II

104TH CONGRESS

1ST SESSION S. 743

To amend the Internal Revenue Code of 1986 to provide a tax credit for

investment necessary to revitalize communities within the United States,

and for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 2 (legislative day, MAY 1), 1995

Mrs. HUTCHISON introduced the following bill; which was read twice and

referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

a tax credit for investment necessary to revitalize communities within the United States, and for other

purposes.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Commercial Revitaliza5 tion Tax Act of 1995’’.

6 SEC. 2. COMMERCIAL REVITALIZATION TAX CREDIT.

7 (a) ALLOWANCE OF CREDIT.—Section 46 of the In8 ternal Revenue Code of 1986 (relating to investment cred-
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1 it) is amended by striking ‘‘and’’ at the end of paragraph

2 (2), by striking the period at the end of paragraph (3)

3 and inserting ‘‘, and’’, and by adding at the end the follow4 ing new paragraph:

5 ‘‘(4) the commercial revitalization credit.’’

6 (b) COMMERCIAL REVITALIZATION CREDIT.—Sub7 part E of part IV of subchapter A of chapter 1 of the

8 Internal Revenue Code of 1986 (relating to rules for com9 puting investment credit) is amended by inserting after

10 section 48 the following new section:

11 ‘‘SEC. 48A. COMMERCIAL REVITALIZATION CREDIT.

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

13 except as provided in subsection (e), the commercial revi14 talization credit for any taxable year is an amount equal

15 to the applicable percentage of the qualified revitalization

16 expenditures with respect to any qualified revitalization

17 building.

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

19 this section—

20 ‘‘(1) IN GENERAL.—The term ‘applicable per21 centage’ means—

22 ‘‘(A) 20 percent, or

23 ‘‘(B) at the election of the taxpayer, 5 per24 cent for each taxable year in the credit period.
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1 The election under subparagraph (B), once made,

2 shall be irrevocable.

3 ‘‘(2) CREDIT PERIOD.—

4 ‘‘(A) IN GENERAL.—The term ‘credit pe5 riod’ means, with respect to any building, the

6 period of 10 taxable years beginning with the

7 taxable year in which the building is placed in

8 service.

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

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

11 section 42(f) shall apply.

12 ‘‘(c) QUALIFIED REVITALIZATION BUILDINGS AND

13 EXPENDITURES.—For purposes of this section—

14 ‘‘(1) QUALIFIED REVITALIZATION BUILDING.—

15 The term ‘qualified revitalization building’ means

16 any building (and its structural components) if—

17 ‘‘(A) such building is located in an eligible

18 commercial revitalization area,

19 ‘‘(B) a commercial revitalization credit

20 amount is allocated to the building under sub21 section (e), and

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

23 of depreciation) is allowable with respect to the

24 building.
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1 ‘‘(2) QUALIFIED REHABILITATION EXPENDI2 TURE.—

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

4 rehabilitation expenditure’ means any amount

5 properly chargeable to capital account—

6 ‘‘(i) for property for which deprecia7 tion is allowable under section 168 and

8 which is—

9 ‘‘(I) nonresidential real property,

10 or

11 ‘‘(II) an addition or improvement

12 to property described in subclause (I),

13 ‘‘(ii) in connection with the construc14 tion or substantial rehabilitation or recon15 struction of a qualified revitalization build16 ing, and

17 ‘‘(iii) for the acquisition of land in

18 connection with the qualified revitalization

19 building.

20 ‘‘(B) DOLLAR LIMITATION.—The aggre21 gate amount which may be treated as qualified

22 revitalization expenditures with respect to any

23 qualified revitalization building for any taxable

24 year shall not exceed $10,000,000, reduced by

25 any such expenditures with respect to the build-
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1 ing taken into account by the taxpayer or any

2 predecessor in determining the amount of the

3 credit under this section for all preceding tax4 able years.

5 ‘‘(C) CERTAIN EXPENDITURES NOT IN6 CLUDED.—The term ‘qualified revitalization ex7 penditure’ does not include—

8 ‘‘(i) STRAIGHT LINE DEPRECIATION

9 MUST BE USED.—Any expenditure (other

10 than with respect to land acquisitions) with

11 respect to which the taxpayer does not use

12 the straight line method over a recovery

13 period determined under subsection (c) or

14 (g) of section 168. The preceding sentence

15 shall not apply to any expenditure to the

16 extent the alternative depreciation system

17 of section 168(g) applies to such expendi18 ture by reason of subparagraph (B) or (C)

19 of section 168(g)(1).

