II

105TH CONGRESS

2D SESSION S. 1995

To amend the Internal Revenue Code of 1986 to allow the designation

of renewal communities, and for other purposes.

IN THE SENATE OF THE UNITED STATES

APRIL 28, 1998

Mr. ABRAHAM (for himself, Mr. BROWNBACK, Mr. COATS, Mr. COVERDELL,

Mr. HUTCHINSON, Mr. SANTORUM, and Mr. LIEBERMAN) 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 allow the

designation of renewal communities, and for other purposes.

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

3 SECTION 1. SHORT TITLE, TABLE OF CONTENTS, FINDINGS,

4 AND PURPOSE.

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

6 ‘‘REAL Life Economic Empowerment Act of 1998’’.

7 (b) TABLE OF CONTENTS.—The table of contents for

8 this Act is as follows:

Section 1. Short title, table of contents, findings, and purpose.
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TITLE I—DESIGNATION AND EVALUATION OF RENEWAL

COMMUNITIES

Sec. 101. Short title.

Sec. 102. Statement of purpose.

Sec. 103. Designation of renewal communities.

Sec. 104. Evaluation and reporting requirements.

Sec. 105. Interaction with other Federal programs.

TITLE II—TAX INCENTIVES FOR RENEWAL COMMUNITIES

Sec. 201. Tax treatment of renewal communities.

Sec. 202. Extension of expensing of environmental remediation costs for renewal communities.

Sec. 203. Extension of work opportunity tax credit for renewal communities.

Sec. 204. Allowance of commercial revitalization credit.

Sec. 205. Conforming and clerical amendments.

TITLE III—ADDITIONAL PROVISIONS

Sec. 301. Transfer of unoccupied and substandard HUD-held housing in renewal communities to local governments.

Sec. 302. CRA credit for investments in community development organizations

located in renewal communities.

1 (c) FINDINGS.—The Congress makes the following

2 findings:

3 (1) Many of the Nation’s urban centers are

4 places with high levels of poverty, high rates of wel5 fare dependency, high crime rates, and joblessness.

6 (2) Federal tax incentives and regulatory re7 forms can encourage economic growth, job creation,

8 and small business formation in many urban centers.

9 (3) Encouraging private sector investment in

10 America’s economically distressed urban and rural

11 areas is essential to breaking the cycle of poverty

12 and the related ills of crime, drug abuse, illiteracy,

13 welfare dependency, and unemployment.

14 (d) PURPOSE.—The purpose of this Act is to increase

15 job creation, small business expansion and formation, and
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1 homeownership, and to foster moral renewal, in economi2 cally depressed areas by providing Federal tax incentives,

3 regulatory reforms, and homeownership incentives.

4 TITLE I—DESIGNATION AND

5 EVALUATION OF RENEWAL

6 COMMUNITIES

7 SEC. 101. SHORT TITLE.

8 This title may be cited as the ‘‘Renewing American

9 Communities Act of 1998’’.

10 SEC. 102. STATEMENT OF PURPOSE.

11 It is the purpose of this title to provide for the estab12 lishment of renewal communities in order to stimulate the

13 creation of new jobs, particularly for disadvantaged work14 ers and long-term unemployed individuals, and to promote

15 revitalization of economically distressed areas primarily by

16 providing or encouraging—

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

18 levels;

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

20 local levels; and

21 (3) improved local services and an increase in

22 the economic stake of renewal community residents

23 in their own community and its development, par24 ticularly through the increased involvement of pri25 vate, local, and neighborhood organizations.
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1 SEC. 103. DESIGNATION OF RENEWAL COMMUNITIES.

2 Chapter 1 of the Internal Revenue Code of 1986 is

3 amended by adding at the end the following new sub4 chapter:

5 ‘‘Subchapter X—Renewal Communities

‘‘Part I. Designation.’’

6 ‘‘PART I—DESIGNATION

‘‘Sec. 1400D. Designation of Renewal Communities.

7 ‘‘SEC. 1400D. DESIGNATION OF RENEWAL COMMUNITIES.

8 ‘‘(a) DESIGNATION.—

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

10 the term ‘renewal community’ means any area—

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

12 local governments and the State or States in

13 which it is located for designation as a renewal

14 community (hereafter in this section referred to

15 as a ‘nominated area’), and

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

17 Urban Development, after consultation with—

18 ‘‘(i) the Secretaries of Agriculture,

19 Commerce, Labor, and the Treasury; the

20 Director of the Office of Management and

21 Budget; and the Administrator of the

22 Small Business Administration, and
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1 ‘‘(ii) in the case of an area on an In2 dian reservation, the Secretary of the Inte3 rior,

4 designates as a renewal community.

5 ‘‘(2) NUMBER OF DESIGNATIONS.—

6 ‘‘(A) IN GENERAL.—The Secretary of

7 Housing and Urban Development may des8 ignate not more than 50 nominated areas as re9 newal communities.

10 ‘‘(B) ADDITIONAL DESIGNATIONS TO RE11 PLACE REVOKED DESIGNATIONS.—

12 ‘‘(i) IN GENERAL.—The Secretary of

13 Housing and Urban Development may des14 ignate one additional area under subpara15 graph (A) to replace each area for which

16 the designation is revoked under subsection

17 (b)(2), but in no event may more than 50

18 areas designated under this subsection

19 bear designations as renewal communities

20 at any time.

21 ‘‘(ii) EXTENSION OF TIME LIMIT ON

22 DESIGNATIONS.—In the case of any des23 ignation made under this subparagraph,

24 paragraph (4)(B) shall be applied by sub25 stituting ‘36-month’ for ‘24-month’.
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1 ‘‘(3) AREAS DESIGNATED BASED ON DEGREE

2 OF POVERTY, ETC.—

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

4 provided in this section, the nominated areas

5 designated as renewal communities under this

6 subsection shall be those nominated areas with

7 the highest average ranking with respect to the

8 criteria described in subparagraphs (C), (D),

9 and (E) of subsection (c)(3). For purposes of

10 the preceding sentence, an area shall be ranked

11 within each such criterion on the basis of the

12 amount by which the area exceeds such cri13 terion, with the area which exceeds such cri14 terion by the greatest amount given the highest

15 ranking.

16 ‘‘(B) EXCEPTION WHERE INADEQUATE

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

18 designated under subparagraph (A) if the Sec19 retary of Housing and Urban Development de20 termines that the course of action described in

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

22 inadequate.

23 ‘‘(C) PRIORITY FOR EMPOWERMENT ZONES

24 AND ENTERPRISE COMMUNITIES WITH RESPECT

25 TO FIRST HALF OF DESIGNATIONS.—With re-
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1 spect to the first 25 designations made under

2 this section, the nominated areas designated as

3 renewal communities shall be chosen first from

4 nominated areas which are enterprise zones or

5 empowerment communities (and are otherwise

6 eligible for designation under this section), and

7 then from other nominated areas which are so

8 eligible.

9 ‘‘(4) LIMITATION ON DESIGNATIONS.—

10 ‘‘(A) PUBLICATION OF REGULATIONS.—

11 The Secretary of Housing and Urban Develop12 ment shall prescribe by regulation no later than

13 4 months after the date of the enactment of

14 this section, after consultation with the officials

15 described in paragraph (1)(B)—

16 ‘‘(i) the procedures for nominating an

17 area under paragraph (1)(A),

18 ‘‘(ii) the parameters relating to the

19 size and population characteristics of a re20 newal community, and

21 ‘‘(iii) the manner in which nominated

22 areas will be evaluated based on the cri23 teria specified in subsection (d).

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

25 of Housing and Urban Development may des-
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1 ignate nominated areas as renewal communities

2 only during the 24-month period beginning on

3 the first day of the first month following the

4 month in which the regulations described in

5 subparagraph (A) are prescribed.

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

7 of Housing and Urban Development shall not

8 make any designation of a nominated area as a

9 renewal community under paragraph (2) un10 less—

11 ‘‘(i) the local governments and the

12 State in which the nominated area is lo13 cated have the authority—

14 ‘‘(I) to nominate such area for

15 designation as a renewal community,

16 ‘‘(II) to make the State and local

17 commitments described in subsection

18 (d), and

19 ‘‘(III) to provide assurances sat20 isfactory to the Secretary of Housing

21 and Urban Development that such

22 commitments will be fulfilled,

23 ‘‘(ii) a nomination regarding such

24 area is submitted in such a manner and in

25 such form, and contains such information,
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1 as the Secretary of Housing and Urban

2 Development shall by regulation prescribe,

3 and

4 ‘‘(iii) the Secretary of Housing and

5 Urban Development determines that any

6 information furnished is reasonably accu7 rate.

8 ‘‘(5) NOMINATION PROCESS FOR INDIAN RES9 ERVATIONS.—For purposes of this subchapter, in

10 the case of a nominated area on an Indian reserva11 tion, the reservation governing body (as determined

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

13 being both the State and local governments with re14 spect to such area.

15 ‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF16 FECT.—

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

18 as a renewal community shall remain in effect dur19 ing the period beginning on the date of the designa20 tion and ending on the earliest of—

21 ‘‘(A) December 31 of the 7th calendar year

22 following the calendar year in which such date

23 occurs,
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1 ‘‘(B) the termination date designated by

2 the State and local governments in their nomi3 nation pursuant to subsection (a)(4)(C)(ii), or

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

5 and Urban Development revokes such designa6 tion under paragraph (2).

7 ‘‘(2) REVOCATION OF DESIGNATION.—The Sec8 retary of Housing and Urban Development may,

9 after—

10 ‘‘(A) consultation with the officials de11 scribed in subsection (a)(1)(B), and

12 ‘‘(B) a hearing on the record involving offi13 cials of the State or local government involved

14 (or both, if applicable),

15 revoke the designation of an area if the Secretary of

16 Housing and Urban Development determines that

17 the local government or State in which the area is

18 located is not complying substantially with the State

19 or local commitments, respectively, described in sub20 section (d).

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

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

23 and Urban Development may designate any nomi24 nated area as a renewal community under subsection
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1 (a) only if the area meets the requirements of para2 graphs (2) and (3) of this subsection.

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

4 meets the requirements of this paragraph if—

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

6 a local government,

7 ‘‘(B) the boundary of the area is continu8 ous, and

9 ‘‘(C) the area—

10 ‘‘(i) has a population, as determined

11 by the most recent census data available,

12 of at least—

13 ‘‘(I) 4,000 if any portion of such

14 area is located within a metropolitan

15 statistical area (within the meaning of

16 section 143(k)(2)(B)) which has a

17 population of 50,000 or greater, or

18 ‘‘(II) 1,000 in any other case, or

19 ‘‘(ii) is entirely within an Indian res20 ervation (as determined by the Secretary of

21 the Interior).

