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poses of this title (other than subsection (b)(2) of this
section) be treated as a credit allowed to the taxpayer
under subpart C.’’.
(2) CONFORMING AMENDMENTS.—Subsection (k)
of section 168 is amended by adding at the end the
following new paragraph:
‘‘(5) CROSS
REFERENCE.—For an election to
claim certain minimum tax credits in lieu of the al-
lowance determined under this subsection, see section
53(e).’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years ending
after December 31, 2003.
(b) USE OF GENERAL BUSINESS CREDITS AGAINST
ALTERNATIVE MINIMUM TAX.—
(1) IN GENERAL.—Section 38(c) (relating to lim-
itations based on amount of tax) is amended by redes-
ignating paragraph (4) as paragraph (5) and by in-
serting after paragraph (3) the following new para-
graph:
‘‘(4) SPECIAL RULE FOR 2004.—Notwithstanding
the preceding provisions of this paragraph, in the
case of any taxable year beginning in 2004, the credit
allowed under subsection (a) shall not exceed the
greater of—
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‘‘(A) the amount determined under this sub-
section without regard to this paragraph, or
‘‘(B) 50 percent of the lesser of—
‘‘(i) the amount which would be deter-
mined under this subsection if the tentative
minimum tax were treated as being zero in
applying paragraph (1) to such credit, or
‘‘(ii) the amount of the current year
business credit.’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning in 2004.
Subtitle D—Expansion of Business
Credit
SEC. 631. NEW MARKETS TAX CREDIT FOR NATIVE AMER-
ICAN RESERVATIONS.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business related credits) is
amended by redesignating sections 45E and 45F as sections
45F and 45G, respectively, and by inserting after section
45D the following new section:
‘‘SEC. 45E. NEW MARKETS TAX CREDIT FOR NATIVE AMER-
ICAN RESERVATIONS.
‘‘(a) ALLOWANCE OF CREDIT.—
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‘‘(1) IN GENERAL.—For purposes of section 38,
in the case of a taxpayer who holds a qualified equity
investment on a credit allowance date of such invest-
ment which occurs during the taxable year, the Native
American new markets tax credit determined under
this section for such taxable year is an amount equal
to the applicable percentage of the amount paid to the
reservation development entity for such investment at
its original issue.
‘‘(2) APPLICABLE
PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage is—
‘‘(A) 5 percent with respect to the first 3
credit allowance dates, and
‘‘(B) 6 percent with respect to the remain-
der of the credit allowance dates.
‘‘(3) CREDIT ALLOWANCE DATE.—For purposes
of paragraph (1), the term ‘credit allowance date’
means, 
with 
respect 
to 
any 
qualified 
equity
investment—
‘‘(A) the date on which such investment is
initially made, and
‘‘(B) each of the 6 anniversary dates of such
date thereafter.
‘‘(b) QUALIFIED EQUITY INVESTMENT.—For purposes
of this section—
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‘‘(1) IN GENERAL.—The term ‘qualified equity
investment’ means any equity investment in a res-
ervation development entity if—
‘‘(A) such investment is acquired by the tax-
payer at its original issue (directly or through
an underwriter) solely in exchange for cash,
‘‘(B) substantially all of such cash is used
by the reservation development entity to make
qualified low-income reservation investments,
and
‘‘(C) such investment is designated for pur-
poses of this section by the reservation develop-
ment entity.
Such term shall not include any equity investment
issued by a reservation development entity more than
5 years after the date that such entity receives an al-
location under subsection (f ). Any allocation not used
within such 5-year period may be reallocated by the
Secretary under subsection (f ).
‘‘(2) LIMITATION.—The maximum amount of eq-
uity investments issued by a reservation development
entity which may be designated under paragraph
(1)(C) by such entity shall not exceed the portion of
the limitation amount allocated under subsection (f )
to such entity.
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‘‘(3) SAFE HARBOR FOR DETERMINING USE OF
CASH.—The requirement of paragraph (1)(B) shall be
treated as met if at least 85 percent of the aggregate
gross assets of the reservation development entity are
invested in qualified low-income reservation invest-
ments.
‘‘(4) 
TREATMENT
OF
SUBSEQUENT
PUR-
CHASERS.—The term ‘qualified equity investment’ in-
cludes any equity investment which would (but for
paragraph (1)(A)) be a qualified equity investment in
the hands of the taxpayer if such investment was a
qualified equity investment in the hands of a prior
holder.
‘‘(5) REDEMPTIONS.—A rule similar to the rule
of section 1202(c)(3) shall apply for purposes of this
subsection.
‘‘(6) EQUITY INVESTMENT.—The term ‘equity in-
vestment’ means—
‘‘(A) any stock (other than nonqualified
preferred stock as defined in section 351(g)(2))
in an entity which is a corporation, and
‘‘(B) any capital interest in an entity
which is a partnership.
‘‘(c) RESERVATION DEVELOPMENT ENTITY.—For pur-
poses of this section—
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‘‘(1) IN GENERAL.—The term ‘reservation devel-
opment entity’ means any domestic corporation or
partnership if—
‘‘(A) the primary mission of the entity is
serving, or providing investment capital for, low-
income reservations,
‘‘(B) the entity maintains accountability to
residents of low-income reservations through
their representation on any governing board of
the entity or on any advisory board to the enti-
ty, and
‘‘(C) the entity is certified by the Secretary
for purposes of this section as being a reservation
development entity.
