II

106TH CONGRESS

2D SESSION S. 2779

To provide for the designation of renewal communities and to provide tax

incentives relating to such communities, to provide a tax credit to taxpayers investing in entities seeking to provide capital to create new

markets in low-income communities, and to provide for the establishment

of Individual Development Accounts (IDAs), and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 22, 2000

Mr. SANTORUM (for himself, Mr. LIEBERMAN, Mr. ABRAHAM, Mr. KOHL, Mr.

HUTCHINSON, Mr. TORRICELLI, and Mr. KERRY) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To provide for the designation of renewal communities and

to provide tax incentives relating to such communities,

to provide a tax credit to taxpayers investing in entities

seeking to provide capital to create new markets in lowincome communities, and to provide for the establishment

of Individual Development Accounts (IDAs), 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,
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1 SECTION 1. SHORT TITLE; ETC.

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

3 ‘‘American Community Renewal and New Markets Em4 powerment Act’’.

5 (b) AMENDMENT OF 1986 CODE.—Except as other6 wise expressly provided, whenever in this Act an amend7 ment or repeal is expressed in terms of an amendment

8 to, or repeal of, a section or other provision, the reference

9 shall be considered to be made to a section or other provi10 sion of the Internal Revenue Code of 1986.

11 (c) TABLE OF CONTENTS.—

Sec. 1. Short title; etc.

TITLE I—AMERICAN COMMUNITY RENEWAL

Sec. 101. Designation of and tax incentives for renewal communities.

Sec. 102. Extension of expensing of environmental remediation costs to renewal

communities; extension of termination date for renewal communities and empowerment zones.

Sec. 103. Work opportunity credit for hiring youth residing in renewal communities.

Sec. 104. Evaluation and reporting requirements.

Sec. 105. Exclusion of effects of this title from paygo scorecard.

TITLE II—NEW MILLENNIUM CLASSROOMS

Sec. 201. Credit for computer donations to schools, senior centers, public libraries, and other training centers.

TITLE III—EXPANSION AND EXTENSION OF EMPOWERMENT

ZONE TAX INCENTIVES

Sec. 301. Authority to designate 9 additional empowerment zones.

Sec. 302. Extension of enterprise zone treatment through 2009.

Sec. 303. 20 percent employment credit for all empowerment zones.

Sec. 304. Increased expensing under section 179.

Sec. 305. Higher limits on tax-exempt empowerment zone facility bonds.

Sec. 306. Nonrecognition of gain on rollover of empowerment zone investments.

Sec. 307. Increased exclusion of gain on sale of empowerment zone investments.

Sec. 308. Funding entitlement for Round II empowerment zones.

Sec. 309. Custom user fees.

TITLE IV—FAITH BASED SUBSTANCE ABUSE TREATMENT
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Sec. 401. Prevention and treatment of substance abuse; services provided

through religious organizations.

TITLE V—HOMEOWNERSHIP

Sec. 501. Transfer of unoccupied and substandard HUD-held housing to local

governments and community development corporations.

Sec. 502. Transfer of HUD assets in revitalization areas.

Sec. 503. Risk-sharing demonstration.

TITLE VI—AMERICA’S PRIVATE INVESTMENT COMPANIES

Sec. 601. Short title.

Sec. 602. Findings and purposes.

Sec. 603. Definitions.

Sec. 604. Authorization.

Sec. 605. Selection of APICs.

Sec. 606. Operations of APICs.

Sec. 607. Credit enhancement by the Federal Government.

Sec. 608. APIC requests for guarantee actions.

Sec. 609. Examination and monitoring of APICs.

Sec. 610. Penalties.

Sec. 611. Effective date.

Sec. 612. Sunset.

TITLE VII—NEW MARKETS TAX CREDIT

Sec. 701. New markets tax credit.

TITLE VIII—COMMUNITY DEVELOPMENT AND VENTURE CAPITAL

Sec. 800. Short title.

Subtitle A—New Markets Venture Capital Program

Sec. 801. New Markets Venture Capital Program.

Sec. 802. Bankruptcy exemption for NMVC companies.

Sec. 803. Federal savings associations.

Subtitle B—Community Development Venture Capital Assistance

Sec. 811. Findings and purposes.

Sec. 812. Community development venture capital activities.

Subtitle C—Business LINC

Sec. 821. Grants authorized.

Sec. 822. Regulations.

TITLE IX—BOND VOLUME CAP AND LOW-INCOME HOUSING

CREDIT INCREASES

Sec. 901. Increase in State ceiling on private activity bonds.

Sec. 902. Increase in State ceiling on low-income housing credit.

TITLE X—INDIVIDUAL DEVELOPMENT ACCOUNTS

Sec. 1001. Findings.

Sec. 1002. Purposes.
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Sec. 1003. Definitions.

Subtitle A—Individual Development Accounts for Low-Income Workers

Sec. 1011. Structure and administration of qualified individual development account programs.

Sec. 1012. Procedures for opening an Individual Development Account and

qualifying for matching funds.

Sec. 1013. Contributions to Individual Development Accounts.

Sec. 1014. Deposits by qualified individual development account programs.

Sec. 1015. Withdrawal procedures.

Sec. 1016. Certification and termination of qualified individual development account programs.

Sec. 1017. Reporting, monitoring, and evaluation.

Sec. 1018. Certain account funds of program participants disregarded for purposes of certain means-tested Federal programs.

Subtitle B—Qualified Individual Development Account Program Investment

Credits

Sec. 1021. Qualified individual development account program investment credits.

Sec. 1022. CRA credit treatment for qualified individual development account

program investments.

Sec. 1023. Designation of earned income tax credit payments for deposit to Individual Development Accounts.

TITLE XI—CHARITABLE CHOICE EXPANSION

Sec. 1101. Provision of assistance under government programs by religious organizations.

1 TITLE I—AMERICAN

2 COMMUNITY RENEWAL

3 SEC. 101. DESIGNATION OF AND TAX INCENTIVES FOR RE4 NEWAL COMMUNITIES.

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

6 at the end the following new subchapter:

7 ‘‘Subchapter X—Renewal Communities

‘‘Part I. Designation.

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

business.

‘‘Part III. Additional incentives.

8 ‘‘PART I—DESIGNATION

‘‘Sec. 1400E. Designation of renewal communities.
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1 ‘‘SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.

2 ‘‘(a) DESIGNATION.—

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

4 the term ‘renewal community’ means any area—

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

6 local governments and the State or States in

7 which it is located for designation as a renewal

8 community (hereinafter in this section referred

9 to as a ‘nominated area’), and

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

11 Urban Development designates as a renewal

12 community, after consultation with—

13 ‘‘(i) the Secretaries of Agriculture,

14 Commerce, Labor, and the Treasury; the

15 Director of the Office of Management and

16 Budget, and the Administrator of the

17 Small Business Administration, and

18 ‘‘(ii) in the case of an area on an In19 dian reservation, the Secretary of the Inte20 rior.

21 ‘‘(2) NUMBER OF DESIGNATIONS.—

22 ‘‘(A) IN GENERAL.—The Secretary of

23 Housing and Urban Development may des24 ignate not more than 1 nominated area as a re25 newal community in each State.
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1 ‘‘(B) MINIMUM DESIGNATION IN RURAL

2 AREAS.—Of the areas designated under para3 graph (1), at least 20 percent must be areas—

4 ‘‘(i) which are within a local govern5 ment jurisdiction or jurisdictions with a

6 population of less than 50,000,

7 ‘‘(ii) which are outside of a metropoli8 tan statistical area (within the meaning of

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

10 ‘‘(iii) which are determined by the

11 Secretary of Housing and Urban Develop12 ment, after consultation with the Secretary

13 of Commerce, to be rural areas.

14 ‘‘(3) AREAS DESIGNATED BASED ON DEGREE

15 OF POVERTY, ETC.—

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

17 provided in this section, the nominated areas

18 designated as renewal communities under this

19 subsection shall be those nominated areas with

20 the highest average ranking with respect to the

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

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

23 the preceding sentence, an area shall be ranked

24 within each such criterion on the basis of the

25 amount by which the area exceeds such cri-
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1 terion, with the area which exceeds such cri2 terion by the greatest amount given the highest

3 ranking.

4 ‘‘(B) EXCEPTION WHERE INADEQUATE

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

6 designated under subparagraph (A) if the Sec7 retary of Housing and Urban Development de8 termines that the course of action described in

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

10 inadequate.

11 ‘‘(4) LIMITATION ON DESIGNATIONS.—

12 ‘‘(A) PUBLICATION OF REGULATIONS.—

13 The Secretary of Housing and Urban Develop14 ment shall prescribe by regulation no later than

15 4 months after the date of the enactment of

16 this section, after consultation with the officials

17 described in paragraph (1)(B)—

18 ‘‘(i) the procedures for nominating an

19 area under paragraph (1)(A),

20 ‘‘(ii) the parameters relating to the

21 size and population characteristics of a re22 newal community, and

23 ‘‘(iii) the manner in which nominated

24 areas will be evaluated based on the cri25 teria specified in subsection (d).
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1 ‘‘(B) TIME LIMITATIONS.—The Secretary

2 of Housing and Urban Development may des3 ignate nominated areas as renewal communities

4 only during the 24-month period beginning on

5 the first day of the first month following the

6 month in which the regulations described in

7 subparagraph (A) are prescribed.

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

9 of Housing and Urban Development shall not

10 make any designation of a nominated area as a

11 renewal community under paragraph (2)

12 unless—

13 ‘‘(i) the local governments and the

14 States in which the nominated area is lo15 cated have the authority—

16 ‘‘(I) to nominate such area for

17 designation as a renewal community,

18 ‘‘(II) to make the State and local

19 commitments described in subsection

20 (d), and

21 ‘‘(III) to provide assurances sat22 isfactory to the Secretary of Housing

23 and Urban Development that such

24 commitments will be fulfilled,
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1 ‘‘(ii) a nomination regarding such

2 area is submitted in such a manner and in

3 such form, and contains such information,

4 as the Secretary of Housing and Urban

5 Development shall by regulation prescribe,

6 and

7 ‘‘(iii) the Secretary of Housing and

8 Urban Development determines that any

9 information furnished is reasonably accu10 rate.

11 ‘‘(5) NOMINATION PROCESS FOR INDIAN RES12 ERVATIONS.—For purposes of this subchapter, in

13 the case of a nominated area on an Indian reserva14 tion, the reservation governing body (as determined

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

16 being both the State and local governments with re17 spect to such area.

18 ‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF19 FECT.—

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

21 as a renewal community shall remain in effect dur22 ing the period beginning on January 1, 2001, and

23 ending on the earliest of—

24 ‘‘(A) December 31, 2009,
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1 ‘‘(B) the termination date designated by

2 the State and local governments in their nomi3 nation, or

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

5 and Urban Development revokes such designa6 tion.

7 ‘‘(2) REVOCATION OF DESIGNATION.—The Sec8 retary of Housing and Urban Development may re9 voke the designation under this section of an area if

10 such Secretary determines that the local government

11 or the State in which the area is located—

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

13 area, or

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

15 or fails to make progress in achieving, the State

16 or local commitments, respectively, described in

17 subsection (d).

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

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

20 and Urban Development may designate a nominated

21 area as a renewal community under subsection (a)

22 only if the area meets the requirements of para23 graphs (2) and (3) of this subsection.

24 ‘‘(2) AREA REQUIREMENTS.—A nominated area

25 meets the requirements of this paragraph if—
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1 ‘‘(A) the area is within the jurisdiction of

2 one or more local governments,

3 ‘‘(B) the boundary of the area is contin4 uous, and

5 ‘‘(C) the area—

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

7 ‘‘(I) 4,000 if any portion of such

8 area (other than a rural area de9 scribed in subsection (a)(2)(B)(i)) is

10 located within a metropolitan statis11 tical area (within the meaning of sec12 tion 143(k)(2)(B)) which has a popu13 lation of 50,000 or greater, or

14 ‘‘(II) 1,000 in any other case, or

15 ‘‘(ii) is entirely within an Indian res16 ervation (as determined by the Secretary of

17 the Interior).

18 ‘‘(3) ELIGIBILITY REQUIREMENTS.—A nomi19 nated area meets the requirements of this paragraph

20 if the State and the local governments in which it

21 is located certify (and the Secretary of Housing and

22 Urban Development, after such review of supporting

23 data as he deems appropriate, accepts such certifi24 cation) that—
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1 ‘‘(A) the area is one of pervasive poverty,

2 unemployment, and general distress,

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

4 as determined by the most recent available

data, was at least 11 5 ⁄2 times the national unem6 ployment rate for the period to which such data

7 relate,

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

9 census tract within the nominated area is at

10 least 20 percent, and

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

12 70 percent of the households living in the area

13 have incomes below 80 percent of the median

14 income of households within the jurisdiction of

15 the local government (determined in the same

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

17 Housing and Community Development Act of

18 1974).

19 ‘‘(4) CONSIDERATION OF HIGH INCIDENCE OF

20 CRIME.—The Secretary of Housing and Urban De21 velopment shall take into account, in selecting nomi22 nated areas for designation as renewal communities

23 under this section, the extent to which such areas

24 have a high incidence of crime.
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1 ‘‘(5) CONSIDERATION OF COMMUNITIES IDENTI2 FIED IN GAO STUDY.—The Secretary of Housing

3 and Urban Development shall take into account, in

4 selecting nominated areas for designation as renewal

5 communities under this section, if the area has cen6 sus tracts identified in the May 12, 1998, report of

7 the Government Accounting Office regarding the

8 identification of economically distressed areas.

9 ‘‘(d) REQUIRED STATE AND LOCAL COMMIT10 MENTS.—

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

12 and Urban Development may designate any nomi13 nated area as a renewal community under subsection

14 (a) only if—

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

16 which the area is located agree in writing that,

17 during any period during which the area is a

18 renewal community, such governments will fol19 low a specified course of action which meets the

20 requirements of paragraph (2) and is designed

21 to reduce the various burdens borne by employ22 ers or employees in such area, and

23 ‘‘(B) the economic growth promotion re24 quirements of paragraph (3) are met.

25 ‘‘(2) COURSE OF ACTION.—
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1 ‘‘(A) IN GENERAL.—A course of action

2 meets the requirements of this paragraph if

3 such course of action is a written document,

4 signed by a State (or local government) and

5 neighborhood organizations, which evidences a

6 partnership between such State or government

7 and community-based organizations and which

8 commits each signatory to specific and measur9 able goals, actions, and timetables. Such course

10 of action shall include at least 4 of the fol11 lowing:

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

13 applying within the renewal community.

14 ‘‘(ii) An increase in the level of effi15 ciency of local services within the renewal

16 community.

17 ‘‘(iii) Crime reduction strategies, such

18 as crime prevention (including the provi19 sion of such services by nongovernmental

20 entities).

21 ‘‘(iv) Actions to reduce, remove, sim22 plify, or streamline governmental require23 ments applying within the renewal commu24 nity.
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1 ‘‘(v) Involvement in the program by

2 private entities, organizations, neighbor3 hood organizations, and community

4 groups, particularly those in the renewal

5 community, including a commitment from

6 such private entities to provide jobs and

7 job training for, and technical, financial, or

8 other assistance to, employers, employees,

9 and residents from the renewal community.

10 ‘‘(vi) The gift (or sale at below fair

11 market value) of surplus real property

12 (such as land, homes, and commercial or

13 industrial structures) in the renewal com14 munity to neighborhood organizations,

15 community development corporations, or

16 private companies.

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

18 For purposes of this section, in evaluating the

19 course of action agreed to by any State or local

20 government, the Secretary of Housing and

21 Urban Development shall take into account the

22 past efforts of such State or local government

23 in reducing the various burdens borne by em24 ployers and employees in the area involved.
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1 ‘‘(3) ECONOMIC GROWTH PROMOTION REQUIRE2 MENTS.—The economic growth promotion require3 ments of this paragraph are met with respect to a

4 nominated area if the local government and the

5 State in which such area is located certify in writing

6 that such government and State (respectively) have

7 repealed, will not enforce, or will reduce within the

8 area at least 4 of the following if such area is des9 ignated as a renewal community:

10 ‘‘(A) Licensing requirements for occupa11 tions that do not ordinarily require a profes12 sional degree.

13 ‘‘(B) Zoning restrictions on home-based

14 businesses which do not create a public nui15 sance.

16 ‘‘(C) Permit requirements for street ven17 dors who do not create a public nuisance.

18 ‘‘(D) Zoning or other restrictions that im19 pede the formation of schools or child care cen20 ters.

21 ‘‘(E) Franchises or other restrictions on

22 competition for businesses providing public

23 services, including taxicabs, jitneys, cable tele24 vision, or trash hauling.
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1 This paragraph shall not apply to the extent that

2 such regulation of businesses and occupations is nec3 essary for and well-tailored to the protection of

4 health and safety.

5 ‘‘(e) COORDINATION WITH TREATMENT OF EM6 POWERMENT ZONES AND ENTERPRISE COMMUNITIES.—

7 ‘‘(1) IN GENERAL.—For purposes of this title,

8 the designation under section 1391 of any area as

9 an empowerment zone or enterprise community shall

10 cease to be in effect as of the date that any portion

11 of such area is designated as a renewal community.

12 ‘‘(2) SPECIAL RULE FOR WAGE CREDIT.—For

13 purposes of section 1400H (relating to renewal com14 munity employment credit)—

15 ‘‘(A) there shall not be taken into account

16 wages taken into account under section 1396

17 (without regard to section 1400H), and

18 ‘‘(B) the $15,000 amount in section

19 1396(c) shall (in applying section 1400H) be

20 reduced for any calendar year by the amount of

21 wages paid or incurred during such year which

22 are taken into account in determining the credit

23 under section 1396 (without regard to section

24 1400H).
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1 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur2 poses of this subchapter—

3 ‘‘(1) GOVERNMENTS.—If more than one govern4 ment seeks to nominate an area as a renewal com5 munity, any reference to, or requirement of, this sec6 tion shall apply to all such governments.

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

8 government’ means—

9 ‘‘(A) any county, city, town, township, par10 ish, village, or other general purpose political

11 subdivision of a State, and

12 ‘‘(B) any combination of political subdivi13 sions described in subparagraph (A) recognized

14 by the Secretary of Housing and Urban Devel15 opment.

16 ‘‘(3) STATE.—The term ‘State’ means the sev17 eral States.

18 ‘‘(4) APPLICATION OF RULES RELATING TO

19 CENSUS TRACTS.—The rules of sections 1392(b)(4)

20 shall apply.

21 ‘‘(5) CENSUS DATA.—Population and poverty

22 rate shall be determined by using 1990 census data.

23 ‘‘PART II—RENEWAL COMMUNITY CAPITAL GAIN;

24 RENEWAL COMMUNITY BUSINESS

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

‘‘Sec. 1400G. Renewal community business defined.
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1 ‘‘SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.

2 ‘‘(a) GENERAL RULE.—Gross income does not in3 clude any qualified capital gain recognized on the sale or

4 exchange of a qualified community asset held for more

5 than 5 years.

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

7 of this section—

8 ‘‘(1) IN GENERAL.—The term ‘qualified com9 munity asset’ means—

10 ‘‘(A) any qualified community stock,

11 ‘‘(B) any qualified community partnership

12 interest, and

13 ‘‘(C) any qualified community business

14 property.

15 ‘‘(2) QUALIFIED COMMUNITY STOCK.—

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

17 subparagraph (B), the term ‘qualified commu18 nity stock’ means any stock in a domestic cor19 poration if—

20 ‘‘(i) such stock is acquired by the tax21 payer after December 31, 2000, and before

22 January 1, 2010, at its original issue (di23 rectly or through an underwriter) from the

24 corporation solely in exchange for cash,

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

26 issued, such corporation was a renewal
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1 community business (or, in the case of a

2 new corporation, such corporation was

3 being organized for purposes of being a re4 newal community business), and

5 ‘‘(iii) during substantially all of the

6 taxpayer’s holding period for such stock,

7 such corporation qualified as a renewal

8 community business.

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

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

11 purposes of this paragraph.

12 ‘‘(3) QUALIFIED COMMUNITY PARTNERSHIP IN13 TEREST.—The term ‘qualified community partner14 ship interest’ means any capital or profits interest in

15 a domestic partnership if—

16 ‘‘(A) such interest is acquired by the tax17 payer after December 31, 2000, and before

18 January 1, 2010, from the partnership solely in

19 exchange for cash,

20 ‘‘(B) as of the time such interest was ac21 quired, such partnership was a renewal commu22 nity business (or, in the case of a new partner23 ship, such partnership was being organized for

24 purposes of being a renewal community busi25 ness), and
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1 ‘‘(C) during substantially all of the tax2 payer’s holding period for such interest, such

3 partnership qualified as a renewal community

4 business.

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

6 apply for purposes of this paragraph.

7 ‘‘(4) QUALIFIED COMMUNITY BUSINESS PROP8 ERTY.—

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

10 community business property’ means tangible

11 property if—

12 ‘‘(i) such property was acquired by

13 the taxpayer by purchase (as defined in

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

15 2000, and before January 1, 2010,

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

17 in the renewal community commences with

18 the taxpayer, and

19 ‘‘(iii) during substantially all of the

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

22 property was in a renewal community busi23 ness of the taxpayer.

24 ‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM25 PROVEMENTS.—The requirements of clauses (i)
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1 and (ii) of subparagraph (A) shall be treated as

2 satisfied with respect to—

3 ‘‘(i) property which is substantially

4 improved by the taxpayer before January

5 1, 2010, and

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

7 is located.

8 The determination of whether a property is sub9 stantially improved shall be made under clause

10 (ii) of section 1400B(b)(4)(B), except that ‘De11 cember 31, 2000’ shall be substituted for ‘De12 cember 31, 1997’ in such clause.

13 ‘‘(c) QUALIFIED CAPITAL GAIN.—For purposes of

14 this section—

15 ‘‘(1) IN GENERAL.—Except as otherwise pro16 vided in this subsection, the term ‘qualified capital

17 gain‘ means any gain recognized on the sale or ex18 change of—

19 ‘‘(A) a capital asset, or

20 ‘‘(B) property used in the trade or busi21 ness (as defined in section 1231(b).

22 ‘‘(2) GAIN BEFORE 2001 OR AFTER 2014 NOT

23 QUALIFIED.—The term ‘qualified capital gain’ shall

24 not include any gain attributable to periods before

25 January 1, 2001, or after December 31, 2014.
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1 ‘‘(3) CERTAIN RULES TO APPLY.—Rules similar

2 to the rules of paragraphs (3), (4), and (5) of sec3 tion 1400B(e) shall apply for purposes of this sub4 section.

5 ‘‘(d) CERTAIN RULES TO APPLY.—For purposes of

6 this section, rules similar to the rules of paragraphs (5),

7 (6), and (7) of subsection (b), and subsections (f ) and

8 (g), of section 1400B shall apply; except that for such pur9 poses section 1400B(g)(2) shall be applied by substituting

10 ‘January 1, 2001’ for ‘January 1, 1998’ and ‘December

11 31, 2014’ for ‘December 31, 2007’.

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

13 ‘‘For purposes of this subchapter, the term ‘renewal

14 community business’ means any entity or proprietorship

15 which would be a qualified business entity or qualified pro16 prietorship under section 1397C if references to renewal

17 communities were substituted for references to empower18 ment zones in such section.

19 ‘‘PART III—ADDITIONAL INCENTIVES

‘‘Sec. 1400H. Renewal community employment credit.

‘‘Sec. 1400I. Commercial revitalization deduction.

‘‘Sec. 1400J. Increase in expensing under section 179.

20 ‘‘SEC. 1400H. RENEWAL COMMUNITY EMPLOYMENT CREDIT.

21 ‘‘(a) IN GENERAL.—Subject to the modification in

22 subsection (b), a renewal community shall be treated as

23 an empowerment zone for purposes of section 1396.
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1 ‘‘(b) MODIFICATION.—In applying section 1396 with

2 respect to renewal communities, the applicable percentage

3 shall be—

4 ‘‘(1) 15 percent in the case of calendar years

5 2001, 2002, 2003, or 2004, and

6 ‘‘(2) 20 percent in the case of calendar years

7 after 2004 and before 2010.

8 ‘‘SEC. 1400I. COMMERCIAL REVITALIZATION DEDUCTION.

9 ‘‘(a) GENERAL RULE.—At the election of the tax10 payer, either—

11 ‘‘(1) one-half of any qualified revitalization ex12 penditures chargeable to capital account with respect

13 to any qualified revitalization building shall be allow14 able as a deduction for the taxable year in which the

15 building is placed in service, or

16 ‘‘(2) a deduction for all such expenditures shall

17 be allowable ratably over the 120-month period be18 ginning with the month in which the building is

19 placed in service.

20 ‘‘(b) QUALIFIED REVITALIZATION BUILDINGS AND

21 EXPENDITURES.—For purposes of this section—

22 ‘‘(1) QUALIFIED REVITALIZATION BUILDING.—

23 The term ‘qualified revitalization building’ means

24 any building (and its structural components) if—
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1 ‘‘(A) such building is located in a renewal

2 community and is placed in service after De3 cember 31, 2000,

4 ‘‘(B) a commercial revitalization deduction

5 amount is allocated to the building under sub6 section (d), and

7 ‘‘(C) depreciation is allowable with respect

8 to the building (without regard to this section).

9 ‘‘(2) QUALIFIED REVITALIZATION EXPENDI10 TURE.—

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

12 revitalization expenditure’ means any amount

13 properly chargeable to capital account—

14 ‘‘(i) for property for which deprecia15 tion is allowable under section 168 (with16 out regard to this section) and which is—

17 ‘‘(I) nonresidential real property,

18 or

19 ‘‘(II) an addition or improvement

20 to property described in subclause (I),

21 ‘‘(ii) in connection with the construc22 tion of any qualified revitalization building

23 which was not previously placed in service

24 or in connection with the substantial reha25 bilitation (within the meaning of section
26

•S 2779 IS

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

2 placed in service before the beginning of

3 such rehabilitation, and

4 ‘‘(iii) for land (including land which is

5 functionally related to such property and

6 subordinate thereto).

7 ‘‘(B) DOLLAR LIMITATION.—The aggre8 gate amount which may be treated as qualified

9 revitalization expenditures with respect to any

10 qualified revitalization building for any taxable

11 year shall not exceed the excess of—

12 ‘‘(i) $10,000,000, reduced by

13 ‘‘(ii) any such expenditures with re14 spect to the building taken into account by

15 the taxpayer or any predecessor in deter16 mining the amount of the deduction under

17 this section for all preceding taxable years.

18 ‘‘(C) CERTAIN EXPENDITURES NOT IN19 CLUDED.—The term ‘qualified revitalization ex20 penditure’ does not include—

21 ‘‘(i) ACQUISITION COSTS.—The costs

22 of acquiring any building or interest there23 in and any land in connection with such

24 building to the extent that such costs ex25 ceed 30 percent of the qualified revitaliza-
27

•S 2779 IS

1 tion expenditures determined without re2 gard to this clause.

3 ‘‘(ii) CREDITS.—Any expenditure

4 which the taxpayer may take into account

5 in computing any credit allowable under

6 this title unless the taxpayer elects to take

7 the expenditure into account only for pur8 poses of this section.

9 ‘‘(c) LIMITATION ON AGGREGATE EXPENDITURES

10 ALLOWABLE WITH RESPECT TO BUILDINGS LOCATED IN

11 A STATE.—

12 ‘‘(1) IN GENERAL.—The aggregate qualified re13 vitalization expenditures chargeable to capital ac14 count with respect to any building which may be

15 taken into account in determining the deduction

16 under this section with respect to such building shall

17 not exceed the commercial revitalization expenditure

18 amount allocated to such building under this sub19 section by the commercial revitalization agency.

20 Such allocation shall be made at the same time and

21 in the same manner as under paragraphs (1) and

22 (7) of section 42(h).

23 ‘‘(2) COMMERCIAL REVITALIZATION EXPENDI24 TURE AMOUNT FOR AGENCIES.—
28

•S 2779 IS

1 ‘‘(A) IN GENERAL.—The aggregate com2 mercial revitalization expenditure amount which

3 a commercial revitalization agency may allocate

4 for any calendar year is the amount of the

5 State commercial revitalization expenditure ceil6 ing determined under this paragraph for such

7 calendar year for such agency.

8 ‘‘(B) STATE COMMERCIAL REVITALIZATION

9 EXPENDITURE CEILING.—The State commercial

10 revitalization expenditure ceiling applicable to

11 any State—

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

13 and before 2010 is $12,000,000 for each

14 renewal community in the State, and

15 ‘‘(ii) for each calendar year thereafter

16 is zero.

17 ‘‘(C) COMMERCIAL REVITALIZATION AGEN18 CY.—For purposes of this section, the term

19 ‘commercial revitalization agency’ means any

20 agency authorized by a State to carry out this

21 section.

22 ‘‘(d) RESPONSIBILITIES OF COMMERCIAL REVITAL23 IZATION AGENCIES.—

24 ‘‘(1) PLANS FOR ALLOCATION.—Notwith25 standing any other provision of this section, the
29

•S 2779 IS

1 commercial revitalization deduction amount with re2 spect to any building shall be zero unless—

3 ‘‘(A) such amount was allocated pursuant

4 to a qualified allocation plan of the commercial

5 revitalization agency which is approved (in ac6 cordance with rules similar to the rules of sec7 tion 147(f)(2) (other than subparagraph (B)(ii)

8 thereof)) by the governmental unit of which

9 such agency is a part, and

10 ‘‘(B) such agency notifies the chief execu11 tive officer (or its equivalent) of the local juris12 diction within which the building is located of

13 such allocation and provides such individual a

14 reasonable opportunity to comment on the allo15 cation.

16 ‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur17 poses of this subsection, the term ‘qualified alloca18 tion plan’ means any plan—

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

20 be used to determine priorities of the commer21 cial revitalization agency which are appropriate

22 to local conditions,

23 ‘‘(B) which considers—

24 ‘‘(i) the degree to which a project con25 tributes to the implementation of a stra-
30

•S 2779 IS

1 tegic plan that is devised for a renewal

2 community through a citizen participation

3 process,

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

5 permanent, full-time employment by reason

6 of any project, and

7 ‘‘(iii) the active involvement of resi8 dents and nonprofit groups within the re9 newal community, and

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

11 agency (or its agent) will follow in monitoring

12 compliance with this section.

13 ‘‘(e) SPECIAL RULES.—

14 ‘‘(1) DEDUCTION IN LIEU OF DEPRECIATION.—

15 The deduction provided by this section for qualified

16 revitalization expenditures shall—

17 ‘‘(A) with respect to the deduction deter18 mined under subsection (a)(1), be in lieu of any

19 depreciation deduction otherwise allowable on

account of 1 20 ⁄2 of such expenditures, and

21 ‘‘(B) with respect to the deduction deter22 mined under subsection (a)(2), be in lieu of any

23 depreciation deduction otherwise allowable on

24 account of all of such expenditures.
31

•S 2779 IS

1 ‘‘(2) BASIS ADJUSTMENT, ETC.—For purposes

2 of sections 1016 and 1250, the deduction under this

3 section shall be treated in the same manner as a

4 depreciation deduction.

5 ‘‘(3) SUBSTANTIAL REHABILITATIONS TREATED

6 AS SEPARATE BUILDINGS.—A substantial rehabilita7 tion (within the meaning of section 47(c)(1)(C)) of

8 a building shall be treated as a separate building for

9 purposes of subsection (a).

10 ‘‘(4) CLARIFICATION OF ALLOWANCE OF DE11 DUCTION UNDER MINIMUM TAX.—Notwithstanding

12 section 56(a)(1), the deduction under this section

13 shall be allowed in determining alternative minimum

14 taxable income under section 55.

15 ‘‘(f) REGULATIONS.—For purposes of this section,

16 the Secretary shall, by regulations, provide for the applica17 tion of rules similar to the rules of section 49 and sub18 sections (a) and (b) of section 50.

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

20 any building placed in service after December 31, 2009.

21 ‘‘SEC. 1400J. INCREASE IN EXPENSING UNDER SECTION 179.