20 ‘‘(ii) ACQUISITION COSTS.—The costs

21 of acquiring any building or interest there22 in and any land in connection with such

23 building to the extent that such costs ex24 ceed 30 percent of the qualified revitaliza-
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1 tion expenditures determined without re2 gard to this clause.

3 ‘‘(iii) OTHER CREDITS.—Any expendi4 ture which the taxpayer may take into ac5 count in computing any other credit allow6 able under this part unless the taxpayer

7 elects to take the expenditure into account

8 only for purposes of this section.

9 ‘‘(3) ELIGIBLE COMMERCIAL REVITALIZATION

10 AREA.—The term ‘eligible commercial revitalization

11 area’ means—

12 ‘‘(A) an empowerment zone or enterprise

13 community designated under subchapter U,

14 ‘‘(B) any area established pursuant to any

15 consolidated planning process for the use of

16 Federal housing and community development

17 funds, and

18 ‘‘(C) any other specially designated com19 mercial revitalization district established by any

20 State or local government, which is a low-in21 come census tract or low-income

22 nonmetropolitan area (as defined in subsection

23 (e)(2)(C)) and is not primarily a nonresidential

24 central business district.
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1 ‘‘(4) SUBSTANTIAL REHABILITATION OR RE2 CONSTRUCTION.—For purposes of this subsection, a

3 rehabilitation or reconstruction shall be treated as a

4 substantial rehabilitation or reconstruction only if

5 the qualified revitalization expenditures in connec6 tion with the rehabilitation or reconstruction exceed

7 25 percent of the fair market value of the building

8 (and its structural components) immediately before

9 the rehabilitation or reconstruction.

10 ‘‘(d) WHEN EXPENDITURES TAKEN INTO AC11 COUNT.—

12 ‘‘(1) IN GENERAL.—Qualified revitalization ex13 penditures with respect to any qualified revitaliza14 tion building shall be taken into account for the tax15 able year in which the qualified rehabilitated build16 ing is placed in service. For purposes of the preced17 ing sentence, a substantial rehabilitation or recon18 struction of a building shall be treated as a separate

19 building.

20 ‘‘(2) PROGRESS EXPENDITURE PAYMENTS.—

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

22 (d) of section 47 shall apply for purposes of this

23 section.
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1 ‘‘(e) LIMITATION ON AGGREGATE CREDITS ALLOW2 ABLE WITH RESPECT TO BUILDINGS LOCATED IN A

3 STATE.—

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

5 determined under this section for any taxable year

6 with respect to any building shall not exceed the

7 commercial revitalization credit amount (in the case

8 of an amount determined under subsection

9 (b)(1)(B), the present value of such amount as de10 termined under the rules of section 42(b)(2)(C)) al11 located to such building under this subsection by the

12 commercial revitalization credit agency. Such alloca13 tion shall be made at the same time and in the same

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

15 42(h).

16 ‘‘(2) COMMERCIAL REVITALIZATION CREDIT

17 AMOUNT FOR AGENCIES.—

18 ‘‘(A) IN GENERAL.—The aggregate com19 mercial revitalization credit amount which a

20 commercial revitalization credit agency may al21 locate for any calendar year is the portion of

22 the State commercial revitalization credit ceil23 ing allocated under this paragraph for such cal24 endar year for such agency.
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1 ‘‘(B) STATE COMMERCIAL REVITALIZATION

2 CREDIT CEILING.—

3 ‘‘(i) IN GENERAL.—The State com4 mercial revitalization credit ceiling applica5 ble to any State for any calendar year is

6 an amount which bears the same ratio to

7 the national ceiling for the calendar year

8 as the population of low-income census

9 tracts and low-income nonmetropolitan

10 areas within the State bears to the popu11 lation of such tracts and areas within all

12 States.

13 ‘‘(ii) NATIONAL CEILING.—For pur14 poses of clause (i), the national ceiling is

15 $100,000,000 for 1996, $200,000,000 for

16 1997, and $400,000,000 for calendar years

17 after 1997.

18 ‘‘(iii) OTHER SPECIAL RULES.—Rules

19 similar to the rules of subparagraphs (D),

20 (E), (F), and (G) of section 42(h)(3) shall

21 apply for purposes of this subsection.

22 ‘‘(C) LOW-INCOME AREAS.—For purposes

23 of subparagraph (B), the terms ‘low-income

24 census tract’ and ‘low-income nonmetropolitan

25 area’ mean a tract or area in which, according
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1 to the most recent census data available, at

2 least 50 percent of residents earned no more

3 than 60 percent of the median household in4 come for the applicable Metropolitan Standard

5 Area, Consolidated Metropolitan Standard

6 Area, or all nonmetropolitan areas in the State.

7 ‘‘(D) COMMERCIAL REVITALIZATION CRED8 IT AGENCY.—For purposes of this section, the

9 term ‘commercial revitalization credit agency’

10 means any agency authorized by a State to

11 carry out this section.

