II

106TH CONGRESS

2D SESSION S. 3152

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

for distressed areas, and for other purposes.

IN THE SENATE OF THE UNITED STATES

OCTOBER 3 (legislative day, SEPTEMBER 22), 2000

Mr. ROTH (for himself, Mr. MOYNIHAN, Mr. GRASSLEY, Mr. BAUCUS, Mr.

HATCH, Mr. ROCKEFELLER, Mr. MURKOWSKI, Mr. BREAUX, Mr. JEFFORDS, Mr. CONRAD, Mr. MACK, Mr. GRAHAM, Mr. THOMPSON, Mr.

KERREY, Mr. ROBB, and Mr. BRYAN) introduced the following bill; which

was read the first time

A BILL

To amend the Internal Revenue Code of 1986 to provide

tax incentives for distressed areas, 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 ‘‘Community Renewal and New Markets Act of 2000’’.

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

9 to, or repeal of, a section or other provision, the reference
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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986.

3 (c) TABLE OF CONTENTS.—

Sec. 1. Short title; etc.

TITLE I—INCENTIVES FOR DISTRESSED COMMUNITIES

Subtitle A—Designation and Treatment of Renewal Zones

Sec. 101. Designation and treatment of renewal zones.

Subtitle B—Modification of Incentives for Empowerment Zones

Sec. 111. Extension of empowerment zone treatment through 2009.

Sec. 112. 15 percent employment credit for all empowerment zones

Sec. 113. Increased expensing under section 179.

Sec. 114. Higher limits on tax-exempt empowerment zone facility bonds.

Sec. 115. Empowerment zone capital gain.

Sec. 116. Funding for Round II empowerment zones.

Subtitle C—Modification of Tax Incentives for DC Zone

Sec. 121. Extension of DC zone through 2006.

Sec. 122. Extension of DC zero percent capital gains rate.

Sec. 123. Gross income test for DC zone businesses.

Sec. 124. Expansion of DC homebuyer tax credit.

Subtitle D—New Markets Tax Credit

Sec. 131. New markets tax credit.

Subtitle E—Modification of Tax Incentives for Puerto Rico

Sec. 141. Modification of Puerto Rico economic activity tax credit.

Subtitle F—Individual Development Accounts

Sec. 151. Definitions.

Sec. 152. Structure and administration of qualified individual development account programs.

Sec. 153. Procedures for opening an individual development account and qualifying for matching funds.

Sec. 154. Contributions to individual development accounts.

Sec. 155. Deposits by qualified individual development account programs.

Sec. 156. Withdrawal procedures.

Sec. 157. Certification and termination of qualified individual development account programs.

Sec. 158. Reporting, monitoring, and evaluation.

Sec. 159. Account funds of program participants disregarded for purposes of

certain means-tested Federal programs.

Sec. 160. Matching funds for individual development accounts provided through

a tax credit for qualified financial institutions.

Sec. 161. Designation of earned income tax credit payments for deposit to individual development accounts.
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Subtitle G—Additional Incentives

Sec. 171. Exclusion of certain amounts received under the National Health

Service Corps Scholarship Program and the F. Edward Hebert

Armed Forces Health Professions Scholarship and Financial

Assistance Program.

Sec. 172. Extension of enhanced deduction for corporate donations of computer

technology.

Sec. 173. Extension of adoption tax credit.

Sec. 174. Tax treatment of Alaska Native Settlement Trusts.

Sec. 175. Treatment of Indian tribal governments under Federal Unemployment Tax Act.

Sec. 176. Increase in social services block grant for FY 2001.

TITLE II—TAX INCENTIVES FOR AFFORDABLE HOUSING

Subtitle A—Low-Income Housing Credit

Sec. 201. Modification of State ceiling on low-income housing credit.

Sec. 202. Modification to rules relating to basis of building which is eligible for

credit.

Subtitle B—Historic Homes

Sec. 211. Tax credit for renovating historic homes.

Subtitle C—Forgiven Mortgage Obligations

Sec. 221. Exclusion from gross income for certain forgiven mortgage obligations.

Subtitle D—Mortgage Revenue Bonds

Sec. 231. Increase in purchase price limitation under mortgage subsidy bond

rules based on median family income.

Sec. 232. Mortgage financing for residences located in presidentially declared

disaster areas.

Subtitle E—Property and Casualty Insurance

Sec. 241. Exemption from income tax for State-created organizations providing

property and casualty insurance for property for which such

coverage is otherwise unavailable.

TITLE III—TAX INCENTIVES FOR URBAN AND RURAL

INFRASTRUCTURE

Sec. 301. Increase in State ceiling on private activity bonds.

Sec. 302. Modifications to expensing of environmental remediation costs.

Sec. 303. Broadband internet access tax credit.

Sec. 304. Credit to holders of qualified Amtrak bonds.

Sec. 305. Clarification of contribution in aid of construction.

Sec. 306. Recovery period for depreciation of certain leasehold improvements.

TITLE IV—TAX RELIEF FOR FARMERS

Sec. 401. Farm, fishing, and ranch risk management accounts.

Sec. 402. Written agreement relating to exclusion of certain farm rental income

from net earnings from self-employment.
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Sec. 403. Treatment of conservation reserve program payments as rentals from

real estate.

Sec. 404. Exemption of agricultural bonds from State volume cap.

Sec. 405. Modifications to section 512(b)(13).

Sec. 406. Charitable deduction for contributions of food inventory.

Sec. 407. Income averaging for farmers and fishermen not to increase alternative minimum tax liability.

Sec. 408. Cooperative marketing includes value-added processing through animals.

Sec. 409. Declaratory judgment relief for section 521 cooperatives.

Sec. 410. Small ethanol producer credit.

Sec. 411. Payment of dividends on stock of cooperatives without reducing patronage dividends.

TITLE V—TAX INCENTIVES FOR THE PRODUCTION OF ENERGY

Sec. 501. Election to expense geological and geophysical expenditures.

Sec. 502. Election to expense delay rental payments

Sec. 503. 5-year net operating loss carryback for losses attributable to operating mineral interests of independent oil and gas producers.

Sec. 504. Temporary suspension of percentage of depletion deduction limitation

based on 65 percent of taxable income.

Sec. 505. Tax credit for marginal domestic oil and natural gas well production.

Sec. 506. Natural gas gathering lines treated as 7-year property.

Sec. 507. Clarification of treatment of pipeline transportation income.

TITLE VI—TAX INCENTIVES FOR CONSERVATION

Sec. 601. Exclusion of 50 percent of gain on sales of land or interests in land

or water to eligible entities for conservation purposes.

Sec. 602. Expansion of estate tax exclusion for real property subject to qualified conservation easement.

Sec. 603. Tax exclusion for cost-sharing payments under partners for wildlife

program.

Sec. 604. Incentive for certain energy efficient property used in business.

Sec. 605. Extension and modification of tax credit for electricity produced from

biomass.

Sec. 606. Tax credit for certain energy efficient motor vehicles.

TITLE VII—ADDITIONAL TAX PROVISIONS

Sec. 701. Limitation on use of nonaccrual experience method of accounting.

Sec. 702. Repeal of section 530(d) of the Revenue Act of 1978.

Sec. 703. Expansion of exemption from personal holding company tax for lending or finance companies.

Sec. 704. Charitable contribution deduction for certain expenses incurred in

support of Native Alaskan subsistence whaling.

Sec. 705. Imposition of excise tax on persons who acquire structured settlement

payments in factoring transactions.
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1 TITLE I—INCENTIVES FOR

2 DISTRESSED COMMUNITIES

3 Subtitle A—Designation and

4 Treatment of Renewal Zones

5 SEC. 101. DESIGNATION AND TREATMENT OF RENEWAL

6 ZONES.

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

8 at the end the following new subchapter:

9 ‘‘Subchapter X—Designation and Treatment

10 of Renewal Zones

‘‘Sec. 1400E. Designation and treatment of renewal zones.

11 ‘‘SEC. 1400E. DESIGNATION AND TREATMENT OF RENEWAL

12 ZONES.

13 ‘‘(a) TREATMENT OF DESIGNATION.—For purposes

14 of this title, any area designated as a renewal zone under

15 this section shall be treated as an empowerment zone.

16 ‘‘(b) DESIGNATION.—

17 ‘‘(1) RENEWAL ZONE DEFINED.—For purposes

18 of this title, the term ‘renewal zone’ means any

19 area—

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

21 local governments and the State or States in

22 which it is located for designation as a renewal

23 zone (hereafter in this section referred to as a

24 ‘nominated area’), and
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1 ‘‘(B) which the appropriate Secretary des2 ignates as a renewal zone.

3 ‘‘(2) NUMBER OF DESIGNATIONS.—

4 ‘‘(A) IN GENERAL.—The appropriate Sec5 retaries may designate not more than 30 nomi6 nated areas as renewal zones.

7 ‘‘(B) MINIMUM DESIGNATION IN RURAL

8 AREAS.—Of the areas designated under sub9 paragraph (A), at least 6 must be areas—

10 ‘‘(i) which are within a local govern11 ment jurisdiction or jurisdictions with a

12 population of less than 50,000, or

13 ‘‘(ii) which satisfy the requirements of

14 section 1393(a)(2).

15 ‘‘(3) AREAS DESIGNATED BASED ON DEGREE

16 OF POVERTY, ETC.—

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

18 provided in this section, the nominated areas

19 designated as renewal zones under this sub20 section shall be those nominated areas with the

21 highest average ranking with respect to the cri22 teria described in subparagraphs (B), (C), and

23 (D) of subsection (d)(3). For purposes of the

24 preceding sentence, an area shall be ranked

25 within each such criterion on the basis of the
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1 amount by which the area exceeds such cri2 terion, with the area which exceeds such cri3 terion by the greatest amount given the highest

4 ranking.

5 ‘‘(B) EXCEPTION WHERE INADEQUATE

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

7 designated under subparagraph (A) if the ap8 propriate Secretary determines that the course

9 of action described in subsection (e)(2) with re10 spect to such area is inadequate.

11 ‘‘(C) PRIORITY FOR 1 NOMINATED AREA IN

12 EACH STATE.—For purposes of this subchapter,

13 1 nominated area within each State without any

14 area designated as an empowerment zone under

15 section 1391 or 1400 shall be treated for pur16 poses of this paragraph as having the highest

17 average with respect to the criteria described in

18 subparagraphs (B), (C), and (D) of subsection

19 (d)(3).

20 ‘‘(4) LIMITATION ON DESIGNATIONS.—

21 ‘‘(A) PUBLICATION OF REGULATIONS.—

22 The Secretary of Housing and Urban Develop23 ment shall prescribe by regulation not later

24 than 4 months after the date of the enactment
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1 of this section, after consultation with the Sec2 retary of Agriculture—

3 ‘‘(i) the procedures for nominating an

4 area under paragraph (1)(A),

5 ‘‘(ii) the parameters relating to the

6 size and population characteristics of a re7 newal zone, and

8 ‘‘(iii) the manner in which nominated

9 areas will be evaluated based on the cri10 teria specified in subsection (e).

11 ‘‘(B) TIME LIMITATIONS.—The appro12 priate Secretaries may designate nominated

13 areas as renewal zones only during the period

14 beginning on the first day of the first month

15 following the month in which the regulations

16 described in subparagraph (A) are prescribed

17 and ending on December 31, 2001.

18 ‘‘(C) PROCEDURAL RULES.—The appro19 priate Secretary shall not make any designation

20 of a nominated area as a renewal zone under

21 paragraph (2) unless—

22 ‘‘(i) the local governments and the

23 States in which the nominated area is lo24 cated have the authority—
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1 ‘‘(I) to nominate such area for

2 designation as a renewal zone,

3 ‘‘(II) to make the State and local

4 commitments described in subsection

5 (e), and

6 ‘‘(III) to provide assurances sat7 isfactory to the appropriate Secretary

8 that such commitments will be ful9 filled,

10 ‘‘(ii) a nomination regarding such

11 area is submitted in such a manner and in

12 such form, and contains such information,

13 as the appropriate Secretary shall by regu14 lation prescribe, and

15 ‘‘(iii) the appropriate Secretary deter16 mines that any information furnished is

17 reasonably accurate.

18 ‘‘(5) NOMINATION PROCESS FOR INDIAN RES19 ERVATIONS.—For purposes of this subchapter, in

20 the case of a nominated area on an Indian reserva21 tion, the reservation governing body (as determined

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

23 being both the State and local governments with re24 spect to such area.
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1 ‘‘(c) PERIOD FOR WHICH DESIGNATION IS IN EF2 FECT.—

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

4 as a renewal zone shall remain in effect during the

5 period beginning on January 1, 2002, and ending on

6 the earliest of—

7 ‘‘(A) December 31, 2009,

8 ‘‘(B) the termination date designated by

9 the State and local governments in their nomi10 nation, or

11 ‘‘(C) the date the appropriate Secretary re12 vokes such designation.

13 ‘‘(2) REVOCATION OF DESIGNATION.—The ap14 propriate Secretary may revoke the designation

15 under this section of an area if such Secretary deter16 mines that the local government or the State in

17 which the area is located—

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

19 area, or

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

21 or fails to make progress in achieving, the State

22 or local commitments, respectively, described in

23 subsection (e).

24 ‘‘(d) AREA AND ELIGIBILITY REQUIREMENTS.—
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1 ‘‘(1) IN GENERAL.—The appropriate Secretary

2 may designate a nominated area as a renewal zone

3 under subsection (b) only if the area meets the re4 quirements of paragraphs (2) and (3) of this sub5 section.

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

7 meets the requirements of this paragraph if—

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

9 one or more local governments,

10 ‘‘(B) the boundary of the area is contin11 uous, and

12 ‘‘(C) the area—

13 ‘‘(i) has a population of not more than

14 200,000 and at least—

15 ‘‘(I) 4,000 if any portion of such

16 area (other than a rural area de17 scribed in subsection (b)(2)(B)(i)) is

18 located within a metropolitan statis19 tical area (within the meaning of sec20 tion 143(k)(2)(B)) which has a popu21 lation of 50,000 or greater, or

22 ‘‘(II) 1,000 in any other case, or

23 ‘‘(ii) is entirely within an Indian res24 ervation (as determined by the Secretary of

25 the Interior).
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1 ‘‘(3) ELIGIBILITY REQUIREMENTS.—A nomi2 nated area meets the requirements of this paragraph

3 if the State and the local governments in which it

4 is located certify in writing (and the appropriate

5 Secretary, after such review of supporting data as

6 such Secretary deems appropriate, accepts such cer7 tification) that—

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

9 unemployment, and general distress,

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

11 as determined by the most recent available

data, was at least 11 12 ⁄2 times the national unem13 ployment rate for the period to which such data

14 relate,

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

16 census tract within the nominated area is at

17 least 20 percent, and

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

19 70 percent of the households living in the area

20 have incomes below 80 percent of the median

21 income of households within the jurisdiction of

22 the local government (determined in the same

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

24 Housing and Community Development Act of

25 1974).
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1 ‘‘(4) CONSIDERATION OF OTHER FACTORS.—

2 The appropriate Secretary, in selecting any nomi3 nated area for designation as a renewal zone under

4 this section—

5 ‘‘(A) shall take into account—

6 ‘‘(i) the extent to which such area has

7 a high incidence of crime,

8 ‘‘(ii) if such area has census tracts

9 identified in the May 12, 1998, report of

10 the General Accounting Office regarding

11 the identification of economically distressed

12 areas, or

13 ‘‘(iii) if such area (or portion thereof)

14 has previously been designated as an enter15 prise community under section 1391, and

16 ‘‘(B) with respect to 1 of the areas to be

17 designated under subsection (b)(2)(B), may, in

18 lieu of any criteria described in paragraph (3),

19 take into account the existence of outmigration

20 from the area.

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

23 ‘‘(1) IN GENERAL.—The appropriate Secretary

24 may designate any nominated area as a renewal

25 zone under subsection (b) only if the local govern-
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1 ment and the State in which the area is located

2 agree in writing that, during any period during

3 which the area is a renewal zone, such governments

4 will follow a specified course of action which meets

5 the requirements of paragraph (2) and is designed

6 to reduce the various burdens borne by employers or

7 employees in such area.

8 ‘‘(2) COURSE OF ACTION.—

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

10 meets the requirements of this paragraph if

11 such course of action is a written document,

12 signed by a State (or local government) and

13 neighborhood organizations, which evidences a

14 partnership between such State or government

15 and community-based organizations and which

16 commits each signatory to specific and measur17 able goals, actions, and timetables. Such course

18 of action shall include at least 4 of the fol19 lowing:

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

21 applying within the renewal zone.

22 ‘‘(ii) An increase in the level of effi23 ciency of local services within the renewal

24 zone.
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1 ‘‘(iii) Crime reduction strategies, such

2 as crime prevention (including the provi3 sion of crime prevention services by non4 governmental entities).

5 ‘‘(iv) Actions to reduce, remove, sim6 plify, or streamline governmental require7 ments applying within the renewal zone.

8 ‘‘(v) Involvement in the program by

9 private entities, organizations, neighbor10 hood organizations, and community

11 groups, particularly those in the renewal

12 zone, including a commitment from such

13 private entities to provide jobs and job

14 training for, and technical, financial, or

15 other assistance to, employers, employees,

16 and residents from the renewal zone.

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

18 market value) of surplus real property

19 (such as land, homes, and commercial or

20 industrial structures) in the renewal zone

21 to neighborhood organizations, community

22 development corporations, or private com23 panies.

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

25 For purposes of this section, in evaluating the
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1 course of action agreed to by any State or local

2 government, the appropriate Secretary shall

3 take into account the past efforts of such State

4 or local government in reducing the various

5 burdens borne by employers and employees in

6 the area involved.

7 ‘‘(f) COORDINATION WITH TREATMENT OF ENTER8 PRISE COMMUNITIES.—For purposes of this title, the des9 ignation under section 1391 of any area as an enterprise

10 community shall cease to be in effect as of the date that

11 the designation of any portion of such area as a renewal

12 zone takes effect.

13 ‘‘(g) DEFINITIONS AND SPECIAL RULES.—For pur14 poses of this subchapter—

15 ‘‘(1) APPROPRIATE SECRETARY.—The term ‘ap16 propriate Secretary’ has the meaning given such

17 term by section 1393(a)(1).

18 ‘‘(2) GOVERNMENTS.—If more than one govern19 ment seeks to nominate an area as a renewal zone,

20 any reference to, or requirement of, this section shall

21 apply to all such governments.

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

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

3 subdivision of a State, and

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

6 by the appropriate Secretary.

7 ‘‘(4) APPLICATION OF RULES RELATING TO

8 CENSUS TRACTS.—The rules of section 1392(b)(4)

9 shall apply.

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

11 rate shall be determined by using 1990 census

12 data.’’.

13 (b) AUDIT AND REPORT.—Not later than January 31

14 of 2004, 2007, and 2010, the Comptroller General of the

15 United States shall, pursuant to an audit of the renewal

16 zone program established under section 1400E of the In17 ternal Revenue Code of 1986 (as added by subsection (a)),

18 report to Congress on such program and its effect on pov19 erty, unemployment, and economic growth within the des20 ignated renewal zones.

21 (c) CLERICAL AMENDMENT.—The table of sub22 chapters for chapter 1 is amended by adding at the end

23 the following new item:

‘‘Subchapter X. Designation and Treatment of Renewal Zones.’’.
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1 Subtitle B—Modification of

2 Incentives for Empowerment Zones

3 SEC. 111. EXTENSION OF EMPOWERMENT ZONE TREAT4 MENT THROUGH 2009.

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

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

7 read as follows:

8 ‘‘(A)(i) in the case of an empowerment

9 zone, December 31, 2009, or

10 ‘‘(ii) in the case of an enterprise commu11 nity, the close of the 10th calendar year begin12 ning on or after such date of designation,’’.

13 SEC. 112. 15 PERCENT EMPLOYMENT CREDIT FOR ALL EM14 POWERMENT ZONES

15 (a) 15 PERCENT CREDIT.—Subsection (b) of section

16 1396 (relating to empowerment zone employment credit)

17 is amended—

18 (1) by striking paragraph (1) and inserting the

19 following new paragraph:

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (2), the applicable percentage is 15 percent.’’,

22 (2) by inserting ‘‘and thereafter’’ after ‘‘2005’’

23 in the table contained in paragraph (2), and

24 (3) by striking the items relating to calendar

25 years 2006 and 2007 in such table.
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1 (b) ALL EMPOWERMENT ZONES ELIGIBLE FOR

2 CREDIT.—Section 1396 is amended by striking subsection

3 (e).

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

5 section 1400 is amended to read as follows:

6 ‘‘(d) SPECIAL RULE FOR APPLICATION OF EMPLOY7 MENT CREDIT.—With respect to the DC Zone, section

8 1396(d)(1)(B) (relating to empowerment zone employ9 ment credit) shall be applied by substituting ‘the District

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

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

12 this section shall apply to wages paid or incurred after

13 December 31, 2001.

14 SEC. 113. INCREASED EXPENSING UNDER SECTION 179.

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

16 1397A(a)(1) is amended by striking ‘‘$20,000’’ and in17 serting ‘‘$35,000’’.

18 (b) EXPENSING FOR PROPERTY USED IN DEVELOP19 ABLE SITES.—Section 1397A is amended by striking sub20 section (c).

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

22 this section shall apply to taxable years beginning after

23 December 31, 2001.
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1 SEC. 114. HIGHER LIMITS ON TAX-EXEMPT EMPOWERMENT

2 ZONE FACILITY BONDS.

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

4 (relating to bonds for empowerment zones designated

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

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

7 For purposes of this subsection, the term ‘empower8 ment zone facility bond’ means any bond which

9 would be described in subsection (a) if—

10 ‘‘(A) in the case of obligations issued be11 fore January 1, 2002, only empowerment zones

12 designated under section 1391(g) were taken

13 into account under sections 1397C and 1397D,

14 and

15 ‘‘(B) in the case of obligations issued after

16 December 31, 2001, all empowerment zones

17 (other than the District of Columbia) were

18 taken into account under sections 1397C and

19 1397D.’’.

20 (b) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to obligations issued after Decem22 ber 31, 2001.

23 SEC. 115. EMPOWERMENT ZONE CAPITAL GAIN.

24 (a) IN GENERAL.—Part III of subchapter U of chap25 ter 1 is amended—

26 (1) by redesignating subpart C as subpart D;
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1 (2) by redesignating sections 1397B and 1397C

2 as sections 1397C and 1397D, respectively; and

3 (3) by inserting after subpart B the following

4 new subpart:

5 ‘‘Subpart C—Empowerment Zone Capital Gain

‘‘Sec. 1397B. Empowerment zone capital gain.

6 ‘‘SEC. 1397B. EMPOWERMENT ZONE CAPITAL GAIN.

7 ‘‘(a) GENERAL RULE.—Gross income shall not in8 clude qualified capital gain from the sale or exchange of

9 any qualified empowerment zone asset held for more than

10 5 years.

11 ‘‘(b) PER TAXPAYER LIMITATION.—

12 ‘‘(1) IN GENERAL.—The amount of eligible gain

13 which may be taken into account under subsection

14 (a) for the taxable year with respect to any taxpayer

15 shall not exceed $25,000,000, reduced by the aggre16 gate amount of eligible gain taken into account

17 under subsection (a) for prior taxable years with re18 spect to such taxpayer.

19 ‘‘(2) ELIGIBLE GAIN.—For purposes of this

20 subsection, ‘eligible gain’’ means any gain from the

21 sale or exchange of a qualified empowerment zone

22 asset held for more than 5 years.

23 ‘‘(3) TREATMENT OF MARRIED INDIVIDUALS.—
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1 ‘‘(A) SEPARATE RETURNS.—In the case of

2 a separate return by a married individual, para3 graph (1) shall be applied by substituting

4 ‘$12,500,000’ for ‘$25,000,000’.

5 ‘‘(B) ALLOCATION OF EXCLUSION.—In the

6 case of a joint return, the amount of gain taken

7 into account under subsection (a) shall be allo8 cated equally between the spouses for purposes

9 of applying this subsection to subsequent tax10 able years.

11 ‘‘(C) MARITAL STATUS.—For purposes of

12 this subsection, marital status shall be deter13 mined under section 7703.

14 ‘‘(4) TREATMENT OF CORPORATE TAX15 PAYERS.—For purposes of this subsection—

16 ‘‘(A) all corporations which are members

17 of the same controlled group of corporations

18 (within the meaning of section 52(a)) shall be

19 treated as 1 taxpayer, and

20 ‘‘(B) any gain excluded under subsection

21 (a) by a predecessor of any C corporation shall

22 be treated as having been excluded by such C

23 corporation.

24 ‘‘(c) QUALIFIED EMPOWERMENT ZONE ASSET.—For

25 purposes of this section—
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1 ‘‘(1) IN GENERAL.—The term ‘qualified em2 powerment zone asset’ means—

3 ‘‘(A) any qualified empowerment zone

4 stock,

5 ‘‘(B) any qualified empowerment zone

6 partnership interest, and

7 ‘‘(C) any qualified empowerment zone busi8 ness property.

9 ‘‘(2) QUALIFIED EMPOWERMENT ZONE

10 STOCK.—

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

12 subparagraph (B), the term ‘qualified empower13 ment zone stock’ means any stock in a domestic

14 corporation if—

15 ‘‘(i) such stock is acquired by the tax16 payer after the date of the enactment of

17 this section (December 31, 2001, in the

18 case of a renewal zone) and before Janu19 ary 1, 2010, at its original issue (directly

20 or through an underwriter) from the cor21 poration solely in exchange for cash,

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

23 issued, such corporation was an enterprise

24 zone business (or, in the case of a new cor25 poration, such corporation was being orga-
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1 nized for purposes of being an enterprise

2 zone business), and

3 ‘‘(iii) during substantially all of the

4 taxpayer’s holding period for such stock,

5 such corporation qualified as an enterprise

6 zone business.

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

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

9 purposes of this paragraph.

10 ‘‘(3) QUALIFIED EMPOWERMENT ZONE PART11 NERSHIP INTEREST.—The term ‘qualified empower12 ment zone partnership interest’ means any capital or

13 profits interest in a domestic partnership if—

14 ‘‘(A) such interest is acquired by the tax15 payer after the date of the enactment of this

16 section (December 31, 2001, in the case of a

17 renewal zone) and before January 1, 2010,

18 from the partnership solely in exchange for

19 cash,

20 ‘‘(B) as of the time such interest was ac21 quired, such partnership was an enterprise zone

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

23 such partnership was being organized for pur24 poses of being an enterprise zone business), and
25

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1 ‘‘(C) during substantially all of the tax2 payer’s holding period for such interest, such

3 partnership qualified as an enterprise zone

4 business.

5 A rule similar to the rule of section 1202(c)(3) shall

6 apply for purposes of this paragraph.

7 ‘‘(4) QUALIFIED EMPOWERMENT ZONE BUSI8 NESS PROPERTY.—

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

10 empowerment zone business property’ means

11 tangible property if—

12 ‘‘(i) such property was acquired by

13 the taxpayer by purchase (as defined in

14 section 179(d)(2)) after the date of the en15 actment of this section (December 31,

16 2001, in the case of a renewal zone) and

17 before January 1, 2010,

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

19 in the empowerment zone commences with

20 the taxpayer, and

21 ‘‘(iii) during substantially all of the

22 taxpayer’s holding period for such prop23 erty, substantially all of the use of such

24 property was in an enterprise zone busi25 ness of the taxpayer.
26

•S 3152 IS

1 ‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM2 PROVEMENTS.—The requirements of clauses (i)

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

4 satisfied with respect to—

5 ‘‘(i) property which is substantially

6 improved by the taxpayer before January

7 1, 2010, and

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

9 is located.

10 The determination of whether a property is sub11 stantially improved shall be made under clause

12 (ii) of section 1400B(b)(4)(B), except that ‘the

13 date of the enactment of this section’ shall be

14 substituted for ‘December 31, 1997’ in such

15 clause.

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

17 this section—

18 ‘‘(1) IN GENERAL.—Except as otherwise pro19 vided in this subsection, the term ‘qualified capital

20 gain’ means any gain recognized on the sale or ex21 change of—

22 ‘‘(A) a capital asset, or

23 ‘‘(B) property used in the trade or busi24 ness (as defined in section 1231(b)).
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•S 3152 IS

1 ‘‘(2) GAIN BEFORE EFFECTIVE DATE OR AFTER

2 2014 NOT QUALIFIED.—The term ‘qualified capital

3 gain’ shall not include any gain attributable to peri4 ods before the date of the enactment of this section

5 (January 1, 2002, in the case of a renewal zone) or

6 after December 31, 2014.

7 ‘‘(3) CERTAIN RULES TO APPLY.—Rules similar

8 to the rules of paragraphs (3), (4), and (5) of sec9 tion 1400B(e) shall apply for purposes of this sub10 section.

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

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

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

14 (g), of section 1400B shall apply; except that for such pur15 poses section 1400B(g)(2) shall be applied by

16 substituting—

17 ‘‘(1) ‘the day after the date of the enactment of

18 section 1397B’ for ‘January 1, 1998’, and

19 ‘‘(2) ‘December 31, 2014’ for ‘December 31,

20 2011’.

21 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

22 such regulations as may be appropriate to carry out the

23 purposes of this section, including regulations to prevent

24 the avoidance of the purposes of this section.’’.

25 (b) CONFORMING AMENDMENTS.—
28

•S 3152 IS

1 (1) Paragraph (2) of section 1394(b) is

2 amended—

3 (A) by striking ‘‘section 1397C’’ and in4 serting ‘‘section 1397D’’; and

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

6 inserting ‘‘section 1397D(a)(2)’’.

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

8 amended—

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

10 it appears and inserting ‘‘section 1397C’’; and

11 (B) by striking ‘‘section 1397B(d)’’ and in12 serting ‘‘section 1397C(d)’’.

13 (3) Sections 1400(e) and 1400B(c) are each

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

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

16 (4) The table of subparts for part III of sub17 chapter U of chapter 1 is amended by striking the

18 last item and inserting the following new items:

‘‘Subpart C. Empowerment zone capital gain.

‘‘Subpart D. General provisions.’’.

19 (5) The table of sections for subpart D of such

20 part III is amended to read as follows:

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

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

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

22 this section shall apply to qualified empowerment zone as23 sets acquired after the date of the enactment of this Act.
29

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1 SEC. 116. FUNDING FOR ROUND II EMPOWERMENT ZONES.

2 (a) ENTITLEMENT.—Section 2007(a)(1) of the Social

3 Security Act (42 U.S.C. 1397f(a)(1)) is amended—

4 (1) in subparagraph (A), by striking ‘‘in the

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

6 is designated pursuant to section 1391(b) of the In7 ternal Revenue Code of 1986;’’; and

8 (2) by adding after subparagraph (B) the fol9 lowing new subparagraphs:

10 ‘‘(C)(i) 1 grant under this section for each

11 qualified empowerment zone that is in an urban

12 area in the State and is designated pursuant to

13 section 1391(g) of such Code; and

14 ‘‘(ii) 1 grant under this section for each

15 qualified empowerment zone that is in a rural

16 area in the State and is designated pursuant to

17 section 1391(g) of such Code; and

18 ‘‘(D) 1 grant under this section for each

19 qualified enterprise community that is in the

20 State, is designated pursuant to section

21 1391(b)(1) of such Code, and is in existence on

22 the date of enactment of this subparagraph.’’.

23 (b) AMOUNT OF GRANTS.—Section 2007(a)(2) of the

24 Social Security Act (42 U.S.C. 1397f(a)(2)) is amended—

25 (1) in the heading of subparagraph (A), by in26 serting ‘‘ORIGINAL’’ before ‘‘EMPOWERMENT’’;
30

•S 3152 IS

1 (2) in subparagraph (A), in the matter pre2 ceding clause (i), by inserting ‘‘referred to in para3 graph (1)(A)’’ after ‘‘empowerment zone’’;

4 (3) by redesignating subparagraph (C) as sub5 paragraph (F); and

6 (4) by inserting after subparagraph (B) the fol7 lowing new subparagraphs:

8 ‘‘(C) ADDITIONAL EMPOWERMENT

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

10 under this section for a qualified empowerment

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

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

13 $5,000,000 for fiscal year 2001; or

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

15 $2,000,000 for fiscal year 2001.

16 ‘‘(D) ADDITIONAL ENTERPRISE COMMU17 NITY GRANTS.—The amount of the grant to a

18 State under this section for a qualified enter19 prise community referred to in paragraph

20 (1)(D) shall be $250,000.’’.

21 (c) TIMING OF GRANTS.—Section 2007(a)(3) of the

22 Social Security Act (42 U.S.C. 1397f(a)(3)) is amended—

23 (1) in the heading of subparagraph (A), by in24 serting ‘‘ORIGINAL’’ before ‘‘QUALIFIED’’;
31

•S 3152 IS

1 (2) in subparagraph (A), in the matter pre2 ceding clause (i), by inserting ‘‘referred to in para3 graph (1)(A)’’ after ‘‘empowerment zone’’; and

4 (3) by adding after subparagraph (B) the fol5 lowing new subparagraphs:

6 ‘‘(C) ADDITIONAL QUALIFIED EMPOWER7 MENT ZONES.—With respect to each qualified

8 empowerment zone referred to in paragraph

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

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

11 on January 1, 2002.

12 ‘‘(D) ADDITIONAL QUALIFIED ENTERPRISE

13 COMMUNITIES.—With respect to each qualified

14 enterprise community referred to in paragraph

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

16 this section to the State in which the commu17 nity lies on January 1, 2002.’’.

18 (d) FUNDING.—Section 2007(a)(4) of the Social Se19 curity Act (42 U.S.C. 1397f(a)(4)) is amended—

20 (1) by striking ‘‘(4) FUNDING.—

21 $1,000,000,000’’ and inserting the following:

22 ‘‘(4) FUNDING.—

23 ‘‘(A) ORIGINAL GRANTS.—

24 $1,000,000,000’’;
32

•S 3152 IS

1 (2) by inserting ‘‘for empowerment zones and

2 enterprise communities described in subparagraphs

3 (A) and (B) of paragraph (1)’’ before the period;

4 and

5 (3) by adding after and below the end the fol6 lowing new subparagraphs:

7 ‘‘(B) ADDITIONAL EMPOWERMENT ZONE

8 GRANTS.—$85,000,000 shall be made available

9 to the Secretary for grants under this section

10 for empowerment zones referred to in para11 graph (1)(C).

