘‘(a) GENERAL RULE.—Gross income does not in17 clude any qualified capital gain from the sale or exchange

18 of a qualified community asset held for more than 5 years.

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

20 of this section—

21 ‘‘(1) IN GENERAL.—The term ‘qualified com22 munity asset’ means—

23 ‘‘(A) any qualified community stock,
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1 ‘‘(B) any qualified community partnership

2 interest, and

3 ‘‘(C) any qualified community business

4 property.

5 ‘‘(2) QUALIFIED COMMUNITY STOCK.—

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

7 subparagraph (B), the term ‘qualified commu8 nity stock’ means any stock in a domestic cor9 poration if—

10 ‘‘(i) such stock is acquired by the tax11 payer after June 30, 2001, and before

12 January 1, 2010, at its original issue (di13 rectly or through an underwriter) from the

14 corporation solely in exchange for cash,

15 ‘‘(ii) as of the time such stock was

16 issued, such corporation was a renewal

17 community business (or, in the case of a

18 new corporation, such corporation was

19 being organized for purposes of being a re20 newal community business), and

21 ‘‘(iii) during substantially all of the

22 taxpayer’s holding period for such stock,

23 such corporation qualified as a renewal

24 community business.
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1 ‘‘(B) REDEMPTIONS.—A rule similar to

2 the rule of section 1202(c)(3) shall apply for

3 purposes of this paragraph.

4 ‘‘(3) QUALIFIED COMMUNITY PARTNERSHIP IN5 TEREST.—The term ‘qualified community partner6 ship interest’ means any capital or profits interest in

7 a domestic partnership if—

8 ‘‘(A) such interest is acquired by the tax9 payer after June 30, 2001, and before January

10 1, 2010, from the partnership solely in ex11 change for cash,

12 ‘‘(B) as of the time such interest was ac13 quired, such partnership was a renewal commu14 nity business (or, in the case of a new partner15 ship, such partnership was being organized for

16 purposes of being a renewal community busi17 ness), and

18 ‘‘(C) during substantially all of the

19 taxpayer’s holding period for such interest,

20 such partnership qualified as a renewal commu21 nity business.

22 A rule similar to the rule of paragraph (2)(B) shall

23 apply for purposes of this paragraph.

24 ‘‘(4) QUALIFIED COMMUNITY BUSINESS PROP25 ERTY.—
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1 ‘‘(A) IN GENERAL.—The term ‘qualified

2 community business property’ means tangible

3 property if—

4 ‘‘(i) such property was acquired by

5 the taxpayer by purchase (as defined in

6 section 179(d)(2)) after June 30, 2001,

7 and before January 1, 2010,

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

9 in the renewal community commences with

10 the taxpayer, and

11 ‘‘(iii) during substantially all of the

12 taxpayer’s holding period for such prop13 erty, substantially all of the use of such

14 property was in a renewal community busi15 ness of the taxpayer.

16 ‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM17 PROVEMENTS.—The requirements of clauses (i)

18 and (ii) of subparagraph (A) shall be treated as

19 satisfied with respect to—

20 ‘‘(i) property which is substantially

21 improved by the taxpayer before January

22 1, 2010, and

23 ‘‘(ii) any land on which such property

24 is located.
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1 The determination of whether a property is sub2 stantially improved shall be made under clause

3 (ii) of section 1400B(b)(4)(B), except that

4 ‘June 30, 2001’ shall be substituted for ‘De5 cember 31, 1997’ in such clause.

6 ‘‘(c) QUALIFIED CAPITAL GAIN.—For purposes of

7 this section—

8 ‘‘(1) IN GENERAL.—Except as otherwise pro9 vided in this subsection, the term ‘qualified capital

10 gain‘ means any gain recognized on the sale or ex11 change of—

12 ‘‘(A) a capital asset, or

13 ‘‘(B) property used in the trade or busi14 ness (as defined in section 1231(b)).

15 ‘‘(2) GAIN BEFORE JULY 1, 2001, OR AFTER 2014

16 NOT QUALIFIED.—The term ‘qualified capital gain’

17 shall not include any gain attributable to periods be18 fore July 1, 2001, or after December 31, 2014.

19 ‘‘(3) CERTAIN RULES TO APPLY.—Rules similar

20 to the rules of paragraphs (3), (4), and (5) of sec21 tion 1400B(e) shall apply for purposes of this sub22 section.

23 ‘‘(d) CERTAIN RULES TO APPLY.—For purposes of

24 this section, rules similar to the rules of paragraphs (5),

25 (6), and (7) of subsection (b), and subsections (f ) and
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1 (g), of section 1400B shall apply; except that for such pur2 poses section 1400B(g)(2) shall be applied by substituting

3 ‘July 1, 2001’ for ‘January 1, 1998’ and ‘December 31,

4 2014’ for ‘December 31, 2007’.

5 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

6 such regulations as may be appropriate to carry out the

7 purposes of this section, including regulations to prevent

8 the avoidance of the purposes of this section.

9 ‘‘SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.

10 ‘‘For purposes of this subchapter, the term ‘renewal

11 community business’ means any entity or proprietorship

12 which would be a qualified business entity or qualified pro13 prietorship under section 1397C if references to renewal

14 communities were substituted for references to empower15 ment zones in such section.

16 ‘‘PART III—ADDITIONAL INCENTIVES

‘‘Sec. 1400H. Renewal community employment credit.

‘‘Sec. 1400I. Commercial revitalization deduction.

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

17 ‘‘SEC. 1400H. RENEWAL COMMUNITY EMPLOYMENT CREDIT.

18 ‘‘(a) IN GENERAL.—Subject to the modification in

19 subsection (b), a renewal community shall be treated as

20 an empowerment zone for purposes of section 1396 with

21 respect to wages paid or incurred after June 30, 2001.

22 ‘‘(b) MODIFICATION.—In applying section 1396 with

23 respect to renewal communities—
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1 ‘‘(1) the applicable percentage shall be 15 per2 cent, and

3 ‘‘(2) subsection (c) thereof shall be applied by

4 substituting ‘$10,000’ for ‘$15,000’ each place it ap5 pears.

6 ‘‘SEC. 1400I. COMMERCIAL REVITALIZATION DEDUCTION.

7 ‘‘(a) GENERAL RULE.—At the election of the tax8 payer, either—

9 ‘‘(1) one-half of any qualified revitalization ex10 penditures chargeable to capital account with respect

11 to any qualified revitalization building shall be allow12 able as a deduction for the taxable year in which the

13 building is placed in service, or

14 ‘‘(2) a deduction for all such expenditures shall

15 be allowable ratably over the 120-month period be16 ginning with the month in which the building is

17 placed in service.

18 ‘‘(b) QUALIFIED REVITALIZATION BUILDINGS AND

19 EXPENDITURES.—For purposes of this section—

20 ‘‘(1) QUALIFIED REVITALIZATION BUILDING.—

21 The term ‘qualified revitalization building’ means

22 any building (and its structural components) if—

23 ‘‘(A) the building is placed in service by

24 the taxpayer in a renewal community and the
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1 original use of the building begins with the tax2 payer, or

3 ‘‘(B) in the case of such building not de4 scribed in subparagraph (A), such building—

5 ‘‘(i) is substantially rehabilitated

6 (within the meaning of section

7 47(c)(1)(C)) by the taxpayer, and

8 ‘‘(ii) is placed in service by the tax9 payer after the rehabilitation in a renewal

10 community.

11 ‘‘(2) QUALIFIED REVITALIZATION EXPENDI12 TURE.—

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

14 revitalization expenditure’ means any amount

15 properly chargeable to capital account for prop16 erty for which depreciation is allowable under

17 section 168 (without regard to this section) and

18 which is—

19 ‘‘(i) nonresidential real property (as

20 defined in section 168(e)), or

21 ‘‘(ii) section 1250 property (as defined

22 in section 1250(c)) which is functionally

23 related and subordinate to property de24 scribed in clause (i).
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1 ‘‘(B) CERTAIN EXPENDITURES NOT IN2 CLUDED.—

3 ‘‘(i) ACQUISITION COST.—In the case

4 of a building described in paragraph

5 (1)(B), the cost of acquiring the building

6 or interest therein shall be treated as a

7 qualified revitalization expenditure only to

8 the extent that such cost does not exceed

9 30 percent of the aggregate qualified revi10 talization expenditures (determined with11 out regard to such cost) with respect to

12 such building.

13 ‘‘(ii) CREDITS.—The term ‘qualified

14 revitalization expenditure’ does not include

15 any expenditure which the taxpayer may

16 take into account in computing any credit

17 allowable under this title unless the tax18 payer elects to take the expenditure into

19 account only for purposes of this section.

20 ‘‘(c) DOLLAR LIMITATION.—The aggregate amount

21 which may be treated as qualified revitalization expendi22 tures with respect to any qualified revitalization building

23 shall not exceed the lesser of—

24 ‘‘(1) $10,000,000, or
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1 ‘‘(2) the commercial revitalization expenditure

2 amount allocated to such building under this section

3 by the commercial revitalization agency for the State

4 in which the building is located.

5 ‘‘(d) COMMERCIAL REVITALIZATION EXPENDITURE

6 AMOUNT.—

7 ‘‘(1) IN GENERAL.—The aggregate commercial

8 revitalization expenditure amount which a commer9 cial revitalization agency may allocate for any cal10 endar year is the amount of the State commercial

11 revitalization expenditure ceiling determined under

12 this paragraph for such calendar year for such agen13 cy.

14 ‘‘(2) STATE COMMERCIAL REVITALIZATION EX15 PENDITURE CEILING.—The State commercial revi16 talization expenditure ceiling applicable to any

17 State—

18 ‘‘(A) for the period after June 30, 2001,

19 and before January 1, 2002, is $6,000,000 for

20 each renewal community in the State,

21 ‘‘(B) for each calendar year after 2001

22 and before 2010 is $12,000,000 for each re23 newal community in the State, and

24 ‘‘(C) for each calendar year thereafter is

25 zero.
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1 ‘‘(3) COMMERCIAL REVITALIZATION AGENCY.—

2 For purposes of this section, the term ‘commercial

3 revitalization agency’ means any agency authorized

4 by a State to carry out this section.

5 ‘‘(4) TIME AND MANNER OF ALLOCATIONS.—

6 Allocations under this section shall be made at the

7 same time and in the same manner as under para8 graphs (1) and (7) of section 42(h).

9 ‘‘(e) RESPONSIBILITIES OF COMMERCIAL REVITAL10 IZATION AGENCIES.—

11 ‘‘(1) PLANS FOR ALLOCATION.—Notwith12 standing any other provision of this section, the

13 commercial revitalization expenditure amount with

14 respect to any building shall be zero unless—

15 ‘‘(A) such amount was allocated pursuant

16 to a qualified allocation plan of the commercial

17 revitalization agency which is approved (in ac18 cordance with rules similar to the rules of sec19 tion 147(f )(2) (other than subparagraph (B)(ii)

20 thereof)) by the governmental unit of which

21 such agency is a part; and

22 ‘‘(B) such agency notifies the chief execu23 tive officer (or its equivalent) of the local juris24 diction within which the building is located of

25 such allocation and provides such individual a
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1 reasonable opportunity to comment on the allo2 cation.

3 ‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur4 poses of this subsection, the term ‘qualified alloca5 tion plan’ means any plan—

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

7 be used to determine priorities of the commer8 cial revitalization agency which are appropriate

9 to local conditions,

10 ‘‘(B) which considers—

11 ‘‘(i) the degree to which a project con12 tributes to the implementation of a stra13 tegic plan that is devised for a renewal

14 community through a citizen participation

15 process,

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

17 permanent, full-time employment by reason

18 of any project, and

19 ‘‘(iii) the active involvement of resi20 dents and nonprofit groups within the re21 newal community, and

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

23 agency (or its agent) will follow in monitoring

24 compliance with this section.

25 ‘‘(f) SPECIAL RULES.—
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1 ‘‘(1) DEDUCTION IN LIEU OF DEPRECIATION.—

2 The deduction provided by this section for qualified

3 revitalization expenditures shall—

4 ‘‘(A) with respect to the deduction deter5 mined under subsection (a)(1), be in lieu of any

6 depreciation deduction otherwise allowable on

7 account of one-half of such expenditures, and

8 ‘‘(B) with respect to the deduction deter9 mined under subsection (a)(2), be in lieu of any

10 depreciation deduction otherwise allowable on

11 account of all of such expenditures.

12 ‘‘(2) BASIS ADJUSTMENT, ETC.—For purposes

13 of sections 1016 and 1250, the deduction under this

14 section shall be treated in the same manner as a de15 preciation deduction. For purposes of section

16 1250(b)(5), the straight line method of adjustment

17 shall be determined without regard to this section.

18 ‘‘(3) SUBSTANTIAL REHABILITATIONS TREATED

19 AS SEPARATE BUILDINGS.—A substantial rehabilita20 tion (within the meaning of section 47(c)(1)(C)) of

21 a building shall be treated as a separate building for

22 purposes of subsection (a).

23 ‘‘(4) CLARIFICATION OF ALLOWANCE OF DE24 DUCTION UNDER MINIMUM TAX.—Notwithstanding

25 section 56(a)(1), the deduction under this section
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1 shall be allowed in determining alternative minimum

2 taxable income under section 55.

3 ‘‘(g) REGULATIONS.—For purposes of this section,

4 the Secretary shall, by regulations, provide for the applica5 tion of rules similar to the rules of section 49 and sub6 sections (a) and (b) of section 50.

7 ‘‘(h) TERMINATION.—This section shall not apply to

8 any building placed in service after December 31, 2009.

9 ‘‘SEC. 1400J. INCREASE IN EXPENSING UNDER SECTION 179.

10 ‘‘(a) IN GENERAL.—For purposes of section

11 1397A—

12 ‘‘(1) a renewal community shall be treated as

13 an empowerment zone,

14 ‘‘(2) a renewal community business shall be

15 treated as an empowerment zone business, and

16 ‘‘(3) qualified renewal property shall be treated

17 as enterprise zone property.

18 ‘‘(b) QUALIFIED RENEWAL PROPERTY.—For pur19 poses of this section—

20 ‘‘(1) IN GENERAL.—The term ‘qualified renewal

21 property’ means any property to which section 168

22 applies (or would apply but for section 179) if—

23 ‘‘(A) such property was acquired by the

24 taxpayer by purchase (as defined in section
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1 179(d)(2)) after June 30, 2001, and before

2 January 1, 2010, and

3 ‘‘(B) such property would be qualified zone

4 property (as defined in section 1397D) if ref5 erences to renewal communities were sub6 stituted for references to empowerment zones in

7 section 1397D.

8 ‘‘(2) CERTAIN RULES TO APPLY.—The rules of

9 subsections (a)(2) and (b) of section 1397D shall

10 apply for purposes of this section.’’.

11 (b) EXCEPTION FOR COMMERCIAL REVITALIZATION

12 DEDUCTION FROM PASSIVE LOSS RULES.—

13 (1) Paragraph (3) of section 469(i) is amended

14 by redesignating subparagraphs (C), (D), and (E) as

15 subparagraphs (D), (E), and (F), respectively, and

16 by inserting after subparagraph (B) the following

17 new subparagraph:

18 ‘‘(C) EXCEPTION FOR COMMERCIAL REVI19 TALIZATION DEDUCTION.—Subparagraph (A)

20 shall not apply to any portion of the passive ac21 tivity loss for any taxable year which is attrib22 utable to the commercial revitalization deduc23 tion under section 1400I.’’.
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1 (2) Subparagraph (E) of section 469(i)(3), as

2 redesignated by subparagraph (A), is amended to

3 read as follows:

4 ‘‘(E) ORDERING RULES TO REFLECT EX5 CEPTIONS AND SEPARATE PHASE-OUTS.—If

6 subparagraph (B), (C), or (D) applies for a tax7 able year, paragraph (1) shall be applied—

8 ‘‘(i) first to the portion of the passive

9 activity loss to which subparagraph (C)

10 does not apply,

11 ‘‘(ii) second to the portion of the pas12 sive activity credit to which subparagraph

13 (B) or (D) does not apply,

14 ‘‘(iii) third to the portion of such

15 credit to which subparagraph (B) applies,

16 ‘‘(iv) fourth to the portion of such loss

17 to which subparagraph (C) applies, and

18 ‘‘(v) then to the portion of such credit

19 to which subparagraph (D) applies.’’.

20 (3)(A) Subparagraph (B) of section 469(i)(6) is

21 amended by striking ‘‘or’’ at the end of clause (i),

22 by striking the period at the end of clause (ii) and

23 inserting ‘‘, or’’, and by adding at the end the fol24 lowing new clause:
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1 ‘‘(iii) any deduction under section

2 1400I (relating to commercial revitaliza3 tion deduction).’’.

4 (B) The heading for such subparagraph (B) is

5 amended by striking ‘‘OR REHABILITATION CREDIT’’

6 and inserting ‘‘, REHABILITATION CREDIT, OR COM7 MERCIAL REVITALIZATION DEDUCTION’’.

8 (c) CLERICAL AMENDMENT.—The table of sub9 chapters for chapter 1 is amended by adding at the end

10 the following new item:

‘‘Subchapter X. Renewal Communities.’’.

11 SEC. 102. EXTENSION OF EXPENSING OF ENVIRONMENTAL

12 REMEDIATION COSTS TO RENEWAL COMMU13 NITIES; EXTENSION OF TERMINATION DATE

14 FOR RENEWAL COMMUNITIES AND EM15 POWERMENT ZONES.

16 (a) EXTENSION.—

17 (1) IN GENERAL.—Subparagraph (A) of section

18 198(c)(2) (defining targeted area) is amended by

19 striking ‘‘and’’ at the end of clause (iii), by striking

20 the period at the end of clause (iv) and inserting ‘‘,

21 and’’, and by adding at the end the following new

22 clause:

23 ‘‘(v) any renewal community (as de24 fined in section 1400E).’’.
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1 (2) EFFECTIVE DATE.—The amendment made

2 by paragraph (1) shall apply to expenditures paid or

3 incurred after June 30, 2001.

4 (b) EXTENSION OF TERMINATION DATE.—Sub5 section (h) of section 198 is amended by inserting before

6 the period ‘‘(December 31, 2009, in the case of an em7 powerment zone or renewal community)’’.

8 SEC. 103. WORK OPPORTUNITY CREDIT FOR HIRING YOUTH

9 RESIDING IN RENEWAL COMMUNITIES.

10 (a) HIGH-RISK YOUTH.—Subparagraphs (A)(ii) and

11 (B) of section 51(d)(5) are each amended by striking ‘‘em12 powerment zone or enterprise community’’ and inserting

13 ‘‘empowerment zone, enterprise community, or renewal

14 community’’.

15 (b) QUALIFIED SUMMER YOUTH EMPLOYEE.—

16 Clause (iv) of section 51(d)(7)(A) is amended by striking

17 ‘‘empowerment zone or enterprise community’’ and insert18 ing ‘‘empowerment zone, enterprise community, or re19 newal community’’.

20 (c) HEADINGS.—Paragraphs (5)(B) and (7)(C) of

21 section 51(d) are each amended by inserting ‘‘OR COMMU22 NITY’’ in the heading after ‘‘ZONE’’.

23 (d) EFFECTIVE DATE.—The amendments made by

24 this section shall apply to individuals who begin work for

25 the employer after June 30, 2001.
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1 TITLE II—EXTENSION AND EX2 PANSION OF EMPOWERMENT

3 ZONE INCENTIVES

4 SEC. 201. AUTHORITY TO DESIGNATE NINE ADDITIONAL

5 EMPOWERMENT ZONES.

6 Section 1391 is amended by adding at the end the

7 following new subsection:

8 ‘‘(h) ADDITIONAL DESIGNATIONS PERMITTED.—

9 ‘‘(1) IN GENERAL.—In addition to the areas

10 designated under subsections (a) and (g), the appro11 priate Secretaries may designate in the aggregate an

12 additional nine nominated areas as empowerment

13 zones under this section, subject to the availability

14 of eligible nominated areas. Of that number, not

15 more than seven may be designated in urban areas

16 and not more than two may be designated in rural

17 areas.

18 ‘‘(2) PERIOD DESIGNATIONS MAY BE MADE AND

19 TAKE EFFECT.—A designation may be made under

20 this subsection after the date of the enactment of

21 this subsection and before January 1, 2002. Subject

22 to subparagraphs (B) and (C) of subsection (d)(1),

23 such designations shall remain in effect during the

24 period beginning on January 1, 2002, and ending on

25 December 31, 2009.
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1 ‘‘(3) MODIFICATIONS TO ELIGIBILITY CRITERIA,

2 ETC.—The rules of subsection (g)(3) shall apply to

3 designations under this subsection.’’.

4 SEC. 202. EXTENSION OF ENTERPRISE ZONE TREATMENT

5 THROUGH 2009.

6 Subparagraph (A) of section 1391(d)(1) (relating to

7 period for which designation is in effect) is amended to

8 read as follows:

9 ‘‘(A) December 31, 2009,’’.

10 SEC. 203. 20 PERCENT EMPLOYMENT CREDIT FOR ALL EM11 POWERMENT ZONES

12 (a) 20 PERCENT CREDIT.—Subsection (b) of section

13 1396 (relating to empowerment zone employment credit)

14 is amended to read as follows:

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

16 this section, the applicable percentage is 20 percent.’’.

17 (b) ALL EMPOWERMENT ZONES ELIGIBLE FOR

18 CREDIT.—Section 1396 is amended by striking subsection

19 (e).

