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vidual shall include only his spouse, ancestors,
and lineal descendants), and
‘‘(B) the basis of the property in the hands
of the person acquiring it is not determined—
‘‘(i) in whole or in part by reference to
the adjusted basis of such property in the
hands of the person from whom acquired, or
‘‘(ii) under section 1014(a) (relating to
property acquired from a decedent).
‘‘(3) PURCHASE
PRICE.—The term ‘purchase
price’ means the adjusted basis of the principal resi-
dence on the date of acquisition.
‘‘(d) REPORTING.—If the Secretary requires informa-
tion reporting under section 6045 to verify the eligibility
of taxpayers for the credit allowable by this section, the ex-
ception provided by section 6045(e)(5) shall not apply.
‘‘(e) CREDIT TREATED
AS NONREFUNDABLE PER-
SONAL CREDIT.—For purposes of this title, the credit al-
lowed by this section shall be treated as a credit allowable
under subpart A of part IV of subchapter A of this chapter.
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‘‘SEC. 1400A. CREDIT FOR EQUITY INVESTMENTS IN AND
LOANS TO DISTRICT OF COLUMBIA BUSI-
NESSES.
‘‘(a) GENERAL RULE.—For purposes of section 38, the
DC investment credit determined under this section for any
taxable year is—
‘‘(1) the qualified lender credit for such year,
and
‘‘(2) the qualified equity investment credit for
such year.
‘‘(b) QUALIFIED LENDER CREDIT.—For purposes of
this section—
‘‘(1) IN GENERAL.—The qualified lender credit
for any taxable year is the amount of credit specified
for such year by the Economic Development Corpora-
tion with respect to qualified District loans made by
the taxpayer.
‘‘(2) LIMITATION.—In no event may the quali-
fied lender credit with respect to any loan exceed 25
percent of the cost of the property purchased with the
proceeds of the loan.
‘‘(3) QUALIFIED DISTRICT LOAN.—For purposes
of paragraph (1), the term ‘qualified district loan’
means any loan for the purchase (as defined in sec-
tion 179(d)(2)) of property to which section 168 ap-
plies (or would apply but for section 179) (or land
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which is functionally related and subordinate to such
property) and substantially all of the use of which is
in the District of Columbia and is in the active con-
duct of a trade or business in the District of Colum-
bia. A rule similar to the rule of section 1397C(a)(2)
shall apply for purposes of the preceding sentence.
‘‘(c) QUALIFIED EQUITY INVESTMENT CREDIT.—
‘‘(1) IN GENERAL.—For purposes of this section,
the qualified equity investment credit determined
under this section for any taxable year is an amount
equal to the percentage specified by the Economic De-
velopment Corporation (but not greater than 25 per-
cent) of the aggregate amount paid in cash by the
taxpayer during the taxable year for the purchase of
District business investments.
‘‘(2) DISTRICT
BUSINESS
INVESTMENT.—For
purposes of this subsection, the term ‘District business
investment’ means—
‘‘(A) any District business stock, and
‘‘(B) any District partnership interest.
‘‘(3) DISTRICT BUSINESS STOCK.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘District business
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stock’ means any stock in a domestic corporation
if—
‘‘(i) such stock is acquired by the tax-
payer at its original issue (directly or
through an underwriter) solely in exchange
for cash, and
‘‘(ii) as of the time such stock was is-
sued, such corporation was engaged in a
trade or business in the District of Colum-
bia (or, in the case of a new corporation,
such corporation was being organized for
purposes of engaging in such a trade or
business).
‘‘(B) REDEMPTIONS.—A rule similar to the
rule of section 1202(c)(3) shall apply for pur-
poses of this paragraph.
‘‘(4) QUALIFIED DISTRICT PARTNERSHIP INTER-
EST.—For purposes of this subsection, the term
‘qualified District 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, and
‘‘(B) as of the time such interest was ac-
quired, such partnership was engaging in a
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trade or business in the District of Columbia (or,
in the case of a new partnership, such partner-
ship was being organized for purposes of engag-
ing in such a trade or business).
A rule similar to the rule of paragraph (3)(B) shall
apply for purposes of this paragraph.
‘‘(5) RECAPTURE OF CREDIT UPON CERTAIN DIS-
POSITIONS OF DISTRICT BUSINESS INVESTMENTS.—
‘‘(A) IN GENERAL.—If a taxpayer disposes
of any District business investment (or any other
property the basis of which is determined in
whole or in part by reference to the adjusted
basis of such investment) before the end of the 5-
year period beginning on the date such invest-
ment was acquired by the taxpayer, the tax-
payer’s tax imposed by this chapter for the tax-
able year in which such distribution occurs shall
be increased by the aggregate decrease in the
credits allowed under section 38 for all prior
taxable years which would have resulted solely
from reducing to zero any credit determined
under this section with respect to such invest-
ment.
‘‘(B) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply to any gift, transfer, or trans-