I
104TH CONGRESS
1ST SESSION
H. R. 2713
To amend the Internal Revenue Code of 1986 to provide additional tax
incentives to stimulate economic growth in depressed areas, and for
other purposes.
IN THE HOUSE OF REPRESENTATIVES
DECEMBER 5, 1995
Mr. RIGGS (for himself, Mr. ENGLISH of Pennsylvania, Mr. ENSIGN, Mr. COX
of California, Mr. TALENT, Mr. STOCKMAN, and Mr. FLANAGAN) intro-
duced the following bill; which was referred to the Committee on Ways
and Means, and in addition to the Committees on the Judiciary and
Banking and Financial Services, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To amend the Internal Revenue Code of 1986 to provide
additional tax incentives to stimulate economic growth
in depressed areas, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;
TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Enhanced Enterprise Zones Act of 1995’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment 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 provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
Sec. 2. Findings and purpose.
TITLE I—FEDERAL TAX INCENTIVES
Sec. 101. Amendments to subchapter U.
Sec. 102. Commercial revitalization tax credit.
TITLE II—REGULATORY FLEXIBILITY
Sec. 201. Definition of small entities in empowerment zones and enterprise
communities for analysis of regulatory functions.
Sec. 202. Waiver or modification of agency rules in empowerment zones and en-
terprise communities.
TITLE III—RESIDENT MANAGEMENT AND HOMEOWNERSHIP
INCENTIVES
Sec. 301. Enterprise zone opportunity grants.
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS.—The Congress makes the following
findings:
(1) Many of the Nation’s urban centers are
places with high levels of poverty, high rates of wel-
fare dependency, high crime rates, poor schools, and
joblessness.
(2) Federal tax incentives and regulatory re-
forms can encourage economic growth, job creation
and small business formation in many urban centers.
(3) Encouraging private sector investment in
America’s economically distressed urban and rural
areas is essential to breaking the cycle of poverty
and the related ills of crime, drug abuse, illiteracy,
welfare dependency, and unemployment.
(4) The provisions creating empowerment zones
that were enacted in 1993 should be enhanced by
providing incentives to increase entrepreneurial
growth, capital formation, job creation, educational
opportunities, and homeownership in designated en-
terprise communities and empowerment zones.
(b) PURPOSE.—The purpose of this Act is to increase
job creation, small business expansion and formation, edu-
cational opportunities, and homeownership in economically
depressed areas by providing Federal tax incentives, regu-
latory reforms, school reform pilot projects, and home-
ownership incentives.
TITLE I—FEDERAL TAX
INCENTIVES
SEC. 101. AMENDMENTS TO SUBCHAPTER U.
(a) IN GENERAL.—Subchapter U of chapter 1 (relat-
ing to designation and treatment of empowerment zones,
enterprise communities, and rural development investment
areas) is amended—
(1) by redesignating part IV as part V,
(2) by redesignating section 1397D as section
1397F, and
(3) by inserting after part III the following new
part:
‘‘PART 
IV—ADDITIONAL 
INCENTIVES 
FOR
EMPOWERMENT ZONES AND ENTERPRISE
COMMUNITIES
‘‘Sec. 1397D. Empowerment zone and enterprise community cap-
ital gain.
‘‘Sec. 1397E. Empowerment zone and enterprise community
stock.
‘‘SEC. 1397D. EMPOWERMENT ZONE AND ENTERPRISE COM-
MUNITY CAPITAL GAIN.
‘‘(a) GENERAL RULE.—Gross income does not in-
clude any qualified capital gain recognized on the sale or
exchange of a qualified zone asset held for more than 5
years.
‘‘(b) QUALIFIED ZONE ASSET.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘qualified zone
asset’ means—
‘‘(A) any qualified zone stock,
‘‘(B) any qualified zone business property,
and
‘‘(C) any qualified zone partnership inter-
est.
‘‘(2) QUALIFIED ZONE STOCK.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘qualified zone
stock’ means any stock in a domestic corpora-
tion if—
‘‘(i) such stock is acquired by the tax-
payer on original issue from the corpora-
tion solely in exchange for cash,
‘‘(ii) as of the time such stock was is-
sued, such corporation was an enterprise
zone business (or, in the case of a new cor-
poration, such corporation was being orga-
nized for purposes of being an enterprise
zone business), and
‘‘(iii) during substantially all of the
taxpayer’s holding period for such stock,
such corporation qualified as an enterprise
zone business.