20 (c) CONFORMING AMENDMENT.—Subsection (d) of

21 section 1400 is amended to read as follows:

22 ‘‘(d) SPECIAL RULE FOR APPLICATION OF EMPLOY23 MENT CREDIT.—With respect to the DC Zone, section

24 1396(d)(1)(B) (relating to empowerment zone employ-
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1 ment credit) shall be applied by substituting ‘the District

2 of Columbia’ for ‘such empowerment zone’.’’.

3 (d) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to wages paid or incurred after

5 December 31, 2001.

6 SEC. 204. INCREASED EXPENSING UNDER SECTION 179.

7 (a) IN GENERAL.—Subparagraph (A) of section

8 1397A(a)(1) is amended by striking ‘‘$20,000’’ and in9 serting ‘‘$35,000’’.

10 (b) EXPENSING FOR PROPERTY USED IN DEVELOP11 ABLE SITES.—Section 1397A is amended by striking sub12 section (c).

13 (c) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years beginning after

15 December 31, 2001.

16 SEC. 205. HIGHER LIMITS ON TAX-EXEMPT EMPOWERMENT

17 ZONE FACILITY BONDS.

18 (a) IN GENERAL.—Paragraph (3) of section 1394(f)

19 (relating to bonds for empowerment zones designated

20 under section 1391(g)) is amended to read as follows:

21 ‘‘(3) EMPOWERMENT ZONE FACILITY BOND.—

22 For purposes of this subsection, the term ‘empower23 ment zone facility bond’ means any bond which

24 would be described in subsection (a) if—
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1 ‘‘(A) in the case of obligations issued be2 fore January 1, 2002, only empowerment zones

3 designated under section 1391(g) were taken

4 into account under sections 1397C and 1397D,

5 and

6 ‘‘(B) in the case of obligations issued after

7 December 31, 2001, all empowerment zones

8 (other than the District of Columbia) were

9 taken into account under sections 1397C and

10 1397D.’’.

11 (b) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to obligations issued after Decem13 ber 31, 2001.

14 SEC. 206. NONRECOGNITION OF GAIN ON ROLLOVER OF

15 EMPOWERMENT ZONE INVESTMENTS.

16 (a) IN GENERAL.—Part III of subchapter U of chap17 ter 1 is amended—

18 (1) by redesignating subpart C as subpart D;

19 (2) by redesignating sections 1397B and 1397C

20 as sections 1397C and 1397D, respectively; and

21 (3) by inserting after subpart B the following

22 new subpart:

23 ‘‘Subpart C—Nonrecognition of Gain on Rollover of

24 Empowerment Zone Investments

‘‘Sec. 1397B. Nonrecognition of Gain on Rollover of Empowerment Zone Investments.
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1 ‘‘SEC. 1397B. NONRECOGNITION OF GAIN ON ROLLOVER OF

2 EMPOWERMENT ZONE INVESTMENTS.

3 ‘‘(a) NONRECOGNITION OF GAIN.—In the case of any

4 sale of a qualified empowerment zone asset held by the

5 taxpayer for more than 1 year and with respect to which

6 such taxpayer elects the application of this section, gain

7 from such sale shall be recognized only to the extent that

8 the amount realized on such sale exceeds—

9 ‘‘(1) the cost of any qualified empowerment

10 zone asset (with respect to the same zone as the

11 asset sold) purchased by the taxpayer during the 60-

12 day period beginning on the date of such sale, re13 duced by

14 ‘‘(2) any portion of such cost previously taken

15 into account under this section.

16 ‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur17 poses of this section—

18 ‘‘(1) QUALIFIED EMPOWERMENT ZONE

19 ASSET.—

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

21 empowerment zone asset’ means any property

22 which would be a qualified community asset (as

23 defined in section 1400F) if in section 1400F—

24 ‘‘(i) references to empowerment zones

25 were substituted for references to renewal

26 communities,
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1 ‘‘(ii) references to enterprise zone

2 businesses (as defined in section 1397C)

3 were substituted for references to renewal

4 community businesses, and

5 ‘‘(iii) the date of the enactment of this

6 paragraph were substituted for ‘December

7 31, 2001’ each place it appears.

8 ‘‘(B) TREATMENT OF DC ZONE.—The Dis9 trict of Columbia Enterprise Zone shall not be

10 treated as an empowerment zone for purposes

11 of this section.

12 ‘‘(2) CERTAIN GAIN NOT ELIGIBLE FOR ROLL13 OVER.—This section shall not apply to—

14 ‘‘(A) any gain which is treated as ordinary

15 income for purposes of this subtitle, and

16 ‘‘(B) any gain which is attributable to real

17 property, or an intangible asset, which is not an

18 integral part of an enterprise zone business.

19 ‘‘(3) PURCHASE.—A taxpayer shall be treated

20 as having purchased any property if, but for para21 graph (4), the unadjusted basis of such property in

22 the hands of the taxpayer would be its cost (within

23 the meaning of section 1012).

24 ‘‘(4) BASIS ADJUSTMENTS.—If gain from any

25 sale is not recognized by reason of subsection (a),
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1 such gain shall be applied to reduce (in the order ac2 quired) the basis for determining gain or loss of any

3 qualified empowerment zone asset which is pur4 chased by the taxpayer during the 60-day period de5 scribed in subsection (a). This paragraph shall not

6 apply for purposes of section 1202.

7 ‘‘(5) HOLDING PERIOD.—For purposes of deter8 mining whether the nonrecognition of gain under

9 subsection (a) applies to any qualified empowerment

10 zone asset which is sold—

11 ‘‘(A) the taxpayer’s holding period for such

12 asset and the asset referred to in subsection

13 (a)(1) shall be determined without regard to

14 section 1223, and

15 ‘‘(B) only the first year of the taxpayer’s

16 holding period for the asset referred to in sub17 section (a)(1) shall be taken into account for

18 purposes of paragraphs (2)(A)(iii), (3)(C), and

19 (4)(A)(iii) of section 1400F(b).’’.

20 (b) CONFORMING AMENDMENTS.—

21 (1) Paragraph (23) of section 1016(a) is

22 amended—

23 (A) by striking ‘‘or 1045’’ and inserting

24 ‘‘1045, or 1397B’’; and
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1 (B) by striking ‘‘or 1045(b)(4)’’ and in2 serting ‘‘1045(b)(4), or 1397B(b)(4)’’.

3 (2) Paragraph (15) of section 1223 is amended

4 to read as follows:

5 ‘‘(15) Except for purposes of sections

6 1202(a)(2), 1202(c)(2)(A), 1400B(b), and

7 1400F(b), in determining the period for which the

8 taxpayer has held property the acquisition of which

9 resulted under section 1045 or 1397B in the non10 recognition of any part of the gain realized on the

11 sale of other property, there shall be included the pe12 riod for which such other property has been held as

13 of the date of such sale.’’.

14 (3) Paragraph (2) of section 1394(b) is

15 amended—

16 (A) by striking ‘‘section 1397C’’ and in17 serting ‘‘section 1397D’’; and

18 (B) by striking ‘‘section 1397C(a)(2)’’ and

19 inserting ‘‘section 1397D(a)(2)’’.

20 (4) Paragraph (3) of section 1394(b) is

21 amended—

22 (A) by striking ‘‘section 1397B’’ each place

23 it appears and inserting ‘‘section 1397C’’; and

24 (B) by striking ‘‘section 1397B(d)’’ and in25 serting ‘‘section 1397C(d)’’.
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1 (5) Sections 1400(e) and 1400B(c) are each

2 amended by striking ‘‘section 1397B’’ each place it

3 appears and inserting ‘‘section 1397C’’.

4 (6) The table of subparts for part III of sub5 chapter U of chapter 1 is amended by striking the

6 last item and inserting the following new items:

‘‘Subpart C. Nonrecognition of gain on rollover of empowerment

zone investments.

‘‘Subpart D. General provisions.’’.

7 (7) The table of sections for subpart D of such

8 part III is amended to read as follows:

‘‘Sec. 1397C. Enterprise zone business defined.

‘‘Sec. 1397D. Qualified zone property defined.’’.

9 (c) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to qualified empowerment zone as11 sets acquired after the date of the enactment of this Act.

12 SEC. 207. INCREASED EXCLUSION OF GAIN ON SALE OF EM13 POWERMENT ZONE STOCK.

14 (a) IN GENERAL.—Subsection (a) of section 1202 is

15 amended to read as follows:

16 ‘‘(a) EXCLUSION.—

17 ‘‘(1) IN GENERAL.—In the case of a taxpayer

18 other than a corporation, gross income shall not in19 clude 50 percent of any gain from the sale or ex20 change of qualified small business stock held for

21 more than 5 years.

22 ‘‘(2) EMPOWERMENT ZONE BUSINESSES.—
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1 ‘‘(A) IN GENERAL.—In the case of quali2 fied small business stock acquired after the date

3 of the enactment of this paragraph in a cor4 poration which is a qualified business entity (as

5 defined in section 1397C(b)) during substan6 tially all of the taxpayer’s holding period for

7 such stock, paragraph (1) shall be applied by

8 substituting ‘60 percent’ for ‘50 percent’.

9 ‘‘(B) CERTAIN RULES TO APPLY.—Rules

10 similar to the rules of paragraphs (5) and (7)

11 of section 1400B(b) shall apply for purposes of

12 this paragraph.

13 ‘‘(C) GAIN AFTER 2014 NOT QUALIFIED.—

14 Subparagraph (A) shall not apply to gain at15 tributable to periods after December 31, 2014.

16 ‘‘(D) TREATMENT OF DC ZONE.—The Dis17 trict of Columbia Enterprise Zone shall not be

18 treated as an empowerment zone for purposes

19 of this paragraph.’’.

20 (b) CONFORMING AMENDMENT.—Paragraph (8) of

21 section 1(h) is amended by striking ‘‘means’’ and all that

22 follows and inserting ‘‘means the excess of—

23 ‘‘(A) the gain which would be excluded

24 from gross income under section 1202 but for
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1 the percentage limitation in section 1202(a),

2 over

3 ‘‘(B) the gain excluded from gross income

4 under section 1202.’’.

5 (c) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to stock acquired after the date

7 of the enactment of this Act.

8 TITLE III—NEW MARKETS TAX

9 CREDIT

10 SEC. 301. NEW MARKETS TAX CREDIT.

11 (a) IN GENERAL.—Subpart D of part IV of sub12 chapter A of chapter 1 (relating to business-related cred13 its) is amended by adding at the end the following new

14 section:

15 ‘‘SEC. 45D. NEW MARKETS TAX CREDIT.

16 ‘‘(a) ALLOWANCE OF CREDIT.—

17 ‘‘(1) IN GENERAL.—For purposes of section 38,

18 in the case of a taxpayer who holds a qualified eq19 uity investment on a credit allowance date of such

20 investment which occurs during the taxable year, the

21 new markets tax credit determined under this sec22 tion for such taxable year is an amount equal to the

23 applicable percentage of the amount paid to the

24 qualified community development entity for such in25 vestment at its original issue.
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1 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

2 of paragraph (1), the applicable percentage is—

3 ‘‘(A) 5 percent with respect to the first

4 three credit allowance dates, and

5 ‘‘(B) 6 percent with respect to the remain6 der of the credit allowance dates.

7 ‘‘(3) CREDIT ALLOWANCE DATE.—For purposes

8 of paragraph (1), the term ‘credit allowance date’

9 means, with respect to any qualified equity

10 investment—

11 ‘‘(A) the date on which such investment is

12 initially made, and

13 ‘‘(B) each of the six anniversary dates of

14 such date thereafter.

15 ‘‘(b) QUALIFIED EQUITY INVESTMENT.—For pur16 poses of this section—

17 ‘‘(1) IN GENERAL.—The term ‘qualified equity

18 investment’ means any equity investment in a quali19 fied community development entity if—

20 ‘‘(A) such investment is acquired by the

21 taxpayer at its original issue (directly or

22 through an underwriter) solely in exchange for

23 cash,

24 ‘‘(B) substantially all of such cash is used

25 by the qualified community development entity
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1 to make qualified low-income community invest2 ments, and

3 ‘‘(C) such investment is designated for

4 purposes of this section by the qualified com5 munity development entity.

6 Such term shall not include any equity investment

7 issued by a qualified community development entity

8 more than 5 years after the date that such entity re9 ceives an allocation under subsection (f). Any alloca10 tion not used within such 5-year period may be re11 allocated by the Secretary under subsection (f).

12 ‘‘(2) LIMITATION.—The maximum amount of

13 equity investments issued by a qualified community

14 development entity which may be designated under

15 paragraph (1)(C) by such entity shall not exceed the

16 portion of the limitation amount allocated under

17 subsection (f) to such entity.

18 ‘‘(3) SAFE HARBOR FOR DETERMINING USE OF

19 CASH.—The requirement of paragraph (1)(B) shall

20 be treated as met if at least 85 percent of the aggre21 gate gross assets of the qualified community devel22 opment entity are invested in qualified low-income

23 community investments.

24 ‘‘(4) TREATMENT OF SUBSEQUENT PUR25 CHASERS.—The term ‘qualified equity investment’
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1 includes any equity investment which would (but for

2 paragraph (1)(A)) be a qualified equity investment

3 in the hands of the taxpayer if such investment was

4 a qualified equity investment in the hands of a prior

5 holder.

6 ‘‘(5) REDEMPTIONS.—A rule similar to the rule

7 of section 1202(c)(3) shall apply for purposes of this

8 subsection.

9 ‘‘(6) EQUITY INVESTMENT.—The term ‘equity

10 investment’ means—

11 ‘‘(A) any stock (other than nonqualified

12 preferred stock as defined in section 351(g)(2))

13 in an entity which is a corporation, and

14 ‘‘(B) any capital interest in an entity

15 which is a partnership.

16 ‘‘(c) QUALIFIED COMMUNITY DEVELOPMENT ENTI17 TY.—For purposes of this section—

18 ‘‘(1) IN GENERAL.—The term ‘qualified com19 munity development entity’ means any domestic cor20 poration or partnership if—

21 ‘‘(A) the primary mission of the entity is

22 serving, or providing investment capital for,

23 low-income communities or low-income persons,

24 ‘‘(B) the entity maintains accountability to

25 residents of low-income communities through
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1 representation on governing or advisory boards

2 or otherwise, and

3 ‘‘(C) the entity is certified by the Secretary

4 for purposes of this section as being a qualified

5 community development entity.

6 ‘‘(2) SPECIAL RULES FOR CERTAIN ORGANIZA7 TIONS.—The requirements of paragraph (1) shall be

8 treated as met by—

9 ‘‘(A) any specialized small business invest10 ment company (as defined in section

11 1044(c)(3)), and

12 ‘‘(B) any community development financial

13 institution (as defined in section 103 of the

14 Community Development Banking and Finan15 cial Institutions Act of 1994 (12 U.S.C. 4702)).

16 ‘‘(d) QUALIFIED LOW-INCOME COMMUNITY INVEST17 MENTS.—For purposes of this section—

18 ‘‘(1) IN GENERAL.—The term ‘qualified low-in19 come community investment’ means—

20 ‘‘(A) any equity investment in, or loan to,

21 any qualified active low-income community busi22 ness,

23 ‘‘(B) the purchase from another commu24 nity development entity of any loan made by
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1 such entity which is a qualified low-income com2 munity investment,

3 ‘‘(C) financial counseling and other serv4 ices specified in regulations prescribed by the

5 Secretary to businesses located in, and resi6 dents of, low-income communities, and

7 ‘‘(D) any equity investment in, or loan to,

8 any qualified community development entity.

9 ‘‘(2) QUALIFIED ACTIVE LOW-INCOME COMMU10 NITY BUSINESS.—

11 ‘‘(A) IN GENERAL.—For purposes of para12 graph (1), the term ‘qualified active low-income

13 community business’ means, with respect to any

14 taxable year, any corporation or partnership if

15 for such year—

16 ‘‘(i) at least 50 percent of the total

17 gross income of such entity is derived from

18 the active conduct of a qualified business

19 within any low-income community,

20 ‘‘(ii) a substantial portion of the use

21 of the tangible property of such entity

22 (whether owned or leased) is within any

23 low-income community,

24 ‘‘(iii) a substantial portion of the serv25 ices performed for such entity by its em-
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1 ployees are performed in any low-income

2 community,

3 ‘‘(iv) less than 5 percent of the aver4 age of the aggregate unadjusted bases of

5 the property of such entity is attributable

6 to collectibles (as defined in section

7 408(m)(2)) other than collectibles that are

8 held primarily for sale to customers in the

9 ordinary course of such business, and

10 ‘‘(v) less than 5 percent of the aver11 age of the aggregate unadjusted bases of

12 the property of such entity is attributable

13 to nonqualified financial property (as de14 fined in section 1397C(e)).

15 ‘‘(B) PROPRIETORSHIP.—Such term shall

16 include any business carried on by an individual

17 as a proprietor if such business would meet the

18 requirements of subparagraph (A) were it incor19 porated.

20 ‘‘(C) PORTIONS OF BUSINESS MAY BE

21 QUALIFIED ACTIVE LOW-INCOME COMMUNITY

22 BUSINESS.—The term ‘qualified active low-in23 come community business’ includes any trades

24 or businesses which would qualify as a qualified

25 active low-income community business if such
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1 trades or businesses were separately incor2 porated.

3 ‘‘(3) QUALIFIED BUSINESS.—For purposes of

4 this subsection, the term ‘qualified business’ has the

5 meaning given to such term by section 1397C(d); ex6 cept that—

7 ‘‘(A) in lieu of applying paragraph (2)(B)

8 thereof, the rental to others of real property lo9 cated in any low-income community shall be

10 treated as a qualified business if there are sub11 stantial improvements located on such property,

12 ‘‘(B) paragraph (3) thereof shall not apply,

13 and

14 ‘‘(C) such term shall not include any busi15 ness if a significant portion of the equity inter16 ests in such business are held by any person

17 who holds a significant portion of the equity in18 vestments in the community development entity.

19 ‘‘(e) LOW-INCOME COMMUNITY.—For purposes of

20 this section—

21 ‘‘(1) IN GENERAL.—The term ‘low-income com22 munity’ means any population census tract if—

23 ‘‘(A) the poverty rate for such tract is at

24 least 20 percent, or
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1 ‘‘(B)(i) in the case of a tract not located

2 within a metropolitan area, the median family

3 income for such tract does not exceed 80 per4 cent of statewide median family income, or

5 ‘‘(ii) in the case of a tract located within

6 a metropolitan area, the median family income

7 for such tract does not exceed 80 percent of the

8 greater of statewide median family income or

9 the metropolitan area median family income.

10 ‘‘(2) AREAS NOT WITHIN CENSUS TRACTS.—In

11 the case of an area which is not tracted for popu12 lation census tracts, the equivalent county divisions

13 (as defined by the Bureau of the Census for pur14 poses of defining poverty areas) shall be used for

15 purposes of determining poverty rates and median

16 family income.

17 ‘‘(f) NATIONAL LIMITATION ON AMOUNT OF INVEST18 MENTS DESIGNATED.—

19 ‘‘(1) IN GENERAL.—There is a new markets tax

20 credit limitation for each calendar year. Such limita21 tion is—

22 ‘‘(A) $1,000,000,000 for 2001,

23 ‘‘(B) $1,500,000,000 for 2002 and 2003,

24 ‘‘(C) $2,000,000,000 for 2004 and 2005,

25 and
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1 ‘‘(D) $3,500,000,000 for 2006 and 2007.

2 ‘‘(2) ALLOCATION OF LIMITATION.—The limita3 tion under paragraph (1) shall be allocated by the

4 Secretary among qualified community development

5 entities selected by the Secretary. In making alloca6 tions under the preceding sentence, the Secretary

7 shall give priority to entities with records of having

8 successfully provided capital or technical assistance

9 to disadvantaged businesses or communities.

10 ‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If

11 the new markets tax credit limitation for any cal12 endar year exceeds the aggregate amount allocated

13 under paragraph (2) for such year, such limitation

14 for the succeeding calendar year shall be increased

15 by the amount of such excess. No amount may be

16 carried under the preceding sentence to any calendar

17 year after 2014.

18 ‘‘(g) RECAPTURE OF CREDIT IN CERTAIN CASES.—

19 ‘‘(1) IN GENERAL.—If, at any time during the

20 7-year period beginning on the date of the original

21 issue of a qualified equity investment in a qualified

22 community development entity, there is a recapture

23 event with respect to such investment, then the tax

24 imposed by this chapter for the taxable year in
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1 which such event occurs shall be increased by the

2 credit recapture amount.

3 ‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur4 poses of paragraph (1), the credit recapture amount

5 is an amount equal to the sum of—

6 ‘‘(A) the aggregate decrease in the credits

7 allowed to the taxpayer under section 38 for all

8 prior taxable years which would have resulted if

9 no credit had been determined under this sec10 tion with respect to such investment, plus

11 ‘‘(B) interest at the overpayment rate es12 tablished under section 6621 on the amount de13 termined under subparagraph (A) for each

14 prior taxable year for the period beginning on

15 the due date for filing the return for the prior

16 taxable year involved.

17 No deduction shall be allowed under this chapter for

18 interest described in subparagraph (B).

19 ‘‘(3) RECAPTURE EVENT.—For purposes of

20 paragraph (1), there is a recapture event with re21 spect to an equity investment in a qualified commu22 nity development entity if—

23 ‘‘(A) such entity ceases to be a qualified

24 community development entity,
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1 ‘‘(B) the proceeds of the investment cease

2 to be used as required of subsection (b)(1)(B),

3 or

4 ‘‘(C) such investment is redeemed by such

5 entity.

