I

106TH CONGRESS

1ST SESSION H. R. 1945

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

Indian investment and employment, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 26, 1999

Mr. SHADEGG introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

tax credits for Indian investment and employment, and

for other purposes.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Indian Reservation

5 Jobs and Investment Act of 1999’’.

6 SEC. 2. CONSTITUTIONAL AUTHORITY.

7 The Constitutional authority upon which this Act

8 rests is the power of Congress to lay and collect taxes and

9 to regulate commerce with foreign nations and among the
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1 several States and with the Indian tribes, as set forth in

2 section 8 of Article I of the United States Constitution.

3 SEC. 3. INVESTMENT TAX CREDIT FOR PROPERTY ON IN4 DIAN RESERVATIONS.

5 (a) ALLOWANCE OF INDIAN RESERVATION CRED6 IT.—Section 46 of the Internal Revenue Code of 1986 (re7 lating to investment credits) is amended by striking ‘‘and’’

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

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

10 after paragraph (3) the following new paragraph:

11 ‘‘(4) the Indian reservation credit.’’.

12 (b) AMOUNT OF INDIAN RESERVATION CREDIT.—

13 (1) IN GENERAL.—Section 48 of such Code (re14 lating to the energy credit and the reforestation

15 credit) is amended by adding after subsection (b)

16 the following new subsection:

17 ‘‘(c) INDIAN RESERVATION CREDIT.—

18 ‘‘(1) IN GENERAL.—For purposes of section 46,

19 the Indian reservation credit for any taxable year is

20 the Indian reservation percentage of the qualified in21 vestment in qualified Indian reservation property

22 placed in service during such taxable year, deter23 mined in accordance with the following table:

‘‘In the case of qualified Indian reservation property

which is—

The Indian reservation percentage is—

Reservation personal property ................................................. 10
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‘‘In the case of qualified Indian reservation property

which is—

The Indian reservation percentage is—

New reservation construction property .................................... 15

Reservation infrastructure investment ..................................... 15

1 ‘‘(2) QUALIFIED INVESTMENT IN QUALIFIED

2 INDIAN RESERVATION PROPERTY DEFINED.—For

3 purposes of this subpart—

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

5 Indian reservation property’ means property—

6 ‘‘(i) which is—

7 ‘‘(I) reservation personal prop8 erty;

9 ‘‘(II) new reservation construc10 tion property; or

11 ‘‘(III) reservation infrastructure

12 investment; and

13 ‘‘(ii) not acquired (directly or indi14 rectly) by the taxpayer from a person who

15 is related to the taxpayer (within the

16 meaning of section 465(b)(3)(C)).

17 The term ‘qualified Indian reservation property’

18 does not include any property (or any portion

19 thereof) placed in service for purposes of con20 ducting or housing class I, II, or III gaming (as

21 defined in section 4 of the Indian Gaming Reg22 ulatory Act (25 U.S.C. 2703)).
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1 ‘‘(B) QUALIFIED INVESTMENT.—The term

2 ‘qualified investment’ means—

3 ‘‘(i) in the case of reservation infra4 structure investment, the amount expended

5 by the taxpayer for the acquisition or con6 struction of the reservation infrastructure

7 investment; and

8 ‘‘(ii) in the case of all other qualified

9 Indian reservation property, the taxpayer’s

10 basis for such property.

11 ‘‘(C) RESERVATION PERSONAL PROP12 ERTY.—The term ‘reservation personal prop13 erty’ means qualified personal property which is

14 used by the taxpayer predominantly in the ac15 tive conduct of a trade or business within an

16 Indian reservation. Property shall not be treat17 ed as ‘reservation personal property’ if it is

18 used or located outside the Indian reservation

19 on a regular basis.

20 ‘‘(D) QUALIFIED PERSONAL PROPERTY.—

21 The term ‘qualified personal property’ means

22 property—

23 ‘‘(i) for which depreciation is allow24 able under section 168;

25 ‘‘(ii) which is not—
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1 ‘‘(I) nonresidential real property;

2 ‘‘(II) residential rental property;

3 or

4 ‘‘(III) real property which is not

5 described in subclause (I) or (II) and

6 which has a class life of more than

7 12.5 years.

8 For purposes of this subparagraph, the

9 terms ‘nonresidential real property’, ‘resi10 dential rental property’, and ‘class life’

11 have the respective meanings given such

12 terms by section 168.

