I 
109TH CONGRESS 
1ST SESSION H. R. 3987 
To amend the Internal Revenue Code of 1986 to provide tax incentives 
for Hurricane Katrina recovery in the Gulf Opportunity Zone. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 6, 2005 
Mr. JINDAL 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 for Hurricane Katrina recovery in the 
Gulf Opportunity Zone. 
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 ‘‘Katrina Economic Op-
portunity Act’’. 
SEC. 2. TAX BENEFITS FOR GULF OPPORTUNITY ZONE. 
(a) IN GENERAL.—Subchapter Y of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at 
the end the following new section:
‘‘SEC. 1400M. TAX BENEFITS FOR GULF OPPORTUNITY 
ZONE. 
‘‘(a) ZERO PERCENT CAPITAL GAINS RATE.— 
‘‘(1) EXCLUSION.—Gross income shall not in-
clude qualified capital gain from the sale or ex-
change of any Gulf Opportunity Zone asset held for 
more than 5 years. 
‘‘(2) GULF OPPORTUNITY ZONE.—For purposes 
of this subsection, the term ‘Gulf Opportunity Zone 
asset’ means— 
‘‘(A) any Gulf Opportunity Zone business 
stock, 
‘‘(B) any Gulf Opportunity Zone partner-
ship interest, and 
‘‘(C) any Gulf Opportunity Zone business 
property. 
‘‘(3) GULF
OPPORTUNITY
ZONE
BUSINESS 
STOCK.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘Gulf Op-
portunity Zone business stock’ means any stock 
in a domestic corporation which is originally 
issued after August 28, 2005, if— 
‘‘(i) such stock is acquired by the tax-
payer, before January 1, 2007, at its origi-
nal issue (directly or through an under-
writer) solely in exchange for cash,
‘‘(ii) as of the time such stock was 
issued, such corporation was a Gulf Oppor-
tunity Zone business (or, in the case of a 
new corporation, such corporation was 
being organized for purposes of being a 
Gulf Opportunity Zone business), and 
‘‘(iii) during substantially all of the 
taxpayer’s holding period for such stock, 
such corporation qualified as a Gulf Op-
portunity Zone business. 
‘‘(B) REDEMPTIONS.—A rule similar to 
the rule of section 1202(c)(3) shall apply for 
purposes of this paragraph. 
‘‘(4) GULF OPPORTUNITY ZONE PARTNERSHIP 
INTEREST.—For purposes of this subsection, the 
term ‘Gulf Opportunity Zone partnership interest’ 
means any capital or profits interest in a domestic 
partnership which is originally issued after August 
28, 2005, if— 
‘‘(A) such interest is acquired by the tax-
payer, before January 1, 2007, from the part-
nership solely in exchange for cash, 
‘‘(B) as of the time such interest was ac-
quired, such partnership was a Gulf Oppor-
tunity Zone business (or, in the case of a new
partnership, such partnership was being orga-
nized for purposes of being a Gulf Opportunity 
Zone business), and 
‘‘(C) during substantially all of the tax-
payer’s holding period for such interest, such 
partnership qualified as a Gulf Opportunity 
Zone business. 
A rule similar to the rule of subparagraph (B)(ii) 
shall apply for purposes of this paragraph. 
‘‘(5) GULF
OPPORTUNITY
ZONE
BUSINESS 
PROPERTY.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘Gulf Op-
portunity Zone business property’ means tan-
gible property if— 
‘‘(i) such property was acquired by 
the taxpayer by purchase (as defined in 
section 179(d)(2)) after August 28, 2005, 
and before January 1, 2007, 
‘‘(ii) the original use of such property 
in the Gulf Opportunity Zone commences 
with the taxpayer, and 
‘‘(iii) during substantially all of the 
taxpayer’s holding period for such prop-
erty, substantially all of the use of such
property was in a Gulf Opportunity Zone 
business of the taxpayer. 
‘‘(B) SPECIAL
RULE
FOR
BUILDINGS 
WHICH ARE SUBSTANTIALLY IMPROVED.— 
‘‘(i) IN GENERAL.—The requirements 
of clauses (i) and (ii) of subparagraph (A) 
shall be treated as met with respect to— 
‘‘(I) property which is substan-
tially improved by the taxpayer before 
January 1, 2007, and 
‘‘(II) any land on which such 
property is located. 
