I
104TH CONGRESS
1ST SESSION
H. R. 2097
To amend the Internal Revenue Code of 1986 to provide a tax credit for
investment necessary to revitalize communities within the United States,
and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 21, 1995
Mr. SERRANO 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
a tax credit for investment necessary to revitalize com-
munities within the United States, and for other pur-
poses.
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 ‘‘Commercial Revitaliza-
tion Tax Act of 1995’’.
SEC. 2. COMMERCIAL REVITALIZATION TAX CREDIT.
(a) ALLOWANCE OF CREDIT.—Section 46 of the In-
ternal Revenue Code of 1986 (relating to investment cred-
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it) is amended by striking ‘‘and’’ at the end of paragraph
(2), by striking the period at the end of paragraph (3)
and inserting ‘‘, and’’, and by adding at the end the follow-
ing new paragraph:
‘‘(4) the commercial revitalization credit.’’
(b) COMMERCIAL REVITALIZATION CREDIT.—Sub-
part E of part IV of subchapter A of chapter 1 of the
Internal Revenue Code of 1986 (relating to rules for com-
puting investment credit) is amended by inserting after
section 48 the following new section:
‘‘SEC. 48A. COMMERCIAL REVITALIZATION CREDIT.
‘‘(a) GENERAL RULE.—For purposes of section 46,
except as provided in subsection (e), the commercial revi-
talization credit for any taxable year is an amount equal
to the applicable percentage of the qualified revitalization
expenditures with respect to any qualified revitalization
building.
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘applicable per-
centage’ means—
‘‘(A) 20 percent, or
‘‘(B) at the election of the taxpayer, 5 per-
cent for each taxable year in the credit period.
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The election under subparagraph (B), once made,
shall be irrevocable.
‘‘(2) CREDIT PERIOD.—
‘‘(A) IN GENERAL.—The term ‘credit pe-
riod’ means, with respect to any building, the
period of 10 taxable years beginning with the
taxable year in which the building is placed in
service.
‘‘(B) APPLICABLE RULES.—Rules similar
to the rules under paragraphs (2) and (4) of
section 42(f) shall apply.
‘‘(c) QUALIFIED REVITALIZATION BUILDINGS AND
EXPENDITURES.—For purposes of this section:
‘‘(1) QUALIFIED REVITALIZATION BUILDING.—
The term ‘qualified revitalization building’ means
any building (and its structural components) if—
‘‘(A) such building is located in an eligible
commercial revitalization area,
‘‘(B) a commercial revitalization credit
amount is allocated to the building under sub-
section (e), and
‘‘(C) depreciation (or amortization in lieu
of depreciation) is allowable with respect to the
building.
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‘‘(2) QUALIFIED
REHABILITATION
EXPENDI-
TURE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
rehabilitation expenditure’ means any amount
properly chargeable to capital account—
‘‘(i) for property for which deprecia-
tion is allowable under section 168 and
which is—
‘‘(I) nonresidential real property,
or
‘‘(II) an addition or improvement
to property described in subclause (I),
‘‘(ii) in connection with the construc-
tion or substantial rehabilitation or recon-
struction of a qualified revitalization build-
ing, and
‘‘(iii) for the acquisition of land in
connection with the qualified revitalization
building.
‘‘(B) DOLLAR
LIMITATION.—The aggre-
gate amount which may be treated as qualified
revitalization expenditures with respect to any
qualified revitalization building for any taxable
year shall not exceed $10,000,000, reduced by
any such expenditures with respect to the build-
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ing taken into account by the taxpayer or any
predecessor in determining the amount of the
credit under this section for all preceding tax-
able years.
‘‘(C) CERTAIN
EXPENDITURES
NOT
IN-
CLUDED.—The term ‘qualified revitalization ex-
penditure’ does not include:
‘‘(i) STRAIGHT
LINE
DEPRECIATION
MUST BE USED.—Any expenditure (other
than with respect to land acquisitions) with
respect to which the taxpayer does not use
the straight line method over a recovery
period determined under subsection (c) or
(g) of section 168. The preceding sentence
shall not apply to any expenditure to the
extent the alternative depreciation system
of section 168(g) applies to such expendi-
ture by reason of subparagraph (B) or (C)
of section 168(g)(1).