12 ‘‘(C) ADDITIONAL ENTERPRISE COMMU13 NITY GRANTS.—$22,000,000 shall be made

14 available to the Secretary for grants under this

15 section for enterprise communities referred to

16 in paragraph (1)(D).’’.

17 (e) DIRECT FUNDING FOR INDIAN TRIBES.—

18 (1) IN GENERAL.—Section 2007(a) of the So19 cial Security Act (42 U.S.C. 1397f(a)) is amended

20 by adding at the end the following new paragraph:

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

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

23 make a grant under this section directly to the

24 governing body of an Indian tribe if—
33

•S 3152 IS

1 ‘‘(i) the tribe is identified in the stra2 tegic plan of a qualified empowerment zone

3 or qualified enterprise community as the

4 entity that assumes sole or primary re5 sponsibility for carrying out activities and

6 projects under the grant; and

7 ‘‘(ii) the grant is to be used for activi8 ties and projects that are—

9 ‘‘(I) included in the strategic

10 plan of the qualified empowerment

11 zone or qualified enterprise commu12 nity, consistent with this section; and

13 ‘‘(II) approved by the Secretary

14 of Agriculture, in the case of a quali15 fied empowerment zone or qualified

16 enterprise community in a rural area,

17 or the Secretary of Housing and

18 Urban Development, in the case of a

19 qualified empowerment zone or quali20 fied enterprise community in an urban

21 area.

22 ‘‘(B) RULES OF INTERPRETATION.—

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

24 made directly to the governing body of an

25 Indian tribe under subparagraph (A), the
34

•S 3152 IS

1 tribe shall be considered a State for pur2 poses of this section.

3 ‘‘(ii) This subparagraph shall not be

4 construed as making applicable to this sec5 tion the provisions of the Indian Self-De6 termination and Education Assistance

7 Act.’’.

8 (2) DEFINITIONS.—Section 2007(f) of such Act

9 (42 U.S.C. 1397f(f)) is amended by adding at the

10 end the following new paragraph:

11 ‘‘(7) INDIAN TRIBE.—The term ‘Indian tribe’

12 means any Indian tribe, band, nation, or other orga13 nized group or community, including any Alaska Na14 tive village or regional or village corporation as de15 fined in or established pursuant to the Alaska Na16 tive Claims Settlement Act, which is recognized as

17 eligible for the special programs and services pro18 vided by the United States to Indians because of

19 their status as Indians.’’.

20 Subtitle C—Modification of Tax

21 Incentives for DC Zone

22 SEC. 121. EXTENSION OF DC ZONE THROUGH 2006.

23 (a) IN GENERAL.—The following provisions are

24 amended by striking ‘‘2002’’ each place it appears and

25 inserting ‘‘2006’’:
35

•S 3152 IS

1 (1) Section 1400(f).

2 (2) Section 1400A(b).

3 (b) ZERO CAPITAL GAINS RATE.—Section 1400B

4 (relating to zero percent capital gains rate) is amended—

5 (1) by striking ‘‘2003’’ each place it appears

6 and inserting ‘‘2007’’, and

7 (2) by striking ‘‘2007’’ each place it appears

8 and inserting ‘‘2011’’.

9 SEC. 122. EXTENSION OF DC ZERO PERCENT CAPITAL

10 GAINS RATE.

11 (a) IN GENERAL.—Section 1400B (relating to zero

12 percent capital gains rate) is amended by adding at the

13 end the following new subsection:

14 ‘‘(h) EXTENSION TO ENTIRE DISTRICT OF COLUM15 BIA.—In applying this section to any stock or partnership

16 interest which is originally issued after December 31,

17 2000, or any tangible property acquired by the taxpayer

18 by purchase after December 31, 2000—

19 ‘‘(1) subsection (d) shall be applied without re20 gard to paragraph (2) thereof, and

21 ‘‘(2) subsections (e)(2) and (g)(2) shall be ap22 plied by substituting ‘January 1, 2001’ for ‘January

23 1, 1998’.’’.

24 (b) EFFECTIVE DATE.—The amendment made by

25 this section shall take effect on January 1, 2001.
36

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1 SEC. 123. GROSS INCOME TEST FOR DC ZONE BUSINESSES.

2 (a) IN GENERAL.—Section 1400B(c) (defining DC

3 Zone business) is amended by adding ‘‘and’’ at the end

4 of paragraph (1), by striking paragraph (2), and by redes5 ignating paragraph (3) as paragraph (2).

6 (b) EFFECTIVE DATE.—The amendment made by

7 this section shall apply to stock and partnership interests

8 originally issued after, and property originally acquired by

9 the taxpayer after, December 31, 2000.

10 SEC. 124. EXPANSION OF DC HOMEBUYER TAX CREDIT.

11 (a) EXTENSION.—Section 1400C(i) (relating to ap12 plication of section) is amended by striking ‘‘2002’’ and

13 inserting ‘‘2004’’.

14 (b) EXPANSION OF INCOME LIMITATION.—Section

15 1400C(b)(1) (relating to limitation based on modified ad16 justed gross income) is amended—

17 (1) by striking ‘‘$110,000’’ in subparagraph

18 (A)(i) and inserting ‘‘$140,000’’, and

19 (2) by inserting ‘‘($40,000 in the case of a joint

20 return)’’ after ‘‘$20,000’’ in subparagraph (B).

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

22 this section shall apply to taxable years beginning after

23 December 31, 2000.
37

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1 Subtitle D—New Markets Tax

2 Credit

3 SEC. 131. NEW MARKETS TAX CREDIT.

4 (a) IN GENERAL.—Subpart D of part IV of sub5 chapter A of chapter 1 (relating to business-related cred6 its) is amended by adding at the end the following new

7 section:

8 ‘‘SEC. 45D. NEW MARKETS TAX CREDIT.

9 ‘‘(a) ALLOWANCE OF CREDIT.—

10 ‘‘(1) IN GENERAL.—For purposes of section 38,

11 in the case of a taxpayer who holds a qualified eq12 uity investment on a credit allowance date of such

13 investment which occurs during the taxable year, the

14 new markets tax credit determined under this sec15 tion for such taxable year is an amount equal to the

16 applicable percentage of the amount paid to the

17 qualified community development entity for such in18 vestment at its original issue.

19 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

20 of paragraph (1), the applicable percentage is—

21 ‘‘(A) 5 percent with respect to the first

22 three credit allowance dates, and

23 ‘‘(B) 6 percent with respect to the remain24 der of the credit allowance dates.
38

•S 3152 IS

1 ‘‘(3) CREDIT ALLOWANCE DATE.—For purposes

2 of paragraph (1), the term ‘credit allowance date’

3 means, with respect to any qualified equity

4 investment—

5 ‘‘(A) the date on which such investment is

6 initially made, and

7 ‘‘(B) each of the six anniversary dates of

8 such date thereafter.

9 ‘‘(b) QUALIFIED EQUITY INVESTMENT.—For pur10 poses of this section—

11 ‘‘(1) IN GENERAL.—The term ‘qualified equity

12 investment’ means any equity investment in a quali13 fied community development entity if—

14 ‘‘(A) such investment is acquired by the

15 taxpayer at its original issue (directly or

16 through an underwriter) solely in exchange for

17 cash,

18 ‘‘(B) substantially all of such cash is used

19 by the qualified community development entity

20 to make qualified low-income community invest21 ments, and

22 ‘‘(C) such investment is designated for

23 purposes of this section by the qualified com24 munity development entity.
39

•S 3152 IS

1 Such term shall not include any equity investment

2 issued by a qualified community development entity

3 more than 5 years after the date that such entity re4 ceives an allocation under subsection (f). Any alloca5 tion not used within such 5-year period may be re6 allocated by the Secretary under subsection (f).

7 ‘‘(2) LIMITATION.—The maximum amount of

8 equity investments issued by a qualified community

9 development entity which may be designated under

10 paragraph (1)(C) by such entity shall not exceed the

11 portion of the limitation amount allocated under

12 subsection (f) to such entity.

13 ‘‘(3) SAFE HARBOR FOR DETERMINING USE OF

14 CASH.—The requirement of paragraph (1)(B) shall

15 be treated as met if at least 85 percent of the aggre16 gate gross assets of the qualified community devel17 opment entity are invested in qualified low-income

18 community investments.

19 ‘‘(4) TREATMENT OF SUBSEQUENT PUR20 CHASERS.—The term ‘qualified equity investment’

21 includes any equity investment which would (but for

22 paragraph (1)(A)) be a qualified equity investment

23 in the hands of the taxpayer if such investment was

24 a qualified equity investment in the hands of a prior

25 holder.
40

•S 3152 IS

1 ‘‘(5) REDEMPTIONS.—A rule similar to the rule

2 of section 1202(c)(3) shall apply for purposes of this

3 subsection.

4 ‘‘(6) EQUITY INVESTMENT.—The term ‘equity

5 investment’ means—

6 ‘‘(A) any stock (other than nonqualified

7 preferred stock as defined in section 351(g)(2))

8 in an entity which is a corporation, and

9 ‘‘(B) any capital interest in an entity

10 which is a partnership.

11 ‘‘(c) QUALIFIED COMMUNITY DEVELOPMENT ENTI12 TY.—For purposes of this section—

13 ‘‘(1) IN GENERAL.—The term ‘qualified com14 munity development entity’ means any domestic cor15 poration or partnership if—

16 ‘‘(A) the primary mission of the entity is

17 serving, or providing investment capital for,

18 low-income communities or low-income persons,

19 ‘‘(B) the entity maintains accountability to

20 residents of low-income communities through

21 their representation on any governing board of

22 the entity or on any advisory boards to the enti23 ty, and
41

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1 ‘‘(C) the entity is certified by the Secretary

2 for purposes of this section as being a qualified

3 community development entity.

4 ‘‘(2) SPECIAL RULES FOR CERTAIN ORGANIZA5 TIONS.—The requirements of paragraph (1) shall be

6 treated as met by—

7 ‘‘(A) any specialized small business invest8 ment company (as defined in section

9 1044(c)(3)), and

10 ‘‘(B) any community development financial

11 institution (as defined in section 103 of the

12 Community Development Banking and Finan13 cial Institutions Act of 1994 (12 U.S.C. 4702)).

14 ‘‘(d) QUALIFIED LOW-INCOME COMMUNITY INVEST15 MENTS.—For purposes of this section—

16 ‘‘(1) IN GENERAL.—The term ‘qualified low-in17 come community investment’ means—

18 ‘‘(A) any capital or equity investment in,

19 or loan to, any qualified active low-income com20 munity business,

21 ‘‘(B) the purchase from another commu22 nity development entity of any loan made by

23 such entity which is a qualified low-income com24 munity investment,
42

•S 3152 IS

1 ‘‘(C) financial counseling and other serv2 ices specified in regulations prescribed by the

3 Secretary to businesses located in, and resi4 dents of, low-income communities, and

5 ‘‘(D) any equity investment in, or loan to,

6 any qualified community development entity.

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 (including a non13 profit corporation) or partnership if for such

14 year—

15 ‘‘(i) at least 50 percent of the total

16 gross income of such entity is derived from

17 the active conduct of a qualified business

18 within any low-income community,

19 ‘‘(ii) a substantial portion of the use

20 of the tangible property of such entity

21 (whether owned or leased) is within any

22 low-income community,

23 ‘‘(iii) a substantial portion of the serv24 ices performed for such entity by its em-
43

•S 3152 IS

1 ployees are performed in any low-income

2 community,

3 ‘‘(iv) less than 5 percent of the aver4 age of the aggregate unadjusted bases of

5 the property of such entity is attributable

6 to collectibles (as defined in section

7 408(m)(2)) other than collectibles that are

8 held primarily for sale to customers in the

9 ordinary course of such business, and

10 ‘‘(v) less than 5 percent of the aver11 age of the aggregate unadjusted bases of

12 the property of such entity is attributable

13 to nonqualified financial property (as de14 fined in section 1397C(e)).

15 ‘‘(B) PROPRIETORSHIP.—Such term shall

16 include any business carried on by an individual

17 as a proprietor if such business would meet the

18 requirements of subparagraph (A) were it incor19 porated.

20 ‘‘(C) PORTIONS OF BUSINESS MAY BE

21 QUALIFIED ACTIVE LOW-INCOME COMMUNITY

22 BUSINESS.—The term ‘qualified active low-in23 come community business’ includes any trades

24 or businesses which would qualify as a qualified

25 active low-income community business if such
44

•S 3152 IS

1 trades or businesses were separately incor2 porated.

3 ‘‘(3) QUALIFIED BUSINESS.—For purposes of

4 this subsection, the term ‘qualified business’ has the

5 meaning given to such term by section 1397C(d); ex6 cept that—

7 ‘‘(A) in lieu of applying paragraph (2)(B)

8 thereof, the rental to others of real property lo9 cated in any low-income community shall be

10 treated as a qualified business if there are sub11 stantial improvements located on such property,

12 and

13 ‘‘(B) paragraph (3) thereof shall not apply.

14 ‘‘(e) LOW-INCOME COMMUNITY.—For purposes of

15 this section—

16 ‘‘(1) IN GENERAL.—The term ‘low-income com17 munity’ means any population census tract if—

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

19 least 20 percent, or

20 ‘‘(B)(i) in the case of a tract not located

21 within a metropolitan area, the median family

22 income for such tract does not exceed 80 per23 cent of statewide median family income, or

24 ‘‘(ii) in the case of a tract located within

25 a metropolitan area, the median family income
45

•S 3152 IS

1 for such tract does not exceed 80 percent of the

2 greater of statewide median family income or

3 the metropolitan area median family income.

4 ‘‘(2) TARGETED AREAS.—The Secretary may

5 designate any area within any census tract as a low6 income community if—

7 ‘‘(A) the boundary of such area is contin8 uous,

9 ‘‘(B) the area would satisfy the require10 ments of paragraph (1) if it were a census

11 tract, and

12 ‘‘(C) an inadequate access to investment

13 capital exists in such area.

14 ‘‘(3) 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—
46

•S 3152 IS

1 ‘‘(A) $1,000,000,000 for 2002, and

2 ‘‘(B) $1,500,000,000 for 2003, 2004,

3 2005, and 2006.

4 ‘‘(2) ALLOCATION OF LIMITATION.—The limita5 tion under paragraph (1) shall be allocated by the

6 Secretary among qualified community development

7 entities selected by the Secretary. In making alloca8 tions under the preceding sentence, the Secretary

9 shall give priority to any entity—

10 ‘‘(A) with a record of having successfully

11 provided capital or technical assistance to dis12 advantaged businesses or communities, or

13 ‘‘(B) which intends to satisfy the require14 ment under subsection (b)(1)(B) by making

15 qualified low-income community investments in

16 1 or more businesses in which persons unre17 lated to such entity (within the meaning of sec18 tion 267(b) or 707(b)(1)) hold the majority eq19 uity interest.

20 ‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If

21 the new markets tax credit limitation for any cal22 endar year exceeds the aggregate amount allocated

23 under paragraph (2) for such year, such limitation

24 for the succeeding calendar year shall be increased

25 by the amount of such excess. No amount may be
47

•S 3152 IS

1 carried under the preceding sentence to any calendar

2 year after 2013.

3 ‘‘(g) RECAPTURE OF CREDIT IN CERTAIN CASES.—

4 ‘‘(1) IN GENERAL.—If, at any time during the

5 7-year period beginning on the date of the original

6 issue of a qualified equity investment in a qualified

7 community development entity, there is a recapture

8 event with respect to such investment, then the tax

9 imposed by this chapter for the taxable year in

10 which such event occurs shall be increased by the

11 credit recapture amount.

12 ‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur13 poses of paragraph (1), the credit recapture amount

14 is an amount equal to the sum of—

15 ‘‘(A) the aggregate decrease in the credits

16 allowed to the taxpayer under section 38 for all

17 prior taxable years which would have resulted if

18 no credit had been determined under this sec19 tion with respect to such investment, plus

20 ‘‘(B) interest at the underpayment rate es21 tablished under section 6621 on the amount de22 termined under subparagraph (A) for each

23 prior taxable year for the period beginning on

24 the due date for filing the return for the prior

25 taxable year involved.
48

•S 3152 IS

1 No deduction shall be allowed under this chapter for

2 interest described in subparagraph (B).

3 ‘‘(3) RECAPTURE EVENT.—For purposes of

4 paragraph (1), there is a recapture event with re5 spect to an equity investment in a qualified commu6 nity development entity if—

7 ‘‘(A) such entity ceases to be a qualified

8 community development entity,

9 ‘‘(B) the proceeds of the investment cease

10 to be used as required of subsection (b)(1)(B),

11 or

12 ‘‘(C) such investment is redeemed by such

13 entity.

14 ‘‘(4) SPECIAL RULES.—

15 ‘‘(A) TAX BENEFIT RULE.—The tax for

16 the taxable year shall be increased under para17 graph (1) only with respect to credits allowed

18 by reason of this section which were used to re19 duce tax liability. In the case of credits not so

20 used to reduce tax liability, the carryforwards

21 and carrybacks under section 39 shall be appro22 priately adjusted.

23 ‘‘(B) NO CREDITS AGAINST TAX.—Any in24 crease in tax under this subsection shall not be

25 treated as a tax imposed by this chapter for
49

•S 3152 IS

1 purposes of determining the amount of any

2 credit under this chapter or for purposes of sec3 tion 55.

4 ‘‘(h) BASIS REDUCTION.—The basis of any qualified

5 equity investment shall be reduced by the amount of any

6 credit determined under this section with respect to such

7 investment. This subsection shall not apply for purposes

8 of sections 1202, 1397B, and 1400B.

9 ‘‘(i) REGULATIONS.—The Secretary shall prescribe

10 such regulations as may be appropriate to carry out this

11 section, including regulations—

12 ‘‘(1) which limit the credit for investments

13 which are directly or indirectly subsidized by other

14 Federal tax benefits (including the credit under sec15 tion 42 and the exclusion from gross income under

16 section 103),

17 ‘‘(2) which prevent the abuse of the purposes of

18 this section,

19 ‘‘(3) which provide rules for determining wheth20 er the requirement of subsection (b)(1)(B) is treated

21 as met,

22 ‘‘(4) which impose appropriate reporting re23 quirements, and

24 ‘‘(5) which apply the provisions of this section

25 to newly formed entities.’’.
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•S 3152 IS

1 (b) CREDIT MADE PART OF GENERAL BUSINESS

2 CREDIT.—

3 (1) IN GENERAL.—Subsection (b) of section 38

4 is amended by striking ‘‘plus’’ at the end of para5 graph (11), by striking the period at the end of

6 paragraph (12) and inserting ‘‘, plus’’, and by add7 ing at the end the following new paragraph:

8 ‘‘(13) the new markets tax credit determined

9 under section 45D(a).’’.

10 (2) LIMITATION ON CARRYBACK.—Subsection

11 (d) of section 39 is amended by adding at the end

12 the following new paragraph:

13 ‘‘(9) NO CARRYBACK OF NEW MARKETS TAX

14 CREDIT BEFORE JANUARY 1, 2002.—No portion of

15 the unused business credit for any taxable year

16 which is attributable to the credit under section 45D

17 may be carried back to a taxable year ending before

18 January 1, 2002.’’.

19 (c) DEDUCTION FOR UNUSED CREDIT.—Subsection

20 (c) of section 196 is amended by striking ‘‘and’’ at the

21 end of paragraph (7), by striking the period at the end

22 of paragraph (8) and inserting ‘‘, and’’, and by adding

23 at the end the following new paragraph:

24 ‘‘(9) the new markets tax credit determined

25 under section 45D(a).’’.
51

•S 3152 IS

1 (d) CLERICAL AMENDMENT.—The table of sections

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

3 is amended by adding at the end the following new item:

‘‘Sec. 45D. New markets tax credit.’’.

4 (e) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to investments made after Decem6 ber 31, 2001.

7 (f) REGULATIONS ON ALLOCATION OF NATIONAL

8 LIMITATION.—Not later than 120 days after the date of

9 the enactment of this Act, the Secretary of the Treasury

10 or the Secretary’s delegate shall prescribe regulations

11 which specify—

12 (1) how entities shall apply for an allocation

13 under section 45D(f)(2) of the Internal Revenue

14 Code of 1986, as added by this section;

15 (2) the competitive procedure through which

16 such allocations are made; and

17 (3) the actions that such Secretary or delegate

18 shall take to ensure that such allocations are prop19 erly made to appropriate entities.

20 (g) AUDIT AND REPORT.—Not later than January 31

21 of 2004 and 2007, the Comptroller General of the United

22 States shall, pursuant to an audit of the new markets tax

23 credit program established under section 45D of the Inter24 nal Revenue Code of 1986 (as added by subsection (a)),

25 report to Congress on such program, including all quali-
52

•S 3152 IS

1 fied community development entities that receive an allo2 cation under the new markets credit under such section.

3 Subtitle E—Modification of Tax

4 Incentives for Puerto Rico

5 SEC. 141. MODIFICATION OF PUERTO RICO ECONOMIC AC6 TIVITY TAX CREDIT.

7 (a) CORPORATIONS ELIGIBLE TO CLAIM CREDIT.—

8 Section 30A(a)(2) (defining qualified domestic corpora9 tion) is amended to read as follows:

10 ‘‘(2) QUALIFIED DOMESTIC CORPORATION.—

11 For purposes of paragraph (1)—

12 ‘‘(A) IN GENERAL.—A domestic corpora13 tion shall be treated as a qualified domestic cor14 poration for a taxable year if it is actively con15 ducting within Puerto Rico during the taxable

16 year—

17 ‘‘(i) a line of business with respect to

18 which the domestic corporation is an exist19 ing credit claimant under section

20 936(j)(9), or

21 ‘‘(ii) with respect to taxable years

22 ending after December 31, 2000, an eligi23 ble line of business not described in clause

24 (i) with respect to which the domestic cor25 poration is an existing credit claimant
53

•S 3152 IS

1 under section 936(j)(9) (determined with2 out regard to subparagraph (B) thereof).

3 ‘‘(B) LIMITATION TO LINES OF BUSI4 NESS.—A domestic corporation shall be treated

5 as a qualified domestic corporation under sub6 paragraph (A) only with respect to the lines of

7 business described in subparagraph (A) which it

8 is actively conducting in Puerto Rico during the

9 taxable year.

10 ‘‘(C) EXCEPTION FOR CORPORATIONS

11 ELECTING REDUCED CREDIT.—A domestic cor12 poration shall not be treated as a qualified do13 mestic corporation if such corporation (or any

14 predecessor) had an election in effect under sec15 tion 936(a)(4)(B)(iii) for any taxable year be16 ginning after December 31, 1996.’’.

17 (b) APPLICATION ON SEPARATE LINE OF BUSINESS

18 BASIS; ELIGIBLE LINE OF BUSINESS.—Section 30A is

19 amended by redesignating subsection (g) as subsection (h)

20 and by inserting after subsection (f) the following new

21 subsection:

22 ‘‘(g) APPLICATION ON LINE OF BUSINESS BASIS; EL23 IGIBLE LINES OF BUSINESS.—For purposes of this

24 section—
54

•S 3152 IS

1 ‘‘(1) APPLICATION TO SEPARATE LINE OF BUSI2 NESS.—

3 ‘‘(A) IN GENERAL.—In determining the

4 amount of the credit under subsection (a), this

5 section shall be applied separately with respect

6 to each substantial line of business of the quali7 fied domestic corporation described in sub8 section (a)(2)(A)(ii).

9 ‘‘(B) ALLOCATION.—The Secretary shall

10 prescribe rules necessary to carry out the pur11 poses of this paragraph, including rules—

12 ‘‘(i) for the allocation of items of in13 come, gain, deduction, and loss for pur14 poses of determining taxable income under

15 subsection (a), and

16 ‘‘(ii) for the allocation of wages, fringe

17 benefit expenses, and depreciation allow18 ances for purposes of applying the limita19 tions under subsection (d).

20 ‘‘(2) ELIGIBLE LINE OF BUSINESS.—The term

21 ‘eligible line of business’ means a substantial line of

22 business established by a qualified domestic corpora23 tion described in subsection (a)(2)(A)(ii) after De24 cember 31, 2000.’’.
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•S 3152 IS

1 (c) MODIFICATION OF BASE PERIOD CAP FOR EXIST2 ING CLAIMANTS.—The last sentence of section 30A(a)(1)

3 (relating to allowance of credit) is amended—

4 (1) by striking ‘‘In’’ and inserting ‘‘With re5 spect to any qualified domestic corporation described

6 in paragraph (2)(A)(i), in’’,

7 (2) by inserting ‘‘the greater of’’ after ‘‘ex8 ceed’’, and

9 (3) by inserting ‘‘, or such income multiplied by

10 the ratio of the average number of full-time employ11 ees of such taxpayers during the taxable year to the

12 average number of such full-time employees in 1995

13 and 1996’’ after ‘‘section 936(j)’’.

14 (d) CREDIT TAKEN OVER 5-YEAR PERIOD.—Section

15 30A, as amended by subsection (b), is amended by redes16 ignating subsection (h) as subsection (i) and by inserting

17 after subsection (g) the following new subsection:

18 ‘‘(h) CREDIT TAKEN OVER 5-YEAR PERIOD.—In the

19 case of any qualified domestic corporation described in

20 paragraph (2)(A)(ii), the aggregate amount of the credit

21 otherwise determined under subsection (a) for any taxable

22 year shall be allowed ratably over the 5-taxable year period

23 beginning with such taxable year.’’.

24 (e) CONFORMING AMENDMENTS.—
56

•S 3152 IS

1 (1) Section 30A(a)(3) is amended by striking

2 ‘‘an existing credit claimant’’ and inserting ‘‘a quali3 fied domestic corporation’’.

4 (2) Section 30A(b) is amended by striking

5 ‘‘within a possession’’ each place it appears and in6 serting ‘‘within Puerto Rico’’.

7 (3) Section 30A(d) is amended by striking

8 ‘‘possession’’ each place it appears.

9 (4) Section 30A(f) is amended to read as fol10 lows:

11 ‘‘(f) DEFINITIONS.—For purposes of this section—

12 ‘‘(1) QUALIFIED INCOME TAXES.—The qualified

13 income taxes for any taxable year allocable to non14 sheltered income shall be determined in the same

15 manner as under section 936(i)(3).

16 ‘‘(2) QUALIFIED WAGES.—The qualified wages

17 for any taxable year shall be determined in the same

18 manner as under section 936(i)(1).

19 ‘‘(3) OTHER TERMS.—Any term used in this

20 section which is also used in section 936 shall have

21 the same meaning given such term by section 936.’’.

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

23 this section shall apply to taxable years ending after De24 cember 31, 2000.
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•S 3152 IS

1 Subtitle F—Individual

2 Development Accounts

3 SEC. 151. DEFINITIONS.

4 As used in this subtitle:

5 (1) ELIGIBLE INDIVIDUAL.—

6 (A) IN GENERAL.—The term ‘‘eligible indi7 vidual’’ means an individual who—

8 (i) has attained the age of 18 years;

9 (ii) is a citizen or legal resident of the

10 United States; and

11 (iii) is a member of a household—

12 (I) the gross income of which

13 does not exceed 60 percent of the na14 tional median family income (as pub15 lished by the Bureau of the Census),

16 as adjusted for family size; and

17 (II) the net worth of which does

18 not exceed $10,000.

19 (B) HOUSEHOLD.—The term ‘‘household’’

20 means all individuals who share use of a dwell21 ing unit as primary quarters for living and eat22 ing separate from other individuals.

23 (C) DETERMINATION OF NET WORTH.—
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•S 3152 IS

1 (i) IN GENERAL.—For purposes of

2 subparagraph (A)(iii)(II), the net worth of

3 a household is the amount equal to—

4 (I) the aggregate fair market

5 value of all assets that are owned in

6 whole or in part by any member of a

7 household, minus

8 (II) the obligations or debts of

9 any member of the household.

10 (ii) CERTAIN ASSETS DIS11 REGARDED.—For purposes of determining

12 the net worth of a household, a household’s

13 assets shall not be considered to include—

14 (I) the primary dwelling unit;

15 (II) 1 motor vehicle owned by the

16 household; and

17 (III) the sum of all contributions

18 by an eligible individual (including

19 earnings thereon) to any Individual

20 Development Account, plus the match21 ing deposits made on behalf of such

22 individual (including earnings there23 on) in any parallel account.

24 (2) INDIVIDUAL DEVELOPMENT ACCOUNT.—

25 The term ‘‘Individual Development Account’’ means
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•S 3152 IS

1 an account established for an eligible individual as

2 part of a qualified individual development account

3 program, but only if the written governing instru4 ment creating the account meets the following re5 quirements:

6 (A) The sole owner of the account is the

7 eligible individual.

8 (B) No contribution will be accepted unless

9 it is in cash, by check, by electronic fund trans10 fer, or by electronic money order.

11 (C) The holder of the account is a quali12 fied financial institution, a qualified nonprofit

13 organization, or an Indian tribe.

14 (D) The assets of the account will not be

15 commingled with other property except in a

16 common trust fund or common investment

17 fund.

18 (E) Except as provided in section 156(b),

19 any amount in the account may be paid out

20 only for the purpose of paying the qualified ex21 penses of the eligible individual.

22 (3) PARALLEL ACCOUNT.—The term ‘‘parallel

23 account’’ means a separate, parallel individual or

24 pooled account for all matching funds and earnings

25 dedicated to an eligible individual as part of a quali-
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•S 3152 IS

1 fied individual development account program, the

2 sole owner of which is a qualified financial institu3 tion, a qualified nonprofit organization, or an Indian

4 tribe.

5 (4) QUALIFIED FINANCIAL INSTITUTION.—

6 (A) IN GENERAL.—The term ‘‘qualified fi7 nancial institution’’ means any person author8 ized to be a trustee of any individual retirement

9 account under section 408(a)(2).

10 (B) RULE OF CONSTRUCTION.—Nothing in

11 this paragraph shall be construed as preventing

12 a person described in subparagraph (A) from

13 collaborating with 1 or more contractual affili14 ates, qualified nonprofit organizations, or In15 dian tribes to carry out an individual develop16 ment account program established under sec17 tion 152.

18 (5) QUALIFIED NONPROFIT ORGANIZATION.—

19 The term ‘‘qualified nonprofit organization’’

20 means—

21 (A) any organization described in section

22 501(c)(3) of the Internal Revenue Code of 1986

23 and exempt from taxation under section 501(a)

24 of such Code;
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•S 3152 IS

1 (B) any community development financial

2 institution certified by the Community Develop3 ment Financial Institution Fund; or

4 (C) any credit union chartered under Fed5 eral or State law and certified by the National

6 Credit Union Administration,

7 that meets standards for financial management and

8 fiduciary responsibility as defined by the Secretary

9 or an organization designated by the Secretary.

10 (6) INDIAN TRIBE.—The term ‘‘Indian tribe’’

11 means any Indian tribe as defined in section 4(12)

12 of the Native American Housing Assistance and

13 Self-Determination Act of 1996 (25 U.S.C.

14 4103(12), and includes any tribal subsidiary, sub15 division, or other wholly owned tribal entity.

16 (7) QUALIFIED INDIVIDUAL DEVELOPMENT AC17 COUNT PROGRAM.—The term ‘‘qualified individual

18 development account program’’ means a program es19 tablished under section 152 under which—

20 (A) Individual Development Accounts and

21 parallel accounts are held by a qualified finan22 cial institution, a qualified nonprofit organiza23 tion, or an Indian tribe; and

24 (B) additional activities determined by the

25 Secretary, or an organization designated by the
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•S 3152 IS

1 Secretary, as necessary to responsibly develop

2 and administer accounts, including recruiting,

3 providing financial education and other training

4 to account holders, and regular program moni5 toring, are carried out by such qualified finan6 cial institution, qualified nonprofit organization,

7 or Indian tribe.

8 (8) QUALIFIED EXPENSE DISTRIBUTION.—

9 (A) IN GENERAL.—The term ‘‘qualified ex10 pense distribution’’ means any amount paid (in11 cluding through electronic payments) or distrib12 uted out of an Individual Development Account

13 and a parallel account established for an eligible

14 individual if such amount—

15 (i) is used exclusively to pay the quali16 fied expenses of such individual or such in17 dividual’s spouse or dependents;

18 (ii) is paid by the qualified financial

19 institution, qualified nonprofit organiza20 tion, or Indian tribe directly to the person

21 to whom the amount is due or to another

22 Individual Development Account; and

23 (iii) is paid after the holder of the In24 dividual Development Account has com-
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•S 3152 IS

1 pleted a financial education course as re2 quired under section 153(b).

3 (B) QUALIFIED EXPENSES.—

4 (i) IN GENERAL.—The term ‘‘qualified

5 expenses’’ means any of the following:

6 (I) Qualified higher education ex7 penses.

8 (II) Qualified first-time home9 buyer costs.

10 (III) Qualified business capital11 ization or expansion costs.

12 (IV) Qualified rollovers.

13 (ii) QUALIFIED HIGHER EDUCATION

14 EXPENSES.—

15 (I) IN GENERAL.—The term

16 ‘‘qualified higher education expenses’’

17 has the meaning given such term by

18 section 72(t)(7) of the Internal Rev19 enue Code of 1986, determined by

20 treating postsecondary vocational edu21 cational schools as eligible educational

22 institutions.

23 (II) POSTSECONDARY VOCA24 TIONAL EDUCATION SCHOOL.—The

25 term ‘‘postsecondary vocational edu-
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•S 3152 IS

1 cational school’’ means an area voca2 tional education school (as defined in

3 subparagraph (C) or (D) of section

4 521(4) of the Carl D. Perkins Voca5 tional and Applied Technology Edu6 cation Act (20 U.S.C. 2471(4)))

7 which is in any State (as defined in

8 section 521(33) of such Act), as such

9 sections are in effect on the date of

10 the enactment of this Act.

