‘‘(3) MODIFICATIONS TO ELIGIBILITY CRITERIA,
ETC.—The rules of subsection (g)(3) shall apply to
designations under this subsection.’’.
SEC. 202. EXTENSION OF ENTERPRISE ZONE TREATMENT
THROUGH 2009.
Subparagraph (A) of section 1391(d)(1) (relating to
period for which designation is in effect) is amended to
read as follows:
‘‘(A) December 31, 2009,’’.
SEC. 203. 20 PERCENT EMPLOYMENT CREDIT FOR ALL EM-
POWERMENT ZONES
(a) 20 PERCENT CREDIT.—Subsection (b) of section
1396 (relating to empowerment zone employment credit)
is amended to read as follows:
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of
this section, the applicable percentage is 20 percent.’’.
(b) ALL
EMPOWERMENT
ZONES
ELIGIBLE
FOR
CREDIT.—Section 1396 is amended by striking subsection
(e).
(c) CONFORMING AMENDMENT.—Subsection (d) of
section 1400 is amended to read as follows:
‘‘(d) SPECIAL RULE FOR APPLICATION OF EMPLOY-
MENT CREDIT.—With respect to the DC Zone, section
1396(d)(1)(B) (relating to empowerment zone employ-
ment credit) shall be applied by substituting ‘the District
of Columbia’ for ‘such empowerment zone’.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to wages paid or incurred after
December 31, 2001.
SEC. 204. INCREASED EXPENSING UNDER SECTION 179.
(a) IN GENERAL.—Subparagraph (A) of section
1397A(a)(1) is amended by striking ‘‘$20,000’’ and in-
serting ‘‘$35,000’’.
(b) EXPENSING FOR PROPERTY USED IN DEVELOP-
ABLE SITES.—Section 1397A is amended by striking sub-
section (c).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 205. HIGHER LIMITS ON TAX-EXEMPT EMPOWERMENT
ZONE FACILITY BONDS.
(a) IN GENERAL.—Paragraph (3) of section 1394(f)
(relating to bonds for empowerment zones designated
under section 1391(g)) is amended to read as follows:
‘‘(3) EMPOWERMENT ZONE FACILITY BOND.—
For purposes of this subsection, the term ‘empower-
ment zone facility bond’ means any bond which
would be described in subsection (a) if—
‘‘(A) in the case of obligations issued be-
fore January 1, 2002, only empowerment zones
designated under section 1391(g) were taken
into account under sections 1397C and 1397D,
and
‘‘(B) in the case of obligations issued after
December 31, 2001, all empowerment zones
(other than the District of Columbia) were
taken into account under sections 1397C and
1397D.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to obligations issued after Decem-
ber 31, 2001.
SEC. 206. NONRECOGNITION OF GAIN ON ROLLOVER OF
EMPOWERMENT ZONE INVESTMENTS.
(a) IN GENERAL.—Part III of subchapter U of chap-
ter 1 is amended—
(1) by redesignating subpart C as subpart D;
(2) by redesignating sections 1397B and 1397C
as sections 1397C and 1397D, respectively; and
(3) by inserting after subpart B the following
new subpart:
‘‘Subpart C—Nonrecognition of Gain on Rollover of
Empowerment Zone Investments
‘‘Sec. 1397B. Nonrecognition of Gain on Rollover of Empower-
ment Zone Investments.
‘‘SEC. 1397B. NONRECOGNITION OF GAIN ON ROLLOVER OF
EMPOWERMENT ZONE INVESTMENTS.
‘‘(a) NONRECOGNITION OF GAIN.—In the case of any
sale of a qualified empowerment zone asset held by the
taxpayer for more than 1 year and with respect to which
such 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—
‘‘(1) the cost of any qualified empowerment
zone asset (with respect to the same zone as the
asset sold) purchased by the taxpayer during the 60-
day period beginning on the date of such sale, re-
duced by
‘‘(2) any portion of such cost previously taken
into account under this section.
‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) 
QUALIFIED
EMPOWERMENT
ZONE
ASSET.—
‘‘(A) IN
GENERAL.—The term ‘qualified
empowerment zone asset’ means any property
which would be a qualified community asset (as
defined in section 1400F) if in section 1400F—
‘‘(i) references to empowerment zones
were substituted for references to renewal
communities,
‘‘(ii) references to enterprise zone
businesses (as defined in section 1397C)
were substituted for references to renewal
community businesses, and
‘‘(iii) the date of the enactment of this
paragraph were substituted for ‘December
31, 2001’ each place it appears.
‘‘(B) TREATMENT OF DC ZONE.—The Dis-
trict of Columbia Enterprise Zone shall not be
treated as an empowerment zone for purposes
of this section.
‘‘(2) CERTAIN GAIN NOT ELIGIBLE FOR ROLL-
OVER.—This section shall not apply to—
‘‘(A) any gain which is treated as ordinary
income for purposes of this subtitle, and
‘‘(B) any gain which is attributable to real
property, or an intangible asset, which is not an
integral part of an enterprise zone business.
