(relating to imposition of tax on unrelated business
income of charitable, etc., organizations).
‘‘(2) LOSS OF EXEMPTION IN CASE OF PROHIB-
ITED TRANSACTIONS.—For purposes of this section,
rules similar to the rules of section 408(e) shall
apply.
‘‘(e) FAMILY DEVELOPMENT ACCOUNT.—For pur-
poses of this title, the term ‘family development account’
means a trust created or organized in the United States
for the exclusive benefit of a qualified individual or his
beneficiaries, but only if the written governing instrument
creating the trust meets the following requirements:
‘‘(1) Except in the case of a qualified rollover
(as defined in subsection (c)(7))—
‘‘(A) no contribution will be accepted un-
less it is in cash, and
‘‘(B) contributions will not be accepted for
the taxable year in excess of $2,000 (deter-
mined without regard to any contribution made
under section 1400I (relating to demonstration
program to provide matching amounts in re-
newal communities)).
‘‘(2) The trustee is a bank (as defined in sec-
tion 408(n)) or such other person who demonstrates
to the satisfaction of the Secretary that the manner
in which such other person will administer the trust
will be consistent with the requirements of this sec-
tion.
‘‘(3) No part of the trust funds will be invested
in life insurance contracts.
‘‘(4) The interest of an individual in the bal-
ance in his account is nonforfeitable.
‘‘(5) The assets of the trust will not be commin-
gled with other property except in a common trust
fund or common investment fund.
‘‘(6) Under regulations prescribed by the Sec-
retary, rules similar to the rules of section 401(a)(9)
and the incidental death benefit requirements of sec-
tion 401(a) shall apply to the distribution of the en-
tire interest of an individual for whose benefit the
trust is maintained.
‘‘(f) QUALIFIED INDIVIDUAL.—For purposes of this
section, the term ‘qualified individual’ means, for any tax-
able year, an individual—
‘‘(1) who is a bona fide resident of a renewal
community throughout the taxable year, and
‘‘(2) to whom a credit was allowed under sec-
tion 32 for the preceding taxable year.
‘‘(g) OTHER DEFINITIONS AND SPECIAL RULES.—
‘‘(1) COMPENSATION.—The term ‘compensa-
tion’ has the meaning given such term by section
219(f)(1).
‘‘(2) MARRIED
INDIVIDUALS.—The maximum
deduction under subsection (a) shall be computed
separately for each individual, and this section shall
be applied without regard to any community prop-
erty laws.
‘‘(3) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—For purposes of this section, a taxpayer
shall be deemed to have made a contribution to a
family development account on the last day of the
preceding taxable year if the contribution is made on
account of such taxable year and is made not later
than the time prescribed by law for filing the return
for such taxable year (not including extensions
thereof).
‘‘(4) EMPLOYER PAYMENTS.—For purposes of
this title, any amount paid by an employer to a fam-
ily development account shall be treated as payment
of compensation to the employee (other than a self-
employed individual who is an employee within the
meaning of section 401(c)(1)) includible in his gross
income in the taxable year for which the amount was
contributed, whether or not a deduction for such
payment is allowable under this section to the em-
ployee.
‘‘(5) ZERO BASIS.—The basis of an individual
in any family development account of such individual
shall be zero.
‘‘(6) CUSTODIAL ACCOUNTS.—For purposes of
this section, a custodial account shall be treated as
a trust if the assets of such account are held by a
bank (as defined in section 408(n)) or another per-
son who demonstrates, to the satisfaction of the Sec-
retary, that the manner in which such person will
administer the account will be consistent with the re-
quirements of this section, and if the custodial ac-
count would, except for the fact that it is not a
trust, constitute a family development account de-
scribed in this section. For purposes of this title, in
the case of a custodial account treated as a trust by
reason of the preceding sentence, the custodian of
such account shall be treated as the trustee thereof.
‘‘(7) REPORTS.—The trustee of a family devel-
opment account shall make such reports regarding
such account to the Secretary and to the individual
for whom the account is maintained with respect to
contributions (and the years to which they relate),
distributions, and such other matters as the Sec-
retary may require under regulations. The reports
required by this paragraph—
‘‘(A) shall be filed at such time and in
such manner as the Secretary prescribes in
such regulations, and
‘‘(B) shall be furnished to individuals—
‘‘(i) not later than January 31 of the
calendar year following the calendar year
to which such reports relate, and
‘‘(ii) in such manner as the Secretary
prescribes in such regulations.
‘‘(8) INVESTMENT IN COLLECTIBLES TREATED
AS DISTRIBUTIONS.—Rules similar to the rules of
section 408(m) shall apply for purposes of this sec-
tion.
‘‘(h) PENALTY FOR DISTRIBUTIONS NOT USED FOR
QUALIFIED FAMILY DEVELOPMENT EXPENSES.—
‘‘(1) IN GENERAL.—If any amount is distrib-
uted from a family development account and is not
used exclusively to pay qualified family development
expenses for the holder of the account or the spouse
or dependent (as defined in section 152) of such
holder, the tax imposed by this chapter for the tax-
able year of such distribution shall be increased by
the sum of—
‘‘(A) 100 percent of the portion of such
amount which is includible in gross income and
is attributable to amounts contributed under
section 1400I (relating to demonstration pro-
gram to provide matching amounts in renewal
communities), and
‘‘(B) 10 percent of the portion of such
amount which is includible in gross income and
is not described in paragraph (1).
For purposes of this subsection, the portion of a dis-
tributed amount which is attributable to amounts
contributed under section 1400I is the amount
which bears the same ratio to the distributed
amount as the aggregate amount contributed under
section 1400I to all family development accounts of
the individual bears to the aggregate amount con-
tributed to such accounts from all sources.
‘‘(2) EXCEPTION
FOR
CERTAIN
DISTRIBU-
TIONS.—Paragraph (1) shall not apply to distribu-
tions which are—
‘‘(A) made on or after the date on which
the account holder attains age 591⁄2,
‘‘(B) made pursuant to subsection (e)(6),
‘‘(C) made to a beneficiary (or the estate
of the account holder) on or after the death of
the account holder, or
‘‘(D) attributable to the account holder’s
being disabled within the meaning of section
72(m)(7).
‘‘SEC. 1400I. DEMONSTRATION PROGRAM TO PROVIDE
MATCHING CONTRIBUTIONS TO FAMILY DE-
VELOPMENT 
ACCOUNTS 
IN 
CERTAIN 
RE-
NEWAL COMMUNITIES.
‘‘(a) DESIGNATION.—
‘‘(1) DEFINITIONS.—For purposes of this sec-
tion, the term ‘FDA matching demonstration area’
means any renewal community—
‘‘(A) which is nominated under this section
by each of the local governments and States
which nominated such community for designa-
tion as a renewal community under section
1400E(a)(1)(A), and
‘‘(B) which the Secretary of Housing and
Urban Development, after consultation with—
‘‘(i) the Secretaries of Agriculture,
Commerce, Labor, and the Treasury, the
Director of the Office of Management and
Budget, and the Administrator of the
Small Business Administration, and
‘‘(ii) in the case of a community on an
Indian reservation, the Secretary of the In-
terior,
designates as an FDA matching demonstration
area.