22 ‘‘(a) IN GENERAL.—For purposes of section

23 1397A—

24 ‘‘(1) a renewal community shall be treated as

25 an empowerment zone,
32

•S 2779 IS

1 ‘‘(2) a renewal community business shall be

2 treated as an empowerment zone business, and

3 ‘‘(3) qualified renewal property shall be treated

4 as enterprise zone property.

5 ‘‘(b) QUALIFIED RENEWAL PROPERTY.—For pur6 poses of this section—

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

8 property’ means any property to which section 168

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

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

11 taxpayer by purchase (as defined in section

12 179(d)(2)) after December 31, 2000, and be13 fore January 1, 2010, and

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

15 property (as defined in section 1397D) if ref16 erences to renewal communities were sub17 stituted for references to empowerment zones in

18 section 1397D.

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

20 subsections (a)(2) and (b) of section 1397D shall

21 apply for purposes of this section.’’.

22 (b) EXCEPTION FOR COMMERCIAL REVITALIZATION

23 DEDUCTION FROM PASSIVE LOSS RULES.—

24 (1) Paragraph (3) of section 469(i) is amended

25 by redesignating subparagraphs (C), (D), and (E) as
33

•S 2779 IS

1 subparagraphs (D), (E), and (F), respectively, and

2 by inserting after subparagraph (B) the following

3 new subparagraph:

4 ‘‘(C) EXCEPTION FOR COMMERCIAL REVI5 TALIZATION DEDUCTION.—Subparagraph (A)

6 shall not apply to any portion of the passive ac7 tivity loss for any taxable year which is attrib8 utable to the commercial revitalization deduc9 tion under section 1400I.’’.

10 (2) Subparagraph (E) of section 469(i)(3), as

11 redesignated by subparagraph (A), is amended to

12 read as follows:

13 ‘‘(E) ORDERING RULES TO REFLECT EX14 CEPTIONS AND SEPARATE PHASE-OUTS.—If

15 subparagraph (B), (C), or (D) applies for a tax16 able year, paragraph (1) shall be applied—

17 ‘‘(i) first to the portion of the passive

18 activity loss to which subparagraph (C)

19 does not apply,

20 ‘‘(ii) second to the portion of the pas21 sive activity credit to which subparagraph

22 (B) or (D) does not apply,

23 ‘‘(iii) third to the portion of such

24 credit to which subparagraph (B) applies,
34

•S 2779 IS

1 ‘‘(iv) fourth to the portion of such loss

2 to which subparagraph (C) applies, and

3 ‘‘(v) then to the portion of such credit

4 to which subparagraph (D) applies.’’.

5 (3)(A) Subparagraph (B) of section 469(i)(6) is

6 amended by striking ‘‘or’’ at the end of clause (i),

7 by striking the period at the end of clause (ii) and

8 inserting ‘‘, or’’, and by adding at the end the fol9 lowing new clause:

10 ‘‘(iii) any deduction under section

11 1400I (relating to commercial revitaliza12 tion deduction).’’.

13 (B) The heading for such subparagraph (B) is

14 amended by striking ‘‘OR REHABILITATION CREDIT’’

15 and inserting ‘‘, REHABILITATION CREDIT, OR COM16 MERCIAL REVITALIZATION DEDUCTION’’.

17 (c) CLERICAL AMENDMENT.—The table of sub18 chapters for chapter 1 is amended by adding at the end

19 the following new item:

‘‘Subchapter X. Renewal Communities.’’.
35

•S 2779 IS

1 SEC. 102. EXTENSION OF EXPENSING OF ENVIRONMENTAL

2 REMEDIATION COSTS TO RENEWAL COMMU3 NITIES; EXTENSION OF TERMINATION DATE

4 FOR RENEWAL COMMUNITIES AND EM5 POWERMENT ZONES.

6 (a) EXTENSION.—

7 (1) IN GENERAL.—Subparagraph (A) of section

8 198(c)(2) (defining targeted area) is amended by

9 striking ‘‘and’’ at the end of clause (iii), by striking

10 the period at the end of clause (iv) and inserting

11 ‘‘, and’’, and by adding at the end the following new

12 clause:

13 ‘‘(v) any renewal community (as de14 fined in section 1400E).’’.

15 (2) EFFECTIVE DATE.—The amendment made

16 by paragraph (1) shall apply to expenditures paid or

17 incurred after December 31, 2000.

18 (b) EXTENSION OF TERMINATION DATE.—Sub19 section (h) of section 198 is amended by inserting before

20 the period ‘‘(December 31, 2009, in the case of an em21 powerment zone or renewal community)’’.

22 SEC. 103. WORK OPPORTUNITY CREDIT FOR HIRING YOUTH

23 RESIDING IN RENEWAL COMMUNITIES.

24 (a) HIGH-RISK YOUTH.—Subparagraphs (A)(ii) and

25 (B) of section 51(d)(5) are each amended by striking ‘‘em26 powerment zone or enterprise community’’ and inserting
36

•S 2779 IS

1 ‘‘empowerment zone, enterprise community, or renewal

2 community’’.

3 (b) QUALIFIED SUMMER YOUTH EMPLOYEE.—

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

5 ‘‘empowerment zone or enterprise community’’ and insert6 ing ‘‘empowerment zone, enterprise community, or re7 newal community’’.

8 (c) HEADINGS.—Paragraphs (5)(B) and (7)(C) of

9 section 51(d) are each amended by inserting ‘‘OR COMMU10 NITY’’ in the heading after ‘‘ZONE’’.

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

12 this section shall apply to individuals who begin work for

13 the employer after December 31, 2000.

14 SEC. 104. EVALUATION AND REPORTING REQUIREMENTS.

15 Not later than the close of the fourth calendar year

16 after the year in which the Secretary of Housing and

17 Urban Development first designates an area as a renewal

18 community under section 1400E of the Internal Revenue

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

20 year thereafter, such Secretary shall prepare and submit

21 to the Congress a report on the effects of such designa22 tions in stimulating the creation of new jobs, particularly

23 for disadvantaged workers and long-term unemployed in24 dividuals, and promoting the revitalization of economically

25 distressed areas.
37

•S 2779 IS

1 SEC. 105. EXCLUSION OF EFFECTS OF THIS TITLE FROM

2 PAYGO SCORECARD.

3 Upon the enactment of this title, the Director of the

4 Office of Management and Budget shall not make any es5 timates of changes in receipts under section 252(d) of the

6 Balanced Budget and Emergency Deficit Control Act of

7 1985 resulting from the enactment of this title.

8 TITLE II—NEW MILLENNIUM

9 CLASSROOMS

10 SEC. 201. CREDIT FOR COMPUTER DONATIONS TO

11 SCHOOLS, SENIOR CENTERS, PUBLIC LIBRAR12 IES, AND OTHER TRAINING CENTERS.

13 (a) IN GENERAL.—Subpart D of part IV of sub14 chapter A of chapter 1 (relating to business related cred15 its) is amended by adding at the end the following new

16 section:

17 ‘‘SEC. 48D. CREDIT FOR COMPUTER DONATIONS TO

18 SCHOOLS, SENIOR CENTERS, PUBLIC LIBRAR19 IES, AND OTHER TRAINING CENTERS.

20 ‘‘(a) GENERAL RULE.—For purposes of section 38,

21 the computer donation credit determined under this sec22 tion is an amount equal to 50 percent of the qualified com23 puter contributions made by the taxpayer during the tax24 able year as determined after the application of section

25 170(e)(6)(A) to any entity located in—
38

•S 2779 IS

1 ‘‘(1) a renewal community designated under

2 section 1400E,

3 ‘‘(2) an empowerment zone or enterprise com4 munity designated under section 1391,

5 ‘‘(3) an Indian reservation (as defined in sec6 tion 168(j)(6)), or

7 ‘‘(4) a low-income community (as defined in

8 subsection (c).

9 ‘‘(b) QUALIFIED COMPUTER CONTRIBUTION.—For

10 purposes of this section, the term ‘qualified computer con11 tribution’ has the meaning given the term ‘qualified ele12 mentary or secondary educational contribution’ by section

13 170(e)(6)(B), except that—

14 ‘‘(1) clause (ii) thereof shall be applied—

15 ‘‘(A) by substituting ‘3 years’ for ‘2 years’,

16 ‘‘(B) by inserting ‘or reacquired’ after ‘ac17 quired’, and

18 ‘‘(C) by inserting ‘for the taxpayer’s own

19 use’ after ‘constructed by the taxpayer’,

20 ‘‘(2) clause (iii) thereof shall be applied by in21 serting ‘, the person from whom the donor re22 acquires the property,’ after ‘the donor’,

23 ‘‘(3) such term shall include the contribution of

24 a computer (as defined in section 168(i)(2)(B)(ii))

25 only if computer software (as defined in section
39

•S 2779 IS

1 197(e)(3)(B)) that serves as a computer operating

2 system has been lawfully installed in such computer,

3 ‘‘(4) notwithstanding clauses (i) and (iv) of sec4 tion 170(e)(6)(B), such term shall include the con5 tribution of computer technology or equipment to—

6 ‘‘(A) multipurpose senior centers (as de7 fined in section 102(35) of the Older Americans

8 Act of 1965 (42 U.S.C. 3002(35), as in effect

9 on the date of the enactment of the American

10 Community Renewal and New Markets Em11 powerment Act) described in section 501(c)(3)

12 and exempt from tax under section 501(a) to be

13 used by individuals who have attained 60 years

14 of age to improve job skills in computers,

15 ‘‘(B) a public library (within the meaning

16 of section 213(2)(A) of the Library Services

17 and Technology Act (20 U.S.C. 9122(2)(A), as

18 in effect on the date of the enactment of the

19 American Community Renewal and New Mar20 kets Empowerment Act) established and main21 tained by an entity described in section

22 170(c)(1), or

23 ‘‘(C) an organization exempt from tax

24 under section 501(a) which provides employ25 ment, vocational, and job-training services to
40

•S 2779 IS

1 individuals with barriers to employment, includ2 ing welfare recipients and individuals with dis3 abilities, and

4 ‘‘(5) such term shall only include contributions

5 which meet the minimum standards prescribed by

6 the Secretary by regulation, after consultation, at

7 the option of the Secretary, with the National Tele8 communications and Information Agency and any

9 other Federal agency with expertise in computer

10 technology.

11 ‘‘(c) LOW-INCOME COMMUNITY.—For purposes of

12 this section—

13 ‘‘(1) IN GENERAL.—The term ‘low-income com14 munity’ means any population census tract if—

15 ‘‘(A)(i) the poverty rate for such tract is at

16 least 20 percent, or

17 ‘‘(ii)(I) in the case of a tract not located

18 within a metropolitan area, the median family

19 income for such tract does not exceed 80 per20 cent of statewide median family income, or

21 ‘‘(II) in the case of a tract located within

22 a metropolitan area, the median family income

23 for such tract does not exceed 80 percent of the

24 greater of statewide median family income or
41

•S 2779 IS

1 the metropolitan area median family income,

2 and

3 ‘‘(B) the unemployment rate for such

4 tract, as determined by the most recent available data, was at least 11 5 ⁄2 times the national

6 unemployment rate for the period to which such

7 data relate.

8 ‘‘(2) AREAS NOT WITHIN CENSUS TRACTS.—In

9 the case of an area which is not tracted for popu10 lation census tracts, the equivalent county divisions

11 (as defined by the Bureau of the Census for pur12 poses of defining poverty areas) shall be used for

13 purposes of determining poverty rates, median fam14 ily income, and unemployment rates.

15 ‘‘(d) CERTAIN RULES MADE APPLICABLE.—For pur16 poses of this section, rules similar to the rules of para17 graphs (1) and (2) of section 41(f) shall apply.

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

19 taxable years beginning after December 31, 2009.’’.

20 (b) CURRENT YEAR BUSINESS CREDIT CALCULA21 TION.—Section 38(b) (relating to current year business

22 credit) is amended by striking ‘‘plus’’ at the end of para23 graph (11), by striking the period at the end of paragraph

24 (12) and inserting ‘‘, plus’’, and by adding at the end the

25 following:
42

•S 2779 IS

1 ‘‘(13) the computer donation credit determined

2 under section 45D(a).’’.

3 (c) DISALLOWANCE OF DEDUCTION BY AMOUNT OF

4 CREDIT.—Section 280C (relating to certain expenses for

5 which credits are allowable) is amended by adding at the

6 end the following:

7 ‘‘(d) CREDIT FOR COMPUTER DONATIONS.—No de8 duction shall be allowed for that portion of the qualified

9 computer contributions (as defined in section 45D(b))

10 made during the taxable year that is equal to the amount

11 of credit determined for the taxable year under section

12 45D(a). In the case of a corporation which is a member

13 of a controlled group of corporations (within the meaning

14 of section 52(a)) or a trade or business which is treated

15 as being under common control with other trades or busi16 nesses (within the meaning of section 52(b)), this sub17 section shall be applied under rules prescribed by the Sec18 retary similar to the rules applicable under subsections (a)

19 and (b) of section 52.’’.

20 (d) LIMITATION ON CARRYBACK.—Subsection (d) of

21 section 39 (relating to carryback and carryforward of un22 used credits) is amended by adding at the end the fol23 lowing:

24 ‘‘(9) NO CARRYBACK OF COMPUTER DONATION

25 CREDIT BEFORE EFFECTIVE DATE.—No amount of
43

•S 2779 IS

1 unused business credit available under section 45D

2 may be carried back to a taxable year beginning on

3 or before the date of the enactment of this para4 graph.’’.

5 (e) CLERICAL AMENDMENT.—The table of sections

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

7 is amended by inserting after the item relating to section

8 45C the following:

‘‘Sec. 45D. Credit for computer donations to schools, senior centers, public libraries, and other training centers.’’.

9 (f) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to contributions made in taxable

11 years beginning after December 31, 2000.

12 TITLE III—EXPANSION AND EX13 TENSION OF EMPOWERMENT

14 ZONE TAX INCENTIVES

15 SEC. 301. ADDITIONAL EMPOWERMENT ZONE DESIGNA16 TIONS.

17 Section 1391 is amended by adding at the end the

18 following new subsection:

19 ‘‘(h) ADDITIONAL DESIGNATIONS PERMITTED.—

20 ‘‘(1) IN GENERAL.—In addition to the areas

21 designated under subsections (a) and (g), the appro22 priate Secretaries may designate in the aggregate an

23 additional 9 nominated areas as empowerment zones

24 under this section, subject to the availability of eligi-
44

•S 2779 IS

1 ble nominated areas. Of that number, not more than

2 7 may be designated in urban areas and not more

3 than 2 may be designated in rural areas.

4 ‘‘(2) PERIOD DESIGNATIONS MAY BE MADE AND

5 TAKE EFFECT.—A designation may be made under

6 this subsection after the date of the enactment of

7 this subsection and before January 1, 2001. Subject

8 to subparagraphs (B) and (C) of subsection (d)(1),

9 such designations shall remain in effect during the

10 period beginning on January 1, 2001, and ending on

11 December 31, 2009.

12 ‘‘(3) MODIFICATIONS TO ELIGIBILITY CRITERIA,

13 ETC.—The rules of subsection (g)(3) shall apply to

14 designations under this subsection.

15 ‘‘(4) EMPOWERMENT ZONES WHICH BECOME

16 RENEWAL COMMUNITIES.—The number of areas

17 which may be designated as empowerment zones

18 under this subsection shall be increased by 1 for

19 each area which ceases to be an empowerment zone

20 by reason of section 1400E(e). Each additional area

21 designated by reason of the preceding sentence shall

22 have the same urban or rural character as the area

23 it is replacing.’’.
45

•S 2779 IS

1 SEC. 302. EXTENSION OF ENTERPRISE ZONE TREATMENT

2 THROUGH 2009.

3 Subparagraph (A) of section 1391(d)(1) (relating to

4 period for which designation is in effect) is amended to

5 read as follows:

6 ‘‘(A) December 31, 2009,’’.

7 SEC. 303. 20 PERCENT EMPLOYMENT CREDIT FOR ALL EM8 POWERMENT ZONES.

9 (a) 20 PERCENT CREDIT.—Subsection (b) of section

10 1396 (relating to empowerment zone employment credit)

11 is amended to read as follows:

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

13 this section, the applicable percentage is 20 percent.’’.

14 (b) ALL EMPOWERMENT ZONES ELIGIBLE FOR

15 CREDIT.—Section 1396 is amended by striking subsection

16 (e).

17 (c) CONFORMING AMENDMENT.—Subsection (d) of

18 section 1400 is amended to read as follows:

19 ‘‘(d) SPECIAL RULE FOR APPLICATION OF EMPLOY20 MENT CREDIT.—With respect to the DC Zone, section

21 1396(d)(1)(B) (relating to empowerment zone employ22 ment credit) shall be applied by substituting ‘the District

23 of Columbia’ for ‘such empowerment zone’.’’.

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

25 this section shall apply to wages paid or incurred after

26 December 31, 2000.
46

•S 2779 IS

1 SEC. 304. INCREASED EXPENSING UNDER SECTION 179.

2 (a) IN GENERAL.—Subparagraph (A) of section

3 1397A(a)(1) is amended by striking ‘‘$20,000’’ and in4 serting ‘‘$35,000’’.

5 (b) EXPENSING FOR PROPERTY USED IN DEVELOP6 ABLE SITES.—Section 1397A is amended by striking sub7 section (c).

8 (c) EFFECTIVE DATE.—The amendment made by

9 subsection (a) shall apply to taxable years beginning after

10 December 31, 2000.

11 SEC. 305. HIGHER LIMITS ON TAX-EXEMPT EMPOWERMENT

12 ZONE FACILITY BONDS.

13 (a) IN GENERAL.—Paragraph (3) of section 1394(f)

14 (relating to bonds for empowerment zones designated

15 under section 1391(g)) is amended to read as follows:

16 ‘‘(3) EMPOWERMENT ZONE FACILITY BOND.—

17 For purposes of this subsection, the term ‘empower18 ment zone facility bond’ means any bond which

19 would be described in subsection (a) if only em20 powerment zones were taken into account under sec21 tions 1397C and 1397D.’’ .

22 (b) CONFORMING AMENDMENTS.—

23 (1) Subsection (f) of section 1394 is amended

24 by striking ‘‘new empowerment zone facility bond’’

25 each place it appears and inserting ‘‘empowerment

26 zone facility bond’’.
47

•S 2779 IS

1 (2) The heading for such subsection is amended

2 to read as follows:

3 ‘‘(f) BONDS FOR EMPOWERMENT ZONES.—’’.

4 (3) Paragraph (1) of section 1394(c) is

5 amended—

6 (A) by striking ‘‘empowerment zone or’’ in

7 subparagraph (A), and

8 (B) by striking ‘‘empowerment zones and’’

9 in subparagraph (B).

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to obligations issued after Decem12 ber 31, 2000.

13 SEC. 306. NONRECOGNITION OF GAIN ON ROLLOVER OF

14 EMPOWERMENT ZONE INVESTMENTS.

15 (a) IN GENERAL.—Part III of subchapter U of chap16 ter 1 is amended—

17 (1) by redesignating subpart C as subpart D,

18 (2) by redesignating sections 1397B and 1397C

19 as sections 1397C and 1397D, respectively, and

20 (3) by inserting after subpart B the following

21 new subpart:

22 ‘‘Subpart C—Nonrecognition of Gain on Rollover of

23 Empowerment Zone Investments

‘‘Sec. 1397B. Nonrecognition of Gain on Rollover of Empowerment Zone Investments.
48

•S 2779 IS

1 ‘‘SEC. 1397B. NONRECOGNITION OF GAIN ON ROLLOVER OF

2 EMPOWERMENT ZONE INVESTMENTS.

3 ‘‘(a) NONRECOGNITION OF GAIN.—In the case of any

4 sale of a qualified empowerment zone asset held by the

5 taxpayer for more than 1 year and with respect to which

6 such taxpayer elects the application of this section, gain

7 from such sale shall be recognized only to the extent that

8 the amount realized on such sale exceeds—

9 ‘‘(1) the cost of any qualified empowerment

10 zone asset (with respect to the same zone as the

11 asset sold) purchased by the taxpayer during the 60-

12 day period beginning on the date of such sale, re13 duced by

14 ‘‘(2) any portion of such cost previously taken

15 into account under this section.

16 This section shall apply only to gain which is qualified cap17 ital gain.

18 ‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur19 poses of this section—

20 ‘‘(1) QUALIFIED EMPOWERMENT ZONE

21 ASSET.—

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

23 empowerment zone asset’ means any property

24 which would be a qualified community asset (as

25 defined in section 1400F) if in section 1400F—
49

•S 2779 IS

1 ‘‘(i) references to empowerment zones

2 were substituted for references to renewal

3 communities, and

4 ‘‘(ii) references to enterprise zone

5 businesses (as defined in section 1397C)

6 were substituted for references to renewal

7 community businesses.

8 ‘‘(B) TREATMENT OF DC ZONE.—

For termination of rollover with respect to the

District of Columbia Enterprise Zone for property

acquired after December 31, 2002, see section

1400(f).

9 ‘‘(2) QUALIFIED CAPITAL GAIN.—

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

11 provided in this paragraph, the term ‘qualified

12 capital gain‘ means any gain from the sale or

13 exchange of—

14 ‘‘(i) a capital asset, or

15 ‘‘(ii) property used in the trade or

16 business (as defined in section 1231(b)).

17 ‘‘(B) CERTAIN RULES TO APPLY.—Rules

18 similar to the rules of paragraphs (3) and (4)

19 of section 1400B(e) shall apply for purposes of

20 this subsection.

21 ‘‘(3) PURCHASE.—A taxpayer shall be treated

22 as having purchased any property if, but for para23 graph (4), the unadjusted basis of such property in
50

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1 the hands of the taxpayer would be its cost (within

2 the meaning of section 1012).

3 ‘‘(4) BASIS ADJUSTMENTS.—If gain from any

4 sale is not recognized by reason of subsection (a),

5 such gain shall be applied to reduce (in the order ac6 quired) the basis for determining gain or loss of any

7 qualified empowerment zone asset which is pur8 chased by the taxpayer during the 60-day period de9 scribed in subsection (a). This paragraph shall not

10 apply for purposes of section 1202.

11 ‘‘(5) HOLDING PERIOD.—For purposes of deter12 mining whether the nonrecognition of gain under

13 subsection (a) applies to any qualified empowerment

14 zone asset which is sold—

15 ‘‘(A) the taxpayer’s holding period for such

16 asset and the asset referred to in subsection

17 (a)(1) shall be determined without regard to

18 section 1223, and

19 ‘‘(B) only the first year of the taxpayer’s

20 holding period for the asset referred to in sub21 section (a)(1) shall be taken into account for

22 purposes of paragraphs (2)(A)(iii), (3)(C), and

23 (4)(A)(iii) of section 1400F(b).’’

24 (b) CONFORMING AMENDMENTS.—
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1 (1) Paragraph (23) of section 1016(a) is

2 amended—

3 (A) by striking ‘‘or 1045’’ and inserting

4 ‘‘1045, or 1397B’’, and

5 (B) by striking ‘‘or 1045(b)(4)’’ and in6 serting ‘‘1045(b)(4), or 1397B(b)(4)’’.

7 (2) Paragraph (15) of section 1223 is amended

8 to read as follows:

9 ‘‘(15) Except for purposes of sections

10 1202(a)(2), 1202(c)(2)(A), 1400B(b), and

11 1400F(b), in determining the period for which the

12 taxpayer has held property the acquisition of which

13 resulted under section 1045 or 1397B in the non14 recognition of any part of the gain realized on the

15 sale of other property, there shall be included the pe16 riod for which such other property has been held as

17 of the date of such sale.’’

18 (3) Paragraph (2) of section 1394(b) is

19 amended—

20 (A) by striking ‘‘section 1397C’’ and in21 serting ‘‘section 1397D’’, and

22 (B) by striking ‘‘section 1397C(a)(2)’’ and

23 inserting ‘‘section 1397D(a)(2)’’.

24 (4) Paragraph (3) of section 1394(b) is

25 amended—
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•S 2779 IS

1 (A) by striking ‘‘section 1397B’’ each place

2 it appears and inserting ‘‘section 1397C’’, and

3 (B) by striking ‘‘section 1397B(d)’’ and in4 serting ‘‘section 1397C(d)’’.

5 (5) Sections 1400(e) and 1400B(c) are each

6 amended by striking ‘‘section 1397B’’ each place it

7 appears and inserting ‘‘section 1397C’’.

8 (6) The table of subparts for part III of sub9 chapter U of chapter 1 is amended by striking the

10 last item and inserting the following new items:

‘‘Subpart C. Nonrecognition of gain on rollover of empowerment

zone investments.

‘‘Subpart D. General provisions.’’

11 (7) The table of sections for subpart D of such

12 part III is amended to read as follows:

‘‘Sec. 1397C. Enterprise zone business defined.

‘‘Sec. 1397D. Qualified zone property defined.’’

13 (c) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to qualified empowerment zone as15 sets acquired after December 31, 2000.

16 SEC. 307. INCREASED EXCLUSION OF GAIN ON SALE OF EM17 POWERMENT ZONE STOCK.

18 (a) IN GENERAL.—Subsection (a) of section 1202 is

19 amended to read as follows:

20 ‘‘(a) EXCLUSION.—

21 ‘‘(1) IN GENERAL.—In the case of a taxpayer

22 other than a corporation, gross income shall not in-
53

•S 2779 IS

1 clude 50 percent of any gain from the sale or ex2 change of qualified small business stock held for

3 more than 5 years.

4 ‘‘(2) EMPOWERMENT ZONE BUSINESSES.—

5 ‘‘(A) IN GENERAL.—In the case of quali6 fied small business stock acquired after the date

7 of the enactment of this paragraph in a cor8 poration which is a qualified business entity (as

9 defined in section 1397C(b)) during substan10 tially all of the taxpayer’s holding period for

11 such stock, paragraph (1) shall be applied by

12 substituting ‘60 percent’ for ‘50 percent’.

13 ‘‘(B) CERTAIN RULES TO APPLY.—Rules

14 similar to the rules of paragraphs (5) and (7)

15 of section 1400B(b) shall apply for purposes of

16 this paragraph.

17 ‘‘(C) GAIN AFTER 2014 NOT QUALIFIED.—

18 Subparagraph (A) shall not apply to gain at19 tributable to periods after December 31,

20 2014.’’.

21 (b) CONFORMING AMENDMENT.—Paragraph (8) of

22 section 1(h) is amended by striking ‘‘means’’ and all that

23 follows and inserting ‘‘means the excess of—

24 ‘‘(A) the gain which would be excluded

25 from gross income under section 1202 but for
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•S 2779 IS

1 the percentage limitation in section 1202(a),

2 over

3 ‘‘(B) the gain excluded from gross income

4 under section 1202.’’.

5 (c) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to stock acquired after December

7 31, 2000.

8 SEC. 308. FUNDING ENTITLEMENT FOR ROUND II EM9 POWERMENT ZONES.

10 (a) IN GENERAL.—

11 (1) ENTITLEMENT.—Section 2007(a)(1) of the

12 Social Security Act (42 U.S.C. 1397f(a)(1)) is

13 amended—

14 (A) in subparagraph (A), by striking ‘‘in

15 the State; and’’ and inserting ‘‘that is in the

16 State and is designated pursuant to section

17 1391(b) of the Internal Revenue Code of

18 1986;’’;

19 (B) by adding after subparagraph (B) the

20 following:

21 ‘‘(C)(i) 8 grants under this section for

22 each qualified empowerment zone that is in an

23 urban area in the State and is designated pur24 suant to section 1391(g) of such Code; and
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1 ‘‘(ii) 8 grants under this section for each

2 qualified empowerment zone that is in a rural

3 area in the State and is designated pursuant to

4 section 1391(g) of such Code;

5 ‘‘(D) 8 grants under this section for each

6 qualified enterprise community that is in the

7 State and is designated pursuant to section 766

8 of the Agriculture, Rural Development, Food

9 and Drug Administration, and Related Agencies

10 Appropriations Act, 1999; and

11 ‘‘(E) 1 grant under this section for each

12 strategic planning community.’’.

13 (2) AMOUNT OF GRANTS.—Section 2007(a)(2)

14 of such Act (42 U.S.C. 1397f(a)(2)) is amended—

15 (A) in the heading of subparagraph (A), by

16 inserting ‘‘ORIGINAL’’ before ‘‘EMPOWER17 MENT’’;

18 (B) in subparagraph (A), in the matter

19 preceding clause (i), by inserting ‘‘referred to in

20 paragraph (1)(A)’’ after ‘‘empowerment zone’’;

21 (C) by redesignating subparagraph (C) as

22 subparagraph (F); and

23 (D) by inserting after subparagraph (B)

24 the following:
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•S 2779 IS

1 ‘‘(C) ADDITIONAL EMPOWERMENT

2 GRANTS.—The amount of the grant to a State

3 under this section for a qualified empowerment

4 zone referred to in paragraph (1)(C) shall be—

5 ‘‘(i) if the zone is in an urban area,

6 $11,675,000 for each of fiscal years 2001

7 through 2008; or

8 ‘‘(ii) if the zone is in a rural area,

9 $4,600,000 for each of fiscal years 2001

10 through 2008,

11 multiplied by the proportion of the population

12 of the zone that resides in the State.

13 ‘‘(D) ADDITIONAL ENTERPRISE COMMU14 NITY GRANTS.—The amount of the grant to a

15 State under this section for a qualified enter16 prise community referred to in paragraph

17 (1)(D) shall be $2,750,000, multiplied by the

18 proportion of the population of the community

19 that resides in the State.

20 ‘‘(E) STRATEGIC PLANNING COMMUNITY

21 GRANTS.—The amount of the grant to a State

22 under this section for a strategic planning com23 munity shall be $3,000,000, multiplied by the

24 proportion of the population of the community

25 that resides in the State.’’.
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1 (3) TIMING OF GRANTS.—Section 2007(a)(3) of

2 such Act (42 U.S.C. 1397f(a)(3)) is amended—

3 (A) in the heading of subparagraph (A), by

4 inserting ‘‘ORIGINAL’’ before ‘‘QUALIFIED’’;

5 (B) in subparagraph (A), in the matter

6 preceding clause (i), by inserting ‘‘referred to in

7 paragraph (1)(A)’’ after ‘‘empowerment zone’’;

8 and

9 (C) by adding after subparagraph (B) the

10 following:

11 ‘‘(C) ADDITIONAL QUALIFIED EMPOWER12 MENT ZONES.—With respect to each qualified

13 empowerment zone referred to in paragraph

14 (1)(C), the Secretary shall make 1 grant under

15 this section to the State in which the zone lies,

16 on the first day of fiscal year 2001 and of each

17 of the 7 succeeding fiscal years.

18 ‘‘(D) ADDITIONAL QUALIFIED ENTERPRISE

19 COMMUNITIES.—With respect to each qualified

20 enterprise community referred to in paragraph

21 (1)(D), the Secretary shall make 1 grant under

22 this section to the State in which the commu23 nity lies on the first day of fiscal year 2001 and

24 of each of the 7 succeeding fiscal years.
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1 ‘‘(E) STRATEGIC PLANNING COMMU2 NITIES.—With respect to each strategic plan3 ning community, the Secretary shall make 1

4 grant under this section to the State in which

5 the community is located, on October 1, 2001.’’.

6 (4) FUNDING.—Section 2007(a)(4) of such Act

7 (42 U.S.C. 1397f(a)(4)) is amended—

8 (A) by striking ‘‘(4) FUNDING.—

9 $1,000,000’’ and inserting the following:

10 ‘‘(4) FUNDING.—

11 ‘‘(A) ORIGINAL GRANTS.—$1,000,000’’;

12 (B) by inserting ‘‘for empowerment zones

13 and enterprise communities described in sub14 paragraphs (A) and (B) of paragraph (1)’’ be15 fore the period; and

16 (C) by adding after and below the end the

17 following:

18 ‘‘(B) ADDITIONAL EMPOWERMENT ZONE

19 GRANTS.—$1,585,000,000 shall be made avail20 able to the Secretary for grants under this sec21 tion for empowerment zones referred to in para22 graph (1)(C).

