I
103D CONGRESS
1ST SESSION
H. R. 1008
To amend the Internal Revenue Code of 1986 to stimulate employment
in, and to promote revitalization of, targeted urban areas designated
as targeted urban areas, by providing Federal tax relief for employment
and investments, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 18, 1993
Mr. SHAYS (for himself and Mr. MFUME) introduced the following bill; which
was referred jointly to the Committees on Ways and Means, the Judici-
ary, and Banking, Finance and Urban Affairs
A BILL
To amend the Internal Revenue Code of 1986 to stimulate
employment in, and to promote revitalization of, targeted
urban areas designated as targeted urban areas, by pro-
viding Federal tax relief for employment and invest-
ments, 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.
This Act may be cited as the ‘‘Business and Urban
Partnership Act’’.
SEC. 2. PURPOSE.
It is the purpose of this Act to provide for the estab-
lishment of targeted urban areas in order to restore the
economic base of targeted urban areas by bringing people,
businesses, and jobs back to them primarily by providing
or encouraging—
(1) tax relief at the Federal, State, and local
levels;
(2) regulatory relief at the Federal, State, and
local levels; and
(3) coordination and cooperation among Fed-
eral, State, and local officials to promote economic
development in targeted cities.
SEC. 3. AMENDMENT OF THE 1986 CODE.
Except as otherwise expressly provided, whenever in
this Act an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code
of 1986.
TITLE I—DESIGNATION OF
TARGETED URBAN AREAS
SEC. 101. DESIGNATION OF ZONES.
(a) GENERAL RULE.—Chapter 80 (relating to gen-
eral rules) is amended by adding at the end thereof the
following new subchapter:
‘‘Subchapter D—Designation of Targeted
Urban Areas
‘‘Sec. 7880. Designation.
‘‘SEC. 7880. DESIGNATION.
‘‘(a) DESIGNATION OF TARGETED URBAN AREAS.—
‘‘(1) DEFINITION.—For purposes of this title,
the term ‘a targeted urban area’ means any area—
‘‘(A) which is nominated by one or more
local governments and the State in which it is
located for designation as a targeted urban area
(hereinafter in this section referred to as a
‘nominated area’), and
‘‘(B) which the Secretary of Housing and
Urban Development designates as a targeted
urban area.
‘‘(2) DESIGNATION BY SECRETARY OF HOUSING
AND URBAN DEVELOPMENT.—Except as provided in
paragraph (3), the Secretary of Housing and Urban
Development shall designate any nominated area as
a targeted urban area if such Secretary determines
that the requirements of subsection (c) and (d) are
met with respect to such area.
‘‘(3) LIMITATIONS ON DESIGNATIONS.—
‘‘(A) PUBLICATION
OF
REGULATIONS.—
Before designating any area as a targeted
urban area and not later than 4 months follow-
ing the date of the enactment of this section,
the Secretary of Housing and Urban Develop-
ment shall prescribe by regulations—
‘‘(i) the procedures for nominating an
area, and
‘‘(ii) the procedures for designation as
a targeted urban area.
‘‘(B) TIME LIMITATIONS.—The Secretary
of Housing and Urban Development shall des-
ignate nominated areas as targeted urban area
only during the 48-month period beginning on
the first day of the first month following the
month in which the effective date of the regula-
tions described in subparagraph (A) occurs.
‘‘(C) PROCEDURAL RULES.—The Secretary
of Housing and Urban Development shall not
make any designation under this section un-
less—
‘‘(i) the local government and the
State in which the nominated area is lo-
cated have the authority to—
‘‘(I) nominate such area for des-
ignation as a targeted urban area,
‘‘(II) make the State and local
commitments under subsection (d),
and
‘‘(III) provide assurances satis-
factory to the Secretary of Housing
and Urban Development that such
commitments will be fulfilled,
‘‘(ii) the State and local governments
in which the nominated area is located will
establish a commission (consisting of State
and local governmental officials, represent-
atives of local businesses, and community
leaders) which shall have the responsibility
for making allocations under section 1394
(relating to overall limitations on targeted
urban area incentives), and
‘‘(iii) a nomination therefor is submit-
ted by such State and local governments in
such a manner and in such form, and con-
tains such information, as the Secretary of
Housing and Urban Development shall
prescribe by regulations.
