[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1008 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 1008

To amend the Internal Revenue Code of 1986 to stimulate employment in, 
 and to promote revitalization of, targeted urban areas designated as 
 targeted urban areas, by providing Federal tax relief for employment 
                and investments, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 18, 1993

 Mr. Shays (for himself and Mr. Mfume) introduced the following bill; 
  which was referred jointly to the Committees on Ways and Means, the 
           Judiciary, and Banking, Finance and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to stimulate employment in, 
 and to promote revitalization of, targeted urban areas designated as 
 targeted urban areas, by providing Federal tax relief for employment 
                and investments, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Business and Urban Partnership 
Act''.

SEC. 2. PURPOSE.

    It is the purpose of this Act to provide for the establishment of 
targeted urban areas in order to restore the economic base of targeted 
urban areas by bringing people, businesses, and jobs back to them 
primarily by providing or encouraging--
            (1) tax relief at the Federal, State, and local levels;
            (2) regulatory relief at the Federal, State, and local 
        levels; and
            (3) coordination and cooperation among Federal, State, and 
        local officials to promote economic development in targeted 
        cities.

SEC. 3. AMENDMENT OF THE 1986 CODE.

    Except as otherwise expressly provided, whenever in this Act an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

              TITLE I--DESIGNATION OF TARGETED URBAN AREAS

SEC. 101. DESIGNATION OF ZONES.

    (a) General Rule.--Chapter 80 (relating to general rules) is 
amended by adding at the end thereof the following new subchapter:

          ``Subchapter D--Designation of Targeted Urban Areas

                              ``Sec. 7880. Designation.

``SEC. 7880. DESIGNATION.

