II

106TH CONGRESS

1ST SESSION S. 463

To amend the Internal Revenue Code of 1986 to provide for the designation

of renewal communities, to provide tax incentives relating to such communities, and for other purposes.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 24, 1999

Mr. ABRAHAM (for himself, Mr. COVERDELL, Mr. LIEBERMAN, and Mr.

SANTORUM) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

for the designation of renewal communities, to provide

tax incentives relating to such communities, and for

other purposes.

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

3 SECTION 1. SHORT TITLE; ETC.

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

5 ‘‘American Community Renewal Act of 1999’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment
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1 to, or repeal of, a section or other provision, the reference

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986.

4 (c) TABLE OF CONTENTS.—

Sec. 1. Short title; etc.

TITLE I—DESIGNATION OF AND TAX INCENTIVES FOR RENEWAL

COMMUNITIES

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

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

communities.

Sec. 103. Extension of work opportunity tax credit for renewal communities.

Sec. 104. Conforming and clerical amendments.

Sec. 105. Evaluation and reporting requirements.

Sec. 106. Exclusion of effects of this Act from Paygo scorecard.

TITLE II—ADDITIONAL PROVISIONS

Sec. 201. Transfer of unoccupied and substandard HUD-held housing in renewal communities to local governments.

Sec. 202. Prevention and treatment of substance abuse; services provided

through religious organizations.

Sec. 203. CRA credit for investments in community development organizations

located in renewal communities.

5 TITLE I—DESIGNATION OF AND

6 TAX INCENTIVES FOR RE7 NEWAL COMMUNITIES

8 SEC. 101. DESIGNATION OF AND TAX INCENTIVES FOR RE9 NEWAL COMMUNITIES.

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

11 at the end the following new subchapter:

12 ‘‘Subchapter X—Renewal Communities

‘‘Part I. Designation.

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

business.

‘‘Part III. Family development accounts.

‘‘Part IV. Additional incentives.
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1 ‘‘PART I—DESIGNATION

‘‘Sec. 1400E. Designation of renewal communities.

2 ‘‘SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.

3 ‘‘(a) DESIGNATION.—

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

5 the term ‘renewal community’ means any area—

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

7 local governments and the State or States in

8 which it is located for designation as a renewal

9 community (hereinafter in this section referred

10 to as a ‘nominated area’); and

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

12 Urban Development designates as a renewal

13 community, after consultation with—

14 ‘‘(i) the Secretaries of Agriculture,

15 Commerce, Labor, and the Treasury; the

16 Director of the Office of Management and

17 Budget; and the Administrator of the

18 Small Business Administration; and

19 ‘‘(ii) in the case of an area on an In20 dian reservation, the Secretary of the Inte21 rior.

22 ‘‘(2) NUMBER OF DESIGNATIONS.—

23 ‘‘(A) IN GENERAL.—The Secretary of

24 Housing and Urban Development may des-
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1 ignate not more than 100 nominated areas as

2 renewal communities.

3 ‘‘(B) MINIMUM DESIGNATION IN RURAL

4 AREAS.—Of the areas designated under para5 graph (1), at least 20 percent must be areas—

6 ‘‘(i) which are within a local govern7 ment jurisdiction or jurisdictions with a

8 population of less than 50,000,

9 ‘‘(ii) which are outside of a metropoli10 tan statistical area (within the meaning of

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

12 ‘‘(iii) which are determined by the

13 Secretary of Housing and Urban Develop14 ment, after consultation with the Secretary

15 of Commerce, to be rural areas.

16 ‘‘(3) AREAS DESIGNATED BASED ON DEGREE

17 OF POVERTY, ETC.—

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

19 provided in this section, the nominated areas

20 designated as renewal communities under this

21 subsection shall be those nominated areas with

22 the highest average ranking with respect to the

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

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

25 the preceding sentence, an area shall be ranked
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1 within each such criterion on the basis of the

2 amount by which the area exceeds such cri3 terion, with the area which exceeds such cri4 terion by the greatest amount given the highest

5 ranking.

6 ‘‘(B) EXCEPTION WHERE INADEQUATE

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

8 designated under subparagraph (A) if the Sec9 retary of Housing and Urban Development de10 termines that the course of action described in

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

12 inadequate.

13 ‘‘(C) PRIORITY FOR EMPOWERMENT ZONES

14 AND ENTERPRISE COMMUNITIES WITH RESPECT

15 TO FIRST HALF OF DESIGNATIONS.—With re16 spect to the first 50 percent of the designations

17 made under this section—

18 ‘‘(i) half shall be chosen from nomi19 nated areas which are empowerment zones

20 or enterprise communities (and are other21 wise eligible for designation under this sec22 tion); and

23 ‘‘(ii) 20 percent shall be areas de24 scribed in paragraph (2)(B).

25 ‘‘(4) LIMITATION ON DESIGNATIONS.—
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1 ‘‘(A) PUBLICATION OF REGULATIONS.—

2 The Secretary of Housing and Urban Develop3 ment shall prescribe by regulation no later than

4 4 months after the date of the enactment of

5 this section, after consultation with the officials

6 described in paragraph (1)(B)—

7 ‘‘(i) the procedures for nominating an

8 area under paragraph (1)(A);

9 ‘‘(ii) the parameters relating to the

10 size and population characteristics of a re11 newal community; and

12 ‘‘(iii) the manner in which nominated

13 areas will be evaluated based on the cri14 teria specified in subsection (d).

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

16 of Housing and Urban Development may des17 ignate nominated areas as renewal communities

18 only during the 24-month period beginning on

19 the first day of the first month following the

20 month in which the regulations described in

21 subparagraph (A) are prescribed.

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

23 of Housing and Urban Development shall not

24 make any designation of a nominated area as a
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1 renewal community under paragraph (2)

2 unless—

3 ‘‘(i) the local governments and the

4 States in which the nominated area is lo5 cated have the authority—

6 ‘‘(I) to nominate such area for

7 designation as a renewal community;

8 ‘‘(II) to make the State and local

9 commitments described in subsection

10 (d); and

11 ‘‘(III) to provide assurances sat12 isfactory to the Secretary of Housing

13 and Urban Development that such

14 commitments will be fulfilled,

15 ‘‘(ii) a nomination regarding such

16 area is submitted in such a manner and in

17 such form, and contains such information,

18 as the Secretary of Housing and Urban

19 Development shall by regulation prescribe;

20 and

21 ‘‘(iii) the Secretary of Housing and

22 Urban Development determines that any

23 information furnished is reasonably accu24 rate.
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1 ‘‘(5) NOMINATION PROCESS FOR INDIAN RES2 ERVATIONS.—For purposes of this subchapter, in

3 the case of a nominated area on an Indian reserva4 tion, the reservation governing body (as determined

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

6 being both the State and local governments with re7 spect to such area.

8 ‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF9 FECT.—

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

11 as a renewal community shall remain in effect dur12 ing the period beginning on the date of the designa13 tion and ending on the earliest of—

14 ‘‘(A) December 31, 2007,

15 ‘‘(B) the termination date designated by

16 the State and local governments in their nomi17 nation, or

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

19 and Urban Development revokes such designa20 tion.

21 ‘‘(2) REVOCATION OF DESIGNATION.—The Sec22 retary of Housing and Urban Development may re23 voke the designation under this section of an area if

24 such Secretary determines that the local government

25 or the State in which the area is located—
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1 ‘‘(A) has modified the boundaries of the

2 area, or

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

4 or fails to make progress in achieving, the State

5 or local commitments, respectively, described in

6 subsection (d).

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

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

9 and Urban Development may designate a nominated

10 area as a renewal community under subsection (a)

11 only if the area meets the requirements of para12 graphs (2) and (3) of this subsection.

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

14 meets the requirements of this paragraph if—

15 ‘‘(A) the area is within the jurisdiction of

16 one or more local governments;

17 ‘‘(B) the boundary of the area is continu18 ous; and

19 ‘‘(C) the area—

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

21 ‘‘(I) 4,000 if any portion of such

22 area (other than a rural area de23 scribed in subsection (a)(2)(B)(i)) is

24 located within a metropolitan statis25 tical area (within the meaning of sec-
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1 tion 143(k)(2)(B)) which has a popu2 lation of 50,000 or greater; or

3 ‘‘(II) 1,000 in any other case; or

4 ‘‘(ii) is entirely within an Indian res5 ervation (as determined by the Secretary of

6 the Interior).

7 ‘‘(3) ELIGIBILITY REQUIREMENTS.—A nomi8 nated area meets the requirements of this paragraph

9 if the State and the local governments in which it

10 is located certify (and the Secretary of Housing and

11 Urban Development, after such review of supporting

12 data as he deems appropriate, accepts such certifi13 cation) that—

14 ‘‘(A) the area is one of pervasive poverty,

15 unemployment, and general distress;

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

17 as determined by the most recent available

data, was at least 11 18 ⁄2 times the national unem19 ployment rate for the period to which such data

20 relate;

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

22 census tract within the nominated area is at

23 least 20 percent; and

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

25 70 percent of the households living in the area
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1 have incomes below 80 percent of the median

2 income of households within the jurisdiction of

3 the local government (determined in the same

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

5 Housing and Community Development Act of

6 1974).

7 ‘‘(4) CONSIDERATION OF HIGH INCIDENCE OF

8 CRIME.—The Secretary of Housing and Urban De9 velopment shall take into account, in selecting nomi10 nated areas for designation as renewal communities

11 under this section, the extent to which such areas

12 have a high incidence of crime.

13 ‘‘(5) CONSIDERATION OF COMMUNITIES IDENTI14 FIED IN GAO STUDY.—The Secretary of Housing

15 and Urban Development shall take into account, in

16 selecting nominated areas for designation as renewal

17 communities under this section, if the area has cen18 sus tracts identified in the May 12, 1998, report of

19 the Government Accounting Office regarding the

20 identification of economically distressed areas.

21 ‘‘(d) REQUIRED STATE AND LOCAL COMMIT22 MENTS.—

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

24 and Urban Development may designate any nomi-
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1 nated area as a renewal community under subsection

2 (a) only if—

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

4 which the area is located agree in writing that,

5 during any period during which the area is a

6 renewal community, such governments will fol7 low a specified course of action which meets the

8 requirements of paragraph (2) and is designed

9 to reduce the various burdens borne by employ10 ers or employees in such area; and

11 ‘‘(B) the economic growth promotion re12 quirements of paragraph (3) are met.