6 ‘‘(4) SPECIAL RULES.—

7 ‘‘(A) TAX BENEFIT RULE.—The tax for

8 the taxable year shall be increased under para9 graph (1) only with respect to credits allowed

10 by reason of this section which were used to re11 duce tax liability. In the case of credits not so

12 used to reduce tax liability, the carryforwards

13 and carrybacks under section 39 shall be appro14 priately adjusted.

15 ‘‘(B) NO CREDITS AGAINST TAX.—Any in16 crease in tax under this subsection shall not be

17 treated as a tax imposed by this chapter for

18 purposes of determining the amount of any

19 credit under this chapter or for purposes of sec20 tion 55.

21 ‘‘(h) BASIS REDUCTION.—The basis of any qualified

22 equity investment shall be reduced by the amount of any

23 credit determined under this section with respect to such

24 investment. This subsection shall not apply for purposes

25 of sections 1202, 1400B, and 1400F.
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1 ‘‘(i) REGULATIONS.—The Secretary shall prescribe

2 such regulations as may be appropriate to carry out this

3 section, including regulations—

4 ‘‘(1) which limit the credit for investments

5 which are directly or indirectly subsidized by other

6 Federal tax benefits (including the credit under sec7 tion 42 and the exclusion from gross income under

8 section 103),

9 ‘‘(2) which prevent the abuse of the purposes of

10 this section,

11 ‘‘(3) which provide rules for determining wheth12 er the requirement of subsection (b)(1)(B) is treated

13 as met,

14 ‘‘(4) which impose appropriate reporting re15 quirements, and

16 ‘‘(5) which apply the provisions of this section

17 to newly formed entities.’’.

18 (b) CREDIT MADE PART OF GENERAL BUSINESS

19 CREDIT.—

20 (1) IN GENERAL.—Subsection (b) of section 38

21 is amended by striking ‘‘plus’’ at the end of para22 graph (11), by striking the period at the end of

23 paragraph (12) and inserting ‘‘, plus’’, and by add24 ing at the end the following new paragraph:
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1 ‘‘(13) the new markets tax credit determined

2 under section 45D(a).’’.

3 (2) LIMITATION ON CARRYBACK.—Subsection

4 (d) of section 39 is amended by adding at the end

5 the following new paragraph:

6 ‘‘(9) NO CARRYBACK OF NEW MARKETS TAX

7 CREDIT BEFORE JANUARY 1, 2001.—No portion of

8 the unused business credit for any taxable year

9 which is attributable to the credit under section 45D

10 may be carried back to a taxable year ending before

11 January 1, 2001.’’.

12 (c) DEDUCTION FOR UNUSED CREDIT.—Subsection

13 (c) of section 196 is amended by striking ‘‘and’’ at the

14 end of paragraph (7), by striking the period at the end

15 of paragraph (8) and inserting ‘‘, and’’, and by adding

16 at the end the following new paragraph:

17 ‘‘(9) the new markets tax credit determined

18 under section 45D(a).’’.

19 (d) CLERICAL AMENDMENT.—The table of sections

20 for subpart D of part IV of subchapter A of chapter 1

21 is amended by adding at the end the following new item:

‘‘Sec. 45D. New markets tax credit.’’.

22 (e) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to investments made after Decem24 ber 31, 2000.
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1 (f) REGULATIONS ON ALLOCATION OF NATIONAL

2 LIMITATION.—Not later than 60 days after the date of

3 the enactment of this Act, the Secretary of the Treasury

4 or the Secretary’s delegate shall prescribe regulations

5 which specify—

6 (1) how entities shall apply for an allocation

7 under section 45D(f)(2) of the Internal Revenue

8 Code of 1986, as added by this section;

9 (2) the competitive procedure through which

10 such allocations are made; and

11 (3) the actions that such Secretary or delegate

12 shall take to ensure that such allocations are prop13 erly made to appropriate entities.

14 TITLE IV—IMPROVEMENTS IN

15 LOW-INCOME HOUSING CREDIT

16 SEC. 401. MODIFICATION OF STATE CEILING ON LOW-IN17 COME HOUSING CREDIT.

18 (a) IN GENERAL.—Clauses (i) and (ii) of section

19 42(h)(3)(C) (relating to State housing credit ceiling) are

20 amended to read as follows:

21 ‘‘(i) the unused State housing credit

22 ceiling (if any) of such State for the pre23 ceding calendar year,

24 ‘‘(ii) the greater of—
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1 ‘‘(I) the applicable amount under

2 subparagraph (H) multiplied by the

3 State population, or

4 ‘‘(II) $2,000,000,’’.

5 (b) APPLICABLE AMOUNT.—Paragraph (3) of section

6 42(h) (relating to housing credit dollar amount for agen7 cies) is amended by adding at the end the following new

8 subparagraph:

9 ‘‘(H) APPLICABLE AMOUNT OF STATE

10 CEILING.—For purposes of subparagraph

11 (C)(ii), the applicable amount shall be deter12 mined under the following table:

‘‘For calendar year: The applicable amount is:

2001 ............................................................................. $1.35

2002 ............................................................................. 1.45

2003 ............................................................................. 1.55

2004 ............................................................................. 1.65

2005 ............................................................................. 1.70

2006 and thereafter ..................................................... 1.75.’’.

13 (c) ADJUSTMENT OF STATE CEILING FOR INCREASES

14 IN COST-OF-LIVING.—Paragraph (3) of section 42(h) (re15 lating to housing credit dollar amount for agencies), as

16 amended by subsection (c), is amended by adding at the

17 end the following new subparagraph:

18 ‘‘(I) COST-OF-LIVING ADJUSTMENT.—

19 ‘‘(i) IN GENERAL.—In the case of a

20 calendar year after 2006, the $2,000,000

21 in subparagraph (C) and the $1.75 amount
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1 in subparagraph (H) shall each be in2 creased by an amount equal to—

3 ‘‘(I) such dollar amount, multi4 plied by

5 ‘‘(II) the cost-of-living adjust6 ment determined under section 1(f)(3)

7 for such calendar year by substituting

8 ‘calendar year 2005’ for ‘calendar

9 year 1992’ in subparagraph (B) there10 of.

11 ‘‘(ii) ROUNDING.—

12 ‘‘(I) In the case of the amount in

13 subparagraph (C), any increase under

14 clause (i) which is not a multiple of

15 $5,000 shall be rounded to the next

16 lowest multiple of $5,000.

17 ‘‘(II) In the case of the amount

18 in subparagraph (H), any increase

19 under clause (i) which is not a mul20 tiple of 5 cents shall be rounded to

21 the next lowest multiple of 5 cents.’’.

22 (d) CONFORMING AMENDMENTS.—

23 (1) Section 42(h)(3)(C), as amended by sub24 section (a), is amended—
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1 (A) by striking ‘‘clause (ii)’’ in the matter

2 following clause (iv) and inserting ‘‘clause (i)’’;

3 and

4 (B) by striking ‘‘clauses (i)’’ in the matter

5 following clause (iv) and inserting ‘‘clauses

6 (ii)’’.

7 (2) Section 42(h)(3)(D)(ii) is amended—

8 (A) by striking ‘‘subparagraph (C)(ii)’’ and

9 inserting ‘‘subparagraph (C)(i)’’; and

10 (B) by striking ‘‘clauses (i)’’ in subclause

11 (II) and inserting ‘‘clauses (ii)’’.

12 (e) EFFECTIVE DATE.—The amendments made by

13 this section shall apply to calendar years after 2000.

14 SEC. 402. MODIFICATION OF CRITERIA FOR ALLOCATING

15 HOUSING CREDITS AMONG PROJECTS.

16 (a) SELECTION CRITERIA.—Subparagraph (C) of

17 section 42(m)(1) (relating to certain selection criteria

18 must be used) is amended—

19 (1) by inserting ‘‘, including whether the project

20 includes the use of existing housing as part of a

21 community revitalization plan’’ before the comma at

22 the end of clause (iii); and

23 (2) by striking clauses (v), (vi), and (vii) and

24 inserting the following new clauses:
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1 ‘‘(v) tenant populations with special

2 housing needs,

3 ‘‘(vi) public housing waiting lists,

4 ‘‘(vii) tenant populations of individ5 uals with children, and

6 ‘‘(viii) projects intended for eventual

7 tenant ownership.’’.

8 (b) PREFERENCE FOR COMMUNITY REVITALIZATION

9 PROJECTS LOCATED IN QUALIFIED CENSUS TRACTS.—

10 Clause (ii) of section 42(m)(1)(B) is amended by striking

11 ‘‘and’’ at the end of subclause (I), by adding ‘‘and’’ at

12 the end of subclause (II), and by inserting after subclause

13 (II) the following new subclause:

14 ‘‘(III) projects which are located

15 in qualified census tracts (as defined

16 in subsection (d)(5)(C)) and the devel17 opment of which contributes to a con18 certed community revitalization

19 plan,’’.

20 SEC. 403. ADDITIONAL RESPONSIBILITIES OF HOUSING

21 CREDIT AGENCIES.

22 (a) MARKET STUDY; PUBLIC DISCLOSURE OF RA23 TIONALE FOR NOT FOLLOWING CREDIT ALLOCATION

24 PRIORITIES.—Subparagraph (A) of section 42(m)(1) (re25 lating to responsibilities of housing credit agencies) is
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1 amended by striking ‘‘and’’ at the end of clause (i), by

2 striking the period at the end of clause (ii) and inserting

3 a comma, and by adding at the end the following new

4 clauses:

5 ‘‘(iii) a comprehensive market study

6 of the housing needs of low-income individ7 uals in the area to be served by the project

8 is conducted before the credit allocation is

9 made and at the developer’s expense by a

10 disinterested party who is approved by

11 such agency, and

12 ‘‘(iv) a written explanation is available

13 to the general public for any allocation of

14 a housing credit dollar amount which is

15 not made in accordance with established

16 priorities and selection criteria of the hous17 ing credit agency.’’.

18 (b) SITE VISITS.—Clause (iii) of section 42(m)(1)(B)

19 (relating to qualified allocation plan) is amended by insert20 ing before the period ‘‘and in monitoring for noncompli21 ance with habitability standards through regular site vis22 its’’.
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1 SEC. 404. MODIFICATIONS TO RULES RELATING TO BASIS

2 OF BUILDING WHICH IS ELIGIBLE FOR CRED3 IT.

4 (a) ADJUSTED BASIS TO INCLUDE PORTION OF CER5 TAIN BUILDINGS USED BY LOW-INCOME INDIVIDUALS

6 WHO ARE NOT TENANTS AND BY PROJECT EMPLOY7 EES.—Paragraph (4) of section 42(d) (relating to special

8 rules relating to determination of adjusted basis) is

9 amended—

10 (1) by striking ‘‘subparagraph (B)’’ in subpara11 graph (A) and inserting ‘‘subparagraphs (B) and

12 (C)’’;

13 (2) by redesignating subparagraph (C) as sub14 paragraph (D); and

15 (3) by inserting after subparagraph (B) the fol16 lowing new subparagraph:

17 ‘‘(C) INCLUSION OF BASIS OF PROPERTY

18 USED TO PROVIDE SERVICES FOR CERTAIN

19 NONTENANTS.—

20 ‘‘(i) IN GENERAL.—The adjusted

21 basis of any building located in a qualified

22 census tract (as defined in paragraph

23 (5)(C)) shall be determined by taking into

24 account the adjusted basis of property (of

25 a character subject to the allowance for de26 preciation and not otherwise taken into ac-
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1 count) used throughout the taxable year in

2 providing any community service facility.

3 ‘‘(ii) LIMITATION.—The increase in

4 the adjusted basis of any building which is

5 taken into account by reason of clause (i)

6 shall not exceed 10 percent of the eligible

7 basis of the qualified low-income housing

8 project of which it is a part. For purposes

9 of the preceding sentence, all community

10 service facilities which are part of the same

11 qualified low-income housing project shall

12 be treated as one facility.

13 ‘‘(iii) COMMUNITY SERVICE FACIL14 ITY.—For purposes of this subparagraph,

15 the term ‘community service facility’

16 means any facility designed to serve pri17 marily individuals whose income is 60 per18 cent or less of area median income (within

19 the meaning of subsection (g)(1)(B)).’’.

20 (b) CERTAIN NATIVE AMERICAN HOUSING ASSIST21 ANCE DISREGARDED IN DETERMINING WHETHER BUILD22 ING IS FEDERALLY SUBSIDIZED FOR PURPOSES OF THE

23 LOW-INCOME HOUSING CREDIT.—Subparagraph (E) of

24 section 42(i)(2) (relating to determination of whether

25 building is federally subsidized) is amended—
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1 (1) in clause (i), by inserting ‘‘or the Native

2 American Housing Assistance and Self-Determina3 tion Act of 1996 (25 U.S.C. 4101 et seq.) (as in ef4 fect on October 1, 1997)’’ after ‘‘this subpara5 graph)’’; and

6 (2) in the subparagraph heading, by inserting

7 ‘‘OR NATIVE AMERICAN HOUSING ASSISTANCE’’ after

8 ‘‘HOME ASSISTANCE’’.

9 SEC. 405. OTHER MODIFICATIONS.

10 (a) ALLOCATION OF CREDIT LIMIT TO CERTAIN

11 BUILDINGS.—

12 (1) The first sentence of section 42(h)(1)(E)(ii)

13 is amended by striking ‘‘(as of’’ the first place it ap14 pears and inserting ‘‘(as of the later of the date

15 which is 6 months after the date that the allocation

16 was made or’’.

17 (2) The last sentence of section 42(h)(3)(C) is

18 amended by striking ‘‘project which’’ and inserting

19 ‘‘project which fails to meet the 10 percent test

20 under paragraph (1)(E)(ii) on a date after the close

21 of the calendar year in which the allocation was

22 made or which’’.

23 (b) DETERMINATION OF WHETHER BUILDINGS ARE

24 LOCATED IN HIGH COST AREAS.—The first sentence of

25 section 42(d)(5)(C)(ii)(I) is amended—
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1 (1) by inserting ‘‘either’’ before ‘‘in which 50

2 percent’’; and

3 (2) by inserting before the period ‘‘or which has

4 a poverty rate of at least 25 percent’’.

5 SEC. 406. CARRYFORWARD RULES.

6 (a) IN GENERAL.—Clause (ii) of section 42(h)(3)(D)

7 (relating to unused housing credit carryovers allocated

8 among certain States) is amended by striking ‘‘the excess’’

9 and all that follows and inserting ‘‘the excess (if any) of—

10 ‘‘(I) the unused State housing

11 credit ceiling for the year preceding

12 such year, over

13 ‘‘(II) the aggregate housing cred14 it dollar amount allocated for such

15 year.’’.

16 (b) CONFORMING AMENDMENT.—The second sen17 tence of section 42(h)(3)(C) (relating to State housing

18 credit ceiling) is amended by striking ‘‘clauses (i) and

19 (iii)’’ and inserting ‘‘clauses (i) through (iv)’’.

20 SEC. 407. EFFECTIVE DATE.

21 Except as otherwise provided in this title, the amend22 ments made by this title shall apply to—

23 (1) housing credit dollar amounts allocated

24 after December 31, 2000; and
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1 (2) buildings placed in service after such date

2 to the extent paragraph (1) of section 42(h) of the

3 Internal Revenue Code of 1986 does not apply to

4 any building by reason of paragraph (4) thereof, but

5 only with respect to bonds issued after such date.

6 TITLE V—PRIVATE ACTIVITY

7 BOND VOLUME CAP

8 SEC. 501. ACCELERATION OF PHASE-IN OF INCREASE IN

9 VOLUME CAP ON PRIVATE ACTIVITY BONDS.

10 (a) IN GENERAL.—The table contained in section

11 146(d)(2) (relating to per capita limit; aggregate limit) is

12 amended to read as follows:

‘‘Calendar Year Per Capita

Limit

Aggregate

Limit

2001 .................................................................................... $55.00 $165,000,000

2002 .................................................................................... 60.00 180,000,000

2003 .................................................................................... 65.00 195,000,000

2004, 2005, and 2006 ......................................................... 70.00 210,000,000

2007 and thereafter ............................................................ 75.00 225,000,000.’’.

13 (b) EFFECTIVE DATE.—The amendment made by

14 this section shall apply to calendar years beginning after

15 2000.

16 TITLE VI—AMERICA’S PRIVATE

17 INVESTMENT COMPANIES

18 SEC. 601. SHORT TITLE.

19 This title may be cited as the ‘‘America’s Private In20 vestment Companies Act’’.

21 SEC. 602. FINDINGS AND PURPOSES.

22 (a) FINDINGS.—The Congress finds that—
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1 (1) people living in distressed areas, both urban

2 and rural, that are characterized by high levels of

3 joblessness, poverty, and low incomes have not bene4 fited adequately from the economic expansion experi5 enced by the Nation as a whole;

6 (2) unequal access to economic opportunities

7 continues to make the social costs of joblessness and

8 poverty to our Nation very high; and

9 (3) there are significant untapped markets in

10 our Nation, and many of these are in areas that are

11 underserved by institutions that can make equity

12 and credit investments.

13 (b) PURPOSES.—The purposes of this title are to—

14 (1) license private for profit community devel15 opment entities that will focus on making equity and

16 credit investments for large-scale business develop17 ments that benefit low-income communities;

18 (2) provide credit enhancement for those enti19 ties for use in low-income communities; and

20 (3) provide a vehicle under which the economic

21 and social returns on financial investments made

22 pursuant to this title may be available both to the

23 investors in these entities and to the residents of the

24 low-income communities.
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1 SEC. 603. DEFINITIONS.

2 As used in this title:

3 (1) ADMINISTRATOR.—The term ‘‘Adminis4 trator’’ means the Administrator of the Small Busi5 ness Administration.

6 (2) AGENCY.—The term ‘‘agency’’ has the

7 meaning given such term in section 551(1) of title

8 5, United States Code.

9 (3) APIC.—The term ‘‘APIC’’ means a busi10 ness entity that has been licensed under the terms

11 of this title as an America’s Private Investment

12 Company, and the license of which has not been re13 voked.

14 (4) COMMUNITY DEVELOPMENT ENTITY.—The

15 term ‘‘community development entity’’ means an en16 tity the primary mission of which is serving or pro17 viding investment capital for low-income commu18 nities or low-income persons and which maintains

19 accountability to residents of low-income commu20 nities.

21 (5) HUD.—The term ‘‘HUD’’ means the Sec22 retary of Housing and Urban Development or the

23 Department of Housing and Urban Development, as

24 the context requires.

25 (6) LICENSE.—The term ‘‘license’’ means a li26 cense issued by HUD as provided in section 604.
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1 (7) LOW-INCOME COMMUNITY.—The term ‘‘low2 income community’’ means—

3 (A) a census tract or tracts that have—

4 (i) a poverty rate of 20 percent or

5 greater, based on the most recent census

6 data; or

7 (ii) a median family income that does

8 not exceed 80 percent of the greater of: (I)

9 the median family income for the metro10 politan area in which such census tract or

11 tracts are located; or (II) the median fam12 ily income for the State in which such cen13 sus tract or tracts are located; or

14 (B) a property that was located on a mili15 tary installation that was closed or realigned

16 pursuant to title II of the Defense Authoriza17 tion Amendments and Base Closure and Re18 alignment Act (Public Law 100–526; 10 U.S.C.

19 2687 note), the Defense Base Closure and Re20 alignment Act of 1990 (part A of title XXIX of

21 Public Law 101–510; 10 U.S.C. 2687 note),

22 section 2687 of title 10, United States Code, or

23 any other similar law enacted after the date of

24 the enactment of this Act that provides for clo25 sure or realignment of military installations.
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1 (8) LOW-INCOME PERSON.—The term ‘‘low-in2 come person’’ means a person who is a member of

3 a low-income family, as such term is defined in sec4 tion 104 of the Cranston-Gonzalez National Afford5 able Housing Act (42 U.S.C. 12704).

6 (9) PRIVATE EQUITY CAPITAL.—

7 (A) IN GENERAL.—The term ‘‘private eq8 uity capital’’—

9 (i) in the case of a corporate entity,

10 the paid-in capital and paid-in surplus of

11 the corporate entity;

12 (ii) in the case of a partnership entity,

13 the contributed capital of the partners of

14 the partnership entity;

15 (iii) in the case of a limited liability

16 company entity, the equity investment of

17 the members of the limited liability com18 pany entity; and

19 (iv) earnings from investments of the

20 entity that are not distributed to investors

21 and are available for reinvestment by the

22 entity.

23 (B) EXCLUSIONS.—Such term does not in24 clude any—
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1 (i) funds borrowed by an entity from

2 any source or obtained through the

3 issuance of leverage; except that this clause

4 may not be construed to exclude amounts

5 evidenced by a legally binding and irrev6 ocable investment commitment in the enti7 ty, or the use by an entity of a pledge of

8 such investment commitment to obtain

9 bridge financing from a private lender to

10 fund the entity’s activities on an interim

11 basis; or

12 (ii) funds obtained directly or indi13 rectly from any Federal, State, or local

14 government or any government agency, ex15 cept for—

16 (I) funds invested by an employee

17 welfare benefit plan or pension plan;

18 and

19 (II) credits against any Federal,

20 State, or local taxes.

21 (10) QUALIFIED ACTIVE BUSINESS.—The term

22 ‘‘qualified active business’’ means a business or

23 trade—

24 (A) that, at the time that an investment is

25 made in the business or trade, is deriving at
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1 least 50 percent of its gross income from the

2 conduct of trade or business activities in low-in3 come communities;

4 (B) a substantial portion of the use of the

5 tangible property of which is used within low6 income communities;

7 (C) a substantial portion of the services

8 that the employees of which perform are per9 formed in low-income communities; and

10 (D) less than 5 percent of the aggregate

11 unadjusted bases of the property of which is at12 tributable to certain financial property, as the

13 Secretary shall set forth in regulations, or in

14 collectibles, other than collectibles held pri15 marily for sale to customers.

