I

103D CONGRESS

1ST SESSION H. R. 2392

To amend the Internal Revenue Code of 1986 to reinstate a 5-percent investment tax credit, to reduce capital gains taxes, to provide certain tax

incentives for investments on closed defense bases, and to provide for

the use of certain defense funds for the provision of services to certain

dislocated defense workers receiving assistance under the Job Training

Partnership Act.

IN THE HOUSE OF REPRESENTATIVES

JUNE 10, 1993

Mr. ZELIFF (for himself, Mr. BURTON of Indiana, Mr. HUNTER, Mr. SOLOMON, and Mr. BALLENGER) introduced the following bill; which was referred jointly to the Committees on Ways and Means, Education and

Labor, and Armed Services

A BILL

To amend the Internal Revenue Code of 1986 to reinstate

a 5-percent investment tax credit, to reduce capital gains

taxes, to provide certain tax incentives for investments

on closed defense bases, and to provide for the use of

certain defense funds for the provision of services to

certain dislocated defense workers receiving assistance

under the Job Training Partnership Act.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

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

3 ‘‘Economic Resurgence and Jobs for America Act’’.

4 (b) AMENDMENT OF 1986 CODE.—Except as other5 wise expressly provided, whenever in this Act an amend6 ment or repeal is expressed in terms of an amendment

7 to, or repeal of, a section or other provision, the reference

8 shall be considered to be made to a section or other provi9 sion of the Internal Revenue Code of 1986.

10 TITLE I—INVESTMENT TAX

11 CREDIT

12 SEC. 101. REINSTATEMENT OF 5-PERCENT INVESTMENT

13 TAX CREDIT.

14 (a) IN GENERAL.—Subpart E of part IV of sub15 chapter A of chapter 1 (relating to rules for computing

16 credit for investment in certain depreciable property), as

17 amended by subsection (b)(2), is amended by adding at

18 the end the following new section:

19 ‘‘SEC. 50. 5-PERCENT REGULAR INVESTMENT CREDIT.

20 ‘‘With respect to any property placed in service after

21 December 31, 1992—

22 ‘‘(1) section 49 shall not apply, and

23 ‘‘(2) the regular percentage for purposes of this

24 subpart shall be 5 percent.’’

25 (b) CONFORMING AMENDMENTS.—
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1 (1) The table of sections for such subpart E is

2 amended by adding at the end the following new

3 item:

‘‘Sec. 50. 5-percent regular investment credit.’’

4 (2) Section 11813 of the Revenue Reconcili5 ation Act of 1990 (Public Law 101–508) is hereby

6 repealed, and the Internal Revenue Code of 1986

7 shall be applied and administered as if such section

8 (and the amendments made by such section) had

9 never been enacted.

10 TITLE II—CAPITAL GAINS TAX

11 REDUCTION

12 SEC. 201. REDUCTION IN INDIVIDUAL CAPITAL GAINS

13 RATE.

14 (a) GENERAL RULE.—Subsection (h) of section 1 (re15 lating to maximum capital gains rate) is amended to read

16 as follows:

17 ‘‘(h) MAXIMUM CAPITAL GAINS RATE.—If a taxpayer

18 has a net capital gain for any taxable year, then the tax

19 imposed by this section shall not exceed the sum of—

20 ‘‘(1) a tax computed at the rates and in the

21 same manner as if this subsection had not been en22 acted on the taxable income reduced by the net cap23 ital gain, plus

24 ‘‘(2) a tax equal to the sum of—
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1 ‘‘(A) 7.5 percent of so much of the net

2 capital gain as does not exceed—

3 ‘‘(i) the maximum amount of taxable

4 income to which the 15-percent rate ap5 plies under the table applicable to the tax6 payer, reduced by

7 ‘‘(ii) the taxable income to which

8 paragraph (1) applies, plus

9 ‘‘(B) 15 percent of the net capital gain in

10 excess of the net capital gain to which subpara11 graph (A) applies.’’

12 (b) PHASE-OUT OF PERSONAL EXEMPTIONS AND

13 LIMITATION ON DEDUCTION OF ITEMIZED DEDUCTIONS

14 NOT TO RESULT FROM NET CAPITAL GAIN.—

15 (1)(A) Subparagraphs (A) and (B) of section

16 151(d)(3) (relating to phaseout of exemption

17 amount) are each amended by inserting ‘‘modified’’

18 before ‘‘adjusted gross income’’.

19 (B) Paragraph (3) of section 151(d) of such

20 Code is amended by redesignating subparagraphs

21 (D) and (E) as subparagraphs (E) and (F), respec22 tively, and by inserting after subparagraph (C) the

23 following new subparagraph:

24 ‘‘(D) MODIFIED ADJUSTED GROSS IN25 COME.—For purposes of this paragraph, the
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1 term ‘modified adjusted gross income’ means

2 adjusted gross income reduced by the net cap3 ital gain.’’

4 (2) Subsection (a) of section 68 (relating to

5 overall limitation on itemized deductions) is amend6 ed by inserting ‘‘(reduced by the net capital gain)’’

7 after ‘‘adjusted gross income’’.

8 (c) TECHNICAL AMENDMENTS.—

9 (1) Paragraph (1) of section 170(e) is amended

10 by striking ‘‘the amount of gain’’ in the material fol11 lowing subparagraph (B)(ii) and inserting ‘‘13/28

12 (19/34 in the case of a corporation) of the amount

13 of gain’’.

14 (2)(A) The second sentence of section

15 7518(g)(6)(A) is amended by striking ‘‘28 percent

16 (34 percent in the case of a corporation)’’ and in17 serting ‘‘15 percent’’.

18 (B) The second sentence of section

19 607(h)(6)(A) of the Merchant Marine Act, 1936, is

20 amended by striking ‘‘28 percent (34 percent in the

21 case of a corporation)’’ and inserting ‘‘15 percent’’.
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1 SEC. 202. REDUCTION IN CORPORATE CAPITAL GAINS

2 RATE.

3 (a) GENERAL RULE.—Section 1201 (relating to al4 ternative tax for corporations) is amended by striking sub5 section (a) and inserting the following:

6 ‘‘(a) GENERAL RULE.—If for any taxable year a cor7 poration has a net capital gain, then, in lieu of the tax

8 imposed by section 11, 511, or 831(a) (whichever applies),

9 there is hereby imposed a tax (if such tax is less than

10 the tax imposed by such section) which shall consist of

11 the sum of—

12 ‘‘(1) a tax computed on the taxable income re13 duced by the net capital gain, at the same rates and

14 in the same manner as if this subsection had not

15 been enacted, plus

16 ‘‘(2) a tax of 15 percent of the net capital

17 gain.’’

