‘‘(II) residential rental property; 
or 
‘‘(III) real property which is not 
described in subclause (I) or (II) and 
which has a class life of more than 
12.5 years.
For purposes of this subparagraph, the 
terms ‘nonresidential real property’, ‘resi-
dential rental property’, and ‘class life’ 
have the respective meanings given such 
terms by section 168. 
‘‘(E) NEW
RESERVATION
CONSTRUCTION 
PROPERTY.—The term ‘new reservation con-
struction property’ means qualified real prop-
erty—
‘‘(i) which is located in an Indian res-
ervation; 
‘‘(ii) which is used by the taxpayer 
predominantly in the active conduct of a 
trade or business within an Indian reserva-
tion; and
‘‘(iii) which is originally placed in 
service by the taxpayer. 
‘‘(F) QUALIFIED
REAL
PROPERTY.—The 
term ‘qualified real property’ means property
for which depreciation is allowable under sec-
tion 168 and which is described in subclause 
(I), (II), or (III) of subparagraph (D)(ii). 
‘‘(G) RESERVATION INFRASTRUCTURE IN-
VESTMENT.—
‘‘(i) IN GENERAL.—The term ‘reserva-
tion 
infrastructure 
investment’ 
means 
qualified personal property or qualified real 
property which—
‘‘(I) benefits the tribal infrastruc-
ture; 
‘‘(II) is available to the general 
public; and 
‘‘(III) is placed in service in con-
nection with the taxpayer’s active con-
duct of a trade or business within an 
Indian reservation. 
‘‘(ii) PROPERTY
MAY
BE
LOCATED 
OUTSIDE
THE
RESERVATION.—Qualified 
personal property and qualified real prop-
erty used or located outside an Indian res-
ervation shall be reservation infrastructure 
investment only if its purpose is to connect 
to existing tribal infrastructure in the res-
ervation, and shall include, but not be lim-
ited to, roads, power lines, water systems, 
railroad spurs, and communications facili-
ties. 
‘‘(H) COORDINATION WITH OTHER CRED-
ITS.—The term ‘qualified Indian reservation 
property’ shall not include any property with re-
spect to which the energy credit or the rehabili-
tation credit is allowed. 
‘‘(3) REAL ESTATE RENTALS.—For purposes of 
this section, the rental to others of real property lo-
cated within an Indian reservation shall be treated 
as the active conduct of a trade or business in an 
Indian reservation. 
‘‘(4) INDIAN
RESERVATION
DEFINED.—For 
purposes of this subpart, the term ‘Indian reserva-
tion’ means a reservation, as defined in—
‘‘(A) section 3(d) of the Indian Financing 
Act of 1974 (25 U.S.C. 1452(d)); or 
‘‘(B) section 4(10) of the Indian Child 
Welfare Act of 1978 (25 U.S.C. 1903(10)). 
‘‘(5) 
LIMITATION
BASED
ON
UNEMPLOY-
MENT.—
‘‘(A) GENERAL
RULE.—The Indian res-
ervation credit allowed under section 46 for any 
taxable year shall equal—
‘‘(i) if the Indian unemployment rate 
on the applicable Indian reservation for 
which the credit is sought exceeds 300 per-
cent of the national average unemployment 
rate at any time during the calendar year 
in which the property is placed in service 
or during the immediately preceding 2 cal-
endar years, 100 percent of such credit; 
‘‘(ii) if such Indian unemployment 
rate exceeds 150 percent but not 300 per-
cent, 50 percent of such credit; and 
‘‘(iii) if such Indian unemployment 
rate does not exceed 150 percent, 0 per-
cent of such credit. 
‘‘(B) 
SPECIAL
RULE
FOR
LARGE 
PROJECTS.—In the case of a qualified Indian 
reservation property which has (or is a compo-
nent of a project which has) a projected con-
struction period of more than 2 years or a cost 
of more than $1,000,000, subparagraph (A)
shall be applied by substituting ‘during the ear-
lier of the calendar year in which the taxpayer 
enters into a binding agreement to make a 
qualified investment or the first calendar year 
in which the taxpayer has expended at least 10
percent of the taxpayer’s qualified investment, 
or the preceding calendar year’ for ‘during the 
calendar year in which the property is placed 
in service or during the immediately preceding 
2 calendar years’.