16 (11) QUALIFIED DEBENTURE.—The term

17 ‘‘qualified debenture’’ means a debt instrument hav18 ing terms that meet the requirements established

19 pursuant to section 606(c)(1).

20 (12) QUALIFIED LOW-INCOME COMMUNITY IN21 VESTMENT.—The term ‘‘qualified low-income com22 munity investment’’ mean an equity investment in,

23 or a loan to, a qualified active business.
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1 (13) SECRETARY.—The term ‘‘Secretary’’

2 means the Secretary of Housing and Urban Develop3 ment, unless otherwise specified in this title.

4 SEC. 604. AUTHORIZATION.

5 (a) LICENSES.—The Secretary is authorized to li6 cense community development entities as America’s Pri7 vate Investment Companies, in accordance with the terms

8 of this title.

9 (b) REGULATIONS.—The Secretary shall regulate

10 APICs for compliance with sound financial management

11 practices, and the program and procedural goals of this

12 title and other related Acts, and other purposes as re13 quired or authorized by this title, or determined by the

14 Secretary. The Secretary shall issue such regulations as

15 are necessary to carry out the licensing and regulatory and

16 other duties under this title, and may issue notices and

17 other guidance or directives as the Secretary determines

18 are appropriate to carry out such duties.

19 (c) USE OF CREDIT SUBSIDY FOR LICENSES.—

20 (1) NUMBER OF LICENSES.—The number of

21 APICs licensed at any one time may not exceed—

22 (A) the number that may be supported by

23 the amount of budget authority appropriated in

24 accordance with section 504(b) of the Federal

25 Credit Reform Act of 1990 (2 U.S.C. 661c) for
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1 the cost (as such term is defined in section 502

2 of such Act) of the subsidy and the investment

3 strategies of such APICs; or

4 (B) to the extent the limitation under sec5 tion 605(e)(1) applies, the number authorized

6 under such section.

7 (2) USE OF ADDITIONAL CREDIT SUBSIDY.—

8 Subject to the limitation under paragraph (1), the

9 Secretary may use any budget authority available

10 after credit subsidy has been allocated for the APICs

11 initially licensed pursuant to section 605 as follows:

12 (A) ADDITIONAL LICENSES.—To license

13 additional APICs.

14 (B) CREDIT SUBSIDY INCREASES.—To in15 crease the credit subsidy allocated to an APIC

16 as an award for high performance under this

17 title, except that such increases may be made

18 only in accordance with the following require19 ments and limitations:

20 (i) TIMING.—An increase may only be

21 provided for an APIC that has been li22 censed for a period of not less than 2

23 years.

24 (ii) COMPETITION.—An increase may

25 only be provided for a fiscal year pursuant
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1 to a competition for such fiscal year among

2 APICs eligible for, and requesting, such an

3 increase. The competition shall be based

4 upon criteria that the Secretary shall es5 tablish, which shall include the financial

6 soundness and performance of the APICs,

7 as measured by achievement of the public

8 performance goals included in the APICs

9 statements required under section

10 605(a)(6) and audits conducted under sec11 tion 609(b)(2). Among the criteria estab12 lished by the Secretary to determine pri13 ority for selection under this section, the

14 Secretary shall include making investments

15 in and loans to qualified active businesses

16 in urban or rural areas that have been des17 ignated under subchapter U of Chapter 1

18 of the Internal Revenue Code of 1986 as

19 empowerment zones or enterprise commu20 nities.

21 (d) COOPERATION AND COORDINATION.—

22 (1) PROGRAM POLICIES.—The Secretary is au23 thorized to coordinate and cooperate, through memo24 randa of understanding, an APIC liaison committee,

25 or otherwise, with the Administrator, the Secretary
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1 of the Treasury, and other agencies in the discretion

2 of the Secretary, on implementation of this title, in3 cluding regulation, examination, and monitoring of

4 APICs under this title.

5 (2) FINANCIAL SOUNDNESS REQUIREMENTS.—

6 The Secretary shall consult with the Administrator

7 and the Secretary of the Treasury, and may consult

8 with such other heads of agencies as the Secretary

9 may consider appropriate, in establishing any regu10 lations, requirements, guidelines, or standards for fi11 nancial soundness or management practices of

12 APICs or entities applying for licensing as APICs.

13 In implementing and monitoring compliance with

14 any such regulations, requirements, guidelines, and

15 standards, the Secretary shall enter into such agree16 ments and memoranda of understanding with the

17 Administrator and the Secretary of the Treasury as

18 may be appropriate to provide for such officials to

19 provide any assistance that may be agreed to.

20 (3) OPERATIONS.—The Secretary may carry

21 out this title—

22 (A) directly, through agreements with

23 other Federal entities under section 1535 of

24 title 31, United States Code, or otherwise; or
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1 (B) indirectly, under contracts or agree2 ments, as the Secretary shall determine.

3 (e) FEES AND CHARGES FOR ADMINISTRATIVE

4 COSTS.—To the extent provided in appropriations Acts,

5 the Secretary is authorized to impose fees and charges for

6 application, review, licensing, and regulation, or other ac7 tions under this title, and to pay for the costs of such

8 activities from the fees and charges collected.

9 (f) GUARANTEE FEES.—The Secretary is authorized

10 to set and collect fees for loan guarantee commitments and

11 loan guarantees that the Secretary makes under this title.

12 (g) FUNDING.—

13 (1) AUTHORIZATION OF APPROPRIATIONS FOR

14 LOAN GUARANTEE COMMITMENTS.—For each of fis15 cal years 2000, 2001, 2002, 2003, and 2004, there

16 is authorized to be appropriated up to $36,000,000

17 for the cost (as such term is defined in section

18 502(5) of the Federal Credit Reform Act of 1990)

19 of annual loan guarantee commitments under this

20 title. Amounts appropriated under this paragraph

21 shall remain available until expended.

22 (2) AGGREGATE LOAN GUARANTEE COMMIT23 MENT LIMITATION.—The Secretary may make com24 mitments to guarantee loans only to the extent that

25 the total loan principal, any part of which is guaran-
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1 teed, will not exceed $1,000,000,000, unless another

2 such amount is specified in appropriation Acts for

3 any fiscal year.

4 (3) AUTHORIZATION OF APPROPRIATIONS FOR

5 ADMINISTRATIVE EXPENSES.—For each of the fiscal

6 years 2000, 2001, 2002, 2003, and 2004, there is

7 authorized to be appropriated $1,000,000 for admin8 istrative expenses for carrying out this title. The

9 Secretary may transfer amounts appropriated under

10 this paragraph to any appropriation account of

11 HUD or another agency, to carry out the program

12 under this title. Any agency to which the Secretary

13 may transfer amounts under this title is authorized

14 to accept such transferred amounts in any appro15 priation account of such agency.

16 SEC. 605. SELECTION OF APICS.

17 (a) ELIGIBLE APPLICANTS.—An entity shall be eligi18 ble to be selected for licensing under section 604 as an

19 APIC only if the entity submits an application in compli20 ance with the requirements established pursuant to sub21 section (b) and the entity meets or complies with the fol22 lowing requirements:

23 (1) ORGANIZATION.—The entity shall be a pri24 vate, for-profit entity that qualifies as a community

25 development entity for the purposes of the New Mar-
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1 kets Tax Credits, to the extent such credits are es2 tablished under Federal law.

3 (2) MINIMUM PRIVATE EQUITY CAPITAL.—The

4 amount of private equity capital reasonably available

5 to the entity, as determined by the Secretary, at the

6 time that a license is approved may not be less than

7 $25,000,000.

8 (3) QUALIFIED MANAGEMENT.—The manage9 ment of the entity shall, in the determination of the

10 Secretary, meet such standards as the Secretary

11 shall establish to ensure that the management of the

12 APIC is qualified, and has the financial expertise,

13 knowledge, experience, and capability necessary, to

14 make investments for community and economic de15 velopment in low-income communities.

16 (4) CONFLICT OF INTEREST.—The entity shall

17 demonstrate that, in accordance with sound financial

18 management practices, the entity is structured to

19 preclude financial conflict of interest between the

20 APIC and a manager or investor.

21 (5) INVESTMENT STRATEGY.—The entity shall

22 prepare and submit to the Secretary an investment

23 strategy that includes benchmarks for evaluation of

24 its progress, that includes an analysis of existing lo25 cally owned businesses in the communities in which
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1 the investments under the strategy will be made,

2 that prioritizes such businesses for investment op3 portunities, and that fulfills the specific public pur4 pose goals of the entity.

5 (6) STATEMENT OF PUBLIC PURPOSE GOALS.—

6 The entity shall prepare and submit to the Secretary

7 a statement of the public purpose goals of the entity,

8 which shall—

9 (A) set forth goals that shall promote com10 munity and economic development, which shall

11 include—

12 (i) making investments in low-income

13 communities that further economic devel14 opment objectives by targeting such invest15 ments in businesses or trades that comply

16 with the requirements under subpara17 graphs (A) through (C) of section 603(10)

18 relating to low-income communities in a

19 manner that benefits low-income persons;

20 (ii) creating jobs in low-income com21 munities for residents of such commu22 nities;

23 (iii) involving community-based orga24 nizations and residents in community de25 velopment activities;
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1 (iv) such other goals as the Secretary

2 shall specify; and

3 (v) such elements as the entity may

4 set forth to achieve specific public purpose

5 goals;

6 (B) include such other elements as the

7 Secretary shall specify; and

8 (C) include proposed measurements and

9 strategies for meeting the goals.

10 (7) COMPLIANCE WITH LAWS.—The entity shall

11 agree to comply with applicable laws, including Fed12 eral Executive orders, Office of Management and

13 Budget circulars, and requirements of the Depart14 ment of the Treasury, and such operating and regu15 latory requirements as the Secretary may impose

16 from time-to-time.

17 (8) OTHER.—The entity shall satisfy any other

18 application requirements that the Secretary may im19 pose by regulation or Federal Register notice.

20 (b) COMPETITIONS.—The Secretary shall select eligi21 ble entities under subsection (a) to be licensed under sec22 tion 604 as APICs on the basis of competitions. The Sec23 retary shall announce each such competition by causing

24 a notice to be published in the Federal Register that in25 vites applications for licenses and sets forth the require-
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1 ments for application and such other terms of the competi2 tion not otherwise provided for, as determined by the Sec3 retary.

4 (c) SELECTION.—In competitions under subsection

5 (b), the Secretary shall select eligible entities under sub6 section (a) for licensing as APICs on the basis of—

7 (1) the extent to which the entity is expected to

8 achieve the goals of this title by meeting or exceed9 ing criteria established under subsection (d); and

10 (2) to the extent practicable and subject to the

11 existence of approvable applications, ensuring geo12 graphical diversity among the applicants selected

13 and diversity of APICs investment strategies, so that

14 urban and rural communities are both served, in the

15 determination of the Secretary, by the program

16 under this title.

17 (d) SELECTION CRITERIA.—The Secretary shall es18 tablish selection criteria for competitions under subsection

19 (b), which shall include the following criteria:

20 (1) CAPACITY.—

21 (A) MANAGEMENT.—The extent to which

22 the entity’s management has the quality, expe23 rience, and expertise to make and manage suc24 cessful investments for community and eco25 nomic development in low-income communities.
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1 (B) STATE AND LOCAL COOPERATION.—

2 The extent to which the entity demonstrates a

3 capacity to cooperate with States or units of

4 general local government and with community5 based organizations and residents of low-income

6 communities.

7 (2) INVESTMENT STRATEGY.—The quality of

8 the entity’s investment strategy submitted in accord9 ance with subsection (a)(5) and the extent to which

10 the investment strategy furthers the goals of this

11 title pursuant to paragraph (3) of this subsection.

12 (3) PUBLIC PURPOSE GOALS.—With respect to

13 the statement of public purpose goals of the entity

14 submitted in accordance with subsection (a)(6), and

15 the strategy and measurements included therein—

16 (A) the extent to which such goals promote

17 community and economic development;

18 (B) the extent to which such goals provide

19 for making qualified investments in low-income

20 communities that further economic development

21 objectives, such as—

22 (i) creating, within 2 years of the

23 completion of the initial such investment,

24 job opportunities, opportunities for owner25 ship, and other economic opportunities
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1 within a low-income community, both

2 short-term and of a longer duration;

3 (ii) improving the economic vitality of

4 a low-income community, including stimu5 lating other business development;

6 (iii) bringing new income into a low7 income community and assisting in the re8 vitalization of such community;

9 (iv) converting real property for the

10 purpose of creating a site for business in11 cubation and location, or business district

12 revitalization;

13 (v) enhancing economic competition,

14 including the advancement of technology;

15 (vi) rural development;

16 (vii) mitigating, rehabilitating, and

17 reusing real property considered subject to

18 the Solid Waste Disposal Act (42 U.S.C.

19 6901 et seq.; commonly referred to as the

20 Resource Conservation and Recovery Act)

21 or restoring coal mine-scarred land;

22 (viii) creation of local wealth through

23 investments in employee stock ownership

24 companies or resident-owned ventures; and
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1 (ix) any other objective that the Sec2 retary may establish to further the pur3 poses of this title;

4 (C) the quality of jobs to be created for

5 residents of low-income communities, taking

6 into consideration such factors as the payment

7 of higher wages, job security, employment bene8 fits, opportunity for advancement, and personal

9 asset building;

10 (D) the extent to which achievement of

11 such goals will involve community-based organi12 zations and residents in community develop13 ment activities; and

14 (E) the extent to which the investments re15 ferred to in subparagraph (B) are likely to ben16 efit existing small business in low-income com17 munities or will encourage the growth of small

18 business in such communities.

19 (4) OTHER.—Any other criteria that the Sec20 retary may establish to carry out the purposes of

21 this title.

22 (e) FIRST YEAR REQUIREMENTS.—

23 (1) NUMERICAL LIMITATION.—The number of

24 APICs may not, at any time during the 1-year pe-
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1 riod that begins upon the Secretary awarding the

2 first license for an APIC under this title, exceed 15.

3 (2) LIMITATION ON ALLOCATION OF AVAILABLE

4 CREDIT SUBSIDY.—Of the amount of budget author5 ity initially made available for allocation under this

6 title for APICs, the amount allocated for any single

7 APIC may not exceed 20 percent.

8 (3) NATIVE AMERICAN PRIVATE INVESTMENT

9 COMPANY.—Subject only to the absence of an ap10 provable application from an entity, during the 1-

11 year period referred to in paragraph (1), of the enti12 ties selected and licensed by the Secretary as APICs,

13 at least one shall be an entity that has as its pri14 mary purpose the making of qualified low-income

15 community investments in areas that are within In16 dian country (as such term is defined in section

17 1151 of title 18, United States Code) or within

18 lands that have status as Hawaiian home land under

19 section 204 of the Hawaiian Homes Commission

20 Act, 1920 (42 Stat. 108) or are acquired pursuant

21 to such Act. The Secretary may establish specific se22 lection criteria for applicants under this paragraph.

23 (f) COMMUNICATIONS BETWEEN HUD AND APPLI24 CANTS.—
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1 (1) IN GENERAL.—The Secretary shall set forth

2 in regulations the procedures under which HUD and

3 applicants for APIC licenses, and others, may com4 municate. Such regulations shall—

5 (A) specify by position the HUD officers

6 and employees who may communicate with such

7 applicants and others;

8 (B) permit HUD officers and employees to

9 request and discuss with the applicant and oth10 ers (such as banks or other credit or business

11 references, or potential investors, that the appli12 cant specifies in writing) any more detailed in13 formation that may be desirable to facilitate

14 HUD’s review of the applicant’s application;

15 (C) restrict HUD officers and employees

16 from revealing to any applicant—

17 (i) the fact or chances of award of a

18 license to such applicant, unless there has

19 been a public announcement of the results

20 of the competition; and

21 (ii) any information with respect to

22 any other applicant; and

23 (D) set forth requirements for making and

24 keeping records of any communications con25 ducted under this subsection, including require-
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1 ments for making such records available to the

2 public after the award of licenses under an ini3 tial or subsequent notice, as appropriate, under

4 subsection (a).

5 (2) TIMING.—Regulations under this subsection

6 may be issued as interim rules for effect on or be7 fore the date of publication of the first notice under

8 subsection (a), and shall apply only with respect to

9 applications under such notice. Regulations to imple10 ment this subsection with respect to any notice after

11 the first such notice shall be subject to notice and

12 comment rulemaking.

13 (3) INAPPLICABILITY OF DEPARTMENT OF HUD

14 ACT PROVISION.—Section 12(e)(2) of the Depart15 ment of Housing and Urban Development Act (42

16 U.S.C. 3537a(e)(2)) is amended by inserting before

17 the period at the end the following: ‘‘or any license

18 provided under the America’s Private Investment

19 Companies Act’’.

20 SEC. 606. OPERATIONS OF APICS.

21 (a) POWERS AND AUTHORITIES.—

22 (1) IN GENERAL.—An APIC shall have any

23 powers or authorities that—
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1 (A) the APIC derives from the jurisdiction

2 in which it is organized, or that the APIC oth3 erwise has;

4 (B) may be conferred by a license under

5 this title; and

6 (C) the Secretary may prescribe by regula7 tion.

8 (2) NEW MARKET ASSISTANCE.—Nothing in

9 this title shall preclude an APIC or its investors

10 from receiving an allocation of New Market Tax

11 Credits (to the extent such credits are established

12 under Federal law) if the APIC satisfies any appli13 cable terms and conditions under the Internal Rev14 enue Code of 1986.

15 (b) INVESTMENT LIMITATIONS.—

16 (1) QUALIFIED LOW-INCOME COMMUNITY IN17 VESTMENTS.—Substantially all investments that an

18 APIC makes shall be qualified low-income commu19 nity investments if the investments are financed

20 with—

21 (A) amounts available from the proceeds of

22 the issuance of an APIC’s qualified debenture

23 guaranteed under this title;

24 (B) proceeds of the sale of obligations de25 scribed under subsection (c)(3)(C)(iii); or
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1 (C) the use of private equity capital, as de2 termined by the Secretary, in an amount speci3 fied in the APIC’s license.

4 (2) SINGLE BUSINESS INVESTMENTS.—An

5 APIC shall not, as a matter of sound financial prac6 tice, invest in any one business an amount that ex7 ceeds an amount equal to 35 percent of the sum

8 of—

9 (A) the APIC’s private equity capital; plus

10 (B) an amount equal to the percentage

11 limit that the Secretary determines that an

12 APIC may have outstanding at any one time,

13 under subsection (c)(2)(A).

14 (c) BORROWING POWERS; QUALIFIED DEBEN15 TURES.—

16 (1) ISSUANCE.—An APIC may issue qualified

17 debentures. The Secretary shall, by regulation, speci18 fy the terms and requirements for debentures to be

19 considered qualified debentures for purposes of this

20 title, except that the term to maturity of any quali21 fied debenture may not exceed 21 years and each

22 qualified debenture shall bear interest during all or

23 any part of that time period at a rate or rates ap24 proved by the Secretary.
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1 (2) LEVERAGE LIMITS.—In general, as a mat2 ter of sound financial management practices—

3 (A) the total amount of qualified deben4 tures that an APIC issues under this title that

5 an APIC may have outstanding at any one time

6 shall not exceed an amount equal to 200 per7 cent of the private equity capital of the APIC,

8 as determined by the Secretary; and

9 (B) an APIC shall not have more than

10 $300,000,000 in face value of qualified deben11 tures issued under this title outstanding at any

12 one time.

13 (3) REPAYMENT.—

14 (A) CONDITION OF BUSINESS WIND-UP.—

15 An APIC shall have repaid, or have otherwise

16 been relieved of indebtedness, with respect to

17 any interest or principal amounts of borrowings

18 under this subsection no less than 2 years be19 fore the APIC may dissolve or otherwise com20 plete the wind-up of its business.

21 (B) TIMING.—An APIC may repay any in22 terest or principal amounts of borrowings under

23 this subsection at any time: Provided, That the

24 repayment of such amounts shall not relieve an

25 APIC of any duty otherwise applicable to the
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1 APIC under this title, unless the Secretary or2 ders such relief.

3 (C) USE OF INVESTMENT PROCEEDS BE4 FORE REPAYMENT.—Until an APIC has repaid

5 all interest and principal amounts on APIC bor6 rowings under this subsection, an APIC may

7 use the proceeds of investments, in accordance

8 with regulations issued by the Secretary, only

9 to—

10 (i) pay for proper costs and expenses

11 the APIC incurs in connection with such

12 investments;

13 (ii) pay for the reasonable administra14 tive expenses of the APIC;

15 (iii) purchase Treasury securities;

16 (iv) repay interest and principal

17 amounts on APIC borrowings under this

18 subsection;

19 (v) make interest, dividend, or other

20 distributions to or on behalf of an investor;

21 or

22 (vi) undertake such other purposes as

23 the Secretary may approve.

24 (D) USE OF INVESTMENT PROCEEDS

25 AFTER REPAYMENT.—After an APIC has re-
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1 paid all interest and principal amounts on

2 APIC borrowings under this subsection, and

3 subject to continuing compliance with sub4 section (a), the APIC may use the proceeds

5 from investments to make interest, dividend, or

6 other distributions to or on behalf of investors

7 in the nature of returns on capital, or the with8 drawal of private equity capital, without regard

9 to subparagraph (C) but in conformity with the

10 APIC’s investment strategy and statement of

11 public purpose goals.

