I

106TH CONGRESS

1ST SESSION H. R. 815

To amend the Internal Revenue Code of 1986 to provide for the designation

of renewal communities, to provide tax incentives relating to such communities, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 24, 1999

Mr. WATTS of Oklahoma (for himself, Mr. DAVIS of Illinois, Mr. TALENT, Mr.

CLYBURN, Mr. ARMEY, Mr. FROST, Mrs. FOWLER, Mr. ENGLISH, Mr.

FORD, Ms. PRYCE of Ohio, Mr. KING, Mr. LIPINSKI, Mrs. BONO, Mr.

KOLBE, Mr. DELAY, Mrs. CHRISTIAN-CHRISTENSEN, Mrs. EMERSON,

Mr. KNOLLENBERG, Mr. HAYWORTH, Mrs. CUBIN, Mr. HORN, Mr. HILL

of Montana, Mr. WELDON of Florida, Mr. TERRY, Mr. SOUDER, Mr.

BALLENGER, Mr. CHABOT, Mr. CHAMBLISS, Mr. WELLER, Mr.

TANCREDO, Mr. SENSENBRENNER, Mr. NORWOOD, Mr. METCALF, Mr.

DICKEY, Mr. GILLMOR, Mr. GREEN of Wisconsin, Mr. HULSHOF, Mr.

LARGENT, Mr. SCARBOROUGH, Mr. PITTS, Mr. ROHRABACHER, Mr.

BURR of North Carolina, Mr. EHLERS, Mr. BUYER, Mr. LATHAM, Mr.

SIMPSON, Mr. MCCOLLUM, Mr. LATOURETTE, Mr. CUNNINGHAM, Mr.

COOK, Mr. LEWIS of Kentucky, Mr. BLUNT, Mr. NEY, Mr. GARY MILLER

of California, Mr. PICKERING, Mr. NETHERCUTT, Mr. MCHUGH, Ms.

GRANGER, Mr. FORBES, Mrs. MYRICK, Mr. SHOWS, Mrs. KELLY, Mr.

OWENS, Mr. THOMPSON of Mississippi, and Mr. COBURN) introduced the

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

and in addition to the Committees on Banking and Financial Services,

Commerce, and the Budget, for a period to be determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 to provide

for the designation of renewal communities, to provide
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tax incentives relating to such communities, and for

other purposes.

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

3 SECTION 1. SHORT TITLE; ETC.

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

5 ‘‘American Community Renewal Act of 1999’’.

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—DESIGNATION OF AND 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.

Sec. 103. Extension of work opportunity tax credit for renewal communities.

Sec. 104. Conforming and clerical amendments.

Sec. 105. Evaluation and reporting requirements.

Sec. 106. Exclusion of effects of this Act from Paygo scorecard.

TITLE II—ADDITIONAL PROVISIONS

Sec. 201. Transfer of unoccupied and substandard HUD-held housing in renewal communities to local governments.

Sec. 202. Prevention and treatment of substance abuse; services provided

through religious organizations.

Sec. 203. CRA credit for investments in community development organizations

located in renewal communities.
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1 TITLE I—DESIGNATION OF AND

2 TAX INCENTIVES FOR RE3 NEWAL COMMUNITIES

4 SEC. 101. DESIGNATION OF AND TAX INCENTIVES FOR RE5 NEWAL COMMUNITIES.

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

7 at the end the following new subchapter:

8 ‘‘Subchapter X—Renewal Communities

‘‘Part I. Designation.

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

business.

‘‘Part III. Family development accounts.

‘‘Part IV. Additional incentives.

9 ‘‘PART I—DESIGNATION

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

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

11 ‘‘(a) DESIGNATION.—

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

13 the term ‘renewal community’ means any area—

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

15 local governments and the State or States in

16 which it is located for designation as a renewal

17 community (hereinafter in this section referred

18 to as a ‘nominated area’); and

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

20 Urban Development designates as a renewal

21 community, after consultation with—
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1 ‘‘(i) the Secretaries of Agriculture,

2 Commerce, Labor, and the Treasury; the

3 Director of the Office of Management and

4 Budget; and the Administrator of the

5 Small Business Administration; and

6 ‘‘(ii) in the case of an area on an In7 dian reservation, the Secretary of the Inte8 rior.

9 ‘‘(2) NUMBER OF DESIGNATIONS.—

10 ‘‘(A) IN GENERAL.—The Secretary of

11 Housing and Urban Development may des12 ignate not more than 100 nominated areas as

13 renewal communities.

14 ‘‘(B) MINIMUM DESIGNATION IN RURAL

15 AREAS.—Of the areas designated under para16 graph (1), at least 20 percent must be areas—

17 ‘‘(i) which are within a local govern18 ment jurisdiction or jurisdictions with a

19 population of less than 50,000,

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

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

23 ‘‘(iii) which are determined by the

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

2 of Commerce, to be rural areas.

3 ‘‘(3) AREAS DESIGNATED BASED ON DEGREE

4 OF POVERTY, ETC.—

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

6 provided in this section, the nominated areas

7 designated as renewal communities under this

8 subsection shall be those nominated areas with

9 the highest average ranking with respect to the

10 criteria described in subparagraphs (B), (C),

11 and (D) of subsection (c)(3). For purposes of

12 the preceding sentence, an area shall be ranked

13 within each such criterion on the basis of the

14 amount by which the area exceeds such cri15 terion, with the area which exceeds such cri16 terion by the greatest amount given the highest

17 ranking.

18 ‘‘(B) EXCEPTION WHERE INADEQUATE

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

20 designated under subparagraph (A) if the Sec21 retary of Housing and Urban Development de22 termines that the course of action described in

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

24 inadequate.
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1 ‘‘(C) PRIORITY FOR EMPOWERMENT ZONES

2 AND ENTERPRISE COMMUNITIES WITH RESPECT

3 TO FIRST HALF OF DESIGNATIONS.—With re4 spect to the first 50 percent of the designations

5 made under this section—

6 ‘‘(i) half shall be chosen from nomi7 nated areas which are empowerment zones

8 or enterprise communities (and are other9 wise eligible for designation under this sec10 tion); and

11 ‘‘(ii) 20 percent shall be areas de12 scribed in paragraph (2)(B).

13 ‘‘(4) LIMITATION ON DESIGNATIONS.—

14 ‘‘(A) PUBLICATION OF REGULATIONS.—

15 The Secretary of Housing and Urban Develop16 ment shall prescribe by regulation no later than

17 4 months after the date of the enactment of

18 this section, after consultation with the officials

19 described in paragraph (1)(B)—

20 ‘‘(i) the procedures for nominating an

21 area under paragraph (1)(A);

22 ‘‘(ii) the parameters relating to the

23 size and population characteristics of a re24 newal community; and
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1 ‘‘(iii) the manner in which nominated

2 areas will be evaluated based on the cri3 teria specified in subsection (d).

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

5 of Housing and Urban Development may des6 ignate nominated areas as renewal communities

7 only during the 24-month period beginning on

8 the first day of the first month following the

9 month in which the regulations described in

10 subparagraph (A) are prescribed.

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

12 of Housing and Urban Development shall not

13 make any designation of a nominated area as a

14 renewal community under paragraph (2)

15 unless—

16 ‘‘(i) the local governments and the

17 States in which the nominated area is lo18 cated have the authority—

19 ‘‘(I) to nominate such area for

20 designation as a renewal community;

21 ‘‘(II) to make the State and local

22 commitments described in subsection

23 (d); and

24 ‘‘(III) to provide assurances sat25 isfactory to the Secretary of Housing
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1 and Urban Development that such

2 commitments will be fulfilled,

3 ‘‘(ii) a nomination regarding such

4 area is submitted in such a manner and in

5 such form, and contains such information,

6 as the Secretary of Housing and Urban

7 Development shall by regulation prescribe;

8 and

9 ‘‘(iii) the Secretary of Housing and

10 Urban Development determines that any

11 information furnished is reasonably accu12 rate.

13 ‘‘(5) NOMINATION PROCESS FOR INDIAN RES14 ERVATIONS.—For purposes of this subchapter, in

15 the case of a nominated area on an Indian reserva16 tion, the reservation governing body (as determined

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

18 being both the State and local governments with re19 spect to such area.

20 ‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF21 FECT.—

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

23 as a renewal community shall remain in effect dur24 ing the period beginning on the date of the designa25 tion and ending on the earliest of—
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1 ‘‘(A) December 31, 2007,

2 ‘‘(B) the termination date designated by

3 the State and local governments in their nomi4 nation, or

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

6 and Urban Development revokes such designa7 tion.

8 ‘‘(2) REVOCATION OF DESIGNATION.—The Sec9 retary of Housing and Urban Development may re10 voke the designation under this section of an area if

11 such Secretary determines that the local government

12 or the State in which the area is located—

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

14 area, or

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

16 or fails to make progress in achieving, the State

17 or local commitments, respectively, described in

18 subsection (d).

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

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

21 and Urban Development may designate a nominated

22 area as a renewal community under subsection (a)

23 only if the area meets the requirements of para24 graphs (2) and (3) of this subsection.
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1 ‘‘(2) AREA REQUIREMENTS.—A nominated area

2 meets the requirements of this paragraph if—

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

4 one or more local governments;

5 ‘‘(B) the boundary of the area is continu6 ous; and

7 ‘‘(C) the area—

8 ‘‘(i) has a population, of at least—

9 ‘‘(I) 4,000 if any portion of such

10 area (other than a rural area de11 scribed in subsection (a)(2)(B)(i)) is

12 located within a metropolitan statis13 tical area (within the meaning of sec14 tion 143(k)(2)(B)) which has a popu15 lation of 50,000 or greater; or

16 ‘‘(II) 1,000 in any other case; or

17 ‘‘(ii) is entirely within an Indian res18 ervation (as determined by the Secretary of

19 the Interior).