11 (III) COORDINATION WITH

12 OTHER BENEFITS.—The amount of

13 qualified higher education expenses

14 for any taxable year shall be reduced

15 as provided in section 25A(g)(2) of

16 such Code and by the amount of such

17 expenses for which a credit or exclu18 sion is allowed under chapter 1 of

19 such Code for such taxable year.

20 (iii) QUALIFIED FIRST-TIME HOME21 BUYER COSTS.—The term ‘‘qualified first22 time homebuyer costs’’ means qualified ac23 quisition costs (as defined in section

24 72(t)(8) of such Code without regard to

25 subparagraph (B) thereof) with respect to
65

•S 3152 IS

1 a principal residence (within the meaning

2 of section 121 of such Code) for a qualified

3 first-time homebuyer (as defined in section

4 72(t)(8) of such Code).

5 (iv) QUALIFIED BUSINESS CAPITAL6 IZATION OR EXPANSION COSTS.—

7 (I) IN GENERAL.—The term

8 ‘‘qualified business capitalization or

9 expansion costs’’ means qualified ex10 penditures for the capitalization or ex11 pansion of a qualified business pursu12 ant to a qualified business plan.

13 (II) QUALIFIED EXPENDI14 TURES.—The term ‘‘qualified expendi15 tures’’ means expenditures included in

16 a qualified business plan, including

17 capital, plant, equipment, working

18 capital, inventory expenses, attorney

19 and accounting fees, and other costs

20 normally associated with starting or

21 expanding a business.

22 (III) QUALIFIED BUSINESS.—

23 The term ‘‘qualified business’’ means

24 any business that does not contravene

25 any law.
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•S 3152 IS

1 (IV) QUALIFIED BUSINESS

2 PLAN.—The term ‘‘qualified business

3 plan’’ means a business plan which

4 meets such requirements as the Sec5 retary or an organization designated

6 by the Secretary may specify.

7 (v) QUALIFIED ROLLOVERS.—The

8 term ‘‘qualified rollover’’ means, with re9 spect to any distribution from an Indi10 vidual Development Account, the payment,

11 within 120 days of such distribution, of all

12 or a portion of such distribution to such

13 account or to another Individual Develop14 ment Account established in another quali15 fied financial institution, qualified non16 profit organization, or Indian tribe for the

17 benefit of the eligible individual, or, if such

18 individual is deceased, the spouse, any de19 pendent, or other named beneficiary of the

20 deceased. Rules similar to the rules of sec21 tion 408(d)(3) of such Code (other than

22 subparagraph (C) thereof) shall apply for

23 purposes of this clause.

24 (9) SECRETARY.—The term ‘‘Secretary’’ means

25 the Secretary of the Treasury.
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•S 3152 IS

1 SEC. 152. STRUCTURE AND ADMINISTRATION OF QUALI2 FIED INDIVIDUAL DEVELOPMENT ACCOUNT

3 PROGRAMS.

4 (a) ESTABLISHMENT OF QUALIFIED INDIVIDUAL DE5 VELOPMENT ACCOUNT PROGRAMS.—Any qualified finan6 cial institution, qualified nonprofit organization, or Indian

7 tribe may establish 1 or more qualified individual develop8 ment account programs which meet the requirements of

9 this subtitle.

10 (b) BASIC PROGRAM STRUCTURE.—

11 (1) IN GENERAL.—All qualified individual de12 velopment account programs shall consist of the fol13 lowing 2 components:

14 (A) An Individual Development Account to

15 which an eligible individual may contribute

16 money in accordance with section 154.

17 (B) A parallel account to which all match18 ing funds shall be deposited in accordance with

19 section 155.

20 (2) TAILORED IDA PROGRAMS.—A qualified fi21 nancial institution, qualified nonprofit organization,

22 or Indian tribe may tailor its qualified individual de23 velopment account program to allow matching funds

24 to be spent on 1 or more of the categories of quali25 fied expenses.
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•S 3152 IS

1 (c) TAX TREATMENT OF ACCOUNTS.—Any account

2 described in subparagraph (B) of subsection (b)(1) is ex3 empt from taxation under the Internal Revenue Code of

4 1986 unless such account has ceased to be such an ac5 count by reason of section 156(c) or the termination of

6 the qualified individual development account program

7 under section 157(b).

8 SEC. 153. PROCEDURES FOR OPENING AN INDIVIDUAL DE9 VELOPMENT ACCOUNT AND QUALIFYING FOR

10 MATCHING FUNDS.

11 (a) OPENING AN ACCOUNT.—An eligible individual

12 must open an Individual Development Account with a

13 qualified financial institution, qualified nonprofit organi14 zation, or Indian tribe and contribute money in accordance

15 with section 154 to qualify for matching funds in a par16 allel account.

17 (b) REQUIRED COMPLETION OF FINANCIAL EDU18 CATION COURSE.—

19 (1) IN GENERAL.—Before becoming eligible to

20 withdraw matching funds to pay for qualified ex21 penses, holders of Individual Development Accounts

22 must complete a financial education course offered

23 by a qualified financial institution, a qualified non24 profit organization, an Indian tribe, or a government

25 entity.
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•S 3152 IS

1 (2) STANDARD AND APPLICABILITY OF

2 COURSE.—The Secretary or an organization des3 ignated by the Secretary, in consultation with rep4 resentatives of qualified individual development ac5 count programs and financial educators, shall estab6 lish minimum performance standards for financial

7 education courses offered under paragraph (1) and

8 a protocol to exempt eligible individuals from the re9 quirement under paragraph (1) because of hardship

10 or lack of need.

11 SEC. 154. CONTRIBUTIONS TO INDIVIDUAL DEVELOPMENT

12 ACCOUNTS.

13 (a) IN GENERAL.—Except in the case of a qualified

14 rollover, individual contributions to an Individual Develop15 ment Account will not be accepted for the taxable year

16 in excess of the lesser of—

17 (1) $2,000; or

18 (2) an amount equal to the sum of—

19 (A) the compensation (as defined in section

20 219(f)(1) of the Internal Revenue Code of

21 1986) includible in the individual’s gross in22 come for such taxable year; and

23 (B) in the case of an eligible individual

24 who has retired on disability (within the mean25 ing of section 22 of the Internal Revenue Code
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•S 3152 IS

1 of 1986) before the close of the taxable year,

2 any amount received as a disability benefit and

3 excluded from the individual’s gross income for

4 such taxable year.

5 (b) PROOF OF COMPENSATION AND STATUS AS AN

6 ELIGIBLE INDIVIDUAL.—Federal W–2 forms and other

7 forms specified by the Secretary proving the eligible indi8 vidual’s wages and other compensation (including amounts

9 described in subsection (a)(2)(B)) and the status of the

10 individual as an eligible individual shall be presented at

11 the time of the establishment of the Individual Develop12 ment Account and at least once annually thereafter.

13 (c) DEEMED WITHDRAWALS OF EXCESS CONTRIBU14 TIONS.—If the individual for whose benefit an Individual

15 Development Account is established contributes an

16 amount in excess of the amount allowed under subsection

17 (a) and fails to withdraw the excess contribution plus the

18 amount of net income attributable to such excess contribu19 tion on or before the day prescribed by law (including ex20 tensions of time) for filing such individual’s return of tax

21 for the taxable year, such excess contribution and net in22 come shall be deemed to have been withdrawn on such day

23 by such individual for purposes other than to pay qualified

24 expenses.
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•S 3152 IS

1 (d) 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. 155. 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 (or upon a proper withdrawal request under

15 section 156, if necessary) deposit into the parallel

16 account with respect to each eligible individual the

17 following:

18 (A) A dollar-for-dollar match for the first

19 $300 contributed by the eligible individual into

20 an Individual Development Account with re21 spect to any taxable year.
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•S 3152 IS

1 (B) Any matching funds provided by State,

2 local, or private sources in accordance to the

3 matching ratio set by those sources.

4 (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.

5 (c) FORFEITURE OF MATCHING FUNDS.—Matching

6 funds that are forfeited under section 156(b) shall be used

7 by the qualified financial institution, qualified nonprofit

8 organization, or Indian tribe to pay matches for other In9 dividual Development Account contributions by eligible in10 dividuals.

11 (d) UNIFORM ACCOUNTING REGULATIONS.—To en12 sure proper recordkeeping and determination of the tax

13 credit under section 30C of the Internal Revenue Code of

14 1986, the Secretary shall prescribe regulations with re15 spect to accounting for matching funds from all possible

16 sources in the parallel accounts.

17 (e) REGULAR REPORTING OF ACCOUNTS.—Any

18 qualified financial institution, qualified nonprofit organi19 zation, or Indian tribe shall report the balances in any

20 Individual Development Account and parallel account of

21 an eligible individual on not less than an annual basis.
73

•S 3152 IS

1 SEC. 156. WITHDRAWAL PROCEDURES.

2 (a) WITHDRAWALS FOR QUALIFIED EXPENSES.—To

3 withdraw money from an eligible individual’s Individual

4 Development Account to pay qualified expenses of such

5 individual or such individual’s spouse or dependents, the

6 qualified financial institution, qualified nonprofit organi7 zation, or Indian tribe shall directly transfer such funds

8 from the Individual Development Account, and, if applica9 ble, from the parallel account electronically to the vendor

10 or other Individual Development Account. If the vendor

11 is not equipped to receive funds electronically, the quali12 fied financial institution, qualified nonprofit organization,

13 or Indian tribe may issue such funds by paper check to

14 the vendor.

15 (b) WITHDRAWALS FOR NONQUALIFIED EX16 PENSES.—An Individual Development Account holder may

17 unilaterally withdraw funds from the Individual Develop18 ment Account for purposes other than to pay qualified ex19 penses, but shall forfeit the corresponding matching funds

20 and interest earned on the matching funds by doing so,

21 unless such withdrawn funds are recontributed to such Ac22 count by September 30 following the withdrawal.

23 (c) DEEMED WITHDRAWALS FROM ACCOUNTS OF

24 NONELIGIBLE INDIVIDUALS.—If the individual for whose

25 benefit an Individual Development Account is established

26 ceases to be an eligible individual, such account shall cease
74

•S 3152 IS

1 to be an Individual Development Account as of the first

2 day of the taxable year of such individual and any balance

3 in such account shall be deemed to have been withdrawn

4 on such first day by such individual for purposes other

5 than to pay qualified expenses.

6 (d) TAX TREATMENT OF MATCHING FUNDS.—Any

7 amount withdrawn from a parallel account shall not be

8 includible in an eligible individual’s gross income.

9 SEC. 157. CERTIFICATION AND TERMINATION OF QUALI10 FIED INDIVIDUAL DEVELOPMENT ACCOUNT

11 PROGRAMS.

12 (a) CERTIFICATION PROCEDURES.—Upon estab13 lishing a qualified individual development account pro14 gram under section 152, a qualified financial institution,

15 qualified nonprofit organization, or Indian tribe shall cer16 tify to the Secretary, or an organization designated by the

17 Secretary, on forms prescribed by the Secretary or such

18 organization and accompanied by any documentation re19 quired by the Secretary or such organization, that—

20 (1) the accounts described in subparagraphs

21 (A) and (B) of section 152(b)(1) are operating pur22 suant to all the provisions of this subtitle; and

23 (2) the qualified financial institution, qualified

24 nonprofit organization, or Indian tribe agrees to im25 plement an information system necessary to monitor
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•S 3152 IS

1 the cost and outcomes of the qualified individual de2 velopment account program.

3 (b) AUTHORITY TO TERMINATE QUALIFIED IDA

4 PROGRAM.—If the Secretary, or an organization des5 ignated by the Secretary, determines that a qualified fi6 nancial institution, qualified nonprofit organization, or In7 dian tribe under this subtitle is not operating a qualified

8 individual development account program in accordance

9 with the requirements of this subtitle (and has not imple10 mented any corrective recommendations directed by the

11 Secretary or such organization), the Secretary or such or12 ganization shall terminate such institution’s, nonprofit or13 ganization’s, or Indian tribe’s authority to conduct the

14 program. If the Secretary, or an organization designated

15 by the Secretary, is unable to identify a qualified financial

16 institution, qualified nonprofit organization, or Indian

17 tribe to assume the authority to conduct such program,

18 then any account established for the benefit of any eligible

19 individual under such program shall cease to be an Indi20 vidual Development Account as of the first day of such

21 termination and any balance in such account shall be

22 deemed to have been withdrawn on such first day by such

23 individual for purposes other than to pay qualified ex24 penses.
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•S 3152 IS

1 SEC. 158. REPORTING, MONITORING, AND EVALUATION.

2 (a) RESPONSIBILITIES OF QUALIFIED FINANCIAL IN3 STITUTIONS, QUALIFIED NONPROFIT ORGANIZATIONS,

4 AND INDIAN TRIBES.—Each qualified financial institu5 tion, qualified nonprofit organization, or Indian tribe that

6 establishes a qualified individual development account pro7 gram under section 152 shall report annually to the Sec8 retary, directly or through an organization designated by

9 the Secretary, within 90 days after the end of each cal10 endar year on—

11 (1) the number of eligible individuals making

12 contributions into Individual Development Accounts;

13 (2) the amounts contributed into Individual De14 velopment Accounts and deposited into parallel ac15 counts for matching funds;

16 (3) the amounts withdrawn from Individual De17 velopment Accounts and parallel accounts, and the

18 purposes for which such amounts were withdrawn;

19 (4) the balances remaining in Individual Devel20 opment Accounts and parallel accounts; and

21 (5) such other information needed to help the

22 Secretary, or an organization designated by the Sec23 retary, monitor the cost and outcomes of the quali24 fied individual development account program.

25 (b) RESPONSIBILITIES OF THE SECRETARY OR DES26 IGNATED ORGANIZATION.—
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1 (1) MONITORING PROTOCOL.—Not later than

2 12 months after the date of the enactment of this

3 Act, the Secretary, or an organization designated by

4 the Secretary, shall develop and implement a pro5 tocol and process to monitor the cost and outcomes

6 of the qualified individual development account pro7 grams established under section 152.

8 (2) ANNUAL REPORTS.—In each year after the

9 date of the enactment of this Act, the Secretary, or

10 an organization designated by the Secretary, shall

11 submit a progress report to Congress on the status

12 of such qualified individual development account

13 programs. Such report shall include from a rep14 resentative sample of qualified financial institutions,

15 qualified nonprofit organizations, and Indian tribes

16 a report on—

17 (A) the characteristics of participants, in18 cluding age, gender, race or ethnicity, marital

19 status, number of children, employment status,

20 and monthly income;

21 (B) individual level data on deposits, with22 drawals, balances, uses of Individual Develop23 ment Accounts, and participant characteristics;

24 (C) the characteristics of qualified indi25 vidual development account programs, including
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•S 3152 IS

1 match rate, economic education requirements,

2 permissible uses of accounts, staffing of pro3 grams in full time employees, and the total

4 costs of programs; and

5 (D) process information on program imple6 mentation and administration, especially on

7 problems encountered and how problems were

8 solved.

9 SEC. 159. ACCOUNT FUNDS OF PROGRAM PARTICIPANTS

10 DISREGARDED FOR PURPOSES OF CERTAIN

11 MEANS-TESTED FEDERAL PROGRAMS.

12 Notwithstanding any other provision of Federal law

13 that requires consideration of 1 or more financial cir14 cumstances of an individual, for the purposes of deter15 mining eligibility to receive, or the amount of, any assist16 ance or benefit authorized by such provision to be provided

17 to or for the benefit of such individual, an amount equal

18 to the sum of—

19 (1) all contributions by an eligible individual

20 (including earnings thereon) to any Individual Devel21 opment Account; plus

22 (2) the matching deposits made on behalf of

23 such individual (including earnings thereon) in any

24 parallel account,
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1 shall be disregarded for such purpose with respect to any

2 period during which the individual participates in a quali3 fied individual development account program established

4 under section 152.

5 SEC. 160. MATCHING FUNDS FOR INDIVIDUAL DEVELOP6 MENT ACCOUNTS PROVIDED THROUGH A TAX

7 CREDIT FOR QUALIFIED FINANCIAL INSTITU8 TIONS.

9 (a) IN GENERAL.—Subpart B of part IV of sub10 chapter A of chapter 1 (relating to other credits) is

11 amended by inserting after section 30A the following new

12 section:

13 ‘‘SEC. 30B. INDIVIDUAL DEVELOPMENT ACCOUNT INVEST14 MENT CREDIT FOR QUALIFIED FINANCIAL IN15 STITUTIONS.

16 ‘‘(a) DETERMINATION OF AMOUNT.—There shall be

17 allowed as a credit against the applicable tax for the tax18 able year an amount equal to the individual development

19 account investment provided by a qualified financial insti20 tution during the taxable year under an individual develop21 ment account program established under section 152 of

22 the Community Renewal and New Markets Act of 2000.

23 ‘‘(b) APPLICABLE TAX.—For the purposes of this

24 section, the term ‘applicable tax’ means the excess (if any)

25 of—
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1 ‘‘(1) the tax imposed under this chapter (other

2 than the taxes imposed under the provisions de3 scribed in subparagraphs (C) through (Q) of section

4 26(b)(2)), over

5 ‘‘(2) the credits allowable under subpart B

6 (other than this section) and subpart D of this part.

7 ‘‘(c) INDIVIDUAL DEVELOPMENT ACCOUNT INVEST8 MENT.—For purposes of this section, the term ‘individual

9 development account investment’ means, with respect to

10 an individual development account program of a qualified

11 financial institution in any taxable year, an amount equal

12 to the sum of—

13 ‘‘(1) 90 percent of the aggregate amount of dol14 lar-for-dollar matches under such program by such

15 institution under section 155(b)(1)(A) of the Com16 munity Renewal and New Markets Act of 2000 for

17 such taxable year, plus

18 ‘‘(2) an amount equal to the sum of the costs

19 incurred, directly or indirectly, with respect to each

20 Individual Development Account opened after the

21 date of the enactment of this section, not to exceed

22 $100 per Account.

23 ‘‘(d) OTHER DEFINITIONS.—For purposes of this

24 section, the terms ‘Individual Development Account’ and

25 ‘qualified financial institution’ have the meanings given
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1 such terms by section 151 of the Community Renewal and

2 New Markets Act of 2000.

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 recapture of the credit allowed under this section in

7 cases where there is a forfeiture under section 156(b) of

8 the Community Renewal and New Markets Act of 2000

9 in a subsequent taxable year of any amount which was

10 taken into account in determining the amount of such

11 credit.

12 ‘‘(f) TERMINATION.—This section shall not apply to

13 any taxable year beginning after December 31, 2005.’’.

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 new item:

‘‘Sec. 30B. Individual development account investment credit for qualified financial institutions.’’.

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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1 SEC. 161. DESIGNATION OF EARNED INCOME TAX CREDIT

2 PAYMENTS FOR DEPOSIT TO INDIVIDUAL DE3 VELOPMENT ACCOUNTS.

4 (a) IN GENERAL.—Section 32 (relating to earned in5 come credit) is amended by adding at the end the following

6 new subsection:

7 ‘‘(o) DESIGNATION OF CREDIT FOR DEPOSIT TO IN8 DIVIDUAL DEVELOPMENT ACCOUNT.—

9 ‘‘(1) IN GENERAL.—With respect to the return

10 of any eligible individual (as defined in section

11 151(1) of the Community Renewal and New Mar12 kets Act of 2000) for the taxable year of the tax im13 posed by this chapter, such individual may designate

14 that a specified portion (not less than $1) of any

15 overpayment of tax for such taxable year which is

16 attributable to the credit allowed under this section

17 shall be deposited by the Secretary into an Indi18 vidual Development Account (as defined in section

19 151(2) of such Act) of such individual. The Sec20 retary shall so deposit such portion designated under

21 this paragraph.

22 ‘‘(2) MANNER AND TIME OF DESIGNATION.—A

23 designation under paragraph (1) may be made with

24 respect to any taxable year—
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1 ‘‘(A) at the time of filing the return of the

2 tax imposed by this chapter for such taxable

3 year, or

4 ‘‘(B) at any other time (after the time of

5 filing the return of the tax imposed by this

6 chapter for such taxable year) specified in regu7 lations prescribed by the Secretary.

8 Such designation shall be made in such manner as

9 the Secretary prescribes by regulations.

10 ‘‘(3) PORTION ATTRIBUTABLE TO EARNED IN11 COME TAX CREDIT.—For purposes of paragraph (1),

12 an overpayment for any taxable year shall be treated

13 as attributable to the credit allowed under this sec14 tion for such taxable year to the extent that such

15 overpayment does not exceed the credit so allowed.

16 ‘‘(4) OVERPAYMENTS TREATED AS RE17 FUNDED.—For purposes of this title, any portion of

18 an overpayment of tax designated under paragraph

19 (1) shall be treated as being refunded to the tax20 payer as of the last date prescribed for filing the re21 turn of tax imposed by this chapter (determined

22 without regard to extensions) or, if later, the date

23 the return is filed.
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1 ‘‘(5) TERMINATION.—This subsection shall not

2 apply to any taxable year beginning after December

3 31, 2005.’’.

4 (b) EFFECTIVE DATE.—The amendment made by

5 this section shall apply to taxable years beginning after

6 December 31, 2001.

7 Subtitle G—Additional Incentives

8 SEC. 171. EXCLUSION OF CERTAIN AMOUNTS RECEIVED

9 UNDER THE NATIONAL HEALTH SERVICE

10 CORPS SCHOLARSHIP PROGRAM AND THE F.

11 EDWARD HEBERT ARMED FORCES HEALTH

12 PROFESSIONS SCHOLARSHIP AND FINANCIAL

13 ASSISTANCE PROGRAM.

14 (a) IN GENERAL.—Section 117(c) (relating to the ex15 clusion from gross income amounts received as a qualified

16 scholarship) is amended—

17 (1) by striking ‘‘Subsections (a)’’ and inserting

18 the following:

19 ‘‘(1) IN GENERAL.—Except as provided in para20 graph (2), subsections (a)’’, and

21 (2) by adding at the end the following new

22 paragraph:

23 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not

24 apply to any amount received by an individual

25 under—
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1 ‘‘(A) the National Health Service Corps

2 Scholarship Program under section

3 338A(g)(1)(A) of the Public Health Service

4 Act, or

5 ‘‘(B) the Armed Forces Health Professions

6 Scholarship and Financial Assistance program

7 under subchapter I of chapter 105 of title 10,

8 United States Code.’’.

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

10 subsection (a) shall apply to amounts received in taxable

11 years beginning after December 31, 1993.

12 SEC. 172. EXTENSION OF ENHANCED DEDUCTION FOR COR13 PORATE DONATIONS OF COMPUTER TECH14 NOLOGY.

15 (a) EXPANSION OF COMPUTER TECHNOLOGY DONA16 TIONS TO PUBLIC LIBRARIES.—

17 (1) IN GENERAL.—Paragraph (6) of section

18 170(e) (relating to special rule for contributions of

19 computer technology and equipment for elementary

20 or secondary school purposes) is amended by strik21 ing ‘‘qualified elementary or secondary educational

22 contribution’’ each place it occurs in the headings

23 and text and inserting ‘‘qualified computer contribu24 tion’’.
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1 (2) EXPANSION OF ELIGIBLE DONEES.—Clause

2 (i) of section 170(e)(6)(B) (relating to qualified ele3 mentary or secondary educational contribution) is

4 amended by striking ‘‘or’’ at the end of subclause

5 (I), by adding ‘‘or’’ at the end of subclause (II), and

6 by inserting after subclause (II) the following new

7 subclause:

8 ‘‘(III) a public library (within the

9 meaning of section 213(2)(A) of the

10 Library Services and Technology Act

11 (20 U.S.C. 9122(2)(A)), as in effect

12 on the date of the enactment of the

13 Community Renewal and New Mar14 kets Act of 2000, established and

15 maintained by an entity described in

16 subsection (c)(1),’’.

17 (b) CONFORMING AMENDMENTS.—

18 (1) Section 170(e)(6)(B)(iv) is amended by

19 striking ‘‘in any grades of the K–12’’.

20 (2) The heading of paragraph (6) of section

21 170(e) is amended by striking ‘‘ELEMENTARY OR

22 SECONDARY SCHOOL PURPOSES’’ and inserting

23 ‘‘EDUCATIONAL PURPOSES’’.

24 (c) EXTENSION OF DEDUCTION.—Section

25 170(e)(6)(F) (relating to termination) is amended by
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1 striking ‘‘December 31, 2000’’ and inserting ‘‘December

2 31, 2003’’.

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

4 this section shall apply to contributions made on and after

5 the date of the enactment of this Act.

6 SEC. 173. EXTENSION OF ADOPTION TAX CREDIT.

7 Section 23(d)(2)(B) (defining eligible child) is

8 amended by striking ‘‘2001’’ and inserting ‘‘2003’’.

9 SEC. 174. TAX TREATMENT OF ALASKA NATIVE SETTLE10 MENT TRUSTS.

11 (a) TREATMENT OF ALASKA NATIVE SETTLEMENT

12 TRUSTS.—Subpart A of part I of subchapter J of chapter

13 1 (relating to general rules for taxation of trusts and es14 tates) is amended by adding at the end the following new

15 section:

16 ‘‘SEC. 646. TAX TREATMENT OF ALASKA NATIVE SETTLE17 MENT TRUSTS.

18 ‘‘(a) IN GENERAL.—Except as otherwise provided in

19 this section, the provisions of this subchapter and section

20 1(e) shall apply to all Settlement Trusts.

21 ‘‘(b) TAXATION OF INCOME OF TRUST.—Except as

22 provided in subsection (f)(1)(B)(ii)—

23 ‘‘(1) IN GENERAL.—The amount of tax imposed

24 on an electing Settlement Trust under section 1(e)

25 shall be determined using the rate of 15 percent.
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1 ‘‘(2) CAPITAL GAIN.—In the case of an electing

2 Settlement Trust with a net capital gain for the tax3 able year, a tax is imposed on such gain at the rate

4 of tax which would apply to such gain if the tax5 payer were subject to a tax on ordinary income at

6 a rate of 15 percent.

7 ‘‘(c) ONE TIME ELECTION.—

8 ‘‘(1) IN GENERAL.—A Settlement Trust may

9 elect to have the provisions of this section apply to

10 the trust and its beneficiaries.

11 ‘‘(2) TIME AND METHOD OF ELECTION.—An

12 election under paragraph (1) shall be made by the

13 trustee of such trust—

14 ‘‘(A) on or before the due date (including

15 extensions) for filing the Settlement Trust’s re16 turn of tax for the first taxable year of such

17 trust ending after the date of the enactment of

18 this section, and

19 ‘‘(B) by attaching to such return of tax a

20 statement specifically providing for such elec21 tion.

22 ‘‘(3) PERIOD ELECTION IN EFFECT.—Except as

23 provided in subsection (f), an election under this

24 subsection—
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1 ‘‘(A) shall apply to the first taxable year

2 described in paragraph (2)(A) and all subse3 quent taxable years, and

4 ‘‘(B) may not be revoked once it is made.

5 ‘‘(d) CONTRIBUTIONS TO TRUST.—

6 ‘‘(1) BENEFICIARIES OF ELECTING TRUST NOT

7 TAXED ON CONTRIBUTIONS.—In the case of an

8 electing Settlement Trust, no amount shall be in9 cludible in gross income of a beneficiary of such

10 trust by reason of a contribution to such trust made

11 during the taxable year.

12 ‘‘(2) EARNINGS AND PROFITS.—The earnings

13 and profits of the sponsoring Native Corporation of

14 a Settlement Trust shall not be reduced on account

15 of any contribution to such Settlement Trust.

16 ‘‘(e) TAX TREATMENT OF DISTRIBUTIONS TO BENE17 FICIARIES.—Amounts distributed by an electing Settle18 ment Trust during any taxable year shall be considered

19 as having the following characteristics in the hands of the

20 recipient beneficiary:

21 ‘‘(1) First, as amounts excludable from gross

22 income for the taxable year to the extent of the tax23 able income of such trust for such taxable year (de24 creased by any income tax paid by the trust with re-
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1 spect to the income) plus any amount excluded from

2 gross income of the trust under section 103.

3 ‘‘(2) Second, as amounts excludable from gross

4 income to the extent of the amount described in

5 paragraph (1) for all taxable years for which an elec6 tion was in effect under subsection (c) with respect

7 to the trust, and not previously taken into account

8 under paragraph (1).

9 ‘‘(3) Third, for purposes of this title other than

10 subsections (b) and (d) of section 301 and section

11 311(b), as amounts distributed by the sponsoring

12 Native Corporation with respect to its stock (within

13 the meaning of section 301(a)) during such taxable

14 year and taxable to the recipient beneficiary as

15 amounts described in section 301(c)(1), to the extent

16 of current and accumulated earnings and profits of

17 the sponsoring Native Corporation as of the close of

18 such taxable year after proper adjustment is made

19 for all distributions made by the sponsoring Native

20 Corporation during such taxable year.

21 ‘‘(4) Fourth, as amounts distributed by the

22 trust in excess of the distributable net income of

23 such trust for such taxable year.

24 ‘‘(f) SPECIAL RULES WHERE TRANSFER RESTRIC25 TIONS MODIFIED.—
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1 ‘‘(1) TRANSFER OF BENEFICIAL INTERESTS.—

2 If, at any time, a beneficial interest in an electing

3 Settlement Trust may be disposed of to a person in

4 a manner which would not be permitted by section

5 7(h) of the Alaska Native Claims Settlement Act (43

6 U.S.C. 1606(h)) if the interest were Settlement

7 Common Stock—

8 ‘‘(A) no election may be made under sub9 section (c) with respect to such trust, and

10 ‘‘(B) if such an election is in effect as of

11 such time—

12 ‘‘(i) such election shall cease to apply

13 as of the first day of the taxable year in

14 which such disposition is first permitted,

15 ‘‘(ii) the provisions of this section

16 shall not apply to such trust for such tax17 able year and all taxable years thereafter,

18 and

19 ‘‘(iii) the distributable net income of

20 such trust shall be increased by the cur21 rent and accumulated earnings and profits

22 of the sponsoring Native Corporation as of

23 the close of such taxable year after proper

24 adjustment is made for all distributions
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1 made by the sponsoring Native Corpora2 tion during such taxable year.

3 In no event shall the increase under clause (iii)

4 exceed the fair market value of the trust’s as5 sets as of the date the beneficial interest of the

6 trust first becomes disposable. The earnings

7 and profits of the sponsoring Native Corpora8 tion shall be adjusted as of the last day of such

9 taxable year by the amount of earnings and

10 profits so included in the distributable net in11 come of the trust.

12 ‘‘(2) STOCK IN CORPORATION.—If—

13 ‘‘(A) the Settlement Common Stock in the

14 sponsoring Native Corporation may be disposed

15 of to a person in any manner not permitted by

16 section 7(h) of the Alaska Native Claims Settle17 ment Act (43 U.S.C. 1606(h)), and

18 ‘‘(B) at any time after such disposition of

19 stock is first permitted, such corporation trans20 fers assets to a Settlement Trust,

21 paragraph (1)(B) shall be applied to such trust on

22 and after the date of the transfer in the same man23 ner as if the trust permitted dispositions of bene24 ficial interests in the trust in a manner not per25 mitted by such section 7(h).
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1 ‘‘(3) CERTAIN DISTRIBUTIONS.—For purposes

2 of this section, the surrender of an interest in a Na3 tive Corporation or an electing Settlement Trust in

4 order to accomplish the whole or partial redemption

5 of the interest of a shareholder or beneficiary in

6 such corporation or trust, or to accomplish the whole

7 or partial liquidation of such corporation or trust,

8 shall be deemed to be a disposition permitted by sec9 tion 7(h) of the Alaska Native Claims Settlement

10 Act (43 U.S.C. 1606(h)).

11 ‘‘(g) TAXABLE INCOME.—For purposes of this title,

12 the taxable income of an electing Settlement Trust shall

13 be determined under section 641(b) without regard to any

14 deduction under section 651 or 661.

15 ‘‘(h) DEFINITIONS.—For purposes of this section—

16 ‘‘(1) ELECTING SETTLEMENT TRUST.—The

17 term ‘electing Settlement Trust’ means a Settlement

18 Trust which has made the election, effective for the

19 taxable year, described in subsection (c).

20 ‘‘(2) NATIVE CORPORATION.—The term ‘Native

21 Corporation’ has the meaning given such term by

22 section 3(m) of the Alaska Native Claims Settlement

23 Act (43 U.S.C. 1602(m)).

24 ‘‘(3) SETTLEMENT COMMON STOCK.—The term

25 ‘Settlement Common Stock’ has the meaning given
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1 such term by section 3(p) of the Alaska Native

2 Claims Settlement Act (43 U.S.C. 1602(p)).

3 ‘‘(4) SETTLEMENT TRUST.—The term ‘Settle4 ment Trust’ has the meaning given such term by

5 section 3(t) of the Alaska Native Claims Settlement

6 Act (43 U.S.C. 1602(t)).

7 ‘‘(5) SPONSORING NATIVE CORPORATION.—The

8 term ‘sponsoring Native Corporation’ means the Na9 tive Corporation which transfers assets to an elect10 ing Settlement Trust.

11 ‘‘(i) CROSS REFERENCE.—

‘‘For information required with respect to electing

Settlement Trusts and sponsoring Native Corporations, see section 6039H.’’

12 (b) REPORTING.—Subpart A of part III of sub13 chapter A of chapter 61 of subtitle F (relating to informa14 tion concerning persons subject to special provisions) is

15 amended by inserting after section 6039G the following

16 new section:

17 ‘‘SEC. 6039H. INFORMATION WITH RESPECT TO ALASKA NA18 TIVE SETTLEMENT TRUSTS AND SPON19 SORING NATIVE CORPORATIONS.