‘‘(2) NUMBER OF DESIGNATIONS.—
‘‘(A) IN
GENERAL.—The Secretary of
Housing and Urban Development may des-
ignate not more than 25 percent of the renewal
communities as FDA matching demonstration
areas.
‘‘(B) MINIMUM
DESIGNATION
IN
RURAL
AREAS.—Of the areas designated under para-
graph (1), at least 2 must be areas described in
section 1400E(a)(2)(B).
‘‘(3) LIMITATIONS ON DESIGNATIONS.—
‘‘(A) PUBLICATION
OF
REGULATIONS.—
The Secretary of Housing and Urban Develop-
ment shall prescribe by regulation no later than
4 months after the date of the enactment of
this section, after consultation with the officials
described in paragraph (1)(B)—
‘‘(i) the procedures for nominating a
renewal 
community 
under 
paragraph
(1)(A) (including procedures for coordinat-
ing such nomination with the nomination
of an area for designation as a renewal
community under section 1400E), and
‘‘(ii) the manner in which nominated
renewal communities will be evaluated for
purposes of this section.
‘‘(B) TIME LIMITATIONS.—The Secretary
of Housing and Urban Development may des-
ignate renewal communities as FDA matching
demonstration areas only during the 24-month
period beginning on the first day of the first
month following the month in which the regula-
tions described in subparagraph (A) are pre-
scribed.
‘‘(4) DESIGNATION BASED ON DEGREE OF POV-
ERTY, ETC.—The rules of section 1400E(a)(3) shall
apply for purposes of designations of FDA matching
demonstration areas under this section.
‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF-
FECT.—Any designation of a renewal community as an
FDA matching demonstration area shall remain in effect
during the period beginning on the date of such designa-
tion and ending on the date on which such area ceases
to be a renewal community.
‘‘(c) MATCHING CONTRIBUTIONS TO FAMILY DEVEL-
OPMENT ACCOUNTS.—
‘‘(1) IN GENERAL.—Not less than once each
taxable year, the Secretary shall deposit (to the ex-
tent provided in appropriation Acts) into a family
development account of each qualified individual (as
defined in section 1400H(f)) who is a resident
throughout the taxable year of an FDA matching
demonstration area an amount equal to the sum of
the amounts deposited into all of the family develop-
ment accounts of such individual during such tax-
able year (determined without regard to any amount
contributed under this section).
‘‘(2) LIMITATIONS.—
‘‘(A) ANNUAL LIMIT.—The Secretary shall
not deposit more than $1000 under paragraph
(1) with respect to any individual for any tax-
able year.
‘‘(B) AGGREGATE
LIMIT.—The Secretary
shall not deposit more than $2000 under para-
graph (1) with respect to any individual.
‘‘(3) EXCLUSION
FROM
INCOME.—Except as
provided in section 1400H, gross income shall not
include any amount deposited into a family develop-
ment account under paragraph (1).
‘‘SEC. 1400J. DESIGNATION OF EARNED INCOME TAX CRED-
IT PAYMENTS FOR DEPOSIT TO FAMILY DE-
VELOPMENT ACCOUNT.
‘‘(a) IN GENERAL.—With respect to the return of any
qualified individual (as defined in section 1400H(f)) for
the taxable year of the tax imposed by this chapter, such
individual may designate that a specified portion (not less
than $1) of any overpayment of tax for such taxable year
which is attributable to the earned income tax credit shall
be deposited by the Secretary into a family development
account of such individual. The Secretary shall so deposit
such portion designated under this subsection.
‘‘(b) MANNER AND TIME OF DESIGNATION.—A des-
ignation under subsection (a) may be made with respect
to any taxable year—
‘‘(1) at the time of filing the return of the tax
imposed by this chapter for such taxable year, or
‘‘(2) at any other time (after the time of filing
the return of the tax imposed by this chapter for
such taxable year) specified in regulations prescribed
by the Secretary.
Such designation shall be made in such manner as the
Secretary prescribes by regulations.
‘‘(c) PORTION ATTRIBUTABLE TO EARNED INCOME
TAX CREDIT.—For purposes of subsection (a), an over-
payment for any taxable year shall be treated as attrib-
utable to the earned income tax credit to the extent that
such overpayment does not exceed the credit allowed to
the taxpayer under section 32 for such taxable year.
‘‘(d) OVERPAYMENTS TREATED
AS REFUNDED.—
For purposes of this title, any portion of an overpayment
of tax designated under subsection (a) shall be treated as
being refunded to the taxpayer as of the last date pre-
scribed for filing the return of tax imposed by this chapter
(determined without regard to extensions) or, if later, the
date the return is filed.
‘‘PART IV—ADDITIONAL INCENTIVES
‘‘Sec. 1400K. Commercial revitalization credit.
‘‘Sec. 1400L. Increase in expensing under section 179.
‘‘Sec. 1400M. Expensing of renewal community environmental re-
mediation costs.
‘‘SEC. 1400K. COMMERCIAL REVITALIZATION TAX CREDIT.
‘‘(a) GENERAL RULE.—For purposes of section 46,
except as provided in subsection (e), the commercial revi-
talization credit for any taxable year is an amount equal
to the applicable percentage of the qualified revitalization
expenditures with respect to any qualified revitalization
building.
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘applicable per-
centage’ means—
‘‘(A) 20 percent for the taxable year in
which a qualified revitalization building is
placed in service, or
‘‘(B) at the election of the taxpayer, 5 per-
cent for each taxable year in the credit period.
The election under subparagraph (B), once made,
shall be irrevocable.
‘‘(2) CREDIT PERIOD.—
‘‘(A) IN GENERAL.—The term ‘credit pe-
riod’ means, with respect to any building, the
period of 10 taxable years beginning with the
taxable year in which the building is placed in
service.
‘‘(B) APPLICABLE RULES.—Rules similar
to the rules under paragraphs (2) and (4) of
section 42(f) shall apply.
‘‘(c) QUALIFIED REVITALIZATION BUILDINGS AND
EXPENDITURES.—For purposes of this section—
‘‘(1) QUALIFIED REVITALIZATION BUILDING.—
The term ‘qualified revitalization building’ means
any building (and its structural components) if—
‘‘(A) such building is located in a renewal
community and is placed in service after the
designation of such renewal community under
section 1400E,
‘‘(B) a commercial revitalization credit
amount is allocated to the building under sub-
section (e), and
‘‘(C) depreciation (or amortization in lieu
of depreciation) is allowable with respect to the
building.
‘‘(2) QUALIFIED
REVITALIZATION
EXPENDI-
TURE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
revitalization expenditure’ means any amount
properly chargeable to capital account—
‘‘(i) for property for which deprecia-
tion is allowable under section 168 and
which is—
‘‘(I) nonresidential real property,
or
‘‘(II) an addition or improvement
to property described in subclause (I),
‘‘(ii) in connection with the construc-
tion or substantial rehabilitation or recon-
struction of a qualified revitalization build-
ing, or
‘‘(iii) for the acquisition of land in
connection with the qualified revitalization
building.
‘‘(B) DOLLAR
LIMITATION.—The aggre-
gate amount which may be treated as qualified
revitalization expenditures with respect to any
qualified revitalization building for any taxable
year shall not exceed the excess of—
‘‘(i) $10,000,000, reduced by
‘‘(ii) any such expenditures with re-
spect to the building taken into account by
the taxpayer or any predecessor in deter-
mining the amount of the credit under this
section for all preceding taxable years.