    ``(a) Designation of Targeted Urban Areas.--
            ``(1) Definition.--For purposes of this title, the term `a 
        targeted urban area' means any area--
                    ``(A) which is nominated by one or more local 
                governments and the State in which it is located for 
                designation as a targeted urban area (hereinafter in 
                this section referred to as a `nominated area'), and
                    ``(B) which the Secretary of Housing and Urban 
                Development designates as a targeted urban area.
            ``(2) Designation by secretary of housing and urban 
        development.--Except as provided in paragraph (3), the 
        Secretary of Housing and Urban Development shall designate any 
        nominated area as a targeted urban area if such Secretary 
        determines that the requirements of subsection (c) and (d) are 
        met with respect to such area.
            ``(3) Limitations on designations.--
                    ``(A) Publication of regulations.--Before 
                designating any area as a targeted urban area and not 
                later than 4 months following the date of the enactment 
                of this section, the Secretary of Housing and Urban 
                Development shall prescribe by regulations--
                            ``(i) the procedures for nominating an 
                        area, and
                            ``(ii) the procedures for designation as a 
                        targeted urban area.
                    ``(B) Time limitations.--The Secretary of Housing 
                and Urban Development shall designate nominated areas 
                as targeted urban area only during the 48-month period 
                beginning on the first day of the first month following 
                the month in which the effective date of the 
                regulations described in subparagraph (A) occurs.
                    ``(C) Procedural rules.--The Secretary of Housing 
                and Urban Development shall not make any designation 
                under this section unless--
                            ``(i) the local government and the State in 
                        which the nominated area is located have the 
                        authority to--
                                    ``(I) nominate such area for 
                                designation as a targeted urban area,
                                    ``(II) make the State and local 
                                commitments under subsection (d), and
                                    ``(III) provide assurances 
                                satisfactory to the Secretary of 
                                Housing and Urban Development that such 
                                commitments will be fulfilled,
                            ``(ii) the State and local governments in 
                        which the nominated area is located will 
                        establish a commission (consisting of State and 
                        local governmental officials, representatives 
                        of local businesses, and community leaders) 
                        which shall have the responsibility for making 
                        allocations under section 1394 (relating to 
                        overall limitations on targeted urban area 
                        incentives), and
                            ``(iii) a nomination therefor is submitted 
                        by such State and local governments in such a 
                        manner and in such form, and contains such 
                        information, as the Secretary of Housing and 
                        Urban Development shall prescribe by 
                        regulations.
                    ``(D) Requirement of allocation formula.--The 
                Secretary of Housing and Urban Development shall not 
                designate any nominated area as a targeted urban area 
                unless the State and local governments in which the 
                nominated area is located have established allocation 
                procedures to be used by the commission established 
                pursuant to subparagraph (C)(ii) in making allocations 
                under section 1394. Such procedures--
                            ``(i) shall provide that allocations under 
                        section 1394 will be based on the following 
                        criteria:
                                    ``(I) the additional investment in 
                                the targeted urban area that will 
                                result from the allocation,
                                    ``(II) the additional jobs in the 
                                targeted urban area that will result 
                                from the allocation,
                                    ``(III) the levels of compensation 
                                for the additional jobs referred to in 
                                subclause (II),
                                    ``(IV) the amount of additional 
                                job-training that will result from the 
                                allocation, and
                                    ``(V) the number of residents of 
                                the targeted urban area employed as a 
                                result of the allocation, and
                            ``(ii) shall provide for a system of 
                        weighting the criteria referred to in clause 
                        (i).
                Such procedures may provide that allocations are to be 
                limited to taxpayers in specified categories of 
                businesses and may be revised with the approval of the 
                Secretary of Housing and Urban Development.
    ``(b) Time Period for Which Designation is in Effect--
            ``(1) In general.--Any designation of an area as a targeted 
        urban area shall remain in effect during the period beginning 
        on the date of the designation and ending on the earliest of--
                    ``(A) December 31 of the 20th calendar year 
                following the calendar year in which such date occurs,
                    ``(B) the termination date specified by the State 
                and local governments as provided in the nomination 
                submitted in accordance with subsection (a)(3)(C)(iii),
                    ``(C) such other date as the Secretary of Housing 
                and Urban Development shall specify as a condition of 
                designation, or
                    ``(D) the date upon which the Secretary of Housing 
                and Urban Development revokes such designation.
            ``(2) Revocation of designation.--The Secretary of Housing 
        and Urban Development may revoke the designation of an area if 
        the Secretary of Housing and Urban Development determines that 