‘‘(C) DETERMINATION OF INDIAN UNEM-
PLOYMENT.—For purposes of this paragraph, 
with respect to any Indian reservation, the In-
dian unemployment rate shall be based upon 
Indians unemployed and able to work, and shall 
be certified by the Secretary of the Interior. 
‘‘(6) 
COORDINATION
WITH
NONREVENUE 
LAWS.—Any reference in this subsection to a provi-
sion not contained in this title shall be treated for 
purposes of this subsection as a reference to such 
provision as in effect on the date of the enactment 
of this paragraph.’’. 
(2) LODGING TO QUALIFY.—Paragraph (2) of 
section 50(b) of such Code (relating to property used 
for lodging) is amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (C); 
(B) by striking the period at the end of 
subparagraph (D) and inserting ‘‘; and’’; and
(C) by adding at the end the following sub-
paragraph: 
‘‘(E) new reservation construction prop-
erty.’’. 
(c) RECAPTURE.—Subsection (a) of section 50 of 
such Code (relating to recapture in case of dispositions, 
etc.), is amended by adding at the end the following new 
paragraph: 
‘‘(6) SPECIAL RULES FOR INDIAN RESERVATION 
PROPERTY.—
‘‘(A) IN GENERAL.—If, during any taxable 
year, property with respect to which the tax-
payer claimed an Indian reservation credit—
‘‘(i) is disposed of; or 
‘‘(ii) in the case of reservation per-
sonal property—
‘‘(I) otherwise ceases to be in-
vestment credit property with respect 
to the taxpayer; or 
‘‘(II) is removed from the Indian 
reservation, converted, or otherwise 
ceases to be Indian reservation prop-
erty,
the tax under this chapter for such taxable year 
shall be increased by the amount described in 
subparagraph (B). 
‘‘(B) AMOUNT
OF
INCREASE.—The in-
crease in tax under subparagraph (A) shall 
equal the aggregate decrease in the credits al-
lowed under section 38 by reason of section 
48(c) for all prior taxable years which would 
have resulted had the qualified investment 
taken into account with respect to the property 
been limited to an amount which bears the 
same ratio to the qualified investment with re-
spect to such property as the period such prop-
erty was held by the taxpayer bears to the ap-
plicable recovery period under section 168(g). 
‘‘(C) COORDINATION WITH OTHER RECAP-
TURE PROVISIONS.—In the case of property to 
which this paragraph applies, paragraph (1) 
shall not apply and the rules of paragraphs (3), 
(4), and (5) shall apply.’’. 
(d) BASIS ADJUSTMENT TO REFLECT INVESTMENT 
CREDIT.—Paragraph (3) of section 50(c) of such Code 
(relating to basis adjustment to investment credit prop-
erty) is amended by striking ‘‘energy credit or reforest-
ation credit’’ and inserting ‘‘energy credit, reforestation
credit, or Indian reservation credit other than with respect 
to any expenditure for new reservation construction prop-
erty’’. 
(e) CERTAIN GOVERNMENTAL USE PROPERTY TO 
QUALIFY.—Paragraph (4) of section 50(b) of such Code 
(relating to property used by governmental units or for-
eign persons or entities) is amended by redesignating sub-
paragraphs (D) and (E) as subparagraphs (E) and (F), 
respectively, and by inserting after subparagraph (C) the 
following new subparagraph: 
‘‘(D) EXCEPTION
FOR
RESERVATION
IN-
FRASTRUCTURE INVESTMENT.—This paragraph 
shall not apply for purposes of determining the 
Indian reservation credit with respect to res-
ervation infrastructure investment.’’. 
(f) APPLICATION
OF AT-RISK RULES.—Subpara-
graph (C) of section 49(a)(1) of such Code is amended 
by striking ‘‘and’’ at the end of clause (ii), by striking 
the period at the end of clause (iii) and inserting ‘‘, and’’, 
and by adding at the end the following new clause: 
‘‘(iv) the qualified investment in quali-
fied Indian reservation property.’’. 
(g) CLERICAL AMENDMENTS.—
(1) Section 48 of such Code is amended by 
striking the heading and inserting the following:
‘‘SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; IN-
DIAN RESERVATION CREDIT.’’. 
(2) The table of sections for subpart E of part 
IV of subchapter A of chapter 1 is amended by 
striking the item relating to section 48 and inserting 
the following:
‘‘Sec. 48. Energy credit; reforestation credit; Indian reservation 
credit.’’.
(h) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
December 31, 2003.
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