23 ‘‘(C) ADDITIONAL ENTERPRISE COMMU24 NITY GRANTS.—$55,000,000 shall be made

25 available to the Secretary for grants under this
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•S 2779 IS

1 section for enterprise communities referred to

2 in paragraph (1)(D).

3 ‘‘(D) STRATEGIC PLANNING COMMUNITY

4 GRANTS.—$45,000,000 shall be made available

5 to the Secretary for grants under this section

6 for strategic planning communities.’’.

7 (5) DIRECT FUNDING FOR INDIAN TRIBES.—

8 Section 2007(a) of such Act (42 U.S.C. 1397f(a)) is

9 amended by adding at the end the following:

10 ‘‘(5) DIRECT FUNDING FOR INDIAN TRIBES.—

11 ‘‘(A) IN GENERAL.—The Secretary may

12 make a grant under this section directly to the

13 governing body of an Indian tribe if—

14 ‘‘(i) the tribe is identified in the stra15 tegic plan of a qualified empowerment zone

16 or qualified enterprise community as the

17 entity that assumes sole or primary re18 sponsibility for carrying out activities and

19 projects under the grant; and

20 ‘‘(ii) the grant is to be used for activi21 ties and projects that are—

22 ‘‘(I) included in the strategic

23 plan of the qualified empowerment

24 zone or qualified enterprise commu25 nity, consistent with this section; and
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1 ‘‘(II) approved by the Secretary

2 of Agriculture, in the case of a quali3 fied empowerment zone or qualified

4 enterprise community in a rural area,

5 or the Secretary of Housing and

6 Urban Development, in the case of a

7 qualified empowerment zone or quali8 fied enterprise community in an urban

9 area.

10 ‘‘(B) RULES OF INTERPRETATION.—

11 ‘‘(i) If grant under this section is

12 made directly to the governing body of an

13 Indian tribe under subparagraph (A), the

14 tribe shall be considered a State for pur15 poses of this section.

16 ‘‘(ii) This subparagraph shall not be

17 construed as making applicable to this sec18 tion the provisions of the Indian Self-De19 termination and Education Assistance

20 Act.’’.

21 (6) DEFINITIONS.—

22 (A) QUALIFIED ENTERPRISE COMMU23 NITY.—Section 2007(f)(2)(A) of such Act (42

24 U.S.C. 1397f(f)(2)(A)) is amended by inserting

25 ‘‘or pursuant to section 766 of the Agriculture,
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•S 2779 IS

1 Rural Development, Food and Drug Adminis2 tration, and Related Agencies Appropriations

3 Act, 1999’’ before the semicolon.

4 (B) STRATEGIC PLAN.—Section 2007(f)(3)

5 of such Act (42 U.S.C. 1397f(f)(3)) is amended

6 by inserting ‘‘or under section 766 of the Agri7 culture, Rural Development, Food and Drug

8 Administration, and Related Agencies Appro9 priations Act, 1999’’ before the period.

10 (C) STRATEGIC PLANNING COMMUNITY.—

11 Section 2007(f) of such Act (42 U.S.C.

12 1397f(f)) is amended by adding at the end the

13 following:

14 ‘‘(7) STRATEGIC PLANNING COMMUNITY.—The

15 term ‘strategic planning community’ means a re16 spondent to the Notice Inviting Applications at 63

17 Federal Register 19162 (April 16, 1998) whose ap18 plication was ranked 16th through 30th in the com19 petition that concluded in December 1998.’’.

20 (D) INDIAN TRIBE.—Section 2007(f) of

21 such Act (42 U.S.C. 1397f(f)), as amended by

22 subparagraph (C), is amended by adding at the

23 end the following:

24 ‘‘(8) INDIAN TRIBE.—The term ‘Indian tribe’

25 means any Indian tribe, band, nation, or other orga-
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1 nized group or community, including any Alaska Na2 tive village or regional or village corporation as de3 fined in or established pursuant to the Alaska Na4 tive Claims Settlement Act, which is recognized as

5 eligible for the special programs and services pro6 vided by the United States to Indians because of

7 their status as Indians.’’.

8 (b) USE OF GRANT FUNDS.—

9 (1) REVOLVING LOAN ACTIVITIES.—Section

10 2007(b) of the Social Security Act (42 U.S.C.

11 1397f(b)) is amended by adding at the end the fol12 lowing:

13 ‘‘(5) REVOLVING LOAN ACTIVITIES.—

14 ‘‘(A) IN GENERAL.—In order to assist dis15 advantaged adults and youths in achieving and

16 maintaining economic self-support, a State may

17 use amounts paid under this section to fund re18 volving loan funds or similar arrangements for

19 the purpose of making loans to residents, insti20 tutions, organizations, or businesses that hire

21 disadvantaged adults and youths.

22 ‘‘(B) RULES FOR DISBURSEMENT.—

23 Amounts to be used as described in subpara24 graph (A) shall be disbursed by the Secretary,

25 consistent with the provisions of the Cash Man-
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1 agement Improvement Act and its implementing

2 rules, regulations, and procedures issued by the

3 Secretary of the Treasury—

4 ‘‘(i) in the case of a grant to a revolv5 ing loan fund—

6 ‘‘(I) pursuant to a written irrev7 ocable grant commitment; and

8 ‘‘(II) at such time or times as the

9 Secretary determines that the funds

10 are needed to meet the purposes of

11 such commitment; or

12 ‘‘(ii) in the case of a grant for pur13 poses of capitalizing an insured depository

14 institution (as defined in section 3 of the

15 Federal Deposit Insurance Act (12 U.S.C.

16 1813)) or an insured credit union (as de17 fined in section 101 of the Federal Credit

18 Union Act (12 U.S.C. 1742)), at such time

19 or times as the Secretary determines that

20 funds are needed for such capitalization.’’.

21 (2) USE AS NON-FEDERAL SHARE.—Section

22 2007(b) of such Act (42 U.S.C. 1397f(b)), as

23 amended by paragraph (1), is amended by adding at

24 the end the following:
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1 ‘‘(6) A State may use amounts received from a

2 grant under this section to pay all or part of the

3 non-Federal share of expenditures under any other

4 Federal grant to a local public or nonprofit private

5 agency or organization for activities consistent with

6 the purposes of this section, unless the statutory au7 thority for such other grant expressly prohibits

8 counting of Federal grant funds as such non-Federal

9 share.’’.

10 (c) ENVIRONMENTAL REVIEW.—Section 2007 of the

11 Social Security Act (42 U.S.C. 1397f) is amended—

12 (1) by redesignating subsection (f) as sub13 section (g); and

14 (2) by inserting after subsection (e) the fol15 lowing:

16 ‘‘(f) ENVIRONMENTAL REVIEW.—

17 ‘‘(1) EXECUTION OF RESPONSIBILITY BY THE

18 SECRETARY OF HOUSING AND URBAN DEVELOPMENT

19 AND THE SECRETARY OF AGRICULTURE.—

20 ‘‘(A) APPLICABILITY.—This subsection

21 shall apply to grants under this section in con22 nection with empowerment zones, enterprise

23 communities, and strategic planning commu24 nities (as defined in subsection (g)).
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1 ‘‘(B) EXECUTION OF RESPONSIBILITY.—

2 With respect to grants described in subpara3 graph (A), the Secretary of Housing and Urban

4 Development and the Secretary of Agriculture,

5 as appropriate, shall execute the responsibilities

6 under the National Environmental Policy Act of

7 1969 and other provisions of law that further

8 the purposes of such Act (as specified in regula9 tions issued by each such Secretary under para10 graph (2)(B)) that would otherwise apply to the

11 Secretary of Health and Human Services, and

12 may provide for the assumption of such respon13 sibilities in accordance with paragraphs (2)

14 through (5).

15 ‘‘(C) DEFINITION OF SECRETARY.—Except

16 as otherwise specified, in this subsection, the

17 term ‘Secretary’ means the Secretary of Hous18 ing and Urban Development for purposes of

19 grants under this section with respect to quali20 fied empowerment zones and qualified enter21 prise communities in urban areas, and strategic

22 planning areas, and the Secretary of Agri23 culture for purposes of grants under this sec24 tion with respect to qualified empowerment
66

•S 2779 IS

1 zones and qualified enterprise communities in

2 rural areas.

3 ‘‘(2) ASSUMPTION OF RESPONSIBILITY BY

4 STATES, UNITS OF GENERAL LOCAL GOVERNMENT,

5 AND INDIAN TRIBES.—

6 ‘‘(A) RELEASE OF FUNDS.—In order to as7 sure that the policies of the National Environ8 mental Policy Act of 1969 and other provisions

9 of law that further the purposes of such Act (as

10 specified in regulations issued by the Secretary

11 under subparagraph (B)) are most effectively

12 implemented in connection with the expenditure

13 of funds under this section, and to assure to the

14 public undiminished protection of the environ15 ment, the Secretary may, under such regula16 tions, in lieu of the environmental protection

17 procedures otherwise applicable, provide for the

18 release of funds for particular projects to recipi19 ents of assistance under this section if the

20 State, unit of general local government, or In21 dian tribe, as designated by the Secretary in ac22 cordance with regulations issued by the Sec23 retary under subparagraph (B), assumes all of

24 the responsibilities for environmental review,

25 decisionmaking, and action pursuant to such
67

•S 2779 IS

1 Act, and such other provisions of law as the

2 regulations of the Secretary specify, that would

3 otherwise apply to the Secretary were the Sec4 retary to undertake such projects as Federal

5 projects.

6 ‘‘(B) IMPLEMENTATION.—The Secretary of

7 Housing and Urban Development and the Sec8 retary of Agriculture shall each issue regula9 tions to carry out this subsection only after con10 sultation with the Council on Environmental

11 Quality. Such regulations shall—

12 ‘‘(i) specify any other provisions of

13 law that further the purposes of the Na14 tional Environmental Policy Act of 1969

15 and to which the assumption of responsi16 bility as provided in this subsection ap17 plies;

18 ‘‘(ii) provide eligibility criteria and

19 procedures for the designation of a State,

20 unit of general local government, or Indian

21 tribe to assume all of the responsibilities

22 described in subparagraph (A);

23 ‘‘(iii) specify the purposes for which

24 funds may be committed without regard to
68

•S 2779 IS

1 the procedure established under paragraph

2 (3);

3 ‘‘(iv) provide for monitoring of the

4 performance of environmental reviews

5 under this subsection;

6 ‘‘(v) in the discretion of the Secretary,

7 provide for the provision or facilitation of

8 training for such performance; and

9 ‘‘(vi) subject to the discretion of the

10 Secretary, provide for suspension or termi11 nation by the Secretary of the assumption

12 under subparagraph (A).

13 ‘‘(C) RESPONSIBILITIES OF STATE, UNIT

14 OF GENERAL LOCAL GOVERNMENT, OR INDIAN

15 TRIBE.—The Secretary’s duty under subpara16 graph (B) shall not be construed to limit any

17 responsibility assumed by a State, unit of gen18 eral local government, or Indian tribe with re19 spect to any particular release of funds under

20 subparagraph (A).

21 ‘‘(3) PROCEDURE.—The Secretary shall ap22 prove the release of funds for projects subject to the

23 procedures authorized by this subsection only if, not

24 less than 15 days prior to such approval and prior

25 to any commitment of funds to such projects (except
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•S 2779 IS

1 for such purposes specified in the regulations issued

2 under paragraph (2)(B)), the recipient submits to

3 the Secretary a request for such release accompanied

4 by a certification of the State, unit of general local

5 government, or Indian tribe that meets the require6 ments of paragraph (4). The approval by the Sec7 retary of any such certification shall be deemed to

8 satisfy the Secretary’s responsibilities pursuant to

9 paragraph (1) under the National Environmental

10 Policy Act of 1969 and such other provisions of law

11 as the regulations of the Secretary specify insofar as

12 those responsibilities relate to the releases of funds

13 for projects to be carried out pursuant thereto that

14 are covered by such certification.

15 ‘‘(4) CERTIFICATION.—A certification under the

16 procedures authorized by this subsection shall—

17 ‘‘(A) be in a form acceptable to the Sec18 retary;

19 ‘‘(B) be executed by the chief executive of20 ficer or other officer of the State, unit of gen21 eral local government, or Indian tribe who

22 qualifies under regulations of the Secretary;

23 ‘‘(C) specify that the State, unit of general

24 local government, or Indian tribe under this
70

•S 2779 IS

1 subsection has fully carried out its responsibil2 ities as described under paragraph (2); and

3 ‘‘(D) specify that the certifying officer—

4 ‘‘(i) consents to assume the status of

5 a responsible Federal official under the

6 National Environmental Policy Act of

7 1969 and each provision of law specified in

8 regulations issued by the Secretary insofar

9 as the provisions of such Act or other such

10 provisions of law apply pursuant to para11 graph (2); and

12 ‘‘(ii) is authorized and consents on be13 half of the State, unit of general local gov14 ernment, or Indian tribe and himself or

15 herself to accept the jurisdiction of the

16 Federal courts for the purpose of enforce17 ment of the responsibilities as such an offi18 cial.

19 ‘‘(5) APPROVAL BY STATES.—In cases in which

20 a unit of general local government carries out the re21 sponsibilities described in paragraph (2), the Sec22 retary may permit the State to perform those ac23 tions of the Secretary described in paragraph (3).

24 The performance of such actions by the State, where

25 permitted, shall be deemed to satisfy the responsibil-
71

•S 2779 IS

1 ities referred to in the second sentence of paragraph

2 (3).’’.

3 SEC. 309. CUSTOMS USER FEES.

4 Section 13031(j)(3) of the Consolidated Omnibus

5 Budget Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3))

6 is amended by striking ‘‘2003’’ and inserting ‘‘2008’’.

7 TITLE IV—FAITH BASED

8 SUBSTANCE ABUSE TREATMENT

9 SEC. 401. PREVENTION AND TREATMENT OF SUBSTANCE

10 ABUSE; SERVICES PROVIDED THROUGH RELI11 GIOUS ORGANIZATIONS.

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

13 290aa et seq.) is amended by adding at the end the fol14 lowing part:

15 ‘‘PART G—SERVICES PROVIDED THROUGH RELIGIOUS

16 ORGANIZATIONS

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

18 ‘‘(a) DESIGNATED PROGRAMS.—Subject to sub19 section (b), this part applies to discretionary and formula

20 grant programs administered by the Substance Abuse and

21 Mental Health Services Administration that make awards

22 of Federal financial assistance to public or private entities

23 for the purpose of carrying out activities to prevent or

24 treat substance abuse (in this part referred to as a ‘des25 ignated program’). Designated programs include the pro-
72

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1 gram under subpart II of part B of title XIX (relating

2 to formula grants to the States).

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

4 award of Federal financial assistance under a designated

5 program for a purpose other than the purpose specified

6 in subsection (a).

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

8 subject to subsection (b)):

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

10 means a public or private entity that has received an

11 award of financial assistance under a designated

12 program (whether the award is a designated direct

13 award or a designated subaward).

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

15 an award of financial assistance under a designated

16 program that is received directly from the Federal

17 Government.

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

19 award of financial assistance made by a non-Federal

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

21 Federal financial assistance provided through an

22 award under a designated program.

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

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

2 grant, cooperative agreement, contract, or

3 voucherized assistance.

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

5 individual who receives program services.

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

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

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

11 of financial assistance under a designated program.

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

13 nonprofit religious organization.

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

15 means—

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

17 program services in which—

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

20 used to pay for program services;

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

23 her according to rules specified by the des24 ignated award recipient; and
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•S 2779 IS

1 ‘‘(iii) the organization selected by the

2 beneficiary is reimbursed by the designated

3 award recipient for program services pro4 vided; or

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

7 program beneficiary determines the allocation

8 of program funds through his or her selection

9 of one service provider from among alternatives.

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

12 ‘‘(a) IN GENERAL.—

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

14 any other provision of law, a religious

15 organization—

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

17 ‘‘(B) may make designated subawards to

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

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

22 the use of voucherized assistance; and

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

24 a designated program, including a provider that

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

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

5 subaward, regardless of whether the entity provides

6 program services. Such term includes an entity

7 whose only participation in a designated program is

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

10 ‘‘(b) RELIGIOUS ORGANIZATIONS.—The purpose of

11 this section is to allow religious organizations to be pro12 gram participants on the same basis as any other non13 profit private provider without impairing the religious

14 character of such organizations, and without diminishing

15 the religious freedom of program beneficiaries.

16 ‘‘(c) NONDISCRIMINATION AGAINST RELIGIOUS OR17 GANIZATIONS.—

18 ‘‘(1) ELIGIBILITY AS PROGRAM PARTICI19 PANTS.—Religious organizations are eligible to be

20 program participants on the same basis as any other

21 nonprofit private organization as long as the pro22 grams are implemented consistent with the Estab23 lishment Clause of the First Amendment to the

24 United States Constitution. The Federal Govern25 ment may under the preceding sentence apply to re-
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1 ligious organizations the same eligibility conditions

2 in designated programs as are applied to any non3 profit private organization as long as the conditions

4 are consistent with the Free Exercise Clause of the

5 First Amendment.

6 ‘‘(2) NONDISCRIMINATION.—Neither the Fed7 eral Government nor a State receiving funds under

8 such programs shall discriminate against an organi9 zation that is or applies to be a program participant

10 on the basis that the organization has a religious

11 character.

12 ‘‘(d) RELIGIOUS CHARACTER AND FREEDOM.—

13 ‘‘(1) RELIGIOUS ORGANIZATIONS.—Except as

14 provided in this section, any religious organization

15 that is a program participant shall retain its inde16 pendence from Federal, State, and local government,

17 including such organization’s control over the defini18 tion, development, practice, and expression of its re19 ligious beliefs.

20 ‘‘(2) ADDITIONAL SAFEGUARDS.—Neither the

21 Federal Government nor a State shall require a reli22 gious organization to—

23 ‘‘(A) alter its form of internal governance;

24 or
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1 ‘‘(B) remove religious art, icons, scripture,

2 or other symbols;

3 in order to be a program participant.

4 ‘‘(e) EMPLOYMENT PRACTICES.—A religious organi5 zation’s exemption provided under section 702 of the Civil

6 Rights Act of 1964 regarding employment practices shall

7 not be affected by its participation in, or receipt of funds

8 from, a designated program.

9 ‘‘(f) RIGHTS OF PROGRAM BENEFICIARIES.—

10 ‘‘(1) IN GENERAL.—With respect to an indi11 vidual who is a program beneficiary or a prospective

12 program beneficiary, if the individual objects to a

13 program participant on the basis that the partici14 pant is a religious organization, the following ap15 plies:

16 ‘‘(A) If the organization received a des17 ignated direct award, the organization shall

18 refer the individual to an alternative entity that

19 provides program services and shall, to the ex20 tent practicable, provide appropriate follow-up

21 services.

22 ‘‘(B) If the organization received a des23 ignated subaward, the non-Federal entity that

24 made the subaward shall refer the individual to

25 an alternative entity that provides program
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1 services and shall, to the extent practicable,

2 provide appropriate follow-up services.

3 ‘‘(C) If the organization is providing serv4 ices pursuant to voucherized assistance, the

5 designated award recipient that operates the

6 voucherized assistance program shall refer the

7 individual to an alternative entity that provides

8 program services and shall, to the extent prac9 ticable, provide appropriate follow-up services.

10 ‘‘(D) If the local government involved

11 makes available a list of entities in the geo12 graphic area that provide program services, the

13 program participant with the responsibility for

14 making the referral under subparagraph (A),

15 (B), or (C), as the case may be, shall obtain a

16 copy of such list and consider the list in making

17 the referral (except that this subparagraph does

18 not apply if the program participant is the local

19 government or the State).

20 ‘‘(E) Referrals under any of subpara21 graphs (A) through (C) shall be made to alter22 native entities that will provide program serv23 ices the monetary value of which is not less

24 than the monetary value of the program serv-
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1 ices that the individual would have received

2 from the religious organization involved.

3 ‘‘(2) NONDISCRIMINATION.—Except as other4 wise provided in law, a religious organization that is

5 a program participant shall not in providing pro6 gram services discriminate against a program bene7 ficiary on the basis of religion or religious belief.

8 ‘‘(g) FISCAL ACCOUNTABILITY.—

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

15 funds provided under such awards.

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

17 award involved, if a religious organization that is a

18 program participant maintains the Federal funds in

19 a separate account from non-Federal funds, then

20 only the Federal funds shall be subject to audit.

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

22 this section by an agency, a religious organization may

23 obtain judicial review of agency action in accordance with

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

2 PURPOSES.

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

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

6 or instruction.

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

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

10 is redeemed or allocated.

11 ‘‘SEC. 584. FINANCIAL ASSISTANCE NOT AID TO INSTITU12 TIONS.

13 ‘‘Financial assistance under a designated program is

14 aid to the beneficiary, not to the organization providing

15 program services.

16 ‘‘SEC. 585. EDUCATIONAL REQUIREMENTS FOR PERSONNEL

17 IN DRUG TREATMENT PROGRAMS.

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

19 ‘‘(1) establishing formal educational qualifica20 tion for counselors and other personnel in drug

21 treatment programs may undermine the effective22 ness of such programs; and

23 ‘‘(2) such formal educational requirements for

24 counselors and other personnel may hinder or pre25 vent the provision of needed drug treatment services.
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1 ‘‘(b) LIMITATION ON EDUCATIONAL REQUIREMENTS

2 OF PERSONNEL.—

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

4 ‘‘(A) IN GENERAL.—If any State or local

5 government that is a program participant im6 poses formal educational qualifications on pro7 viders of program services, including religious

8 organizations, such State or local government

9 shall treat religious education and training of

10 personnel as having a critical and positive role

11 in the delivery of program services.

12 ‘‘(B) EDUCATION AND TRAINING ON PRE13 VENTION AND TREATMENT OF SUBSTANCE

14 ABUSE.—In applying to religious organizations

15 educational qualifications for personnel of such

16 organizations who provide program services, a

17 State or local government that is a program

18 participant shall, with respect to education and

19 training on preventing and treating substance

20 abuse, give credit for such education and train21 ing that is provided by religious organizations

22 equivalent to credit given for secular course

23 work that provides such education and training.

24 ‘‘(C) GENERAL EDUCATIONAL REQUIRE25 MENTS.—In applying to religious organizations
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1 educational qualifications for personnel of such

2 organizations who provide program services, a

3 State or local government that is a program

4 participant shall, if such qualifications include

5 course work that does not relate specifically to

6 preventing or treating substance abuse, give

7 credit for religious education equivalent to cred8 it given for secular course work.

9 ‘‘(2) RESTRICTION OF DISCRIMINATION RE10 QUIREMENTS..—

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

12 (1), a State or local government that is a pro13 gram participant may establish formal edu14 cational qualifications for personnel in organiza15 tions providing program services that contribute

16 to success in reducing drug use among program

17 beneficiaries.

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

19 waive the application of any educational quali20 fication imposed under subparagraph (A) for an

21 individual religious organization, if the Sec22 retary determines that—

23 ‘‘(i) the religious organization has a

24 record of prior successful drug treatment

25 for at least the preceding three years;
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1 ‘‘(ii) the educational qualifications

2 have effectively barred such religious orga3 nization from becoming a program pro4 vider;

5 ‘‘(iii) the organization has applied to

6 the Secretary to waive the qualifications;

7 and

8 ‘‘(iv) the State or local government

9 has failed to demonstrate empirically that

10 the educational qualifications in question

11 are necessary to the successful operation of

12 a drug treatment program.’’.

13 TITLE V—HOMEOWNERSHIP

14 SEC. 501. TRANSFER OF UNOCCUPIED AND SUBSTANDARD

15 HUD-HELD HOUSING TO LOCAL GOVERN16 MENTS AND COMMUNITY DEVELOPMENT

17 CORPORATIONS.

18 Section 204 of the Departments of Veterans Affairs

19 and Housing and Urban Development, and Independent

20 Agencies Appropriations Act, 1997 (12 U.S.C. 1715z–

21 11a) is amended—

22 (1) by striking ‘‘FLEXIBLE AUTHORITY.—’’ and

23 inserting ‘‘DISPOSITION OF HUD-OWNED PROP24 ERTIES. (a) FLEXIBLE AUTHORITY FOR MULTI25 FAMILY PROJECTS.—’’; and
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1 (2) by adding at the end the following new sub2 section:

3 ‘‘(b) TRANSFER OF UNOCCUPIED AND SUBSTANDARD

4 HOUSING TO LOCAL GOVERNMENTS AND COMMUNITY

5 DEVELOPMENT CORPORATIONS.—

6 ‘‘(1) TRANSFER AUTHORITY.—Notwithstanding

7 the authority under subsection (a) and the last sen8 tence of section 204(g) of the National Housing Act

9 (12 U.S.C. 1710(g)), the Secretary of Housing and

10 Urban Development shall transfer ownership of any

11 qualified HUD property, subject to the requirements

12 of this section, to a unit of general local government

13 having jurisdiction for the area in which the prop14 erty is located or to a community development cor15 poration which operates within such a unit of gen16 eral local government in accordance with this sub17 section, but only to the extent that units of general

18 local government and community development cor19 porations consent to transfer and the Secretary de20 termines that such transfer is practicable.

21 ‘‘(2) QUALIFIED HUD PROPERTIES.—For pur22 poses of this subsection, the term ‘qualified HUD

23 property’ means any property for which, as of the

24 date that notification of the property is first made

25 under paragraph (3)(B), not less than 6 months
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1 have elapsed since the later of the date that the

2 property was acquired by the Secretary or the date

3 that the property was determined to be unoccupied

4 or substandard, that is owned by the Secretary and

5 is—

6 ‘‘(A) an unoccupied multifamily housing

7 project;

8 ‘‘(B) a substandard multifamily housing

9 project; or

10 ‘‘(C) an unoccupied single family property

11 that—

12 ‘‘(i) has been determined by the Sec13 retary not to be an eligible asset under sec14 tion 204(h) of the National Housing Act

15 (12 U.S.C. 1710(h)); or

16 ‘‘(ii) is an eligible asset under such

17 section 204(h), but—

18 ‘‘(I) is not subject to a specific

19 sale agreement under such section;

20 and

21 ‘‘(II) has been determined by the

22 Secretary to be inappropriate for con23 tinued inclusion in the program under

24 such section 204(h) pursuant to para25 graph (10) of such section.
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1 ‘‘(3) TIMING.—The Secretary shall establish

2 procedures that provide for—

3 ‘‘(A) time deadlines for transfers under

4 this subsection;

5 ‘‘(B) notification to units of general local

6 government and community development cor7 porations of qualified HUD properties in their

8 jurisdictions;

9 ‘‘(C) such units and corporations to ex10 press interest in the transfer under this sub11 section of such properties;

12 ‘‘(D) a right of first refusal for transfer of

13 qualified HUD properties to units of general

14 local government and community development

15 corporations, under which—

16 ‘‘(i) the Secretary shall establish a pe17 riod during which the Secretary may not

18 transfer such properties except to such

19 units and corporations;

20 ‘‘(ii) the Secretary shall offer qualified

21 HUD properties that are single family

22 properties for purchase by units of general

23 local government at a cost of $1 for each

24 property, but only to the extent that the

25 costs to the Federal Government of dis-
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1 posal at such price do not exceed the costs

2 to the Federal Government of disposing of

3 property subject to the procedures for sin4 gle family property established by the Sec5 retary pursuant to the authority under the

6 last sentence of section 204(g) of the Na7 tional Housing Act (12 U.S.C. 1710(g));

8 ‘‘(iii) the Secretary may accept an

9 offer to purchase a property made by a

10 community development corporation only if

11 the offer provides for purchase on a cost

12 recovery basis; and

13 ‘‘(iv) the Secretary shall accept an

14 offer to purchase such a property that is

15 made during such period by such a unit or

16 corporation and that complies with the re17 quirements of this paragraph;

18 ‘‘(E) a written explanation, to any unit of

19 general local government or community develop20 ment corporation making an offer to purchase

21 a qualified HUD property under this subsection

22 that is not accepted, of the reason that such

23 offer was not acceptable.

24 ‘‘(4) OTHER DISPOSITION.—With respect to

25 any qualified HUD property, if the Secretary does
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1 not receive an acceptable offer to purchase the prop2 erty pursuant to the procedure established under

3 paragraph (3), the Secretary shall dispose of the

4 property to the unit of general local government in

5 which property is located or to community develop6 ment corporations located in such unit of general

7 local government on a negotiated, competitive bid, or

8 other basis, on such terms as the Secretary deems

9 appropriate.

10 ‘‘(5) SATISFACTION OF INDEBTEDNESS.—Be11 fore transferring ownership of any qualified HUD

12 property pursuant to this subsection, the Secretary

13 shall satisfy any indebtedness incurred in connection

14 with the property to be transferred, by canceling the

15 indebtedness.

16 ‘‘(6) DETERMINATION OF STATUS OF PROP17 ERTIES.—To ensure compliance with the require18 ments of this subsection, the Secretary shall take the

19 following actions:

20 ‘‘(A) UPON ENACTMENT.—Upon the enact21 ment of this subsection, the Secretary shall

22 promptly assess each residential property owned

23 by the Secretary to determine whether such

24 property is a qualified HUD property.
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1 ‘‘(B) UPON ACQUISITION.—Upon acquiring

2 any residential property, the Secretary shall

3 promptly determine whether the property is a

4 qualified HUD property.

5 ‘‘(C) UPDATES.—The Secretary shall peri6 odically reassess the residential properties

7 owned by the Secretary to determine whether

8 any such properties have become qualified

9 HUD properties.

10 ‘‘(7) TENANT LEASES.—This subsection shall

11 not affect the terms or the enforceability of any con12 tract or lease entered into with respect to any resi13 dential property before the date that such property

14 becomes a qualified HUD property.

15 ‘‘(8) USE OF PROPERTY.—Property transferred

16 under this subsection shall be used only for appro17 priate neighborhood revitalization efforts, including

18 homeownership, rental units, commercial space, and

19 parks, consistent with local zoning regulations, local

20 building codes, and subdivision regulations and re21 strictions of record.

22 ‘‘(9) INAPPLICABILITY TO PROPERTIES MADE

23 AVAILABLE FOR HOMELESS.—Notwithstanding any

24 other provision of this subsection, this subsection

25 shall not apply to any properties that the Secretary
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1 determines are to be made available for use by the

2 homeless pursuant to subpart E of part 291 of title

3 24, Code of Federal Regulations, during the period

4 that the properties are so available.

5 ‘‘(10) PROTECTION OF EXISTING CONTRACTS.—

6 This subsection may not be construed to alter, af7 fect, or annul any legally binding obligations entered

8 into with respect to a qualified HUD property before

9 the property becomes a qualified HUD property.

10 ‘‘(11) DEFINITIONS.—For purposes of this sub11 section, the following definitions shall apply:

12 ‘‘(A) COMMUNITY DEVELOPMENT COR13 PORATION.—The term ‘community development

14 corporation’ means a nonprofit organization

15 whose primary purpose is to promote commu16 nity development by providing housing opportu17 nities for low-income families.

18 ‘‘(B) COST RECOVERY BASIS.—The term

19 ‘cost recovery basis’ means, with respect to any

20 sale of a residential property by the Secretary,

21 that the purchase price paid by the purchaser

22 is equal to or greater than the sum of (i) the

23 appraised value of the property, as determined

24 in accordance with such requirements as the

25 Secretary shall establish, and (ii) the costs in-
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1 curred by the Secretary in connection with such

2 property during the period beginning on the

3 date on which the Secretary acquires title to the

4 property and ending on the date on which the

5 sale is consummated.

6 ‘‘(C) MULTIFAMILY HOUSING PROJECT.—

7 The term ‘multifamily housing project’ has the

8 meaning given the term in section 203 of the

9 Housing and Community Development Amend10 ments of 1978.

11 ‘‘(D) RESIDENTIAL PROPERTY.—The term

12 ‘residential property’ means a property that is

13 a multifamily housing project or a single family

14 property.