‘‘(2) EXCEPTION.—For purposes of subparagraph
(C) of paragraph (1), the Secretary shall not certify
an entity as a reservation development entity if such
entity is also certified as a qualified community de-
velopment entity under section 45D(c).
‘‘(d) QUALIFIED LOW-INCOME RESERVATION INVEST-
MENTS.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified low-in-
come reservation investment’ means—
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‘‘(A) any capital or equity investment in,
or loan to, any qualified active low-income res-
ervation business,
‘‘(B) the purchase from another reservation
development entity of any loan made by such en-
tity which is a qualified low-income reservation
investment,
‘‘(C) financial counseling and other services
specified in regulations prescribed by the Sec-
retary to businesses located in, and residents of,
low-income reservations, and
‘‘(D) any equity investment in, or loan to,
any reservation development entity.
‘‘(2) QUALIFIED ACTIVE LOW-INCOME RESERVA-
TION BUSINESS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘qualified active low-income
reservation business’ means, with respect to any
taxable year, any corporation (including a non-
profit corporation) or partnership if for such
year—
‘‘(i) at least 50 percent of the total
gross income of such entity is derived from
the active conduct of a qualified business
within any low-income reservation,
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‘‘(ii) a substantial portion of the use of
the tangible property of such entity (wheth-
er owned or leased) is within any low-in-
come reservation,
‘‘(iii) a substantial portion of the serv-
ices performed for such entity by its em-
ployees are performed in any low-income
reservation,
‘‘(iv) less than 5 percent of the average
of the aggregate unadjusted bases of the
property of such entity is attributable to
collectibles (as defined in section 408(m)(2))
other than collectibles that are held pri-
marily for sale to customers in the ordinary
course of such business, and
‘‘(v) less than 5 percent of the average
of the aggregate unadjusted bases of the
property of such entity is attributable to
nonqualified financial property (as defined
in section 1397C(e)).
‘‘(B) PROPRIETORSHIP.—Such term shall
include any business carried on by an indi-
vidual as a proprietor if such business would
meet the requirements of subparagraph (A) were
it incorporated.
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‘‘(C) PORTIONS
OF
BUSINESS
MAY
BE
QUALIFIED
ACTIVE
LOW-INCOME
RESERVATION
BUSINESS.—The term ‘qualified active low-in-
come reservation business’ includes any trades or
businesses which would qualify as a qualified ac-
tive low-income reservation business if such
trades or businesses were separately incor-
porated.
‘‘(3) QUALIFIED
BUSINESS.—For purposes of
this subsection, the term ‘qualified business’ has the
meaning given to such term by section 45D(d)(3).
‘‘(e) LOW-INCOME RESERVATION.—For purposes of
this section, the term ‘low-income reservation’ means any
Indian reservation (as defined in section 168(j)(6)) which
has a poverty rate of at least 40 percent.
‘‘(f ) NATIONAL LIMITATION ON AMOUNT OF INVEST-
MENTS DESIGNATED.—
‘‘(1) IN GENERAL.—There is a Native American
new markets tax credit limitation of $50,000,000 for
each of calendar years 2004 through 2007.
‘‘(2) ALLOCATION OF LIMITATION.—The limita-
tion under paragraph (1) shall be allocated by the
Secretary among reservation development entities se-
lected by the Secretary. In making allocations under
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the preceding sentence, the Secretary shall give pri-
ority to any entity—
‘‘(A) with a record of having successfully
provided capital or technical assistance to dis-
advantaged businesses or communities, or
‘‘(B) which intends to satisfy the require-
ment under subsection (b)(1)(B) by making
qualified low-income reservation investments in
1 or more businesses in which persons unrelated
to such entity (within the meaning of section
267(b) or 707(b)(1)) hold the majority equity in-
terest.
‘‘(3) CARRYOVER
OF
UNUSED
LIMITATION.—If
the Native American new markets tax credit limita-
tion for any calendar year exceeds the aggregate
amount allocated under paragraph (2) for such year,
such limitation for the succeeding calendar year shall
be increased by the amount of such excess. No amount
may be carried under the preceding sentence to any
calendar year after 2014.
‘‘(g) RECAPTURE OF CREDIT IN CERTAIN CASES.—
‘‘(1) IN GENERAL.—If, at any time during the 7-
year period beginning on the date of the original
issue of a qualified equity investment in a reservation
development entity, there is a recapture event with re-
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spect to such investment, then the tax imposed by this
chapter for the taxable year in which such event oc-
curs shall be increased by the credit recapture
amount.
‘‘(2) CREDIT
RECAPTURE
AMOUNT.—For pur-
poses of paragraph (1), the credit recapture amount
is an amount equal to the sum of—
‘‘(A) the aggregate decrease in the credits
allowed to the taxpayer under section 38 for all
prior taxable years which would have resulted if
no credit had been determined under this section
with respect to such investment, plus
‘‘(B) interest at the underpayment rate es-
tablished under section 6621 on the amount de-
termined under subparagraph (A) for each prior
taxable year for the period beginning on the due
date for filing the return for the prior taxable
year involved.
No deduction shall be allowed under this chapter for
interest described in subparagraph (B).
‘‘(3) RECAPTURE EVENT.—For purposes of para-
graph (1), there is a recapture event with respect to
an equity investment in a reservation development
entity if—
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‘‘(A) such entity ceases to be a reservation
development entity,
‘‘(B) the proceeds of the investment cease to
be used as required of subsection (b)(1)(B), or
‘‘(C) such investment is redeemed by such
entity.