20 ‘‘(a) REQUIREMENT.—The fiduciary of an electing

21 Settlement Trust (as defined in section 646(h)(1)) shall

22 include with the return of income of the trust a statement

23 containing the information required under subsection (c).
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1 ‘‘(b) APPLICATION WITH OTHER REQUIREMENTS.—

2 The filing of any statement under this section shall be in

3 lieu of the reporting requirement under section 6034A to

4 furnish any statement to a beneficiary regarding amounts

5 distributed to such beneficiary (and such other reporting

6 requirements as the Secretary deems appropriate).

7 ‘‘(c) REQUIRED INFORMATION.—The information re8 quired under this subsection shall include—

9 ‘‘(1) the amount of distributions made during

10 the taxable year to each beneficiary,

11 ‘‘(2) the treatment of such distribution under

12 the applicable provision of section 646, including the

13 amount that is excludable from the recipient bene14 ficiary’s gross income under section 646, and

15 ‘‘(3) the amount (if any) of any distribution

16 during such year that is deemed to have been made

17 by the sponsoring Native Corporation (as defined in

18 section 646(h)(5)).

19 ‘‘(d) SPONSORING NATIVE CORPORATION.—

20 ‘‘(1) IN GENERAL.—The electing Settlement

21 Trust shall, on or before the date on which the

22 statement under subsection (a) is required to be

23 filed, furnish such statement to the sponsoring Na24 tive Corporation (as so defined).
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1 ‘‘(2) DISTRIBUTEES.—The sponsoring Native

2 Corporation shall furnish each recipient of a dis3 tribution described in section 646(e)(3) a statement

4 containing the amount deemed to have been distrib5 uted to such recipient by such corporation for the

6 taxable year.’’.

7 (c) CLERICAL AMENDMENT.—

8 (1) The table of sections for subpart A of part

9 I of subchapter J of chapter 1 is amended by adding

10 at the end the following new item:

‘‘Sec. 646. Electing Alaska Native Settlement Trusts.’’.

11 (2) The table of sections for subpart A of part

12 III of subchapter A of chapter 61 of subtitle F is

13 amended by inserting after the item relating to sec14 tion 6039G the following new item:

‘‘Sec. 6039H. Information with respect to Alaska Native Settlement Trusts and sponsoring Native Corporations.’’.

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

16 this section shall apply to taxable years ending after the

17 date of the enactment of this Act and to contributions

18 made to electing Settlement Trusts for such year or any

19 subsequent year.

20 SEC. 175. TREATMENT OF INDIAN TRIBAL GOVERNMENTS

21 UNDER FEDERAL UNEMPLOYMENT TAX ACT.

22 (a) IN GENERAL.—Section 3306(c)(7) (defining em23 ployment) is amended—
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1 (1) by inserting ‘‘or in the employ of an Indian

2 tribe,’’ after ‘‘service performed in the employ of a

3 State, or any political subdivision thereof,’’; and

4 (2) by inserting ‘‘or Indian tribes’’ after ‘‘whol5 ly owned by one or more States or political subdivi6 sions’’.

7 (b) PAYMENTS IN LIEU OF CONTRIBUTIONS.—Sec8 tion 3309 (relating to State law coverage of services per9 formed for nonprofit organizations or governmental enti10 ties) is amended—

11 (1) in subsection (a)(2) by inserting ‘‘, includ12 ing an Indian tribe,’’ after ‘‘the State law shall pro13 vide that a governmental entity’’;

14 (2) in subsection (b)(3)(B) by inserting ‘‘, or of

15 an Indian tribe’’ after ‘‘of a State or political sub16 division thereof’’;

17 (3) in subsection (b)(3)(E) by inserting ‘‘or

18 tribal’’ after ‘‘the State’’; and

19 (4) in subsection (b)(5) by inserting ‘‘or of an

20 Indian tribe’’ after ‘‘an agency of a State or political

21 subdivision thereof’’.

22 (c) STATE LAW COVERAGE.—Section 3309 (relating

23 to State law coverage of services performed for nonprofit

24 organizations or governmental entities) is amended by

25 adding at the end the following new subsection:
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1 ‘‘(d) ELECTION BY INDIAN TRIBE.—The State law

2 shall provide that an Indian tribe may make contributions

3 for employment as if the employment is within the mean4 ing of section 3306 or make payments in lieu of contribu5 tions under this section, and shall provide that an Indian

6 tribe may make separate elections for itself and each sub7 division, subsidiary, or business enterprise wholly owned

8 by such Indian tribe. State law may require a tribe to post

9 a payment bond or take other reasonable measures to as10 sure the making of payments in lieu of contributions under

11 this section. Notwithstanding the requirements of section

12 3306(a)(6), if, within 90 days of having received a notice

13 of delinquency, a tribe fails to make contributions, pay14 ments in lieu of contributions, or payment of penalties or

15 interest (at amounts or rates comparable to those applied

16 to all other employers covered under the State law) as17 sessed with respect to such failure, or if the tribe fails

18 to post a required payment bond, then service for the tribe

19 shall not be excepted from employment under section

20 3306(c)(7) until any such failure is corrected. This sub21 section shall apply to an Indian tribe within the meaning

22 of section 4(e) of the Indian Self-Determination and Edu23 cation Assistance Act (25 U.S.C. 450b(e)).’’.
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1 (d) DEFINITIONS.—Section 3306 (relating to defini2 tions) is amended by adding at the end the following new

3 subsection:

4 ‘‘(u) INDIAN TRIBE.—For purposes of this chapter,

5 the term ‘Indian tribe’ has the meaning given to such term

6 by section 4(e) of the Indian Self-Determination and Edu7 cation Assistance Act (25 U.S.C. 450b(e)), and includes

8 any subdivision, subsidiary, or business enterprise wholly

9 owned by such an Indian tribe.’’.

10 (e) EFFECTIVE DATE; TRANSITION RULE.—

11 (1) EFFECTIVE DATE.—The amendments made

12 by this section shall apply to service performed on

13 or after the date of the enactment of this Act.

14 (2) TRANSITION RULE.—For purposes of the

15 Federal Unemployment Tax Act, service performed

16 in the employ of an Indian tribe (as defined in sec17 tion 3306(u) of the Internal Revenue Code of 1986

18 (as added by this section)) shall not be treated as

19 employment (within the meaning of section 3306 of

20 such Code) if—

21 (A) it is service which is performed before

22 the date of the enactment of this Act and with

23 respect to which the tax imposed under the

24 Federal Unemployment Tax Act has not been

25 paid, and
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1 (B) such Indian tribe reimburses a State

2 unemployment fund for unemployment benefits

3 paid for service attributable to such tribe for

4 such period.

5 SEC. 176. INCREASE IN SOCIAL SERVICES BLOCK GRANT

6 FOR FY 2001.

7 (a) IN GENERAL.—Section 2003(c) of the Social Se8 curity Act (42 U.S.C. 1397b(c)) is amended—

9 (1) in paragraph (10), by striking ‘‘and’’ at the

10 end;

11 (2) in paragraph (11), by striking ‘‘2001’’ and

12 inserting ‘‘2002’’;

13 (3) by redesignating paragraph (11) (as so

14 amended) as paragraph (12); and

15 (4) by inserting after paragraph (10), the fol16 lowing new paragraph:

17 ‘‘(11) $2,400,000,000 for the fiscal year 2001;

18 and’’.

19 (b) EFFECTIVE DATE.—The amendments made by

20 subsection (a) take effect October 1, 2000.
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1 TITLE II—TAX INCENTIVES FOR

2 AFFORDABLE HOUSING

3 Subtitle A—Low-Income Housing

4 Credit

5 SEC. 201. MODIFICATION OF STATE CEILING ON LOW-IN6 COME HOUSING CREDIT.

7 (a) IN GENERAL.—Clauses (i) and (ii) of section

8 42(h)(3)(C) (relating to State housing credit ceiling) are

9 amended to read as follows:

10 ‘‘(i) the unused State housing credit

11 ceiling (if any) of such State for the pre12 ceding calendar year,

13 ‘‘(ii) the greater of—

14 ‘‘(I) $1.75 multiplied by the

15 State population, or

16 ‘‘(II) $2,000,000,’’.

17 (b) ADJUSTMENT OF STATE CEILING FOR IN18 CREASES IN COST-OF-LIVING.—Paragraph (3) of section

19 42(h) (relating to housing credit dollar amount for agen20 cies) is amended by adding at the end the following new

21 subparagraph:

22 ‘‘(H) COST-OF-LIVING ADJUSTMENT.—In

23 the case of a calendar year after 2001, each of

24 the dollar amounts contained in subparagraph
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1 (C)(ii) shall be increased by an amount equal

2 to—

3 ‘‘(i) such dollar amount, multiplied by

4 ‘‘(ii) the cost-of-living adjustment de5 termined under section 1(f)(3) for such

6 calendar year by substituting ‘calendar

7 year 2000’ for ‘calendar year 1992’ in sub8 paragraph (B) thereof.

9 If any increase determined under the preceding

10 sentence is not a multiple of 5 cents ($5,000 in

11 the case of the dollar amount in subparagraph

12 (C)(ii)(II)), such increase shall be rounded to

13 the nearest multiple thereof.’’.

14 (c) CONFORMING AMENDMENTS.—

15 (1) Section 42(h)(3)(C), as amended by sub16 section (a), is amended—

17 (A) by striking ‘‘clause (ii)’’ in the matter

18 following clause (iv) and inserting ‘‘clause (i)’’,

19 and

20 (B) by striking ‘‘clauses (i)’’ in the matter

21 following clause (iv) and inserting ‘‘clauses

22 (ii)’’.

23 (2) Section 42(h)(3)(D)(ii) is amended—

24 (A) by striking ‘‘subparagraph (C)(ii)’’ and

25 inserting ‘‘subparagraph (C)(i)’’, and
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1 (B) by striking ‘‘clauses (i)’’ in subclause

2 (II) and inserting ‘‘clauses (ii)’’.

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

4 this section shall apply to calendar years after 2000.

5 SEC. 202. MODIFICATION TO RULES RELATING TO BASIS OF

6 BUILDING WHICH IS ELIGIBLE FOR CREDIT.

7 (a) CERTAIN NATIVE AMERICAN HOUSING ASSIST8 ANCE DISREGARDED IN DETERMINING WHETHER BUILD9 ING IS FEDERALLY SUBSIDIZED FOR PURPOSES OF THE

10 LOW-INCOME HOUSING CREDIT.—Subparagraph (E) of

11 section 42(i)(2) (relating to determination of whether

12 building is federally subsidized) is amended—

13 (1) in clause (i), by inserting ‘‘or the Native

14 American Housing Assistance and Self-Determina15 tion Act of 1996 (25 U.S.C. 4101 et seq.) (as in ef16 fect on October 1, 1997)’’ after ‘‘this subpara17 graph)’’, and

18 (2) in the subparagraph heading, by inserting

19 ‘‘OR NATIVE AMERICAN HOUSING ASSISTANCE’’ after

20 ‘‘HOME ASSISTANCE’’.

21 (b) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to—

23 (1) housing credit dollar amounts allocated

24 after December 31, 2000, and
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•S 3152 IS

1 (2) buildings placed in service after such date

2 to the extent paragraph (1) of section 42(h) of the

3 Internal Revenue Code of 1986 does not apply to

4 any building by reason of paragraph (4) thereof, but

5 only with respect to bonds issued after such date.

6 Subtitle B—Historic Homes

7 SEC. 211. TAX CREDIT FOR RENOVATING HISTORIC HOMES.

8 (a) IN GENERAL.—Subpart A of part IV of sub9 chapter A of chapter 1 (relating to nonrefundable personal

10 credits) is amended by inserting after section 25A the fol11 lowing new section:

12 ‘‘SEC. 25B. HISTORIC HOMEOWNERSHIP REHABILITATION

13 CREDIT.

14 ‘‘(a) GENERAL RULE.—In the case of an individual,

15 there shall be allowed as a credit against the tax imposed

16 by this chapter for the taxable year an amount equal to

17 20 percent of the qualified rehabilitation expenditures

18 made by the taxpayer with respect to a qualified historic

19 home.

20 ‘‘(b) DOLLAR LIMITATION.—The credit allowed by

21 subsection (a) with respect to any residence of a taxpayer

22 shall not exceed $20,000 ($10,000 in the case of a married

23 individual filing a separate return).

24 ‘‘(c) CARRYFORWARD OF CREDIT UNUSED BY REA25 SON OF LIMITATION BASED ON TAX LIABILITY.—If the
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1 credit allowable under subsection (a) for any taxable year

2 exceeds the limitation imposed by section 26(a) for such

3 taxable year reduced by the sum of the credits allowable

4 under this subpart (other than this section), such excess

5 shall be carried to the succeeding taxable year (but not

6 for more than 10 taxable years succeeding the first taxable

7 year in which the credit under this section is allowed to

8 the taxpayer) and added to the credit allowable under sub9 section (a) for such succeeding taxable year.

10 ‘‘(d) QUALIFIED REHABILITATION EXPENDITURE.—

11 For purposes of this section—

12 ‘‘(1) IN GENERAL.—The term ‘qualified reha13 bilitation expenditure’ means any amount properly

14 chargeable to capital account—

15 ‘‘(A) in connection with the certified reha16 bilitation of a qualified historic home, and

17 ‘‘(B) for property for which depreciation

18 would be allowable under section 168 if the

19 qualified historic home were used in a trade or

20 business.

21 ‘‘(2) CERTAIN EXPENDITURES NOT IN22 CLUDED.—

23 ‘‘(A) EXTERIOR.—Such term shall not in24 clude any expenditure in connection with the re25 habilitation of a building unless at least 5 per-
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1 cent of the total expenditures made in the reha2 bilitation process are allocable to the rehabilita3 tion of the exterior of such building.

4 ‘‘(B) OTHER RULES TO APPLY.—Rules

5 similar to the rules of clauses (ii) and (iii) of

6 section 47(c)(2)(B) shall apply.

7 ‘‘(3) MIXED USE OR MULTIFAMILY BUILDING.—

8 If only a portion of a building is used as the prin9 cipal residence of the taxpayer, only qualified reha10 bilitation expenditures which are properly allocable

11 to such portion shall be taken into account under

12 this section.

13 ‘‘(e) CERTIFIED REHABILITATION.—For purposes of

14 this section—

15 ‘‘(1) IN GENERAL.—Except as otherwise pro16 vided in this subsection, the term ‘certified rehabili17 tation’ has the meaning given such term by section

18 47(c)(2)(C).

19 ‘‘(2) FACTORS TO BE CONSIDERED IN THE

20 CASE OF TARGETED AREA RESIDENCES, ETC.—

21 ‘‘(A) IN GENERAL.—For purposes of ap22 plying section 47(c)(2)(C) under this section

23 with respect to the rehabilitation of a building

24 to which this paragraph applies, consideration

25 shall be given to—
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1 ‘‘(i) the feasibility of preserving exist2 ing architectural and design elements of

3 the interior of such building,

4 ‘‘(ii) the risk of further deterioration

5 or demolition of such building in the event

6 that certification is denied because of the

7 failure to preserve such interior elements,

8 and

9 ‘‘(iii) the effects of such deterioration

10 or demolition on neighboring historic prop11 erties.

12 ‘‘(B) BUILDINGS TO WHICH THIS PARA13 GRAPH APPLIES.—This paragraph shall apply

14 with respect to any building—

15 ‘‘(i) any part of which is a targeted

16 area residence within the meaning of sec17 tion 143(j)(1), or

18 ‘‘(ii) which is located within an enter19 prise community or empowerment zone as

20 designated under section 1391,

21 but shall not apply with respect to any building

22 which is listed in the National Register.

23 ‘‘(3) APPROVED STATE PROGRAM.—The term

24 ‘certified rehabilitation’ includes a certification made

25 by—
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1 ‘‘(A) a State Historic Preservation Officer

2 who administers a State Historic Preservation

3 Program approved by the Secretary of the Inte4 rior pursuant to section 101(b)(1) of the Na5 tional Historic Preservation Act, as in effect on

6 July 21, 1999, or

7 ‘‘(B) a local government, certified pursuant

8 to section 101(c)(1) of the National Historic

9 Preservation Act, as in effect on July 21, 1999,

10 and authorized by a State Historic Preservation

11 Officer, or the Secretary of the Interior where

12 there is no approved State program),

13 subject to such terms and conditions as may be

14 specified by the Secretary of the Interior for the re15 habilitation of buildings within the jurisdiction of

16 such officer (or local government) for purposes of

17 this section.

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

20 ‘‘(1) QUALIFIED HISTORIC HOME.—The term

21 ‘qualified historic home’ means a certified historic

22 structure—

23 ‘‘(A) which has been substantially rehabili24 tated, and

25 ‘‘(B) which (or any portion of which)—
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•S 3152 IS

1 ‘‘(i) is owned by the taxpayer, and

2 ‘‘(ii) is used (or will, within a reason3 able period, be used) by such taxpayer as

4 his principal residence.

5 ‘‘(2) SUBSTANTIALLY REHABILITATED.—The

6 term ‘substantially rehabilitated’ has the meaning

7 given such term by section 47(c)(1)(C); except that,

8 in the case of any building described in subsection

9 (e)(2), clause (i)(I) thereof shall not apply.

10 ‘‘(3) PRINCIPAL RESIDENCE.—The term ‘prin11 cipal residence’ has the same meaning as when used

12 in section 121.

13 ‘‘(4) CERTIFIED HISTORIC STRUCTURE.—

14 ‘‘(A) IN GENERAL.—The term ‘certified

15 historic structure’ means any building (and its

16 structural components) which—

17 ‘‘(i) is listed in the National Register,

18 or

19 ‘‘(ii) is located in a registered historic

20 district (as defined in section 47(c)(3)(B))

21 within which only qualified census tracts

22 (or portions thereof) are located, and is

23 certified by the Secretary of the Interior to

24 the Secretary as being of historic signifi25 cance to the district.
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1 ‘‘(B) CERTAIN STRUCTURES INCLUDED.—

2 Such term includes any building (and its struc3 tural components) which is designated as being

4 of historic significance under a statute of a

5 State or local government, if such statute is

6 certified by the Secretary of the Interior to the

7 Secretary as containing criteria which will sub8 stantially achieve the purpose of preserving and

9 rehabilitating buildings of historic significance.

10 ‘‘(C) QUALIFIED CENSUS TRACTS.—For

11 purposes of subparagraph (A)(ii)—

12 ‘‘(i) IN GENERAL.—The term ‘quali13 fied census tract’ means a census tract in

14 which the median family income is less

15 than twice the statewide median family in16 come.

17 ‘‘(ii) DATA USED.—The determination

18 under clause (i) shall be made on the basis

19 of the most recent decennial census for

20 which data are available.

21 ‘‘(5) REHABILITATION NOT COMPLETE BEFORE

22 CERTIFICATION.—A rehabilitation shall not be treat23 ed as complete before the date of the certification re24 ferred to in subsection (e).
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1 ‘‘(6) LESSEES.—A taxpayer who leases his

2 principal residence shall, for purposes of this section,

3 be treated as the owner thereof if the remaining

4 term of the lease (as of the date determined under

5 regulations prescribed by the Secretary) is not less

6 than such minimum period as the regulations re7 quire.

8 ‘‘(7) TENANT-STOCKHOLDER IN COOPERATIVE

9 HOUSING CORPORATION.—If the taxpayer holds

10 stock as a tenant-stockholder (as defined in section

11 216) in a cooperative housing corporation (as de12 fined in such section), such stockholder shall be

13 treated as owning the house or apartment which the

14 taxpayer is entitled to occupy as such stockholder.

15 ‘‘(8) ALLOCATION OF EXPENDITURES RELAT16 ING TO EXTERIOR OF BUILDING CONTAINING COOP17 ERATIVE OR CONDOMINIUM UNITS.—The percentage

18 of the total expenditures made in the rehabilitation

19 of a building containing cooperative or condominium

20 residential units allocated to the rehabilitation of the

21 exterior of the building shall be attributed propor22 tionately to each cooperative or condominium resi23 dential unit in such building for which a credit

24 under this section is claimed.
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1 ‘‘(g) WHEN EXPENDITURES TAKEN INTO AC2 COUNT.—In the case of a building other than a building

3 to which subsection (h) applies, qualified rehabilitation ex4 penditures shall be treated for purposes of this section as

5 made on the date the rehabilitation is completed.

6 ‘‘(h) ALLOWANCE OF CREDIT FOR PURCHASE OF RE7 HABILITATED HISTORIC HOME.—

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

9 purchased historic home, the taxpayer shall be treat10 ed as having made (on the date of purchase) the

11 qualified rehabilitation expenditures made by the

12 seller of such home. For purposes of the preceding

13 sentence, expenditures made by the seller shall be

14 deemed to be qualified rehabilitation expenditures if

15 such expenditures, if made by the purchaser, would

16 be qualified rehabilitation expenditures.

17 ‘‘(2) QUALIFIED PURCHASED HISTORIC

18 HOME.—For purposes of this subsection, the term

19 ‘qualified purchased historic home’ means any sub20 stantially rehabilitated certified historic structure

21 purchased by the taxpayer if—

22 ‘‘(A) the taxpayer is the first purchaser of

23 such structure after the date rehabilitation is

24 completed, and the purchase occurs within 5

25 years after such date,
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1 ‘‘(B) the structure (or a portion thereof)

2 will, within a reasonable period, be the principal

3 residence of the taxpayer,

4 ‘‘(C) no credit was allowed to the seller

5 under this section or section 47 with respect to

6 such rehabilitation, and

7 ‘‘(D) the taxpayer is furnished with such

8 information as the Secretary determines is nec9 essary to determine the credit under this sub10 section.

11 ‘‘(i) HISTORIC REHABILITATION MORTGAGE CREDIT

12 CERTIFICATE.—

13 ‘‘(1) IN GENERAL.—The taxpayer may elect, in

14 lieu of the credit otherwise allowable under this sec15 tion, to receive a historic rehabilitation mortgage

16 credit certificate. An election under this paragraph

17 shall be made—

18 ‘‘(A) in the case of a building to which

19 subsection (h) applies, at the time of purchase,

20 or

21 ‘‘(B) in any other case, at the time reha22 bilitation is completed.

23 ‘‘(2) HISTORIC REHABILITATION MORTGAGE

24 CREDIT CERTIFICATE.—For purposes of this sub-
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1 section, the term ‘historic rehabilitation mortgage

2 credit certificate’ means a certificate—

3 ‘‘(A) issued to the taxpayer, in accordance

4 with procedures prescribed by the Secretary,

5 with respect to a certified rehabilitation,

6 ‘‘(B) the face amount of which shall be

7 equal to the credit which would (but for this

8 subsection) be allowable under subsection (a) to

9 the taxpayer with respect to such rehabilitation,

10 ‘‘(C) which may only be transferred by the

11 taxpayer to a lending institution (including a

12 non-depository institution) in connection with a

13 loan—

14 ‘‘(i) that is secured by the building

15 with respect to which the credit relates,

16 and

17 ‘‘(ii) the proceeds of which may not be

18 used for any purpose other than the acqui19 sition or rehabilitation of such building,

20 and

21 ‘‘(D) in exchange for which such lending

22 institution provides the taxpayer—

23 ‘‘(i) a reduction in the rate of interest

24 on the loan which results in interest pay25 ment reductions which are substantially
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•S 3152 IS

1 equivalent on a present value basis to the

2 face amount of such certificate, or

3 ‘‘(ii) if the taxpayer so elects with re4 spect to a specified amount of the face

5 amount of such a certificate relating to a

6 building—

7 ‘‘(I) which is a targeted area res8 idence within the meaning of section

9 143(j)(1), or

10 ‘‘(II) which is located in an en11 terprise community or empowerment

12 zone as designated under section

13 1391,

14 a payment which is substantially equivalent

15 to such specified amount to be used to re16 duce the taxpayer’s cost of purchasing the

17 building (and only the remainder of such

18 face amount shall be taken into account

19 under clause (i)).

20 ‘‘(3) METHOD OF DISCOUNTING.—The present

21 value under paragraph (2)(D)(i) shall be

22 determined—

23 ‘‘(A) for a period equal to the term of the

24 loan referred to in subparagraph (D)(i),
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•S 3152 IS

1 ‘‘(B) by using the convention that any pay2 ment on such loan in any taxable year within

3 such period is deemed to have been made on

4 the last day of such taxable year,

5 ‘‘(C) by using a discount rate equal to 65

6 percent of the average of the annual Federal

7 mid-term rate and the annual Federal long8 term rate applicable under section 1274(d)(1)

9 to the month in which the taxpayer makes an

10 election under paragraph (1) and compounded

11 annually, and

12 ‘‘(D) by assuming that the credit allowable

13 under this section for any year is received on

14 the last day of such year.

15 ‘‘(4) USE OF CERTIFICATE BY LENDER.—The

16 amount of the credit specified in the certificate shall

17 be allowed to the lender only to offset the regular

18 tax (as defined in section 55(c)) of such lender. The

19 lender may carry forward all unused amounts under

20 this subsection until exhausted.

21 ‘‘(5) HISTORIC REHABILITATION MORTGAGE

22 CREDIT CERTIFICATE NOT TREATED AS TAXABLE IN23 COME.—Notwithstanding any other provision of law,

24 no benefit accruing to the taxpayer through the use

25 of an historic rehabilitation mortgage credit certifi-
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•S 3152 IS

1 cate shall be treated as taxable income for purposes

2 of this title.

3 ‘‘(j) RECAPTURE.—

4 ‘‘(1) IN GENERAL.—If, before the end of the 5-

5 year period beginning on the date on which the reha6 bilitation of the building is completed (or, if sub7 section (h) applies, the date of purchase of such

8 building by the taxpayer, or, if subsection (i) applies,

9 the date of the loan)—

10 ‘‘(A) the taxpayer disposes of such tax11 payer’s interest in such building, or

12 ‘‘(B) such building ceases to be used as the

13 principal residence of the taxpayer,

14 the taxpayer’s tax imposed by this chapter for the

15 taxable year in which such disposition or cessation

16 occurs shall be increased by the recapture percent17 age of the credit allowed under this section for all

18 prior taxable years with respect to such rehabilita19 tion.

20 ‘‘(2) RECAPTURE PERCENTAGE.—For purposes

21 of paragraph (1), the recapture percentage shall be

22 determined in accordance with the following table:

‘‘If the disposition or cessation occurs within—The recapture percentage is—

(i) One full year after the taxpayer becomes entitled to the

credit.

100

(ii) One full year after the close of the period described in

clause (i).

80
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‘‘If the disposition or cessation occurs within—The recapture percentage is—

(iii) One full year after the close of the period described in

clause (ii).

60

(iv) One full year after the close of the period described in

clause (iii).

40

(v) One full year after the close of the period described in

clause (iv).

20.

1 ‘‘(k) BASIS ADJUSTMENTS.—For purposes of this

2 subtitle, if a credit is allowed under this section for any

3 expenditure with respect to any property (including any

4 purchase under subsection (h) and any transfer under

5 subsection (i)), the increase in the basis of such property

6 which would (but for this subsection) result from such ex7 penditure shall be reduced by the amount of the credit

8 so allowed.

9 ‘‘(l) DENIAL OF DOUBLE BENEFIT.—No credit shall

10 be allowed under this section for any amount for which

11 credit is allowed under section 47.

12 ‘‘(m) REGULATIONS.—The Secretary shall prescribe

13 such regulations as may be appropriate to carry out the

14 purposes of this section, including regulations where less

15 than all of a building is used as a principal residence and

16 where more than 1 taxpayer use the same dwelling unit

17 as their principal residence.’’.

18 (b) CONFORMING AMENDMENTS.—

19 (1) Section 23(c) is amended by striking ‘‘sec20 tion 1400C’’ and inserting ‘‘sections 25B and

21 1400C’’.
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1 (2) Section 25(e)(1)(C) is amended by striking

2 ‘‘23’’ and inserting ‘‘23, 25B,’’.

3 (3) Section 1016(a) is amended by striking

4 ‘‘and’’ at the end of paragraph (26), by striking the

5 period at the end of paragraph (27) and inserting ‘‘,

6 and’’, and by adding at the end the following new

7 item:

8 ‘‘(28) to the extent provided in section

9 25B(k).’’.

10 (4) Section 1400C(d) is amended by inserting

11 ‘‘and section 25B’’ after ‘‘this section’’.

12 (c) CLERICAL AMENDMENT.—The table of sections

13 for subpart A of part IV of subchapter A of chapter 1

14 is amended by inserting after the item relating to section

15 25A the following new item:

‘‘Sec. 25B. Historic homeownership rehabilitation credit.’’.

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

17 this section shall apply to expenses paid or incurred in

18 taxable years beginning after December 31, 2001.

19 Subtitle C—Forgiven Mortgage

20 Obligations

21 SEC. 221. EXCLUSION FROM GROSS INCOME FOR CERTAIN

22 FORGIVEN MORTGAGE OBLIGATIONS.

23 (a) IN GENERAL.—Paragraph (1) of section 108(a)

24 (relating to exclusion from gross income) is amended by

25 striking ‘‘or’’ at the end of both subparagraphs (A) and
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•S 3152 IS

1 (C), by striking the period at the end of subparagraph (D)

2 and inserting ‘‘, or’’, and by inserting after subparagraph

3 (D) the following new subparagraph:

4 ‘‘(E) in the case of an individual, the in5 debtedness discharged is qualified residential in6 debtedness.’’.

7 (b) QUALIFIED RESIDENTIAL INDEBTEDNESS

8 SHORTFALL.—Section 108 (relating to discharge of in9 debtedness) is amended by adding at the end the following

10 new subsection:

11 ‘‘(h) QUALIFIED RESIDENTIAL INDEBTEDNESS.—

12 ‘‘(1) LIMITATIONS.—The amount excluded

13 under subparagraph (E) of subsection (a)(1) with

14 respect to any qualified residential indebtedness

15 shall not exceed the excess (if any) of—

16 ‘‘(A) the outstanding principal amount of

17 such indebtedness (immediately before the dis18 charge), over

19 ‘‘(B) the sum of—

20 ‘‘(i) the amount realized from the sale

21 of the real property securing such indebt22 edness reduced by the cost of such sale,

23 and
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1 ‘‘(ii) the outstanding principal amount

2 of any other indebtedness secured by such

3 property.

4 ‘‘(2) QUALIFIED RESIDENTIAL INDEBTED5 NESS.—

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

7 residential indebtedness’ means indebtedness

8 which—

9 ‘‘(i) was incurred or assumed by the

10 taxpayer in connection with real property

11 used as the principal residence of the tax12 payer (within the meaning of section 121)

13 and is secured by such real property,

14 ‘‘(ii) is incurred or assumed to ac15 quire, construct, reconstruct, or substan16 tially improve such real property, and

17 ‘‘(iii) with respect to which such tax18 payer makes an election to have this para19 graph apply.

20 ‘‘(B) REFINANCED INDEBTEDNESS.—Such

21 term shall include indebtedness resulting from

22 the refinancing of indebtedness under subpara23 graph (A)(ii), but only to the extent the refi24 nanced indebtedness does not exceed the

25 amount of the indebtedness being refinanced.
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•S 3152 IS

1 ‘‘(C) EXCEPTIONS.—Such term shall not

2 include qualified farm indebtedness or qualified

3 real property business indebtedness.’’.

4 (c) CONFORMING AMENDMENTS.—

5 (1) Paragraph (2) of section 108(a) is

6 amended—

7 (A) by striking ‘‘and (D)’’ in subparagraph

8 (A) and inserting ‘‘(D), and (E)’’, and

9 (B) by amending subparagraph (B) to read

10 as follows:

11 ‘‘(B) INSOLVENCY EXCLUSION TAKES

12 PRECEDENCE OVER QUALIFIED FARM EXCLU13 SION; QUALIFIED REAL PROPERTY BUSINESS

14 EXCLUSION; AND QUALIFIED RESIDENTIAL

15 SHORTFALL EXCLUSION.—Subparagraphs (C),

16 (D), and (E) of paragraph (1) shall not apply

17 to a discharge to the extent the taxpayer is in18 solvent.’’.

19 (2) Paragraph (1) of section 108(b) is amended

20 by striking ‘‘or (C)’’ and inserting ‘‘(C), or (E)’’.

21 (3) Subsection (c) of section 121 is amended by

22 adding at the end the following new paragraph:

23 ‘‘(3) SPECIAL RULE RELATING TO DISCHARGE

24 OF INDEBTEDNESS.—The amount of gain which

25 (but for this paragraph) would be excluded from
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•S 3152 IS

1 gross income under subsection (a) with respect to a

2 principal residence shall be reduced by the amount

3 excluded from gross income under section

4 108(a)(1)(E) with respect to such residence.’’.

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

6 this section shall apply to discharges after the date of the

7 enactment of this Act.

8 Subtitle D—Mortgage Revenue

9 Bonds

10 SEC. 231. INCREASE IN PURCHASE PRICE LIMITATION

11 UNDER MORTGAGE SUBSIDY BOND RULES

12 BASED ON MEDIAN FAMILY INCOME.

13 (a) IN GENERAL.—Paragraph (1) of section 143(e)

14 (relating to purchase price requirement) is amended to

15 read as follows:

16 ‘‘(1) IN GENERAL.—An issue meets the require17 ments of this subsection only if the acquisition cost

18 of each residence the owner-financing of which is

19 provided under the issue does not exceed the greater

20 of—

21 ‘‘(A) 90 percent of the average area pur22 chase price applicable to the residence, or

23 ‘‘(B) 3.5 times the applicable median fam24 ily income (as defined in subsection (f)(4)).’’.
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•S 3152 IS

1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to obligations issued after the date

3 of the enactment of this Act.

