138
commercial revitalization credit agency may al-
locate for any calendar year is the amount of
the State commercial revitalization credit ceil-
ing determined under this paragraph for such
calendar year for such agency.
‘‘(B) STATE COMMERCIAL REVITALIZATION
CREDIT CEILING.—
‘‘(i) IN
GENERAL.—The State com-
mercial revitalization credit ceiling applica-
ble to any State for any calendar year is
$2,000,000 for each renewal community in
the State.
‘‘(ii) SPECIAL RULE WHERE COMMU-
NITY LOCATED IN MORE THAN 1 STATE.—
If a renewal community is located in more
than 1 State, a State’s share of the
amount specified in clause (i) with respect
to such community shall be an amount
that bears the same ratio to $2,000,000 as
the population in the State bears to the
population in all States in which such com-
munity is located.
‘‘(iii) OTHER SPECIAL RULES.—Rules
similar to the rules of subparagraphs (D),
139
(E), (F), and (G) of section 42(h)(3) shall
apply for purposes of this subsection.
‘‘(C) COMMERCIAL REVITALIZATION CRED-
IT AGENCY.—For purposes of this section, the
term ‘commercial revitalization credit agency’
means any agency authorized by a State to
carry out this section.
‘‘(f) RESPONSIBILITIES OF COMMERCIAL REVITAL-
IZATION CREDIT AGENCIES.—
‘‘(1) PLANS FOR ALLOCATION.—Notwithstand-
ing any other provision of this section, the commer-
cial revitalization credit amount with respect to any
building shall be zero unless—
‘‘(A) such amount was allocated pursuant
to a qualified allocation plan of the commercial
revitalization credit agency which is approved
(in accordance with rules similar to the rules of
section 147(f)(2) (other than subparagraph
(B)(ii) thereof)) by the governmental unit of
which such agency is a part, and
‘‘(B) such agency notifies the chief execu-
tive officer (or its equivalent) of the local juris-
diction within which the building is located of
such allocation and provides such individual a
140
reasonable opportunity to comment on the allo-
cation.
‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur-
poses of this subsection, the term ‘qualified alloca-
tion plan’ means any plan—
‘‘(A) which sets forth selection criteria to
be used to determine priorities of the commer-
cial revitalization credit agency which are ap-
propriate to local conditions,
‘‘(B) which considers—
‘‘(i) the degree to which a project con-
tributes to the implementation of a strate-
gic plan that is devised for a renewal com-
munity through a citizen participation
process,
‘‘(ii) the amount of any increase in
permanent, full-time employment by reason
of any project, and
‘‘(iii) the active involvement of resi-
dents and nonprofit groups within the re-
newal community, and
‘‘(C) which provides a procedure that the
agency (or its agent) will follow in monitoring
compliance with this section.
141
‘‘(g) TERMINATION.—This section shall not apply to
any building placed in service after December 31, 2002.
‘‘SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.
‘‘(a) GENERAL RULE.—In the case of a renewal com-
munity business (as defined in section 1400G), for pur-
poses of section 179—
‘‘(1) the limitation under section 179(b)(1)
shall be increased by the lesser of—
‘‘(A) $35,000, or
‘‘(B) the cost of section 179 property
which is qualified renewal property placed in
service during the taxable year, and
‘‘(2) the amount taken into account under sec-
tion 179(b)(2) with respect to any section 179 prop-
erty which is qualified renewal property shall be 50
percent of the cost thereof.
‘‘(b) RECAPTURE.—Rules similar to the rules under
section 179(d)(10) shall apply with respect to any quali-
fied renewal property which ceases to be used in a renewal
community by a renewal community business.
‘‘(c) QUALIFIED RENEWAL PROPERTY.—
‘‘(1) GENERAL
RULE.—For purposes of this
section—
‘‘(A) IN
GENERAL.—The term ‘qualified
renewal property’ means any property to which
142
section 168 applies (or would apply but for sec-
tion 179) if—
‘‘(i) such property was acquired by
the taxpayer by purchase (as defined in
section 179(d)(2)) after December 31,
1999, and before January 1, 2007,
‘‘(ii) the original use of which in a re-
newal community commences with the tax-
payer, and
‘‘(iii) substantially all of the use of
which is in a renewal community and is in
the active conduct of a qualified business
(as defined in section 1400G(d)) by the
taxpayer in such renewal community.