22 ‘‘(3) ELIGIBILITY REQUIREMENTS.—A nomi23 nated area meets the requirements of this paragraph

24 if the State and the local governments in which it

25 is located certify (and the Secretary of Housing and
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1 Urban Development, after such review of supporting

2 data as he deems appropriate, accepts such certifi3 cation) that—

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

5 unemployment, and general distress,

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

7 as determined by the appropriate available

data, was at least 11 8 ⁄2 times the national unem9 ployment rate for the period to which such data

10 relate,

11 ‘‘(C) the poverty rate (as determined by

12 the most recent census data available) for each

13 population census tract (or where not tracted,

14 the equivalent county division as defined by the

15 Bureau of the Census for the purpose of defin16 ing poverty areas) within the area was at least

17 20 percent for the period to which such data re18 late, and

19 ‘‘(D) at least 70 percent of the households

20 living in the area have incomes below 80 per21 cent of the median income of households within

22 the jurisdiction of the local government (deter23 mined in the same manner as under section

24 119(b)(2) of the Housing and Community De25 velopment Act of 1974).
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1 ‘‘(4) CONSIDERATION OF HIGH INCIDENCE OF

2 CRIME.—The Secretary of Housing and Urban De3 velopment shall take into account, in selecting nomi4 nated areas for designation as renewal communities

5 under this section, the extent to which such areas

6 have a high incidence of crime.

7 ‘‘(d) REQUIRED STATE AND LOCAL COMMIT8 MENTS.—

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

10 and Urban Development may designate any nomi11 nated area as a renewal community under subsection

12 (a) only if—

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

14 which the area is located agree in writing that,

15 during any period during which the area is a

16 renewal community, such governments will fol17 low a specified course of action which meets the

18 requirements of paragraph (2) and is designed

19 to reduce the various burdens borne by employ20 ers or employees in such area, and

21 ‘‘(B) the economic growth promotion re22 quirements of paragraph (3) are met.

23 ‘‘(2) COURSE OF ACTION.—

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

25 meets the requirements of this paragraph if
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1 such course of action is a written document,

2 signed by a State (or local government) and

3 neighborhood organizations, which evidences a

4 partnership between such State or government

5 and community-based organizations and which

6 commits each signatory to specific and measur7 able goals, actions, and timetables. Such course

8 of action shall include at least five of the follow9 ing:

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

11 applying within the renewal community.

12 ‘‘(ii) An increase in the level of effi13 ciency of local services within the renewal

14 community.

15 ‘‘(iii) Crime reduction strategies, such

16 as crime prevention (including the provi17 sion of such services by nongovernmental

18 entities).

19 ‘‘(iv) Actions to reduce, remove, sim20 plify, or streamline governmental require21 ments applying within the renewal commu22 nity.

23 ‘‘(v) Involvement in the program by

24 private entities, organizations, neighbor25 hood organizations, and community
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1 groups, particularly those in the renewal

2 community, including a commitment from

3 such private entities to provide jobs and

4 job training for, and technical, financial, or

5 other assistance to, employers, employees,

6 and residents from the renewal community.

7 ‘‘(vi) State or local income tax bene8 fits for fees paid for services performed by

9 a nongovernmental entity which were for10 merly performed by a governmental entity.

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

12 market value) of surplus realty (such as

13 land, homes, and commercial or industrial

14 structures) in the renewal community to

15 neighborhood organizations, community de16 velopment corporations, or private compa17 nies.

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

19 For purposes of this section, in evaluating the

20 course of action agreed to by any State or local

21 government, the Secretary of Housing and

22 Urban Development shall take into account the

23 past efforts of such State or local government

24 in reducing the various burdens borne by em25 ployers and employees in the area involved.
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1 ‘‘(3) ECONOMIC GROWTH PROMOTION REQUIRE2 MENTS.—The economic growth promotion require3 ments of this paragraph are met with respect to a

4 nominated area if the local government and the

5 State in which such area is located certify in writing

6 that such government and State, respectively, have

7 repealed or otherwise will not enforce within the

8 area, if such area is designated as a renewal commu9 nity—

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

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

14 businesses which do not create a public nui15 sance,

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

18 ‘‘(D) zoning or other restrictions that im19 pede the formation of schools or child care cen20 ters, and

21 ‘‘(E) franchises or other restrictions on

22 competition for businesses providing public

23 services, including but not limited to taxicabs,

24 jitneys, cable television, or trash hauling,
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1 except to the extent that such regulation of busi2 nesses and occupations is necessary for and well-tai3 lored to the protection of health and safety.

4 ‘‘(e) COORDINATION WITH TREATMENT OF EM5 POWERMENT ZONES AND ENTERPRISE COMMUNITIES.—

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

7 to the same area both—

8 ‘‘(1) a designation as a renewal community, and

9 ‘‘(2) a designation as an empowerment zone or

10 enterprise community,

11 both of such designations shall be given full effect with

12 respect to such area.

13 ‘‘(f) DEFINITIONS.—For purposes of this sub14 chapter—

15 ‘‘(1) GOVERNMENTS.—If more than one govern16 ment seeks to nominate an area as a renewal com17 munity, any reference to, or requirement of, this sec18 tion shall apply to all such governments.

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

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

21 American Samoa, the Northern Mariana Islands,

22 and any other possession of the United States.

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

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

3 subdivision of a State,

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

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

8 ‘‘(C) the District of Columbia.’’

9 SEC. 104. EVALUATION AND REPORTING REQUIREMENTS.

10 Not later than the close of the fourth calendar year

11 after the year in which the Secretary of Housing and

12 Urban Development first designates an area as a renewal

13 community under section 1400D of the Internal Revenue

14 Code of 1986 (as added by this title), and at the close

15 of each fourth calendar year thereafter, such Secretary

16 shall prepare and submit to the Congress a report on the

17 effects of such designations in accomplishing the purposes

18 of this title.

19 SEC. 105. INTERACTION WITH OTHER FEDERAL PROGRAMS.

20 (a) TAX REDUCTIONS.—Any reduction of taxes, with

21 respect to any renewal community designated under sec22 tion 1400D of the Internal Revenue Code of 1986 (as so

23 added), under any plan of action under section 1400D(d)

24 of such Code shall be disregarded in determining the eligi25 bility of a State or local government for, or the amount
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1 or extent of, any assistance or benefits under any law of

2 the United States (other than subchapter X of chapter 1

3 of such Code).

4 (b) COORDINATION WITH RELOCATION ASSIST5 ANCE.—The designation of a renewal community under

6 section 1400D of such Code (as so added) shall not—

7 (1) constitute approval of a Federal or Feder8 ally assisted program or project (within the meaning

9 of the Uniform Relocation Assistance and Real

10 Property Acquisition Policies Act of 1970 (42

11 U.S.C. 4601 et seq.)), or

12 (2) entitle any person displaced from real prop13 erty located in such community to any rights or any

14 benefits under such Act.

15 (c) RENEWAL COMMUNITIES TREATED AS LABOR

16 SURPLUS AREAS.—Any area which is designated as a re17 newal community under section 1400D of such Code (as

18 so added) shall be treated for all purposes under Federal

19 law as a labor surplus area.

20 TITLE II—TAX INCENTIVES FOR

21 RENEWAL COMMUNITIES

22 SEC. 201. TAX TREATMENT OF RENEWAL COMMUNITIES.

23 (a) IN GENERAL.—Subchapter X of chapter I of the

24 Internal Revenue Code of 1986 (as added by section 103)

25 is amended by adding at the end the following new parts:
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1 ‘‘PART II—RENEWAL COMMUNITY CAPITAL GAIN

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

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

2 ‘‘SEC. 1400E. RENEWAL COMMUNITY CAPITAL GAIN.

3 ‘‘(a) GENERAL RULE.—Gross income does not in4 clude any qualified capital gain recognized on the sale or

5 exchange of a qualified community asset held for more

6 than 5 years.

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

8 of this section—

9 ‘‘(1) IN GENERAL.—The term ‘qualified com10 munity asset’ means—

11 ‘‘(A) any qualified community stock,

12 ‘‘(B) any qualified community business

13 property, and

14 ‘‘(C) any qualified community partnership

15 interest.

16 ‘‘(2) QUALIFIED COMMUNITY STOCK.—

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

18 subparagraph (B), the term ‘qualified commu19 nity stock’ means any stock in a domestic cor20 poration if—

21 ‘‘(i) such stock is acquired by the tax22 payer on original issue from the corpora23 tion solely in exchange for cash,
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1 ‘‘(ii) as of the time such stock was

2 issued, such corporation was a renewal

3 community business (or, in the case of a

4 new corporation, such corporation was

5 being organized for purposes of being a re6 newal community business), and

7 ‘‘(iii) during substantially all of the

8 taxpayer’s holding period for such stock,

9 such corporation qualified as a renewal

10 community business.

11 ‘‘(B) REDEMPTIONS.—The term ‘qualified

12 community stock’ shall not include any stock

13 acquired from a corporation which made a sub14 stantial stock redemption or distribution (with15 out a bona fide business purpose therefor) in an

16 attempt to avoid the purposes of this section.

17 ‘‘(3) QUALIFIED COMMUNITY BUSINESS PROP18 ERTY.—

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

20 community business property’ means tangible

21 property if—

22 ‘‘(i) such property was acquired by

23 the taxpayer by purchase (as defined in

24 section 179(d)(2)) after the date on which
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1 the designation of the renewal community

2 took effect,

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

4 in the renewal community commences with

5 the taxpayer, and

6 ‘‘(iii) during substantially all of the

7 taxpayer’s holding period for such prop8 erty, substantially all of the use of such

9 property was in a renewal community busi10 ness of the taxpayer.

11 ‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM12 PROVEMENTS.—

13 ‘‘(i) IN GENERAL.—The requirements

14 of clauses (i) and (ii) of subparagraph (A)

15 shall be treated as satisfied with respect

16 to—

17 ‘‘(I) property which is substan18 tially improved by the taxpayer, and

19 ‘‘(II) any land on which such

20 property is located.

21 ‘‘(ii) SUBSTANTIAL IMPROVEMENT.—

22 For purposes of clause (i), property shall

23 be treated as substantially improved by the

24 taxpayer only if, during any 24-month pe25 riod beginning after the date on which the
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1 designation of the renewal community took

2 effect, additions to basis with respect to

3 such property in the hands of the taxpayer

4 exceed the greater of—

5 ‘‘(I) an amount equal to the ad6 justed basis at the beginning of such

7 24-month period in the hands of the

8 taxpayer, or

9 ‘‘(II) $5,000.

10 ‘‘(C) LIMITATION ON LAND.—The term

11 ‘qualified community business property’ shall

12 not include land which is not an integral part

13 of a renewal community business.