13 ‘‘(2) COURSE OF ACTION.—

14 ‘‘(A) IN GENERAL.—A course of action

15 meets the requirements of this paragraph if

16 such course of action is a written document,

17 signed by a State (or local government) and

18 neighborhood organizations, which evidences a

19 partnership between such State or government

20 and community-based organizations and which

21 commits each signatory to specific and measur22 able goals, actions, and timetables. Such course

23 of action shall include at least five of the follow24 ing:
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1 ‘‘(i) A reduction of tax rates or fees

2 applying within the renewal community.

3 ‘‘(ii) An increase in the level of effi4 ciency of local services within the renewal

5 community.

6 ‘‘(iii) Crime reduction strategies, such

7 as crime prevention (including the provi8 sion of such services by nongovernmental

9 entities).

10 ‘‘(iv) Actions to reduce, remove, sim11 plify, or streamline governmental require12 ments applying within the renewal commu13 nity.

14 ‘‘(v) Involvement in the program by

15 private entities, organizations, neighbor16 hood organizations, and community

17 groups, particularly those in the renewal

18 community, including a commitment from

19 such private entities to provide jobs and

20 job training for, and technical, financial, or

21 other assistance to, employers, employees,

22 and residents from the renewal community.

23 ‘‘(vi) State or local income tax bene24 fits for fees paid for services performed by
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1 a nongovernmental entity which were for2 merly performed by a governmental entity.

3 ‘‘(vii) The gift (or sale at below fair

4 market value) of surplus real property

5 (such as land, homes, and commercial or

6 industrial structures) in the renewal com7 munity to neighborhood organizations,

8 community development corporations, or

9 private companies.

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

11 For purposes of this section, in evaluating the

12 course of action agreed to by any State or local

13 government, the Secretary of Housing and

14 Urban Development shall take into account the

15 past efforts of such State or local government

16 in reducing the various burdens borne by em17 ployers and employees in the area involved.

18 ‘‘(3) ECONOMIC GROWTH PROMOTION REQUIRE19 MENTS.—The economic growth promotion require20 ments of this paragraph are met with respect to a

21 nominated area if the local government and the

22 State in which such area is located certify in writing

23 that such government and State, respectively, have

24 repealed or otherwise will not enforce within the
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1 area, if such area is designated as a renewal

2 community—

3 ‘‘(A) licensing requirements for occupa4 tions that do not ordinarily require a profes5 sional degree;

6 ‘‘(B) zoning restrictions on home-based

7 businesses which do not create a public nui8 sance;

9 ‘‘(C) permit requirements for street ven10 dors who do not create a public nuisance;

11 ‘‘(D) zoning or other restrictions that im12 pede the formation of schools or child care cen13 ters; and

14 ‘‘(E) franchises or other restrictions on

15 competition for businesses providing public

16 services, including but not limited to taxicabs,

17 jitneys, cable television, or trash hauling,

18 except to the extent that such regulation of busi19 nesses and occupations is necessary for and well-tai20 lored to the protection of health and safety.

21 ‘‘(e) COORDINATION WITH TREATMENT OF EM22 POWERMENT ZONES AND ENTERPRISE COMMUNITIES.—

23 For purposes of this title, if there are in effect with respect

24 to the same area both—

25 ‘‘(1) a designation as a renewal community; and
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1 ‘‘(2) a designation as an empowerment zone or

2 enterprise community,

3 both of such designations shall be given full effect with

4 respect to such area.

5 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur6 poses of this subchapter—

7 ‘‘(1) GOVERNMENTS.—If more than one govern8 ment seeks to nominate an area as a renewal com9 munity, any reference to, or requirement of, this sec10 tion shall apply to all such governments.

11 ‘‘(2) STATE.—The term ‘State’ includes Puerto

12 Rico, the Virgin Islands of the United States, Guam,

13 American Samoa, the Northern Mariana Islands,

14 and any other possession of the United States.

15 ‘‘(3) LOCAL GOVERNMENT.—The term ‘local

16 government’ means—

17 ‘‘(A) any county, city, town, township, par18 ish, village, or other general purpose political

19 subdivision of a State;

20 ‘‘(B) any combination of political subdivi21 sions described in subparagraph (A) recognized

22 by the Secretary of Housing and Urban Devel23 opment; and

24 ‘‘(C) the District of Columbia.
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1 ‘‘(4) APPLICATION OF RULES RELATING TO

2 CENSUS TRACTS AND CENSUS DATA.—The rules of

3 sections 1392(b)(4) and 1393(a)(9) shall apply.

4 ‘‘PART II—RENEWAL COMMUNITY CAPITAL GAIN;

5 RENEWAL COMMUNITY BUSINESS

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

‘‘Sec. 1400G. Renewal community business defined.

6 ‘‘SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.

7 ‘‘(a) GENERAL RULE.—Gross income does not in8 clude any qualified capital gain recognized on the sale or

9 exchange of a qualified community asset held for more

10 than 5 years.

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

12 of this section—

13 ‘‘(1) IN GENERAL.—The term ‘qualified com14 munity asset’ means—

15 ‘‘(A) any qualified community stock;

16 ‘‘(B) any qualified community partnership

17 interest; and

18 ‘‘(C) any qualified community business

19 property.

20 ‘‘(2) QUALIFIED COMMUNITY STOCK.—

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

22 subparagraph (B), the term ‘qualified commu23 nity stock’ means any stock in a domestic cor24 poration if—
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1 ‘‘(i) such stock is acquired by the tax2 payer after December 31, 2000, and before

3 January 1, 2008, at its original issue (di4 rectly or through an underwriter) from the

5 corporation solely in exchange for cash;

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

7 issued, such corporation was a renewal

8 community business (or, in the case of a

9 new corporation, such corporation was

10 being organized for purposes of being a re11 newal community business); and

12 ‘‘(iii) during substantially all of the

13 taxpayer’s holding period for such stock,

14 such corporation qualified as a renewal

15 community business.

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

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

18 purposes of this paragraph.

19 ‘‘(3) QUALIFIED COMMUNITY PARTNERSHIP IN20 TEREST.—The term ‘qualified community partner21 ship interest’ means any interest in a partnership

22 if—

23 ‘‘(A) such interest is acquired by the tax24 payer after December 31, 2000, and before

25 January 1, 2008;
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1 ‘‘(B) as of the time such interest was ac2 quired, such partnership was a renewal commu3 nity business (or, in the case of a new partner4 ship, such partnership was being organized for

5 purposes of being a renewal community busi6 ness); and

7 ‘‘(C) during substantially all of the tax8 payer’s holding period for such interest, such

9 partnership qualified as a renewal community

10 business.

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

12 apply for purposes of this paragraph.

13 ‘‘(4) QUALIFIED COMMUNITY BUSINESS PROP14 ERTY.—

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

16 community business property’ means tangible

17 property if—

18 ‘‘(i) such property was acquired by

19 the taxpayer by purchase (as defined in

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

21 2000, and before January 1, 2008;

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

23 in the renewal community commences with

24 the taxpayer; and
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1 ‘‘(iii) during substantially all of the

2 taxpayer’s holding period for such prop3 erty, substantially all of the use of such

4 property was in a renewal community busi5 ness of the taxpayer.

6 ‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM7 PROVEMENTS.—The requirements of clauses (i)

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

9 satisfied with respect to—

10 ‘‘(i) property which is substantially

11 improved (within the meaning of section

12 1400B(b)(4)(B)(ii)) by the taxpayer before

13 January 1, 2008; and

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

15 is located.

16 ‘‘(c) CERTAIN RULES TO APPLY.—Rules similar to

17 the rules of paragraphs (5), (6), and (7) of subsection (b),

18 and subsections (e), (f), and (g), of section 1400B shall

19 apply for purposes of this section.

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

21 ‘‘For purposes of this part, the term ‘renewal commu22 nity business’ means any entity or proprietorship which

23 would be a qualified business entity or qualified propri24 etorship under section 1397B if—
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1 ‘‘(1) references to renewal communities were

2 substituted for references to empowerment zones in

3 such section; and

4 ‘‘(2) ‘80 percent’ were substituted for ‘50 per5 cent’ in subsections (b)(2) and (c)(1) of such sec6 tion.

7 ‘‘PART III—FAMILY DEVELOPMENT ACCOUNTS

‘‘Sec. 1400H. Family development accounts for renewal community EITC recipients.

‘‘Sec. 1400I. Demonstration program to provide matching contributions to family development accounts in certain

renewal communities.

‘‘Sec. 1400J. Designation of earned income tax credit payments

for deposit to family development account.

8 ‘‘SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RE9 NEWAL COMMUNITY EITC RECIPIENTS.

10 ‘‘(a) ALLOWANCE OF DEDUCTION.—

11 ‘‘(1) IN GENERAL.—There shall be allowed as a

12 deduction—

13 ‘‘(A) in the case of a qualified individual,

14 the amount paid in cash for the taxable year by

15 such individual to any family development ac16 count for such individual’s benefit; and

17 ‘‘(B) in the case of any person other than

18 a qualified individual, the amount paid in cash

19 for the taxable year by such person to any fam20 ily development account for the benefit of a

21 qualified individual but only if the amount so
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1 paid is designated for purposes of this section

2 by such individual.

3 No deduction shall be allowed under this paragraph

4 for any amount deposited in a family development

5 account under section 1400I (relating to demonstra6 tion program to provide matching amounts in re7 newal communities).

8 ‘‘(2) LIMITATION.—

9 ‘‘(A) IN GENERAL.—The amount allowable

10 as a deduction to any individual for any taxable

11 year by reason of paragraph (1)(A) shall not

12 exceed the lesser of—

13 ‘‘(i) $2,000, or

14 ‘‘(ii) an amount equal to the com15 pensation includible in the individual’s

16 gross income for such taxable year.

17 ‘‘(B) PERSONS DONATING TO FAMILY DE18 VELOPMENT ACCOUNTS OF OTHERS.—The

19 amount which may be designated under para20 graph (1)(B) by any qualified individual for any

21 taxable year of such individual shall not exceed

22 $1,000.

23 ‘‘(3) SPECIAL RULES FOR CERTAIN MARRIED

24 INDIVIDUALS.—Rules similar to rules of section
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1 219(c) shall apply to the limitation in paragraph

2 (2)(A).