15 ‘‘(E) SECRETARY.—The term ‘Secretary’

16 means the Secretary of Housing and Urban De17 velopment.

18 ‘‘(F) SEVERE PHYSICAL PROBLEMS.—The

19 term ‘severe physical problems’ means, with re20 spect to a dwelling unit, that the unit—

21 ‘‘(i) lacks hot or cold piped water, a

22 flush toilet, or both a bathtub and a show23 er in the unit, for the exclusive use of that

24 unit;
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1 ‘‘(ii) on not less than three separate

2 occasions during the preceding winter

3 months, was uncomfortably cold for a pe4 riod of more than 6 consecutive hours due

5 to a malfunction of the heating system for

6 the unit;

7 ‘‘(iii) has no functioning electrical

8 service, exposed wiring, any room in which

9 there is not a functioning electrical outlet,

10 or has experienced three or more blown

11 fuses or tripped circuit breakers during the

12 preceding 90-day period;

13 ‘‘(iv) is accessible through a public

14 hallway in which there are no working

15 light fixtures, loose or missing steps or

16 railings, and no elevator; or

17 ‘‘(v) has severe maintenance problems,

18 including water leaks involving the roof,

19 windows, doors, basement, or pipes or

20 plumbing fixtures, holes or open cracks in

21 walls or ceilings, severe paint peeling or

22 broken plaster, and signs of rodent infesta23 tion.
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1 ‘‘(G) SINGLE FAMILY PROPERTY.—The

2 term ‘single family property’ means a 1- to 4-

3 family residence.

4 ‘‘(H) SUBSTANDARD.—The term ‘sub5 standard’ means, with respect to a multifamily

6 housing project, that 25 percent or more of the

7 dwelling units in the project have severe phys8 ical problems.

9 ‘‘(I) UNIT OF GENERAL LOCAL GOVERN10 MENT.—The term ‘unit of general local govern11 ment’ has the meaning given such term in sec12 tion 102(a) of the Housing and Community De13 velopment Act of 1974.

14 ‘‘(J) UNOCCUPIED.—The term ‘unoccu15 pied’ means, with respect to a residential prop16 erty, that the unit of general local government

17 having jurisdiction over the area in which the

18 project is located has certified in writing that

19 the property is not inhabited.

20 ‘‘(12) REGULATIONS.—

21 ‘‘(A) INTERIM.—Not later than 30 days

22 after the date of the enactment of this sub23 section, the Secretary shall issue such interim

24 regulations as are necessary to carry out this

25 subsection.
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1 ‘‘(B) FINAL.—Not later than 60 days after

2 the date of the enactment of this subsection,

3 the Secretary shall issue such final regulations

4 as are necessary to carry out this subsection.’’.

5 SEC. 502. TRANSFER OF HUD ASSETS IN REVITALIZATION

6 AREAS.

7 In carrying out the program under section 204(h) of

8 the National Housing Act (12 U.S.C. 1710(h)), upon the

9 request of the chief executive officer of a county or the

10 government of appropriate jurisdiction and not later than

11 60 days after such request is made, the Secretary of Hous12 ing and Urban Development shall designate as a revital13 ization area all portions of such county that meet the cri14 teria for such designation under paragraph (3) of such

15 section.

16 SEC. 503. RISK-SHARING DEMONSTRATION.

17 Section 249 of the National Housing Act (12 U.S.C.

18 1715z–14) is amended—

19 (1) by striking the section heading and insert20 ing the following:

21 ‘‘RISK-SHARING DEMONSTRATION’’;

22 (2) by striking ‘‘reinsurance’’ each place such

23 term appears and insert ‘‘risk-sharing’’;

24 (3) in subsection (a)—
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1 (A) in the first sentence, by inserting ‘‘and

2 insured community development financial insti3 tutions’’ after ‘‘private mortgage insurers’’;

4 (B) in the second sentence—

5 (i) by striking ‘‘two’’ and inserting

6 ‘‘4’’; and

7 (ii) by striking ‘‘March 15, 1988’’ and

8 inserting ‘‘the expiration of the 5-year pe9 riod beginning on the date of the enact10 ment of the American Community Renewal

11 and New Markets Empowerment Act’’; and

12 (C) in the last sentence, by striking ‘‘10

13 percent’’ and inserting ‘‘20 percent’’;

14 (4) in subsection (b)—

15 (A) in the first sentence, by inserting ‘‘and

16 with insured community development financial

17 institutions’’ before the period at the end;

18 (B) in the first sentence, by striking

19 ‘‘which have been determined to be qualified in20 surers under section 302(b)(2)(C)’’;

21 (C) in the second sentence, by inserting

22 ‘‘and insured community development financial

23 institutions’’ after ‘‘private mortgage insurance

24 companies’’;
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1 (D) by striking paragraph (1) and insert2 ing the following new paragraph:

3 ‘‘(1) assume the first loss on any mortgage in4 sured pursuant to section 203(b), 234, or 245 that

5 covers a one- to four-family dwelling and is included

6 in the program under this section, up to the percent7 age of loss that is set forth in the risk-sharing con8 tract;’’; and

9 (E) in paragraph (2)—

10 (i) by striking ‘‘carry out (under ap11 propriate delegation) such’’ and inserting

12 ‘‘delegate underwriting,’’; and

13 (ii) by striking ‘‘function’’ and insert14 ing ‘‘functions’’;

15 (5) in subsection (c)—

16 (A) in the first sentence—

17 (i) by striking ‘‘of’’ the first place it

18 appears and insert ‘‘for’’;

19 (ii) by striking ‘‘insurance reserves’’

20 and inserting ‘‘loss reserves’’; and

21 (iii) by striking ‘‘such insurance’’ and

22 inserting ‘‘such reserves’’; and

23 (B) in the second sentence, by inserting

24 ‘‘or insured community development financial
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1 institution’’ after ‘‘private mortgage insurance

2 company’’;

3 (6) in subsection (d), by inserting ‘‘or insured

4 community development financial institution’’ after

5 ‘‘private mortgage insurance company’’; and

6 (7) by adding at the end the following new sub7 section:

8 ‘‘(e) INSURED COMMUNITY DEVELOPMENT FINAN9 CIAL INSTITUTIONS.—For purposes of this section, the

10 term ‘insured community development financial institu11 tion’ means a community development financial institu12 tion, as such term is defined in section 103 of Reigle Com13 munity Development and Regulatory Improvement Act of

14 1994 (12 U.S.C. 4702) that is an insured depository insti15 tution (as such term is defined in section 3 of the Federal

16 Deposit Insurance Act (12 U.S.C. 1813)) or an insured

17 credit union (as such term is defined in section 101 of

18 the Federal Credit Union Act (12 U.S.C. 1752)).’’.

19 TITLE VI—AMERICA’S PRIVATE

20 INVESTMENT COMPANIES

21 SEC. 601. SHORT TITLE.

22 This title may be cited as the ‘‘America’s Private In23 vestment Companies Act’’.

24 SEC. 602. FINDINGS AND PURPOSES.

25 (a) FINDINGS.—The Congress finds that—
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1 (1) people living in distressed areas, both urban

2 and rural, that are characterized by high levels of

3 joblessness, poverty, and low incomes have not bene4 fited adequately from the economic expansion experi5 enced by the Nation as a whole;

6 (2) unequal access to economic opportunities

7 continues to make the social costs of joblessness and

8 poverty to our Nation very high; and

9 (3) there are significant untapped markets in

10 our Nation, and many of these are in areas that are

11 underserved by institutions that can make equity

12 and credit investments.

13 (b) PURPOSES.—The purposes of this title are to—

14 (1) license private for profit community devel15 opment entities that will focus on making equity and

16 credit investments for large-scale business develop17 ments that benefit low-income communities;

18 (2) provide credit enhancement for those enti19 ties for use in low-income communities; and

20 (3) provide a vehicle under which the economic

21 and social returns on financial investments made

22 pursuant to this title may be available both to the

23 investors in these entities and to the residents of the

24 low-income communities.
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1 SEC. 603. DEFINITIONS.

2 As used in this title:

3 (1) ADMINISTRATOR.—The term ‘‘Adminis4 trator’’ means the Administrator of the Small Busi5 ness Administration.

6 (2) AGENCY.—The term ‘‘agency’’ has the

7 meaning given such term in section 551(1) of title

8 5, United States Code.

9 (3) APIC.—The term ‘‘APIC’’ means a busi10 ness entity that has been licensed under the terms

11 of this title as an America’s Private Investment

12 Company, and the license of which has not been re13 voked.

14 (4) COMMUNITY DEVELOPMENT ENTITY.—The

15 term ‘‘community development entity’’ means an en16 tity the primary mission of which is serving or pro17 viding investment capital for low-income commu18 nities or low-income persons and which maintains

19 accountability to residents of low-income commu20 nities.

21 (5) HUD.—The term ‘‘HUD’’ means the Sec22 retary of Housing and Urban Development or the

23 Department of Housing and Urban Development, as

24 the context requires.

25 (6) LICENSE.—The term ‘‘license’’ means a li26 cense issued by HUD as provided in section 604.
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1 (7) LOW-INCOME COMMUNITY.—The term ‘‘low2 income community’’ means—

3 (A) a census tract or tracts that have—

4 (i) a poverty rate of 20 percent or

5 greater, based on the most recent census

6 data; or

7 (ii) a median family income that does

8 not exceed 80 percent of the greater of (I)

9 the median family income for the metro10 politan area in which such census tract or

11 tracts are located, or (II) the median fam12 ily income for the State in which such cen13 sus tract or tracts are located; or

14 (B) a property that was located on a mili15 tary installation that was closed or realigned

16 pursuant to title II of the Defense Authoriza17 tion Amendments and Base Closure and Re18 alignment Act (Public Law 100–526; 10 U.S.C.

19 2687 note), the Defense Base Closure and Re20 alignment Act of 1990 (part A of title XXIX of

21 Public Law 101–510; 10 U.S.C. 2687 note),

22 section 2687 of title 10, United States Code, or

23 any other similar law enacted after the date of

24 the enactment of this Act that provides for clo25 sure or realignment of military installations.
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1 (8) LOW-INCOME PERSON.—The term ‘‘low-in2 come person’’ means a person who is a member of

3 a low-income family, as such term is defined in sec4 tion 104 of the Cranston-Gonzalez National Afford5 able Housing Act (42 U.S.C. 12704).

6 (9) PRIVATE EQUITY CAPITAL.—

7 (A) IN GENERAL.—The term ‘‘private eq8 uity capital’’—

9 (i) in the case of a corporate entity,

10 the paid-in capital and paid-in surplus of

11 the corporate entity;

12 (ii) in the case of a partnership entity,

13 the contributed capital of the partners of

14 the partnership entity;

15 (iii) in the case of a limited liability

16 company entity, the equity investment of

17 the members of the limited liability com18 pany entity; and

19 (iv) earnings from investments of the

20 entity that are not distributed to investors

21 and are available for reinvestment by the

22 entity.

23 (B) EXCLUSIONS.—Such term does not in24 clude any—
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1 (i) funds borrowed by an entity from

2 any source or obtained through the

3 issuance of leverage; except that this clause

4 may not be construed to exclude amounts

5 evidenced by a legally binding and irrev6 ocable investment commitment in the enti7 ty, or the use by an entity of a pledge of

8 such investment commitment to obtain

9 bridge financing from a private lender to

10 fund the entity’s activities on an interim

11 basis; or

12 (ii) funds obtained directly or indi13 rectly from any Federal, State, or local

14 government or any government agency, ex15 cept for—

16 (I) funds invested by an employee

17 welfare benefit plan or pension plan;

18 and

19 (II) credits against any Federal,

20 State, or local taxes.

21 (10) QUALIFIED ACTIVE BUSINESS.—The term

22 ‘‘qualified active business’’ means a business or

23 trade—

24 (A) that, at the time that an investment is

25 made in the business or trade, is deriving at
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1 least 50 percent of its gross income from the

2 conduct of trade or business activities in low-in3 come communities;

4 (B) a substantial portion of the use of the

5 tangible property of which is used within low6 income communities;

7 (C) a substantial portion of the services

8 that the employees of which perform are per9 formed in low-income communities; and

10 (D) less than 5 percent of the aggregate

11 unadjusted bases of the property of which is at12 tributable to certain financial property, as the

13 Secretary shall set forth in regulations, or in

14 collectibles, other than collectibles held pri15 marily for sale to customers.

16 (11) QUALIFIED DEBENTURE.—The term

17 ‘‘qualified debenture’’ means a debt instrument hav18 ing terms that meet the requirements established

19 pursuant to section 606(c)(1).

20 (12) QUALIFIED LOW-INCOME COMMUNITY IN21 VESTMENT.—The term ‘‘qualified low-income com22 munity investment’’ mean an equity investment in,

23 or a loan to, a qualified active business.
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1 (13) SECRETARY.—The term ‘‘Secretary’’

2 means the Secretary of Housing and Urban Develop3 ment, unless otherwise specified in this title.

4 SEC. 604. AUTHORIZATION.

5 (a) LICENSES.—The Secretary is authorized to li6 cense community development entities as America’s Pri7 vate Investment Companies, in accordance with the terms

8 of this title.

9 (b) REGULATIONS.—The Secretary shall regulate

10 APICs for compliance with sound financial management

11 practices, and the program and procedural goals of this

12 title and other related Acts, and other purposes as re13 quired or authorized by this title, or determined by the

14 Secretary. The Secretary shall issue such regulations as

15 are necessary to carry out the licensing and regulatory and

16 other duties under this title, and may issue notices and

17 other guidance or directives as the Secretary determines

18 are appropriate to carry out such duties.

19 (c) USE OF CREDIT SUBSIDY FOR LICENSES.—

20 (1) NUMBER OF LICENSES.—The number of

21 APICs licensed at any one time may not exceed—

22 (A) the number that may be supported by

23 the amount of budget authority appropriated in

24 accordance with section 504(b) of the Federal

25 Credit Reform Act of 1990 (2 U.S.C. 661c) for
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1 the cost (as such term is defined in section 502

2 of such Act) of the subsidy and the investment

3 strategies of such APICs; or

4 (B) to the extent the limitation under sec5 tion 605(e)(1) applies, the number authorized

6 under such section.

7 (2) USE OF ADDITIONAL CREDIT SUBSIDY.—

8 Subject to the limitation under paragraph (1), the

9 Secretary may use any budget authority available

10 after credit subsidy has been allocated for the APICs

11 initially licensed pursuant to section 605 as follows:

12 (A) ADDITIONAL LICENSES.—To license

13 additional APICs.

14 (B) CREDIT SUBSIDY INCREASES.—To in15 crease the credit subsidy allocated to an APIC

16 as an award for high performance under this

17 title, except that such increases may be made

18 only in accordance with the following require19 ments and limitations:

20 (i) TIMING.—An increase may only be

21 provided for an APIC that has been li22 censed for a period of not less than 2

23 years.

24 (ii) COMPETITION.—An increase may

25 only be provided for a fiscal year pursuant
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1 to a competition for such fiscal year among

2 APICs eligible for, and requesting, such an

3 increase. The competition shall be based

4 upon criteria that the Secretary shall es5 tablish, which shall include the financial

6 soundness and performance of the APICs,

7 as measured by achievement of the public

8 performance goals included in the APICs

9 statements required under section

10 605(a)(6) and audits conducted under sec11 tion 609(b)(2). Among the criteria estab12 lished by the Secretary to determine pri13 ority for selection under this section, the

14 Secretary shall include making investments

15 in and loans to qualified active businesses

16 in urban or rural areas that have been des17 ignated under subchapter U of Chapter 1

18 of the Internal Revenue Code of 1986 as

19 empowerment zones or enterprise commu20 nities.

21 (d) COOPERATION AND COORDINATION.—

22 (1) PROGRAM POLICIES.—The Secretary is au23 thorized to coordinate and cooperate, through memo24 randa of understanding, an APIC liaison committee,

25 or otherwise, with the Administrator, the Secretary
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1 of the Treasury, and other agencies in the discretion

2 of the Secretary, on implementation of this title, in3 cluding regulation, examination, and monitoring of

4 APICs under this title.

5 (2) FINANCIAL SOUNDNESS REQUIREMENTS.—

6 The Secretary shall consult with the Administrator

7 and the Secretary of the Treasury, and may consult

8 with such other heads of agencies as the Secretary

9 may consider appropriate, in establishing any regu10 lations, requirements, guidelines, or standards for fi11 nancial soundness or management practices of

12 APICs or entities applying for licensing as APICs.

13 In implementing and monitoring compliance with

14 any such regulations, requirements, guidelines, and

15 standards, the Secretary shall enter into such agree16 ments and memoranda of understanding with the

17 Administrator and the Secretary of the Treasury as

18 may be appropriate to provide for such officials to

19 provide any assistance that may be agreed to.

20 (3) OPERATIONS.—The Secretary may carry

21 out this title—

22 (A) directly, through agreements with

23 other Federal entities under section 1535 of

24 title 31, United States Code, or otherwise, or
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1 (B) indirectly, under contracts or agree2 ments, as the Secretary shall determine.

3 (e) FEES AND CHARGES FOR ADMINISTRATIVE

4 COSTS.—To the extent provided in appropriations Acts,

5 the Secretary is authorized to impose fees and charges for

6 application, review, licensing, and regulation, or other ac7 tions under this title, and to pay for the costs of such

8 activities from the fees and charges collected.

9 (f) GUARANTEE FEES.—The Secretary is authorized

10 to set and collect fees for loan guarantee commitments and

11 loan guarantees that the Secretary makes under this title.

12 (g) FUNDING.—

13 (1) AUTHORIZATION OF APPROPRIATIONS FOR

14 LOAN GUARANTEE COMMITMENTS.—For each of fis15 cal years 2000, 2001, 2002, 2003, and 2004, there

16 is authorized to be appropriated up to $36,000,000

17 for the cost (as such term is defined in section

18 502(5) of the Federal Credit Reform Act of 1990)

19 of annual loan guarantee commitments under this

20 title. Amounts appropriated under this paragraph

21 shall remain available until expended.

22 (2) AGGREGATE LOAN GUARANTEE COMMIT23 MENT LIMITATION.—The Secretary may make com24 mitments to guarantee loans only to the extent that

25 the total loan principal, any part of which is guaran-
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1 teed, will not exceed $1,000,000,000, unless another

2 such amount is specified in appropriation Acts for

3 any fiscal year.

4 (3) AUTHORIZATION OF APPROPRIATIONS FOR

5 ADMINISTRATIVE EXPENSES.—For each of the fiscal

6 years 2000, 2001, 2002, 2003, and 2004, there is

7 authorized to be appropriated $1,000,000 for admin8 istrative expenses for carrying out this title. The

9 Secretary may transfer amounts appropriated under

10 this paragraph to any appropriation account of

11 HUD or another agency, to carry out the program

12 under this title. Any agency to which the Secretary

13 may transfer amounts under this title is authorized

14 to accept such transferred amounts in any appro15 priation account of such agency.

16 SEC. 605. SELECTION OF APICS.

17 (a) ELIGIBLE APPLICANTS.—An entity shall be eligi18 ble to be selected for licensing under section 604 as an

19 APIC only if the entity submits an application in compli20 ance with the requirements established pursuant to sub21 section (b) and the entity meets or complies with the fol22 lowing requirements:

23 (1) ORGANIZATION.—The entity shall be a pri24 vate, for-profit entity that qualifies as a community

25 development entity for the purposes of the New Mar-
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1 kets Tax Credits, to the extent such credits are es2 tablished under Federal law.

3 (2) MINIMUM PRIVATE EQUITY CAPITAL.—The

4 amount of private equity capital reasonably available

5 to the entity, as determined by the Secretary, at the

6 time that a license is approved may not be less than

7 $25,000,000.

8 (3) QUALIFIED MANAGEMENT.—The manage9 ment of the entity shall, in the determination of the

10 Secretary, meet such standards as the Secretary

11 shall establish to ensure that the management of the

12 APIC is qualified, and has the financial expertise,

13 knowledge, experience, and capability necessary, to

14 make investments for community and economic de15 velopment in low-income communities.

16 (4) CONFLICT OF INTEREST.—The entity shall

17 demonstrate that, in accordance with sound financial

18 management practices, the entity is structured to

19 preclude financial conflict of interest between the

20 APIC and a manager or investor.

21 (5) INVESTMENT STRATEGY.—The entity shall

22 prepare and submit to the Secretary an investment

23 strategy that includes benchmarks for evaluation of

24 its progress, that includes an analysis of existing lo25 cally owned businesses in the communities in which
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1 the investments under the strategy will be made,

2 that prioritizes such businesses for investment op3 portunities, and that fulfills the specific public pur4 pose goals of the entity.

5 (6) STATEMENT OF PUBLIC PURPOSE GOALS.—

6 The entity shall prepare and submit to the Secretary

7 a statement of the public purpose goals of the entity,

8 which shall—

9 (A) set forth goals that shall promote com10 munity and economic development, which shall

11 include—

12 (i) making investments in low-income

13 communities that further economic devel14 opment objectives by targeting such invest15 ments in businesses or trades that comply

16 with the requirements under subpara17 graphs (A) through (C) of section 603(10)

18 relating to low-income communities in a

19 manner that benefits low-income persons;

20 (ii) creating jobs in low-income com21 munities for residents of such commu22 nities;

23 (iii) involving community-based orga24 nizations and residents in community de25 velopment activities;
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1 (iv) such other goals as the Secretary

2 shall specify; and

3 (v) such elements as the entity may

4 set forth to achieve specific public purpose

5 goals;

6 (B) include such other elements as the

7 Secretary shall specify; and

8 (C) include proposed measurements and

9 strategies for meeting the goals.

10 (7) COMPLIANCE WITH LAWS.—The entity shall

11 agree to comply with applicable laws, including Fed12 eral executive orders, Office of Management and

13 Budget circulars, and requirements of the Depart14 ment of the Treasury, and such operating and regu15 latory requirements as the Secretary may impose

16 from time to time.

17 (8) OTHER.—The entity shall satisfy any other

18 application requirements that the Secretary may im19 pose by regulation or Federal Register notice.

20 (b) COMPETITIONS.—The Secretary shall select eligi21 ble entities under subsection (a) to be licensed under sec22 tion 604 as APICs on the basis of competitions. The Sec23 retary shall announce each such competition by causing

24 a notice to be published in the Federal Register that in25 vites applications for licenses and sets forth the require-
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1 ments for application and such other terms of the competi2 tion not otherwise provided for, as determined by the Sec3 retary.

4 (c) SELECTION.—In competitions under subsection

5 (b), the Secretary shall select eligible entities under sub6 section (a) for licensing as APICs on the basis of—

7 (1) the extent to which the entity is expected to

8 achieve the goals of this title by meeting or exceed9 ing criteria established under subsection (d); and

10 (2) to the extent practicable and subject to the

11 existence of approvable applications, ensuring geo12 graphical diversity among the applicants selected

13 and diversity of APICs investment strategies, so that

14 urban and rural communities are both served, in the

15 determination of the Secretary, by the program

16 under this title.

17 (d) SELECTION CRITERIA.—The Secretary shall es18 tablish selection criteria for competitions under subsection

19 (b), which shall include the following criteria:

20 (1) CAPACITY.—

21 (A) MANAGEMENT.—The extent to which

22 the entity’s management has the quality, expe23 rience, and expertise to make and manage suc24 cessful investments for community and eco25 nomic development in low-income communities.
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1 (B) STATE AND LOCAL COOPERATION.—

2 The extent to which the entity demonstrates a

3 capacity to cooperate with States or units of

4 general local government and with community5 based organizations and residents of low-income

6 communities.

7 (2) INVESTMENT STRATEGY.—The quality of

8 the entity’s investment strategy submitted in accord9 ance with subsection (a)(5) and the extent to which

10 the investment strategy furthers the goals of this

11 title pursuant to paragraph (3) of this subsection.

12 (3) PUBLIC PURPOSE GOALS.—With respect to

13 the statement of public purpose goals of the entity

14 submitted in accordance with subsection (a)(6), and

15 the strategy and measurements included therein—

16 (A) the extent to which such goals promote

17 community and economic development;

18 (B) the extent to which such goals provide

19 for making qualified investments in low-income

20 communities that further economic development

21 objectives, such as—

22 (i) creating, within 2 years of the

23 completion of the initial such investment,

24 job opportunities, opportunities for owner25 ship, and other economic opportunities
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1 within a low-income community, both

2 short-term and of a longer duration;

3 (ii) improving the economic vitality of

4 a low-income community, including stimu5 lating other business development;

6 (iii) bringing new income into a low7 income community and assisting in the re8 vitalization of such community;

9 (iv) converting real property for the

10 purpose of creating a site for business in11 cubation and location, or business district

12 revitalization;

13 (v) enhancing economic competition,

14 including the advancement of technology;

15 (vi) rural development;

16 (vii) mitigating, rehabilitating, and

17 reusing real property considered subject to

18 the Solid Waste Disposal Act (42 U.S.C.

19 6901 et seq.; commonly referred to as the

20 Resource Conservation and Recovery Act)

21 or restoring coal mine-scarred land;

22 (viii) creation of local wealth through

23 investments in employee stock ownership

24 companies or resident-owned ventures; and
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1 (ix) any other objective that the Sec2 retary may establish to further the pur3 poses of this title;

4 (C) the quality of jobs to be created for

5 residents of low-income communities, taking

6 into consideration such factors as the payment

7 of higher wages, job security, employment bene8 fits, opportunity for advancement, and personal

9 asset building;

10 (D) the extent to which achievement of

11 such goals will involve community-based organi12 zations and residents in community develop13 ment activities; and

14 (E) the extent to which the investments re15 ferred to in subparagraph (B) are likely to ben16 efit existing small business in low-income com17 munities or will encourage the growth of small

18 business in such communities.

19 (4) OTHER.—Any other criteria that the Sec20 retary may establish to carry out the purposes of

21 this title.

22 (e) FIRST YEAR REQUIREMENTS.—

23 (1) NUMERICAL LIMITATION.—The number of

24 APICs may not, at any time during the 1-year pe-
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1 riod that begins upon the Secretary awarding the

2 first license for an APIC under this title, exceed 15.

3 (2) LIMITATION ON ALLOCATION OF AVAILABLE

4 CREDIT SUBSIDY.—Of the amount of budget author5 ity initially made available for allocation under this

6 title for APICs, the amount allocated for any single

7 APIC may not exceed 20 percent.

8 (3) NATIVE AMERICAN PRIVATE INVESTMENT

9 COMPANY.—Subject only to the absence of an ap10 provable application from an entity, during the 1-

11 year period referred to in paragraph (1), of the enti12 ties selected and licensed by the Secretary as APICs,

13 at least one shall be an entity that has as its pri14 mary purpose the making of qualified low-income

15 community investments in areas that are within In16 dian country (as such term is defined in section

17 1151 of title 18, United States Code) or within

18 lands that have status as Hawaiian home land under

19 section 204 of the Hawaiian Homes Commission

20 Act, 1920 (42 Stat. 108) or are acquired pursuant

21 to such Act. The Secretary may establish specific se22 lection criteria for applicants under this paragraph.

23 (f) COMMUNICATIONS BETWEEN HUD AND APPLI24 CANTS.—
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1 (1) IN GENERAL.—The Secretary shall set forth

2 in regulations the procedures under which HUD and

3 applicants for APIC licenses, and others, may com4 municate. Such regulations shall—

5 (A) specify by position the HUD officers

6 and employees who may communicate with such

7 applicants and others;

8 (B) permit HUD officers and employees to

9 request and discuss with the applicant and oth10 ers (such as banks or other credit or business

11 references, or potential investors, that the appli12 cant specifies in writing) any more detailed in13 formation that may be desirable to facilitate

14 HUD’s review of the applicant’s application;

15 (C) restrict HUD officers and employees

16 from revealing to any applicant—

17 (i) the fact or chances of award of a

18 license to such applicant, unless there has

19 been a public announcement of the results

20 of the competition; and

21 (ii) any information with respect to

22 any other applicant; and

23 (D) set forth requirements for making and

24 keeping records of any communications con25 ducted under this subsection, including require-
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•S 2779 IS

1 ments for making such records available to the

2 public after the award of licenses under an ini3 tial or subsequent notice, as appropriate, under

4 subsection (a).

5 (2) TIMING.—Regulations under this subsection

6 may be issued as interim rules for effect on or be7 fore the date of publication of the first notice under

8 subsection (a), and shall apply only with respect to

9 applications under such notice. Regulations to imple10 ment this subsection with respect to any notice after

11 the first such notice shall be subject to notice and

12 comment rulemaking.

13 (3) INAPPLICABILITY OF DEPARTMENT OF HUD

14 ACT PROVISION.—Section 12(e)(2) of the Depart15 ment of Housing and Urban Development Act (42

16 U.S.C. 3537a(e)(2)) is amended by inserting before

17 the period at the end the following: ‘‘or any license

18 provided under the America’s Private Investment

19 Companies Act’’.

20 SEC. 606. OPERATIONS OF APICS.

21 (a) POWERS AND AUTHORITIES.—

22 (1) IN GENERAL.—An APIC shall have any

23 powers or authorities that—
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1 (A) the APIC derives from the jurisdiction

2 in which it is organized, or that the APIC oth3 erwise has;

4 (B) may be conferred by a license under

5 this title; and

6 (C) the Secretary may prescribe by regula7 tion.

8 (2) NEW MARKET ASSISTANCE.—Nothing in

9 this title shall preclude an APIC or its investors

10 from receiving an allocation of New Market Tax

11 Credits (to the extent such credits are established

12 under Federal law) if the APIC satisfies any appli13 cable terms and conditions under the Internal Rev14 enue Code of 1986.

15 (b) INVESTMENT LIMITATIONS.—

16 (1) QUALIFIED LOW-INCOME COMMUNITY IN17 VESTMENTS.—Substantially all investments that an

18 APIC makes shall be qualified low-income commu19 nity investments if the investments are financed

20 with—

21 (A) amounts available from the proceeds of

22 the issuance of an APIC’s qualified debenture

23 guaranteed under this title;

24 (B) proceeds of the sale of obligations de25 scribed under subsection (c)(3)(C)(iii); or
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•S 2779 IS

1 (C) the use of private equity capital, as de2 termined by the Secretary, in an amount speci3 fied in the APIC’s license.

4 (2) SINGLE BUSINESS INVESTMENTS.—An

5 APIC shall not, as a matter of sound financial prac6 tice, invest in any one business an amount that ex7 ceeds an amount equal to 35 percent of the sum

8 of—

9 (A) the APIC’s private equity capital; plus

10 (B) an amount equal to the percentage

11 limit that the Secretary determines that an

12 APIC may have outstanding at any one time,

13 under subsection (c)(2)(A).

14 (c) BORROWING POWERS; QUALIFIED DEBEN15 TURES.—

16 (1) ISSUANCE.—An APIC may issue qualified

17 debentures. The Secretary shall, by regulation, speci18 fy the terms and requirements for debentures to be

19 considered qualified debentures for purposes of this

20 title, except that the term to maturity of any quali21 fied debenture may not exceed 21 years and each

22 qualified debenture shall bear interest during all or

23 any part of that time period at a rate or rates ap24 proved by the Secretary.
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•S 2779 IS

1 (2) LEVERAGE LIMITS.—In general, as a mat2 ter of sound financial management practices—

3 (A) the total amount of qualified deben4 tures that an APIC issues under this title that

5 an APIC may have outstanding at any one time

6 shall not exceed an amount equal to 200 per7 cent of the private equity capital of the APIC,

8 as determined by the Secretary; and

9 (B) an APIC shall not have more than

10 $300,000,000 in face value of qualified deben11 tures issued under this title outstanding at any

12 one time.

13 (3) REPAYMENT.—

14 (A) CONDITION OF BUSINESS WIND-UP.—

15 An APIC shall have repaid, or have otherwise

16 been relieved of indebtedness, with respect to

17 any interest or principal amounts of borrowings

18 under this subsection no less than 2 years be19 fore the APIC may dissolve or otherwise com20 plete the wind-up of its business.