‘‘(C) CERTAIN
EXPENDITURES
NOT
IN-
CLUDED.—The term ‘qualified revitalization ex-
penditure’ does not include—
‘‘(i) STRAIGHT
LINE
DEPRECIATION
MUST BE USED.—Any expenditure (other
than with respect to land acquisitions) with
respect to which the taxpayer does not use
the straight line method over a recovery
period determined under subsection (c) or
(g) of section 168. The preceding sentence
shall not apply to any expenditure to the
extent the alternative depreciation system
of section 168(g) applies to such expendi-
ture by reason of subparagraph (B) or (C)
of section 168(g)(1).
‘‘(ii) ACQUISITION COSTS.—The costs
of acquiring any building or interest there-
in and any land in connection with such
building to the extent that such costs ex-
ceed 30 percent of the qualified revitaliza-
tion expenditures determined without re-
gard to this clause.
‘‘(iii) OTHER CREDITS.—Any expendi-
ture which the taxpayer may take into ac-
count in computing any other credit allow-
able under this title unless the taxpayer
elects to take the expenditure into account
only for purposes of this section.
‘‘(5) SUBSTANTIAL
REHABILITATION
OR
RE-
CONSTRUCTION.—For purposes of this subsection, a
rehabilitation or reconstruction shall be treated as a
substantial rehabilitation or reconstruction only if
the qualified revitalization expenditures in connec-
tion with the rehabilitation or reconstruction exceed
25 percent of the fair market value of the building
(and its structural components) immediately before
the rehabilitation or reconstruction.
‘‘(d) WHEN
EXPENDITURES
TAKEN
INTO
AC-
COUNT.—
‘‘(1) IN GENERAL.—Qualified revitalization ex-
penditures with respect to any qualified revitaliza-
tion building shall be taken into account for the tax-
able year in which the qualified revitalization build-
ing is placed in service. For purposes of the preced-
ing sentence, a substantial rehabilitation or recon-
struction of a building shall be treated as a separate
building.
‘‘(2) PROGRESS
EXPENDITURE
PAYMENTS.—
Rules similar to the rules of subsections (b)(2) and
(d) of section 47 shall apply for purposes of this sec-
tion.
‘‘(e) LIMITATION ON AGGREGATE CREDITS ALLOW-
ABLE WITH RESPECT
TO BUILDINGS LOCATED
IN
A
STATE.—
‘‘(1) IN GENERAL.—The amount of the credit
determined under this section for any taxable year
with respect to any building shall not exceed the
commercial revitalization credit amount (in the case
of 
an 
amount 
determined 
under 
subsection
(b)(1)(B), the present value of such amount as de-
termined under the rules of section 42(b)(2)(C)) al-
located to such building under this subsection by the
commercial revitalization credit agency. Such alloca-
tion shall be made at the same time and in the same
manner as under paragraphs (1) and (7) of section
42(h).
‘‘(2) COMMERCIAL
REVITALIZATION
CREDIT
AMOUNT FOR AGENCIES.—
‘‘(A) IN GENERAL.—The aggregate com-
mercial revitalization credit amount which a
commercial revitalization credit agency may al-
locate for any calendar year is the amount of
the State commercial revitalization credit ceil-
ing determined under this paragraph for such
calendar year for such agency.
‘‘(B) STATE COMMERCIAL REVITALIZATION
CREDIT CEILING.—
‘‘(i) IN
GENERAL.—The State com-
mercial revitalization credit ceiling applica-
ble to any State for any calendar year is
$2,000,000 for each renewal community in
the State.
‘‘(ii) SPECIAL RULE WHERE COMMU-
NITY LOCATED IN MORE THAN 1 STATE.—
If a renewal community is located in more
than 1 State, a State’s share of the
amount specified in clause (i) with respect
to such community shall be an amount
that bears the same ratio to $2,000,000 as
the population in the State bears to the
population in all States in which such com-
munity is located.
‘‘(iii) OTHER SPECIAL RULES.—Rules
similar to the rules of subparagraphs (D),
(E), (F), and (G) of section 42(h)(3) shall
apply for purposes of this subsection.
‘‘(C) COMMERCIAL REVITALIZATION CRED-
IT AGENCY.—For purposes of this section, the
term ‘commercial revitalization credit agency’
means any agency authorized by a State to
carry out this section.
‘‘(f) RESPONSIBILITIES OF COMMERCIAL REVITAL-
IZATION CREDIT AGENCIES.—
‘‘(1) PLANS FOR ALLOCATION.—Notwithstand-
ing any other provision of this section, the commer-
cial revitalization credit amount with respect to any
building shall be zero unless—
‘‘(A) such amount was allocated pursuant
to a qualified allocation plan of the commercial
revitalization credit agency which is approved
(in accordance with rules similar to the rules of
section 147(f)(2) (other than subparagraph
(B)(ii) thereof)) by the governmental unit of
which such agency is a part, and
‘‘(B) such agency notifies the chief execu-
tive officer (or its equivalent) of the local juris-
diction within which the building is located of
such allocation and provides such individual a
reasonable opportunity to comment on the allo-
cation.
‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur-
poses of this subsection, the term ‘qualified alloca-
tion plan’ means any plan—
‘‘(A) which sets forth selection criteria to
be used to determine priorities of the commer-
cial revitalization credit agency which are ap-
propriate to local conditions,
‘‘(B) which considers—
‘‘(i) the degree to which a project con-
tributes to the implementation of a strate-
gic plan that is devised for a renewal com-
munity through a citizen participation
process,
‘‘(ii) the amount of any increase in
permanent, full-time employment by reason
of any project, and
‘‘(iii) the active involvement of resi-
dents and nonprofit groups within the re-
newal community, and
‘‘(C) which provides a procedure that the
agency (or its agent) will follow in monitoring
compliance with this section.
‘‘(g) TERMINATION.—This section shall not apply to
any building placed in service after December 31, 2002.
‘‘SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.
‘‘(a) GENERAL RULE.—In the case of a renewal com-
munity business (as defined in section 1400G), for pur-
poses of section 179—
‘‘(1) the limitation under section 179(b)(1)
shall be increased by the lesser of—
‘‘(A) $35,000, or
‘‘(B) the cost of section 179 property
which is qualified renewal property placed in
service during the taxable year, and
‘‘(2) the amount taken into account under sec-
tion 179(b)(2) with respect to any section 179 prop-
erty which is qualified renewal property shall be 50
percent of the cost thereof.
‘‘(b) RECAPTURE.—Rules similar to the rules under
section 179(d)(10) shall apply with respect to any quali-
fied renewal property which ceases to be used in a renewal
community by a renewal community business.
‘‘(c) QUALIFIED RENEWAL PROPERTY.—
‘‘(1) GENERAL
RULE.—For purposes of this
section—
‘‘(A) IN
GENERAL.—The term ‘qualified
renewal property’ means any property to which
section 168 applies (or would apply but for sec-
tion 179) if—
‘‘(i) 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 renewal community
took effect,
‘‘(ii) the original use of which in a re-
newal community commences with the tax-
payer, and
‘‘(iii) substantially all of the use of
which is in a renewal community and is in
the active conduct of a qualified business
(as defined in section 1400G(d)) by the
taxpayer in such renewal community.
