‘‘, and the amount expended meets the requirements of
the expenditure rule. Paragraph (1) shall not apply if the
lessee is a qualified retail business (as defined by section
118(d)(3) without regard to the proximity requirement in
subparagraph (A) thereof).’’.
(b) EXPENDITURE RULE.—Section 110 of such Code
is amended by redesignating subsections (b),(c), and (d)
as subsections (c), (d), and (e), respectively, and by insert-
ing after subsection (a) the following new subsection:
‘‘(b) EXPENDITURE RULE.—An expenditure meets
the requirements of this subsection if the expenditure oc-
curs before the end of the second taxable year after such
amount was received.’’.
(c) CONFORMING AMENDMENTS.—
(1) The section heading for section 110 of such
Code is amended by striking ‘‘FOR SHORT-TERM
LEASES’’.
(2) The item relating to section 110 in the table
of sections for part III of subchapter B of chapter
1 of such Code is amended by striking ‘‘for short-
term leases’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to leases entered into after the date
of the enactment of this Act.
SEC. 2. EXCLUSION FROM GROSS INCOME FOR CERTAIN
CONTRIBUTIONS TO THE CAPITAL OF CER-
TAIN RETAILERS.
(a) IN GENERAL.—Section 118 of the Internal Rev-
enue Code of 1986 (relating to contributions to the capital
of a corporation) is amended by redesignating subsections
(d) and (e) as subsections (e) and (f ), respectively, and
by inserting after subsection (c) the following new sub-
section:
‘‘(d) SAFE HARBOR FOR CONTRIBUTIONS TO CER-
TAIN RETAILERS.—
‘‘(1) GENERAL
RULE.—For purposes of this
section, the term ‘contribution to the capital of the
taxpayer’ includes any amount of money or other
property received by the taxpayer if—
‘‘(A) the taxpayer has entered into an
agreement to operate (or cause to be operated)
a qualified retail business at a particular loca-
tion for a period of at least 15 years,
‘‘(B)(i) immediately after the receipt of
such money or other property, the taxpayer
owns the land and the structure to be used by
the taxpayer in carrying on a qualified retail
business at such location, or
‘‘(ii) the taxpayer uses such amount to ac-
quire ownership of at least such land and struc-
ture,
‘‘(C) such amount meets the requirements
of the expenditure rule of paragraph (2), and
‘‘(D) the contributor of such amount does
not hold a beneficial interest in any property lo-
cated on the premises of such qualified retail
business other than de minimis amounts of
property associated with the operation of prop-
erty adjacent to such premises.
‘‘(2) EXPENDITURE RULE.—An amount meets
the requirements of this paragraph if—
‘‘(A) an amount equal to such amount is
expended for the acquisition of land or for ac-
quisition or construction of other property de-
scribed in section 1231(b)—
‘‘(i) which was the purpose motivating
the contribution, and
‘‘(ii) which is used predominantly in a
qualified retail business at the location re-
ferred to in paragraph (1)(A),
‘‘(B) the expenditure referred to in sub-
paragraph (A) occurs before the end of the sec-
ond taxable year after the year in which such
amount was received, and
‘‘(C) accurate records are kept of the
amounts contributed and expenditures made on
the basis of the project for which the contribu-
tion was made and on the basis of the year of
the contribution expenditure.
‘‘(3) DEFINITION OF QUALIFIED RETAIL BUSI-
NESS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘qualified retail
business’ means a trade or business of selling
tangible personal property to the general public
if the premises on which such trade or business
is conducted is in close proximity to property
that the contributor of the amount referred to
in paragraph (1) is developing or operating for
profit (or, in the case of a contributor which is
a governmental entity, is attempting to revi-
talize).
‘‘(B) SERVICES.—A trade or business shall
not fail to be treated as a qualified retail busi-
ness by reason of sales of services if such sales
are incident to the sale of tangible personal
property or if the services are de minimis in
amount.
‘‘(4) SPECIAL RULES.—
‘‘(A) LEASES.—For purposes of paragraph
(1), property shall be treated as owned by the
taxpayer if the taxpayer is the lessee of such
property under a lease having a term of at least
30 years and on which only nominal rent is re-
quired.
‘‘(B) CONTROLLED
GROUPS.—For pur-
poses of this subsection, all persons treated as
a single employer under subsection (a) or (b) of
section 52 shall be treated as one person.
‘‘(5) DISALLOWANCE
OF
DEDUCTIONS
AND
CREDITS; ADJUSTED
BASIS.—Notwithstanding any
other provision of this subtitle, no deduction or cred-
it shall be allowed for, or by reason of, any amount
received by the taxpayer which constitutes a con-
tribution to capital to which this subsection applies.
The adjusted basis of any property acquired with the
contributions to which this subsection applies shall
be reduced by the amount of the contributions to
which this subsection applies.
‘‘(6) REGULATIONS.—The Secretary shall pre-
scribe such regulations are appropriate to prevent