21 (B) TIMING.—An APIC may repay any in22 terest or principal amounts of borrowings under

23 this subsection at any time: Provided, That the

24 repayment of such amounts shall not relieve an

25 APIC of any duty otherwise applicable to the
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•S 2779 IS

1 APIC under this title, unless the Secretary or2 ders such relief.

3 (C) USE OF INVESTMENT PROCEEDS BE4 FORE REPAYMENT.—Until an APIC has repaid

5 all interest and principal amounts on APIC bor6 rowings under this subsection, an APIC may

7 use the proceeds of investments, in accordance

8 with regulations issued by the Secretary, only

9 to—

10 (i) pay for proper costs and expenses

11 the APIC incurs in connection with such

12 investments;

13 (ii) pay for the reasonable administra14 tive expenses of the APIC;

15 (iii) purchase Treasury securities;

16 (iv) repay interest and principal

17 amounts on APIC borrowings under this

18 subsection;

19 (v) make interest, dividend, or other

20 distributions to or on behalf of an investor;

21 or

22 (vi) undertake such other purposes as

23 the Secretary may approve.

24 (D) USE OF INVESTMENT PROCEEDS

25 AFTER REPAYMENT.—After an APIC has re-
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•S 2779 IS

1 paid all interest and principal amounts on

2 APIC borrowings under this subsection, and

3 subject to continuing compliance with sub4 section (a), the APIC may use the proceeds

5 from investments to make interest, dividend, or

6 other distributions to or on behalf of investors

7 in the nature of returns on capital, or the with8 drawal of private equity capital, without regard

9 to subparagraph (C) but in conformity with the

10 APIC’s investment strategy and statement of

11 public purpose goals.

12 (d) REUSE OF QUALIFIED DEBENTURE PRO13 CEEDS.—An APIC may use the proceeds of sale of Treas14 ury securities purchased under subsection (c)(3)(C)(iii) to

15 make qualified low-income community investments, sub16 ject to the Secretary’s approval. In making the request

17 for the Secretary’s approval, the APIC shall follow the

18 procedures applicable to an APIC’s request for HUD

19 guarantee action, as the Secretary may modify such proce20 dures for implementation of this subsection. Such proce21 dures shall include the description and certifications that

22 an APIC must include in all requests for guarantee action,

23 and the environmental certification applicable to initial ex24 penditures for a project or activity.
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1 (e) ANTIPIRATING.—Notwithstanding any other pro2 vision of law, an APIC may not use any private equity

3 capital required to be contributed under this title, or the

4 proceeds from the sale of any qualified debenture under

5 this title, to make an investment, as determined by the

6 Secretary, to assist directly in the relocation of any indus7 trial or commercial plant, facility, or operation, from 1

8 area to another area, if the relocation is likely to result

9 in a significant loss of employment in the labor market

10 area from which the relocation occurs.

11 (f) EXCLUSION OF APIC FROM DEFINITION OF

12 DEBTOR UNDER BANKRUPTCY PROVISIONS.—Section

13 109(b)(2) of title 11, United States Code, is amended by

14 inserting before ‘‘credit union’’ the following: ‘‘America’s

15 Private Investment Company licensed under the America’s

16 Private Investment Companies Act,’’.

17 SEC. 607. CREDIT ENHANCEMENT BY THE FEDERAL GOV18 ERNMENT.

19 (a) ISSUANCE AND GUARANTEE OF QUALIFIED DE20 BENTURES.—

21 (1) AUTHORITY.—To the extent consistent with

22 the Federal Credit Reform Act of 1990, the Sec23 retary is authorized to make commitments to guar24 antee and guarantee the timely payment of all prin25 cipal and interest as scheduled on qualified deben-
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•S 2779 IS

1 tures issued by APICs. Such commitments and

2 guarantees may only be made in accordance with the

3 terms and conditions established under paragraph

4 (2).

5 (2) TERMS AND CONDITIONS.—The Secretary

6 shall establish such terms and conditions as the Sec7 retary determines to be appropriate for commit8 ments and guarantees under this subsection, includ9 ing terms and conditions relating to amounts, expi10 ration, number, priorities of repayment, security,

11 collateral, amortization, payment of interest (includ12 ing the timing thereof), and fees and charges. The

13 terms and conditions applicable to any particular

14 commitment or guarantee may be established in doc15 uments that the Secretary approves for such com16 mitment or guarantee.

17 (3) SENIORITY.—Notwithstanding any other

18 provision of Federal law or any law or the constitu19 tion of any State, qualified debentures guaranteed

20 under this subsection by the Secretary shall be sen21 ior to any other debt obligation, equity contribution

22 or earnings, or the distribution of dividends, inter23 est, or other amounts, of an APIC.

24 (b) ISSUANCE OF TRUST CERTIFICATES.—The Sec25 retary, or an agent or entity selected by the Secretary,
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1 is authorized to issue trust certificates representing own2 ership of all or a fractional part of guaranteed qualified

3 debentures issued by APICs and held in trust.

4 (c) GUARANTEE OF TRUST CERTIFICATES.—

5 (1) IN GENERAL.—The Secretary is authorized,

6 upon such terms and conditions as the Secretary de7 termines to be appropriate, to guarantee the timely

8 payment of the principal of and interest on trust

9 certificates issued by the Secretary, or an agent or

10 other entity, for purposes of this section. Such guar11 antee shall be limited to the extent of principal and

12 interest on the guaranteed qualified debentures

13 which compose the trust.

14 (2) SUBSTITUTION OPTION.—The Secretary

15 shall have the option to replace in the corpus of the

16 trust any prepaid or defaulted qualified debenture

17 with a debenture, another full faith and credit in18 strument, or any obligations of the United States,

19 that may reasonably substitute for such prepaid or

20 defaulted qualified debenture.

21 (3) PROPORTIONATE REDUCTION OPTION.—In

22 the event that the Secretary elects not to exercise

23 the option under paragraph (2), and a qualified de24 benture in such trust is prepaid, or in the event of

25 default of a qualified debenture, the guarantee of
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1 timely payment of principal and interest on the trust

2 certificate shall be reduced in proportion to the

3 amount of principal and interest that such prepaid

4 qualified debenture represents in the trust. Interest

5 on prepaid or defaulted qualified debentures shall

6 accrue and be guaranteed by the Secretary only

7 through the date of payment of the guarantee. Dur8 ing the term of a trust certificate, it may be called

9 for redemption due to prepayment or default of all

10 qualified debentures that are in the corpus of the

11 trust.

12 (d) FULL FAITH AND CREDIT BACKING OF GUARAN13 TEES.—The full faith and credit of the United States is

14 pledged to the timely payment of all amounts which may

15 be required to be paid under any guarantee by the Sec16 retary pursuant to this section.

17 (e) SUBROGATION AND LIENS.—

18 (1) SUBROGATION.—In the event the Secretary

19 pays a claim under a guarantee issued under this

20 section, the Secretary shall be subrogated fully to

21 the rights satisfied by such payment.

22 (2) PRIORITY OF LIENS.—No State or local

23 law, and no Federal law, shall preclude or limit the

24 exercise by the Secretary of its ownership rights in
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1 the debentures in the corpus of a trust under this

2 section.

3 (f) REGISTRATION.—

4 (1) IN GENERAL.—The Secretary shall provide

5 for a central registration of all trust certificates

6 issued pursuant to this section.

7 (2) AGENTS.—The Secretary may contract with

8 an agent or agents to carry out on behalf of the Sec9 retary the pooling and the central registration func10 tions of this section notwithstanding any other provi11 sion of law, including maintenance on behalf of and

12 under the direction of the Secretary, such commer13 cial bank accounts or investments in obligations of

14 the United States as may be necessary to facilitate

15 trusts backed by qualified debentures guaranteed

16 under this title and the issuance of trust certificates

17 to facilitate formation of the corpus of the trusts.

18 The Secretary may require such agent or agents to

19 provide a fidelity bond or insurance in such amounts

20 as the Secretary determines to be necessary to pro21 tect the interests of the Government.

22 (3) FORM.—Book-entry or other electronic

23 forms of registration for trust certificates under this

24 title are authorized.
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1 (g) TIMING OF ISSUANCE OF GUARANTEES OF

2 QUALIFIED DEBENTURES AND TRUST CERTIFICATES.—

3 The Secretary may, from time to time in the Secretary’s

4 discretion, exercise the authority to issue guarantees of

5 qualified debentures under this title or trust certificates

6 under this title.

7 SEC. 608. APIC REQUESTS FOR GUARANTEE ACTIONS.

8 (a) IN GENERAL.—The Secretary may issue a guar9 antee under this title for a qualified debenture that an

10 APIC intends to issue only pursuant to a request to the

11 Secretary by the APIC for such guarantee that is made

12 in accordance with regulations governing the content and

13 procedures for such requests, that the Secretary shall pre14 scribe. Such regulations shall provide that each such re15 quest shall include—

16 (1) a description of the manner in which the

17 APIC intends to use the proceeds from the qualified

18 debenture;

19 (2) a certification by the APIC that the APIC

20 is in substantial compliance with—

21 (A) this title and other applicable laws, in22 cluding any requirements established under this

23 title by the Secretary;

24 (B) all terms and conditions of its license,

25 any cease-and-desist order issued under section
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•S 2779 IS

1 610, and of any penalty or condition that may

2 have arisen from examination or monitoring by

3 the Secretary or otherwise, including the satis4 faction of any financial audit exception that

5 may have been outstanding; and

6 (C) all requirements relating to the alloca7 tion and use of New Markets Tax Credits, to

8 the extent such credits are established under

9 Federal law; and

10 (3) any other information or certification that

11 the Secretary considers appropriate.

12 (b) REQUESTS FOR GUARANTEE OF QUALIFIED DE13 BENTURES THAT INCLUDE FUNDING FOR INITIAL EX14 PENDITURE FOR A PROJECT OR ACTIVITY.—In addition

15 to the description and certification that an APIC is re16 quired to supply in all requests for guarantee action under

17 subsection (a), in the case of an APIC’s request for a

18 guarantee that includes a qualified debenture, the pro19 ceeds of which the APIC expects to be used as its initial

20 expenditure for a project or activity in which the APIC

21 intends to invest, and the expenditure for which would re22 quire an environmental assessment under the National

23 Environmental Policy Act of 1969 and other related laws

24 that further the purposes of such Act, such request for

25 guarantee action shall include evidence satisfactory to the
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•S 2779 IS

1 Secretary of the certification of the completion of environ2 mental review of the project or activity required of the cog3 nizant State or local government under subsection (c). If

4 the environmental review responsibility for the project or

5 activity has not been assumed by a State or local govern6 ment under subsection (c), then the Secretary shall be re7 sponsible for carrying out the applicable responsibilities

8 under the National Environmental Policy Act of 1969 and

9 other provisions of law that further the purposes of such

10 Act that relate to the project or activity, and the Secretary

11 shall execute such responsibilities before acting on the

12 APIC’s request for the guarantee that is covered by this

13 subsection.

14 (c) RESPONSIBILITY FOR ENVIRONMENTAL RE15 VIEWS.—

16 (1) EXECUTION OF RESPONSIBILITY BY THE

17 SECRETARY.—This subsection shall apply to guaran18 tees by the Secretary of qualified debentures under

19 this title, the proceeds of which would be used in

20 connection with qualified low-income community in21 vestments of APICs under this title.

22 (2) ASSUMPTION OF RESPONSIBILITY BY COG23 NIZANT UNIT OF GENERAL GOVERNMENT.—

24 (A) GUARANTEE OF QUALIFIED DEBEN25 TURES.—In order to assure that the policies of
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•S 2779 IS

1 the National Environmental Policy Act of 1969

2 and other provisions of law that further the

3 purposes of such Act (as specified in regula4 tions issued by the Secretary) are most effec5 tively implemented in connection with the ex6 penditure of funds under this title, and to as7 sure to the public undiminished protection of

8 the environment, the Secretary may, under such

9 regulations, in lieu of the environmental protec10 tion procedures otherwise applicable, provide for

11 the guarantee of qualified debentures, any part

12 of the proceeds of which are to fund particular

13 qualified low-income community investments of

14 APICs under this title, if a State or unit of

15 general local government, as designated by the

16 Secretary in accordance with regulations issued

17 by the Secretary, assumes all of the responsibil18 ities for environmental review, decisionmaking,

19 and action pursuant to the National Environ20 mental Policy Act of 1969 and such other pro21 visions of law that further such Act as the reg22 ulations of the Secretary specify, that would

23 otherwise apply to the Secretary were the Sec24 retary to undertake the funding of such invest25 ments as a Federal action.
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•S 2779 IS

1 (B) IMPLEMENTATION.—The Secretary

2 shall issue regulations to carry out this sub3 section only after consultation with the Council

4 on Environmental Quality. Such regulations

5 shall—

6 (i) specify any other provisions of law

7 which further the purposes of the National

8 Environmental Policy Act of 1969 and to

9 which the assumption of responsibility as

10 provided in this subsection applies;

11 (ii) provide eligibility criteria and pro12 cedures for the designation of a State or

13 unit of general local government to assume

14 all of the responsibilities in this subsection;

15 (iii) specify the purposes for which

16 funds may be committed without regard to

17 the procedure established under paragraph

18 (3);

19 (iv) provide for monitoring of the per20 formance of environmental reviews under

21 this subsection;

22 (v) in the discretion of the Secretary,

23 provide for the provision or facilitation of

24 training for such performance; and
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•S 2779 IS

1 (vi) subject to the discretion of the

2 Secretary, provide for suspension or termi3 nation by the Secretary of the assumption

4 under subparagraph (A).

5 (C) RESPONSIBILITIES OF STATES AND

6 UNITS OF GENERAL LOCAL GOVERNMENT.—The

7 Secretary’s duty under subparagraph (B) shall

8 not be construed to limit any responsibility as9 sumed by a State or unit of general local gov10 ernment with respect to any particular request

11 for guarantee under subparagraph (A), or the

12 use of funds for a qualified investment.

13 (3) PROCEDURE.—Subject to compliance by the

14 APIC with the requirements of this title, the Sec15 retary shall approve the request for guarantee of a

16 qualified debenture, any part of the proceeds of

17 which is to fund particular qualified low-income

18 community investments of an APIC under this title,

19 that is subject to the procedures authorized by this

20 subsection only if, not less than 15 days prior to

21 such approval and prior to any commitment of funds

22 to such investment (except for such purposes speci23 fied in the regulations issued under paragraph

24 (2)(B)), the APIC submits to the Secretary a re25 quest for guarantee of a qualified debenture that is
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•S 2779 IS

1 accompanied by evidence of a certification of the

2 State or unit of general local government which

3 meets the requirements of paragraph (4). The ap4 proval by the Secretary of any such certification

5 shall be deemed to satisfy the Secretary’s respon6 sibilities pursuant to paragraph (1) under the Na7 tional Environmental Policy Act of 1969 and such

8 other provisions of law as the regulations of the Sec9 retary specify insofar as those responsibilities relate

10 to the guarantees of qualified debentures, any parts

11 of the proceeds of which are to fund such invest12 ments, which are covered by such certification.

13 (4) CERTIFICATION.—A certification under the

14 procedures authorized by this subsection shall—

15 (A) be in a form acceptable to the Sec16 retary;

17 (B) be executed by the chief executive offi18 cer or other officer of the State or unit of gen19 eral local government who qualifies under regu20 lations of the Secretary;

21 (C) specify that the State or unit of gen22 eral local government under this subsection has

23 fully carried out its responsibilities as described

24 under paragraph (2); and

25 (D) specify that the certifying officer—
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•S 2779 IS

1 (i) consents to assume the status of a

2 responsible Federal official under the Na3 tional Environmental Policy Act of 1969

4 and each provision of law specified in regu5 lations issued by the Secretary insofar as

6 the provisions of such Act or other such

7 provision of law apply pursuant to para8 graph (2); and

9 (ii) is authorized and consents on be10 half of the State or unit of general local

11 government and himself or herself to ac12 cept the jurisdiction of the Federal courts

13 for the purpose of enforcement of the re14 sponsibilities as such an official.

15 SEC. 609. EXAMINATION AND MONITORING OF APICS.

16 (a) IN GENERAL.—The Secretary shall, under regula17 tions, through audits, performance agreements, license

18 conditions, or otherwise, examine and monitor the oper19 ations and activities of APICs for compliance with sound

20 financial management practices, and for satisfaction of the

21 program and procedural goals of this title and other re22 lated Acts. The Secretary may undertake any responsi23 bility under this section in cooperation with an APIC liai24 son committee, or any agency that is a member of such

25 a committee, or other agency.
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•S 2779 IS

1 (b) MONITORING, UPDATING, AND PROGRAM RE2 VIEW.—

3 (1) REPORTING AND UPDATING.—The Sec4 retary shall establish such annual or more frequent

5 reporting requirements for APICs, and such require6 ments for the updating of the statement of public

7 purpose goals, investment strategy (including the

8 benchmarks in such strategy), and other documents

9 that may have been used in the license application

10 process under this title, as the Secretary determines

11 necessary to assist the Secretary in monitoring the

12 compliance and performance of APICs.

13 (2) ANNUAL AUDITS.—The Secretary shall re14 quire each APIC to have an independent audit con15 ducted annually of the operations of the APIC. The

16 Secretary, in consultation with the Administrator

17 and the Secretary of the Treasury, shall establish re18 quirements and standards for such audits, including

19 requirements that such audits be conducted in ac20 cordance with generally accepted accounting prin21 ciples, that the APIC submit the results of the audit

22 to Secretary, and that specify the information to be

23 submitted.

24 (3) EXAMINATIONS.—The Secretary shall, no

25 less often than once every 2 years, examine the oper-
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•S 2779 IS

1 ations and portfolio of each APIC licensed under

2 this title for compliance with sound financial man3 agement practices, and for compliance with this title.

4 (4) EXAMINATION STANDARDS.—

5 (A) SOUND FINANCIAL MANAGEMENT

6 PRACTICES.—The Secretary shall examine each

7 APIC to ensure, as a matter of sound financial

8 management practices, substantial compliance

9 with this and other applicable laws, including

10 Federal executive orders, Department of Treas11 ury and Office of Management and Budget

12 guidance, circulars, and application and licens13 ing requirements on a continuing basis. The

14 Secretary may, by regulation, establish any ad15 ditional standards for sound financial manage16 ment practices, including standards that ad17 dress solvency and financial exposure.

18 (B) PERFORMANCE AND OTHER EXAMINA19 TIONS.—The Secretary shall monitor each

20 APIC’s progress in meeting the goals in the

21 APIC’s statement of public purpose goals, exe22 cuting the APIC’s investment strategy, and

23 other matters.

24 (c) INSPECTOR GENERAL RESPONSIBILITY.—In car25 rying out monitoring of HUD’s responsibilities under this
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•S 2779 IS

1 title and for purposes of ensuring that the program under

2 this title is operated in accordance with sound financial

3 management practices, the Inspector General of the De4 partment of Housing and Urban Development shall con5 sult with the Inspector General of the Department of the

6 Treasury and the Inspector General of the Small Business

7 Administration, as appropriate, and may enter into such

8 agreements and memoranda of understanding as may be

9 necessary to obtain the cooperation of the Inspectors Gen10 eral of the Department of the Treasury and the Small

11 Business Administration in carrying out such function.

12 (d) ANNUAL REPORT BY SECRETARY.—The Sec13 retary shall submit a report to the Congress annually re14 garding the operations, activities, financial health, and

15 achievements of the APIC program under this title. The

16 report shall list each investment made by an APIC and

17 include a summary of the examinations conducted under

18 subsection (b)(3), the guarantee actions of HUD, and any

19 regulatory or policy actions taken by HUD. The report

20 shall distinguish recently licensed APICs from APICs that

21 have held licenses for a longer period for purposes of indi22 cating program activities and performance.

23 (e) GAO REPORT.—

24 (1) REQUIREMENT.—Not later than 2 years

25 after the date of the enactment of this Act, the
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•S 2779 IS

1 Comptroller General of the United States shall sub2 mit a report to the Congress regarding the operation

3 of the program under this title for licensing and

4 guarantees for APICs.

5 (2) CONTENTS.—The report shall include—

6 (A) an analysis of the operations and mon7 itoring by HUD of the APIC program under

8 this title;

9 (B) the administrative and capacity needs

10 of HUD required to ensure the integrity of the

11 program;

12 (C) the extent and adequacy of any credit

13 subsidy appropriated for the program; and

14 (D) the management of financial risk and

15 liability of the Federal Government under the

16 program.

17 SEC. 610. PENALTIES.

18 (a) VIOLATIONS SUBJECT TO PENALTY.—The Sec19 retary may impose a penalty under this subsection on any

20 APIC or manager of an APIC that, by any act, practice,

21 or failure to act, engages in fraud, mismanagement, or

22 noncompliance with this title, the regulations under this

23 title, or a condition of the APIC’s license under this title.

24 The Secretary shall, by regulation, identify, by generic de-
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•S 2779 IS

1 scription of a role or responsibilities, any manager of an

2 APIC that is subject to a penalty under this section.

3 (b) PENALTIES REQUIRING NOTICE AND AN OPPOR4 TUNITY TO RESPOND.—If, after notice in writing to an

5 APIC or the manager of an APIC that the APIC or man6 ager has engaged in any action, practice, or failure to act

7 that, under subsection (a), is subject to a penalty, and

8 after an opportunity for the APIC or manager to respond

9 to the notice, the Secretary determines that the APIC or

10 manager engaged in such action or failure to act, the Sec11 retary may, in addition to other penalties imposed—

12 (1) assess a civil money penalty, except than

13 any civil money penalty under this subsection shall

14 be in an amount not exceeding $10,000;

15 (2) issue an order to cease and desist with re16 spect to such action, practice, or failure to act of the

17 APIC or manager;

18 (3) suspend, or condition the use of, the APIC’s

19 license, including deferring, for the period of the

20 suspension, any commitment to guarantee any new

21 qualified debenture of the APIC, except that any

22 suspension or condition under this paragraph may

23 not exceed 90 days; and
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•S 2779 IS

1 (4) impose any other penalty that the Secretary

2 determines to be less burdensome to the APIC than

3 a penalty under subsection (c).

4 (c) PENALTIES REQUIRING NOTICE AND HEAR5 ING.—If, after notice in writing to an APIC or the man6 ager of an APIC that an APIC or manager has engaged

7 in any action, practice, or failure to act that, under sub8 section (a), is subject to a penalty, and after an oppor9 tunity for administrative hearing, the Secretary deter10 mines that the APIC or manager engaged in such action

11 or failure to act, the Secretary may—

12 (1) assess a civil money penalty against the

13 APIC or a manager in any amount;

14 (2) require the APIC to divest any interest in

15 an investment, on such terms and conditions as the

16 Secretary may impose; or

17 (3) revoke the APIC’s license.

18 (d) EFFECTIVE DATE OF PENALTIES.—

19 (1) PRIOR NOTICE REQUIREMENT.—Except as

20 provided in paragraph (2) of this subsection, a pen21 alty under subsection (b) or (c) shall not be due and

22 payable and shall not otherwise take effect or be

23 subject to enforcement by an order of a court, before

24 notice of the penalty is published in the Federal

25 Register.
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•S 2779 IS

1 (2) CEASE-AND-DESIST ORDERS AND SUSPEN2 SION OR CONDITIONING OF LICENSE.—In the case of

3 a cease-and-desist order under subsection (b)(2) or

4 the suspension or conditioning of an APIC’s license

5 under subsection (b)(3), the following procedures

6 shall apply:

7 (A) ACTION WITHOUT PUBLISHED NO8 TICE.—The Secretary may order an APIC or

9 manager to cease and desist from an action,

10 practice, or failure to act or may suspend or

11 condition an APIC’s license, for not more than

12 45 days without prior publication of notice in

13 the Federal Register, but such cease-and-desist

14 order or suspension or conditioning shall take

15 effect only after the Secretary has issued a

16 written notice (which may include a writing in

17 electronic form) of such action to the APIC.

18 Notwithstanding subsection (b), such written

19 notice shall be effective without regard to

20 whether the APIC has been accorded an oppor21 tunity to respond. Upon such notice, such

22 cease-and-desist order or suspension or condi23 tioning shall be subject to enforcement by an

24 order of a court.
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•S 2779 IS

1 (B) PUBLICATION OF NOTICE OF SUSPEN2 SION OR CONDITIONING OF LICENSE.—Upon a

3 suspension or conditioning of a license taking

4 effect pursuant to subparagraph (A), the Sec5 retary shall promptly cause a notice of suspen6 sion or conditioning of such license for a period

7 of not more than 90 days to be published in the

8 Federal Register. The Secretary shall provide

9 the APIC an opportunity to respond to such no10 tice. For purposes of the determining the dura11 tion of the period of any suspension or condi12 tioning under this subparagraph, the first day

13 of such period shall be the day of issuance of

14 the written notice under this paragraph of the

15 suspension or conditioning.

16 (C) REVOCATION OF LICENSE.—During

17 the period of the suspension or conditioning of

18 an APIC’s license, the Secretary may take ac19 tion under subsection (c)(3) to revoke the li20 cense of the APIC, in accordance with the pro21 cedures applicable to such subsection. Notwith22 standing any other provision of this section, if

23 the Secretary takes such action, the Secretary

24 may extend the suspension or conditioning of

25 the APIC’s license, for one or more periods of
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•S 2779 IS

1 not more than 90 days each, by causing notice

2 of such action to be published in the Federal

3 Register—

4 (i) for the first such extension, before

5 the expiration of the period under subpara6 graph (B); and

7 (ii) for any subsequent extension, be8 fore the expiration of the preceding exten9 sion period under this subparagraph.

10 (D) TERM OF EFFECTIVENESS.—A cease-and11 desist order or the suspension or conditioning of an

12 APIC’s license by the Secretary under this para13 graph shall remain in effect in accordance with the

14 terms of the order, suspension, or conditioning until

15 final adjudication in any action undertaken to chal16 lenge the order, or the suspension or conditioning, or

17 the revocation, of an APIC’s license.

18 SEC. 611. EFFECTIVE DATE.

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

20 (b), this title shall take effect upon the expiration of the

21 6-month period beginning on the date of the enactment

22 of this Act.

23 (b) ISSUANCE OF REGULATIONS AND GUIDELINES.—

24 Any authority under this title of the Secretary, the Admin25 istrator, and the Secretary of the Treasury to issue regula-
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•S 2779 IS

1 tions, standards, guidelines, or licensing requirements,

2 and any authority of such officials to consult or enter into

3 agreements or memoranda of understanding regarding

4 such issuance, shall take effect on the date of the enact5 ment of this Act.

6 SEC. 612. SUNSET.

7 After the expiration of the 5-year period beginning

8 upon the date that the Secretary awards the first license

9 for an APIC under this title—

10 (1) the Secretary may not license any APIC;

11 and

12 (2) no amount may be appropriated for the

13 costs (as such term is defined in section 502 of the

14 Federal Credit Reform Act of 1990 (2 U.S.C. 661c))

15 of any guarantee under this title for any debenture

16 issued by an APIC.

17 This section may not be construed to prohibit, limit, or

18 affect the award, allocation, or use of any budget authority

19 for the costs of such guarantees that is appropriated be20 fore the expiration of such period.

21 TITLE VII—NEW MARKETS TAX

22 CREDIT

23 SEC. 701. NEW MARKETS TAX CREDIT.

24 (a) IN GENERAL.—Subpart D of part IV of sub25 chapter A of chapter 1 (relating to business-related cred-
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•S 2779 IS

1 its), as amended by section 201(a), is amended by adding

2 at the end the following new section:

3 ‘‘SEC. 45E. NEW MARKETS TAX CREDIT.

4 ‘‘(a) ALLOWANCE OF CREDIT.—

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

6 in the case of a taxpayer who holds a qualified eq7 uity investment on a credit allowance date of such

8 investment which occurs during the taxable year, the

9 new markets tax credit determined under this sec10 tion for such taxable year is an amount equal to the

11 applicable percentage of the amount paid to the

12 qualified community development entity for such in13 vestment at its original issue.

14 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

15 of paragraph (1), the applicable percentage is—

16 ‘‘(A) 5 percent with respect to the first 3

17 credit allowance dates, and

18 ‘‘(B) 6 percent with respect to the remain19 der of the credit allowance dates.

20 ‘‘(3) CREDIT ALLOWANCE DATE.—For purposes

21 of paragraph (1), the term ‘credit allowance date’

22 means, with respect to any qualified equity

23 investment—

24 ‘‘(A) the date on which such investment is

25 initially made, and
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•S 2779 IS

1 ‘‘(B) each of the 6 anniversary dates of

2 such date thereafter.

3 ‘‘(b) QUALIFIED EQUITY INVESTMENT.—For pur4 poses of this section—

5 ‘‘(1) IN GENERAL.—The term ‘qualified equity

6 investment’ means any equity investment in a quali7 fied community development entity if—

8 ‘‘(A) such investment is acquired by the

9 taxpayer at its original issue (directly or

10 through an underwriter) solely in exchange for

11 cash,

12 ‘‘(B) substantially all of the proceeds from

13 such investment is used by the qualified com14 munity development entity to make qualified

15 low-income community investments, and

16 ‘‘(C) such investment is designated for

17 purposes of this section by the qualified com18 munity development entity.

19 Such term shall not include any equity investment

20 issued by a qualified community development entity

21 more than 5 years after the date that such entity re22 ceives an allocation under subsection (f). Any alloca23 tion not used within such 5-year period may be re24 allocated by the Secretary under subsection (f).
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•S 2779 IS

1 ‘‘(2) LIMITATION.—The maximum amount of

2 equity investments issued by a qualified community

3 development entity which may be designated under

4 paragraph (1)(C) by such entity shall not exceed the

5 portion of the limitation amount allocated under

6 subsection (f) to such entity.

7 ‘‘(3) SAFE HARBOR FOR DETERMINING USE OF

8 CASH.—The requirement of paragraph (1)(B) shall

9 be treated as met if at least 85 percent of the aggre10 gate gross assets of the qualified community devel11 opment entity are invested in qualified low-income

12 community investments.

13 ‘‘(4) TREATMENT OF SUBSEQUENT PUR14 CHASERS.—The term ‘qualified equity investment’

15 includes any equity investment which would (but for

16 paragraph (1)(A)) be a qualified equity investment

17 in the hands of the taxpayer if such investment was

18 a qualified equity investment in the hands of a prior

19 holder.

20 ‘‘(5) REDEMPTIONS.—A rule similar to the rule

21 of section 1202(c)(3) shall apply for purposes of this

22 subsection.

23 ‘‘(6) EQUITY INVESTMENT.—The term ‘equity

24 investment’ means—
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•S 2779 IS

1 ‘‘(A) any stock in a qualified community

2 development entity which is a corporation, and

3 ‘‘(B) any capital interest in a qualified

4 community development entity which is a part5 nership.

6 ‘‘(c) QUALIFIED COMMUNITY DEVELOPMENT ENTI7 TY.—For purposes of this section—

8 ‘‘(1) IN GENERAL.—The term ‘qualified com9 munity development entity’ means any domestic cor10 poration or partnership if—

11 ‘‘(A) the primary mission of the entity is

12 serving, or providing investment capital for,

13 low-income communities or low-income persons,

14 ‘‘(B) the entity maintains accountability to

15 residents of low-income communities through

16 representation on governing or advisory boards

17 or otherwise, and

18 ‘‘(C) the entity is certified by the Secretary

19 for purposes of this section as being a qualified

20 community development entity.

