I

103D CONGRESS

1ST SESSION H. R. 1008

To amend the Internal Revenue Code of 1986 to stimulate employment

in, and to promote revitalization of, targeted urban areas designated

as targeted urban areas, by providing Federal tax relief for employment

and investments, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 18, 1993

Mr. SHAYS (for himself and Mr. MFUME) introduced the following bill; which

was referred jointly to the Committees on Ways and Means, the Judiciary, and Banking, Finance and Urban Affairs

A BILL

To amend the Internal Revenue Code of 1986 to stimulate

employment in, and to promote revitalization of, targeted

urban areas designated as targeted urban areas, by providing Federal tax relief for employment and investments, and for other purposes.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Business and Urban

5 Partnership Act’’.
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1 SEC. 2. PURPOSE.

2 It is the purpose of this Act to provide for the estab3 lishment of targeted urban areas in order to restore the

4 economic base of targeted urban areas by bringing people,

5 businesses, and jobs back to them primarily by providing

6 or encouraging—

7 (1) tax relief at the Federal, State, and local

8 levels;

9 (2) regulatory relief at the Federal, State, and

10 local levels; and

11 (3) coordination and cooperation among Fed12 eral, State, and local officials to promote economic

13 development in targeted cities.

14 SEC. 3. AMENDMENT OF THE 1986 CODE.

15 Except as otherwise expressly provided, whenever in

16 this Act an amendment or repeal is expressed in terms

17 of an amendment to, or repeal of, a section or other provi18 sion, the reference shall be considered to be made to a

19 section or other provision of the Internal Revenue Code

20 of 1986.

21 TITLE I—DESIGNATION OF

22 TARGETED URBAN AREAS

23 SEC. 101. DESIGNATION OF ZONES.

24 (a) GENERAL RULE.—Chapter 80 (relating to gen25 eral rules) is amended by adding at the end thereof the

26 following new subchapter:
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1 ‘‘Subchapter D—Designation of Targeted

2 Urban Areas

‘‘Sec. 7880. Designation.

3 ‘‘SEC. 7880. DESIGNATION.

4 ‘‘(a) DESIGNATION OF TARGETED URBAN AREAS.—

5 ‘‘(1) DEFINITION.—For purposes of this title,

6 the term ‘a targeted urban area’ means any area—

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

8 local governments and the State in which it is

9 located for designation as a targeted urban area

10 (hereinafter in this section referred to as a

11 ‘nominated area’), and

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

13 Urban Development designates as a targeted

14 urban area.

15 ‘‘(2) DESIGNATION BY SECRETARY OF HOUSING

16 AND URBAN DEVELOPMENT.—Except as provided in

17 paragraph (3), the Secretary of Housing and Urban

18 Development shall designate any nominated area as

19 a targeted urban area if such Secretary determines

20 that the requirements of subsection (c) and (d) are

21 met with respect to such area.

22 ‘‘(3) LIMITATIONS ON DESIGNATIONS.—

23 ‘‘(A) PUBLICATION OF REGULATIONS.—

24 Before designating any area as a targeted
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1 urban area and not later than 4 months follow2 ing the date of the enactment of this section,

3 the Secretary of Housing and Urban Develop4 ment shall prescribe by regulations—

5 ‘‘(i) the procedures for nominating an

6 area, and

7 ‘‘(ii) the procedures for designation as

8 a targeted urban area.

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

10 of Housing and Urban Development shall des11 ignate nominated areas as targeted urban area

12 only during the 48-month period beginning on

13 the first day of the first month following the

14 month in which the effective date of the regula15 tions described in subparagraph (A) occurs.

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

17 of Housing and Urban Development shall not

18 make any designation under this section un19 less—

20 ‘‘(i) the local government and the

21 State in which the nominated area is lo22 cated have the authority to—

23 ‘‘(I) nominate such area for des24 ignation as a targeted urban area,
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1 ‘‘(II) make the State and local

2 commitments under subsection (d),

3 and

4 ‘‘(III) provide assurances satis5 factory to the Secretary of Housing

6 and Urban Development that such

7 commitments will be fulfilled,

8 ‘‘(ii) the State and local governments

9 in which the nominated area is located will

10 establish a commission (consisting of State

11 and local governmental officials, represent12 atives of local businesses, and community

13 leaders) which shall have the responsibility

14 for making allocations under section 1394

15 (relating to overall limitations on targeted

16 urban area incentives), and

17 ‘‘(iii) a nomination therefor is submit18 ted by such State and local governments in

19 such a manner and in such form, and con20 tains such information, as the Secretary of

21 Housing and Urban Development shall

22 prescribe by regulations.

23 ‘‘(D) REQUIREMENT OF ALLOCATION FOR24 MULA.—The Secretary of Housing and Urban

25 Development shall not designate any nominated
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1 area as a targeted urban area unless the State

2 and local governments in which the nominated

3 area is located have established allocation pro4 cedures to be used by the commission estab5 lished pursuant to subparagraph (C)(ii) in mak6 ing allocations under section 1394. Such proce7 dures—

8 ‘‘(i) shall provide that allocations

9 under section 1394 will be based on the

10 following criteria:

11 ‘‘(I) the additional investment in

12 the targeted urban area that will re13 sult from the allocation,

14 ‘‘(II) the additional jobs in the

15 targeted urban area that will result

16 from the allocation,

17 ‘‘(III) the levels of compensation

18 for the additional jobs referred to in

19 subclause (II),

20 ‘‘(IV) the amount of additional

21 job-training that will result from the

22 allocation, and

23 ‘‘(V) the number of residents of

24 the targeted urban area employed as a

25 result of the allocation, and
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1 ‘‘(ii) shall provide for a system of

2 weighting the criteria referred to in clause

3 (i).

4 Such procedures may provide that allocations

5 are to be limited to taxpayers in specified cat6 egories of businesses and may be revised with

7 the approval of the Secretary of Housing and

8 Urban Development.

9 ‘‘(b) TIME PERIOD FOR WHICH DESIGNATION IS IN

10 EFFECT—

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

12 as a targeted urban area shall remain in effect dur13 ing the period beginning on the date of the designa14 tion and ending on the earliest of—

15 ‘‘(A) December 31 of the 20th calendar

16 year following the calendar year in which such

17 date occurs,

18 ‘‘(B) the termination date specified by the

19 State and local governments as provided in the

20 nomination submitted in accordance with sub21 section (a)(3)(C)(iii),

22 ‘‘(C) such other date as the Secretary of

23 Housing and Urban Development shall specify

24 as a condition of designation, or
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1 ‘‘(D) the date upon which the Secretary of

2 Housing and Urban Development revokes such

3 designation.

