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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 1097 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                S. 1097

To provide for the establishment of rural development investment zones, 
                        and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             June 15, 1993

  Mr. Dorgan introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
To provide for the establishment of rural development investment zones, 
                        and for other purposes.

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

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Rural Development 
Investment Zone Act of 1993''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 2. PURPOSES.

    The purposes of this Act are to provide for the establishment of 
Rural Development Investment Zones (RDIZs) to stimulate the creation of 
new jobs and businesses, to promote revitalization of economically 
distressed rural areas, and to provide increased economic opportunity 
for residents thereof, primarily by providing or encouraging--
            (1) tax relief at the Federal, State, and local levels,
            (2) increased Federal and State assistance,
            (3) regulatory relief at the Federal, State, and local 
        levels, and
            (4) improved local services, particularly through the 
        increased involvement of private, local, and community 
        organizations.

       TITLE I--DESIGNATION OF RURAL DEVELOPMENT INVESTMENT ZONES

SEC. 101. DESIGNATION OF ZONES.

    (a) General Rule.--Chapter 80 (relating to general rules) is 
amended by adding at the end thereof the following new subchapter:

   ``Subchapter D--Designation of Rural Development Investment Zones

                              ``Sec. 7881. Designation.

``SEC. 7881. DESIGNATION.

