and Urban Development that such
commitments will be fulfilled,
‘‘(ii) a nomination regarding such
area is submitted in such a manner and in
such form, and contains such information,
as the Secretary of Housing and Urban
Development shall by regulation prescribe;
and
‘‘(iii) the Secretary of Housing and
Urban Development determines that any
information furnished is reasonably accu-
rate.
‘‘(5) NOMINATION PROCESS FOR INDIAN RES-
ERVATIONS.—For purposes of this subchapter, in
the case of a nominated area on an Indian reserva-
tion, the reservation governing body (as determined
by the Secretary of the Interior) shall be treated as
being both the State and local governments with re-
spect to such area.
‘‘(b) PERIOD FOR WHICH DESIGNATION IS IN EF-
FECT.—
‘‘(1) IN GENERAL.—Any designation of an area
as a renewal community shall remain in effect dur-
ing the period beginning on the date of the designa-
tion and ending on the earliest of—
‘‘(A) December 31, 2007,
‘‘(B) the termination date designated by
the State and local governments in their nomi-
nation, or
‘‘(C) the date the Secretary of Housing
and Urban Development revokes such designa-
tion.
‘‘(2) REVOCATION OF DESIGNATION.—The Sec-
retary of Housing and Urban Development may re-
voke the designation under this section of an area if
such Secretary determines that the local government
or the State in which the area is located—
‘‘(A) has modified the boundaries of the
area, or
‘‘(B) is not complying substantially with,
or fails to make progress in achieving, the State
or local commitments, respectively, described in
subsection (d).
‘‘(c) AREA AND ELIGIBILITY REQUIREMENTS.—
‘‘(1) IN GENERAL.—The Secretary of Housing
and Urban Development may designate a nominated
area as a renewal community under subsection (a)
only if the area meets the requirements of para-
graphs (2) and (3) of this subsection.
‘‘(2) AREA REQUIREMENTS.—A nominated area
meets the requirements of this paragraph if—
‘‘(A) the area is within the jurisdiction of
one or more local governments;
‘‘(B) the boundary of the area is continu-
ous; and
‘‘(C) the area—
‘‘(i) has a population, of at least—
‘‘(I) 4,000 if any portion of such
area (other than a rural area de-
scribed in subsection (a)(2)(B)(i)) is
located within a metropolitan statis-
tical area (within the meaning of sec-
tion 143(k)(2)(B)) which has a popu-
lation of 50,000 or greater; or
‘‘(II) 1,000 in any other case; or
‘‘(ii) is entirely within an Indian res-
ervation (as determined by the Secretary of
the Interior).
‘‘(3) ELIGIBILITY
REQUIREMENTS.—A nomi-
nated area meets the requirements of this paragraph
if the State and the local governments in which it
is located certify (and the Secretary of Housing and
Urban Development, after such review of supporting
data as he deems appropriate, accepts such certifi-
cation) that—
‘‘(A) the area is one of pervasive poverty,
unemployment, and general distress;
‘‘(B) the unemployment rate in the area,
as determined by the most recent available
data, was at least 11⁄2 times the national unem-
ployment rate for the period to which such data
relate;
‘‘(C) the poverty rate for each population
census tract within the nominated area is at
least 20 percent; and
‘‘(D) in the case of an urban area, at least
70 percent of the households living in the area
have incomes below 80 percent of the median
income of households within the jurisdiction of
the local government (determined in the same
manner as under section 119(b)(2) of the
Housing and Community Development Act of
1974).
‘‘(4) CONSIDERATION OF HIGH INCIDENCE OF
CRIME.—The Secretary of Housing and Urban De-
velopment shall take into account, in selecting nomi-
nated areas for designation as renewal communities
under this section, the extent to which such areas
have a high incidence of crime.
‘‘(5) CONSIDERATION OF COMMUNITIES IDENTI-
FIED
IN
GAO
STUDY.—The Secretary of Housing
and Urban Development shall take into account, in
selecting nominated areas for designation as renewal
communities under this section, if the area has cen-
sus tracts identified in the May 12, 1998, report of
the Government Accounting Office regarding the
identification of economically distressed areas.