‘‘(B) SPECIAL
RULE
FOR
SUBSTANTIAL
RENOVATIONS.—In the case of any property
which is substantially renovated by the tax-
payer, the requirements of clauses (i) and (ii)
of subparagraph (A) shall be treated as satis-
fied. For purposes of the preceding sentence,
property shall be treated as substantially ren-
ovated by the taxpayer only if, during any 24-
month period beginning after the date on which
the designation of the renewal community 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 ad-
justed basis at the beginning of such 24-month
period in the hands of the taxpayer, or (ii)
$5,000.
‘‘(2) SPECIAL RULES FOR SALE-LEASEBACKS.—
For purposes of paragraph (1)(A)(ii), 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.
‘‘SEC. 1400M. EXPENSING OF RENEWAL COMMUNITY ENVI-
RONMENTAL REMEDIATION COSTS.
‘‘(a) TREATMENT AS EXPENSE.—A taxpayer may
elect to treat any renewal community environmental reme-
diation cost as an expense which is not chargeable to cap-
ital account. Any cost so treated shall be allowable as a
deduction for the taxable year in which the cost is paid
or incurred.
‘‘(b) RENEWAL COMMUNITY ENVIRONMENTAL RE-
MEDIATION COST.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘renewal commu-
nity environmental remediation cost’ means any cost
which—
‘‘(A) is chargeable to capital account (de-
termined without regard to this section),
‘‘(B) is paid or incurred in connection with
the abatement or control of environmental con-
taminants at a site located within a renewal
community, and
‘‘(C) is certified by the applicable Federal
or State authority as being required by, and in
compliance with, applicable Federal and State
laws governing abatement and control of envi-
ronmental contaminants.
‘‘(2) EXCEPTIONS.—Such term shall not in-
clude any amount paid or incurred—
‘‘(A) for equipment which is used in the
environmental remediation and which is of a
character subject to an allowance for deprecia-
tion or amortization, or
‘‘(B) in connection with a site which is on
the national priorities list under section
105(a)(8)(B) of the Comprehensive Environ-
mental Response, Compensation, and Liability
Act of 1980 (42 U.S.C. 9605(a)(8)(B)).
No deduction shall be allowed under this section for
any amount which is allowed as a deduction under
any other provision of this subtitle.
‘‘(c) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) LIMITATION
BASED
ON
INCOME
FROM
TRADE OR BUSINESS.—The amount allowed as a de-
duction under subsection (a) for any taxable year
shall not exceed the aggregate amount of taxable in-
come of the taxpayer for such taxable year which is
derived from the active conduct by the taxpayer of
any trade or business during such taxable year. For
purposes of this paragraph, rules similar to the rules
of subparagraphs (B) and (C) of section 179(b)(3)
shall apply. In the case of a partnership, S corpora-
tion, trust or other pass thru entity, this paragraph
shall be applied at both the entity and owner levels.
‘‘(2) RECAPTURE RULES.—
‘‘(A) PROPERTY NOT USED IN TRADE OR
BUSINESS.—The Secretary shall, by regulations,
provide for recapturing the benefit of any de-
duction allowable under subsection (a) with re-
spect to any property not used predominantly in
a trade or business at any time.
‘‘(B) TREATMENT OF GAIN AS ORDINARY
INCOME.—For purposes of section 1245—
‘‘(i) the deduction allowable under
subsection (a) shall be treated as a deduc-
tion allowable to the taxpayer for deprecia-
tion or amortization; and
‘‘(ii) property (other than section
1245 property) to which the deduction
would otherwise have been chargeable shall
be treated as section 1245 property solely
for purposes of applying section 1245 to
such deduction.’’
(b) DEDUCTION FOR CONTRIBUTIONS TO FAMILY
DEVELOPMENT ACCOUNTS ALLOWABLE WHETHER
OR
NOT TAXPAYER ITEMIZES.—Subsection (a) of section 62
of the Internal Revenue Code of 1986 (relating to adjusted
gross income defined) is amended by inserting after para-
graph (17) the following new paragraph:
‘‘(18) FAMILY DEVELOPMENT ACCOUNTS.—The
deduction allowed by section 1400H(a)(1)(A).’’
SEC. 202. EXTENSION OF WORK OPPORTUNITY TAX CREDIT
FOR RENEWAL COMMUNITIES
(a) EXTENSION.—Subsection (c) of section 51 of the
Internal Revenue Code of 1986 (relating to termination)
is amended by adding at the end the following new para-
graph:
‘‘(5) EXTENSION
OF
CREDIT
FOR
RENEWAL
COMMUNITIES.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who begins work for the employer after
the date contained in paragraph (4)(B), for
purposes of section 38—
‘‘(i) in lieu of applying subsection (a),
the amount of the work opportunity credit
determined under this section for the tax-
able year shall be equal to—
‘‘(I) 15 percent of the qualified
first-year wages for such year, and
‘‘(II) 30 percent of the qualified
second-year wages for such year,
‘‘(ii) subsection (b)(3) shall be applied
by substituting ‘$10,000’ for ‘$6,000’,
‘‘(iii) paragraph (4)(B) shall be ap-
plied by substituting for the date contained
therein the last day for which the designa-
tion under section 1400E of the renewal
community referred to in subparagraph
(B)(i) is in effect, and
‘‘(iv) rules similar to the rules of sec-
tion 51A(b)(5)(C) shall apply.
‘‘(B) QUALIFIED FIRST AND SECOND-YEAR
WAGES.—For purposes of subparagraph (A)—
‘‘(i) IN GENERAL.—The term ‘quali-
fied wages’ means, with respect to each 1-
year period referred to in clause (ii) or
(iii), as the case may be, the wages paid or
incurred by the employer during the tax-
able year to any individual but only if—
‘‘(I) the employer is engaged in a
trade or business in a renewal com-
munity throughout such 1-year period,
‘‘(II) the individual is a resident
of such renewal community through-
out such 1-year period, and
‘‘(III) substantially all of the
services which such individual per-
forms for the employer during such 1-
year period are performed in such re-
newal community.
‘‘(ii) 
QUALIFIED
FIRST-YEAR
WAGES.—The term ‘qualified first-year
wages’ means, with respect to any individ-
ual, qualified wages attributable to service
rendered during the 1-year period begin-
ning with the day the individual begins
work for the employer.
‘‘(iii) 
QUALIFIED
SECOND-YEAR
WAGES.—The term ‘qualified second-year
wages’ means, with respect to any individ-
ual, qualified wages attributable to service
rendered during the 1-year period begin-
ning on the day after the last day of the
1-year period with respect to such individ-
ual determined under clause (ii).’’
(b) CONGRUENT TREATMENT OF RENEWAL COMMU-
NITIES
AND ENTERPRISE ZONES
FOR PURPOSES
OF
YOUTH RESIDENCE REQUIREMENTS.—
(1) HIGH-RISK YOUTH.—Subparagraphs (A)(ii)
and (B) of section 51(d)(5) of such Code are each
amended by striking ‘‘empowerment zone or enter-
prise community’’ and inserting ‘‘empowerment
zone, enterprise community, or renewal community’’.