    ``(a) Designation of Zones.--
            ``(1) Definitions.--For purposes of this title, the term 
        `rural development investment zone' means any area--
                    ``(A) which is nominated by 1 or more local 
                governments and the State or States in which it is 
                located for designation as a rural development 
                investment zone (hereinafter in this section referred 
                to as a `nominated area'), and
                    ``(B) which the Secretary of the Treasury (after 
                consultation with the Secretaries of Agriculture, 
                Commerce, and Labor, and the Administrator of the Small 
                Business Administration) designates as a rural 
                development investment zone.
            ``(2) Limitations on designations.--
                    ``(A) Publication of regulations.--Before 
                designating any area as a rural development investment 
                zone and not later than 4 months following the date of 
                the enactment of this section, the Secretary of the 
                Treasury shall prescribe by regulation, after 
                consultation with the officials described in paragraph 
                (1)(B)--
                            ``(i) the procedures for nominating an area 
                        under paragraph (1)(A),
                            ``(ii) the parameters relating to the size 
                        and population characteristics of a rural 
                        development investment zone, and
                            ``(iii) the manner in which nominated areas 
                        will be compared based on the criteria 
                        specified in subsection (d) and the other 
                        factors specified in subsection (f).
                    ``(B) Time limitations.--The Secretary of the 
                Treasury shall designate nominated areas as rural 
                development investment zones only during the 36-month 
                period beginning on the later of--
                            ``(i) the first day of the first month 
                        following the month in which the effective date 
                        of the regulations described in subparagraph 
                        (A) occurs, or
                            ``(ii) January 1, 1993.
                    ``(C) Number of designations.--The Secretary of the 
                Treasury may not designate--
                            ``(i) more than 100 nominated areas as 
                        rural development investment zones under this 
                        section, and
                            ``(ii) more than 40 nominated areas as 
                        rural development investment zones during the 
                        first 12-month period beginning on the date 
                        determined under subparagraph (B) and each 
                        subsequent 12-month period.
                    ``(D) Procedural rules.--The Secretary of the 
                Treasury shall not make any designation of an area as a 
                rural development investment zone under paragraph (1) 
                unless--
                            ``(i) the local government and the State in 
                        which the nominated area is located have the 
                        authority--
                                    ``(I) to nominate such area for 
                                designation as a rural development 
                                investment zone,
                                    ``(II) to make the State and local 
                                commitments under subsection (d), and
                                    ``(III) to provide assurances 
                                satisfactory to the Secretary of the 
                                Treasury that such commitments will be 
                                fulfilled,
                            ``(ii) a nomination therefor is submitted 
                        in such a manner and in such form, and contains 
                        such information, as the Secretary of the 
                        Treasury shall by regulation prescribe,
                            ``(iii) the Secretary of the Treasury 
                        determines that any information furnished is 
                        reasonably accurate, and
                            ``(iv) the State and local governments 
                        certify that no portion of such area is already 
                        included in a rural development investment zone 
                        or in an area otherwise nominated to be a rural 
                        development investment zone.
    ``(b) Period for Which Designation Is in Effect.--
            ``(1) In general.--Any designation of an area as a rural 
        development investment zone shall remain in effect during the 
        period beginning on the date of the designation and ending on 
        the earliest of--
                    ``(A) December 31 of the 12th calendar year 
                following the calendar year in which such date occurs,
                    ``(B) the termination date designated by the State 
                and local governments as provided in the nomination 
                submitted under subsection (a)(2)(D)(ii), or
                    ``(C) the date the Secretary of the Treasury 
                revokes such designation under paragraph (2).
            ``(2) Revocation of designation.--The Secretary of the 
        Treasury after consultation with the officials described in 
        subsection (a)(1)(B), may revoke the designation of an area if 
        the Secretary of the Treasury determines that the local 
        government or the State in which it is located is not complying 
        substantially with the State and local commitments under 
        subsection (d).
            ``(3) Designation shall not take effect unless inventory of 
        historic properties.--Notwithstanding paragraph (1)--
                    ``(A) within 60 days after the date of the 
                designation of an area as a rural development 
                investment zone (determined without regard to this 
                paragraph), the State or local government of such area 
                shall submit to the Secretary of the Treasury an 
                inventory of historic properties within such area, and
                    ``(B) the date of such designation shall not be 
                earlier than the date on which such inventory is 
                submitted.
    ``(c) Area and Eligibility Requirements.--
            ``(1) In general.--The Secretary of the Treasury may make a 
        designation of any nominated area under subsection (a)(1) only 
        if it meets the requirements of paragraphs (2) and (3).
            ``(2) Area requirements.--A nominated area meets the 
        requirements of this paragraph if--
                    ``(A) the area is--
                            ``(i) within a local government 
                        jurisdiction or jurisdictions which are not 
                        central cities of a metropolitan statistical 
                        area (within the meaning of section 
                        143(k)(2)(B)) and which have a population of 
                        less than 50,000 (as determined by the most 
                        recent census data available),
                            ``(ii) outside of a metropolitan 
                        statistical area (within the meaning of section 
                        143(k)(2)(B)), or
                            ``(iii) determined by the Secretary of the 
                        Treasury, after consultation with the Secretary 
                        of Agriculture, to be a rural area,
                    ``(B) the area--
                            ``(i) does not exceed 10,000 square miles,
                            ``(ii) consists of areas within not more 
                        than 4 contiguous counties,
                            ``(iii) has a boundary which is continuous, 
                        or consists of not more than 3 noncontiguous 
                        parcels, and
                            ``(iv) is located entirely within 1 State, 
                        and
                    ``(C) the area has a population, as determined by 
                the most recent census data available, of at least 
                1,000.
            ``(3) Eligibility requirements.--For purposes of paragraph 
        (1), a nominated area meets the requirements of this paragraph 
        if the State and local governments in which it is located 
        certify and the Secretary of the Treasury, after such review of 
        supporting data as he deems appropriate, accepts such 
        certification, that the area meets the following criteria:
                    ``(A) Distress.--The area is one of pervasive 
                poverty, unemployment, and general distress.
                    ``(B) Additional criteria.--The area meets not less 
                than 2 of the following criteria:
                            ``(i) Unemployment rate.--The unemployment 
                        rate (as determined by the appropriate 
                        available data) is not less than 1.5 times the 
                        national unemployment rate.
                            ``(ii) Poverty rate.--The poverty rate (as 
                        determined by the most recent census data 
                        available) for not less than 90 percent of the 
                        population census tracts (or where not tracted, 
                        the equivalent county divisions as defined by 
                        the Bureau of the Census for the purposes of 
                        defining poverty areas) within the area is not 
                        less than 20 percent.
                            ``(iii) Job loss.--The amount of wages 
                        attributable to employment in the area, and 
                        subject to tax under section 3301, during the 
                        preceding calendar year is not more than 90 
                        percent of the annual average of such wages for 
                        calendar years 1986 through 1990, adjusted as 
                        provided in paragraph (4).
                            ``(iv) Out-migration.--The population of 
                        the area decreased (as determined by the most 
                        recent census data available) by 10 percent or 
                        more between 1980 and 1990.
            ``(4) Inflation adjustment.--In making the determination 
        under paragraph (3)(B)(iii) for any calendar year (the 
        `determination year'), the wages for each of the calendar years 
        1986 through 1990 shall be adjusted in the same manner as under 
        section 1(f) to reflect any increase in the consumer price 
        index between each of such calendar years and the calendar year 
        preceding the determination year.
    ``(d) Required State and Local Commitments.--
            ``(1) In general.--No nominated area shall be designated as 
        a rural development investment zone unless the local government 
        and the State in which it is located agree in writing that, 
        during any period during which the area is a rural development 
        investment zone, such governments will follow a specified 
        course of action designed to reduce the various burdens borne 
        by employers or employees in such area.
            ``(2) Course of action.--The course of action under 
        paragraph (1) may be implemented by both such governments and 
        private nongovernmental entities, may be funded from proceeds 
        of any Federal program, and may include, but is not limited 
        to--
                    ``(A) a reduction of tax rates or fees applying 
                within the rural development investment zone,
                    ``(B) an increase in the level or efficiency of 
                local services within the rural development investment 
                zone,
                    ``(C) actions to reduce, remove, simplify, or 
                streamline governmental requirements applying within 
                the rural development investment zone,
                    ``(D) involvement in the program by private 
                entities, organizations, neighborhood associations, and 
                community groups, particularly those within the 
                nominated area, including a commitment from such 
                private entities to provide jobs and job training for, 
                and technical, financial or other assistance to, 
                employers, employees, and residents of the nominated 
                area, and
                    ``(E) mechanisms to increase the equity ownership 
                of residents and employees within the rural development 
                investment zone.
            ``(3) Subsequent modification of course of action.--The 
        Secretary of the Treasury may by regulation prescribe 
        procedures for modifying a course of action within a rural 
        development investment zone under paragraph (1) following 
        designation of such zone.
    ``(e) Priority of Designation.--In choosing nominated areas for 
designation, the Secretary of the Treasury shall give special 
preference to the areas with respect to which the strongest and highest 
quality contributions described in subsection (d)(2) have been promised 
as part of the course of action, taking into consideration the fiscal 
ability of the nominating State and local governments to provide tax 
relief. The Secretary shall also give preference to--
            ``(1) the nominated areas with respect to which the 
        nominating State and local governments have provided the most 
        effective and enforceable guarantees that the proposed course 
        of action under subsection (d) will actually be carried out 
        during the period of the rural development investment zone 
        designation,
            ``(2) the nominated areas with high levels of poverty, 
        unemployment, and general distress, particularly the areas--
                    ``(A) which are near areas with concentrations of 
                disadvantaged workers or long-term unemployed or under-
                employed individuals, and
                    ``(B) with respect to which there is a strong 
                likelihood that residents of the area described in 
                subparagraph (A) will receive jobs if the area is 
                designated as a rural development investment zone,
            ``(3) the nominated areas the size and location of which--
                    ``(A) will primarily stimulate new economic 
                activity, and
                    ``(B) minimize unnecessary tax losses to the 
                Federal Government,
            ``(4) the nominated areas with respect to which private 
        entities have made the most substantial commitments in 
        additional resources and contributions, including the creation 
        of new or expanded business activities, and
            ``(5) the nominated areas which best exhibit such other 
        factors determined by the Secretary of the Treasury as are--
                    ``(A) consistent with the intent of the rural 
                development investment zone program, and
                    ``(B) important to minimizing the unnecessary loss 
                of tax revenues to the Federal Government.
    ``(f) Definitions.--For the purposes of this title--
            ``(1) Governments.--If more than 1 government seeks to 
        nominate an area as a rural development investment zone, any 
        reference to, or requirement of, this section shall apply to 
        all such governments.
            ``(2) State.--The term `State' shall also include the 
        Commonwealth of Puerto Rico, the Virgin Islands, Guam, American 
        Samoa, the Commonwealth of the Northern Mariana Islands, the 
        Republic of the Marshall Islands, the Federated States of 
        Micronesia, the Republic of Palau; and any other possession of 
        the United States.
            ``(3) Local government.--The term `local government' 
        means--
                    ``(A) any county, city, town, township, parish, 
                village, or other general purpose political subdivision 
                of a State, and
                    ``(B) any combination of political subdivisions 
                described in subparagraph (A) recognized by the 
                Secretary of the Treasury.''
    (b) Conforming Amendment.--The table of subchapters for chapter 80 
is amended by adding at the end thereof the following new item:

                              ``Subchapter D. Designation of rural 
                                        development investment zones.''

SEC. 102. EVALUATION AND REPORTING REQUIREMENTS.

    Not later than the close of the third calendar year after the 
calendar year in which the Secretary of the Treasury first designates 
areas as rural development investment zones under section 7881 of the 
Internal Revenue Code of 1986, and at the close of each third calendar 
year thereafter, the Secretary of the Treasury shall prepare and submit 
to the Congress a report on the effects of such designation in 
accomplishing the purposes of this Act.

SEC. 103. INTERACTION WITH OTHER FEDERAL PROGRAMS.

    (a) Tax Reductions.--Any reduction of taxes under any required 
program of State and local commitment under section 7881(d) of the 
Internal Revenue Code of 1986 shall be disregarded in determining the 
eligibility of a State or local government for, or the amount or extent 
of, any assistance or benefits under any law of the United States.
    (b) Coordination With Relocation Assistance.--The designation of a 
rural development investment zone under section 7881 of the Internal 
Revenue Code of 1986 shall not--
            (1) constitute approval of a Federal or federally assisted 
        program or project (within the meaning of the Uniform 
        Relocation Assistance and Real Property Acquisition Policies 
        Act of 1970 (42 U.S.C. 4601 et seq.)), or
            (2) entitle any person displaced from real property located 
        in such zone to any rights or any benefits under such Act.
    (c) Coordination With Environmental Policy.--Designation of a rural 
development investment zone under section 7881 of the Internal Revenue 
Code of 1986 shall not constitute a Federal action for purposes of 
applying the requirements of the National Environmental Policy Act of 
1969 (42 U.S.C. 4321 et seq.) or other provisions of Federal law 
relating to the protection of the environment.

                TITLE II--FEDERAL INCOME TAX INCENTIVES

                   Subtitle A--Credits for Employers

SEC. 201. CREDIT FOR RURAL DEVELOPMENT INVESTMENT ZONE EMPLOYERS.

    (a) Credit for Increased Rural Development Investment Zone 
Employment.--Subpart B of part IV of subchapter A of chapter 1 
(relating to foreign tax credit, etc.) is amended by inserting after 
section 30 the following new section:

``SEC. 30A. CREDIT FOR RURAL DEVELOPMENT INVESTMENT ZONE EMPLOYMENT.