4 ‘‘(2) REVOCATION OF DESIGNATION.—The Sec5 retary of Housing and Urban Development may re6 voke the designation of an area if the Secretary of

7 Housing and Urban Development determines that

8 the State or a local government in which the area

9 is located is not complying substantially with the

10 agreed course of action for the area.

11 ‘‘(c) AREA AND ELIGIBILITY REQUIREMENTS—

12 ‘‘(1) IN GENERAL.—A nominated area meets

13 the requirements of this subsection if it is within the

14 jurisdiction of a qualified city and if it is the only

15 area in such city nominated as a targeted urban

16 area.

17 ‘‘(2) QUALIFIED CITY.—For purposes of para18 graph (1), the term ‘qualified city’ means any city—

19 ‘‘(A) which is a metropolitan city (as de20 fined in section 102(a)(4) of the Housing and

21 Community Development Act of 1974 (42

22 U.S.C. 5302(a)(4)),

23 ‘‘(B) which is eligible to receive an alloca24 tion of funds under section 106(a)(3) of the

25 Housing and Community Development Act of
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1 1974 for the most recent fiscal year ending be2 fore the date on which the nomination was sub3 mitted under subsection (a), and

4 ‘‘(C) which has a need adjusted per capita

5 income factor equal to or less than .7 (as deter6 mined under section 1394(b)(7) on the basis of

7 the most recent data available before the date

8 on which the nomination was submitted under

9 subsection (a).

10 ‘‘(d) REQUIRED STATE AND LOCAL COMMIT11 MENTS.—

12 ‘‘(1) IN GENERAL.—A nominated area meets

13 the requirements of this subsection if the State and

14 the local government or governments of the jurisdic15 tions in which the nominated area is located agree

16 in writing that, during any period during which the

17 nominated area is a targeted urban area, such gov18 ernments will follow a specified course of action de19 signed to reduce the various burdens borne by em20 ployers or employees in such area.

21 ‘‘(2) COURSE OF ACTION.—The course of action

22 under paragraph (1)—

23 ‘‘(A) shall include—

24 ‘‘(i) modifications to (or waivers of)

25 zoning requirements to permit multiple use
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1 of appropriate areas within the targeted

2 urban area; except that this clause shall

3 not be construed to require waivers for

4 gambling or other adult-only entertainment

5 businesses,

6 ‘‘(ii) procedures under which a busi7 ness can obtain all required State and local

8 permits from 1 agency in the city in which

9 the targeted urban area is located,

10 ‘‘(iii) actions to reduce, remove, sim11 plify, or streamline governmental require12 ments applying within the targeted urban

13 area, and

14 ‘‘(iv) procedures for involvement in

15 the program by private entities, organiza16 tions, neighborhood associations, and com17 munity groups, particularly those within

18 the nominated area, including a commit19 ment from such private entities to provide

20 jobs and job training for, and technical, fi21 nancial or other assistance to, employers,

22 employees, and residents of the nominated

23 area, and

24 ‘‘(B) may include 1 or more of the follow25 ing:
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1 ‘‘(i) State sales tax exemptions for

2 property purchased for use in the targeted

3 urban area,

4 ‘‘(ii) property tax exemptions or re5 ductions within the targeted urban area or

6 taxes guaranteed to be used for infrastruc7 ture or crime-prevention projects benefiting

8 the targeted urban area,

9 ‘‘(iii) enhanced crime prevention

10 measures in the targeted urban area such

11 as ‘crime free zones’,

12 ‘‘(iv) the reduction or elimination of

13 other taxes or fees applying within the tar14 geted urban area,

15 ‘‘(v) an increase in the level or effi16 ciency of local services within the targeted

17 urban area, for example, crime prevention,

18 and drug enforcement prevention and

19 treatment,

20 ‘‘(vi) donation (or sale below market

21 value) of land and buildings to benefit low

22 and moderate income people,

23 ‘‘(vii) linkages to—

24 ‘‘(I) job training,

25 ‘‘(II) transportation,
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1 ‘‘(III) education,

2 ‘‘(IV) day care,

3 ‘‘(V) health care, and

4 ‘‘(VI) other social service sup5 port,

6 ‘‘(viii) provision of supporting public

7 facilities, and infrastructure improvements,

8 ‘‘(ix) encouragement of local entrepre9 neurship; and

10 ‘‘(x) other factors determined essen11 tial to support targeted urban area activi12 ties and increase livability or quality of life.

13 ‘‘(3) LATER MODIFICATION OF A COURSE OF

14 ACTION.—The Secretary of Housing and Urban De15 velopment may by regulations prescribe procedures

16 to permit or require a course of action to be updated

17 or modified during the time that a designation is in

18 effect.

19 ‘‘(e) DEFINITIONS.—For the purposes of this title—

20 ‘‘(1) GOVERNMENTS.—If more than one govern21 ment seeks to nominate an area as a targeted urban

22 area, any reference to, or requirement of, this sec23 tion shall apply to all such governments.

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

25 government’ means—
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1 ‘‘(A) any county, city, town, township, par2 ish, village, or other general purpose political

3 subdivision of a State,

4 ‘‘(B) any combination of political subdivi5 sions described in subparagraph (A) recognized

6 by the Secretary of Housing and Urban Devel7 opment, and

8 ‘‘(C) the District of Columbia.’’

9 (b) CLERICAL AMENDMENT.—The table of sub10 chapters for chapter 80 is amended by adding at the end

11 thereof the following new item:

‘‘SUBCHAPTER D. Designation of targeted urban areas.’’.