21 ‘‘(2) SPECIAL RULES FOR CERTAIN ORGANIZA22 TIONS.—The requirements of paragraph (1) shall be

23 treated as met by—
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•S 2779 IS

1 ‘‘(A) any specialized small business invest2 ment company (as defined in section

3 1044(c)(3)), and

4 ‘‘(B) any community development financial

5 institution (as defined in section 103 of the

6 Community Development Banking and Finan7 cial Institutions Act of 1994 (12 U.S.C. 4702)).

8 ‘‘(d) QUALIFIED LOW-INCOME COMMUNITY INVEST9 MENTS.—For purposes of this section—

10 ‘‘(1) IN GENERAL.—The term ‘qualified low-in11 come community investment’ means—

12 ‘‘(A) any equity investment in, or loan to,

13 any qualified active low-income community busi14 ness,

15 ‘‘(B) the purchase from another commu16 nity development entity of any loan made by

17 such entity which is a qualified low-income com18 munity investment if the amount received by

19 such other entity from such purchase is used by

20 such other entity to make qualified low-income

21 community investments,

22 ‘‘(C) financial counseling and other serv23 ices specified in regulations prescribed by the

24 Secretary to businesses located in, and resi25 dents of, low-income communities, and
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•S 2779 IS

1 ‘‘(D) any equity investment in, or loan to,

2 any qualified community development entity if

3 substantially all of the investment or loan is

4 used by such entity to make qualified low-in5 come community investments described in sub6 paragraphs (A), (B), and (C).

7 ‘‘(2) QUALIFIED ACTIVE LOW-INCOME COMMU8 NITY BUSINESS.—

9 ‘‘(A) IN GENERAL.—For purposes of para10 graph (1), the term ‘qualified active low-income

11 community business’ means, with respect to any

12 taxable year, any corporation or partnership if

13 for such year—

14 ‘‘(i) at least 50 percent of the total

15 gross income of such entity is derived from

16 the active conduct of a qualified business

17 within any low-income community,

18 ‘‘(ii) a substantial portion of the use

19 of the tangible property of such entity

20 (whether owned or leased) is within any

21 low-income community,

22 ‘‘(iii) a substantial portion of the serv23 ices performed for such entity by its em24 ployees are performed in any low-income

25 community,
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1 ‘‘(iv) less than 5 percent of the aver2 age of the aggregate unadjusted bases of

3 the property of such entity is attributable

4 to collectibles (as defined in section

5 408(m)(2)) other than collectibles that are

6 held primarily for sale to customers in the

7 ordinary course of such business, and

8 ‘‘(v) less than 5 percent of the aver9 age of the aggregate unadjusted bases of

10 the property of such entity is attributable

11 to nonqualified financial property (as de12 fined in section 1397C(e)).

13 ‘‘(B) PROPRIETORSHIP.—Such term shall

14 include any business carried on by an individual

15 as a proprietor if such business would meet the

16 requirements of subparagraph (A) were it incor17 porated.

18 ‘‘(C) PORTIONS OF BUSINESS MAY BE

19 QUALIFIED ACTIVE LOW-INCOME COMMUNITY

20 BUSINESS.—The term ‘qualified active low-in21 come community business’ includes any trades

22 or businesses which would qualify as a qualified

23 active low-income community business if such

24 trades or businesses were separately incor25 porated.
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1 ‘‘(3) QUALIFIED BUSINESS.—For purposes of

2 this subsection, the term ‘qualified business’ has the

3 meaning given to such term by section 1397C(d); ex4 cept that—

5 ‘‘(A) in lieu of applying paragraph (2)(B)

6 thereof, the rental to others of real property lo7 cated in any low-income community shall be

8 treated as a qualified business if there are sub9 stantial improvements located on such property,

10 ‘‘(B) paragraph (3) thereof shall not apply,

11 and

12 ‘‘(C) such term shall not include any busi13 ness if a significant portion of the equity inter14 ests in such business are held by any person

15 who holds a significant portion of the equity in16 vestments in the community development entity.

17 ‘‘(e) LOW-INCOME COMMUNITY.—For purposes of

18 this section—

19 ‘‘(1) IN GENERAL.—The term ‘low-income com20 munity’ means any population census tract if—

21 ‘‘(A) the poverty rate for such tract is at

22 least 20 percent,

23 ‘‘(B)(i) in the case of a tract not located

24 within a metropolitan area, the median family
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•S 2779 IS

1 income for such tract does not exceed 80 per2 cent of statewide median family income, or

3 ‘‘(ii) in the case of a tract located within

4 a metropolitan area, the median family income

5 for such tract does not exceed 80 percent of the

6 greater of statewide median family income or

7 the metropolitan area median family income, or

8 ‘‘(C) as determined by the Secretary based

9 on objective criteria, a substantial population of

10 low-income individuals reside in such tract, an

11 inadequate access to investment capital exists in

12 such tract, or other indications of economic dis13 tress exist in such tract.

14 ‘‘(2) AREAS NOT WITHIN CENSUS TRACTS.—In

15 the case of an area which is not tracted for popu16 lation census tracts, the equivalent county divisions

17 (as defined by the Bureau of the Census for pur18 poses of defining poverty areas) shall be used for

19 purposes of determining poverty rates and median

20 family income.

21 ‘‘(f) NATIONAL LIMITATION ON AMOUNT OF INVEST22 MENTS DESIGNATED.—

23 ‘‘(1) IN GENERAL.—There is a new markets tax

24 credit limitation for each calendar year. Such limita25 tion is—
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1 ‘‘(A) $500,000,000 for 2001,

2 ‘‘(B) $1,500,000,000 for 2002 and 2003,

3 ‘‘(C) $2,500,000,000 for 2004 and 2005,

4 ‘‘(D) $3,000,000,000 for 2006,

5 ‘‘(E) $3,500,000,000 for 2007.

6 ‘‘(2) ALLOCATION OF LIMITATION.—The limita7 tion under paragraph (1) shall be allocated by the

8 Secretary among qualified community development

9 entities selected by the Secretary. In making alloca10 tions under the preceding sentence, the Secretary

11 shall give priority to entities with records of having

12 successfully provided capital or technical assistance

13 to disadvantaged businesses or communities.

14 ‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If

15 the new markets tax credit limitation for any cal16 endar year exceeds the aggregate amount allocated

17 under paragraph (2) for such year, such limitation

18 for the succeeding calendar year shall be increased

19 by the amount of such excess.

20 ‘‘(g) RECAPTURE OF CREDIT IN CERTAIN CASES.—

21 ‘‘(1) IN GENERAL.—If, at any time during the

22 7-year period beginning on the date of the original

23 issue of a qualified equity investment in a qualified

24 community development entity, there is a recapture

25 event with respect to such investment, then the tax
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•S 2779 IS

1 imposed by this chapter for the taxable year in

2 which such event occurs shall be increased by the

3 credit recapture amount.

4 ‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur5 poses of paragraph (1), the credit recapture amount

6 is an amount equal to the sum of—

7 ‘‘(A) the aggregate decrease in the credits

8 allowed to the taxpayer under section 38 for all

9 prior taxable years which would have resulted if

10 no credit had been determined under this sec11 tion with respect to such investment, plus

12 ‘‘(B) interest at the overpayment rate es13 tablished under section 6621 on the amount de14 termined under subparagraph (A) for each

15 prior taxable year for the period beginning on

16 the due date for filing the return for the prior

17 taxable year involved.

18 No deduction shall be allowed under this chapter for

19 interest described in subparagraph (B).

20 ‘‘(3) RECAPTURE EVENT.—For purposes of

21 paragraph (1), there is a recapture event with re22 spect to an equity investment in a qualified commu23 nity development entity if—

24 ‘‘(A) such entity ceases to be a qualified

25 community development entity,
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1 ‘‘(B) the proceeds of the investment cease

2 to be used as required of subsection (b)(1)(B),

3 or

4 ‘‘(C) such investment is redeemed by such

5 entity.

6 ‘‘(4) SPECIAL RULES.—

7 ‘‘(A) TAX BENEFIT RULE.—The tax for

8 the taxable year shall be increased under para9 graph (1) only with respect to credits allowed

10 by reason of this section which were used to re11 duce tax liability. In the case of credits not so

12 used to reduce tax liability, the carryforwards

13 and carrybacks under section 39 shall be appro14 priately adjusted.

15 ‘‘(B) NO CREDITS AGAINST TAX.—Any in16 crease in tax under this subsection shall not be

17 treated as a tax imposed by this chapter for

18 purposes of determining the amount of any

19 credit under this chapter or for purposes of sec20 tion 55.

21 ‘‘(h) BASIS REDUCTION.—The basis of any qualified

22 equity investment shall be reduced by the amount of any

23 credit determined under this section with respect to such

24 investment.
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1 ‘‘(i) REGULATIONS.—The Secretary shall prescribe

2 such regulations as may be appropriate to carry out this

3 section, including regulations—

4 ‘‘(1) which limit the credit for investments

5 which are directly or indirectly subsidized by other

6 Federal benefits (including the credit under section

7 42 and the exclusion from gross income under sec8 tion 103),

9 ‘‘(2) which prevent the abuse of the provisions

10 of this section through the use of related parties,

11 ‘‘(3) which impose appropriate reporting re12 quirements, and

13 ‘‘(4) which apply the provisions of this section

14 to newly formed entities.’’.

15 (b) CREDIT MADE PART OF GENERAL BUSINESS

16 CREDIT.—

17 (1) IN GENERAL.—Subsection (b) of section 38,

18 as amended by section 201(b), is amended by strik19 ing ‘‘plus’’ at the end of paragraph (12), by striking

20 the period at the end of paragraph (13) and insert21 ing ‘‘, plus’’, and by adding at the end the following

22 new paragraph:

23 ‘‘(14) the new markets tax credit determined

24 under section 45E(a).’’.
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1 (2) LIMITATION ON CARRYBACK.—Subsection

2 (d) of section 39, as amended by section 201(d), is

3 amended by adding at the end the following new

4 paragraph:

5 ‘‘(10) NO CARRYBACK OF NEW MARKETS TAX

6 CREDIT BEFORE JANUARY 1, 2001.—No portion of

7 the unused business credit for any taxable year

8 which is attributable to the credit under section 45E

9 may be carried back to a taxable year ending before

10 January 1, 2001.’’.

11 (c) DEDUCTION FOR UNUSED CREDIT.—Subsection

12 (c) of section 196 is amended by striking ‘‘and’’ at the

13 end of paragraph (7), by striking the period at the end

14 of paragraph (8) and inserting ‘‘, and’’, and by adding

15 at the end the following new paragraph:

16 ‘‘(9) the new markets tax credit determined

17 under section 45E(a).’’.

18 (d) CLERICAL AMENDMENT.—The table of sections

19 for subpart D of part IV of subchapter A of chapter 1,

20 as amended by section 201(e), is amended by adding at

21 the end the following new item:

‘‘Sec. 45E. New markets tax credit.’’.

22 (e) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to investments made after Decem24 ber 31, 2000.
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1 (f) REGULATIONS ON ALLOCATION OF NATIONAL

2 LIMITATION.—Not later than 90 days after the date of

3 the enactment of this Act, the Secretary of the Treasury

4 or the Secretary’s delegate shall prescribe regulations

5 which specify objective criteria to be used in making the

6 allocations under section 45E(f)(2) of the Internal Rev7 enue Code of 1986, as added by this section.

8 TITLE VIII—COMMUNITY DEVEL9 OPMENT AND VENTURE CAP10 ITAL

11 SEC. 800. SHORT TITLE.

12 This title may be cited as the ‘‘Community Develop13 ment and Venture Capital Act of 2000’’.

14 Subtitle A—New Markets Venture

15 Capital Program

16 SEC. 801. NEW MARKETS VENTURE CAPITAL PROGRAM.

17 (a) IN GENERAL.—Title III of the Small Business

18 Investment Act of 1958 (15 U.S.C. 681 et seq.) is

19 amended—

20 (1) by striking the title designation and heading

21 and inserting the following:
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1 ‘‘TITLE III—INVESTMENT

2 DIVISION PROGRAMS

3 ‘‘PART A—SMALL BUSINESS INVESTMENT

4 COMPANIES’’;

5 and

6 (2) by adding at the end the following:

7 ‘‘PART B—NEW MARKETS VENTURE CAPITAL

8 PROGRAM

9 ‘‘SEC. 351. DEFINITIONS.

10 ‘‘In this part—

11 ‘‘(1) the term ‘eligible company’ means a com12 pany that—

13 ‘‘(A) is a newly formed for-profit entity,

14 which may be a newly formed for-profit sub15 sidiary of an existing entity; and

16 ‘‘(B) has a management team with experi17 ence in community development financing or

18 relevant venture capital financing;

19 ‘‘(2) the term ‘low-income individual’ means an

20 individual whose income (adjusted for family size)

21 does not exceed—

22 ‘‘(A) for metropolitan areas, 80 percent of

23 the area median income; and

24 ‘‘(B) for nonmetropolitan areas, the great25 er of—
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•S 2779 IS

1 ‘‘(i) 80 percent of the area median in2 come; or

3 ‘‘(ii) 80 percent of the statewide non4 metropolitan area median income;

5 ‘‘(3) the term ‘low- or moderate-income geo6 graphic area’ means—

7 ‘‘(A) any population census tract (or in the

8 case of an area that is not tracted for popu9 lation census tracts, the equivalent county divi10 sion, as defined by the Bureau of the Census of

11 the Department of Commerce for purposes of

12 defining poverty areas) if—

13 ‘‘(i) the poverty rate for such census

14 tract is not less than 20 percent;

15 ‘‘(ii)(I) in the case of a tract located

16 within a metropolitan area, the median

17 family income for such tract does not ex18 ceed the greater of 80 percent of the state19 wide median family income or 80 percent

20 of the metropolitan area median family in21 come; or

22 ‘‘(II) in the case of a tract not located

23 within a metropolitan area, the median

24 family income for such tract does not ex-
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•S 2779 IS

1 ceed 80 percent of the statewide median

2 family income; or

3 ‘‘(iii) as determined by the Adminis4 trator based on objective criteria, a sub5 stantial population of low-income individ6 uals reside, an inadequate access to invest7 ment capital exists, or other indications of

8 economic distress exist; or

9 ‘‘(B) any area located within—

10 ‘‘(i) a HUBZone (as defined in sec11 tion 3(p) of the Small Business Act and

12 the implementing regulations issued under

13 that section);

14 ‘‘(ii) an urban empowerment zone or

15 urban enterprise community (as designated

16 by the Secretary of Housing and Urban

17 Development); or

18 ‘‘(iii) a rural empowerment zone or

19 rural enterprise community (as designated

20 by the Secretary of Agriculture);

21 ‘‘(4) the terms ‘new markets venture capital

22 company’ and ‘NMVC company’ mean a company

23 that has been designated as a new markets venture

24 capital company by the Administrator under section

25 354(d);
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1 ‘‘(5) the term ‘participation agreement’ means

2 an agreement, between the Administrator and a

3 company granted final approval under section

4 354(e), that—

5 ‘‘(A) details the company’s operating plan

6 and investment criteria; and

7 ‘‘(B) requires the company to make invest8 ments in smaller enterprises at least 80 percent

9 of which are located in low- or moderate-income

10 geographic areas; and

11 ‘‘(6) the term ‘specialized small business invest12 ment company’ means any small business investment

13 company that—

14 ‘‘(A) invests solely in small business con15 cerns that contribute to a well-balanced na16 tional economy by facilitating ownership in such

17 concerns by persons whose participation in the

18 free enterprise system is hampered because of

19 social or economic disadvantages;

20 ‘‘(B) is organized or chartered under State

21 business or nonprofit corporations statutes, or

22 formed as a limited partnership; and

23 ‘‘(C) was licensed under section 301(d), as

24 in effect before September 30, 1996.
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1 ‘‘SEC. 352. PURPOSES.

2 ‘‘The purposes of this part are—

3 ‘‘(1) to encourage venture capital investment in

4 smaller enterprises located within urban and rural

5 areas;

6 ‘‘(2) to promote the creation of wealth, eco7 nomic development, and job opportunities in low8 and moderate-income geographic areas; and

9 ‘‘(3) to establish a venture capital program,

10 which shall be administered by the Administrator—

11 ‘‘(A) to make grants to NMVC companies

12 for the purpose of providing marketing, man13 agement, and technical assistance to smaller en14 terprises financed, or expected to be financed,

15 by such companies; and

16 ‘‘(B) to guarantee debentures issued by

17 NMVC companies to enable such companies to

18 make venture capital investments in smaller en19 terprises within urban and rural areas.

20 ‘‘SEC. 353. PROGRAM ESTABLISHMENT.

21 ‘‘There is established a New Markets Venture Capital

22 Program, under which the Administrator is authorized

23 to—

24 ‘‘(1) make grants to NMVC companies, as pro25 vided in section 355; and
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1 ‘‘(2) guarantee debentures issued by NMVC

2 companies, as provided in section 356.

3 ‘‘SEC. 354. SELECTION OF NMVC COMPANIES.

4 ‘‘(a) APPLICATIONS.—In order to be eligible to par5 ticipate in the program under this part as an NMVC com6 pany, an eligible company shall submit to the Adminis7 trator an application, within such period of time as the

8 Administrator shall establish, which shall include—

9 ‘‘(1) a business plan that describes the manner

10 and geographic areas in which the applicant will

11 make successful venture capital investments in

12 smaller enterprises described in subparagraphs (A)

13 and (B) of section 351(5) and provide marketing,

14 management, and technical assistance to those en15 terprises;

16 ‘‘(2) the qualifications and general business

17 reputation of the management of the applicant, spe18 cifically addressing—

19 ‘‘(A) the experience of the management in

20 making venture capital investments in smaller

21 enterprises described in subparagraphs (A) and

22 (B) of section 351(5); and

23 ‘‘(B) the success of those investments in

24 terms of business growth, jobs created, and
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•S 2779 IS

1 such other factors as the Administrator may re2 quire; and

3 ‘‘(3) a description of the manner in which the

4 applicant will interface with community organiza5 tions;

6 ‘‘(4) a proposal describing the manner in which

7 grant amounts made available under this part would

8 provide marketing, management, and technical as9 sistance to smaller enterprises expected to be fi10 nanced by the applicant;

11 ‘‘(5) proposed criteria by which to evaluate the

12 performance of the applicant in meeting program ob13 jectives;

14 ‘‘(6) the management and financial strength of

15 any parent or affiliated firm, or any firm essential

16 to the success of the business plan of the applicant;

17 ‘‘(7) with respect to binding commitments to be

18 made to the company under this part, an estimate

19 of the ratio of cash to in-kind contributions; and

20 ‘‘(8) such other information as the Adminis21 trator may require.

22 ‘‘(b) CRITERIA FOR CONDITIONAL APPROVAL.—

23 ‘‘(1) IN GENERAL.—Upon receipt of an applica24 tion submitted under subsection (a), the Adminis25 trator shall review the application and make a deter-
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•S 2779 IS

1 mination regarding whether to grant conditional ap2 proval to the applicant to operate as an NMVC com3 pany during the time period described in subsection

4 (c), based on—

5 ‘‘(A) the geographic area and employment

6 characteristics of the smaller enterprises in

7 which the proposed investments of the NMVC

8 company will be made (in order to promote in9 vestment nationwide);

10 ‘‘(B) the likelihood that the applicant will

11 meet the goals of the business plan of the appli12 cant;

13 ‘‘(C) the experience and background of the

14 company’s management team;

15 ‘‘(D) the need for equity or equity-type in16 vestments within the proposed investment

17 areas;

18 ‘‘(E) the extent to which the applicant will

19 concentrate its activities on serving its invest20 ment areas;

21 ‘‘(F) the likelihood that the applicant will

22 be able to satisfy the requirements of subsection

23 (c);
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1 ‘‘(G) the extent to which the proposed ac2 tivities will expand economic opportunities with3 in the investment areas; and

4 ‘‘(H) such other factors as the Adminis5 trator determines to be appropriate.

6 ‘‘(2) NATIONWIDE DISTRIBUTION.—The Admin7 istrator shall select companies under paragraph (1)

8 in such a way that promotes investment nationwide.

9 ‘‘(c) REQUIREMENTS FOR FINAL APPROVAL.—

10 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

11 each applicant that is granted conditional approval

12 by the Administrator to operate as an NMVC com13 pany under subsection (b), shall, before the expira14 tion of a time period established by the Adminis15 trator not to exceed 24 months, beginning on the

16 date on which such conditional approval is

17 granted—

18 ‘‘(A) raise not less than $5,000,000 of con19 tributed capital or binding capital commitments

20 from 1 or more investors (other than an agency

21 of the Federal Government) that meet criteria

22 established by the Administrator; and

23 ‘‘(B) in order to provide marketing, man24 agement, and technical assistance, have—
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•S 2779 IS

1 ‘‘(i) cash or binding commitments for

2 contributions (in cash or in-kind) from 1

3 or more sources other than the Adminis4 tration that meet criteria established by

5 the Administrator, payable or available

6 over a multiyear period acceptable to the

7 Administrator (not to exceed 10 years), in

8 an amount equal to 30 percent of the cap9 ital and commitments raised under sub10 paragraph (A);

11 ‘‘(ii) purchased an annuity from an

12 insurance company acceptable to the Ad13 ministrator, using amounts (other than the

14 amounts raised to satisfy the requirements

15 of subparagraph (A)) from any source

16 other than the Administration, that would

17 yield cash payments over a multiyear pe18 riod acceptable to the Administrator (not

19 to exceed 10 years), in an amount equal to

20 30 percent of the capital and commitments

21 raised under subparagraph (A); or

22 ‘‘(iii) cash or binding commitments

23 for contributions (in cash or in-kind) of the

24 type described in clause (i) and have pur25 chased an annuity of the type described in
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•S 2779 IS

1 clause (ii), that in the aggregate make

2 available, over a multiyear period accept3 able to the Administrator (not to exceed 10

4 years), an amount equal to 30 percent of

5 the capital and commitments raised under

6 subparagraph (A).

7 ‘‘(2) EXCEPTION.—The Administrator may, in

8 the discretion of the Administrator and based upon

9 a showing of special circumstances and good cause,

10 consider an applicant to have satisfied the require11 ments of paragraph (1)(B) if the applicant has—

12 ‘‘(A) a viable plan that reasonably projects

13 the capacity of the applicant to raise the

14 amount (in cash or in-kind) required under

15 paragraph (1)(B); and

16 ‘‘(B) binding commitments in an amount

17 not less than 20 percent of the total amount re18 quired under paragraph (1)(B).

19 ‘‘(d) GRANT OF FINAL APPROVAL; DESIGNATION.—

20 The Administrator shall, with respect to each applicant

21 conditionally approved to operate as an NMVC company

22 under subsection (b), either—

23 ‘‘(1) grant final approval to the applicant to op24 erate as an NMVC company under this part and
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•S 2779 IS

1 designate the applicant as an NMVC company, if

2 the applicant—

3 ‘‘(A) satisfies the requirements of sub4 section (c) on or before the expiration of the

5 time period described in that subsection; and

6 ‘‘(B) enters into a participation agreement

7 with the Administrator; or

8 ‘‘(2) if the applicant fails to satisfy the require9 ments of subsection (c) on or before the expiration

10 of the time period described in that subsection, re11 voke the conditional approval granted under that

12 subsection.

13 ‘‘SEC. 355. TECHNICAL ASSISTANCE GRANTS.

14 ‘‘(a) GRANTS.—

15 ‘‘(1) IN GENERAL.—The Administrator, in ac16 cordance with such terms and conditions as the Ad17 ministrator may require, is authorized to award 1 or

18 more grants to each NMVC company or to any other

19 entity, as authorized by this part, which shall be

20 used to provide marketing, management, and tech21 nical assistance for the benefit of smaller enterprises

22 financed, or expected to be financed, by the NMVC

23 company or other authorized entity.

24 ‘‘(2) MULTIYEAR GRANTS.—Amounts from a

25 grant awarded under this section shall be paid upon
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•S 2779 IS

1 the direction of the Administrator over a multiyear

2 period of not to exceed 10 years.

3 ‘‘(3) GRANTS TO SPECIALIZED SMALL BUSINESS

4 INVESTMENT COMPANIES.—

5 ‘‘(A) AUTHORITY.—In accordance with

6 this section, the Administrator may make

7 grants to specialized small business investment

8 companies to provide marketing, management,

9 and technical assistance to smaller enterprises

10 financed, or expected to be financed, by such

11 companies after the effective date of the Com12 munity Development and Venture Capital Act

13 of 2000.

14 ‘‘(B) USE OF FUNDS.—The proceeds of a

15 grant made under this paragraph may be used

16 by the company receiving such grant only to

17 provide marketing, management, and technical

18 assistance in connection with an equity or eq19 uity-type investment (made with capital raised

20 after the effective date of the Community De21 velopment and Venture Capital Act of 2000) in

22 a business located in a low- or moderate-income

23 geographic area.

24 ‘‘(C) SUBMISSION OF PLANS.—A special25 ized small business investment company shall
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1 be eligible for a grant under this section only if

2 the company submits to the Administrator, in

3 such form and manner as the Administrator

4 may require, a plan for use of the grant.

5 ‘‘(4) GRANT AMOUNT.—

6 ‘‘(A) IN GENERAL.—Subject to subpara7 graph (B), the amount of a grant awarded to

8 an NMVC company or other authorized entity

9 under this subsection shall be equal to 30 per10 cent of the amount of capital and commitments

11 raised under section 354(c)(1)(A).

12 ‘‘(B) MATCHING REQUIREMENT.—In order

13 to receive funds under a grant awarded under

14 this subsection, an NMVC company or other

15 authorized entity shall provide a matching con16 tribution (in cash or in-kind) from sources

17 other than the Administration, in an amount

18 equal to the funds to received.

19 ‘‘(5) PRO RATA REDUCTIONS.—If the amount

20 made available to carry out this section for a fiscal

21 year is insufficient for the Administrator to award

22 grants in the amounts required under paragraph

23 (4), the Administrator shall make pro rata reduc24 tions in the amounts otherwise payable to each
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•S 2779 IS

1 NMVC company or other authorized entity under

2 that paragraph.

3 ‘‘(b) SUPPLEMENTAL GRANTS.—

4 ‘‘(1) IN GENERAL.—In addition to any grant

5 under subsection (a), the Administrator, in accord6 ance with such terms and conditions as the Adminis7 trator may require, may make 1 or more supple8 mental grants to an NMVC company or other au9 thorized entity, which shall be used to provide addi10 tional marketing, management, and technical assist11 ance for the benefit of smaller enterprises financed,

12 or expected to be financed, by the NMVC company

13 or other authorized entity.

14 ‘‘(2) MATCHING REQUIREMENT.—The Adminis15 trator may require, as a condition of any supple16 mental grant made under this subsection, that the

17 NMVC company provide a matching contribution (in

18 cash or in-kind) from 1 or more sources other than

19 the Administrator in an amount equal to the amount

20 of the supplemental grant.

21 ‘‘(c) LIMITATION.—No part of any grant made avail22 able under this section may be used for any purpose other

23 than to provide direct technical and financial assistance

24 to smaller enterprises financed, or expected to be financed,

25 by the NMVC companies or other authorized entities.
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1 ‘‘SEC. 356. DEBENTURES.

2 ‘‘(a) IN GENERAL.—The Administrator is authorized

3 to guarantee the timely payment of principal and interest

4 as scheduled on debentures issued by NMVC companies,

5 in accordance with such terms and conditions the Admin6 istrator determines to be appropriate.

7 ‘‘(b) FULL FAITH AND CREDIT.—The full faith and

8 credit of the United States is pledged to the payment of

9 all amounts that may be required to be paid under any

10 guarantee under this section.

11 ‘‘(c) DEBENTURE REQUIREMENTS.—A debenture

12 guaranteed under this section—

13 ‘‘(1) may be issued for a term of not to exceed

14 15 years;

15 ‘‘(2) shall bear interest at a rate approved by

16 the Administrator; and

17 ‘‘(3) shall contain such other terms and condi18 tions as the Administrator may require.

19 ‘‘(d) TOTAL FACE VALUE.—The total face amount

20 of debentures issued by an NMVC company and guaran21 teed under this section that may be outstanding at any

22 1 time shall not exceed 150 percent of the contributed cap23 ital of the NMVC company, as determined by the Adminis24 trator. For purposes of this subsection, the contributed

25 capital of an NMVC company includes capital that is
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•S 2779 IS

1 deemed to be Federal funds contributed by an investor

2 other than an agency of the Federal Government.

3 ‘‘SEC. 357. ISSUANCE AND GUARANTEE OF TRUST CERTIFI4 CATES.

5 ‘‘(a) IN GENERAL.—The Administrator (or an agent

6 of the Administrator) is authorized to issue trust certifi7 cates representing ownership of all or a fractional part of

8 debentures guaranteed by the Administrator under section

9 356, if such trust certificates are based on and backed

10 by a trust or pool approved by the Administrator and com11 posed solely of debentures guaranteed under section 356.

12 ‘‘(b) GUARANTEE AUTHORITY.—

13 ‘‘(1) IN GENERAL.—The Administrator is au14 thorized to, upon such terms and conditions as the

15 Administrator determines to be appropriate, guar16 antee the timely payment of the principal of and in17 terest on any trust certificate issued under this sec18 tion.

19 ‘‘(2) LIMITATION.—A guarantee under this sub20 section shall be limited to the extent of the principal

21 of and interest on the guaranteed debentures that

22 compose the trust or pool described in subsection

23 (a).

24 ‘‘(3) REDUCTION.—If a debenture in a trust or

25 pool described in subsection (a) is prepaid, or in the
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1 event of default of a debenture, the guarantee of

2 timely payment of principal and interest on the re3 lated trust certificate issued under this section shall

4 be reduced in proportion to the amount of principal

5 and interest that such prepaid debenture represents

6 in that trust or pool.

7 ‘‘(4) ACCRUAL OF INTEREST.—Interest on pre8 paid or defaulted debentures shall accrue and be

9 guaranteed by the Administrator only through the

10 date of payment of the guarantee.

11 ‘‘(5) REDEMPTION OF TRUST CERTIFICATES.—

12 During the term of any trust certificate issued under

13 this subsection, the trust certificate may be called

14 for redemption due to prepayment or default of all

15 debentures in the trust or pool.

16 ‘‘(c) FULL FAITH AND CREDIT.—The full faith and

17 credit of the United States is pledged to the payment of

18 all amounts that may be required to be paid under any

19 guarantee of a trust certificate issued under this section.

20 ‘‘(d) FEES.—The Administrator shall not collect a fee

21 for any guarantee of a trust certificate issued under this

22 section, except that nothing in this subsection may be con23 strued to preclude an agent of the Administrator from col24 lecting a fee approved by the Administrator for the func25 tions described in subsection (f)(2).
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1 ‘‘(e) SUBROGATION.—

2 ‘‘(1) IN GENERAL.—If the Administrator pays a

3 claim under a guarantee issued under this section,

4 the Administration shall be subrogated fully to the

5 rights satisfied by such payment.

6 ‘‘(2) OWNERSHIP RIGHTS.—No Federal, State,

7 or local law shall preclude or limit the exercise by

8 the Administrator of the ownership rights of the Ad9 ministrator in the debentures residing in a trust or

10 pool against which trust certificates are issued under

11 this section.

12 ‘‘(f) CENTRAL REGISTRATION.—

13 ‘‘(1) IN GENERAL.—The Administrator may

14 provide for a central registration of all trust certifi15 cates issued under this section.

16 ‘‘(2) CONTRACTING OF FUNCTIONS.—

17 ‘‘(A) IN GENERAL.—The Administrator

18 may contract with an agent or agents to carry

19 out on behalf of the Administrator the pooling

20 and the central registration functions of this

21 section including, notwithstanding any other

22 provision of law—

23 ‘‘(i) maintenance on behalf of and

24 under the direction of the Administrator of

25 such commercial bank accounts or invest-
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1 ments in obligations of the United States

2 as may be necessary to facilitate trusts or

3 pools backed by debentures guaranteed

4 under this part; and

5 ‘‘(ii) the issuance of trust certificates

6 to facilitate such poolings.

7 ‘‘(B) FIDELITY BOND OR INSURANCE RE8 QUIRED.—An agent contracting with the Ad9 ministrator under this paragraph shall be re10 quired to provide a fidelity bond or insurance in

11 such amounts as the Administrator determines

12 to be necessary to fully protect the interests of

13 the Government.

14 ‘‘(3) REGULATION OF BROKERS AND DEAL15 ERS.—Notwithstanding section 3(a)(42) of the Secu16 rities Exchange Act of 1934 (15 U.S.C. 78c(a)(42)),

17 the Administrator may regulate brokers and dealers

18 in trust certificates issued under this section.