‘‘(ii) SUBSTANTIAL IMPROVEMENT.— 
For purposes of clause (i), property shall 
be treated as substantially improved by the 
taxpayer only if, during any 24-month pe-
riod beginning after August 28, 2005, ad-
ditions to basis with respect to such prop-
erty in the hands of the taxpayer exceed 
the greater of— 
‘‘(I) an amount equal to the ad-
justed basis of such property at the 
beginning of such 24-month period in 
the hands of the taxpayer, or 
‘‘(II) $5,000.
‘‘(6) GULF
OPPORTUNITY
ZONE
BUSINESS.— 
For purposes of this subsection, the term ‘Gulf Op-
portunity Zone business’ means any corporation, 
partnership, or business which would be an enter-
prise zone business (as defined in section 1397C) if 
such section were applied by substituting ‘Gulf Op-
portunity Zone’ for ‘empowerment zone’ each place 
it appears. 
‘‘(7) SPECIAL RULES RELATED TO GULF OP-
PORTUNITY
ZONE
ASSETS.—For purposes of this 
subsection— 
‘‘(A) TREATMENT OF SUBSEQUENT PUR-
CHASERS, ETC.—For purposes of this sub-
section, the term ‘Gulf Opportunity Zone asset’ 
includes any property which would be a Gulf 
Opportunity Zone asset but for paragraph 
(3)(A)(i), (4)(A), or (5)(A)(i) or (ii) in the 
hands of the taxpayer if such property was a 
Gulf Opportunity Zone asset in the hands of a 
prior holder. 
‘‘(B) 5-YEAR SAFE HARBOR.—If any prop-
erty ceases to be a Gulf Opportunity Zone asset 
by reason of paragraph (3)(A)(iii), (4)(C), or 
(5)(A)(iii) after the 5-year period beginning on 
the date the taxpayer acquired such property,
such property shall continue to be treated as 
meeting the requirements of such paragraph; 
except that the amount of gain to which para-
graph (1) applies on any sale or exchange of 
such property shall not exceed the amount 
which would be qualified capital gain had such 
property been sold on the date of such ces-
sation. 
‘‘(8) QUALIFIED CAPITAL GAIN.—For purposes 
of this subsection— 
‘‘(A) IN GENERAL.—Except as otherwise 
provided in this paragraph, the term ‘qualified 
capital gain’ means any gain recognized on the 
sale or exchange of— 
‘‘(i) a capital asset, or 
‘‘(ii) property used in the trade or 
business (as defined in section 1231(b). 
‘‘(B) GAIN BEFORE HURRICANE OR AFTER 
2011 NOT QUALIFIED.—The term ‘qualified cap-
ital gain’ shall not include any gain attributable 
to periods before August 29, 2005, or after De-
cember 31, 2011. 
‘‘(C) CERTAIN
ORDINARY
INCOME
GAIN 
NOT
QUALIFIED.—The term ‘qualified capital 
gain’ shall not include any gain which would be
treated as ordinary income under section 1245 
or under section 1250 if section 1250 applied to 
all depreciation rather than the additional de-
preciation. 
‘‘(D) INTANGIBLES AND LAND NOT INTE-
GRAL PART OF GULF OPPORTUNITY ZONE BUSI-
NESS.—The term ‘qualified capital gain’ shall 
not include any gain which is attributable to 
real property, or an intangible asset, which is 
not an integral part of a Gulf Opportunity Zone 
business. 
‘‘(E) RELATED
PARTY
TRANSACTIONS.— 
The term ‘qualified capital gain’ shall not in-
clude any gain attributable, directly or indi-
rectly, in whole or in part, to a transaction with 
a related person. For purposes of this subpara-
graph, persons are related to each other if such 
persons are described in section 267(b) or 
707(b)(1). 
‘‘(9) CERTAIN OTHER RULES TO APPLY.—Rules 
similar to the rules of subsections (g), (h), (i)(2), 
and (j) of section 1202 shall apply for purposes of 
this subsection. 