‘‘(D) REQUIREMENT OF ALLOCATION FOR-
MULA.—The Secretary of Housing and Urban
Development shall not designate any nominated
area as a targeted urban area unless the State
and local governments in which the nominated
area is located have established allocation pro-
cedures to be used by the commission estab-
lished pursuant to subparagraph (C)(ii) in mak-
ing allocations under section 1394. Such proce-
dures—
‘‘(i) shall provide that allocations
under section 1394 will be based on the
following criteria:
‘‘(I) the additional investment in
the targeted urban area that will re-
sult from the allocation,
‘‘(II) the additional jobs in the
targeted urban area that will result
from the allocation,
‘‘(III) the levels of compensation
for the additional jobs referred to in
subclause (II),
‘‘(IV) the amount of additional
job-training that will result from the
allocation, and
‘‘(V) the number of residents of
the targeted urban area employed as a
result of the allocation, and
‘‘(ii) shall provide for a system of
weighting the criteria referred to in clause
(i).
Such procedures may provide that allocations
are to be limited to taxpayers in specified cat-
egories of businesses and may be revised with
the approval of the Secretary of Housing and
Urban Development.
‘‘(b) TIME PERIOD FOR WHICH DESIGNATION IS IN
EFFECT—
‘‘(1) IN GENERAL.—Any designation of an area
as a targeted urban area 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 of the 20th calendar
year following the calendar year in which such
date occurs,
‘‘(B) the termination date specified by the
State and local governments as provided in the
nomination submitted in accordance with sub-
section (a)(3)(C)(iii),
‘‘(C) such other date as the Secretary of
Housing and Urban Development shall specify
as a condition of designation, or
‘‘(D) the date upon which the Secretary of
Housing and Urban Development revokes such
designation.
‘‘(2) REVOCATION OF DESIGNATION.—The Sec-
retary of Housing and Urban Development may re-
voke the designation of an area if the Secretary of
Housing and Urban Development determines that
the State or a local government in which the area
is located is not complying substantially with the
agreed course of action for the area.
‘‘(c) AREA AND ELIGIBILITY REQUIREMENTS—
‘‘(1) IN GENERAL.—A nominated area meets
the requirements of this subsection if it is within the
jurisdiction of a qualified city and if it is the only
area in such city nominated as a targeted urban
area.
‘‘(2) QUALIFIED CITY.—For purposes of para-
graph (1), the term ‘qualified city’ means any city—
‘‘(A) which is a metropolitan city (as de-
fined in section 102(a)(4) of the Housing and
Community Development Act of 1974 (42
U.S.C. 5302(a)(4)),
‘‘(B) which is eligible to receive an alloca-
tion of funds under section 106(a)(3) of the
Housing and Community Development Act of
1974 for the most recent fiscal year ending be-
fore the date on which the nomination was sub-
mitted under subsection (a), and
‘‘(C) which has a need adjusted per capita
income factor equal to or less than .7 (as deter-
mined under section 1394(b)(7) on the basis of
the most recent data available before the date
on which the nomination was submitted under
subsection (a).
‘‘(d) REQUIRED
STATE
AND
LOCAL
COMMIT-
MENTS.—
‘‘(1) IN GENERAL.—A nominated area meets
the requirements of this subsection if the State and
the local government or governments of the jurisdic-
tions in which the nominated area is located agree
in writing that, during any period during which the
nominated area is a targeted urban area, such gov-
ernments will follow a specified course of action de-
signed to reduce the various burdens borne by em-
ployers or employees in such area.