12 (d) REUSE OF QUALIFIED DEBENTURE PRO13 CEEDS.—An APIC may use the proceeds of sale of Treas14 ury securities purchased under subsection (c)(3)(C)(iii) to

15 make qualified low-income community investments, sub16 ject to the Secretary’s approval. In making the request

17 for the Secretary’s approval, the APIC shall follow the

18 procedures applicable to an APIC’s request for HUD

19 guarantee action, as the Secretary may modify such proce20 dures for implementation of this subsection. Such proce21 dures shall include the description and certifications that

22 an APIC must include in all requests for guarantee action,

23 and the environmental certification applicable to initial ex24 penditures for a project or activity.
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1 (e) ANTIPIRATING.—Notwithstanding any other pro2 vision of law, an APIC may not use any private equity

3 capital required to be contributed under this title, or the

4 proceeds from the sale of any qualified debenture under

5 this title, to make an investment, as determined by the

6 Secretary, to assist directly in the relocation of any indus7 trial or commercial plant, facility, or operation, from one

8 area to another area, if the relocation is likely to result

9 in a significant loss of employment in the labor market

10 area from which the relocation occurs.

11 (f) EXCLUSION OF APIC FROM DEFINITION OF

12 DEBTOR UNDER BANKRUPTCY PROVISIONS.—Section

13 109(b)(2) of title 11, United States Code, is amended by

14 inserting before ‘‘credit union’’ the following: ‘‘America’s

15 Private Investment Company licensed under the America’s

16 Private Investment Companies Act,’’.

17 SEC. 607. CREDIT ENHANCEMENT BY THE FEDERAL GOV18 ERNMENT.

19 (a) ISSUANCE AND GUARANTEE OF QUALIFIED DE20 BENTURES.—

21 (1) AUTHORITY.—To the extent consistent with

22 the Federal Credit Reform Act of 1990, the Sec23 retary is authorized to make commitments to guar24 antee and guarantee the timely payment of all prin25 cipal and interest as scheduled on qualified deben-
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1 tures issued by APICs. Such commitments and

2 guarantees may only be made in accordance with the

3 terms and conditions established under paragraph

4 (2).

5 (2) TERMS AND CONDITIONS.—The Secretary

6 shall establish such terms and conditions as the Sec7 retary determines to be appropriate for commit8 ments and guarantees under this subsection, includ9 ing terms and conditions relating to amounts, expi10 ration, number, priorities of repayment, security,

11 collateral, amortization, payment of interest (includ12 ing the timing thereof), and fees and charges. The

13 terms and conditions applicable to any particular

14 commitment or guarantee may be established in doc15 uments that the Secretary approves for such com16 mitment or guarantee.

17 (3) SENIORITY.—Notwithstanding any other

18 provision of Federal law or any law or the constitu19 tion of any State, qualified debentures guaranteed

20 under this subsection by the Secretary shall be sen21 ior to any other debt obligation, equity contribution

22 or earnings, or the distribution of dividends, inter23 est, or other amounts, of an APIC.

24 (b) ISSUANCE OF TRUST CERTIFICATES.—The Sec25 retary, or an agent or entity selected by the Secretary,
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1 is authorized to issue trust certificates representing own2 ership of all or a fractional part of guaranteed qualified

3 debentures issued by APICs and held in trust.

4 (c) GUARANTEE OF TRUST CERTIFICATES.—

5 (1) IN GENERAL.—The Secretary is authorized,

6 upon such terms and conditions as the Secretary de7 termines to be appropriate, to guarantee the timely

8 payment of the principal of and interest on trust

9 certificates issued by the Secretary, or an agent or

10 other entity, for purposes of this section. Such guar11 antee shall be limited to the extent of principal and

12 interest on the guaranteed qualified debentures

13 which compose the trust.

14 (2) SUBSTITUTION OPTION.—The Secretary

15 shall have the option to replace in the corpus of the

16 trust any prepaid or defaulted qualified debenture

17 with a debenture, another full faith and credit in18 strument, or any obligations of the United States,

19 that may reasonably substitute for such prepaid or

20 defaulted qualified debenture.

21 (3) PROPORTIONATE REDUCTION OPTION.—In

22 the event that the Secretary elects not to exercise

23 the option under paragraph (2), and a qualified de24 benture in such trust is prepaid, or in the event of

25 default of a qualified debenture, the guarantee of
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1 timely payment of principal and interest on the trust

2 certificate shall be reduced in proportion to the

3 amount of principal and interest that such prepaid

4 qualified debenture represents in the trust. Interest

5 on prepaid or defaulted qualified debentures shall

6 accrue and be guaranteed by the Secretary only

7 through the date of payment of the guarantee. Dur8 ing the term of a trust certificate, it may be called

9 for redemption due to prepayment or default of all

10 qualified debentures that are in the corpus of the

11 trust.

12 (d) FULL FAITH AND CREDIT BACKING OF GUARAN13 TEES.—The full faith and credit of the United States is

14 pledged to the timely payment of all amounts which may

15 be required to be paid under any guarantee by the Sec16 retary pursuant to this section.

17 (e) SUBROGATION AND LIENS.—

18 (1) SUBROGATION.—In the event the Secretary

19 pays a claim under a guarantee issued under this

20 section, the Secretary shall be subrogated fully to

21 the rights satisfied by such payment.

22 (2) PRIORITY OF LIENS.—No State or local

23 law, and no Federal law, shall preclude or limit the

24 exercise by the Secretary of its ownership rights in
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1 the debentures in the corpus of a trust under this

2 section.

3 (f) REGISTRATION.—

4 (1) IN GENERAL.—The Secretary shall provide

5 for a central registration of all trust certificates

6 issued pursuant to this section.

7 (2) AGENTS.—The Secretary may contract with

8 an agent or agents to carry out on behalf of the Sec9 retary the pooling and the central registration func10 tions of this section notwithstanding any other provi11 sion of law, including maintenance on behalf of and

12 under the direction of the Secretary, such commer13 cial bank accounts or investments in obligations of

14 the United States as may be necessary to facilitate

15 trusts backed by qualified debentures guaranteed

16 under this title and the issuance of trust certificates

17 to facilitate formation of the corpus of the trusts.

18 The Secretary may require such agent or agents to

19 provide a fidelity bond or insurance in such amounts

20 as the Secretary determines to be necessary to pro21 tect the interests of the Government.

22 (3) FORM.—Book-entry or other electronic

23 forms of registration for trust certificates under this

24 title are authorized.
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1 (g) TIMING OF ISSUANCE OF GUARANTEES OF

2 QUALIFIED DEBENTURES AND TRUST CERTIFICATES.—

3 The Secretary may, from time to time in the Secretary’s

4 discretion, exercise the authority to issue guarantees of

5 qualified debentures under this title or trust certificates

6 under this title.

7 SEC. 608. APIC REQUESTS FOR GUARANTEE ACTIONS.

8 (a) IN GENERAL.—The Secretary may issue a guar9 antee under this title for a qualified debenture that an

10 APIC intends to issue only pursuant to a request to the

11 Secretary by the APIC for such guarantee that is made

12 in accordance with regulations governing the content and

13 procedures for such requests, that the Secretary shall pre14 scribe. Such regulations shall provide that each such re15 quest shall include—

16 (1) a description of the manner in which the

17 APIC intends to use the proceeds from the qualified

18 debenture;

19 (2) a certification by the APIC that the APIC

20 is in substantial compliance with—

21 (A) this title and other applicable laws, in22 cluding any requirements established under this

23 title by the Secretary;

24 (B) all terms and conditions of its license,

25 any cease-and-desist order issued under section
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1 610, and of any penalty or condition that may

2 have arisen from examination or monitoring by

3 the Secretary or otherwise, including the satis4 faction of any financial audit exception that

5 may have been outstanding; and

6 (C) all requirements relating to the alloca7 tion and use of New Markets Tax Credits, to

8 the extent such credits are established under

9 Federal law; and

10 (3) any other information or certification that

11 the Secretary considers appropriate.

12 (b) REQUESTS FOR GUARANTEE OF QUALIFIED DE13 BENTURES THAT INCLUDE FUNDING FOR INITIAL EX14 PENDITURE FOR A PROJECT OR ACTIVITY.—In addition

15 to the description and certification that an APIC is re16 quired to supply in all requests for guarantee action under

17 subsection (a), in the case of an APIC’s request for a

18 guarantee that includes a qualified debenture, the pro19 ceeds of which the APIC expects to be used as its initial

20 expenditure for a project or activity in which the APIC

21 intends to invest, and the expenditure for which would re22 quire an environmental assessment under the National

23 Environmental Policy Act of 1969 and other related laws

24 that further the purposes of such Act, such request for

25 guarantee action shall include evidence satisfactory to the
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1 Secretary of the certification of the completion of environ2 mental review of the project or activity required of the cog3 nizant State or local government under subsection (c). If

4 the environmental review responsibility for the project or

5 activity has not been assumed by a State or local govern6 ment under subsection (c), then the Secretary shall be re7 sponsible for carrying out the applicable responsibilities

8 under the National Environmental Policy Act of 1969 and

9 other provisions of law that further the purposes of such

10 Act that relate to the project or activity, and the Secretary

11 shall execute such responsibilities before acting on the

12 APIC’s request for the guarantee that is covered by this

13 subsection.

14 (c) RESPONSIBILITY FOR ENVIRONMENTAL RE15 VIEWS.—

16 (1) EXECUTION OF RESPONSIBILITY BY THE

17 SECRETARY.—This subsection shall apply to guaran18 tees by the Secretary of qualified debentures under

19 this title, the proceeds of which would be used in

20 connection with qualified low-income community in21 vestments of APICs under this title.

22 (2) ASSUMPTION OF RESPONSIBILITY BY COG23 NIZANT UNIT OF GENERAL GOVERNMENT.—

24 (A) GUARANTEE OF QUALIFIED DEBEN25 TURES.—In order to assure that the policies of
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1 the National Environmental Policy Act of 1969

2 and other provisions of law that further the

3 purposes of such Act (as specified in regula4 tions issued by the Secretary) are most effec5 tively implemented in connection with the ex6 penditure of funds under this title, and to as7 sure to the public undiminished protection of

8 the environment, the Secretary may, under such

9 regulations, in lieu of the environmental protec10 tion procedures otherwise applicable, provide for

11 the guarantee of qualified debentures, any part

12 of the proceeds of which are to fund particular

13 qualified low-income community investments of

14 APICs under this title, if a State or unit of

15 general local government, as designated by the

16 Secretary in accordance with regulations issued

17 by the Secretary, assumes all of the responsibil18 ities for environmental review, decisionmaking,

19 and action pursuant to the National Environ20 mental Policy Act of 1969 and such other pro21 visions of law that further such Act as the reg22 ulations of the Secretary specify, that would

23 otherwise apply to the Secretary were the Sec24 retary to undertake the funding of such invest25 ments as a Federal action.
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1 (B) IMPLEMENTATION.—The Secretary

2 shall issue regulations to carry out this sub3 section only after consultation with the Council

4 on Environmental Quality. Such regulations

5 shall—

6 (i) specify any other provisions of law

7 which further the purposes of the National

8 Environmental Policy Act of 1969 and to

9 which the assumption of responsibility as

10 provided in this subsection applies;

11 (ii) provide eligibility criteria and pro12 cedures for the designation of a State or

13 unit of general local government to assume

14 all of the responsibilities in this subsection;

15 (iii) specify the purposes for which

16 funds may be committed without regard to

17 the procedure established under paragraph

18 (3);

19 (iv) provide for monitoring of the per20 formance of environmental reviews under

21 this subsection;

22 (v) in the discretion of the Secretary,

23 provide for the provision or facilitation of

24 training for such performance; and
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•HR 4923 PCS

1 (vi) subject to the discretion of the

2 Secretary, provide for suspension or termi3 nation by the Secretary of the assumption

4 under subparagraph (A).

5 (C) RESPONSIBILITIES OF STATES AND

6 UNITS OF GENERAL LOCAL GOVERNMENT.—The

7 Secretary’s duty under subparagraph (B) shall

8 not be construed to limit any responsibility as9 sumed by a State or unit of general local gov10 ernment with respect to any particular request

11 for guarantee under subparagraph (A), or the

12 use of funds for a qualified investment.

13 (3) PROCEDURE.—Subject to compliance by the

14 APIC with the requirements of this title, the Sec15 retary shall approve the request for guarantee of a

16 qualified debenture, any part of the proceeds of

17 which is to fund particular qualified low-income

18 community investments of an APIC under this title,

19 that is subject to the procedures authorized by this

20 subsection only if, not less than 15 days prior to

21 such approval and prior to any commitment of funds

22 to such investment (except for such purposes speci23 fied in the regulations issued under paragraph

24 (2)(B)), the APIC submits to the Secretary a re25 quest for guarantee of a qualified debenture that is
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•HR 4923 PCS

1 accompanied by evidence of a certification of the

2 State or unit of general local government which

3 meets the requirements of paragraph (4). The ap4 proval by the Secretary of any such certification

5 shall be deemed to satisfy the Secretary’s respon6 sibilities pursuant to paragraph (1) under the Na7 tional Environmental Policy Act of 1969 and such

8 other provisions of law as the regulations of the Sec9 retary specify insofar as those responsibilities relate

10 to the guarantees of qualified debentures, any parts

11 of the proceeds of which are to fund such invest12 ments, which are covered by such certification.

13 (4) CERTIFICATION.—A certification under the

14 procedures authorized by this subsection shall—

15 (A) be in a form acceptable to the Sec16 retary;

17 (B) be executed by the chief executive offi18 cer or other officer of the State or unit of gen19 eral local government who qualifies under regu20 lations of the Secretary;

21 (C) specify that the State or unit of gen22 eral local government under this subsection has

23 fully carried out its responsibilities as described

24 under paragraph (2); and

25 (D) specify that the certifying officer—
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•HR 4923 PCS

1 (i) consents to assume the status of a

2 responsible Federal official under the Na3 tional Environmental Policy Act of 1969

4 and each provision of law specified in regu5 lations issued by the Secretary insofar as

6 the provisions of such Act or other such

7 provision of law apply pursuant to para8 graph (2); and

9 (ii) is authorized and consents on be10 half of the State or unit of general local

11 government and himself or herself to ac12 cept the jurisdiction of the Federal courts

13 for the purpose of enforcement of the re14 sponsibilities as such an official.

15 SEC. 609. EXAMINATION AND MONITORING OF APICS.

16 (a) IN GENERAL.—The Secretary shall, under regula17 tions, through audits, performance agreements, license

18 conditions, or otherwise, examine and monitor the oper19 ations and activities of APICs for compliance with sound

20 financial management practices, and for satisfaction of the

21 program and procedural goals of this title and other re22 lated Acts. The Secretary may undertake any responsi23 bility under this section in cooperation with an APIC liai24 son committee, or any agency that is a member of such

25 a committee, or other agency.
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1 (b) MONITORING, UPDATING, AND PROGRAM RE2 VIEW.—

3 (1) REPORTING AND UPDATING.—The Sec4 retary shall establish such annual or more frequent

5 reporting requirements for APICs, and such require6 ments for the updating of the statement of public

7 purpose goals, investment strategy (including the

8 benchmarks in such strategy), and other documents

9 that may have been used in the license application

10 process under this title, as the Secretary determines

11 necessary to assist the Secretary in monitoring the

12 compliance and performance of APICs.

13 (2) ANNUAL AUDITS.—The Secretary shall re14 quire each APIC to have an independent audit con15 ducted annually of the operations of the APIC. The

16 Secretary, in consultation with the Administrator

17 and the Secretary of the Treasury, shall establish re18 quirements and standards for such audits, including

19 requirements that such audits be conducted in ac20 cordance with generally accepted accounting prin21 ciples, that the APIC submit the results of the audit

22 to Secretary, and that specify the information to be

23 submitted.

24 (3) EXAMINATIONS.—The Secretary shall, no

25 less often than once every 2 years, examine the oper-
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•HR 4923 PCS

1 ations and portfolio of each APIC licensed under

2 this title for compliance with sound financial man3 agement practices, and for compliance with this title.

4 (4) EXAMINATION STANDARDS.—

5 (A) SOUND FINANCIAL MANAGEMENT

6 PRACTICES.—The Secretary shall examine each

7 APIC to ensure, as a matter of sound financial

8 management practices, substantial compliance

9 with this and other applicable laws, including

10 Federal executive orders, Department of Treas11 ury and Office of Management and Budget

12 guidance, circulars, and application and licens13 ing requirements on a continuing basis. The

14 Secretary may, by regulation, establish any ad15 ditional standards for sound financial manage16 ment practices, including standards that ad17 dress solvency and financial exposure.

18 (B) PERFORMANCE AND OTHER EXAMINA19 TIONS.—The Secretary shall monitor each

20 APIC’s progress in meeting the goals in the

21 APIC’s statement of public purpose goals, exe22 cuting the APIC’s investment strategy, and

23 other matters.

24 (c) INSPECTOR GENERAL RESPONSIBILITY.—In car25 rying out monitoring of HUD’s responsibilities under this
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•HR 4923 PCS

1 title and for purposes of ensuring that the program under

2 this title is operated in accordance with sound financial

3 management practices, the Inspector General of the De4 partment of Housing and Urban Development shall con5 sult with the Inspector General of the Department of the

6 Treasury and the Inspector General of the Small Business

7 Administration, as appropriate, and may enter into such

8 agreements and memoranda of understanding as may be

9 necessary to obtain the cooperation of the Inspectors Gen10 eral of the Department of the Treasury and the Small

11 Business Administration in carrying out such function.

12 (d) ANNUAL REPORT BY SECRETARY.—The Sec13 retary shall submit a report to the Congress annually re14 garding the operations, activities, financial health, and

15 achievements of the APIC program under this title. The

16 report shall list each investment made by an APIC and

17 include a summary of the examinations conducted under

18 subsection (b)(3), the guarantee actions of HUD, and any

19 regulatory or policy actions taken by HUD. The report

20 shall distinguish recently licensed APICs from APICs that

21 have held licenses for a longer period for purposes of indi22 cating program activities and performance.

23 (e) GAO REPORT.—

24 (1) REQUIREMENT.—Not later than 2 years

25 after the date of the enactment of this Act, the
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1 Comptroller General of the United States shall sub2 mit a report to the Congress regarding the operation

3 of the program under this title for licensing and

4 guarantees for APICs.

5 (2) CONTENTS.—The report shall include—

6 (A) an analysis of the operations and mon7 itoring by HUD of the APIC program under

8 this title;

9 (B) the administrative and capacity needs

10 of HUD required to ensure the integrity of the

11 program;

12 (C) the extent and adequacy of any credit

13 subsidy appropriated for the program; and

14 (D) the management of financial risk and

15 liability of the Federal Government under the

16 program.

17 SEC. 610. PENALTIES.

18 (a) VIOLATIONS SUBJECT TO PENALTY.—The Sec19 retary may impose a penalty under this subsection on any

20 APIC or manager of an APIC that, by any act, practice,

21 or failure to act, engages in fraud, mismanagement, or

22 noncompliance with this title, the regulations under this

23 title, or a condition of the APIC’s license under this title.

24 The Secretary shall, by regulation, identify, by generic de-
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•HR 4923 PCS

1 scription of a role or responsibilities, any manager of an

2 APIC that is subject to a penalty under this section.

3 (b) PENALTIES REQUIRING NOTICE AND AN OPPOR4 TUNITY TO RESPOND.—If, after notice in writing to an

5 APIC or the manager of an APIC that the APIC or man6 ager has engaged in any action, practice, or failure to act

7 that, under subsection (a), is subject to a penalty, and

8 after an opportunity for the APIC or manager to respond

9 to the notice, the Secretary determines that the APIC or

10 manager engaged in such action or failure to act, the Sec11 retary may, in addition to other penalties imposed—

12 (1) assess a civil money penalty, except than

13 any civil money penalty under this subsection shall

14 be in an amount not exceeding $10,000;

15 (2) issue an order to cease and desist with re16 spect to such action, practice, or failure to act of the

17 APIC or manager;

18 (3) suspend, or condition the use of, the APIC’s

19 license, including deferring, for the period of the

20 suspension, any commitment to guarantee any new

21 qualified debenture of the APIC, except that any

22 suspension or condition under this paragraph may

23 not exceed 90 days; and
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•HR 4923 PCS

1 (4) impose any other penalty that the Secretary

2 determines to be less burdensome to the APIC than

3 a penalty under subsection (c).

4 (c) PENALTIES REQUIRING NOTICE AND HEAR5 ING.—If, after notice in writing to an APIC or the man6 ager of an APIC that an APIC or manager has engaged

7 in any action, practice, or failure to act that, under sub8 section (a), is subject to a penalty, and after an oppor9 tunity for administrative hearing, the Secretary deter10 mines that the APIC or manager engaged in such action

11 or failure to act, the Secretary may—

12 (1) assess a civil money penalty against the

13 APIC or a manager in any amount;

14 (2) require the APIC to divest any interest in

15 an investment, on such terms and conditions as the

16 Secretary may impose; or

17 (3) revoke the APIC’s license.