20 ‘‘(3) ELIGIBILITY REQUIREMENTS.—A nomi21 nated area meets the requirements of this paragraph

22 if the State and the local governments in which it

23 is located certify (and the Secretary of Housing and

24 Urban Development, after such review of supporting
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1 data as he deems appropriate, accepts such certifi2 cation) that—

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

4 unemployment, and general distress;

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

6 as determined by the most recent available

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

9 relate;

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

11 census tract within the nominated area is at

12 least 20 percent; and

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

14 70 percent of the households living in the area

15 have incomes below 80 percent of the median

16 income of households within the jurisdiction of

17 the local government (determined in the same

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

19 Housing and Community Development Act of

20 1974).

21 ‘‘(4) CONSIDERATION OF HIGH INCIDENCE OF

22 CRIME.—The Secretary of Housing and Urban De23 velopment shall take into account, in selecting nomi24 nated areas for designation as renewal communities
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1 under this section, the extent to which such areas

2 have a high incidence of crime.

3 ‘‘(5) CONSIDERATION OF COMMUNITIES IDENTI4 FIED IN GAO STUDY.—The Secretary of Housing

5 and Urban Development shall take into account, in

6 selecting nominated areas for designation as renewal

7 communities under this section, if the area has cen8 sus tracts identified in the May 12, 1998, report of

9 the Government Accounting Office regarding the

10 identification of economically distressed areas.

11 ‘‘(d) REQUIRED STATE AND LOCAL COMMIT12 MENTS.—

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

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

16 (a) only if—

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

18 which the area is located agree in writing that,

19 during any period during which the area is a

20 renewal community, such governments will fol21 low a specified course of action which meets the

22 requirements of paragraph (2) and is designed

23 to reduce the various burdens borne by employ24 ers or employees in such area; and
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1 ‘‘(B) the economic growth promotion re2 quirements of paragraph (3) are met.

3 ‘‘(2) COURSE OF ACTION.—

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

5 meets the requirements of this paragraph if

6 such course of action is a written document,

7 signed by a State (or local government) and

8 neighborhood organizations, which evidences a

9 partnership between such State or government

10 and community-based organizations and which

11 commits each signatory to specific and measur12 able goals, actions, and timetables. Such course

13 of action shall include at least five of the follow14 ing:

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

16 applying within the renewal community.

17 ‘‘(ii) An increase in the level of effi18 ciency of local services within the renewal

19 community.

20 ‘‘(iii) Crime reduction strategies, such

21 as crime prevention (including the provi22 sion of such services by nongovernmental

23 entities).

24 ‘‘(iv) Actions to reduce, remove, sim25 plify, or streamline governmental require-
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1 ments applying within the renewal commu2 nity.

3 ‘‘(v) Involvement in the program by

4 private entities, organizations, neighbor5 hood organizations, and community

6 groups, particularly those in the renewal

7 community, including a commitment from

8 such private entities to provide jobs and

9 job training for, and technical, financial, or

10 other assistance to, employers, employees,

11 and residents from the renewal community.

12 ‘‘(vi) State or local income tax bene13 fits for fees paid for services performed by

14 a nongovernmental entity which were for15 merly performed by a governmental entity.

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

17 market value) of surplus real property

18 (such as land, homes, and commercial or

19 industrial structures) in the renewal com20 munity to neighborhood organizations,

21 community development corporations, or

22 private companies.

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

24 For purposes of this section, in evaluating the

25 course of action agreed to by any State or local
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1 government, the Secretary of Housing and

2 Urban Development shall take into account the

3 past efforts of such State or local government

4 in reducing the various burdens borne by em5 ployers and employees in the area involved.

6 ‘‘(3) ECONOMIC GROWTH PROMOTION REQUIRE7 MENTS.—The economic growth promotion require8 ments of this paragraph are met with respect to a

9 nominated area if the local government and the

10 State in which such area is located certify in writing

11 that such government and State, respectively, have

12 repealed or otherwise will not enforce within the

13 area, if such area is designated as a renewal

14 community—

15 ‘‘(A) licensing requirements for occupa16 tions that do not ordinarily require a profes17 sional degree;

18 ‘‘(B) zoning restrictions on home-based

19 businesses which do not create a public nui20 sance;

21 ‘‘(C) permit requirements for street ven22 dors who do not create a public nuisance;

23 ‘‘(D) zoning or other restrictions that im24 pede the formation of schools or child care cen25 ters; and
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1 ‘‘(E) franchises or other restrictions on

2 competition for businesses providing public

3 services, including but not limited to taxicabs,

4 jitneys, cable television, or trash hauling,

5 except to the extent that such regulation of busi6 nesses and occupations is necessary for and well-tai7 lored to the protection of health and safety.

8 ‘‘(e) COORDINATION WITH TREATMENT OF EM9 POWERMENT ZONES AND ENTERPRISE COMMUNITIES.—

10 For purposes of this title, if there are in effect with respect

11 to the same area both—

12 ‘‘(1) a designation as a renewal community; and

13 ‘‘(2) a designation as an empowerment zone or

14 enterprise community,

15 both of such designations shall be given full effect with

16 respect to such area.

17 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur18 poses of this subchapter—

19 ‘‘(1) GOVERNMENTS.—If more than one govern20 ment seeks to nominate an area as a renewal com21 munity, any reference to, or requirement of, this sec22 tion shall apply to all such governments.

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

24 Rico, the Virgin Islands of the United States, Guam,
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1 American Samoa, the Northern Mariana Islands,

2 and any other possession of the United States.

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

4 government’ means—

5 ‘‘(A) any county, city, town, township, par6 ish, village, or other general purpose political

7 subdivision of a State;

8 ‘‘(B) any combination of political subdivi9 sions described in subparagraph (A) recognized

10 by the Secretary of Housing and Urban Devel11 opment; and

12 ‘‘(C) the District of Columbia.

13 ‘‘(4) APPLICATION OF RULES RELATING TO

14 CENSUS TRACTS AND CENSUS DATA.—The rules of

15 sections 1392(b)(4) and 1393(a)(9) shall apply.

16 ‘‘PART II—RENEWAL COMMUNITY CAPITAL GAIN;

17 RENEWAL COMMUNITY BUSINESS

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

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

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

19 ‘‘(a) GENERAL RULE.—Gross income does not in20 clude any qualified capital gain recognized on the sale or

21 exchange of a qualified community asset held for more

22 than 5 years.

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

24 of this section—
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1 ‘‘(1) IN GENERAL.—The term ‘qualified com2 munity asset’ means—

3 ‘‘(A) any qualified community stock;

4 ‘‘(B) any qualified community partnership

5 interest; and

6 ‘‘(C) any qualified community business

7 property.

8 ‘‘(2) QUALIFIED COMMUNITY STOCK.—

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

10 subparagraph (B), the term ‘qualified commu11 nity stock’ means any stock in a domestic cor12 poration if—

13 ‘‘(i) such stock is acquired by the tax14 payer after December 31, 2000, and before

15 January 1, 2008, at its original issue (di16 rectly or through an underwriter) from the

17 corporation solely in exchange for cash;

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

19 issued, such corporation was a renewal

20 community business (or, in the case of a

21 new corporation, such corporation was

22 being organized for purposes of being a re23 newal community business); and

24 ‘‘(iii) during substantially all of the

25 taxpayer’s holding period for such stock,
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1 such corporation qualified as a renewal

2 community business.

3 ‘‘(B) REDEMPTIONS.—A rule similar to

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

5 purposes of this paragraph.

6 ‘‘(3) QUALIFIED COMMUNITY PARTNERSHIP IN7 TEREST.—The term ‘qualified community partner8 ship interest’ means any interest in a partnership

9 if—

10 ‘‘(A) such interest is acquired by the tax11 payer after December 31, 2000, and before

12 January 1, 2008;

13 ‘‘(B) as of the time such interest was ac14 quired, such partnership was a renewal commu15 nity business (or, in the case of a new partner16 ship, such partnership was being organized for

17 purposes of being a renewal community busi18 ness); and

19 ‘‘(C) during substantially all of the tax20 payer’s holding period for such interest, such

21 partnership qualified as a renewal community

22 business.

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

24 apply for purposes of this paragraph.
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1 ‘‘(4) QUALIFIED COMMUNITY BUSINESS PROP2 ERTY.—

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

4 community business property’ means tangible

5 property if—

6 ‘‘(i) such property was acquired by

7 the taxpayer by purchase (as defined in

8 section 179(d)(2)) after December 31,

9 2000, and before January 1, 2008;

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

11 in the renewal community commences with

12 the taxpayer; and

13 ‘‘(iii) during substantially all of the

14 taxpayer’s holding period for such prop15 erty, substantially all of the use of such

16 property was in a renewal community busi17 ness of the taxpayer.

18 ‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM19 PROVEMENTS.—The requirements of clauses (i)

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

21 satisfied with respect to—

22 ‘‘(i) property which is substantially

23 improved (within the meaning of section

24 1400B(b)(4)(B)(ii)) by the taxpayer before

25 January 1, 2008; and
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1 ‘‘(ii) any land on which such property

2 is located.

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

4 the rules of paragraphs (5), (6), and (7) of subsection (b),

5 and subsections (e), (f), and (g), of section 1400B shall

6 apply for purposes of this section.

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

8 ‘‘For purposes of this part, the term ‘renewal commu9 nity business’ means any entity or proprietorship which

10 would be a qualified business entity or qualified propri11 etorship under section 1397B if—

12 ‘‘(1) references to renewal communities were

13 substituted for references to empowerment zones in

14 such section; and

15 ‘‘(2) ‘80 percent’ were substituted for ‘50 per16 cent’ in subsections (b)(2) and (c)(1) of such sec17 tion.

18 ‘‘PART III—FAMILY DEVELOPMENT ACCOUNTS

‘‘Sec. 1400H. Family development accounts for renewal community EITC recipients.

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

renewal communities.

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

for deposit to family development account.

19 ‘‘SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RE20 NEWAL COMMUNITY EITC RECIPIENTS.