‘‘(2) COURSE OF ACTION.—The course of action
under paragraph (1)—
‘‘(A) shall include—
‘‘(i) modifications to (or waivers of)
zoning requirements to permit multiple use
of appropriate areas within the targeted
urban area; except that this clause shall
not be construed to require waivers for
gambling or other adult-only entertainment
businesses,
‘‘(ii) procedures under which a busi-
ness can obtain all required State and local
permits from 1 agency in the city in which
the targeted urban area is located,
‘‘(iii) actions to reduce, remove, sim-
plify, or streamline governmental require-
ments applying within the targeted urban
area, and
‘‘(iv) procedures for involvement in
the program by private entities, organiza-
tions, neighborhood associations, and com-
munity groups, particularly those within
the nominated area, including a commit-
ment from such private entities to provide
jobs and job training for, and technical, fi-
nancial or other assistance to, employers,
employees, and residents of the nominated
area, and
‘‘(B) may include 1 or more of the follow-
ing:
‘‘(i) State sales tax exemptions for
property purchased for use in the targeted
urban area,
‘‘(ii) property tax exemptions or re-
ductions within the targeted urban area or
taxes guaranteed to be used for infrastruc-
ture or crime-prevention projects benefiting
the targeted urban area,
‘‘(iii) 
enhanced 
crime 
prevention
measures in the targeted urban area such
as ‘crime free zones’,
‘‘(iv) the reduction or elimination of
other taxes or fees applying within the tar-
geted urban area,
‘‘(v) an increase in the level or effi-
ciency of local services within the targeted
urban area, for example, crime prevention,
and drug enforcement prevention and
treatment,
‘‘(vi) donation (or sale below market
value) of land and buildings to benefit low
and moderate income people,
‘‘(vii) linkages to—
‘‘(I) job training,
‘‘(II) transportation,
‘‘(III) education,
‘‘(IV) day care,
‘‘(V) health care, and
‘‘(VI) other social service sup-
port,
‘‘(viii) provision of supporting public
facilities, and infrastructure improvements,
‘‘(ix) encouragement of local entrepre-
neurship; and
‘‘(x) other factors determined essen-
tial to support targeted urban area activi-
ties and increase livability or quality of life.
‘‘(3) LATER MODIFICATION OF A COURSE OF
ACTION.—The Secretary of Housing and Urban De-
velopment may by regulations prescribe procedures
to permit or require a course of action to be updated
or modified during the time that a designation is in
effect.
‘‘(e) DEFINITIONS.—For the purposes of this title—
‘‘(1) GOVERNMENTS.—If more than one govern-
ment seeks to nominate an area as a targeted urban
area, any reference to, or requirement of, this sec-
tion shall apply to all such governments.
‘‘(2) 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.’’
(b) CLERICAL AMENDMENT.—The table of sub-
chapters for chapter 80 is amended by adding at the end
thereof the following new item:
‘‘SUBCHAPTER D. Designation of targeted urban areas.’’.
SEC. 102. REPORTING REQUIREMENTS.
Not later than the close of the second calendar year
after the calendar year in which the Secretary of Housing
and Urban Development first designates areas as targeted
urban areas, and at the close of each second calendar year
thereafter, the Secretary of Housing and Urban Develop-
ment shall submit to the Congress a report on the effects
of such designation in accomplishing the purposes of this
Act.
SEC. 103. INTERACTION WITH OTHER FEDERAL PROGRAMS.
(a) COORDINATION
WITH
RELOCATION
ASSIST-
ANCE.—The designation of a targeted urban area under
section 7880 of the Internal Revenue Code of 1986 (as
added by this Act) shall not—
(1) constitute approval of a Federal or federally
assisted program or project (within the meaning of
the Uniform Relocation Assistance and Real Prop-
erty Acquisition Policies Act of 1970 (42 U.S.C.
4601)); or
(2) entitle any person displaced from real prop-
erty located in such targeted urban areas to any
rights or any benefits under such Act.