12 SEC. 102. REPORTING REQUIREMENTS.

13 Not later than the close of the second calendar year

14 after the calendar year in which the Secretary of Housing

15 and Urban Development first designates areas as targeted

16 urban areas, and at the close of each second calendar year

17 thereafter, the Secretary of Housing and Urban Develop18 ment shall submit to the Congress a report on the effects

19 of such designation in accomplishing the purposes of this

20 Act.

21 SEC. 103. INTERACTION WITH OTHER FEDERAL PROGRAMS.

22 (a) COORDINATION WITH RELOCATION ASSIST23 ANCE.—The designation of a targeted urban area under

24 section 7880 of the Internal Revenue Code of 1986 (as

25 added by this Act) shall not—
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1 (1) constitute approval of a Federal or federally

2 assisted program or project (within the meaning of

3 the Uniform Relocation Assistance and Real Prop4 erty Acquisition Policies Act of 1970 (42 U.S.C.

5 4601)); or

6 (2) entitle any person displaced from real prop7 erty located in such targeted urban areas to any

8 rights or any benefits under such Act.

9 (b) COORDINATION WITH ENVIRONMENTAL POL10 ICY.—Designation of a targeted urban area under section

11 7880 of such Code shall not constitute a Federal action

12 for purposes of applying the procedural requirements of

13 the National Environmental Policy Act of 1969 (42 U.S.C.

14 4341) or other provisions of Federal law relating to the

15 protection of the environment.

16 TITLE II—FEDERAL INCOME TAX

17 INCENTIVES

18 SEC. 201. TAX INCENTIVES.

19 (a) GENERAL RULE.—Chapter 1 (relating to normal

20 tax and surtax rules) is amended by inserting after sub21 chapter T the following new subchapter:

22 Subchapter U—Tax Incentives for Targeted Urban

23 Areas

‘‘Sec. 1391. Credit for health, day care, and job training expenses

of targeted urban area employers.

‘‘Sec. 1392. Expense treatment for cost of qualified targeted

urban area property.

‘‘Sec. 1393. Deduction for targeted urban area stock.
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‘‘Sec. 1394. Overall limitation on targeted urban area incentives.

1 ‘‘SEC. 1391. CREDIT FOR HEALTH, DAY CARE, AND JOB

2 TRAINING EXPENSES OF TARGETED URBAN

3 AREA EMPLOYERS.

4 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al5 lowed as a credit against the tax imposed by this subtitle

6 for the taxable year an amount equal to 50 percent of the

7 qualified expenses of the taxpayer for such taxable year.

8 ‘‘(b) LIMITATION.—The amount of the credit allow9 able under subsection (a) to any taxpayer for any taxable

10 year with respect to any targeted urban area shall not ex11 ceed the credit amount allocated to the taxpayer under

12 section 1394 with respect to such targeted urban area for

13 such taxable year.

14 ‘‘(c) QUALIFIED EXPENSES.—For purposes of this

15 section, the term ‘qualified expenses’ means—

16 ‘‘(1) any amount paid or incurred by the tax17 payer for coverage under an accident or health plan

18 of any qualified targeted urban area employee,

19 ‘‘(2) any amount paid or incurred by the tax20 payer for dependent care assistance (as defined in

21 section 129(e)(1)) with respect to any qualified tar22 geted urban area employee, and

23 ‘‘(3) any job training expenses paid or incurred

24 by the taxpayer with respect to any qualified tar25 geted urban area employee.
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1 ‘‘(d) QUALIFIED TARGETED URBAN AREA EM2 PLOYEE.—For purposes of this section—

3 ‘‘(1) IN GENERAL.—Except as otherwise pro4 vided in this subsection, the term ‘qualified targeted

5 urban area employee’ means, with respect to any pe6 riod, any employee of the taxpayer if—

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

9 the taxpayer are performed within a targeted

10 urban area in a trade or business of the tax11 payer, and

12 ‘‘(B) the principal place of abode of such

13 employee while performing such services is

14 within a city which includes any portion of such

15 targeted urban area.

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

17 The term ‘qualified targeted urban area employee’

18 shall not include—

19 ‘‘(A) any individual described in subpara20 graph (A), (B), or (C) of section 51(i)(1), and

21 ‘‘(B) any 5-percent owner (as defined in

22 section 416(i)(1)(B)).

23 ‘‘(e) CREDIT REFUNDABLE.—For purposes of section

24 6401(b), the credit under this section shall be treated as
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1 a credit allowable under subpart C of part IV of sub2 chapter A of this chapter.

3 ‘‘SEC. 1392. EXPENSE TREATMENT FOR COST OF QUALIFIED

4 ZONE PROPERTY.

5 ‘‘(a) TREATMENT AS EXPENSES.—A taxpayer may

6 elect to treat the cost of any qualified targeted urban area

7 property as an expense which is not chargeable to capital

8 account. Any cost so treated shall be allowed as a deduc9 tion for the taxable year in which the qualified targeted

10 urban area property is placed in service.

11 ‘‘(b) LIMITATION.—The amount allowed as a deduc12 tion under subsection (a) to any taxpayer for any taxable

13 year with respect to any targeted urban area shall not ex14 ceed the expense treatment amount allocated to the tax15 payer under section 1394 for such taxable year with re16 spect to such targeted urban area.

17 ‘‘(c) QUALIFIED TARGETED URBAN AREA PROP18 ERTY.—For purposes of this section—

19 ‘‘(1) IN GENERAL.—The term ‘qualified tar20 geted urban area property’ means any property to

21 which section 168 applies and which is acquired by

22 purchase if—

23 ‘‘(A) such property is real property located

24 in a targeted urban area and used by the tax-
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1 payer in the active conduct of a trade or busi2 ness, or

3 ‘‘(B) such property is other tangible prop4 erty substantially all the use of which by the

5 taxpayer is used in a targeted urban area in the

6 active conduct of a trade or business.

7 Determinations of whether an area is a targeted

8 urban area shall be made as of the time the property

9 is placed in service.

10 ‘‘(2) TREATMENT OF PROPERTY HELD FOR

11 RENT.—The term ‘qualified targeted urban area

12 property’ shall not include any property with respect

13 to which the taxpayer is a lessor.

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

15 ‘‘(1) PURCHASE AND COST.—The terms ‘pur16 chase’ and ‘cost’ have the respective meanings given

17 such terms by section 179(d).

18 ‘‘(2) ELECTION.—An election under this sec19 tion—

20 ‘‘(A) shall specify the property to which

21 the election applies, and

22 ‘‘(B) shall be made on the taxpayer’s re23 turn for the taxable year in which the property

24 is placed in service.
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1 Any such election, once made, may be revoked only

2 with the consent of the Secretary.