21 ‘‘(a) ALLOWANCE OF DEDUCTION.—
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1 ‘‘(1) IN GENERAL.—There shall be allowed as a

2 deduction—

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

4 the amount paid in cash for the taxable year by

5 such individual to any family development ac6 count for such individual’s benefit; and

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

8 a qualified individual, the amount paid in cash

9 for the taxable year by such person to any fam10 ily development account for the benefit of a

11 qualified individual but only if the amount so

12 paid is designated for purposes of this section

13 by such individual.

14 No deduction shall be allowed under this paragraph

15 for any amount deposited in a family development

16 account under section 1400I (relating to demonstra17 tion program to provide matching amounts in re18 newal communities).

19 ‘‘(2) LIMITATION.—

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

21 as a deduction to any individual for any taxable

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

23 exceed the lesser of—

24 ‘‘(i) $2,000, or
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1 ‘‘(ii) an amount equal to the com2 pensation includible in the individual’s

3 gross income for such taxable year.

4 ‘‘(B) PERSONS DONATING TO FAMILY DE5 VELOPMENT ACCOUNTS OF OTHERS.—The

6 amount which may be designated under para7 graph (1)(B) by any qualified individual for any

8 taxable year of such individual shall not exceed

9 $1,000.

10 ‘‘(3) SPECIAL RULES FOR CERTAIN MARRIED

11 INDIVIDUALS.—Rules similar to rules of section

12 219(c) shall apply to the limitation in paragraph

13 (2)(A).

14 ‘‘(4) COORDINATION WITH IRA’S.—No deduc15 tion shall be allowed under this section to any per16 son by reason of a payment to an account for the

17 benefit of a qualified individual if any amount is

18 paid into an individual retirement account (including

19 a Roth IRA) for the benefit of such individual.

20 ‘‘(5) ROLLOVERS.—No deduction shall be al21 lowed under this section with respect to any rollover

22 contribution.

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

24 ‘‘(1) INCLUSION OF AMOUNTS IN GROSS IN25 COME.—Except as otherwise provided in this sub-
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1 section, any amount paid or distributed out of a

2 family development account shall be included in

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

4 may be.

5 ‘‘(2) EXCLUSION OF QUALIFIED FAMILY DEVEL6 OPMENT DISTRIBUTIONS.—Paragraph (1) shall not

7 apply to any qualified family development distribu8 tion.

9 ‘‘(c) QUALIFIED FAMILY DEVELOPMENT DISTRIBU10 TION.—For purposes of this section—

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

12 development distribution’ means any amount paid or

13 distributed out of a family development account

14 which would otherwise be includible in gross income,

15 to the extent that such payment or distribution is

16 used exclusively to pay qualified family development

17 expenses for the holder of the account or the spouse

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

19 holder.

20 ‘‘(2) QUALIFIED FAMILY DEVELOPMENT EX21 PENSES.—The term ‘qualified family development

22 expenses’ means any of the following:

23 ‘‘(A) Qualified higher education expenses.

24 ‘‘(B) Qualified first-time homebuyer costs.
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1 ‘‘(C) Qualified business capitalization

2 costs.

3 ‘‘(D) Qualified medical expenses.

4 ‘‘(E) Qualified rollovers.

5 ‘‘(3) QUALIFIED HIGHER EDUCATION EX6 PENSES.—

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

8 higher education expenses’ has the meaning

9 given such term by section 72(t)(7), determined

10 by treating postsecondary vocational edu11 cational schools as eligible educational institu12 tions.

13 ‘‘(B) POSTSECONDARY VOCATIONAL EDU14 CATION SCHOOL.—The term ‘postsecondary vo15 cational educational school’ means an area vo16 cational education school (as defined in sub17 paragraph (C) or (D) of section 521(4) of the

18 Carl D. Perkins Vocational and Applied Tech19 nology Education Act (20 U.S.C. 2471(4)))

20 which is in any State (as defined in section

21 521(33) of such Act), as such sections are in

22 effect on the date of the enactment of this sec23 tion.

24 ‘‘(C) COORDINATION WITH OTHER BENE25 FITS.—The amount of qualified higher edu-
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1 cation expenses for any taxable year shall be re2 duced as provided in section 25A(g)(2).

3 ‘‘(4) QUALIFIED FIRST-TIME HOMEBUYER

4 COSTS.—The term ‘qualified first-time homebuyer

5 costs’ means qualified acquisition costs (as defined

6 in section 72(t)(8) without regard to subparagraph

7 (B) thereof) with respect to a principal residence

8 (within the meaning of section 121) for a qualified

9 first-time homebuyer (as defined in such section).

10 ‘‘(5) QUALIFIED BUSINESS CAPITALIZATION

11 COSTS.—

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

13 business capitalization costs’ means qualified

14 expenditures for the capitalization of a qualified

15 business pursuant to a qualified plan.

16 ‘‘(B) QUALIFIED EXPENDITURES.—The

17 term ‘qualified expenditures’ means expendi18 tures included in a qualified plan, including

19 capital, plant, equipment, working capital, and

20 inventory expenses.

21 ‘‘(C) QUALIFIED BUSINESS.—The term

22 ‘qualified business’ means any business that

23 does not contravene any law.
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1 ‘‘(D) QUALIFIED PLAN.—The term ‘quali2 fied plan’ means a business plan which meets

3 such requirements as the Secretary may specify.

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

5 term ‘qualified medical expenses’ means any amount

6 paid during the taxable year, not compensated for by

7 insurance or otherwise, for medical care (as defined

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

9 dependent (as defined in section 152).

10 ‘‘(7) QUALIFIED ROLLOVERS.—The term ‘quali11 fied rollover’ means any amount paid from a family

12 development account of a taxpayer into another such

13 account established for the benefit of—

14 ‘‘(A) such taxpayer, or

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

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

17 ‘‘(ii) any dependent (as defined in sec18 tion 152) of the taxpayer.

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

20 apply for purposes of this paragraph.

21 ‘‘(d) TAX TREATMENT OF ACCOUNTS.—

22 ‘‘(1) IN GENERAL.—Any family development ac23 count is exempt from taxation under this subtitle

24 unless such account has ceased to be a family devel25 opment account by reason of paragraph (2). Not-
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1 withstanding the preceding sentence, any such ac2 count is subject to the taxes imposed by section 511

3 (relating to imposition of tax on unrelated business

4 income of charitable, etc., organizations). Notwith5 standing any other provision of this title (including

6 chapters 11 and 12), the basis of any person in such

7 an account is zero.

8 ‘‘(2) LOSS OF EXEMPTION IN CASE OF PROHIB9 ITED TRANSACTIONS.—For purposes of this section,

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

11 apply.

12 ‘‘(3) OTHER RULES TO APPLY.—Rules similar

13 to the rules of paragraphs (4), (5), and (6) of sec14 tion 408(d) shall apply for purposes of this section.

15 ‘‘(e) FAMILY DEVELOPMENT ACCOUNT.—For pur16 poses of this title, the term ‘family development account’

17 means a trust created or organized in the United States

18 for the exclusive benefit of a qualified individual or his

19 beneficiaries, but only if the written governing instrument

20 creating the trust meets the following requirements:

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

22 (as defined in subsection (c)(7))—

23 ‘‘(A) no contribution will be accepted un24 less it is in cash; and
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1 ‘‘(B) contributions will not be accepted for

2 the taxable year in excess of $3,000 (deter3 mined without regard to any contribution made

4 under section 1400I (relating to demonstration

5 program to provide matching amounts in re6 newal communities)).

7 ‘‘(2) The requirements of paragraphs (2)

8 through (6) of section 408(a) are met.

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

10 section, the term ‘qualified individual’ means, for any tax11 able year, an individual—

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

13 community throughout the taxable year; and

14 ‘‘(2) to whom a credit was allowed under sec15 tion 32 for the preceding taxable year.

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

17 ‘‘(1) COMPENSATION.—The term ‘compensa18 tion’ has the meaning given such term by section

19 219(f)(1).

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

21 deduction under subsection (a) shall be computed

22 separately for each individual, and this section shall

23 be applied without regard to any community prop24 erty laws.
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1 ‘‘(3) TIME WHEN CONTRIBUTIONS DEEMED

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

3 shall be deemed to have made a contribution to a

4 family development account on the last day of the

5 preceding taxable year if the contribution is made on

6 account of such taxable year and is made not later

7 than the time prescribed by law for filing the return

8 for such taxable year (not including extensions

9 thereof).

10 ‘‘(4) EMPLOYER PAYMENTS; CUSTODIAL AC11 COUNTS.—Rules similar to the rules of sections

12 219(f)(5) and 408(h) shall apply for purposes of this

13 section.

14 ‘‘(5) REPORTS.—The trustee of a family devel15 opment account shall make such reports regarding

16 such account to the Secretary and to the individual

17 for whom the account is maintained with respect to

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

19 distributions, and such other matters as the Sec20 retary may require under regulations. The reports

21 required by this paragraph—

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

23 such manner as the Secretary prescribes in

24 such regulations; and

25 ‘‘(B) shall be furnished to individuals—
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1 ‘‘(i) not later than January 31 of the

2 calendar year following the calendar year

3 to which such reports relate; and

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

5 prescribes in such regulations.

6 ‘‘(6) INVESTMENT IN COLLECTIBLES TREATED

7 AS DISTRIBUTIONS.—Rules similar to the rules of

8 section 408(m) shall apply for purposes of this sec9 tion.

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

11 QUALIFIED FAMILY DEVELOPMENT EXPENSES.—

12 ‘‘(1) IN GENERAL.—If any amount is distrib13 uted from a family development account and is not

14 used exclusively to pay qualified family development

15 expenses for the holder of the account or the spouse

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

17 holder, the tax imposed by this chapter for the tax18 able year of such distribution shall be increased by

19 the sum of—

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

21 amount which is includible in gross income and

22 is attributable to amounts contributed under

23 section 1400I (relating to demonstration pro24 gram to provide matching amounts in renewal

25 communities); and
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1 ‘‘(B) 10 percent of the portion of such

2 amount which is includible in gross income and

3 is not described in subparagraph (A).