14 ‘‘(4) QUALIFIED COMMUNITY PARTNERSHIP IN15 TEREST.—The term ‘qualified community partner16 ship interest’ means any interest in a partnership

17 if—

18 ‘‘(A) such interest is acquired by the tax19 payer from the partnership solely in exchange

20 for cash,

21 ‘‘(B) as of the time such interest was ac22 quired, such partnership was a renewal commu23 nity business (or, in the case of a new partner24 ship, such partnership was being organized for
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1 purposes of being a renewal community busi2 ness), and

3 ‘‘(C) during substantially all of the tax4 payer’s holding period for such interest, such

5 partnership qualified as a renewal community

6 business.

7 A rule similar to the rule of paragraph (2)(C) shall

8 apply for purposes of this paragraph.

9 ‘‘(5) TREATMENT OF SUBSEQUENT PUR10 CHASERS.—The term ‘qualified community asset’ in11 cludes any property which would be a qualified com12 munity asset but for paragraph (2)(A)(i), (3)(A)(ii),

13 or (4)(A) in the hands of the taxpayer if such prop14 erty was a qualified community asset in the hands

15 of all prior holders.

16 ‘‘(6) 10-YEAR SAFE HARBOR.—If any property

17 ceases to be a qualified community asset by reason

18 of paragraph (2)(A)(iii), (3)(A)(iii), or (4)(C) after

19 the 10-year period beginning on the date the tax20 payer acquired such property, such property shall

21 continue to be treated as meeting the requirements

22 of such paragraph; except that the amount of gain

23 to which subsection (a) applies on any sale or ex24 change of such property shall not exceed the amount
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1 which would be qualified capital gain had such prop2 erty been sold on the date of such cessation.

3 ‘‘(7) TREATMENT OF COMMUNITY DESIGNATION

4 TERMINATIONS.—The termination of any designa5 tion of an area as a renewal community shall be dis6 regarded for purposes of determining whether any

7 property is a qualified community asset.

8 ‘‘(c) OTHER DEFINITIONS AND SPECIAL RULES.—

9 For purposes of this section—

10 ‘‘(1) QUALIFIED CAPITAL GAIN.—Except as

11 otherwise provided in this subsection, the term

12 ‘qualified capital gain’ means any long-term capital

13 gain recognized on the sale or exchange of a quali14 fied community asset held for more than 5 years

15 (determined without regard to any period before the

16 designation of the renewal community).

17 ‘‘(2) CERTAIN GAIN ON REAL PROPERTY NOT

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

19 not include any gain which would be treated as ordi20 nary income under section 1250 if section 1250 ap21 plied to all depreciation rather than the additional

22 depreciation.

23 ‘‘(3) GAIN ATTRIBUTABLE TO PERIODS AFTER

24 TERMINATION OF COMMUNITY DESIGNATION NOT

25 QUALIFIED.—The term ‘qualified capital gain’ shall
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1 not include any gain attributable to periods after the

2 termination of any designation of an area as a re3 newal community.

4 ‘‘(4) RELATED PARTY TRANSACTIONS.—The

5 term ‘qualified capital gain’ shall not include any

6 gain attributable, directly or indirectly, in whole or

7 in part, to a transaction with a related person. For

8 purposes of this paragraph, persons are related to

9 each other if such persons are described in section

10 267(b) or 707(b)(1).

11 ‘‘(d) TREATMENT OF PASS-THRU ENTITIES.—

12 ‘‘(1) SALES AND EXCHANGES.—Gain on the

13 sale or exchange of an interest in a pass-thru entity

14 held by the taxpayer (other than an interest in an

15 entity which was a renewal community business dur16 ing substantially all of the period the taxpayer held

17 such interest) for more than 5 years shall be treated

18 as gain described in subsection (a) to the extent

19 such gain is attributable to amounts which would be

20 qualified capital gain on qualified community assets

21 (determined as if such assets had been sold on the

22 date of the sale or exchange) held by such entity for

23 more than 5 years (determined without regard to

24 any period before the date of the designation of the

25 renewal community) and throughout the period the
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1 taxpayer held such interest. A rule similar to the

2 rule of paragraph (2)(C) shall apply for purposes of

3 the preceding sentence.

4 ‘‘(2) INCOME INCLUSIONS.—

5 ‘‘(A) IN GENERAL.—Any amount included

6 in income by reason of holding an interest in a

7 pass-thru entity (other than an entity which

8 was a renewal community business during sub9 stantially all of the period the taxpayer held the

10 interest to which such inclusion relates) shall be

11 treated as gain described in subsection (a) if

12 such amount meets the requirements of sub13 paragraph (B).

14 ‘‘(B) REQUIREMENTS.—An amount meets

15 the requirements of this subparagraph if—

16 ‘‘(i) such amount is attributable to

17 qualified capital gain recognized on the

18 sale or exchange by the pass-thru entity of

19 property which is a qualified community

20 asset in the hands of such entity and

21 which was held by such entity for the pe22 riod required under subsection (a), and

23 ‘‘(ii) such amount is includible in the

24 gross income of the taxpayer by reason of

25 the holding of an interest in such entity
28

•S 1995 IS

1 which was held by the taxpayer on the date

2 on which such pass-thru entity acquired

3 such asset and at all times thereafter be4 fore the disposition of such asset by such

5 pass-thru entity.

6 ‘‘(C) LIMITATION BASED ON INTEREST

7 ORIGINALLY HELD BY TAXPAYER.—Subpara8 graph (A) shall not apply to any amount to the

9 extent such amount exceeds the amount to

10 which subparagraph (A) would have applied if

11 such amount were determined by reference to

12 the interest the taxpayer held in the pass-thru

13 entity on the date the qualified community

14 asset was acquired.

15 ‘‘(3) PASS-THRU ENTITY.—For purposes of this

16 subsection, the term ‘pass-thru entity’ means—

17 ‘‘(A) any partnership,

18 ‘‘(B) any S corporation,

19 ‘‘(C) any regulated investment company,

20 and

21 ‘‘(D) any common trust fund.

22 ‘‘(e) SALES AND EXCHANGES OF INTERESTS IN

23 PARTNERSHIPS AND S CORPORATIONS WHICH ARE

24 QUALIFIED COMMUNITY BUSINESSES.—In the case of the

25 sale or exchange of an interest in a partnership, or of
29

•S 1995 IS

1 stock in an S corporation, which was a renewal community

2 business during substantially all of the period the taxpayer

3 held such interest or stock, the amount of qualified capital

4 gain shall be determined without regard to—

5 ‘‘(1) any intangible, and any land, which is not

6 an integral part of any qualified business entity (as

7 defined in section 1400F(b)), and

8 ‘‘(2) gain attributable to periods before the des9 ignation of an area as a renewal community.

10 ‘‘(f) CERTAIN TAX-FREE AND OTHER TRANSFERS.—

11 For purposes of this section—

12 ‘‘(1) IN GENERAL.—In the case of a transfer of

13 a qualified community asset to which this subsection

14 applies, the transferee shall be treated as—

15 ‘‘(A) having acquired such asset in the

16 same manner as the transferor, and

17 ‘‘(B) having held such asset during any

18 continuous period immediately preceding the

19 transfer during which it was held (or treated as

20 held under this subsection) by the transferor.

21 ‘‘(2) TRANSFERS TO WHICH SUBSECTION AP22 PLIES.—This subsection shall apply to any trans23 fer—

24 ‘‘(A) by gift,

25 ‘‘(B) at death, or
30

•S 1995 IS

1 ‘‘(C) from a partnership to a partner

2 thereof, of a qualified community asset with re3 spect to which the requirements of subsection

4 (d)(2) are met at the time of the transfer (with5 out regard to the 5-year holding requirement).

6 ‘‘(3) CERTAIN RULES MADE APPLICABLE.—

7 Rules similar to the rules of section 1244(d)(2) shall

8 apply for purposes of this section.

9 ‘‘SEC. 1400F. RENEWAL COMMUNITY BUSINESS DEFINED.

10 ‘‘(a) IN GENERAL.—For purposes of this part, the

11 term ‘renewal community business’ means—

12 ‘‘(1) any qualified business entity, and

13 ‘‘(2) any qualified proprietorship.

14 Such term shall include any trades or businesses which

15 would qualify as a renewal community business if such

16 trades or businesses were separately incorporated. Such

17 term shall not include any trade or business of producing

18 property of a character subject to the allowance for deple19 tion under section 611.

20 ‘‘(b) QUALIFIED BUSINESS ENTITY.— For purposes

21 of this section, the term ‘qualified business entity’ means,

22 with respect to any taxable year, any corporation or part23 nership if for such year—
31

•S 1995 IS

1 ‘‘(1) every trade or business of such entity is

2 the active conduct of a qualified business within a

3 renewal community,

4 ‘‘(2) at least 80 percent of the total gross in5 come of such entity is derived from the active con6 duct of such business,

7 ‘‘(3) substantially all of the use of the tangible

8 property of such entity (whether owned or leased) is

9 within a renewal community,

10 ‘‘(4) substantially all of the intangible property

11 of such entity is used in, and exclusively related to,

12 the active conduct of any such business,

13 ‘‘(5) substantially all of the services performed

14 for such entity by its employees are performed in a

15 renewal community,

16 ‘‘(6) at least 35 percent of its employees are

17 residents of a renewal community,

18 ‘‘(7) less than 5 percent of the average of the

19 aggregate unadjusted bases of the property of such

20 entity is attributable to collectibles (as defined in

21 section 408(m)(2)) other than collectibles that are

22 held primarily for sale to customers in the ordinary

23 course of such business, and

24 ‘‘(8) less than 5 percent of the average of the

25 aggregate unadjusted bases of the property of such
32

•S 1995 IS

1 entity is attributable to nonqualified financial prop2 erty.

3 ‘‘(c) QUALIFIED PROPRIETORSHIP.—For purposes of

4 this section, the term ‘qualified proprietorship’ means,

5 with respect to any taxable year, any qualified business

6 carried on by an individual as a proprietorship if for such

7 year—

8 ‘‘(1) at least 80 percent of the total gross in9 come of such individual from such business is de10 rived from the active conduct of such business in a

11 renewal community,

12 ‘‘(2) substantially all of the use of the tangible

13 property of such individual in such business (wheth14 er owned or leased) is within a renewal community,

15 ‘‘(3) substantially all of the intangible property

16 of such business is used in, and exclusively related

17 to, the active conduct of such business,

18 ‘‘(4) substantially all of the services performed

19 for such individual in such business by employees of

20 such business are performed in a renewal commu21 nity,

22 ‘‘(5) at least 35 percent of such employees are

23 residents of a renewal community,

24 ‘‘(6) less than 5 percent of the average of the

25 aggregate unadjusted bases of the property of such
33

•S 1995 IS

1 individual which is used in such business is attrib2 utable to collectibles (as defined in section

3 408(m)(2)) other than collectibles that are held pri4 marily for sale to customers in the ordinary course

5 of such business, and

6 ‘‘(7) less than 5 percent of the average of the

7 aggregate unadjusted bases of the property of such

8 individual which is used in such business is attrib9 utable to nonqualified financial property.