4 SEC. 232. MORTGAGE FINANCING FOR RESIDENCES LO5 CATED IN PRESIDENTIALLY DECLARED DIS6 ASTER AREAS.

7 (a) IN GENERAL.—Paragraph (11) of section 143(k)

8 of the Internal Revenue Code of 1986 is amended to read

9 as follows:

10 ‘‘(11) SPECIAL RULES FOR RESIDENCES LO11 CATED IN DISASTER AREAS.—

12 ‘‘(A) HOME IMPROVEMENT LOANS FOR RE13 PAIRS.—In the case of financing provided by a

14 qualified home improvement loan for the repair

15 of damage to a residence located in a disaster

16 area which was sustained as a result of the

17 disaster—

18 ‘‘(i) the limitation under paragraph

19 (4) shall be increased (but not above

20 $100,000) to the extent such loan is for

21 the repair of such damage, and

22 ‘‘(ii) subsection (f) (relating to income

23 requirement) shall be applied as if such

24 residence were a targeted area residence.
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•S 3152 IS

1 ‘‘(B) PURCHASE OF REPLACEMENT

2 HOME.—In the case of financing provided to ac3 quire a residence located in a disaster area by

4 mortgagors whose prior residence was in such

5 area and was destroyed or otherwise rendered

6 uninhabitable as a result of the disaster—

7 ‘‘(i) subsection (d) (relating to 3-year

8 requirement) shall not apply, and

9 ‘‘(ii) subsections (e) and (f) (relating

10 to purchase price requirement and income

11 requirement) shall be applied as if such

12 residence were a targeted area residence.

13 ‘‘(C) FINANCING MUST BE PROVIDED

14 WITHIN 2 YEARS AFTER DISASTER DECLARA15 TION.—This paragraph shall apply only to fi16 nancing provided within 2 years after the date

17 of the disaster declaration.

18 ‘‘(D) DISASTER AREA.—For purposes of

19 this paragraph, the term ‘disaster area’ means

20 an area determined by the President to warrant

21 assistance from the Federal Government under

22 the Robert T. Stafford Disaster Relief and

23 Emergency Assistance Act (as in effect on the

24 date of the enactment of the Taxpayer Relief

25 Act of 1997) and with respect to which the
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•S 3152 IS

1 Federal share of disaster payments exceeds 75

2 percent.

3 ‘‘(E) APPLICATION OF PARAGRAPH.—This

4 paragraph shall apply only with respect to

5 bonds issued after December 31, 2000.’’.

6 (b) EFFECTIVE DATE.—The amendment made by

7 this section shall apply to bonds issued after December

8 31, 2000.

9 Subtitle E—Property and Casualty

10 Insurance

11 SEC. 241. EXEMPTION FROM INCOME TAX FOR STATE-CRE12 ATED ORGANIZATIONS PROVIDING PROP13 ERTY AND CASUALTY INSURANCE FOR PROP14 ERTY FOR WHICH SUCH COVERAGE IS OTH15 ERWISE UNAVAILABLE.

16 (a) IN GENERAL.—Subsection (c) of section 501 (re17 lating to exemption from tax on corporations, certain

18 trusts, etc.) is amended by adding at the end the following

19 new paragraph:

20 ‘‘(28)(A) Any association created before Janu21 ary 1, 1999, by State law and organized and oper22 ated exclusively to provide property and casualty in23 surance coverage for property located within the

24 State for which the State has determined that cov-
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•S 3152 IS

1 erage in the authorized insurance market is limited

2 or unavailable at reasonable rates, if—

3 ‘‘(i) no part of the net earnings of which

4 inures to the benefit of any private shareholder

5 or individual,

6 ‘‘(ii) except as provided in clause (v), no

7 part of the assets of which may be used for, or

8 diverted to, any purpose other than—

9 ‘‘(I) to satisfy, in whole or in part, the

10 liability of the association for, or with re11 spect to, claims made on policies written

12 by the association,

13 ‘‘(II) to invest in investments author14 ized by applicable law,

15 ‘‘(III) to pay reasonable and nec16 essary administration expenses in connec17 tion with the establishment and operation

18 of the association and the processing of

19 claims against the association, or

20 ‘‘(IV) to make remittances pursuant

21 to State law to be used by the State to

22 provide for the payment of claims on poli23 cies written by the association, purchase

24 reinsurance covering losses under such

25 policies, or to support governmental pro-
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•S 3152 IS

1 grams to prepare for or mitigate the ef2 fects of natural catastrophic events,

3 ‘‘(iii) the State law governing the associa4 tion permits the association to levy assessments

5 on insurance companies authorized to sell prop6 erty and casualty insurance in the State, or on

7 property and casualty insurance policyholders

8 with insurable interests in property located in

9 the State to fund deficits of the association, in10 cluding the creation of reserves,

11 ‘‘(iv) the plan of operation of the associa12 tion is subject to approval by the chief executive

13 officer or other official of the State, by the

14 State legislature, or both, and

15 ‘‘(v) the assets of the association revert

16 upon dissolution to the State, the State’s des17 ignee, or an entity designated by the State law

18 governing the association, or State law does not

19 permit the dissolution of the association.

20 ‘‘(B)(i) An entity described in clause (ii) shall

21 be disregarded as a separate entity and treated as

22 part of the association described in subparagraph

23 (A) from which it receives remittances described in

24 clause (ii) if an election is made within 30 days after
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•S 3152 IS

1 the date that such association is determined to be

2 exempt from tax.

3 ‘‘(ii) An entity is described in this clause if it

4 is an entity or fund created before January 1, 1999,

5 pursuant to State law and organized and operated

6 exclusively to receive, hold, and invest remittances

7 from an association described in subparagraph (A)

8 and exempt from tax under subsection (a), to make

9 disbursements to pay claims on insurance contracts

10 issued by such association, and to make disburse11 ments to support governmental programs to prepare

12 for or mitigate the effects of natural catastrophic

13 events.’’.

14 (b) UNRELATED BUSINESS TAXABLE INCOME.—

15 Subsection (a) of section 512 (relating to unrelated busi16 ness taxable income) is amended by adding at the end the

17 following new paragraph:

18 ‘‘(6) SPECIAL RULE APPLICABLE TO ORGANIZA19 TIONS DESCRIBED IN SECTION 501(c)(28).—In the

20 case of an organization described in section

21 501(c)(28), the term ‘unrelated business taxable in22 come’ means taxable income for a taxable year com23 puted without the application of section 501(c)(28)

24 if at the end of the immediately preceding taxable

25 year the organization’s net equity exceeded 15 per-
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•S 3152 IS

1 cent of the total coverage in force under insurance

2 contracts issued by the organization and outstanding

3 at the end of such preceding year.’’.

4 (c) TRANSITIONAL RULE.—No income or gain shall

5 be recognized by an association as a result of a change

6 in status to that of an association described by section

7 501(c)(28) of the Internal Revenue Code of 1986, as

8 amended by subsection (a).

9 (d) EFFECTIVE DATE.—The amendment made by

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

11 December 31, 2000.

12 TITLE III—TAX INCENTIVES FOR

13 URBAN AND RURAL INFRA14 STRUCTURE

15 SEC. 301. INCREASE IN STATE CEILING ON PRIVATE ACTIV16 ITY BONDS.

17 (a) IN GENERAL.—Paragraphs (1) and (2) of section

18 146(d) (relating to State ceiling) are amended to read as

19 follows:

20 ‘‘(1) IN GENERAL.—The State ceiling applicable

21 to any State for any calendar year shall be the

22 greater of—

23 ‘‘(A) an amount equal to $75 multiplied by

24 the State population, or

25 ‘‘(B) $225,000.000.
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1 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—In the

2 case of a calendar year after 2001, each of the dollar

3 amounts contained in paragraph (1) shall be in4 creased by an amount equal to—

5 ‘‘(A) such dollar amount, multiplied by

6 ‘‘(B) the cost-of-living adjustment deter7 mined under section 1(f)(3) for such calendar

8 year by substituting ‘calendar year 2000’ for

9 ‘calendar year 1992’ in subparagraph (B)

10 thereof.

11 If any increase determined under the preceding sen12 tence is not a multiple of $5 ($5,000 in the case of

13 the dollar amount in paragraph (1)(B)), such in14 crease shall be rounded to the nearest multiple

15 thereof.’’.

16 (b) EFFECTIVE DATE.—The amendment made by

17 this section shall apply to calendar years after 2000.

18 SEC. 302. MODIFICATIONS TO EXPENSING OF ENVIRON19 MENTAL REMEDIATION COSTS.

20 (a) EXPENSING NOT LIMITED TO SITES IN TAR21 GETED AREAS.—Subsection (c) of section 198 is amended

22 to read as follows:

23 ‘‘(c) QUALIFIED CONTAMINATED SITE.—For pur24 poses of this section—
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•S 3152 IS

1 ‘‘(1) IN GENERAL.—The term ‘qualified con2 taminated site’ means any area—

3 ‘‘(A) which is held by the taxpayer for use

4 in a trade or business or for the production of

5 income, or which is property described in sec6 tion 1221(a)(1) in the hands of the taxpayer,

7 and

8 ‘‘(B) at or on which there has been a re9 lease (or threat of release) or disposal of any

10 hazardous substance.

11 ‘‘(2) NATIONAL PRIORITIES LISTED SITES NOT

12 INCLUDED.—Such term shall not include any site

13 which is on, or proposed for, the national priorities

14 list under section 105(a)(8)(B) of the Comprehen15 sive Environmental Response, Compensation, and

16 Liability Act of 1980 (as in effect on the date of the

17 enactment of this section).

18 ‘‘(3) TAXPAYER MUST RECEIVE STATEMENT

19 FROM STATE ENVIRONMENTAL AGENCY.—An area

20 shall be treated as a qualified contaminated site with

21 respect to expenditures paid or incurred during any

22 taxable year only if the taxpayer receives a state23 ment from the appropriate agency of the State in

24 which such area is located that such area meets the

25 requirement of paragraph (1)(B).
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•S 3152 IS

1 ‘‘(4) APPROPRIATE STATE AGENCY.—For pur2 poses of paragraph (3), the chief executive officer of

3 each State may, in consultation with the Adminis4 trator of the Environmental Protection Agency, des5 ignate the appropriate State environmental agency

6 within 60 days of the date of the enactment of this

7 section. If the chief executive officer of a State has

8 not designated an appropriate environmental agency

9 within such 60-day period, the appropriate environ10 mental agency for such State shall be designated by

11 the Administrator of the Environmental Protection

12 Agency.’’.

13 (b) EXTENSION OF TERMINATION DATE.—Sub14 section (h) of section 198 is amended by striking ‘‘2001’’

15 and inserting ‘‘2003’’.

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

17 this section shall apply to expenditures paid or incurred

18 after the date of the enactment of this Act.

19 SEC. 303. BROADBAND INTERNET ACCESS TAX CREDIT.

20 (a) IN GENERAL.—Subpart E of part IV of chapter

21 1 (relating to rules for computing investment credit) is

22 amended by inserting after section 48 the following new

23 section:
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1 ‘‘SEC. 48A. BROADBAND CREDIT.

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

3 the broadband credit for any taxable year is the sum of—

4 ‘‘(1) the current generation broadband credit,

5 plus

6 ‘‘(2) the next generation broadband credit.

7 ‘‘(b) CURRENT GENERATION BROADBAND CREDIT;

8 NEXT GENERATION BROADBAND CREDIT.—For purposes

9 of this section—

10 ‘‘(1) CURRENT GENERATION BROADBAND

11 CREDIT.—The current generation broadband credit

12 for any taxable year is equal to 10 percent of the

13 qualified expenditures incurred with respect to quali14 fied equipment offering current generation

15 broadband services to rural subscribers or under16 served subscribers and taken into account with re17 spect to such taxable year.

18 ‘‘(2) NEXT GENERATION BROADBAND CRED19 IT.—The next generation broadband credit for any

20 taxable year is equal to 20 percent of the qualified

21 expenditures incurred with respect to qualified

22 equipment offering next generation broadband serv23 ices to all rural subscribers, all underserved sub24 scribers, or any other residential subscribers and

25 taken into account with respect to such taxable year.
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•S 3152 IS

1 ‘‘(c) WHEN EXPENDITURES TAKEN INTO AC2 COUNT.—For purposes of this section—

3 ‘‘(1) IN GENERAL.—Qualified expenditures with

4 respect to qualified equipment shall be taken into ac5 count with respect to the first taxable year in which

6 current generation broadband services or next gen7 eration broadband services are offered by the tax8 payer through such equipment to subscribers.

9 ‘‘(2) OFFER OF SERVICES.—For purposes of

10 paragraph (1), the offer of current generation

11 broadband services or next generation broadband

12 services through qualified equipment occurs when

13 such class of service is purchased by and provided

14 to at least 10 percent of the subscribers described in

15 subsection (b) which such equipment is capable of

16 serving through the legal or contractual area access

17 rights or obligations of the taxpayer.

18 ‘‘(d) SPECIAL ALLOCATION RULES.—

19 ‘‘(1) CURRENT GENERATION BROADBAND SERV20 ICES.—For purposes of determining the current gen21 eration broadband credit under subsection (a)(1), if

22 the qualified equipment is capable of serving both

23 the subscribers described under subsection (b)(1)

24 and other subscribers, the qualified expenditures

25 shall be multiplied by a fraction—
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•S 3152 IS

1 ‘‘(A) the numerator of which is the sum of

2 the total potential subscriber populations within

3 the rural areas and the underserved areas

4 which the equipment is capable of serving, and

5 ‘‘(B) the denominator of which is the total

6 potential subscriber population of the area

7 which the equipment is capable of serving.

8 ‘‘(2) NEXT GENERATION BROADBAND SERV9 ICES.—For purposes of determining the next genera10 tion broadband credit under subsection (a)(2), if the

11 qualified equipment is capable of serving both the

12 subscribers described under subsection (b)(2) and

13 other subscribers, the qualified expenditures shall be

14 multiplied by a fraction—

15 ‘‘(A) the numerator of which is the sum

16 of—

17 ‘‘(i) the total potential subscriber pop18 ulations within the rural areas and under19 served areas, plus

20 ‘‘(ii) the total potential subscriber

21 population of the area consisting only of

22 residential subscribers not described in

23 clause (i),

24 which the equipment is capable of serving, and
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•S 3152 IS

1 ‘‘(B) the denominator of which is the total

2 potential subscriber population of the area

3 which the equipment is capable of serving.

4 ‘‘(e) DEFINITIONS.—For purposes of this section—

5 ‘‘(1) ANTENNA.—The term ‘antenna’ means

6 any device used to transmit or receive signals

7 through the electromagnetic spectrum, including sat8 ellite equipment.

9 ‘‘(2) CABLE OPERATOR.—The term ‘cable oper10 ator’ has the meaning given such term by section

11 602(5) of the Communications Act of 1934 (47

12 U.S.C. 522(5)).

13 ‘‘(3) COMMERCIAL MOBILE SERVICE CAR14 RIER.—The term ‘commercial mobile service carrier’

15 means any person authorized to provide commercial

16 mobile radio service as defined in section 20.3 of

17 title 47, Code of Federal Regulations.

18 ‘‘(4) CURRENT GENERATION BROADBAND SERV19 ICE.—The term ‘current generation broadband serv20 ice’ means the transmission of signals at a rate of

21 at least 1,500,000 bits per second to the subscriber

22 and at least 200,000 bits per second from the sub23 scriber.

24 ‘‘(5) NEXT GENERATION BROADBAND SERV25 ICE.—The term ‘next generation broadband service’
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•S 3152 IS

1 means the transmission of signals at a rate of at

2 least 22,000,000 bits per second to the subscriber

3 and at least 10,000,000 bits per second from the

4 subscriber.

5 ‘‘(6) NONRESIDENTIAL SUBSCRIBER.—The

6 term ‘nonresidential subscriber’ means a person or

7 entity who purchases broadband services which are

8 delivered to the permanent place of business of such

9 person or entity.

10 ‘‘(7) OPEN VIDEO SYSTEM OPERATOR.—The

11 term ‘open video system operator’ means any person

12 authorized to provide service under section 653 of

13 the Communications Act of 1934 (47 U.S.C. 573).

14 ‘‘(8) OTHER WIRELESS CARRIER.—The term

15 ‘other wireless carrier’ means any person (other than

16 a telecommunications carrier, commercial mobile

17 service carrier, cable operator, open video system op18 erator, or satellite carrier) providing current genera19 tion broadband services or next generation

20 broadband service to subscribers through the radio

21 transmission of energy.

22 ‘‘(9) PACKET SWITCHING.—The term ‘packet

23 switching’ means controlling or routing the path of

24 a digitized transmission signal which is assembled

25 into packets or cells.
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•S 3152 IS

1 ‘‘(10) QUALIFIED EQUIPMENT.—

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

3 equipment’ means equipment capable of pro4 viding current generation broadband services or

5 next generation broadband services at any time

6 to each subscriber who is utilizing such services.

7 ‘‘(B) ONLY CERTAIN INVESTMENT TAKEN

8 INTO ACCOUNT.—Except as provided in sub9 paragraph (C), equipment shall be taken into

10 account under subparagraph (A) only to the ex11 tent it—

12 ‘‘(i) extends from the last point of

13 switching to the outside of the unit, build14 ing, dwelling, or office owned or leased by

15 a subscriber in the case of a telecommuni16 cations carrier,

17 ‘‘(ii) extends from the customer side

18 of the mobile telephone switching office to

19 a transmission/receive antenna (including

20 such antenna) owned or leased by a sub21 scriber in the case of a commercial mobile

22 service carrier,

23 ‘‘(iii) extends from the customer side

24 of the headend to the outside of the unit,

25 building, dwelling, or office owned or
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•S 3152 IS

1 leased by a subscriber in the case of a

2 cable operator or open video system oper3 ator, or

4 ‘‘(iv) extends from a transmission/re5 ceive antenna (including such antenna)

6 which transmits and receives signals to or

7 from multiple subscribers to a trans8 mission/receive antenna (including such

9 antenna) on the outside of the unit, build10 ing, dwelling, or office owned or leased by

11 a subscriber in the case of a satellite car12 rier or other wireless carrier, unless such

13 other wireless carrier is also a tele14 communications carrier.

15 ‘‘(C) PACKET SWITCHING EQUIPMENT.—

16 Packet switching equipment, regardless of loca17 tion, shall be taken into account under subpara18 graph (A) only if it is deployed in connection

19 with equipment described in subparagraph (B)

20 and it is uniquely designed to perform the func21 tion of packet switching for current generation

22 broadband services or next generation

23 broadband services, but only if such packet

24 switching is the last in a series of such func25 tions performed in the transmission of a signal
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•S 3152 IS

1 to a subscriber or the first in a series of such

2 functions performed in the transmission of a

3 signal from a subscriber.

4 ‘‘(11) QUALIFIED EXPENDITURE.—

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

6 expenditure’ means any amount—

7 ‘‘(i) chargeable to capital account with

8 respect to the purchase and installation of

9 qualified equipment (including any up10 grades thereto) for which depreciation is

11 allowable under section 168, and

12 ‘‘(ii) incurred—

13 ‘‘(I) with respect to the provision

14 of current generation broadband serv15 ice, after December 31, 2000, and be16 fore January 1, 2004, and

17 ‘‘(II) with respect to the provi18 sion of next generation broadband

19 service, after December 31, 2001, and

20 before January 1, 2005.

21 ‘‘(B) CERTAIN SATELLITE EXPENDITURES

22 EXCLUDED.—Such term shall not include any

23 expenditure with respect to the launching of

24 any satellite equipment.
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•S 3152 IS

1 ‘‘(12) RESIDENTIAL SUBSCRIBER.—The term

2 ‘residential subscriber’ means an individual who pur3 chases broadband services which are delivered to

4 such individual’s dwelling.

5 ‘‘(13) RURAL SUBSCRIBER.—

6 ‘‘(A) IN GENERAL.—The term ‘rural sub7 scriber’ means a residential subscriber residing

8 in a dwelling located in a rural area or nonresi9 dential subscriber maintaining a permanent

10 place of business located in a rural area.

11 ‘‘(B) RURAL AREA.—The term ‘rural area’

12 means any census tract which—

13 ‘‘(i) is not within 10 miles of any in14 corporated or census designated place con15 taining more than 25,000 people, and

16 ‘‘(ii) is not within a county or county

17 equivalent which has an overall population

18 density of more than 500 people per

19 square mile of land.

20 ‘‘(14) SATELLITE CARRIER.—The term ‘sat21 ellite carrier’ means any person using the facilities

22 of a satellite or satellite service licensed by the Fed23 eral Communications Commission and operating in

24 the Fixed-Satellite Service under part 25 of title 47

25 of the Code of Federal Regulations or the Direct
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•S 3152 IS

1 Broadcast Satellite Service under part 100 of title

2 47 of such Code to establish and operate a channel

3 of communications for point-to-multipoint distribu4 tion of signals, and owning or leasing a capacity or

5 service on a satellite in order to provide such point6 to-multipoint distribution.

7 ‘‘(15) SUBSCRIBER.—The term ‘subscriber’

8 means a person who purchases current generation

9 broadband services or next generation broadband

10 services.

11 ‘‘(16) TELECOMMUNICATIONS CARRIER.—The

12 term ‘telecommunications carrier’ has the meaning

13 given such term by section 3(44) of the Communica14 tions Act of 1934 (47 U.S.C. 153 (44)), but—

15 ‘‘(A) includes all members of an affiliated

16 group of which a telecommunications carrier is

17 a member, and

18 ‘‘(B) does not include a commercial mobile

19 service carrier.

20 ‘‘(17) TOTAL POTENTIAL SUBSCRIBER POPU21 LATION.—The term ‘total potential subscriber popu22 lation’ means, with respect to any area and based on

23 the most recent census data, the total number of po24 tential residential subscribers residing in dwellings

25 located in such area and potential nonresidential
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•S 3152 IS

1 subscribers maintaining permanent places of busi2 ness located in such area.

3 ‘‘(18) UNDERSERVED SUBSCRIBER.—

4 ‘‘(A) IN GENERAL.—The term ‘under5 served subscriber’ means a residential sub6 scriber residing in a dwelling located in an un7 derserved area or nonresidential subscriber

8 maintaining a permanent place of business lo9 cated in an underserved area.

10 ‘‘(B) UNDERSERVED AREA.—The term

11 ‘underserved area’ means any census tract—

12 ‘‘(i) the poverty level of which is at

13 least 30 percent (based on the most recent

14 census data),

15 ‘‘(ii) the median family income of

16 which does not exceed—

17 ‘‘(I) in the case of a census tract

18 located in a metropolitan statistical

19 area, 70 percent of the greater of the

20 metropolitan area median family in21 come or the statewide median family

22 income, and

23 ‘‘(II) in the case of a census tract

24 located in a nonmetropolitan statis25 tical area, 70 percent of the non-
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•S 3152 IS

1 metropolitan statewide median family

2 income, or

3 ‘‘(iii) which is located in an empower4 ment zone or enterprise community des5 ignated under section 1391.

6 ‘‘(f) DESIGNATION OF CENSUS TRACTS.—The Sec7 retary shall, not later than 90 days after the date of the

8 enactment of this section, designate and publish those cen9 sus tracts meeting the criteria described in paragraphs

10 (13)(B) and (18)(B) of subsection (e), and such tracts

11 shall remain so designated for the period ending with the

12 applicable termination date described in subsection

13 (e)(11)(A)(ii).’’.

14 (b) CREDIT TO BE PART OF INVESTMENT CREDIT.—

15 Section 46 (relating to the amount of investment credit)

16 is amended by striking ‘‘and’’ at the end of paragraph (2),

17 by striking the period at the end of paragraph (3) and

18 inserting ‘‘, and’’, and by adding at the end the following

19 new paragraph:

20 ‘‘(4) the broadband credit.’’.

21 (c) SPECIAL RULE FOR MUTUAL OR COOPERATIVE

22 TELEPHONE COMPANIES.—Section 501(c)(12)(B) (relat23 ing to list of exempt organizations) is amended by striking

24 ‘‘or’’ at the end of clause (iii), by striking the period at
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•S 3152 IS

1 the end of clause (iv) and inserting ‘‘, or’’, and by adding

2 at the end the following new clause:

3 ‘‘(v) from sources not described in

4 subparagraph (A), but only to the extent

5 such income does not in any year exceed

6 an amount equal to the credit for qualified

7 expenditures which would be determined

8 under section 48A for such year if the mu9 tual or cooperative telephone company was

10 not exempt from taxation.’’.

11 (d) CONFORMING AMENDMENT.—The table of sec12 tions for subpart E of part IV of subchapter A of chapter

13 1 is amended by inserting after the item relating to section

14 48 the following new item:

‘‘Sec. 48A. Broadband credit.’’.

15 (e) REGULATORY MATTERS.—No Federal or State

16 agency or instrumentality shall adopt regulations or rate17 making procedures that would have the effect of confis18 cating any credit or portion thereof allowed under section

19 48A of the Internal Revenue Code of 1986 (as added by

20 this section) or otherwise subverting the purpose of this

21 section.

22 (f) STUDY AND REPORT.—

23 (1) SENSE OF CONGRESS.—It is the sense of

24 Congress that in order to maintain competitive neu25 trality, the credit allowed under section 48A of the
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•S 3152 IS

1 Internal Revenue Code of 1986 (as added by this

2 section) should be administered in such a manner so

3 as to ensure that each class of provider receives the

4 same level of financial incentive to deploy current

5 generation broadband services and next generation

6 broadband services.

7 (2) STUDY AND REPORT.—The Secretary of the

8 Treasury shall, within 180 days after the effective

9 date of this section, study the impact of the credit

10 allowed under section 48A of the Internal Revenue

11 Code of 1986 (as added by this section) on the rel12 ative competitiveness of potential classes of providers

13 of current generation broadband services and next

14 generation broadband services, and shall report to

15 Congress the findings of such study, together with

16 any legislative or regulatory proposals determined to

17 be necessary to ensure that the purposes of such

18 credit can be furthered without impacting competi19 tive neutrality among such classes of providers.

20 (g) EFFECTIVE DATES.—

21 (1) IN GENERAL.—Except as provided in para22 graph (2), the amendments made by this section

23 shall apply to expenditures incurred after December

24 31, 2000.
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•S 3152 IS

1 (2) SPECIAL RULE.—The amendments made by

2 subsection (c) shall apply to amounts received after

3 December 31, 2000.

4 SEC. 304. CREDIT TO HOLDERS OF QUALIFIED AMTRAK

5 BONDS.

6 (a) IN GENERAL.—Part IV of subchapter A of chap7 ter 1 (relating to credits against tax) is amended by add8 ing at the end the following new subpart:

9 ‘‘Subpart H—Nonrefundable Credit for Holders of

10 Qualified Amtrak Bonds

‘‘Sec. 54. Credit to holders of qualified Amtrak bonds.

11 ‘‘SEC. 54. CREDIT TO HOLDERS OF QUALIFIED AMTRAK

12 BONDS.

13 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax14 payer who holds a qualified Amtrak bond on a credit al15 lowance date of such bond which occurs during the taxable

16 year, there shall be allowed as a credit against the tax

17 imposed by this chapter for such taxable year an amount

18 equal to the sum of the credits determined under sub19 section (b) with respect to credit allowance dates during

20 such year on which the taxpayer holds such bond.

21 ‘‘(b) AMOUNT OF CREDIT.—

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

23 determined under this subsection with respect to any

24 credit allowance date for a qualified Amtrak bond is
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•S 3152 IS

1 25 percent of the annual credit determined with re2 spect to such bond.

3 ‘‘(2) ANNUAL CREDIT.—The annual credit de4 termined with respect to any qualified Amtrak bond

5 is the product of—

6 ‘‘(A) the applicable credit rate, multiplied

7 by

8 ‘‘(B) the outstanding face amount of the

9 bond.

10 ‘‘(3) APPLICABLE CREDIT RATE.—For purposes

11 of paragraph (2), the applicable credit rate with re12 spect to an issue is the rate equal to an average

13 market yield (as of the day before the date of

14 issuance of the issue) on outstanding long-term cor15 porate debt obligations (determined under regula16 tions prescribed by the Secretary).

17 ‘‘(4) SPECIAL RULE FOR ISSUANCE AND RE18 DEMPTION.—In the case of a bond which is issued

19 during the 3-month period ending on a credit allow20 ance date, the amount of the credit determined

21 under this subsection with respect to such credit al22 lowance date shall be a ratable portion of the credit

23 otherwise determined based on the portion of the 3-

24 month period during which the bond is outstanding.
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•S 3152 IS

1 A similar rule shall apply when the bond is re2 deemed.

3 ‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—

4 ‘‘(1) IN GENERAL.—The credit allowed under

5 subsection (a) for any taxable year shall not exceed

6 the excess of—

7 ‘‘(A) the sum of the regular tax liability

8 (as defined in section 26(b)) plus the tax im9 posed by section 55, over

10 ‘‘(B) the sum of the credits allowable

11 under this part (other than this subpart and

12 subpart C).

13 ‘‘(2) CARRYOVER OF UNUSED CREDIT.—If the

14 credit allowable under subsection (a) exceeds the

15 limitation imposed by paragraph (1) for such taxable

16 year, such excess shall be carried to the succeeding

17 taxable year and added to the credit allowable under

18 subsection (a) for such taxable year.

19 ‘‘(d) QUALIFIED AMTRAK BOND.—For purposes of

20 this part—

21 ‘‘(1) IN GENERAL.—The term ‘qualified Amtrak

22 bond’ means any bond issued as part of an issue

23 if—

24 ‘‘(A) 95 percent or more of the proceeds of

25 such issue are—
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•S 3152 IS

1 ‘‘(i) to be used for any qualified

2 project, or

3 ‘‘(ii) to be pledged to secure payments

4 and other obligations incurred by the Na5 tional Railroad Passenger Corporation in

6 connection with any qualified project,

7 ‘‘(B) the bond is issued by the National

8 Railroad Passenger Corporation,

9 ‘‘(C) the issuer—

10 ‘‘(i) designates such bond for purposes

11 of this section,

12 ‘‘(ii) certifies that it meets the State

13 contribution requirement of paragraph (2)

14 with respect to such project, and

15 ‘‘(iii) certifies that it has obtained the

16 written approval of the Secretary of Trans17 portation for such project,

18 ‘‘(D) the term of each bond which is part

19 of such issue does not exceed 20 years, and

20 ‘‘(E) the payment of principal with respect

21 to such bond is guaranteed by the National

22 Railroad Passenger Corporation.

23 ‘‘(2) STATE CONTRIBUTION REQUIREMENT.—

24 ‘‘(A) IN GENERAL.—For purposes of para25 graph (1)(C)(ii), the State contribution require-
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•S 3152 IS

1 ment of this paragraph is met with respect to

2 any qualified project if the National Railroad

3 Passenger Corporation has a written binding

4 commitment from 1 or more States to make

5 matching contributions not later than the date

6 of issuance of the issue of not less than 20 per7 cent of the cost of the qualified project.

8 ‘‘(B) USE OF STATE MATCHING CONTRIBU9 TIONS.—The matching contributions described

10 in subparagraph (A) with respect to each quali11 fied project shall be used—

12 ‘‘(i) in the case of an amount not to

13 exceed 20 percent of the cost of such

14 project, to redeem bonds which are a part

15 of the issue with respect to such project,

16 and

17 ‘‘(ii) in the case of any remaining

18 amount, at the election of the National

19 Railroad Passenger Corporation and the

20 contributing State—

21 ‘‘(I) to fund the qualified project,

22 ‘‘(II) to redeem such bonds, or

23 ‘‘(III) for the purposes of sub24 clauses (I) and (II).
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•S 3152 IS

1 ‘‘(C) STATE MATCHING CONTRIBUTIONS

2 MAY NOT INCLUDE FEDERAL FUNDS.—For pur3 poses of this paragraph, State matching con4 tributions shall not be derived, directly or indi5 rectly, from Federal funds, including any trans6 fers from the Highway Trust Fund under sec7 tion 9503.

8 ‘‘(D) NO STATE CONTRIBUTION REQUIRE9 MENT FOR CERTAIN QUALIFIED PROJECT.—

10 With respect to the qualified project described

11 in subsection (e)(2)(B), the State contribution

12 requirement of this paragraph is zero.

13 ‘‘(3) QUALIFIED PROJECT.—The term ‘qualified

14 project’ means—

15 ‘‘(A) the acquisition, financing, or refi16 nancing (as described in paragraph (1)(A)(ii))

17 of equipment, rolling stock, and other capital

18 improvements for the northeast rail corridor be19 tween Washington, D.C. and Boston, Massa20 chusetts (including the project described in sub21 section (e)(2)(B)),

22 ‘‘(B) the acquisition, financing, or refi23 nancing (as so described) of equipment, rolling

24 stock, and other capital improvements for the

25 improvement of train speeds or safety (or both)
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•S 3152 IS

1 on the high-speed rail corridors designated

2 under section 104(d)(2) of title 23, United

3 States Code, and

4 ‘‘(C) the acquisition, financing, or refi5 nancing (as so described) of equipment, rolling

6 stock, and other capital improvements for other

7 intercity passenger rail corridors, including sta8 tion rehabilitation or construction, track or sig9 nal improvements, or the elimination of grade

10 crossings.

11 ‘‘(e) LIMITATIONS ON AMOUNT OF BONDS DES12 IGNATED.—

13 ‘‘(1) IN GENERAL.—There is a qualified Am14 trak bond limitation for each fiscal year. Such limi15 tation is—

16 ‘‘(A) $1,000,000,000 for each of the fiscal

17 years 2001 through 2010, and

18 ‘‘(B) except as provided in paragraph (5),

19 zero after fiscal year 2010.

20 ‘‘(2) BONDS FOR RAIL CORRIDORS.—

21 ‘‘(A) IN GENERAL.—Not more than

22 $3,000,000,000 of the limitation under para23 graph (1) may be designated for any 1 rail cor24 ridor described in subparagraph (A) or (B) of

25 subsection (d)(3).
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•S 3152 IS

1 ‘‘(B) SPECIFIC QUALIFIED PROJECT ALLO2 CATION.—Of the amount described in subpara3 graph (A), the Secretary of Transportation

4 shall allocate $92,000,000 for the acquisition

5 and installation of platform facilities, perform6 ance of railroad force account work necessary to

7 complete improvements below street grade, and

8 any other necessary improvements related to

9 construction at the railroad station at the

10 James A. Farley Post Office Building in New

11 York City, New York.

12 ‘‘(3) BONDS FOR OTHER PROJECTS.—Not more

13 than 10 percent of the limitation under paragraph

14 (1) for any fiscal year may be allocated to qualified

15 projects described in subsection (d)(3)(C).