18 (b) TECHNICAL AMENDMENTS.—

19 (1) Clause (iii) of section 852(b)(3)(D) is

20 amended by striking ‘‘66 percent’’ and inserting ‘‘85

21 percent’’.

22 (2) Paragraphs (1) and (2) of section 1445(e)

23 are each amended by striking ‘‘34 percent’’ and in24 serting ‘‘15 percent’’.
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1 SEC. 203. REDUCTION OF MINIMUM TAX RATE ON CAPITAL

2 GAINS.

3 Subparagraph (A) of section 55(b)(1) (relating to

4 tentative minimum tax) is amended to read as follows:

5 ‘‘(A) the sum of—

6 ‘‘(i) 15 percent of the lesser of—

7 ‘‘(I) the net capital gain (deter8 mined with the adjustments provided

9 in this part), or

10 ‘‘(II) so much of the alternative

11 minimum taxable income for the tax12 able year as exceeds the exemption

13 amount, plus

14 ‘‘(ii) 20 percent (24 percent in the

15 case of a taxpayer other than a corpora16 tion) of the amount (if any) by which the

17 excess referred to in clause (i)(II) exceeds

18 the net capital gain (as so determined), re19 duced by’’.

20 SEC. 204. INDEXING OF CERTAIN ASSETS FOR PURPOSES

21 OF DETERMINING GAIN OR LOSS.

22 (a) IN GENERAL.—Part II of subchapter O of chap23 ter 1 (relating to basis rules of general application) is

24 amended by inserting after section 1021 the following new

25 section:
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1 ‘‘SEC. 1022. INDEXING OF CERTAIN ASSETS FOR PURPOSES

2 OF DETERMINING GAIN OR LOSS.

3 ‘‘(a) GENERAL RULE.—

4 ‘‘(1) INDEXED BASIS SUBSTITUTED FOR AD5 JUSTED BASIS.—Except as provided in paragraph

6 (2), if an indexed asset which has been held for

7 more than 1 year is sold or otherwise disposed of,

8 for purposes of this title the indexed basis of the

9 asset shall be substituted for its adjusted basis.

10 ‘‘(2) EXCEPTION FOR DEPRECIATION, ETC.—

11 The deduction for depreciation, depletion, and amor12 tization shall be determined without regard to the

13 application of paragraph (1) to the taxpayer or any

14 other person.

15 ‘‘(b) INDEXED ASSET.—

16 ‘‘(1) IN GENERAL.—For purposes of this sec17 tion, the term ‘indexed asset’ means—

18 ‘‘(A) stock in a corporation, and

19 ‘‘(B) tangible property (or any interest

20 therein), which is a capital asset of property

21 used in the trade or business (as defined in sec22 tion 1231(b)).

23 ‘‘(2) CERTAIN PROPERTY EXCLUDED.—For

24 purposes of this section, the term ‘indexed asset’

25 does not include—
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1 ‘‘(A) CREDITOR’S INTEREST.—Any interest

2 in property which is in the nature of a credi3 tor’s interest.

4 ‘‘(B) OPTIONS.—Any option or other right

5 to acquire an interest in property.

6 ‘‘(C) NET LEASE PROPERTY.—In the case

7 of a lessor, net lease property (within the mean8 ing of subsection (h)(1)).

9 ‘‘(D) CERTAIN PREFERRED STOCK.—Stock

10 which is fixed and preferred as to dividends and

11 does not participate in corporate growth to any

12 significant extent.

13 ‘‘(E) STOCK IN CERTAIN CORPORATIONS.—

14 Stock in—

15 ‘‘(i) an S corporation (within the

16 meaning of section 1361),

17 ‘‘(ii) a personal holding company (as

18 defined in section 542), and

19 ‘‘(iii) a foreign corporation.

20 ‘‘(3) EXCEPTION FOR STOCK IN FOREIGN COR21 PORATION WHICH IS REGULARLY TRADED ON NA22 TIONAL OR REGIONAL EXCHANGE.—Clause (iii) of

23 paragraph (2)(E) shall not apply to stock in a for24 eign corporation the stock of which is listed on the

25 New York Stock Exchange, the American Stock Ex-
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1 change, or any domestic regional exchange for which

2 quotations are published on a regular basis other

3 than—

4 ‘‘(A) stock of a foreign investment com5 pany (within the meaning of section 1246(b)),

6 and

7 ‘‘(B) stock in a foreign corporation held by

8 a United States person who meets the require9 ments of section 1248(a)(2).

10 ‘‘(c) INDEXED BASIS.—For purposes of this sec11 tion—

12 ‘‘(1) INDEXED BASIS.—The indexed basis for

13 any asset is—

14 ‘‘(A) the adjusted basis of the asset, multi15 plied by

16 ‘‘(B) the applicable inflation ratio.

17 ‘‘(2) APPLICABLE INFLATION RATIO.—The ap18 plicable inflation ratio for any asset is the percent19 age arrived at by dividing—

20 ‘‘(A) the gross national product deflator

21 for the calendar quarter in which the disposi22 tion takes place, by

23 ‘‘(B) the gross national product deflator

24 for the calendar quarter in which the asset was
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1 acquired by the taxpayer (or, if later, the cal2 endar quarter ending December 31, 1992).

3 The applicable inflation ratio shall not be taken into

4 account unless it is greater than 1. The applicable

5 inflation ratio for any asset shall be rounded to the

6 nearest one-tenth of 1 percent.

7 ‘‘(3) GROSS NATIONAL PRODUCT DEFLATOR.—

8 The gross national product deflator for any calendar

9 quarter is the implicit price deflator for the gross

10 national product for such quarter (as shown in the

11 1st revision thereof).

12 ‘‘(4) SECRETARY TO PUBLISH TABLES.—The

13 Secretary shall publish tables specifying the applica14 ble inflation ratios for each calendar quarter.

15 ‘‘(d) SPECIAL RULES.—For purposes of this sec16 tion—

17 ‘‘(1) TREATMENT AS SEPARATE ASSET.—In the

18 case of any asset, the following shall be treated as

19 a separate asset:

20 ‘‘(A) a substantial improvement to prop21 erty,

22 ‘‘(B) in the case of stock of a corporation,

23 a substantial contribution to capital, and

24 ‘‘(C) any other portion of an asset to the

25 extent that separate treatment of such portion
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1 is appropriate to carry out the purposes of this

2 section.

3 ‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS

4 THROUGHOUT HOLDING PERIOD.—

5 ‘‘(A) IN GENERAL.—The applicable infla6 tion ratio shall be appropriately reduced for cal7 endar months at any time during which the

8 asset was not an indexed asset.