‘‘(ii) ACQUISITION COSTS.—The costs
of acquiring any building or interest there-
in and any land in connection with such
building to the extent that such costs ex-
ceed 30 percent of the qualified revitaliza-
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tion expenditures determined without re-
gard to this clause.
‘‘(iii) OTHER CREDITS.—Any expendi-
ture which the taxpayer may take into ac-
count in computing any other credit allow-
able under this part unless the taxpayer
elects to take the expenditure into account
only for purposes of this section.
‘‘(3) ELIGIBLE
COMMERCIAL
REVITALIZATION
AREA.—The term ‘eligible commercial revitalization
area’ means—
‘‘(A) an empowerment zone or enterprise
community designated under subchapter U,
‘‘(B) any area established pursuant to any
consolidated planning process for the use of
Federal housing and community development
funds, and
‘‘(C) any other specially designated com-
mercial revitalization district established by any
State or local government, which is a low-in-
come census tract or low-income nonmetro-
politan area (as defined in subsection (e)(2)(C))
and is not primarily a nonresidential central
business district.
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‘‘(4) SUBSTANTIAL
REHABILITATION
OR
RE-
CONSTRUCTION.—For purposes of this subsection, a
rehabilitation or reconstruction shall be treated as a
substantial rehabilitation or reconstruction only if
the qualified revitalization expenditures in connec-
tion with the rehabilitation or reconstruction exceed
25 percent of the fair market value of the building
(and its structural components) immediately before
the rehabilitation or reconstruction.
‘‘(d) WHEN
EXPENDITURES
TAKEN
INTO
AC-
COUNT.—
‘‘(1) IN GENERAL.—Qualified revitalization ex-
penditures with respect to any qualified revitaliza-
tion building shall be taken into account for the tax-
able year in which the qualified rehabilitated build-
ing is placed in service. For purposes of the preced-
ing sentence, a substantial rehabilitation or recon-
struction of a building shall be treated as a separate
building.
‘‘(2) PROGRESS
EXPENDITURE
PAYMENTS.—
Rules similar to the rules of subsections (b)(2) and
(d) of section 47 shall apply for purposes of this sec-
tion.
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‘‘(e) LIMITATION ON AGGREGATE CREDIT ALLOW-
ABLE WITH RESPECT
TO BUILDINGS LOCATED
IN
A
STATE.—
‘‘(1) IN GENERAL.—The amount of the credit
determined under this section for any taxable year
with respect to any building shall not exceed the
commercial revitalization credit amount (in the case
of 
an 
amount 
determined 
under 
subsection
(b)(1)(B), the present value of such amount as de-
termined under the rules of section 42(b)(2)(C)) al-
located to such building under this subsection by the
commercial revitalization credit agency. Such alloca-
tion shall be made at the same time and in the same
manner as under paragraphs (1) and (7) of section
42(h).
‘‘(2) COMMERCIAL
REVITALIZATION
CREDIT
AMOUNT FOR AGENCIES.—
‘‘(A) IN GENERAL.—The aggregate com-
mercial revitalization credit amount which a
commercial revitalization credit agency may al-
locate for any calendar year is the portion of
the State commercial revitalization credit ceil-
ing allocated under this paragraph for such cal-
endar year for such agency.
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‘‘(B) STATE COMMERCIAL REVITALIZATION
CREDIT CEILING.—
‘‘(i) IN
GENERAL.—The State com-
mercial revitalization credit ceiling applica-
ble to any State for any calendar year is
an amount which bears the same ratio to
the national ceiling for the calendar year
as the population of low-income census
tracts and low-income nonmetropolitan
areas within the State bears to the popu-
lation of such tracts and areas within all
States.
‘‘(ii) NATIONAL
CEILING.—For pur-
poses of clause (i), the national ceiling is
$100,000,000 for 1996, $200,000,000 for
1997, and $400,000,000 for calendar years
after 1997.
‘‘(iii) OTHER SPECIAL RULES.—Rules
similar to the rules of subparagraphs (D),
(E), (F), and (G) of section 42(h)(3) shall
apply for purposes of this subsection.
‘‘(C) LOW-INCOME AREAS.—For purposes
of subparagraph (B), the terms ‘low-income
census tract’ and ‘low-income nonmetropolitan
area’ mean a tract or area in which, according
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to the most recent census data available, at
least 50 percent of residents earned no more
than 60 percent of the median household in-
come for the applicable Metropolitan Standard
Area, 
Consolidated 
Metropolitan 
Standard
Area, or all nonmetropolitan areas in the State.