3 ‘‘(3) RECAPTURE.—The Secretary shall, by reg4 ulations, provide for recapturing the benefit of any

5 deduction allowable under subsection (a) with re6 spect to any property which ceases to be qualified

7 targeted urban area property.

8 ‘‘SEC. 1393. DEDUCTION FOR ENTERPRISE ZONE STOCK.

9 ‘‘(a) GENERAL RULE.—There shall be allowed as a

10 deduction an amount equal to the aggregate amount paid

11 in cash by the taxpayer during the taxable year for the

12 purchase of targeted urban area stock.

13 ‘‘(b) LIMITATIONS.—

14 ‘‘(1) CEILING.—

15 ‘‘(A) IN GENERAL.—The maximum

16 amount allowed as a deduction under subsection

17 (a) to a taxpayer shall not exceed the least of:

18 ‘‘(i) $100,000,

19 ‘‘(ii) the targeted urban area stock

20 amount allocated under section 1294 to

21 the taxpayer for the taxable year, or

22 ‘‘(iii) the excess of $500,000 over the

23 amount allowed as a deduction under this

24 section to the taxpayer for all prior taxable

25 years.
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1 ‘‘(B) EXCESS AMOUNTS.—If the amount

2 otherwise deductible by any person under sub3 section (a) exceeds the limitation under sub4 paragraph (A)—

5 ‘‘(i) the amount of such excess shall

6 be treated as an amount paid to which

7 subsection (a) applies during the next tax8 able year, and

9 ‘‘(ii) the deduction allowed for any

10 taxable year shall be allocated among the

11 targeted urban area stock purchased by

12 such person in accordance with the pur13 chase price per share.

14 ‘‘(2) AGGREGATION RULES.—All persons who

15 are members of the same family (as defined in sec16 tion 267(c)(4) or who are under common control

17 shall be treated as one person for purposes of

18 clauses (i) and (iii) of paragraph (1)(A), and the

19 limitations contained in such clauses shall be allo20 cated among such persons in accordance with their

21 respective purchases of targeted urban area stock.

22 ‘‘(c) DISPOSITIONS OF STOCK.—

23 ‘‘(1) GAIN TREATED AS ORDINARY INCOME.—

24 Except as otherwise provided in regulations, if a tax25 payer disposes of any targeted urban area stock with
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1 respect to which a deduction was allowed under sub2 section (a), the amount realized on such disposi3 tion—

4 ‘‘(A) shall be recognized notwithstanding

5 any other provision of this subtitle, and

6 ‘‘(B) to the extent such amount does not

7 exceed the amount allowed as a deduction

8 under subsection (a) with respect to such stock,

9 shall be treated as ordinary income.

10 ‘‘(2) INTEREST CHARGED IF DISPOSITION

11 WITHIN 5 YEARS OF PURCHASE.—

12 ‘‘(A) IN GENERAL.—If a taxpayer disposes

13 of any targeted urban area stock with respect

14 to which a deduction was allowed under sub15 section (a) before the end of the 5-year period

16 beginning on the date such stock was purchased

17 by the taxpayer, the tax imposed by this chap18 ter for the taxable year in which such disposi19 tion occurs shall be increased by the amount

20 determined under subparagraph (B).

21 ‘‘(B) ADDITIONAL AMOUNT.—For purposes

22 of subparagraph (A), the additional amount

23 shall be equal to the amount of interest (deter24 mined at the rate applicable under section

25 6621(a)(2)) that would accrue—
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1 ‘‘(i) during the period beginning on

2 the date the stock was purchased by the

3 taxpayer and ending on the date such

4 stock was disposed of by the taxpayer,

5 ‘‘(ii) on an amount equal to the aggre6 gate decrease in tax of the taxpayer result7 ing from the deduction allowed under this

8 subsection (a) with respect to the stock so

9 disposed of.

10 ‘‘(C) SPECIAL RULE.—Any increase in tax

11 under subparagraph (A) shall not be treated as

12 a tax imposed by this chapter for purposes of—

13 ‘‘(i) determining the amount of any

14 credit allowable under this chapter, and

15 ‘‘(ii) determining the amount of the

16 tax imposed by section 55.

17 ‘‘(3) EXCEPTION FOR TRANSFERS AT DEATH.—

18 This subsection shall not apply to a transfer at

19 death.

20 ‘‘(d) DISQUALIFICATION.—

21 ‘‘(1) ISSUER OR STOCK CEASES TO QUALIFY.—

22 If, during the 10-year period beginning on the date

23 targeted urban area stock was purchased by the tax24 payer—
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1 ‘‘(A) the issuer of such stock ceases to be

2 a qualified issuer (determined without regard to

3 subsection (f)(1)(C)), or

4 ‘‘(B) the proceeds from the issuance of

5 such stock fail or otherwise cease to be invested

6 by the issuer in qualified targeted urban area

7 property,

8 then, notwithstanding any provision of this subtitle

9 other than paragraph (2), the taxpayer shall be

10 treated for purposes of subsection (c) as disposing of

11 such stock during the taxable year during which

12 such cessation or failure occurs at its fair market

13 value as of 1st day of such taxable year.

14 ‘‘(2) CESSATION OF TARGETED URBAN AREA

15 STATUS NOT TO CAUSE RECAPTURE.—A corporation

16 shall not fail to be treated as a qualified issuer for

17 purposes of paragraph (1) solely by reason of the

18 termination or revocation of a tax targeted urban

19 area designation.

20 ‘‘(e) TARGETED URBAN AREA STOCK.—For purposes

21 of this section,

22 ‘‘(1) IN GENERAL.—The term ‘targeted urban

23 area stock’ means stock of a corporation if—

24 ‘‘(A) such stock was acquired on original

25 issue from the corporation, and
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1 ‘‘(B) such corporation was, at the time of

2 issue, a qualified issuer.

3 ‘‘(2) PROCEEDS MUST BE INVESTED IN QUALI4 FIED TARGETED URBAN AREA PROPERTY.—Such

5 term shall include such stock only to the extent that

6 the amount of proceeds of such issuance are used by

7 such issuer during the 12-month period beginning on

8 the date of issuance to acquire qualified targeted

9 urban area property.