4 For purposes of this subsection, distributions which

5 are includable in gross income shall be treated as at6 tributable to amounts contributed under section

7 1400I to the extent thereof. For purposes of the pre8 ceding sentence, all family development accounts of

9 an individual shall be treated as one account.

10 ‘‘(2) EXCEPTION FOR CERTAIN DISTRIBU11 TIONS.—Paragraph (1) shall not apply to distribu12 tions which are—

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

the account holder attains age 591 14 ⁄2,

15 ‘‘(B) made to a beneficiary (or the estate

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

17 the account holder, or

18 ‘‘(C) attributable to the account holder’s

19 being disabled within the meaning of section

20 72(m)(7).

21 ‘‘(i) TERMINATION.—No deduction shall be allowed

22 under this section for any amount paid to a family devel23 opment account for any taxable year beginning after De24 cember 31, 2007.
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1 ‘‘SEC. 1400I. DEMONSTRATION PROGRAM TO PROVIDE

2 MATCHING CONTRIBUTIONS TO FAMILY DE3 VELOPMENT ACCOUNTS IN CERTAIN RE4 NEWAL COMMUNITIES.

5 ‘‘(a) DESIGNATION.—

6 ‘‘(1) DEFINITIONS.—For purposes of this sec7 tion, the term ‘FDA matching demonstration area’

8 means any renewal community—

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

10 by each of the local governments and States

11 which nominated such community for designa12 tion as a renewal community under section

13 1400E(a)(1)(A); and

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

15 Urban Development designates as an FDA

16 matching demonstration area after consultation

17 with—

18 ‘‘(i) the Secretaries of Agriculture,

19 Commerce, Labor, and the Treasury, the

20 Director of the Office of Management and

21 Budget, and the Administrator of the

22 Small Business Administration; and

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

24 Indian reservation, the Secretary of the In25 terior.

26 ‘‘(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 5 communities as FDA

4 matching demonstration areas.

5 ‘‘(B) MINIMUM DESIGNATION IN RURAL

6 AREAS.—Of the areas designated under sub7 paragraph (A), at least 2 must be areas de8 scribed in section 1400E(a)(2)(B).

9 ‘‘(3) LIMITATIONS ON DESIGNATIONS.—

10 ‘‘(A) PUBLICATION OF REGULATIONS.—

11 The Secretary of Housing and Urban Develop12 ment shall prescribe by regulation no later than

13 4 months after the date of the enactment of

14 this section, after consultation with the officials

15 described in paragraph (1)(B)—

16 ‘‘(i) the procedures for nominating a

17 renewal community under paragraph

18 (1)(A) (including procedures for coordinat19 ing such nomination with the nomination

20 of an area for designation as a renewal

21 community under section 1400E); and

22 ‘‘(ii) the manner in which nominated

23 renewal communities will be evaluated for

24 purposes of this section.
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1 ‘‘(B) TIME LIMITATIONS.—The Secretary

2 of Housing and Urban Development may des3 ignate renewal communities as FDA matching

4 demonstration areas only during the 24-month

5 period beginning on the first day of the first

6 month following the month in which the regula7 tions described in subparagraph (A) are pre8 scribed.

9 ‘‘(4) DESIGNATION BASED ON DEGREE OF POV10 ERTY, ETC.—The rules of section 1400E(a)(3) shall

11 apply for purposes of designations of FDA matching

12 demonstration areas under this section.

13 ‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF14 FECT.—Any designation of a renewal community as an

15 FDA matching demonstration area shall remain in effect

16 during the period beginning on the date of such designa17 tion and ending on the date on which such area ceases

18 to be a renewal community.

19 ‘‘(c) MATCHING CONTRIBUTIONS TO FAMILY DEVEL20 OPMENT ACCOUNTS.—

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

22 taxable year, the Secretary shall deposit (to the ex23 tent provided in appropriation Acts) into a family

24 development account of each qualified individual (as

25 defined in section 1400H(f))—
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1 ‘‘(A) who is a resident throughout the tax2 able year of an FDA matching demonstration

3 area; and

4 ‘‘(B) who requests (in such form and man5 ner as the Secretary prescribes) such deposit

6 for the taxable year,

7 an amount equal to the sum of the amounts depos8 ited into all of the family development accounts of

9 such individual during such taxable year (determined

10 without regard to any amount contributed under this

11 section).

12 ‘‘(2) LIMITATIONS.—

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

14 not deposit more than $1000 under paragraph

15 (1) with respect to any individual for any tax16 able year.

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

18 shall not deposit more than $2000 under para19 graph (1) with respect to any individual for all

20 taxable years.

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

22 provided in section 1400H, gross income shall not

23 include any amount deposited into a family develop24 ment account under paragraph (1).
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1 ‘‘(d) NOTICE OF PROGRAM.—The Secretary shall

2 provide appropriate notice to residents of FDA matching

3 demonstration areas of the availability of the benefits

4 under this section.

5 ‘‘(e) TERMINATION.—No amount may be deposited

6 under this section for any taxable year beginning after De7 cember 31, 2007.

8 ‘‘SEC. 1400J. DESIGNATION OF EARNED INCOME TAX CRED9 IT PAYMENTS FOR DEPOSIT TO FAMILY DE10 VELOPMENT ACCOUNT.

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

12 qualified individual (as defined in section 1400H(f)) for

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

14 individual may designate that a specified portion (not less

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

16 which is attributable to the earned income tax credit shall

17 be deposited by the Secretary into a family development

18 account of such individual. The Secretary shall so deposit

19 such portion designated under this subsection.

20 ‘‘(b) MANNER AND TIME OF DESIGNATION.—A des21 ignation under subsection (a) may be made with respect

22 to any taxable year—

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

24 imposed by this chapter for such taxable year, or
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1 ‘‘(2) at any other time (after the time of filing

2 the return of the tax imposed by this chapter for

3 such taxable year) specified in regulations prescribed

4 by the Secretary.

5 Such designation shall be made in such manner as the

6 Secretary prescribes by regulations.

7 ‘‘(c) PORTION ATTRIBUTABLE TO EARNED INCOME

8 TAX CREDIT.—For purposes of subsection (a), an over9 payment for any taxable year shall be treated as attrib10 utable to the earned income tax credit to the extent that

11 such overpayment does not exceed the credit allowed to

12 the taxpayer under section 32 for such taxable year.

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

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

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

16 being refunded to the taxpayer as of the last date pre17 scribed for filing the return of tax imposed by this chapter

18 (determined without regard to extensions) or, if later, the

19 date the return is filed.

20 ‘‘(e) TERMINATION.—This section shall not apply to

21 any taxable year beginning after December 31, 2007.

22 ‘‘PART IV—ADDITIONAL INCENTIVES

‘‘Sec. 1400K. Commercial revitalization credit.

‘‘Sec. 1400L. Increase in expensing under section 179.
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1 ‘‘SEC. 1400K. COMMERCIAL REVITALIZATION CREDIT.

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

3 except as provided in subsection (e), the commercial revi4 talization credit for any taxable year is an amount equal

5 to the applicable percentage of the qualified revitalization

6 expenditures with respect to any qualified revitalization

7 building.

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

9 this section—

10 ‘‘(1) IN GENERAL.—The term ‘applicable per11 centage’ means—

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

13 which a qualified revitalization building is

14 placed in service, or

15 ‘‘(B) at the election of the taxpayer, 5 per16 cent for each taxable year in the credit period.

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

18 shall be irrevocable.

19 ‘‘(2) CREDIT PERIOD.—

20 ‘‘(A) IN GENERAL.—The term ‘credit pe21 riod’ means, with respect to any building, the

22 period of 10 taxable years beginning with the

23 taxable year in which the building is placed in

24 service.
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1 ‘‘(B) APPLICABLE RULES.—Rules similar

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

3 section 42(f) shall apply.

4 ‘‘(c) QUALIFIED REVITALIZATION BUILDINGS AND

5 EXPENDITURES.—For purposes of this section—

6 ‘‘(1) QUALIFIED REVITALIZATION BUILDING.—

7 The term ‘qualified revitalization building’ means

8 any building (and its structural components) if—

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

10 community and is placed in service after De11 cember 31, 2000;

12 ‘‘(B) a commercial revitalization credit

13 amount is allocated to the building under sub14 section (e); and

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

16 of depreciation) is allowable with respect to the

17 building.

18 ‘‘(2) QUALIFIED REVITALIZATION EXPENDI19 TURE.—

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

21 revitalization expenditure’ means any amount

22 properly chargeable to capital account—

23 ‘‘(i) for property for which deprecia24 tion is allowable under section 168 and

25 which is—
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1 ‘‘(I) nonresidential real property;

2 or

3 ‘‘(II) an addition or improvement

4 to property described in subclause (I);

5 and

6 ‘‘(ii) in connection with the construc7 tion of any qualified revitalization building

8 which was not previously placed in service

9 or in connection with the substantial reha10 bilitation (within the meaning of section

11 47(c)(1)(C)) of a building which was

12 placed in service before the beginning of

13 such rehabilitation.

14 ‘‘(B) DOLLAR LIMITATION.—The aggre15 gate amount which may be treated as qualified

16 revitalization expenditures with respect to any

17 qualified revitalization building for any taxable

18 year shall not exceed the excess of—

19 ‘‘(i) $10,000,000, reduced by

20 ‘‘(ii) any such expenditures with re21 spect to the building taken into account by

22 the taxpayer or any predecessor in deter23 mining the amount of the credit under this

24 section for all preceding taxable years.
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1 ‘‘(C) CERTAIN EXPENDITURES NOT IN2 CLUDED.—The term ‘qualified revitalization ex3 penditure’ does not include—

4 ‘‘(i) STRAIGHT LINE DEPRECIATION

5 MUST BE USED.—Any expenditure (other

6 than with respect to land acquisitions) with

7 respect to which the taxpayer does not use

8 the straight line method over a recovery

9 period determined under subsection (c) or

10 (g) of section 168. The preceding sentence

11 shall not apply to any expenditure to the

12 extent the alternative depreciation system

13 of section 168(g) applies to such expendi14 ture by reason of subparagraph (B) or (C)

15 of section 168(g)(1).