16 ‘‘(4) BONDS FOR ALASKA RAILROAD.—The Sec17 retary of Transportation may allocate to the Alaska

18 Railroad a portion of the qualified Amtrak limitation

19 for any fiscal year in order to allow the Alaska Rail20 road to issue bonds which meet the requirements of

21 this section for use in financing any project de22 scribed in subsection (d)(3)(C). For purposes of this

23 section, the Alaska Railroad shall be treated in the

24 same manner as the National Passenger Railroad

25 Corporation.
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•S 3152 IS

1 ‘‘(5) CARRYOVER OF UNUSED LIMITATION.—If

2 for any fiscal year—

3 ‘‘(A) the limitation amount under para4 graph (1), exceeds

5 ‘‘(B) the amount of bonds issued during

6 such year which are designated under sub7 section (d)(1)(C)(i),

8 the limitation amount under paragraph (1) for the

9 following fiscal year (through fiscal year 2014) shall

10 be increased by the amount of such excess.

11 ‘‘(6) PREFERENCE FOR GREATER STATE PAR12 TICIPATION.—In selecting qualified projects for allo13 cation of the qualified Amtrak bond limitation under

14 this subsection, the Secretary of Transportation

15 shall give preference to any project with a State

16 matching contribution rate exceeding 20 percent.

17 ‘‘(f) OTHER DEFINITIONS.—For purposes of this

18 subpart—

19 ‘‘(1) BOND.—The term ‘bond’ includes any ob20 ligation.

21 ‘‘(2) CREDIT ALLOWANCE DATE.—The term

22 ‘credit allowance date’ means—

23 ‘‘(A) March 15,

24 ‘‘(B) June 15,

25 ‘‘(C) September 15, and
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•S 3152 IS

1 ‘‘(D) December 15.

2 Such term includes the last day on which the bond

3 is outstanding.

4 ‘‘(3) STATE.—The term ‘State’ includes the

5 District of Columbia.

6 ‘‘(g) CREDIT INCLUDED IN GROSS INCOME.—Gross

7 income includes the amount of the credit allowed to the

8 taxpayer under this section (determined without regard to

9 subsection (c)) and the amount so included shall be treat10 ed as interest income.

11 ‘‘(h) SPECIAL RULES RELATING TO ARBITRAGE.—

12 ‘‘(1) IN GENERAL.—A bond shall not be treated

13 as failing to meet the requirements of subsection

14 (d)(1) solely by reason of the fact that proceeds of

15 the issue of which such bond is a part are invested

16 for a temporary period (but not more than 36

17 months) until such proceeds are needed for the pur18 pose for which such issue was issued.

19 ‘‘(2) REASONABLE EXPECTATION AND BINDING

20 COMMITMENT REQUIREMENTS.—Paragraph (1) shall

21 apply to an issue only if, as of the date of issuance,

22 the issuer reasonably expects—

23 ‘‘(A) that at least 95 percent of the pro24 ceeds of the issue will be spent for 1 or more
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•S 3152 IS

1 qualified projects within the 3-year period be2 ginning on such date,

3 ‘‘(B) to incur a binding commitment with

4 a third party to spend at least 10 percent of the

5 proceeds of the issue, or to commence prelimi6 nary engineering or construction, with respect

7 to such projects within the 6-month period be8 ginning on such date, and

9 ‘‘(C) that the remaining proceeds of the

10 issue will be spent with due diligence with re11 spect to such projects.

12 ‘‘(3) EARNINGS ON PROCEEDS.—Any earnings

13 on proceeds during the temporary period shall be

14 treated as proceeds of the issue for purposes of ap15 plying subsection (d)(1) and paragraph (1) of this

16 subsection.

17 ‘‘(i) USE OF TRUST ACCOUNT.—

18 ‘‘(1) IN GENERAL.—The amount of any match19 ing contribution with respect to a qualified project

20 described in subsection (d)(2)(B)(i) or

21 (d)(2)(B)(ii)(II) and the temporary period invest22 ment earnings on proceeds of the issue with respect

23 to such project described in subsection (h)(1), and

24 any earnings thereon, shall be held in a trust ac25 count by a trustee independent of the National Rail-
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•S 3152 IS

1 road Passenger Corporation to be used to redeem

2 bonds which are part of such issue.

3 ‘‘(2) USE OF REMAINING FUNDS IN TRUST AC4 COUNT.—Upon the repayment of the principal of all

5 qualified Amtrak bonds issued under this section,

6 any remaining funds in the trust account described

7 in paragraph (1) shall be available to the trustee de8 scribed in paragraph (1) to meet any remaining obli9 gations under any guaranteed investment contract

10 used to secure earnings sufficient to repay the prin11 cipal of such bonds.

12 ‘‘(j) OTHER SPECIAL RULES.—

13 ‘‘(1) PARTNERSHIP; S CORPORATION; AND

14 OTHER PASS-THRU ENTITIES.—Under regulations

15 prescribed by the Secretary, in the case of a partner16 ship, trust, S corporation, or other pass-thru entity,

17 rules similar to the rules of section 41(g) shall apply

18 with respect to the credit allowable under subsection

19 (a).

20 ‘‘(2) BONDS HELD BY REGULATED INVEST21 MENT COMPANIES.—If any qualified Amtrak bond is

22 held by a regulated investment company, the credit

23 determined under subsection (a) shall be allowed to

24 shareholders of such company under procedures pre25 scribed by the Secretary.
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•S 3152 IS

1 ‘‘(3) CREDITS MAY BE STRIPPED.—Under regu2 lations prescribed by the Secretary—

3 ‘‘(A) IN GENERAL.—There may be a sepa4 ration (including at issuance) of the ownership

5 of a qualified Amtrak bond and the entitlement

6 to the credit under this section with respect to

7 such bond. In case of any such separation, the

8 credit under this section shall be allowed to the

9 person who on the credit allowance date holds

10 the instrument evidencing the entitlement to

11 the credit and not to the holder of the bond.

12 ‘‘(B) CERTAIN RULES TO APPLY.—In the

13 case of a separation described in subparagraph

14 (A), the rules of section 1286 shall apply to the

15 qualified Amtrak bond as if it were a stripped

16 bond and to the credit under this section as if

17 it were a stripped coupon.

18 ‘‘(4) TREATMENT FOR ESTIMATED TAX PUR19 POSES.—Solely for purposes of sections 6654 and

20 6655, the credit allowed by this section to a tax21 payer by reason of holding a qualified Amtrak bond

22 on a credit allowance date shall be treated as if it

23 were a payment of estimated tax made by the tax24 payer on such date.
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1 ‘‘(5) CREDIT MAY BE TRANSFERRED.—Nothing

2 in any law or rule of law shall be construed to limit

3 the transferability of the credit allowed by this sec4 tion through sale and repurchase agreements.

5 ‘‘(6) REPORTING.—Issuers of qualified Amtrak

6 bonds shall submit reports similar to the reports re7 quired under section 149(e).’’.

8 (b) REPORTING.—Subsection (d) of section 6049 (re9 lating to returns regarding payments of interest) is

10 amended by adding at the end the following new para11 graph:

12 ‘‘(8) REPORTING OF CREDIT ON QUALIFIED AM13 TRAK BONDS.—

14 ‘‘(A) IN GENERAL.—For purposes of sub15 section (a), the term ‘interest’ includes amounts

16 includible in gross income under section 54(g)

17 and such amounts shall be treated as paid on

18 the credit allowance date (as defined in section

19 54(f)(2)).

20 ‘‘(B) REPORTING TO CORPORATIONS,

21 ETC.—Except as otherwise provided in regula22 tions, in the case of any interest described in

23 subparagraph (A) of this paragraph, subsection

24 (b)(4) of this section shall be applied without
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•S 3152 IS

1 regard to subparagraphs (A), (H), (I), (J), (K),

2 and (L)(i).

3 ‘‘(C) REGULATORY AUTHORITY.—The Sec4 retary may prescribe such regulations as are

5 necessary or appropriate to carry out the pur6 poses of this paragraph, including regulations

7 which require more frequent or more detailed

8 reporting.’’.

9 (c) CLERICAL AMENDMENTS.—

10 (1) The table of subparts for part IV of sub11 chapter A of chapter 1 is amended by adding at the

12 end the following new item:

‘‘Subpart H. Nonrefundable Credit for Holders of Qualified Amtrak Bonds.’’.

13 (2) Section 6401(b)(1) is amended by striking

14 ‘‘and G’’ and inserting ‘‘G, and H’’.

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

16 this section shall apply to obligations issued after Sep17 tember 30, 2000.

18 (e) MULTI-YEAR CAPITAL SPENDING PLAN AND

19 OVERSIGHT.—

20 (1) AMTRAK CAPITAL SPENDING PLAN.—

21 (A) IN GENERAL.—The National Railroad

22 Passenger Corporation shall annually submit to

23 the President and Congress a multi-year capital
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•S 3152 IS

1 spending plan, as approved by the Board of Di2 rectors of the Corporation.

3 (B) CONTENTS OF PLAN.—Such plan shall

4 identify the capital investment needs of the

5 Corporation over a period of not less than 5

6 years and the funding sources available to fi7 nance such needs and shall prioritize such

8 needs according to corporate goals and strate9 gies.

10 (C) INITIAL SUBMISSION DATE.—The first

11 plan shall be submitted before the issuance of

12 any qualified Amtrak bonds pursuant to section

13 54 of the Internal Revenue Code of 1986 (as

14 added by this section).

15 (2) OVERSIGHT OF AMTRAK TRUST ACCOUNT

16 AND QUALIFIED PROJECTS.—

17 (A) TRUST ACCOUNT OVERSIGHT.—The

18 Secretary of the Treasury shall annually report

19 to Congress as to whether the amount deposited

20 in the trust account established by the National

21 Passenger Railroad Corporation under section

22 54(i) of such Code (as so added) is sufficient to

23 fully repay at maturity the principal of any out24 standing qualified Amtrak bonds issued pursu25 ant to section 54 of such Code (as so added).
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1 (B) PROJECT OVERSIGHT.—The National

2 Railroad Passenger Corporation shall contract

3 for an annual independent assessment of the

4 costs and benefits of the qualified projects fi5 nanced by such qualified Amtrak bonds, includ6 ing an assessment of the investment evaluation

7 process of the Corporation. The annual assess8 ment shall be included in the plan submitted

9 under paragraph (1).

10 (f) PROTECTION OF HIGHWAY TRUST FUND.—

11 (1) CERTIFICATION BY THE SECRETARY OF

12 THE TREASURY.—The issuance of any qualified Am13 trak bonds by the National Passenger Railroad Cor14 poration pursuant to section 54 of the Internal Rev15 enue Code of 1986 (as added by this section) is con16 ditioned on certification by the Secretary of the

17 Treasury, after consultation with the Secretary of

18 Transportation, within 30 days of a request by the

19 issuer, that with respect to funds of the Highway

20 Trust Fund described under paragraph (2), the

21 issuer either—

22 (A) has not received such funds during fis23 cal years commencing with fiscal year 2001 and

24 ending before the fiscal year the bonds are

25 issued, or
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•S 3152 IS

1 (B) has repaid to the Highway Trust Fund

2 any such funds which were received during such

3 fiscal years.

4 (2) APPLICABILITY.—This subsection shall

5 apply to funds received directly or indirectly from

6 the Highway Trust Fund established under section

7 9503 of the Internal Revenue Code of 1986, except

8 for funds authorized to be expended under section

9 9503(c) of such Code, as in effect on the date of the

10 enactment of this Act.

11 (3) NO RETROACTIVE EFFECT.—Nothing in

12 this subsection shall adversely affect the entitlement

13 of the holders of qualified Amtrak bonds to the tax

14 credit allowed pursuant to section 54 of the Internal

15 Revenue Code of 1986 (as so added) or to repay16 ment of principal upon maturity.

17 SEC. 305. CLARIFICATION OF CONTRIBUTION IN AID OF

18 CONSTRUCTION.

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

20 118(c)(3) (relating to definitions) is amended to read as

21 follows:

22 ‘‘(A) CONTRIBUTION IN AID OF CONSTRUC23 TION.—The term ‘contribution in aid of con24 struction’ shall be defined by regulations pre-
166

•S 3152 IS

1 scribed by the Secretary, except that such

2 term—

3 ‘‘(i) shall include amounts paid as

4 customer connection fees (including

5 amounts paid to connect the customer’s

6 line to or extend a main water or sewer

7 line), and

8 ‘‘(ii) shall not include amounts paid as

9 service charges for starting or stopping

10 services.’’.

11 (b) EFFECTIVE DATE.—The amendment made by

12 subsection (a) shall apply to amounts received after the

13 date of the enactment of this Act.

14 SEC. 306. RECOVERY PERIOD FOR DEPRECIATION OF CER15 TAIN LEASEHOLD IMPROVEMENTS.

16 (a) 15-YEAR RECOVERY PERIOD.—Subparagraph

17 (E) of section 168(e)(3) (relating to 15-year property) is

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

19 striking the period at the end of clause (iii) and inserting

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

21 clause:

22 ‘‘(iv) any qualified leasehold improve23 ment property.’’.
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•S 3152 IS

1 (b) QUALIFIED LEASEHOLD IMPROVEMENT PROP2 ERTY.—Subsection (e) of section 168 is amended by add3 ing at the end the following new paragraph:

4 ‘‘(6) QUALIFIED LEASEHOLD IMPROVEMENT

5 PROPERTY.—

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

7 leasehold improvement property’ means any im8 provement to an interior portion of a building

9 which is nonresidential real property if—

10 ‘‘(i) such improvement is made under

11 or pursuant to a lease (as defined in sub12 section (h)(7))—

13 ‘‘(I) by the lessee (or any subles14 see) of such portion, or

15 ‘‘(II) by the lessor of such por16 tion,

17 ‘‘(ii) the original use of such improve18 ment begins with the lessee and after De19 cember 31, 2006,

20 ‘‘(iii) such portion is to be occupied

21 exclusively by the lessee (or any sublessee)

22 of such portion, and

23 ‘‘(iv) such improvement is placed in

24 service more than 3 years after the date

25 the building was first placed in service.
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•S 3152 IS

1 ‘‘(B) CERTAIN IMPROVEMENTS NOT IN2 CLUDED.—Such term shall not include any im3 provement for which the expenditure is attrib4 utable to—

5 ‘‘(i) the enlargement of the building,

6 ‘‘(ii) any elevator or escalator,

7 ‘‘(iii) any structural component bene8 fiting a common area, and

9 ‘‘(iv) the internal structural frame10 work of the building.

11 ‘‘(C) DEFINITIONS AND SPECIAL RULES.—

12 For purposes of this paragraph—

13 ‘‘(i) COMMITMENT TO LEASE TREAT14 ED AS LEASE.—A commitment to enter

15 into a lease shall be treated as a lease, and

16 the parties to such commitment shall be

17 treated as lessor and lessee, respectively, if

18 the lease is in effect at the time the prop19 erty is placed in service.

20 ‘‘(ii) RELATED PERSONS.—A lease be21 tween related persons shall not be consid22 ered a lease. For purposes of the preceding

23 sentence, the term ‘related persons’

24 means—
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•S 3152 IS

1 ‘‘(I) members of an affiliated

2 group (as defined in section 1504),

3 and

4 ‘‘(II) persons having a relation5 ship described in subsection (b) of

6 section 267(b) or 707(b)(1); except

7 that, for purposes of this clause, the

8 phrase ‘80 percent or more’ shall be

9 substituted for the phrase ‘more than

10 50 percent’ each place it appears in

11 such subsections.’’.

12 (c) REQUIREMENT TO USE STRAIGHT LINE METH13 OD.—Paragraph (3) of section 168(b) is amended by add14 ing at the end the following new subparagraph:

15 ‘‘(G) Qualified leasehold improvement

16 property described in subsection (e)(6).’’.

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

18 this section shall apply to qualified leasehold improvement

19 property placed in service after December 31, 2006.

20 TITLE IV—TAX RELIEF FOR

21 FARMERS

22 SEC. 401. FARM, FISHING, AND RANCH RISK MANAGEMENT

23 ACCOUNTS.

24 (a) IN GENERAL.—Subpart C of part II of sub25 chapter E of chapter 1 (relating to taxable year for which
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•S 3152 IS

1 deductions taken) is amended by inserting after section

2 468B the following new section:

3 ‘‘SEC. 468C. FARM, FISHING, AND RANCH RISK MANAGE4 MENT ACCOUNTS.

5 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi6 vidual engaged in an eligible farming business or commer7 cial fishing, there shall be allowed as a deduction for any

8 taxable year the amount paid in cash by the taxpayer dur9 ing the taxable year to a Farm, Fishing, and Ranch Risk

10 Management Account (hereinafter referred to as the

11 ‘FFARRM Account’).

12 ‘‘(b) LIMITATION.—

13 ‘‘(1) CONTRIBUTIONS.—The amount which a

14 taxpayer may pay into the FFARRM Account for

15 any taxable year shall not exceed 20 percent of so

16 much of the taxable income of the taxpayer (deter17 mined without regard to this section) which is at18 tributable (determined in the manner applicable

19 under section 1301) to any eligible farming business

20 or commercial fishing.

21 ‘‘(2) DISTRIBUTIONS.—Distributions from a

22 FFARRM Account may not be used to purchase,

23 lease, or finance any new fishing vessel, add capacity

24 to any fishery, or otherwise contribute to the over25 capitalization of any fishery. The Secretary of Com-
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•S 3152 IS

1 merce shall implement regulations to enforce this

2 paragraph.

3 ‘‘(c) ELIGIBLE BUSINESSES.—For purposes of this

4 section—

5 ‘‘(1) ELIGIBLE FARMING BUSINESS.—The term

6 ‘eligible farming business’ means any farming busi7 ness (as defined in section 263A(e)(4)) which is not

8 a passive activity (within the meaning of section

9 469(c)) of the taxpayer.

10 ‘‘(2) COMMERCIAL FISHING.—The term ‘com11 mercial fishing’ has the meaning given such term by

12 section (3) of the Magnuson-Stevens Fishery Con13 servation and Management Act (16 U.S.C. 1802)

14 but only if such fishing is not a passive activity

15 (within the meaning of section 469(c)) of the tax16 payer.

17 ‘‘(d) FFARRM ACCOUNT.—For purposes of this

18 section—

19 ‘‘(1) IN GENERAL.—The term ‘FFARRM Ac20 count’ means a trust created or organized in the

21 United States for the exclusive benefit of the tax22 payer, but only if the written governing instrument

23 creating the trust meets the following requirements:

24 ‘‘(A) No contribution will be accepted for

25 any taxable year in excess of the amount al-
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•S 3152 IS

1 lowed as a deduction under subsection (a) for

2 such year.

3 ‘‘(B) The trustee is a bank (as defined in

4 section 408(n)) or another person who dem5 onstrates to the satisfaction of the Secretary

6 that the manner in which such person will ad7 minister the trust will be consistent with the re8 quirements of this section.

9 ‘‘(C) The assets of the trust consist en10 tirely of cash or of obligations which have ade11 quate stated interest (as defined in section

12 1274(c)(2)) and which pay such interest not

13 less often than annually.

14 ‘‘(D) All income of the trust is distributed

15 currently to the grantor.

16 ‘‘(E) The assets of the trust will not be

17 commingled with other property except in a

18 common trust fund or common investment

19 fund.

20 ‘‘(2) ACCOUNT TAXED AS GRANTOR TRUST.—

21 The grantor of a FFARRM Account shall be treated

22 for purposes of this title as the owner of such Ac23 count and shall be subject to tax thereon in accord24 ance with subpart E of part I of subchapter J of
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•S 3152 IS

1 this chapter (relating to grantors and others treated

2 as substantial owners).

3 ‘‘(e) INCLUSION OF AMOUNTS DISTRIBUTED.—

4 ‘‘(1) IN GENERAL.—Except as provided in para5 graph (2), there shall be includible in the gross in6 come of the taxpayer for any taxable year—

7 ‘‘(A) any amount distributed from a

8 FFARRM Account of the taxpayer during such

9 taxable year, and

10 ‘‘(B) any deemed distribution under—

11 ‘‘(i) subsection (f )(1) (relating to de12 posits not distributed within 5 years),

13 ‘‘(ii) subsection (f )(2) (relating to ces14 sation in eligible farming business), and

15 ‘‘(iii) subparagraph (B) or (C) of sub16 section (f )(3) (relating to prohibited trans17 actions and pledging account as security).

18 ‘‘(2) EXCEPTIONS.—Paragraph (1)(A) shall not

19 apply to—

20 ‘‘(A) any distribution to the extent attrib21 utable to income of the Account, and

22 ‘‘(B) the distribution of any contribution

23 paid during a taxable year to a FFARRM Ac24 count to the extent that such contribution ex25 ceeds the limitation applicable under subsection
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•S 3152 IS

1 (b) if requirements similar to the requirements

2 of section 408(d)(4) are met.

3 For purposes of subparagraph (A), distributions

4 shall be treated as first attributable to income and

5 then to other amounts.

6 ‘‘(f ) SPECIAL RULES.—

7 ‘‘(1) TAX ON DEPOSITS IN ACCOUNT WHICH

8 ARE NOT DISTRIBUTED WITHIN 5 YEARS.—

9 ‘‘(A) IN GENERAL.—If, at the close of any

10 taxable year, there is a nonqualified balance in

11 any FFARRM Account—

12 ‘‘(i) there shall be deemed distributed

13 from such Account during such taxable

14 year an amount equal to such balance, and

15 ‘‘(ii) the taxpayer’s tax imposed by

16 this chapter for such taxable year shall be

17 increased by 10 percent of such deemed

18 distribution.

19 The preceding sentence shall not apply if an

20 amount equal to such nonqualified balance is

21 distributed from such Account to the taxpayer

22 before the due date (including extensions) for

23 filing the return of tax imposed by this chapter

24 for such year (or, if earlier, the date the tax25 payer files such return for such year).
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•S 3152 IS

1 ‘‘(B) NONQUALIFIED BALANCE.—For pur2 poses of subparagraph (A), the term ‘non3 qualified balance’ means any balance in the Ac4 count on the last day of the taxable year which

5 is attributable to amounts deposited in such Ac6 count before the 4th preceding taxable year.

7 ‘‘(C) ORDERING RULE.—For purposes of

8 this paragraph, distributions from a FFARRM

9 Account (other than distributions of current in10 come) shall be treated as made from deposits in

11 the order in which such deposits were made, be12 ginning with the earliest deposits.

13 ‘‘(2) CESSATION IN ELIGIBLE BUSINESS.—At

14 the close of the first disqualification period after a

15 period for which the taxpayer was engaged in an eli16 gible farming business or commercial fishing, there

17 shall be deemed distributed from the FFARRM Ac18 count of the taxpayer an amount equal to the bal19 ance in such Account (if any) at the close of such

20 disqualification period. For purposes of the pre21 ceding sentence, the term ‘disqualification period’

22 means any period of 2 consecutive taxable years for

23 which the taxpayer is not engaged in an eligible

24 farming business or commercial fishing.
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•S 3152 IS

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

2 to the following rules shall apply for purposes of this

3 section:

4 ‘‘(A) Section 220(f )(8) (relating to treat5 ment on death).

6 ‘‘(B) Section 408(e)(2) (relating to loss of

7 exemption of account where individual engages

8 in prohibited transaction).

9 ‘‘(C) Section 408(e)(4) (relating to effect

10 of pledging account as security).

11 ‘‘(D) Section 408(g) (relating to commu12 nity property laws).

13 ‘‘(E) Section 408(h) (relating to custodial

14 accounts).

15 ‘‘(4) TIME WHEN PAYMENTS DEEMED MADE.—

16 For purposes of this section, a taxpayer shall be

17 deemed to have made a payment to a FFARRM Ac18 count on the last day of a taxable year if such pay19 ment is made on account of such taxable year and

20 is made on or before the due date (without regard

21 to extensions) for filing the return of tax for such

22 taxable year.

23 ‘‘(5) INDIVIDUAL.—For purposes of this sec24 tion, the term ‘individual’ shall not include an estate

25 or trust.
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1 ‘‘(6) DEDUCTION NOT ALLOWED FOR SELF-EM2 PLOYMENT TAX.—The deduction allowable by reason

3 of subsection (a) shall not be taken into account in

4 determining an individual’s net earnings from self5 employment (within the meaning of section 1402(a))

6 for purposes of chapter 2.

7 ‘‘(g) REPORTS.—The trustee of a FFARRM Account

8 shall make such reports regarding such Account to the

9 Secretary and to the person for whose benefit the Account

10 is maintained with respect to contributions, distributions,

11 and such other matters as the Secretary may require

12 under regulations. The reports required by this subsection

13 shall be filed at such time and in such manner and fur14 nished to such persons at such time and in such manner

15 as may be required by such regulations.’’.

16 (b) TAX ON EXCESS CONTRIBUTIONS.—

17 (1) Subsection (a) of section 4973 (relating to

18 tax on excess contributions to certain tax-favored ac19 counts and annuities) is amended by striking ‘‘or’’

20 at the end of paragraph (3), by redesignating para21 graph (4) as paragraph (5), and by inserting after

22 paragraph (3) the following new paragraph:

23 ‘‘(4) a FFARRM Account (within the meaning

24 of section 468C(d)), or’’.
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1 (2) Section 4973 is amended by adding at the

2 end the following new subsection:

3 ‘‘(g) EXCESS CONTRIBUTIONS TO FFARRM AC4 COUNTS.—For purposes of this section, in the case of a

5 FFARRM Account (within the meaning of section

6 468C(d)), the term ‘excess contributions’ means the

7 amount by which the amount contributed for the taxable

8 year to the Account exceeds the amount which may be con9 tributed to the Account under section 468C(b) for such

10 taxable year. For purposes of this subsection, any con11 tribution which is distributed out of the FFARRM Ac12 count in a distribution to which section 468C(e)(2)(B) ap13 plies shall be treated as an amount not contributed.’’.

14 (3) The section heading for section 4973 is

15 amended to read as follows:

16 ‘‘SEC. 4973. EXCESS CONTRIBUTIONS TO CERTAIN AC17 COUNTS, ANNUITIES, ETC.’’.

18 (4) The table of sections for chapter 43 is

19 amended by striking the item relating to section

20 4973 and inserting the following new item:

‘‘Sec. 4973. Excess contributions to certain accounts, annuities,

etc.’’.

21 (c) TAX ON PROHIBITED TRANSACTIONS.—

22 (1) Subsection (c) of section 4975 (relating to

23 tax on prohibited transactions) is amended by add24 ing at the end the following new paragraph:
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1 ‘‘(6) SPECIAL RULE FOR FFARRM ACCOUNTS.—

2 A person for whose benefit a FFARRM Account

3 (within the meaning of section 468C(d)) is estab4 lished shall be exempt from the tax imposed by this

5 section with respect to any transaction concerning

6 such account (which would otherwise be taxable

7 under this section) if, with respect to such trans8 action, the account ceases to be a FFARRM Ac9 count by reason of the application of section

10 468C(f )(3)(A) to such account.’’.

11 (2) Paragraph (1) of section 4975(e) is amend12 ed by redesignating subparagraphs (E) and (F) as

13 subparagraphs (F) and (G), respectively, and by in14 serting after subparagraph (D) the following new

15 subparagraph:

16 ‘‘(E) a FFARRM Account described in

17 section 468C(d),’’.

18 (d) FAILURE TO PROVIDE REPORTS ON FFARRM

19 ACCOUNTS.—Paragraph (2) of section 6693(a) (relating

20 to failure to provide reports on certain tax-favored ac21 counts or annuities) is amended by redesignating subpara22 graphs (C) and (D) as subparagraphs (D) and (E), re23 spectively, and by inserting after subparagraph (B) the

24 following new subparagraph:
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1 ‘‘(C) section 468C(g) (relating to

2 FFARRM Accounts),’’.

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

4 for subpart C of part II of subchapter E of chapter 1 is

5 amended by inserting after the item relating to section

6 468B the following new item:

‘‘Sec. 468C. Farm, Fishing and Ranch Risk Management Accounts.’’.

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

8 this section shall apply to taxable years beginning after

9 December 31, 2000.

10 SEC. 402. WRITTEN AGREEMENT RELATING TO EXCLUSION

11 OF CERTAIN FARM RENTAL INCOME FROM

12 NET EARNINGS FROM SELF-EMPLOYMENT.

13 (a) INTERNAL REVENUE CODE.—Section

14 1402(a)(1)(A) (relating to net earnings from self-employ15 ment) is amended by striking ‘‘an arrangement’’ and in16 serting ‘‘a lease agreement’’.

17 (b) SOCIAL SECURITY ACT.—Section 211(a)(1)(A) of

18 the Social Security Act is amended by striking ‘‘an ar19 rangement’’ and inserting ‘‘a lease agreement’’.

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

21 this section shall apply to taxable years beginning after

22 December 31, 2000.
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1 SEC. 403. TREATMENT OF CONSERVATION RESERVE PRO2 GRAM PAYMENTS AS RENTALS FROM REAL

3 ESTATE.

4 (a) IN GENERAL.—Section 1402(a)(1) (defining net

5 earnings from self-employment) is amended by inserting

6 ‘‘and including payments under section 1233(2) of the

7 Food Security Act of 1985 (16 U.S.C. 3833(2))’’ after

8 ‘‘crop shares’’.

9 (b) EFFECTIVE DATE.—The amendment made by

10 this section shall apply to payments made after December

11 31, 2000.

12 SEC. 404. EXEMPTION OF AGRICULTURAL BONDS FROM

13 STATE VOLUME CAP.

14 (a) IN GENERAL.—Section 146(g) (relating to excep15 tion for certain bonds) is amended by striking ‘‘and’’ at

16 the end of paragraph (3), by striking the period at the

17 end of paragraph (4) and inserting ‘‘, and’’, and by insert18 ing after paragraph (4) the following new paragraph:

19 ‘‘(5) any qualified small issue bond described in

20 section 144(a)(12)(B)(ii).’’.

21 (b) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to bonds issued after December

23 31, 2000.

24 SEC. 405. MODIFICATIONS TO SECTION 512(b)(13).

25 (a) IN GENERAL.—Paragraph (13) of section 512(b)

26 is amended by redesignating subparagraph (E) as sub-
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1 paragraph (F) and by inserting after subparagraph (D)

2 the following new paragraph:

3 ‘‘(E) PARAGRAPH TO APPLY ONLY TO EX4 CESS PAYMENTS.—

5 ‘‘(i) IN GENERAL.—Subparagraph (A)

6 shall apply only to the portion of a speci7 fied payment received by the controlling

8 organization that exceeds the amount

9 which would have been paid if such pay10 ment met the requirements prescribed

11 under section 482.

12 ‘‘(ii) ADDITION TO TAX FOR VALU13 ATION MISSTATEMENTS.—The tax imposed

14 by this chapter on the controlling organiza15 tion shall be increased by an amount equal

16 to 20 percent of such excess.’’.

17 (b) EFFECTIVE DATE.—

18 (1) IN GENERAL.—The amendment made by

19 this section shall apply to payments received or ac20 crued after December 31, 2000.

21 (2) PAYMENTS SUBJECT TO BINDING CONTRACT

22 TRANSITION RULE.—If the amendments made by

23 section 1041 of the Taxpayer Relief Act of 1997 did

24 not apply to any amount received or accrued in the

25 first 2 taxable years beginning on or after the date
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1 of the enactment of this Act under any contract de2 scribed in subsection (b)(2) of such section, such

3 amendments also shall not apply to amounts re4 ceived or accrued under such contract before Janu5 ary 1, 2001.

6 SEC. 406. CHARITABLE DEDUCTION FOR CONTRIBUTIONS

7 OF FOOD INVENTORY.

8 (a) IN GENERAL.—Subsection (e) of section 170 (re9 lating to certain contributions of ordinary income and cap10 ital gain property) is amended by adding at the end the

11 following new paragraph:

12 ‘‘(7) SPECIAL RULE FOR CONTRIBUTIONS OF

13 FOOD INVENTORY.—For purposes of this section—

14 ‘‘(A) CONTRIBUTIONS BY NON-CORPORATE

15 TAXPAYERS.—In the case of a charitable con16 tribution of food by a taxpayer in a farming

17 business (as defined in section 263A(e)(4)),

18 paragraph (3)(A) shall be applied without re19 gard to whether or not the contribution is made

20 by a corporation.

21 ‘‘(B) LIMIT ON REDUCTION.—In the case

22 of a charitable contribution of food which is a

23 qualified contribution (within the meaning of

24 paragraph (3)(A), as modified by subparagraph

25 (A) of this paragraph)—
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1 ‘‘(i) paragraph (3)(B) shall not apply,

2 and

3 ‘‘(ii) the reduction under paragraph

4 (1)(A) for such contribution shall be no

5 greater than the amount (if any) by which

6 the amount of such contribution exceeds

7 twice the basis of such food.

8 ‘‘(C) DETERMINATION OF BASIS.—For

9 purposes of this paragraph, if a taxpayer uses

10 the cash method of accounting, the basis of any

11 qualified contribution of such taxpayer shall be

12 deemed to be 50 percent of the fair market

13 value of such contribution.

14 ‘‘(D) DETERMINATION OF FAIR MARKET

15 VALUE.—In the case of a charitable contribu16 tion of food which is a qualified contribution

17 (within the meaning of paragraph (3), as modi18 fied by subparagraphs (A) and (B) of this para19 graph) and which, solely by reason of internal

20 standards of the taxpayer, lack of market, or

21 similar circumstances, or which is produced by

22 the taxpayer exclusively for the purposes of

23 transferring the food to an organization de24 scribed in paragraph (3)(A), cannot or will not
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1 be sold, the fair market value of such contribu2 tion shall be determined—

3 ‘‘(i) without regard to such internal

4 standards, such lack of market, such cir5 cumstances, or such exclusive purpose, and

6 ‘‘(ii) if applicable, by taking into ac7 count the price at which the same or simi8 lar food items are sold by the taxpayer at

9 the time of the contribution (or, if not so

10 sold at such time, in the recent past).

11 ‘‘(E) TERMINATION.—This paragraph

12 shall not apply to any contribution made during

13 any taxable year beginning after December 31,

14 2003.’’.