19 ‘‘(4) ELECTRONIC REGISTRATION.—Nothing in

20 this subsection may be construed to prohibit the use

21 of a book-entry or other electronic form of registra22 tion for trust certificates issued under this section.

23 ‘‘SEC. 358. FEES.

24 ‘‘Except as provided under section 357(d), the Ad25 ministrator may charge such fees as the Administrator de-
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1 termines to be appropriate with respect to any guarantee

2 issued or grant awarded under this part.

3 ‘‘SEC. 359. BANK PARTICIPATION.

4 ‘‘Any national bank, or any member bank of the Fed5 eral Reserve System or nonmember insured bank to the

6 extent permitted under applicable State law, may invest

7 in any 1 or more NMVC companies, or in any entity estab8 lished to invest solely in NMVC companies, except that

9 in no event shall the total amount of such investments of

10 any such bank exceed 5 percent of the total capital and

11 surplus of the bank.

12 ‘‘SEC. 360. FEDERAL FINANCING BANK.

13 ‘‘Section 318 shall not apply to any debenture issued

14 by a NMVC company under this part.

15 ‘‘SEC. 361. REPORTING REQUIREMENTS.

16 ‘‘Each NMVC company shall provide to the Adminis17 trator such information as the Administrator may request,

18 including—

19 ‘‘(1) information related to the measurement

20 criteria that the NMVC company proposed in the

21 application submitted under section 354(a);

22 ‘‘(2) documentation on the use of technical as23 sistance grants under this part; and

24 ‘‘(3) in each case in which the company under

25 this part makes an investment in, or a loan or grant
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1 to, a business that is not located in a low- or mod2 erate-income geographic area, a report on the num3 ber and percentage of employees of the business who

4 reside in such areas.

5 ‘‘SEC. 362. EXAMINATIONS.

6 ‘‘(a) IN GENERAL.—Each NMVC company shall be

7 subject to examinations made at the direction of the In8 vestment Division of the Administration, which may be

9 conducted with the assistance of a private sector entity

10 that has both the qualifications to conduct and the exper11 tise in conducting such examinations.

12 ‘‘(b) ASSESSMENT OF COSTS.—The cost of such ex13 aminations, including the compensation of the examiners,

14 may in the discretion of the Administrator be assessed

15 against the company examined and when so assessed shall

16 be paid by such company.

17 ‘‘(c) DEPOSIT OF FEES.—Fees collected under this

18 section shall be deposited in the account for salaries and

19 expenses of the Administration.

20 ‘‘SEC. 363. INJUNCTIONS AND OTHER ORDERS.

21 ‘‘(a) IN GENERAL.—If, in the judgment of the Ad22 ministrator, an NMVC company or any other person has

23 engaged or is about to engage in any act or practice that

24 constitutes or will constitute a violation of any provision

25 of this title (or any rule, regulation, or order issued under
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•S 2779 IS

1 this title) or of a participation agreement entered into

2 under this part—

3 ‘‘(1) the Administrator may make application to

4 the proper district court of the United States or a

5 United States court of any place subject to the juris6 diction of the United States for an order enjoining

7 such act or practice, or for an order enforcing com8 pliance with such provision; and

9 ‘‘(2) such court shall—

10 ‘‘(A) have jurisdiction over such applica11 tion and any ensuing proceedings; and

12 ‘‘(B) upon a showing by the Administrator

13 that such NMVC company or other person has

14 engaged or is about to engage in any such act

15 or practice, grant without bond a permanent or

16 temporary injunction, restraining order, or

17 other appropriate order.

18 ‘‘(b) POWERS OF COURT.—In any proceeding under

19 subsection (a)—

20 ‘‘(1) the court as a court of equity may, to such

21 extent as the court determines to be necessary, take

22 exclusive jurisdiction of the NMVC company and the

23 assets thereof, wherever located; and

24 ‘‘(2) the court shall have jurisdiction in any

25 such proceeding to appoint a trustee or receiver to
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•S 2779 IS

1 hold or administer under the direction of the court

2 the assets so possessed.

3 ‘‘(c) TRUSTEE OR RECEIVER.—The Administrator is

4 authorized to act as trustee or receiver of the NMVC com5 pany. Upon request by the Administrator, the court may

6 appoint the Administrator to act in such capacity unless

7 the court determines such appointment to be inequitable

8 or otherwise inappropriate based on the special cir9 cumstances at issue.

10 ‘‘SEC. 364. UNLAWFUL ACTS AND OMISSIONS BY OFFICERS,

11 DIRECTORS, EMPLOYEES, OR AGENTS;

12 BREACH OF FIDUCIARY DUTY.

13 ‘‘(a) IN GENERAL.—If an NMVC company violates

14 any provision of this title (or any rule or regulation issued

15 under this title), or of a participation agreement entered

16 into under this part, by failing to comply with the terms

17 thereof or by engaging in any act or practice that con18 stitutes or will constitute a violation thereof, such violation

19 shall be deemed to be also a violation and an unlawful

20 act on the part of any person who, directly or indirectly,

21 authorizes, orders, participates in, or causes, brings about,

22 counsels, aids, or abets in the commission of any act, prac23 tice, or transaction that constitutes or will constitute, in

24 whole or in part, such violation.
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•S 2779 IS

1 ‘‘(b) BREACH OF FIDUCIARY DUTY.—It shall be un2 lawful for any officer, director, employee, agent, or other

3 participant in the management or conduct of the affairs

4 of an NMVC company to engage in any act or practice,

5 or to omit any act, in breach of the fiduciary duty of such

6 officer, director, employee, agent, or participant, if, as a

7 result thereof, the NMVC company has suffered or is in

8 imminent danger of suffering financial loss or other dam9 age.

10 ‘‘(c) OTHER PROHIBITIONS.—Except with the writ11 ten consent of the Administrator, it shall be unlawful—

12 ‘‘(1) for any person to take office as an officer,

13 director, or employee of an NMVC company, or to

14 become an agent or participant in the conduct of the

15 affairs or management of an NMVC company, if

16 that person—

17 ‘‘(A) has been convicted of a felony, or any

18 other criminal offense involving dishonesty or

19 breach of trust; or

20 ‘‘(B) has been found civilly liable in dam21 ages, or has been permanently or temporarily

22 enjoined by order, judgment, or decree of a

23 court of competent jurisdiction, by reason of

24 any act or practice involving fraud or breach of

25 trust; or
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•S 2779 IS

1 ‘‘(2) for any person to continue to serve in any

2 of the above-described capacities, if that person is

3 subsequently—

4 ‘‘(A) convicted of a felony, or any other

5 criminal offense involving dishonesty or breach

6 of trust; or

7 ‘‘(B) found civilly liable in damages, or is

8 permanently or temporarily enjoined by an

9 order, judgment, or decree of a court of com10 petent jurisdiction, by reason of any act or

11 practice involving fraud or breach of trust.

12 ‘‘(d) NOTICE.—The Administrator may serve upon

13 any officer, director, employee, or other participant in the

14 conduct of the management or other affairs of an NMVC

15 company a written notice of the intention of the Adminis16 trator to remove that person from his or her position

17 whenever, in the opinion of the Administrator, that

18 person—

19 ‘‘(1) has willfully committed any substantial

20 violation of—

21 ‘‘(A) this title (or any rule, regulation, or

22 order issued under this title); or

23 ‘‘(B) a participation agreement entered

24 into under this part; or
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•S 2779 IS

1 ‘‘(C) a cease-and-desist order that has be2 come final; or

3 ‘‘(2) has willfully committed or engaged in any

4 act, omission, or practice that constitutes a substan5 tial breach of fiduciary duty, and that such violation

6 or such breach of fiduciary duty is one involving per7 sonal dishonesty on the part of such person.

8 ‘‘(e) SUSPENSION OR REMOVAL.—The Administrator

9 may suspend or remove from office any person upon whom

10 the Administrator has served a notice under subsection

11 (d), in accordance with the procedures set forth in section

12 313.

13 ‘‘SEC. 365. REGULATIONS.

14 ‘‘The Administrator may promulgate such regula15 tions as the Administrator determines to be necessary to

16 carry out this part.

17 ‘‘SEC. 366. AUTHORIZATIONS.

18 ‘‘(a) IN GENERAL.—For fiscal years 2000 through

19 2005, the Administration is authorized to be appropriated,

20 to remain available until expended—

21 ‘‘(1) such subsidy budget authority as may be

22 necessary to guarantee $150,000,000 of debentures

23 under this part; and

24 ‘‘(2) $30,000,000 to make grants under this

25 part.
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•S 2779 IS

1 ‘‘(b) FUNDS COLLECTED FOR EXAMINATIONS.—

2 Funds deposited under section 362(c) are authorized to

3 be appropriated only for the costs of examinations under

4 section 362 and for the costs of other oversight activities

5 with respect to the program established under this part.’’.

6 (b) CONFORMING AMENDMENT.—Section

7 20(e)(1)(C) of the Small Business Act (15 U.S.C. 631

8 note) is amended by inserting ‘‘part A of’’ before ‘‘title

9 III’’.

10 SEC. 802. BANKRUPTCY EXEMPTION FOR NMVC COMPA11 NIES.

12 Section 109(b)(2) of title 11, United States Code, is

13 amended by inserting after ‘‘homestead association,’’ the

14 following: ‘‘a new markets venture capital company (as de15 fined in section 351 of the Small Business Investment Act

16 of 1958),’’.

17 SEC. 803. FEDERAL SAVINGS ASSOCIATIONS.

18 Section 5(c)(4) of the Home Owners’ Loan Act (12

19 U.S.C. 1464(c)(4)) is amended by adding at the end the

20 following:

21 ‘‘(F) NEW MARKETS VENTURE CAPITAL

22 COMPANIES.—A Federal savings association

23 may invest in stock, obligations, or other securi24 ties of any new markets venture capital com25 pany (as defined in section 351 of the Small
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•S 2779 IS

1 Business Investment Act of 1958). A Federal

2 savings association may not make any invest3 ment under this subparagraph if its aggregate

4 outstanding investment under this subpara5 graph would exceed 5 percent of the capital and

6 surplus of such savings association.’’.

7 Subtitle B—Community Develop8 ment Venture Capital Assist9 ance

10 SEC. 811. FINDINGS.

11 Congress finds that—

12 (1) there is a need for the development and ex13 pansion of organizations that provide private equity

14 capital to smaller businesses in areas in which eq15 uity-type capital is scarce, such as inner cities and

16 rural areas, in order to create and retain jobs for

17 low-income residents of those areas;

18 (2) to invest successfully in smaller businesses,

19 particularly in inner cities and rural areas, requires

20 highly specialized investment and management skills;

21 (3) there is a shortage of professionals who pos22 sess such skills and there are few training grounds

23 for individuals to obtain those skills;

24 (4) providing assistance to organizations that

25 provide specialized technical assistance and training
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•S 2779 IS

1 to individuals and organizations seeking to enter or

2 expand in this segment of the market would stimu3 late small business development and entrepreneur4 ship in economically distressed communities; and

5 (5) assistance from the Federal Government

6 could act as a catalyst to attract investment from

7 the private sector and would help to develop a spe8 cialized venture capital industry focused on creating

9 jobs, increasing business ownership, and generating

10 wealth in low-income communities.

11 SEC. 812. COMMUNITY DEVELOPMENT VENTURE CAPITAL

12 ACTIVITIES.

13 (a) IN GENERAL.—The Small Business Act (15

14 U.S.C. 631 et seq.) is amended—

15 (1) by redesignating section 34 as section 35;

16 and

17 (2) by inserting after section 33 the following:

18 ‘‘SEC. 34. COMMUNITY DEVELOPMENT VENTURE CAPITAL

19 ACTIVITIES.

20 ‘‘(a) DEFINITIONS.—In this section:

21 ‘‘(1) COMMUNITY DEVELOPMENT VENTURE

22 CAPITAL ORGANIZATION.—The term ‘community de23 velopment venture capital organization’ means a pri24 vately-controlled organization that—
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•S 2779 IS

1 ‘‘(A) has a primary mission of promoting

2 community development in low-income commu3 nities, as defined by the Administrator, through

4 investment in private business enterprises; or

5 ‘‘(B) administers or is in the process of es6 tablishing a community development venture

7 capital fund for the purpose of making equity

8 investments in private business enterprises in

9 such communities.

10 ‘‘(2) DEVELOPMENTAL ORGANIZATION.—The

11 term ‘developmental organization’—

12 ‘‘(A) means a public or private entity, in13 cluding a college or university, that provides

14 technical assistance to community development

15 venture capital organizations or that conducts

16 research or training in community development

17 venture capital investment; and

18 ‘‘(B) may include an intermediary organi19 zation.

20 ‘‘(3) INTERMEDIARY ORGANIZATION.—The term

21 ‘intermediary organization’—

22 ‘‘(A) means a private, nonprofit entity that

23 has—

24 ‘‘(i) a primary mission of promoting

25 community development through invest-
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•S 2779 IS

1 ment in private businesses in low-income

2 communities; and

3 ‘‘(ii) significant prior experience in

4 providing technical assistance or financial

5 assistance to community development ven6 ture capital organizations;

7 ‘‘(B) may include community development

8 venture capital organizations.

9 ‘‘(b) AUTHORITY.—In order to promote the develop10 ment of community development venture capital organiza11 tions, the Administrator, may—

12 ‘‘(1) enter into contracts with 1 or more devel13 opmental organizations to carry out training and re14 search activities under subsection (c); and

15 ‘‘(2) make grants in accordance with this

16 section—

17 ‘‘(A) to developmental organizations to

18 carry out training and research activities under

19 subsection (c); and

20 ‘‘(B) to intermediary organizations to pro21 vide intensive marketing, management, and

22 technical assistance and training to community

23 development venture capital organizations

24 under subsection (d).

25 ‘‘(c) TRAINING AND RESEARCH ACTIVITIES.—
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•S 2779 IS

1 ‘‘(1) IN GENERAL.—Subject to paragraph (2), a

2 developmental organization that receives a grant

3 under subsection (b) shall use the funds made avail4 able through the grant for 1 or more of the following

5 training and research activities:

6 ‘‘(A) STRENGTHENING PROFESSIONAL

7 SKILLS.—Creating and operating training pro8 grams to enhance the professional skills for in9 dividuals in community development venture

10 capital organizations or operating private com11 munity development venture capital funds.

12 ‘‘(B) INCREASING INTEREST IN COMMU13 NITY DEVELOPMENT VENTURE CAPITAL.—Cre14 ating and operating a program to select and

15 place students and recent graduates from busi16 ness and related professional schools as interns

17 with community development venture capital or18 ganizations and intermediary organizations for

19 a period of up to 1 year, and to provide sti20 pends for such interns during the internship pe21 riod.

22 ‘‘(C) PROMOTING ‘BEST PRACTICES’.—Or23 ganizing an annual national conference for com24 munity development venture capital organiza25 tions to discuss and share information on the
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•S 2779 IS

1 best practices regarding issues relevant to the

2 creation and operation of community develop3 ment venture capital organizations.

4 ‘‘(D) MOBILIZING ACADEMIC RE5 SOURCES.—Encouraging the formation of 1 or

6 more centers for the study of community devel7 opment venture capital at graduate schools of

8 business and management, providing funding

9 for the development of materials for courses on

10 topics in this area, and providing funding for

11 research on economic, operational, and policy

12 issues relating to community development ven13 ture capital.

14 ‘‘(2) LIMITATION.—The Administrator shall en15 sure that not more than 25 percent of the amount

16 made available to carry out this section is used for

17 activities described in paragraph (1).

18 ‘‘(d) INTENSIVE MARKETING, MANAGEMENT, AND

19 TECHNICAL ASSISTANCE AND TRAINING.—An inter20 mediary organization that receives a grant under sub21 section (b) shall use the funds made available through the

22 grant to provide intensive marketing, management, and

23 technical assistance and training to promote the develop24 ment of community development venture capital organiza25 tions, which assistance may include grants to community
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•S 2779 IS

1 development venture capital organizations for the start up

2 costs and operating support of those organizations.

3 ‘‘(e) MATCHING CONTRIBUTION REQUIREMENT.—

4 The Administrator shall require, as a condition of any

5 grant made to an intermediary organization under this

6 section, that a matching contribution equal to the amount

7 of such grant be provided from sources other than the

8 Federal Government.

9 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There

10 is authorized to be appropriated to carry out this section

11 $20,000,000 for fiscal years 2000 through 2003, to re12 main available until expended.’’.

13 (b) REQUIREMENTS.—The Administrator of the

14 Small Business Administration may promulgate such reg15 ulations as may be necessary to carry out section 34 of

16 the Small Business Act, as amended by this section, which

17 regulations may take effect upon issuance.

18 Subtitle C—Business LINC

19 SEC. 821. GRANTS AUTHORIZED.

20 Section 8 of the Small Business Act (15 U.S.C. 637)

21 is amended by adding at the end the following:

22 ‘‘(m) BUSINESS LINC GRANTS.—

23 ‘‘(1) IN GENERAL.—The Administrator may

24 make grants to and enter into cooperative agree-
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•S 2779 IS

1 ments with any coalition of private or public sector

2 participants that—

3 ‘‘(A) expand business-to-business relation4 ships between large and small businesses; and

5 ‘‘(B) provide businesses, directly or indi6 rectly, with online information and a database

7 of companies that are interested in mentor-pro8 tegee programs or community-based, state-wide,

9 or local business development programs.

10 ‘‘(2) MATCHING REQUIREMENTS.—

11 ‘‘(A) IN GENERAL.—Subject to subpara12 graph (B), the Administrator may make grants

13 to and enter into cooperative agreements with

14 any coalition of private or public sector partici15 pants if the coalition provides a matching

16 amount, either in-kind or in cash, equal to the

17 grant amount.

18 ‘‘(B) WAIVER.—In the best interests of the

19 program, the Administrator may waive the re20 quirements for matching funds to be provided

21 by the coalition.

22 ‘‘(3) AUTHORIZATION OF APPROPRIATIONS.—

23 There is authorized to be appropriated to carry out

24 this subsection $6,600,000 for each of fiscal years
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•S 2779 IS

1 2000 through 2003, to remain available until ex2 pended.’’.

3 SEC. 822. REGULATIONS.

4 The Administrator of the Small Business Administra5 tion may promulgate such regulations as the Administra6 tion determines to be necessary to carry out this title and

7 the amendment made by this title.

8 TITLE IX—BOND VOLUME CAP

9 AND LOW-INCOME HOUSING

10 CREDIT INCREASES

11 SEC. 901. INCREASE IN STATE CEILING ON PRIVATE ACTIV12 ITY BONDS.

13 (a) IN GENERAL.—Paragraphs (1) and (2) of section

14 146(d) (relating to State ceiling) are amended to read as

15 follows:

16 ‘‘(1) IN GENERAL.—The State ceiling applicable

17 to any State for any calendar year shall be the

18 greater of—

19 ‘‘(A) an amount equal to $75 multiplied by

20 the State population, or

21 ‘‘(B) $225,000,000.

22 Subparagraph (B) shall not apply to any possession

23 of the United States.

24 ‘‘(2) INFLATION ADJUSTMENT.—In the case of

25 a calendar year after 2001, each of the dollar
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•S 2779 IS

1 amounts contained in paragraph (1) shall be in2 creased by an amount equal to—

3 ‘‘(A) such dollar amount, multiplied by

4 ‘‘(B) the cost-of-living adjustment deter5 mined under section 1(f)(3) for such calendar

6 year by substituting ‘calendar year 2000’ for

7 ‘calendar year 1992’ in subparagraph (B)

8 thereof.

9 If any increase determined under the preceding sen10 tence is not a multiple of $1 ($250 in the case of

11 the dollar amount in paragraph (1)(B), such in12 crease shall be rounded to the nearest multiple

13 thereof.’’

14 (c) EFFECTIVE DATE.—The amendments made by

15 this section shall apply to calendar years after 2000.

16 SEC. 902. INCREASE IN STATE CEILING ON LOW-INCOME

17 HOUSING CREDIT.

18 (a) IN GENERAL.—Clause (i) of section 42(h)(3)(C)

19 (relating to State housing credit ceiling) is amended by

20 striking ‘‘$1.25’’ and inserting ‘‘$1.75’’.

21 (b) ADJUSTMENT OF STATE CEILING FOR IN22 CREASES IN COST-OF-LIVING.—Paragraph (3) of section

23 42(h) (relating to housing credit dollar amount for agen24 cies) is amended by adding at the end the following new

25 subparagraph:
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•S 2779 IS

1 ‘‘(H) COST-OF-LIVING ADJUSTMENT.—

2 ‘‘(i) IN GENERAL.—In the case of a

3 calendar year after 2001, the dollar

4 amount contained in subparagraph (C)(i)

5 shall be increased by an amount equal to—

6 ‘‘(I) such dollar amount, multi7 plied by

8 ‘‘(II) the cost-of-living adjust9 ment determined under section 1(f)(3)

10 for such calendar year by substituting

11 ‘calendar year 2000’ for ‘calendar

12 year 1992’ in subparagraph (B) there13 of.

14 ‘‘(ii) ROUNDING.—If any increase

15 under clause (i) is not a multiple of 5

16 cents, such increase shall be rounded to

17 the next lowest multiple of 5 cents.’’.

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

19 this section shall apply to calendar years after 2000.

20 TITLE X—INDIVIDUAL

21 DEVELOPMENT ACCOUNTS

22 SEC. 1001. FINDINGS.

23 Congress makes the following findings:

24 (1) One-third of all Americans have no assets

25 available for investment, and another 20 percent
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•S 2779 IS

1 have only negligible assets. The household savings

2 rate of the United States lags far behind other in3 dustrial nations, presenting a barrier to national

4 economic growth and preventing many Americans

5 from entering the economic mainstream by buying a

6 house, obtaining an adequate education, or starting

7 a business.

8 (2) By building assets, Americans can improve

9 their economic independence and stability, stimulate

10 the development of human and other capital, and

11 work toward a viable and hopeful future for them12 selves and their children. Thus, economic well-being

13 does not come solely from income, spending, and

14 consumption, but also requires savings, investment,

15 and accumulation of assets.

16 (3) Traditional public assistance programs

17 based on income and consumption have rarely been

18 successful in promoting and supporting the transi19 tion to increased economic self-sufficiency. Income20 based social policies that meet consumption needs

21 (including food, child care, rent, clothing, and health

22 care) should be complemented by asset-based policies

23 that can provide the means to achieve long-term

24 independence and economic well-being.
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•S 2779 IS

1 (4) Individual Development Accounts (IDAs)

2 can provide working Americans with strong incen3 tives to build assets, basic financial management

4 training, and access to secure and relatively inexpen5 sive banking services.

6 (5) There is reason to believe that Individual

7 Development Accounts would also foster greater par8 ticipation in electric fund transfers (EFT), generate

9 financial returns, including increased income, tax

10 revenue, and decreased welfare cash assistance, that

11 will far exceed the cost of public investment in the

12 program.

13 SEC. 1002. PURPOSES.

14 The purposes of this title are to provide for the estab15 lishment of individual development account programs that

16 will—

17 (1) provide individuals and families with limited

18 means an opportunity to accumulate assets and to

19 enter the financial mainstream;

20 (2) promote education, homeownership, and the

21 development of small businesses;

22 (3) stabilize families and build communities;

23 and

24 (4) support continued United States economic

25 expansion.
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1 SEC. 1003. DEFINITIONS.

2 As used in this title:

3 (1) ELIGIBLE INDIVIDUAL.—

4 (A) IN GENERAL.—The term ‘‘eligible indi5 vidual’’ means an individual who—

6 (i) has attained the age of 18 years;

7 (ii) is a citizen or legal resident of the

8 United States; and

9 (iii) is a member of a household the

10 gross income of which does not exceed 80

11 percent of the median family income for

12 the area in which such individual resides

13 (as published by the Department of Hous14 ing and Urban Affairs).

15 (B) HOUSEHOLD.—The term ‘‘household’’

16 means all individuals who share use of a dwell17 ing unit as primary quarters for living and eat18 ing separate from other individuals.

19 (2) INDIVIDUAL DEVELOPMENT ACCOUNT.—

20 The term ‘‘Individual Development Account’’ means

21 an account established for an eligible individual as

22 part of a qualified individual development account

23 program, but only if the written governing instru24 ment creating the account meets the following re25 quirements:
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•S 2779 IS

1 (A) The sole owner of the account is the

2 eligible individual.

3 (B) No contribution will be accepted unless

4 it is in cash, by check, by electronic fund trans5 fer, or by electronic money order.

6 (C) The holder of the account is a quali7 fied financial institution, a qualified nonprofit

8 organization, or an Indian tribe.

9 (D) The assets of the account will not be

10 commingled with other property except in a

11 common trust fund or common investment

12 fund.

13 (E) Except as provided in section 1015(b),

14 any amount in the account may be paid out

15 only for the purpose of paying the qualified ex16 penses of the eligible individual.

17 (3) PARALLEL ACCOUNT.—The term ‘‘parallel

18 account’’ means a separate, parallel individual or

19 pooled account for all matching funds and earnings

20 dedicated to an eligible individual as part of a quali21 fied individual account program, the sole owner of

22 which is a qualified financial institution, a qualified

23 nonprofit organization, or an Indian tribe.

24 (4) QUALIFIED FINANCIAL INSTITUTION.—
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•S 2779 IS

1 (A) IN GENERAL.—The term ‘‘qualified fi2 nancial institution’’ means any person author3 ized to be a trustee of any individual retirement

4 account under section 408(a)(2).

5 (B) RULE OF CONSTRUCTION.—Nothing in

6 this paragraph shall be construed as preventing

7 a person described in subparagraph (A) from

8 collaborating with 1 or more qualified nonprofit

9 organizations or Indian tribes to carry out an

10 individual development account program estab11 lished under section 1011.

12 (5) QUALIFIED NONPROFIT ORGANIZATION.—

13 The term ‘‘qualified nonprofit organization’’

14 means—

15 (A)(i) any organization described in section

16 501(c)(3) of the Internal Revenue Code of 1986

17 and exempt from taxation under section 501(a)

18 of such Code;

19 (ii) any community development financial

20 institution as certified by the Community De21 velopment Financial Institution Fund; or

22 (iii) any credit union certified by the Na23 tional Credit Union Administration,
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•S 2779 IS

1 that meets standards for financial management and

2 fiduciary responsibility as defined by the Secretary

3 or an organization designated by the Secretary.

4 (6) INDIAN TRIBE.—The term ‘‘Indian tribe’’

5 means any Indian tribe as defined in section 4(12)

6 of the Native American Housing Assistance and

7 Self-Determination Act of 1996 (25 U.S.C.

8 4103(12), and includes any tribal subsidiary, sub9 division, or other wholly owned tribal entity.

10 (7) QUALIFIED INDIVIDUAL DEVELOPMENT AC11 COUNT PROGRAM.—The term ‘‘qualified individual

12 development program’’ means a program established

13 under section 1011 under which—

14 (A) individual development accounts and

15 parallel accounts are held by a qualified finan16 cial institution, a qualified nonprofit organiza17 tion, or an Indian tribe; and

18 (B) additional activities determined by the

19 Secretary, or an organization designated by the

20 Secretary, as necessary to responsibly develop

21 and administer accounts, including recruiting,

22 providing financial education and other training

23 to account holders, and regular program moni24 toring, are carried out by such qualified finan-
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•S 2779 IS

1 cial institution, qualified nonprofit organization,

2 or Indian tribe.

3 (8) QUALIFIED EXPENSE DISTRIBUTION.—

4 (A) IN GENERAL.—The term ‘‘qualified ex5 pense distribution’’ means any amount paid (in6 cluding through electronic payments) or distrib7 uted out of an Individual Development Account

8 and a parallel account established for an eligible

9 individual if such amount—

10 (i) is used exclusively to pay the quali11 fied expenses of such individual or such in12 dividual’s spouse or dependents,

13 (ii) is paid by the qualified financial

14 institution, qualified nonprofit organiza15 tion, or Indian tribe directly to the person

16 to whom the amount is due or to another

17 Individual Development Account, and

18 (iii) is paid after the holder of the In19 dividual Development Account has com20 pleted a financial education course as re21 quired under section 1012(b).

22 (B) QUALIFIED EXPENSES.—

23 (i) IN GENERAL.—The term ‘‘qualified

24 expenses’’ means any of the following:
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•S 2779 IS

1 (I) Qualified higher education ex2 penses.

3 (II) Qualified first-time home4 buyer costs.

5 (III) Qualified business capital6 ization or expansion costs.

7 (IV) Qualified rollovers.

8 (ii) QUALIFIED HIGHER EDUCATION

9 EXPENSES.—

10 (I) IN GENERAL.—The term

11 ‘‘qualified higher education expenses’’

12 has the meaning given such term by

13 section 72(t)(7) of the Internal Rev14 enue Code of 1986, determined by

15 treating postsecondary vocational edu16 cational schools as eligible educational

17 institutions.

18 (II) POSTSECONDARY VOCA19 TIONAL EDUCATION SCHOOL.—The

20 term ‘‘postsecondary vocational edu21 cational school’’ means an area voca22 tional education school (as defined in

23 subparagraph (C) or (D) of section

24 521(4) of the Carl D. Perkins Voca25 tional and Applied Technology Edu-
210

•S 2779 IS

1 cation Act (20 U.S.C. 2471(4)))

2 which is in any State (as defined in

3 section 521(33) of such Act), as such

4 sections are in effect on the date of

5 enactment of this Act.

6 (III) COORDINATION WITH

7 OTHER BENEFITS.—The amount of

8 qualified higher education expenses

9 for any taxable year shall be reduced

10 as provided in section 25A(g)(2) of

11 such Code and by the amount of such

12 expenses for which a credit or exclu13 sion is allowed under chapter 1 of

14 such Code for such taxable year.

15 (iii) QUALIFIED FIRST-TIME HOME16 BUYER COSTS.—The term ‘‘qualified first17 time homebuyer costs’’ means qualified ac18 quisition costs (as defined in section

19 72(t)(8) of such Code without regard to

20 subparagraph (B) thereof) with respect to

21 a principal residence (within the meaning

22 of section 121 of such Code) for a qualified

23 first-time homebuyer (as defined in section

24 72(t)(8) of such Code).
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•S 2779 IS

1 (iv) QUALIFIED BUSINESS CAPITAL2 IZATION OR EXPANSION COSTS.—

3 (I) IN GENERAL.—The term

4 ‘‘qualified business capitalization or

5 expansion costs’’ means qualified ex6 penditures for the capitalization or ex7 pansion of a qualified business pursu8 ant to a qualified business plan.

9 (II) QUALIFIED EXPENDI10 TURES.—The term ‘‘qualified expendi11 tures’’ means expenditures included in

12 a qualified business plan, including

13 capital, plant, equipment, working

14 capital, inventory expenses, attorney

15 and accounting fees, and other costs

16 normally associated with starting or

17 expanding a business.

18 (III) QUALIFIED BUSINESS.—

19 The term ‘‘qualified business’’ means

20 any business that does not contravene

21 any law.

22 (IV) QUALIFIED BUSINESS

23 PLAN.—The term ‘‘qualified business

24 plan’’ means a business plan which

25 meets such requirements as the Sec-
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•S 2779 IS

1 retary or an organization designated

2 by the Secretary may specify.

3 (v) QUALIFIED ROLLOVERS.—The

4 term ‘‘qualified rollover’’ means, with re5 spect to any distribution from an Indi6 vidual Development Account, the payment,

7 within 120 days of such distribution, of all

8 or a portion of such distribution to such

9 account or to another Individual Develop10 ment Account established in another quali11 fied financial institution, qualified non12 profit organization, or Indian tribe for the

13 benefit of the eligible individual. Rules

14 similar to the rules of section 408(d)(3) of

15 such Code (other than subparagraph (C)

16 thereof) shall apply for purposes of this

17 clause.