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

17 of acquiring any building or interest there18 in and any land in connection with such

19 building to the extent that such costs ex20 ceed 30 percent of the qualified revitaliza21 tion expenditures determined without re22 gard to this clause.

23 ‘‘(iii) OTHER CREDITS.—Any expendi24 ture which the taxpayer may take into ac25 count in computing any other credit allow-
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1 able under this title unless the taxpayer

2 elects to take the expenditure into account

3 only for purposes of this section.

4 ‘‘(d) WHEN EXPENDITURES TAKEN INTO AC5 COUNT.—

6 ‘‘(1) IN GENERAL.—Qualified revitalization ex7 penditures with respect to any qualified revitaliza8 tion building shall be taken into account for the tax9 able year in which the qualified revitalization build10 ing is placed in service. For purposes of the preced11 ing sentence, a substantial rehabilitation of a build12 ing shall be treated as a separate building.

13 ‘‘(2) PROGRESS EXPENDITURE PAYMENTS.—

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

15 (d) of section 47 shall apply for purposes of this sec16 tion.

17 ‘‘(e) LIMITATION ON AGGREGATE CREDITS ALLOW18 ABLE WITH RESPECT TO BUILDINGS LOCATED IN A

19 STATE.—

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

21 determined under this section for any taxable year

22 with respect to any building shall not exceed the

23 commercial revitalization credit amount (in the case

24 of an amount determined under subsection

25 (b)(1)(B), the present value of such amount as de-
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1 termined under the rules of section 42(b)(2)(C)) al2 located to such building under this subsection by the

3 commercial revitalization credit agency. Such alloca4 tion shall be made at the same time and in the same

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

6 42(h).

7 ‘‘(2) COMMERCIAL REVITALIZATION CREDIT

8 AMOUNT FOR AGENCIES.—

9 ‘‘(A) IN GENERAL.—The aggregate com10 mercial revitalization credit amount which a

11 commercial revitalization credit agency may al12 locate for any calendar year is the amount of

13 the State commercial revitalization credit ceil14 ing determined under this paragraph for such

15 calendar year for such agency.

16 ‘‘(B) STATE COMMERCIAL REVITALIZATION

17 CREDIT CEILING.—The State commercial revi18 talization credit ceiling applicable to any

19 State—

20 ‘‘(i) for each calendar year after 2000

21 and before 2008 is $2,000,000 for each re22 newal community in the State; and

23 ‘‘(ii) zero for each calendar year

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

3 term ‘commercial revitalization credit agency’

4 means any agency authorized by a State to

5 carry out this section.

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

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

11 building shall be zero unless—

12 ‘‘(A) such amount was allocated pursuant

13 to a qualified allocation plan of the commercial

14 revitalization credit agency which is approved

15 (in accordance with rules similar to the rules of

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

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

18 which such agency is a part; and

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

22 such allocation and provides such individual a

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

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

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

8 ‘‘(B) which considers—

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

13 process;

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

15 permanent, full-time employment by reason

16 of any project; and

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

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

21 agency (or its agent) will follow in monitoring

22 compliance with this section.

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

24 any building placed in service after December 31, 2007.
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1 ‘‘SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.

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

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

6 shall be increased by the lesser of—

7 ‘‘(A) $35,000; or

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

9 which is qualified renewal property placed in

10 service during the taxable year; and

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

14 percent of the cost thereof.

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

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

18 community by a renewal community business.

19 ‘‘(c) QUALIFIED RENEWAL PROPERTY.—For pur20 poses of this section—

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

22 property’ means any property to which section 168

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

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

25 taxpayer by purchase (as defined in section
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1 179(d)(2)) after December 31, 2000, and be2 fore January 1, 2008; and

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

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

7 section 1397C.

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

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

10 apply for purposes of this section.’’.

11 SEC. 102. EXTENSION OF EXPENSING OF ENVIRONMENTAL

12 REMEDIATION COSTS TO RENEWAL COMMU13 NITIES.

14 (a) EXTENSION.—Paragraph (2) of section 198(c)

15 (defining targeted area) is amended by redesignating sub16 paragraph (C) as subparagraph (D) and by inserting after

17 subparagraph (B) the following new subparagraph:

18 ‘‘(C) RENEWAL COMMUNITIES IN19 CLUDED.—Except as provided in subparagraph

20 (B), such term shall include a renewal commu21 nity (as defined in section 1400E).’’.

22 (b) EXTENSION OF TERMINATION DATE FOR RE23 NEWAL COMMUNITIES.—Subsection (h) of section 198 is

24 amended by inserting before the period ‘‘(December 31,
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1 2007, in the case of a renewal community, as defined in

2 section 1400E).’’.

3 SEC. 103. EXTENSION OF WORK OPPORTUNITY TAX CREDIT

4 FOR RENEWAL COMMUNITIES.

5 (a) EXTENSION.—Subsection (c) of section 51 (relat6 ing to termination) is amended by adding at the end the

7 following new paragraph:

8 ‘‘(5) EXTENSION OF CREDIT FOR RENEWAL

9 COMMUNITIES.—

10 ‘‘(A) IN GENERAL.—In the case of an indi11 vidual who begins work for the employer after

12 the date contained in paragraph (4)(B), for

13 purposes of section 38—

14 ‘‘(i) in lieu of applying subsection (a),

15 the amount of the work opportunity credit

16 determined under this section for the tax17 able year shall be equal to—

18 ‘‘(I) 15 percent of the qualified

19 first-year wages for such year; and

20 ‘‘(II) 30 percent of the qualified

21 second-year wages for such year;

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

23 by substituting ‘$10,000’ for ‘$6,000’;

24 ‘‘(iii) paragraph (4)(B) shall be ap25 plied by substituting for the date contained
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1 therein the last day for which the designa2 tion under section 1400E of the renewal

3 community referred to in subparagraph

4 (B)(i) is in effect; and

5 ‘‘(iv) rules similar to the rules of sec6 tion 51A(b)(5)(C) shall apply.

7 ‘‘(B) QUALIFIED FIRST- AND SECOND8 YEAR WAGES.—For purposes of subparagraph

9 (A)—

10 ‘‘(i) IN GENERAL.—The term ‘quali11 fied wages’ means, with respect to each 1-

12 year period referred to in clause (ii) or

13 (iii), as the case may be, the wages paid or

14 incurred by the employer during the tax15 able year to any individual but only if—

16 ‘‘(I) the employer is engaged in a

17 trade or business in a renewal com18 munity throughout such 1-year period;

19 ‘‘(II) the principal place of abode

20 of such individual is in such renewal

21 community throughout such 1-year

22 period; and

23 ‘‘(III) substantially all of the

24 services which such individual per25 forms for the employer during such 1-
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1 year period are performed in such re2 newal community.

3 ‘‘(ii) QUALIFIED FIRST-YEAR

4 WAGES.—The term ‘qualified first-year

5 wages’ means, with respect to any individ6 ual, qualified wages attributable to service

7 rendered during the 1-year period begin8 ning with the day the individual begins

9 work for the employer.

10 ‘‘(iii) QUALIFIED SECOND-YEAR

11 WAGES.—The term ‘qualified second-year

12 wages’ means, with respect to any individ13 ual, qualified wages attributable to service

14 rendered during the 1-year period begin15 ning on the day after the last day of the

16 1-year period with respect to such individ17 ual determined under clause (ii).’’.

18 (b) CONGRUENT TREATMENT OF RENEWAL COMMU19 NITIES AND ENTERPRISE ZONES FOR PURPOSES OF

20 YOUTH RESIDENCE REQUIREMENTS.—

21 (1) HIGH-RISK YOUTH.—Subparagraphs (A)(ii)

22 and (B) of section 51(d)(5) are each amended by

23 striking ‘‘empowerment zone or enterprise commu24 nity’’ and inserting ‘‘empowerment zone, enterprise

25 community, or renewal community’’.
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1 (2) QUALIFIED SUMMER YOUTH EMPLOYEE.—

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

3 striking ‘‘empowerment zone or enterprise commu4 nity’’ and inserting ‘‘empowerment zone, enterprise

5 community, or renewal community’’.

6 (3) HEADINGS.—Paragraphs (5)(B) and (7)(C)

7 of section 51(d) are each amended by inserting ‘‘OR

8 COMMUNITY’’ in the heading after ‘‘ZONE’’.

9 SEC. 104. CONFORMING AND CLERICAL AMENDMENTS.

10 (a) DEDUCTION FOR CONTRIBUTIONS TO FAMILY

11 DEVELOPMENT ACCOUNTS ALLOWABLE WHETHER OR

12 NOT TAXPAYER ITEMIZES.—Subsection (a) of section 62

13 (relating to adjusted gross income defined) is amended by

14 inserting after paragraph (17) the following new para15 graph:

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

17 deduction allowed by section 1400H(a)(1)(A).’’.