‘‘(3) PURCHASE.—A taxpayer shall be treated
as having purchased any property if, but for para-
graph (4), the unadjusted basis of such property in
the hands of the taxpayer would be its cost (within
the meaning of section 1012).
‘‘(4) 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 empowerment zone asset which is pur-
chased by the taxpayer during the 60-day period de-
scribed in subsection (a). This paragraph shall not
apply for purposes of section 1202.
‘‘(5) HOLDING PERIOD.—For purposes of deter-
mining whether the nonrecognition of gain under
subsection (a) applies to any qualified empowerment
zone 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).’’.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (23) of section 1016(a) is
amended—
(A) by striking ‘‘or 1045’’ and inserting
‘‘1045, or 1397B’’; and
(B) by striking ‘‘or 1045(b)(4)’’ and in-
serting ‘‘1045(b)(4), or 1397B(b)(4)’’.
(2) Paragraph (15) of section 1223 is amended
to read as follows:
‘‘(15) 
Except 
for 
purposes 
of 
sections
1202(a)(2), 
1202(c)(2)(A), 
1400B(b), 
and
1400F(b), in determining the period for which the
taxpayer has held property the acquisition of which
resulted under section 1045 or 1397B in the non-
recognition of any part of the gain realized on the
sale of other property, there shall be included the pe-
riod for which such other property has been held as
of the date of such sale.’’.
(3) Paragraph (2) of section 1394(b) is
amended—
(A) by striking ‘‘section 1397C’’ and in-
serting ‘‘section 1397D’’; and
(B) by striking ‘‘section 1397C(a)(2)’’ and
inserting ‘‘section 1397D(a)(2)’’.
(4) Paragraph (3) of section 1394(b) is
amended—
(A) by striking ‘‘section 1397B’’ each place
it appears and inserting ‘‘section 1397C’’; and
(B) by striking ‘‘section 1397B(d)’’ and in-
serting ‘‘section 1397C(d)’’.
(5) Sections 1400(e) and 1400B(c) are each
amended by striking ‘‘section 1397B’’ each place it
appears and inserting ‘‘section 1397C’’.
(6) The table of subparts for part III of sub-
chapter U of chapter 1 is amended by striking the
last item and inserting the following new items:
‘‘Subpart C. Nonrecognition of gain on rollover of empowerment
zone investments.
‘‘Subpart D. General provisions.’’.
(7) The table of sections for subpart D of such
part III is amended to read as follows:
‘‘Sec. 1397C. Enterprise zone business defined.
‘‘Sec. 1397D. Qualified zone property defined.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to qualified empowerment zone as-
sets acquired after the date of the enactment of this Act.
SEC. 207. INCREASED EXCLUSION OF GAIN ON SALE OF EM-
POWERMENT ZONE STOCK.
(a) IN GENERAL.—Subsection (a) of section 1202 is
amended to read as follows:
‘‘(a) EXCLUSION.—
‘‘(1) IN GENERAL.—In the case of a taxpayer
other than a corporation, gross income shall not in-
clude 50 percent of any gain from the sale or ex-
change of qualified small business stock held for
more than 5 years.
‘‘(2) EMPOWERMENT ZONE BUSINESSES.—
‘‘(A) IN GENERAL.—In the case of quali-
fied small business stock acquired after the date
of the enactment of this paragraph in a cor-
poration which is a qualified business entity (as
defined in section 1397C(b)) during substan-
tially all of the taxpayer’s holding period for
such stock, paragraph (1) shall be applied by
substituting ‘60 percent’ for ‘50 percent’.
‘‘(B) CERTAIN RULES TO APPLY.—Rules
similar to the rules of paragraphs (5) and (7)
of section 1400B(b) shall apply for purposes of
this paragraph.
‘‘(C) GAIN AFTER 2014 NOT QUALIFIED.—
Subparagraph (A) shall not apply to gain at-
tributable to periods after December 31, 2014.
‘‘(D) TREATMENT OF DC ZONE.—The Dis-
trict of Columbia Enterprise Zone shall not be
treated as an empowerment zone for purposes
of this paragraph.’’.
(b) CONFORMING AMENDMENT.—Paragraph (8) of
section 1(h) is amended by striking ‘‘means’’ and all that
follows and inserting ‘‘means the excess of—
‘‘(A) the gain which would be excluded
from gross income under section 1202 but for
the percentage limitation in section 1202(a),
over
‘‘(B) the gain excluded from gross income
under section 1202.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to stock acquired after the date
of the enactment of this Act.
TITLE III—NEW MARKETS TAX
CREDIT
SEC. 301. NEW MARKETS TAX CREDIT.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business-related cred-
its) is amended by adding at the end the following new
section:
‘‘SEC. 45D. NEW MARKETS TAX CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—For purposes of section 38,
in the case of a taxpayer who holds a qualified eq-
uity investment on a credit allowance date of such
investment which occurs during the taxable year, the
new markets tax credit determined under this sec-
tion for such taxable year is an amount equal to the
applicable percentage of the amount paid to the
qualified community development entity for such in-
vestment at its original issue.