18 (d) EFFECTIVE DATE OF PENALTIES.—

19 (1) PRIOR NOTICE REQUIREMENT.—Except as

20 provided in paragraph (2) of this subsection, a pen21 alty under subsection (b) or (c) shall not be due and

22 payable and shall not otherwise take effect or be

23 subject to enforcement by an order of a court, before

24 notice of the penalty is published in the Federal

25 Register.
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1 (2) CEASE-AND-DESIST ORDERS AND SUSPEN2 SION OR CONDITIONING OF LICENSE.—In the case of

3 a cease-and-desist order under subsection (b)(2) or

4 the suspension or conditioning of an APIC’s license

5 under subsection (b)(3), the following procedures

6 shall apply:

7 (A) ACTION WITHOUT PUBLISHED NO8 TICE.—The Secretary may order an APIC or

9 manager to cease and desist from an action,

10 practice, or failure to act or may suspend or

11 condition an APIC’s license, for not more than

12 45 days without prior publication of notice in

13 the Federal Register, but such cease-and-desist

14 order or suspension or conditioning shall take

15 effect only after the Secretary has issued a

16 written notice (which may include a writing in

17 electronic form) of such action to the APIC.

18 Notwithstanding subsection (b), such written

19 notice shall be effective without regard to

20 whether the APIC has been accorded an oppor21 tunity to respond. Upon such notice, such

22 cease-and-desist order or suspension or condi23 tioning shall be subject to enforcement by an

24 order of a court.
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1 (B) PUBLICATION OF NOTICE OF SUSPEN2 SION OR CONDITIONING OF LICENSE.—Upon a

3 suspension or conditioning of a license taking

4 effect pursuant to subparagraph (A), the Sec5 retary shall promptly cause a notice of suspen6 sion or conditioning of such license for a period

7 of not more than 90 days to be published in the

8 Federal Register. The Secretary shall provide

9 the APIC an opportunity to respond to such no10 tice. For purposes of the determining the dura11 tion of the period of any suspension or condi12 tioning under this subparagraph, the first day

13 of such period shall be the day of issuance of

14 the written notice under this paragraph of the

15 suspension or conditioning.

16 (C) REVOCATION OF LICENSE.—During

17 the period of the suspension or conditioning of

18 an APIC’s license, the Secretary may take ac19 tion under subsection (c)(3) to revoke the li20 cense of the APIC, in accordance with the pro21 cedures applicable to such subsection. Notwith22 standing any other provision of this section, if

23 the Secretary takes such action, the Secretary

24 may extend the suspension or conditioning of

25 the APIC’s license, for one or more periods of
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•HR 4923 PCS

1 not more than 90 days each, by causing notice

2 of such action to be published in the Federal

3 Register—

4 (i) for the first such extension, before

5 the expiration of the period under subpara6 graph (B); and

7 (ii) for any subsequent extension, be8 fore the expiration of the preceding exten9 sion period under this subparagraph.

10 (D) TERM OF EFFECTIVENESS.—A cease-and11 desist order or the suspension or conditioning of an

12 APIC’s license by the Secretary under this para13 graph shall remain in effect in accordance with the

14 terms of the order, suspension, or conditioning until

15 final adjudication in any action undertaken to chal16 lenge the order, or the suspension or conditioning, or

17 the revocation, of an APIC’s license.

18 SEC. 611. EFFECTIVE DATE.

19 (a) IN GENERAL.—Except as provided in subsection

20 (b), this title shall take effect upon the expiration of the

21 6-month period beginning on the date of the enactment

22 of this Act.

23 (b) ISSUANCE OF REGULATIONS AND GUIDELINES.—

24 Any authority under this title of the Secretary, the Admin25 istrator, and the Secretary of the Treasury to issue regula-
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1 tions, standards, guidelines, or licensing requirements,

2 and any authority of such officials to consult or enter into

3 agreements or memoranda of understanding regarding

4 such issuance, shall take effect on the date of the enact5 ment of this Act.

6 SEC. 612. SUNSET.

7 After the expiration of the 5-year period beginning

8 upon the date that the Secretary awards the first license

9 for an APIC under this title—

10 (1) the Secretary may not license any APIC;

11 and

12 (2) no amount may be appropriated for the

13 costs (as such term is defined in section 502 of the

14 Federal Credit Reform Act of 1990 (2 U.S.C. 661c))

15 of any guarantee under this title for any debenture

16 issued by an APIC.

17 This section may not be construed to prohibit, limit, or

18 affect the award, allocation, or use of any budget authority

19 for the costs of such guarantees that is appropriated be20 fore the expiration of such period.
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1 TITLE VII—OTHER COMMUNITY

2 RENEWAL AND NEW MAR3 KETS ASSISTANCE

4 SEC. 701. TRANSFER OF UNOCCUPIED AND SUBSTANDARD

5 HUD-HELD HOUSING TO LOCAL GOVERN6 MENTS AND COMMUNITY DEVELOPMENT

7 CORPORATIONS.

8 Section 204 of the Departments of Veterans Affairs

9 and Housing and Urban Development, and Independent

10 Agencies Appropriations Act, 1997 (12 U.S.C. 1715z–

11 11a) is amended—

12 (1) by striking ‘‘FLEXIBLE AUTHORITY.—’’ and

13 inserting ‘‘DISPOSITION OF HUD-OWNED PROP14 ERTIES. (a) FLEXIBLE AUTHORITY FOR MULTI15 FAMILY PROJECTS.—’’; and

16 (2) by adding at the end the following new sub17 section:

18 ‘‘(b) TRANSFER OF UNOCCUPIED AND SUBSTANDARD

19 HOUSING TO LOCAL GOVERNMENTS AND COMMUNITY

20 DEVELOPMENT CORPORATIONS.—

21 ‘‘(1) TRANSFER AUTHORITY.—Notwithstanding

22 the authority under subsection (a) and the last sen23 tence of section 204(g) of the National Housing Act

24 (12 U.S.C. 1710(g)), the Secretary of Housing and

25 Urban Development shall transfer ownership of any
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1 qualified HUD property, subject to the requirements

2 of this section, to a unit of general local government

3 having jurisdiction for the area in which the prop4 erty is located or to a community development cor5 poration which operates within such a unit of gen6 eral local government in accordance with this sub7 section, but only to the extent that units of general

8 local government and community development cor9 porations consent to transfer and the Secretary de10 termines that such transfer is practicable.

11 ‘‘(2) QUALIFIED HUD PROPERTIES.—For pur12 poses of this subsection, the term ‘qualified HUD

13 property’ means any property for which, as of the

14 date that notification of the property is first made

15 under paragraph (3)(B), not less than 6 months

16 have elapsed since the later of the date that the

17 property was acquired by the Secretary or the date

18 that the property was determined to be unoccupied

19 or substandard, that is owned by the Secretary and

20 is—

21 ‘‘(A) an unoccupied multifamily housing

22 project;

23 ‘‘(B) a substandard multifamily housing

24 project; or
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1 ‘‘(C) an unoccupied single family property

2 that—

3 ‘‘(i) has been determined by the Sec4 retary not to be an eligible asset under sec5 tion 204(h) of the National Housing Act

6 (12 U.S.C. 1710(h)); or

7 ‘‘(ii) is an eligible asset under such

8 section 204(h), but—

9 ‘‘(I) is not subject to a specific

10 sale agreement under such section;

11 and

12 ‘‘(II) has been determined by the

13 Secretary to be inappropriate for con14 tinued inclusion in the program under

15 such section 204(h) pursuant to para16 graph (10) of such section.

17 ‘‘(3) TIMING.—The Secretary shall establish

18 procedures that provide for—

19 ‘‘(A) time deadlines for transfers under

20 this subsection;

21 ‘‘(B) notification to units of general local

22 government and community development cor23 porations of qualified HUD properties in their

24 jurisdictions;
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1 ‘‘(C) such units and corporations to ex2 press interest in the transfer under this sub3 section of such properties;

4 ‘‘(D) a right of first refusal for transfer of

5 qualified HUD properties to units of general

6 local government and community development

7 corporations, under which—

8 ‘‘(i) the Secretary shall establish a pe9 riod during which the Secretary may not

10 transfer such properties except to such

11 units and corporations;

12 ‘‘(ii) the Secretary shall offer qualified

13 HUD properties that are single family

14 properties for purchase by units of general

15 local government at a cost of $1 for each

16 property, but only to the extent that the

17 costs to the Federal Government of dis18 posal at such price do not exceed the costs

19 to the Federal Government of disposing of

20 property subject to the procedures for sin21 gle family property established by the Sec22 retary pursuant to the authority under the

23 last sentence of section 204(g) of the Na24 tional Housing Act (12 U.S.C. 1710(g));
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1 ‘‘(iii) the Secretary may accept an

2 offer to purchase a property made by a

3 community development corporation only if

4 the offer provides for purchase on a cost

5 recovery basis; and

6 ‘‘(iv) the Secretary shall accept an

7 offer to purchase such a property that is

8 made during such period by such a unit or

9 corporation and that complies with the re10 quirements of this paragraph;

11 ‘‘(E) a written explanation, to any unit of

12 general local government or community develop13 ment corporation making an offer to purchase

14 a qualified HUD property under this subsection

15 that is not accepted, of the reason that such

16 offer was not acceptable.

17 ‘‘(4) OTHER DISPOSITION.—With respect to

18 any qualified HUD property, if the Secretary does

19 not receive an acceptable offer to purchase the prop20 erty pursuant to the procedure established under

21 paragraph (3), the Secretary shall dispose of the

22 property to the unit of general local government in

23 which property is located or to community develop24 ment corporations located in such unit of general

25 local government on a negotiated, competitive bid, or
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1 other basis, on such terms as the Secretary deems

2 appropriate.

3 ‘‘(5) SATISFACTION OF INDEBTEDNESS.—Be4 fore transferring ownership of any qualified HUD

5 property pursuant to this subsection, the Secretary

6 shall satisfy any indebtedness incurred in connection

7 with the property to be transferred, by canceling the

8 indebtedness.

9 ‘‘(6) DETERMINATION OF STATUS OF PROP10 ERTIES.—To ensure compliance with the require11 ments of this subsection, the Secretary shall take the

12 following actions:

13 ‘‘(A) UPON ENACTMENT.—Upon the enact14 ment of this subsection, the Secretary shall

15 promptly assess each residential property owned

16 by the Secretary to determine whether such

17 property is a qualified HUD property.

18 ‘‘(B) UPON ACQUISITION.—Upon acquiring

19 any residential property, the Secretary shall

20 promptly determine whether the property is a

21 qualified HUD property.

22 ‘‘(C) UPDATES.—The Secretary shall peri23 odically reassess the residential properties

24 owned by the Secretary to determine whether
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1 any such properties have become qualified

2 HUD properties.

3 ‘‘(7) TENANT LEASES.—This subsection shall

4 not affect the terms or the enforceability of any con5 tract or lease entered into with respect to any resi6 dential property before the date that such property

7 becomes a qualified HUD property.

8 ‘‘(8) USE OF PROPERTY.—Property transferred

9 under this subsection shall be used only for appro10 priate neighborhood revitalization efforts, including

11 homeownership, rental units, commercial space, and

12 parks, consistent with local zoning regulations, local

13 building codes, and subdivision regulations and re14 strictions of record.

15 ‘‘(9) INAPPLICABILITY TO PROPERTIES MADE

16 AVAILABLE FOR HOMELESS.—Notwithstanding any

17 other provision of this subsection, this subsection

18 shall not apply to any properties that the Secretary

19 determines are to be made available for use by the

20 homeless pursuant to subpart E of part 291 of title

21 24, Code of Federal Regulations, during the period

22 that the properties are so available.

23 ‘‘(10) PROTECTION OF EXISTING CONTRACTS.—

24 This subsection may not be construed to alter, af25 fect, or annul any legally binding obligations entered
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1 into with respect to a qualified HUD property before

2 the property becomes a qualified HUD property.

3 ‘‘(11) DEFINITIONS.—For purposes of this sub4 section, the following definitions shall apply:

5 ‘‘(A) COMMUNITY DEVELOPMENT COR6 PORATION.—The term ‘community development

7 corporation’ means a nonprofit organization

8 whose primary purpose is to promote commu9 nity development by providing housing opportu10 nities for low-income families.

11 ‘‘(B) COST RECOVERY BASIS.—The term

12 ‘cost recovery basis’ means, with respect to any

13 sale of a residential property by the Secretary,

14 that the purchase price paid by the purchaser

15 is equal to or greater than the sum of: (i) the

16 appraised value of the property, as determined

17 in accordance with such requirements as the

18 Secretary shall establish; and (ii) the costs in19 curred by the Secretary in connection with such

20 property during the period beginning on the

21 date on which the Secretary acquires title to the

22 property and ending on the date on which the

23 sale is consummated.

24 ‘‘(C) MULTIFAMILY HOUSING PROJECT.—

25 The term ‘multifamily housing project’ has the
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1 meaning given the term in section 203 of the

2 Housing and Community Development Amend3 ments of 1978.

4 ‘‘(D) RESIDENTIAL PROPERTY.—The term

5 ‘residential property’ means a property that is

6 a multifamily housing project or a single family

7 property.

8 ‘‘(E) SECRETARY.—The term ‘Secretary’

9 means the Secretary of Housing and Urban De10 velopment.

11 ‘‘(F) SEVERE PHYSICAL PROBLEMS.—The

12 term ‘severe physical problems’ means, with re13 spect to a dwelling unit, that the unit—

14 ‘‘(i) lacks hot or cold piped water, a

15 flush toilet, or both a bathtub and a show16 er in the unit, for the exclusive use of that

17 unit;

18 ‘‘(ii) on not less than three separate

19 occasions during the preceding winter

20 months, was uncomfortably cold for a pe21 riod of more than 6 consecutive hours due

22 to a malfunction of the heating system for

23 the unit;

24 ‘‘(iii) has no functioning electrical

25 service, exposed wiring, any room in which
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1 there is not a functioning electrical outlet,

2 or has experienced three or more blown

3 fuses or tripped circuit breakers during the

4 preceding 90-day period;

5 ‘‘(iv) is accessible through a public

6 hallway in which there are no working

7 light fixtures, loose or missing steps or

8 railings, and no elevator; or

9 ‘‘(v) has severe maintenance problems,

10 including water leaks involving the roof,

11 windows, doors, basement, or pipes or

12 plumbing fixtures, holes or open cracks in

13 walls or ceilings, severe paint peeling or

14 broken plaster, and signs of rodent infesta15 tion.

16 ‘‘(G) SINGLE FAMILY PROPERTY.—The

17 term ‘single family property’ means a 1- to 4-

18 family residence.

19 ‘‘(H) SUBSTANDARD.—The term ‘sub20 standard’ means, with respect to a multifamily

21 housing project, that 25 percent or more of the

22 dwelling units in the project have severe phys23 ical problems.

24 ‘‘(I) UNIT OF GENERAL LOCAL GOVERN25 MENT.—The term ‘unit of general local govern-
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1 ment’ has the meaning given such term in sec2 tion 102(a) of the Housing and Community De3 velopment Act of 1974.

4 ‘‘(J) UNOCCUPIED.—The term ‘unoccu5 pied’ means, with respect to a residential prop6 erty, that the unit of general local government

7 having jurisdiction over the area in which the

8 project is located has certified in writing that

9 the property is not inhabited.

10 ‘‘(12) REGULATIONS.—

11 ‘‘(A) INTERIM.—Not later than 30 days

12 after the date of the enactment of this sub13 section, the Secretary shall issue such interim

14 regulations as are necessary to carry out this

15 subsection.

16 ‘‘(B) FINAL.—Not later than 60 days after

17 the date of the enactment of this subsection,

18 the Secretary shall issue such final regulations

19 as are necessary to carry out this subsection.’’.

20 SEC. 702. TRANSFER OF HUD ASSETS IN REVITALIZATION

21 AREAS.

22 In carrying out the program under section 204(h) of

23 the National Housing Act (12 U.S.C. 1710(h)), upon the

24 request of the chief executive officer of a county or the

25 government of appropriate jurisdiction and not later than
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1 60 days after such request is made, the Secretary of Hous2 ing and Urban Development shall designate as a revital3 ization area all portions of such county that meet the cri4 teria for such designation under paragraph (3) of such

5 section.

6 SEC. 703. RISK-SHARING DEMONSTRATION.

7 Section 249 of the National Housing Act (12 U.S.C.

8 1715z–14) is amended—

9 (1) by striking the section heading and insert10 ing the following:

11 ‘‘RISK-SHARING DEMONSTRATION’’;

12 (2) by striking ‘‘reinsurance’’ each place such

13 term appears and insert ‘‘risk-sharing’’;

14 (3) in subsection (a)—

15 (A) in the first sentence, by inserting ‘‘and

16 insured community development financial insti17 tutions’’ after ‘‘private mortgage insurers’’;

18 (B) in the second sentence—

19 (i) by striking ‘‘two’’ and inserting

20 ‘‘4’’; and

21 (ii) by striking ‘‘March 15, 1988’’ and

22 inserting ‘‘the expiration of the 5-year pe23 riod beginning on the date of the enact24 ment of the Community Renewal and New

25 Market Act of 2000’’; and
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1 (C) in the last sentence, by striking ‘‘10

2 percent’’ and inserting ‘‘20 percent’’;

3 (4) in subsection (b)—

4 (A) in the first sentence, by inserting ‘‘and

5 with insured community development financial

6 institutions’’ before the period at the end;

7 (B) in the first sentence, by striking

8 ‘‘which have been determined to be qualified in9 surers under section 302(b)(2)(C)’’;

10 (C) in the second sentence, by inserting

11 ‘‘and insured community development financial

12 institutions’’ after ‘‘private mortgage insurance

13 companies’’;

14 (D) by striking paragraph (1) and insert15 ing the following new paragraph:

16 ‘‘(1) assume the first loss on any mortgage in17 sured pursuant to section 203(b), 234, or 245 that

18 covers a one- to four-family dwelling and is included

19 in the program under this section, up to the percent20 age of loss that is set forth in the risk-sharing con21 tract;’’; and

22 (E) in paragraph (2)—

23 (i) by striking ‘‘carry out (under ap24 propriate delegation) such’’ and inserting

25 ‘‘delegate underwriting,’’; and
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1 (ii) by striking ‘‘function’’ and insert2 ing ‘‘functions’’;

3 (5) in subsection (c)—

4 (A) in the first sentence—

5 (i) by striking ‘‘of’’ the first place it

6 appears and insert ‘‘for’’;

7 (ii) by striking ‘‘insurance reserves’’

8 and inserting ‘‘loss reserves’’; and

9 (iii) by striking ‘‘such insurance’’ and

10 inserting ‘‘such reserves’’; and

11 (B) in the second sentence, by inserting

12 ‘‘or insured community development financial

13 institution’’ after ‘‘private mortgage insurance

14 company’’;

15 (6) in subsection (d), by inserting ‘‘or insured

16 community development financial institution’’ after

17 ‘‘private mortgage insurance company’’; and

18 (7) by adding at the end the following new sub19 section:

20 ‘‘(e) INSURED COMMUNITY DEVELOPMENT FINAN21 CIAL INSTITUTIONS.—For purposes of this section, the

22 term ‘insured community development financial institu23 tion’ means a community development financial institu24 tion, as such term is defined in section 103 of Reigle Com25 munity Development and Regulatory Improvement Act of
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1 1994 (12 U.S.C. 4702) that is an insured depository insti2 tution (as such term is defined in section 3 of the Federal

3 Deposit Insurance Act (12 U.S.C. 1813)) or an insured

4 credit union (as such term is defined in section 101 of

5 the Federal Credit Union Act (12 U.S.C. 1752)).’’.

6 SEC. 704. PREVENTION AND TREATMENT OF SUBSTANCE

7 ABUSE; SERVICES PROVIDED THROUGH RELI8 GIOUS ORGANIZATIONS.

9 Title V of the Public Health Service Act (42 U.S.C.

10 290aa et seq.) is amended by adding at the end the fol11 lowing part:

12 ‘‘PART G—SERVICES PROVIDED THROUGH RELIGIOUS

13 ORGANIZATIONS

14 ‘‘SEC. 581. APPLICABILITY TO DESIGNATED PROGRAMS.

15 ‘‘(a) DESIGNATED PROGRAMS.—Subject to sub16 section (b), this part applies to discretionary and formula

17 grant programs administered by the Substance Abuse and

18 Mental Health Services Administration that make awards

19 of financial assistance to public or private entities for the

20 purpose of carrying out activities to prevent or treat sub21 stance abuse (in this part referred to as a ‘designated pro22 gram’). Designated programs include the program under

23 subpart II of part B of title XIX (relating to formula

24 grants to the States).
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1 ‘‘(b) LIMITATION.—This part does not apply to any

2 award of financial assistance under a designated program

3 for a purpose other than the purpose specified in sub4 section (a).

5 ‘‘(c) DEFINITIONS.—For purposes of this part (and

6 subject to subsection (b)):

7 ‘‘(1) The term ‘designated program’ has the

8 meaning given such term in subsection (a).

9 ‘‘(2) The term ‘financial assistance’ means a

10 grant, cooperative agreement, or contract.

11 ‘‘(3) The term ‘program beneficiary’ means an

12 individual who receives program services.

13 ‘‘(4) The term ‘program participant’ means a

14 public or private entity that has received financial

15 assistance under a designated program.

16 ‘‘(5) The term ‘program services’ means treat17 ment for substance abuse, or preventive services re18 garding such abuse, provided pursuant to an award

19 of financial assistance under a designated program.

20 ‘‘(6) The term ‘religious organization’ means a

21 nonprofit religious organization.
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1 ‘‘SEC. 582. RELIGIOUS ORGANIZATIONS AS PROGRAM PAR2 TICIPANTS.

3 ‘‘(a) IN GENERAL.—Notwithstanding any other pro4 vision of law, a religious organization, on the same basis

5 as any other nonprofit private provider—

6 ‘‘(1) may receive financial assistance under a

7 designated program; and

8 ‘‘(2) may be a provider of services under a des9 ignated program.

