I 

108TH CONGRESS 

1ST SESSION H. R. 388

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 

JANUARY 27, 2003

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 2003’’. 

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

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

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

23 ‘‘(B) QUALIFIED INVESTMENT.—The term 

24 ‘qualified investment’ means—
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1 ‘‘(i) in the case of reservation infra2 structure investment, the amount expended 

3 by the taxpayer for the acquisition or con4 struction of the reservation infrastructure 

5 investment; and 

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

7 Indian reservation property, the taxpayer’s 

8 basis for such property. 

9 ‘‘(C) RESERVATION PERSONAL PROP10 ERTY.—The term ‘reservation personal prop11 erty’ means qualified personal property which is 

12 used by the taxpayer predominantly in the ac13 tive conduct of a trade or business within an 

14 Indian reservation. Property shall not be treat15 ed as ‘reservation personal property’ if it is 

16 used or located outside the Indian reservation 

17 on a regular basis. 

18 ‘‘(D) QUALIFIED PERSONAL PROPERTY.—

19 The term ‘qualified personal property’ means 

20 property—

21 ‘‘(i) for which depreciation is allow22 able under section 168; 

23 ‘‘(ii) which is not—

24 ‘‘(I) nonresidential real property; 
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1 ‘‘(II) residential rental property; 

2 or 

3 ‘‘(III) real property which is not 

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

5 which has a class life of more than 

6 12.5 years.

7 For purposes of this subparagraph, the 

8 terms ‘nonresidential real property’, ‘resi9 dential rental property’, and ‘class life’ 

10 have the respective meanings given such 

11 terms by section 168. 

12 ‘‘(E) NEW RESERVATION CONSTRUCTION

13 PROPERTY.—The term ‘new reservation con14 struction property’ means qualified real prop15 erty—

16 ‘‘(i) which is located in an Indian res17 ervation; 

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

19 predominantly in the active conduct of a 

20 trade or business within an Indian reserva21 tion; and

22 ‘‘(iii) which is originally placed in 

23 service by the taxpayer. 

24 ‘‘(F) QUALIFIED REAL PROPERTY.—The 

25 term ‘qualified real property’ means property 
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1 for which depreciation is allowable under sec2 tion 168 and which is described in subclause 

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

4 ‘‘(G) RESERVATION INFRASTRUCTURE IN5 VESTMENT.—

6 ‘‘(i) IN GENERAL.—The term ‘reserva7 tion infrastructure investment’ means 

8 qualified personal property or qualified real 

9 property which—

10 ‘‘(I) benefits the tribal infrastruc11 ture; 

12 ‘‘(II) is available to the general 

13 public; and 

14 ‘‘(III) is placed in service in con15 nection with the taxpayer’s active con16 duct of a trade or business within an 

17 Indian reservation. 

18 ‘‘(ii) PROPERTY MAY BE LOCATED

19 OUTSIDE THE RESERVATION.—Qualified 

20 personal property and qualified real prop21 erty used or located outside an Indian res22 ervation shall be reservation infrastructure 

23 investment only if its purpose is to connect 

24 to existing tribal infrastructure in the res25 ervation, and shall include, but not be lim-
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1 ited to, roads, power lines, water systems, 

2 railroad spurs, and communications facili3 ties. 

4 ‘‘(H) COORDINATION WITH OTHER CRED5 ITS.—The term ‘qualified Indian reservation 

6 property’ shall not include any property with re7 spect to which the energy credit or the rehabili8 tation credit is allowed. 

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

10 this section, the rental to others of real property lo11 cated within an Indian reservation shall be treated 

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

13 Indian reservation. 

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

15 purposes of this subpart, the term ‘Indian reserva16 tion’ means a reservation, as defined in—

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

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

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

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

21 ‘‘(5) LIMITATION BASED ON UNEMPLOY22 MENT.—

23 ‘‘(A) GENERAL RULE.—The Indian res24 ervation credit allowed under section 46 for any 

25 taxable year shall equal—
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1 ‘‘(i) if the Indian unemployment rate 

2 on the applicable Indian reservation for 

3 which the credit is sought exceeds 300 per4 cent of the national average unemployment 

5 rate at any time during the calendar year 

6 in which the property is placed in service 

7 or during the immediately preceding 2 cal8 endar years, 100 percent of such credit; 

9 ‘‘(ii) if such Indian unemployment 

10 rate exceeds 150 percent but not 300 per11 cent, 50 percent of such credit; and 

12 ‘‘(iii) if such Indian unemployment 

13 rate does not exceed 150 percent, 0 per14 cent of such credit. 

15 ‘‘(B) SPECIAL RULE FOR LARGE

16 PROJECTS.—In the case of a qualified Indian 

17 reservation property which has (or is a compo18 nent of a project which has) a projected con19 struction period of more than 2 years or a cost 

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

21 shall be applied by substituting ‘during the ear22 lier of the calendar year in which the taxpayer 

23 enters into a binding agreement to make a 

24 qualified investment or the first calendar year 

25 in which the taxpayer has expended at least 10 
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1 percent of the taxpayer’s qualified investment, 

2 or the preceding calendar year’ for ‘during the 

3 calendar year in which the property is placed 

4 in service or during the immediately preceding 

5 2 calendar years’.

6 ‘‘(C) DETERMINATION OF INDIAN UNEM7 PLOYMENT.—For purposes of this paragraph, 

8 with respect to any Indian reservation, the In9 dian unemployment rate shall be based upon 

10 Indians unemployed and able to work, and shall 

11 be certified by the Secretary of the Interior. 

12 ‘‘(6) COORDINATION WITH NONREVENUE

13 LAWS.—Any reference in this subsection to a provi14 sion not contained in this title shall be treated for 

15 purposes of this subsection as a reference to such 

16 provision as in effect on the date of the enactment 

17 of this paragraph.’’. 

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

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

20 for lodging) is amended—

21 (A) by striking ‘‘and’’ at the end of sub22 paragraph (C); 

23 (B) by striking the period at the end of 

24 subparagraph (D) and inserting ‘‘; and’’; and 
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1 (C) by adding at the end the following sub2 paragraph: 

3 ‘‘(E) new reservation construction prop4 erty.’’. 

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

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

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

8 paragraph: 

9 ‘‘(6) SPECIAL RULES FOR INDIAN RESERVATION

10 PROPERTY.—

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

12 year, property with respect to which the tax13 payer claimed an Indian reservation credit—

14 ‘‘(i) is disposed of; or 

15 ‘‘(ii) in the case of reservation per16 sonal property—

17 ‘‘(I) otherwise ceases to be in18 vestment credit property with respect 

19 to the taxpayer; or 

20 ‘‘(II) is removed from the Indian 

21 reservation, converted, or otherwise 

22 ceases to be Indian reservation prop23 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, 2003.

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