        the State or a local government in which the area is located is 
        not complying substantially with the agreed course of action 
        for the area.
    ``(c) Area and Eligibility Requirements--
            ``(1) In general.--A nominated area meets the requirements 
        of this subsection if it is within the jurisdiction of a 
        qualified city and if it is the only area in such city 
        nominated as a targeted urban area.
            ``(2) Qualified city.--For purposes of paragraph (1), the 
        term `qualified city' means any city--
                    ``(A) which is a metropolitan city (as defined in 
                section 102(a)(4) of the Housing and Community 
                Development Act of 1974 (42 U.S.C. 5302(a)(4)),
                    ``(B) which is eligible to receive an allocation of 
                funds under section 106(a)(3) of the Housing and 
                Community Development Act of 1974 for the most recent 
                fiscal year ending before the date on which the 
                nomination was submitted under subsection (a), and
                    ``(C) which has a need adjusted per capita income 
                factor equal to or less than .7 (as determined under 
                section 1394(b)(7) on the basis of the most recent data 
                available before the date on which the nomination was 
                submitted under subsection (a).
    ``(d) Required State and Local Commitments.--
            ``(1) In general.--A nominated area meets the requirements 
        of this subsection if the State and the local government or 
        governments of the jurisdictions in which the nominated area is 
        located agree in writing that, during any period during which 
        the nominated area is a targeted urban area, such governments 
        will follow a specified course of action designed to reduce the 
        various burdens borne by employers or employees in such area.
            ``(2) Course of action.--The course of action under 
        paragraph (1)--
                    ``(A) shall include--
                            ``(i) modifications to (or waivers of) 
                        zoning requirements to permit multiple use of 
                        appropriate areas within the targeted urban 
                        area; except that this clause shall not be 
                        construed to require waivers for gambling or 
                        other adult-only entertainment businesses,
                            ``(ii) procedures under which a business 
                        can obtain all required State and local permits 
                        from 1 agency in the city in which the targeted 
                        urban area is located,
                            ``(iii) actions to reduce, remove, 
                        simplify, or streamline governmental 
                        requirements applying within the targeted urban 
                        area, and
                            ``(iv) procedures for involvement in the 
                        program by private entities, organizations, 
                        neighborhood associations, and community 
                        groups, particularly those within the nominated 
                        area, including a commitment from such private 
                        entities to provide jobs and job training for, 
                        and technical, financial or other assistance 
                        to, employers, employees, and residents of the 
                        nominated area, and
                    ``(B) may include 1 or more of the following:
                            ``(i) State sales tax exemptions for 
                        property purchased for use in the targeted 
                        urban area,
                            ``(ii) property tax exemptions or 
                        reductions within the targeted urban area or 
                        taxes guaranteed to be used for infrastructure 
                        or crime-prevention projects benefiting the 
                        targeted urban area,
                            ``(iii) enhanced crime prevention measures 
                        in the targeted urban area such as `crime free 
                        zones',
                            ``(iv) the reduction or elimination of 
                        other taxes or fees applying within the 
                        targeted urban area,
                            ``(v) an increase in the level or 
                        efficiency of local services within the 
                        targeted urban area, for example, crime 
                        prevention, and drug enforcement prevention and 
                        treatment,
                            ``(vi) donation (or sale below market 
                        value) of land and buildings to benefit low and 
                        moderate income people,
                            ``(vii) linkages to--
                                    ``(I) job training,
                                    ``(II) transportation,
                                    ``(III) education,
                                    ``(IV) day care,
                                    ``(V) health care, and
                                    ``(VI) other social service 
                                support,
                            ``(viii) provision of supporting public 
                        facilities, and infrastructure improvements,
                            ``(ix) encouragement of local 
                        entrepreneurship; and
                            ``(x) other factors determined essential to 
                        support targeted urban area activities and 
                        increase livability or quality of life.
            ``(3) Later modification of a course of action.--The 
        Secretary of Housing and Urban Development may by regulations 
        prescribe procedures to permit or require a course of action to 
        be updated or modified during the time that a designation is in 
        effect.
    ``(e) Definitions.--For the purposes of this title--
            ``(1) Governments.--If more than one government seeks to 
        nominate an area as a targeted urban area, any reference to, or 
        requirement of, this section shall apply to all such 
        governments.
            ``(2) Local government.--The term `local government' 
        means--
                    ``(A) any county, city, town, township, parish, 
                village, or other general purpose political subdivision 
                of a State,
                    ``(B) any combination of political subdivisions 
                described in subparagraph (A) recognized by the 
                Secretary of Housing and Urban Development, and
                    ``(C) the District of Columbia.''
    (b) Clerical Amendment.--The table of subchapters for chapter 80 is 
amended by adding at the end thereof the following new item:

                              ``Subchapter D. Designation of targeted 
                                        urban areas.''.

SEC. 102. REPORTING REQUIREMENTS.

    Not later than the close of the second calendar year after the 
calendar year in which the Secretary of Housing and Urban Development 
first designates areas as targeted urban areas, and at the close of 
each second calendar year thereafter, the Secretary of Housing and 
Urban Development shall submit to the Congress a report on the effects 
of such designation in accomplishing the purposes of this Act.

SEC. 103. INTERACTION WITH OTHER FEDERAL PROGRAMS.

    (a) Coordination With Relocation Assistance.--The designation of a 
targeted urban area under section 7880 of the Internal Revenue Code of 
1986 (as added by this Act) shall not--
            (1) constitute approval of a Federal or federally assisted 
        program or project (within the meaning of the Uniform 
        Relocation Assistance and Real Property Acquisition Policies 
        Act of 1970 (42 U.S.C. 4601)); or
            (2) entitle any person displaced from real property located 
        in such targeted urban areas to any rights or any benefits 
        under such Act.
    (b) Coordination With Environmental Policy.--Designation of a 
targeted urban area under section 7880 of such Code shall not 
constitute a Federal action for purposes of applying the procedural 
requirements of the National Environmental Policy Act of 1969 (42 
U.S.C. 4341) or other provisions of Federal law relating to the 
protection of the environment.

                TITLE II--FEDERAL INCOME TAX INCENTIVES

SEC. 201. TAX INCENTIVES.

