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.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``American Community Renewal Act of 
2002''.

SEC. 2. ADDITIONAL DESIGNATIONS OF RENEWAL COMMUNITIES.

    (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 determinations.--The 
        rules of this section shall apply to designations under this 
        subsection, except that population 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 chapter 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 INVESTED 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--
            ``(1) the cost of any qualified asset purchased by the 
        taxpayer during the 60-day period beginning on the date of such 
        sale, reduced by
            ``(2) any portion of such cost previously taken into 
        account under this section.
    ``(b) Qualified Asset.--For purposes of this section, the term 
`qualified asset' means--
            ``(1) any qualified empowerment zone asset (as defined in 
        section 1397B),
            ``(2) any qualified community asset (as defined in section 
        1400F(b)), and
            ``(3) any property which would be a qualified empowerment 
        zone asset (as so defined) if enterprise communities and HUB 
        zones were treated as empowerment zones.
    ``(c) Special Rules.--
            ``(1) Ordinary income not eligible for rollover.--This 
        section shall not apply to any gain which is treated as 
        ordinary income for purposes of this subtitle.
            ``(2) Purchase.--A taxpayer shall be treated as having 
        purchased any property if, but for paragraph (4), the 
        unadjusted basis of such property in the hands of the taxpayer 
        would be its cost (within the meaning of section 1012).
            ``(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 acquired) 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 
        section 1202.
            ``(4) Holding period.--For purposes of determining 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 subsection (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 inserting 
                ``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 subchapter 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 enactment of this Act.

SEC. 4. LOCAL ALLOCATION OF COMMERCIAL REVITALIZATION 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 commercial revitalization deduction) 
is amended by adding at the end the following new paragraph:
            ``(3) Local allocation of revitalization amount where state 
        fails to adopt allocation plan.--If a qualified allocation plan 
        with respect 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 having 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.

Summary: American Community Renewal Act of 2002 - Amends the Internal Revenue Code to: (1) provide for the designation of 20 additional renewal communities; (2) permit the nonrecognition of gain on proceeds of sales of real property which are invested in qualified renewal community zone assets; and (3) provide for the local allocation of commercial revitalization expenditure amounts if a State fails to adopt a qualified allocation plan.