(b) COORDINATION WITH ENVIRONMENTAL POL-
ICY.—Designation of a targeted urban area under section
7880 of such Code shall not constitute a Federal action
for purposes of applying the procedural requirements of
the National Environmental Policy Act of 1969 (42 U.S.C.
4341) or other provisions of Federal law relating to the
protection of the environment.
TITLE II—FEDERAL INCOME TAX
INCENTIVES
SEC. 201. TAX INCENTIVES.
(a) GENERAL RULE.—Chapter 1 (relating to normal
tax and surtax rules) is amended by inserting after sub-
chapter T the following new subchapter:
Subchapter U—Tax Incentives for Targeted Urban
Areas
‘‘Sec. 1391. Credit for health, day care, and job training expenses
of targeted urban area employers.
‘‘Sec. 1392. Expense treatment for cost of qualified targeted
urban area property.
‘‘Sec. 1393. Deduction for targeted urban area stock.
‘‘Sec. 1394. Overall limitation on targeted urban area incentives.
‘‘SEC. 1391. CREDIT FOR HEALTH, DAY CARE, AND JOB
TRAINING EXPENSES OF TARGETED URBAN
AREA EMPLOYERS.
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this subtitle
for the taxable year an amount equal to 50 percent of the
qualified expenses of the taxpayer for such taxable year.
‘‘(b) LIMITATION.—The amount of the credit allow-
able under subsection (a) to any taxpayer for any taxable
year with respect to any targeted urban area shall not ex-
ceed the credit amount allocated to the taxpayer under
section 1394 with respect to such targeted urban area for
such taxable year.
‘‘(c) QUALIFIED EXPENSES.—For purposes of this
section, the term ‘qualified expenses’ means—
‘‘(1) any amount paid or incurred by the tax-
payer for coverage under an accident or health plan
of any qualified targeted urban area employee,
‘‘(2) any amount paid or incurred by the tax-
payer for dependent care assistance (as defined in
section 129(e)(1)) with respect to any qualified tar-
geted urban area employee, and
‘‘(3) any job training expenses paid or incurred
by the taxpayer with respect to any qualified tar-
geted urban area employee.
‘‘(d) QUALIFIED
TARGETED
URBAN
AREA
EM-
PLOYEE.—For purposes of this section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘qualified targeted
urban area employee’ means, with respect to any pe-
riod, any employee of the taxpayer if—
‘‘(A) substantially all of the services per-
formed during such period by such employee for
the taxpayer are performed within a targeted
urban area in a trade or business of the tax-
payer, and
‘‘(B) the principal place of abode of such
employee while performing such services is
within a city which includes any portion of such
targeted urban area.
‘‘(2) CERTAIN INDIVIDUALS NOT ELIGIBLE.—
The term ‘qualified targeted urban area employee’
shall not include—
‘‘(A) any individual described in subpara-
graph (A), (B), or (C) of section 51(i)(1), and
‘‘(B) any 5-percent owner (as defined in
section 416(i)(1)(B)).
‘‘(e) CREDIT REFUNDABLE.—For purposes of section
6401(b), the credit under this section shall be treated as
a credit allowable under subpart C of part IV of sub-
chapter A of this chapter.
‘‘SEC. 1392. EXPENSE TREATMENT FOR COST OF QUALIFIED
ZONE PROPERTY.
‘‘(a) TREATMENT AS EXPENSES.—A taxpayer may
elect to treat the cost of any qualified targeted urban area
property as an expense which is not chargeable to capital
account. Any cost so treated shall be allowed as a deduc-
tion for the taxable year in which the qualified targeted
urban area property is placed in service.
‘‘(b) LIMITATION.—The amount allowed as a deduc-
tion under subsection (a) to any taxpayer for any taxable
year with respect to any targeted urban area shall not ex-
ceed the expense treatment amount allocated to the tax-
payer under section 1394 for such taxable year with re-
spect to such targeted urban area.