(2) QUALIFIED SUMMER YOUTH EMPLOYEE.—
Clause (iv) of section 51(d)(7)(A) of such Code is
amended by striking ‘‘empowerment zone or enter-
prise community’’ and inserting ‘‘empowerment
zone, enterprise community, or renewal community’’.
(3) HEADINGS.—Paragraphs (5)(B) and (7)(C)
of section 51(d) of such Code are each amended by
inserting ‘‘OR
COMMUNITY’’ in the heading after
‘‘ZONE’’.
SEC. 203. ALLOWANCE OF COMMERCIAL REVITALIZATION
CREDIT.
Section 46 of the Internal Revenue Code of 1986 (re-
lating to investment credit) is amended by striking ‘‘and’’
at the end of paragraph (2), by striking the period at the
end of paragraph (3) and inserting ‘‘, and’’, and by adding
at the end the following new paragraph:
‘‘(4) the commercial revitalization credit pro-
vided under section 1400K.’’
SEC. 204. CONFORMING AND CLERICAL AMENDMENTS.
(a) TAX ON EXCESS CONTRIBUTIONS.—
(1) TAX IMPOSED.—Subsection (a) of section
4973 of such Code is amended by striking ‘‘or’’ at
the end of paragraph (3), adding ‘‘or’’ at the end of
paragraph (4), and inserting after paragraph (4) the
following new paragraph:
‘‘(5) a family development account (within the
meaning of section 1400H(e)),’’.
(2) EXCESS CONTRIBUTIONS.—Section 4973 of
such Code is amended by adding at the end the fol-
lowing new subsection:
‘‘(g) FAMILY DEVELOPMENT ACCOUNTS.—For pur-
poses of this section, in the case of a family development
account, the term ‘excess contributions’ means the sum
of—
‘‘(1) the excess (if any) of—
‘‘(A) the amount contributed for the tax-
able year to the account (other than a qualified
rollover, as defined in section 1400H(c)(7), or
a contribution under section 1400I), over
‘‘(B) the amount allowable as a deduction
under section 1400H for such contributions,
and
‘‘(2) the amount determined under this sub-
section for the preceding taxable year reduced by the
sum of—
‘‘(A) the distributions out of the account
for the taxable year which were included in the
gross income of the payee under section
1400H(b)(1),
‘‘(B) the distributions out of the account
for the taxable year to which rules similar to
the rules of section 408(d)(5) apply by reason
of section 1400H(b)(3), and
‘‘(C) the excess (if any) of the maximum
amount allowable as a deduction under section
1400H for the taxable year over the amount
contributed to the account for the taxable year
(other than a contribution under section
1400I).
For purposes of this subsection, any contribution which
is distributed from the family development account in a
distribution to which rules similar to the rules of section
408(d)(4) apply by reason of section 1400H(b)(3) shall
be treated as an amount not contributed.’’
(3) HEADING.—The heading of section 4973 of
such Code is amended by inserting ‘‘FAMILY DE-
VELOPMENT ACCOUNTS,’’ after ‘‘CONTRACTS,’’.
(b) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 of such Code is amended—
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(6) SPECIAL
RULE
FOR
FAMILY
DEVELOP-
MENT ACCOUNTS.—An individual for whose benefit a
family development account is established and any
contributor to such account shall be exempt from the
tax imposed by this section with respect to any
transaction concerning such account (which would
otherwise be taxable under this section) if, with re-
spect to such transaction, the account ceases to be
a family development account by reason of the appli-
cation of section 1400H(d)(2) to such account.’’,
and
(2) in subsection (e)(1), by striking ‘‘or’’ at the
end of subparagraph (E), by redesignating subpara-
graph (F) as subparagraph (G), and by inserting
after subparagraph (E) the following new subpara-
graph:
‘‘(F) a family development account de-
scribed in section 1400H(e), or’’.
(c) INFORMATION RELATING TO CERTAIN TRUSTS
AND ANNUITY PLANS.—Subsection (c) of section 6047 of
such Code is amended—
(1) by inserting ‘‘or section 1400H’’ after ‘‘sec-
tion 219’’, and
(2) by inserting ‘‘, of any family development
account described in section 1400H(e),’’, after ‘‘sec-
tion 408(a)’’.
(d) INSPECTION OF APPLICATIONS FOR TAX EXEMP-
TION.—Clause (i) of section 6104(a)(1)(B) of such Code
is amended by inserting ‘‘a family development account
described in section 1400H(e),’’ after ‘‘section 408(a),’’.
(e) FAILURE TO PROVIDE REPORTS ON FAMILY DE-
VELOPMENT
ACCOUNTS.—Paragraph (2) of section
6693(a) of such Code is amended by striking ‘‘and’’ at
the end of subparagraph (C), by striking the period and
inserting ‘‘, and’’ at the end of subparagraph (D), and
by adding at the end the following new subparagraph:
‘‘(E) section 1400H(g)(7) (relating to fam-
ily development accounts).’’
(f) CONFORMING AMENDMENTS REGARDING COM-
MERCIAL REVITALIZATION CREDIT.—
(1) Section 39(d) of such Code is amended by
adding at the end the following new paragraph:
‘‘(9) NO CARRYBACK OF SECTION 1400K CREDIT
BEFORE DATE OF ENACTMENT.—No portion of the
unused business credit for any taxable year which is
attributable to any commercial revitalization credit
determined under section 1400K may be carried
back to a taxable year ending before the date of the
enactment of section 1400K.’’
(2) Subparagraph (B) of section 48(a)(2) of
such Code is amended by inserting ‘‘or commercial
revitalization’’ after ‘‘rehabilitation’’ each place it
appears in the text and heading.
(3) Subparagraph (C) of section 49(a)(1) of
such Code is amended by striking ‘‘and’’ at the end
of clause (ii), by striking the period at the end of
clause (iii) and inserting ‘‘, and’’, and by adding at
the end the following new clause:
‘‘(iv) the portion of the basis of any
qualified revitalization building attributable
to qualified revitalization expenditures.’’
(4) Paragraph (2) of section 50(a) of such Code
is amended by inserting ‘‘or 1400K(d)(2)’’ after
‘‘section 47(d)’’ each place it appears.
(5) Subparagraph (A) of section 50(b)(2) of
such Code is amended by inserting ‘‘or qualified re-
vitalization building (respectively)’’ after ‘‘qualified
rehabilitated building’’.
(6) Subparagraph (B) of section 50(a)(2) of
such Code is amended by adding at the end the fol-
lowing new sentence: ‘‘A similar rule shall apply for
purposes of section 1400K.’’
(7) Paragraph (2) of section 50(b) of such Code
is amended by striking ‘‘and’’ at the end of subpara-
graph (C), by striking the period at the end of sub-
paragraph (D) and inserting ‘‘; and’’, and by adding
at the end the following new subparagraph:
‘‘(E) a qualified revitalization building (as
defined in section 1400K) to the extent of the
portion of the basis which is attributable to
qualified revitalization expenditures (as defined
in section 1400K).’’
(8) Subparagraph (C) of section 50(b)(4) of
such Code is amended—
(A) by inserting ‘‘or commercial revitaliza-
tion’’ after ‘‘rehabilitated’’ in the text and head-
ing, and
(B) by inserting ‘‘or commercial revitaliza-
tion’’ after ‘‘rehabilitation’’.
