I
107TH CONGRESS
2D SESSION
H. R. 5566
To amend the Internal Revenue Code of 1986 to provide for additional
designations of renewal communities and to allow nonrecognition of gain
on sales of real property if the proceeds are invested in renewal and
similar community businesses.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 7, 2002
Mr. WATTS of Oklahoma (for himself, Mr. HAYES, and Mr. GOODE) intro-
duced 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
for additional designations of renewal communities and
to allow nonrecognition of gain on sales of real property
if the proceeds are invested in renewal and similar com-
munity businesses.
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 ‘‘American Community
Renewal Act of 2002’’.
SEC. 2. ADDITIONAL DESIGNATIONS OF RENEWAL COMMU-
NITIES.
(a) IN GENERAL.—Section 1400E of the Internal
Revenue Code of 1986 (relating to designation of renewal
communities) is amended by redesignating subsection (f)
as subsection (g) and by inserting after subsection (e) the
following new subsection:
‘‘(f) ADDITIONAL DESIGNATIONS PERMITTED.—
‘‘(1) IN GENERAL.—In addition to the areas
designated under subsection (a), the Secretary of
Housing and Urban Development may designate in
the aggregate an additional 20 nominated areas as
renewal communities under this section, subject to
the availability of eligible nominated areas. Of that
number, not less than 5 shall be designated in areas
described in subsection (a)(2)(B).
‘‘(2) PERIOD DESIGNATIONS MAY BE MADE AND
TAKE EFFECT.—A designation may be made under
this subsection after the date of the enactment of
this subsection and before January 1, 2004. Subject
to subparagraphs (B) and (C) of subsection (b)(1),
such designations shall remain in effect during the
period beginning on January 1, 2004, and ending on
December 31, 2011.
‘‘(3) MODIFICATIONS TO ELIGIBILITY DETER-
MINATIONS.—The rules of this section shall apply to
designations under this subsection, except that popu-
lation and poverty rate shall be determined by using
the 2000 census.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 3. NONRECOGNITION OF GAIN ON PROCEEDS OF SALE
OF REAL PROPERTY WHICH ARE INVESTED
IN RENEWAL COMMUNITY, ETC. BUSINESSES.
(a) IN GENERAL.—Part III of subchapter O of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
common nontaxable exchanges) is amended by adding at
the end the following new section:
‘‘SEC. 1046. NONRECOGNITION OF GAIN ON PROCEEDS OF
SALE OF REAL PROPERTY WHICH ARE IN-
VESTED 
IN 
RENEWAL 
COMMUNITY, 
ETC.
BUSINESSES.
‘‘(a) NONRECOGNITION OF GAIN.—In the case of a
sale of real property held by the taxpayer for more than
1 year and with respect to which the taxpayer elects the
application of this section, gain from such sale shall be
recognized only to the extent that the amount realized on
such sale exceeds—
‘‘(3) BASIS ADJUSTMENTS.—If gain from any
sale is not recognized by reason of subsection (a),
such gain shall be applied to reduce (in the order ac-
quired) the basis for determining gain or loss of any
qualified asset which is purchased by the taxpayer
during the 60-day period described in subsection (a).
This paragraph shall not apply for purposes of sec-
tion 1202.
‘‘(4) HOLDING PERIOD.—For purposes of deter-
mining whether the nonrecognition of gain under
subsection (a) applies to any qualified asset which is
sold—
‘‘(A) the taxpayer’s holding period for such
asset and the asset referred to in subsection
(a)(1) shall be determined without regard to
section 1223, and
‘‘(B) only the first year of the taxpayer’s
holding period for the asset referred to in sub-
section (a)(1) shall be taken into account for
purposes of paragraphs (2)(A)(iii), (3)(C), and
(4)(A)(iii) of section 1400F(b) or comparable
rules under section 1397B.’’.
(b) TECHNICAL AMENDMENTS.—
(1) Paragraph (23) of section 1016(a) of such
Code is amended is amended—
(A) by striking ‘‘or 1397B’’ and inserting
‘‘1397B, or 1046’’, and
(B) by striking ‘‘or 1397B(b)(4)’’ and in-
serting ‘‘1397B(b)(4), or 1046(c)(4)’’.
(2) Paragraph (15) of section 1223 is amended
by striking ‘‘or 1397B’’ and inserting ‘‘, 1397B, or
1046’’.
(3) The table of sections for part III of sub-
chapter O of chapter 1 of such Code is amended by
adding at the end the following new item:
‘‘Sec. 1046. Nonrecognition of gain on proceeds of sale of real property which
are invested in renewal community, etc. businesses.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales after the date of the enact-
ment of this Act.
SEC. 4. LOCAL ALLOCATION OF COMMERCIAL REVITALIZA-
TION DEDUCTION AMOUNTS WHERE STATE
FAILS TO ADOPT ALLOCATION PLAN.
(a) IN GENERAL.—Subsection (e) of section 1400I
of the Internal Revenue Code of 1986 (relating to com-
mercial revitalization deduction) is amended by adding at
the end the following new paragraph:
‘‘(3) LOCAL ALLOCATION OF REVITALIZATION
AMOUNT WHERE STATE FAILS TO ADOPT ALLOCA-
TION PLAN.—If a qualified allocation plan with re-
spect to any State is not approved as provided in
paragraph (1) before the 120th day after the date
of the enactment of this paragraph, then, beginning
on such 120th day—
‘‘(A) subsection (d)(3) shall cease to apply,
and
‘‘(B) the term ‘commercial revitalization
agency’ means, with respect to any renewal
community, any agency authorized to carry out
this section by the local governmental unit hav-
ing within its jurisdiction the largest portion of
such community.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect the date of the enactment
of this Act.
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