I

104TH CONGRESS

1ST SESSION H. R. 1519

To amend the Internal Revenue Code of 1986 to allow a credit for the

construction and renovation of nonresidential buildings in distressed areas.

IN THE HOUSE OF REPRESENTATIVES

APRIL 7, 1995

Ms. WATERS introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to allow a

credit for the construction and renovation of

nonresidential buildings in distressed areas.

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.

4 This Act may be cited as the ‘‘Low Income Commu5 nity Development Tax Credit Act of 1995’’.

6 SEC. 2. CREDIT FOR NONRESIDENTIAL BUILDINGS CON7 STRUCTED OR RENOVATED IN DISTRESSED

8 AREAS.

9 (a) IN GENERAL.—Subpart D of part IV of sub10 chapter A of chapter 1 of the Internal Revenue Code of
2

•HR 1519 IH

1 1986 (relating to business related credits) is amended by

2 adding at the end the following new section:

3 ‘‘SEC. 45C. CREDIT FOR NONRESIDENTIAL BUILDINGS IN

4 DISTRESSED AREAS.

5 ‘‘(a) IN GENERAL.—For purposes of section 38, the

6 amount of the distressed area building credit determined

7 under this section for any taxable year in the credit period

8 shall be an amount equal to—

9 ‘‘(1) the applicable percentage of

10 ‘‘(2) the eligible basis of each qualified dis11 tressed area building.

12 ‘‘(b) APPLICABLE PERCENTAGE: 70 PERCENT

13 PRESENT VALUE CREDIT FOR CERTAIN NEW BUILDINGS;

14 30 PERCENT PRESENT VALUE CREDIT FOR CERTAIN

15 OTHER BUILDINGS.—For purposes of this section—

16 ‘‘(1) IN GENERAL.—The term ‘applicable per17 centage’ means the appropriate percentage pre18 scribed by the Secretary for the earlier of—

19 ‘‘(A) the month in which such building is

20 placed in service, or

21 ‘‘(B) at the election of the taxpayer—

22 ‘‘(i) the month in which the taxpayer

23 and the credit allocating agency enter into

24 an agreement with respect to such building

25 (which is binding on such agency, the tax-
3

•HR 1519 IH

1 payer, and all successors in interest) as to

2 the building credit dollar amount to be al3 located to such building, or

4 ‘‘(ii) in the case of any building to

5 which the rules of section 42(h)(4)(B)

6 apply, the month in which the tax-exempt

7 obligations are issued.

8 A month may be elected under clause (ii) only if the

9 election is made not later than the 5th day after the

10 close of such month. Such an election, once made,

11 shall be irrevocable.

12 ‘‘(2) METHOD OF PRESCRIBING PERCENT13 AGES.—

14 ‘‘(A) IN GENERAL.—The percentages pre15 scribed by the Secretary for any month shall be

16 percentages which will yield over a 10-year pe17 riod amounts of credit under subsection (a)

18 which have a present value equal to—

19 ‘‘(i) 70 percent of the eligible basis of

20 a new building, and

21 ‘‘(ii) 30 percent of the eligible basis of

22 an existing building.

23 ‘‘(B) INCREASED CREDIT FOR BUILDINGS

24 IN MORE DISTRESSED AREAS.—In the case of

25 buildings located in a census tract which would
4

•HR 1519 IH

1 be a distressed area if ‘50 percent’ were sub2 stituted for ‘80 percent’ in subsection (c)(2),

3 subparagraph (A) shall be applied by substitut4 ing ‘75 percent’ for ‘70 percent’ and ‘35 per5 cent’ for ‘30 percent’.

6 ‘‘(c) QUALIFIED DISTRESSED AREA BUILDING; DIS7 TRESSED AREA.—For purposes of this section—

8 ‘‘(1) QUALIFIED DISTRESSED AREA BUILD9 ING.—The term ‘qualified distressed area building’

10 means any building (other than residential rental

11 property) which, when placed in service, is located in

12 a distressed area.

13 ‘‘(2) DISTRESSED AREA.—The term ‘distressed

14 area’ means any census tract in which, for the most

15 recent year for which census data are available on

16 household income in such tract, 70 percent or more

17 of the households have an income which is 80 per18 cent or less of the area median gross income (within

19 the meaning of section 142(d)) for such year.