10 ‘‘(b) RELIGIOUS ORGANIZATIONS.—The purpose of

11 this section is to allow religious organizations to be pro12 gram participants on the same basis as any other non13 profit private provider without impairing the religious

14 character of such organizations, and without diminishing

15 the religious freedom of program beneficiaries.

16 ‘‘(c) NONDISCRIMINATION AGAINST RELIGIOUS OR17 GANIZATIONS.—

18 ‘‘(1) ELIGIBILITY AS PROGRAM PARTICI19 PANTS.—Religious organizations are eligible to be

20 program participants on the same basis as any other

21 nonprofit private organization as long as the pro22 grams are implemented consistent with the Estab23 lishment Clause and Free Exercise Clause of the

24 First Amendment to the United States Constitution.

25 Nothing in this Act shall be construed to restrict the

26 ability of the Federal Government, or a State or
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1 local government receiving funds under such pro2 grams, to apply to religious organizations the same

3 eligibility conditions in designated programs as are

4 applied to any other nonprofit private organization.

5 ‘‘(2) NONDISCRIMINATION.—Neither the Fed6 eral Government nor a State or local government re7 ceiving funds under designated programs shall dis8 criminate against an organization that is or applies

9 to be a program participant on the basis that the or10 ganization has a religious character.

11 ‘‘(d) RELIGIOUS CHARACTER AND FREEDOM.—

12 ‘‘(1) RELIGIOUS ORGANIZATIONS.—Except as

13 provided in this section, any religious organization

14 that is a program participant shall retain its inde15 pendence from Federal, State, and local government,

16 including such organization’s control over the defini17 tion, development, practice, and expression of its re18 ligious beliefs.

19 ‘‘(2) ADDITIONAL SAFEGUARDS.—Neither the

20 Federal Government nor a State shall require a reli21 gious organization to—

22 ‘‘(A) alter its form of internal governance;

23 or

24 ‘‘(B) remove religious art, icons, scripture,

25 or other symbols,
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1 in order to be a program participant.

2 ‘‘(e) EMPLOYMENT PRACTICES.—Nothing in this sec3 tion shall be construed to modify or affect the provisions

4 of any other Federal or State law or regulation that re5 lates to discrimination in employment. A religious organi6 zation’s exemption provided under section 702 of the Civil

7 Rights Act of 1964 regarding employment practices shall

8 not be affected by its participation in, or receipt of funds

9 from, a designated program.

10 ‘‘(f) RIGHTS OF PROGRAM BENEFICIARIES.—

11 ‘‘(1) IN GENERAL.—If an individual who is a

12 program beneficiary or a prospective program bene13 ficiary objects to the religious character of a pro14 gram participant, within a reasonable period of time

15 after the date of such objection such program partic16 ipant shall refer such individual to, and the appro17 priate Federal, State, or local government that ad18 ministers a designated program or is a program par19 ticipant shall provide to such individual (if otherwise

20 eligible for such services), program services that—

21 ‘‘(A) are from an alternative provider that

22 is accessible to, and has the capacity to provide

23 such services to, such individual; and

24 ‘‘(B) have a value that is not less than the

25 value of the services that the individual would
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1 have received from the program participant to

2 which the individual had such objection.

3 ‘‘(2) NOTICES.—Appropriate Federal, State, or

4 local governments that administer designated pro5 grams or are program participants shall ensure that

6 notice is provided to program beneficiaries or pro7 spective program beneficiaries of their rights under

8 this subsection.

9 ‘‘(3) ADDITIONAL REQUIREMENTS.—A program

10 participant making a referral pursuant to paragraph

11 (1) shall—

12 ‘‘(A) prior to making such referral, con13 sider any list that the State or local government

14 makes available of entities in the geographic

15 area that provide program services; and

16 ‘‘(B) ensure that the individual makes con17 tact with the alternative provider to which the

18 individual is referred.

19 ‘‘(4) NONDISCRIMINATION.—A religious organi20 zation that is a program participant shall not in pro21 viding program services or engaging in outreach ac22 tivities under designated programs discriminate

23 against a program beneficiary or prospective pro24 gram beneficiary on the basis of religion or religious

25 belief.
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1 ‘‘(g) FISCAL ACCOUNTABILITY.—

2 ‘‘(1) IN GENERAL.—Except as provided in para3 graph (2), any religious organization that is a pro4 gram participant shall be subject to the same regula5 tions as other recipients of awards of Federal finan6 cial assistance to account, in accordance with gen7 erally accepted auditing principles, for the use of the

8 funds provided under such awards.

9 ‘‘(2) LIMITED AUDIT.—With respect to the

10 award involved, if a religious organization that is a

11 program participant maintains the Federal funds in

12 a separate account from non-Federal funds, then

13 only the Federal funds shall be subject to audit.

14 ‘‘(h) COMPLIANCE.—With respect to compliance with

15 this section by an agency, a religious organization may

16 obtain judicial review of agency action in accordance with

17 chapter 7 of title 5, United States Code.

18 ‘‘SEC. 583. LIMITATIONS ON USE OF FUNDS FOR CERTAIN

19 PURPOSES.

20 ‘‘No funds provided under a designated program shall

21 be expended for sectarian worship, instruction, or pros22 elytization.

23 ‘‘SEC. 584. EDUCATIONAL REQUIREMENTS FOR PERSONNEL

24 IN DRUG TREATMENT PROGRAMS.

25 ‘‘(a) FINDINGS.—The Congress finds that—
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1 ‘‘(1) establishing unduly rigid or uniform edu2 cational qualification for counselors and other per3 sonnel in drug treatment programs may undermine

4 the effectiveness of such programs; and

5 ‘‘(2) such educational requirements for coun6 selors and other personnel may hinder or prevent the

7 provision of needed drug treatment services.

8 ‘‘(b) NONDISCRIMINATION.—In determining whether

9 personnel of a program participant that has a record of

10 successful drug treatment for the preceding three years

11 have satisfied State or local requirements for education

12 and training, a State or local government shall not dis13 criminate against education and training provided to such

14 personnel by a religious organization, so long as such edu15 cation and training includes basic content substantially

16 equivalent to the content provided by nonreligious organi17 zations that the State or local government would credit

18 for purposes of determining whether the relevant require19 ments have been satisfied.’’.

20 SEC. 705. NEW MARKETS VENTURE CAPITAL PROGRAM.

21 (a) SHORT TITLE.—This section may be cited as the

22 ‘‘New Markets Venture Capital Program Act of 2000’’.

23 (b) NEW MARKETS VENTURE CAPITAL PROGRAM.—

24 Title III of the Small Business Investment Act of 1958

25 (15 U.S.C. 681 et seq.) is amended—
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1 (1) in the heading for the title, by striking

2 ‘‘SMALL BUSINESS INVESTMENT COMPA3 NIES’’ and inserting ‘‘INVESTMENT DIVISION

4 PROGRAMS’’;

5 (2) by inserting before the heading for section

6 301 the following:

7 ‘‘PART A—SMALL BUSINESS INVESTMENT COMPANIES’’;

8 and

9 (3) by adding at the end the following:

10 ‘‘PART B—NEW MARKETS VENTURE CAPITAL PROGRAM

11 ‘‘SEC. 351. DEFINITIONS.

12 ‘‘In this part, the following definitions apply:

13 ‘‘(1) DEVELOPMENTAL VENTURE CAPITAL.—

14 The term ‘developmental venture capital’ means cap15 ital in the form of equity investments in businesses

16 made with a primary objective of fostering economic

17 development in low- or moderate-income geographic

18 areas.

19 ‘‘(2) LOW- OR MODERATE-INCOME GEOGRAPHIC

20 AREA.—The term ‘low- or moderate-income geo21 graphic area’ means—

22 ‘‘(A) a census tract, or the equivalent

23 county division as defined by the Bureau of the

24 Census for purposes of defining poverty areas,

25 in which—
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1 ‘‘(i) the poverty rate is not less than

2 20 percent;

3 ‘‘(ii) in the case of a census tract or

4 division located within a metropolitan area,

5 the median family income for such tract or

6 division does not exceed the greater of 80

7 percent of the statewide median family in8 come or 80 percent of the metropolitan

9 area median family income; or

10 ‘‘(iii) in the case of a census tract or

11 division not located within a metropolitan

12 area, the median family income for such

13 tract or division does not exceed 80 per14 cent of the statewide median family in15 come; or

16 ‘‘(B) any area located within—

17 ‘‘(i) a historically underutilized busi18 ness zone (HUBZone), as defined in sec19 tion 3(p) of the Small Business Act (15

20 U.S.C. 632(p));

21 ‘‘(ii) an urban empowerment zone or

22 an urban enterprise community, as des23 ignated by the Secretary of the Depart24 ment of Housing and Urban Development;

25 or
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1 ‘‘(iii) a rural empowerment zone or a

2 rural enterprise community, as designated

3 by the Secretary of the Department of Ag4 riculture.

5 ‘‘(3) NEW MARKETS VENTURE CAPITAL COM6 PANY.—The term ‘New Markets Venture Capital

7 company’ means a company that—

8 ‘‘(A) has been granted final approval by

9 the Administration under section 354(e); and

10 ‘‘(B) has entered into a participation

11 agreement with the Administration.

12 ‘‘(4) OPERATIONAL ASSISTANCE.—The term

13 ‘operational assistance’ means management, mar14 keting, and other technical assistance that assists a

15 small business concern with business development.

16 ‘‘(5) PARTICIPATION AGREEMENT.—The term

17 ‘participation agreement’ means an agreement, be18 tween the Administration and a company granted

19 final approval under section 354(e), that—

20 ‘‘(A) details the company’s operating plan

21 and investment criteria; and

22 ‘‘(B) requires the company to make invest23 ments in smaller enterprises at least 80 percent

24 of which are located in low- or moderate-income

25 geographic areas.
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1 ‘‘(6) SPECIALIZED SMALL BUSINESS INVEST2 MENT COMPANY.—The term ‘specialized small busi3 ness investment company’ means any small business

4 investment company that—

5 ‘‘(A) invests solely in small business con6 cerns that contribute to a well-balanced na7 tional economy by facilitating ownership in such

8 concerns by persons whose participation in the

9 free enterprise system is hampered because of

10 social or economic disadvantages;

11 ‘‘(B) is organized or chartered under State

12 business or nonprofit corporations statutes, or

13 formed as a limited partnership; and

14 ‘‘(C) was licensed under section 301(d), as

15 in effect before September 30, 1996.

16 ‘‘SEC. 352. PURPOSES.

17 ‘‘The purposes of the New Markets Venture Capital

18 Program established under this part are—

19 ‘‘(1) to promote economic development and the

20 creation of wealth and job opportunities in low- or

21 moderate-income geographic areas and among indi22 viduals living in such areas by encouraging develop23 mental venture capital investments in smaller enter24 prises primarily located in such areas; and
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1 ‘‘(2) to establish a developmental venture cap2 ital program, with the mission of addressing the

3 unmet equity investment needs of small enterprises

4 located in low- and moderate-income geographic

5 areas, to be administered by the Administration—

6 ‘‘(A) to enter into participation agreements

7 with New Markets Venture Capital companies;

8 ‘‘(B) to guarantee debentures of New Mar9 kets Venture Capital companies to enable each

10 such company to make developmental venture

11 capital investments in smaller enterprises in

12 low- or moderate-income geographic areas; and

13 ‘‘(C) to make grants to New Markets Ven14 ture Capital companies, and to other entities,

15 for the purpose of providing operational assist16 ance to smaller enterprises financed, or ex17 pected to be financed, by such companies.

18 ‘‘SEC. 353. ESTABLISHMENT.

19 ‘‘In accordance with this part, the Administration

20 shall establish a New Markets Venture Capital Program,

21 under which the Administration may—

22 ‘‘(1) enter into participation agreements with

23 companies granted final approval under section

24 354(e) for the purposes set forth in section 352;
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1 ‘‘(2) guarantee the debentures issued by New

2 Markets Venture Capital companies as provided in

3 section 355; and

4 ‘‘(3) make grants to New Markets Venture

5 Capital companies, and to other entities, under sec6 tion 358.

7 ‘‘SEC. 354. SELECTION OF NEW MARKETS VENTURE CAP8 ITAL COMPANIES.

9 ‘‘(a) ELIGIBILITY.—A company shall be eligible to

10 apply to participate, as a New Markets Venture Capital

11 company, in the program established under this part if—

12 ‘‘(1) the company is a newly formed for-profit

13 entity or a newly formed for-profit subsidiary of an

14 existing entity;

15 ‘‘(2) the company has a management team with

16 experience in community development financing or

17 relevant venture capital financing; and

18 ‘‘(3) the company has a primary objective of

19 economic development of low- or moderate-income

20 geographic areas.

21 ‘‘(b) APPLICATION.—To participate, as a New Mar22 kets Venture Capital company, in the program established

23 under this part a company meeting the eligibility require24 ments set forth in subsection (a) shall submit an applica25 tion to the Administration that includes—
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1 ‘‘(1) a business plan describing how the com2 pany intends to make successful developmental ven3 ture capital investments in identified low- or mod4 erate-income geographic areas;

5 ‘‘(2) information regarding the community de6 velopment finance or relevant venture capital quali7 fications and general reputation of the company’s

8 management;

9 ‘‘(3) a description of how the company intends

10 to work with community organizations and to seek

11 to address the unmet capital needs of the commu12 nities served;

13 ‘‘(4) a proposal describing how the company

14 will use the grant funds provided under this part to

15 provide operational assistance to smaller enterprises

16 financed by the company, including information re17 garding whether the company will use licensed pro18 fessionals, where applicable, on the company’s staff

19 or from an outside entity;

20 ‘‘(5) with respect to binding commitments to be

21 made to the company under this part, an estimate

22 of the ratio of cash to in-kind contributions;

23 ‘‘(6) a description of the criteria to be used to

24 evaluate whether and to what extent the company
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1 meets the objectives of the program established

2 under this part;

3 ‘‘(7) information regarding the management

4 and financial strength of any parent firm, affiliated

5 firm, or any other firm essential to the success of

6 the company’s business plan; and

7 ‘‘(8) such other information as the Administra8 tion may require.

9 ‘‘(c) CONDITIONAL APPROVAL.—

10 ‘‘(1) IN GENERAL.—From among companies

11 submitting applications under subsection (b), the

12 Administration shall, in accordance with this sub13 section, conditionally approve companies to partici14 pate in the New Markets Venture Capital Program.

15 ‘‘(2) SELECTION CRITERIA.—In selecting com16 panies under paragraph (1), the Administration

17 shall consider the following:

18 ‘‘(A) The likelihood that the company will

19 meet the goals of its business plan.

20 ‘‘(B) The experience and background of

21 the company’s management team.

22 ‘‘(C) The need for developmental venture

23 capital investments in the geographic areas in

24 which the company intends to invest.
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1 ‘‘(D) The extent to which the company will

2 concentrate its activities on serving the geo3 graphic areas in which it intends to invest.

4 ‘‘(E) The likelihood that the company will

5 be able to satisfy the conditions under sub6 section (d).

7 ‘‘(F) The extent to which the activities

8 proposed by the company will expand economic

9 opportunities in the geographic areas in which

10 the company intends to invest.

11 ‘‘(G) The strength of the company’s pro12 posal to provide operational assistance under

13 this part as the proposal relates to the ability

14 of the applicant to meet applicable cash require15 ments and properly utilize in-kind contribu16 tions, including the use of resources for the

17 services of licensed professionals whether pro18 vided by persons on the company’s staff or by

19 persons outside of the company.

20 ‘‘(H) Any other factors deemed appro21 priate by the Administration.

22 ‘‘(3) NATIONWIDE DISTRIBUTION.—The Admin23 istration shall select companies under paragraph (1)

24 in such a way that promotes investment nationwide.
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1 ‘‘(d) REQUIREMENTS TO BE MET FOR FINAL AP2 PROVAL.—The Administration shall grant each condi3 tionally approved company a period of time, not to exceed

4 2 years, to satisfy the following requirements:

5 ‘‘(1) CAPITAL REQUIREMENT.—Each condi6 tionally approved company must raise not less than

7 $5,000,000 of private capital or binding capital com8 mitments from one or more investors (other than

9 agencies or departments of the Federal Government)

10 who meet criteria established by the Administration.

11 ‘‘(2) NONADMINISTRATION RESOURCES FOR

12 OPERATIONAL ASSISTANCE.—In order to provide

13 operational assistance to smaller enterprises ex14 pected to be financed by the company, each condi15 tionally approved company—

16 ‘‘(A) must have binding commitments (for

17 contribution in cash or in kind)—

18 ‘‘(i) from any sources other than the

19 Administration that meet criteria estab20 lished by the Administration;

21 ‘‘(ii) payable or available over a

22 multiyear period acceptable to the Admin23 istration (not to exceed 10 years); and
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1 ‘‘(iii) in an amount not less than 30

2 percent of the total amount of capital and

3 commitments raised under paragraph (1);

4 ‘‘(B) must have purchased an annuity—

5 ‘‘(i) from an insurance company ac6 ceptable to the Administration;

7 ‘‘(ii) using funds (other than the

8 funds raised under paragraph (1)) from

9 any source other than the Administration;

10 and

11 ‘‘(iii) that yields cash payments over a

12 multiyear period acceptable to the Admin13 istration (not to exceed 10 years) in an

14 amount not less than 30 percent of the

15 total amount of capital and commitments

16 raised under paragraph (1); or

17 ‘‘(C) must have binding commitments (for

18 contributions in cash or in kind) of the type de19 scribed in subparagraph (A) and must have

20 purchased an annuity of the type described in

21 subparagraph (B), which in the aggregate make

22 available, over a multiyear period acceptable to

23 the Administration (not to exceed 10 years), an

24 amount not less than 30 percent of the total
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1 amount of capital and commitments raised

2 under paragraph (1).

3 ‘‘(e) FINAL APPROVAL.—The Administration shall

4 grant to a company conditionally approved under sub5 section (c) final approval to participate in the program es6 tablished under this part after the company has met the

7 requirements set forth in subsection (d).

8 ‘‘SEC. 355. DEBENTURES.

9 ‘‘(a) IN GENERAL.—The Administration may guar10 antee the timely payment of principal and interest, as

11 scheduled, on debentures issued by any New Markets Ven12 ture Capital company.

13 ‘‘(b) TERMS AND CONDITIONS.—The Administration

14 may make guarantees under this section on such terms

15 and conditions as it deems appropriate, except that the

16 term of any debenture guaranteed under this section shall

17 not exceed 15 years.

18 ‘‘(c) FULL FAITH AND CREDIT OF THE UNITED

19 STATES.—The full faith and credit of the United States

20 is pledged to pay all amounts that may be required to be

21 paid under any guarantee under this part.

22 ‘‘(d) MAXIMUM GUARANTEE.—

23 ‘‘(1) IN GENERAL.—Under this section, the Ad24 ministration may guarantee the debentures issued by

25 a New Markets Venture Capital company only to the
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1 extent that the total face amount of outstanding

2 guaranteed debentures of such company does not ex3 ceed 150 percent of the private capital of the com4 pany, as determined by the Administration.

5 ‘‘(2) TREATMENT OF CERTAIN FEDERAL

6 FUNDS.—For the purposes of paragraph (1), private

7 capital shall include capital that is considered to be

8 Federal funds, if such capital is contributed by an

9 investor other than an agency or department of the

10 Federal Government.

11 ‘‘SEC. 356. ISSUANCE AND GUARANTEE OF TRUST CERTIFI12 CATES.

13 ‘‘(a) ISSUANCE.—The Administration may issue trust

14 certificates representing ownership of all or a fractional

15 part of debentures issued by a New Markets Venture Cap16 ital company and guaranteed by the Administration under

17 this part, if such certificates are based on and backed by

18 a trust or pool approved by the Administration and com19 posed solely of guaranteed debentures.

20 ‘‘(b) GUARANTEE.—

21 ‘‘(1) IN GENERAL.—The Administration may,

22 under such terms and conditions as it deems appro23 priate, guarantee the timely payment of the principal

24 of and interest on trust certificates issued by the
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1 Administration or its agents for purposes of this sec2 tion.

3 ‘‘(2) LIMITATION.—Each guarantee under this

4 subsection shall be limited to the extent of principal

5 and interest on the guaranteed debentures that com6 pose the trust or pool.

7 ‘‘(3) PREPAYMENT OR DEFAULT.—In the event

8 that a debenture in a trust or pool is prepaid, or in

9 the event of default of such a debenture, the guar10 antee of timely payment of principal and interest on

11 the trust certificates shall be reduced in proportion

12 to the amount of principal and interest such prepaid

13 debenture represents in the trust or pool. Interest on

14 prepaid or defaulted debentures shall accrue and be

15 guaranteed by the Administration only through the

16 date of payment of the guarantee. At any time dur17 ing its term, a trust certificate may be called for re18 demption due to prepayment or default of all deben19 tures.

20 ‘‘(c) FULL FAITH AND CREDIT OF THE UNITED

21 STATES.—The full faith and credit of the United States

22 is pledged to pay all amounts that may be required to be

23 paid under any guarantee of a trust certificate issued by

24 the Administration or its agents under this section.
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1 ‘‘(d) FEES.—The Administration shall not collect a

2 fee for any guarantee of a trust certificate under this sec3 tion, but any agent of the Administration may collect a

4 fee approved by the Administration for the functions de5 scribed in subsection (f)(2).

6 ‘‘(e) SUBROGATION AND OWNERSHIP RIGHTS.—

7 ‘‘(1) SUBROGATION.—In the event the Adminis8 tration pays a claim under a guarantee issued under

9 this section, it shall be subrogated fully to the rights

10 satisfied by such payment.