    (a) General Rule.--Chapter 1 (relating to normal tax and surtax 
rules) is amended by inserting after subchapter T the following new 
subchapter:

         Subchapter U--Tax Incentives for Targeted Urban Areas

                              ``Sec. 1391. Credit for health, day care, 
                                        and job training expenses of 
                                        targeted urban area employers.
                              ``Sec. 1392. Expense treatment for cost 
                                        of qualified targeted urban 
                                        area property.
                              ``Sec. 1393. Deduction for targeted urban 
                                        area stock.
                              ``Sec. 1394. Overall limitation on 
                                        targeted urban area incentives.

``SEC. 1391. CREDIT FOR HEALTH, DAY CARE, AND JOB TRAINING EXPENSES OF 
              TARGETED URBAN AREA EMPLOYERS.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this subtitle for the taxable year an amount 
equal to 50 percent of the qualified expenses of the taxpayer for such 
taxable year.
    ``(b) Limitation.--The amount of the credit allowable under 
subsection (a) to any taxpayer for any taxable year with respect to any 
targeted urban area shall not exceed the credit amount allocated to the 
taxpayer under section 1394 with respect to such targeted urban area 
for such taxable year.
    ``(c) Qualified Expenses.--For purposes of this section, the term 
`qualified expenses' means--
            ``(1) any amount paid or incurred by the taxpayer for 
        coverage under an accident or health plan of any qualified 
        targeted urban area employee,
            ``(2) any amount paid or incurred by the taxpayer for 
        dependent care assistance (as defined in section 129(e)(1)) 
        with respect to any qualified targeted urban area employee, and
            ``(3) any job training expenses paid or incurred by the 
        taxpayer with respect to any qualified targeted urban area 
        employee.
    ``(d) Qualified Targeted Urban Area Employee.--For purposes of this 
section--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `qualified targeted urban area employee' 
        means, with respect to any period, any employee of the taxpayer 
        if--
                    ``(A) substantially all of the services performed 
                during such period by such employee for the taxpayer 
                are performed within a targeted urban area in a trade 
                or business of the taxpayer, and
                    ``(B) the principal place of abode of such employee 
                while performing such services is within a city which 
                includes any portion of such targeted urban area.
            ``(2) Certain individuals not eligible.--The term 
        `qualified targeted urban area employee' shall not include--
                    ``(A) any individual described in subparagraph (A), 
                (B), or (C) of section 51(i)(1), and
                    ``(B) any 5-percent owner (as defined in section 
                416(i)(1)(B)).
    ``(e) Credit Refundable.--For purposes of section 6401(b), the 
credit under this section shall be treated as a credit allowable under 
subpart C of part IV of subchapter A of this chapter.

``SEC. 1392. EXPENSE TREATMENT FOR COST OF QUALIFIED ZONE PROPERTY.

    ``(a) Treatment as Expenses.--A taxpayer may elect to treat the 
cost of any qualified targeted urban area property as an expense which 
is not chargeable to capital account. Any cost so treated shall be 
allowed as a deduction for the taxable year in which the qualified 
targeted urban area property is placed in service.
    ``(b) Limitation.--The amount allowed as a deduction under 
subsection (a) to any taxpayer for any taxable year with respect to any 
targeted urban area shall not exceed the expense treatment amount 
allocated to the taxpayer under section 1394 for such taxable year with 
respect to such targeted urban area.
    ``(c) Qualified Targeted Urban Area Property.--For purposes of this 
section--
            ``(1) In general.--The term `qualified targeted urban area 
        property' means any property to which section 168 applies and 
        which is acquired by purchase if--
                    ``(A) such property is real property located in a 
                targeted urban area and used by the taxpayer in the 
                active conduct of a trade or business, or
                    ``(B) such property is other tangible property 
                substantially all the use of which by the taxpayer is 
                used in a targeted urban area in the active conduct of 
                a trade or business.
        Determinations of whether an area is a targeted urban area 
        shall be made as of the time the property is placed in service.
            ``(2) Treatment of property held for rent.--The term 
        `qualified targeted urban area property' shall not include any 
        property with respect to which the taxpayer is a lessor.
    ``(d) Other Definitions and Special Rules.--
            ``(1) Purchase and cost.--The terms `purchase' and `cost' 
        have the respective meanings given such terms by section 
        179(d).
            ``(2) Election.--An election under this section--
                    ``(A) shall specify the property to which the 
                election applies, and
                    ``(B) shall be made on the taxpayer's return for 
                the taxable year in which the property is placed in 
                service.
        Any such election, once made, may be revoked only with the 
        consent of the Secretary.
            ``(3) Recapture.--The Secretary shall, by regulations, 
        provide for recapturing the benefit of any deduction allowable 
        under subsection (a) with respect to any property which ceases 
        to be qualified targeted urban area property.