10 For purposes of this subsection, the term ‘employee’ in11 cludes the proprietor.

12 ‘‘(d) QUALIFIED BUSINESS.—For purposes of this

13 section—

14 ‘‘(1) IN GENERAL.—Except as otherwise pro15 vided in this subsection, the term ‘qualified business’

16 means any trade or business.

17 ‘‘(2) RENTAL OF REAL PROPERTY.—The rental

18 to others of real property located in a renewal com19 munity shall be treated as a qualified business if and

20 only if—

21 ‘‘(A) the property is not residential rental

22 property (as defined in section 168(e)(2)), and

23 ‘‘(B) at least 50 percent of the gross rental

24 income from the real property is from renewal

25 community businesses.
34

•S 1995 IS

1 ‘‘(3) RENTAL OF TANGIBLE PERSONAL PROP2 ERTY.—The rental to others of tangible personal

3 property shall be treated as a qualified business if

4 and only if substantially all of the rental of such

5 property is by renewal community businesses or by

6 residents of a renewal community.

7 ‘‘(4) TREATMENT OF BUSINESS HOLDING IN8 TANGIBLES.—The term ‘qualified business’ shall not

9 include any trade or business consisting predomi10 nantly of the development or holding of intangibles

11 for sale or license.

12 ‘‘(5) CERTAIN BUSINESSES EXCLUDED.—The

13 term ‘qualified business’ shall not include—

14 ‘‘(A) any trade or business consisting of

15 the operation of any facility described in section

16 144(c)(6)(B), and

17 ‘‘(B) any trade or business the principal

18 activity of which is farming (within the meaning

19 of subparagraph (A) or (B) of section

20 2032A(e)(5)), but only if, as of the close of the

21 preceding taxable year, the sum of—

22 ‘‘(i) the aggregate unadjusted bases

23 (or, if greater, the fair market value) of

24 the assets owned by the taxpayer which are

25 used in such a trade or business, and
35

•S 1995 IS

1 ‘‘(ii) the aggregate value of assets

2 leased by the taxpayer which are used in

3 such a trade or business,

4 exceeds $500,000.

5 ‘‘(6) CONTROLLED GROUPS.—For purposes of

6 paragraph (5)(B), all persons treated as a single em7 ployer under subsection (a) or (b) of section 52 shall

8 be treated as a single taxpayer.

9 ‘‘(e) NONQUALIFIED FINANCIAL PROPERTY.—For

10 purposes of this section, the term ‘nonqualified financial

11 property’ means debt, stock, partnership interests, op12 tions, futures contracts, forward contracts, warrants, no13 tional principal contracts, annuities, and other similar

14 property specified in regulations; except that such term

15 shall not include—

16 ‘‘(1) reasonable amounts of working capital

17 held in cash, cash equivalents, or debt instruments

18 with a term of 18 months or less, or

19 ‘‘(2) debt instruments described in section

20 1221(4).

21 ‘‘PART III—FAMILY DEVELOPMENT ACCOUNTS

‘‘Sec. 1400G. Family development accounts.

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

renewal communities.

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

for deposit to family development account.
36

•S 1995 IS

1 ‘‘SEC. 1400G. FAMILY DEVELOPMENT ACCOUNTS FOR RE2 NEWAL COMMUNITY EITC RECIPIENTS.

3 ‘‘(a) ALLOWANCE OF DEDUCTION.—

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

5 deduction—

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

7 the amount paid in cash for the taxable year by

8 such individual to any family development ac9 count for such individual’s benefit, and

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

11 a qualified individual, the amount paid in cash

12 for the taxable year by such person to any fam13 ily development account for the benefit of a

14 qualified individual.

15 No deduction shall be allowed under this paragraph

16 for any amount deposited in a family development

17 account under section 1400H (relating to dem18 onstration program to provide matching amounts in

19 renewal communities).

20 ‘‘(2) LIMITATION.—

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

22 as a deduction to any individual for any taxable

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

24 exceed the lesser of—

25 ‘‘(i) $2,000, or
37

•S 1995 IS

1 ‘‘(ii) an amount equal to the com2 pensation includible in the individual’s

3 gross income for such taxable year.

4 ‘‘(B) PERSONS DONATING TO FAMILY DE5 VELOPMENT ACCOUNTS OF OTHERS.—The

6 amount allowable as a deduction to any person

7 for any taxable year by reason of paragraph

8 (1)(B) shall not exceed $1,000 with respect to

9 any qualified individual.

10 ‘‘(3) SPECIAL RULES FOR CERTAIN MARRIED

11 INDIVIDUALS.—

12 ‘‘(A) IN GENERAL.—In the case of an indi13 vidual to whom this subparagraph applies for

14 the taxable year, the limitation of subparagraph

15 (A) of paragraph (2) shall be equal to the lesser

16 of—

17 ‘‘(i) the dollar amount in effect under

18 paragraph (2)(A)(i) for the taxable year,

19 or

20 ‘‘(ii) the sum of—

21 ‘‘(I) the compensation includible

22 in such individual’s gross income for

23 the taxable year, plus—

24 ‘‘(II) the compensation includible

25 in the gross income of such individ-
38

•S 1995 IS

1 ual’s spouse for the taxable year re2 duced by the amount allowed as a de3 duction under paragraph (1) to such

4 spouse for such taxable year.

5 ‘‘(B) INDIVIDUALS TO WHOM SUBPARA6 GRAPH (A) APPLIES.—Subparagraph (A) shall

7 apply to any individual if—

8 ‘‘(i) such individual files a joint return

9 for the taxable year, and

10 ‘‘(ii) the amount of compensation (if

11 any) includible in such individual’s gross

12 income for the taxable year is less than the

13 compensation includible in the gross in14 come of such individual’s spouse for the

15 taxable year.

16 ‘‘(4) ROLLOVERS.—No deduction shall be al17 lowed under this section with respect to any rollover

18 contribution.

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

20 ‘‘(1) INCLUSION OF AMOUNTS IN GROSS IN21 COME.—Except as otherwise provided in this sub22 section, any amount paid or distributed out of a

23 family development account shall be included in

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

25 may be.
39

•S 1995 IS

1 ‘‘(2) EXCLUSION OF QUALIFIED FAMILY DEVEL2 OPMENT DISTRIBUTIONS.—Paragraph (1) shall not

3 apply to any qualified family development distribu4 tion.

5 ‘‘(3) SPECIAL RULES.—Rules similar to the

6 rules of paragraphs (4) and (5) of section 408(d)

7 shall apply for purposes of this section.

8 ‘‘(c) QUALIFIED FAMILY DEVELOPMENT DISTRIBU9 TION.—For purposes of this section—

10 ‘‘(1) IN GENERAL.—The term ‘qualified family

11 development distribution’ means any amount paid or

12 distributed out of a family development account

13 which would otherwise be includible in gross income,

14 to the extent that such payment or distribution is

15 used exclusively to pay qualified family development

16 expenses for the holder of the account or the spouse

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

18 holder.

19 ‘‘(2) QUALIFIED FAMILY DEVELOPMENT EX20 PENSES.—The term ‘qualified family development

21 expenses’ means any of the following:

22 ‘‘(A) Qualified postsecondary educational

23 expenses.

24 ‘‘(B) First-home purchase costs.
40

•S 1995 IS

1 ‘‘(C) Qualified business capitalization

2 costs.

3 ‘‘(D) Qualified medical expenses.

4 ‘‘(E) Qualified rollovers.

5 ‘‘(3) QUALIFIED POSTSECONDARY EDU6 CATIONAL EXPENSES.—

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

8 postsecondary educational expenses’ means

9 postsecondary educational expenses paid to an

10 eligible educational institution.

11 ‘‘(B) POSTSECONDARY EDUCATIONAL EX12 PENSES.—The term ‘postsecondary educational

13 expenses’ means tuition, fees, room, board,

14 books, supplies, and equipment required for the

15 enrollment or attendance of a student at an eli16 gible educational institution.

17 ‘‘(C) ELIGIBLE EDUCATIONAL INSTITU18 TION.—The term ‘eligible educational institu19 tion’ means the following:

20 ‘‘(i) INSTITUTION OF HIGHER EDU21 CATION.—An institution described in sec22 tion 481(a)(1) or 1201(a) of the Higher

23 Education Act of 1965 (20 U.S.C.

24 1088(a)(1), 1141(a)), as such sections are
41

•S 1995 IS

1 in effect on the date of the enactment of

2 this section.

3 ‘‘(ii) POSTSECONDARY VOCATIONAL

4 EDUCATION SCHOOL.—An area vocational

5 education school (as defined in subpara6 graph (C) or (D) of section 521(4) of the

7 Carl D. Perkins Vocational and Applied

8 Technology Education Act (20 U.S.C.

9 2471(4))) which is in any State (as defined

10 in section 521(33) of such Act), as such

11 sections are in effect on the date of the en12 actment of this section.

13 ‘‘(D) COORDINATION WITH SAVINGS BOND

14 PROVISIONS.—The amount of qualified post15 secondary educational expenses for any taxable

16 year shall be reduced by any amount excludable

17 from gross income under section 135.

18 ‘‘(4) FIRST-HOME PURCHASE COSTS.—

19 ‘‘(A) IN GENERAL.—The term ‘first-home

20 purchase costs’ means qualified acquisition

21 costs with respect to a qualified principal resi22 dence for a qualified first-time homebuyer.

23 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

24 The term ‘qualified acquisition costs’ means the

25 costs of acquiring, constructing, or reconstruct-
42

•S 1995 IS

1 ing a residence. Such term includes any usual

2 or reasonable settlement, financing, or other

3 closing costs.

4 ‘‘(C) QUALIFIED PRINCIPAL RESIDENCE.—

5 The term ‘qualified principal residence’ means a

6 principal residence (within the meaning of sec7 tion 1034), the qualified acquisition costs of

8 which do not exceed 100 percent of the average

9 area purchase price applicable to such residence

10 (determined in accordance with paragraphs (2)

11 and (3) of section 143(e)).

12 ‘‘(D) QUALIFIED FIRST-TIME HOME13 BUYER.—

14 ‘‘(i) IN GENERAL.—The term ‘quali15 fied first-time homebuyer’ means an indi16 vidual if such individual (and, in the case

17 of a married individual, the individual’s

18 spouse) has no present ownership interest

19 in a principal residence during the 3-year

20 period ending on the date of acquisition of

21 the principal residence to which this sub22 section applies.

23 ‘‘(ii) DATE OF ACQUISITION.—The

24 term ‘date of acquisition’ means the date

25 on which a binding contract to acquire,
43

•S 1995 IS

1 construct, or reconstruct the principal resi2 dence to which this subsection applies is

3 entered into.