‘‘(D) COMMERCIAL REVITALIZATION CRED-
IT AGENCY.—For purposes of this section, the
term ‘commercial revitalization credit agency’
means any agency authorized by a State to
carry out this section.
‘‘(E) STATE.—For purposes of this sec-
tion, the term ‘State’ includes a possession of
the United States.
‘‘(f) RESPONSIBILITIES OF COMMERCIAL REVITAL-
IZATION CREDIT AGENCIES.—
‘‘(1) PLANS FOR ALLOCATION.—Notwithstand-
ing any other provision of this section, the commer-
cial revitalization credit dollar amount with respect
to any building shall be zero unless—
‘‘(A) such amount was allocated pursuant
to a qualified allocation plan of the commercial
revitalization credit agency which is approved
by the governmental unit (in accordance with
rules similar to the rules of section 147(f)(2)
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(other than subparagraph (B)(ii) thereof)) of
which such agency is a part, and
‘‘(B) such agency notifies the chief execu-
tive officer (or its equivalent) of the local juris-
diction within which the building is located of
such project and provides such individual a rea-
sonable opportunity to comment on the project.
‘‘(2) QUALIFIED ALLOCATION PLAN.—For pur-
poses of this subsection, the term ‘qualified alloca-
tion plan’ means any plan—
‘‘(A) which sets forth selection criteria to
be used to determine priorities of the commer-
cial revitalization credit agency which are ap-
propriate to local conditions,
‘‘(B) which considers—
‘‘(i) the degree to which a project con-
tributes to the implementation of a strate-
gic plan that is devised for an eligible com-
mercial revitalization area through a citi-
zen participation process,
‘‘(ii) the amount of any increase in
permanent, full-time employment by reason
of any project, and
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‘‘(iii) the active involvement of resi-
dents and nonprofit groups within the eli-
gible commercial revitalization area, and
‘‘(C) which provides a procedure that the
agency (or its agent) will follow in monitoring
for compliance with this section.
‘‘(g) TERMINATION.—This section shall not apply to
any building placed in service after December 31, 2000.’’
(b) CONFORMING AMENDMENTS.—
(1) Section 39(d) of the Internal Revenue Code
of 1986 is amended by adding at the end the follow-
ing new paragraph:
‘‘(7) NO CARRYBACK OF SECTION 48A CREDIT
BEFORE
ENACTMENT.—No portion of the unused
business credit for any taxable year which is attrib-
utable to any commercial revitalization credit deter-
mined under section 48A may be carried back to a
taxable year ending before the date of the enactment
of section 48A.’’
(2) Subparagraph (B) of section 48(a)(2) of
such Code is amended by inserting ‘‘or commercial
revitalization’’ after ‘‘rehabilitation’’ each place it
appears in the text and heading thereof.
(3) Subparagraph (C) of section 49(a)(1) of
such Code is amended by striking ‘‘and’’ at the end
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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 basis of any qualified revital-
ization building attributable to qualified re-
vitalization expenditures.’’
(4) Paragraph (2) of section 50(a) of such Code
is amended by inserting ‘‘or 48A(d)(2)’’ after ‘‘sec-
tion 47(d)’’ each place it appears.
(5) Subparagraph (B) of section 50(a)(2) of
such Code is amended by adding at the end the fol-
lowing new sentence: ‘‘A similar rule shall apply for
purposes of section 48A.’’
(6) Paragraph (2) of section 50(b) of such Code
is amended by striking ‘‘and’’ at the end of subpara-
graph (C), by striking the period at the end of sub-
paragraph (D) and inserting ‘‘, and’’, and by adding
at the end the following new subparagraph:
‘‘(E) a qualified revitalization building to
the extent of the portion of the basis which is
attributable to qualified revitalization expendi-
tures.’’
(7) Subparagraph (C) of section 50(b)(4) of
such Code is amended by inserting ‘‘or commercial
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revitalization’’ after ‘‘rehabilitated’’ each place it ap-
pears in the text or heading thereof.
(8) Subparagraph (C) of section 469(i)(3) is
amended—
(A) by inserting ‘‘or section 48A’’ after
‘‘section 42’’, and
(B) by striking ‘‘credit’’ in the heading and
inserting ‘‘and commercial revitalization cred-
its’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
December 31, 1995.
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