    ``(a) In General.--There shall be allowed as a credit against the 
tax imposed by this chapter for the taxable year an amount equal to 10 
percent of the qualified increased employment expenditures of the 
taxpayer for the taxable year.
    ``(b) Limitations Based on Amount of Tax.--
            ``(1) In general.--The credit allowed by subsection (a) for 
        a taxable year shall not exceed the excess (if any) of--
                    ``(A) the regular tax liability for the taxable 
                year reduced by the sum of the credits allowable under 
                subpart A and sections 27, 28, 29, 30, over
                    ``(B) the tentative minimum tax for the taxable 
                year.
            ``(2) Carryback and carryover of unused credit.--
                    ``(A) Allowance of credit.--If the amount of the 
                credit determined under this section for any taxable 
                year exceeds the limitation provided by paragraph (1) 
                for such taxable year (hereinafter in this paragraph 
                referred to as the `unused credit year'), such excess 
                shall be--
                            ``(i) a rural development investment zone 
                        employment credit carryback to each of the 3 
                        taxable years preceding the unused credit year, 
                        and
                            ``(ii) a rural development investment zone 
                        employment credit carryover to each of the 15 
                        taxable years following the unused credit year,
                and shall be added to the amount allowable as a credit 
                by this section for such years. If any portion of such 
                excess is a carryback to a taxable year beginning 
                before January 1, 1993, this section shall be deemed to 
                have been in effect for such taxable year for purposes 
                of allowing such carryback as a credit under this 
                section. The entire amount of the unused credit for an 
                unused credit year shall be carried to the earliest of 
                the 18 taxable years to which (by reason of clauses (i) 
                and (ii)) such credit may be carried, and then to each 
                of the other 17 taxable years to the extent that, 
                because of the limitation contained in subparagraph 
                (B), such unused credit may not be added for a prior 
                taxable year to which such unused credit may be 
                carried.
                    ``(B) Limitation.--The amount of the unused credit 
                which may be added under subparagraph (A) for any 
                preceding or succeeding taxable year shall not exceed 
                the amount by which the limitation provided by 
                paragraph (1) for such taxable year exceeds the sum 
                of--
                            ``(i) the credit allowable under this 
                        section for such taxable year, and
                            ``(ii) the amounts which, by reason of this 
                        paragraph, are added to the amount allowable 
                        for such taxable year and which are 
                        attributable to taxable years preceding the 
                        unused credit year.
    ``(c) Qualified Increased Employment Expenditures Defined.--For 
purposes of this section--
            ``(1) In general.--The term `qualified increased employment 
        expenditures' means the lesser of--
                    ``(A) the increased zone employment expenditures, 
                or
                    ``(B) the increased aggregate employment 
                expenditures.
            ``(2) Increased zone employment expenditures.--The term 
        `increased zone employment expenditures' means, with respect to 
        any rural development investment zone, the excess of--
                    ``(A) the qualified wages paid or incurred by the 
                employer during the taxable year to qualified employees 
                with respect to such zone, over
                    ``(B) the base period wages of the employer with 
                respect to such zone.
            ``(3) Increased aggregate employment expenditures.--The 
        term `increased aggregate employment expenditures' means the 
        excess of--
                    ``(A) the qualified wages paid or incurred by the 
                employer during the taxable year to all employees, over
                    ``(B) the base period wages of the employer.
            ``(4) Limitation as to qualified wages taken into 
        account.--The amount of any qualified wages taken into account 
        under this subsection for any taxable year with respect to any 
        employee may not exceed 2.5 times the dollar limitation in 
        effect under section 3306(b)(1) for the calendar year with or 
        within which such taxable year ends.
            ``(5) Base period wages.--
                    ``(A) In general.--The term `base period wages' 
                means, with respect to any rural development investment 
                zone, the amount of wages paid to employees during the 
                12-month period preceding the date on which the rural 
                development investment zone was designated as such 
                under section 7881, or the date on which the rural 
                development investment zone is designated under State 
                law, enacted after January 1, 1981, if earlier, which 
                would have been qualified wages paid to qualified 
                employees if such designation had been in effect for 
                such period.
                    ``(B) Rules of special application.--For purposes 
                of subparagraph (A)--
                            ``(i) subsection (e)(1) shall be applied by 
                        substituting `12-month period' for `taxable 
                        year' each place it appears, and
                            ``(ii) the dollar limitation taken into 
                        account under paragraph (2) in computing 
                        qualified wages shall be the amount in effect 
                        for taxable year for which the amount of the 
                        credit under subsection (a) is being computed.
    ``(d) Qualified Wages Defined.--For purposes of this section--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `qualified wages' has the meaning given to 
        the term `wages' by subsection (b) of section 3306 (determined 
        without regard to any dollar limitation contained in such 
        section).
            ``(2) Reduction for certain federally funded payments.--For 
        purposes of this section the wages paid or incurred by an 
        employer for any period shall not include the amount of any 
        Federally funded payments the employer receives or is entitled 
        to receive for on-the-job training of such individual for such 
        period.
            ``(3) Special rules for agricultural and railway labor.--
        Under regulations prescribed by the Secretary, rules similar to 
        the rules of section 51(h) shall apply with respect to services 
        described in subparagraphs (A) and (B) of section 51(h)(1).
    ``(e) Qualified Employee Defined.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified employee' means an individual--
                    ``(A) at least 90 percent of whose services for the 
                employer during the taxable year are directly related 
                to the conduct of the employer's trade or business 
                located in a rural development investment zone, and
                    ``(B) who performs at least 50 percent of his 
                services for the employer during the taxable year in a 
                rural development investment zone.
            ``(2) Exception for individuals with respect to whom credit 
        is determined under section 51(a).--The term `qualified 
        employee' shall not include an individual with respect to whom 
        any credit for the employer is determined under section 51(a) 
        for the taxable year (relating to targeted jobs credit).
    ``(f) Special Rules.--For purposes of this section--
            ``(1) Application to certain entities, etc.--Under 
        regulations prescribed by the Secretary, rules similar to the 
        rules of section 52 (other than subsection (b) thereof) and 
        section 30(f)(3) (as in effect before the enactment of the Tax 
        Reform Act of 1986) shall apply.
            ``(2) Periods of less than a year.--If designation of an 
        area as a rural development investment zone under section 7881 
        occurs, expires, or is revoked on a date other than the first 
        or last day of the taxable year of the taxpayer, or in the case 
        of a short taxable year--
                    ``(A) the limitation specified in subsection 
                (c)(2), and the base period wages determined under 
                subsection (c)(3), shall be adjusted on a pro rata 
                basis (based upon the number of days), and
                    ``(B) the reduction specified in subsection (d)(2) 
                and the 90 percent and 50 percent tests set forth in 
                subsection (e)(1) shall be determined by reference to 
                the portion of the taxable year during which the 
                designation of the area as a rural development 
                investment zone is in effect.
    ``(g) Phaseout of Credit.--
            ``(1) In general.--Except as provided in paragraph (2), in 
        determining the amount of the credit for a taxable year under 
        subsection (a) with respect to qualified wages paid or incurred 
        for services performed in a rural development investment zone, 
        the following percentages shall be substituted for `10 percent' 
        in subsection (a):
                    ``(A) 7.5 percent in the earlier of--
                            ``(i) the taxable year which includes the 
                        date which is 21 years after the date on which 
                        such rural development investment zone was 
                        designated under section 7881, or
                            ``(ii) the taxable year which includes the 
                        date which is 4 years before the date (if any) 
                        on which such rural development investment zone 
                        ceases to be a zone under section 
                        7881(b)(1)(B),
                    ``(B) 5 percent in the next succeeding taxable 
                year,
                    ``(C) 2.5 percent in the second next succeeding 
                taxable year, and
                    ``(D) zero thereafter.
            ``(2) Revocation of designation.--If the designation of an 
        area as a rural development investment zone is revoked under 
        section 7881(b)(2), such area shall continue to be treated as a 
        rural development investment zone for the period of 3 taxable 
        years beginning after the date of such revocation except that 
        only the allowable percentage of the amount of the credit which 
        would (but for this paragraph) be allowable under this section 
        for such a year shall be allowed. For purposes of the preceding 
        sentence, the term `allowable percentage' means the amount 
        determined in accordance with the following table:

        ``If the taxable year beginning
                                                          The allowable
        after the revocation is:
                                                         percentage is:
                The first such year..................          75      
                The second such year.................          50      
                The third such year..................         25.      
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section, 
including regulations to prevent the abuse of such purposes by denying 
the credit allowable under this section to employers which relocate 
their businesses in a rural development investment zone while 
displacing former employees or which otherwise conduct their businesses 
so as to take advantage of the credit allowable by this section without 
furthering such purposes.''
    (b) No Deduction Allowed.--Section 280C (relating to disallowance 
of deductions for certain expenses for which credits are allowable) is 
amended by adding at the end thereof the following new subsection:
    ``(d) Rule for Section 30A Credits.--No deduction shall be allowed 
for that portion of the wages or salaries paid or incurred for the 
taxable year which is equal to the amount of the credit allowable under 
section 30A (relating to the employment credit for rural development 
investment zone businesses). This subsection shall be applied under a 
rule similar to the rule under the last sentence of subsection (a).''
    (c) Technical Amendments Related to Carryover and Carryback of 
Credits.--
            (1) Carryover of credit.--
                    (A) Subsection (c) of section 381 (relating to 
                items of the distributor or transferor corporation) is 
                amended by adding at the end thereof the following new 
                paragraph:
            ``(26) Credit under section 30a.--The acquiring corporation 
        shall take into account (to the extent proper to carry out the 
        purposes of this section and section 30A, and under such 
        regulations as may be prescribed by the Secretary) the items 
        required to be taken into account for purposes of section 30A 
        in respect to the distributor or transferor corporation.''
                    (B) Paragraph (2) of section 383(a) (relating to 
                special limitations on certain excess credits, etc.) is 
                amended by redesignating subparagraphs (A) and (B) as 
                subparagraphs (B) and (C), respectively, and by 
                inserting before subparagraph (B) (as so redesignated) 
                the following new subparagraph:
                    ``(A) any unused rural development investment zone 
                employment credit under section 30A,''.
            (2) Carryback of credit.--
                    (A) Subparagraph (C) of section 6511(d)(4) 
                (defining credit carryback) is amended by inserting 
                ``any rural development investment zone employment 
                credit under section 30A(b) and'' after ``means''.
                    (B) Subsection (a) of section 6411 (relating to 
                tentative carryback and refund adjustments) is 
                amended--
                            (i) by inserting ``by a rural development 
                        investment zone employment credit carryback 
                        under section 30A,'' after ``172(b),'' in the 
                        first sentence, and
                            (ii) by striking out ``net capital loss'' 
                        the first place it appears in the second 
                        sentence and all that follows before ``in the 
                        manner and form'' and inserting in lieu thereof 
                        the following: ``net capital loss, unused rural 
                        development investment zone employment credit, 
                        or unused business credit from which the 
                        carryback results and within a period of 12 
                        months after such taxable year or, with respect 
                        to any portion of a rural development 
                        investment zone employment credit carryback or 
                        business credit carryback attributable to a net 
                        operating loss carryback or a net capital loss 
                        carryback from a subsequent taxable year, 
                        within a period of 12 months from the end of 
                        such subsequent taxable year or, with respect 
                        to any portion of a business credit carryback 
                        attributable to a rural development investment 
                        zone employment credit carryback from a 
                        subsequent taxable year within a period of 12 
                        months from the end of such subsequent taxable 
                        year,''.
                    (C) Paragraph (1) of section 6411(a) is amended by 
                inserting ``unused rural development investment zone 
                employment credit,'' after ``net capital loss,''.
    (d) Clerical Amendment.--The table of sections for subpart B of 
part IV of subchapter A of chapter 1 is amended by adding after the 
item relating to section 30 the following new item:

                              ``Sec. 30A. Credit for rural development 
                                        investment zone employment.''
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1992.

   Subtitle B--Credits for Investment in Tangible Property in Rural 
                      Development Investment Zones

SEC. 211. INVESTMENT TAX CREDIT FOR NEW RURAL DEVELOPMENT INVESTMENT 
              ZONE CONSTRUCTION PROPERTY.