4 ‘‘(5) QUALIFIED BUSINESS CAPITALIZATION

5 COSTS.—

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

7 business capitalization costs’ means qualified

8 expenditures for the capitalization of a qualified

9 business pursuant to a qualified plan.

10 ‘‘(B) QUALIFIED EXPENDITURES.—The

11 term ‘qualified expenditures’ means expendi12 tures included in a qualified plan, including

13 capital, plant, equipment, working capital, and

14 inventory expenses.

15 ‘‘(C) QUALIFIED BUSINESS.—The term

16 ‘qualified business’ means any business that

17 does not contravene any law or public policy (as

18 determined by the Secretary).

19 ‘‘(D) QUALIFIED PLAN.—The term ‘quali20 fied plan’ means a business plan which—

21 ‘‘(i) is approved by a financial institu22 tion, or by a nonprofit loan fund having

23 demonstrated fiduciary integrity,
44

•S 1995 IS

1 ‘‘(ii) includes a description of services

2 or goods to be sold, a marketing plan, and

3 projected financial statements, and

4 ‘‘(iii) may require the eligible individ5 ual to obtain the assistance of an experi6 enced entrepreneurial adviser.

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

8 term ‘qualified medical expenses’ means any amount

9 paid during the taxable year, not compensated for by

10 insurance or otherwise, for medical care (as defined

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

12 dependent (as defined in section 152).

13 ‘‘(7) QUALIFIED ROLLOVERS.—The term ‘quali14 fied rollover’ means any amount paid from a family

15 development account of a taxpayer into another such

16 account established for the benefit of—

17 ‘‘(A) such taxpayer, or

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

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

20 ‘‘(ii) any dependent (as defined in sec21 tion 152) of the taxpayer.

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

23 apply for purposes of this paragraph.

24 ‘‘(d) TAX TREATMENT OF ACCOUNTS.—
45

•S 1995 IS

1 ‘‘(1) IN GENERAL.—Any family development ac2 count is exempt from taxation under this subtitle

3 unless such account has ceased to be a family devel4 opment account by reason of paragraph (2). Not5 withstanding the preceding sentence, any such ac6 count is subject to the taxes imposed by section 511

7 (relating to imposition of tax on unrelated business

8 income of charitable, etc., organizations).

9 ‘‘(2) LOSS OF EXEMPTION IN CASE OF PROHIB10 ITED TRANSACTIONS.—For purposes of this section,

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

12 apply.

13 ‘‘(e) FAMILY DEVELOPMENT ACCOUNT.—For pur14 poses of this title, the term ‘family development account’

15 means a trust created or organized in the United States

16 for the exclusive benefit of a qualified individual or his

17 beneficiaries, but only if the written governing instrument

18 creating the trust meets the following requirements:

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

20 (as defined in subsection (c)(7))—

21 ‘‘(A) no contribution will be accepted un22 less it is in cash, and

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

24 the taxable year in excess of $2,000 (deter25 mined without regard to any contribution made
46

•S 1995 IS

1 under section 1400H (relating to demonstration

2 program to provide matching amounts in re3 newal communities)).

4 ‘‘(2) The trustee is a bank (as defined in sec5 tion 408(n)) or such other person who demonstrates

6 to the satisfaction of the Secretary that the manner

7 in which such other person will administer the trust

8 will be consistent with the requirements of this sec9 tion.

10 ‘‘(3) No part of the trust funds will be invested

11 in life insurance contracts.

12 ‘‘(4) The interest of an individual in the bal13 ance in his account is nonforfeitable.

14 ‘‘(5) The assets of the trust will not be commin15 gled with other property except in a common trust

16 fund or common investment fund.

17 ‘‘(6) Under regulations prescribed by the Sec18 retary, rules similar to the rules of section 401(a)(9)

19 and the incidental death benefit requirements of sec20 tion 401(a) shall apply to the distribution of the en21 tire interest of an individual for whose benefit the

22 trust is maintained.

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

24 section, the term ‘qualified individual’ means, for any tax25 able year, an individual—
47

•S 1995 IS

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

2 community throughout the taxable year, and

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

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

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

8 219(f)(1).

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

10 deduction under subsection (a) shall be computed

11 separately for each individual, and this section shall

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

14 ‘‘(3) TIME WHEN CONTRIBUTIONS DEEMED

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

16 shall be deemed to have made a contribution to a

17 family development account on the last day of the

18 preceding taxable year if the contribution is made on

19 account of such taxable year and is made not later

20 than the time prescribed by law for filing the return

21 for such taxable year (not including extensions

22 thereof).

23 ‘‘(4) EMPLOYER PAYMENTS.—For purposes of

24 this title, any amount paid by an employer to a fam25 ily development account shall be treated as payment
48

•S 1995 IS

1 of compensation to the employee (other than a self2 employed individual who is an employee within the

3 meaning of section 401(c)(1)) includible in his gross

4 income in the taxable year for which the amount was

5 contributed, whether or not a deduction for such

6 payment is allowable under this section to the em7 ployee.

8 ‘‘(5) ZERO BASIS.—The basis of an individual

9 in any family development account of such individual

10 shall be zero.

11 ‘‘(6) CUSTODIAL ACCOUNTS.—For purposes of

12 this section, a custodial account shall be treated as

13 a trust if the assets of such account are held by a

14 bank (as defined in section 408(n)) or another per15 son who demonstrates, to the satisfaction of the Sec16 retary, that the manner in which such person will

17 administer the account will be consistent with the re18 quirements of this section, and if the custodial ac19 count would, except for the fact that it is not a

20 trust, constitute a family development account de21 scribed in this section. For purposes of this title, in

22 the case of a custodial account treated as a trust by

23 reason of the preceding sentence, the custodian of

24 such account shall be treated as the trustee thereof.
49

•S 1995 IS

1 ‘‘(7) REPORTS.—The trustee of a family devel2 opment account shall make such reports regarding

3 such account to the Secretary and to the individual

4 for whom the account is maintained with respect to

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

6 distributions, and such other matters as the Sec7 retary may require under regulations. The reports

8 required by this paragraph—

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

10 such manner as the Secretary prescribes in

11 such regulations, and

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

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

14 calendar year following the calendar year

15 to which such reports relate, and

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

17 prescribes in such regulations.

18 ‘‘(8) INVESTMENT IN COLLECTIBLES TREATED

19 AS DISTRIBUTIONS.—Rules similar to the rules of

20 section 408(m) shall apply for purposes of this sec21 tion.

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

23 QUALIFIED FAMILY DEVELOPMENT EXPENSES.—

24 ‘‘(1) IN GENERAL.—If any amount is distrib25 uted from a family development account and is not
50

•S 1995 IS

1 used exclusively to pay qualified family development

2 expenses for the holder of the account or the spouse

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

4 holder, the tax imposed by this chapter for the tax5 able year of such distribution shall be increased by

6 the sum of—

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

8 amount which is includible in gross income and

9 is attributable to amounts contributed under

10 section 1400H (relating to demonstration pro11 gram to provide matching amounts in renewal

12 communities), and

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

14 amount which is includible in gross income and

15 is not described in paragraph (1).

16 For purposes of this subsection, the portion of a dis17 tributed amount which is attributable to amounts

18 contributed under section 1400H is the amount

19 which bears the same ratio to the distributed

20 amount as the aggregate amount contributed under

21 section 1400H to all family development accounts of

22 the individual bears to the aggregate amount con23 tributed to such accounts from all sources.
51

•S 1995 IS

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

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

the account holder attains age 591 5 ⁄2,

6 ‘‘(B) made pursuant to subsection (e)(6),

7 ‘‘(C) made to a beneficiary (or the estate

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

9 the account holder, or

10 ‘‘(D) attributable to the account holder’s

11 being disabled within the meaning of section

12 72(m)(7).

13 ‘‘SEC. 1400H. DEMONSTRATION PROGRAM TO PROVIDE

14 MATCHING CONTRIBUTIONS TO FAMILY DE15 VELOPMENT ACCOUNTS IN CERTAIN RE16 NEWAL COMMUNITIES.

17 ‘‘(a) DESIGNATION.—

18 ‘‘(1) DEFINITIONS.—For purposes of this sec19 tion, the term ‘FDA matching demonstration area’

20 means any renewal community—

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

22 by each of the local governments and States

23 which nominated such community for designa24 tion as a renewal community under section

25 1400D(a)(1)(A), and
52

•S 1995 IS

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

2 Urban Development, after consultation with—

3 ‘‘(i) the Secretaries of Agriculture,

4 Commerce, Labor, and the Treasury, the

5 Director of the Office of Management and

6 Budget, and the Administrator of the

7 Small Business Administration, and

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

9 Indian reservation, the Secretary of the In10 terior,

11 designates as an FDA matching demonstration

12 area.

13 ‘‘(2) NUMBER OF DESIGNATIONS.—The Sec14 retary of Housing and Urban Development may des15 ignate not more than 25 renewal communities as

16 FDA matching demonstration areas.

17 ‘‘(3) LIMITATIONS ON DESIGNATIONS.—

18 ‘‘(A) PUBLICATION OF REGULATIONS.—

19 The Secretary of Housing and Urban Develop20 ment shall prescribe by regulation no later than

21 4 months after the date of the enactment of

22 this section, after consultation with the officials

23 described in paragraph (1)(B)—

24 ‘‘(i) the procedures for nominating a

25 renewal community under paragraph
53

•S 1995 IS

1 (1)(A) (including procedures for coordinat2 ing such nomination with the nomination

3 of an area for designation as a renewal

4 community under section 1400D), and

5 ‘‘(ii) the manner in which nominated

6 renewal communities will be evaluated for

7 purposes of this section.

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

9 of Housing and Urban Development may des10 ignate renewal communities as FDA matching

11 demonstration areas only during the 24-month

12 period beginning on the first day of the first

13 month following the month in which the regula14 tions described in subparagraph (A) are pre15 scribed.

16 ‘‘(4) DESIGNATION BASED ON DEGREE OF POV17 ERTY, ETC.—The rules of section 1400D(a)(3) shall

18 apply for purposes of designations of FDA matching

19 demonstration areas under this section.

20 ‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF21 FECT.—Any designation of a renewal community as an

22 FDA matching demonstration area shall remain in effect

23 during the period beginning on the date of such designa24 tion and ending on the date on which such area ceases

25 to be a renewal community.
54

•S 1995 IS

1 ‘‘(c) MATCHING CONTRIBUTIONS TO FAMILY DEVEL2 OPMENT ACCOUNTS.—

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

4 taxable year, the Secretary shall deposit (to the ex5 tent provided in appropriation Acts) into a family

6 development account of each qualified individual (as

7 defined in section 1400G(f)) who is a resident

8 throughout the taxable year of an FDA matching

9 demonstration area an amount equal to the sum of

10 the amounts deposited into all of the family develop11 ment accounts of such individual during such tax12 able year (determined without regard to any amount

13 contributed under this section).