(9) Subparagraph (C) of section 469(i)(3) is
amended—
(A) by inserting ‘‘or section 1400K’’ after
‘‘section 42’’; and
(B) by striking ‘‘CREDIT’’ in the heading
and inserting ‘‘AND COMMERCIAL REVITALIZA-
TION CREDITS’’.
(g) CLERICAL AMENDMENTS.—
(1) The table of subchapters for chapter 1 of
the Internal Revenue Code of 1986 is amended by
adding at the end the following new item:
‘‘Subchapter X. Renewal Communities.’’
(2) The table of parts for subchapter X of
chapter 1 of such Code (as added by title I) is
amended by adding at the end the following new
items:
‘‘Part II.
Renewal community capital gain and stock.
‘‘Part III. Family development accounts.
‘‘Part IV.
Additional Incentives.’’
(3) The table of sections for chapter 43 of such
Code is amended by striking the item relating to sec-
tion 4973 and inserting the following new item:
‘‘Sec. 4973. Tax on excess contributions to individual retirement
accounts, medical savings accounts, certain section
403(b) contracts, family development accounts, and
certain individual retirement annuities.’’
TITLE III—ADDITIONAL
PROVISIONS
SEC. 301. TRANSFER OF UNOCCUPIED AND SUBSTANDARD
HUD-HELD HOUSING IN RENEWAL COMMU-
NITIES TO LOCAL GOVERNMENTS.
(a) TRANSFER REQUIREMENT.—Pursuant to the au-
thority under section 204 of the Departments of Veterans
Affairs and Housing and Urban Development, and Inde-
pendent Agencies Appropriations Act, 1997, the Secretary
shall transfer ownership of any qualified HUD property
to the unit of general local government having jurisdiction
for the area in which the property is located in accordance
with this section, but only if the unit of general local gov-
ernment enters into an agreement with the Secretary
meeting the requirements of subsection (d).
(b) QUALIFIED HUD PROPERTIES.—For purposes of
this section, the term ‘‘qualified HUD property’’ means
any unoccupied multifamily housing, project, substandard
multifamily housing project, or unoccupied single family
property, that is—
(1) owned by the Secretary; and
(2) located within a renewal community.
(c) TIMING OF TRANSFER.—Any transfer of owner-
ship required under subsection (a) shall be completed—
(1) with respect to any multifamily housing
project or single family property that is acquired by
the Secretary before the date on which the area in
which property is located is designated as a renewal
community and that is substandard or unoccupied
(as applicable) upon such date, not later than 1 year
after such date; and
(2) with respect to any multifamily housing
project or single family property that is acquired by
the Secretary on or after the date on which the area
in which the property is located is designated as a
renewal community, not later than 1 year after—
(A) the date on which the project is deter-
mined to be substandard or unoccupied (as ap-
plicable), in the case of a property that is not
unoccupied or substandard upon acquisition by
the Secretary; or
(B) the date on which the project is ac-
quired by the Secretary, in the case of a prop-
erty that is substandard or unoccupied (as ap-
plicable) upon such acquisition.
(d) AGREEMENTS TO SELL PROPERTY TO COMMU-
NITY DEVELOPMENT CORPORATIONS.—An agreement de-
scribed in this subsection is an agreement that requires
a unit of general local government to dispose of the quali-
fied HUD property acquired by the unit of general local
government in accordance with the following require-
ments:
(1) NOTIFICATION
TO
COMMUNITY
DEVELOP-
MENT CORPORATIONS.—Not later than 30 days after
the date on which the unit of general local govern-
ment acquires title to the property under subsection
(a), the unit of general local government shall notify
each community development corporation located in
the State in which the property is located—
(A) of such acquisition of title; and
(B) that, during the 6-month period begin-
ning on the date on which such notification is
made, such community development corpora-
tions shall have the exclusive right under this
subsection to make bona fide offers to purchase
the property on a cost recovery basis.
(2) RIGHT OF FIRST REFUSAL.—During the 6-
month period described in paragraph (1)(B)—
(A) the unit of general local government
may not sell or offer to sell the qualified HUD
property other than to a party notified under
paragraph (1), unless each community develop-
ment corporation required to be so notified has
notified the unit of general local government
that the corporation will not make an offer to
purchase the property; and
(B) the unit of general local government
shall accept a bona fide offer to purchase the
property made during such period if the offer is
acceptable to the unit of general local govern-
ment, except that a unit of general local govern-
ment may not sell a property to a community
development corporation during that 6-month
period other than on a cost recovery basis.
(3) OTHER DISPOSITION.—During the 6-month
period beginning on the expiration of the 6-month
period described in paragraph (1)(B), the unit of
general local government shall dispose of the prop-
erty on a negotiated, competitive bid, or other basis,
on such terms as the unit of general local govern-
ment deems appropriate.
(e) 
SATISFACTION
OF
INDEBTEDNESS.—Before
transferring ownership of any qualified HUD property
pursuant to subsection (a), the Secretary shall satisfy any
indebtedness incurred in connection with the property to
be transferred, by—
(1) canceling the indebtedness; or
(2) reimbursing the unit of general local gov-
ernment to which the property is transferred for the
amount of the indebtedness.
(f) DETERMINATION OF STATUS OF PROPERTIES.—
To ensure compliance with the requirements of subsection
(c), the Secretary shall take the following actions:
(1) UPON DESIGNATION OF RENEWAL COMMU-
NITIES.—Upon the designation of any renewal com-
munity, the Secretary shall promptly assess each
residential property owned by the Secretary that is
located within such renewal community to determine
whether such property is a qualified HUD property.
(2) UPON ACQUISITION.—Upon acquiring any
residential property that is located with a renewal
community, the Secretary shall promptly determine
whether the property is a qualified HUD property.
(3) UPDATES.—The Secretary shall periodically
reassess the residential properties owned by the Sec-
retary to determine whether any such properties
have become qualified HUD properties.
(g) TENANT LEASES.—This section shall not affect
the terms or the enforceability of any contract or lease
entered into with respect to any residential property before
the date that such property becomes a qualified HUD
property.
(h) PROCEDURES.—Not later than the expiration of
the 6-month period beginning on the date of the enact-
ment of this Act, the Secretary shall establish, by rule,
regulation, or order, such procedures as may be necessary
to carry out this section.
(i) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
(1) 
COMMUNITY
DEVELOPMENT
CORPORA-
TION.—The term ‘‘community development corpora-
tion’’ means a nonprofit organization whose primary
purpose is to promote community development by
providing housing opportunities for low-income fami-
lies.
(2) COST RECOVERY BASIS.—The term ‘‘cost
recovery basis’’ means, with respect to any sale of a
residential property by a unit of general local gov-
ernment to a community development corporation
under subsection (d)(2), that the purchase price paid
by the community development corporation is less
than or equal to the costs incurred by the unit of
general local government in connection with such
property during the period beginning on the date on
which the unit of general local government acquires
title to the property under subsection (a) and ending
on the date on which the sale is consummated.
(3) LOW-INCOME FAMILIES.—The term ‘‘low-in-
come families’’ has the meaning given the term in
section 3(b) of the United States Housing Act of
1937.