18 (b) TAX ON EXCESS CONTRIBUTIONS.—

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

20 4973 is amended by striking ‘‘or’’ at the end of

21 paragraph (3), adding ‘‘or’’ at the end of paragraph

22 (4), and inserting after paragraph (4) the following

23 new paragraph:

24 ‘‘(5) a family development account (within the

25 meaning of section 1400H(e)),’’.
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1 (2) EXCESS CONTRIBUTIONS.—Section 4973 is

2 amended by adding at the end the following new

3 subsection:

4 ‘‘(g) FAMILY DEVELOPMENT ACCOUNTS.—For pur5 poses of this section, in the case of a family development

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

7 of—

8 ‘‘(1) the excess (if any) of—

9 ‘‘(A) the amount contributed for the tax10 able year to the account (other than a qualified

11 rollover, as defined in section 1400H(c)(7), or

12 a contribution under section 1400I), over

13 ‘‘(B) the amount allowable as a deduction

14 under section 1400H for such contributions;

15 and

16 ‘‘(2) the amount determined under this sub17 section for the preceding taxable year reduced by the

18 sum of—

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

20 for the taxable year which were included in the

21 gross income of the payee under section

22 1400H(b)(1);

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

24 for the taxable year to which rules similar to
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1 the rules of section 408(d)(5) apply by reason

2 of section 1400H(d)(3); and

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

4 amount allowable as a deduction under section

5 1400H for the taxable year over the amount

6 contributed to the account for the taxable year

7 (other than a contribution under section

8 1400I).

9 For purposes of this subsection, any contribution which

10 is distributed from the family development account in a

11 distribution to which rules similar to the rules of section

12 408(d)(4) apply by reason of section 1400H(d)(3) shall

13 be treated as an amount not contributed.’’.

14 (c) TAX ON PROHIBITED TRANSACTIONS.—Section

15 4975 is amended—

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

17 following new paragraph:

18 ‘‘(6) SPECIAL RULE FOR FAMILY DEVELOP19 MENT ACCOUNTS.—An individual for whose benefit a

20 family development account is established and any

21 contributor to such account shall be exempt from the

22 tax imposed by this section with respect to any

23 transaction concerning such account (which would

24 otherwise be taxable under this section) if, with re25 spect to such transaction, the account ceases to be
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1 a family development account by reason of the appli2 cation of section 1400H(d)(2) to such account.’’;

3 and

4 (2) in subsection (e)(1), by striking ‘‘or’’ at the

5 end of subparagraph (E), by redesignating subpara6 graph (F) as subparagraph (G), and by inserting

7 after subparagraph (E) the following new subpara8 graph:

9 ‘‘(F) a family development account de10 scribed in section 1400H(e), or’’.

11 (d) INFORMATION RELATING TO CERTAIN TRUSTS

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

13 amended—

14 (1) by inserting ‘‘or section 1400H’’ after ‘‘sec15 tion 219’’; and

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

17 account described in section 1400H(e),’’, after ‘‘sec18 tion 408(a)’’.

19 (e) INSPECTION OF APPLICATIONS FOR TAX EXEMP20 TION.—Clause (i) of section 6104(a)(1)(B) is amended by

21 inserting ‘‘a family development account described in sec22 tion 1400H(e),’’ after ‘‘section 408(a),’’.

23 (f) FAILURE TO PROVIDE REPORTS ON FAMILY DE24 VELOPMENT ACCOUNTS.—Paragraph (2) of section

25 6693(a) is amended by striking ‘‘and’’ at the end of sub-
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1 paragraph (C), by striking the period and inserting ‘‘,

2 and’’ at the end of subparagraph (D), and by adding at

3 the end the following new subparagraph:

4 ‘‘(E) section 1400H(g)(6) (relating to fam5 ily development accounts).’’.

6 (g) CONFORMING AMENDMENTS REGARDING COM7 MERCIAL REVITALIZATION CREDIT.—

8 (1) Section 46 (relating to investment credit) is

9 amended by striking ‘‘and’’ at the end of paragraph

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

11 (3) and inserting ‘‘, and’’, and by adding at the end

12 the following new paragraph:

13 ‘‘(4) the commercial revitalization credit pro14 vided under section 1400K.’’.

15 (2) Section 39(d) is amended by adding at the

16 end the following new paragraph:

17 ‘‘(9) NO CARRYBACK OF SECTION 1400K CREDIT

18 BEFORE DATE OF ENACTMENT.—No portion of the

19 unused business credit for any taxable year which is

20 attributable to any commercial revitalization credit

21 determined under section 1400K may be carried

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

23 enactment of section 1400K.’’.

24 (3) Subparagraph (B) of section 48(a)(2) is

25 amended by inserting ‘‘or commercial revitalization’’
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1 after ‘‘rehabilitation’’ each place it appears in the

2 text and heading.

3 (4) Subparagraph (C) of section 49(a)(1) is

4 amended by striking ‘‘and’’ at the end of clause (ii),

5 by striking the period at the end of clause (iii) and

6 inserting ‘‘, and’’, and by adding at the end the fol7 lowing new clause:

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

9 qualified revitalization building attributable

10 to qualified revitalization expenditures.’’.

11 (5) Paragraph (2) of section 50(a) is amended

12 by inserting ‘‘or 1400K(d)(2)’’ after ‘‘section 47(d)’’

13 each place it appears.

14 (6) Subparagraph (A) of section 50(a)(2) is

15 amended by inserting ‘‘or qualified revitalization

16 building (respectively)’’ after ‘‘qualified rehabilitated

17 building’’.

18 (7) Subparagraph (B) of section 50(a)(2) is

19 amended by adding at the end the following new

20 sentence: ‘‘A similar rule shall apply for purposes of

21 section 1400K.’’.

22 (8) Paragraph (2) of section 50(b) is amended

23 by striking ‘‘and’’ at the end of subparagraph (C),

24 by striking the period at the end of subparagraph
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1 (D) and inserting ‘‘; and’’, and by adding at the end

2 the following new subparagraph:

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

4 defined in section 1400K) to the extent of the

5 portion of the basis which is attributable to

6 qualified revitalization expenditures (as defined

7 in section 1400K).’’.

8 (9) The last sentence of section 50(b)(3) is

9 amended to read as follows: ‘‘If any qualified reha10 bilitated building or qualified revitalization building

11 is used by the tax-exempt organization pursuant to

12 a lease, this paragraph shall not apply for purposes

13 of determining the amount of the rehabilitation cred14 it or the commercial revitalization credit.’’.

15 (10) Subparagraph (C) of section 50(b)(4) is

16 amended—

17 (A) by inserting ‘‘or commercial revitaliza18 tion’’ after ‘‘rehabilitated’’ in the text and head19 ing; and

20 (B) by inserting ‘‘or commercial revitaliza21 tion’’ after ‘‘rehabilitation’’.

22 (11) Subparagraph (C) of section 469(i)(3) is

23 amended—

24 (A) by inserting ‘‘or section 1400K’’ after

25 ‘‘section 42’’; and
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1 (B) by striking ‘‘CREDIT’’ in the heading

2 and inserting ‘‘AND COMMERCIAL REVITALIZA3 TION CREDITS’’.

4 (h) CLERICAL AMENDMENTS.—The table of sub5 chapters for chapter 1 is amended by adding at the end

6 the following new item:

‘‘Subchapter X. Renewal Communities.’’.

7 SEC. 105. EVALUATION AND REPORTING REQUIREMENTS.

8 Not later than the close of the fourth calendar year

9 after the year in which the Secretary of Housing and

10 Urban Development first designates an area as a renewal

11 community under section 1400E of the Internal Revenue

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

13 year thereafter, such Secretary shall prepare and submit

14 to the Congress a report on the effects of such designa15 tions in stimulating the creation of new jobs, particularly

16 for disadvantaged workers and long-term unemployed in17 dividuals, and promoting the revitalization of economically

18 distressed areas.

19 SEC. 106. EXCLUSION OF EFFECTS OF THIS ACT FROM

20 PAYGO SCORECARD.

21 Upon the enactment of this Act, the Director of the

22 Office of Management and Budget shall not make any es23 timates of changes in receipts under section 252(d) of the

24 Balanced Budget and Emergency Deficit Control Act of

25 1985 resulting from the enactment of this Act.
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1 TITLE II—ADDITIONAL

2 PROVISIONS

3 SEC. 201. TRANSFER OF UNOCCUPIED AND SUBSTANDARD

4 HUD-HELD HOUSING IN RENEWAL COMMU5 NITIES TO LOCAL GOVERNMENTS.

6 (a) TRANSFER REQUIREMENT.—Pursuant to the au7 thority under section 204 of the Departments of Veterans

8 Affairs and Housing and Urban Development, and Inde9 pendent Agencies Appropriations Act, 1997, the Secretary

10 shall transfer ownership of any qualified HUD property

11 to the unit of general local government having jurisdiction

12 for the area in which the property is located in accordance

13 with this section, but only if the unit of general local gov14 ernment enters into an agreement with the Secretary

15 meeting the requirements of subsection (d).

16 (b) QUALIFIED HUD PROPERTIES.—For purposes of

17 this section, the term ‘‘qualified HUD property’’ means

18 any unoccupied multifamily housing, project, substandard

19 multifamily housing project, or unoccupied single family

20 property, that is—

21 (1) owned by the Secretary; and

22 (2) located within a renewal community.

23 (c) TIMING OF TRANSFER.—Any transfer of owner24 ship required under subsection (a) shall be completed—
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1 (1) with respect to any multifamily housing

2 project or single family property that is acquired by

3 the Secretary before the date on which the area in

4 which property is located is designated as a renewal

5 community and that is substandard or unoccupied

6 (as applicable) upon such date, not later than 1 year

7 after such date; and

8 (2) with respect to any multifamily housing

9 project or single family property that is acquired by

10 the Secretary on or after the date on which the area

11 in which the property is located is designated as a

12 renewal community, not later than 1 year after—

13 (A) the date on which the project is deter14 mined to be substandard or unoccupied (as ap15 plicable), in the case of a property that is not

16 unoccupied or substandard upon acquisition by

17 the Secretary; or

18 (B) the date on which the project is ac19 quired by the Secretary, in the case of a prop20 erty that is substandard or unoccupied (as ap21 plicable) upon such acquisition.