13 ‘‘(E) NEW RESERVATION CONSTRUCTION

14 PROPERTY.—The term ‘new reservation con15 struction property’ means qualified real

16 property—

17 ‘‘(i) which is located in an Indian res18 ervation;

19 ‘‘(ii) which is used by the taxpayer

20 predominantly in the active conduct of a

21 trade or business within an Indian reserva22 tion; and

23 ‘‘(iii) which is originally placed in

24 service by the taxpayer.
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1 ‘‘(F) QUALIFIED REAL PROPERTY.—The

2 term ‘qualified real property’ means property

3 for which depreciation is allowable under sec4 tion 168 and which is described in subclause

5 (I), (II), or (III) of subparagraph (D)(ii).

6 ‘‘(G) RESERVATION INFRASTRUCTURE IN7 VESTMENT.—

8 ‘‘(i) IN GENERAL.—The term ‘reserva9 tion infrastructure investment’ means

10 qualified personal property or qualified real

11 property which—

12 ‘‘(I) benefits the tribal infrastruc13 ture;

14 ‘‘(II) is available to the general

15 public; and

16 ‘‘(III) is placed in service in con17 nection with the taxpayer’s active con18 duct of a trade or business within an

19 Indian reservation.

20 ‘‘(ii) PROPERTY MAY BE LOCATED

21 OUTSIDE THE RESERVATION.—Qualified

22 personal property and qualified real prop23 erty used or located outside an Indian res24 ervation shall be reservation infrastructure

25 investment only if its purpose is to connect
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1 to existing tribal infrastructure in the res2 ervation, and shall include, but not be lim3 ited to, roads, power lines, water systems,

4 railroad spurs, and communications facili5 ties.

6 ‘‘(H) COORDINATION WITH OTHER CRED7 ITS.—The term ‘qualified Indian reservation

8 property’ shall not include any property with re9 spect to which the energy credit or the rehabili10 tation credit is allowed.

11 ‘‘(3) REAL ESTATE RENTALS.—For purposes of

12 this section, the rental to others of real property lo13 cated within an Indian reservation shall be treated

14 as the active conduct of a trade or business in an

15 Indian reservation.

16 ‘‘(4) INDIAN RESERVATION DEFINED.—For

17 purposes of this subpart, the term ‘Indian reserva18 tion’ means a reservation, as defined in—

19 ‘‘(A) section 3(d) of the Indian Financing

20 Act of 1974 (25 U.S.C. 1452(d)); or

21 ‘‘(B) section 4(10) of the Indian Child

22 Welfare Act of 1978 (25 U.S.C. 1903(10)).

23 ‘‘(5) LIMITATION BASED ON UNEMPLOY24 MENT.—
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1 ‘‘(A) GENERAL RULE.—The Indian res2 ervation credit allowed under section 46 for any

3 taxable year shall equal—

4 ‘‘(i) if the Indian unemployment rate

5 on the applicable Indian reservation for

6 which the credit is sought exceeds 300 per7 cent of the national average unemployment

8 rate at any time during the calendar year

9 in which the property is placed in service

10 or during the immediately preceding 2 cal11 endar years, 100 percent of such credit;

12 ‘‘(ii) if such Indian unemployment

13 rate exceeds 150 percent but not 300 per14 cent, 50 percent of such credit; and

15 ‘‘(iii) if such Indian unemployment

16 rate does not exceed 150 percent, 0 per17 cent of such credit.

18 ‘‘(B) SPECIAL RULE FOR LARGE

19 PROJECTS.—In the case of a qualified Indian

20 reservation property which has (or is a compo21 nent of a project which has) a projected con22 struction period of more than 2 years or a cost

23 of more than $1,000,000, subparagraph (A)

24 shall be applied by substituting ‘during the ear25 lier of the calendar year in which the taxpayer
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1 enters into a binding agreement to make a

2 qualified investment or the first calendar year

3 in which the taxpayer has expended at least 10

4 percent of the taxpayer’s qualified investment,

5 or the preceding calendar year’ for ‘during the

6 calendar year in which the property is placed in

7 service or during the immediately preceding 2

8 calendar years’.

9 ‘‘(C) DETERMINATION OF INDIAN UNEM10 PLOYMENT.—For purposes of this paragraph,

11 with respect to any Indian reservation, the In12 dian unemployment rate shall be based upon

13 Indians unemployed and able to work, and shall

14 be certified by the Secretary of the Interior.