9 ‘‘(B) CERTAIN SHORT SALES.—For pur10 poses of applying subparagraph (A), an asset

11 shall be treated as not an indexed asset for any

12 short sale period during which the taxpayer or

13 the taxpayer’s spouse sells short property sub14 stantially identical to the asset. For purposes of

15 the preceding sentence, the short sale period be16 gins on the day after the substantially identical

17 property is sold and ends on the closing date

18 for the sale.

19 ‘‘(3) TREATMENT OF CERTAIN DISTRIBU20 TIONS.—A distribution with respect to stock in a

21 corporation which is not a dividend shall be treated

22 as a disposition.

23 ‘‘(4) SECTION CANNOT INCREASE ORDINARY

24 LOSS.—To the extent that (but for this paragraph)

25 this section would create or increase a net ordinary
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1 loss to which section 1231(a)(2) applies or an ordi2 nary loss to which any other provision of this title

3 applies, such provision shall not apply. The taxpayer

4 shall be treated as having a long-term capital loss in

5 an amount equal to the amount of the ordinary loss

6 to which the preceding sentence applies.

7 ‘‘(5) ACQUISITION DATE WHERE THERE HAS

8 BEEN PRIOR APPLICATION OF SUBSECTION (a)(1)

9 WITH RESPECT TO THE TAXPAYER.—If there has

10 been a prior application of subsection (a)(1) to an

11 asset while such asset was held by the taxpayer, the

12 date of acquisition of such asset by the taxpayer

13 shall be treated as not earlier than the date of the

14 most recent such prior application.

15 ‘‘(6) COLLAPSIBLE CORPORATIONS.—The appli16 cation of section 341(a) (relating to collapsible cor17 porations) shall be determined without regard to this

18 section.

19 ‘‘(e) CERTAIN CONDUIT ENTITIES.—

20 ‘‘(1) REGULATED INVESTMENT COMPANIES;

21 REAL ESTATE INVESTMENT TRUSTS; COMMON TRUST

22 FUNDS.—

23 ‘‘(A) IN GENERAL.—Stock in a qualified

24 investment entity shall be an indexed asset for

25 any calendar month in the same ratio as the
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1 fair market value of the assets held by such en2 tity at the close of such month which are in3 dexed assets bears to the fair market value of

4 all assets of such entity at the close of such

5 month.

6 ‘‘(B) RATIO OF 90 PERCENT OR MORE.—If

7 the ratio for any calendar month determined

8 under subparagraph (A) would (but for this

9 subparagraph) be 90 percent or more, such

10 ratio for such month shall be 100 percent.

11 ‘‘(C) RATIO OF 10 PERCENT OR LESS.—If

12 the ratio for any calendar month determined

13 under subparagraph (A) would (but for this

14 subparagraph) be 10 percent or less, such ratio

15 for such month shall be zero.

16 ‘‘(D) VALUATION OF ASSETS IN CASE OF

17 REAL ESTATE INVESTMENT TRUSTS.—Nothing

18 in this paragraph shall require a real estate in19 vestment trust to value its assets more fre20 quently than once each 36 months (except

21 where such trust ceases to exist). The ratio

22 under subparagraph (A) for any calendar

23 month for which there is no valuation shall be

24 the trustee’s good faith judgment as to such

25 valuation.
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1 ‘‘(E) QUALIFIED INVESTMENT ENTITY.—

2 For purposes of this paragraph, the term

3 ‘qualified investment entity’ means—

4 ‘‘(i) a regulated investment company

5 (within the meaning of section 851),

6 ‘‘(ii) a real estate investment trust

7 (within the meaning of section 856), and

8 ‘‘(iii) a common trust fund (within the

9 meaning of section 584).

10 ‘‘(2) PARTNERSHIPS.—In the case of a partner11 ship, the adjustment made under subsection (a) at

12 the partnership level shall be passed through to the

13 partners.

14 ‘‘(3) SUBCHAPTER S CORPORATIONS.—In the

15 case of an electing small business corporation, the

16 adjustment under subsection (a) at the corporate

17 level shall be passed through to the shareholders.

18 ‘‘(f) DISPOSITIONS BETWEEN RELATED PERSONS.—

19 ‘‘(1) IN GENERAL.—This section shall not apply

20 to any sale or other disposition of property between

21 related persons except to the extent that the basis

22 of such property in the hands of the transferee is a

23 substituted basis.
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1 ‘‘(2) RELATED PERSONS DEFINED.—For pur2 poses of this section, the term ‘related persons’

3 means—

4 ‘‘(A) persons bearing a relationship set

5 forth in section 267(b), and

6 ‘‘(B) persons treated as single employer

7 under subsection (b) or (c) of section 414.

8 ‘‘(g) TRANSFERS TO INCREASE INDEXING ADJUST9 MENT OR DEPRECIATION ALLOWANCE.—If any person

10 transfers cash, debt, or any other property to another per11 son and the principal purpose of such transfer is—

12 ‘‘(1) to secure or increase an adjustment under

13 subsection (a), or

14 ‘‘(2) to increase (by reason of an adjustment

15 under subsection (a)) a deduction for depreciation,

16 depletion, or amortization,

17 the Secretary may disallow part or all of such adjustment

18 or increase.

19 ‘‘(h) DEFINITIONS.—For purposes of this section—

20 ‘‘(1) NET LEASE PROPERTY DEFINED.—The

21 term ‘net lease property’ means leased real property

22 where—

23 ‘‘(A) the term of the lease (taking into ac24 count options to renew) was 50 percent or more

25 of the useful life of the property, and
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1 ‘‘(B) for the period of the lease, the sum

2 of the deductions with respect to such property

3 which are allowable to the lessor solely by rea4 son of section 162 (other than rents and reim5 bursed amounts with respect to such property)

6 is 15 percent or less of the rental income pro7 duced by such property.

8 ‘‘(2) STOCK INCLUDES INTEREST IN COMMON

9 TRUST FUND.—The term ‘stock in a corporation’ in10 cludes any interest in a common trust fund (as de11 fined in section 584(a)).

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

13 such regulations as may be necessary or appropriate to

14 carry out the purposes of this section.’’

15 (b) CLERICAL AMENDMENT.—The table of sections

16 for part II of subchapter O of such chapter 1 is amended

17 by inserting after the item relating to section 1021 the

18 following new item:

‘‘Sec. 1022. Indexing of certain assets for purposes of determining

gain or loss.’’