‘‘(d) REQUIRED
STATE
AND
LOCAL
COMMIT-
MENTS.—
‘‘(1) IN GENERAL.—The Secretary of Housing
and Urban Development may designate any nomi-
nated area as a renewal community under subsection
(a) only if—
‘‘(A) the local government and the State in
which the area is located agree in writing that,
during any period during which the area is a
renewal community, such governments will fol-
low a specified course of action which meets the
requirements of paragraph (2) and is designed
to reduce the various burdens borne by employ-
ers or employees in such area; and
‘‘(B) the economic growth promotion re-
quirements of paragraph (3) are met.
‘‘(2) COURSE OF ACTION.—
‘‘(A) IN
GENERAL.—A course of action
meets the requirements of this paragraph if
such course of action is a written document,
signed by a State (or local government) and
neighborhood organizations, which evidences a
partnership between such State or government
and community-based organizations and which
commits each signatory to specific and measur-
able goals, actions, and timetables. Such course
of action shall include at least five of the follow-
ing:
‘‘(i) A reduction of tax rates or fees
applying within the renewal community.
‘‘(ii) An increase in the level of effi-
ciency of local services within the renewal
community.
‘‘(iii) Crime reduction strategies, such
as crime prevention (including the provi-
sion of such services by nongovernmental
entities).
‘‘(iv) Actions to reduce, remove, sim-
plify, or streamline governmental require-
ments applying within the renewal commu-
nity.
‘‘(v) Involvement in the program by
private entities, organizations, neighbor-
hood 
organizations, 
and 
community
groups, particularly those in the renewal
community, including a commitment from
such private entities to provide jobs and
job training for, and technical, financial, or
other assistance to, employers, employees,
and residents from the renewal community.
‘‘(vi) State or local income tax bene-
fits for fees paid for services performed by
a nongovernmental entity which were for-
merly performed by a governmental entity.
‘‘(vii) The gift (or sale at below fair
market value) of surplus real property
(such as land, homes, and commercial or
industrial structures) in the renewal com-
munity to neighborhood organizations,
community development corporations, or
private companies.
‘‘(B) RECOGNITION OF PAST EFFORTS.—
For purposes of this section, in evaluating the
course of action agreed to by any State or local
government, the Secretary of Housing and
Urban Development shall take into account the
past efforts of such State or local government
in reducing the various burdens borne by em-
ployers and employees in the area involved.
‘‘(3) ECONOMIC GROWTH PROMOTION REQUIRE-
MENTS.—The economic growth promotion require-
ments of this paragraph are met with respect to a
nominated area if the local government and the
State in which such area is located certify in writing
that such government and State, respectively, have
repealed or otherwise will not enforce within the
area, if such area is designated as a renewal
community—
‘‘(A) licensing requirements for occupa-
tions that do not ordinarily require a profes-
sional degree;
‘‘(B) zoning restrictions on home-based
businesses which do not create a public nui-
sance;
‘‘(C) permit requirements for street ven-
dors who do not create a public nuisance;
‘‘(D) zoning or other restrictions that im-
pede the formation of schools or child care cen-
ters; and
‘‘(E) franchises or other restrictions on
competition for businesses providing public
services, including but not limited to taxicabs,
jitneys, cable television, or trash hauling,
except to the extent that such regulation of busi-
nesses and occupations is necessary for and well-tai-
lored to the protection of health and safety.
‘‘(e) COORDINATION WITH TREATMENT
OF EM-
POWERMENT ZONES AND ENTERPRISE COMMUNITIES.—
For purposes of this title, if there are in effect with respect
to the same area both—
‘‘(1) a designation as a renewal community; and
‘‘(2) a designation as an empowerment zone or
enterprise community,
both of such designations shall be given full effect with
respect to such area.
‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this subchapter—
‘‘(1) GOVERNMENTS.—If more than one govern-
ment seeks to nominate an area as a renewal com-
munity, any reference to, or requirement of, this sec-
tion shall apply to all such governments.