3 ‘‘(4) COORDINATION WITH IRA’S.—No deduc4 tion shall be allowed under this section to any per5 son by reason of a payment to an account for the

6 benefit of a qualified individual if any amount is

7 paid into an individual retirement account (including

8 a Roth IRA) for the benefit of such individual.

9 ‘‘(5) ROLLOVERS.—No deduction shall be al10 lowed under this section with respect to any rollover

11 contribution.

12 ‘‘(b) TAX TREATMENT OF DISTRIBUTIONS.—

13 ‘‘(1) INCLUSION OF AMOUNTS IN GROSS IN14 COME.—Except as otherwise provided in this sub15 section, any amount paid or distributed out of a

16 family development account shall be included in

17 gross income by the payee or distributee, as the case

18 may be.

19 ‘‘(2) EXCLUSION OF QUALIFIED FAMILY DEVEL20 OPMENT DISTRIBUTIONS.—Paragraph (1) shall not

21 apply to any qualified family development distribu22 tion.

23 ‘‘(c) QUALIFIED FAMILY DEVELOPMENT DISTRIBU24 TION.—For purposes of this section—
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1 ‘‘(1) IN GENERAL.—The term ‘qualified family

2 development distribution’ means any amount paid or

3 distributed out of a family development account

4 which would otherwise be includible in gross income,

5 to the extent that such payment or distribution is

6 used exclusively to pay qualified family development

7 expenses for the holder of the account or the spouse

8 or dependent (as defined in section 152) of such

9 holder.

10 ‘‘(2) QUALIFIED FAMILY DEVELOPMENT EX11 PENSES.—The term ‘qualified family development

12 expenses’ means any of the following:

13 ‘‘(A) Qualified higher education expenses.

14 ‘‘(B) Qualified first-time homebuyer costs.

15 ‘‘(C) Qualified business capitalization

16 costs.

17 ‘‘(D) Qualified medical expenses.

18 ‘‘(E) Qualified rollovers.

19 ‘‘(3) QUALIFIED HIGHER EDUCATION EX20 PENSES.—

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

22 higher education expenses’ has the meaning

23 given such term by section 72(t)(7), determined

24 by treating postsecondary vocational edu-
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1 cational schools as eligible educational institu2 tions.

3 ‘‘(B) POSTSECONDARY VOCATIONAL EDU4 CATION SCHOOL.—The term ‘postsecondary vo5 cational educational school’ means an area vo6 cational education school (as defined in sub7 paragraph (C) or (D) of section 521(4) of the

8 Carl D. Perkins Vocational and Applied Tech9 nology Education Act (20 U.S.C. 2471(4)))

10 which is in any State (as defined in section

11 521(33) of such Act), as such sections are in

12 effect on the date of the enactment of this sec13 tion.

14 ‘‘(C) COORDINATION WITH OTHER BENE15 FITS.—The amount of qualified higher edu16 cation expenses for any taxable year shall be re17 duced as provided in section 25A(g)(2).

18 ‘‘(4) QUALIFIED FIRST-TIME HOMEBUYER

19 COSTS.—The term ‘qualified first-time homebuyer

20 costs’ means qualified acquisition costs (as defined

21 in section 72(t)(8) without regard to subparagraph

22 (B) thereof) with respect to a principal residence

23 (within the meaning of section 121) for a qualified

24 first-time homebuyer (as defined in such section).
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1 ‘‘(5) QUALIFIED BUSINESS CAPITALIZATION

2 COSTS.—

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

4 business capitalization costs’ means qualified

5 expenditures for the capitalization of a qualified

6 business pursuant to a qualified plan.

7 ‘‘(B) QUALIFIED EXPENDITURES.—The

8 term ‘qualified expenditures’ means expendi9 tures included in a qualified plan, including

10 capital, plant, equipment, working capital, and

11 inventory expenses.

12 ‘‘(C) QUALIFIED BUSINESS.—The term

13 ‘qualified business’ means any business that

14 does not contravene any law.

15 ‘‘(D) QUALIFIED PLAN.—The term ‘quali16 fied plan’ means a business plan which meets

17 such requirements as the Secretary may specify.

18 ‘‘(6) QUALIFIED MEDICAL EXPENSES.—The

19 term ‘qualified medical expenses’ means any amount

20 paid during the taxable year, not compensated for by

21 insurance or otherwise, for medical care (as defined

22 in section 213(d)) of the taxpayer, his spouse, or his

23 dependent (as defined in section 152).

24 ‘‘(7) QUALIFIED ROLLOVERS.—The term ‘quali25 fied rollover’ means any amount paid from a family
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1 development account of a taxpayer into another such

2 account established for the benefit of—

3 ‘‘(A) such taxpayer, or

4 ‘‘(B) any qualified individual who is—

5 ‘‘(i) the spouse of such taxpayer, or

6 ‘‘(ii) any dependent (as defined in sec7 tion 152) of the taxpayer.

8 Rules similar to the rules of section 408(d)(3) shall

9 apply for purposes of this paragraph.

10 ‘‘(d) TAX TREATMENT OF ACCOUNTS.—

11 ‘‘(1) IN GENERAL.—Any family development ac12 count is exempt from taxation under this subtitle

13 unless such account has ceased to be a family devel14 opment account by reason of paragraph (2). Not15 withstanding the preceding sentence, any such ac16 count is subject to the taxes imposed by section 511

17 (relating to imposition of tax on unrelated business

18 income of charitable, etc., organizations). Notwith19 standing any other provision of this title (including

20 chapters 11 and 12), the basis of any person in such

21 an account is zero.

22 ‘‘(2) LOSS OF EXEMPTION IN CASE OF PROHIB23 ITED TRANSACTIONS.—For purposes of this section,

24 rules similar to the rules of section 408(e) shall

25 apply.
28

•S 463 IS

1 ‘‘(3) OTHER RULES TO APPLY.—Rules similar

2 to the rules of paragraphs (4), (5), and (6) of sec3 tion 408(d) shall apply for purposes of this section.

4 ‘‘(e) FAMILY DEVELOPMENT ACCOUNT.—For pur5 poses of this title, the term ‘family development account’

6 means a trust created or organized in the United States

7 for the exclusive benefit of a qualified individual or his

8 beneficiaries, but only if the written governing instrument

9 creating the trust meets the following requirements:

10 ‘‘(1) Except in the case of a qualified rollover

11 (as defined in subsection (c)(7))—

12 ‘‘(A) no contribution will be accepted un13 less it is in cash; and

14 ‘‘(B) contributions will not be accepted for

15 the taxable year in excess of $3,000 (deter16 mined without regard to any contribution made

17 under section 1400I (relating to demonstration

18 program to provide matching amounts in re19 newal communities)).

20 ‘‘(2) The requirements of paragraphs (2)

21 through (6) of section 408(a) are met.

22 ‘‘(f) QUALIFIED INDIVIDUAL.—For purposes of this

23 section, the term ‘qualified individual’ means, for any tax24 able year, an individual—
29

•S 463 IS

1 ‘‘(1) who is a bona fide resident of a renewal

2 community throughout the taxable year; and

3 ‘‘(2) to whom a credit was allowed under sec4 tion 32 for the preceding taxable year.

5 ‘‘(g) OTHER DEFINITIONS AND SPECIAL RULES.—

6 ‘‘(1) COMPENSATION.—The term ‘compensa7 tion’ has the meaning given such term by section

8 219(f)(1).

9 ‘‘(2) MARRIED INDIVIDUALS.—The maximum

10 deduction under subsection (a) shall be computed

11 separately for each individual, and this section shall

12 be applied without regard to any community prop13 erty laws.

14 ‘‘(3) TIME WHEN CONTRIBUTIONS DEEMED

15 MADE.—For purposes of this section, a taxpayer

16 shall be deemed to have made a contribution to a

17 family development account on the last day of the

18 preceding taxable year if the contribution is made on

19 account of such taxable year and is made not later

20 than the time prescribed by law for filing the return

21 for such taxable year (not including extensions

22 thereof).

23 ‘‘(4) EMPLOYER PAYMENTS; CUSTODIAL AC24 COUNTS.—Rules similar to the rules of sections
30

•S 463 IS

1 219(f)(5) and 408(h) shall apply for purposes of this

2 section.

3 ‘‘(5) REPORTS.—The trustee of a family devel4 opment account shall make such reports regarding

5 such account to the Secretary and to the individual

6 for whom the account is maintained with respect to

7 contributions (and the years to which they relate),

8 distributions, and such other matters as the Sec9 retary may require under regulations. The reports

10 required by this paragraph—

11 ‘‘(A) shall be filed at such time and in

12 such manner as the Secretary prescribes in

13 such regulations; and

14 ‘‘(B) shall be furnished to individuals—

15 ‘‘(i) not later than January 31 of the

16 calendar year following the calendar year

17 to which such reports relate; and

18 ‘‘(ii) in such manner as the Secretary

19 prescribes in such regulations.

20 ‘‘(6) INVESTMENT IN COLLECTIBLES TREATED

21 AS DISTRIBUTIONS.—Rules similar to the rules of

22 section 408(m) shall apply for purposes of this sec23 tion.

24 ‘‘(h) PENALTY FOR DISTRIBUTIONS NOT USED FOR

25 QUALIFIED FAMILY DEVELOPMENT EXPENSES.—
31

•S 463 IS

1 ‘‘(1) IN GENERAL.—If any amount is distrib2 uted from a family development account and is not

3 used exclusively to pay qualified family development

4 expenses for the holder of the account or the spouse

5 or dependent (as defined in section 152) of such

6 holder, the tax imposed by this chapter for the tax7 able year of such distribution shall be increased by

8 the sum of—

9 ‘‘(A) 100 percent of the portion of such

10 amount which is includible in gross income and

11 is attributable to amounts contributed under

12 section 1400I (relating to demonstration pro13 gram to provide matching amounts in renewal

14 communities); and

15 ‘‘(B) 10 percent of the portion of such

16 amount which is includible in gross income and

17 is not described in subparagraph (A).

18 For purposes of this subsection, distributions which

19 are includible in gross income shall be treated as at20 tributable to amounts contributed under section

21 1400I to the extent thereof. For purposes of the pre22 ceding sentence, all family development accounts of

23 an individual shall be treated as one account.
32

•S 463 IS

1 ‘‘(2) EXCEPTION FOR CERTAIN DISTRIBU2 TIONS.—Paragraph (1) shall not apply to distribu3 tions which are—

4 ‘‘(A) made on or after the date on which

the account holder attains age 591 5 ⁄2,

6 ‘‘(B) made to a beneficiary (or the estate

7 of the account holder) on or after the death of

8 the account holder, or

9 ‘‘(C) attributable to the account holder’s

10 being disabled within the meaning of section

11 72(m)(7).