‘‘(4) SPECIAL RULES.—
‘‘(A) TAX BENEFIT RULE.—The tax for the
taxable year shall be increased under paragraph
(1) only with respect to credits allowed by reason
of this section which were used to reduce tax li-
ability. In the case of credits not so used to re-
duce tax liability, the carryforwards and
carrybacks under section 39 shall be appro-
priately adjusted.
‘‘(B) NO CREDITS AGAINST TAX.—Any in-
crease in tax under this subsection shall not be
treated as a tax imposed by this chapter for pur-
poses of determining the amount of any credit
under this chapter or for purposes of section 55.
‘‘(h) BASIS REDUCTION.—The basis of any qualified
equity investment shall be reduced by the amount of any
credit determined under this section with respect to such
investment. This subsection shall not apply for purposes of
sections 1202, 1400B, and 1400F.
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‘‘(i) REGULATIONS.—The Secretary shall prescribe
such regulations as may be appropriate to carry out this
section, including regulations—
‘‘(1) which limit the credit for investments which
are directly or indirectly subsidized by other Federal
tax benefits (including the credit under section 42
and the exclusion from gross income under section
103),
‘‘(2) which prevent the abuse of the purposes of
this section,
‘‘(3) which provide rules for determining whether
the requirement of subsection (b)(1)(B) is treated as
met,
‘‘(4) which impose appropriate reporting re-
quirements, and
‘‘(5) which apply the provisions of this section to
newly formed entities.’’.
(b) CREDIT MADE PART
OF GENERAL BUSINESS
CREDIT.—
(1) IN GENERAL.—Subsection (b) of section 38 is
amended by redesignating paragraphs (14) and (15)
as paragraphs (15) and (16), respectively, and by in-
serting after paragraph (13) the following new para-
graph:
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‘‘(14) the Native American new markets tax
credit determined under section 45E(a),’’.
(2) LIMITATION ON CARRYBACK.—Subsection (d)
of section 39 is amended by redesignating paragraph
(10) as paragraph (11) and by inserting after para-
graph (9) the following new paragraph:
‘‘(10) NO CARRYBACK OF NATIVE AMERICAN NEW
MARKETS TAX CREDIT BEFORE JANUARY 1, 2004.—No
portion of the unused business credit for any taxable
year which is attributable to the credit under section
45E may be carried back to a taxable year ending be-
fore January 1, 2004.’’.
(c) DEDUCTION FOR UNUSED CREDIT.—Subsection (c)
of section 196 is amended by redesignating paragraph (10)
as paragraph (11), by striking ‘‘and’’ at the end of para-
graph (9), and by inserting after paragraph (9) the fol-
lowing new paragraph:
‘‘(10) the Native American new markets tax
credit determined under section 45E(a), and’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 38(b)(15), as redesignated by sub-
section (b)(1), is amended—
(A) by striking ‘‘45E(c)’’ and inserting
‘‘45F(c)’’, and
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(B) by striking ‘‘45E(a)’’ and inserting
‘‘45F(a)’’.
(2) Section 38(b)(16), as redesignated by sub-
section (b)(1), is amended by striking ‘‘45F(a)’’ and
inserting ‘‘45G(a)’’.
(3) Section 39(d)(11), as redesignated by sub-
section (b)(2), is amended by striking ‘‘section 45E’’
and inserting ‘‘section 45F’’.
(4) Section 196(c)(11), as redesignated by sub-
section (c), is amended by striking ‘‘45E(a)’’ and in-
serting ‘‘45F(a)’’.
(5) Section 1016(a)(28) is amended—
(A) by striking ‘‘under section 45F’’ and in-
serting ‘‘under section 45G’’, and
(B) by striking ‘‘section 45F(f)(1)’’ and in-
serting ‘‘section 45G(f)(1)’’.
(e) CLERICAL AMENDMENT.—The table of sections for
subpart D of part IV of subchapter A of chapter 1 is amend-
ed by striking the items relating to sections 45E and 45F
and inserting the following:
‘‘Sec. 45E. New markets tax credit for Native American reserva-
tions.
‘‘Sec. 45F. Small employer pension plan startup costs.
‘‘Sec. 45G. Employer-provided child care credit.’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to investments made after December 31,
2003.
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(f ) GUIDANCE ON ALLOCATION OF NATIONAL LIMITA-
TION.—Not later than 120 days after the date of the enact-
ment of this Act, the Secretary of the Treasury or the Sec-
retary’s delegate shall issue guidance which specifies—
(1) how entities shall apply for an allocation
under section 45E(f )(2) of the Internal Revenue Code
of 1986, as added by this section;
(2) the competitive procedure through which such
allocations are made; and
(3) the actions that such Secretary or delegate
shall take to ensure that such allocations are properly
made to appropriate entities.
(g) AUDIT AND REPORT.—Not later than January 31
of 2007 and 2010, the Comptroller General of the United
States shall, pursuant to an audit of the Native American
new markets tax credit program established under section
45E of the Internal Revenue Code of 1986 (as added by
subsection (a)), report to Congress on such program, includ-
ing all reservation development entities that receive an allo-
cation under the Native American new markets credit under
such section.
