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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2246 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 2246

To amend the Internal Revenue Code of 1986 to provide tax incentives to 
             encourage development in certain border areas.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              May 25, 1993

   Mr. Andrews of Texas (for himself and Mr. Coleman) 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 incentives to 
             encourage development in certain border areas.

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

SECTION 1. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this Act an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

SEC. 2. DESIGNATION AND TREATMENT OF BORDER EMPOWERMENT ZONES AND 
              BORDER ENTERPRISE COMMUNITIES.

    (a) In General.--Chapter 1 (relating to normal taxes and surtaxes) 
is amended by inserting after subchapter T the following new 
subchapter:

 ``Subchapter U--Designation and Treatment of Border Empowerment Zones 
                   and Border Enterprise Communities

                              ``Part I. Designation.
                              ``Part II. Incentives for border 
                                        empowerment zones and border 
                                        enterprise communities.
                              ``Part III. Additional incentives for 
                                        border empowerment zone.
                              ``Part IV. Regulations.

                         ``PART I--DESIGNATION

                              ``Sec. 1391. Designation procedure.
                              ``Sec. 1392. Eligibility criteria.
                              ``Sec. 1393. Definitions and special 
                                        rules.

``SEC. 1391. DESIGNATION PROCEDURE.

    ``(a) In General.--From among the border areas nominated for 
designation under this section, the appropriate Secretaries may, in 
consultation with the Enterprise Board, designate 1 border empowerment 
zone and 5 border enterprise communities.
    ``(b) Period Designations May Be Made.--A designation may be made 
under this section only after 1993 and before 1996.
    ``(c) Period for Which Designation Is In Effect.--
            ``(1) In general.--Any designation under this section shall 
        remain in effect during the period beginning on the date of the 
        designation and ending on the earliest of--
                    ``(A) the close of the 10th calendar year beginning 
                on or after such date of designation,
                    ``(B) the termination date designated by the State 
                and local governments as provided for in their 
                nomination, or
                    ``(C) the date the appropriate Secretary revokes 
                the designation.
            ``(2) Revocation of designation.--
                    ``(A) In general.--The appropriate Secretary, in 
                consultation with the Enterprise Board, may revoke the 
                designation under this section of an area if such 
                Secretary determines that the local government or the 
                State in which it is located--
                            ``(i) has modified the boundaries of the 
                        area, or
                            ``(ii) is not complying substantially with, 
                        or fails to make progress in achieving the 
                        benchmarks set forth in, the strategic plan 
                        under subsection (e)(2).
                    ``(B) Applicable procedures.--A designation may be 
                revoked by the appropriate Secretary under subparagraph 
                (A) only after a hearing on the record involving 
                officials of the State or local government involved.
    ``(d) Limitations on Designations.--An area may be designated under 
subsection (a) only if--
            ``(1) the area is a border area,
            ``(2) the area is nominated by 1 or more local governments 
        and the State or States in which it is located for designation 
        under this section,
            ``(3) such State or States and the local governments have 
        the authority--
                    ``(A) to nominate the area for designation under 
                this section, and
                    ``(B) to provide the assurances described in 
                paragraph (4),
            ``(4) such State or States and the local governments 
        provide written assurances satisfactory to the appropriate 
        Secretary that the strategic plan described in the application 
        under subsection (e)(2) for such area will be implemented,
            ``(5) the appropriate Secretary determines that any 
        information furnished is reasonably accurate, and
            ``(6) such State or States and local governments certify 
        that no portion of the area nominated is already included in an 
        area designated under this section or in an area otherwise 
        nominated to be designated under this section.
    ``(e) Application.--An application for designation as a border 
empowerment zone or as a border enterprise community shall--
            ``(1) demonstrate that the nominated area satisfies the 
        eligibility criteria described in section 1392,
            ``(2) include a strategic plan for accomplishing the 
        purposes of this subchapter that--
                    ``(A) describes the coordinated economic, human, 
                community, and physical development plan and related 
                activities proposed for the nominated area,
                    ``(B) describes the process by which the affected 
                community is a full partner in the process of 
                developing and implementing the plan and the extent to 
                which local institutions and organizations have 
                contributed to the planning process,
                    ``(C) identifies the amount of State, local, and 
                private resources that will be available in the 
                nominated area and the private/public partnerships to 
                be used, which may include participation by, and 
                cooperation with, universities, medical centers, and 
                other private and public entities,
                    ``(D) identifies the funding requested under any 
                Federal program in support of the proposed economic, 
                human, community, and physical development and related 
                activities,
                    ``(E) identifies baselines, methods, and benchmarks 
                for measuring the success of carrying out the strategic 
                plan, including the extent to which poor persons and 
                families will be empowered to become economically self-
                sufficient,
                    ``(F) contains a plan for--
                            ``(i) providing water and wastewater 
                        services to a substantial portion of any 
                        substandard residential subdivisions in the 
                        nominated area which lack such services,
                            ``(ii) restraining the construction of 
                        substandard housing on undeveloped parcels 
                        within any existing substandard residential 
                        subdivisions in the nominated area, and
                            ``(iii) restraining the proliferation of 
                        substandard residential subdivisions within the 
                        nominated area, and
                    ``(G) does not include any action to assist any 
                establishment in relocating from one area within the 
                United States and outside the nominated area to the 
                nominated area, except that assistance for the 
                expansion of an existing business entity through the 
                establishment of a new branch, affiliate, or subsidiary 
                is permitted if--
                            ``(i) the establishment of the new branch, 
                        affiliate, or subsidiary will not result in a 
                        decrease in employment in the area of original 
                        location or in any other area where the 
                        existing business entity conducts business 
                        operations, and
                            ``(ii) there is no reason to believe that 
                        the new branch, affiliate, or subsidiary is 
                        being established with the intention of closing 
                        down the operations of the existing business 
                        entity in the area of its original location or 
                        in any other area where the existing business 
                        entity conducts business operations, and
            ``(3) include such other information as may be required by 
        the appropriate Secretary or the Enterprise Board.

``SEC. 1392. ELIGIBILITY CRITERIA.