‘‘(B) EXCLUSION OF STOCK FOR WHICH
DEDUCTION
UNDER
SECTION
1397E
AL-
LOWED.—The term ‘qualified zone stock’ shall
not include any stock the basis of which is re-
duced under section 1397E.
‘‘(C) REDEMPTIONS.—The term ‘qualified
zone stock’ shall not include any stock acquired
from a corporation which made a substantial
stock redemption or distribution (without a
bona fide business purpose therefor) in an at-
tempt to avoid the purposes of this section.
‘‘(3) QUALIFIED ZONE BUSINESS PROPERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
zone business property’ means tangible property
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 empowerment zone
or enterprise community took effect,
‘‘(ii) the original use of such property
in the empowerment zone or enterprise
community commences with the taxpayer,
and
‘‘(iii) during substantially all of the
taxpayer’s holding period for such prop-
erty, substantially all of the use of such
property was in an enterprise zone busi-
ness of the taxpayer.
‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM-
PROVEMENTS.—
‘‘(i) IN GENERAL.—The requirements
of clauses (i) and (ii) of subparagraph (A)
shall be treated as satisfied with respect
to—
‘‘(I) property which is substan-
tially improved by the taxpayer, and
‘‘(II) any land on which such
property is located.
‘‘(ii) SUBSTANTIAL IMPROVEMENT.—
For purposes of clause (i), property shall
be treated as substantially improved by the
taxpayer if, during any 24-month period
beginning after the date on which the des-
ignation of the empowerment zone or en-
terprise community took effect, additions
to basis with respect to such property in
the hands of the taxpayer exceed the great-
er 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.
‘‘(C) LIMITATION
ON
LAND.—The term
‘qualified zone business property’ shall not in-
clude land which is not an integral part of an
enterprise zone business.
‘‘(4) QUALIFIED
ZONE
PARTNERSHIP
INTER-
EST.—The term ‘qualified zone partnership interest’
means any interest in a partnership if—
‘‘(A) such interest is acquired by the tax-
payer from the partnership solely in exchange
for cash,
‘‘(B) as of the time such interest was ac-
quired, such partnership was an enterprise zone
business (or, in the case of a new partnership,
such partnership was being organized for pur-
poses of being an enterprise zone business), and
‘‘(C) during substantially all of the tax-
payer’s holding period for such interest, such
partnership qualified as an enterprise zone
business.
A rule similar to the rule of paragraph (2)(C) shall
apply for purposes of this paragraph.
‘‘(5) 
TREATMENT
OF
SUBSEQUENT
PUR-
CHASERS.—The term ‘qualified zone asset’ includes
any property which would be a qualified zone asset
but for paragraph (2)(A)(i), (3)(A)(ii), or (4)(A) in
the hands of the taxpayer if such property was a
qualified zone asset in the hands of all prior holders.
‘‘(6) 10-YEAR SAFE HARBOR.—If any property
ceases to be a qualified zone asset by reason of para-
graph (2)(A)(iii), (3)(A)(iii), or (4)(C) after the 10-
year period beginning on the date the taxpayer ac-
quired such property, such property shall continue to
be treated as meeting the requirements of such
paragraph; except that the amount of gain to which
subsection (a) applies on any sale or exchange of
such property shall not exceed the amount which
would be qualified capital gain had such property
been sold on the date of such cessation.
‘‘(7) TREATMENT OF ZONE TERMINATIONS.—
The termination of any designation of an area as an
empowerment zone or enterprise community shall be
disregarded for purposes of determining whether any
property is a qualified zone asset.
‘‘(c) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) QUALIFIED
CAPITAL
GAIN.—Except as
otherwise provided in this subsection, the term
‘qualified capital gain’ means any long-term capital
gain recognized on the sale or exchange of a quali-
fied zone asset held for more than 5 years.
‘‘(2) CERTAIN GAIN ON REAL PROPERTY NOT
QUALIFIED.—The term ‘qualified capital gain’ shall
not include any gain which would be treated as ordi-
nary income under section 1250 if section 1250 ap-
plied to all depreciation rather than the additional
depreciation.