(h) GRANTS IN COORDINATION WITH CREDIT.—
(1) IN GENERAL.—The Secretary of the Treasury
is authorized to award a grant of not more than
$1,000,000 to the First Nations Oweesta Corporation.
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(2) USE OF FUNDS.—The grant awarded under
paragraph (1) may be used—
(A) to enhance the capacity of people living
on low-income reservations (within the meaning
of section 45E(e) of the Internal Revenue Code of
1986, as added by this section) to access, apply,
control, create, leverage, utilize, and retain the
financial benefits to such low-income reservations
which are attributable to qualified low-income
reservation investments (within the meaning of
section 45E(d) of such Code), and
(B) to provide access to appropriate finan-
cial capital for the development of such low-in-
come reservations.
(3) AUTHORIZATION
OF
APPROPRIATIONS.—
There are authorized to be appropriated $1,000,000
for fiscal years 2004 through 2014 to carry out the
provisions of this subsection.
SEC. 632. READY RESERVE-NATIONAL GUARD EMPLOYEE
CREDIT 
AND 
READY 
RESERVE-NATIONAL
GUARD REPLACEMENT EMPLOYEE CREDIT.
(a) READY RESERVE-NATIONAL GUARD CREDIT.—
(1) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business-related
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‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) QUALIFIED ACTIVE DUTY.—The term ‘quali-
fied active duty’ means—
‘‘(A) active duty, other than the training
duty specified in section 10147 of title 10,
United States Code (relating to training require-
ments for the Ready Reserve), or section 502(a)
of title 32, United States Code (relating to re-
quired drills and field exercises for the National
Guard), in connection with which an employee is
entitled to reemployment rights and other bene-
fits or to a leave of absence from employment
under chapter 43 of title 38, United States Code,
and
‘‘(B) hospitalization incident to such duty.
‘‘(2) COMPENSATION.—The term ‘compensation’
means any remuneration for employment, whether in
cash or in kind, which is paid or incurred by a tax-
payer and which is deductible from the taxpayer’s
gross income under section 162(a)(1).
‘‘(3) READY
RESERVE-NATIONAL
GUARD
EM-
PLOYEE.—The term ‘Ready Reserve-National Guard
employee’ means an employee who is a member of the
Ready Reserve of a reserve component of an Armed
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Force of the United States as described in sections
10142 and 10101 of title 10, United States Code.
‘‘(4) CERTAIN RULES TO APPLY.—Rules similar
to the rules of section 52 shall apply.
‘‘(e) PORTION OF CREDIT REFUNDABLE.—
‘‘(1) IN GENERAL.—In the case of an employer
of a qualified first responder, the aggregate credits al-
lowed to a taxpayer under subpart C shall be in-
creased by the lesser of—
‘‘(A) the credit which would be allowed
under this section without regard to this sub-
section and the limitation under section 38(c), or
‘‘(B) the amount by which the aggregate
amount of credits allowed by this subpart (deter-
mined without regard to this subsection) would
increase if the limitation imposed by section
38(c) for any taxable year were increased by the
amount of employer payroll taxes imposed on the
taxpayer during the calendar year in which the
taxable year begins.
The amount of the credit allowed under this sub-
section shall not be treated as a credit allowed under
this subpart and shall reduce the amount of the credit
otherwise allowable under subsection (a) without re-
gard to section 38(c).
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‘‘(2) EMPLOYER PAYROLL TAXES.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘employer
payroll taxes’ means the taxes imposed by—
‘‘(i) section 3111(b), and
‘‘(ii) sections 3211(a) and 3221(a) (de-
termined at a rate equal to the rate under
section 3111(b)).
‘‘(B) SPECIAL RULE.—A rule similar to the
rule of section 24(d)(2)(C) shall apply for pur-
poses of subparagraph (A).
‘‘(3) QUALIFIED FIRST RESPONDER.—For pur-
poses of this subsection, the term ‘qualified first re-
sponder’ means any person who is—
‘‘(A) employed as a law enforcement offi-
cial, a firefighter, or a paramedic, and
‘‘(B) a Ready Reserve-National Guard em-
ployee.’’.
(2) CREDIT TO BE PART OF GENERAL BUSINESS
CREDIT.—Subsection (b) of section 38 (relating to
general business credit), as amended by this Act, is
amended by striking ‘‘plus’’ at the end of paragraph
(15), by striking the period at the end of paragraph
(16) and inserting ‘‘, plus’’, and by adding at the end
the following:
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‘‘(17) the Ready Reserve-National Guard em-
ployee credit determined under section 45H(a).’’.
(3) DENIAL
OF
DOUBLE
BENEFIT.—Section
280C(a) (relating to rule for employment credits) is
amended by inserting ‘‘45H(a),’’ after ‘‘45A(a),’’.
(4) CONFORMING AMENDMENT.—The table of sec-
tions for subpart D of part IV of subchapter A of
chapter 1, as amended by this Act, is amended by in-
serting after the item relating to section 45G the fol-
lowing:
‘‘Sec. 45H. Ready Reserve-National Guard employee credit.’’.
(5) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to amounts paid or in-
curred after September 30, 2004, in taxable years
ending after such date.
(b) READY RESERVE-NATIONAL GUARD REPLACEMENT
EMPLOYEE CREDIT.—
(1) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 (relating to foreign tax credit,
etc.), as amended by this Act, is amended by adding
after section 30C the following new section:
‘‘SEC. 30D. READY RESERVE-NATIONAL GUARD REPLACE-
MENT EMPLOYEE CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—In the case of an eligible tax-
payer, there shall be allowed as a credit against the
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tax imposed by this chapter for the taxable year the
sum of the employment credits for each qualified re-
placement employee under this section.