10 ‘‘(3) $5,000,000 LIMIT.—Not more than

11 $5,000,000 of stock of such corporation and all re12 lated persons may be targeted urban area stock.

13 ‘‘(f) QUALIFIED ISSUER.—For purposes of this sec14 tion—

15 ‘‘(1) IN GENERAL.—The term ‘qualified issuer’

16 means any domestic C corporation if—

17 ‘‘(A) such corporation does not have more

18 than one class of stock,

19 ‘‘(B) such corporation meets the targeted

20 urban area business requirements of paragraph

21 (2),

22 ‘‘(C) the sum of—

23 ‘‘(i) the money,
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1 ‘‘(ii) the aggregate unadjusted bases

2 of property owned by such corporation,

3 and

4 ‘‘(iii) the value of property leased to

5 the corporation (as determined under regu6 lations prescribed by the Secretary),

7 does not exceed $5,000,000, and

8 ‘‘(D) more than 20 percent of the total

9 voting power, and 20 percent of the total value,

10 of the stock of such corporation is owned by in11 dividuals or estates or indirectly by individuals

12 through partnerships or trusts.

13 ‘‘(2) TARGETED URBAN AREA BUSINESS RE14 QUIREMENTS.—

15 ‘‘(A) IN GENERAL.—A corporation meets

16 the targeted urban area business requirements

17 of this paragraph for any taxable year if—

18 ‘‘(i) at least 80 percent of the total

19 gross income of such corporation for the

20 taxable year is derived from the active con21 duct of a trade or business within a tax

22 targeted urban area,

23 ‘‘(ii) less than 10 percent of the aver24 age of the aggregate unadjusted bases of

25 the property of the corporation during
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1 such taxable year is attributable to securi2 ties (as defined in section 165(g)(2)),

3 ‘‘(iii) substantially all of the use of the

4 tangible property of the corporation

5 (whether owned or leased) is within a tax

6 targeted urban area,

7 ‘‘(iv) substantially all of the services

8 performed for the corporation by the em9 ployees of such corporation are performed

10 in a tax targeted urban area, and

11 ‘‘(v) no more than an insubstantial

12 portion of the property of the corporation

13 constitutes collectibles (as defined in sec14 tion 408(m)(2)), unless such collectibles

15 constitute property held primarily for sale

16 to customers in the ordinary course of such

17 trade or business.

18 ‘‘(B) SPECIAL RULES.—

19 ‘‘(i) RENTAL REAL PROPERTY.—For

20 purposes of subparagraph (A), real prop21 erty located within a tax targeted urban

22 area and held for use by customers other

23 than related persons shall be treated as the

24 active conduct of a trade or business.
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1 ‘‘(ii) EXCESSIVE PROPERTY OR SERV2 ICES PROVIDED TO OR BY RELATED PER3 SONS.—A corporation shall cease to meet

4 the requirements of this paragraph if—

5 ‘‘(I) more than 50 percent (by

6 value) of the property or services ac7 quired by the corporation during the

8 taxable year are acquired from related

9 persons which do not meet the re10 quirements of this paragraph; or

11 ‘‘(II) more than 50 percent of

12 the gross income of the corporation

13 for the taxable year is attributable to

14 property or services provided to relat15 ed persons which do not meet the re16 quirements of this paragraph.

17 ‘‘(iii) NEW CORPORATIONS.—In the

18 case of a new corporation, clauses (i) and

19 (ii) of subparagraph (A) shall not apply to

20 the 1st taxable year of such corporation.

21 ‘‘(3) QUALIFIED TARGETED URBAN AREA PROP22 ERTY.—The term ‘targeted urban area property’

23 means property to which section 168 applies—

24 ‘‘(A) the original use of which commences

25 with the qualified issuer, and
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1 ‘‘(B) substantially all of the use of which

2 is in a tax targeted urban area.

3 ‘‘(4) RELATED PERSON.—A person shall be

4 treated as related to another person if—

5 ‘‘(A) the relationship of such persons is de6 scribed in section 267(b) or 707(b)(1), or

7 ‘‘(B) such persons are engaged in trades or

8 businesses under common control (within the

9 meaning of subsections (a) and (b) of section

10 52).

11 For purposes of subparagraph (A), in applying sec12 tion 267(b) or 707(b)(1), ‘33 percent’ shall be sub13 stituted for ‘50 percent’.

14 ‘‘(g) BASIS ADJUSTMENT.—For purposes of this sub15 title, the taxpayer’s basis (without regard to this sub16 section) for the targeted urban area stock shall be reduced

17 by the deduction allowed under subsection (a) with respect

18 to such stock.

19 ‘‘SEC. 1394. OVERALL LIMITATION ON TARGETED URBAN

20 AREA INCENTIVES.

21 ‘‘(a) GENERAL RULE.—The allocating commission of

22 each targeted urban area shall make allocations of—

23 ‘‘(1) credit amounts,

24 ‘‘(2) expense treatment amounts, and
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1 ‘‘(3) targeted urban area stock deduction

2 amounts.

3 ‘‘(b) LIMITATION ON AGGREGATE AMOUNTS ALLO4 CATED.—

5 ‘‘(1) LIMITATION.—No amount may be allo6 cated under subsection (a) by the allocating commis7 sion of any tax targeted urban area if such alloca8 tion would result in the targeted urban area limit for

9 the calendar year of the allocation being reduced

10 below zero.

11 ‘‘(2) TARGETED URBAN AREA LIMIT.—For pur12 poses of this section—

13 ‘‘(A) BASIC AMOUNT.—Except as other14 wise provided in this paragraph, the targeted

15 urban area limit for any tax targeted urban

16 area for any calendar year shall be determined

17 in accordance with the following formula:

A +

X , U

18 ‘‘(B) CARRYOVER OF UNUSED AMOUNTS.—

19 ‘‘(i) IN GENERAL.—Before the end of

20 any calendar year, the allocating commis21 sion of any targeted urban area may

22 elect—
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1 ‘‘(I) to reduce the targeted urban

2 area limit applicable to such targeted

3 urban area for such year, and

4 ‘‘(II) to increase the targeted

5 urban area limit applicable to such

6 targeted urban area for the succeed7 ing calendar year by an amount equal

8 to such reduction.