12 ‘‘(i) TERMINATION.—No deduction shall be allowed

13 under this section for any amount paid to a family devel14 opment account for any taxable year beginning after De15 cember 31, 2007.

16 ‘‘SEC. 1400I. DEMONSTRATION PROGRAM TO PROVIDE

17 MATCHING CONTRIBUTIONS TO FAMILY DE18 VELOPMENT ACCOUNTS IN CERTAIN RE19 NEWAL COMMUNITIES.

20 ‘‘(a) DESIGNATION.—

21 ‘‘(1) DEFINITIONS.—For purposes of this sec22 tion, the term ‘FDA matching demonstration area’

23 means any renewal community—

24 ‘‘(A) which is nominated under this section

25 by each of the local governments and States
33

•S 463 IS

1 which nominated such community for designa2 tion as a renewal community under section

3 1400E(a)(1)(A); and

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

5 Urban Development designates as an FDA

6 matching demonstration area after consultation

7 with—

8 ‘‘(i) the Secretaries of Agriculture,

9 Commerce, Labor, and the Treasury, the

10 Director of the Office of Management and

11 Budget, and the Administrator of the

12 Small Business Administration; and

13 ‘‘(ii) in the case of a community on an

14 Indian reservation, the Secretary of the In15 terior.

16 ‘‘(2) NUMBER OF DESIGNATIONS.—

17 ‘‘(A) IN GENERAL.—The Secretary of

18 Housing and Urban Development may des19 ignate not more than 5 communities as FDA

20 matching demonstration areas.

21 ‘‘(B) MINIMUM DESIGNATION IN RURAL

22 AREAS.—Of the areas designated under sub23 paragraph (A), at least 2 must be areas de24 scribed in section 1400E(a)(2)(B).

25 ‘‘(3) LIMITATIONS ON DESIGNATIONS.—
34

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1 ‘‘(A) PUBLICATION OF REGULATIONS.—

2 The Secretary of Housing and Urban Develop3 ment shall prescribe by regulation no later than

4 4 months after the date of the enactment of

5 this section, after consultation with the officials

6 described in paragraph (1)(B)—

7 ‘‘(i) the procedures for nominating a

8 renewal community under paragraph

9 (1)(A) (including procedures for coordinat10 ing such nomination with the nomination

11 of an area for designation as a renewal

12 community under section 1400E); and

13 ‘‘(ii) the manner in which nominated

14 renewal communities will be evaluated for

15 purposes of this section.

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

17 of Housing and Urban Development may des18 ignate renewal communities as FDA matching

19 demonstration areas only during the 24-month

20 period beginning on the first day of the first

21 month following the month in which the regula22 tions described in subparagraph (A) are pre23 scribed.

24 ‘‘(4) DESIGNATION BASED ON DEGREE OF POV25 ERTY, ETC.—The rules of section 1400E(a)(3) shall
35

•S 463 IS

1 apply for purposes of designations of FDA matching

2 demonstration areas under this section.

3 ‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF4 FECT.—Any designation of a renewal community as an

5 FDA matching demonstration area shall remain in effect

6 during the period beginning on the date of such designa7 tion and ending on the date on which such area ceases

8 to be a renewal community.

9 ‘‘(c) MATCHING CONTRIBUTIONS TO FAMILY DEVEL10 OPMENT ACCOUNTS.—

11 ‘‘(1) IN GENERAL.—Not less than once each

12 taxable year, the Secretary shall deposit (to the ex13 tent provided in appropriation Acts) into a family

14 development account of each qualified individual (as

15 defined in section 1400H(f))—

16 ‘‘(A) who is a resident throughout the tax17 able year of an FDA matching demonstration

18 area; and

19 ‘‘(B) who requests (in such form and man20 ner as the Secretary prescribes) such deposit

21 for the taxable year,

22 an amount equal to the sum of the amounts depos23 ited into all of the family development accounts of

24 such individual during such taxable year (determined
36

•S 463 IS

1 without regard to any amount contributed under this

2 section).

3 ‘‘(2) LIMITATIONS.—

4 ‘‘(A) ANNUAL LIMIT.—The Secretary shall

5 not deposit more than $1000 under paragraph

6 (1) with respect to any individual for any tax7 able year.

8 ‘‘(B) AGGREGATE LIMIT.—The Secretary

9 shall not deposit more than $2000 under para10 graph (1) with respect to any individual for all

11 taxable years.

12 ‘‘(3) EXCLUSION FROM INCOME.—Except as

13 provided in section 1400H, gross income shall not

14 include any amount deposited into a family develop15 ment account under paragraph (1).

16 ‘‘(d) NOTICE OF PROGRAM.—The Secretary shall

17 provide appropriate notice to residents of FDA matching

18 demonstration areas of the availability of the benefits

19 under this section.

20 ‘‘(e) TERMINATION.—No amount may be deposited

21 under this section for any taxable year beginning after De22 cember 31, 2007.
37

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1 ‘‘SEC. 1400J. DESIGNATION OF EARNED INCOME TAX CRED2 IT PAYMENTS FOR DEPOSIT TO FAMILY DE3 VELOPMENT ACCOUNT.

4 ‘‘(a) IN GENERAL.—With respect to the return of any

5 qualified individual (as defined in section 1400H(f)) for

6 the taxable year of the tax imposed by this chapter, such

7 individual may designate that a specified portion (not less

8 than $1) of any overpayment of tax for such taxable year

9 which is attributable to the earned income tax credit shall

10 be deposited by the Secretary into a family development

11 account of such individual. The Secretary shall so deposit

12 such portion designated under this subsection.

13 ‘‘(b) MANNER AND TIME OF DESIGNATION.—A des14 ignation under subsection (a) may be made with respect

15 to any taxable year—

16 ‘‘(1) at the time of filing the return of the tax

17 imposed by this chapter for such taxable year, or

18 ‘‘(2) at any other time (after the time of filing

19 the return of the tax imposed by this chapter for

20 such taxable year) specified in regulations prescribed

21 by the Secretary.

22 Such designation shall be made in such manner as the

23 Secretary prescribes by regulations.

24 ‘‘(c) PORTION ATTRIBUTABLE TO EARNED INCOME

25 TAX CREDIT.—For purposes of subsection (a), an over26 payment for any taxable year shall be treated as attrib-
38

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1 utable to the earned income tax credit to the extent that

2 such overpayment does not exceed the credit allowed to

3 the taxpayer under section 32 for such taxable year.

4 ‘‘(d) OVERPAYMENTS TREATED AS REFUNDED.—

5 For purposes of this title, any portion of an overpayment

6 of tax designated under subsection (a) shall be treated as

7 being refunded to the taxpayer as of the last date pre8 scribed for filing the return of tax imposed by this chapter

9 (determined without regard to extensions) or, if later, the

10 date the return is filed.

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

12 any taxable year beginning after December 31, 2007.

13 ‘‘PART IV—ADDITIONAL INCENTIVES

‘‘Sec. 1400K. Commercial revitalization credit.

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

14 ‘‘SEC. 1400K. COMMERCIAL REVITALIZATION CREDIT.

15 ‘‘(a) GENERAL RULE.—For purposes of section 46,

16 except as provided in subsection (e), the commercial revi17 talization credit for any taxable year is an amount equal

18 to the applicable percentage of the qualified revitalization

19 expenditures with respect to any qualified revitalization

20 building.

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

22 this section—

23 ‘‘(1) IN GENERAL.—The term ‘applicable per24 centage’ means—
39

•S 463 IS

1 ‘‘(A) 20 percent for the taxable year in

2 which a qualified revitalization building is

3 placed in service, or

4 ‘‘(B) at the election of the taxpayer, 5 per5 cent for each taxable year in the credit period.

6 The election under subparagraph (B), once made,

7 shall be irrevocable.

8 ‘‘(2) CREDIT PERIOD.—

9 ‘‘(A) IN GENERAL.—The term ‘credit pe10 riod’ means, with respect to any building, the

11 period of 10 taxable years beginning with the

12 taxable year in which the building is placed in

13 service.

14 ‘‘(B) APPLICABLE RULES.—Rules similar

15 to the rules under paragraphs (2) and (4) of

16 section 42(f) shall apply.

17 ‘‘(c) QUALIFIED REVITALIZATION BUILDINGS AND

18 EXPENDITURES.—For purposes of this section—

19 ‘‘(1) QUALIFIED REVITALIZATION BUILDING.—

20 The term ‘qualified revitalization building’ means

21 any building (and its structural components) if—

22 ‘‘(A) such building is located in a renewal

23 community and is placed in service after De24 cember 31, 2000;
40

•S 463 IS

1 ‘‘(B) a commercial revitalization credit

2 amount is allocated to the building under sub3 section (e); and

4 ‘‘(C) depreciation (or amortization in lieu

5 of depreciation) is allowable with respect to the

6 building.

7 ‘‘(2) QUALIFIED REVITALIZATION EXPENDI8 TURE.—

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

10 revitalization expenditure’ means any amount

11 properly chargeable to capital account—

12 ‘‘(i) for property for which deprecia13 tion is allowable under section 168 and

14 which is—

15 ‘‘(I) nonresidential real property;

16 or

17 ‘‘(II) an addition or improvement

18 to property described in subclause (I);

19 and

20 ‘‘(ii) in connection with the construc21 tion of any qualified revitalization building

22 which was not previously placed in service

23 or in connection with the substantial reha24 bilitation (within the meaning of section

25 47(c)(1)(C)) of a building which was
41

•S 463 IS

1 placed in service before the beginning of

2 such rehabilitation.

3 ‘‘(B) DOLLAR LIMITATION.—The aggre4 gate amount which may be treated as qualified

5 revitalization expenditures with respect to any

6 qualified revitalization building for any taxable

7 year shall not exceed the excess of—

8 ‘‘(i) $10,000,000, reduced by

9 ‘‘(ii) any such expenditures with re10 spect to the building taken into account by

11 the taxpayer or any predecessor in deter12 mining the amount of the credit under this

13 section for all preceding taxable years.