‘‘(3) GAIN ATTRIBUTABLE TO PERIODS AFTER
TERMINATION OF ZONE DESIGNATION NOT QUALI-
FIED.—The term ‘qualified capital gain’ shall not in-
clude any gain attributable to periods after the ter-
mination of any designation of an area as an
empowerment zone or enterprise community.
‘‘(4) RELATED
PARTY
TRANSACTIONS.—The
term ‘qualified capital gain’ shall not include any
gain attributable, directly or indirectly, in whole or
in part, to a transaction with a related person.
‘‘(5) ENTERPRISE ZONE BUSINESS.—The term
‘enterprise zone business’ has the meaning given
such term by section 1394(b)(3), except that, in ap-
plying section 1394(b)(3), the term ‘qualified busi-
ness’ shall not include any trade or business of pro-
ducing property of a character subject to the allow-
ance for depletion under section 611.
‘‘(d) TREATMENT OF PASS-THRU ENTITIES.—
‘‘(1) SALES
AND
EXCHANGES.—Gain on the
sale or exchange of an interest in a pass-thru entity
held by the taxpayer (other than an interest in an
entity which was an enterprise zone business during
substantially all of the period the taxpayer held such
interest) for more than 5 years shall be treated as
gain described in subsection (a) to the extent such
gain is attributable to amounts which would be
qualified capital gain on qualified zone assets (deter-
mined as if such assets had been sold on the date
of the sale or exchange) held by such entity for more
than 5 years and throughout the period the taxpayer
held such interest. A rule similar to the rule of para-
graph (2)(C) shall apply for purposes of the preced-
ing sentence.
‘‘(2) INCOME INCLUSIONS.—
‘‘(A) IN GENERAL.—Any amount included
in income by reason of holding an interest in a
pass-thru entity (other than an entity which
was an enterprise zone business during substan-
tially all of the period the taxpayer held the in-
terest to which such inclusion relates) shall be
treated as gain described in subsection (a) if
such amount meets the requirements of sub-
paragraph (B).
‘‘(B) REQUIREMENTS.—An amount meets
the requirements of this subparagraph if—
‘‘(i) such amount is attributable to
qualified capital gain recognized on the
sale or exchange by the pass-thru entity of
property which is a qualified zone asset in
the hands of such entity and which was
held by such entity for the period required
under subsection (a), and
‘‘(ii) such amount is includible in the
gross income of the taxpayer by reason of
the holding of an interest in such entity
which was held by the taxpayer on the date
on which such pass-thru entity acquired
such asset and at all times thereafter be-
fore the disposition of such asset by such
pass-thru entity.
‘‘(C) LIMITATION
BASED
ON
INTEREST
ORIGINALLY
HELD
BY
TAXPAYER.—Subpara-
graph (A) shall not apply to any amount to the
extent such amount exceeds the amount to
which subparagraph (A) would have applied if
such amount were determined by reference to
the interest the taxpayer held in the pass-thru
entity on the date the qualified zone asset was
acquired.
‘‘(3) PASS-THRU ENTITY.—For purposes of this
subsection, the term ‘pass-thru entity’ means—
‘‘(A) any partnership,
‘‘(B) any S corporation,
‘‘(C) any regulated investment company,
and
‘‘(D) any common trust fund.
‘‘(e) SALES
AND EXCHANGES
OF INTERESTS
IN
PARTNERSHIPS
AND
S CORPORATIONS
WHICH
ARE
QUALIFIED ZONE BUSINESSES.—In the case of the sale
or exchange of an interest in a partnership, or of stock
in an S corporation, which was an enterprise zone business
during substantially all of the period the taxpayer held
such interest or stock, the amount of qualified capital gain
shall be determined without regard to—
‘‘(1) any intangible, and any land, which is not
an integral part of any qualified business (as defined
in section 1397B(b) except that references to
empowerment zones shall be treated as including ref-
erences to enterprise communities), and
‘‘(2) gain attributable to periods before the des-
ignation of an area as an empowerment zone or en-
terprise community.