‘‘(B) SPECIAL
RULE
FOR
SUBSTANTIAL
RENOVATIONS.—In the case of any property
which is substantially renovated by the tax-
payer, the requirements of clauses (i) and (ii)
of subparagraph (A) shall be treated as satis-
fied. For purposes of the preceding sentence,
property shall be treated as substantially ren-
ovated by the taxpayer only if, during any 24-
month period beginning after the date on which
the designation of the renewal community took
effect, additions to basis with respect to such
143
property in the hands of the taxpayer exceed
the greater of (i) an amount equal to the ad-
justed basis at the beginning of such 24-month
period in the hands of the taxpayer, or (ii)
$5,000.
‘‘(2) SPECIAL RULES FOR SALE-LEASEBACKS.—
For purposes of paragraph (1)(A)(ii), if property is
sold and leased back by the taxpayer within 3
months after the date such property was originally
placed in service, such property shall be treated as
originally placed in service not earlier than the date
on which such property is used under the leaseback.
‘‘SEC. 1400M. EXPENSING OF RENEWAL COMMUNITY ENVI-
RONMENTAL REMEDIATION COSTS.
‘‘(a) TREATMENT AS EXPENSE.—A taxpayer may
elect to treat any renewal community environmental reme-
diation cost as an expense which is not chargeable to cap-
ital account. Any cost so treated shall be allowable as a
deduction for the taxable year in which the cost is paid
or incurred.
‘‘(b) RENEWAL COMMUNITY ENVIRONMENTAL RE-
MEDIATION COST.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘renewal commu-
nity environmental remediation cost’ means any cost
which—
144
‘‘(A) is chargeable to capital account (de-
termined without regard to this section),
‘‘(B) is paid or incurred in connection with
the abatement or control of environmental con-
taminants at a site located within a renewal
community, and
‘‘(C) is certified by the applicable Federal
or State authority as being required by, and in
compliance with, applicable Federal and State
laws governing abatement and control of envi-
ronmental contaminants.
‘‘(2) EXCEPTIONS.—Such term shall not in-
clude any amount paid or incurred—
‘‘(A) for equipment which is used in the
environmental remediation and which is of a
character subject to an allowance for deprecia-
tion or amortization, or
‘‘(B) in connection with a site which is on
the national priorities list under section
105(a)(8)(B) of the Comprehensive Environ-
mental Response, Compensation, and Liability
Act of 1980 (42 U.S.C. 9605(a)(8)(B)).
No deduction shall be allowed under this section for
any amount which is allowed as a deduction under
any other provision of this subtitle.
145
‘‘(c) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) LIMITATION
BASED
ON
INCOME
FROM
TRADE OR BUSINESS.—The amount allowed as a de-
duction under subsection (a) for any taxable year
shall not exceed the aggregate amount of taxable in-
come of the taxpayer for such taxable year which is
derived from the active conduct by the taxpayer of
any trade or business during such taxable year. For
purposes of this paragraph, rules similar to the rules
of subparagraphs (B) and (C) of section 179(b)(3)
shall apply. In the case of a partnership, S corpora-
tion, trust or other pass thru entity, this paragraph
shall be applied at both the entity and owner levels.
‘‘(2) RECAPTURE RULES.—
‘‘(A) PROPERTY NOT USED IN TRADE OR
BUSINESS.—The Secretary shall, by regulations,
provide for recapturing the benefit of any de-
duction allowable under subsection (a) with re-
spect to any property not used predominantly in
a trade or business at any time.
‘‘(B) TREATMENT OF GAIN AS ORDINARY
INCOME.—For purposes of section 1245—
‘‘(i) the deduction allowable under
subsection (a) shall be treated as a deduc-
146
tion allowable to the taxpayer for deprecia-
tion or amortization; and
‘‘(ii) property (other than section
1245 property) to which the deduction
would otherwise have been chargeable shall
be treated as section 1245 property solely
for purposes of applying section 1245 to
such deduction.