    (a) Allowance of Investment Credit.--Section 46 (relating to amount 
of credit) is amended by striking ``and'' at the end of paragraph (2), 
by striking the period at the end of paragraph (3) and inserting ``, 
and'', and by adding at the end thereof the following new paragraph:
            ``(4) the rural development investment zone credit.''
    (b) Rural Development Investment Zone Credit.--Section 48 is 
amended by adding at the end thereof the following new subsection:
    ``(c) Rural Development Investment Zone Credit.--
            ``(1) In general.--For purposes of section 46, the rural 
        development investment zone credit for any taxable year is the 
        applicable percentage of the basis of each new rural 
        development investment zone construction property placed in 
        service during such taxable year.
            ``(2) Applicable percentage.--
                    ``(A) In general.--The applicable percentage is the 
                percentage equal to the product of--
                            ``(i) 10 percent, and
                            ``(ii) the taxpayer's employment growth 
                        success percentage for the taxable year in 
                        which the property is placed in service with 
                        respect to the rural development investment 
                        zone in which such property is placed in 
                        service.
                    ``(B) Employment growth success percentage.--For 
                purposes of subparagraph (A), the employment growth 
                success percentage with respect to a rural development 
                investment zone for any taxable year is the percentage 
                (but not over 100 percent) which--
                            ``(i) the employment growth percentage of 
                        the taxpayer with respect to such zone for such 
                        year, bears to
                            ``(ii) the target employment growth 
                        percentage.
                    ``(C) Employment growth percentage.--For purposes 
                of subparagraph (B), the employment growth percentage 
                with respect to a rural development investment zone for 
                any taxable year is the average annual percentage 
                which--
                            ``(i) the qualified increased employment 
                        expenditures (as defined in section 30A) with 
                        respect to such zone for each taxable year 
                        beginning after the base period and before the 
                        taxable year for which the credit is being 
                        determined, bears to
                            ``(ii) the base period wages (as defined in 
                        such section) of the employer
                    ``(D) Target growth employment percentage.--For 
                purposes of this paragraph, the target growth 
                employment percentage is 5 percent.
                    ``(E) Phaseout of credit as development investment 
                zone ends.--Subparagraph (A) shall be applied by 
                substituting the following percentages for 10 percent:
                            ``(i) For the taxable year described in 
                        section 30A(g)(1)(A), 7.5.
                            ``(ii) For the next succeeding taxable 
                        year, 5.
                            ``(iii) For the second succeeding taxable 
                        year, 2.5.
                            ``(iv) For any subsequent taxable year, 
                        zero.''
            ``(3) New rural development investment zone construction 
        property.--For purposes of this subsection, the term `new rural 
        development investment zone construction property' means 
        property which is--
                    ``(A) located in a rural development investment 
                zone,
                    ``(B) nonresidential real property, residential 
                rental real property, or real property which has a 
                class life of more than 12.5 years (as such terms are 
                defined in section 168),
                    ``(C) used by the taxpayer predominantly in the 
                active conduct of a trade or business within a rural 
                development investment zone, and
                    ``(D) either--
                            ``(i) the construction, reconstruction, 
                        rehabilitation, renovation, expansion, or 
                        erection of which is completed by the taxpayer 
                        during the period the designation as a zone is 
                        in effect under section 7881, or
                            ``(ii) acquired during such period if the 
                        original use of such property commences with 
                        the taxpayer and commences during such period.
            ``(4) Special rules.--
                    ``(A) Property ineligible if acquired from related 
                person.--The term `new rural development investment 
                zone construction property' shall not include property 
                acquired (directly or indirectly) by the taxpayer from 
                a person who is related to the taxpayer (within the 
                meaning of section 465(b)(3)(C)).
                    ``(B) Credit for progress expenditures allowable 
                but only basis attributable to construction during 
                period taken into account.--Rules similar to the rules 
                of section 47(d) shall apply but in applying such rules 
                in the case of property described in paragraph 
                (1)(D)(i), there shall be taken into account only that 
                portion of the basis which is properly attributable to 
                the activities described in such paragraph carried on 
                during such period.
            ``(3) Real estate rental.--For purposes of this section, 
        ownership of residential, commercial, or industrial real 
        property within a rural development investment zone for rental 
        shall be treated as the active conduct of a trade or business 
        in a rural development investment zone.''
    (d) Lodging to Qualify.--Paragraph (2) of section 50(b) (relating 
to property used for lodging) is amended--
            (1) by striking out ``and'' at the end of subparagraph (C),
            (2) by striking out the period at the end of subparagraph 
        (D) and inserting in lieu thereof ``, and,'' and
            (3) by adding at the end thereof the following new 
        subparagraph:
                    ``(E) new rural development investment zone 
                construction property.''
    (e) Recapture.--Subsection (a) of section 50 (relating to certain 
dispositions, etc., of investment credit property) is amended by adding 
at the end thereof the following new paragraph:
            ``(6) Special rules for new rural development investment 
        zone construction property.--
                    ``(A) In general.--If, during any taxable year, 
                property with respect to which the taxpayer claimed a 
                rural development investment zone credit is disposed 
                of, the tax under this chapter for such taxable year 
                shall be increased by the amount described in 
                subparagraph (B).
                    ``(B) Amount of increase.--The increase in tax 
                under subparagraph (A) shall equal the aggregate 
                decrease in the credits allowed under section 38 by 
                reason of section 46(4) for all prior taxable years 
                which would have resulted solely from reducing the 
                expenditures taken into account with respect to the 
                property by an amount which bears the same ratio to 
                such expenditures as the number of taxable years that 
                the property was held by the taxpayer bears to the 
                applicable recovery period under section 168(g).''
    (f) Effective Date.--The amendments made by this section shall 
apply to periods after December 31, 1992, under rules similar to the 
rules of section 48(m) of the Internal Revenue Code of 1986 (as in 
effect before its repeal by the Revenue Reconciliation Act of 1990).

          Subtitle C--Rural Development Investment Zone Bonds

SEC. 221. RURAL DEVELOPMENT INVESTMENT ZONE BONDS.