    ``(a) In General.--A nominated area shall be eligible for 
designation under section 1391 only if it meets the following criteria:
            ``(1) Lack of infrastructure.--The population of the 
        counties in which the nominated area is located increased (as 
        determined by the most recent census data available) by 18 
        percent or more between 1980 and 1990, without a corresponding 
        expansion of basic infrastructure such as water and wastewater 
        services, and not less than 20 percent of the population 
        residing within the nominated area resides in substandard 
        residential subdivisions.
            ``(2) Distress.--The nominated area is one of pervasive 
        poverty, unemployment, and general distress.
            ``(3) Size.--The nominated area--
                    ``(A) does not exceed 1,000 square miles,
                    ``(B) has a boundary which is continuous, or, 
                except in the case of an area located in more than 1 
                State, consists of not more than 3 noncontiguous 
                parcels,
                    ``(C) is located entirely within no more than 3 
                contiguous States, and
                    ``(D) does not include any portion of a central 
                business district (as such term is used for purposes of 
                the most recent Census of Retail Trade) unless the 
                poverty rate for each population census tract in such 
                district is not less than 35 percent (30 percent in the 
                case of an enterprise community).
            ``(4) Poverty rate.--The poverty rate--
                    ``(A) for each population census tract within the 
                nominated area is not less than 20 percent,
                    ``(B) for at least 90 percent of the population 
                census tracts within the nominated area is not less 
                than 25 percent, and
                    ``(C) for at least 50 percent of the population 
                census tracts within the nominated area is not less 
                than 35 percent.
    ``(b) Special Rules Relating to Determination of Poverty Rate.--For 
purposes of subsection (a)(4)--
            ``(1) Treatment of census tracts with small populations.--
                    ``(A) Tracts with no population.--In the case of a 
                population census tract with no population--
                            ``(i) such tract shall be treated as having 
                        a poverty rate which meets the requirements of 
                        subparagraphs (A) and (B) of subsection (a)(4), 
                        but
                            ``(ii) such tract shall be treated as 
                        having a zero poverty rate for purposes of 
                        applying subparagraph (C) thereof.
                    ``(B) Tracts with populations of less than 2,000.--
                A population census tract with a population of less 
                than 2,000 shall be treated as having a poverty rate 
                which meets the requirements of subparagraphs (A) and 
                (B) of subsection (a)(4) if more than 75 percent of 
                such tract is zoned for commercial or industrial use.
            ``(2) Discretion to adjust requirements.--Where necessary 
        to carry out the purposes of this subchapter, the appropriate 
        Secretary may reduce by 5 percentage points one of the 
        following thresholds for not more than 10 percent of the 
        population census tracts (or, if fewer, 5 population census 
        tracts) in the nominated area:
                    ``(A) The 20 percent threshold in subsection 
                (a)(4)(A).
                    ``(B) The 25 percent threshold in subsection 
                (a)(4)(B).
                    ``(C) The 35 percent threshold in subsection 
                (a)(4)(C).
        If the appropriate Secretary elects to reduce the threshold 
        under subparagraph (C) for a border enterprise community, such 
        Secretary may (in lieu of applying the preceding sentence) 
        reduce by 10 percentage points the threshold under subparagraph 
        (C) for 3 population census tracts.
            ``(3) Each noncontiguous area must satisfy poverty rate 
        rule.--A nominated area may not include a noncontiguous parcel 
        unless such parcel separately meets (subject to paragraphs (1) 
        and (2)) the criteria set forth in subsection (a)(4).
            ``(4) Areas not within census tracts.--In the case of an 
        area which is not tracted for population census tracts, the 
        equivalent county divisions (as defined by the Bureau of the 
        Census for purposes of defining poverty areas) shall be used 
        for purposes of determining poverty rates.
    ``(c) Factors To Consider.--From among the nominated areas eligible 
for designation under section 1391 by the appropriate Secretary, such 
appropriate Secretary shall make designations of the border empowerment 
zone and border enterprise communities on the basis of--
            ``(1) the effectiveness of the strategic plan submitted 
        pursuant to section 1391(e)(2) and the assurances made pursuant 
        to section 1391(d)(3), and
            ``(2) criteria specified by the Enterprise Board.

``SEC. 1393. DEFINITIONS AND SPECIAL RULES.

    ``(a) In General.--For purposes of this subchapter--
            ``(1) Appropriate secretary.--The term `appropriate 
        Secretary' means--
                    ``(A) the Secretary of Housing and Urban 
                Development in the case of any nominated area which is 
                located in an urban area,
                    ``(B) the Secretary of Agriculture in the case of 
                any nominated area which is located in a rural area, 
                and
                    ``(C) the Secretary of the Interior in the case of 
                any nominated area which is located in an Indian 
                reservation.
            ``(2) Enterprise board.--The term `Enterprise Board' means 
        any board hereafter established and designated for purposes of 
        this subchapter as the `Enterprise Board'.
            ``(3) Rural area.--The term `rural area' means any area 
        which is--
                    ``(A) outside of a metropolitan statistical area 
                (within the meaning of section 143(k)(2)(B)), or
                    ``(B) determined by the Secretary of Agriculture, 
                after consultation with the Secretary of Commerce, to 
                be a rural area.
            ``(4) Urban area.--The term `urban area' means an area 
        which is not a rural area.
            ``(5) Indian reservation.--
                    ``(A) In general.--The term `Indian reservation' 
                means a reservation as defined in--
                            ``(i) section 3(d) of the Indian Financing 
                        Act of 1974 (25 U.S.C. 1452(d)), or
                            ``(ii) section 4(10) of the Indian Child 
                        Welfare Act of 1978 (25 U.S.C. 1903(10)).
                    ``(B) Governments.--In the case of an area in an 
                Indian reservation, the reservation governing body (as 
                determined by the Secretary of the Interior) shall be 
                deemed to be both the State and local governments with 
                respect to such area.
            ``(6) Border area.--The term `border area' means an area 
        which is located in one or more counties each of which is 
        located adjacent to an international border.
            ``(7) Substandard residential subdivision.--The term 
        `substandard residential subdivision' means a residential 
        area--
                    ``(A) which at the time it was first occupied by a 
                substantial number of residents, lacked basic 
                infrastructure such as water or wastewater services, 
                and
                    ``(B) the residents of which are exposed to greatly 
                increased health risks by reason of living conditions 
                in such residential area or in nearby residential 
                areas.
        In determining whether the condition of subparagraph (B) is 
        met, the Secretary of Housing and Urban Development shall take 
        into account data regarding communicable disease rates, studies 
        by qualified engineering firms, and other relevant factors.
            ``(8) Local government.--The term `local government' 
        means--
                    ``(A) any county, city, town, township, parish, 
                village, or other general purpose political subdivision 
                of a State,
                    ``(B) any limited purpose political subdivision of 
                a State which is involved in the plan described in 
                section 1391(e)(2)(F), and
                    ``(C) any combination of political subdivisions 
                described in subparagraphs (A) and (B) recognized by 
                the appropriate Secretary.
            ``(9) Nominated area.--The term `nominated area' means an 
        area which is nominated by 1 or more local governments and the 
        State or States in which it is located for designation under 
        section 1391.
            ``(10) Governments.--If more than 1 State or local 
        government seeks to nominate an area under this part, any 
        reference to, or requirement of, this subchapter shall apply to 
        all such governments.
            ``(11) Special rule.--An area shall be treated as nominated 
        by a State and a local government if it is nominated by such 
        other entity as may be specified by the Enterprise Board.
            ``(12) Use of census data.--Population and poverty rate 
        shall be determined by the most recent decennial census data 
        available.
    ``(b) Border Empowerment Zone; Border Enterprise Community.--For 
purposes of this title, the terms `border empowerment zone' and `border 
enterprise community' mean areas designated as such under section 1391.