‘‘(2) EMPLOYMENT
CREDIT.—The employment
credit with respect to a qualified replacement em-
ployee of the taxpayer for any taxable year is equal
to 50 percent of the lesser of—
‘‘(A) the individual’s qualified compensa-
tion attributable to service rendered as a quali-
fied replacement employee, or
‘‘(B) $12,000.
‘‘(b) QUALIFIED COMPENSATION.—The term ‘qualified
compensation’ means—
‘‘(1) compensation which is normally contingent
on the qualified replacement employee’s presence for
work and which is deductible from the taxpayer’s
gross income under section 162(a)(1),
‘‘(2) compensation which is not characterized by
the taxpayer as vacation or holiday pay, or as sick
leave or pay, or as any other form of pay for a non-
specific leave of absence, and
‘‘(3) group health plan costs (if any) with respect
to the qualified replacement employee.
‘‘(c) QUALIFIED REPLACEMENT EMPLOYEE.—For pur-
poses of this section—
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‘‘(1) IN GENERAL.—The term ‘qualified replace-
ment employee’ means an individual who is hired to
replace a Ready Reserve-National Guard employee or
a Ready Reserve-National Guard self-employed tax-
payer, but only with respect to the period during
which such Ready Reserve-National Guard employee
or Ready Reserve-National Guard self-employed tax-
payer participates in qualified active duty, including
time spent in travel status.
‘‘(2) READY
RESERVE-NATIONAL
GUARD
EM-
PLOYEE.—The term ‘Ready Reserve-National Guard
employee’ has the meaning given such term by section
45H(d)(3).
‘‘(3) READY
RESERVE-NATIONAL
GUARD
SELF-
EMPLOYED TAXPAYER.—The term ‘Ready Reserve-Na-
tional Guard self-employed taxpayer’ means a tax-
payer who—
‘‘(A) has net earnings from self-employment
(as defined in section 1402(a)) for the taxable
year, and
‘‘(B) is a member of the Ready Reserve of
a reserve component of an Armed Force of the
United States as described in section 10142 and
10101 of title 10, United States Code.
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‘‘(d) COORDINATION WITH OTHER CREDITS.—The
amount of credit otherwise allowable under sections 51(a)
and 1396(a) with respect to any employee shall be reduced
by the credit allowed by this section with respect to such
employee.
‘‘(e) LIMITATIONS.—
‘‘(1) APPLICATION WITH OTHER CREDITS.—The
credit allowed under subsection (a) for any taxable
year shall not exceed the excess (if any) of—
‘‘(A) the regular tax for the taxable year re-
duced by the sum of the credits allowable under
subpart A and sections 27, 29, and 30, over
‘‘(B) the tentative minimum tax for the tax-
able year.
‘‘(2) DISALLOWANCE FOR FAILURE TO COMPLY
WITH EMPLOYMENT OR REEMPLOYMENT RIGHTS OF
MEMBERS OF THE RESERVE COMPONENTS OF THE
ARMED FORCES OF THE UNITED STATES.—No credit
shall be allowed under subsection (a) to a taxpayer
for—
‘‘(A) any taxable year, beginning after the
date of the enactment of this section, in which
the taxpayer is under a final order, judgment, or
other process issued or required by a district
court of the United States under section 4323 of
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title 38 of the United States Code with respect to
a violation of chapter 43 of such title, and
‘‘(B) the 2 succeeding taxable years.
‘‘(f) GENERAL DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) ELIGIBLE
TAXPAYER.—The term ‘eligible
taxpayer’ means a small business employer or a
Ready Reserve-National Guard self-employed tax-
payer.
‘‘(2) SMALL BUSINESS EMPLOYER.—
‘‘(A) IN GENERAL.—The term ‘small busi-
ness employer’ means, with respect to any tax-
able year, any employer who employed an aver-
age of 50 or fewer employees on business days
during such taxable year.
‘‘(B) CONTROLLED GROUPS.—For purposes
of subparagraph (A), all persons treated as a
single employer under subsection (b), (c), (m), or
(o) of section 414 shall be treated as a single em-
ployer.
‘‘(3) QUALIFIED ACTIVE DUTY.—The term ‘quali-
fied active duty’ has the meaning given such term by
section 45H(d)(1).
‘‘(4) SPECIAL
RULES
FOR
CERTAIN
MANUFAC-
TURERS.—
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‘‘(A) IN
GENERAL.—In the case of any
qualified manufacturer—
‘‘(i) subsection (a)(2)(B) shall be ap-
plied by substituting ‘$20,000’ for ‘$12,000’,
and
‘‘(ii) paragraph (2)(A) of this sub-
section shall be applied by substituting ‘100’
for ‘50’.
‘‘(B) 
QUALIFIED
MANUFACTURER.—For
purposes of this paragraph, the term ‘qualified
manufacturer’ means any person if—
‘‘(i) the primary business of such per-
son is classified in sector 31, 32, or 33 of
the North American Industrial Classifica-
tion System, and
‘‘(ii) all of such person’s facilities
which are used for production in such busi-
ness are located in the United States.