12 ‘‘(E) STATE.—For purposes of this sec13 tion, the term ‘State’ includes a possession of

14 the United States.

15 ‘‘(f) RESPONSIBILITIES OF COMMERCIAL REVITAL16 IZATION CREDIT AGENCIES.—

17 ‘‘(1) PLANS FOR ALLOCATION.—Notwithstand18 ing any other provision of this section, the commer19 cial revitalization credit dollar amount with respect

20 to any building shall be zero unless—

21 ‘‘(A) such amount was allocated pursuant

22 to a qualified allocation plan of the commercial

23 revitalization credit agency which is approved

24 by the governmental unit (in accordance with

25 rules similar to the rules of section 147(f)(2)
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1 (other than subparagraph (B)(ii) thereof)) of

2 which such agency is a part, and

3 ‘‘(B) such agency notifies the chief execu4 tive officer (or its equivalent) of the local juris5 diction within which the building is located of

6 such project and provides such individual a rea7 sonable opportunity to comment on the project.

8 ‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur9 poses of this subsection, the term ‘qualified alloca10 tion plan’ means any plan—

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

12 be used to determine priorities of the commer13 cial revitalization credit agency which are ap14 propriate to local conditions,

15 ‘‘(B) which considers—

16 ‘‘(i) the degree to which a project con17 tributes to the implementation of a strate18 gic plan that is devised for an eligible com19 mercial revitalization area through a citi20 zen participation process,

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

22 permanent, full-time employment by reason

23 of any project, and
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1 ‘‘(iii) the active involvement of resi2 dents and nonprofit groups within the eli3 gible commercial revitalization area, and

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

5 agency (or its agent) will follow in monitoring

6 for compliance with this section.

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

8 any building placed in service after December 31, 2000.’’

9 (b) CONFORMING AMENDMENTS.—

10 (1) Section 39(d) of the Internal Revenue Code

11 of 1986 is amended by adding at the end the follow12 ing new paragraph:

13 ‘‘(7) NO CARRYBACK OF SECTION 48A CREDIT

14 BEFORE ENACTMENT.—No portion of the unused

15 business credit for any taxable year which is attrib16 utable to any commercial revitalization credit deter17 mined under section 48A may be carried back to a

18 taxable year ending before the date of the enactment

19 of section 48A.’’

20 (2) Subparagraph (B) of section 48(a)(2) of

21 such Code is amended by inserting ‘‘or commercial

22 revitalization’’ after ‘‘rehabilitation’’ each place it

23 appears in the text and heading thereof.

24 (3) Subparagraph (C) of section 49(a)(1) of

25 such Code is amended by striking ‘‘and’’ at the end
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1 of clause (ii), by striking the period at the end of

2 clause (iii) and inserting ‘‘, and’’, and by adding at

3 the end the following new clause:

4 ‘‘(iv) the basis of any qualified revital5 ization building attributable to qualified re6 vitalization expenditures.’’

7 (4) Paragraph (2) of section 50(a) of such Code

8 is amended by inserting ‘‘or 48A(d)(2)’’ after ‘‘sec9 tion 47(d)’’ each place it appears.

10 (5) Subparagraph (B) of section 50(a)(2) of

11 such Code is amended by adding at the end the fol12 lowing new sentence: ‘‘A similar rule shall apply for

13 purposes of section 48A.’’

14 (6) Paragraph (2) of section 50(b) of such Code

15 is amended by striking ‘‘and’’ at the end of subpara16 graph (C), by striking the period at the end of sub17 paragraph (D) and inserting ‘‘, and’’, and by adding

18 at the end the following new subparagraph:

19 ‘‘(E) a qualified revitalization building to

20 the extent of the portion of the basis which is

21 attributable to qualified revitalization expendi22 tures.’’

23 (7) Subparagraph (C) of section 50(b)(4) of

24 such Code is amended by inserting ‘‘or commercial
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1 revitalization’’ after ‘‘rehabilitated’’ each place it ap2 pears in the text or heading thereof.

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

4 amended—

5 (A) by inserting ‘‘or section 48A’’ after

6 ‘‘section 42’’, and

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

8 and inserting ‘‘AND COMMERCIAL REVITALIZA9 TION CREDITS’’.

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

11 this section shall apply to property placed in service after

12 December 31, 1995.

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