14 ‘‘(C) CERTAIN EXPENDITURES NOT IN15 CLUDED.—The term ‘qualified revitalization ex16 penditure’ does not include—

17 ‘‘(i) STRAIGHT LINE DEPRECIATION

18 MUST BE USED.—Any expenditure (other

19 than with respect to land acquisitions) with

20 respect to which the taxpayer does not use

21 the straight line method over a recovery

22 period determined under subsection (c) or

23 (g) of section 168. The preceding sentence

24 shall not apply to any expenditure to the

25 extent the alternative depreciation system
42

•S 463 IS

1 of section 168(g) applies to such expendi2 ture by reason of subparagraph (B) or (C)

3 of section 168(g)(1).

4 ‘‘(ii) ACQUISITION COSTS.—The costs

5 of acquiring any building or interest there6 in and any land in connection with such

7 building to the extent that such costs ex8 ceed 30 percent of the qualified revitaliza9 tion expenditures determined without re10 gard to this clause.

11 ‘‘(iii) OTHER CREDITS.—Any expendi12 ture which the taxpayer may take into ac13 count in computing any other credit allow14 able under this title unless the taxpayer

15 elects to take the expenditure into account

16 only for purposes of this section.

17 ‘‘(d) WHEN EXPENDITURES TAKEN INTO AC18 COUNT.—

19 ‘‘(1) IN GENERAL.—Qualified revitalization ex20 penditures with respect to any qualified revitaliza21 tion building shall be taken into account for the tax22 able year in which the qualified revitalization build23 ing is placed in service. For purposes of the preced24 ing sentence, a substantial rehabilitation of a build25 ing shall be treated as a separate building.
43

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1 ‘‘(2) PROGRESS EXPENDITURE PAYMENTS.—

2 Rules similar to the rules of subsections (b)(2) and

3 (d) of section 47 shall apply for purposes of this sec4 tion.

5 ‘‘(e) LIMITATION ON AGGREGATE CREDITS ALLOW6 ABLE WITH RESPECT TO BUILDINGS LOCATED IN A

7 STATE.—

8 ‘‘(1) IN GENERAL.—The amount of the credit

9 determined under this section for any taxable year

10 with respect to any building shall not exceed the

11 commercial revitalization credit amount (in the case

12 of an amount determined under subsection

13 (b)(1)(B), the present value of such amount as de14 termined under the rules of section 42(b)(2)(C)) al15 located to such building under this subsection by the

16 commercial revitalization credit agency. Such alloca17 tion shall be made at the same time and in the same

18 manner as under paragraphs (1) and (7) of section

19 42(h).

20 ‘‘(2) COMMERCIAL REVITALIZATION CREDIT

21 AMOUNT FOR AGENCIES.—

22 ‘‘(A) IN GENERAL.—The aggregate com23 mercial revitalization credit amount which a

24 commercial revitalization credit agency may al25 locate for any calendar year is the amount of
44

•S 463 IS

1 the State commercial revitalization credit ceil2 ing determined under this paragraph for such

3 calendar year for such agency.

4 ‘‘(B) STATE COMMERCIAL REVITALIZATION

5 CREDIT CEILING.—The State commercial revi6 talization credit ceiling applicable to any

7 State—

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

9 and before 2008 is $2,000,000 for each re10 newal community in the State; and

11 ‘‘(ii) zero for each calendar year

12 thereafter.

13 ‘‘(C) COMMERCIAL REVITALIZATION CRED14 IT AGENCY.—For purposes of this section, the

15 term ‘commercial revitalization credit agency’

16 means any agency authorized by a State to

17 carry out this section.

18 ‘‘(f) RESPONSIBILITIES OF COMMERCIAL REVITAL19 IZATION CREDIT AGENCIES.—

20 ‘‘(1) PLANS FOR ALLOCATION.—Notwithstand21 ing any other provision of this section, the commer22 cial revitalization credit amount with respect to any

23 building shall be zero unless—

24 ‘‘(A) such amount was allocated pursuant

25 to a qualified allocation plan of the commercial
45

•S 463 IS

1 revitalization credit agency which is approved

2 (in accordance with rules similar to the rules of

3 section 147(f)(2) (other than subparagraph

4 (B)(ii) thereof)) by the governmental unit of

5 which such agency is a part; and

6 ‘‘(B) such agency notifies the chief execu7 tive officer (or its equivalent) of the local juris8 diction within which the building is located of

9 such allocation and provides such individual a

10 reasonable opportunity to comment on the allo11 cation.

12 ‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur13 poses of this subsection, the term ‘qualified alloca14 tion plan’ means any plan—

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

16 be used to determine priorities of the commer17 cial revitalization credit agency which are ap18 propriate to local conditions;

19 ‘‘(B) which considers—

20 ‘‘(i) the degree to which a project con21 tributes to the implementation of a strate22 gic plan that is devised for a renewal com23 munity through a citizen participation

24 process;
46

•S 463 IS

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

2 permanent, full-time employment by reason

3 of any project; and

4 ‘‘(iii) the active involvement of resi5 dents and nonprofit groups within the re6 newal community; and

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

8 agency (or its agent) will follow in monitoring

9 compliance with this section.

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

11 any building placed in service after December 31, 2007.

12 ‘‘SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.

13 ‘‘(a) GENERAL RULE.—In the case of a renewal com14 munity business (as defined in section 1400G), for pur15 poses of section 179—

16 ‘‘(1) the limitation under section 179(b)(1)

17 shall be increased by the lesser of—

18 ‘‘(A) $35,000; or

19 ‘‘(B) the cost of section 179 property

20 which is qualified renewal property placed in

21 service during the taxable year; and

22 ‘‘(2) the amount taken into account under sec23 tion 179(b)(2) with respect to any section 179 prop24 erty which is qualified renewal property shall be 50

25 percent of the cost thereof.
47

•S 463 IS

1 ‘‘(b) RECAPTURE.—Rules similar to the rules under

2 section 179(d)(10) shall apply with respect to any quali3 fied renewal property which ceases to be used in a renewal

4 community by a renewal community business.

5 ‘‘(c) 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, 2008; and

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

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

18 section 1397C.

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

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

21 apply for purposes of this section.’’.
48

•S 463 IS

1 SEC. 102. EXTENSION OF EXPENSING OF ENVIRONMENTAL

2 REMEDIATION COSTS TO RENEWAL COMMU3 NITIES.

4 (a) EXTENSION.—Paragraph (2) of section 198(c)

5 (defining targeted area) is amended by redesignating sub6 paragraph (C) as subparagraph (D) and by inserting after

7 subparagraph (B) the following new subparagraph:

8 ‘‘(C) RENEWAL COMMUNITIES IN9 CLUDED.—Except as provided in subparagraph

10 (B), such term shall include a renewal commu11 nity (as defined in section 1400E).’’.

12 (b) EXTENSION OF TERMINATION DATE FOR RE13 NEWAL COMMUNITIES.—Subsection (h) of section 198 is

14 amended by inserting before the period ‘‘(December 31,

15 2007, in the case of a renewal community, as defined in

16 section 1400E).’’.

17 SEC. 103. EXTENSION OF WORK OPPORTUNITY TAX CREDIT

18 FOR RENEWAL COMMUNITIES

19 (a) EXTENSION.—Subsection (c) of section 51 (relat20 ing to termination) is amended by adding at the end the

21 following new paragraph:

22 ‘‘(5) EXTENSION OF CREDIT FOR RENEWAL

23 COMMUNITIES.—

24 ‘‘(A) IN GENERAL.—In the case of an indi25 vidual who begins work for the employer after
49

•S 463 IS

1 the date contained in paragraph (4)(B), for

2 purposes of section 38—

3 ‘‘(i) in lieu of applying subsection (a),

4 the amount of the work opportunity credit

5 determined under this section for the tax6 able year shall be equal to—

7 ‘‘(I) 15 percent of the qualified

8 first-year wages for such year; and

9 ‘‘(II) 30 percent of the qualified

10 second-year wages for such year;

11 ‘‘(ii) subsection (b)(3) shall be applied

12 by substituting ‘$10,000’ for ‘$6,000’;

13 ‘‘(iii) paragraph (4)(B) shall be ap14 plied by substituting for the date contained

15 therein the last day for which the designa16 tion under section 1400E of the renewal

17 community referred to in subparagraph

18 (B)(i) is in effect; and

19 ‘‘(iv) rules similar to the rules of sec20 tion 51A(b)(5)(C) shall apply.

21 ‘‘(B) QUALIFIED FIRST- AND SECOND22 YEAR WAGES.—For purposes of subparagraph

23 (A)—

24 ‘‘(i) IN GENERAL.—The term ‘quali25 fied wages’ means, with respect to each 1-
50

•S 463 IS

1 year period referred to in clause (ii) or

2 (iii), as the case may be, the wages paid or

3 incurred by the employer during the tax4 able year to any individual but only if—

5 ‘‘(I) the employer is engaged in a

6 trade or business in a renewal com7 munity throughout such 1-year period;

8 ‘‘(II) the principal place of abode

9 of such individual is in such renewal

10 community throughout such 1-year

11 period; and

12 ‘‘(III) substantially all of the

13 services which such individual per14 forms for the employer during such 1-

15 year period are performed in such re16 newal community.

17 ‘‘(ii) QUALIFIED FIRST-YEAR

18 WAGES.—The term ‘qualified first-year

19 wages’ means, with respect to any individ20 ual, qualified wages attributable to service

21 rendered during the 1-year period begin22 ning with the day the individual begins

23 work for the employer.

24 ‘‘(iii) QUALIFIED SECOND-YEAR

25 WAGES.—The term ‘qualified second-year
51

•S 463 IS

1 wages’ means, with respect to any individ2 ual, qualified wages attributable to service

3 rendered during the 1-year period begin4 ning on the day after the last day of the

5 1-year period with respect to such individ6 ual determined under clause (ii).’’.

7 (b) CONGRUENT TREATMENT OF RENEWAL COMMU8 NITIES AND ENTERPRISE ZONES FOR PURPOSES OF

9 YOUTH RESIDENCE REQUIREMENTS.—

10 (1) HIGH-RISK YOUTH.—Subparagraphs (A)(ii)

11 and (B) of section 51(d)(5) are each amended by

12 striking ‘‘empowerment zone or enterprise commu13 nity’’ and inserting ‘‘empowerment zone, enterprise

14 community, or renewal community’’.

15 (2) QUALIFIED SUMMER YOUTH EMPLOYEE.—

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

17 striking ‘‘empowerment zone or enterprise commu18 nity’’ and inserting ‘‘empowerment zone, enterprise

19 community, or renewal community’’.

20 (3) HEADINGS.—Paragraphs (5)(B) and (7)(C)

21 of section 51(d) are each amended by inserting ‘‘OR

22 COMMUNITY’’ in the heading after ‘‘ZONE’’.

23 SEC. 104. CONFORMING AND CLERICAL AMENDMENTS.

24 (a) DEDUCTION FOR CONTRIBUTIONS TO FAMILY

25 DEVELOPMENT ACCOUNTS ALLOWABLE WHETHER OR
52

•S 463 IS

1 NOT TAXPAYER ITEMIZES.—Subsection (a) of section 62

2 (relating to adjusted gross income defined) is amended by

3 inserting after paragraph (17) the following new para4 graph:

5 ‘‘(18) FAMILY DEVELOPMENT ACCOUNTS.—The

6 deduction allowed by section 1400H(a)(1)(A).’’.

7 (b) TAX ON EXCESS CONTRIBUTIONS.—

8 (1) TAX IMPOSED.—Subsection (a) of section

9 4973 is amended by striking ‘‘or’’ at the end of

10 paragraph (3), adding ‘‘or’’ at the end of paragraph

11 (4), and inserting after paragraph (4) the following

12 new paragraph:

13 ‘‘(5) a family development account (within the

14 meaning of section 1400H(e)),’’.

15 (2) EXCESS CONTRIBUTIONS.—Section 4973 is

16 amended by adding at the end the following new

17 subsection:

18 ‘‘(g) FAMILY DEVELOPMENT ACCOUNTS.—For pur19 poses of this section, in the case of a family development

20 account, the term ‘excess contributions’ means the sum

21 of—

22 ‘‘(1) the excess (if any) of—

23 ‘‘(A) the amount contributed for the tax24 able year to the account (other than a qualified
53

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1 rollover, as defined in section 1400H(c)(7), or

2 a contribution under section 1400I), over

3 ‘‘(B) the amount allowable as a deduction

4 under section 1400H for such contributions;

5 and

6 ‘‘(2) the amount determined under this sub7 section for the preceding taxable year reduced by the

8 sum of—

9 ‘‘(A) the distributions out of the account

10 for the taxable year which were included in the

11 gross income of the payee under section

12 1400H(b)(1);

13 ‘‘(B) the distributions out of the account

14 for the taxable year to which rules similar to

15 the rules of section 408(d)(5) apply by reason

16 of section 1400H(d)(3); and

17 ‘‘(C) the excess (if any) of the maximum

18 amount allowable as a deduction under section

19 1400H for the taxable year over the amount

20 contributed to the account for the taxable year

21 (other than a contribution under section

22 1400I).

23 For purposes of this subsection, any contribution which

24 is distributed from the family development account in a

25 distribution to which rules similar to the rules of section
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1 408(d)(4) apply by reason of section 1400H(d)(3) shall

2 be treated as an amount not contributed.’’.

3 (c) TAX ON PROHIBITED TRANSACTIONS.—Section

4 4975 is amended—

5 (1) by adding at the end of subsection (c) the

6 following new paragraph:

7 ‘‘(6) SPECIAL RULE FOR FAMILY DEVELOP8 MENT ACCOUNTS.—An individual for whose benefit a

9 family development account is established and any

10 contributor to such account shall be exempt from the

11 tax imposed by this section with respect to any

12 transaction concerning such account (which would

13 otherwise be taxable under this section) if, with re14 spect to such transaction, the account ceases to be

15 a family development account by reason of the appli16 cation of section 1400H(d)(2) to such account.’’;

17 and

18 (2) in subsection (e)(1), by striking ‘‘or’’ at the

19 end of subparagraph (E), by redesignating subpara20 graph (F) as subparagraph (G), and by inserting

21 after subparagraph (E) the following new subpara22 graph:

23 ‘‘(F) a family development account de24 scribed in section 1400H(e), or’’.
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1 (d) INFORMATION RELATING TO CERTAIN TRUSTS

2 AND ANNUITY PLANS.—Subsection (c) of section 6047 is

3 amended—

4 (1) by inserting ‘‘or section 1400H’’ after ‘‘sec5 tion 219’’; and

6 (2) by inserting ‘‘, of any family development

7 account described in section 1400H(e),’’, after ‘‘sec8 tion 408(a)’’.

9 (e) INSPECTION OF APPLICATIONS FOR TAX EXEMP10 TION.—Clause (i) of section 6104(a)(1)(B) is amended by

11 inserting ‘‘a family development account described in sec12 tion 1400H(e),’’ after ‘‘section 408(a),’’.

13 (f) FAILURE TO PROVIDE REPORTS ON FAMILY DE14 VELOPMENT ACCOUNTS.—Paragraph (2) of section

15 6693(a) is amended by striking ‘‘and’’ at the end of sub16 paragraph (C), by striking the period and inserting ‘‘,

17 and’’ at the end of subparagraph (D), and by adding at

18 the end the following new subparagraph:

19 ‘‘(E) section 1400H(g)(6) (relating to fam20 ily development accounts).’’.

21 (g) CONFORMING AMENDMENTS REGARDING COM22 MERCIAL REVITALIZATION CREDIT.—

23 (1) Section 46 (relating to investment credit) is

24 amended by striking ‘‘and’’ at the end of paragraph

25 (2), by striking the period at the end of paragraph
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•S 463 IS

1 (3) and inserting ‘‘, and’’, and by adding at the end

2 the following new paragraph:

3 ‘‘(4) the commercial revitalization credit pro4 vided under section 1400K.’’.

5 (2) Section 39(d) is amended by adding at the

6 end the following new paragraph:

7 ‘‘(9) NO CARRYBACK OF SECTION 1400K CREDIT

8 BEFORE DATE OF ENACTMENT.—No portion of the

9 unused business credit for any taxable year which is

10 attributable to any commercial revitalization credit

11 determined under section 1400K may be carried

12 back to a taxable year ending before the date of the

13 enactment of section 1400K.’’.

14 (3) Subparagraph (B) of section 48(a)(2) is

15 amended by inserting ‘‘or commercial revitalization’’

16 after ‘‘rehabilitation’’ each place it appears in the

17 text and heading.

18 (4) Subparagraph (C) of section 49(a)(1) is

19 amended by striking ‘‘and’’ at the end of clause (ii),

20 by striking the period at the end of clause (iii) and

21 inserting ‘‘, and’’, and by adding at the end the fol22 lowing new clause:

23 ‘‘(iv) the portion of the basis of any

24 qualified revitalization building attributable

25 to qualified revitalization expenditures.’’.
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1 (5) Paragraph (2) of section 50(a) is amended

2 by inserting ‘‘or 1400K(d)(2)’’ after ‘‘section 47(d)’’

3 each place it appears.

4 (6) Subparagraph (A) of section 50(a)(2) is

5 amended by inserting ‘‘or qualified revitalization

6 building (respectively)’’ after ‘‘qualified rehabilitated

7 building’’.

8 (7) Subparagraph (B) of section 50(a)(2) is

9 amended by adding at the end the following new

10 sentence: ‘‘A similar rule shall apply for purposes of

11 section 1400K.’’.

12 (8) Paragraph (2) of section 50(b) is amended

13 by striking ‘‘and’’ at the end of subparagraph (C),

14 by striking the period at the end of subparagraph

15 (D) and inserting ‘‘; and’’, and by adding at the end

16 the following new subparagraph:

17 ‘‘(E) a qualified revitalization building (as

18 defined in section 1400K) to the extent of the

19 portion of the basis which is attributable to

20 qualified revitalization expenditures (as defined

21 in section 1400K).’’.

22 (9) The last sentence of section 50(b)(3) is

23 amended to read as follows: ‘‘If any qualified reha24 bilitated building or qualified revitalization building

25 is used by the tax-exempt organization pursuant to
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1 a lease, this paragraph shall not apply for purposes

2 of determining the amount of the rehabilitation cred3 it or the commercial revitalization credit.’’.

4 (10) Subparagraph (C) of section 50(b)(4) is

5 amended—

6 (A) by inserting ‘‘or commercial revitaliza7 tion’’ after ‘‘rehabilitated’’ in the text and head8 ing; and

9 (B) by inserting ‘‘or commercial revitaliza10 tion’’ after ‘‘rehabilitation’’.

11 (11) Subparagraph (C) of section 469(i)(3) is

12 amended—

13 (A) by inserting ‘‘or section 1400K’’ after

14 ‘‘section 42’’; and

15 (B) by striking ‘‘CREDIT’’ in the heading

16 and inserting ‘‘AND COMMERCIAL REVITALIZA17 TION CREDITS’’.

18 (h) CLERICAL AMENDMENTS.—The table of sub19 chapters for chapter 1 is amended by adding at the end

20 the following new item:

‘‘Subchapter X. Renewal Communities.’’.

21 SEC. 105. EVALUATION AND REPORTING REQUIREMENTS.

22 Not later than the close of the fourth calendar year

23 after the year in which the Secretary of Housing and

24 Urban Development first designates an area as a renewal

25 community under section 1400E of the Internal Revenue
59

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

2 year thereafter, such Secretary shall prepare and submit

3 to the Congress a report on the effects of such designa4 tions in stimulating the creation of new jobs, particularly

5 for disadvantaged workers and long-term unemployed in6 dividuals, and promoting the revitalization of economically

7 distressed areas.

8 SEC. 106. EXCLUSION OF EFFECTS OF THIS ACT FROM

9 PAYGO SCORECARD.

10 Upon the enactment of this Act, the Director of the

11 Office of Management and Budget shall not make any es12 timates of changes in receipts under section 252(d) of the

13 Balanced Budget and Emergency Deficit Control Act of

14 1985 resulting from the enactment of this Act.

15 TITLE II—ADDITIONAL

16 PROVISIONS

17 SEC. 201. TRANSFER OF UNOCCUPIED AND SUBSTANDARD

18 HUD-HELD HOUSING IN RENEWAL COMMU19 NITIES TO LOCAL GOVERNMENTS.

20 (a) TRANSFER REQUIREMENT.—Pursuant to the au21 thority under section 204 of the Departments of Veterans

22 Affairs and Housing and Urban Development, and Inde23 pendent Agencies Appropriations Act, 1997, the Secretary

24 shall transfer ownership of any qualified HUD property

25 to the unit of general local government having jurisdiction
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1 for the area in which the property is located in accordance

2 with this section, but only if the unit of general local gov3 ernment enters into an agreement with the Secretary

4 meeting the requirements of subsection (d).