‘‘(f) CERTAIN TAX-FREE AND OTHER TRANSFERS.—
For purposes of this section—
‘‘(1) IN GENERAL.—In the case of a transfer of
a qualified zone asset to which this subsection ap-
plies, the transferee shall be treated as—
‘‘(A) having acquired such asset in the
same manner as the transferor, and
‘‘(B) having held such asset during any
continuous period immediately preceding the
transfer during which it was held (or treated as
held under this subsection) by the transferor.
‘‘(2) TRANSFERS TO WHICH SUBSECTION AP-
PLIES.—This subsection shall apply to any trans-
fer—
‘‘(A) by gift,
‘‘(B) at death, or
‘‘(C) from a partnership to a partner
thereof of a qualified zone asset with respect to
which the requirements of subsection (d)(2) are
met at the time of the transfer (without regard
to the 5-year holding requirement).
‘‘(3) CERTAIN
RULES
MADE
APPLICABLE.—
Rules similar to the rules of section 1244(d)(2) shall
apply for purposes of this section.
‘‘SEC. 1397E. EMPOWERMENT ZONE AND ENTERPRISE COM-
MUNITY STOCK.
‘‘(a) GENERAL RULE.—At the election of any individ-
ual, the aggregate amount paid by such taxpayer during
the taxable year for the purchase of enterprise zone stock
on the original issue of such stock by a qualified issuer
shall be allowed as a deduction.
‘‘(b) LIMITATIONS.—
‘‘(1) CEILING.—
‘‘(A) 
IN
GENERAL.—The 
maximum
amount allowed as a deduction under subsection
(a) to a taxpayer shall not exceed—
‘‘(i) $100,000 for any taxable year,
and
‘‘(ii) when added to the aggregate
amount allowed as a deduction under this
section in all prior years, $500,000.
‘‘(B) EXCESS
AMOUNTS.—If the amount
otherwise deductible by any person under sub-
section (a) exceeds the limitation under—
‘‘(i) subparagraph (A)(i), the amount
of such excess shall be treated as an
amount paid in the next taxable year, and
‘‘(ii) subparagraph (A), the deduction
allowed for any taxable year shall be allo-
cated proportionately among the enterprise
zone stock purchased by such person on
the basis of the respective purchase prices
per share.
‘‘(2) RELATED
PERSON.—The taxpayer and
members of the taxpayer’s family shall be treated as
one person for purposes of paragraph (1) and the
limitations contained in such paragraph shall be al-
located among the taxpayer and such members in
accordance with their respective purchases of enter-
prise zone stock. For purposes of this paragraph, an
individual’s family includes only such individual’s
spouse and minor children.
‘‘(3) PARTIAL TAXABLE YEAR.—If designation
of an area as an empowerment zone or enterprise
community occurs, expires, or is revoked pursuant to
section 1391 on a date other than the first or last
day of the taxable year of the taxpayer, or in the
case of a short taxable year, the limitations specified
in paragraph (1) shall be adjusted on a pro rata
basis (based upon the number of days).
‘‘(c) ENTERPRISE ZONE STOCK.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘enterprise zone
stock’ means stock of a corporation if—
‘‘(A) such stock is acquired on original
issue from the corporation, and
‘‘(B) such corporation is, at the time of
issue, a qualified enterprise zone issuer.
‘‘(2) PROCEEDS MUST BE INVESTED IN QUALI-
FIED ENTERPRISE ZONE PROPERTY.—
‘‘(A) IN GENERAL.—Such term shall in-
clude such stock only to the extent that the pro-
ceeds of such issuance are used by such issuer
during the 12-month period beginning on the
date of issuance to purchase (as defined in sec-
tion 179(d)(2)) qualified enterprise zone prop-
erty.
‘‘(B) QUALIFIED ENTERPRISE ZONE PROP-
ERTY.—For purposes of this section, the term
‘qualified enterprise zone property’ means prop-
erty to which section 168 applies (or would
apply but for section 179)—
‘‘(i) the original use of which com-
mences in an empowerment zone or enter-
prise community with the issuer, and
‘‘(ii) substantially all of the use of
which is in such empowerment zone or en-
terprise community.
‘‘(3) REDEMPTIONS.—The term ‘enterprise
zone stock’ shall not include any stock acquired from
a corporation which made a substantial stock re-
demption or distribution (without a bona fide busi-
ness purpose therefor) in an attempt to avoid the
purposes of this section.
‘‘(d) QUALIFIED ENTERPRISE ZONE ISSUER.—For
purposes of this section, the term ‘qualified enterprise
zone issuer’ means any domestic C corporation if—
‘‘(1) such corporation is a corporation described
in section 1397B(b) (except that in applying such
section the references to empowerment zones shall
be treated as including references to enterprise com-
munities) or, in the case of a new corporation, such
corporation is being organized for purposes of being
such a corporation,
‘‘(2) such corporation does not have more than
one class of stock,
‘‘(3) the sum of—
‘‘(A) the money,
‘‘(B) the aggregate unadjusted bases of
property owned by such corporation, and
‘‘(C) the value of property leased to the
corporation (as determined under regulations
prescribed by the Secretary),
does not exceed $50,000,000, and
‘‘(4) more than 20 percent of the total voting
power, and 20 percent of the total value, of the
stock of such corporation is owned directly by indi-
viduals or estates or indirectly by individuals
through partnerships or trusts.
The determination under paragraph (3) shall be made as
of the time of issuance of the stock in question but shall
include amounts received for such stock.
‘‘(e) DISPOSITIONS OF STOCK.—
‘‘(1) BASIS REDUCTION.—For purposes of this
title, the basis of any enterprise zone stock shall be
reduced by the amount of the deduction allowed
under this section with respect to such stock.
‘‘(2) DEDUCTION
RECAPTURED
AS
ORDINARY
INCOME.—For purposes of section 1245—
‘‘(A) any stock the basis of which is re-
duced under paragraph (1) (and any other
property the basis of which is determined in
whole or in part by reference to the adjusted
basis of such stock) shall be treated as section
1245 property, and
‘‘(B) any reduction under paragraph (1)
shall be treated as a deduction allowed for de-
preciation.
If an exchange of any stock described in paragraph
(1) qualifies under section 354(a), 355(a), or
356(a), the amount of gain recognized under section
1245 by reason of this paragraph shall not exceed
the amount of gain recognized in the exchange (de-
termined without regard to this paragraph).
‘‘(3) CERTAIN EVENTS TREATED AS DISPOSI-
TIONS.—For purposes of determining the amount
treated as ordinary income under section 1245 by
reason of paragraph (2), paragraph (3) of section
1245(b) (relating to certain tax-free transactions)
shall not apply.
‘‘(4) INTEREST
CHARGED
IF
DISPOSITION
WITHIN 5 YEARS OF PURCHASE.—
‘‘(A) IN GENERAL.—If—
‘‘(i) a taxpayer disposes of any enter-
prise zone stock with respect to which a
deduction was allowed under subsection (a)
(or any other property the basis of which
is determined in whole or in part by ref-
erence to the adjusted basis of such stock)
before the end of the 5-year period begin-
ning on the date such stock was purchased
by the taxpayer, and
‘‘(ii) section 1245(a) applies to such
disposition by reason of paragraph (2),
then the tax imposed by this chapter for the
taxable year in which such disposition occurs
shall be increased by the amount determined
under subparagraph (B).
‘‘(B) ADDITIONAL AMOUNT.—For purposes
of subparagraph (A), the additional amount
shall be equal to the amount of interest (deter-
mined at the rate applicable under section
6621(a)(2)) that would accrue—
‘‘(i) during the period beginning on
the date the stock was purchased by the
taxpayer and ending on the date of such
disposition by the taxpayer, and
‘‘(ii) on an amount equal to the aggre-
gate decrease in tax of the taxpayer result-
ing from the deduction allowed under this
subsection (a) with respect to such stock.
‘‘(C) SPECIAL RULE.—Any increase in tax
under subparagraph (A) shall not be treated as
a tax imposed by this chapter for purposes of—
‘‘(i) determining the amount of any
credit allowable under this chapter, and
‘‘(ii) determining the amount of the
tax imposed by section 55.
‘‘(f) DISQUALIFICATION.—
‘‘(1) ISSUER CEASES TO QUALIFY.—If, during
the 10-year period beginning on the date enterprise
zone stock was purchased by the taxpayer, the issuer
of such stock ceases to be a qualified enterprise zone
issuer (determined without regard to subsection
(d)(3)), then notwithstanding any provision of this
subtitle other than paragraph (2), the taxpayer shall
be treated for purposes of subsection (e) as dispos-
ing of such stock (and any other property the basis
of which is determined in whole or in part by ref-
erence to the adjusted basis of such stock) during
the taxable year during which such cessation occurs
at its fair market value as of the 1st day of such
taxable year.
‘‘(2) CESSATION OF ENTERPRISE ZONE STATUS
NOT
TO
CAUSE
RECAPTURE.—A corporation shall
not fail to be treated as a qualified enterprise zone
issuer for purposes of paragraph (1) solely by reason
of the termination or revocation of a designation as
an empowerment zone or enterprise community, as
the case may be.
‘‘(g) OTHER SPECIAL RULES.—
‘‘(1) APPLICATION
OF
LIMITS
TO
PARTNER-
SHIPS AND S CORPORATIONS.—In the case of a part-
nership or an S corporation, the limitations under
subsection (b) shall apply at the partner and share-
holder level and shall not apply at the partnership
or corporation level.
‘‘(2) DEDUCTION NOT ALLOWED TO ESTATES
AND TRUSTS.—Estates and trusts shall not be treat-
ed as individuals for purposes of this section.’’
(b) ADDITIONAL EXPENSING.—Section 1397A (relat-
ing to increase in expensing under section 179) is amend-
ed—
(1) in subparagraph (A) of subsection (a)(1),
by striking ‘‘$20,000’’ and inserting ‘‘$35,000’’, and
(2) by adding at the end the following new sub-
section:
‘‘(c) ENTERPRISE ZONE BUSINESS.—For purposes of
this section, the term ‘enterprise zone business’ has the
meaning given such term by section 1397B, except that
in applying such section references to empowerment zones
shall be treated as including references to enterprise com-
munities.’’
(c) TECHNICAL AMENDMENT.—Subsection (a) of sec-
tion 1016 (relating to adjustments to basis) is amended
by striking ‘‘and’’ at the end of paragraph (24), by strik-
ing the period at the end of paragraph (25) and inserting
‘‘, and’’; and by adding at the end the following new para-
graph:
‘‘(26) to the extent provided in section
1397E(b), in the case of stock with respect to which
a deduction was allowed or allowable under section
1397E(a).’’
(d) CLERICAL AND CONFORMING AMENDMENTS.—
(1) The table of parts for subchapter U is
amended by striking the item relating to part IV
and inserting the following new items:
‘‘Part IV. Additional incentives for empowerment zones and en-
terprise communities.
‘‘Part V.
Regulations.’’
(2) The table of sections for part V of sub-
chapter U of chapter 1, as redesignated by sub-
section (a)(1), is amended by redesignating the item
relating to section 1397D as section 1397F.
(3) Section 1397F, as so redesignated, is
amended by striking ‘‘and III’’ each place it appears
and inserting ‘‘, III, and IV’’.
(e) EFFECTIVE DATE.—The amendments made by
this section apply to taxable years beginning after Decem-
ber 31, 1995.
SEC. 102. COMMERCIAL REVITALIZATION TAX CREDIT.
(a) ALLOWANCE OF CREDIT.—Section 46 of the In-
ternal Revenue Code of 1986 (relating to investment cred-
it) 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 follow-
ing new paragraph:
‘‘(4) the commercial revitalization credit.’’
(b) COMMERCIAL REVITALIZATION CREDIT.—Sub-
part E of part IV of subchapter A of chapter 1 of the
Internal Revenue Code of 1986 (relating to rules for com-
puting investment credit) is amended by inserting after
section 48 the following new section:
‘‘SEC. 48A. COMMERCIAL REVITALIZATION 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, 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 an eligible
commercial revitalization area,
‘‘(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
REHABILITATION
EXPENDI-
TURE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
rehabilitation 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, and
‘‘(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 $10,000,000, reduced by
any such expenditures with respect to the build-
ing taken into account by the taxpayer or any
predecessor in determining the amount of the
credit under this section for all preceding tax-
able 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 part unless the taxpayer
elects to take the expenditure into account
only for purposes of this section.
‘‘(3) ELIGIBLE
COMMERCIAL
REVITALIZATION
AREA.—The term ‘eligible commercial revitalization
area’ means an empowerment zone or enterprise
community designated under subchapter U.
‘‘(4) 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 rehabilitated 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).