19 (c) ADJUSTMENT TO APPLY FOR PURPOSES OF DE20 TERMINING EARNINGS AND PROFITS.—Subsection (f) of

21 section 312 (relating to effect on earnings and profits of

22 gain or loss and of receipt of tax-free distributions) is

23 amended by adding at the end the following new para24 graph:
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1 ‘‘(3) EFFECT ON EARNINGS AND PROFITS OF

2 INDEXED BASIS.—

‘‘For substitution of indexed basis for adjusted

basis in the case of the disposition of certain assets

after December 31, 1992, see section 1022(a)(1).’’

3 SEC. 205. INDEXING OF LIMITATION ON CAPITAL LOSSES

4 OF INDIVIDUALS.

5 Section 1211 (relating to limitation on capital losses)

6 is amended by adding at the end the following new sub7 section:

8 ‘‘(c) INDEXATION OF LIMITATION ON

9 NONCORPORATE TAXPAYERS.—

10 ‘‘(1) IN GENERAL.—In the case of any taxable

11 year beginning in a calendar year after 1992, the

12 $3,000 and $1,500 amounts under subsection (b)(1)

13 shall be increased by an amount equal to—

14 ‘‘(A) such dollar amount, multiplied by

15 ‘‘(B) the applicable inflation adjustment

16 for the calendar year in which the taxable year

17 begins.

18 ‘‘(2) APPLICABLE INFLATION ADJUSTMENT.—

19 For purposes of paragraph (1), the applicable infla20 tion adjustment for any calendar year is the percent21 age (if any) by which—

22 ‘‘(A) the gross national product deflator

23 for the last calendar quarter of the preceding

24 calendar year, exceeds
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1 ‘‘(B) the gross national product deflator

2 for the last calendar quarter of 1991.

3 For purposes of this paragraph, the term ‘gross na4 tional product deflator’ has the meaning given such

5 term by section 1022(c)(3).’’

6 SEC. 206. EFFECTIVE DATES.

7 (a) IN GENERAL.—Except as provided in subsection

8 (b), the amendments made by this title shall apply to sales

9 or exchanges occurring after December 31, 1992.

10 (b) INDEXING OF LOSS LIMITATION.—The amend11 ment made by section 205 shall apply to taxable years be12 ginning after December 31, 1992

13 TITLE III—INCENTIVES FOR RE14 DEVELOPMENT OF CLOSED

15 MILITARY BASES

16 SEC. 301. TAX INCENTIVES FOR INVESTMENTS ON CLOSED

17 MILITARY BASES.

18 (a) GENERAL RULE.—Chapter 1 (relating to normal

19 taxes and surtaxes) is amended by inserting after sub20 chapter T the following new subchapter:

21 ‘‘Subchapter U—Investment Incentives for Closed

22 Military Bases

‘‘Sec. 1391. Exclusion of gain from closed military base investments.

‘‘Sec. 1392. Modification of passive loss rules.

‘‘Sec. 1393. Additional incentives.

‘‘Sec. 1394. Closed base business defined.

‘‘Sec. 1395. Qualified closed military base defined.
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‘‘Sec. 1396. Regulations.

1 ‘‘SEC. 1391. EXCLUSION OF GAIN FROM CLOSED MILITARY

2 BASE INVESTMENTS.

3 ‘‘(a) GENERAL RULE.—Gross income shall not in4 clude 100 percent of any qualified capital gain recognized

5 on the sale or exchange of a qualified closed base asset

6 held for more than 5 years.

7 ‘‘(b) QUALIFIED CLOSED BASE ASSET.—For pur8 poses of this section—

9 ‘‘(1) IN GENERAL.—The term ‘qualified closed

10 base asset’ means—

11 ‘‘(A) any qualified stock,

12 ‘‘(B) any qualified business property, and

13 ‘‘(C) any qualified partnership interest.

14 Such term shall not include any property acquired

15 by the taxpayer after November 30, 1997.

16 ‘‘(2) QUALIFIED STOCK.—

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

18 subparagraph (B), the term ‘qualified stock’

19 means any stock in a domestic corporation if—

20 ‘‘(i) such stock is acquired by the tax21 payer on original issue from the corpora22 tion solely in exchange for cash,

23 ‘‘(ii) as of the time such stock was is24 sued, such corporation was a closed base
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1 business (or, in the case of a new corpora2 tion, such corporation was being organized

3 for purposes of being a closed base busi4 ness), and

5 ‘‘(iii) during substantially all of the

6 taxpayer’s holding period for such stock,

7 such corporation qualified as a closed base

8 business.

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

10 stock’ shall not include any stock acquired from

11 a corporation which made a substantial stock

12 redemption or distribution (without a bona fide

13 business purpose therefor) in an attempt to

14 avoid the purposes of this section.

15 ‘‘(3) QUALIFIED BUSINESS PROPERTY.—

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

17 business property’ means any property if—

18 ‘‘(i) such property was acquired by

19 the taxpayer by purchase (as defined in

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

21 the closure of the military base occurred,

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

23 on a qualified closed military base com24 mences with the taxpayer, and
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1 ‘‘(iii) during substantially all of the

2 taxpayer’s holding period for such prop3 erty, substantially all of the use of such

4 property was within a qualified closed mili5 tary base and in a closed base business of

6 the taxpayer.

7 ‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM8 PROVEMENTS.—The requirements of clauses (i)

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

10 satisfied with respect to—

11 ‘‘(i) property which is substantially

12 improved by the taxpayer, and

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

14 is located.

15 For purposes of the preceding sentence, prop16 erty shall be treated as substantially improved

17 by the taxpayer if, during any 24-month period

18 beginning after the date on which closure of the

19 military base occurred, additions to basis with

20 respect to such property in the hands of the

21 taxpayer exceed the greater of (i) an amount

22 equal to the adjusted basis at the beginning of

23 such 24-month period in the hands of the tax24 payer, or (ii) $5,000.
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1 ‘‘(C) LIMITATION ON LAND.—The term

2 ‘qualified business property’ shall not include

3 land which is not an integral part of a qualified

4 business.

5 ‘‘(4) QUALIFIED PARTNERSHIP INTEREST.—

6 The term ‘qualified partnership interest’ means any

7 interest in a partnership if—

8 ‘‘(A) such interest is acquired by the tax9 payer from the partnership solely in exchange

10 for cash,

11 ‘‘(B) as of the time such interest was ac12 quired, such partnership was a closed base busi13 ness (or, in the case of a new partnership, such

14 partnership was being organized for purposes of

15 being a closed base business), and

16 ‘‘(C) during substantially all of the tax17 payer’s holding period for such interest, such

18 partnership qualified as a closed base business.