22 (d) AGREEMENTS TO SELL PROPERTY TO COMMU23 NITY DEVELOPMENT CORPORATIONS.—An agreement de24 scribed in this subsection is an agreement that requires

25 a unit of general local government to dispose of the quali-
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1 fied HUD property acquired by the unit of general local

2 government in accordance with the following require3 ments:

4 (1) NOTIFICATION TO COMMUNITY DEVELOP5 MENT CORPORATIONS.—Not later than 30 days after

6 the date on which the unit of general local govern7 ment acquires title to the property under subsection

8 (a), the unit of general local government shall notify

9 each community development corporation located in

10 the State in which the property is located—

11 (A) of such acquisition of title; and

12 (B) that, during the 6-month period begin13 ning on the date on which such notification is

14 made, such community development corpora15 tions shall have the exclusive right under this

16 subsection to make bona fide offers to purchase

17 the property on a cost recovery basis.

18 (2) RIGHT OF FIRST REFUSAL.—During the 6-

19 month period described in paragraph (1)(B)—

20 (A) the unit of general local government

21 may not sell or offer to sell the qualified HUD

22 property other than to a party notified under

23 paragraph (1), unless each community develop24 ment corporation required to be so notified has

25 notified the unit of general local government
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1 that the corporation will not make an offer to

2 purchase the property; and

3 (B) the unit of general local government

4 shall accept a bona fide offer to purchase the

5 property made during such period if the offer is

6 acceptable to the unit of general local govern7 ment, except that a unit of general local govern8 ment may not sell a property to a community

9 development corporation during that 6-month

10 period other than on a cost recovery basis.

11 (3) OTHER DISPOSITION.—During the 6-month

12 period beginning on the expiration of the 6-month

13 period described in paragraph (1)(B), the unit of

14 general local government shall dispose of the prop15 erty on a negotiated, competitive bid, or other basis,

16 on such terms as the unit of general local govern17 ment deems appropriate.

18 (e) SATISFACTION OF INDEBTEDNESS.—Before

19 transferring ownership of any qualified HUD property

20 pursuant to subsection (a), the Secretary shall satisfy any

21 indebtedness incurred in connection with the property to

22 be transferred, by—

23 (1) canceling the indebtedness; or
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1 (2) reimbursing the unit of general local gov2 ernment to which the property is transferred for the

3 amount of the indebtedness.

4 (f) DETERMINATION OF STATUS OF PROPERTIES.—

5 To ensure compliance with the requirements of subsection

6 (c), the Secretary shall take the following actions:

7 (1) UPON DESIGNATION OF RENEWAL COMMU8 NITIES.—Upon the designation of any renewal com9 munity, the Secretary shall promptly assess each

10 residential property owned by the Secretary that is

11 located within such renewal community to determine

12 whether such property is a qualified HUD property.

13 (2) UPON ACQUISITION.—Upon acquiring any

14 residential property that is located with a renewal

15 community, the Secretary shall promptly determine

16 whether the property is a qualified HUD property.

17 (3) UPDATES.—The Secretary shall periodically

18 reassess the residential properties owned by the Sec19 retary to determine whether any such properties

20 have become qualified HUD properties.

21 (g) TENANT LEASES.—This section shall not affect

22 the terms or the enforceability of any contract or lease

23 entered into with respect to any residential property before

24 the date that such property becomes a qualified HUD

25 property.
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1 (h) PROCEDURES.—Not later than the expiration of

2 the 6-month period beginning on the date of the enact3 ment of this Act, the Secretary shall establish, by rule,

4 regulation, or order, such procedures as may be necessary

5 to carry out this section.

6 (i) DEFINITIONS.—For purposes of this section, the

7 following definitions shall apply:

8 (1) COMMUNITY DEVELOPMENT CORPORA9 TION.—The term ‘‘community development corpora10 tion’’ means a nonprofit organization whose primary

11 purpose is to promote community development by

12 providing housing opportunities for low-income fami13 lies.

14 (2) COST RECOVERY BASIS.—The term ‘‘cost

15 recovery basis’’ means, with respect to any sale of a

16 residential property by a unit of general local gov17 ernment to a community development corporation

18 under subsection (d)(2), that the purchase price paid

19 by the community development corporation is less

20 than or equal to the costs incurred by the unit of

21 general local government in connection with such

22 property during the period beginning on the date on

23 which the unit of general local government acquires

24 title to the property under subsection (a) and ending

25 on the date on which the sale is consummated.
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1 (3) LOW-INCOME FAMILIES.—The term ‘‘low-in2 come families’’ has the meaning given the term in

3 section 3(b) of the United States Housing Act of

4 1937.

5 (4) MULTIFAMILY HOUSING PROJECT.—The

6 term ‘‘multifamily housing project’’ has the meaning

7 given the term in section 203 of the Housing and

8 Community Development Amendments of 1978.

9 (5) RENEWAL COMMUNITY.—The term ‘‘re10 newal community’’ means an area designated (under

11 subchapter X of chapter 1 of the Internal Revenue

12 Code of 1986) as a renewal community.

13 (6) RESIDENTIAL PROPERTY.—The term ‘‘resi14 dential property’’ means a property that is a multi15 family housing project or a single family property.

16 (7) SECRETARY.—The term ‘‘Secretary’’ means

17 the Secretary of Housing and Urban Development.

18 (8) SEVERE PHYSICAL PROBLEMS.—The term

19 ‘‘severe physical problems’’ means, with respect to a

20 dwelling unit, that the unit—

21 (A) lacks hot or cold piped water, a flush

22 toilet, or both a bathtub and a shower in the

23 unit, for the exclusive use of that unit;

24 (B) on not less than 3 separate occasions

25 during the preceding winter months, was un-
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1 comfortably cold for a period of more than 6

2 consecutive hours due to a malfunction of the

3 heating system for the unit;

4 (C) has no functioning electrical service,

5 exposed wiring, any room in which there is not

6 a functioning electrical outlet, or has experi7 enced 3 or more blown fuses or tripped circuit

8 breakers during the preceding 90-day period;

9 (D) is accessible through a public hallway

10 in which there are no working light fixtures,

11 loose or missing steps or railings, and no eleva12 tor; or

13 (E) has severe maintenance problems, in14 cluding water leaks involving the roof, windows,

15 doors, basement, or pipes or plumbing fixtures,

16 holes or open cracks in walls or ceilings, severe

17 paint peeling or broken plaster, and signs of ro18 dent infestation.

19 (9) SINGLE FAMILY PROPERTY.—The term

20 ‘‘single family property’’ means a 1- to 4-family resi21 dence.

22 (10) SUBSTANDARD.—The term ‘‘substandard’’

23 means, with respect to a multifamily housing

24 project, that 25 percent or more of the dwelling

25 units in the project have severe physical problems.
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1 (11) UNIT OF GENERAL LOCAL GOVERN2 MENT.—The term ‘‘unit of general local govern3 ment’’ has the meaning given the term in section

4 102(a) of the Housing and Community Development

5 Act of 1974.

6 (12) UNOCCUPIED.—The term ‘‘unoccupied’’

7 means, with respect to a residential property, that

8 the unit of general local government having jurisdic9 tion over the area in which the project is located has

10 certified in writing that the property is not inhab11 ited.

12 SEC. 202. PREVENTION AND TREATMENT OF SUBSTANCE

13 ABUSE; SERVICES PROVIDED THROUGH RELI14 GIOUS ORGANIZATIONS.

15 Title V of the Public Health Service Act (42 U.S.C.

16 290aa et seq.) is amended by adding at the end the follow17 ing part:

18 ‘‘PART G—SERVICES PROVIDED THROUGH RELIGIOUS

19 ORGANIZATIONS

20 ‘‘SEC. 581. APPLICABILITY TO DESIGNATED PROGRAMS.

21 ‘‘(a) DESIGNATED PROGRAMS.—Subject to sub22 section (b), this part applies to each program under this

23 Act that makes awards of Federal financial assistance to

24 public or private entities for the purpose of carrying out

25 activities to prevent or treat substance abuse (in this part
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1 referred to as a ‘designated program’). Designated pro2 grams include the program under subpart II of part B

3 of title XIX (relating to formula grants to the States).

4 ‘‘(b) LIMITATION.—This part does not apply to any

5 award of Federal financial assistance under a designated

6 program for a purpose other than the purpose specified

7 in subsection (a).

8 ‘‘(c) DEFINITIONS.—For purposes of this part (and

9 subject to subsection (b)):

10 ‘‘(1) The term ‘designated award recipient’

11 means a public or private entity that has received an

12 award under a designated program (whether the

13 award is a designated direct award or a designated

14 subaward).

15 ‘‘(2) The term ‘designated direct award’ means

16 an award under a designated program that is re17 ceived directly from the Federal Government.

18 ‘‘(3) The term ‘designated subaward’ means an

19 award of financial assistance made by a non-Federal

20 entity, which award consists in whole or in part of

21 Federal financial assistance provided through an

22 award under a designated program.

23 ‘‘(4) The term ‘designated program’ has the

24 meaning given such term in subsection (a).
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1 ‘‘(5) The term ‘financial assistance’ means a

2 grant, cooperative agreement, contract, or

3 voucherized assistance.

4 ‘‘(6) The term ‘program beneficiary’ means an

5 individual who receives program services.

6 ‘‘(7) The term ‘program participant’ has the

7 meaning given such term in section 582(a)(2).

8 ‘‘(8) The term ‘program services’ means treat9 ment for substance abuse, or preventive services re10 garding such abuse, provided pursuant to an award

11 under a designated program.

12 ‘‘(9) The term ‘religious organization’ means a

13 nonprofit religious organization.

14 ‘‘(10) The term ‘voucherized assistance’

15 means—

16 ‘‘(A) a system of selecting and reimbursing

17 program services in which—

18 ‘‘(i) the beneficiary is given a docu19 ment or other authorization that may be

20 used to pay for program services;

21 ‘‘(ii) the beneficiary chooses the orga22 nization that will provide services to him or

23 her according to rules specified by the des24 ignated award recipient; and
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1 ‘‘(iii) the organization selected by the

2 beneficiary is reimbursed by the designated

3 award recipient for program services pro4 vided; or

5 ‘‘(B) any other mode of financial assist6 ance to pay for program services in which the

7 program beneficiary determines the allocation

8 of program funds through his or her selection

9 of one service provider from among alternatives.