‘‘(10) SALES AND EXCHANGES OF INTERESTS 
IN PARTNERSHIPS AND S CORPORATIONS WHICH ARE
GULF
OPPORTUNITY
ZONE
BUSINESSES.—In the 
case of the sale or exchange of an interest in a part-
nership, or of stock in an S corporation, which was 
a Gulf Opportunity Zone business during substan-
tially all of the period the taxpayer held such inter-
est or stock, the amount of qualified capital gain 
shall be determined without regard to— 
‘‘(A) any gain which is attributable to real 
property, or an intangible asset, which is not an 
integral part of a Gulf Opportunity Zone busi-
ness, and 
‘‘(B) any gain attributable to periods be-
fore August 29, 2005, or after December 31, 
2011. 
‘‘(b) INCREASE AND EXPANSION OF EXPENSING OF 
BUSINESS PROPERTY.— 
‘‘(1) WAIVER OF DOLLAR LIMITATIONS.—The 
limitations of paragraphs (1) and (2) of section 
179(b) shall not apply to Gulf Opportunity Zone 
property and shall be applied to other property with-
out regard to Gulf Opportunity Zone property. 
‘‘(2) INCLUSION OF REAL PROPERTY, ETC.— 
Gulf Opportunity Zone property shall be treated as 
section 179 property (as defined in section 179(d))
without regard to the limitation of subparagraph (B) 
of section 179(d)(1). 
‘‘(3) GULF OPPORTUNITY ZONE PROPERTY.— 
The term ‘Gulf Opportunity Zone property’ means 
any property— 
‘‘(A) placed in service by the taxpayer dur-
ing the period beginning on August 28, 2005, 
and ending on December 31, 2007, in the Gulf 
Opportunity Zone, and 
‘‘(B) substantially all of the use of which 
is in such Zone and is in the active conduct of 
a trade or business by the taxpayer in such 
Zone. 
‘‘(4) RECAPTURE.—Rules similar to the rules 
under section 170(d)(10) shall apply with respect to 
any Gulf Opportunity Zone property which ceases to 
be used in the Gulf Opportunity Zone. 
‘‘(c) APPLICATION OF NEW MARKETS TAX CRED-
IT.— 
‘‘(1) IN GENERAL.—The Gulf Opportunity Zone 
shall be treated as a low-income community for pur-
poses of section 45D. 
‘‘(2) COORDINATION WITH NATIONAL LIMITA-
TION.—
‘‘(A) IN
GENERAL.—Any credit allowed 
under section 45D by reason of paragraph (1) 
shall not be taken into account under section 
45D(f). 
‘‘(B) SEPARATE LIMITATION.—There is a 
limitation on the aggregate credits allowed 
under section 45D by reason of paragraph (1). 
Such limitation is— 
‘‘(i) $32,200,000 for 2005, 
‘‘(ii) $56,300,000 for 2006, and 
‘‘(iii) $56,300,000 for 2007. 
‘‘(C) ALLOCATION
OF
LIMITATION.—The 
limitation under subparagraph (B) shall be allo-
cated by the Secretary among those qualified 
community development entities (as defined in 
section 45D(c)) with respect to the Gulf Oppor-
tunity Zone which are selected by the Secretary. 
In making allocations under the preceding sen-
tence, the Secretary shall give priority to enti-
ties described in subparagraph (A) or (B) of 
section 45D(f)(2). 
‘‘(D) CARRYOVER
OF
UNUSED
LIMITA-
TION.—The rules of paragraph (3) of section 
45D(f) shall apply for purposes of this para-
graph.
‘‘(d) GULF OPPORTUNITY ZONE.—For purposes of 
this section, the term ‘Gulf Opportunity Zone’ means an 
area determined by the President to warrant individual 
or individual and public assistance from the Federal Gov-
ernment under the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act by reason of Hurricane 
Katrina.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) The heading for subchapter Y of chapter 1 
of such Code is amended to read as follows: 
‘‘Subchapter Y—Temporary Regional 
Benefits’’. 
(2) The table of sections for such subchapter is 
amended by adding at the end the following new 
item: 
‘‘Sec. 1400M. Tax benefits for Gulf Opportunity Zone.’’. 
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