``SEC. 1393. DEDUCTION FOR ENTERPRISE ZONE STOCK.

    ``(a) General Rule.--There shall be allowed as a deduction an 
amount equal to the aggregate amount paid in cash by the taxpayer 
during the taxable year for the purchase of targeted urban area stock.
    ``(b) Limitations.--
            ``(1) Ceiling.--
                    ``(A) In general.--The maximum amount allowed as a 
                deduction under subsection (a) to a taxpayer shall not 
                exceed the least of:
                            ``(i) $100,000,
                            ``(ii) the targeted urban area stock amount 
                        allocated under section 1294 to the taxpayer 
                        for the taxable year, or
                            ``(iii) the excess of $500,000 over the 
                        amount allowed as a deduction under this 
                        section to the taxpayer for all prior taxable 
                        years.
                    ``(B) Excess amounts.--If the amount otherwise 
                deductible by any person under subsection (a) exceeds 
                the limitation under subparagraph (A)--
                            ``(i) the amount of such excess shall be 
                        treated as an amount paid to which subsection 
                        (a) applies during the next taxable year, and
                            ``(ii) the deduction allowed for any 
                        taxable year shall be allocated among the 
                        targeted urban area stock purchased by such 
                        person in accordance with the purchase price 
                        per share.
            ``(2) Aggregation rules.--All persons who are members of 
        the same family (as defined in section 267(c)(4) or who are 
        under common control shall be treated as one person for 
        purposes of clauses (i) and (iii) of paragraph (1)(A), and the 
        limitations contained in such clauses shall be allocated among 
        such persons in accordance with their respective purchases of 
        targeted urban area stock.
    ``(c) Dispositions of Stock.--
            ``(1) Gain treated as ordinary income.--Except as otherwise 
        provided in regulations, if a taxpayer disposes of any targeted 
        urban area stock with respect to which a deduction was allowed 
        under subsection (a), the amount realized on such disposition--
                    ``(A) shall be recognized notwithstanding any other 
                provision of this subtitle, and
                    ``(B) to the extent such amount does not exceed the 
                amount allowed as a deduction under subsection (a) with 
                respect to such stock, shall be treated as ordinary 
                income.
            ``(2) Interest charged if disposition within 5 years of 
        purchase.--
                    ``(A) In general.--If a taxpayer disposes of any 
                targeted urban area stock with respect to which a 
                deduction was allowed under subsection (a) before the 
                end of the 5-year period beginning on the date such 
                stock was purchased by the taxpayer, the tax imposed by 
                this chapter for the taxable year in which such 
                disposition occurs shall be increased by the amount 
                determined under subparagraph (B).
                    ``(B) Additional amount.--For purposes of 
                subparagraph (A), the additional amount shall be equal 
                to the amount of interest (determined at the rate 
                applicable under section 6621(a)(2)) that would 
                accrue--
                            ``(i) during the period beginning on the 
                        date the stock was purchased by the taxpayer 
                        and ending on the date such stock was disposed 
                        of by the taxpayer,
                            ``(ii) on an amount equal to the aggregate 
                        decrease in tax of the taxpayer resulting from 
                        the deduction allowed under this subsection (a) 
                        with respect to the stock so disposed of.
                    ``(C) Special rule.--Any increase in tax under 
                subparagraph (A) shall not be treated as a tax imposed 
                by this chapter for purposes of--
                            ``(i) determining the amount of any credit 
                        allowable under this chapter, and
                            ``(ii) determining the amount of the tax 
                        imposed by section 55.
            ``(3) Exception for transfers at death.--This subsection 
        shall not apply to a transfer at death.
    ``(d) Disqualification.--
            ``(1) Issuer or stock ceases to qualify.--If, during the 
        10-year period beginning on the date targeted urban area stock 
        was purchased by the taxpayer--
                    ``(A) the issuer of such stock ceases to be a 
                qualified issuer (determined without regard to 
                subsection (f)(1)(C)), or
                    ``(B) the proceeds from the issuance of such stock 
                fail or otherwise cease to be invested by the issuer in 
                qualified targeted urban area property,
        then, notwithstanding any provision of this subtitle other than 
        paragraph (2), the taxpayer shall be treated for purposes of 
        subsection (c) as disposing of such stock during the taxable 
        year during which such cessation or failure occurs at its fair 
        market value as of 1st day of such taxable year.
            ``(2) Cessation of targeted urban area status not to cause 
        recapture.--A corporation shall not fail to be treated as a 
        qualified issuer for purposes of paragraph (1) solely by reason 
        of the termination or revocation of a tax targeted urban area 
        designation.
    ``(e) Targeted Urban Area Stock.--For purposes of this section,
            ``(1) In general.--The term `targeted urban area stock' 
        means stock of a corporation if--
                    ``(A) such stock was acquired on original issue 
                from the corporation, and
                    ``(B) such corporation was, at the time of issue, a 
                qualified issuer.