9 ‘‘(ii) LIMITATION.—The increase in a

10 targeted urban area limit under clause

11 (i)(II) for any calendar year shall not ex12 ceed 70 percent of the targeted urban area

13 limit otherwise applicable to the targeted

14 urban area for such year.

15 ‘‘(C) SPECIAL RULE.—The targeted urban

16 area limits for any calendar year shall be deter17 mined by the Secretary of Housing and Urban

18 Development before the beginning of such cal19 endar year on the basis of the most recent data

20 available.

21 ‘‘(3) DETERMINATION OF TERM ‘A’.—For pur22 poses of paragraph (2), the term ‘A’ means—

23 ‘‘(A) $500,000,000 in the case of calendar

24 year 1993,
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1 ‘‘(B) $1,000,000,000 in the case of cal2 endar year 1994,

3 ‘‘(C) $2,000,000,000 in the case of cal4 endar years 1995, 1996, and 1997, and

5 ‘‘(D) in the case of any following calendar

6 year, the amount hereafter provided by law.

7 ‘‘(4) DETERMINATION OF TERM ‘U’.—For pur8 poses of paragraph (2), the term ‘U’ means the sum

9 of the respective terms ‘X’ determined for all quali10 fied cities (as defined in section 7880(c)(2)) under

11 paragraph (5).

12 ‘‘(5) DETERMINATION OF TERM ‘X’.—For pur13 poses of paragraph (2), the term ‘X’ means the

14 product of—

15 ‘‘(A) the total population of the city in16 volved, as determined by the Secretary using

17 the most recent data that is available from the

18 Secretary of Commerce pursuant to the decen19 nial census and pursuant to reasonable esti20 mates by such Secretary of changes occurring

21 in the data in the ensuing period;

22 ‘‘(B) the need index of such city, as deter23 mined under paragraph (6); and
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1 ‘‘(C) the need adjusted per capita income

2 factor of such city, as determined under para3 graph (7).

4 ‘‘(6) DETERMINATION OF NEED INDEX.—

5 ‘‘(A) For purposes of paragraph (5)(B),

6 the term ‘need index’ means the number equal

7 to the quotient of—

8 ‘‘(i) the term ‘N’, as determined

9 under subparagraph (B); divided by

10 ‘‘(ii) the term ‘P’, as determined

11 under subparagraph (C).

12 ‘‘(B) For purposes of subparagraph (A)(i),

13 the term ‘N’ means the percentage constituted

14 by the ratio of—

15 ‘‘(i) the amount of funds allotted to

16 the city in the fiscal year in which the cal17 endar year begins under section 106(a)(3)

18 of the Housing and Community Develop19 ment Act of 1974; to

20 ‘‘(ii) the sum of the amount of funds

21 received by all eligible cities in such fiscal

22 year under section 106(a)(3) of the Hous23 ing and Community Development Act of

24 1974.
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1 ‘‘(C) For purposes of subparagraph (A)(ii),

2 the term ‘P’ means the percentage constituted

3 by the ratio of—

4 ‘‘(i) the amount equal to the total

5 population of the city, as determined by

6 the Secretary using the most recent data

7 that is available from the Secretary of

8 Commerce pursuant to the decennial cen9 sus and pursuant to reasonable estimates

10 by such Secretary of changes occurring in

11 the data in the ensuing period; to

12 ‘‘(ii) the amount equal to the total

13 population of all eligible cities in the cur14 rent fiscal year.

15 ‘‘(D) For purposes of this paragraph, the

16 term ‘‘eligible cities’’ means those cities which

17 meet the requirements of subparagraphs (A)

18 and (B) of section 7880(c)(2).

19 ‘‘(7) DETERMINATION OF NEED ADJUSTED PER

20 CAPITA INCOME FACTOR.—

21 ‘‘(A) For purposes of paragraph (5)(C)

22 (and subject to subparagraph (D)), the term

23 ‘need adjusted per capita income factor’ means

24 the amount equal to the percentage determined
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1 for the city in accordance with the following

2 formula:

1¥.15 +

I

,

Q

3 ‘‘(B) For purposes of subparagraph (A),

4 the term ‘I’ means the per capita income of the

5 city for the most recent year for which data is

6 available, as determined by the Secretary of

7 Commerce.

8 ‘‘(C) For purposes of subparagraph (A),

9 the term ‘Q’ means the product of—

10 ‘‘(i) the need index of such city, as de11 termined under paragraph (6); and

12 ‘‘(ii) the amount equal to the per cap13 ita income of the United States for the

14 most recent year for which data is avail15 able, as determined by the Secretary of

16 Commerce.

17 ‘‘(D) In the case of a city for which the

18 quotient of the term ‘I’ (as determined under

19 subparagraph (B)) divided by the term ‘Q’ (as

20 determined under subparagraph (C)) is less

21 than 0.2, then such quotient shall be deemed to

22 be equal to 0.2 for such city for purposes of the

23 formula under subparagraph (A).
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1 ‘‘(c) PROCEDURAL RULE.—The allocating commis2 sion of each targeted urban area shall make allocations

3 under subsection (a) in accordance with the procedures es4 tablished under section 7880(a)(3)(D).

5 ‘‘(d) ALLOCATING COMMISSION.—For purposes of

6 this section, the term ‘allocating commission’ means the

7 commission established pursuant to section

8 7880(a)(3)(C)(ii).

9 ‘‘(e) OPERATING RULES.—For purposes of this sec10 tion—

11 ‘‘(1) CREDIT AMOUNT.—Any allocation of credit

12 amount—

13 ‘‘(A) shall specify the employer and taxable

14 year to which such allocation applies, and

15 ‘‘(B) shall reduce the targeted urban area

16 limit for the calendar year in which such tax17 able year begins by 1 dollar for each dollar of

18 the amount so allocated.

19 ‘‘(2) EXPENSE TREATMENT AMOUNT.—Any al20 location of an expense treatment amount—

21 ‘‘(A) shall specify the adjusted basis of the

22 property to which such allocation applies, and

23 ‘‘(B) shall reduce the targeted urban area

24 limit for the calendar year in which the prop-
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1 erty is placed in service by 35 cents for each

2 dollar so allocated.