‘‘(5) 
CARRYBACK
AND
CARRYFORWARD
AL-
LOWED.—
‘‘(A) IN GENERAL.—If the credit allowable
under subsection (a) for a taxable year exceeds
the amount of the limitation under subsection
(e)(1) for such taxable year (in this paragraph
referred to as the ‘unused credit year’), such ex-
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cess shall be a credit carryback to each of the 3
taxable years preceding the unused credit year
and a credit carryforward to each of the 20 tax-
able years following the unused credit year.
‘‘(B) RULES.—Rules similar to the rules of
section 39 shall apply with respect to the credit
carryback and credit carryforward under sub-
paragraph (A).
‘‘(6) CERTAIN RULES TO APPLY.—Rules similar
to the rules of subsections (c), (d), and (e) of section
52 shall apply.’’.
(2) NO DEDUCTION FOR COMPENSATION TAKEN
INTO ACCOUNT FOR CREDIT.—Section 280C(a) (relat-
ing to rule for employment credits), as amended by
this Act, is amended—
(A) by inserting ‘‘or compensation’’ after
‘‘salaries’’, and
(B) by inserting ‘‘30D,’’ before ‘‘45A(a),’’.
(3) 
CONFORMING
AMENDMENT.—Section
55(c)(2), as amended by this Act, is amended by in-
serting ‘‘30D(e)(1),’’ after ‘‘30C(e),’’.
(4) CLERICAL AMENDMENT.—The table of sec-
tions for subpart B of part IV of subchapter A of
chapter 1, as amended by this Act, is amended by
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adding after the item relating to section 30C the fol-
lowing new item:
‘‘Sec. 30D. Credit for replacement of activated military reservists.’’.
(5) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to amounts paid or in-
curred after September 30, 2004, in taxable years
ending after such date.
(c) APPLICATION
OF
ANNUAL
EXCLUSION
LIMIT
UNDER SECTION 911 TO HOUSING COSTS.—
(1) IN
GENERAL.—Section 911(c) (relating to
housing cost amount) is amended by adding at the
end the following new paragraph:
‘‘(4) LIMIT ON EXCLUSION FOR EMPLOYER PRO-
VIDED HOUSING COSTS.—The housing cost amount for
any individual for any taxable year attributable to
employer provided amounts shall not exceed the excess
(if any) of—
‘‘(A) the product of—
‘‘(i) the exclusion amount determined
under subsection (b)(2)(D) for the taxable
year, and
‘‘(ii) a fraction equal to the number of
days of the taxable year within the applica-
ble period described in subparagraph (A) or
(B) of subsection (d)(1) divided by the num-
ber of days in the taxable year, over
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‘‘(B) the foreign earned income of the indi-
vidual excluded under subsection (a)(1) for the
taxable year.’’
(2) 
CONFORMING
AMENDMENT.—Section
911(c)(1) is amended by striking ‘‘The’’ and inserting
‘‘Except as provided in paragraph (4), the’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 2003.
SEC. 633. RURAL INVESTMENT TAX CREDIT.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business related credits) is
amended by adding at the end the following:
‘‘SEC. 42A. RURAL INVESTMENT CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 38, the
amount of the rural investment credit determined under
this section for any taxable year in the credit period shall
be an amount equal to the applicable percentage of the eligi-
ble basis of each qualified rural investment building.
‘‘(b) 
APPLICABLE
PERCENTAGE: 
PERCENT
PRESENT VALUE CREDIT FOR NEW BUILDINGS; 30 PER-
CENT PRESENT VALUE CREDIT
FOR EXISTING BUILD-
INGS.—For purposes of this section—
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‘‘(1) IN
GENERAL.—The term ‘applicable per-
centage’ means the appropriate percentage prescribed
by the Secretary for the earlier of—
‘‘(A) the first month of the credit period
with respect to a rural investment building, or
‘‘(B) at the election of the taxpayer, the
month in which the taxpayer and the rural in-
vestment credit agency enter into an agreement
with respect to such building (which is binding
on such agency, the taxpayer, and all successors
in interest) as to the rural investment credit dol-
lar amount to be allocated to such building.
A month may be elected under subparagraph (B) only
if the election is made not later than the 5th day after
the close of such month. Such an election, once made,
shall be irrevocable.
‘‘(2) METHOD OF PRESCRIBING PERCENTAGES.—
The percentages prescribed by the Secretary for any
month shall be percentages which will yield over a 10-
year period amounts of credit under subsection (a)
which have a present value equal to—
‘‘(A) 70 percent of the eligible basis of a
new building, and
‘‘(B) 30 percent of the eligible basis of an
existing building.
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‘‘(3) METHOD
OF
DISCOUNTING.—The present
value under paragraph (2) shall be determined—
‘‘(A) as of the last day of the 1st year of the
10-year period referred to in paragraph (2),
‘‘(B) by using a discount rate equal to 72
percent of the average of the annual Federal
mid-term rate and the annual Federal long-term
rate applicable under section 1274(d)(1) to the
month applicable under subparagraph (A) or (B)
of paragraph (1) and compounded annually, and
‘‘(C) by assuming that the credit allowable
under this section for any year is received on the
last day of such year.
‘‘(c) ELIGIBLE BASIS; QUALIFIED RURAL INVESTMENT
BUILDING.—For purposes of this section—
‘‘(1) ELIGIBLE BASIS.—
‘‘(A) IN
GENERAL.—The eligible basis of
any qualified rural investment building for any
taxable year shall be determined under rules
similar to the rules under section 42(d), except
that—
‘‘(i) the determination of the adjusted
basis of any building shall be made as of
the beginning of the credit period, and
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‘‘(ii) such basis shall include develop-
ment costs properly attributable to such
building.