‘‘(d) TERMINATION.—This section shall not apply to
any cost paid or incurred after December 31, 2006.’’
SEC. 622. EXTENSION OF WORK OPPORTUNITY TAX CREDIT
FOR RENEWAL COMMUNITIES
(a) EXTENSION.—Subsection (c) of section 51 (relat-
ing to termination) is amended by adding at the end the
following new paragraph:
‘‘(5) EXTENSION
OF
CREDIT
FOR
RENEWAL
COMMUNITIES.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who begins work for the employer after
the date contained in paragraph (4)(B), for
purposes of section 38—
‘‘(i) in lieu of applying subsection (a),
the amount of the work opportunity credit
determined under this section for the tax-
able year shall be equal to—
147
‘‘(I) 15 percent of the qualified
first-year wages for such year, and
‘‘(II) 30 percent of the qualified
second-year wages for such year,
‘‘(ii) subsection (b)(3) shall be applied
by substituting ‘$10,000’ for ‘$6,000’,
‘‘(iii) paragraph (4)(B) shall be ap-
plied by substituting for the date contained
therein the last day for which the designa-
tion under section 1400E of the renewal
community referred to in subparagraph
(B)(i) is in effect, and
‘‘(iv) rules similar to the rules of sec-
tion 51A(b)(5)(C) shall apply.
‘‘(B) QUALIFIED FIRST AND SECOND-YEAR
WAGES.—For purposes of subparagraph (A)—
‘‘(i) IN GENERAL.—The term ‘quali-
fied wages’ means, with respect to each 1-
year period referred to in clause (ii) or
(iii), as the case may be, the wages paid or
incurred by the employer during the tax-
able year to any individual but only if—
‘‘(I) the employer is engaged in a
trade or business in a renewal com-
munity throughout such 1-year period,
148
‘‘(II) the individual is a resident
of such renewal community through-
out such 1-year period, and
‘‘(III) substantially all of the
services which such individual per-
forms for the employer during such 1-
year period are performed in such re-
newal community.
‘‘(ii) 
QUALIFIED
FIRST-YEAR
WAGES.—The term ‘qualified first-year
wages’ means, with respect to any individ-
ual, qualified wages attributable to service
rendered during the 1-year period begin-
ning with the day the individual begins
work for the employer.
‘‘(iii) 
QUALIFIED
SECOND-YEAR
WAGES.—The term ‘qualified second-year
wages’ means, with respect to any individ-
ual, qualified wages attributable to service
rendered during the 1-year period begin-
ning on the day after the last day of the
1-year period with respect to such individ-
ual determined under clause (ii).’’
149
(b) CONGRUENT TREATMENT OF RENEWAL COMMU-
NITIES
AND ENTERPRISE ZONES
FOR PURPOSES
OF
YOUTH RESIDENCE REQUIREMENTS.—
(1) HIGH-RISK YOUTH.—Subparagraphs (A)(ii)
and (B) of section 51(d)(5) are each amended by
striking ‘‘empowerment zone or enterprise commu-
nity’’ and inserting ‘‘empowerment zone, enterprise
community, or renewal community’’.
(2) QUALIFIED SUMMER YOUTH EMPLOYEE.—
Clause (iv) of section 51(d)(7)(A) is amended by
striking ‘‘empowerment zone or enterprise commu-
nity’’ and inserting ‘‘empowerment zone, enterprise
community, or renewal community’’.
(3) HEADINGS.—Paragraphs (5)(B) and (7)(C)
of section 51(d) are each amended by inserting ‘‘OR
COMMUNITY’’ in the heading after ‘‘ZONE’’.
SEC. 623. CONFORMING AND CLERICAL AMENDMENTS.
(a) DEDUCTION FOR CONTRIBUTIONS TO FAMILY
DEVELOPMENT ACCOUNTS ALLOWABLE WHETHER
OR
NOT TAXPAYER ITEMIZES.—Subsection (a) of section 62
(relating to adjusted gross income defined) is amended by
inserting after paragraph (17) the following new para-
graph:
‘‘(18) FAMILY DEVELOPMENT ACCOUNTS.—The
deduction allowed by section 1400H(a)(1)(A).’’