14 ‘‘(2) LIMITATIONS.—

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

16 not deposit more than $1000 under paragraph

17 (1) with respect to any individual for any tax18 able year.

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

20 shall not deposit more than $2000 under para21 graph (1) with respect to any individual.

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

23 provided in section 1400G, gross income shall not

24 include any amount deposited into a family develop25 ment account under paragraph (1).
55

•S 1995 IS

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

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

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

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

7 individual may designate that a specified portion (not less

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

9 which is attributable to the earned income tax credit shall

10 be deposited by the Secretary into a family development

11 account of such individual. The Secretary shall so deposit

12 such portion designated under this subsection.

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

15 to any taxable year—

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

17 imposed by this chapter for such taxable year, or

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

19 the return of the tax imposed by this chapter for

20 such taxable year) specified in regulations prescribed

21 by the Secretary.

22 Such designation shall be made in such manner as the

23 Secretary prescribes by regulations.

24 ‘‘(c) PORTION ATTRIBUTABLE TO EARNED INCOME

25 TAX CREDIT.—For purposes of subsection (a), an over26 payment for any taxable year shall be treated as attrib-
56

•S 1995 IS

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

2 such overpayment does not exceed the credit allowed to

3 the taxpayer under section 32 for such taxable year.

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

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

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

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

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

10 date the return is filed.

11 ‘‘PART IV—ADDITIONAL INCENTIVES

‘‘Sec. 1400J. Commercial revitalization credit.

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

12 ‘‘SEC. 1400J. COMMERCIAL REVITALIZATION TAX CREDIT.

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

14 except as provided in subsection (e), the commercial revi15 talization credit for any taxable year is an amount equal

16 to the applicable percentage of the qualified revitalization

17 expenditures with respect to any qualified revitalization

18 building.

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

20 this section—

21 ‘‘(1) IN GENERAL.—The term ‘applicable per22 centage’ means—
57

•S 1995 IS

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

2 which a qualified revitalization building is

3 placed in service, or

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

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

7 shall be irrevocable.

8 ‘‘(2) CREDIT PERIOD.—

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

11 period of 10 taxable years beginning with the

12 taxable year in which the building is placed in

13 service.

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

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

16 section 42(f) shall apply.

17 ‘‘(c) QUALIFIED REVITALIZATION BUILDINGS AND

18 EXPENDITURES.—For purposes of this section—

19 ‘‘(1) QUALIFIED REVITALIZATION BUILDING.—

20 The term ‘qualified revitalization building’ means

21 any building (and its structural components) if—

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

23 community and is placed in service after the

24 designation of such renewal community under

25 section 1400D,
58

•S 1995 IS

1 ‘‘(B) a commercial revitalization credit

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

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

5 of depreciation) is allowable with respect to the

6 building.

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

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

10 revitalization expenditure’ means any amount

11 properly chargeable to capital account—

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

14 which is—

15 ‘‘(I) nonresidential real property,

16 or

17 ‘‘(II) an addition or improvement

18 to property described in subclause (I),

19 ‘‘(ii) in connection with the construc20 tion or substantial rehabilitation or recon21 struction of a qualified revitalization build22 ing, or

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

24 connection with the qualified revitalization

25 building.
59

•S 1995 IS

1 ‘‘(B) DOLLAR LIMITATION.—The aggre2 gate amount which may be treated as qualified

3 revitalization expenditures with respect to any

4 qualified revitalization building for any taxable

5 year shall not exceed the excess of—

6 ‘‘(i) $10,000,000, reduced by

7 ‘‘(ii) any such expenditures with re8 spect to the building taken into account by

9 the taxpayer or any predecessor in deter10 mining the amount of the credit under this

11 section for all preceding taxable years.

12 ‘‘(C) CERTAIN EXPENDITURES NOT IN13 CLUDED.—The term ‘qualified revitalization ex14 penditure’ does not include—

15 ‘‘(i) STRAIGHT LINE DEPRECIATION

16 MUST BE USED.—Any expenditure (other

17 than with respect to land acquisitions) with

18 respect to which the taxpayer does not use

19 the straight line method over a recovery

20 period determined under subsection (c) or

21 (g) of section 168. The preceding sentence

22 shall not apply to any expenditure to the

23 extent the alternative depreciation system

24 of section 168(g) applies to such expendi-
60

•S 1995 IS

1 ture by reason of subparagraph (B) or (C)

2 of section 168(g)(1).

3 ‘‘(ii) ACQUISITION COSTS.—The costs

4 of acquiring any building or interest there5 in and any land in connection with such

6 building to the extent that such costs ex7 ceed 30 percent of the qualified revitaliza8 tion expenditures determined without re9 gard to this clause.

10 ‘‘(iii) OTHER CREDITS.—Any expendi11 ture which the taxpayer may take into ac12 count in computing any other credit allow13 able under this title unless the taxpayer

14 elects to take the expenditure into account

15 only for purposes of this section.

16 ‘‘(5) SUBSTANTIAL REHABILITATION OR RE17 CONSTRUCTION.—For purposes of this subsection, a

18 rehabilitation or reconstruction shall be treated as a

19 substantial rehabilitation or reconstruction only if

20 the qualified revitalization expenditures in connec21 tion with the rehabilitation or reconstruction exceed

22 25 percent of the fair market value of the building

23 (and its structural components) immediately before

24 the rehabilitation or reconstruction.
61

•S 1995 IS

1 ‘‘(d) WHEN EXPENDITURES TAKEN INTO AC2 COUNT.—

3 ‘‘(1) IN GENERAL.—Qualified revitalization ex4 penditures with respect to any qualified revitaliza5 tion building shall be taken into account for the tax6 able year in which the qualified revitalization build7 ing is placed in service. For purposes of the preced8 ing sentence, a substantial rehabilitation or recon9 struction of a building shall be treated as a separate

10 building.

11 ‘‘(2) PROGRESS EXPENDITURE PAYMENTS.—

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

13 (d) of section 47 shall apply for purposes of this sec14 tion.

15 ‘‘(e) LIMITATION ON AGGREGATE CREDITS ALLOW16 ABLE WITH RESPECT TO BUILDINGS LOCATED IN A

17 STATE.—

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

19 determined under this section for any taxable year

20 with respect to any building shall not exceed the

21 commercial revitalization credit amount (in the case

22 of an amount determined under subsection

23 (b)(1)(B), the present value of such amount as de24 termined under the rules of section 42(b)(2)(C)) al25 located to such building under this subsection by the
62

•S 1995 IS

1 commercial revitalization credit agency. Such alloca2 tion shall be made at the same time and in the same

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

4 42(h).

5 ‘‘(2) COMMERCIAL REVITALIZATION CREDIT

6 AMOUNT FOR AGENCIES.—

7 ‘‘(A) IN GENERAL.—The aggregate com8 mercial revitalization credit amount which a

9 commercial revitalization credit agency may al10 locate for any calendar year is the amount of

11 the State commercial revitalization credit ceil12 ing determined under this paragraph for such

13 calendar year for such agency.

14 ‘‘(B) STATE COMMERCIAL REVITALIZATION

15 CREDIT CEILING.—

16 ‘‘(i) IN GENERAL.—The State com17 mercial revitalization credit ceiling applica18 ble to any State for any calendar year is

19 $2,000,000 for each renewal community in

20 the State.

21 ‘‘(ii) SPECIAL RULE WHERE COMMU22 NITY LOCATED IN MORE THAN 1 STATE.—

23 If a renewal community is located in more

24 than 1 State, a State’s share of the

25 amount specified in clause (i) with respect
63

•S 1995 IS

1 to such community shall be an amount

2 that bears the same ratio to $2,000,000 as

3 the population in the State bears to the

4 population in all States in which such com5 munity is located.

6 ‘‘(iii) OTHER SPECIAL RULES.—Rules

7 similar to the rules of subparagraphs (D),

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

9 apply for purposes of this subsection.

10 ‘‘(C) COMMERCIAL REVITALIZATION CRED11 IT AGENCY.—For purposes of this section, the

12 term ‘commercial revitalization credit agency’

13 means any agency authorized by a State to

14 carry out this section.

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 amount with respect to any

20 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 (in accordance with rules similar to the rules of

25 section 147(f)(2) (other than subparagraph
64

•S 1995 IS

1 (B)(ii) thereof)) by the governmental unit 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 allocation and provides such individual a

7 reasonable opportunity to comment on the allo8 cation.

9 ‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur10 poses of this subsection, the term ‘qualified alloca11 tion plan’ means any plan—

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

13 be used to determine priorities of the commer14 cial revitalization credit agency which are ap15 propriate to local conditions,

16 ‘‘(B) which considers—

17 ‘‘(i) the degree to which a project con18 tributes to the implementation of a strate19 gic plan that is devised for a renewal com20 munity through a citizen participation

21 process,

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

23 permanent, full-time employment by reason

24 of any project, and
65

•S 1995 IS

1 ‘‘(iii) the active involvement of resi2 dents and nonprofit groups within the re3 newal community, and

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

5 agency (or its agent) will follow in monitoring

6 compliance with this section.

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

8 any building placed in service after December 31, 2002.

9 ‘‘SEC. 1400K. INCREASE IN EXPENSING UNDER SECTION 179.

10 ‘‘(a) GENERAL RULE.—In the case of a renewal com11 munity business (as defined in section 1400F), for pur12 poses of section 179—

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

14 shall be increased by the lesser of—

15 ‘‘(A) $35,000, or

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

17 which is qualified renewal property placed in

18 service during the taxable year, and

19 ‘‘(2) the amount taken into account under sec20 tion 179(b)(2) with respect to any section 179 prop21 erty which is qualified renewal property shall be 50

22 percent of the cost thereof.

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

24 section 179(d)(10) shall apply with respect to any quali-
66

•S 1995 IS

1 fied renewal property which ceases to be used in a renewal

2 community by a renewal community business.

3 ‘‘(c) QUALIFIED RENEWAL PROPERTY.—

4 ‘‘(1) GENERAL RULE.—For purposes of this

5 section—

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

7 renewal property’ means any property to which

8 section 168 applies (or would apply but for sec9 tion 179) if—

10 ‘‘(i) such property was acquired by

11 the taxpayer by purchase (as defined in

12 section 179(d)(2)) after the date on which

13 the designation of the renewal community

14 took effect,

15 ‘‘(ii) the original use of which in a re16 newal community commences with the tax17 payer, and

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

19 which is in a renewal community and is in

20 the active conduct of a qualified business

21 (as defined in section 1400F(d)) by the

22 taxpayer in such renewal community.

23 ‘‘(B) SPECIAL RULE FOR SUBSTANTIAL

24 RENOVATIONS.—In the case of any property

25 which is substantially renovated by the tax-
67

•S 1995 IS

1 payer, the requirements of clauses (i) and (ii)

2 of subparagraph (A) shall be treated as satis3 fied. For purposes of the preceding sentence,

4 property shall be treated as substantially ren5 ovated by the taxpayer only if, during any 24-

6 month period beginning after the date on which

7 the designation of the renewal community took

8 effect, additions to basis with respect to such

9 property in the hands of the taxpayer exceed

10 the greater of (i) an amount equal to the ad11 justed basis at the beginning of such 24-month

12 period in the hands of the taxpayer, or (ii)

13 $5,000.

14 ‘‘(2) SPECIAL RULES FOR SALE-LEASEBACKS.—

15 For purposes of paragraph (1)(A)(ii), if property is

16 sold and leased back by the taxpayer within 3

17 months after the date such property was originally

18 placed in service, such property shall be treated as

19 originally placed in service not earlier than the date

20 on which such property is used under the lease21 back.’’

22 (b) DEDUCTION FOR CONTRIBUTIONS TO FAMILY

23 DEVELOPMENT ACCOUNTS ALLOWABLE WHETHER OR

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

25 of the Internal Revenue Code of 1986 (relating to adjusted
68

•S 1995 IS

1 gross income defined) is amended by inserting after para2 graph (17) the following new paragraph:

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

4 deduction allowed by section 1400G(a)(1)(A).’’

5 SEC. 202. EXTENSION OF EXPENSING OF ENVIRONMENTAL

6 REMEDIATION COSTS FOR RENEWAL COMMU7 NITIES.

8 Section 198(c)(2)(A) of the Internal Revenue Code

9 of 1986 (defining targeted area) is amended by striking

10 ‘‘and’’ at the end of clause (iii), by redesignating clause

11 (iv) as clause (v), and by inserting after clause (iii) the

12 following new clause:

13 ‘‘(iv) any renewal community des14 ignated under section 1400D, and’’.

15 SEC. 203. EXTENSION OF WORK OPPORTUNITY TAX CREDIT

16 FOR RENEWAL COMMUNITIES.

17 (a) EXTENSION.—Paragraph (4) of section 51(c) of

18 the Internal Revenue Code of 1986 (relating to termi19 nation) is amended to read as follows:

20 ‘‘(4) TERMINATION.—

21 ‘‘(A) IN GENERAL.—The term ‘wages’

22 shall not include any amount paid or incurred

23 to an individual who begins work for the em24 ployer—
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1 ‘‘(i) after December 31, 1994, and be2 fore October 1, 1996, or

3 ‘‘(ii) after June 30, 1998.

4 ‘‘(B) SPECIAL RULE FOR RENEWAL COM5 MUNITIES.—If—

6 ‘‘(i) the employer is engaged in a

7 trade or business in a renewal community

8 throughout the 1-year period referred to in

9 subsection (b)(2),

10 ‘‘(ii) the individual who begins work

11 for the employer is a resident of such re12 newal community throughout such 1-year

13 period, and

14 ‘‘(iii) substantially all of the services

15 which such individual performs for the em16 ployer during such 1-year period are per17 formed in such renewal community,

18 then subparagraph (A)(ii) shall be applied by

19 substituting the last day for which the designa20 tion of such renewal community under section

21 1400D is in effect for ‘June 30, 1998.’ ’’

22 (b) CONGRUENT TREATMENT OF RENEWAL COMMU23 NITIES AND ENTERPRISE ZONES FOR PURPOSES OF

24 YOUTH RESIDENCE REQUIREMENTS.—
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•S 1995 IS

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

2 and (B) of section 51(d)(5) of the Internal Revenue

3 Code of 1986 are each amended by striking ‘‘em4 powerment zone or enterprise community’’ and in5 serting ‘‘empowerment zone, enterprise community,

6 or renewal community’’.

7 (2) QUALIFIED SUMMER YOUTH EMPLOYEE.—

8 Clause (iv) of section 51(d)(7)(A) of such Code is

9 amended by striking ‘‘empowerment zone or enter10 prise community’’ and inserting ‘‘empowerment

11 zone, enterprise community, or renewal community’’.

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

13 of section 51(d) of such Code are each amended by

14 inserting ‘‘OR COMMUNITY’’ in the heading after

15 ‘‘ZONE’’.

16 SEC. 204. ALLOWANCE OF COMMERCIAL REVITALIZATION

17 CREDIT.

18 Section 46 of the Internal Revenue Code of 1986 (re19 lating to investment credit) is amended by striking ‘‘and’’

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

21 end of paragraph (3) and inserting ‘‘, and’’, and by adding

22 at the end the following new paragraph:

23 ‘‘(4) the commercial revitalization credit pro24 vided under section 1400J.’’
71

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1 SEC. 205. CONFORMING AND CLERICAL AMENDMENTS.

2 (a) TAX ON EXCESS CONTRIBUTIONS.—

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

4 4973 of the Internal Revenue Code of 1986 is

5 amended by striking ‘‘or’’ at the end of paragraph

6 (2), adding ‘‘or’’ at the end of paragraph (3), and

7 inserting after paragraph (3) the following new

8 paragraph:

9 ‘‘(4) a family development account (within the

10 meaning of section 1400G(e)),’’

11 (2) EXCESS CONTRIBUTIONS.—Section 4973 of

12 such Code is amended by adding at the end the fol13 lowing new subsection:

14 ‘‘(g) FAMILY DEVELOPMENT ACCOUNTS.—For pur15 poses of this section, in the case of a family development

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

17 of—

18 ‘‘(1) the excess (if any) of—

19 ‘‘(A) the amount contributed for the tax20 able year to the account (other than a qualified

21 rollover, as defined in section 1400G(c)(7), or a

22 contribution under section 1400H), over

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

24 under section 1400G for such contributions,

25 and
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1 ‘‘(2) the amount determined under this sub2 section for the preceding taxable year reduced by the

3 sum of—

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

5 for the taxable year which were included in the

6 gross income of the payee under section

7 1400G(b)(1),

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

9 for the taxable year to which rules similar to

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

11 of section 1400G(b)(3), and

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

13 amount allowable as a deduction under section

14 1400G for the taxable year over the amount

15 contributed to the account for the taxable year

16 (other than a contribution under section

17 1400H).

18 For purposes of this subsection, any contribution which

19 is distributed from the family development account in a

20 distribution to which rules similar to the rules of section

21 408(d)(4) apply by reason of section 1400G(b)(3) shall

22 be treated as an amount not contributed.’’

23 (3) HEADING.—The heading of section 4973 of

24 such Code is amended by inserting ‘‘FAMILY DE25 VELOPMENT ACCOUNTS,’’ after ‘‘CONTRACTS,’’.
73

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1 (b) TAX ON PROHIBITED TRANSACTIONS.—Section

2 4975 of the Internal Revenue Code of 1986 is amended—

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

4 following new paragraph:

5 ‘‘(6) SPECIAL RULE FOR FAMILY DEVELOP6 MENT ACCOUNTS.—An individual for whose benefit a

7 family development account is established and any

8 contributor to such account shall be exempt from the

9 tax imposed by this section with respect to any

10 transaction concerning such account (which would

11 otherwise be taxable under this section) if, with re12 spect to such transaction, the account ceases to be

13 a family development account by reason of the appli14 cation of section 1400G(d)(2) to such account.’’, and

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

16 end of subparagraph (E), by redesignating subpara17 graph (F) as subparagraph (G), and by inserting

18 after subparagraph (E) the following new subpara19 graph:

20 ‘‘(F) a family development account de21 scribed in section 1400G(e), or’’.

22 (c) INFORMATION RELATING TO CERTAIN TRUSTS

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

24 the Internal Revenue Code of 1986 is amended—
74

•S 1995 IS

1 (1) by inserting ‘‘or section 1400G’’ after ‘‘sec2 tion 219’’, and

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

4 account described in section 1400G(e),’’, after ‘‘sec5 tion 408(a)’’.

6 (d) INSPECTION OF APPLICATIONS FOR TAX EXEMP7 TION.—Clause (i) of section 6104(a)(1)(B) of the Internal

8 Revenue Code of 1986 is amended by inserting ‘‘a family

9 development account described in section 1400G(e),’’ after

10 ‘‘section 408(a),’’.

11 (e) FAILURE TO PROVIDE REPORTS ON FAMILY DE12 VELOPMENT ACCOUNTS.—Section 6693 of the Internal

13 Revenue Code of 1986 is amended—

14 (1) by inserting ‘‘OR ON FAMILY DEVELOP15 MENT ACCOUNTS’’ after ‘‘ANNUITIES’’ in the

16 heading of such section, and

17 (2) in subsection (a)(2), by striking ‘‘and’’ at

18 the end of subparagraph (C), by striking the period

19 and inserting ‘‘, and’’ in subparagraph (D), and by

20 adding at the end the following new subparagraph:

21 ‘‘(E) section 1400G(g)(7) (relating to fam22 ily development accounts).’’

23 (f) CONFORMING AMENDMENTS REGARDING COM24 MERCIAL REVITALIZATION CREDIT.—
75

•S 1995 IS

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

2 of 1986 is amended by adding at the end the follow3 ing new paragraph:

4 ‘‘(9) NO CARRYBACK OF SECTION 1400J CREDIT

5 BEFORE DATE OF ENACTMENT.—No portion of the

6 unused business credit for any taxable year which is

7 attributable to any commercial revitalization credit

8 determined under section 1400J may be carried

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

10 enactment of section 1400J.’’

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

12 such Code is amended by inserting ‘‘or commercial

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

14 appears in the text and heading.

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

16 such Code is amended by striking ‘‘and’’ at the end

17 of clause (ii), by striking the period at the end of

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

19 the end the following new clause:

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

21 qualified revitalization building attributable

22 to qualified revitalization expenditures.’’

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

24 is amended by inserting ‘‘or 1400J(d)(2)’’ after

25 ‘‘section 47(d)’’ each place it appears.
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1 (5) Subparagraph (A) of section 50(a)(2) of

2 such Code is amended by inserting ‘‘or qualified re3 vitalization building (respectively)’’ after ‘‘qualified

4 rehabilitated building’’.

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

6 such Code is amended by adding at the end the fol7 lowing new sentence: ‘‘A similar rule shall apply for

8 purposes of section 1400J.’’

9 (7) Paragraph (2) of section 50(b) of such Code

10 is amended by striking ‘‘and’’ at the end of subpara11 graph (C), by striking the period at the end of sub12 paragraph (D) and inserting ‘‘; and’’, and by adding

13 at the end the following new subparagraph:

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

15 defined in section 1400J) to the extent of the

16 portion of the basis which is attributable to

17 qualified revitalization expenditures (as defined

18 in section 1400J).’’

19 (8) Subparagraph (C) of section 50(b)(4) of

20 such Code is amended—

21 (A) by inserting ‘‘or commercial revitaliza22 tion’’ after ‘‘rehabilitated’’ in the text and head23 ing, and

24 (B) by inserting ‘‘or commercial revitaliza25 tion’’ after ‘‘rehabilitation’’.
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•S 1995 IS

1 (9) Subparagraph (C) of section 469(i)(3) is

2 amended—

3 (A) by inserting ‘‘or section 1400J’’ after

4 ‘‘section 42’’; and

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

6 and inserting ‘‘AND COMMERCIAL REVITALIZA7 TION CREDITS’’.

8 (g) CLERICAL AMENDMENTS.—

9 (1) The table of subchapters for chapter 1 of

10 the Internal Revenue Code of 1986 is amended by

11 adding at the end the following new item:

‘‘Subchapter X. Renewal Communities.’’

12 (2) The table of parts for subchapter X of

13 chapter 1 of such Code (as added by section 103)

14 is amended by adding at the end the following new

15 items:

‘‘Part II. Renewal community capital gain and stock.

‘‘Part III. Family development accounts.

‘‘Part IV. Additional Incentives.’’

16 (3) The table of sections for chapter 43 of such

17 Code is amended by striking the item relating to sec18 tion 4973 and inserting the following new item:

‘‘Sec. 4973. Tax on excess contributions to individual retirement

accounts, medical savings accounts, certain section

403(b) contracts, family development accounts, and

certain individual retirement annuities.’’

19 (4) The table of sections for part I of sub20 chapter B of chapter 68 of such Code is amended
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1 by striking the item relating to section 6693 and in2 serting the following new item:

‘‘Sec. 6693. Failure to provide reports on individual retirement

accounts or annuities or on family development accounts; penalties relating to designated nondeductible contributions.’’

3 TITLE III—ADDITIONAL

4 PROVISIONS

5 SEC. 301. TRANSFER OF UNOCCUPIED AND SUBSTANDARD

6 HUD-HELD HOUSING IN RENEWAL COMMU7 NITIES TO LOCAL GOVERNMENTS.

8 (a) TRANSFER REQUIREMENT.—Pursuant to the au9 thority under section 204 of the Departments of Veterans

10 Affairs and Housing and Urban Development, and Inde11 pendent Agencies Appropriations Act, 1997, the Secretary

12 shall transfer ownership of any qualified HUD property

13 to the unit of general local government having jurisdiction

14 for the area in which the property is located in accordance

15 with this section, but only if the unit of general local gov16 ernment enters into an agreement with the Secretary

17 meeting the requirements of subsection (d).

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

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

20 any unoccupied multifamily housing, project, substandard

21 multifamily housing project, or unoccupied single family

22 property, that is—

23 (1) owned by the Secretary; and
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1 (2) located within a renewal community.

2 (c) TIMING OF TRANSFER.—Any transfer of owner3 ship required under subsection (a) shall be completed—

4 (1) with respect to any multifamily housing

5 project or single family property that is acquired by

6 the Secretary before the date on which the area in

7 which property is located is designated as a renewal

8 community and that is substandard or unoccupied

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

10 after such date; and

11 (2) with respect to any multifamily housing

12 project or single family property that is acquired by

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

14 in which the property is located is designated as a

15 renewal community, not later than 1 year after—

16 (A) the date on which the project is deter17 mined to be substandard or unoccupied (as ap18 plicable), in the case of a property that is not

19 unoccupied or substandard upon acquisition by

20 the Secretary; or

21 (B) the date on which the project is ac22 quired by the Secretary, in the case of a prop23 erty that is substandard or unoccupied (as ap24 plicable) upon such acquisition.
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1 (d) AGREEMENTS TO SELL PROPERTY TO COMMU2 NITY DEVELOPMENT CORPORATIONS.—An agreement de3 scribed in this subsection is an agreement that requires

4 a unit of general local government to dispose of the quali5 fied HUD property acquired by the unit of general local

6 government in accordance with the following require7 ments:

8 (1) NOTIFICATION TO COMMUNITY DEVELOP9 MENT CORPORATIONS.—Not later than 30 days after

10 the date on which the unit of general local govern11 ment acquires title to the property under subsection

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

13 each community development corporation located in

14 the State in which the property is located—

15 (A) of such acquisition of title; and

16 (B) that, during the 6-month period begin17 ning on the date on which such notification is

18 made, such community development corpora19 tions shall have the exclusive right under this

20 subsection to make bona fide offers to purchase

21 the property on a cost recovery basis.

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

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

24 (A) the unit of general local government

25 may not sell or offer to sell the qualified HUD
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1 property other than to a party notified under

2 paragraph (1), unless each community develop3 ment corporation required to be so notified has

4 notified the unit of general local government

5 that the corporation will not make an offer to

6 purchase the property; and

7 (B) the unit of general local government

8 shall accept a bona fide offer to purchase the

9 property made during such period if the offer is

10 acceptable to the unit of general local govern11 ment, except that a unit of general local govern12 ment may not sell a property to a community

13 development corporation during that 6-month

14 period other than on a cost recovery basis.

15 (3) OTHER DISPOSITION.—During the 6-month

16 period beginning on the expiration of the 6-month

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

18 general local government shall dispose of the prop19 erty on a negotiated, competitive bid, or other basis,

20 on such terms as the unit of general local govern21 ment deems appropriate.

22 (e) SATISFACTION OF INDEBTEDNESS.—Before

23 transferring ownership of any qualified HUD property

24 pursuant to subsection (a), the Secretary shall satisfy any
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1 indebtedness incurred in connection with the property to

2 be transferred, by—

3 (1) canceling the indebtedness; or

4 (2) reimbursing the unit of general local gov5 ernment to which the property is transferred for the

6 amount of the indebtedness.

7 (f) DETERMINATION OF STATUS OF PROPERTIES.—

8 To ensure compliance with the requirements of subsection

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

10 (1) UPON DESIGNATION OF RENEWAL COMMU11 NITIES.—Upon the designation of any renewal com12 munity, the Secretary shall promptly assess each

13 residential property owned by the Secretary that is

14 located within such renewal community to determine

15 whether such property is a qualified HUD property.

16 (2) UPON ACQUISITION.—Upon acquiring any

17 residential property that is located within a renewal

18 community, the Secretary shall promptly determine

19 whether the property is a qualified HUD property.

20 (3) UPDATES.—The Secretary shall periodically

21 reassess the residential properties owned by the Sec22 retary to determine whether any such properties

23 have become qualified HUD properties.

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

25 the terms or the enforceability of any contract or lease
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1 entered into with respect to any residential property before

2 the date that such property becomes a qualified HUD

3 property.

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

5 the 6-month period beginning on the date of the enact6 ment of this Act, the Secretary shall establish, by rule,

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

8 to carry out this section.

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

10 following definitions shall apply:

11 (1) COMMUNITY DEVELOPMENT CORPORA12 TION.—The term ‘‘community development corpora13 tion’’ means a nonprofit organization whose primary

14 purpose is to promote community development by

15 providing housing opportunities for low-income fami16 lies.

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

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

19 residential property by a unit of general local gov20 ernment to a community development corporation

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

22 by the community development corporation is less

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

24 general local government in connection with such

25 property during the period beginning on the date on
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1 which the unit of general local government acquires

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

3 on the date on which the sale is consummated.

4 (3) LOW-INCOME FAMILIES.—The term ‘‘low-in5 come families’’ has the meaning given the term in

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

7 1937.

8 (4) MULTIFAMILY HOUSING PROJECT.—The

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

10 given the term in section 203 of the Housing and

11 Community Development Amendments of 1978.

12 (5) RENEWAL COMMUNITY.—The term ‘‘re13 newal community’’ means an area designated (under

14 subchapter X of chapter 1 of the Internal Revenue

15 Code of 1986) as a renewal community.

16 (6) RESIDENTIAL PROPERTY.—The term ‘‘resi17 dential property’’ means a property that is a multi18 family housing project or a single family property.

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

20 the Secretary of Housing and Urban Development.

21 (8) SEVERE PHYSICAL PROBLEMS.—The term

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

23 dwelling unit, that the unit—
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1 (A) lacks hot or cold piped water, a flush

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

3 unit, for the exclusive use of that unit;

4 (B) on not less than 3 separate occasions

5 during the preceding winter months, was un6 comfortably cold for a period of more than 6

7 consecutive hours due to a malfunction of the

8 heating system for the unit;

9 (C) has no functioning electrical service,

10 exposed wiring, any room in which there is not

11 a functioning electrical outlet, or has experi12 enced 3 or more blown fuses or tripped circuit

13 breakers during the preceding 90-day period;

14 (D) is accessible through a public hallway

15 in which there are no working light fixtures,

16 loose or missing steps or railings, and no eleva17 tor; or

18 (E) has severe maintenance problems, in19 cluding water leaks involving the roof, windows,

20 doors, basement, or pipes or plumbing fixtures,

21 holes or open cracks in walls or ceilings, severe

22 paint peeling or broken plaster, and signs of ro23 dent infestation.
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1 (9) SINGLE FAMILY PROPERTY.—The term

2 ‘‘single family property’’ means a 1- to 4-family resi3 dence.

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

5 means, with respect to a multifamily housing

6 project, that 25 percent or more of the dwelling

7 units in the project have severe physical problems.

8 (11) UNIT OF GENERAL LOCAL GOVERN9 MENT.—The term ‘‘unit of general local govern10 ment’’ has the meaning given the term in section

11 102(a) of the Housing and Community Development

12 Act of 1974.

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

14 means, with respect to a residential property, that

15 the unit of general local government having jurisdic16 tion over the area in which the project is located has

17 certified in writing that the property is not inhab18 ited.

19 SEC. 302. CRA CREDIT FOR INVESTMENTS IN COMMUNITY

20 DEVELOPMENT ORGANIZATIONS LOCATED IN

21 RENEWAL COMMUNITIES.

22 Section 804 of the Community Reinvestment Act of

23 1977 (12 U.S.C. 2903) is amended by adding at the end

24 the following new subsection:
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1 ‘‘(c) INVESTMENTS IN CERTAIN COMMUNITY DEVEL2 OPMENT ORGANIZATIONS.—In assessing and taking into

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

4 financial institution, the appropriate Federal financial su5 pervisory agency may consider, as a factor, investments

6 of the institution in, and capital investment, loan partici7 pation, and other ventures undertaken by the institution

8 in cooperation with, any community development organi9 zation (as defined in section 234 of the Bank Enterprise

10 Act of 1991) which is located in a renewal community (as

11 designated under section 1400D of the Internal Revenue

12 Code of 1986).’’.

Æ