‘‘(2) STATE.—The term ‘State’ includes Puerto
Rico, the Virgin Islands of the United States, Guam,
American Samoa, the Northern Mariana Islands,
and any other possession of the United States.
‘‘(3) LOCAL
GOVERNMENT.—The term ‘local
government’ means—
‘‘(A) any county, city, town, township, par-
ish, village, or other general purpose political
subdivision of a State;
‘‘(B) any combination of political subdivi-
sions described in subparagraph (A) recognized
by the Secretary of Housing and Urban Devel-
opment; and
‘‘(C) the District of Columbia.
‘‘(4) APPLICATION
OF
RULES
RELATING
TO
CENSUS TRACTS AND CENSUS DATA.—The rules of
sections 1392(b)(4) and 1393(a)(9) shall apply.
‘‘PART II—RENEWAL COMMUNITY CAPITAL GAIN;
RENEWAL COMMUNITY BUSINESS
‘‘Sec. 1400F. Renewal community capital gain.
‘‘Sec. 1400G. Renewal community business defined.
‘‘SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.
‘‘(a) GENERAL RULE.—Gross income does not in-
clude any qualified capital gain recognized on the sale or
exchange of a qualified community asset held for more
than 5 years.
‘‘(b) QUALIFIED COMMUNITY ASSET.—For purposes
of this section—
‘‘(1) IN GENERAL.—The term ‘qualified com-
munity asset’ means—
‘‘(A) any qualified community stock;
‘‘(B) any qualified community partnership
interest; and
‘‘(C) any qualified community business
property.
‘‘(2) QUALIFIED COMMUNITY STOCK.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘qualified commu-
nity stock’ means any stock in a domestic cor-
poration if—
‘‘(i) such stock is acquired by the tax-
payer after December 31, 2000, and before
January 1, 2008, at its original issue (di-
rectly or through an underwriter) from the
corporation solely in exchange for cash;
‘‘(ii) as of the time such stock was
issued, such corporation was a renewal
community business (or, in the case of a
new corporation, such corporation was
being organized for purposes of being a re-
newal community business); and
‘‘(iii) during substantially all of the
taxpayer’s holding period for such stock,
such corporation qualified as a renewal
community business.
‘‘(B) REDEMPTIONS.—A rule similar to
the rule of section 1202(c)(3) shall apply for
purposes of this paragraph.
‘‘(3) QUALIFIED COMMUNITY PARTNERSHIP IN-
TEREST.—The term ‘qualified community partner-
ship interest’ means any interest in a partnership
if—
‘‘(A) such interest is acquired by the tax-
payer after December 31, 2000, and before
January 1, 2008;
‘‘(B) as of the time such interest was ac-
quired, such partnership was a renewal commu-
nity business (or, in the case of a new partner-
ship, such partnership was being organized for
purposes of being a renewal community busi-
ness); and
‘‘(C) during substantially all of the tax-
payer’s holding period for such interest, such
partnership qualified as a renewal community
business.
A rule similar to the rule of paragraph (2)(B) shall
apply for purposes of this paragraph.
‘‘(4) QUALIFIED COMMUNITY BUSINESS PROP-
ERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
community business property’ means tangible
property if—
‘‘(i) such property was acquired by
the taxpayer by purchase (as defined in
section 179(d)(2)) after December 31,
2000, and before January 1, 2008;
‘‘(ii) the original use of such property
in the renewal 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 a renewal community busi-
ness of the taxpayer.
‘‘(B) SPECIAL RULE FOR SUBSTANTIAL IM-
PROVEMENTS.—The requirements of clauses (i)
and (ii) of subparagraph (A) shall be treated as
satisfied with respect to—
‘‘(i) property which is substantially
improved (within the meaning of section
1400B(b)(4)(B)(ii)) by the taxpayer before
January 1, 2008; and
‘‘(ii) any land on which such property
is located.