15 (b) EFFECTIVE DATE.—The amendment made by

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

17 December 31, 2000.

18 SEC. 407. INCOME AVERAGING FOR FARMERS AND FISHER19 MEN NOT TO INCREASE ALTERNATIVE MIN20 IMUM TAX LIABILITY.

21 (a) IN GENERAL.—Section 55(c) (defining regular

22 tax) is amended by redesignating paragraph (2) as para23 graph (3) and by inserting after paragraph (1) the fol24 lowing new paragraph:
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1 ‘‘(2) COORDINATION WITH INCOME AVERAGING

2 FOR FARMERS AND FISHERMEN.—Solely for pur3 poses of this section, section 1301 (relating to aver4 aging of farm and fishing income) shall not apply in

5 computing the regular tax.’’.

6 (b) ALLOWING INCOME AVERAGING FOR FISHER7 MEN.—

8 (1) IN GENERAL.—Section 1301(a) is amended

9 by striking ‘‘farming business’’ and inserting ‘‘farm10 ing business or fishing business’’.

11 (2) DEFINITION OF ELECTED FARM INCOME.—

12 (A) IN GENERAL.—Clause (i) of section

13 1301(b)(1)(A) is amended by inserting ‘‘or fish14 ing business’’ before the semicolon.

15 (B) CONFORMING AMENDMENT.—Subpara16 graph (B) of section 1301(b)(1) is amended by

17 inserting ‘‘or fishing business’’ after ‘‘farming

18 business’’ both places it occurs.

19 (3) DEFINITION OF FISHING BUSINESS.—Sec20 tion 1301(b) is amended by adding at the end the

21 following new paragraph:

22 ‘‘(4) FISHING BUSINESS.—The term ‘fishing

23 business’ means the conduct of commercial fishing

24 as defined in section 3 of the Magnuson-Stevens
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1 Fishery Conservation and Management Act (16

2 U.S.C. 1802).’’.

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

4 this section shall apply to taxable years beginning after

5 December 31, 2000.

6 SEC. 408. COOPERATIVE MARKETING INCLUDES VALUE7 ADDED PROCESSING THROUGH ANIMALS.

8 (a) IN GENERAL.—Section 1388 (relating to defini9 tions and special rules) is amended by adding at the end

10 the following new subsection:

11 ‘‘(k) COOPERATIVE MARKETING INCLUDES VALUE12 ADDED PROCESSING THROUGH ANIMALS.—For purposes

13 of section 521 and this subchapter, the term ‘marketing

14 the products of members or other producers’ includes feed15 ing the products of members or other producers to cattle,

16 hogs, fish, chickens, or other animals and selling the re17 sulting animals or animal products.’’.

18 (b) EFFECTIVE DATE.—The amendment made by

19 this section shall apply to taxable years beginning after

20 the date of the enactment of this Act.

21 SEC. 409. DECLARATORY JUDGMENT RELIEF FOR SECTION

22 521 COOPERATIVES.

23 (a) IN GENERAL.—Section 7428(a)(1) (relating to

24 declaratory judgments of tax exempt organizations) is
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1 amended by striking ‘‘or’’ at the end of subparagraph (B)

2 and by adding at the end the following new subparagraph:

3 ‘‘(D) with respect to the initial qualifica4 tion or continuing qualification of a cooperative

5 as described in section 521(b) which is exempt

6 from tax under section 521(a), or’’.

7 (b) EFFECTIVE DATE.—The amendments made by

8 this section shall apply with respect to pleadings filed after

9 the date of the enactment of this Act but only with respect

10 to determinations (or requests for determinations) made

11 after January 1, 2000.

12 SEC. 410. SMALL ETHANOL PRODUCER CREDIT.

13 (a) ALLOCATION OF ALCOHOL FUELS CREDIT TO

14 PATRONS OF A COOPERATIVE.—Section 40(g) (relating to

15 alcohol used as fuel) is amended by adding at the end the

16 following new paragraph:

17 ‘‘(6) ALLOCATION OF SMALL ETHANOL PRO18 DUCER CREDIT TO PATRONS OF COOPERATIVE.—

19 ‘‘(A) ELECTION TO ALLOCATE.—

20 ‘‘(i) IN GENERAL.—In the case of a

21 cooperative organization described in sec22 tion 1381(a), any portion of the credit de23 termined under subsection (a)(3) for the

24 taxable year may, at the election of the or25 ganization, be apportioned pro rata among
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1 patrons of the organization on the basis of

2 the quantity or value of business done with

3 or for such patrons for the taxable year.

4 ‘‘(ii) FORM AND EFFECT OF ELEC5 TION.—An election under clause (i) for any

6 taxable year shall be made on a timely

7 filed return for such year. Such election,

8 once made, shall be irrevocable for such

9 taxable year.

10 ‘‘(B) TREATMENT OF ORGANIZATIONS AND

11 PATRONS.—The amount of the credit appor12 tioned to patrons under subparagraph (A)—

13 ‘‘(i) shall not be included in the

14 amount determined under subsection (a)

15 with respect to the organization for the

16 taxable year,

17 ‘‘(ii) shall be included in the amount

18 determined under subsection (a) for the

19 taxable year of each patron for which the

20 patronage dividends for the taxable year

21 described in subparagraph (A) are included

22 in gross income, and

23 ‘‘(iii) shall be included in gross income

24 of such patrons for the taxable year in the
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1 manner and to the extent provided in sec2 tion 87.

3 ‘‘(C) SPECIAL RULES FOR DECREASE IN

4 CREDITS FOR TAXABLE YEAR.—If the amount

5 of the credit of a cooperative organization de6 termined under subsection (a)(3) for a taxable

7 year is less than the amount of such credit

8 shown on the return of the cooperative organi9 zation for such year, an amount equal to the

10 excess of—

11 ‘‘(i) such reduction, over

12 ‘‘(ii) the amount not apportioned to

13 such patrons under subparagraph (A) for

14 the taxable year,

15 shall be treated as an increase in tax imposed

16 by this chapter on the organization. Such in17 crease shall not be treated as tax imposed by

18 this chapter for purposes of determining the

19 amount of any credit under this subpart or sub20 part A, B, E, or G.’’.

21 (b) IMPROVEMENTS TO SMALL ETHANOL PRODUCER

22 CREDIT.—

23 (1) SMALL ETHANOL PRODUCER CREDIT NOT A

24 PASSIVE ACTIVITY CREDIT.—Clause (i) of section

25 469(d)(2)(A) is amended by striking ‘‘subpart D’’
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1 and inserting ‘‘subpart D, other than section

2 40(a)(3),’’.

3 (2) ALLOWING CREDIT AGAINST MINIMUM

4 TAX.—

5 (A) IN GENERAL.—Subsection (c) of sec6 tion 38 (relating to limitation based on amount

7 of tax) is amended by redesignating paragraph

8 (3) as paragraph (4) and by inserting after

9 paragraph (2) the following new paragraph:

10 ‘‘(3) SPECIAL RULES FOR SMALL ETHANOL

11 PRODUCER CREDIT.—

12 ‘‘(A) IN GENERAL.—In the case of the

13 small ethanol producer credit—

14 ‘‘(i) this section and section 39 shall

15 be applied separately with respect to the

16 credit, and

17 ‘‘(ii) in applying paragraph (1) to the

18 credit—

19 ‘‘(I) subparagraphs (A) and (B)

20 thereof shall not apply, and

21 ‘‘(II) the limitation under para22 graph (1) (as modified by subclause

23 (I)) shall be reduced by the credit al24 lowed under subsection (a) for the
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1 taxable year (other than the small

2 ethanol producer credit).

3 ‘‘(B) SMALL ETHANOL PRODUCER CRED4 IT.—For purposes of this subsection, the term

5 ‘small ethanol producer credit’ means the credit

6 allowable under subsection (a) by reason of sec7 tion 40(a)(3).’’.

8 (B) CONFORMING AMENDMENT.—Sub9 clause (II) of section 38(c)(2)(A)(ii) is amended

10 by striking ‘‘(other’’ and all that follows

11 through ‘‘credit)’’ and inserting ‘‘(other than

12 the empowerment zone employment credit or

13 the small ethanol producer credit)’’.

14 (3) SMALL ETHANOL PRODUCER CREDIT NOT

15 ADDED BACK TO INCOME UNDER SECTION 87.—Sec16 tion 87 (relating to income inclusion of alcohol fuel

17 credit) is amended to read as follows:

18 ‘‘SEC. 87. ALCOHOL FUEL CREDIT.

19 ‘‘Gross income includes an amount equal to the sum

20 of—

21 ‘‘(1) the amount of the alcohol mixture credit

22 determined with respect to the taxpayer for the tax23 able year under section 40(a)(1), and
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1 ‘‘(2) the alcohol credit determined with respect

2 to the taxpayer for the taxable year under section

3 40(a)(2).’’.

4 (c) CONFORMING AMENDMENT.—Section 1388 (re5 lating to definitions and special rules for cooperative orga6 nizations), as amended by section 408, is amended by add7 ing at the end the following new subsection:

8 ‘‘(l) CROSS REFERENCE.—For provisions relating to

9 the apportionment of the alcohol fuels credit between coop10 erative organizations and their patrons, see section

11 40(g)(6).’’.

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

13 this section shall apply to taxable years beginning after

14 the date of the enactment of this Act.

15 SEC. 411. PAYMENT OF DIVIDENDS ON STOCK OF COOPERA16 TIVES WITHOUT REDUCING PATRONAGE

17 DIVIDENDS.

18 (a) IN GENERAL.—Subsection (a) of section 1388

19 (relating to patronage dividend defined) is amended by

20 adding at the end the following new sentence: ‘‘For pur21 poses of paragraph (3), net earnings shall not be reduced

22 by amounts paid during the year as dividends on capital

23 stock or other proprietary capital interests of the organiza24 tion to the extent that the articles of incorporation or by25 laws of such organization or other contract with patrons
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1 provide that such dividends are in addition to amounts

2 otherwise payable to patrons which are derived from busi3 ness done with or for patrons during the taxable year.’’.

4 (b) EFFECTIVE DATE.—The amendment made by

5 this section shall apply to distributions in taxable years

6 beginning after the date of the enactment of this Act.

7 TITLE V—ENERGY PROVISIONS

8 SEC. 501. ELECTION TO EXPENSE GEOLOGICAL AND GEO9 PHYSICAL EXPENDITURES.

10 (a) IN GENERAL.—Section 263 (relating to capital

11 expenditures) is amended by adding at the end the fol12 lowing new subsection:

13 ‘‘(j) GEOLOGICAL AND GEOPHYSICAL EXPENDI14 TURES FOR DOMESTIC OIL AND GAS WELLS.—Notwith15 standing subsection (a), a taxpayer may elect to treat geo16 logical and geophysical expenses incurred in connection

17 with the exploration for, or development of, oil or gas with18 in the United States (as defined in section 638) as ex19 penses which are not chargeable to capital account. Any

20 expenses so treated shall be allowed as a deduction in the

21 taxable year in which paid or incurred.’’.

22 (b) CONFORMING AMENDMENT.—Section 263A(c)(3)

23 is amended by inserting ‘‘263(j),’’ after ‘‘263(i),’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to expenses paid or incurred in

3 taxable years beginning after December 31, 2001.

4 SEC. 502. ELECTION TO EXPENSE DELAY RENTAL PAY5 MENTS

6 (a) IN GENERAL.—Section 263 (relating to capital

7 expenditures), as amended by section 501(a), is amended

8 by adding at the end the following new subsection:

9 ‘‘(k) DELAY RENTAL PAYMENTS FOR DOMESTIC OIL

10 AND GAS WELLS.—

11 ‘‘(1) IN GENERAL.—Notwithstanding subsection

12 (a), a taxpayer may elect to treat delay rental pay13 ments incurred in connection with the development

14 of oil or gas within the United States (as defined in

15 section 638) as payments which are not chargeable

16 to capital account. Any payments so treated shall be

17 allowed as a deduction in the taxable year in which

18 paid or incurred.

19 ‘‘(2) DELAY RENTAL PAYMENTS.—For purposes

20 of paragraph (1), the term ‘delay rental payment’

21 means an amount paid for the privilege of deferring

22 development of an oil or gas well.’’.

23 (b) CONFORMING AMENDMENT.—Section

24 263A(c)(3), as amended by section 501(b), is amended by

25 inserting ‘‘263(k),’’ after ‘‘263(j),’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to payments made or incurred in

3 taxable years beginning after December 31, 2001.

4 SEC. 503. 5-YEAR NET OPERATING LOSS CARRYBACK FOR

5 LOSSES ATTRIBUTABLE TO OPERATING MIN6 ERAL INTERESTS OF INDEPENDENT OIL AND

7 GAS PRODUCERS.

8 (a) IN GENERAL.—Paragraph (1) of section 172(b)

9 (relating to years to which loss may be carried) is amended

10 by adding at the end the following new subparagraph:

11 ‘‘(H) LOSSES ON OPERATING MINERAL IN12 TERESTS OF INDEPENDENT OIL AND GAS PRO13 DUCERS.—In the case of a taxpayer—

14 ‘‘(i) which has an eligible oil and gas

15 loss (as defined in subsection (j)) for a tax16 able year, and

17 ‘‘(ii) which is not an integrated oil

18 company (as defined in section 291(b)(4)),

19 such eligible oil and gas loss shall be a net op20 erating loss carryback to each of the 5 taxable

21 years preceding the taxable year of such loss.’’.

22 (b) ELIGIBLE OIL AND GAS LOSS.—Section 172 is

23 amended by redesignating subsection (j) as subsection (k)

24 and by inserting after subsection (i) the following new sub25 section:
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1 ‘‘(j) ELIGIBLE OIL AND GAS LOSS.—For purposes of

2 this section—

3 ‘‘(1) IN GENERAL.—The term ‘eligible oil and

4 gas loss’ means the lesser of—

5 ‘‘(A) the amount which would be the net

6 operating loss for the taxable year if only in7 come and deductions attributable to operating

8 mineral interests (as defined in section 614(d))

9 in oil and gas wells are taken into account, or

10 ‘‘(B) the amount of the net operating loss

11 for such taxable year.

12 ‘‘(2) COORDINATION WITH SUBSECTION

13 (b)(2).—For purposes of applying subsection (b)(2),

14 an eligible oil and gas loss for any taxable year shall

15 be treated in a manner similar to the manner in

16 which a specified liability loss is treated.

17 ‘‘(3) ELECTION.—Any taxpayer entitled to a 5-

18 year carryback under subsection (b)(1)(H) from any

19 loss year may elect to have the carryback period

20 with respect to such loss year determined without re21 gard to subsection (b)(1)(H).’’.

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

23 this section shall apply to net operating losses for taxable

24 years beginning after December 31, 2001.
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1 SEC. 504. TEMPORARY SUSPENSION OF PERCENTAGE OF

2 DEPLETION DEDUCTION LIMITATION BASED

3 ON 65 PERCENT OF TAXABLE INCOME.

4 (a) IN GENERAL.—Section 613A(d)(1) (relating to

5 limitation based on taxable income) is amended by adding

6 at the end the following new sentence: ‘‘This paragraph

7 shall not apply for taxable years beginning after December

8 31, 2000, and before January 1, 2004.’’.

9 (b) EFFECTIVE DATE.—The amendment made by

10 this section shall apply to taxable years beginning after

11 December 31, 2000.

12 SEC. 505. TAX CREDIT FOR MARGINAL DOMESTIC OIL AND

13 NATURAL GAS WELL PRODUCTION.

14 (a) IN GENERAL.—Subpart D of part IV of sub15 chapter A of chapter 1 (relating to business credits), as

16 amended by section 131(a), is amended by adding at the

17 end the following new section:

18 ‘‘SEC. 45E. CREDIT FOR PRODUCING OIL AND GAS FROM

19 MARGINAL WELLS.

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

21 the marginal well production credit for any taxable year

22 is an amount equal to the product of—

23 ‘‘(1) the credit amount, and

24 ‘‘(2) the qualified crude oil production and the

25 qualified natural gas production which is attrib26 utable to the taxpayer.
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1 ‘‘(b) CREDIT AMOUNT.—For purposes of this

2 section—

3 ‘‘(1) IN GENERAL.—The credit amount is—

4 ‘‘(A) $3 per barrel of qualified crude oil

5 production, and

6 ‘‘(B) 50 cents per 1,000 cubic feet of

7 qualified natural gas production.

8 ‘‘(2) REDUCTION AS OIL AND GAS PRICES IN9 CREASE.—

10 ‘‘(A) IN GENERAL.—The $3 and 50 cents

11 amounts under paragraph (1) shall each be re12 duced (but not below zero) by an amount which

13 bears the same ratio to such amount (deter14 mined without regard to this paragraph) as—

15 ‘‘(i) the excess (if any) of the applica16 ble reference price over $14 ($1.56 for

17 qualified natural gas production), bears to

18 ‘‘(ii) $3 ($0.33 for qualified natural

19 gas production).

20 The applicable reference price for a taxable

21 year is the reference price for the calendar year

22 preceding the calendar year in which the tax23 able year begins.

24 ‘‘(B) INFLATION ADJUSTMENT.—In the

25 case of any taxable year beginning in a calendar
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1 year after 2001, each of the dollar amounts

2 contained in subparagraph (A) shall be in3 creased to an amount equal to such dollar

4 amount multiplied by the inflation adjustment

5 factor for such calendar year (determined under

6 section 43(b)(3)(B) by substituting ‘2000’ for

7 ‘1990’).

8 ‘‘(C) REFERENCE PRICE.—For purposes of

9 this paragraph, the term ‘reference price’

10 means, with respect to any calendar year—

11 ‘‘(i) in the case of qualified crude oil

12 production, the reference price determined

13 under section 29(d)(2)(C), and

14 ‘‘(ii) in the case of qualified natural

15 gas production, the Secretary’s estimate of

16 the annual average wellhead price per

17 1,000 cubic feet for all domestic natural

18 gas.

19 ‘‘(c) QUALIFIED CRUDE OIL AND NATURAL GAS

20 PRODUCTION.—For purposes of this section—

21 ‘‘(1) IN GENERAL.—The terms ‘qualified crude

22 oil production’ and ‘qualified natural gas production’

23 mean domestic crude oil or natural gas which is pro24 duced from a marginal well.
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1 ‘‘(2) LIMITATION ON AMOUNT OF PRODUCTION

2 WHICH MAY QUALIFY.—

3 ‘‘(A) IN GENERAL.—Crude oil or natural

4 gas produced during any taxable year from any

5 well shall not be treated as qualified crude oil

6 production or qualified natural gas production

7 to the extent production from the well during

8 the taxable year exceeds 1,095 barrels or barrel

9 equivalents.

10 ‘‘(B) PROPORTIONATE REDUCTIONS.—

11 ‘‘(i) SHORT TAXABLE YEARS.—In the

12 case of a short taxable year, the limitations

13 under this paragraph shall be proportion14 ately reduced to reflect the ratio which the

15 number of days in such taxable year bears

16 to 365.

17 ‘‘(ii) WELLS NOT IN PRODUCTION EN18 TIRE YEAR.—In the case of a well which is

19 not capable of production during each day

20 of a taxable year, the limitations under

21 this paragraph applicable to the well shall

22 be proportionately reduced to reflect the

23 ratio which the number of days of produc24 tion bears to the total number of days in

25 the taxable year.
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•S 3152 IS

1 ‘‘(3) DEFINITIONS.—

2 ‘‘(A) MARGINAL WELL.—The term ‘mar3 ginal well’ means a domestic well—

4 ‘‘(i) the production from which during

5 the taxable year is treated as marginal

6 production under section 613A(c)(6), or

7 ‘‘(ii) which, during the taxable year—

8 ‘‘(I) has average daily production

9 of not more than 25 barrel equiva10 lents, and

11 ‘‘(II) produces water at a rate

12 not less than 95 percent of total well

13 effluent.

14 ‘‘(B) CRUDE OIL, ETC.—The terms ‘crude

15 oil’, ‘natural gas’, ‘domestic’, and ‘barrel’ have

16 the meanings given such terms by section

17 613A(e).

18 ‘‘(C) BARREL EQUIVALENT.—The term

19 ‘barrel equivalent’ means, with respect to nat20 ural gas, a conversion ratio of 6,000 cubic feet

21 of natural gas to 1 barrel of crude oil.

22 ‘‘(d) OTHER RULES.—

23 ‘‘(1) PRODUCTION ATTRIBUTABLE TO THE TAX24 PAYER.—In the case of a marginal well in which

25 there is more than one owner of operating interests
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1 in the well and the crude oil or natural gas produc2 tion exceeds the limitation under subsection (c)(2),

3 qualifying crude oil production or qualifying natural

4 gas production attributable to the taxpayer shall be

5 determined on the basis of the ratio which tax6 payer’s revenue interest in the production bears to

7 the aggregate of the revenue interests of all oper8 ating interest owners in the production.

9 ‘‘(2) OPERATING INTEREST REQUIRED.—Any

10 credit under this section may be claimed only on

11 production which is attributable to the holder of an

12 operating interest.

13 ‘‘(3) PRODUCTION FROM NONCONVENTIONAL

14 SOURCES EXCLUDED.—In the case of production

15 from a marginal well which is eligible for the credit

16 allowed under section 29 for the taxable year, no

17 credit shall be allowable under this section unless

18 the taxpayer elects not to claim credit under section

19 29 with respect to the well.’’.

20 (b) CREDIT TREATED AS BUSINESS CREDIT.—Sec21 tion 38(b), as amended by section 131(b)(1), is amended

22 by striking ‘‘plus’’ at the end of paragraph (12), by strik23 ing the period at the end of paragraph (13) and inserting

24 ‘‘, plus’’, and by adding at the end of the following new

25 paragraph:
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1 ‘‘(14) the marginal oil and gas well production

2 credit determined under section 45E(a).’’.

3 (c) CREDIT ALLOWED AGAINST REGULAR AND MIN4 IMUM TAX.—

5 (1) IN GENERAL.—Subsection (c) of section 38

6 (relating to limitation based on amount of tax), as

7 amended by section 410(b)(2)(A), is amended by re8 designating paragraph (4) as paragraph (5) and by

9 inserting after paragraph (3) the following new

10 paragraph:

11 ‘‘(4) SPECIAL RULES FOR MARGINAL OIL AND

12 GAS WELL PRODUCTION CREDIT.—

13 ‘‘(A) IN GENERAL.—In the case of the

14 marginal oil and gas well production credit—

15 ‘‘(i) this section and section 39 shall

16 be applied separately with respect to the

17 credit, and

18 ‘‘(ii) in applying paragraph (1) to the

19 credit—

20 ‘‘(I) subparagraphs (A) and (B)

21 thereof shall not apply, and

22 ‘‘(II) the limitation under para23 graph (1) (as modified by subclause

24 (I)) shall be reduced by the credit al25 lowed under subsection (a) for the
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•S 3152 IS

1 taxable year (other than the marginal

2 oil and gas well production credit).

3 ‘‘(B) MARGINAL OIL AND GAS WELL PRO4 DUCTION CREDIT.—For purposes of this sub5 section, the term ‘marginal oil and gas well pro6 duction credit’ means the credit allowable under

7 subsection (a) by reason of section 45E(a).’’.

8 (2) CONFORMING AMENDMENTS.—

9 (A) Subclause (II) of section

10 38(c)(2)(A)(ii), as amended by section

11 410(b)(2)(B), is amended by striking ‘‘or the

12 small ethanol producer credit’’ and inserting ‘‘,

13 the small ethanol producer credit, or the mar14 ginal oil and gas well production credit’’.

15 (B) Subclause (II) of section

16 38(c)(3)(A)(ii), as added by section

17 410(b)(2)(A), is amended by inserting ‘‘or the

18 marginal oil and gas well production credit’’

19 after ‘‘the small ethanol producer credit’’.

20 (d) CARRYBACK.—Subsection (a) of section 39 (relat21 ing to carryback and carryforward of unused credits gen22 erally) is amended by adding at the end the following new

23 paragraph—
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1 ‘‘(3) 10-YEAR CARRYBACK FOR MARGINAL OIL

2 AND GAS WELL PRODUCTION CREDIT.—In the case

3 of the marginal oil and gas well production credit—

4 ‘‘(A) this section shall be applied sepa5 rately from the business credit (other than the

6 marginal oil and gas well production credit),

7 ‘‘(B) paragraph (1) shall be applied by

8 substituting ‘10 taxable year’ for ‘1 taxable

9 year’ in subparagraph (A) thereof, and

10 ‘‘(C) paragraph (2) shall be applied—

11 ‘‘(i) by substituting ‘31 taxable years’

12 for ‘21 taxable years’ in subparagraph (A)

13 thereof, and

14 ‘‘(ii) by substituting ‘30 taxable years’

15 for ‘20 taxable years’ in subparagraph (B)

16 thereof.’’.

17 (e) COORDINATION WITH SECTION 29.—Section

18 29(a) is amended by striking ‘‘There’’ and inserting ‘‘At

19 the election of the taxpayer, there’’.

20 (f) CLERICAL AMENDMENT—The table of sections

21 for subpart D of part IV of subchapter A of chapter 1,

22 as amended by section 131(d), is amended by adding at

23 the end the following item:

‘‘Sec. 45E. Credit for producing oil and gas from marginal

wells.’’.
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•S 3152 IS

1 (g) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to production in taxable years be3 ginning after December 31, 2000.

4 SEC. 506. NATURAL GAS GATHERING LINES TREATED AS 7-

5 YEAR PROPERTY.

6 (a) IN GENERAL.—Subparagraph (C) of section

7 168(e)(3) (relating to classification of certain property) is

8 amended by redesignating clause (ii) as clause (iii) and

9 by inserting after clause (i) the following new clause:

10 ‘‘(ii) any natural gas gathering line,

11 and’’.

12 (b) NATURAL GAS GATHERING LINE.—Subsection (i)

13 of section 168 is amended by adding at the end the fol14 lowing new paragraph:

15 ‘‘(15) NATURAL GAS GATHERING LINE.—The

16 term ‘natural gas gathering line’ means—

17 ‘‘(A) the pipe, equipment, and appur18 tenances determined to be a gathering line by

19 the Federal Energy Regulatory Commission, or

20 ‘‘(B) the pipe, equipment, and appur21 tenances used to deliver natural gas from the

22 wellhead or a common point to the point at

23 which such gas first reaches—

24 ‘‘(i) a gas processing plant,
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•S 3152 IS

1 ‘‘(ii) an interconnection with a trans2 mission pipeline certificated by the Federal

3 Energy Regulatory Commission as an

4 interstate transmission pipeline,

5 ‘‘(iii) an interconnection with an

6 intrastate transmission pipeline, or

7 ‘‘(iv) a direct interconnection with a

8 local distribution company, a gas storage

9 facility, or an industrial consumer.’’.

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

11 this section shall apply to property placed in service on

12 or after the date of the enactment of this Act.

13 SEC. 507. CLARIFICATION OF TREATMENT OF PIPELINE

14 TRANSPORTATION INCOME.

15 (a) IN GENERAL.—Section 954(g)(1) (defining for16 eign base company oil related income) is amended by strik17 ing ‘‘or’’ at the end of subparagraph (A), by striking the

18 period at the end of subparagraph (B) and inserting ‘‘,

19 or’’, and by inserting after subparagraph (B) the following

20 new subparagraph:

21 ‘‘(C) the pipeline transportation of oil or

22 gas within such foreign country.’’.

23 (b) EFFECTIVE DATE.—The amendment made by

24 this section shall apply to taxable years of controlled for25 eign corporations beginning after December 31, 2001, and
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•S 3152 IS

1 taxable years of United States shareholders with or within

2 which such taxable years of controlled foreign corporations

3 end.

4 TITLE VI—CONSERVATION

5 PROVISIONS

6 SEC. 601. EXCLUSION OF 50 PERCENT OF GAIN ON SALES

7 OF LAND OR INTERESTS IN LAND OR WATER

8 TO ELIGIBLE ENTITIES FOR CONSERVATION

9 PURPOSES.

10 (a) IN GENERAL.—Part III of subchapter B of chap11 ter 1 (relating to items specifically excluded from gross

12 income) is amended by inserting after section 121 the fol13 lowing new section:

14 ‘‘SEC. 121A. 50-PERCENT EXCLUSION OF GAIN ON SALES OF

15 LAND OR INTERESTS IN LAND OR WATER TO

16 ELIGIBLE ENTITIES FOR CONSERVATION

17 PURPOSES.

18 ‘‘(a) EXCLUSION.—Gross income shall not include 50

19 percent of any gain from the sale of land or an interest

20 in land or water (determined without regard to any im21 provements) to an eligible entity if—

22 ‘‘(1) such land or interest in land or water was

23 owned by the taxpayer or a member of the tax24 payer’s family (as defined in section 2032A(e)(2)) at
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•S 3152 IS

1 all times during the 3-year period ending on the date

2 of the sale, and

3 ‘‘(2) such land or interest in land or water is

4 being acquired by an eligible entity which provides

5 the taxpayer, at the time of acquisition, a written

6 letter of intent which shall include the following

7 statement: ‘The purchaser’s intent is that this acqui8 sition will serve 1 or more of the conservation pur9 poses specified in clause (i), (ii), or (iii) of section

10 170(h)(4)(A).’

11 ‘‘(b) ELIGIBLE ENTITY.—For purposes of this sec12 tion, the term ‘eligible entity’ means—

13 ‘‘(1) any agency of the United States or of any

14 State or local government, or

15 ‘‘(2) any other organization that—

16 ‘‘(A) is organized and at all times operated

17 principally for 1 or more of the conservation

18 purposes specified in clause (i), (ii), or (iii) of

19 section 170(h)(4)(A), and

20 ‘‘(B) is described in section 170(h)(3).

21 ‘‘(c) STOCK IN HOLDING CORPORATIONS.—For pur22 poses of this section, the term ‘land or an interest in land

23 or water’ shall include stock in any corporation, if the fair

24 market value of the corporation’s land or interests in land

25 or water equals or exceeds 90 percent of the fair market
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•S 3152 IS

1 value of all of such corporation’s assets at all times during

2 the 3-year period ending on the date of the sale.’’.

3 (b) CLERICAL AMENDMENT.—The table of sections

4 for part III of subchapter B of chapter 1 is amended by

5 inserting after the item relating to section 121 the fol6 lowing new item:

‘‘Sec. 121A. 50-percent exclusion of gain on sales of land or interests in land

or water to eligible entities for conservation purposes.’’.

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

8 this section shall apply to sales occurring on or after De9 cember 31, 2003.

10 SEC. 602. EXPANSION OF ESTATE TAX EXCLUSION FOR

11 REAL PROPERTY SUBJECT TO QUALIFIED

12 CONSERVATION EASEMENT.

13 (a) REPEAL OF CERTAIN RESTRICTIONS ON WHERE

14 LAND IS LOCATED.—Clause (i) of section 2031(c)(8)(A)

15 (defining land subject to a qualified conservation ease16 ment) is amended to read as follows:

17 ‘‘(i) which is located in the United

18 States or any possession of the United

19 States,’’.

20 (b) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to estates of decedents dying after

22 December 31, 2001.
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1 SEC. 603. TAX EXCLUSION FOR COST-SHARING PAYMENTS

2 UNDER PARTNERS FOR WILDLIFE PROGRAM.

3 (a) IN GENERAL.—Section 126(a) (relating to cer4 tain cost-sharing payments) is amended by redesignating

5 paragraph (10) as paragraph (11) and by inserting after

6 paragraph (9) the following new paragraph:

7 ‘‘(10) The Partners for Fish and Wildlife Pro8 gram authorized by the Fish and Wildlife Act of

9 1956 (16 U.S.C. 742a et seq.).’’.

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

11 this section shall apply to payments received after the date

12 of the enactment of this Act.

13 SEC. 604. INCENTIVE FOR CERTAIN ENERGY EFFICIENT

14 PROPERTY USED IN BUSINESS.

15 (a) IN GENERAL.—Part VI of subchapter B of chap16 ter 1 is amended by adding at the end the following new

17 section:

18 ‘‘SEC. 199. ENERGY PROPERTY DEDUCTION.

19 ‘‘(a) DEDUCTION ALLOWED.—

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

21 deduction for the taxable year an amount equal to

22 the amount of energy efficient commercial building

23 expenditures made by the taxpayer for the taxable

24 year.

25 ‘‘(2) MAXIMUM AMOUNT OF DEDUCTION.—The

26 amount of energy efficient commercial building prop-
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•S 3152 IS

1 erty expenditures taken into account under para2 graph (1) shall not exceed an amount equal to the

3 product of—

4 ‘‘(A) $2.25, and

5 ‘‘(B) the square footage of the building

6 with respect to which the expenditures are

7 made.

8 ‘‘(3) YEAR DEDUCTION ALLOWED.—The deduc9 tion under paragraph (1) shall be allowed in the tax10 able year in which the construction of the building

11 is completed.

12 ‘‘(b) ENERGY EFFICIENT COMMERCIAL BUILDING

13 PROPERTY EXPENDITURES.—For purposes of this sec14 tion, the term ‘energy efficient commercial building prop15 erty expenditures’ means an amount paid or incurred for

16 energy efficient commercial building property installed on

17 or in connection with new construction or reconstruction

18 of property—

19 ‘‘(1) for which depreciation is allowable under

20 section 167,

21 ‘‘(2) which is located in the United States, and

22 ‘‘(3) the construction or erection of which is

23 completed by the taxpayer.

24 Such property includes all residential rental property, in25 cluding low-rise multifamily structures and single family
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•S 3152 IS

1 housing property which is not within the scope of Stand2 ard 90.1–1999 (as described in subsection (c)(1)). Such

3 term includes expenditures for labor costs properly allo4 cable to the onsite preparation, assembly, or original in5 stallation of the property.