150
(b) TAX ON EXCESS CONTRIBUTIONS.—
(1) TAX IMPOSED.—Subsection (a) of section
4973 is amended by striking ‘‘or’’ at the end of
paragraph (3), adding ‘‘or’’ at the end of paragraph
(4), and inserting after paragraph (4) the following
new paragraph:
‘‘(5) a family development account (within the
meaning of section 1400H(e)),’’.
(2) EXCESS CONTRIBUTIONS.—Section 4973 is
amended by adding at the end the following new
subsection:
‘‘(g) FAMILY DEVELOPMENT ACCOUNTS.—For pur-
poses of this section, in the case of a family development
account, the term ‘excess contributions’ means the sum
of—
‘‘(1) the excess (if any) of—
‘‘(A) the amount contributed for the tax-
able year to the account (other than a qualified
rollover, as defined in section 1400H(c)(7), or
a contribution under section 1400I), over
‘‘(B) the amount allowable as a deduction
under section 1400H for such contributions,
and
151
‘‘(2) the amount determined under this sub-
section for the preceding taxable year reduced by the
sum of—
‘‘(A) the distributions out of the account
for the taxable year which were included in the
gross income of the payee under section
1400H(b)(1),
‘‘(B) the distributions out of the account
for the taxable year to which rules similar to
the rules of section 408(d)(5) apply by reason
of section 1400H(b)(3), and
‘‘(C) the excess (if any) of the maximum
amount allowable as a deduction under section
1400H for the taxable year over the amount
contributed to the account for the taxable year
(other than a contribution under section
1400I).
For purposes of this subsection, any contribution which
is distributed from the family development account in a
distribution to which rules similar to the rules of section
408(d)(4) apply by reason of section 1400H(b)(3) shall
be treated as an amount not contributed.’’
(c) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 is amended—
152
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(6) SPECIAL
RULE
FOR
FAMILY
DEVELOP-
MENT ACCOUNTS.—An individual for whose benefit a
family development account is established and any
contributor to such account shall be exempt from the
tax imposed by this section with respect to any
transaction concerning such account (which would
otherwise be taxable under this section) if, with re-
spect to such transaction, the account ceases to be
a family development account by reason of the appli-
cation of section 1400H(d)(2) to such account.’’,
and
(2) in subsection (e)(1), by striking ‘‘or’’ at the
end of subparagraph (E), by redesignating subpara-
graph (F) as subparagraph (G), and by inserting
after subparagraph (E) the following new subpara-
graph:
‘‘(F) a family development account de-
scribed in section 1400H(e), or’’.
(d) INFORMATION RELATING TO CERTAIN TRUSTS
AND ANNUITY PLANS.—Subsection (c) of section 6047 is
amended—
(1) by inserting ‘‘or section 1400H’’ after ‘‘sec-
tion 219’’, and
153
(2) by inserting ‘‘, of any family development
account described in section 1400H(e),’’, after ‘‘sec-
tion 408(a)’’.
(e) INSPECTION OF APPLICATIONS FOR TAX EXEMP-
TION.—Clause (i) of section 6104(a)(1)(B) is amended by
inserting ‘‘a family development account described in sec-
tion 1400H(e),’’ after ‘‘section 408(a),’’.
(f) FAILURE TO PROVIDE REPORTS ON FAMILY DE-
VELOPMENT
ACCOUNTS.—Paragraph (2) of section
6693(a) is amended by striking ‘‘and’’ at the end of sub-
paragraph (C), by striking the period and inserting
‘‘, and’’ at the end of subparagraph (D), and by adding
at the end the following new subparagraph:
‘‘(E) section 1400H(g)(7) (relating to fam-
ily development accounts).’’
(g) CONFORMING AMENDMENTS REGARDING COM-
MERCIAL REVITALIZATION CREDIT.—
(1) Section 46 (relating to investment credit) is
amended by striking ‘‘and’’ at the end of paragraph
(2), by striking the period at the end of paragraph
(3) and inserting ‘‘, and’’, and by adding at the end
the following new paragraph:
‘‘(4) the commercial revitalization credit pro-
vided under section 1400K.’’