taxpayer held such interest. A rule similar to the
rule of paragraph (2)(C) shall apply for purposes of
the preceding sentence.
‘‘(2) INCOME INCLUSIONS.—
‘‘(A) IN GENERAL.—Any amount included
in income by reason of holding an interest in a
pass-thru entity (other than an entity which
was a qualified area business during substan-
tially all of the period the taxpayer held the in-
terest to which such inclusion relates) shall be
treated as gain on a qualified area investment
if such amount meets the requirements of sub-
paragraph (B).
‘‘(B) REQUIREMENTS.—An amount meets
the requirements of this subparagraph if—
‘‘(i) such amount is attributable to
long-term capital gain recognized on the
sale or exchange by the pass-thru entity of
property which is a qualified area invest-
ment asset in the hands of such entity and
which was held by such entity for more
than 5 years, and
‘‘(ii) such amount is includible in the
gross income of the taxpayer by reason of
the holding of an interest in such entity
which was held by the taxpayer on the date
on which such pass-thru entity acquired
such asset and at all times thereafter be-
fore the disposition of such asset by such
pass-thru entity.
‘‘(C) LIMITATION
BASED
ON
INTEREST
ORIGINALLY
HELD
BY
TAXPAYER.—Subpara-
graph (A) shall not apply to any amount to the
extent such amount exceeds the amount to
which subparagraph (A) would have applied if
such amount were determined by reference to
the interest the taxpayer held in the pass-thru
entity on the date the qualified area asset was
acquired.
‘‘(3) PASS-THRU ENTITY.—For purposes of this
subsection, the term ‘pass-thru entity’ means—
‘‘(A) any partnership,
‘‘(B) any S corporation,
‘‘(C) any regulated investment company,
and
‘‘(D) any common trust fund.
‘‘(f) SALES
AND EXCHANGES
OF INTERESTS
IN
PARTNERSHIPS
AND
S CORPORATIONS
WHICH
ARE
QUALIFIED AREA BUSINESSES.—In the case of the sale
or exchange of an interest in a partnership, or of stock
in an S corporation, which was a qualified area business
during substantially all of the period the taxpayer held
such interest or stock, the amount of long-term capital
gain shall be determined without regard to—
‘‘(1) any intangible, and any land, which is not
an integral part of any qualified business, and
‘‘(2) gain attributable to periods before the des-
ignation of an area as an economic recovery area.
‘‘(g) CERTAIN
TAX-FREE
AND
OTHER
TRANS-
FERS.—For purposes of this section—
‘‘(1) IN GENERAL.—In the case of a transfer of
a qualified area investment to which this subsection
applies, the transferee shall be treated as—
‘‘(A) having acquired such investment in
the same manner as the transferor, and
‘‘(B) having held such investment during
any continuous period immediately preceding
the transfer during which it was held (or treat-
ed as held under this subsection) by the trans-
feror.
‘‘(2) TRANSFERS TO WHICH SUBSECTION AP-
PLIES.—This subsection shall apply to any trans-
fer—
‘‘(A) by gift,
‘‘(B) at death, or
‘‘(C) from a partnership to a partner
thereof of a qualified area investment with re-
spect to which the requirements of subsection
(e)(2) are met at the time of the transfer (with-
out regard to the 5-year holding requirement).
‘‘(3) CERTAIN
RULES
MADE
APPLICABLE.—
Rules similar to the rules of section 1244(d)(2) shall
apply for purposes of this section.
‘‘SEC. 1399F. OTHER INCENTIVES.
‘‘(a) EXPENSING OF EQUIPMENT AND LEASEHOLD
IMPROVEMENTS.—
‘‘(1) IN GENERAL.—In the case of a qualified
area business (as defined in section 1399E(d)), for
purposes of section 179—
‘‘(A) the limitations of paragraphs (1) and
(2) of section 179(b) shall not apply to section
179 property which is qualified area property
placed in service during the taxable year, and
‘‘(B) leasehold improvements placed in
service by the lessor in an economic recovery
area shall be treated as section 179 property
for purposes of subparagraph (A) and section
179.
‘‘(2) RECAPTURE.—Rules similar to the rules
under section 179(d)(10) shall apply with respect to
any qualified area property which ceases to be used
in an economic recovery area by a qualified area
business.
‘‘(3) QUALIFIED
AREA
PROPERTY.—For pur-
poses of this subsection, the term ‘qualified area
property’ means any property which would be quali-
fied zone property as defined in section 1397C, if
‘economic recovery area’ were substituted for
‘empowerment zone’ each place it appears.
‘‘(b) PASSIVE LOSS RULES NOT TO APPLY TO REHA-
BILITATION
OF HISTORIC STRUCTURES.—Section 469
shall not apply to so much of the rehabilitation credit de-
termined under section 47 as is attributable to certified
historic structures (as defined in section 47(c)(3)) located
in an economic recovery area.
‘‘(c) DOUBLE
DEDUCTION
FOR
SECURITY
DE-
VICES.—The amount of any deduction otherwise allowable
under section 162 for any security expenses shall be in-
creased by 100 percent of such amount.’’
(b) REDUCTION IN CAPITAL GAINS RATES.—
(1) 
TAXPAYERS
OTHER
THAN
CORPORA-
TIONS.—Subsection (h) of section 1 of such Code
(relating to maximum capital gains rate) is amended
to read as follows:
‘‘(h) MAXIMUM CAPITAL GAINS RATE.—