5 (b) QUALIFIED HUD PROPERTIES.—For purposes of

6 this section, the term ‘‘qualified HUD property’’ means

7 any unoccupied multifamily housing, project, substandard

8 multifamily housing project, or unoccupied single family

9 property, that is—

10 (1) owned by the Secretary; and

11 (2) located within a renewal community.

12 (c) TIMING OF TRANSFER.—Any transfer of owner13 ship required under subsection (a) shall be completed—

14 (1) with respect to any multifamily housing

15 project or single family property that is acquired by

16 the Secretary before the date on which the area in

17 which property is located is designated as a renewal

18 community and that is substandard or unoccupied

19 (as applicable) upon such date, not later than 1 year

20 after such date; and

21 (2) with respect to any multifamily housing

22 project or single family property that is acquired by

23 the Secretary on or after the date on which the area

24 in which the property is located is designated as a

25 renewal community, not later than 1 year after—
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1 (A) the date on which the project is deter2 mined to be substandard or unoccupied (as ap3 plicable), in the case of a property that is not

4 unoccupied or substandard upon acquisition by

5 the Secretary; or

6 (B) the date on which the project is ac7 quired by the Secretary, in the case of a prop8 erty that is substandard or unoccupied (as ap9 plicable) upon such acquisition.

10 (d) AGREEMENTS TO SELL PROPERTY TO COMMU11 NITY DEVELOPMENT CORPORATIONS.—An agreement de12 scribed in this subsection is an agreement that requires

13 a unit of general local government to dispose of the quali14 fied HUD property acquired by the unit of general local

15 government in accordance with the following require16 ments:

17 (1) NOTIFICATION TO COMMUNITY DEVELOP18 MENT CORPORATIONS.—Not later than 30 days after

19 the date on which the unit of general local govern20 ment acquires title to the property under subsection

21 (a), the unit of general local government shall notify

22 each community development corporation located in

23 the State in which the property is located—

24 (A) of such acquisition of title; and
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1 (B) that, during the 6-month period begin2 ning on the date on which such notification is

3 made, such community development corpora4 tions shall have the exclusive right under this

5 subsection to make bona fide offers to purchase

6 the property on a cost recovery basis.

7 (2) RIGHT OF FIRST REFUSAL.—During the 6-

8 month period described in paragraph (1)(B)—

9 (A) the unit of general local government

10 may not sell or offer to sell the qualified HUD

11 property other than to a party notified under

12 paragraph (1), unless each community develop13 ment corporation required to be so notified has

14 notified the unit of general local government

15 that the corporation will not make an offer to

16 purchase the property; and

17 (B) the unit of general local government

18 shall accept a bona fide offer to purchase the

19 property made during such period if the offer is

20 acceptable to the unit of general local govern21 ment, except that a unit of general local govern22 ment may not sell a property to a community

23 development corporation during that 6-month

24 period other than on a cost recovery basis.
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1 (3) OTHER DISPOSITION.—During the 6-month

2 period beginning on the expiration of the 6-month

3 period described in paragraph (1)(B), the unit of

4 general local government shall dispose of the prop5 erty on a negotiated, competitive bid, or other basis,

6 on such terms as the unit of general local govern7 ment deems appropriate.

8 (e) SATISFACTION OF INDEBTEDNESS.—Before

9 transferring ownership of any qualified HUD property

10 pursuant to subsection (a), the Secretary shall satisfy any

11 indebtedness incurred in connection with the property to

12 be transferred, by—

13 (1) canceling the indebtedness; or

14 (2) reimbursing the unit of general local gov15 ernment to which the property is transferred for the

16 amount of the indebtedness.

17 (f) DETERMINATION OF STATUS OF PROPERTIES.—

18 To ensure compliance with the requirements of subsection

19 (c), the Secretary shall take the following actions:

20 (1) UPON DESIGNATION OF RENEWAL COMMU21 NITIES.—Upon the designation of any renewal com22 munity, the Secretary shall promptly assess each

23 residential property owned by the Secretary that is

24 located within such renewal community to determine

25 whether such property is a qualified HUD property.
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1 (2) UPON ACQUISITION.—Upon acquiring any

2 residential property that is located with a renewal

3 community, the Secretary shall promptly determine

4 whether the property is a qualified HUD property.

5 (3) UPDATES.—The Secretary shall periodically

6 reassess the residential properties owned by the Sec7 retary to determine whether any such properties

8 have become qualified HUD properties.

9 (g) TENANT LEASES.—This section shall not affect

10 the terms or the enforceability of any contract or lease

11 entered into with respect to any residential property before

12 the date that such property becomes a qualified HUD

13 property.

14 (h) PROCEDURES.—Not later than the expiration of

15 the 6-month period beginning on the date of the enact16 ment of this Act, the Secretary shall establish, by rule,

17 regulation, or order, such procedures as may be necessary

18 to carry out this section.

19 (i) DEFINITIONS.—For purposes of this section, the

20 following definitions shall apply:

21 (1) COMMUNITY DEVELOPMENT CORPORA22 TION.—The term ‘‘community development corpora23 tion’’ means a nonprofit organization whose primary

24 purpose is to promote community development by
65

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1 providing housing opportunities for low-income fami2 lies.

3 (2) COST RECOVERY BASIS.—The term ‘‘cost

4 recovery basis’’ means, with respect to any sale of a

5 residential property by a unit of general local gov6 ernment to a community development corporation

7 under subsection (d)(2), that the purchase price paid

8 by the community development corporation is less

9 than or equal to the costs incurred by the unit of

10 general local government in connection with such

11 property during the period beginning on the date on

12 which the unit of general local government acquires

13 title to the property under subsection (a) and ending

14 on the date on which the sale is consummated.

15 (3) LOW-INCOME FAMILIES.—The term ‘‘low-in16 come families’’ has the meaning given the term in

17 section 3(b) of the United States Housing Act of

18 1937.

19 (4) MULTIFAMILY HOUSING PROJECT.—The

20 term ‘‘multifamily housing project’’ has the meaning

21 given the term in section 203 of the Housing and

22 Community Development Amendments of 1978.

23 (5) RENEWAL COMMUNITY.—The term ‘‘re24 newal community’’ means an area designated (under
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1 subchapter X of chapter 1 of the Internal Revenue

2 Code of 1986) as a renewal community.

3 (6) RESIDENTIAL PROPERTY.—The term ‘‘resi4 dential property’’ means a property that is a multi5 family housing project or a single family property.

6 (7) SECRETARY.—The term ‘‘Secretary’’ means

7 the Secretary of Housing and Urban Development.

8 (8) SEVERE PHYSICAL PROBLEMS.—The term

9 ‘‘severe physical problems’’ means, with respect to a

10 dwelling unit, that the unit—

11 (A) lacks hot or cold piped water, a flush

12 toilet, or both a bathtub and a shower in the

13 unit, for the exclusive use of that unit;

14 (B) on not less than 3 separate occasions

15 during the preceding winter months, was un16 comfortably cold for a period of more than 6

17 consecutive hours due to a malfunction of the

18 heating system for the unit;

19 (C) has no functioning electrical service,

20 exposed wiring, any room in which there is not

21 a functioning electrical outlet, or has experi22 enced 3 or more blown fuses or tripped circuit

23 breakers during the preceding 90-day period;

24 (D) is accessible through a public hallway

25 in which there are no working light fixtures,
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1 loose or missing steps or railings, and no eleva2 tor; or

3 (E) has severe maintenance problems, in4 cluding water leaks involving the roof, windows,

5 doors, basement, or pipes or plumbing fixtures,

6 holes or open cracks in walls or ceilings, severe

7 paint peeling or broken plaster, and signs of ro8 dent infestation.

9 (9) SINGLE FAMILY PROPERTY.—The term

10 ‘‘single family property’’ means a 1- to 4-family resi11 dence.

12 (10) SUBSTANDARD.—The term ‘‘substandard’’

13 means, with respect to a multifamily housing

14 project, that 25 percent or more of the dwelling

15 units in the project have severe physical problems.

16 (11) UNIT OF GENERAL LOCAL GOVERN17 MENT.—The term ‘‘unit of general local govern18 ment’’ has the meaning given the term in section

19 102(a) of the Housing and Community Development

20 Act of 1974.

21 (12) UNOCCUPIED.—The term ‘‘unoccupied’’

22 means, with respect to a residential property, that

23 the unit of general local government having jurisdic24 tion over the area in which the project is located has
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1 certified in writing that the property is not inhab2 ited.

3 SEC. 202. PREVENTION AND TREATMENT OF SUBSTANCE

4 ABUSE; SERVICES PROVIDED THROUGH RELI5 GIOUS ORGANIZATIONS.

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

7 290aa et seq.) is amended by adding at the end the follow8 ing part:

9 ‘‘PART G—SERVICES PROVIDED THROUGH RELIGIOUS

10 ORGANIZATIONS

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

12 ‘‘(a) DESIGNATED PROGRAMS.—Subject to sub13 section (b), this part applies to each program under this

14 Act that makes awards of Federal financial assistance to

15 public or private entities for the purpose of carrying out

16 activities to prevent or treat substance abuse (in this part

17 referred to as a ‘designated program’). Designated pro18 grams include the program under subpart II of part B

19 of title XIX (relating to formula grants to the States).

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

21 award of Federal financial assistance under a designated

22 program for a purpose other than the purpose specified

23 in subsection (a).

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

25 subject to subsection (b)):
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1 ‘‘(1) The term ‘designated award recipient’

2 means a public or private entity that has received an

3 award under a designated program (whether the

4 award is a designated direct award or a designated

5 subaward).

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

7 an award under a designated program that is re8 ceived directly from the Federal Government.

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

10 award of financial assistance made by a non-Federal

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

12 Federal financial assistance provided through an

13 award under a designated program.

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

15 meaning given such term in subsection (a).

16 ‘‘(5) The term ‘financial assistance’ means a

17 grant, cooperative agreement, contract, or

18 voucherized assistance.

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

20 individual who receives program services.

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

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

23 ‘‘(8) The term ‘program services’ means treat24 ment for substance abuse, or preventive services re-
70

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1 garding such abuse, provided pursuant to an award

2 under a designated program.

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

4 nonprofit religious organization.