     ``PART II--INCENTIVES FOR BORDER EMPOWERMENT ZONES AND BORDER 
                         ENTERPRISE COMMUNITIES

                              ``Sec. 1394. Incentives.

``SEC. 1394. INCENTIVES.

    ``(a) Increase in Low Income Housing Credit.--For purposes of 
section 42(d)(5)(C), a building shall be treated as located in a 
qualified census tract if--
            ``(1) such building is located in a census tract having a 
        poverty rate of at least 30 percent (determined in accordance 
        with section 1393(a)(10)), and
            ``(2) such building is located in a border empowerment zone 
        or border enterprise community.
    ``(b) Tax Exempt Enterprise Zone Facility Bonds.--
            ``(1) In general.--For purposes of part IV of subchapter B 
        of chapter 1 (relating to tax exemption requirements for State 
        and local bonds), the term `exempt facility bond' includes any 
        bond issued as part of an issue 95 percent or more of the net 
        proceeds (as defined in section 150(a)(3)) of which are to be 
        used to provide any enterprise zone facility.
            ``(2) Enterprise zone facility.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `enterprise zone 
                facility' means any qualified zone property the 
                principal user of which is an enterprise zone business 
                (as defined in section 1399B), and any land which is 
                functionally related and subordinate to such property.
                    ``(B) Qualified zone property.--The term `qualified 
                zone property' has the meaning given such term by 
                section 1399(c); except that--
                            ``(i) section 1399(c)(3) shall not apply, 
                        and
                            ``(ii) the references to a border 
                        empowerment zone shall be treated as including 
                        references to border enterprise communities.
            ``(3) Limitation on amount of bonds.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any issue if the aggregate amount of outstanding 
                enterprise zone facility bonds allocable to any 
                enterprise zone business (taking into account such 
                issue) exceeds--
                            ``(i) $3,000,000 with respect to any 1 
                        border empowerment zone or border enterprise 
                        community, or
                            ``(ii) $20,000,000 with respect to the 
                        border empowerment zone and all border 
                        enterprise communities.
                    ``(B) Aggregate enterprise zone facility bond 
                benefit.--For purposes of subparagraph (A), the 
                aggregate amount of outstanding enterprise zone 
                facility bonds allocable to any business shall be 
                determined under rules similar to the rules of section 
                144(a)(10), taking into account only bonds to which 
                paragraph (1) applies.
            ``(4) Acquisition of land and existing property 
        permitted.--The requirements of sections 147(c)(1)(A) and 
        147(d) shall not apply to any bond described in paragraph (1).
            ``(5) Partial exemption from volume cap.--Only for purposes 
        of section 146, the term `private activity bond' shall not 
        include 50 percent of any bond issued as part of an issue 
        described in paragraph (1).
            ``(6) Penalty for ceasing to meet requirements.--
                    ``(A) Failures corrected.--An issue which fails to 
                meet 1 or more of the requirements of paragraphs (1) 
                and (2) shall be treated as meeting such requirements 
                if--
                            ``(i) the issuer and any principal user in 
                        good faith attempted to meet such requirements, 
                        and
                            ``(ii) any failure to meet such 
                        requirements is corrected within a reasonable 
                        period after such failure is first discovered.
                    ``(B) Loss of deductions where facility ceases to 
                be qualified.--No deduction shall be allowed under this 
                chapter for interest on any financing provided from any 
                bond to which paragraph (1) applies with respect to any 
                facility to the extent such interest accrues during the 
                period beginning on the first day of the calendar year 
                which includes the date on which--
                            ``(i) substantially all of the facility 
                        with respect to which the financing was 
                        provided ceases to be used in an border 
                        empowerment zone or border enterprise 
                        community, or
                            ``(ii) the principal user of such facility 
                        ceases to be an enterprise zone business (as 
                        defined in section 1399B, but treating 
                        references to the border empowerment zones as 
                        including references to border enterprise 
                        communities).
                    ``(C) Exception if zone ceases.--Subparagraphs (A) 
                and (B) shall not apply solely by reason of the 
                termination or revocation of a designation as a border 
                empowerment zone or a border enterprise community.
                    ``(D) Exception for bankruptcy.--Subparagraphs (A) 
                and (B) shall not apply to any cessation resulting from 
                bankruptcy.
    ``(c) Enterprise Zone Facility Bonds Not Subject to Interest 
Deduction Limitations on Financial Institutions.--Any tax-exempt bond 
described in subsection (b)(1)--
            ``(1) shall be treated as acquired before August 8, 1986, 
        for purposes of sections 265(b) and 291(e)(1)(B), and
            ``(2) shall not be taken into account in determining 
        whether any issuer is a qualified small issuer for purposes of 
        section 265(b).
    ``(d) Additional Low-Income Housing Credit Amount.--
            ``(1) In general.--Each State which includes a border 
        empowerment zone or border enterprise community shall receive 
        an additional State housing credit ceiling amount for purposes 
        of section 42 of $818,000 for each such zone or community.
            ``(2) Additional amount must be allocated to buildings in 
        designated areas.--
                    ``(A) In general.--The portion of the additional 
                amount received under paragraph (1) by reason of any 
                border empowerment zone or border enterprise community 
                which may be applied to increase the State housing 
                credit ceiling for any calendar year shall not exceed 
                the lesser of--
                            ``(i) the unused portion of such additional 
                        amount with respect to such zone or community, 
                        or
                            ``(ii) the aggregate housing credit dollar 
                        amount allocated from such ceiling for such 
                        year to buildings located in such zone or 
                        community.
                    ``(B) Unused portion.--For purposes of subparagraph 
                (A), the unused portion for any calendar year of the 
                additional amount received under paragraph (1) is the 
                amount equal to the excess of--
                            ``(i) the additional amount received under 
                        paragraph (1) by the State by reason of the 
                        zone or community, over
                            ``(ii) the aggregate of the increases in 
                        the State housing credit ceiling by reason of 
                        such amount for all prior calendar years.
            ``(3) Availability of additional amount.--None of the 
        additional amount received under paragraph (1) may be applied 
        after 1996.
            ``(4) Areas located in more than 1 state.--In the case of a 
        border empowerment zone or border enterprise community which is 
        located in more than 1 State, the $818,000 amount shall be 
        allocated among such States in proportion to the population of 
        such zone or community which is within each such State.
            ``(5) Zones located in constitutional home rule cities.--If 
        any border empowerment zone or border enterprise community is 
        located in a constitutional home rule city (as defined in 
        section 42(h)(4)(E)), the additional amount received under 
        paragraph (1) shall be allocated to such city and shall not be 
        taken into account in determining such city's share of the 
        State housing credit ceiling under section 42(h)(4)(E).

     ``PART III--ADDITIONAL INCENTIVES FOR BORDER EMPOWERMENT ZONE

                              ``Subpart A. Empowerment zone employment 
                                        credit.
                              ``Subpart B. Zone resident empowerment 
                                        savings credit.
                              ``Subpart C. Depreciation and other 
                                        incentives.

            ``Subpart A--Empowerment Zone Employment Credit

                              ``Sec. 1396. Empowerment zone employment 
                                        credit.
                              ``Sec. 1397. Other definitions and 
                                        special rules.

``SEC. 1396. EMPOWERMENT ZONE EMPLOYMENT CREDIT.

    ``(a) Amount of Credit.--For purposes of section 38, the amount of 
the empowerment zone employment credit determined under this section 
with respect to any employer for any taxable year is the applicable 
percentage of the qualified zone wages paid or incurred during the 
calendar year which ends with or within such taxable year.
    ``(b) Applicable Percentage.--For purposes of this section, the 
term `applicable percentage' means the percentage determined in 
accordance with the following table:

                  ``In the case of wages paid or
                                                         The applicable
                    incurred during calendar year:
                                                         percentage is:
                          1994 through 2000..........          25      
                          2001.......................          20      
                          2002.......................          15      
                          2003.......................          10      
                          2004.......................           5      
    ``(c) Qualified Zone Wages.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified zone wages' means any wages paid or incurred by an 
        employer for services performed by an employee while such 
        employee is a qualified zone employee.
            ``(2) Only first $20,000 of wages per year taken into 
        account.--With respect to each qualified zone employee, the 
        amount of qualified zone wages which may be taken into account 
        for a calendar year shall not exceed $20,000.
            ``(3) Coordination with targeted jobs credit.--
                    ``(A) In general.--The term `qualified zone wages' 
                shall not include wages taken into account in 
                determining the credit under section 51.
                    ``(B) Coordination with paragraph (2).--The $20,000 
                amount in paragraph (2) shall be reduced for any 
                calendar year by the amount of wages paid or incurred 
                during such year which are taken into account in 
                determining the credit under section 51.
    ``(d) Qualified Zone Employee.--For purposes of this section--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `qualified zone employee' means, with 
        respect to any period, any employee of an employer if--
                    ``(A) substantially all of the services performed 
                during such period by such employee for such employer 
                are performed within a border empowerment zone in a 
                trade or business of the employer, and
                    ``(B) the principal place of abode of such employee 
                while performing such services is within such border 
                empowerment zone.
            ``(2) Certain individuals not eligible.--The term 
        `qualified zone employee' shall not include--
                    ``(A) any individual described in subparagraph (A), 
                (B), or (C) of section 51(i)(1),
                    ``(B) any 5-percent owner (as defined in section 
                416(i)(1)(B)),
                    ``(C) any individual employed by the employer for 
                less than 90 days,
                    ``(D) any individual employed by the employer at 
                any facility described in section 144(c)(6)(B), and
                    ``(E) any individual employed by the employer in a 
                trade or business the principal activity of which is 
                farming (within the meaning of subparagraphs (A) or (B) 
                of section 2032A(e)(5)), but only if, as of the close 
                of the taxable year, the sum of--
                            ``(i) the aggregate unadjusted bases (or, 
                        if greater, the fair market value) of the 
                        assets owned by the employer which are used in 
                        such a trade or business, and
                            ``(ii) the aggregate value of assets leased 
                        by the employer which are used in such a trade 
                        or business (as determined under regulations 
                        prescribed by the Secretary),
                exceeds $500,000.
            ``(3) Special rules related to termination of employment.--
                    ``(A) In general.--Paragraph (2)(C) shall not apply 
                to--
                            ``(i) a termination of employment of an 
                        individual who before the close of the period 
                        referred to in paragraph (2)(C) becomes 
                        disabled to perform the services of such 
                        employment unless such disability is removed 
                        before the close of such period and the 
                        taxpayer fails to offer reemployment to such 
                        individual, or
                            ``(ii) a termination of employment of an 
                        individual if it is determined under the 
                        applicable State unemployment compensation law 
                        that the termination was due to the misconduct 
                        of such individual.
                    ``(B) Changes in form of business.--For purposes of 
                paragraph (2)(C), the employment relationship between 
                the taxpayer and an employee shall not be treated as 
                terminated--
                            ``(i) by a transaction to which section 
                        381(a) applies if the employee continues to be 
                        employed by the acquiring corporation, or
                            ``(ii) by reason of a mere change in the 
                        form of conducting the trade or business of the 
                        taxpayer if the employee continues to be 
                        employed in such trade or business and the 
                        taxpayer retains a substantial interest in such 
                        trade or business.

``SEC. 1397. OTHER DEFINITIONS AND SPECIAL RULES.

    ``(a) Wages.--For purposes of this subpart--
            ``(1) In general.--The term `wages' has the same meaning as 
        when used in section 51.
            ``(2) Certain training and educational benefits.--
                    ``(A) In general.--The following amounts shall be 
                treated as wages paid to an employee:
                            ``(i) Any amount paid or incurred by an 
                        employer which is excludable from the gross 
                        income of an employee under section 127, but 
                        only to the extent paid or incurred to a person 
                        not related to the employer.
                            ``(ii) In the case of an employee who has 
                        not attained the age of 19, any amount paid or 
                        incurred by an employer for any youth training 
                        program operated by such employer in 
                        conjunction with local education officials.
                    ``(B) Related person.--A person is related to any 
                other person if the person bears a relationship to such 
                other person specified in section 267(b) or 707(b)(1), 
                or such person and such other person are engaged in 
                trades or businesses under common control (within the 
                meaning of subsections (a) and (b) of section 52). For 
                purposes of the preceding sentence, in applying section 
                267(b) or 707(b)(1), `10 percent' shall be substituted 
                for `50 percent'.
    ``(b) Controlled Groups.--For purposes of this subpart--
            ``(1) all employers treated as a single employer under 
        subsection (a) or (b) of section 52 shall be treated as a 
        single employer for purposes of this subpart, and
            ``(2) the credit (if any) determined under section 1396 
        with respect to each such employer shall be its proportionate 
        share of the wages giving rise to such credit.
    ``(c) Certain Other Rules Made Applicable.--For purposes of this 
subpart, rules similar to the rules of section 51(k) and subsections 
(c), (d), and (e) of section 52 shall apply.
    ``(d) Notice of Availability of Advance Payment of Earned Income 
Credit.--Each employer shall take reasonable steps to notify all 
qualified zone employees of the availability to eligible individuals of 
receiving advanced payments of the credit under section 32 (relating to 
the earned income credit).

         ``Subpart B--Zone Resident Empowerment Savings Credit

                              ``Sec. 1398. Zone resident empowerment 
                                        savings credit.

``SEC. 1398. ZONE RESIDENT EMPOWERMENT SAVINGS CREDIT.

    ``(a) General Rule.--For purposes of section 38, the amount of the 
zone resident empowerment savings credit determined under this section 
with respect to any employer for any taxable year is 50 percent of the 
qualified savings contributions for the taxable year.
    ``(b) Qualified Savings Contributions.--For purposes of this 
section--
            ``(1) In general.--The term `qualified savings 
        contribution' means any contribution by an employer to a 
        defined contribution plan--
                    ``(A) which is made on behalf of an employee in 
                connection with services performed by such employee 
                while such employee is a qualified zone employee, and
                    ``(B) with respect to which the employee has a 
                nonforfeitable right.
            ``(2) Limitation based on compensation.--
                    ``(A) In general.--The qualified savings 
                contributions taken into account with respect to any 
                qualified zone employee for any taxable year shall not 
                exceed an amount equal to 2 percent of so much of the 
                employee's compensation (as defined in section 414(s)) 
                as does not exceed $35,000.
                    ``(B) Zone designation in effect for partial 
                year.--If a designation of an area as an empowerment 
                zone is in effect for less than the entire taxable 
                year, the $35,000 amount under subparagraph (A) shall 
                be ratably reduced to reflect the portion of the year 
                such designation is not in effect.
            ``(3) Certain contributions excluded.--The term `qualified 
        savings contribution' shall not include any contribution--
                    ``(A) to a plan subject to the funding requirements 
                of section 412,
                    ``(B) to a tax credit employee stock ownership plan 
                (as defined in section 409(a)) or to an employee stock 
                ownership plan (as defined in section 4975(e)(7)),
                    ``(C) to a stock bonus plan, or
                    ``(D) which is an elective deferral (within the 
                meaning of section 402(g)(3)).
            ``(4) Simplified employee pension.--A contribution to an 
        individual savings plan pursuant to a simplified employee 
        pension (as defined in section 408(k)) shall be treated as a 
        contribution to a defined contribution plan.
    ``(c) Employer Requirements.--This section shall apply to an 
employer for any taxable year only if--
            ``(1) the employer elects the application of this section, 
        and
            ``(2) the plan pursuant to which any qualified savings 
        contribution is made provides that any contribution to such 
        plan (whether or not a qualified savings contribution) may be 
        withdrawn by a qualified zone employee as described in section 
        72(t)(2) (B) or (D).
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified zone employee.--The term `qualified zone 
        employee' has the meaning given such term by section 1396(d).
            ``(2) Defined contribution plan.--The term `defined 
        contribution plan' means a defined contribution plan (as 
        defined in section 414(i)) which is described in section 401(a) 
        and includes a trust exempt from tax under section 501(a).
    ``(e) Treatment of Plans.--A plan shall not be treated as failing 
to meet any requirement of part I of subchapter D of chapter 1 by 
reason of permitting withdrawals required to be permitted under 
subsection (c)(2).

             ``Subpart C--Depreciation and Other Incentives

                              ``Sec. 1399. Depreciation benefits.
                              ``Sec. 1399A. Additional exclusion from 
                                        volume cap for certain 
                                        enterprise zone facility bonds.
                              ``Sec. 1399B. Enterprise zone business.

``SEC. 1399. DEPRECIATION BENEFITS.

    ``(a) Increase in Expensing Under Section 179.--
            ``(1) In general.--In the case of an enterprise zone 
        business, for purposes of section 179--
                    ``(A) qualified zone property shall be treated as 
                section 179 property,
                    ``(B) the limitation under section 179(b)(1) shall 
                be increased by the lesser of--
                            ``(i) $50,000, or
                            ``(ii) the cost of qualified zone property 
                        placed in service during the taxable year, and
                    ``(C) section 179(b)(2) shall be applied by 
                substituting `by one-half of the amount by which the 
                cost of qualified zone property (other than real 
                property) and other section 179 property' for `by the 
                amount by which the cost of section 179 property'.
    ``(b) Accelerated Depreciation.--
            ``(1) In general.--For purposes of section 168(a), with 
        respect to qualified zone property of an enterprise zone 
        business, the applicable recovery period shall be determined in 
        accordance with the table contained in paragraph (2) in lieu of 
        the table contained in section 168(c).
            ``(2) Applicable recovery period for qualified zone 
        property.--For purposes of paragraph (1)--

                                                         The applicable
``In the case of:                                   recovery period is:
    3-year property...............................              2 years
    5-year property...............................              3 years
    7-year property...............................              4 years
    10-year property..............................              6 years
    15-year property..............................              9 years
    20-year property..............................             12 years
    Nonresidential real property..................            22 years.
            ``(3) Deduction allowed in computing minimum tax.--
        Paragraph (1) shall apply for purposes of determining 
        alternative minimum taxable income under section 55.
    ``(c) Qualified Zone Property.--For purposes of this section--
            ``(1) In general.--The term `qualified zone property' means 
        any property to which section 168 applies (or would apply but 
        for section 179) if--
                    ``(A) such property was acquired by the taxpayer by 
                purchase (as defined in section 179(d)(2)) after the 
                date on which the designation of the border empowerment 
                zone took effect,
                    ``(B) the original use of which in a border 
                empowerment zone commences with the taxpayer, and
                    ``(C) substantially all of the use of which is in a 
                border empowerment zone and is in the active conduct of 
                a trade or business by the taxpayer in such zone.
            ``(2) Special rule for substantial renovations.--In the 
        case of any property which is substantially renovated by the 
        taxpayer, the requirements of subparagraphs (A) and (B) of 
        paragraph (1) shall be treated as satisfied. For purposes of 
        the preceding sentence, property shall be treated as 
        substantially renovated by the taxpayer if, during any 24-month 
        period beginning after the date on which the designation of the 
        border empowerment zone took effect, additions to basis with 
        respect to such property in the hands of the taxpayer exceed 
        the greater of (i) an amount equal to the adjusted basis at the 
        beginning of such 24-month period in the hands of the taxpayer, 
        or (ii) $5,000.
            ``(3) Exception for alternative depreciation property.--The 
        term `qualified zone property' does not include any property to 
        which the alternative depreciation system under section 168(g) 
        applies, determined--
                    ``(A) without regard to section 168(g)(7) (relating 
                to election to use alternative depreciation system), 
                and
                    ``(B) after the application of section 280F(b) 
                (relating to listed property with limited business 
                use).
    ``(d) Special Rules for Sale-Leasebacks.--For purposes of 
subsection (c)(1)(B), if property is sold and leased back by the 
taxpayer within 3 months after the date such property was originally 
placed in service, such property shall be treated as originally placed 
in service not earlier than the date on which such property is used 
under the leaseback.
    ``(e) Recapture.--Rules similar to the rules under section 
179(d)(10) shall apply with respect to any qualified zone property of 
any business which ceases to be an enterprise zone business.

``SEC. 1399A. ADDITIONAL EXCLUSION FROM VOLUME CAP FOR CERTAIN 
              ENTERPRISE ZONE FACILITY BONDS.

    ``(a) In General.--Section 1394(b)(5) shall be applied by 
substituting `75 percent' for `50 percent' in the case of any bond 
described in section 1394(b)(1) issued as part of an issue 95 percent 
or more of the net proceeds (as defined in section 150(a)(3)) of which 
are used to provide qualified zone property the principal user of which 
is any enterprise zone business if the ownership requirements of 
subsection (b) are met with respect to such business.
    ``(b) Ownership Requirements.--The ownership requirements of this 
subsection are met with respect to an enterprise zone business if--
            ``(1) in the case of a sole proprietorship, the principal 
        place of abode of the proprietor is in a border empowerment 
        zone,
            ``(2) in the case of a corporation, more than 50 percent of 
        the stock (by vote and value) in the corporation is owned 
        (directly or indirectly) by individuals whose principal place 
        of abode is in a border empowerment zone, and
            ``(3) in the case of a partnership, more than 50 percent of 
        the capital and profits interests in the partnership is owned 
        (directly or indirectly) by individuals whose principal place 
        of abode is in a border empowerment zone.

``SEC. 1399B. ENTERPRISE ZONE BUSINESS DEFINED.

    ``(a) In General.--For purposes of this subpart, the term 
`enterprise zone business' means--
            ``(1) any qualified business entity, and
            ``(2) any qualified proprietorship.
    ``(b) Qualified Business Entity.--For purposes of this section, the 
term `qualified business entity' means, with respect to any taxable 
year, any corporation or partnership if for such year--
            ``(1) every trade or business of such entity is the active 
        conduct of a qualified business within a border empowerment 
        zone,
            ``(2) at least 80 percent of the total gross income of such 
        entity is derived from the active conduct of such business,
            ``(3) substantially all of the use of the tangible property 
        of such entity (whether owned or leased) is within a border 
        empowerment zone,
            ``(4) substantially all of the intangible property of such 
        entity is used in, and exclusively related to, the active 
        conduct of any such business,
            ``(5) substantially all of the services performed for such 
        entity by its employees are performed in a border empowerment 
        zone,
            ``(6) at least 35 percent of its employees are residents of 
        a border empowerment zone,
            ``(7) less than 5 percent of the average of the aggregate 
        unadjusted bases of the property of such entity is attributable 
        to collectibles (as defined in section 408(m)(2)) other than 
        collectibles that are held primarily for sale to customers in 
        the ordinary course of such business, and
            ``(8) less than 5 percent of the average of the aggregate 
        unadjusted bases of the property of such entity is attributable 
        to nonqualified financial property.
    ``(c) Qualified Proprietorship.--For purposes of this section, the 
term `qualified proprietorship' means, with respect to any taxable 
year, any qualified business carried on by an individual as a 
proprietorship if for such year--
            ``(1) at least 80 percent of the total gross income of such 
        individual from such business is derived from the active 
        conduct of such business in a border empowerment zone,
            ``(2) substantially all of the use of the tangible property 
        of such individual in such business (whether owned or leased) 
        is within a border empowerment zone,
            ``(3) substantially all of the intangible property of such 
        business is used in, and exclusively related to, the active 
        conduct of such business,
            ``(4) substantially all of the services performed for such 
        individual in such business by employees of such business are 
        performed in a border empowerment zone,
            ``(5) at least 35 percent of such employees are residents 
        of a border empowerment zone,
            ``(6) less than 5 percent of the average of the aggregate 
        unadjusted bases of the property of such individual which is 
        used in such business is attributable to collectibles (as 
        defined in section 408(m)(2)) other than collectibles that are 
        held primarily for sale to customers in the ordinary course of 
        such business, and
            ``(7) less than 5 percent of the average of the aggregate 
        unadjusted bases of the property of such individual which is 
        used in such business is attributable to nonqualified financial 
        property.
For purposes of this subsection, the term `employee' includes the 
proprietor.
    ``(d) Qualified Business.--For purposes of this section--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `qualified business' means any trade or 
        business.
            ``(2) Rental of real property.--The rental to others of 
        real property located in a border empowerment zone shall be 
        treated as a qualified business if and only if--
                    ``(A) the property is not residential rental 
                property (as defined in section 168(e)(2)), and
                    ``(B) at least 50 percent of the gross rental 
                income from the real property is from enterprise zone 
                businesses.
            ``(3) Rental of tangible personal property.--The rental to 
        others of tangible personal property shall be treated as a 
        qualified business if and only if substantially all of the 
        rental of such property is by enterprise zone businesses or by 
        residents of a border empowerment zone.
            ``(4) Treatment of business holding intangibles.--The term 
        `qualified business' shall not include any trade or business 
        consisting predominantly of the development or holding of 
        intangibles for sale or license.
            ``(5) Certain businesses excluded.--The term `qualified 
        business' shall not include--
                    ``(A) any trade or business consisting of the 
                operation of any facility described in section 
                144(c)(6)(B), and
                    ``(B) any trade or business the principal activity 
                of which is farming (within the meaning of 
                subparagraphs (A) or (B) of section 2032A(e)(5)), but 
                only if, as of the close of the preceding taxable year, 
                the sum of--
                            ``(i) the aggregate unadjusted bases (or, 
                        if greater, the fair market value) of the 
                        assets owned by the taxpayer which are used in 
                        such a trade or business, and
                            ``(ii) the aggregate value of assets leased 
                        by the taxpayer which are used in such a trade 
                        or business,
                exceeds $500,000.
        For purposes of subparagraph (B), rules similar to the rules of 
        section 1397(b) shall apply.
    ``(e) Nonqualified Financial Property.--For purposes of this 
section, the term `nonqualified financial property' means debt, stock, 
partnership interests, options, futures contracts, forward contracts, 
warrants, notional principal contracts, annuities, and other similar 
property specified in regulations; except that such term shall not 
include--
            ``(1) reasonable amounts of working capital held in cash, 
        cash equivalents, or debt instruments with a term of 18 months 
        or less, or
            ``(2) debt instruments described in section 1221(4).

                         ``PART IV--REGULATIONS

                              ``Sec. 1399C. Regulations.

``SEC. 1399C. REGULATIONS.

    ``The Secretary shall prescribe such regulations as may be 
necessary or appropriate to carry out the purposes of parts II and III, 
including--
            ``(1) regulations limiting the benefit of parts II and III 
        in circumstances where such benefits, in combination with 
        benefits provided under other Federal programs, would result in 
        an activity being 100 percent or more subsidized by the Federal 
        Government,
            ``(2) regulations preventing abuse of the provisions of 
        parts II and III, and
            ``(3) regulations dealing with inadvertent failures of 
        entities to be enterprise zone businesses.''
    (b) Clerical Amendment.--The table of subchapters for chapter 1 is 
amended by inserting after the item relating to subchapter T the 
following new item:

                              ``Subchapter U. Designation and treatment 
                                        of border empowerment zones and 
                                        border enterprise 
                                        communities.''

SEC. 3. EXPANSION OF TARGETED JOBS CREDIT.

    (a) Allowance of Credit for Hiring Border Empowerment Zone 
Resident.--Paragraph (1) of section 51(d) (defining members of targeted 
groups) is amended by striking ``or'' at the end of subparagraph (I), 
by striking the period at the end of subparagraph (J) and inserting ``, 
or'', and by adding at the end the following new subparagraph:
            ``(K) an economically disadvantaged border empowerment zone 
        resident.''
    (b) Economically Disadvantaged Empowerment Zone Resident.--Section 
51(d) is amended by redesignating paragraphs (13) through (16) as 
paragraphs (14) through (17), respectively, and by inserting after 
paragraph (12) the following new paragraph:
            ``(13) Economically disadvantaged border empowerment zone 
        resident.--The term `economically disadvantaged border 
        empowerment zone resident' means an individual--
                    ``(A) whose principal place of abode while 
                performing services for the employer is within a border 
                empowerment zone, and
                    ``(B) who is certified by the designated local 
                agency as being a member of an economically 
                disadvantaged family (as determined under paragraph 
                (11)).
        Such term shall not include a qualified zone employee (as 
        defined in section 1396(d) without regard to paragraph (2) 
        thereof).''
    (c) Conforming Amendment.--Subparagraph (C) of section 51(d)(12) is 
amended by striking ``paragraph (14)'' and inserting ``paragraph 
(15)''.

