I
103D CONGRESS
1ST SESSION
H. R. 508
To amend the Internal Revenue Code of 1986 to provide tax incentives
to encourage corporations to provide financing and management support
services to small business concerns operating in urban areas designated
as enterprise zones.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 21, 1993
Mr. FRANKS of Connecticut introduced the following bill; which was referred
to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
tax incentives to encourage corporations to provide fi-
nancing and management support services to small busi-
ness concerns operating in urban areas designated as
enterprise zones.
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 ‘‘Urban Entrepreneurial
Opportunities Act’’.
SEC. 2. TAX INCENTIVES FOR URBAN ENTREPRENEURIAL
OPPORTUNITY FINANCING SUBSIDIARIES.
(a) GENERAL RULE.—Part VIII of subchapter B of
chapter 1 of the Internal Revenue Code of 1986 (relating
to special deductions for corporations) is amended by add-
ing at the end thereof the following new subpart:
‘‘Subpart B—Tax Incentives for Urban
Entrepreneurial Financing Subsidiaries
‘‘Sec. 251. Deduction for equity contributions to urban entre-
preneurial opportunity financing subsidiaries.
‘‘Sec. 252. Overall limitation on deductions.
‘‘Sec. 253. Definitions and special rules.
‘‘SEC. 251. DEDUCTION FOR EQUITY CONTRIBUTIONS TO
URBAN 
ENTREPRENEURIAL 
OPPORTUNITY
FINANCING SUBSIDIARIES.
‘‘(a) GENERAL RULE.—In the case of a qualified con-
tributing corporation, there shall be allowed as a deduction
an amount equal to the equity contributions made by such
corporation to an urban entrepreneurial opportunity fi-
nancing subsidiary of such corporation. Such deduction
shall be allowed for the taxable year of the contributing
corporation in which the equity contribution is used by the
subsidiary in making qualified enterprise zone business
loans.
‘‘(b) LIMITATION.—The amount allowed as a deduc-
tion under subsection (a) to any qualified contributing cor-
poration for any taxable year shall not exceed the lesser
of—
‘‘(1) $10,000,000, or
‘‘(2) the portion of the program limitation allo-
cated to such corporation under section 252 to the
extent the amount so allocated was not used in a
prior taxable year.
‘‘(c) EQUITY CONTRIBUTION.—For purposes of this
section, the term ‘equity contribution’ means—
‘‘(1) any amount paid in cash for stock in an
urban entrepreneurial opportunity financing subsidi-
ary of the corporation if such stock is acquired at
its original issuance, and
‘‘(2) any contribution in cash to the capital of
an urban entrepreneurial opportunity financing sub-
sidiary of the corporation.
‘‘(d) RECAPTURE PROVISIONS.—
‘‘(1) BASIS ADJUSTMENT.—The adjusted basis
of any stock held by a corporation in an urban en-
trepreneurial opportunity financing subsidiary of
such corporation shall be reduced by the amount al-
lowed as a deduction under subsection (a) in connec-
tion with the acquisition of such stock. No increase
in the basis of any such stock shall be made on ac-
count of any contribution to the capital of such sub-
sidiary for which a deduction is allowed under sub-
section (a).
‘‘(2) ORDINARY
INCOME
RECAPTURE.—Any
gain recognized on the sale or other disposition by
a corporation of stock in an urban entrepreneurial
opportunity financing subsidiary of such corporation
shall be treated as ordinary income.
‘‘(3) CERTAIN EVENTS TREATED AS DISPOSI-
TIONS.—If any urban entrepreneurial opportunity fi-
nancing subsidiary of a corporation ceases to qualify
as an urban entrepreneurial opportunity financing
subsidiary with respect to such corporation, such
corporation shall recognize gain as if it sold its stock
in such subsidiary for an amount equal to its fair
market value immediately before such cessation.
‘‘SEC. 252. OVERALL LIMITATION ON DEDUCTIONS.
‘‘(a) GENERAL RULE.—The Secretary of Housing
and Urban Development shall allocate the program limita-
tion among the qualified contributing corporations submit-
ting applications to such Secretary for allocations under
this section.
‘‘(b) PROGRAM LIMITATION.—The program limita-
tion is $250,000,000.
‘‘(c) METHOD OF MAKING ALLOCATIONS.—The Sec-
retary of Housing and Urban Development shall prescribe
regulations setting forth the procedures for making alloca-
tions under this section. Such procedures shall—
‘‘(1) include the criteria used in selecting the
corporations to which the allocations are made, and
‘‘(2) be designed to ensure a reasonable avail-
ability, on a geographical basis, of the benefits of
this subpart.
‘‘SEC. 253. DEFINITIONS AND SPECIAL RULES.
‘‘(a) QUALIFIED CONTRIBUTING CORPORATION.—
For purposes of this subpart, the term ‘qualified contrib-
uting corporation’ means any domestic corporation which
is not a small business concern; except that such term
shall not include any corporation predominantly engaged
in a banking, insurance, finance, or similar business.
‘‘(b) URBAN ENTREPRENEURIAL OPPORTUNITY FI-
NANCING SUBSIDIARY.—For purposes of this subpart, the
term ‘urban entrepreneurial financing subsidiary’ means
any domestic corporation—
‘‘(1) all the stock of which (exclusive of direc-
tors’ qualifying shares) is held directly by one quali-
fied contributing corporation, and
‘‘(2) all the activities of which consist of—
‘‘(A) making qualified enterprise zone busi-
ness loans,
‘‘(B) providing management, administra-
tive, consulting, and other support services to
qualified small business concerns to which such
corporation has made qualified enterprise zone
business loans, and
‘‘(C) making temporary investments (for a
period not exceeding 6 months) of amounts
being held for purposes of making qualified en-
terprise zone business loans.
‘‘(c) QUALIFIED
ENTERPRISE
ZONE
BUSINESS
LOANS.—For purposes of this subpart, the term ‘qualified
enterprise zone business loan’ means any loan made by
an urban entrepreneurial opportunity financing subsidiary
if—
‘‘(1) such loan is made to a qualified small
business concern and such concern is not related
(within the meaning of section 267(b) or 707(b)) to
such subsidiary or the qualified contributing cor-
poration holding such subsidiary,
‘‘(2) the proceeds of such loan are used by such
qualified small business concern in the active con-
duct of a trade or business in an urban enterprise
zone,
‘‘(3) the urban entrepreneurial opportunity fi-
nancing subsidiary provides (without charge) sub-