    Subsection (a) of section 144 (relating to qualified small issue 
bonds) is amended by adding at the end thereof the following new 
paragraph:
            ``(13) Rural development investment zone bonds.--
                    ``(A) In general.--Paragraph (12) shall not apply 
                to any rural development investment zone bond.
                    ``(B) Rural development investment zone bond.--For 
                purposes of subparagraph (A), the term `rural 
                development investment zone bond' means any bond issued 
                as part of an issue if--
                            ``(i) such bond is a qualified small issue 
                        bond (determined without regard to paragraphs 
                        (8)(A) and (12)),
                            ``(ii) 95 percent or more of the net 
                        proceeds of the issue are to provide facilities 
                        in a rural development investment zone, and
                            ``(iii) the issue meets the requirements of 
                        subparagraphs (C), (D), and (E).
                    ``(C) Period to spend proceeds.--
                            ``(i) General rule.--An issue meets the 
                        requirements of this subparagraph only if the 
                        proceeds are spent for the governmental 
                        purposes of the issue within 18 months after 
                        the date of the issuance of the bond.
                            ``(ii) Exception.--Clause (i) shall not 
                        apply to any issue if--
                                    ``(I) the issuer pays a penalty 
                                equal to 3 percent of the amount of 
                                available proceeds of the issue which 
                                is not spent for the governmental 
                                purposes of the issue as of the close 
                                of such 18-month period, and
                                    ``(II) the issuer redeems such bond 
                                not later than 24 months after the date 
                                of the issuance of the bond.
                    ``(D) Acquisition of land not permitted.--An issue 
                meets the requirements of this subparagraph only if no 
                portion of the proceeds of the issue is used to acquire 
                land (or any interest therein).
                    ``(E) Repayments; effective rate of interest on 
                loans.--
                            ``(i) In general.--An issue meets the 
                        requirements of this subparagraph only if, with 
                        respect to loans financed by such issue--
                                    ``(I) repayments of principal are 
                                used not later than the close of the 
                                1st semiannual period beginning after 
                                the date the repayment is received to 
                                redeem bonds which are part of such 
                                issue, and
                                    ``(II) the effective rate of 
                                interest does not exceed the yield on 
                                the issue by more than 0.125 percentage 
                                points.
                        In determining the effective rate of interest 
                        for purposes of subclause (II), there shall be 
                        taken into account all fees, charges, and other 
                        amounts (other than amounts for any credit 
                        report) borne by the borrower which are 
                        attributable to the loan or the bond issue.
                            ``(ii) De minimis redemptions not 
                        required.--Clause (i) shall not be construed to 
                        require amounts of less than $250,000 to be 
                        used to redeem bonds. The Secretary may by 
                        regulation treat related issues as 1 issue for 
                        purposes of the preceding sentence.
                    ``(F) Penalty.--
                            ``(i) In general.--In the case of property 
                        with respect to which financing was provided 
                        under this paragraph, if, at any time during 
                        the 10-year period beginning on the date such 
                        financing was provided, substantially all of 
                        the use of such property ceases to be in a 
                        rural development investment zone, there is 
                        hereby imposed on the trade or business to 
                        which such financing was provided a penalty 
                        equal to 1.25 percent of so much of the face 
                        amount of all financing provided (whether or 
                        not from the same issue and whether or not such 
                        issue is outstanding) before such cessation to 
                        the trade or business using such property.
                            ``(ii) No penalty by reason of zone 
                        termination.--No penalty shall be imposed under 
                        clause (i) solely by reason of the termination 
                        or revocation of a tax enterprise zone 
                        designation.
                            ``(iii) Exception for bankruptcy.--Clause 
                        (i) shall not apply to any cessation resulting 
                        from bankruptcy.''.

 TITLE III--ESTABLISHMENT OF FOREIGN-TRADE ZONES IN RURAL DEVELOPMENT 
                            INVESTMENT ZONES

SEC. 301. FOREIGN-TRADE ZONE PREFERENCES.

    (a) Preference in Establishment of Foreign-Trade Zones in 
Revitalization Areas.--In processing applications for the establishment 
of foreign-trade zones pursuant to an Act entitled ``To provide for the 
establishment, operation, and maintenance of foreign-trade zones in 
ports of entry of the United States, to expedite and encourage foreign 
commerce, and for other purposes'', approved June 18, 1934 (48 Stat. 
998), the Foreign-Trade Zone Board shall consider on a priority basis 
and expedite, to the maximum extent possible, the processing of any 
application involving the establishment of a foreign-trade zone within 
a rural development investment zone designated pursuant to section 7881 
of the Internal Revenue Code of 1986.
    (b) Application Procedure.--In processing applications for the 
establishment of ports of entry pursuant to an Act entitled ``An Act 
making appropriations for sundry civil expenses of the Government for 
the fiscal year ending June thirtieth, nineteen hundred and fifteen, 
and for other purposes'', approved August 1, 1914 (38 Stat. 609), the 
Secretary of the Treasury shall consider on a priority basis and 
expedite, to the maximum extent possible, the processing of any 
application involving the establishment of a port of entry which is 
necessary to permit the establishment of a foreign-trade zone within a 
rural development investment zone (as so designated).
    (c) Application Evaluation.--In evaluating applications for the 
establishment of foreign-trade zones and ports of entry in connection 
with rural development investment zones (as so designated), the 
Foreign-Trade Zone Board and the Secretary of the Treasury shall 
approve the applications to the maximum extent practicable, consistent 
with their respective statutory responsibilities.

  TITLE IV--RESPONSIBILITIES OF FEDERAL AGENCIES IN RURAL DEVELOPMENT 
                INVESTMENT ZONES; REGULATORY FLEXIBILITY

SEC. 401. RESPONSIBILITIES OF FEDERAL AGENCIES IN RURAL DEVELOPMENT 
              INVESTMENT ZONES.

    (a) In General.--To the extent permitted by law and consistent with 
its primary mission, each Federal agency (as defined in section 551(1) 
of title 5, United States Code) shall seek to provide special 
assistance to rural development investment zones designated pursuant to 
section 7881 of the Internal Revenue Code of 1986. Such assistance may 
include, but is not limited to--
            (1) expedited processing,
            (2) priority funding,
            (3) program set-asides, and
            (4) provision of technical assistance in furtherance of the 
        purposes set forth in section 2 of this Act.
    (b) Regulations.--The head of each Federal agency, after 
consultation with the Secretary of Agriculture shall prescribe such 
regulations as may be necessary or appropriate to carry out the 
purposes of this section.

SEC. 402. DEFINITION OF SMALL ENTITIES IN RURAL DEVELOPMENT INVESTMENT 
              ZONES FOR PURPOSES OF ANALYSIS OF REGULATORY FUNCTIONS.