3 ‘‘(3) ZONE STOCK DEDUCTION AMOUNT.—Any

4 allocation of a targeted urban area stock deduction

5 amount—

6 ‘‘(A) shall specify the stock purchases to

7 which the allocation relates, and

8 ‘‘(B) shall reduce the targeted urban area

9 limit for the calendar year in which such tax10 able year begins by 35 cents for each dollar of

11 the amount so allocated.

12 ‘‘(f) RETROACTIVE ALLOCATIONS NOT EFFECTIVE.—

13 ‘‘(1) IN GENERAL.—No retroactive allocation

14 under subsection (a) shall be effective.

15 ‘‘(2) RETROACTIVE ALLOCATION.—For pur16 poses of subsection (a), the term ‘retroactive alloca17 tion’ means any allocation of—

18 ‘‘(A) an employment credit amount after

19 the beginning of the taxable year to which such

20 allocation applies,

21 ‘‘(B) an expense treatment amount after

22 the property involved is placed in service, or

23 ‘‘(C) a targeted urban area stock deduction

24 amount after the stock involved is acquired.’’
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1 (b) TECHNICAL AMENDMENT.—Subsection (a) of

2 section 1016 (relating to adjustments to basis) is amended

3 by striking out ‘‘and’’ at the end of paragraph (23); by

4 striking out the period at the end of paragraph (24) and

5 inserting in lieu thereof ‘‘; and’’; and by adding at the

6 end thereof the following new paragraph:

7 ‘‘(25) to the extent provided in section 1393(g),

8 in the case of stock with respect to which a deduc9 tion was allowed or allowable under section

10 1393(a).’’

11 (c) CLERICAL AMENDMENT.—The table of sub12 chapters for chapter 1 is amended by inserting after the

13 item relating to subchapter T the following new item:

‘‘SUBCHAPTER U. Targeted Urban Area.’’

14 SEC. 202. ALTERNATIVE MINIMUM TAX.

15 Subsection (a) of section 56 (relating to adjustments

16 applicable to all taxpayers) is amended by adding at the

17 end thereof the following new paragraph:

18 ‘‘(9) TARGETED URBAN AREA INCENTIVES AL19 LOWED.—The provisions of subchapter U shall

20 apply, including for purposes of determining ad21 justed current earnings under subsection (g).’’.

22 SEC. 203. ADJUSTED GROSS INCOME DEFINED.

23 Section 62(a) (relating to the definition of adjusted

24 gross income) is amended by inserting after paragraph

25 (13) the following new paragraph:
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1 ‘‘(14) TARGETED URBAN AREA STOCK.—The

2 deduction allowed by section 1393.’’.

3 SEC. 204. EFFECTIVE DATE.

4 The amendments made by this title shall apply to tax5 able years ending after December 31, 1992.

6 TITLE III—REGULATORY

7 FLEXIBILITY

8 SEC. 301. DEFINITION OF SMALL ENTITIES IN TARGETED

9 URBAN AREA FOR PURPOSES OF ANALYSIS

10 OF REGULATORY FUNCTIONS.

11 Section 601 of title 5, United States Code, is amend12 ed by—

13 (1) striking out ‘‘and’’ at the end of paragraph

14 (5); and

15 (2) striking out paragraph (6) and inserting in

16 lieu thereof the following:

17 ‘‘(6) the term ‘small entity’ means—

18 ‘‘(A) a small business, small organization,

19 or small governmental jurisdiction defined in

20 paragraphs (3), (4), and (5) of this section, re21 spectively; and

22 ‘‘(B) any qualified targeted urban area

23 business; any unit of government that nomi24 nated an area which the Secretary of Housing

25 and Urban Development designates as a tar-
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1 geted urban area (within the meaning of section

2 7880 of the Internal Revenue Code of 1986)

3 that has a rule pertaining to the carrying out

4 of any project, activity, or undertaking within

5 such targeted urban area; and any not-for-prof6 it enterprise carrying out a significant portion

7 of its activities within such a targeted urban

8 area; and

9 ‘‘(7) the term ‘qualified targeted urban area

10 business’ means any person, corporation, or other

11 entity—

12 ‘‘(A) which is engaged in the active con13 duct of a trade or business within an targeted

14 urban area (within the meaning of section 7880

15 of the Internal Revenue Code of 1986); and

16 ‘‘(B) for whom at least 50 percent of its

17 employees perform substantially all of their

18 services for the employer in a targeted urban

19 area (as so defined).’’

20 SEC. 302. WAIVER OR MODIFICATION OF AGENCY RULES IN

21 TARGETED URBAN AREAS.

22 (a) Chapter 6 of title 5, United States Code, is

23 amended by redesignating sections 611 and 612 as sec24 tions 612 and 613, respectively, and inserting the follow25 ing new section immediately after section 610:
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1 ‘‘§ 611. Waiver or modification of agency rules in tar2 geted urban areas

3 ‘‘(a) Upon the written request of any government

4 which nominated an area that the Secretary of Housing

5 and Urban Development has designated as a targeted

6 urban area under section 7880 of the Internal Revenue

7 Code of 1986, an agency is authorized, in order to further

8 the job creation, community development, or economic re9 vitalization objectives with respect to such targeted urban

10 area, to waive or modify all or part of any rule which it

11 has authority to promulgate, as such rule pertains to the

12 carrying out of projects, activities, or undertakings within

13 such targeted urban area.

14 ‘‘(b) Nothing in this section shall authorize an agency

15 to waive or modify any rule adopted to carry out a statute

16 or Executive order which prohibits, or the purpose of

17 which is to protect persons against, discrimination on the

18 basis of race, color, religion, sex, familial status, national

19 origin, age, or handicap.

20 ‘‘(c) A request under subsection (a) shall specify the

21 rule or rules to be waived or modified and the change pro22 posed, and shall briefly describe why the change would

23 promote the achievement of the job creation, community

24 development, or economic revitalization objectives of the

25 targeted urban area. If such a request is made to any

26 agency other than the Department of Housing and Urban
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1 Development, the requesting government shall send a copy

2 of the request to the Secretary of Housing and Urban De3 velopment at the time the request is made.