‘‘(B) DEVELOPMENT COSTS.—For purposes
of subparagraph (A)(ii), the term ‘development
costs’ includes—
‘‘(i) site preparation costs,
‘‘(ii) State and local impact fees,
‘‘(iii) reasonable development costs,
‘‘(iv) professional fees related to basis
items,
‘‘(v) construction financing costs re-
lated to basis items other than land, and
‘‘(vi) on-site and adjacent improve-
ments required by State and local govern-
ments.
‘‘(2) QUALIFIED
RURAL
INVESTMENT
BUILD-
ING.—The term ‘qualified rural investment building’
means any building which is part of a qualified rural
investment project at all times during the period—
‘‘(A) beginning on the 1st day in the com-
pliance period on which such building is part of
such an investment project, and
‘‘(B) ending on the last day of the compli-
ance period with respect to such building.
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‘‘(d) REHABILITATION EXPENDITURES TREATED AS
SEPARATE NEW BUILDING.—Rehabilitation expenditures
paid or incurred by the taxpayer with respect to any build-
ing shall be treated for purposes of this section as a separate
new building under the rules of section 42(e).
‘‘(e) DEFINITION AND SPECIAL RULES RELATING TO
CREDIT PERIOD.—
‘‘(1) CREDIT PERIOD DEFINED.—For purposes of
this section, the term ‘credit period’ means, with re-
spect to any building, the period of 10 taxable years
beginning with the taxable year in which the building
is first placed in service.
‘‘(2) SPECIAL RULE FOR 1ST YEAR OF CREDIT
PERIOD.—
‘‘(A) IN
GENERAL.—The credit allowable
under subsection (a) with respect to any building
for the 1st taxable year of the credit period shall
be determined by multiplying such credit by the
fraction—
‘‘(i) the numerator of which is the
number of full months of such year during
which such building was in service, and
‘‘(ii) the denominator of which is 12.
‘‘(B) DISALLOWED
1ST
YEAR
CREDIT
AL-
LOWED IN 11TH YEAR.—Any reduction by reason
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of subparagraph (A) in the credit allowable
(without regard to subparagraph (A)) for the 1st
taxable year of the credit period shall be allow-
able under subsection (a) for the 1st taxable year
following the credit period.
‘‘(3) CREDIT PERIOD FOR EXISTING BUILDINGS
NOT TO BEGIN BEFORE REHABILITATION CREDIT AL-
LOWED.—The credit period for an existing building
shall not begin before the 1st taxable year of the credit
period for rehabilitation expenditures with respect to
the building.
‘‘(f) QUALIFIED RURAL INVESTMENT PROJECT; QUALI-
FYING COUNTY.—For purposes of this section—
‘‘(1) QUALIFIED RURAL INVESTMENT PROJECT.—
The term ‘qualified rural investment project’ means
any investment project of 1 or more qualified rural
investment buildings located in a qualifying county
(and, if necessary to the project, any contiguous coun-
ty) and selected by the State according to its qualified
rural investment plan.
‘‘(2) QUALIFYING COUNTY.—The term ‘qualifying
county’ means any county which—
‘‘(A) is outside a metropolitan statistical
area (defined as such by the Office of Manage-
ment and Budget), and
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‘‘(B) during the 20-year period ending with
the year in which the most recent census was
conducted, has a net out-migration of inhab-
itants from the county of at least 10 percent of
the population of the county at the beginning of
such period.
‘‘(g) LIMITATION ON AGGREGATE CREDIT ALLOWABLE
WITH RESPECT TO INVESTMENT PROJECTS LOCATED IN A
STATE.—
‘‘(1) CREDIT MAY NOT EXCEED CREDIT AMOUNT
ALLOCATED TO BUILDING.—The amount of the credit
determined under this section for any taxable year
with respect to any building shall not exceed the rural
investment credit dollar amount allocated to such
building under rules similar to the rules of section
42(h)(1).
‘‘(2) ALLOCATED CREDIT AMOUNT TO APPLY TO
ALL
TAXABLE
YEARS
ENDING
DURING
OR
AFTER
CREDIT
ALLOCATION
YEAR.—Any rural investment
credit dollar amount allocated to any building for
any calendar year—
‘‘(A) shall apply to such building for all
taxable years in the credit period ending during
or after such calendar year, and
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‘‘(B) shall reduce the aggregate rural invest-
ment credit dollar amount of the allocating agen-
cy only for such calendar year.
‘‘(3) 
RURAL
INVESTMENT
CREDIT
DOLLAR
AMOUNT FOR AGENCIES.—
‘‘(A) IN GENERAL.—The aggregate rural in-
vestment credit dollar amount which a rural in-
vestment credit agency may allocate for any cal-
endar year is the portion of the State rural in-
vestment credit ceiling allocated under this para-
graph for such calendar year to such agency.
‘‘(B) STATE CEILING INITIALLY ALLOCATED
TO
STATE
RURAL
INVESTMENT
CREDIT
AGEN-
CIES.—Except as provided in subparagraphs (D)
and (E), the State rural investment credit ceil-
ing for each calendar year shall be allocated to
the rural investment credit agency of such State.
