121
Secretary among qualified community development
entities selected by the Secretary. In making alloca-
tions under the preceding sentence, the Secretary
shall give priority to entities with records of having
successfully provided capital or technical assistance
to disadvantaged businesses or communities.
‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If
the new markets tax credit limitation for any cal-
endar year exceeds the aggregate amount allocated
under paragraph (2) for such year, such limitation
for the succeeding calendar year shall be increased
by the amount of such excess.
‘‘(g) RECAPTURE OF CREDIT IN CERTAIN CASES.—
‘‘(1) IN GENERAL.—If, at any time during the
5-year period beginning on the date of the original
issue of a qualified equity investment in a qualified
community development entity, there is a recapture
event with respect to such investment, then the tax
imposed by this chapter for the taxable year in
which such event occurs shall be increased by the
credit recapture amount.
‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur-
poses of paragraph (1), the credit recapture amount
is an amount equal to the sum of—
122
‘‘(A) the aggregate decrease in the credits
allowed to the taxpayer under section 38 for all
prior taxable years which would have resulted if
no credit had been determined under this sec-
tion with respect to such investment, plus
‘‘(B) interest at the overpayment rate es-
tablished under section 6621 on the amount de-
termined under subparagraph (A) for each
prior taxable year for the period beginning on
the due date for filing the return for the prior
taxable year involved.
No deduction shall be allowed under this chapter for
interest described in subparagraph (B).
‘‘(3) RECAPTURE
EVENT.—For purposes of
paragraph (1), there is a recapture event with re-
spect to an equity investment in a qualified commu-
nity development entity if—
‘‘(A) such entity ceases to be a qualified
community development entity,
‘‘(B) the proceeds of the investment cease
to be used as required of subsection (b)(1)(B),
or
‘‘(C) such investment is redeemed by such
entity.
‘‘(4) SPECIAL RULES.—
123
‘‘(A) TAX
BENEFIT
RULE.—The tax for
the taxable year shall be increased under para-
graph (1) only with respect to credits allowed
by reason of this section which were used to re-
duce tax liability. In the case of credits not so
used to reduce tax liability, the carryforwards
and carrybacks under section 39 shall be appro-
priately adjusted.
‘‘(B) NO CREDITS AGAINST TAX.—Any in-
crease in tax under this subsection shall not be
treated as a tax imposed by this chapter for
purposes of determining the amount of any
credit under this chapter or for purposes of sec-
tion 55.
‘‘(h) BASIS REDUCTION.—The basis of any qualified
equity investment shall be reduced by the amount of any
credit determined under this section with respect to such
investment.
‘‘(i) REGULATIONS.—The Secretary shall prescribe
such regulations as may be appropriate to carry out this
section, including regulations—
‘‘(1) which limit the credit for investments
which are directly or indirectly subsidized by other
Federal benefits (including the credit under section
124
42 and the exclusion from gross income under sec-
tion 103),
‘‘(2) which prevent the abuse of the provisions
of this section through the use of related parties,
‘‘(3) which impose appropriate reporting re-
quirements, and
‘‘(4) which apply the provisions of this section
to newly formed entities.’’.
(b) CREDIT MADE PART OF GENERAL BUSINESS
CREDIT.—
(1) IN GENERAL.—Subsection (b) of section 38
of such Code is amended by striking ‘‘plus’’ at the
end of paragraph (11), by striking the period at the
end of paragraph (12) and inserting ‘‘, plus’’, and
by adding at the end the following new paragraph:
‘‘(13) the new markets tax credit determined
under section 45D(a).’’
(2) LIMITATION
ON
CARRYBACK.—Subsection
(d) of section 39 of such Code is amended by adding
at the end the following new paragraph:
‘‘(9) NO CARRYBACK OF NEW MARKETS TAX
CREDIT BEFORE JANUARY 1, 2000.—No portion of
the unused business credit for any taxable year
which is attributable to the credit under section 45D
125
may be carried back to a taxable year ending before
January 1, 2000.’’
(c) DEDUCTION FOR UNUSED CREDIT.—Subsection
(c) of section 196 of such Code is amended by striking
‘‘and’’ at the end of paragraph (7), by striking the period
at the end of paragraph (8) and inserting ‘‘, and’’, and
by adding at the end the following new paragraph:
‘‘(9) the new markets tax credit determined
under section 45D(a).’’
(d) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
of such Code is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 45D. New markets tax credit.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to investments made after Decem-
ber 31, 1999.
Calendar No. 464
106TH CONGRESS
2D SESSION
H. R. 2848
[Report No. 106–706, Part I]
A BILL
To amend the Small Business Investment Act of
1958 and the Small Business Act to establish a
New Markets Venture Capital Program, to estab-
lish an America’s Private Investment Company
Program, to amend the Internal Revenue Code of
1986 to establish a New Markets Tax Credit,
and for other purposes.
JUNE 28, 2000
Reported from the Committee on Banking and Financial
Services with an amendment
JUNE 28, 2000
Referral to the Committees on Ways and Means and
Small Business extended for a period ending not later
than July 28, 2000
JULY 28, 2000
The Committees on Ways and Means and Small Business
discharged; committed to the Committee of the Whole
House on the State of the Union and ordered to be
printed