‘‘(c) QUALIFIED TARGETED URBAN AREA PROP-
ERTY.—For purposes of this section—
‘‘(1) IN
GENERAL.—The term ‘qualified tar-
geted urban area property’ means any property to
which section 168 applies and which is acquired by
purchase if—
‘‘(A) such property is real property located
in a targeted urban area and used by the tax-
payer in the active conduct of a trade or busi-
ness, or
‘‘(B) such property is other tangible prop-
erty substantially all the use of which by the
taxpayer is used in a targeted urban area in the
active conduct of a trade or business.
Determinations of whether an area is a targeted
urban area shall be made as of the time the property
is placed in service.
‘‘(2) TREATMENT
OF
PROPERTY
HELD
FOR
RENT.—The term ‘qualified targeted urban area
property’ shall not include any property with respect
to which the taxpayer is a lessor.
‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—
‘‘(1) PURCHASE AND COST.—The terms ‘pur-
chase’ and ‘cost’ have the respective meanings given
such terms by section 179(d).
‘‘(2) ELECTION.—An election under this sec-
tion—
‘‘(A) shall specify the property to which
the election applies, and
‘‘(B) shall be made on the taxpayer’s re-
turn for the taxable year in which the property
is placed in service.
Any such election, once made, may be revoked only
with the consent of the Secretary.
‘‘(3) RECAPTURE.—The Secretary shall, by reg-
ulations, provide for recapturing the benefit of any
deduction allowable under subsection (a) with re-
spect to any property which ceases to be qualified
targeted urban area property.
‘‘SEC. 1393. DEDUCTION FOR ENTERPRISE ZONE STOCK.
‘‘(a) GENERAL RULE.—There shall be allowed as a
deduction an amount equal to the aggregate amount paid
in cash by the taxpayer during the taxable year for the
purchase of targeted urban area stock.
‘‘(b) LIMITATIONS.—
‘‘(1) CEILING.—
‘‘(A) 
IN
GENERAL.—The 
maximum
amount allowed as a deduction under subsection
(a) to a taxpayer shall not exceed the least of:
‘‘(i) $100,000,
‘‘(ii) the targeted urban area stock
amount allocated under section 1294 to
the taxpayer for the taxable year, or
‘‘(iii) the excess of $500,000 over the
amount allowed as a deduction under this
section to the taxpayer for all prior taxable
years.
‘‘(B) EXCESS
AMOUNTS.—If the amount
otherwise deductible by any person under sub-
section (a) exceeds the limitation under sub-
paragraph (A)—
‘‘(i) the amount of such excess shall
be treated as an amount paid to which
subsection (a) applies during the next tax-
able year, and
‘‘(ii) the deduction allowed for any
taxable year shall be allocated among the
targeted urban area stock purchased by
such person in accordance with the pur-
chase price per share.
‘‘(2) AGGREGATION
RULES.—All persons who
are members of the same family (as defined in sec-
tion 267(c)(4) or who are under common control
shall be treated as one person for purposes of
clauses (i) and (iii) of paragraph (1)(A), and the
limitations contained in such clauses shall be allo-
cated among such persons in accordance with their
respective purchases of targeted urban area stock.
‘‘(c) DISPOSITIONS OF STOCK.—
‘‘(1) GAIN TREATED AS ORDINARY INCOME.—
Except as otherwise provided in regulations, if a tax-
payer disposes of any targeted urban area stock with
respect to which a deduction was allowed under sub-
section (a), the amount realized on such disposi-
tion—
‘‘(A) shall be recognized notwithstanding
any other provision of this subtitle, and
‘‘(B) to the extent such amount does not
exceed the amount allowed as a deduction
under subsection (a) with respect to such stock,
shall be treated as ordinary income.