19 A rule similar to the rule of paragraph (2)(B) shall

20 apply for purposes of this paragraph.

21 ‘‘(5) TREATMENT OF SUBSEQUENT PUR22 CHASERS.—The term ‘qualified closed base asset’ in23 cludes any property which would be a qualified

24 closed base asset but for paragraph (2)(A)(i),

25 (3)(A)(ii), or (4)(A) in the hands of the taxpayer if
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1 such property was a qualified closed base asset in

2 the hands of any prior holder.

3 ‘‘(6) 10-YEAR SAFE HARBOR.—If any property

4 ceases to be a qualified closed base asset by reason

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

6 the 10-year period beginning on the date the tax7 payer acquired such property, such property shall

8 continue to be treated as meeting the requirements

9 of such paragraph; except that the amount of gain

10 to which subsection (a) applies on any sale or ex11 change of such property shall not exceed the amount

12 which would be qualified capital gain had such prop13 erty been sold on the date of such cessation.

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

15 For purposes of this section—

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

17 otherwise provided in this subsection, the term

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

19 gain.

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

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

22 not include any gain which would be treated as ordi23 nary income under section 1250 if section 1250 ap24 plied to all depreciation rather than the additional

25 depreciation.
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1 ‘‘(d) TREATMENT OF PASS-THRU ENTITIES.—

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

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

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

5 entity which was a closed base business during sub6 stantially all of the period the taxpayer held such in7 terest) for more than 5 years shall be treated as

8 gain described in subsection (a) to the extent such

9 gain is attributable to amounts which would be

10 qualified capital gain on qualified closed base assets

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

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

13 more than 5 years and throughout the period the

14 taxpayer held such interest. A rule similar to the

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

16 the preceding sentence.

17 ‘‘(2) INCOME INCLUSIONS.—

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

19 in income by reason of holding an interest in a

20 pass-thru entity (other than an entity which

21 was a closed base business during substantially

22 all of the period the taxpayer held the interest

23 to which such inclusion relates) shall be treated

24 as gain described in subsection (a) if such
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1 amount meets the requirements of subpara2 graph (B).

3 ‘‘(B) REQUIREMENTS.—An amount meets

4 the requirements of this subparagraph if—

5 ‘‘(i) such amount is attributable to

6 qualified capital gain recognized on the

7 sale or exchange by the pass-thru entity of

8 property which is a qualified closed base

9 asset in the hands of such entity and

10 which was held by such entity for the pe11 riod required under subsection (a), and

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

13 gross income of the taxpayer by reason of

14 the holding of an interest in such entity

15 which was held by the taxpayer on the date

16 on which such pass-thru entity acquired

17 such asset and at all times thereafter be18 fore the disposition of such asset by such

19 pass-thru entity.

20 ‘‘(C) LIMITATION BASED ON INTEREST

21 ORIGINALLY HELD BY TAXPAYER.—Subpara22 graph (A) shall not apply to any amount to the

23 extent such amount exceeds the amount to

24 which subparagraph (A) would have applied if

25 such amount were determined by reference to
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1 the interest the taxpayer held in the pass-thru

2 entity on the date the qualified zone asset was

3 acquired.

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

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

6 ‘‘(A) any partnership,

7 ‘‘(B) any S corporation,

8 ‘‘(C) any regulated investment company,

9 and

10 ‘‘(D) any common trust fund.

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

12 PARTNERSHIPS AND S CORPORATIONS WHICH ARE

13 CLOSED BASE BUSINESSES.—In the case of the sale or

14 exchange of an interest in a partnership, or of stock in

15 an S corporation, which was a closed base business during

16 substantially all of the period the taxpayer held such inter17 est or stock, the amount of qualified capital gain shall be

18 determined without regard to—

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

20 an integral part of any qualified business, and

21 ‘‘(2) gain attributable to periods before the clo22 sure of the military base.

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

24 For purposes of this section—
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1 ‘‘(1) IN GENERAL.—In the case of a transfer of

2 a qualified closed base asset to which this subsection

3 applies, the transferee shall be treated as—

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

5 same manner as the transferor, and

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

7 continuous period immediately preceding the

8 transfer during which it was held (or treated as

9 held under this subsection) by the transferor.

10 ‘‘(2) TRANSFERS TO WHICH SUBSECTION AP11 PLIES.—This subsection shall apply to any trans12 fer—

13 ‘‘(A) by gift,

14 ‘‘(B) at death, or

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

16 thereof of a qualified closed base asset with re17 spect to which the requirements of subsection

18 (d)(2) are met at the time of the transfer (with19 out regard to the 5-year holding requirement).

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

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

22 apply for purposes of this section.

23 ‘‘(g) CERTAIN BUSINESSES TREATED AS NOT

24 QUALIFIED BUSINESSES.—For purposes of this section,

25 the term ‘closed base business’ has the meaning given such
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1 term by section 1394; except that, in applying section

2 1394 for such purposes, the term ‘qualified business’ shall

3 not include any trade or business of producing property

4 of a character subject to the allowance for depletion under

5 section 611.

6 ‘‘SEC. 1392. MODIFICATION OF PASSIVE LOSS RULES.

7 ‘‘(a) IN GENERAL.—If this section applies to any tax8 payer for a taxable year—

9 ‘‘(1) paragraph (2) of section 469(c) shall not

10 apply to any qualified rental real estate activity of

11 such taxpayer for such taxable year, and

12 ‘‘(2) this section shall be applied as if each in13 terest of the taxpayer in rental real estate described

14 in subsection (b) were a separate activity.

15 Notwithstanding paragraph (2), a taxpayer may elect to

16 treat all interests in rental real estate described in sub17 section (b) as one activity. Nothing in the preceding provi18 sions of this subsection shall be construed as affecting the

19 determination of whether the taxpayer materially partici20 pates with respect to any interest in a limited partnership

21 as a limited partner.

22 ‘‘(b) QUALIFIED RENTAL REAL ESTATE ACTIVITY.—

23 For purposes of this section, the term ‘qualified rental real

24 estate activity’ means any rental real estate activity with

25 respect to any real property which—
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1 ‘‘(1) is located within a qualified closed base,

2 and

3 ‘‘(2) is acquired by the taxpayer after the date

4 on which such base was closed and before December

5 1, 1998.

6 ‘‘(c) TAXPAYERS TO WHOM SECTION APPLIES.—

7 This section shall apply to a taxpayer for a taxable year

8 if more than one-half of the personal services performed

9 in trades or businesses by the taxpayer during such tax10 able year are performed in real property trades or busi11 nesses in which the taxpayer materially participates.