    Section 601 of title 5, United States Code, is amended--
            (1) by striking out ``and'' at the end of paragraph (5); 
        and
            (2) by striking out paragraph (6) and inserting in lieu 
        thereof the following:
            ``(6) the term `small entity' means--
                    ``(A) a small business, small organization, or 
                small governmental jurisdiction within the meaning of 
                paragraphs (3), (4), and (5) of this section, 
                respectively; and
                    ``(B) any qualified rural development investment 
                zone business; any governments which designated and 
                approved an area which has been designated as a rural 
                development investment zone (within the meaning of 
                section 7881 of the Internal Revenue Code of 1986) to 
                the extent any rule pertains to the carrying out of 
                projects, activities, or undertakings within such zone; 
                and any not-for-profit development investment carrying 
                out a significant portion of its activities within such 
                a zone; and
            ``(7) the term `qualified rural development investment zone 
        business' means any person, corporation, or other entity--
                    ``(A) which is engaged in the active conduct of a 
                trade or business within a rural development investment 
                zone (within the meaning of section 7881 of the 
                Internal Revenue Code of 1986); and
                    ``(B) for whom at least 50 percent of its employees 
                are qualified employees (within the meaning of section 
                30A(e) of such Code).''

SEC. 403. WAIVER OR MODIFICATION OF AGENCY RULES IN RURAL DEVELOPMENT 
              INVESTMENT ZONES.

    (a) Chapter 6 of title 5, United States Code, is amended by 
redesignating sections 611 and 612 as sections 612 and 613, 
respectively, and inserting the following new section immediately after 
section 610:
``Sec. 611. Waiver or modification of agency rules in rural development 
              investment zones
    ``(a) Upon the written request of the governments which designated 
and approved an area which has been designated as a rural development 
investment zone under section 7881 of the Internal Revenue Code of 
1986, an agency is authorized, in order to further the job creation, 
community development, or economic revitalization objectives of the 
zone, to waive or modify all or part of any rule which it has authority 
to promulgate, as such rule pertains to the carrying out of projects, 
activities or undertakings within the zone.
    ``(b) Nothing in this section shall authorize an agency to waive or 
modify any rule adopted to carry out a statute or Executive order which 
prohibits, or the purpose of which is to protect persons against, 
discrimination on the basis of race, color, religion, sex, marital 
status, national origin, age, or handicap.
    ``(c) A request under subsection (a) shall specify the rule or 
rules to be waived or modified and the change proposed, and shall 
briefly describe why the change would promote the achievement of the 
job creation, community development, or economic revitalization 
objectives of the rural development investment zone. If a request is 
made to an agency other than the Department of the Treasury, the 
requesting governments shall send a copy of the request to the 
Secretary of the Treasury at the time the request is made.
    ``(d) In considering a request, the agency shall weigh the extent 
to which the proposed change is likely to further job creation, 
community development, or economic revitalization within the rural 
development investment zone against the effect the change is likely to 
have on the underlying purposes of applicable statutes in the 
geographic area which would be affected by the change. The agency shall 
approve the request whenever it finds, in its discretion, that the 
public interest which the proposed change would serve in furthering 
such job creation, community development, or economic revitalization 
outweighs the public interest which continuation of the rule unchanged 
would serve in furthering such underlying purposes. The agency shall 
not approve any request to waive or modify a rule if that waiver or 
modification would--
            ``(1) directly violate a statutory requirement (including 
        any requirement of the Fair Labor Standards Act of 1938 (52 
        Stat. 1060; 29 U.S.C. 201 et seq.)); or
            ``(2) be likely to present a significant risk to the public 
        health, including environmental health or safety, such as a 
        rule with respect to occupational safety or health, or 
        environmental pollution.
    ``(e) If a request is disapproved, the agency shall inform the 
requesting governments in writing of the reasons therefor and shall, to 
the maximum extent possible, work with such governments to develop an 
alternative, consistent with the standards contained in subsection (d).
    ``(f) Agencies shall discharge their responsibilities under this 
section in an expeditious manner, and shall make a determination on 
requests not later than 90 days after their receipt.
    ``(g) A waiver or modification of a rule under subsection (a) shall 
not be considered to be a rule, rulemaking, or regulation under chapter 
5 of this title. To facilitate reaching its decision on any requested 
waiver or modification, the agency may seek the views of interested 
parties and, if the views are to be sought, determine how they should 
be obtained and to what extent, if any, they should be taken into 
account in considering the request. The agency shall publish a notice 
in the Federal Register stating any waiver or modification of a rule 
under this section.
    ``(h) In the event that an agency proposes to amend a rule for 
which a waiver or modification under this section is in effect, the 
agency shall not change the waiver or modification to impose additional 
requirements unless it determines, consistent with standards contained 
in subsection (d), that such action is necessary.
    ``(i) No waiver or modification of a rule under this section shall 
remain in effect for a longer period than the period for which the 
rural development investment zone designation remains in effect for the 
area in which the waiver or modification applies.
    ``(j) For purposes of this section, the term `rule' means (1) any 
rule as defined in section 551(4) of this title or (2) any rulemaking 
conducted on the record after opportunity for an agency hearing 
pursuant to sections 556 and 557 of this title.''
    (b) The table of sections for such chapter is amended by 
redesignating the items relating to sections 611 and 612 as sections 
612 and 613, respectively, and inserting the following new item 
immediately after the item relating to section 610:

                              ``611. Waiver or modification of agency 
                                        rules in rural development 
                                        investment zones.''
    (c) Section 601(2) of such title is amended by inserting ``(except 
for purposes of section 611)'' immediately before ``means.''.
    (d) Section 613 of such title, as redesignated by subsection (a) of 
this section, is amended by--
            (1) inserting ``(except section 611)'' immediately after 
        ``chapter'' in subsection (a); and
            (2) inserting ``as defined in section 601(2)'' immediately 
        before the period at the end of the first sentence of 
        subsection (b).

                                 <all>

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