            ``(2) Proceeds must be invested in qualified targeted urban 
        area property.--Such term shall include such stock only to the 
        extent that the amount of proceeds of such issuance are used by 
        such issuer during the 12-month period beginning on the date of 
        issuance to acquire qualified targeted urban area property.
            ``(3) $5,000,000 limit.--Not more than $5,000,000 of stock 
        of such corporation and all related persons may be targeted 
        urban area stock.
    ``(f) Qualified Issuer.--For purposes of this section--
            ``(1) In general.--The term `qualified issuer' means any 
        domestic C corporation if--
                    ``(A) such corporation does not have more than one 
                class of stock,
                    ``(B) such corporation meets the targeted urban 
                area business requirements of paragraph (2),
                    ``(C) the sum of--
                            ``(i) the money,
                            ``(ii) the aggregate unadjusted bases of 
                        property owned by such corporation, and
                            ``(iii) the value of property leased to the 
                        corporation (as determined under regulations 
                        prescribed by the Secretary),
                does not exceed $5,000,000, and
                    ``(D) more than 20 percent of the total voting 
                power, and 20 percent of the total value, of the stock 
                of such corporation is owned by individuals or estates 
                or indirectly by individuals through partnerships or 
                trusts.
            ``(2) Targeted urban area business requirements.--
                    ``(A) In general.--A corporation meets the targeted 
                urban area business requirements of this paragraph for 
                any taxable year if--
                            ``(i) at least 80 percent of the total 
                        gross income of such corporation for the 
                        taxable year is derived from the active conduct 
                        of a trade or business within a tax targeted 
                        urban area,
                            ``(ii) less than 10 percent of the average 
                        of the aggregate unadjusted bases of the 
                        property of the corporation during such taxable 
                        year is attributable to securities (as defined 
                        in section 165(g)(2)),
                            ``(iii) substantially all of the use of the 
                        tangible property of the corporation (whether 
                        owned or leased) is within a tax targeted urban 
                        area,
                            ``(iv) substantially all of the services 
                        performed for the corporation by the employees 
                        of such corporation are performed in a tax 
                        targeted urban area, and
                            ``(v) no more than an insubstantial portion 
                        of the property of the corporation constitutes 
                        collectibles (as defined in section 408(m)(2)), 
                        unless such collectibles constitute property 
                        held primarily for sale to customers in the 
                        ordinary course of such trade or business.
                    ``(B) Special rules.--
                            ``(i) Rental real property.--For purposes 
                        of subparagraph (A), real property located 
                        within a tax targeted urban area and held for 
                        use by customers other than related persons 
                        shall be treated as the active conduct of a 
                        trade or business.
                            ``(ii) Excessive property or services 
                        provided to or by related persons.--A 
                        corporation shall cease to meet the 
                        requirements of this paragraph if--
                                    ``(I) more than 50 percent (by 
                                value) of the property or services 
                                acquired by the corporation during the 
                                taxable year are acquired from related 
                                persons which do not meet the 
                                requirements of this paragraph; or
                                    ``(II) more than 50 percent of the 
                                gross income of the corporation for the 
                                taxable year is attributable to 
                                property or services provided to 
                                related persons which do not meet the 
                                requirements of this paragraph.
                            ``(iii) New corporations.--In the case of a 
                        new corporation, clauses (i) and (ii) of 
                        subparagraph (A) shall not apply to the 1st 
                        taxable year of such corporation.
            ``(3) Qualified targeted urban area property.--The term 
        `targeted urban area property' means property to which section 
        168 applies--
                    ``(A) the original use of which commences with the 
                qualified issuer, and
                    ``(B) substantially all of the use of which is in a 
                tax targeted urban area.
            ``(4) Related person.--A person shall be treated as related 
        to another person if--
                    ``(A) the relationship of such persons is described 
                in section 267(b) or 707(b)(1), or
                    ``(B) such persons are engaged in trades or 
                businesses under common control (within the meaning of 
                subsections (a) and (b) of section 52).
        For purposes of subparagraph (A), in applying section 267(b) or 
        707(b)(1), `33 percent' shall be substituted for `50 percent'.
    ``(g) Basis Adjustment.--For purposes of this subtitle, the 
taxpayer's basis (without regard to this subsection) for the targeted 
urban area stock shall be reduced by the deduction allowed under 
subsection (a) with respect to such stock.