(4) MULTIFAMILY
HOUSING
PROJECT.—The
term ‘‘multifamily housing project’’ has the meaning
given the term in section 203 of the Housing and
Community Development Amendments of 1978.
(5) RENEWAL
COMMUNITY.—The term ‘‘re-
newal community’’ means an area designated (under
subchapter X of chapter 1 of the Internal Revenue
Code of 1986) as a renewal community.
(6) RESIDENTIAL PROPERTY.—The term ‘‘resi-
dential property’’ means a property that is a multi-
family housing project or a single family property.
(7) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Housing and Urban Development.
(8) SEVERE PHYSICAL PROBLEMS.—The term
‘‘severe physical problems’’ means, with respect to a
dwelling unit, that the unit—
(A) lacks hot or cold piped water, a flush
toilet, or both a bathtub and a shower in the
unit, for the exclusive use of that unit;
(B) on not less than 3 separate occasions
during the preceding winter months, was un-
comfortably cold for a period of more than 6
consecutive hours due to a malfunction of the
heating system for the unit;
(C) has no functioning electrical service,
exposed wiring, any room in which there is not
a functioning electrical outlet, or has experi-
enced 3 or more blown fuses or tripped circuit
breakers during the preceding 90-day period;
(D) is accessible through a public hallway
in which there are no working light fixtures,
loose or missing steps or railings, and no eleva-
tor; or
(E) has severe maintenance problems, in-
cluding water leaks involving the roof, windows,
doors, basement, or pipes or plumbing fixtures,
holes or open cracks in walls or ceilings, severe
paint peeling or broken plaster, and signs of ro-
dent infestation.
(9) SINGLE
FAMILY
PROPERTY.—The term
‘‘single family property’’ means a 1- to 4-family resi-
dence.
(10) SUBSTANDARD.—The term ‘‘substandard’’
means, with respect to a multifamily housing
project, that 25 percent or more of the dwelling
units in the project have severe physical problems.
(11) UNIT
OF
GENERAL
LOCAL
GOVERN-
MENT.—The term ‘‘unit of general local govern-
ment’’ has the meaning given the term in section
102(a) of the Housing and Community Development
Act of 1974.
(12) UNOCCUPIED.—The term ‘‘unoccupied’’
means, with respect to a residential property, that
the unit of general local government having jurisdic-
tion over the area in which the project is located has
certified in writing that the property is not inhab-
ited.
SEC. 302. PREVENTION AND TREATMENT OF SUBSTANCE
ABUSE; SERVICES PROVIDED THROUGH RELI-
GIOUS ORGANIZATIONS.
Title V of the Public Health Service Act (42 U.S.C.
290aa et seq.) is amended by adding at the end the follow-
ing part:
‘‘PART G—SERVICES PROVIDED THROUGH RELIGIOUS
ORGANIZATIONS
‘‘SEC. 581. APPLICABILITY TO DESIGNATED PROGRAMS.
‘‘(a) DESIGNATED
PROGRAMS.—Subject to sub-
section (b), this part applies to each program under this
Act that makes awards of Federal financial assistance to
public or private entities for the purpose of carrying out
activities to prevent or treat substance abuse (in this part
referred to as a ‘designated program’). Designated pro-
grams include the program under subpart II of part B
of title XIX (relating to formula grants to the States).
‘‘(b) LIMITATION.—This part does not apply to any
award of Federal financial assistance under a designated
program for a purpose other than the purpose specified
in subsection (a).
‘‘(c) DEFINITIONS.—For purposes of this part (and
subject to subsection (b)):
‘‘(1) The term ‘designated award recipient’
means a public or private entity that has received an
award under a designated program (whether the
award is a designated direct award or a designated
subaward).
‘‘(2) The term ‘designated direct award’ means
an award under a designated program that is re-
ceived directly from the Federal Government.
‘‘(3) The term ‘designated subaward’ means an
award of financial assistance made by a non-Federal
entity, which award consists in whole or in part of
Federal financial assistance provided through an
award under a designated program.
‘‘(4) The term ‘designated program’ has the
meaning given such term in subsection (a).
‘‘(5) The term ‘financial assistance’ means a
grant, 
cooperative 
agreement, 
contract, 
or
voucherized assistance.
‘‘(6) The term ‘program beneficiary’ means an
individual who receives program services.
‘‘(7) The term ‘program participant’ has the
meaning given such term in section 582(a)(2).
‘‘(8) The term ‘program services’ means treat-
ment for substance abuse, or preventive services re-
garding such abuse, provided pursuant to an award
under a designated program.
‘‘(9) The term ‘religious organization’ means a
nonprofit religious organization.
‘‘(10) 
The 
term 
‘voucherized 
assistance’
means—
‘‘(A) a system of selecting and reimbursing
program services in which—
‘‘(i) the beneficiary is given a docu-
ment or other authorization that may be
used to pay for program services;
‘‘(ii) the beneficiary chooses the orga-
nization that will provide services to him or
her according to rules specified by the des-
ignated award recipient; and
‘‘(iii) the organization selected by the
beneficiary is reimbursed by the designated
award recipient for program services pro-
vided; or
‘‘(B) any other mode of financial assist-
ance to pay for program services in which the
program beneficiary determines the allocation
of program funds through his or her selection
of one service provider from among alternatives.
‘‘SEC. 582. RELIGIOUS ORGANIZATIONS AS PROGRAM PAR-
TICIPANTS.
‘‘(a) IN GENERAL.—
‘‘(1) SCOPE OF AUTHORITY.—Notwithstanding
any other provision of law, a religious organiza-
tion—
‘‘(A) may be a designated award recipient;
‘‘(B) may make designated subawards to
other public or nonprofit private entities (in-
cluding other religious organizations);
‘‘(C) may provide for the provision of pro-
gram services to program beneficiaries through
the use of voucherized assistance; and
‘‘(D) may be a provider of services under
a designated program, including a provider that
accepts voucherized assistance.
‘‘(2) DEFINITION OF PROGRAM PARTICIPANT.—
For purposes of this part, the term ‘program partici-
pant’ means a public or private entity that has re-
ceived a designated direct award, or a designated
subaward, regardless of whether the entity provides
program services. Such term includes an entity
whose only participation in a designated program is
to provide program services pursuant to the accept-
ance of voucherized assistance.
‘‘(b) RELIGIOUS ORGANIZATIONS.—The purpose of
this section is to allow religious organizations to be pro-
gram participants on the same basis as any other non-
profit private provider without impairing the religious
character of such organizations, and without diminishing
the religious freedom of program beneficiaries.
‘‘(c) NONDISCRIMINATION AGAINST RELIGIOUS OR-
GANIZATIONS.—
‘‘(1) FINDINGS.—The Congress finds that the
establishment clause of the first amendment to the
Constitution of the United States does not require
that—
‘‘(A) social-welfare programs discriminate
against faith-based providers of services; or
‘‘(B) faith-based providers of services, as a
prerequisite to participation in Federal pro-
grams, abandon their religious character and
censor their religious expression.
‘‘(2) NONDISCRIMINATION.—Religious organiza-
tions are eligible to be program participants on the
same basis as any other nonprofit private organiza-
tion. Neither the Federal Government nor a State
receiving funds under such programs shall discrimi-
nate against an organization that is or applies to be
a program participant on the basis that the organi-
zation has a religious character.