‘‘(2) INTEREST
CHARGED
IF
DISPOSITION
WITHIN 5 YEARS OF PURCHASE.—
‘‘(A) IN GENERAL.—If a taxpayer disposes
of any targeted urban area stock with respect
to which a deduction was allowed under sub-
section (a) before the end of the 5-year period
beginning on the date such stock was purchased
by the taxpayer, the tax imposed by this chap-
ter for the taxable year in which such disposi-
tion 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 such
stock was disposed of by the taxpayer,
‘‘(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 the stock so
disposed of.
‘‘(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.
‘‘(3) EXCEPTION FOR TRANSFERS AT DEATH.—
This subsection shall not apply to a transfer at
death.
‘‘(d) DISQUALIFICATION.—
‘‘(1) ISSUER OR STOCK CEASES TO QUALIFY.—
If, during the 10-year period beginning on the date
targeted urban area stock was purchased by the tax-
payer—
‘‘(A) the issuer of such stock ceases to be
a qualified issuer (determined without regard to
subsection (f)(1)(C)), or
‘‘(B) the proceeds from the issuance of
such stock fail or otherwise cease to be invested
by the issuer in qualified targeted urban area
property,
then, notwithstanding any provision of this subtitle
other than paragraph (2), the taxpayer shall be
treated for purposes of subsection (c) as disposing of
such stock during the taxable year during which
such cessation or failure occurs at its fair market
value as of 1st day of such taxable year.
‘‘(2) CESSATION
OF
TARGETED
URBAN
AREA
STATUS NOT TO CAUSE RECAPTURE.—A corporation
shall not fail to be treated as a qualified issuer for
purposes of paragraph (1) solely by reason of the
termination or revocation of a tax targeted urban
area designation.
‘‘(e) TARGETED URBAN AREA STOCK.—For purposes
of this section,
‘‘(1) IN GENERAL.—The term ‘targeted urban
area stock’ means stock of a corporation if—
‘‘(A) such stock was acquired on original
issue from the corporation, and
‘‘(B) such corporation was, at the time of
issue, a qualified issuer.
‘‘(2) PROCEEDS MUST BE INVESTED IN QUALI-
FIED
TARGETED
URBAN
AREA
PROPERTY.—Such
term shall include such stock only to the extent that
the amount of proceeds of such issuance are used by
such issuer during the 12-month period beginning on
the date of issuance to acquire qualified targeted
urban area property.
‘‘(3) 
$5,000,000 
LIMIT.—Not 
more 
than
$5,000,000 of stock of such corporation and all re-
lated persons may be targeted urban area stock.
‘‘(f) QUALIFIED ISSUER.—For purposes of this sec-
tion—
‘‘(1) IN GENERAL.—The term ‘qualified issuer’
means any domestic C corporation if—
‘‘(A) such corporation does not have more
than one class of stock,
‘‘(B) such corporation meets the targeted
urban area business requirements of paragraph
(2),
‘‘(C) the sum of—
‘‘(i) the money,
‘‘(ii) the aggregate unadjusted bases
of property owned by such corporation,
and
‘‘(iii) the value of property leased to
the corporation (as determined under regu-
lations prescribed by the Secretary),
does not exceed $5,000,000, and
‘‘(D) more than 20 percent of the total
voting power, and 20 percent of the total value,
of the stock of such corporation is owned by in-
dividuals or estates or indirectly by individuals
through partnerships or trusts.
‘‘(2) TARGETED
URBAN
AREA
BUSINESS
RE-
QUIREMENTS.—
‘‘(A) IN GENERAL.—A corporation meets
the targeted urban area business requirements
of this paragraph for any taxable year if—
‘‘(i) at least 80 percent of the total
gross income of such corporation for the
taxable year is derived from the active con-
duct of a trade or business within a tax
targeted urban area,
‘‘(ii) less than 10 percent of the aver-
age of the aggregate unadjusted bases of
the property of the corporation during
such taxable year is attributable to securi-
ties (as defined in section 165(g)(2)),
‘‘(iii) substantially all of the use of the
tangible 
property 
of 
the 
corporation
(whether owned or leased) is within a tax
targeted urban area,
‘‘(iv) substantially all of the services
performed for the corporation by the em-
ployees of such corporation are performed
in a tax targeted urban area, and
‘‘(v) no more than an insubstantial
portion of the property of the corporation
constitutes collectibles (as defined in sec-
tion 408(m)(2)), unless such collectibles
constitute property held primarily for sale
to customers in the ordinary course of such
trade or business.
