103 
a corporation with respect to which an election is in effect 
under section 1203, the net capital gain for any taxable 
year shall be reduced (but not below zero) by the corpora-
tion’s qualified timber gain (as defined in section 
1203(b)).’’. 
(c) DEDUCTION ALLOWED WHETHER OR NOT INDI-
VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) 
of section 62, as amended by this Act, is amended by in-
serting before the last sentence the following new para-
graph: 
‘‘(22) QUALIFIED TIMBER GAINS.—The deduc-
tion allowed by section 1203.’’. 
(d) DEDUCTION
ALLOWED
IN
COMPUTING
AD-
JUSTED CURRENT EARNINGS.—Subparagraph (C) of sec-
tion 56(g)(4) is amended by adding at the end the fol-
lowing new clause: 
‘‘(vii) DEDUCTION
FOR
QUALIFIED 
TIMBER GAIN.—Clause (i) shall not apply 
to any deduction allowed under section 
1203.’’. 
(e) DEDUCTION ALLOWED IN COMPUTING TAXABLE 
INCOME OF ELECTING SMALL BUSINESS TRUSTS.—Sub-
paragraph (C) of section 641(c)(2) is amended by insert-
ing after clause (iii) the following new clause: 
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‘‘(iv) The deduction allowed under 
section 1203.’’. 
(f) CONFORMING AMENDMENTS.— 
(1) Subparagraph (B) of section 172(d)(2) is 
amended to read as follows: 
‘‘(B) the exclusion under section 1202 and 
the deduction under section 1203 shall not be 
allowed.’’. 
(2) Paragraph (4) of section 642(c) is amended 
by striking the first sentence and inserting the fol-
lowing: ‘‘To the extent that the amount otherwise al-
lowable as a deduction under this subsection consists 
of gain described in section 1202(a) or qualified tim-
ber gain (as defined in section 1203(b)), proper ad-
justment shall be made for any exclusion allowable 
to the estate or trust under section 1202 and for 
any deduction allowable to the estate or trust under 
section 1203.’’. 
(3) Paragraph (3) of section 643(a) is amended 
by striking the last sentence and inserting the fol-
lowing: ‘‘The exclusion under section 1202 and the 
deduction under section 1203 shall not be taken into 
account.’’. 
(4) Subparagraph (C) of section 643(a)(6) is 
amended to read as follows: 
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‘‘(C) Paragraph (3) shall not apply to a 
foreign trust. In the case of such a trust— 
‘‘(i) there shall be included gains from 
the sale or exchange of capital assets, re-
duced by losses from such sales or ex-
changes to the extent such losses do not 
exceed gains from such sales or exchanges, 
and 
‘‘(ii) the deduction under section 1203 
shall not be taken into account.’’. 
(5) Paragraph (4) of section 691(c) is amended 
by inserting ‘‘1203,’’ after ‘‘1202,’’. 
(6) Paragraph (2) of section 871(a) is amended 
by striking ‘‘section 1202’’ and inserting ‘‘sections 
1202 and 1203’’. 
(7) The table of sections for part I of sub-
chapter P of chapter 1 is amended by adding at the 
end the following new item: 
‘‘Sec. 1203. Deduction for qualified timber gain.’’. 
(g) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxable years ending after 
the date of the enactment of this Act. 
(2) TAXABLE YEARS WHICH INCLUDE DATE OF 
ENACTMENT.—In the case of any taxable year which 
includes the date of the enactment of this Act, for 
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106 
purposes of the Internal Revenue Code of 1986, the 
taxpayer’s qualified timber gain shall not exceed the 
excess that would be described in section 1203(b) of 
such Code, as added by this section, if only disposi-
tions of timber after such date were taken into ac-
count. 
SEC. 253. CREDIT TO HOLDERS OF RURAL RENAISSANCE 
BONDS. 
(a) IN GENERAL.—Subpart H of part IV of sub-
chapter A of chapter 1 (relating to credits against tax) 
is amended by adding at the end the following new section: 
‘‘SEC. 54A. CREDIT TO HOLDERS OF RURAL RENAISSANCE 
BONDS. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax-
payer who holds a rural renaissance bond on a credit al-
lowance date of such bond, which occurs during the tax-
able year, there shall be allowed as a credit against the 
tax imposed by this chapter for such taxable year an 
amount equal to the sum of the credits determined under 
subsection (b) with respect to credit allowance dates dur-
ing such year on which the taxpayer holds such bond. 
‘‘(b) AMOUNT OF CREDIT.— 
‘‘(1) IN GENERAL.—The amount of the credit 
determined under this subsection with respect to any 
credit allowance date for a rural renaissance bond is 
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107 
25 percent of the annual credit determined with re-
spect to such bond. 
‘‘(2) ANNUAL CREDIT.—The annual credit de-
termined with respect to any rural renaissance bond 
is the product of— 
‘‘(A) the credit rate determined by the Sec-
retary under paragraph (3) for the day on 
which such bond was sold, multiplied by 
‘‘(B) the outstanding face amount of the 
bond. 
‘‘(3) DETERMINATION.—For purposes of para-
graph (2), with respect to any rural renaissance 
bond, the Secretary shall determine daily or caused 
to be determined daily a credit rate which shall 
apply to the first day on which there is a binding, 
written contract for the sale or exchange of the 
bond. The credit rate for any day is the credit rate 
which the Secretary or the Secretary’s designee esti-
mates will permit the issuance of rural renaissance 
bonds with a specified maturity or redemption date 
without discount and without interest cost to the 
qualified issuer. 
‘‘(4) CREDIT ALLOWANCE DATE.—For purposes 
of this section, the term ‘credit allowance date’ 
means— 
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