‘‘(d) RELIGIOUS CHARACTER AND FREEDOM.—
‘‘(1) RELIGIOUS
ORGANIZATIONS.—Except as
provided in this section, any religious organization
that is a program participant shall retain its inde-
pendence from Federal, State, and local government,
including such organization’s control over the defini-
tion, development, practice, and expression of its re-
ligious beliefs.
‘‘(2) ADDITIONAL
SAFEGUARDS.—Neither the
Federal Government nor a State shall require a reli-
gious organization to—
‘‘(A) alter its form of internal governance;
or
‘‘(B) remove religious art, icons, scripture,
or other symbols;
in order to be a program participant.
‘‘(e) NONDISCRIMINATION IN EMPLOYMENT.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), nothing in this section shall be construed
to modify or affect the provisions of any other Fed-
eral or State law or regulation that relates to dis-
crimination in employment on the basis of religion.
‘‘(2) EXCEPTION.—A religious organization
that is a program participant may require that an
employee rendering programs services adhere to—
‘‘(A) the religious beliefs and practices of
such organization; and
‘‘(B) any rules of the organization regard-
ing the use of drugs or alcohol.
‘‘(f) RIGHTS OF PROGRAM BENEFICIARIES.—With
respect to an individual who is a program beneficiary or
a prospective program beneficiary, if the individual objects
to a program participant on the basis that the participant
is a religious organization, the following applies:
‘‘(1) If the organization received a designated
direct award, the organization shall arrange for the
individual to receive program services through an al-
ternative entity.
‘‘(2) If the organization received a designated
subaward, the non-Federal entity that made the
subaward shall arrange for the individual to receive
the program services through an alternative program
participant.
‘‘(3) If the organization is providing services
pursuant to voucherized assistance, the designated
award recipient that operates the voucherized assist-
ance program shall arrange for the individual to re-
ceive the program services through an alternative
provider.
‘‘(4) Arrangements under any of paragraphs
(1) through (3) with an alternative entity shall pro-
vide for program services the monetary value of
which is not less than the monetary value of the pro-
gram services that the individual would have re-
ceived from the religious organization involved.
‘‘(g) FISCAL ACCOUNTABILITY.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), any religious organization that is a pro-
gram participant shall be subject to the same regula-
tions as other recipients of awards of Federal finan-
cial assistance to account, in accordance with gen-
erally accepted auditing principles, for the use of the
funds provided under such awards.
‘‘(2) LIMITED
AUDIT.—With respect to the
award involved, if a religious organization that is a
program participant maintains the Federal funds in
a separate account from non-Federal funds, then
only the Federal funds shall be subject to audit.
‘‘(h) COMPLIANCE.—With respect to compliance with
this section by an agency, a religious organization may
obtain judicial review of agency action in accordance with
chapter 7 of title 5, United States Code.
100
‘‘SEC. 583. LIMITATIONS ON USE OF FUNDS FOR CERTAIN
PURPOSES.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), no funds provided directly to an entity under a des-
ignated program shall be expended for sectarian worship
or instruction.
‘‘(b) EXCEPTION.—Subsection (a) shall not apply to
assistance provided to or on behalf of a program bene-
ficiary if the beneficiary may choose where such assistance
is redeemed or allocated.
‘‘SEC. 584. ADMINISTRATION OF PROGRAM AND TREAT-
MENT OF FUNDS.
‘‘(a) FUNDS NOT AID TO INSTITUTIONS.—Financial
assistance under a designated program provided to or on
behalf of program beneficiaries is aid to the beneficiary,
not to the organization providing program services. The
receipt by a program beneficiary of program services at
the facilities of the organization shall not constitute Fed-
eral financial assistance to the organization involved.
‘‘(b) PROHIBITION ON STATE DISCRIMINATION IN
USE OF FUNDS.—No provision in any State constitution
or State law shall be construed to prohibit the expenditure
of Federal funds under a designated program in a reli-
gious facility or by a religious organization that is a pro-
gram participant. If a State law or constitution would pre-
vent the expenditure of State or local public funds in such
101
a facility or by such an organization, then the State or
local government shall segregate the Federal funds from
State or other public funds for purposes of carrying out
the designated program.
‘‘SEC. 585. EDUCATIONAL REQUIREMENTS FOR PERSONNEL
IN DRUG TREATMENT PROGRAMS.
‘‘(a) FINDINGS.—The Congress finds that—
‘‘(1) establishing formal educational qualifica-
tion for counselors and other personnel in drug
treatment programs may undermine the effective-
ness of such programs; and
‘‘(2) such formal educational requirements for
counselors and other personnel may hinder or pre-
vent the provision of needed drug treatment services.
‘‘(b) LIMITATION ON EDUCATIONAL REQUIREMENTS
OF PERSONNEL.—
‘‘(1) TREATMENT OF RELIGIOUS EDUCATION.—
If any State or local government that is a program
participant imposes formal educational qualifications
on providers of program services, including religious
organizations, such State or local government shall
treat religious education and training of personnel
as having a critical and positive role in the delivery
of program services. In applying educational quali-
fications for personnel in religious organizations,
102
such State or local government shall give credit for
religious education and training equivalent to credit
given for secular course work in drug treatment or
any other secular subject that is of similar grade
level and duration.
‘‘(2) RESTRICTION
OF
DISCRIMINATION
RE-
QUIREMENTS.—
‘‘(A) IN GENERAL.—Subject to paragraph
(1), a State or local government that is a pro-
gram participant may establish formal edu-
cational qualifications for personnel in organiza-
tions providing program services that contribute
to success in reducing drug use among program
beneficiaries.
‘‘(B) EXCEPTION.—The Secretary shall
waive the application of any educational quali-
fication imposed under subparagraph (A) for an
individual religious organization, if the Sec-
retary determines that—
‘‘(i) the religious organization has a
record of prior successful drug treatment
for at least the preceding three years;
‘‘(ii) the educational qualifications
have effectively barred such religious orga-
103
nization from becoming a program pro-
vider;
‘‘(iii) the organization has applied to
the Secretary to waive the qualifications;
and
‘‘(iv) the State or local government
has failed to demonstrate empirically that
the educational qualifications in question
are necessary to the successful operation of
a drug treatment program.’’.
SEC. 303. CRA CREDIT FOR INVESTMENTS IN COMMUNITY
DEVELOPMENT ORGANIZATIONS LOCATED IN
RENEWAL COMMUNITIES.
Section 804 of the Community Reinvestment Act of
1977 (12 U.S.C. 2903) is amended by adding at the end
the following new subsection:
‘‘(c) INVESTMENTS IN CERTAIN COMMUNITY DEVEL-
OPMENT ORGANIZATIONS.—In assessing and taking into
account, under subsection (a), the record of a regulated
financial institution, the appropriate Federal financial su-
pervisory agency may consider, as a factor, investments
of the institution in, and capital investment, loan partici-
pation, and other ventures undertaken by the institution
in cooperation with, any community development organi-
zation (as defined in section 234 of the Bank Enterprise
104
Act of 1991) which is located in a renewal community (as
designated under section 1400E of the Internal Revenue
Code of 1986).’’.
Æ