20 ‘‘(d) ELIGIBLE BASIS.—For purposes of this section,

21 the eligible basis of any building shall be determined under

22 the rules of paragraphs (1) and (2) of section 42(d).

23 ‘‘(e) REHABILITATION EXPENDITURES TREATED AS

24 SEPARATE NEW BUILDING.—
5

•HR 1519 IH

1 ‘‘(1) IN GENERAL.—Rehabilitation expenditures

2 paid or incurred by the taxpayer with respect to any

3 building shall be treated for purposes of this section

4 as a separate new building.

5 ‘‘(2) REHABILITATION EXPENDITURES.—For

6 purposes of paragraph (1)—

7 ‘‘(A) IN GENERAL.—The term ‘rehabilita8 tion expenditures’ means amounts chargeable to

9 capital account and incurred for property (or

10 additions or improvements to property) of a

11 character subject to the allowance for deprecia12 tion in connection with the rehabilitation of a

13 building.

14 ‘‘(B) COST OF ACQUISITION, ETC., NOT IN15 CLUDED.—Such term does not include the cost

16 of acquiring any building (or interest therein).

17 ‘‘(3) MINIMUM EXPENDITURES TO QUALIFY.—

18 ‘‘(A) IN GENERAL.—Paragraph (1) shall

19 apply to rehabilitation expenditures with respect

20 to any building only if the amount of such ex21 penditures during any 24-month period is not

22 less than 10 percent of the adjusted basis of the

23 building (determined as of the 1st day of such

24 period and without regard to paragraphs (2)

25 and (3) of section 1016(a)).
6

•HR 1519 IH

1 ‘‘(B) DATE OF DETERMINATION.—The de2 termination under subparagraph (A) shall be

3 made as of the close of the 1st taxable year in

4 the credit period with respect to such expendi5 tures.

6 ‘‘(4) SPECIAL RULES.—Rules similar to the

7 rules of paragraph (4)(A) and (5) of section 42(e)

8 shall apply for purposes of this subsection.

9 ‘‘(f) DEFINITION AND SPECIAL RULES RELATING TO

10 CREDIT PERIOD.—

11 ‘‘(1) CREDIT PERIOD DEFINED.—For purposes

12 of this section, the term ‘credit period’ means, with

13 respect to any building, the period of 10 taxable

14 years beginning with—

15 ‘‘(A) the taxable year in which the building

16 is placed in service, or

17 ‘‘(B) at the election of the taxpayer, the

18 succeeding taxable year,

19 but only if the building is a qualified distressed area

20 building as of the close of the 1st year of such pe21 riod. The election under subparagraph (B), once

22 made, shall be irrevocable.

23 ‘‘(2) SPECIAL RULES.—Rules similar to the

24 rules of paragraphs (3), (4), and (5) of section 42(f)

25 shall apply for purposes of this subsection.
7

•HR 1519 IH

1 ‘‘(g) LIMITATION ON AGGREGATE CREDIT ALLOW2 ABLE WITH RESPECT TO BUILDINGS LOCATED IN A

3 STATE.—

4 ‘‘(1) CREDIT MAY NOT EXCEED CREDIT

5 AMOUNT ALLOCATED TO BUILDING.—

6 ‘‘(A) IN GENERAL.—The amount of the

7 credit determined under this section for any

8 taxable year with respect to any building shall

9 not exceed the distressed area building credit

10 dollar amount allocated to such building under

11 this subsection.

12 ‘‘(B) TIME FOR MAKING ALLOCATION.—

13 Rules similar to the rules of subparagraphs (B)

14 through (F) of section 42(h)(1) shall apply for

15 purposes of this paragraph.

16 ‘‘(2) ALLOCATED CREDIT AMOUNT TO APPLY

17 TO ALL TAXABLE YEARS ENDING DURING OR AFTER

18 CREDIT ALLOCATION YEAR.—Any distressed area

19 building credit dollar amount allocated to any build20 ing for any calendar year—

21 ‘‘(A) shall apply to such building for all

22 taxable years in the credit period ending during

23 or after such calendar year, and
8

•HR 1519 IH

1 ‘‘(B) shall reduce the aggregate distressed

2 area building credit dollar amount of the credit

3 allocating agency only for such calendar year.

4 ‘‘(3) DISTRESS AREA BUILDING CREDIT DOL5 LAR AMOUNT FOR AGENCIES.—

6 ‘‘(A) IN GENERAL.—The aggregate dis7 tressed area building credit dollar amount

8 which a credit agency may allocate for any cal9 endar year is the portion of the State distressed

10 area building credit ceiling allocated under this

11 paragraph for such calendar year to such agen12 cy.

13 ‘‘(B) STATE CEILING INITIALLY ALLO14 CATED TO STATE HOUSING CREDIT AGEN15 CIES.—The State distressed area building credit

16 ceiling for each calendar year shall be allocated

17 to the housing credit agency of such State. If

18 there is more than 1 housing credit agency of

19 a State, all such agencies shall be treated as a

20 single agency.

21 ‘‘(C) STATE DISTRESSED AREA BUILDING

22 CREDIT CEILING.—The State distressed area

23 building credit ceiling applicable to any State

24 for any calendar year shall be an amount equal

25 to the sum of—
9

•HR 1519 IH

1 ‘‘(i) $1.25 multiplied by the State

2 population,

3 ‘‘(ii) the unused State distressed area

4 building credit ceiling (if any) of such

5 State for the preceding calendar year,

6 ‘‘(iii) the amount of State distressed

7 area building credit ceiling returned in the

8 calendar year, plus

9 ‘‘(iv) the amount (if any) allocated

10 under subparagraph (D) to such State by

11 the Secretary.

12 For purposes of clause (ii), the unused State

13 distressed area building credit ceiling for any

14 calendar year is the excess (if any) of the sum

15 of the amounts described in clauses (i) and (iii)

16 over the aggregate distressed area building

17 credit dollar amount allocated for such year.

18 ‘‘(D) UNUSED CREDIT CARRYOVERS ALLO19 CATED AMONG CERTAIN STATES.—Rules similar

20 to the rules of section 42(h)(2)(D) shall apply

21 for purposes of this paragraph.

22 ‘‘(4) OTHER RULES TO APPLY.—Rules similar

23 to the rules of subparagraphs (E), (F), and (G) of

24 section 42(h)(2), and paragraphs (4), (5), and (7) of
10

•HR 1519 IH

1 section 42(h), shall apply for purposes of this sub2 section.

3 ‘‘(5) DEFINITIONS.—For purposes of this sub4 section—

5 ‘‘(A) CREDIT ALLOCATING AGENCY.—The

6 term ‘credit allocating agency’ means any agen7 cy authorized to carry out this subsection.

8 ‘‘(B) POSSESSIONS TREATED AS STATES.—

9 The term ‘State’ includes a possession of the

10 United States.

11 ‘‘(h) DEFINITIONS AND SPECIAL RULES.—For pur12 poses of this section —

13 ‘‘(1) NEW BUILDING.—The term ‘new building’

14 means a building the original use of which begins

15 with the taxpayer.

16 ‘‘(2) EXISTING BUILDING.—The term ‘existing

17 building’ means any building which is not a new

18 building.

19 ‘‘(3) APPLICATION TO ESTATES AND TRUSTS.—

20 In the case of an estate or trust, the amount of the

21 credit determined under subsection (a) shall be ap22 portioned between the estate or trust and the bene23 ficiaries on the basis of the income of the estate or

24 trust allocable to each.
11

•HR 1519 IH

1 ‘‘(i) APPLICATION OF AT-RISK RULES.—Rules simi2 lar to the rules of section 42(j) shall apply for purposes

3 of this section.

4 ‘‘(j) CERTIFICATIONS AND OTHER REPORTS TO SEC5 RETARY.—

6 ‘‘(1) CERTIFICATION WITH RESPECT TO 1ST

7 YEAR OF CREDIT PERIOD.—Following the close of

8 the 1st taxable year in the credit period with respect

9 to any qualified distressed area building, the tax10 payer shall certify to the Secretary (at such time

11 and in such form and in such manner as the Sec12 retary prescribes)—

13 ‘‘(A) the taxable year, and calendar year,

14 in which such building was placed in service,

15 ‘‘(B) the adjusted basis and eligible basis

16 of such building as of the close of the 1st year

17 of the credit period,

18 ‘‘(C) the maximum applicable percentage

19 and eligible basis permitted to be taken into ac20 count by the appropriate credit allocating agen21 cy, and

22 ‘‘(D) such other information as the Sec23 retary may require.

24 In the case of a failure to make the certification re25 quired by the preceding sentence on the date pre-
12

•HR 1519 IH

1 scribed therefor, unless it is shown that such failure

2 is due to reasonable cause and not to willful neglect,

3 no credit shall be allowable by reason of subsection

4 (a) with respect to such building for any taxable

5 year ending before such certification is made.

6 ‘‘(2) REPORTS TO THE SECRETARY.—The Sec7 retary may require taxpayers and credit allocating

8 agencies to submit such reports as the Secretary de9 termines necessary or appropriate to carry out the

10 purposes of this section.

11 ‘‘(k) CREDIT ALLOCATED TO BUILDING NOT TO EX12 CEED AMOUNT NECESSARY TO ASSURE PROJECT FEA13 SIBILITY.—

14 ‘‘(1) IN GENERAL.—The distressed area build15 ing credit dollar amount allocated to a building shall

16 not exceed the amount the credit allocating agency

17 determines is necessary for the financial feasibility

18 of the building throughout the credit period.

19 ‘‘(2) AGENCY EVALUATION.—In making the de20 termination under paragraph (1), the credit allocat21 ing agency shall consider—

22 ‘‘(A) the sources and uses of funds and the

23 total financing planned for the building,

24 ‘‘(B) any proceeds or receipts expected to

25 be generated by reason of tax benefits, and
13

•HR 1519 IH

1 ‘‘(C) the percentage of the distressed area

2 building credit dollar amount used for building

3 costs other than the cost of intermediaries.

4 Subparagraph (C) shall not be applied so as to im5 pede the development of buildings in hard-to-develop

6 areas. Such a determination shall not be construed

7 to be a representation or warranty as to the feasibil8 ity or viability of the building.

9 ‘‘(3) DETERMINATION MADE WHEN CREDIT

10 AMOUNT APPLIED FOR AND WHEN BUILDING

11 PLACED IN SERVICE.—

12 ‘‘(A) IN GENERAL.—A determination

13 under paragraph (1) shall be made as of each

14 of the following times:

15 ‘‘(i) The application for the distressed

16 area building credit dollar amount.

17 ‘‘(ii) The allocation of the distressed

18 area building credit dollar amount.

19 ‘‘(iii) The date the building is placed

20 in service.

21 ‘‘(B) CERTIFICATION AS TO AMOUNT OF

22 OTHER SUBSIDIES.—Prior to each determina23 tion under subparagraph (A), the taxpayer shall

24 certify to the credit allocating agency the full

25 extent of all Federal, State, and local subsidies
14

•HR 1519 IH

1 which apply (or which the taxpayer expects to

2 apply) with respect to the building.

3 ‘‘(l) REGULATIONS.—The Secretary shall prescribe

4 such regulations as may be necessary or appropriate to

5 carry out the purposes of this section.’’

6 (b) CREDIT TO BE PART OF GENERAL BUSINESS

7 CREDIT.—

8 (1) Subsection (b) of section 38 of such Code

9 is amended by striking ‘‘plus’’ at the end of para10 graph (10), by striking the period at the end of

11 paragraph (11) and inserting ‘‘, plus’’, and by add12 ing at the end the following new paragraph:

13 ‘‘(12) the distressed area building credit deter14 mined under section 45C(a).’’

15 (2) Subsection (d) of section 39 of such Code

16 is amended by adding at the end the following new

17 paragraph:

18 ‘‘(7) DISTRESSED AREA BUILDING CREDIT.—

19 No portion of the unused business credit which is at20 tributable to the credit determined under section

21 45C (relating to distressed area building credit) may

22 be carried to any taxable year ending before January

23 1, 1996.’’

24 (3) Subsection (c) of section 196 of such Code

25 (relating to deduction for certain unused business
15

•HR 1519 IH

1 credits) is amended by striking ‘‘and’’ at the end of

2 paragraph (6), by striking the period at the end of

3 paragraph (7) and inserting ‘‘, and’’, and by adding

4 at the end the following new paragraph:

5 ‘‘(8) the distressed area building credit deter6 mined under section 45C(a).’’

7 (c) CLERICAL AMENDMENT.—The table of sections

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

9 of such Code is amended by adding at the end the follow10 ing new item:

‘‘Sec. 45C. Credit for nonresidential buildings in distressed

areas.’’

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

12 this section shall apply to property placed in service after

13 December 31, 1995.

Æ