10 ‘‘SEC. 582. RELIGIOUS ORGANIZATIONS AS PROGRAM PAR11 TICIPANTS.

12 ‘‘(a) IN GENERAL.—

13 ‘‘(1) SCOPE OF AUTHORITY.—Notwithstanding

14 any other provision of law, a religious

15 organization—

16 ‘‘(A) may be a designated award recipient;

17 ‘‘(B) may make designated subawards to

18 other public or nonprofit private entities (in19 cluding other religious organizations);

20 ‘‘(C) may provide for the provision of pro21 gram services to program beneficiaries through

22 the use of voucherized assistance; and

23 ‘‘(D) may be a provider of services under

24 a designated program, including a provider that

25 accepts voucherized assistance.
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1 ‘‘(2) DEFINITION OF PROGRAM PARTICIPANT.—

2 For purposes of this part, the term ‘program partici3 pant’ means a public or private entity that has re4 ceived a designated direct award, or a designated

5 subaward, regardless of whether the entity provides

6 program services. Such term includes an entity

7 whose only participation in a designated program is

8 to provide program services pursuant to the accept9 ance of voucherized assistance.

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

17 ORGANIZATIONS.—

18 ‘‘(1) FINDINGS.—The Congress finds that the

19 establishment clause of the first amendment to the

20 Constitution of the United States does not require

21 that—

22 ‘‘(A) social-welfare programs discriminate

23 against faith-based providers of services; or

24 ‘‘(B) faith-based providers of services, as a

25 prerequisite to participation in Federal pro-
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1 grams, abandon their religious character and

2 censor their religious expression.

3 ‘‘(2) NONDISCRIMINATION.—Religious organiza4 tions are eligible to be program participants on the

5 same basis as any other nonprofit private organiza6 tion. Neither the Federal Government nor a State

7 receiving funds under such programs shall discrimi8 nate against an organization that is or applies to be

9 a program participant on the basis that the organi10 zation 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) NONDISCRIMINATION IN EMPLOYMENT.—

3 ‘‘(1) IN GENERAL.—Except as provided in para4 graph (2), nothing in this section shall be construed

5 to modify or affect the provisions of any other Fed6 eral or State law or regulation that relates to dis7 crimination in employment on the basis of religion.

8 ‘‘(2) EXCEPTION.—A religious organization

9 that is a program participant may require that an

10 employee rendering programs services adhere to—

11 ‘‘(A) the religious beliefs and practices of

12 such organization; and

13 ‘‘(B) any rules of the organization regard14 ing the use of drugs or alcohol.

15 ‘‘(f) RIGHTS OF PROGRAM BENEFICIARIES.—With

16 respect to an individual who is a program beneficiary or

17 a prospective program beneficiary, if the individual objects

18 to a program participant on the basis that the participant

19 is a religious organization, the following applies:

20 ‘‘(1) If the organization received a designated

21 direct award, the organization shall arrange for the

22 individual to receive program services through an al23 ternative entity.

24 ‘‘(2) If the organization received a designated

25 subaward, the non-Federal entity that made the
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1 subaward shall arrange for the individual to receive

2 the program services through an alternative program

3 participant.

4 ‘‘(3) If the organization is providing services

5 pursuant to voucherized assistance, the designated

6 award recipient that operates the voucherized assist7 ance program shall arrange for the individual to re8 ceive the program services through an alternative

9 provider.

10 ‘‘(4) Arrangements under any of paragraphs

11 (1) through (3) with an alternative entity shall pro12 vide for program services the monetary value of

13 which is not less than the monetary value of the pro14 gram services that the individual would have re15 ceived from the religious organization involved.

16 ‘‘(5) NONDISCRIMINATION.—

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

18 subparagraph (B) or as otherwise provided in

19 law, a religious organization that is a program

20 participant shall not in providing program serv21 ices discriminate against a program beneficiary

22 on the basis of religion or religious belief.

23 ‘‘(B) LIMITATION.—A religious organiza24 tion that is a program participant may require

25 a program beneficiary who has elected in ac-
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1 cordance with paragraph (1) to receive program

2 services from such organization—

3 ‘‘(i) to actively participate in religious

4 practice, worship, and instruction; and

5 ‘‘(ii) to follow rules of behavior de6 vised by the organizations that are reli7 gious in content or origin.

8 ‘‘(g) FISCAL ACCOUNTABILITY.—

9 ‘‘(1) IN GENERAL.—Except as provided in para10 graph (2), any religious organization that is a pro11 gram participant shall be subject to the same regula12 tions as other recipients of awards of Federal finan13 cial assistance to account, in accordance with gen14 erally accepted auditing principles, for the use of the

15 funds provided under such awards.

16 ‘‘(2) LIMITED AUDIT.—With respect to the

17 award involved, if a religious organization that is a

18 program participant maintains the Federal funds in

19 a separate account from non-Federal funds, then

20 only the Federal funds shall be subject to audit.

21 ‘‘(h) COMPLIANCE.—With respect to compliance with

22 this section by an agency, a religious organization may

23 obtain judicial review of agency action in accordance with

24 chapter 7 of title 5, United States Code.
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1 ‘‘SEC. 583. LIMITATIONS ON USE OF FUNDS FOR CERTAIN

2 PURPOSES.

3 ‘‘(a) IN GENERAL.—Except as provided in subsection

4 (b), no funds provided directly to an entity under a des5 ignated program shall be expended for sectarian worship

6 or instruction.

7 ‘‘(b) EXCEPTION.—Subsection (a) shall not apply to

8 assistance provided to or on behalf of a program bene9 ficiary if the beneficiary may choose where such assistance

10 is redeemed or allocated.

11 ‘‘SEC. 584. ADMINISTRATION OF PROGRAM AND TREAT12 MENT OF FUNDS.

13 ‘‘(a) FUNDS NOT AID TO INSTITUTIONS.—Financial

14 assistance under a designated program provided to or on

15 behalf of program beneficiaries is aid to the beneficiary,

16 not to the organization providing program services. The

17 receipt by a program beneficiary of program services at

18 the facilities of the organization shall not constitute Fed19 eral financial assistance to the organization involved.

20 ‘‘(b) PROHIBITION ON STATE DISCRIMINATION IN

21 USE OF FUNDS.—No provision in any State constitution

22 or State law shall be construed to prohibit the expenditure

23 of Federal funds under a designated program in a reli24 gious facility or by a religious organization that is a pro25 gram participant. If a State law or constitution would pre26 vent the expenditure of State or local public funds in such
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1 a facility or by such an organization, then the State or

2 local government shall segregate the Federal funds from

3 State or other public funds for purposes of carrying out

4 the designated program.

5 ‘‘SEC. 585. EDUCATIONAL REQUIREMENTS FOR PERSONNEL

6 IN DRUG TREATMENT PROGRAMS.

7 ‘‘(a) FINDINGS.—The Congress finds that—

8 ‘‘(1) establishing formal educational qualifica9 tion for counselors and other personnel in drug

10 treatment programs may undermine the effective11 ness of such programs; and

12 ‘‘(2) such formal educational requirements for

13 counselors and other personnel may hinder or pre14 vent the provision of needed drug treatment services.

15 ‘‘(b) LIMITATION ON EDUCATIONAL REQUIREMENTS

16 OF PERSONNEL.—

17 ‘‘(1) TREATMENT OF RELIGIOUS EDUCATION.—

18 If any State or local government that is a program

19 participant imposes formal educational qualifications

20 on providers of program services, including religious

21 organizations, such State or local government shall

22 treat religious education and training of personnel

23 as having a critical and positive role in the delivery

24 of program services. In applying educational quali25 fications for personnel in religious organizations,
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1 such State or local government shall give credit for

2 religious education and training equivalent to credit

3 given for secular course work in drug treatment or

4 any other secular subject that is of similar grade

5 level and duration.

6 ‘‘(2) RESTRICTION OF DISCRIMINATION RE7 QUIREMENTS.—

8 ‘‘(A) IN GENERAL.—Subject to paragraph

9 (1), a State or local government that is a pro10 gram participant may establish formal edu11 cational qualifications for personnel in organiza12 tions providing program services that contribute

13 to success in reducing drug use among program

14 beneficiaries.

15 ‘‘(B) EXCEPTION.—The Secretary shall

16 waive the application of any educational quali17 fication imposed under subparagraph (A) for an

18 individual religious organization, if the Sec19 retary determines that—

20 ‘‘(i) the religious organization has a

21 record of prior successful drug treatment

22 for at least the preceding three years;

23 ‘‘(ii) the educational qualifications

24 have effectively barred such religious orga-
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1 nization from becoming a program pro2 vider;

3 ‘‘(iii) the organization has applied to

4 the Secretary to waive the qualifications;

5 and

6 ‘‘(iv) the State or local government

7 has failed to demonstrate empirically that

8 the educational qualifications in question

9 are necessary to the successful operation of

10 a drug treatment program.’’.

11 SEC. 203. CRA CREDIT FOR INVESTMENTS IN COMMUNITY

12 DEVELOPMENT ORGANIZATIONS LOCATED IN

13 RENEWAL COMMUNITIES.

14 Section 804 of the Community Reinvestment Act of

15 1977 (12 U.S.C. 2903) is amended by adding at the end

16 the following new subsection:

17 ‘‘(c) INVESTMENTS IN CERTAIN COMMUNITY DEVEL18 OPMENT ORGANIZATIONS.—In assessing and taking into

19 account, under subsection (a), the record of a regulated

20 financial institution, the appropriate Federal financial su21 pervisory agency may consider, as a factor, investments

22 of the institution in, and capital investment, loan partici23 pation, and other ventures undertaken by the institution

24 in cooperation with, any community development organi25 zation (as defined in section 234 of the Bank Enterprise
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1 Act of 1991) which is located in a renewal community (as

2 designated under section 1400E of the Internal Revenue

3 Code of 1986).’’.

Æ