‘‘(B) SPECIAL RULES.—
‘‘(i) RENTAL REAL PROPERTY.—For
purposes of subparagraph (A), real prop-
erty located within a tax targeted urban
area and held for use by customers other
than related persons shall be treated as the
active conduct of a trade or business.
‘‘(ii) EXCESSIVE PROPERTY OR SERV-
ICES PROVIDED TO OR BY RELATED PER-
SONS.—A corporation shall cease to meet
the requirements of this paragraph if—
‘‘(I) more than 50 percent (by
value) of the property or services ac-
quired by the corporation during the
taxable year are acquired from related
persons which do not meet the re-
quirements of this paragraph; or
‘‘(II) more than 50 percent of
the gross income of the corporation
for the taxable year is attributable to
property or services provided to relat-
ed persons which do not meet the re-
quirements of this paragraph.
‘‘(iii) NEW
CORPORATIONS.—In the
case of a new corporation, clauses (i) and
(ii) of subparagraph (A) shall not apply to
the 1st taxable year of such corporation.
‘‘(3) QUALIFIED TARGETED URBAN AREA PROP-
ERTY.—The term ‘targeted urban area property’
means property to which section 168 applies—
‘‘(A) the original use of which commences
with the qualified issuer, and
‘‘(B) substantially all of the use of which
is in a tax targeted urban area.
‘‘(4) RELATED
PERSON.—A person shall be
treated as related to another person if—
‘‘(A) the relationship of such persons is de-
scribed in section 267(b) or 707(b)(1), or
‘‘(B) such persons are engaged in trades or
businesses under common control (within the
meaning of subsections (a) and (b) of section
52).
For purposes of subparagraph (A), in applying sec-
tion 267(b) or 707(b)(1), ‘33 percent’ shall be sub-
stituted for ‘50 percent’.
‘‘(g) BASIS ADJUSTMENT.—For purposes of this sub-
title, the taxpayer’s basis (without regard to this sub-
section) for the targeted urban area stock shall be reduced
by the deduction allowed under subsection (a) with respect
to such stock.
‘‘SEC. 1394. OVERALL LIMITATION ON TARGETED URBAN
AREA INCENTIVES.
‘‘(a) GENERAL RULE.—The allocating commission of
each targeted urban area shall make allocations of—
‘‘(1) credit amounts,
‘‘(2) expense treatment amounts, and
‘‘(3) targeted urban area stock deduction
amounts.
‘‘(b) LIMITATION ON AGGREGATE AMOUNTS ALLO-
CATED.—
‘‘(1) LIMITATION.—No amount may be allo-
cated under subsection (a) by the allocating commis-
sion of any tax targeted urban area if such alloca-
tion would result in the targeted urban area limit for
the calendar year of the allocation being reduced
below zero.
‘‘(2) TARGETED URBAN AREA LIMIT.—For pur-
poses of this section—
‘‘(A) BASIC
AMOUNT.—Except as other-
wise provided in this paragraph, the targeted
urban area limit for any tax targeted urban
area for any calendar year shall be determined
in accordance with the following formula:
A
+
X
,
U
‘‘(B) CARRYOVER OF UNUSED AMOUNTS.—
‘‘(i) IN GENERAL.—Before the end of
any calendar year, the allocating commis-
sion of any targeted urban area may
elect—
‘‘(I) to reduce the targeted urban
area limit applicable to such targeted
urban area for such year, and
‘‘(II) to increase the targeted
urban area limit applicable to such
targeted urban area for the succeed-
ing calendar year by an amount equal
to such reduction.