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

6 means—

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

8 program services in which—

9 ‘‘(i) the beneficiary is given a docu10 ment or other authorization that may be

11 used to pay for program services;

12 ‘‘(ii) the beneficiary chooses the orga13 nization that will provide services to him or

14 her according to rules specified by the des15 ignated award recipient; and

16 ‘‘(iii) the organization selected by the

17 beneficiary is reimbursed by the designated

18 award recipient for program services pro19 vided; or

20 ‘‘(B) any other mode of financial assist21 ance to pay for program services in which the

22 program beneficiary determines the allocation

23 of program funds through his or her selection

24 of one service provider from among alternatives.
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1 ‘‘SEC. 582. RELIGIOUS ORGANIZATIONS AS PROGRAM PAR2 TICIPANTS.

3 ‘‘(a) IN GENERAL.—

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

5 any other provision of law, a religious

6 organization—

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

8 ‘‘(B) may make designated subawards to

9 other public or nonprofit private entities (in10 cluding other religious organizations);

11 ‘‘(C) may provide for the provision of pro12 gram services to program beneficiaries through

13 the use of voucherized assistance; and

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

15 a designated program, including a provider that

16 accepts voucherized assistance.

17 ‘‘(2) DEFINITION OF PROGRAM PARTICIPANT.—

18 For purposes of this part, the term ‘program partici19 pant’ means a public or private entity that has re20 ceived a designated direct award, or a designated

21 subaward, regardless of whether the entity provides

22 program services. Such term includes an entity

23 whose only participation in a designated program is

24 to provide program services pursuant to the accept25 ance of voucherized assistance.
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1 ‘‘(b) RELIGIOUS ORGANIZATIONS.—The purpose of

2 this section is to allow religious organizations to be pro3 gram participants on the same basis as any other non4 profit private provider without impairing the religious

5 character of such organizations, and without diminishing

6 the religious freedom of program beneficiaries.

7 ‘‘(c) NONDISCRIMINATION AGAINST RELIGIOUS OR8 GANIZATIONS.—

9 ‘‘(1) FINDINGS.—The Congress finds that the

10 establishment clause of the first amendment to the

11 Constitution of the United States does not require

12 that—

13 ‘‘(A) social-welfare programs discriminate

14 against faith-based providers of services; or

15 ‘‘(B) faith-based providers of services, as a

16 prerequisite to participation in Federal pro17 grams, abandon their religious character and

18 censor their religious expression.

19 ‘‘(2) NONDISCRIMINATION.—Religious organiza20 tions are eligible to be program participants on the

21 same basis as any other nonprofit private organiza22 tion. Neither the Federal Government nor a State

23 receiving funds under such programs shall discrimi24 nate against an organization that is or applies to be
73

•S 463 IS

1 a program participant on the basis that the organi2 zation has a religious character.

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

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

5 provided in this section, any religious organization

6 that is a program participant shall retain its inde7 pendence from Federal, State, and local government,

8 including such organization’s control over the defini9 tion, development, practice, and expression of its re10 ligious beliefs.

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

12 Federal Government nor a State shall require a reli13 gious organization to—

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

15 or

16 ‘‘(B) remove religious art, icons, scripture,

17 or other symbols;

18 in order to be a program participant.

19 ‘‘(e) NONDISCRIMINATION IN EMPLOYMENT.—

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (2), nothing in this section shall be construed

22 to modify or affect the provisions of any other Fed23 eral or State law or regulation that relates to dis24 crimination in employment on the basis of religion.
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1 ‘‘(2) EXCEPTION.—A religious organization

2 that is a program participant may require that an

3 employee rendering program services adhere to—

4 ‘‘(A) the religious beliefs and practices of

5 such organization; and

6 ‘‘(B) any rules of the organization regard7 ing the use of drugs or alcohol.

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

9 (1) OBJECTIONS REGARDING RELIGIOUS ORGA10 NIZATIONS.—With respect to an individual who is a

11 program beneficiary or a prospective program bene12 ficiary, if the individual objects to a program partici13 pant on the basis that the participant is a religious

14 organization, the following applies:

15 ‘‘(A) If the organization received a des16 ignated direct award, the organization shall ar17 range for the individual to receive program

18 services through an alternative entity.

19 ‘‘(B) If the organization received a des20 ignated subaward, the non-Federal entity that

21 made the subaward shall arrange for the indi22 vidual to receive the program services through

23 an alternative program participant.

24 ‘‘(C) If the organization is providing serv25 ices pursuant to voucherized assistance, the
75

•S 463 IS

1 designated award recipient that operates the

2 voucherized assistance program shall arrange

3 for the individual to receive the program serv4 ices through an alternative provider.

5 ‘‘(D) Arrangements under any of para6 graphs (A) through (C) with an alternative en7 tity shall provide for program services the mon8 etary value of which is not less than the mone9 tary value of the program services that the indi10 vidual would have received from the religious

11 organization involved.

12 ‘‘(2) NONDISCRIMINATION.—

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

14 subparagraph (B) or as otherwise provided in

15 law, a religious organization that is a program

16 participant shall not in providing program serv17 ices discriminate against a program beneficiary

18 on the basis of religion or religious belief.

19 ‘‘(B) LIMITATION.—A religious organiza20 tion that is a program participant may require

21 a program beneficiary who has elected in ac22 cordance with paragraph (1) to receive program

23 services from such organization—

24 ‘‘(i) to actively participate in religious

25 practice, worship, and instruction; and
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1 ‘‘(ii) to follow rules of behavior de2 vised by the organizations that are reli3 gious in content or origin.

4 ‘‘(g) FISCAL ACCOUNTABILITY.—

5 ‘‘(1) IN GENERAL.—Except as provided in para6 graph (2), any religious organization that is a pro7 gram participant shall be subject to the same regula8 tions as other recipients of awards of Federal finan9 cial assistance to account, in accordance with gen10 erally accepted auditing principles, for the use of the

11 funds provided under such awards.

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

13 award involved, if a religious organization that is a

14 program participant maintains the Federal funds in

15 a separate account from non-Federal funds, then

16 only the Federal funds shall be subject to audit.

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

18 this section by an agency, a religious organization may

19 obtain judicial review of agency action in accordance with

20 chapter 7 of title 5, United States Code.

21 ‘‘SEC. 583. LIMITATIONS ON USE OF FUNDS FOR CERTAIN

22 PURPOSES.

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

24 (b), no funds provided directly to an entity under a des-
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1 ignated program shall be expended for sectarian worship

2 or instruction.

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

4 assistance provided to or on behalf of a program bene5 ficiary if the beneficiary may choose where such assistance

6 is redeemed or allocated.

7 ‘‘SEC. 584. ADMINISTRATION OF PROGRAM AND TREAT8 MENT OF FUNDS.

9 ‘‘(a) FUNDS NOT AID TO INSTITUTIONS.—Financial

10 assistance under a designated program provided to or on

11 behalf of program beneficiaries is aid to the beneficiary,

12 not to the organization providing program services. The

13 receipt by a program beneficiary of program services at

14 the facilities of the organization shall not constitute Fed15 eral financial assistance to the organization involved.

16 ‘‘(b) PROHIBITION ON STATE DISCRIMINATION IN

17 USE OF FUNDS.—No provision in any State constitution

18 or State law shall be construed to prohibit the expenditure

19 of Federal funds under a designated program in a reli20 gious facility or by a religious organization that is a pro21 gram participant. If a State law or constitution would pre22 vent the expenditure of State or local public funds in such

23 a facility or by such an organization, then the State or

24 local government shall segregate the Federal funds from
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1 State or other public funds for purposes of carrying out

2 the designated program.

3 ‘‘SEC. 585. EDUCATIONAL REQUIREMENTS FOR PERSONNEL

4 IN DRUG TREATMENT PROGRAMS.

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

6 ‘‘(1) establishing formal educational qualifica7 tion for counselors and other personnel in drug

8 treatment programs may undermine the effective9 ness of such programs; and

10 ‘‘(2) such formal educational requirements for

11 counselors and other personnel may hinder or pre12 vent the provision of needed drug treatment services.

13 ‘‘(b) LIMITATION ON EDUCATIONAL REQUIREMENTS

14 OF PERSONNEL.—

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

16 If any State or local government that is a program

17 participant imposes formal educational qualifications

18 on providers of program services, including religious

19 organizations, such State or local government shall

20 treat religious education and training of personnel

21 as having a critical and positive role in the delivery

22 of program services. In applying educational quali23 fications for personnel in religious organizations,

24 such State or local government shall give credit for

25 religious education and training equivalent to credit
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1 given for secular course work in drug treatment or

2 any other secular subject that is of similar grade

3 level and duration.

4 ‘‘(2) RESTRICTION OF DISCRIMINATION RE5 QUIREMENTS.—

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

7 (1), a State or local government that is a pro8 gram participant may establish formal edu9 cational qualifications for personnel in organiza10 tions providing program services that contribute

11 to success in reducing drug use among program

12 beneficiaries.

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

14 waive the application of any educational quali15 fication imposed under subparagraph (A) for an

16 individual religious organization, if the Sec17 retary determines that—

18 ‘‘(i) the religious organization has a

19 record of prior successful drug treatment

20 for at least the preceding three years;

21 ‘‘(ii) the educational qualifications

22 have effectively barred such religious orga23 nization from becoming a program pro24 vider;
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1 ‘‘(iii) the organization has applied to

2 the Secretary to waive the qualifications;

3 and

4 ‘‘(iv) the State or local government

5 has failed to demonstrate empirically that

6 the educational qualifications in question

7 are necessary to the successful operation of

8 a drug treatment program.’’.

9 SEC. 203. CRA CREDIT FOR INVESTMENTS IN COMMUNITY

10 DEVELOPMENT ORGANIZATIONS LOCATED IN

11 RENEWAL COMMUNITIES.

12 Section 804 of the Community Reinvestment Act of

13 1977 (12 U.S.C. 2903) is amended by adding at the end

14 the following new subsection:

15 ‘‘(c) INVESTMENTS IN CERTAIN COMMUNITY DEVEL16 OPMENT ORGANIZATIONS.—In assessing and taking into

17 account, under subsection (a), the record of a regulated

18 financial institution, the appropriate Federal financial su19 pervisory agency may consider, as a factor, investments

20 of the institution in, and capital investment, loan partici21 pation, and other ventures undertaken by the institution

22 in cooperation with, any community development organi23 zation (as defined in section 234 of the Bank Enterprise

24 Act of 1991) which is located in a renewal community (as
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1 designated under section 1400E of the Internal Revenue

2 Code of 1986).’’.

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