I
105TH CONGRESS
1ST SESSION
H. R. 201
To amend the Internal Revenue Code of 1986 to provide tax incentives
for the economic recovery of areas affected by the loss of employment
in the financial institution and real estate sectors.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 7, 1997
Mrs. KENNELLY of Connecticut 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
tax incentives for the economic recovery of areas affected
by the loss of employment in the financial institution
and real estate sectors.
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 ‘‘Financial Institution
and Real Estate (FIRE) Relief Act of 1997’’.
SEC. 2. DESIGNATION AND TREATMENT OF ECONOMIC RE-
COVERY AREAS.
(a) IN GENERAL.—Chapter 1 of the Internal Reve-
nue Code of 1986 is amended by adding at the end the
following new subchapter:
‘‘Subchapter W—Designation and
Treatment of Economic Recov-
ery Areas
‘‘Part I. Designation.
‘‘Part II. Incentives.
‘‘PART I—DESIGNATION
‘‘Sec. 1399A. Designation procedure.
‘‘Sec. 1399B. Eligibility criteria; definitions and special rules.
‘‘SEC. 1399A. DESIGNATION PROCEDURE.
‘‘(a) IN GENERAL.—From among the areas nomi-
nated for designation under this section, the Secretary
may designate 3 nominated areas as economic recovery
areas.
‘‘(b) PERIOD DESIGNATIONS MAY BE MADE.—A des-
ignation may be made under this section only during the
1-year period beginning on the date of the enactment of
this subchapter.
‘‘(c) PERIOD FOR WHICH DESIGNATION IS IN EF-
FECT.—
‘‘(1) IN GENERAL.—Any designation under this
section shall remain in effect during the period be-
ginning on the date of the designation and ending
on the earliest of—
‘‘(A) the close of the 10th calendar year
beginning on or after such date of designation,
‘‘(B) the termination date designated by
the State and local governments as provided for
in their nomination, or
‘‘(C) the date the Secretary revokes the
designation.
‘‘(2) REVOCATION OF DESIGNATION.—The Sec-
retary may revoke the designation under this section
of an area under rules similar to the rules of section
1391(d)(2).
‘‘(d) OTHER RULES TO APPLY.—Rules similar to the
rules of subsections (e) and (f) of section 1391 shall apply
for purposes of the designation under this section.
‘‘SEC. 1399B. ELIGIBILITY CRITERIA; DEFINITIONS AND
SPECIAL RULES.
‘‘(a) IN GENERAL.—A nominated area shall be eligi-
ble for designation under section 1399A only if it meets
the following criteria:
‘‘(1) ENTERPRISE ZONE CRITERIA.—The nomi-
nated area is an urban area which meets the criteria
under section 1392 for urban areas (determined
without regard to section 1392(a)(3)(D) thereof).
‘‘(2) EMPLOYMENT LOSSES IN FINANCIAL IN-
STITUTION AND REAL ESTATE SECTORS.—With re-
spect to the nominated area—
‘‘(A) at least 12 percent of the wages at-
tributable to private, nonagricultural employ-
ment in the area during 1989, and subject to
tax under section 3301 during such year, were
in the financial institution and real estate sec-
tors, and
‘‘(B) the employment in such area in such
sectors for the calendar year preceding the cal-
endar year in which such area is nominated for
designation is 10 percent (or, if lesser, 5,000
full-time equivalent jobs) less than such employ-
ment during 1989.
The requirement of subparagraph (B) shall not be
met if substantially all of such decline in employ-
ment is attributable to 1 employer. Data for the
labor market area which includes the nominated
area may be used for purposes of this paragraph if
data is not separately available for the nominated
area.
‘‘(b) DEFINITIONS.—For purposes of this sub-
chapter—
‘‘(1) ECONOMIC
RECOVERY
AREA.—The term
‘economic recovery area’ means an area designated
as such under section 1399A.
‘‘(2) FINANCIAL INSTITUTION.—The term ‘fi-
nancial institution’ includes any bank, any insurance
company, and any trade or business of performing
brokerage services.
‘‘(3) URBAN
AREA.—The term ‘urban area’
means an area which is not a rural area (as defined
in section 1393(a)(2)).
‘‘(4) 
OTHER
DEFINITIONS
AND
SPECIAL
RULES.—Rules similar to the rules of paragraphs
(4) through (9) of section 1393(a) shall apply for
purposes of this subchapter.
‘‘PART II—INCENTIVES
‘‘Sec. 1399D. Economic recovery area employment credit.