6 ‘‘(c) ENERGY EFFICIENT COMMERCIAL BUILDING

7 PROPERTY.—For purposes of subsection (b)—

8 ‘‘(1) IN GENERAL.—The term ‘energy efficient

9 commercial building property’ means any property

10 which reduces total annual energy and power costs

11 with respect to the lighting, heating, cooling, ventila12 tion, and hot water supply systems of the building

13 by 50 percent or more in comparison to a reference

14 building which meets the requirements of Standard

15 90.1–1999 of the American Society of Heating, Re16 frigerating, and Air Conditioning Engineers and the

17 Illuminating Engineering Society of North America

18 using methods of calculation under paragraph (2)

19 and certified by qualified professionals as provided

20 under subsection (f).

21 ‘‘(2) METHODS OF CALCULATION.—The Sec22 retary, in consultation with the Secretary of Energy,

23 shall promulgate regulations which describe in detail

24 methods for calculating and verifying energy and

25 power consumption and cost, taking into consider-
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1 ation the provisions of the 1998 California Nonresi2 dential ACM Manual. These procedures shall meet

3 the following requirements:

4 ‘‘(A) In calculating tradeoffs and energy

5 performance, the regulations shall prescribe the

6 costs per unit of energy and power, such as kil7 owatt hour, kilowatt, gallon of fuel oil, and

8 cubic foot or Btu of natural gas, which may be

9 dependent on time of usage.

10 ‘‘(B) The calculational methodology shall

11 require that compliance be demonstrated for a

12 whole building. If some systems of the building,

13 such as lighting, are designed later than other

14 systems of the building, the method shall pro15 vide that either—

16 ‘‘(i) the expenses taken into account

17 under subsection (a) shall not occur until

18 the date designs for all energy-using sys19 tems of the building are completed,

20 ‘‘(ii) the energy performance of all

21 systems and components not yet designed

22 shall be assumed to comply minimally with

23 the requirements of such Standard 90.1–

24 1999, or
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•S 3152 IS

1 ‘‘(iii) the expenses taken into account

2 under subsection (a) shall be a fraction of

3 such expenses based on the performance of

4 less than all energy-using systems in ac5 cordance with subparagraph (C).

6 ‘‘(C) The expenditures in connection with

7 the design of subsystems in the building, such

8 as the envelope, the heating, ventilation, air

9 conditioning and water heating system, and the

10 lighting system shall be allocated to the appro11 priate building subsystem based on system-spe12 cific energy cost savings targets in regulations

13 promulgated by the Secretary of Energy which

14 are equivalent, using the calculation method15 ology, to the whole building requirement of 50

16 percent savings.

17 ‘‘(D) The calculational methods under this

18 paragraph need not comply fully with section

19 11 of such Standard 90.1–1999.

20 ‘‘(E) The calculational methods shall be

21 fuel neutral, such that the same energy effi22 ciency features shall qualify a building for the

23 deduction under this subsection regardless of

24 whether the heating source is a gas or oil fur25 nace or an electric heat pump.
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•S 3152 IS

1 ‘‘(F) The calculational methods shall pro2 vide appropriate calculated energy savings for

3 design methods and technologies not otherwise

4 credited in either such Standard 90.1–1999 or

5 in the 1998 California Nonresidential ACM

6 Manual, including the following:

7 ‘‘(i) Natural ventilation.

8 ‘‘(ii) Evaporative cooling.

9 ‘‘(iii) Automatic lighting controls such

10 as occupancy sensors, photocells, and time11 clocks.

12 ‘‘(iv) Daylighting.

13 ‘‘(v) Designs utilizing semi-condi14 tioned spaces that maintain adequate com15 fort conditions without air conditioning or

16 without heating.

17 ‘‘(vi) Improved fan system efficiency,

18 including reductions in static pressure.

19 ‘‘(vii) Advanced unloading mecha20 nisms for mechanical cooling, such as mul21 tiple or variable speed compressors.

22 ‘‘(viii) The calculational methods may

23 take into account the extent of commis24 sioning in the building, and allow the tax-
218

•S 3152 IS

1 payer to take into account measured per2 formance that exceeds typical performance.

3 ‘‘(3) COMPUTER SOFTWARE.—

4 ‘‘(A) IN GENERAL.—Any calculation under

5 this subsection shall be prepared by qualified

6 computer software.

7 ‘‘(B) QUALIFIED COMPUTER SOFTWARE.—

8 For purposes of this paragraph, the term

9 ‘qualified computer software’ means software—

10 ‘‘(i) for which the software designer

11 has certified that the software meets all

12 procedures and detailed methods for calcu13 lating energy and power consumption and

14 costs as required by the Secretary,

15 ‘‘(ii) which provides such forms as re16 quired to be filed by the Secretary in con17 nection with energy efficiency of property

18 and the deduction allowed under this sec19 tion, and

20 ‘‘(iii) which provides a notice form

21 which summarizes the energy efficiency

22 features of the building and its projected

23 annual energy costs.

24 ‘‘(d) ALLOCATION OF DEDUCTION FOR PUBLIC

25 PROPERTY.—In the case of energy efficient commercial
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•S 3152 IS

1 building property installed on or in public property, the

2 Secretary shall promulgate regulations to allow the alloca3 tion of the deduction to the person primarily responsible

4 for designing the property in lieu of the public entity which

5 is the owner of such property. Such person shall be treated

6 as the taxpayer for purposes of this section.

7 ‘‘(e) NOTICE TO OWNER.—The qualified individual

8 shall provide an explanation to the owner of the building

9 regarding the energy efficiency features of the building

10 and its projected annual energy costs as provided in the

11 notice under subsection (c)(3)(B)(iii).

12 ‘‘(f) CERTIFICATION.—

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

14 subsection, the Secretary, in consultation with the

15 Secretary of Energy, shall establish requirements for

16 certification and compliance procedures after exam17 ining the requirements for energy consultants and

18 home energy ratings providers specified by the Mort19 gage Industry National Accreditation Procedures for

20 Home Energy Rating Systems.

21 ‘‘(2) QUALIFIED INDIVIDUALS.—Individuals

22 qualified to determine compliance shall be only those

23 individuals who are recognized by an organization

24 certified by the Secretary for such purposes.
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•S 3152 IS

1 ‘‘(3) PROFICIENCY OF QUALIFIED INDIVID2 UALS.—The Secretary shall consult with nonprofit

3 organizations and State agencies with expertise in

4 energy efficiency calculations and inspections to de5 velop proficiency tests and training programs to

6 qualify individuals to determine compliance.

7 ‘‘(g) BASIS REDUCTION.—For purposes of this sub8 title, if a deduction is allowed under this section with re9 spect to any energy efficient commercial building property,

10 the basis of such property shall be reduced by the amount

11 of the deduction so allowed.

12 ‘‘(h) TERMINATION.—This section shall not apply

13 with respect to any taxable year beginning after December

14 31, 2003.’’.

15 (b) CONFORMING AMENDMENT.—Section 1016(a), as

16 amended by section 211(b), is amended by striking ‘‘and’’

17 at the end of paragraph (27), by striking the period at

18 the end of paragraph (28) and inserting ‘‘, and’’, and by

19 inserting the following new paragraph:

20 ‘‘(29) for amounts allowed as a deduction under

21 section 199(a).’’.

22 (c) CLERICAL AMENDMENT.—The table of sections

23 for part VI of subchapter B of chapter 1 is amended by

24 adding at the end the following new item:

‘‘Sec. 199. Energy property deduction.’’.
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•S 3152 IS

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

2 this section shall apply to taxable years beginning after

3 December 31, 2000.

4 SEC. 605. EXTENSION AND MODIFICATION OF TAX CREDIT

5 FOR ELECTRICITY PRODUCED FROM BIO6 MASS.

7 (a) EXTENSION AND MODIFICATION OF PLACED-IN8 SERVICE RULES.—

9 (1) IN GENERAL.—Section 45(c)(3) is amended

10 by adding at the end the following new subpara11 graphs:

12 ‘‘(D) BIOMASS FACILITY.—In the case of a

13 facility using biomass (other than closed-loop

14 biomass) to produce electricity, the term ‘quali15 fied facility’ means any facility owned by the

16 taxpayer which is originally placed in service be17 fore January 1, 2002.

18 ‘‘(E) LANDFILL GAS FACILITY.—

19 ‘‘(i) IN GENERAL.—In the case of a

20 facility using landfill gas to produce elec21 tricity, the term ‘qualified facility’ means

22 any facility of the taxpayer which is origi23 nally placed in service after December 31,

24 1999, and before January 1, 2002.
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•S 3152 IS

1 ‘‘(ii) SPECIAL RULE.—In the case of a

2 facility using landfill gas, such term shall

3 include equipment and housing (not includ4 ing wells and related systems required to

5 collect and transmit gas to the production

6 facility) required to generate electricity

7 which are owned by the taxpayer and so

8 placed in service.

9 ‘‘(F) SPECIAL RULE.—In the case of a

10 qualified facility described in subparagraph (D)

11 or (E), the period referred to in subsection

12 (a)(2)(A)(ii) shall be applied by substituting ‘3-

13 year’ for ‘10-year’ and shall be treated as be14 ginning no earlier than January 1, 2001.’’.

15 (2) CLOSED-LOOP BIOMASS FACILITY.—Section

16 45(c)(3)(B) (relating to closed-loop biomass facility)

17 is amended by striking ‘‘owned by the taxpayer’’ and

18 all that follows and inserting ‘‘owned by the tax19 payer which is—’’

20 ‘‘(i) originally placed in service after

21 December 31, 1992, and before January 1,

22 2002, or

23 ‘‘(ii) originally placed in service before

24 December 31, 1992, and modified to use

25 closed-loop biomass to co-fire with coal
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•S 3152 IS

1 after such date and before January 1,

2 2002.’’.

3 (b) EXPANSION OF QUALIFIED ENERGY RE4 SOURCES.—

5 (1) IN GENERAL.—Section 45(c)(1) (defining

6 qualified energy resources) is amended by striking

7 ‘‘and’’ at the end of subparagraph (B), by striking

8 the period at the end of subparagraph (C) and in9 serting a comma, and by adding at the end the fol10 lowing new subparagraphs:

11 ‘‘(D) biomass (other than closed-loop bio12 mass), and

13 ‘‘(E) landfill gas.’’.

14 (2) DEFINITIONS.—Section 45(c) is amended

15 by adding at the end the following new paragraphs:

16 ‘‘(5) BIOMASS.—The term ‘biomass’ means any

17 solid, nonhazardous, cellulosic waste material which

18 is segregated from other waste materials and which

19 is derived from—

20 ‘‘(A) any of the following forest-related re21 sources: mill residues, precommercial thinnings,

22 slash, and brush, but not including old-growth

23 timber,

24 ‘‘(B) urban sources, including waste pal25 lets, crates, and dunnage, manufacturing and
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•S 3152 IS

1 construction wood wastes, and landscape or

2 right-of-way tree trimmings, but not including

3 unsegregated municipal solid waste (garbage),

4 paper that is commonly recycled, or pressure

5 treated, chemically treated, or lead painted

6 wood wastes, or

7 ‘‘(C) agriculture sources, including orchard

8 tree crops, vineyard, grain, legumes, sugar, and

9 other crop by-products or residues.

10 ‘‘(6) LANDFILL GAS.—The term ‘landfill gas’

11 means gas from the decomposition of any household

12 solid waste, commercial solid waste, and industrial

13 solid waste disposed of in a municipal solid waste

14 landfill unit (as such terms are defined in regula15 tions promulgated under subtitle D of the Solid

16 Waste Disposal Act (42 U.S.C. 6941 et seq.)).’’.

17 (c) SPECIAL RULES.—Section 45(d) (relating to defi18 nitions and special rules) is amended by adding at the end

19 the following new paragraph:

20 ‘‘(8) DENIAL OF DOUBLE BENEFIT.—No credit

21 shall be allowed under this section with respect to a

22 facility for any taxable year if the credit under sec23 tion 29 is allowed in such year or has been allowed

24 in any preceding taxable year with respect to any

25 fuel produced from such facility.’’.
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•S 3152 IS

1 (d) CONFORMING AMENDMENT.—Section 29(d) (re2 lating to other definitions and special rules) is amended

3 by adding at the end the following new paragraph:

4 ‘‘(9) DENIAL OF DOUBLE BENEFIT.—No credit

5 shall be allowed under this section with respect to

6 any fuel produced from a facility for any taxable

7 year if the credit under section 45 is allowed in such

8 year or has been allowed in any preceding taxable

9 year with respect to such facility.’’.

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

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

12 of this Act.

13 SEC. 606. TAX CREDIT FOR CERTAIN ENERGY EFFICIENT

14 MOTOR VEHICLES.

15 (a) IN GENERAL.—Subpart B of part IV of sub16 chapter A of chapter 1, as amended by section 160(a),

17 is amended by adding at the end the following new section:

18 ‘‘SEC. 30C. CREDIT FOR HYBRID VEHICLES.

19 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al20 lowed as a credit against the tax imposed by this chapter

21 for the taxable year an amount equal to the sum of the

22 credit amounts for each qualified hybrid vehicle placed in

23 service during the taxable year.

24 ‘‘(b) CREDIT AMOUNT.—For purposes of this

25 section—
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•S 3152 IS

1 ‘‘(1) IN GENERAL.—The credit amount for each

2 qualified hybrid vehicle with a rechargeable energy

3 storage system that provides the applicable percent4 age of the maximum available power shall be the

5 amount specified in the following table:

‘‘Applicable percentage Credit amount

Not less than 5 percent but less than 10 percent ............................. $500

Not less than 10 percent but less than 20 percent ........................... $1,000

Not less than 20 percent but less than 30 percent ........................... $1,500

Not less than 30 percent ................................................................... $2,000.

6 ‘‘(2) INCREASE IN CREDIT AMOUNT FOR RE7 GENERATIVE BRAKING SYSTEM.—In the case of a

8 qualified hybrid vehicle that actively employs a re9 generative braking system which supplies to the re10 chargeable energy storage system the applicable per11 centage of the energy available from braking in a

12 typical 60 miles per hour to 0 miles per hour brak13 ing event, the credit amount determined under this

14 section shall be increased by the amount specified in

15 the following table:

‘‘Applicable percentage Credit amount

Not less than 20 percent but less than 40 percent ........................... $250

Not less than 40 percent but less than 60 percent ........................... $500

Not less than 60 percent ................................................................... $1,000.

16 ‘‘(c) DEFINITIONS.—For purposes of this section—

17 ‘‘(1) QUALIFIED HYBRID VEHICLE.—The term

18 ‘qualified hybrid vehicle’ means an automobile that

19 meets all applicable regulatory requirements and

20 that can draw propulsion energy from both of the

21 following onboard sources of stored energy:
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•S 3152 IS

1 ‘‘(A) A consumable fuel.

2 ‘‘(B) A rechargeable energy storage sys3 tem.

4 ‘‘(2) MAXIMUM AVAILABLE POWER.—The term

5 ‘maximum available power’ means the maximum

6 value of the sum of the heat engine and electric

7 drive system power or other nonheat energy conver8 sion devices available for a driver’s command for

9 maximum acceleration at vehicle speeds under 75

10 miles per hour.

11 ‘‘(3) AUTOMOBILE.—The term ‘automobile’ has

12 the meaning given such term by section 4064(b)(1)

13 (without regard to subparagraphs (B) and (C) there14 of). A vehicle shall not fail to be treated as an auto15 mobile solely by reason of weight if such vehicle is

16 rated at 8,500 pounds gross vehicle weight rating or

17 less.

18 ‘‘(d) APPLICATION WITH OTHER CREDITS.—The

19 credit allowed by subsection (a) for any taxable year shall

20 not exceed the excess (if any) of—

21 ‘‘(1) the regular tax for the taxable year re22 duced by the sum of the credits allowable under sub23 part A and the preceding sections of this subpart,

24 over
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•S 3152 IS

1 ‘‘(2) the tentative minimum tax for the taxable

2 year.

3 ‘‘(e) SPECIAL RULES.—

4 ‘‘(1) BASIS REDUCTION.—The basis of any

5 property for which a credit is allowable under sub6 section (a) shall be reduced by the amount of such

7 credit (determined without regard to subsection (d)).

8 ‘‘(2) RECAPTURE.—The Secretary shall, by reg9 ulations, provide for recapturing the benefit of any

10 credit allowable under subsection (a) with respect to

11 any property which ceases to be property eligible for

12 such credit.

13 ‘‘(3) PROPERTY USED OUTSIDE UNITED

14 STATES, ETC., NOT QUALIFIED.—No credit shall be

15 allowed under this section with respect to—

16 ‘‘(A) any property for which a credit is al17 lowed under section 30,

18 ‘‘(B) any property referred to in section

19 50(b), or

20 ‘‘(C) any property taken into account

21 under section 179 or 179A.

22 ‘‘(4) ELECTION TO NOT TAKE CREDIT.—No

23 credit shall be allowed under subsection (a) for any

24 vehicle if the taxpayer elects to not have this section

25 apply to such vehicle.
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•S 3152 IS

1 ‘‘(f) REGULATIONS.—

2 ‘‘(1) TREASURY.—The Secretary shall prescribe

3 such regulations as may be necessary or appropriate

4 to carry out the purposes of this section.

5 ‘‘(2) ENVIRONMENTAL PROTECTION AGENCY.—

6 The Administrator of the Environmental Protection

7 Agency, in coordination with the Secretary of Trans8 portation and consistent with the laws administered

9 by such agency for automobiles, shall timely pre10 scribe such regulations as may be necessary or ap11 propriate solely for the purpose of specifying the

12 testing and calculation procedures to determine

13 whether a vehicle meets the qualifications for a cred14 it under this section.

15 ‘‘(g) APPLICATION OF SECTION.—This section shall

16 apply to any qualified hybrid vehicles placed in service

17 after December 31, 2003, and before January 1, 2005.’’

18 (b) CONFORMING AMENDMENTS.—

19 (1) Section 53(d)(1)(B)(iii) is amended by in20 serting ‘‘or not allowed under section 30C solely by

21 reason of the application of section 30C(d)(2)’’ after

22 ‘‘section 30(b)(3)(B)’’.

23 (2) Section 55(c)(2) is amended by inserting

24 ‘‘30C(d),’’ after ‘‘30(b)(3),’’.
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•S 3152 IS

1 (3) Subsection (a) of section 1016, as amended

2 by section 604(b), is amended by striking ‘‘and’’ at

3 the end of paragraph (28), by striking the period at

4 the end of paragraph (29) and inserting ‘‘, and’’,

5 and by adding at the end the following new para6 graph:

7 ‘‘(30) to the extent provided in section

8 30C(e)(1).’’.

9 (4) The table of sections for subpart B of part

10 IV of subchapter A of chapter 1, as amended by sec11 tion 160(b), is amended by adding at the end the

12 following new item:

‘‘Sec. 30C. Credit for hybrid vehicles.’’.

13 TITLE VII—ADDITIONAL TAX

14 PROVISIONS

15 SEC. 701. LIMITATION ON USE OF NONACCRUAL EXPERI16 ENCE METHOD OF ACCOUNTING.

17 (a) IN GENERAL.—Section 448(d)(5) (relating to

18 special rule for services) is amended—

19 (1) by inserting ‘‘in fields described in para20 graph (2)(A)’’ after ‘‘services by such person’’, and

21 (2) by inserting ‘‘CERTAIN PERSONAL’’ before

22 ‘‘SERVICES’’ in the heading.

23 (b) EFFECTIVE DATE.—
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•S 3152 IS

1 (1) IN GENERAL.—The amendments made by

2 this section shall apply to taxable years ending after

3 the date of the enactment of this Act.

4 (2) CHANGE IN METHOD OF ACCOUNTING.—In

5 the case of any taxpayer required by the amend6 ments made by this section to change its method of

7 accounting for its first taxable year ending after the

8 date of the enactment of this Act—

9 (A) such change shall be treated as initi10 ated by the taxpayer,

11 (B) such change shall be treated as made

12 with the consent of the Secretary of the Treas13 ury, and

14 (C) the net amount of the adjustments re15 quired to be taken into account by the taxpayer

16 under section 481 of the Internal Revenue Code

17 of 1986 shall be taken into account over a pe18 riod (not greater than 4 taxable years) begin19 ning with such first taxable year.

20 SEC. 702. REPEAL OF SECTION 530(d) OF THE REVENUE ACT

21 OF 1978.

22 (a) IN GENERAL.—Section 530(d) of the Revenue

23 Act of 1978 (as added by section 1706 of the Tax Reform

24 Act of 1986) is repealed.
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•S 3152 IS

1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to periods ending after the date

3 of the enactment of this Act.

4 SEC. 703. EXPANSION OF EXEMPTION FROM PERSONAL

5 HOLDING COMPANY TAX FOR LENDING OR FI6 NANCE COMPANIES.

7 (a) IN GENERAL.—Paragraph (6) of section 542(c)

8 (defining personal holding company) is amended—

9 (1) by striking ‘‘rents,’’ in subparagraph (B),

10 and

11 (2) by adding ‘‘and’’ at the end of subpara12 graph (B),

13 (3) by striking subparagraph (C), and

14 (4) by redesignating subparagraph (D) as sub15 paragraph (C).

16 (b) EXCEPTION FOR LENDING OR FINANCE COMPA17 NIES DETERMINED ON AFFILIATED GROUP BASIS.—Sub18 section (d) of section 542 is amended by striking para19 graphs (1) and (2) and inserting the following new para20 graphs:

21 ‘‘(1) LENDING OR FINANCE BUSINESS DE22 FINED.—For purposes of subsection (c)(6), the term

23 ‘lending or finance business’ means a business of—

24 ‘‘(A) making loans,
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•S 3152 IS

1 ‘‘(B) purchasing or discounting accounts

2 receivable, notes, or installment obligations,

3 ‘‘(C) engaging in leasing (including enter4 ing into leases and purchasing, servicing, and

5 disposing of leases and leased assets),

6 ‘‘(D) rendering services or making facilities

7 available in the ordinary course of a lending or

8 finance business,

9 ‘‘(E) rendering services or making facilities

10 available in connection with activities described

11 in subparagraphs (A), (B), and (C) carried on

12 by the corporation rendering services or making

13 facilities available, or

14 ‘‘(F) rendering services or making facilities

15 available to another corporation which is en16 gaged in the lending or finance business (within

17 the meaning of this paragraph), if such services

18 or facilities are related to the lending or finance

19 business (within such meaning) of such other

20 corporation and such other corporation and the

21 corporation rendering services or making facili22 ties available are members of the same affili23 ated group (as defined in section 1504).

24 ‘‘(2) EXCEPTION DETERMINED ON AN AFFILI25 ATED GROUP BASIS.—In the case of a lending or fi-
234

•S 3152 IS

1 nance company which is a member of an affiliated

2 group (as defined in section 1504), such company

3 shall be treated as meeting the requirements of sub4 section (c)(6) if such group (determined by taking

5 into account only members of such group which are

6 engaged in a lending or finance business) meets such

7 requirements.’’.

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

9 this section shall apply to taxable years beginning after

10 December 31, 2000.

11 SEC. 704. CHARITABLE CONTRIBUTION DEDUCTION FOR

12 CERTAIN EXPENSES INCURRED IN SUPPORT

13 OF NATIVE ALASKAN SUBSISTENCE WHAL14 ING.

15 (a) IN GENERAL.—Section 170 (relating to chari16 table, etc., contributions and gifts) is amended by redesig17 nating subsection (m) as subsection (n) and by inserting

18 after subsection (l) the following new subsection:

19 ‘‘(m) EXPENSES PAID BY CERTAIN WHALING CAP20 TAINS IN SUPPORT OF NATIVE ALASKAN SUBSISTENCE

21 WHALING.—

22 ‘‘(1) IN GENERAL.—In the case of an individual

23 who is recognized by the Alaska Eskimo Whaling

24 Commission as a whaling captain charged with the

25 responsibility of maintaining and carrying out sanc-
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•S 3152 IS

1 tioned whaling activities and who engages in such

2 activities during the taxable year, the amount de3 scribed in paragraph (2) (to the extent such amount

4 does not exceed $7,500 for the taxable year) shall be

5 treated for purposes of this section as a charitable

6 contribution.

7 ‘‘(2) AMOUNT DESCRIBED.—

8 ‘‘(A) IN GENERAL.—The amount described

9 in this paragraph is the aggregate of the rea10 sonable and necessary whaling expenses paid by

11 the taxpayer during the taxable year in carrying

12 out sanctioned whaling activities.

13 ‘‘(B) WHALING EXPENSES.—For purposes

14 of subparagraph (A), the term ‘whaling ex15 penses’ includes expenses for—

16 ‘‘(i) the acquisition and maintenance

17 of whaling boats, weapons, and gear used

18 in sanctioned whaling activities,

19 ‘‘(ii) the supplying of food for the

20 crew and other provisions for carrying out

21 such activities, and

22 ‘‘(iii) storage and distribution of the

23 catch from such activities.

24 ‘‘(3) SANCTIONED WHALING ACTIVITIES.—For

25 purposes of this subsection, the term ‘sanctioned
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•S 3152 IS

1 whaling activities’ means subsistence bowhead whale

2 hunting activities conducted pursuant to the man3 agement plan of the Alaska Eskimo Whaling Com4 mission.’’.

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

6 subsection (a) shall apply to taxable years ending after

7 December 31, 2000.

8 SEC. 705. IMPOSITION OF EXCISE TAX ON PERSONS WHO

9 ACQUIRE STRUCTURED SETTLEMENT PAY10 MENTS IN FACTORING TRANSACTIONS.

11 (a) IN GENERAL.—Subtitle E is amended by adding

12 at the end the following new chapter:

13 ‘‘CHAPTER 55—STRUCTURED

14 SETTLEMENT FACTORING TRANSACTIONS

‘‘Sec. 5891. Structured settlement factoring transactions.

15 ‘‘SEC. 5891. STRUCTURED SETTLEMENT FACTORING TRANS16 ACTIONS.

17 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed

18 on any person who acquires directly or indirectly struc19 tured settlement payment rights in a structured settle20 ment factoring transaction a tax equal to 40 percent of

21 the factoring discount as determined under subsection

22 (c)(4) with respect to such factoring transaction.

23 ‘‘(b) EXCEPTION FOR CERTAIN APPROVED TRANS24 ACTIONS.—
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•S 3152 IS

1 ‘‘(1) IN GENERAL.—The tax under subsection

2 (a) shall not apply in the case of a structured settle3 ment factoring transaction in which the transfer of

4 structured settlement payment rights is approved in

5 advance in a qualified order.

6 ‘‘(2) QUALIFIED ORDER.—For purposes of this

7 section, the term ‘qualified order’ means a final

8 order, judgment, or decree which—

9 ‘‘(A) finds that the transfer described in

10 paragraph (1)—

11 ‘‘(i) does not contravene any Federal

12 or State statute or the order of any court

13 or responsible administrative authority,

14 and

15 ‘‘(ii) is in the best interest of the

16 payee, taking into account the welfare and

17 support of the payee’s dependents, and

18 ‘‘(B) is issued—

19 ‘‘(i) under the authority of an applica20 ble State statute by an applicable State

21 court, or

22 ‘‘(ii) by the responsible administrative

23 authority (if any) which has exclusive ju24 risdiction over the underlying action or
238

•S 3152 IS

1 proceeding which was resolved by means of

2 the structured settlement.

3 ‘‘(3) APPLICABLE STATE STATUTE.—For pur4 poses of this section, the term ‘applicable State stat5 ute’ means a statute providing for the entry of an

6 order, judgment, or decree described in paragraph

7 (2)(A) which is enacted by—

8 ‘‘(A) the State in which the payee of the

9 structured settlement is domiciled, or

10 ‘‘(B) if there is no statute described in

11 subparagraph (A), the State in which either the

12 party to the structured settlement (including an

13 assignee under a qualified assignment under

14 section 130) or the person issuing the funding

15 asset for the structured settlement is domiciled

16 or has its principal place of business.

17 ‘‘(4) APPLICABLE STATE COURT.—For pur18 poses of this section—

19 ‘‘(A) IN GENERAL.—The term ‘applicable

20 State court’ means, with respect to any applica21 ble State statute, a court of the State which en22 acted such statute.

23 ‘‘(B) SPECIAL RULE.—In the case of an

24 applicable State statute described in paragraph

25 (3)(B), such term also includes a court of the
239

•S 3152 IS

1 State in which the payee of the structured set2 tlement is domiciled.

3 ‘‘(5) QUALIFIED ORDER DISPOSITIVE.—A quali4 fied order shall be treated as dispositive for purposes

5 of the exception under this subsection.

6 ‘‘(c) DEFINITIONS.—For purposes of this section—

7 ‘‘(1) STRUCTURED SETTLEMENT.—The term

8 ‘structured settlement’ means an arrangement—

9 ‘‘(A) which is established by—

10 ‘‘(i) suit or agreement for the periodic

11 payment of damages excludable from the

12 gross income of the recipient under section

13 104(a)(2), or

14 ‘‘(ii) agreement for the periodic pay15 ment of compensation under any workers’

16 compensation act excludable from the

17 gross income of the recipient under section

18 104(a)(1), and

19 ‘‘(B) under which the periodic payments

20 are—

21 ‘‘(i) of the character described in sub22 paragraphs (A) and (B) of section

23 130(c)(2), and

24 ‘‘(ii) payable by a person who is a

25 party to the suit or agreement or to the
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•S 3152 IS

1 workers’ compensation claim or by a per2 son who has assumed the liability for such

3 periodic payments under a qualified assign4 ment in accordance with section 130.

5 ‘‘(2) STRUCTURED SETTLEMENT PAYMENT

6 RIGHTS.—The term ‘structured settlement payment

7 rights’ means rights to receive payments under a

8 structured settlement.

9 ‘‘(3) STRUCTURED SETTLEMENT FACTORING

10 TRANSACTION.—

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

12 settlement factoring transaction’ means a trans13 fer of structured settlement payment rights (in14 cluding portions of structured settlement pay15 ments) made for consideration by means of

16 sale, assignment, pledge, or other form of en17 cumbrance or alienation for consideration.

18 ‘‘(B) EXCEPTION.—Such term shall not

19 include—

20 ‘‘(i) the creation or perfection of a se21 curity interest in structured settlement

22 payment rights under a blanket security

23 agreement entered into with an insured de24 pository institution in the absence of any

25 action to redirect the structured settlement
241

•S 3152 IS

1 payments to such institution (or agent or

2 successor thereof) or otherwise to enforce

3 such blanket security interest as against

4 the structured settlement payment rights,

5 or

6 ‘‘(ii) a subsequent transfer of struc7 tured settlement payment rights acquired

8 in a structured settlement factoring trans9 action.

10 ‘‘(4) FACTORING DISCOUNT.—The term ‘fac11 toring discount’ means an amount equal to the ex12 cess of—

13 ‘‘(A) the aggregate undiscounted amount

14 of structured settlement payments being ac15 quired in the structured settlement factoring

16 transaction, over

17 ‘‘(B) the total amount actually paid by the

18 acquirer to the person from whom such struc19 tured settlement payments are acquired.

20 ‘‘(5) RESPONSIBLE ADMINISTRATIVE AUTHOR21 ITY.—The term ‘responsible administrative author22 ity’ means the administrative authority which had

23 jurisdiction over the underlying action or proceeding

24 which was resolved by means of the structured set25 tlement.
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•S 3152 IS

1 ‘‘(6) STATE.—The term ‘State’ includes any

2 possession of the United States.

3 ‘‘(d) COORDINATION WITH OTHER PROVISIONS.—

4 ‘‘(1) IN GENERAL.—If the applicable require5 ments of sections 72, 104(a) (1) and (2), 130, and

6 461(h) were satisfied at the time the structured set7 tlement was entered into, the subsequent occurrence

8 of a structured settlement factoring transaction shall

9 not affect the application of the provisions of such

10 sections to the parties to the structured settlement

11 (including an assignee under a qualified assignment

12 under section 130) in any taxable year.

13 ‘‘(2) NO WITHHOLDING OF TAX.—The provi14 sions of section 3405 regarding withholding of tax

15 shall not apply to the person making the payments

16 in the event of a structured settlement factoring

17 transaction.’’.

18 (b) CLERICAL AMENDMENTS.—The table of chapters

19 for subtitle E is amended by adding at the end the fol20 lowing new item:

‘‘CHAPTER 55. Structured settlement factoring transactions.’’.

21 (c) EFFECTIVE DATES.—

22 (1) IN GENERAL.—The amendments made by

23 this section (other than the provisions of section

24 5891(d) of the Internal Revenue Code of 1986, as

25 added by this section) shall apply to structured set-
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•S 3152 IS

1 tlement factoring transactions (as defined in section

2 5891(c) of such Code as adopted by this section) en3 tered into on or after the 30th day following the

4 date of the enactment of this Act.

5 (2) CLARIFICATION OF EXISTING LAW.—Section

6 5891(d) of such Code (as so added) shall apply to

7 transactions entered into before, on, or after such

8 30th day.

9 (3) TRANSITION RULE.—In the case of a struc10 tured settlement factoring transaction entered into

11 during the period beginning on the 30th day fol12 lowing the date of the enactment of this Act and

13 ending on July 1, 2002, no tax shall be imposed

14 under section 5891(a) of such Code if—

15 (A) the structured settlement payee is

16 domiciled in a State (or possession of the

17 United States) which has not enacted a statute

18 providing that the structured settlement fac19 toring transaction is ineffective unless the

20 transaction has been approved by an order,

21 judgment, or decree of a court (or where appli22 cable, a responsible administrative authority)

23 which finds that such transaction—
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•S 3152 IS

1 (i) does not contravene any Federal or

2 State statute or the order of any court (or

3 responsible administrative authority), and

4 (ii) is in the best interest of the struc5 tured settlement payee or is appropriate in

6 light of a hardship faced by the payee, and

7 (B) the person acquiring the structured

8 settlement payment rights discloses to the

9 structured settlement payee in advance of the

10 structured settlement factoring transaction the

11 amounts and due dates of the payments to be

12 transferred, the aggregate amount to be trans13 ferred, the consideration to be received by the

14 structured settlement payee for the transferred

15 payments, the discounted present value of the

16 transferred payments including the present

17 value as determined in the manner described in

18 section 7520 of such Code, and the expenses re19 quired under the terms of the structured settle20 ment factoring transaction to be paid by the

21 structured settlement payee or deducted from

22 the proceeds of such transaction.

Æ