12 ‘‘(d) REAL PROPERTY TRADE OR BUSINESS.—For

13 purposes of this section, the term ‘real property trade or

14 business’ means any real property development, redevelop15 ment, construction, reconstruction, acquisition, conver16 sion, rental, operation, management, leasing, or brokerage

17 trade or business.

18 ‘‘(e) SPECIAL RULES FOR SUBSECTION (c).—

19 ‘‘(1) CLOSELY HELD C CORPORATIONS.—In the

20 case of a closely held C corporation, the require21 ments of subsection (c) shall be treated as met for

22 any taxable year if more than 50 percent of the

23 gross receipts of such corporation for such taxable

24 year are derived from real property trades or busi-
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1 nesses in which the corporation materially partici2 pates.

3 ‘‘(2) PERSONAL SERVICES AS AN EMPLOYEE.—

4 For purposes of subsection (c), personal services

5 performed as an employee shall not be treated as

6 performed in real property trades or businesses. The

7 preceding sentence shall not apply if such employee

8 is a 5-percent owner (as defined in section

9 416(i)(1)(B)) in the employer.

10 ‘‘SEC. 1393. ADDITIONAL INCENTIVES.

11 ‘‘(a) INCREASE IN EXPENSING UNDER SECTION

12 179.—In the case of a closed base business, section

13 179(b)(1) shall be applied by substituting ‘$50,000’ for

14 ‘$10,000’; except that any increase under this subsection

15 in such dollar amount for any taxable year shall not exceed

16 $250,000 reduced by the aggregate additional amount al17 lowed as a deduction under section 179 for prior taxable

18 years by reason of this subsection. The preceding sentence

19 shall not apply to property acquired after November 30,

20 1997.

21 ‘‘(b) ORDINARY LOSS TREATMENT FOR CERTAIN

22 PROPERTY.—

23 ‘‘(1) IN GENERAL.—Loss on any qualified

24 closed base asset (as defined in section 1391(b))
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1 held for more than 2 years (5 years in the case of

2 real property) shall be treated as an ordinary loss.

3 ‘‘(2) REAL PROPERTY.—For purposes of para4 graph (1), the term ‘real property’ means any prop5 erty which is section 1250 property (as defined in

6 section 1250(c)).

7 ‘‘(3) SPECIAL RULES.—

8 ‘‘(A) CERTAIN RULES MADE APPLICA9 BLE.—For purposes of this subsection, rules

10 similar to the following rules shall apply:

11 ‘‘(i) Paragraphs (1), (2), and (3) of

12 section 1244(d).

13 ‘‘(ii) Subsections (b)(6), (d), (e), and

14 (f) of section 1391.

15 ‘‘(B) COORDINATION WITH SECTION

16 1231.—Losses treated as ordinary losses by rea17 son of this subsection shall not be taken into

18 account in applying section 1231.

19 ‘‘SEC. 1394. CLOSED BASE BUSINESS DEFINED.

20 ‘‘(a) IN GENERAL.—For purposes of this subchapter,

21 the term ‘closed base business’ means—

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

23 ‘‘(2) any qualified proprietorship.

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

25 of this section, the term ‘qualified business entity’ means,
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1 with respect to any taxable year, any corporation or part2 nership if for such year—

3 ‘‘(1)(A) every trade or business of such entity

4 is the active conduct of a qualified business within

5 a qualified closed military base, and

6 ‘‘(B) at least 80 percent of the total gross in7 come of such entity is derived from the active con8 duct of such business,

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

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

11 within a qualified closed military base,

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

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

14 the active conduct of any such business,

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

16 for such entity by its employees are performed with17 in a qualified closed military base,

18 ‘‘(5) 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 ‘‘(6) less than 5 percent of the average of the

25 aggregate unadjusted bases of the property of such
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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 within

11 a qualified closed base,

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 qualified closed base,

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 within a qualified

21 closed base,

22 ‘‘(5) less than 5 percent of the average of the

23 aggregate unadjusted bases of the property of such

24 individual which is used in such business is attrib25 utable to collectibles (as defined in section
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1 408(m)(2)) other than collectibles that are held pri2 marily for sale to customers in the ordinary course

3 of such business, and

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

5 aggregate unadjusted bases of the property of such

6 individual which is used in such business is attrib7 utable to nonqualified financial property.

8 For purposes of this subsection, the term ‘employee’ in9 cludes the proprietor.

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

11 section—

12 ‘‘(1) IN GENERAL.—Except as otherwise pro13 vided in this subsection, the term ‘qualified business’

14 means any trade or business.

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

16 to others of real property located in a qualified

17 closed base shall be treated as a qualified business

18 if and only if—

19 ‘‘(A) in the case of real property which is

20 not residential rental property (as defined in

21 section 168(e)(2)), the lessee is a closed base

22 business, or

23 ‘‘(B) in the case of residential rental prop24 erty (as so defined)—
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1 ‘‘(i) such property was originally

2 placed in service after the date the base

3 was closed, or

4 ‘‘(ii) such property is rehabilitated

5 after such date in a rehabilitation which

6 meets requirements based on the principles

7 of section 42(e)(3).

8 ‘‘(3) RENTAL OF TANGIBLE PERSONAL PROP9 ERTY.—The rental to others of tangible personal

10 property shall be treated as a qualified business if

11 and only if substantially all of the rental of such

12 property is by closed base businesses or by residents

13 of a qualified closed base.

14 ‘‘(4) TREATMENT OF BUSINESS HOLDING IN15 TANGIBLES.—The term ‘qualified business’ shall not

16 include any trade or business consisting predomi17 nantly of the development or holding of intangibles

18 for sale or license.

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

20 term ‘qualified business’ shall not include—

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

22 the operation of any facility described in section

23 144(c)(6)(B), and

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

25 activity of which is farming (within the meaning
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1 of subparagraphs (A) or (B) of section

2 2032A(e)(5)), but only if, as of the close of the

3 preceding taxable year, the sum of—

4 ‘‘(i) the aggregate unadjusted bases

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

6 the assets owned by the taxpayer which are

7 used in such a trade or business, and

8 ‘‘(ii) the aggregate value of assets

9 leased by the taxpayer which are used in

10 such a trade or business,

11 exceeds $500,000.

12 For purposes of subparagraph (B), rules similar to

13 the rules of sections 52 (a) and (b) shall apply.