‘‘(c) CERTAIN RULES TO APPLY.—Rules similar to
the rules of paragraphs (5), (6), and (7) of subsection (b),
and subsections (e), (f), and (g), of section 1400B shall
apply for purposes of this section.
‘‘SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.
‘‘For purposes of this part, the term ‘renewal commu-
nity business’ means any entity or proprietorship which
would be a qualified business entity or qualified propri-
etorship under section 1397B if—
‘‘(1) references to renewal communities were
substituted for references to empowerment zones in
such section; and
‘‘(2) ‘80 percent’ were substituted for ‘50 per-
cent’ in subsections (b)(2) and (c)(1) of such sec-
tion.
‘‘PART III—FAMILY DEVELOPMENT ACCOUNTS
‘‘Sec. 1400H. Family development accounts for renewal commu-
nity EITC recipients.
‘‘Sec. 1400I. Demonstration program to provide matching con-
tributions to family development accounts in certain
renewal communities.
‘‘Sec. 1400J. Designation of earned income tax credit payments
for deposit to family development account.
‘‘SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RE-
NEWAL COMMUNITY EITC RECIPIENTS.
‘‘(a) ALLOWANCE OF DEDUCTION.—
‘‘(1) IN GENERAL.—There shall be allowed as a
deduction—
‘‘(A) in the case of a qualified individual,
the amount paid in cash for the taxable year by
such individual to any family development ac-
count for such individual’s benefit; and
‘‘(B) in the case of any person other than
a qualified individual, the amount paid in cash
for the taxable year by such person to any fam-
ily development account for the benefit of a
qualified individual but only if the amount so
paid is designated for purposes of this section
by such individual.
No deduction shall be allowed under this paragraph
for any amount deposited in a family development
account under section 1400I (relating to demonstra-
tion program to provide matching amounts in re-
newal communities).
‘‘(2) LIMITATION.—
‘‘(A) IN GENERAL.—The amount allowable
as a deduction to any individual for any taxable
year by reason of paragraph (1)(A) shall not
exceed the lesser of—
‘‘(i) $2,000, or
‘‘(ii) an amount equal to the com-
pensation includible in the individual’s
gross income for such taxable year.
‘‘(B) PERSONS DONATING TO FAMILY DE-
VELOPMENT
ACCOUNTS
OF
OTHERS.—The
amount which may be designated under para-
graph (1)(B) by any qualified individual for any
taxable year of such individual shall not exceed
$1,000.
‘‘(3) SPECIAL RULES FOR CERTAIN MARRIED
INDIVIDUALS.—Rules similar to rules of section
219(c) shall apply to the limitation in paragraph
(2)(A).
‘‘(4) COORDINATION
WITH
IRA’S.—No deduc-
tion shall be allowed under this section to any per-
son by reason of a payment to an account for the
benefit of a qualified individual if any amount is
paid into an individual retirement account (including
a Roth IRA) for the benefit of such individual.
‘‘(5) ROLLOVERS.—No deduction shall be al-
lowed under this section with respect to any rollover
contribution.
‘‘(b) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) INCLUSION
OF
AMOUNTS
IN
GROSS
IN-
COME.—Except as otherwise provided in this sub-
section, any amount paid or distributed out of a
family development account shall be included in
gross income by the payee or distributee, as the case
may be.
‘‘(2) EXCLUSION OF QUALIFIED FAMILY DEVEL-
OPMENT DISTRIBUTIONS.—Paragraph (1) shall not
apply to any qualified family development distribu-
tion.
‘‘(c) QUALIFIED FAMILY DEVELOPMENT DISTRIBU-
TION.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified family
development distribution’ means any amount paid or
distributed out of a family development account
which would otherwise be includible in gross income,
to the extent that such payment or distribution is
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.
‘‘(2) QUALIFIED
FAMILY
DEVELOPMENT
EX-
PENSES.—The term ‘qualified family development
expenses’ means any of the following:
‘‘(A) Qualified higher education expenses.
‘‘(B) Qualified first-time homebuyer costs.