18 (9) SECRETARY.—The term ‘‘Secretary’’ means

19 the Secretary of the Treasury.
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•S 2779 IS

1 Subtitle A—Individual Develop2 ment Accounts for Low-Income

3 Workers

4 SEC. 1011. STRUCTURE AND ADMINISTRATION OF QUALI5 FIED INDIVIDUAL DEVELOPMENT ACCOUNT

6 PROGRAMS.

7 (a) ESTABLISHMENT OF QUALIFIED INDIVIDUAL DE8 VELOPMENT ACCOUNT PROGRAMS.—Any qualified finan9 cial institution, qualified nonprofit organization, or Indian

10 tribe may establish 1 or more qualified individual develop11 ment account programs which meet the requirements of

12 this title.

13 (b) BASIC PROGRAM STRUCTURE.—

14 (1) IN GENERAL.—All qualified individual de15 velopment account programs shall consist of the fol16 lowing 2 components:

17 (A) An Individual Development Account to

18 which an eligible individual may contribute

19 money in accordance with section 1013.

20 (B) A parallel account to which all match21 ing funds shall be deposited in accordance with

22 section 1014.

23 (2) TAILORED IDA PROGRAMS.—A qualified fi24 nancial institution, qualified nonprofit organization,

25 or Indian tribe may tailor its qualified individual de-
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•S 2779 IS

1 velopment account program to allow matching funds

2 to be spent on 1 or more of the categories of quali3 fied expenses.

4 (c) ACCOUNT POPULATION DISTRIBUTION REQUIRE5 MENT.—An individual development account program shall

6 be treated as qualified under this title only if not less than

7 one third of the Individual Development Accounts under

8 such program are owned by eligible individuals each of

9 whom is a member of a household the gross income of

10 which does not exceed 50 percent of the median family

11 income for the area in which such individuals reside (as

12 published by the Department of Housing and Urban Af13 fairs).

14 (d) TAX TREATMENT OF ACCOUNTS.—Any account

15 described in subparagraph (B) of subsection (b)(1) is ex16 empt from taxation under the Internal Revenue Code of

17 1986 unless such account has ceased to be such an ac18 count by reason of section 1015(c) or the termination of

19 the qualified individual development account program

20 under section 1016(b).

21 SEC. 1012. PROCEDURES FOR OPENING AN INDIVIDUAL DE22 VELOPMENT ACCOUNT AND QUALIFYING FOR

23 MATCHING FUNDS.

24 (a) OPENING AN ACCOUNT.—An eligible individual

25 must open an Individual Development Account with a
215

•S 2779 IS

1 qualified financial institution, qualified nonprofit organi2 zation, or Indian tribe and contribute money in accordance

3 with section 1013 to qualify for matching funds in a par4 allel account.

5 (b) REQUIRED COMPLETION OF FINANCIAL EDU6 CATION COURSE.—

7 (1) IN GENERAL.—Before becoming eligible to

8 withdraw matching funds to pay for qualified ex9 penses, holders of Individual Development Accounts

10 must complete a financial education course offered

11 by a qualified financial institution, a qualified non12 profit organization, an Indian tribe, or a government

13 entity.

14 (2) STANDARD AND APPLICABILITY OF

15 COURSE.—The Secretary or an organization des16 ignated by the Secretary, in consultation with rep17 resentatives of qualified individual development ac18 count programs and financial educators, shall estab19 lish minimum performance standards for financial

20 education courses offered under paragraph (1) and

21 a protocol to exempt eligible individuals from the re22 quirement under paragraph (1) because of hardship

23 or lack of need.
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•S 2779 IS

1 SEC. 1013. CONTRIBUTIONS TO INDIVIDUAL DEVELOPMENT

2 ACCOUNTS.

3 (a) IN GENERAL.—Except in the case of a qualified

4 rollover, individual contributions to an Individual Develop5 ment Account will not be accepted for the taxable year

6 in excess of the lesser of—

7 (1) $2,000; or

8 (2) an amount equal to the sum of—

9 (A) the compensation (as defined in section

10 219(f)(1) of the Internal Revenue Code of

11 1986) includible in the individual’s gross in12 come for such taxable year; and

13 (B) in the case of an eligible individual

14 who has attained age 65 or retired on disability

15 (within the meaning of section 22 of the Inter16 nal Revenue Code of 1986) before the close of

17 the taxable year, any amount received as a pen18 sion or annuity or as a disability benefit and ex19 cluded from the individual’s gross income for

20 such taxable year.

21 (b) PROOF OF COMPENSATION AND STATUS AS AN

22 ELIGIBLE INDIVIDUAL.—Federal W–2 forms and other

23 forms specified by the Secretary proving the eligible indi24 vidual’s wages and other compensation (including amounts

25 described in subsection (a)(2)(B)) and the status of the

26 individual as an eligible individual shall be presented at
217

•S 2779 IS

1 the time of the establishment of the Individual Develop2 ment Account and at least once annually thereafter.

3 (c) TIME WHEN CONTRIBUTIONS DEEMED MADE.—

4 For purposes of this section, a taxpayer shall be deemed

5 to have made a contribution to an Individual Development

6 Account on the last day of the preceding taxable year if

7 the contribution is made on account of such taxable year

8 and is made not later than the time prescribed by law for

9 filing the Federal income tax return for such taxable year

10 (not including extensions thereof).

11 (d) DEEMED WITHDRAWALS OF EXCESS CONTRIBU12 TIONS.—If the individual for whose benefit an Individual

13 Development Account is established contributes an

14 amount in excess of the amount allowed under subsection

15 (a) and fails to withdraw the excess contribution plus the

16 amount of net income attributable to such excess contribu17 tion on or before the day prescribed by law (including ex18 tensions of time) for filing such individual’s return of tax

19 for the taxable year, such excess contribution and net in20 come shall be deemed to have been withdrawn on such day

21 by such individual for purposes other than to pay qualified

22 expenses.
218

•S 2779 IS

1 (e) CROSS REFERENCE.—

For designation of earned income tax credit payments for deposit to an Individual Development Account, see section 32(o) of the Internal Revenue

Code of 1986.

2 SEC. 1014. DEPOSITS BY QUALIFIED INDIVIDUAL DEVELOP3 MENT ACCOUNT PROGRAMS.

4 (a) PARALLEL ACCOUNTS.—The qualified financial

5 institution, qualified nonprofit organization, or Indian

6 tribe shall deposit all matching funds for each Individual

7 Development Account into a parallel account at a qualified

8 financial institution, qualified nonprofit organization, or

9 Indian tribe.

10 (b) REGULAR DEPOSITS OF MATCHING FUNDS.—

11 (1) IN GENERAL.—Subject to paragraph (2),

12 the qualified financial institution, qualified nonprofit

13 organization, or Indian tribe shall not less than an14 nually deposit into the parallel account with respect

15 to each eligible individual the following:

16 (A) A dollar-for-dollar match for the first

17 $500 contributed by the eligible individual into

18 an Individual Development Account with re19 spect to any taxable year.

20 (B) Any matching funds provided by State,

21 local, or private sources in accordance to the

22 matching ratio set by those sources.
219

•S 2779 IS

1 (2) CROSS REFERENCE.—

For allowance of tax credit for Individual Development Account subsidies, including matching

funds, see section 30B of the Internal Revenue Code

of 1986.

2 (c) FORFEITURE OF MATCHING FUNDS.—Matching

3 funds that are forfeited under section 1015(b) shall be

4 used by the qualified financial institution, qualified non5 profit organization, or Indian tribe to pay matches for

6 other Individual Development Account contributions by el7 igible individuals.

8 (d) UNIFORM ACCOUNTING REGULATIONS.—The

9 Secretary shall prescribe regulations with respect to ac10 counting for matching funds from all possible sources in

11 the parallel accounts.

12 (e) REGULAR REPORTING OF ACCOUNTS.—Any

13 qualified financial institution, qualified nonprofit organi14 zation, or Indian tribe shall report the balances in any

15 Individual Development Account and parallel account of

16 an eligible individual on not less than an annual basis.

17 SEC. 1015. WITHDRAWAL PROCEDURES.

18 (a) WITHDRAWALS FOR QUALIFIED EXPENSES.—To

19 withdraw money from an eligible individual’s Individual

20 Development Account to pay qualified expenses of such

21 individual or such individual’s spouse or dependents, the

22 qualified financial institution, qualified nonprofit organi23 zation, or Indian tribe shall directly transfer such funds
220

•S 2779 IS

1 from the Individual Development Account, and, if applica2 ble, from the parallel account electronically to the vendor

3 or other Individual Development Account. If the vendor

4 is not equipped to receive funds electronically, the quali5 fied financial institution, qualified nonprofit organization,

6 or Indian tribe may issue such funds by paper check to

7 the vendor.

8 (b) WITHDRAWALS FOR NONQUALIFIED EX9 PENSES.—An Individual Development Account holder may

10 unilaterally withdraw funds from the Individual Develop11 ment Account for purposes other than to pay qualified ex12 penses, but shall forfeit the corresponding matching funds

13 and interest earned on the matching funds by doing so,

14 unless such withdrawn funds are recontributed to such Ac15 count by September 30 following the withdrawal.

16 (c) DEEMED WITHDRAWALS FROM ACCOUNTS OF

17 NONELIGIBLE INDIVIDUALS.—If the individual for whose

18 benefit an Individual Development Account is established

19 ceases to be an eligible individual, such account shall cease

20 to be an Individual Development Account as of the first

21 day of the taxable year of such individual and any balance

22 in such account shall be deemed to have been withdrawn

23 on such first day by such individual for purposes other

24 than to pay qualified expenses.
221

•S 2779 IS

1 (d) TAX TREATMENT OF MATCHING FUNDS.—Any

2 amount withdrawn from a parallel account shall not be

3 includible in an eligible individual’s gross income.

4 SEC. 1016. CERTIFICATION AND TERMINATION OF QUALI5 FIED INDIVIDUAL DEVELOPMENT ACCOUNT

6 PROGRAMS.

7 (a) CERTIFICATION PROCEDURES.—Upon estab8 lishing a qualified individual development account pro9 gram under section 1011, a qualified financial institution,

10 qualified nonprofit organization, or Indian tribe shall cer11 tify to the Secretary, or an organization designated by the

12 Secretary, on forms prescribed by the Secretary or such

13 organization and accompanied by any documentation re14 quired by the Secretary or such organization, that—

15 (1) the accounts described in subparagraphs

16 (A) and (B) of section 1011(b)(1) are operating pur17 suant to all the provisions of this title; and

18 (2) the qualified financial institution, qualified

19 nonprofit organization, or Indian tribe agrees to im20 plement an information system necessary to monitor

21 the cost and outcomes of the qualified individual de22 velopment account program.

23 (b) AUTHORITY TO TERMINATE QUALIFIED IDA

24 PROGRAM.—If the Secretary, or an organization des25 ignated by the Secretary, determines that a qualified fi-
222

•S 2779 IS

1 nancial institution, qualified nonprofit organization, or In2 dian tribe under this title is not operating a qualified indi3 vidual development account program in accordance with

4 the requirements of this title (and has not implemented

5 any corrective recommendations directed by the Secretary

6 or such organization), the Secretary or such organization

7 shall terminate such institution’s, nonprofit organiza8 tion’s, or Indian tribe’s authority to conduct the program.

9 If the Secretary, or an organization designated by the Sec10 retary, is unable to identify a qualified financial institu11 tion, qualified nonprofit organization, or Indian tribe to

12 assume the authority to conduct such program, then any

13 account established for the benefit of any eligible indi14 vidual under such program shall cease to be an Individual

15 Development Account as of the first day of such termi16 nation and any balance in such account shall be deemed

17 to have been withdrawn on such first day by such indi18 vidual for purposes other than to pay qualified expenses.

19 SEC. 1017. REPORTING, MONITORING, AND EVALUATION.

20 (a) RESPONSIBILITIES OF QUALIFIED FINANCIAL IN21 STITUTIONS, QUALIFIED NONPROFIT ORGANIZATIONS,

22 AND INDIAN TRIBES.—Each qualified financial institu23 tion, qualified nonprofit organization, or Indian tribe that

24 establishes a qualified individual development account pro25 gram under section 1011 shall report annually to the Sec-
223

•S 2779 IS

1 retary, directly or through an organization designated by

2 the Secretary, within 90 days after the end of each cal3 endar year on—

4 (1) the number of eligible individuals making

5 contributions into Individual Development Accounts;

6 (2) the amounts contributed into Individual De7 velopment Accounts and deposited into parallel ac8 counts for matching funds;

9 (3) the amounts withdrawn from Individual De10 velopment Accounts and parallel accounts, and the

11 purposes for which such amounts were withdrawn;

12 (4) the balances remaining in Individual Devel13 opment Accounts and parallel accounts; and

14 (5) such other information needed to help the

15 Secretary, or an organization designated by the Sec16 retary, monitor the cost and outcomes of the quali17 fied individual development account program.

18 (b) RESPONSIBILITIES OF THE SECRETARY OR DES19 IGNATED ORGANIZATION.—

20 (1) MONITORING PROTOCOL.—Not later than

21 12 months after the date of enactment of this Act,

22 the Secretary, or an organization designated by the

23 Secretary, shall develop and implement a protocol

24 and process to monitor the cost and outcomes of the
224

•S 2779 IS

1 qualified individual development account programs

2 established under section 1011.

3 (2) ANNUAL REPORTS.—In each year after the

4 date of enactment of this Act, the Secretary, or an

5 organization designated by the Secretary, shall issue

6 a progress report on the status of such qualified in7 dividual development account programs. Such report

8 shall include from a representative sample of quali9 fied financial institutions, qualified nonprofit organi10 zations, and Indian tribes a report on—

11 (A) the characteristics of participants, in12 cluding age, gender, race or ethnicity, marital

13 status, number of children, employment status,

14 and monthly income;

15 (B) individual level data on deposits, with16 drawals, balances, uses of Individual Develop17 ment Accounts, and participant characteristics;

18 (C) the characteristics of qualified indi19 vidual development account programs, including

20 match rate, economic education requirements,

21 permissible uses of accounts, staffing of pro22 grams in full time employees, and the total

23 costs of programs; and

24 (D) process information on program imple25 mentation and administration, especially on
225

•S 2779 IS

1 problems encountered and how problems were

2 solved.

3 (3) APPROPRIATIONS FOR MONITORING.—There

4 is authorized to be appropriated $5,000,000 for the

5 purposes of monitoring qualified individual develop6 ment account programs established under section

7 1011, to remain available until expended.

8 SEC. 1018. CERTAIN ACCOUNT FUNDS OF PROGRAM PAR9 TICIPANTS DISREGARDED FOR PURPOSES OF

10 CERTAIN MEANS-TESTED FEDERAL PRO11 GRAMS.

12 Notwithstanding any provision of the Internal Rev13 enue Code of 1986 or the Social Security Act that requires

14 consideration of 1 or more financial circumstances of an

15 individual, for the purposes of determining eligibility to

16 receive, or the amount of, any assistance or benefit author17 ized by such provision to be provided to or for the benefit

18 of such individual, the sum of—

19 (1) the lesser of—

20 (A) the sum of all contributions by an eli21 gible individual (including earnings thereon) to

22 any Individual Development Account; or

23 (B) $10,000; plus
226

•S 2779 IS

1 (2) the sum of the matching deposits made on

2 behalf of such individual (including earnings there3 on) in any parallel account,

4 shall be disregarded for such purpose with respect to any

5 period during which the individual participates in a quali6 fied individual development account program established

7 under section 1011.

8 Subtitle B—Qualified Individual

9 Development Account Program

10 Investment Credits

11 SEC. 1021. QUALIFIED INDIVIDUAL DEVELOPMENT AC12 COUNT PROGRAM INVESTMENT CREDITS.

13 (a) IN GENERAL.—Subpart B of part IV of sub14 chapter A of chapter 1 (relating to other credits) is

15 amended by inserting after section 30A the following:

16 ‘‘SEC. 30B. QUALIFIED INDIVIDUAL DEVELOPMENT AC17 COUNT PROGRAM INVESTMENT CREDIT.

18 ‘‘(a) DETERMINATION OF AMOUNT.—There shall be

19 allowed as a credit against the applicable tax for the tax20 able year an amount equal to the qualified individual de21 velopment account program investment provided by a tax22 payer during the taxable year under a qualified individual

23 development account program established under section

24 1011 of the American Community Renewal and New Mar25 kets Empowerment Act.
227

•S 2779 IS

1 ‘‘(b) APPLICABLE TAX.—For the purposes of this

2 section, the term ‘applicable tax’ means the excess (if any)

3 of—

4 ‘‘(1) the tax imposed under this chapter (other

5 than the taxes imposed under the provisions de6 scribed in subparagraphs (C) through (Q) of section

7 26(b)(2)), over

8 ‘‘(2) the credits allowable under subpart B

9 (other than this section) and subpart D of this part.

10 ‘‘(c) QUALIFIED INDIVIDUAL DEVELOPMENT AC11 COUNT PROGRAM INVESTMENT.—For purposes of this

12 section, the term ‘qualified individual development account

13 program investment’ means an amount equal to—

14 ‘‘(1) in the case of a taxpayer which is a quali15 fied financial institution, the sum of—

16 ‘‘(A) the lesser of—

17 ‘‘(i) 90 percent of the aggregate

18 amount of dollar-for-dollar matches under

19 any qualified individual development ac20 count program by such taxpayer under sec21 tion 1014 of the American Community Re22 newal and New Markets Empowerment

23 Act for such taxable year, or

24 ‘‘(ii) $90,000,000, plus

25 ‘‘(B) the lesser of—
228

•S 2779 IS

1 ‘‘(i) 50 percent of the aggregate costs

2 paid or incurred under such program by

3 the taxpayer during such taxable year—

4 ‘‘(I) to provide financial edu5 cation courses to Individual Develop6 ment Account holders under section

7 1012(b) of such Act, and

8 ‘‘(II) to underwrite program ac9 tivities described in section 503(6)(B)

10 of such Act), or

11 ‘‘(ii) $1,500,000, and

12 ‘‘(2) in the case of a taxpayer which is not a

13 qualified financial institution and which meets the

14 requirement described in paragraph (2) of sub15 section (d), the lesser of—

16 ‘‘(A) the sum of—

17 ‘‘(i) 50 percent of the aggregate

18 amount of such dollar-for-dollar matches

19 by such taxpayer for such taxable year,

20 plus

21 ‘‘(ii) 50 percent of the aggregate costs

22 described in paragraph (1)(B)(i) paid

23 under such program by the taxpayer dur24 ing such taxable year, or

25 ‘‘(B) $5,000,000.
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•S 2779 IS

1 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—

2 ‘‘(1) IN GENERAL.—For purposes of this sec3 tion, the terms ‘Individual Development Account’ ,

4 ‘qualified individual development account program’,

5 and ‘qualified financial institution’ have the mean6 ings given such terms by section 1003 of the Amer7 ican Community Renewal and New Markets Em8 powerment Act.

9 ‘‘(2) REQUIREMENT FOR TAXPAYERS WHICH

10 ARE NOT QUALIFIED FINANCIAL INSTITUTIONS.—

11 The requirement described in this paragraph with

12 respect to any taxpayer which is not a qualified fi13 nancial institution is the requirement that at least

14 70 percent of the expenditures by such taxpayer

15 with respect to any qualified individual development

16 account program for any taxable year are described

17 in subsection (c)(2)(A).

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

19 Rules similar to the rules of paragraphs (1) and (2)

20 of section 41(f) shall apply for purposes of this sec21 tion.

22 ‘‘(4) DENIAL OF DOUBLE BENEFIT.—No de23 duction or credit under any other provision of this

24 chapter shall be allowed with respect to qualified in-
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•S 2779 IS

1 dividual development account program investments

2 taken into account under subsection (a).

3 ‘‘(e) REGULATIONS.—The Secretary may prescribe

4 such regulations as may be necessary or appropriate to

5 carry out this section, including regulations providing for

6 a reduction of the credit allowed under this section for

7 any taxable year by the amount of any forfeiture under

8 section 1015(b) of the American Community Renewal and

9 New Markets Empowerment Act in such taxable year of

10 any amount which was taken into account in determining

11 the amount of such credit in a preceding taxable year.

12 ‘‘(f) TERMINATION.—This section shall not apply to

13 any taxable year beginning after December 31, 2006.’’.

14 (b) CONFORMING AMENDMENT.—The table of sec15 tions for subpart B of part IV of subchapter A of chapter

16 1 is amended by inserting after the item relating to section

17 30A the following:

‘‘Sec. 30B. Qualified individual development account program investment credit.’’.

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

19 this section shall apply to taxable years beginning after

20 December 31, 2001.
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•S 2779 IS

1 SEC. 1022. CRA CREDIT TREATMENT FOR QUALIFIED INDI2 VIDUAL DEVELOPMENT ACCOUNT PROGRAM

3 INVESTMENTS.

4 Qualified financial institutions which establish quali5 fied individual development account programs under sec6 tion 1011 shall not receive credit for funding, administra7 tion, and education expenses under any test contained in

8 regulations for the Community Reinvestment Act of 1977

9 for those activities and expenses related to such programs

10 and taken into account for purposes of the tax credit al11 lowed under section 30B of the Internal Revenue Code of

12 1986.

13 SEC. 1023. DESIGNATION OF EARNED INCOME TAX CREDIT

14 PAYMENTS FOR DEPOSIT TO INDIVIDUAL DE15 VELOPMENT ACCOUNTS.

16 (a) IN GENERAL.—Section 32 (relating to earned in17 come credit) is amended by adding at the end the fol18 lowing:

19 ‘‘(o) DESIGNATION OF CREDIT FOR DEPOSIT TO IN20 DIVIDUAL DEVELOPMENT ACCOUNT.—

21 ‘‘(1) IN GENERAL.—With respect to the return

22 of any eligible individual (as defined in section

23 1003(1) of the American Community Renewal and

24 New Markets Empowerment Act) for the taxable

25 year of the tax imposed by this chapter, such indi26 vidual may designate that a specified portion (not
232

•S 2779 IS

1 less than $1) of any overpayment of tax for such

2 taxable year which is attributable to the credit al3 lowed under this section shall be deposited by the

4 Secretary into an Individual Development Account

5 (as defined in section 1003(2) of such Act) of such

6 individual. The Secretary shall so deposit such por7 tion designated under this paragraph.

8 ‘‘(2) MANNER AND TIME OF DESIGNATION.—A

9 designation under paragraph (1) may be made with

10 respect to any taxable year—

11 ‘‘(A) at the time of filing the return of the

12 tax imposed by this chapter for such taxable

13 year, or

14 ‘‘(B) at any other time (after the time of

15 filing the return of the tax imposed by this

16 chapter for such taxable year) specified in regu17 lations prescribed by the Secretary.

18 Such designation shall be made in such manner as

19 the Secretary prescribes by regulations.

20 ‘‘(3) PORTION ATTRIBUTABLE TO EARNED IN21 COME TAX CREDIT.—For purposes of paragraph (1),

22 an overpayment for any taxable year shall be treated

23 as attributable to the credit allowed under this sec24 tion for such taxable year to the extent that such

25 overpayment does not exceed the credit so allowed.
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•S 2779 IS

1 ‘‘(4) OVERPAYMENTS TREATED AS RE2 FUNDED.—For purposes of this title, any portion of

3 an overpayment of tax designated under paragraph

4 (1) shall be treated as being refunded to the tax5 payer as of the last date prescribed for filing the re6 turn of tax imposed by this chapter (determined

7 without regard to extensions) or, if later, the date

8 the return is filed.

9 ‘‘(5) TERMINATION.—This subsection shall not

10 apply to any taxable year beginning after December

11 31, 2006.’’.

12 (b) EFFECTIVE DATE.—The amendment made by

13 this section shall apply to taxable years beginning after

14 December 31, 2001.

15 TITLE XI—CHARITABLE CHOICE

16 EXPANSION

17 SEC. 1101. PROVISION OF ASSISTANCE UNDER GOVERN18 MENT PROGRAMS BY RELIGIOUS ORGANIZA19 TIONS.

20 Title XXIV of the Revised Statutes is amended by

21 inserting after section 1990 (42 U.S.C. 1994) the fol22 lowing:

23 ‘‘SEC. 1994A. CHARITABLE CHOICE.

24 ‘‘(a) SHORT TITLE.—This section may be cited as the

25 ‘Charitable Choice Expansion Act of 2000’.
234

•S 2779 IS

1 ‘‘(b) PURPOSE.—The purposes of this section are—

2 ‘‘(1) to prohibit discrimination against non3 governmental organizations and certain individuals

4 on the basis of religion in the distribution of govern5 ment funds to provide government assistance and

6 distribution of such assistance, under government

7 programs described in subsection (c); and

8 ‘‘(2) to allow such organizations to accept such

9 funds to provide such assistance to such individuals

10 without impairing the religious character of such or11 ganizations or the religious freedom of such individ12 uals.

13 ‘‘(c) RELIGIOUS ORGANIZATIONS INCLUDED AS NON14 GOVERNMENTAL PROVIDERS.—For any program carried

15 out by the Federal Government, or by a State or local

16 government with Federal funds, in which the Federal,

17 State, or local government is authorized to use nongovern18 mental organizations, through contracts, grants, certifi19 cates, vouchers, or other forms of disbursement, to provide

20 assistance to beneficiaries under the program, the govern21 ment shall consider, on the same basis as other nongovern22 mental organizations, religious organizations to provide

23 the assistance under the program, so long as the program

24 is implemented in a manner consistent with the Establish25 ment Clause of the first amendment to the Constitution.
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1 Neither the Federal Government nor a State or local gov2 ernment receiving funds under such program shall dis3 criminate against an organization that provides assistance

4 under, or applies to provide assistance under, such pro5 gram, on the basis that the organization has a religious

6 character.

7 ‘‘(d) EXCLUSIONS.—As used in subsection (c), the

8 term ‘program’ does not include activities carried out

9 under—

10 ‘‘(1) Federal programs providing education to

11 children eligible to attend elementary schools or sec12 ondary schools, as defined in section 14101 of the

13 Elementary and Secondary Education Act of 1965

14 (20 U.S.C. 8801) (except for activities to assist stu15 dents in obtaining the recognized equivalents of sec16 ondary school diplomas);

17 ‘‘(2) the Higher Education Act of 1965 (20

18 U.S.C. 1001 et seq.);

19 ‘‘(3) the Head Start Act (42 U.S.C. 9831 et

20 seq.); or

21 ‘‘(4) the Child Care and Development Block

22 Grant Act of 1990 (42 U.S.C. 9858 et seq.).

23 ‘‘(e) RELIGIOUS CHARACTER AND INDEPENDENCE.—

24 ‘‘(1) IN GENERAL.—A religious organization

25 that provides assistance under a program described
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1 in subsection (c) shall retain its independence from

2 Federal, State, and local governments, including

3 such organization’s control over the definition, devel4 opment, practice, and expression of its religious be5 liefs.

6 ‘‘(2) ADDITIONAL SAFEGUARDS.—Neither the

7 Federal Government nor a State or local government

8 shall require a religious organization—

9 ‘‘(A) to alter its form of internal govern10 ance; or

11 ‘‘(B) to remove religious art, icons, scrip12 ture, or other symbols;

13 in order to be eligible to provide assistance under a

14 program described in subsection (c).

15 ‘‘(f) EMPLOYMENT PRACTICES.—

16 ‘‘(1) TENETS AND TEACHINGS.—A religious or17 ganization that provides assistance under a program

18 described in subsection (c) may require that its em19 ployees providing assistance under such program ad20 here to the religious tenets and teachings of such or21 ganization, and such organization may require that

22 those employees adhere to rules forbidding the use

23 of drugs or alcohol.

24 ‘‘(2) TITLE VII EXEMPTION.—The exemption of

25 a religious organization provided under section 702
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1 or 703(e)(2) of the Civil Rights Act of 1964 (42

2 U.S.C. 2000e–1, 2000e–2(e)(2)) regarding employ3 ment practices shall not be affected by the religious

4 organization’s provision of assistance under, or re5 ceipt of funds from, a program described in sub6 section (c).

7 ‘‘(g) RIGHTS OF BENEFICIARIES OF ASSISTANCE.—

8 ‘‘(1) IN GENERAL.—If an individual described

9 in paragraph (3) has an objection to the religious

10 character of the organization from which the indi11 vidual receives, or would receive, assistance funded

12 under any program described in subsection (c), the

13 appropriate Federal, State, or local governmental

14 entity shall provide to such individual (if otherwise

15 eligible for such assistance) within a reasonable pe16 riod of time after the date of such objection, assist17 ance that—

18 ‘‘(A) is from an alternative organization

19 that is accessible to the individual; and

20 ‘‘(B) has a value that is not less than the

21 value of the assistance that the individual would

22 have received from such organization.

23 ‘‘(2) NOTICE.—The appropriate Federal, State,

24 or local governmental entity shall ensure that notice
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1 is provided to individuals described in paragraph (3)

2 of the rights of such individuals under this section.

3 ‘‘(3) INDIVIDUAL DESCRIBED.—An individual

4 described in this paragraph is an individual who re5 ceives or applies for assistance under a program de6 scribed in subsection (c).

7 ‘‘(h) NONDISCRIMINATION AGAINST BENE8 FICIARIES.—

9 ‘‘(1) GRANTS AND CONTRACTS.—A religious or10 ganization providing assistance through a grant or

11 contract under a program described in subsection (c)

12 shall not discriminate, in carrying out the program,

13 against an individual described in subsection (g)(3)

14 on the basis of religion, a religious belief, a refusal

15 to hold a religious belief, or a refusal to actively par16 ticipate in a religious practice.

17 ‘‘(2) INDIRECT FORMS OF DISBURSEMENT.—A

18 religious organization providing assistance through a

19 voucher, certificate, or other form of indirect dis20 bursement under a program described in subsection

21 (c) shall not deny an individual described in sub22 section (g)(3) admission into such program on the

23 basis of religion, a religious belief, or a refusal to

24 hold a religious belief.

25 ‘‘(i) FISCAL ACCOUNTABILITY.—
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1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), any religious organization providing as3 sistance under any program described in subsection

4 (c) shall be subject to the same regulations as other

5 nongovernmental organizations to account in accord

6 with generally accepted accounting principles for the

7 use of such funds provided under such program.

8 ‘‘(2) LIMITED AUDIT.—Such organization shall

9 segregate government funds provided under such

10 program into a separate account. Only the govern11 ment funds shall be subject to audit by the govern12 ment.

13 ‘‘(j) COMPLIANCE.—A party alleging that the rights

14 of the party under this section have been violated by a

15 State or local government may bring a civil action pursu16 ant to section 1979 against the official or government

17 agency that has allegedly committed such violation. A

18 party alleging that the rights of the party under this sec19 tion have been violated by the Federal Government may

20 bring a civil action for appropriate relief in an appropriate

21 Federal district court against the official or government

22 agency that has allegedly committed such violation.

23 ‘‘(k) LIMITATIONS ON USE OF FUNDS FOR CERTAIN

24 PURPOSES.—No funds provided through a grant or con25 tract to a religious organization to provide assistance
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1 under any program described in subsection (c) shall be

2 expended for sectarian worship, instruction, or proselytiza3 tion.

4 ‘‘(l) EFFECT ON STATE AND LOCAL FUNDS.—If a

5 State or local government contributes State or local funds

6 to carry out a program described in subsection (c), the

7 State or local government may segregate the State or local

8 funds from the Federal funds provided to carry out the

9 program or may commingle the State or local funds with

10 the Federal funds. If the State or local government com11 mingles the State or local funds, the provisions of this sec12 tion shall apply to the commingled funds in the same man13 ner, and to the same extent, as the provisions apply to

14 the Federal funds.

15 ‘‘(m) TREATMENT OF INTERMEDIATE CONTRAC16 TORS.—If a nongovernmental organization (referred to in

17 this subsection as an ‘intermediate organization’), acting

18 under a contract or other agreement with the Federal Gov19 ernment or a State or local government, is given the au20 thority under the contract or agreement to select non21 governmental organizations to provide assistance under

22 the programs described in subsection (c), the intermediate

23 organization shall have the same duties under this section
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1 as the government but shall retain all other rights of a

2 nongovernmental organization under this section.’’.

Æ