‘‘(ii) LIMITATION.—The increase in a
targeted urban area limit under clause
(i)(II) for any calendar year shall not ex-
ceed 70 percent of the targeted urban area
limit otherwise applicable to the targeted
urban area for such year.
‘‘(C) SPECIAL RULE.—The targeted urban
area limits for any calendar year shall be deter-
mined by the Secretary of Housing and Urban
Development before the beginning of such cal-
endar year on the basis of the most recent data
available.
‘‘(3) DETERMINATION OF TERM ‘A’.—For pur-
poses of paragraph (2), the term ‘A’ means—
‘‘(A) $500,000,000 in the case of calendar
year 1993,
‘‘(B) $1,000,000,000 in the case of cal-
endar year 1994,
‘‘(C) $2,000,000,000 in the case of cal-
endar years 1995, 1996, and 1997, and
‘‘(D) in the case of any following calendar
year, the amount hereafter provided by law.
‘‘(4) DETERMINATION OF TERM ‘U’.—For pur-
poses of paragraph (2), the term ‘U’ means the sum
of the respective terms ‘X’ determined for all quali-
fied cities (as defined in section 7880(c)(2)) under
paragraph (5).
‘‘(5) DETERMINATION OF TERM ‘X’.—For pur-
poses of paragraph (2), the term ‘X’ means the
product of—
‘‘(A) the total population of the city in-
volved, as determined by the Secretary using
the most recent data that is available from the
Secretary of Commerce pursuant to the decen-
nial census and pursuant to reasonable esti-
mates by such Secretary of changes occurring
in the data in the ensuing period;
‘‘(B) the need index of such city, as deter-
mined under paragraph (6); and
‘‘(C) the need adjusted per capita income
factor of such city, as determined under para-
graph (7).
‘‘(6) DETERMINATION OF NEED INDEX.—
‘‘(A) For purposes of paragraph (5)(B),
the term ‘need index’ means the number equal
to the quotient of—
‘‘(i) the term ‘N’, as determined
under subparagraph (B); divided by
‘‘(ii) the term ‘P’, as determined
under subparagraph (C).
‘‘(B) For purposes of subparagraph (A)(i),
the term ‘N’ means the percentage constituted
by the ratio of—
‘‘(i) the amount of funds allotted to
the city in the fiscal year in which the cal-
endar year begins under section 106(a)(3)
of the Housing and Community Develop-
ment Act of 1974; to
‘‘(ii) the sum of the amount of funds
received by all eligible cities in such fiscal
year under section 106(a)(3) of the Hous-
ing and Community Development Act of
1974.
(b) TECHNICAL AMENDMENT.—Subsection (a) of
section 1016 (relating to adjustments to basis) is amended
by striking out ‘‘and’’ at the end of paragraph (23); by
striking out the period at the end of paragraph (24) and
inserting in lieu thereof ‘‘; and’’; and by adding at the
end thereof the following new paragraph:
‘‘(25) to the extent provided in section 1393(g),
in the case of stock with respect to which a deduc-
tion was allowed or allowable under section
1393(a).’’
(c) CLERICAL AMENDMENT.—The table of sub-
chapters for chapter 1 is amended by inserting after the
item relating to subchapter T the following new item:
‘‘SUBCHAPTER U. Targeted Urban Area.’’
SEC. 202. ALTERNATIVE MINIMUM TAX.
Subsection (a) of section 56 (relating to adjustments
applicable to all taxpayers) is amended by adding at the
end thereof the following new paragraph:
‘‘(9) TARGETED URBAN AREA INCENTIVES AL-
LOWED.—The provisions of subchapter U shall
apply, including for purposes of determining ad-
justed current earnings under subsection (g).’’.
SEC. 203. ADJUSTED GROSS INCOME DEFINED.
Section 62(a) (relating to the definition of adjusted
gross income) is amended by inserting after paragraph
(13) the following new paragraph: