used for 1 or more redevelopment purposes (as
defined in section 144(c)) in a tax enterprise
zone, and
‘‘(B) during the 60-month period begin-
ning on the date of the designation of such
zone.’’
(c) PENALTIES FOR LOANS MADE TO BUSINESSES
THAT CEASE TO BE ENTERPRISE ZONE BUSINESSES,
ETC.—Subsection (b) of section 150 is amended by adding
at the end thereof the following new paragraph:
‘‘(6) 
ENTERPRISE
ZONE
REDEVELOPMENT
BONDS.—In the case of any financing provided by
an issue the interest on which is exempt from tax by
reason of section 144(c)(9)—
‘‘(A) IN GENERAL.—No deduction shall be
allowed under this chapter for interest on such
financing which accrues during the period be-
ginning on the first day of the calendar year
which includes the date on which—
‘‘(i) the trade or business to which the
financing was provided ceases to be an en-
terprise zone business (as defined in sec-
tion 1397B), or
‘‘(ii) substantially all of the use of the
property (determined in accordance with
subchapter U) with respect to which the fi-
nancing was provided ceases to be in a tax
enterprise zone.
The preceding sentence shall not apply solely by
reason of the termination or revocation of a tax
enterprise zone designation.
‘‘(B) EXCEPTION FOR BANKRUPTCY.—This
paragraph shall not apply to any cessation re-
sulting from bankruptcy.’’
SEC. 5. TECHNICAL AND CONFORMING AMENDMENTS.
(a) ENTERPRISE ZONE EMPLOYMENT CREDIT PART
OF GENERAL BUSINESS CREDIT.—
(1) Subsection (b) of section 38 (relating to
current year business credit) is amended by striking
‘‘plus’’ at the end of paragraph (7), by striking the
period at the end of paragraph (8) and inserting ‘‘,
plus’’, and by adding at the end the following new
paragraph:
‘‘(9) the enterprise zone employment credit de-
termined under section 1394(a).’’
(2) Subsection (d) of section 39 is amended by
adding at the end thereof the following new para-
graph:
‘‘(4) NO CARRYBACK OF SECTION 1394 CREDIT
BEFORE
ENACTMENT.—No portion of the unused
business credit for any taxable year which is attrib-
utable to the enterprise zone employment credit de-
termined under section 1394 may be carried to a
taxable year ending before the date of the enactment
of section 1394.’’
(b) NONITEMIZERS ALLOWED DEDUCTION FOR EN-
TERPRISE ZONE STOCK.—Subsection (a) of section 62 is
amended by inserting after paragraph (14) the following
new paragraph:
‘‘(15) ENTERPRISE ZONE STOCK.—The deduc-
tion allowed by section 1396.’’
(c) DENIAL OF DEDUCTION FOR PORTION OF WAGES
EQUAL TO ENTERPRISE ZONE EMPLOYMENT CREDIT.—
(1) Subsection (a) of section 280C (relating to
rule for targeted jobs credit) is amended—
(A) by striking ‘‘the amount of the credit
determined for the taxable year under section
51(a)’’ and inserting ‘‘the sum of the credits
determined for the taxable year under sections
51(a) and 1394(a)’’, and
(B) by striking ‘‘TARGETED JOBS CRED-
IT’’ in the subsection heading and inserting
‘‘EMPLOYMENT CREDITS’’.
(2) Subsection (c) of section 196 (relating to
deduction for certain unused business credits) is
amended by striking ‘‘and’’ at the end of paragraph
(4), by striking the period at the end of paragraph
(5) and inserting ‘‘, and’’, and by adding at the end
the following new paragraph:
‘‘(6) the enterprise zone employment credit de-
termined under section 1394(a).’’
(d) OTHER AMENDMENTS.—
(1)(A) Section 172(d)(2) (relating to modifica-
tions with respect to net operating loss deduction) is
amended to read as follows:
‘‘(2) CAPITAL
GAINS
AND
LOSSES
OF
TAX-
PAYERS OTHER THAN CORPORATIONS.—In the case
of a taxpayer other than a corporation—
‘‘(A) the amount deductible on account of
losses from sales or exchanges of capital assets
shall not exceed the amount includable on ac-
count of gains from sales or exchanges of cap-
ital assets; and
‘‘(B) the exclusion provided by section
1397 shall not be allowed.’’
(B) Subparagraph (B) of section 172(d)(4) is
amended by inserting ‘‘, (2)(B),’’ after ‘‘paragraph
(1)’’.
(2) Subsection (c) of section 381 (relating to
carryovers in certain corporate acquisitions) is
amended by adding at the end the following new
paragraph:
‘‘(26) ENTERPRISE
ZONE
PROVISIONS.—The
acquiring corporation shall take into account (to the
extent proper to carry out the purposes of this sec-
tion and subchapter U, and under such regulations
as may be prescribed by the Secretary) the items re-
quired to be taken into account for purposes of sub-
chapter U in respect of the distributor or transferor
corporation.’’
(3) Paragraph (4) of section 642(c) is amended
to read as follows:
‘‘(4) ADJUSTMENTS.—To the extent that the
amount otherwise allowable as a deduction under
this subsection consists of gain described in section
1397(a), proper adjustment shall be made for any
exclusion allowable to the estate or trust under sec-
tion 1397. In the case of a trust, the deduction al-
lowed by this subsection shall be subject to section
681 (relating to unrelated business income).’’
(4) Paragraph (3) of section 643(a) is amended
by adding at the end thereof the following new sen-
tence: ‘‘The exclusion under section 1397 shall not
be taken into account.’’
(5) Paragraph (4) of section 691(c) is amended
by striking ‘‘1201, and 1211’’ and inserting ‘‘1201,
1397, and 1211’’.
(6) The second sentence of paragraph (2) of
section 871(a) is amended by inserting ‘‘such gains
and losses shall be determined without regard to sec-
tion 1397 and’’ after ‘‘except that’’.
(7) Paragraph (1) of section 1371(d) (relating
to coordination with investment credit recapture) is
amended by inserting before the period at the end
the 
following 
‘‘and 
for 
purposes 
of 
section
1394(d)(3)’’.
(8) Subsection (a) of section 1016 (relating to
adjustments to basis) is amended by striking ‘‘and’’
at the end of paragraph (25), by striking the period
at the end of paragraph (26) and inserting a semi-
colon, and by adding at the end thereof the following
new paragraphs:
‘‘(27) in the case of stock with respect to which
a deduction was allowed under section 1396(a), to
the extent provided in section 1396(e); and
‘‘(28) in the case of property the acquisition of
which resulted under section 1397A in the non-
recognition of any part of the gain realized on the