I

104TH CONGRESS

1ST SESSION H. R. 2015

To amend the Internal Revenue Code of 1986 to provide tax incentives

for the economic recovery of areas affected by the loss of employment

in the financial institution and real estate sectors.

IN THE HOUSE OF REPRESENTATIVES

JULY 11, 1995

Mrs. KENNELLY 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 provide

tax incentives for the economic recovery of areas affected

by the loss of employment in the financial institution

and real estate sectors.

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 ‘‘Financial Institution

5 and Real Estate (FIRE) Relief Act of 1995’’.
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1 SEC. 2. DESIGNATION AND TREATMENT OF ECONOMIC RE2 COVERY AREAS.

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

5 following new subchapter:

6 ‘‘Subchapter W—Designation and

7 Treatment of Economic Recov8 ery Areas

‘‘Part I. Designation.

‘‘Part II. Incentives.

9 ‘‘PART I—DESIGNATION

‘‘Sec. 1399A. Designation procedure.

‘‘Sec. 1399B. Eligibility criteria; definitions and special rules.

10 ‘‘SEC. 1399A. DESIGNATION PROCEDURE.

11 ‘‘(a) IN GENERAL.—From among the areas nomi12 nated for designation under this section, the Secretary

13 may designate 3 nominated areas as economic recovery

14 areas.

15 ‘‘(b) PERIOD DESIGNATIONS MAY BE MADE.—A des16 ignation may be made under this section only during the

17 1-year period beginning on the date of the enactment of

18 this subchapter.

19 ‘‘(c) PERIOD FOR WHICH DESIGNATION IS IN EF20 FECT.—

21 ‘‘(1) IN GENERAL.—Any designation under this

22 section shall remain in effect during the period be-
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1 ginning on the date of the designation and ending

2 on the earliest of—

3 ‘‘(A) the close of the 10th calendar year

4 beginning on or after such date of designation,

5 ‘‘(B) the termination date designated by

6 the State and local governments as provided for

7 in their nomination, or

8 ‘‘(C) the date the Secretary revokes the

9 designation.

10 ‘‘(2) REVOCATION OF DESIGNATION.—The Sec11 retary may revoke the designation under this section

12 of an area under rules similar to the rules of section

13 1391(d)(2).

14 ‘‘(d) OTHER RULES TO APPLY.—Rules similar to the

15 rules of subsections (e) and (f) of section 1391 shall apply

16 for purposes of the designation under this section.

17 ‘‘SEC. 1399B. ELIGIBILITY CRITERIA; DEFINITIONS AND

18 SPECIAL RULES.

19 ‘‘(a) IN GENERAL.—A nominated area shall be eligi20 ble for designation under section 1399A only if it meets

21 the following criteria:

22 ‘‘(1) ENTERPRISE ZONE CRITERIA.—The nomi23 nated area is an urban area which meets the criteria

24 under section 1392 for urban areas (determined

25 without regard to section 1392(a)(3)(D) thereof).
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1 ‘‘(2) EMPLOYMENT LOSSES IN FINANCIAL IN2 STITUTION AND REAL ESTATE SECTORS.—With re3 spect to the nominated area—

4 ‘‘(A) at least 12 percent of the wages at5 tributable to private, nonagricultural employ6 ment in the area during 1989, and subject to

7 tax under section 3301 during such year, were

8 in the financial institution and real estate sec9 tors, and

10 ‘‘(B) the employment in such area in such

11 sectors for the calendar year preceding the cal12 endar year in which such area is nominated for

13 designation is 10 percent (or, if lesser, 5,000

14 full-time equivalent jobs) less than such employ15 ment during 1989.

16 The requirement of subparagraph (B) shall not be

17 met if substantially all of such decline in employ18 ment is attributable to 1 employer. Data for the

19 labor market area which includes the nominated

20 area may be used for purposes of this paragraph if

21 data is not separately available for the nominated

22 area.

23 ‘‘(b) DEFINITIONS.—For purposes of this sub24 chapter—
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1 ‘‘(1) ECONOMIC RECOVERY AREA.—The term

2 ‘economic recovery area’ means an area designated

3 as such under section 1399A.

4 ‘‘(2) FINANCIAL INSTITUTION.—The term ‘fi5 nancial institution’ includes any bank, any insurance

6 company, and any trade or business of performing

7 brokerage services.

8 ‘‘(3) URBAN AREA.—The term ‘urban area’

9 means an area which is not a rural area (as defined

10 in section 1393(a)(2)).

11 ‘‘(4) OTHER DEFINITIONS AND SPECIAL

12 RULES.—Rules similar to the rules of paragraphs

13 (4) through (9) of section 1393(a) shall apply for

14 purposes of this subchapter.

15 ‘‘PART II—INCENTIVES

‘‘Sec. 1399D. Economic recovery area employment credit.

‘‘Sec. 1399E. Reduction in capital gains tax on equity investments in area businesses.

‘‘Sec. 1399F. Other incentives.

16 ‘‘SEC. 1399D. ECONOMIC RECOVERY AREA EMPLOYMENT

17 CREDIT.

18 ‘‘(a) AMOUNT OF CREDIT.—For purposes of section

19 38, the amount of the economic recovery area employment

20 credit determined under this section with respect to any

21 employer for any taxable year is 20 percent of the quali22 fied area wages paid or incurred during the calendar year

23 which ends with or within such taxable year.
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1 ‘‘(b) QUALIFIED AREA WAGES.—

2 ‘‘(1) IN GENERAL.—For purposes of this sec3 tion, the term ‘qualified area wages’ means any

4 wages paid or incurred by an employer for services

5 performed by an employee while such employee is a

6 qualified area employee.

7 ‘‘(2) ONLY FIRST $15,000 OF WAGES PER YEAR

8 TAKEN INTO ACCOUNT.—With respect to each quali9 fied area employee, the amount of qualified area

10 wages which may be taken into account for a cal11 endar year shall not exceed $15,000.

12 ‘‘(3) COORDINATION WITH TARGETED JOBS

13 CREDIT AND EMPOWERMENT ZONE EMPLOYMENT

14 CREDIT.—

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

16 area wages’ shall not include wages taken into

17 account in determining the credit under section

18 51 or 1396.

19 ‘‘(B) COORDINATION WITH PARAGRAPH

20 (2).—The $15,000 amount in paragraph (2)

21 shall be reduced for any calendar year by the

22 amount of wages paid or incurred during such

23 year which are taken into account in determin24 ing the credit under section 51 or 1396.
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1 ‘‘(c) QUALIFIED AREA EMPLOYEE.—For purposes of

2 this section—

3 ‘‘(1) IN GENERAL.—Except as otherwise pro4 vided in this subsection, the term ‘qualified area em5 ployee’ means, with respect to any period, any em6 ployee of an employer if—

7 ‘‘(A) substantially all of the services per8 formed during such period by such employee for

9 such employer are performed within an eco10 nomic recovery area in a trade or business of

11 the employer, and

12 ‘‘(B) the prior employment of such em13 ployee was by an employer in such area from

14 which—

15 ‘‘(i) such employee was involuntarily

16 separated from service (other than in a

17 separation determined under the applicable

18 State unemployment compensation law to

19 be due to the misconduct of such em20 ployee), or

21 ‘‘(ii) such employee retired.

22 ‘‘(2) CERTAIN INDIVIDUALS NOT ELIGIBLE.—

23 Rules similar to the rules of paragraphs (2) and (3)

24 of section 1396(d) shall apply for purposes of para25 graph (1).
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1 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—

2 For purposes of this section—

3 ‘‘(1) WAGES.—The term ‘wages’ has the same

4 meaning as when used in section 51.

5 ‘‘(2) CONTROLLED GROUPS.—All employers

6 treated as a single employer under subsection (a) or

7 (b) of section 52 shall be treated as a single em8 ployer for purposes of this section, and the credit (if

9 any) determined under this section with respect to

10 each such employer shall be its proportionate share

11 of the wages giving rise to such credit.

12 ‘‘(3) CERTAIN OTHER RULES MADE APPLICA13 BLE.—For purposes of this section, rules similar to

14 the rules of section 51(k) and subsections (c), (d),

15 and (e) of section 52 shall apply.

16 ‘‘SEC. 1399E. REDUCTION IN CAPITAL GAINS TAX ON EQ17 UITY INVESTMENTS IN AREA BUSINESSES.

18 ‘‘(a) TAXPAYERS OTHER THAN CORPORATIONS.—

‘‘For 10 percent maximum rate of tax on qualified

area investments, see section 1(h).

19 ‘‘(b) CORPORATIONS.—

‘‘For 17 percent maximum rate of tax on qualified

area investments, see section 1201.

20 ‘‘(c) QUALIFIED AREA INVESTMENTS.—For purposes

21 of sections 1 and 1201—

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

23 investment’ means—
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1 ‘‘(A) any qualified area stock,

2 ‘‘(B) any qualified area business property,

3 and

4 ‘‘(C) any qualified area partnership inter5 est,

6 held for more than 5 years as of the date of the sale

7 or exchange to which section 1 or 1201 applies.

8 ‘‘(2) QUALIFIED AREA STOCK.—

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

10 subparagraph (B), the term ‘qualified area

11 stock’ means any stock in a domestic corpora12 tion if—

13 ‘‘(i) such stock is acquired by the tax14 payer on original issue from the corpora15 tion solely in exchange for cash,

16 ‘‘(ii) as of the time such stock was is17 sued, such corporation was a qualified area

18 business (or, in the case of a new corpora19 tion, such corporation was being organized

20 for purposes of being a qualified area busi21 ness), and

22 ‘‘(iii) during substantially all of the

23 taxpayer’s holding period for such stock,

24 such corporation qualified as a qualified

25 area business.
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1 ‘‘(B) REDEMPTIONS.—The term ‘qualified

2 area stock’ shall not include any stock acquired

3 from a corporation which made a substantial

4 stock redemption or distribution (without a

5 bona fide business purpose therefor) in an at6 tempt to avoid the purposes of this section.

7 ‘‘(3) QUALIFIED AREA BUSINESS PROPERTY.—

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

9 area business property’ means tangible property

10 if—

11 ‘‘(i) such property was acquired by

12 the taxpayer by purchase (as defined in

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

14 the designation of the economic recovery

15 area took effect,

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

17 in such an area commences with the tax18 payer, and

19 ‘‘(iii) during substantially all of the

20 taxpayer’s holding period for such prop21 erty, substantially all of the use of such

22 property was in an economic recovery area

23 and in a qualified area business of the tax24 payer.
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1 ‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM2 PROVEMENTS.—The requirements of clauses (i)

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

4 satisfied with respect to—

5 ‘‘(i) property which is substantially

6 improved by the taxpayer, and

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

8 is located.

9 For purposes of the preceding sentence, prop10 erty shall be treated as substantially improved

11 by the taxpayer if, during any 24-month period

12 beginning after the date on which the designa13 tion of the economic recovery area took effect,

14 additions to basis with respect to such property

15 in the hands of the taxpayer exceed the greater

16 of (i) an amount equal to the adjusted basis at

17 the beginning of such 24-month period in the

18 hands of the taxpayer, or (ii) $5,000.

19 ‘‘(C) LIMITATION ON LAND.—The term

20 ‘qualified area business property’ shall not in21 clude land which is not an integral part of a

22 qualified area business.

23 ‘‘(4) QUALIFIED AREA PARTNERSHIP INTER24 EST.—The term ‘qualified area partnership interest’

25 means any interest in a partnership if—
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1 ‘‘(A) such interest is acquired by the tax2 payer from the partnership solely in exchange

3 for cash,

4 ‘‘(B) as of the time such interest was ac5 quired, such partnership was a qualified area

6 business (or, in the case of a new partnership,

7 such partnership was being organized for pur8 poses of being a qualified area business), and

9 ‘‘(C) during substantially all of the tax10 payer’s holding period for such interest, such

11 partnership qualified as a qualified area busi12 ness.

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

14 apply for purposes of this paragraph.

15 ‘‘(5) TREATMENT OF SUBSEQUENT PUR16 CHASERS.—The term ‘qualified area investment’ in17 cludes any property which would be a qualified area

18 investment but for paragraph (2)(A)(i), (3)(A)(ii), or

19 (4)(A) in the hands of the taxpayer if such property

20 was a qualified area investment in the hands of any

21 prior holder.

22 ‘‘(6) 10-YEAR SAFE HARBOR.—If any property

23 ceases to be a qualified area investment by reason

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

25 the 10-year period beginning on the date the tax-
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1 payer acquired such property, such property shall

2 continue to be treated as meeting the requirements

3 of such paragraph; except that the amount of gain

4 to which subsections (a) and (b) apply on any sale

5 or exchange of such property shall not exceed the

6 amount which would be long-term capital gain had

7 such property been sold on the date of such ces8 sation.

9 ‘‘(7) TREATMENT OF AREA TERMINATIONS.—

10 The termination of any designation of an area as an

11 economic recovery area shall be disregarded for pur12 poses of determining whether any property is a

13 qualified area investment.

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

15 For purposes of this section—

16 ‘‘(1) QUALIFIED AREA BUSINESS.—The term

17 ‘qualified area business’ means any business which

18 would be an enterprise zone business as defined in

19 section 1397B if ‘economic recovery area’ were sub20 stituted for ‘empowerment zone’ each place it ap21 pears.

22 ‘‘(2) QUALIFIED BUSINESS.—The term ‘quali23 fied business’ has the meaning given such term by

24 section 1397B(d), determined by substituting ‘eco-
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1 nomic recovery area’ for ‘empowerment zone’ each

2 place it appears.

3 ‘‘(3) GAIN ATTRIBUTABLE TO PERIODS AFTER

4 TERMINATION OF AREA DESIGNATION NOT QUALI5 FIED.—The amount of gain to which subsections (a)

6 and (b) apply on any sale or exchange of property

7 shall not include any gain attributable to periods

8 after the termination of any designation of an area

9 as an economic recovery area.

10 ‘‘(e) TREATMENT OF PASS-THRU ENTITIES.—

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

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

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

14 entity which was a qualified area business during

15 substantially all of the period the taxpayer held such

16 interest) for more than 5 years shall be treated as

17 gain on a qualified area investment to the extent

18 such gain is attributable to amounts which would be

19 long-term capital gain on qualified area investments

20 (determined as if such investments had been sold on

21 the date of the sale or exchange) held by such entity

22 for more than 5 years and throughout the period the

23 taxpayer held such interest. A rule similar to the

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

25 the preceding sentence.
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1 ‘‘(2) INCOME INCLUSIONS.—

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

3 in income by reason of holding an interest in a

4 pass-thru entity (other than an entity which

5 was a qualified area business during substan6 tially all of the period the taxpayer held the in7 terest to which such inclusion relates) shall be

8 treated as gain on a qualified area investment

9 if such amount meets the requirements of sub10 paragraph (B).

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

12 the requirements of this subparagraph if—

13 ‘‘(i) such amount is attributable to

14 long-term capital gain recognized on the

15 sale or exchange by the pass-thru entity of

16 property which is a qualified area invest17 ment asset in the hands of such entity and

18 which was held by such entity for more

19 than 5 years, and

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

21 gross income of the taxpayer by reason of

22 the holding of an interest in such entity

23 which was held by the taxpayer on the date

24 on which such pass-thru entity acquired

25 such asset and at all times thereafter be-
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1 fore the disposition of such asset by such

2 pass-thru entity.

3 ‘‘(C) LIMITATION BASED ON INTEREST

4 ORIGINALLY HELD BY TAXPAYER.—Subpara5 graph (A) shall not apply to any amount to the

6 extent such amount exceeds the amount to

7 which subparagraph (A) would have applied if

8 such amount were determined by reference to

9 the interest the taxpayer held in the pass-thru

10 entity on the date the qualified area asset was

11 acquired.

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

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

14 ‘‘(A) any partnership,

15 ‘‘(B) any S corporation,

16 ‘‘(C) any regulated investment company,

17 and

18 ‘‘(D) any common trust fund.

19 ‘‘(f) SALES AND EXCHANGES OF INTERESTS IN

20 PARTNERSHIPS AND S CORPORATIONS WHICH ARE

21 QUALIFIED AREA BUSINESSES.—In the case of the sale

22 or exchange of an interest in a partnership, or of stock

23 in an S corporation, which was a qualified area business

24 during substantially all of the period the taxpayer held
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1 such interest or stock, the amount of long-term capital

2 gain shall be determined without regard to—

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

4 an integral part of any qualified business, and

5 ‘‘(2) gain attributable to periods before the des6 ignation of an area as an economic recovery area.

7 ‘‘(g) CERTAIN TAX-FREE AND OTHER TRANS8 FERS.—For purposes of this section—

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

10 a qualified area investment to which this subsection

11 applies, the transferee shall be treated as—

12 ‘‘(A) having acquired such investment in

13 the same manner as the transferor, and

14 ‘‘(B) having held such investment during

15 any continuous period immediately preceding

16 the transfer during which it was held (or treat17 ed as held under this subsection) by the trans18 feror.

19 ‘‘(2) TRANSFERS TO WHICH SUBSECTION AP20 PLIES.—This subsection shall apply to any trans21 fer—

22 ‘‘(A) by gift,

23 ‘‘(B) at death, or

24 ‘‘(C) from a partnership to a partner

25 thereof of a qualified area investment with re-
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1 spect to which the requirements of subsection

2 (e)(2) are met at the time of the transfer (with3 out regard to the 5-year holding requirement).

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

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

6 apply for purposes of this section.

7 ‘‘SEC. 1399F. OTHER INCENTIVES.

8 ‘‘(a) EXPENSING OF EQUIPMENT AND LEASEHOLD

9 IMPROVEMENTS.—

10 ‘‘(1) IN GENERAL.—In the case of a qualified

11 area business (as defined in section 1399E(d)), for

12 purposes of section 179—

13 ‘‘(A) the limitations of paragraphs (1) and

14 (2) of section 179(b) shall not apply to section

15 179 property which is qualified area property

16 placed in service during the taxable year, and

17 ‘‘(B) leasehold improvements placed in

18 service by the lessor in an economic recovery

19 area shall be treated as section 179 property

20 for purposes of subparagraph (A) and section

21 179.

22 ‘‘(2) RECAPTURE.—Rules similar to the rules

23 under section 179(d)(10) shall apply with respect to

24 any qualified area property which ceases to be used
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1 in an economic recovery area by a qualified area

2 business.

3 ‘‘(3) QUALIFIED AREA PROPERTY.—For pur4 poses of this subsection, the term ‘qualified area

5 property’ means any property which would be quali6 fied zone property as defined in section 1397C, if

7 ‘economic recovery area’ were substituted for

8 ‘empowerment zone’ each place it appears.

9 ‘‘(b) PASSIVE LOSS RULES NOT TO APPLY TO REHA10 BILITATION OF HISTORIC STRUCTURES.—Section 469

11 shall not apply to so much of the rehabilitation credit de12 termined under section 47 as is attributable to certified

13 historic structures (as defined in section 47(c)(3)) located

14 in an economic recovery area.

15 ‘‘(c) DOUBLE DEDUCTION FOR SECURITY DE16 VICES.—The amount of any deduction otherwise allowable

17 under section 162 for any security expenses shall be in18 creased by 100 percent of such amount.’’

19 (b) REDUCTION IN CAPITAL GAINS RATES.—

20 (1) TAXPAYERS OTHER THAN CORPORA21 TIONS.—Subsection (h) of section 1 of such Code

22 (relating to maximum capital gains rate) is amended

23 to read as follows:

24 ‘‘(h) MAXIMUM CAPITAL GAINS RATE.—
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1 ‘‘(1) IN GENERAL.—If a taxpayer has a net

2 capital gain for any taxable year, then the tax im3 posed by this section shall not exceed the sum of—

4 ‘‘(A) a tax computed at the rates and in

5 the same manner as if this subsection had not

6 been enacted on the greater of—

7 ‘‘(i) taxable income reduced by the

8 amount of the net capital gain, or

9 ‘‘(ii) the amount of taxable income

10 taxed at a rate below 10 percent, plus

11 ‘‘(B) a tax of 10 percent on the lesser of—

12 ‘‘(i) the net capital gain determined

13 by only taking into account gain and loss

14 attributable to qualified area investments

15 (as defined in section 1399E(c)), or

16 ‘‘(ii) the amount of taxable income in

17 excess of the amount on which tax is deter18 mined under subparagraph (A), plus

19 ‘‘(C) a tax of 28 percent of taxable income

20 in excess of the sum of the amounts on which

21 tax was determined under subparagraphs (A)

22 and (B).

23 ‘‘(2) COORDINATION WITH INVESTMENT IN24 COME ELECTION.—For purposes of paragraph (1),

25 the net capital gain for any taxable year shall be re-
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1 duced (but not below zero) by the amount which the

2 taxpayer elects to take into account as investment

3 income for the taxable year under section

4 163(d)(4)(B)(iii).’’

5 (2) CORPORATIONS.—Paragraph (2) of section

6 1201(a) of such Code is amended to read as follows:

7 ‘‘(2)(A) a tax of 17 percent of the lesser of—

8 ‘‘(i) the net capital gain determined by

9 only taking into account gain and loss attrib10 utable to qualified area investments (as defined

11 in section 1399E(c)), or

12 ‘‘(ii) the net capital gain, plus

13 ‘‘(B) a tax of 35 percent of the net capital gain

14 in excess of the amount on which tax was deter15 mined under subparagraph (A).’’

16 (c) TECHNICAL AMENDMENTS.—

17 (1) EMPLOYMENT CREDIT PART OF GENERAL

18 BUSINESS CREDIT.—

19 (A) Subsection (b) of section 38 of such

20 Code (relating to current year business credit)

21 is amended by striking ‘‘plus’’ at the end of

22 paragraph (10), by striking the period at the

23 end of paragraph (11) and inserting ‘‘, plus’’,

24 and by adding at the end the following new

25 paragraph:
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1 ‘‘(12) the economic recovery area employment

2 credit determined under section 1399D(a).’’

3 (B) Subsection (d) of section 39 of such

4 Code is amended by adding at the end the fol5 lowing new paragraph:

6 ‘‘(4) ECONOMIC RECOVERY AREA EMPLOYMENT

7 CREDIT.—No portion of the unused business credit

8 which is attributable to the credit determined under

9 section 1399D (relating to economic recovery area

10 employment credit) may be carried to any taxable

11 year ending before January 1, 1995.’’

12 (2) DENIAL OF DEDUCTION FOR PORTION OF

13 WAGES EQUAL TO ECONOMIC RECOVERY AREA EM14 PLOYMENT CREDIT.—

15 (A) Subsection (a) of section 280C of such

16 Code (relating to rule for targeted jobs credit)

17 is amended by striking ‘‘and 1396(a)’’ and in18 serting ‘‘, 1396(a), and 1399D(a)’’.

19 (B) Subsection (c) of section 196 of such

20 Code (relating to deduction for certain unused

21 business credits) is amended by striking ‘‘and’’

22 at the end of paragraph (6), by striking the pe23 riod at the end of paragraph (7) and inserting

24 ‘‘, and’’, and by adding at the end the following

25 new paragraph:
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1 ‘‘(8) the economic recovery area employment

2 credit determined under section 1399D(a).’’

3 (3) CARRYOVERS.—Subsection (c) of section

4 381 of such Code (relating to carryovers in certain

5 corporate acquisitions) is amended by adding at the

6 end the following new paragraph:

7 ‘‘(27) ECONOMIC RECOVERY AREA PROVI8 SIONS.—The acquiring corporation shall take into

9 account (to the extent proper to carry out the pur10 poses of this section and subchapter W, and under

11 such regulations as may be prescribed by the Sec12 retary) the items required to be taken into account

13 for purposes of subchapter W in respect of the dis14 tributor or transferor corporation.’’

15 (4) The table of subchapters for chapter 1 of

16 such Code is amended by inserting after the item re17 lating to subchapter V the following new item:

‘‘Subchapter W. Designation and treatment of economic recovery

areas.’’

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

19 this section shall take effect on the date of the enactment

20 of this Act.

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