‘‘Sec. 1399E. Reduction in capital gains tax on equity invest-
ments in area businesses.
‘‘Sec. 1399F. Other incentives.
‘‘SEC. 1399D. ECONOMIC RECOVERY AREA EMPLOYMENT
CREDIT.
‘‘(a) AMOUNT OF CREDIT.—For purposes of section
38, the amount of the economic recovery area employment
credit determined under this section with respect to any
employer for any taxable year is 20 percent of the quali-
fied area wages paid or incurred during the calendar year
which ends with or within such taxable year.
‘‘(b) QUALIFIED AREA WAGES.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified area wages’ means any
wages paid or incurred by an employer for services
performed by an employee while such employee is a
qualified area employee.
‘‘(2) ONLY FIRST $15,000 OF WAGES PER YEAR
TAKEN INTO ACCOUNT.—With respect to each quali-
fied area employee, the amount of qualified area
wages which may be taken into account for a cal-
endar year shall not exceed $15,000.
‘‘(3) COORDINATION
WITH
TARGETED
JOBS
CREDIT
AND
EMPOWERMENT
ZONE
EMPLOYMENT
CREDIT.—
‘‘(A) IN
GENERAL.—The term ‘qualified
area wages’ shall not include wages taken into
account in determining the credit under section
51 or 1396.
‘‘(B) COORDINATION
WITH
PARAGRAPH
(2).—The $15,000 amount in paragraph (2)
shall be reduced for any calendar year by the
amount of wages paid or incurred during such
year which are taken into account in determin-
ing the credit under section 51 or 1396.
‘‘(c) QUALIFIED AREA EMPLOYEE.—For purposes of
this section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘qualified area em-
ployee’ means, with respect to any period, any em-
ployee of an employer if—
‘‘(A) substantially all of the services per-
formed during such period by such employee for
such employer are performed within an eco-
nomic recovery area in a trade or business of
the employer, and
‘‘(B) the prior employment of such em-
ployee was by an employer in such area from
which—
‘‘(i) such employee was involuntarily
separated from service (other than in a
separation determined under the applicable
State unemployment compensation law to
be due to the misconduct of such em-
ployee), or
‘‘(ii) such employee retired.
‘‘(2) CERTAIN INDIVIDUALS NOT ELIGIBLE.—
Rules similar to the rules of paragraphs (2) and (3)
of section 1396(d) shall apply for purposes of para-
graph (1).
‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) WAGES.—The term ‘wages’ has the same
meaning as when used in section 51.
‘‘(2) CONTROLLED
GROUPS.—All employers
treated as a single employer under subsection (a) or
(b) of section 52 shall be treated as a single em-
ployer for purposes of this section, and the credit (if
any) determined under this section with respect to
each such employer shall be its proportionate share
of the wages giving rise to such credit.
‘‘(3) CERTAIN OTHER RULES MADE APPLICA-
BLE.—For purposes of this section, rules similar to
the rules of section 51(k) and subsections (c), (d),
and (e) of section 52 shall apply.
‘‘SEC. 1399E. REDUCTION IN CAPITAL GAINS TAX ON EQ-
UITY INVESTMENTS IN AREA BUSINESSES.
‘‘(a) TAXPAYERS OTHER THAN CORPORATIONS.—
‘‘For 10 percent maximum rate of tax on qualified
area investments, see section 1(h).
‘‘(b) CORPORATIONS.—
‘‘For 17 percent maximum rate of tax on qualified
area investments, see section 1201.
‘‘(c) QUALIFIED AREA INVESTMENTS.—For purposes
of sections 1 and 1201—
‘‘(1) IN GENERAL.—The term ‘qualified area
investment’ means—
‘‘(A) any qualified area stock,
‘‘(B) any qualified area business property,
and
‘‘(C) any qualified area partnership inter-
est,
held for more than 5 years as of the date of the sale
or exchange to which section 1 or 1201 applies.
‘‘(2) QUALIFIED AREA STOCK.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘qualified area
stock’ means any stock in a domestic corpora-
tion if—
‘‘(i) such stock is acquired by the tax-
payer on original issue from the corpora-
tion solely in exchange for cash,
‘‘(ii) as of the time such stock was is-
sued, such corporation was a qualified area
business (or, in the case of a new corpora-
tion, such corporation was being organized
for purposes of being a qualified area busi-
ness), and
‘‘(iii) during substantially all of the
taxpayer’s holding period for such stock,