If there is more than 1 rural investment credit
agency of a State, all such agencies shall be
treated as a single agency.
‘‘(C) STATE
RURAL
INVESTMENT
CREDIT
CEILING.—The State rural investment credit
ceiling applicable to any State and any calendar
year shall be an amount equal to the sum of—
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‘‘(i) the unused State rural investment
credit ceiling (if any) of such State for the
preceding calendar year,
‘‘(ii) $185,000 for each qualifying
county in the State,
‘‘(iii) the amount of State rural invest-
ment credit ceiling returned in the calendar
year, plus
‘‘(iv) the amount (if any) allocated
under subparagraph (D) to such State by
the Secretary.
For purposes of clause (i), the unused State
rural investment credit ceiling for any calendar
year is the excess (if any) of the sum of the
amounts described in clauses (ii) through (iv)
over the aggregate rural investment credit dollar
amount allocated for such year. For purposes of
clause (iii), the amount of State rural invest-
ment credit ceiling returned in the calendar year
equals the rural investment credit dollar amount
previously allocated within the State to any in-
vestment project which fails to meet the 10 per-
cent test under section 42(h)(1)(E)(ii) on a date
after the close of the calendar year in which the
allocation was made or which does not become a
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qualified rural investment project within the pe-
riod required by this section or the terms of the
allocation or to any investment project with re-
spect to which an allocation is canceled by mu-
tual consent of the rural investment credit agen-
cy and the allocation recipient.
‘‘(D) UNUSED RURAL INVESTMENT CREDIT
CARRYOVERS
ALLOCATED
AMONG
CERTAIN
STATES.—
‘‘(i) IN GENERAL.—The unused rural
investment credit carryover of a State for
any calendar year shall be assigned to the
Secretary for allocation among qualified
States for the succeeding calendar year.
‘‘(ii) UNUSED
RURAL
INVESTMENT
CREDIT CARRYOVER.—For purposes of this
subparagraph, the unused rural investment
credit carryover of a State for any calendar
year is the excess (if any) of the unused
State rural investment credit ceiling for
such year (as defined in subparagraph
(C)(i)) over the excess (if any) of—
‘‘(I) the unused State rural in-
vestment credit ceiling for the year
preceding such year, over
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‘‘(II) the aggregate rural invest-
ment credit dollar amount allocated for
such year.
‘‘(iii) FORMULA FOR ALLOCATION OF
UNUSED
RURAL
INVESTMENT
CREDIT
CARRYOVERS AMONG QUALIFIED STATES.—
The amount allocated under this subpara-
graph to a qualified State for any calendar
year shall be the amount determined by the
Secretary to bear the same ratio to the ag-
gregate unused rural investment credit
carryovers of all States for the preceding
calendar year as such State’s population for
the calendar year bears to the population of
all qualified States for the calendar year.
For purposes of the preceding sentence, pop-
ulation shall be determined in accordance
with section 146(j).
‘‘(iv) QUALIFIED
STATE.—For pur-
poses of this subparagraph, the term ‘quali-
fied State’ means, with respect to a cal-
endar year, any State—
‘‘(I) which allocated its entire
State rural investment credit ceiling
for the preceding calendar year, and
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‘‘(12) Chapter 43 of title 38, United States Code
(relating to employment and reemployment rights of
members of the uniformed services).
‘‘(13) Section 1977, 1979, or 1980 of the Revised
Statutes (42 U.S.C. 1981, 1983, or 1985).
‘‘(14) Section 703, 704, or 717 of the Civil
Rights Act of 1964 (42 U.S.C. 2000e–2, 2000e–3, or
2000e–16).
‘‘(15) Section 804, 805, 806, 808, or 818 of the
Fair Housing Act (42 U.S.C. 3604, 3605, 3606, 3608,
or 3617).
‘‘(16) Section 102, 202, 302, or 503 of the Amer-
icans with Disabilities Act of 1990 (42 U.S.C. 12112,
12132, 12182, or 12203).
‘‘(17) Any provision of Federal law (popularly
known as whistleblower protection provisions) prohib-
iting the discharge of an employee, the discrimination
against an employee, or any other form of retaliation
or reprisal against an employee for asserting rights or
taking other actions permitted under Federal law.
‘‘(18) Any provision of Fderal, State, or local
law, or common law claims permitted under Federal,
State, or local law—
‘‘(i) providing for the enforcement of
civil rights, or
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‘‘(A) is placed in service after December 31,
2004, and before January 1, 2017,
‘‘(B) has a design net heat rate of not more
than 7,720 (8,900 in the case of units placed in
service before 2009, and 8,500 in the case of
units placed in service after 2008 and before
2013), and
‘‘(C) has a net thermal efficiency (HHV)
using coal with fuel or chemical co-production of
not less than 44.2 percent (38.4 percent in the
case of units placed in service before 2009, and
40.2 percent in the case of units placed in service
after 2008 and before 2013).
‘‘(5) ELIGIBLE OTHER TECHNOLOGY UNIT.—The
term ‘eligible other technology unit’ means a clean
coal technology unit using any other technology for
the production of electricity which is placed in service
after December 31, 2004, and before January 1, 2017.
‘‘(6) CARBON EMISSION RATE REQUIREMENTS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), a unit meets the requirements
of this paragraph if—
‘‘(i) in the case of a unit using design
coal with a heat content of not more than
9,000 Btu per pound, the carbon emission