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

15 purposes of this section, the term ‘nonqualified financial

16 property’ means debt, stock, partnership interests, op17 tions, futures contracts, forward contracts, warrants, no18 tional principal contracts, annuities, and other similar

19 property specified in regulations; except that such term

20 shall not include—

21 ‘‘(1) reasonable amounts of working capital

22 held in cash, cash equivalents, or debt instruments

23 with a term of 18 months or less, or

24 ‘‘(2) debt instruments described in section

25 1221(4).
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1 ‘‘SEC. 1395. QUALIFIED CLOSED MILITARY BASE DEFINED.

2 For purposes of this subchapter, the term ‘qualified

3 closed military base’ means any military installation if—

4 ‘‘(1) such installation was closed pursuant to

5 the Defense Base Closure and Realignment Act of

6 1990 (10 U.S.C. 2687 note), and

7 ‘‘(2) the Secretary of Defense certifies to the

8 Secretary that at least 1,000 workers on such instal9 lation or in surrounding areas were displaced by rea10 son of such closure.

11 ‘‘SEC. 1396. REGULATIONS.

12 ‘‘The Secretary shall prescribe such regulations as

13 may be necessary or appropriate to carry out the purposes

14 of this subchapter, including—

15 ‘‘(1) regulations limiting the benefit of this part

16 in circumstances where such benefits, in combination

17 with benefits provided under other Federal pro18 grams, would result in an activity being 100 percent

19 or more subsidized by the Federal Government,

20 ‘‘(2) regulations preventing abuse of the provi21 sions of this part, and

22 ‘‘(3) regulations dealing with inadvertent fail23 ures of entities to be closed base businesses.’’

24 (b) CLERICAL AMENDMENT.—The table of sub25 chapters for chapter 1 is amended by inserting after the

26 item relating to subchapter T the following new item:
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‘‘Subchapter U. Investment incentives for closed military bases.’’

1 SEC. 302. SPECIAL RULES FOR REDEVELOPMENT BONDS

2 PROVIDING FINANCING FOR CLOSED MILI3 TARY BASES.

4 (a) IN GENERAL.—Subsection (c) of section 144 (re5 lating to qualified redevelopment bonds) is amended by

6 adding at the end thereof the following new paragraph:

7 ‘‘(9) SPECIAL RULES FOR TAX ENTERPRISE

8 ZONES.—For purposes of this subsection, in the case

9 of bonds issued during the period beginning on the

10 date a qualified closed military base is closed and

11 ending on November 30, 1997—

12 ‘‘(A) TREATMENT AS DESIGNATED

13 BLIGHTED AREA.—Such area shall be treated

14 as a designated blighted area. Any area des15 ignated by reason of the preceding sentence

16 shall not be taken into account in applying

17 paragraph (4)(C).

18 ‘‘(B) SECURITY FOR BONDS.—The require19 ments of paragraph (2)(B) shall be treated as

20 met with respect to a financed area that is

21 within a qualified closed military base if the

22 general purpose governmental unit guarantees

23 the payment of principal and interest on the

24 issue either directly or through insurance, a let25 ter of credit, or a similar agreement but only if
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1 the cost thereof is financed other than with pro2 ceeds of any tax-exempt private activity bond or

3 earnings on such proceeds.

4 ‘‘(C) EXPANSION OF REDEVELOPMENT

5 PURPOSES.—

6 ‘‘(i) IN GENERAL.—The term ‘redevel7 opment purposes’ includes the making of

8 loans to any closed base business (as de9 fined in section 1394) for—

10 ‘‘(I) the acquisition of land with11 in the qualified closed base for use in

12 such business, or

13 ‘‘(II) the acquisition, construc14 tion, reconstruction, or improvement

15 by such business of land, or property

16 of a character subject to the allowance

17 for depreciation, for use in such busi18 ness.

19 ‘‘(ii) $2,500,000 LIMITATION.—Clause

20 (i) shall apply to loans made to any closed

21 base business only if the aggregate prin22 cipal amount of such loans (whether or not

23 financed by the same issue) does not ex24 ceed $2,500,000. For purposes of the pre25 ceding sentence, all persons treated as a
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1 single employer under subsection (a) or (b)

2 of section 52 shall be treated as 1 person.

3 ‘‘(iii) LOANS MUST BE MADE WITHIN

4 18 MONTHS AFTER BONDS ISSUED; REPAY5 MENTS MUST BE USED FOR REDEMP6 TIONS.—Clause (i) shall apply only to

7 loans—

8 ‘‘(I) made during the 18-month

9 period beginning on the date of issu10 ance of the issue financing such loan,

11 ‘‘(II) repayments of principal on

12 which are used not later than the

13 close of the 1st semiannual period be14 ginning after the date the repayment

15 is received to redeem bonds which are

16 part of such issue, and

17 ‘‘(III) the effective rate of inter18 est on which does not exceed the yield

19 on the issue by more than 0.125 per20 centage points.

21 In determining the effective rate of interest

22 for purposes of subclause (III), there shall

23 be taken into account all fees, charges, and

24 other amounts (other than amounts for

25 any credit report) borne by the borrower
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1 which are attributable to the loan or the

2 bond issue.

3 ‘‘(iv) HOUSING LOANS EXCLUDED.—

4 Clause (i) shall not apply to any loan to be

5 used directly or indirectly to provide resi6 dential real property.

7 ‘‘(v) COORDINATION WITH RESTRIC8 TIONS ON USE OF PROCEEDS.—Paragraphs

9 (6) and (8) shall apply notwithstanding

10 clause (i); except that in applying para11 graph (6), subsection (a)(8) shall be treat12 ed as not including a reference to a facility

13 the primary purpose of which is retail food

14 services.

15 ‘‘(D) ISSUER TO DESIGNATE AMOUNT OF

16 ISSUE TO BE USED FOR LOANS.—Subparagraph

17 (C) shall not apply with respect to any issue

18 unless the issuer designates before the date of

19 issuance the amount of the proceeds of such

20 issue which is to be used for loans to which

21 subparagraph (C)(i) applies. If such amount ex22 ceeds the principal amount of loans to which

23 subparagraph (C)(i) applies, an amount of pro24 ceeds equal to such excess shall be used not

25 later than the close of the 1st semiannual pe-
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1 riod beginning after the close of the 18-month

2 period referred to in subparagraph (C)(iii) to

3 redeem bonds which are part of such issue.

4 ‘‘(E) DE MINIMIS REDEMPTIONS NOT RE5 QUIRED.—Subparagraphs (C)(iii) and (D) shall

6 not be construed to require amounts of less

7 than $250,000 to be used to redeem bonds. The

8 Secretary may by regulation treat related issues

9 as 1 issue for purposes of the preceding sen10 tence.