15 ‘‘(6) COORDINATION WITH NONREVENUE

16 LAWS.—Any reference in this subsection to a provi17 sion not contained in this title shall be treated for

18 purposes of this subsection as a reference to such

19 provision as in effect on the date of the enactment

20 of this paragraph.’’.

21 (2) LODGING TO QUALIFY.—Paragraph (2) of

22 section 50(b) of such Code (relating to property used

23 for lodging) is amended—

24 (A) by striking ‘‘and’’ at the end of sub25 paragraph (C);
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1 (B) by striking the period at the end of

2 subparagraph (D) and inserting ‘‘; and’’ and

3 (C) by adding at the end the following sub4 paragraph:

5 ‘‘(E) new reservation construction prop6 erty.’’.

7 (c) RECAPTURE.—Subsection (a) of section 50 of

8 such Code (relating to recapture in case of dispositions,

9 etc.), is amended by adding at the end the following new

10 paragraph:

11 ‘‘(6) SPECIAL RULES FOR INDIAN RESERVATION

12 PROPERTY.—

13 ‘‘(A) IN GENERAL.—If, during any taxable

14 year, property with respect to which the tax15 payer claimed an Indian reservation credit—

16 ‘‘(i) is disposed of; or

17 ‘‘(ii) in the case of reservation per18 sonal property—

19 ‘‘(I) otherwise ceases to be in20 vestment credit property with respect

21 to the taxpayer; or

22 ‘‘(II) is removed from the Indian

23 reservation, converted, or otherwise

24 ceases to be Indian reservation prop25 erty,
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1 the tax under this chapter for such taxable year

2 shall be increased by the amount described in

3 subparagraph (B).

4 ‘‘(B) AMOUNT OF INCREASE.—The in5 crease in tax under subparagraph (A) shall

6 equal the aggregate decrease in the credits al7 lowed under section 38 by reason of section

8 48(c) for all prior taxable years which would

9 have resulted had the qualified investment

10 taken into account with respect to the property

11 been limited to an amount which bears the

12 same ratio to the qualified investment with re13 spect to such property as the period such prop14 erty was held by the taxpayer bears to the ap15 plicable recovery period under section 168(g).

16 ‘‘(C) COORDINATION WITH OTHER RECAP17 TURE PROVISIONS.—In the case of property to

18 which this paragraph applies, paragraph (1)

19 shall not apply and the rules of paragraphs (3),

20 (4), and (5) shall apply.’’.

21 (d) BASIS ADJUSTMENT TO REFLECT INVESTMENT

22 CREDIT.—Paragraph (3) of section 50(c) of such Code

23 (relating to basis adjustment to investment credit prop24 erty) is amended by striking ‘‘energy credit or reforest25 ation credit’’ and inserting ‘‘energy credit, reforestation
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1 credit, or Indian reservation credit other than with respect

2 to any expenditure for new reservation construction prop3 erty’’.

4 (e) CERTAIN GOVERNMENTAL USE PROPERTY TO

5 QUALIFY.—Paragraph (4) of section 50(b) of such Code

6 (relating to property used by governmental units or for7 eign persons or entities) is amended by redesignating sub8 paragraphs (D) and (E) as subparagraphs (E) and (F),

9 respectively, and by inserting after subparagraph (C) the

10 following new subparagraph:

11 ‘‘(D) EXCEPTION FOR RESERVATION IN12 FRASTRUCTURE INVESTMENT.—This paragraph

13 shall not apply for purposes of determining the

14 Indian reservation credit with respect to res15 ervation infrastructure investment.’’.

16 (f) APPLICATION OF AT-RISK RULES.—Subpara17 graph (C) of section 49(a)(1) of such Code is amended

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

19 the period at the end of clause (iii) and inserting ‘‘, and’’,

20 and by adding at the end the following new clause:

21 ‘‘(iv) the qualified investment in quali22 fied Indian reservation property.’’.

23 (g) CLERICAL AMENDMENTS.—

24 (1) Section 48 of such Code is amended by

25 striking the heading and inserting the following:
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1 ‘‘SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; IN2 DIAN RESERVATION CREDIT.’’.

3 (2) The table of sections for subpart E of part

4 IV of subchapter A of chapter 1 is amended by

5 striking the item relating to section 48 and inserting

6 the following:

‘‘Sec. 48. Energy credit; reforestation credit; Indian reservation

credit.’’.

7 (h) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to property placed in service after

9 December 31, 1999.

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