4 ‘‘(d) In considering a request, the agency shall weigh

5 the extent to which the proposed change is likely to further

6 job creation, community development, or economic revital7 ization within the targeted urban area against the effect

8 the change is likely to have on the underlying purposes

9 of applicable statutes in the geographic area which would

10 be affected by the change. The agency shall approve the

11 request whenever it finds, in its discretion, that the public

12 interest which the proposed change would serve in further13 ing such job creation, community development, or eco14 nomic revitalization outweighs the public interest which

15 continuation of the rule unchanged would serve. The agen16 cy shall not approve any request to waive or modify a rule

17 if that waiver or modification would—

18 ‘‘(1) violate a statutory requirement (including

19 any requirements of the Fair Labor Standards Act

20 of 1938 (52 Stat. 1060; 29 U.S.C. 201 et seq.)); or

21 ‘‘(2) be likely to present a significant risk to the

22 public health, including environmental or occupa23 tional health or safety, or of environmental pollution.

24 ‘‘(e) If a request is disapproved, the agency shall in25 form all the requesting governments, and the Department
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1 of Housing and Urban Development, in writing of the rea2 sons therefor and shall, to the maximum extent possible,

3 work with such governments to develop an alternative,

4 consistent with the standards contained in subsection (d).

5 ‘‘(f) Agencies shall discharge their responsibilities

6 under this section in an expeditious manner, and shall

7 make a determination on requests not later than 90 days

8 after their receipt.

9 ‘‘(g) A waiver or modification of a rule under sub10 section (a) shall not be considered to be a rule, rule11 making, or regulation under chapter 5 of this title. To fa12 cilitate reaching its decision on any requested waiver or

13 modification, the agency may seek the views of interested

14 parties and, if the views are to be sought, determine how

15 they should be obtained and to what extent, if any, they

16 should be taken into account in considering the request.

17 The agency shall publish a notice in the Federal Register

18 stating any waiver or modification of a rule under this

19 section, the time such waiver or modification takes effect

20 and its duration, and the scope of applicability of such

21 waiver or modification.

22 ‘‘(h) In the event that an agency proposes to amend

23 a rule for which a waiver or modification under this sec24 tion is in effect, the agency shall not change the waiver

25 or modification to impose additional requirements unless
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1 it determines, consistent with standards contained in sub2 section (d), that such action is necessary. Such determina3 tions shall be published with the proposal to amend such

4 rule.

5 ‘‘(i) No waiver or modification of a rule under this

6 section shall remain in effect with respect to a targeted

7 urban area after the targeted urban area designation has

8 expired or has been revoked.

9 ‘‘(j) For purposes of this section, the term ‘rule’

10 means (1) any rule as defined in section 551(4) of this

11 title or (2) any rulemaking conducted on the record after

12 opportunity for an agency hearing pursuant to sections

13 556 and 557 of this title.’’

14 (b) The analysis for chapter 6 of title 5, United

15 States Code, is amended by redesignating the items relat16 ing to sections 611 and 612 as items relating to sections

17 612 and 613, respectively, and by inserting after the item

18 relating to section 610 the following new item:

‘‘611. Waiver or modification of agency rules in targeted urban

areas.’’.

19 (c) Section 601(2) of such title 5 is amended by in20 serting ‘‘(except for purposes of section 611’’ immediately

21 before ‘‘means’’.

22 (d) Section 613 of such title 5, as redesignated by

23 subsection (a), is amended—
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1 (1) in subsection (a) by inserting ‘‘(except sec2 tion 611)’’ immediately after ‘‘chapter’’; and

3 (2) in subsection (b) by inserting ‘‘as defined in

4 section 601(2)’’ immediately before the period at the

5 end of the first sentence.

6 SEC. 303. FEDERAL AGENCY SUPPORT OF TARGETED

7 URBAN AREAS.

8 In order to maximize all agencies’ support of targeted

9 urban areas, the Secretary of Housing and Urban Devel10 opment is authorized to convene regional and local coordi11 nating councils of any appropriate agencies to assist State

12 and local governments to achieve the objectives agreed to

13 in the course of action under section 7880 of the Internal

14 Revenue Code of 1986.

15 TITLE IV—ESTABLISHMENT OF

16 FOREIGN-TRADE ZONES IN

17 TARGETED URBAN AREAS

18 SEC. 401. FOREIGN-TRADE ZONE PREFERENCES.

19 (a) PREFERENCE IN ESTABLISHMENT OF FOREIGN20 TRADE ZONES IN TARGETED URBAN AREAS.—In process21 ing applications for the establishment of foreign-trade

22 zones pursuant to an Act ‘‘To provide for the establish23 ment, operation, and maintenance of foreign-trade zones

24 in ports of entry of the United States, to expedite and

25 encourage foreign commerce, and for other purposes’’, ap-
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1 proved June 18, 1934 (48 Stat. 998), the Foreign-Trade

2 Zone Board shall consider on a priority basis and expedite,

3 to the maximum extent possible, the processing of any ap4 plication involving the establishment of a foreign-trade

5 zone within a targeted urban area designated pursuant to

6 section 7880 of the Internal Revenue Code of 1986.

7 (b) APPLICATION PROCEDURE.—In processing appli8 cations for the establishment of ports of entry pursuant

9 to ‘‘An Act making appropriations for sundry civil ex10 penses of the Government for the fiscal year ending June

11 thirtieth, nineteen hundred and fifteen, and for other pur12 poses’’, approved August 1, 1914 (38 Stat. 609), the Sec13 retary of the Treasury shall consider on a priority basis

14 and expedite, to the maximum extent possible, the process15 ing of any application involving the establishment of a port

16 of entry which is necessary to permit the establishment

17 of a foreign-trade zone within a targeted urban area so

18 designated.

19 (c) APPLICATION EVALUATION.—In evaluating appli20 cations for the establishment of foreign-trade zones and

21 ports of entry in connection with targeted urban areas so

22 designated, the Foreign-Trade Zone Board and the Sec23 retary of the Treasury shall approve the applications, to

24 the maximum extent practicable, consistent with their re25 spective statutory responsibilities.
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1 TITLE V—REPEAL OF TITLE VII

2 OF THE HOUSING AND COM3 MUNITY DEVELOPMENT ACT

4 OF 1987

5 SEC. 501. REPEAL.

6 Title VII of the Housing and Community Develop7 ment Act of 1987 is hereby repealed.

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