11 ‘‘(F) PENALTY.—

12 ‘‘(i) IN GENERAL.—In the case of

13 property with respect to which financing

14 was provided under this paragraph, if at

15 any time during the 10-period beginning

16 on the date such financing was provided—

17 ‘‘(I) such property ceases to be in

18 use in a closed base business (as de19 fined in section 1394), or

20 ‘‘(II) substantially all of the use

21 of such property ceases to be in a

22 qualified closed base,

23 there is hereby imposed on the trade or

24 business to which such financing was pro25 vided a penalty equal to 1.25 percent of so
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1 much of the face amount of all financing

2 provided (whether or not from the same

3 issue and whether or not such issue is out4 standing) before such cessation to the

5 trade or business using such property.

6 ‘‘(ii) NO PENALTY BY REASON OF

7 ZONE TERMINATION.—No penalty shall be

8 imposed under clause (i) solely by reason

9 of the termination of the treatment of an

10 area as a qualified closed base.

11 ‘‘(iii) EXCEPTION FOR BANK12 RUPTCY.—Clause (i) shall not apply to any

13 cessation resulting from bankruptcy.’’

14 (b) VOLUME CAP ONLY CHARGED WITH 50 PER15 CENT OF TAX ENTERPRISE ZONE REDEVELOPMENT

16 BONDS.—Subsection (g) of section 146 is amended by

17 striking ‘‘and’’ at the end of paragraph (3), by striking

18 the period at the end of paragraph (4) and inserting ‘‘,

19 and’’, and by adding at the end thereof the following new

20 paragraph:

21 ‘‘(5) 50 percent of any qualified redevelopment

22 bond issued as part of an issue 95 percent or more

23 of the net proceeds of which are to be used for 1 or

24 more redevelopment purposes (as defined in section

25 144(c)) in a qualified closed base.’’
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1 (c) PENALTIES FOR LOANS MADE TO BUSINESSES

2 THAT CEASE TO BE ENTERPRISE ZONE BUSINESSES,

3 ETC.—Subsection (b) of section 150 is amended by adding

4 at the end thereof the following new paragraph:

5 ‘‘(6) ENTERPRISE ZONE REDEVELOPMENT

6 BONDS.—In the case of any financing provided by

7 an issue the interest on which is exempt from tax by

8 reason of section 144(c)(9)—

9 ‘‘(A) IN GENERAL.—No deduction shall be

10 allowed under this chapter for interest on such

11 financing which accrues during the period be12 ginning on the first day of the calendar year

13 which includes the date on which—

14 ‘‘(i) the trade or business to which the

15 financing was provided ceases to be a

16 closed base business (as defined in section

17 1394

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

19 property (determined in accordance with

20 subchapter U) with respect to which the fi21 nancing was provided ceases to be in a

22 qualified closed base.

23 The preceding sentence shall not apply solely by

24 reason of the treatment of an area as a quali25 fied closed base.
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1 ‘‘(B) EXCEPTION FOR BANKRUPTCY.—This

2 paragraph shall not apply to any cessation re3 sulting from bankruptcy.’’

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

5 this section shall apply to obligations issued after the date

6 of the enactment of this Act.

7 TITLE IV—USE OF TRANS8 FERRED DEFENSE FUNDS

9 FOR PROVISION OF SERVICES

10 TO CERTAIN DISLOCATED DE11 FENSE WORKERS UNDER JOB

12 TRAINING PARTNERSHIP ACT

13 SEC. 401. USE OF TRANSFERRED DEFENSE FUNDS.

14 (a) IN GENERAL.—Title III of the Job Training

15 Partnership Act (29 U.S.C. 1651 et seq.) is amended by

16 adding at the end the following new section:

17 ‘‘SEC. 327. USE OF TRANSFERRED DEFENSE FUNDS FOR

18 PROVISION OF SERVICES TO CERTAIN DIS19 LOCATED DEFENSE WORKERS.

20 ‘‘(a) IN GENERAL.—From funds transferred under

21 section 402(a) of the Economic Resurgence and Jobs for

22 America Act for a fiscal year, the Secretary shall allot

23 such funds to a State for the program year ending in such

24 fiscal year in accordance with subsection (b) for reim25 bursement of the provision of employment and training as-
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1 sistance under this title to individuals who have been ter2 minated, laid off, received notice of termination or lay off,

3 or have been notified that they will receive notice of termi4 nation or layoff due to a closure of a qualified military

5 base.

6 ‘‘(b) ALLOTMENT AMONG STATES.—The Secretary

7 shall allot funds described in subsection (a) to a State in

8 an amount equal to the product of—

9 ‘‘(1) $3,810; and

10 ‘‘(2) the number of individuals described in sub11 section (a) receiving employment and training assist12 ance under this title for such program year in such

13 State.

14 ‘‘(c) WITHIN STATE DISTRIBUTION.—The Governor

15 of a State that receives an allotment of funds under sub16 section (b) shall distribute such funds to substate areas

17 for services provided to individuals described in such sub18 section.

19 ‘‘(d) CERTIFICATION PROCEDURES.—The Secretary,

20 in conjunction with the Secretary of Defense, shall estab21 lish certification procedures to determine whether an indi22 vidual receiving assistance under this title is an individual

23 described in subsection (a).
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1 ‘‘(e) QUALIFIED MILITARY BASE DEFINED.—For

2 purposes of this section, the term ‘qualified military base’

3 means any military installation if—

4 ‘‘(1) such installation was closed pursuant to

5 the Defense Base Closure and Realignment Act of

6 1990 (10 U.S.C. 2687 note); and

7 ‘‘(2) the Secretary of Defense certifies to the

8 Secretary of Labor that at least 1,000 workers on

9 such installation or in surrounding areas were dis10 placed by reason of such closure.’’.

11 (b) CONFORMING AMENDMENT.—The table of con12 tents of the Job Training Partnership Act is amended by

13 inserting after the item relating to section 326 the follow14 ing new item:

‘‘Sec. 327. Use of transferred defense funds for provision of services to

certain dislocated defense workers.’’.

15 SEC. 402. TRANSFER OF DEFENSE FUNDS.

16 (a) IN GENERAL.—From funds available to the Sec17 retary of Defense for defense reinvestment and economic

18 growth for a fiscal year, the Secretary of Defense shall

19 transfer such funds to the Secretary of Labor for the pro20 gram year ending in such fiscal year in an amount equal

21 to the sum of the amounts determined under section

22 327(b) of the Job Training Partnership Act for all States

23 receiving an allotment under such section for such pro24 gram year.
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1 (b) TIMELY TRANSFER.—The Secretary of Defense

2 shall transfer funds described in subsection (a) to the Sec3 retary of Labor in a timely manner.

Æ

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