11 ‘‘(2) OWNERSHIP RIGHTS.—No Federal, State,

12 or local law shall preclude or limit the exercise by

13 the Administration of its ownership rights in the de14 bentures residing in a trust or pool against which

15 trust certificates are issued under this section.

16 ‘‘(f) MANAGEMENT AND ADMINISTRATION.—

17 ‘‘(1) REGISTRATION.—

18 ‘‘(A) IN GENERAL.—The Administration

19 may provide for a central registration of all

20 trust certificates issued under this section.

21 ‘‘(B) FORMS OF REGISTRATION.—Nothing

22 in this subsection shall prohibit the use of a

23 book entry or other electronic form of registra24 tion for trust certificates.

25 ‘‘(2) CONTRACTING OF FUNCTIONS.—
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1 ‘‘(A) IN GENERAL.—The Administration

2 may contract with an agent or agents to carry

3 out on behalf of the Administration the pooling

4 and the central registration functions provided

5 for in this section including, notwithstanding

6 any other provision of law—

7 ‘‘(i) maintenance, on behalf of and

8 under the direction of the Administration,

9 of such commercial bank accounts or in10 vestments in obligations of the United

11 States as may be necessary to facilitate the

12 creation of trusts or pools backed by de13 bentures guaranteed under this part; and

14 ‘‘(ii) the issuance of trust certificates

15 to facilitate the creation of such trusts or

16 pools.

17 ‘‘(B) FIDELITY BOND OR INSURANCE RE18 QUIREMENT.—Any agent performing functions

19 on behalf of the Administration under this

20 paragraph shall provide a fidelity bond or insur21 ance in such amounts as the Administration de22 termines to be necessary to fully protect the in23 terests of the United States.

24 ‘‘(3) APPLICABILITY OF THE SECURITIES EX25 CHANGE ACT OF 1934.—Notwithstanding section
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1 3(a)(42) of the Securities Exchange Act of 1934 (15

2 U.S.C. 78c(a)(42)), trust certificates issued under

3 this section shall not be treated as government secu4 rities for the purposes of that Act.

5 ‘‘SEC. 357. FEES.

6 ‘‘Except as provided in section 356(d), the Adminis7 tration may charge such fees as it deems appropriate with

8 respect to any guarantee or grant issued under this part.

9 ‘‘SEC. 358. OPERATIONAL ASSISTANCE GRANTS.

10 ‘‘(a) IN GENERAL.—

11 ‘‘(1) AUTHORITY.—In accordance with this sec12 tion, the Administration may make grants to New

13 Markets Venture Capital companies and to other en14 tities, as authorized by this part, to provide oper15 ational assistance to smaller enterprises financed, or

16 expected to be financed, by such companies or other

17 entities.

18 ‘‘(2) TERMS.—Grants made under this sub19 section shall be made over a multiyear period not to

20 exceed 10 years, under such other terms as the Ad21 ministration may require.

22 ‘‘(3) GRANTS TO SPECIALIZED SMALL BUSINESS

23 INVESTMENT COMPANIES.—

24 ‘‘(A) AUTHORITY.—In accordance with

25 this section, the Administration may make
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1 grants to specialized small business investment

2 companies to provide operational assistance to

3 smaller enterprises financed, or expected to be

4 financed, by such companies after the effective

5 date of the New Markets Venture Capital Pro6 gram Act of 2000.

7 ‘‘(B) USE OF FUNDS.—

8 ‘‘(i) IN GENERAL.—The proceeds of a

9 grant made under this paragraph may be

10 used by the company receiving such grant

11 only to provide operational assistance in

12 connection with an equity investment

13 (made with capital raised after the effec14 tive date of the New Markets Venture Cap15 ital Program Act of 2000) in a business lo16 cated in a low- or moderate-income geo17 graphic area.

18 ‘‘(ii) ADDITIONAL LIMITATION.—

19 Operational assistance referred to in clause

20 (i) may not be provided in connection with

21 more than one equity investment.

22 ‘‘(C) SUBMISSION OF PLANS.—A special23 ized small business investment company shall

24 be eligible for a grant under this section only if

25 the company submits to the Administrator, in
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1 such form and manner as the Administrator

2 may require, a plan for use of the grant.

3 ‘‘(4) GRANT AMOUNT.—

4 ‘‘(A) NEW MARKETS VENTURE CAPITAL

5 COMPANIES.—The amount of a grant made

6 under this subsection to a New Markets Ven7 ture Capital company shall be equal to the re8 sources (in cash or in kind) raised by the com9 pany under with section 354(d)(2).

10 ‘‘(B) OTHER ENTITIES.—The amount of a

11 grant made under this subsection to any entity

12 other than a New Markets Venture capital com13 pany shall be equal to the resources (in cash or

14 in kind) raised by the entity in accordance with

15 the requirements applicable to New Markets

16 Venture Capital companies set forth in section

17 354(d)(2).

18 ‘‘(5) PRO RATA REDUCTIONS.—If the amount

19 made available to carry out this section is insuffi20 cient for the Administration to provide grants in the

21 amounts provided for in paragraph (4), the Adminis22 tration shall make pro rata reductions in the

23 amounts otherwise payable to each company and en24 tity under such paragraph.

25 ‘‘(b) SUPPLEMENTAL GRANTS.—
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1 ‘‘(1) IN GENERAL.—The Administration may

2 make supplemental grants to New Markets Venture

3 Capital companies and to other entities, as author4 ized by this part, under such terms as the Adminis5 tration may require, to provide additional oper6 ational assistance to smaller enterprises financed, or

7 expected to be financed, by the companies.

8 ‘‘(2) MATCHING REQUIREMENT.—The Adminis9 tration may require, as a condition of any supple10 mental grant made under this subsection, that the

11 company or entity receiving the grant provide from

12 resources (in cash or in kind), other than those pro13 vided by the Administration, a matching contribu14 tion equal to the amount of the supplemental grant.

15 ‘‘(c) LIMITATION.—None of the assistance made

16 available under this section may be used for any operating

17 expense of a New Markets Venture Capital company or

18 a specialized small business investment company.

19 ‘‘SEC. 359. BANK PARTICIPATION.

20 ‘‘(a) IN GENERAL.—Except as provided in subsection

21 (b), any national bank, any member bank of the Federal

22 Reserve System, and (to the extent permitted under appli23 cable State law) any insured bank that is not a member

24 of such system, may invest in any New Markets Venture
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1 Capital company, or in any entity established to invest

2 solely in New Markets Venture Capital companies.

3 ‘‘(b) LIMITATION.—No bank described in subsection

4 (a) may make investments described in such subsection

5 that are greater than 5 percent of the capital and surplus

6 of the bank.

7 ‘‘SEC. 360. FEDERAL FINANCING BANK.

8 ‘‘Section 318 shall not apply to any debenture issued

9 by a New Markets Venture Capital company under this

10 part.

11 ‘‘SEC. 361. REPORTING REQUIREMENTS.

12 ‘‘Each New Markets Venture Capital company that

13 participates in the program established under this part

14 shall provide to the Administration such information as

15 the Administration may require, including—

16 ‘‘(1) information related to the measurement

17 criteria that the company proposed in its program

18 application; and

19 ‘‘(2) in each case in which the company under

20 this part makes an investment in, or a loan or grant

21 to, a business that is not located in a low- or mod22 erate-income geographic area, a report on the num23 ber and percentage of employees of the business who

24 reside in such areas.
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1 ‘‘SEC. 362. EXAMINATIONS.

2 ‘‘(a) IN GENERAL.—Each New Markets Venture

3 Capital company that participates in the program estab4 lished under this part shall be subject to examinations

5 made at the direction of the Investment Division of the

6 Administration in accordance with this section.

7 ‘‘(b) ASSISTANCE OF PRIVATE SECTOR ENTITIES.—

8 Examinations under this section may be conducted with

9 the assistance of a private sector entity that has both the

10 qualifications and the expertise necessary to conduct such

11 examinations.

12 ‘‘(c) COSTS.—

13 ‘‘(1) ASSESSMENT.—

14 ‘‘(A) IN GENERAL.—The Administration

15 may assess the cost of examinations under this

16 section, including compensation of the exam17 iners, against the company examined.

18 ‘‘(B) PAYMENT.—Any company against

19 which the Administration assesses costs under

20 this paragraph shall pay such costs.

21 ‘‘(2) DEPOSIT OF FUNDS.—Funds collected

22 under this section shall be deposited in the account

23 for salaries and expenses of the Administration.

24 ‘‘SEC. 363. INJUNCTIONS AND OTHER ORDERS.

25 ‘‘(a) IN GENERAL.—Whenever, in the judgment of

26 the Administration, a New Markets Venture Capital com-
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1 pany or any other person has engaged or is about to en2 gage in any acts or practices which constitute or will con3 stitute a violation of any provision of this Act, or of any

4 rule or regulation under this Act, or of any order issued

5 under this Act, the Administration may make application

6 to the proper district court of the United States or a

7 United States court of any place subject to the jurisdiction

8 of the United States for an order enjoining such acts or

9 practices, or for an order enforcing compliance with such

10 provision, rule, regulation, or order, and such courts shall

11 have jurisdiction of such actions and, upon a showing by

12 the Administration that such New Markets Venture Cap13 ital company or other person has engaged or is about to

14 engage in any such acts or practices, a permanent or tem15 porary injunction, restraining order, or other order, shall

16 be granted without bond.

17 ‘‘(b) JURISDICTION.—In any proceeding under sub18 section (a), the court as a court of equity may, to such

19 extent as it deems necessary, take exclusive jurisdiction

20 of the New Market Venture Capital company and the as21 sets thereof, wherever located, and the court shall have

22 jurisdiction in any such proceeding to appoint a trustee

23 or receiver to hold or administer under the direction of

24 the court the assets so possessed.

25 ‘‘(c) ADMINISTRATION AS TRUSTEE OR RECEIVER.—
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1 ‘‘(1) AUTHORITY.—The Administration may act

2 as trustee or receiver of a New Markets Venture

3 Capital company.

4 ‘‘(2) APPOINTMENT.—Upon request of the Ad5 ministration, the court may appoint the Administra6 tion to act as a trustee or receiver of a New Markets

7 Venture Capital company unless the court deems

8 such appointment inequitable or otherwise inappro9 priate by reason of the special circumstances in10 volved.

11 ‘‘SEC. 364. ADDITIONAL PENALTIES FOR NONCOMPLIANCE.

12 ‘‘(a) IN GENERAL.—With respect to any New Mar13 kets Venture Capital company that violates or fails to

14 comply with any of the provisions of this Act, of any regu15 lation issued under this Act, or of any participation agree16 ment entered into under this Act, the Administration may

17 in accordance with this section—

18 ‘‘(1) void the participation agreement between

19 the Administration and the company; and

20 ‘‘(2) cause the company to forfeit all of the

21 rights and privileges derived by the company from

22 this Act.

23 ‘‘(b) ADJUDICATION OF NONCOMPLIANCE.—

24 ‘‘(1) IN GENERAL.—Before the Administration

25 may cause a New Markets Venture Capital company
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1 to forfeit rights or privileges under subsection (a), a

2 court of the United States of competent jurisdiction

3 must find that the company committed a violation,

4 or failed to comply, in a cause of action brought for

5 that purpose in the district, territory, or other place

6 subject to the jurisdiction of the United States, in

7 which the principal office of the company is located.

8 ‘‘(2) PARTIES AUTHORIZED TO FILE CAUSES OF

9 ACTION.—Each cause of action brought by the

10 United States under this subsection shall be brought

11 by the Administration or by the Attorney General.

12 ‘‘SEC. 365. UNLAWFUL ACTS AND OMISSIONS; BREACH OF

13 FIDUCIARY DUTY.

14 ‘‘(a) PARTIES DEEMED TO COMMIT A VIOLATION.—

15 Whenever any New Markets Venture Capital company vio16 lates any provision of this Act, of a regulation issued

17 under this Act, or of a participation agreement entered

18 into under this Act, by reason of its failure to comply with

19 its terms or by reason of its engaging in any act or prac20 tice that constitutes or will constitute a violation thereof,

21 such violation shall also be deemed to be a violation and

22 an unlawful act committed by any person who, directly

23 or indirectly, authorizes, orders, participates in, causes,

24 brings about, counsels, aids, or abets in the commission
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1 of any acts, practices, or transactions that constitute or

2 will constitute, in whole or in part, such violation.

3 ‘‘(b) FIDUCIARY DUTIES.—It shall be unlawful for

4 any officer, director, employee, agent, or other participant

5 in the management or conduct of the affairs of a New

6 Markets Venture Capital company to engage in any act

7 or practice, or to omit any act or practice, in breach of

8 the person’s fiduciary duty as such officer, director, em9 ployee, agent, or participant if, as a result thereof, the

10 company suffers or is in imminent danger of suffering fi11 nancial loss or other damage.

12 ‘‘(c) UNLAWFUL ACTS.—Except with the written con13 sent of the Administration, it shall be unlawful—

14 ‘‘(1) for any person to take office as an officer,

15 director, or employee of any New Markets Venture

16 Capital company, or to become an agent or partici17 pant in the conduct of the affairs or management of

18 such a company, if the person—

19 ‘‘(A) has been convicted of a felony, or any

20 other criminal offense involving dishonesty or

21 breach of trust, or

22 ‘‘(B) has been found civilly liable in dam23 ages, or has been permanently or temporarily

24 enjoined by an order, judgment, or decree of a

25 court of competent jurisdiction, by reason of
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1 any act or practice involving fraud, or breach of

2 trust; and

3 ‘‘(2) for any person continue to serve in any of

4 the capacities described in paragraph (1), if—

5 ‘‘(A) the person is convicted of a felony, or

6 any other criminal offense involving dishonesty

7 or breach of trust, or

8 ‘‘(B) the person is found civilly liable in

9 damages, or is permanently or temporarily en10 joined by an order, judgment, or decree of a

11 court of competent jurisdiction, by reason of

12 any act or practice involving fraud or breach of

13 trust.

14 ‘‘SEC. 366. REMOVAL OR SUSPENSION OF DIRECTORS OR

15 OFFICERS.

16 ‘‘Using the procedures for removing or suspending a

17 director or an officer of a licensee set forth in section 313

18 (to the extent such procedures are not inconsistent with

19 the requirements of this part), the Administration may re20 move or suspend any director or officer of any New Mar21 kets Venture Capital company.

22 ‘‘SEC. 367. REGULATIONS.

23 ‘‘The Administration may issue such regulations as

24 it deems necessary to carry out the provisions of this part

25 in accordance with its purposes.
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1 ‘‘SEC. 368. AUTHORIZATIONS OF APPROPRIATIONS.

2 ‘‘(a) IN GENERAL.—For fiscal years 2000 through

3 2005, the Administration is authorized to be appropriated,

4 to remain available until expended—

5 ‘‘(1) such subsidy budget authority as may be

6 necessary to guarantee $150,000,000 of debentures

7 under this part; and

8 ‘‘(2) $30,000,000 to make grants under this

9 part.

10 ‘‘(b) FUNDS COLLECTED FOR EXAMINATIONS.—

11 Funds deposited under section 362(c)(2) are authorized

12 to be appropriated only for the costs of examinations

13 under section 362 and for the costs of other oversight ac14 tivities with respect to the program established under this

15 part.’’.

16 (c) CONFORMING AMENDMENT.—Section 20(e)(1)(C)

17 of the Small Business Act (15 U.S.C 631 note) is amend18 ed by inserting ‘‘part A of’’ before ‘‘title III’’.

19 (d) CALCULATION OF MAXIMUM AMOUNT OF SBIC

20 LEVERAGE.—

21 (1) MAXIMUM LEVERAGE.—Section 303(b)(2)

22 of the Small Business Investment Act of 1958 (15

23 U.S.C. 683(b)(2)) is amended to read as follows:

24 ‘‘(2) MAXIMUM LEVERAGE.—

25 ‘‘(A) IN GENERAL.—After March 31,

26 1993, the maximum amount of outstanding le-
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1 verage made available to a company licensed

2 under section 301(c) of this Act shall be deter3 mined by the amount of such company’s private

4 capital—

5 ‘‘(i) if the company has private capital

6 of not more than $15,000,000, the total

7 amount of leverage shall not exceed 300

8 percent of private capital;

9 ‘‘(ii) if the company has private cap10 ital of more than $15,000,000 but not

11 more than $30,000,000, the total amount

12 of leverage shall not exceed $45,000,000

13 plus 200 percent of the amount of private

14 capital over $15,000,000; and

15 ‘‘(iii) if the company has private cap16 ital of more than $30,000,000, the total

17 amount of leverage shall not exceed

18 $75,000,000 plus 100 percent of the

19 amount of private capital over $30,000,000

20 but not to exceed an additional

21 $15,000,000.

22 ‘‘(B) ADJUSTMENTS.—

23 ‘‘(i) IN GENERAL.—The dollar

24 amounts in clauses (i), (ii), and (iii) of

25 subparagraph (A) shall be adjusted annu-
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1 ally to reflect increases in the Consumer

2 Price Index established by the Bureau of

3 Labor Statistics of the Department of

4 Labor.

5 (ii) INITIAL ADJUSTMENTS.—The ini6 tial adjustments made under this subpara7 graph after the date of the enactment of

8 the Small Business Reauthorization Act of

9 1997 shall reflect only increases from

10 March 31, 1993.

11 ‘‘(C) INVESTMENTS IN LOW- OR MOD12 ERATE INCOME AREAS.—In calculating the out13 standing leverage of a company for the pur14 poses of subparagraph (A), the Administrator

15 shall not include the amount of the cost basis

16 of any equity investment made by the company

17 in a smaller enterprise located in a low- or mod18 erate-income geographic area (as defined in sec19 tion 351), to the extent that the total of such

20 amounts does not exceed 50 percent of the com21 pany’s private capital.’’.

22 (2) MAXIMUM AGGREGATE LEVERAGE.—Section

23 303(b)(4) of the Small Business Investment Act of

24 1958 (15 U.S.C. 683(b)(4)) is amended by adding

25 at the end the following new subparagraph:
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1 ‘‘(D) INVESTMENTS IN LOW- OR MOD2 ERATE INCOME AREAS.—In calculating the ag3 gregate outstanding leverage of a company for

4 the purposes of subparagraph (A), the Adminis5 trator shall not include the amount of the cost

6 basis of any equity investment made by the

7 company in a smaller enterprise located in a

8 low- or moderate-income geographic area (as

9 defined in section 351), to the extent that the

10 total of such amounts does not exceed 50 per11 cent of the company’s private capital.’’.

12 (e) BANKRUPTCY EXEMPTION FOR NEW MARKETS

13 VENTURE CAPITAL COMPANIES.—Section 109(b)(2) of

14 title 11, United States Code, is amended by inserting ‘‘a

15 New Markets Venture Capital company as defined in sec16 tion 351 of the Small Business Investment Act of 1958,’’

17 after ‘‘homestead association,’’.

18 (f) FEDERAL SAVINGS ASSOCIATIONS.—Section

19 5(c)(4) of the Home Owners’ Loan Act (12 U.S.C.

20 1464(c)(4)) is amended by adding at the end the fol21 lowing:

22 ‘‘(F) NEW MARKETS VENTURE CAPITAL

23 COMPANIES.—A Federal savings association

24 may invest in stock, obligations, or other securi25 ties of any New Markets Venture Capital com-
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1 pany as defined in section 351 of the Small

2 Business investment Act of 1958, except that a

3 Federal savings association may not make any

4 investment under this subparagraph if its ag5 gregate outstanding investment under this sub6 paragraph would exceed 5 percent of the capital

7 and surplus of such savings association.’’.

8 SEC. 706. BUSINESSLINC GRANTS AND COOPERATIVE

9 AGREEMENTS.

10 Section 8 of the Small Business Act (15 U.S.C. 637)

11 is amended by adding at the end the following:

12 ‘‘(m) BUSINESSLINC GRANTS AND COOPERATIVE

13 AGREEMENTS.—

14 ‘‘(1) IN GENERAL.—In accordance with this

15 subsection, the Administrator may make grants to

16 and enter into cooperative agreements with any coa17 lition of private entities, public entities, or any com18 bination of private and public entities—

19 ‘‘(A) to expand business-to-business rela20 tionships between large and small businesses;

21 and

22 ‘‘(B) to provide businesses, directly or indi23 rectly, with online information and a database

24 of companies that are interested in mentor-
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prote ́ge

 ́ 1 programs or community-based, state2 wide, or local business development programs.

3 ‘‘(2) MATCHING REQUIREMENT.—Subject to

4 subparagraph (B), the Administrator may make a

5 grant to a coalition under paragraph (1) only if the

6 coalition provides for activities described in para7 graph (1)(A) or (1)(B) an amount, either in kind or

8 in cash, equal to the grant amount.

9 ‘‘(3) AUTHORIZATION OF APPROPRIATIONS.—

10 There is authorized to be appropriated to carry out

11 this subsection $6,600,000, to remain available until

12 expended, for each of fiscal years 2001 through

13 2003.’’.

Passed the House of Representatives July 25, 2000.

Attest: JEFF TRANDAHL,

Clerk.
Calendar No. 780

106TH CONGRESS

2D SESSION H. R. 4923

AN ACT

To amend the Internal Revenue Code of 1986 to

provide tax incentives for the renewal of distressed communities, to provide for nine additional empowerment zones and increased tax incentives for empowerment zone development, toencourage investments in new markets, and forother purposes.

SEPTEMBER 5, 2000

Read the second time and placed on the calendar