SEC. 4. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Certain Credits Part of General Business Credit.--
            (1) Subsection (b) of section 38 (relating to current year 
        business credit) is amended by striking ``plus'' at the end of 
        paragraph (7), by striking the period at the end of paragraph 
        (8) and inserting a comma, and by adding at the end the 
        following new paragraphs:
            ``(9) the empowerment zone employment credit determined 
        under section 1396(a), plus
            ``(10) the zone resident empowerment savings credit 
        determined under section 1398.''
            (2) Subsection (d) of section 39 is amended by adding at 
        the end the following new paragraph:
            ``(4) Enterprise zone credits.--No portion of the unused 
        business credit which is attributable to the credit determined 
        under section 1396 (relating to empowerment zone employment 
        credit) or section 1398 (relating to zone resident empowerment 
        savings credit) may be carried to any taxable year ending 
        before January 1, 1994.''
    (b) Denial of Deduction for Portion of Wages Equal to Empowerment 
Zone Employment Credit.--
            (1) Subsection (a) of section 280C (relating to rule for 
        targeted jobs credit) is amended--
                    (A) by striking ``the amount of the credit 
                determined for the taxable year under section 51(a)'' 
                and inserting ``the sum of the credits determined for 
                the taxable year under sections 51(a) and 1396(a)'', 
                and
                    (B) by striking ``Targeted Jobs Credit'' in the 
                subsection heading and inserting ``Employment 
                Credits''.
            (2) Subsection (c) of section 196 (relating to deduction 
        for certain unused business credits) is amended by striking 
        ``and'' at the end of paragraph (4), by striking the period at 
        the end of paragraph (5) and inserting ``, and'', and by adding 
        at the end the following new paragraph:
            ``(6) the empowerment zone employment credit determined 
        under section 1396(a).''
    (c) Employment and Savings Credits May Offset 25 Percent of Minimum 
Tax.--
            (1) In general.--Section 38(c) (relating to limitation 
        based on amount of tax) is amended by redesignating paragraph 
        (2) as paragraph (3) and by inserting after paragraph (1) the 
        following new paragraph:
            ``(2) Empowerment zone credits may offset 25 percent of 
        minimum tax.--
                    ``(A) In general.--In the case of the empowerment 
                zone credits--
                            ``(i) this section and section 39 shall be 
                        applied separately with respect to such 
                        credits, and
                            ``(ii) for purposes of applying paragraph 
                        (1) to such credits--
                                    ``(I) 75 percent of the tentative 
                                minimum tax shall be substituted for 
                                the tentative minimum tax under 
                                subparagraph (A) thereof, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than the 
                                empowerment zone credits).
                    ``(B) Empowerment zone credits.--For purposes of 
                this paragraph, the term `empowerment zone credits' 
                means the portion of the credit under subsection (a) 
                which is attributable to the credits determined under 
                section 1396 (relating to empowerment zone employment 
                credit) and section 1398 (relating to zone resident 
                empowerment savings credit).''
    (d) Changes Relating to Empowerment Zone Resident Empowerment 
Savings Credit.--
            (1) Disallowance of deduction.--Section 404 (relating to 
        deduction for certain employer contributions) is amended by 
        adding at the end the following new subsection:
    ``(m) Coordination With Empowerment Zone Credit.--No deduction 
shall be allowed under this section for any qualified employer 
contribution taken into account in computing the credit determined 
under section 1398.''
            (2) Penalty-free distributions.--
                    (A) In general.--Paragraph (2) of section 72(t) 
                (relating to exceptions to 10-percent additional tax on 
                early distributions from qualified retirement plans) is 
                amended by adding at the end thereof the following new 
                subparagraph:
                    ``(D) Distributions from certain plans for first 
                home purchases or educational expenses.--
                            ``(i) In general.--Distributions to an 
                        individual from a qualified retirement plan--
                                    ``(I) which are qualified first-
                                time homebuyer distributions (as 
                                defined in paragraph (6)),
                                    ``(II) to the extent such 
                                distributions do not exceed the 
                                qualified higher education expenses (as 
                                defined in paragraph (7)) of the 
                                taxpayer for the taxable year, or
                                    ``(III) to the extent such 
                                distributions do not exceed an amount 
                                equal to the aggregate investment made 
                                by the taxpayer during the taxable year 
                                in any enterprise zone business (as 
                                defined in section 1399B) that meets 
                                the ownership requirements of section 
                                1399A(b).
                            ``(ii) Limitation.--Clause (i) shall not 
                        apply to the extent that the aggregate amount 
                        of the distributions described in clause (i) is 
                        greater than the excess of--
                                    ``(I) the qualified savings 
                                contributions (as defined in section 
                                1398(b)) of the taxpayer, and any 
                                earnings thereon, over
                                    ``(II) the aggregate amounts to 
                                which clause (i) and the last sentence 
                                of paragraph (3)(A) applied for 
                                preceding taxable years.''
                    (B) Definitions.--Section 72(t) is amended by 
                adding at the end thereof the following new paragraphs:
            ``(6) Qualified first-time homebuyer distributions.--For 
        purposes of paragraph (2)(D)(i)(I)--
                    ``(A) In general.--The term `qualified first-time 
                homebuyer distribution' means any payment or 
                distribution received by an individual to the extent 
                such payment or distribution is used by the individual 
                before the close of the 60th day after the day on which 
                such payment or distribution is received to pay 
                qualified acquisition costs with respect to a principal 
                residence of a first-time homebuyer who is such 
                individual or the spouse of such individual.
                    ``(B) Qualified acquisition costs.--For purposes of 
                this paragraph, the term `qualified acquisition costs' 
                means the costs of acquiring, constructing, or 
                reconstructing a residence. Such term includes any 
                usual or reasonable settlement, financing, or other 
                closing costs.
                    ``(C) First-time homebuyer; other definitions.--For 
                purposes of this paragraph--
                            ``(i) First-time homebuyer.--The term 
                        `first-time homebuyer' means any individual 
                        if--
                                    ``(I) such individual (and if 
                                married, such individual's spouse) had 
                                no present ownership interest in a 
                                principal residence during the 3-year 
                                period ending on the date of 
                                acquisition of the principal residence 
                                to which this paragraph applies, and
                                    ``(II) subsection (a)(6), (h), or 
                                (k) of section 1034 did not suspend the 
                                running of any period of time specified 
                                in section 1034 with respect to such 
                                individual on the day before the date 
                                the distribution is applied pursuant to 
                                subparagraph (A)(ii).
                            ``(ii) Principal residence.--The term 
                        `principal residence' has the same meaning as 
                        when used in section 1034.
                            ``(iii) Date of acquisition.--The term 
                        `date of acquisition' means the date--
                                    ``(I) on which a binding contract 
                                to acquire the principal residence to 
                                which subparagraph (A) applies is 
                                entered into, or
                                    ``(II) on which construction or 
                                reconstruction of such a principal 
                                residence is commenced.
                    ``(D) Special rule where delay in acquisition.--If 
                any distribution from any qualified retirement plan 
                fails to meet the requirements of subparagraph (A) 
                solely by reason of a delay or cancellation of the 
                purchase or construction of the residence, the amount 
                of the distribution may be recontributed to the plan 
                from which it was distributed within 120 days after the 
                date of such distribution.
            ``(7) Qualified higher education expenses.--For purposes of 
        paragraph (2)(D)(ii)(II)--
                    ``(A) In general.--The term `qualified higher 
                education expenses' means tuition, fees, books, 
                supplies, and equipment required for the enrollment or 
                attendance of--
                            ``(i) the taxpayer,
                            ``(ii) the taxpayer's spouse, or
                            ``(iii) the taxpayer's child (as defined in 
                        section 151(c)(3)) or grandchild,
                at an eligible educational institution (as defined in 
                section 135(c)(3)).
                    ``(B) Coordination with savings bond provisions.--
                The amount of qualified higher education expenses for 
                any taxable year shall be reduced by any amount 
                excludable from gross income under section 135.''.
                    (C) Conforming amendments.--
                            (i) Subparagraph (B) of section 72(t)(2) is 
                        amended by striking ``or (C)'' and inserting 
                        ``, (C), or (D)''.
                            (ii) Section 401(k)(2)(B)(i) is amended by 
                        striking ``or'' at the end of subclause (III), 
                        by striking ``and'' at the end of subclause 
                        (IV) and inserting ``or'', and by inserting 
                        after subclause (IV) the following new 
                        subclause:
                                    ``(V) subject to the limitation of 
                                section 72(t)(2)(D)(ii), the date on 
                                which qualified first-time homebuyer 
                                distributions (as defined in section 
                                72(t)(6)), distributions for qualified 
                                higher education expenses (as defined 
                                in section 72(t)(7)), or distributions 
                                for investments described in section 
                                72(t)(2)(D)(i)(III) are made, and''.
    (e) Amendment of Targeted Jobs Credit.--Subparagraph (A) of section 
51(i)(1) is amended by inserting ``, or, if the taxpayer is an entity 
other than a corporation, to any individual who owns, directly or 
indirectly, more than 50 percent of the capital and profits interests 
in the entity,'' after ``of the corporation''.
    (f) Carryovers.--Subsection (c) of section 381 (relating to 
carryovers in certain corporate acquisitions) is amended by adding at 
the end the following new paragraph:
            ``(26) Enterprise zone provisions.--The acquiring 
        corporation shall take into account (to the extent proper to 
        carry out the purposes of this section and subchapter U, and 
        under such regulations as may be prescribed by the Secretary) 
        the items required to be taken into account for purposes of 
        subchapter U in respect of the distributor or transferor 
        corporation.''

SEC. 5. EFFECTIVE DATE.

    The amendments made by this Act shall take effect on the date of 
the enactment of this Act.

                                 <all>

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