``SEC. 1394. OVERALL LIMITATION ON TARGETED URBAN AREA INCENTIVES.

    ``(a) General Rule.--The allocating commission of each targeted 
urban area shall make allocations of--
            ``(1) credit amounts,
            ``(2) expense treatment amounts, and
            ``(3) targeted urban area stock deduction amounts.
    ``(b) Limitation on Aggregate Amounts Allocated.--
            ``(1) Limitation.--No amount may be allocated under 
        subsection (a) by the allocating commission of any tax targeted 
        urban area if such allocation would result in the targeted 
        urban area limit for the calendar year of the allocation being 
        reduced below zero.
            ``(2) Targeted urban area limit.--For purposes of this 
        section--
                    ``(A) Basic amount.--Except as otherwise provided 
                in this paragraph, the targeted urban area limit for 
                any tax targeted urban area for any calendar year shall 
                be determined in accordance with the following formula:

      

                                                                                                                
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                                                                      U                                         


                    ``(B) Carryover of unused amounts.--
                            ``(i) In general.--Before the end of any 
                        calendar year, the allocating commission of any 
                        targeted urban area may elect--
                                    ``(I) to reduce the targeted urban 
                                area limit applicable to such targeted 
                                urban area for such year, and
                                    ``(II) to increase the targeted 
                                urban area limit applicable to such 
                                targeted urban area for the succeeding 
                                calendar year by an amount equal to 
                                such reduction.
                            ``(ii) Limitation.--The increase in a 
                        targeted urban area limit under clause (i)(II) 
                        for any calendar year shall not exceed 70 
                        percent of the targeted urban area limit 
                        otherwise applicable to the targeted urban area 
                        for such year.
                    ``(C) Special rule.--The targeted urban area limits 
                for any calendar year shall be determined by the 
                Secretary of Housing and Urban Development before the 
                beginning of such calendar year on the basis of the 
                most recent data available.
            ``(3) Determination of term `a'.--For purposes of paragraph 
        (2), the term `A' means--
                    ``(A) $500,000,000 in the case of calendar year 
                1993,
                    ``(B) $1,000,000,000 in the case of calendar year 
                1994,
                    ``(C) $2,000,000,000 in the case of calendar years 
                1995, 1996, and 1997, and
                    ``(D) in the case of any following calendar year, 
                the amount hereafter provided by law.
            ``(4) Determination of term `u'.--For purposes of paragraph 
        (2), the term `U' means the sum of the respective terms `X' 
        determined for all qualified cities (as defined in section 
        7880(c)(2)) under paragraph (5).
            ``(5) Determination of term `x'.--For purposes of paragraph 
        (2), the term `X' means the product of--
                    ``(A) the total population of the city involved, as 
                determined by the Secretary using the most recent data 
                that is available from the Secretary of Commerce 
                pursuant to the decennial census and pursuant to 
                reasonable estimates by such Secretary of changes 
                occurring in the data in the ensuing period;
                    ``(B) the need index of such city, as determined 
                under paragraph (6); and
                    ``(C) the need adjusted per capita income factor of 
                such city, as determined under paragraph (7).
            ``(6) Determination of need index.--
                    ``(A) For purposes of paragraph (5)(B), the term 
                `need index' means the number equal to the quotient 
                of--
                            ``(i) the term `N', as determined under 
                        subparagraph (B); divided by
                            ``(ii) the term `P', as determined under 
                        subparagraph (C).
                    ``(B) For purposes of subparagraph (A)(i), the term 
                `N' means the percentage constituted by the ratio of--
                            ``(i) the amount of funds allotted to the 
                        city in the fiscal year in which the calendar 
                        year begins under section 106(a)(3) of the 
                        Housing and Community Development Act of 1974; 
                        to
                            ``(ii) the sum of the amount of funds 
                        received by all eligible cities in such fiscal 
                        year under section 106(a)(3) of the Housing and 
                        Community Development Act of 1974.
                    ``(C) For purposes of subparagraph (A)(ii), the 
                term `P' means the percentage constituted by the ratio 
                of--
                            ``(i) the amount equal to the total 
                        population of the city, as determined by the 
                        Secretary using the most recent data that is 
                        available from the Secretary of Commerce 
                        pursuant to the decennial census and pursuant 
                        to reasonable estimates by such Secretary of 
                        changes occurring in the data in the ensuing 
                        period; to
                            ``(ii) the amount equal to the total 
                        population of all eligible cities in the 
                        current fiscal year.
                    ``(D) For purposes of this paragraph, the term 
                ``eligible cities'' means those cities which meet the 
                requirements of subparagraphs (A) and (B) of section 
                7880(c)(2).
            ``(7) Determination of need adjusted per capita income 
        factor.--
                    ``(A) For purposes of paragraph (5)(C) (and subject 
                to subparagraph (D)), the term `need adjusted per 
                capita income factor' means the amount equal to the 
                percentage determined for the city in accordance with 
                the following formula:

      

                                                                                                                
                                                                      I                                         
                                                   1-.15   <3-ln (> ---- <3-ln )>                               
                                                                      Q                                         

                    ``(B) For purposes of subparagraph (A), the term 
                `I' means the per capita income of the city for the 
                most recent year for which data is available, as 
                determined by the Secretary of Commerce.
                    ``(C) For purposes of subparagraph (A), the term 
                `Q' means the product of--
                            ``(i) the need index of such city, as 
                        determined under paragraph (6); and
                            ``(ii) the amount equal to the per capita 
                        income of the United States for the most recent 
                        year for which data is available, as determined 
                        by the Secretary of Commerce.
                    ``(D) In the case of a city for which the quotient 
                of the term `I' (as determined under subparagraph (B)) 
                divided by the term `Q' (as determined under 
                subparagraph (C)) is less than 0.2, then such quotient 
                shall be deemed to be equal to 0.2 for such city for 
                purposes of the formula under subparagraph (A).
    ``(c) Procedural Rule.--The allocating commission of each targeted 
urban area shall make allocations under subsection (a) in accordance 
with the procedures established under section 7880(a)(3)(D).
    ``(d) Allocating Commission.--For purposes of this section, the 
term `allocating commission' means the commission established pursuant 
to section 7880(a)(3)(C)(ii).
    ``(e) Operating Rules.--For purposes of this section--
            ``(1) Credit amount.--Any allocation of credit amount--
                    ``(A) shall specify the employer and taxable year 
                to which such allocation applies, and
                    ``(B) shall reduce the targeted urban area limit 
                for the calendar year in which such taxable year begins 
                by 1 dollar for each dollar of the amount so allocated.
            ``(2) Expense treatment amount.--Any allocation of an 
        expense treatment amount--
                    ``(A) shall specify the adjusted basis of the 
                property to which such allocation applies, and
                    ``(B) shall reduce the targeted urban area limit 
                for the calendar year in which the property is placed 
                in service by 35 cents for each dollar so allocated.
            ``(3) Zone stock deduction amount.--Any allocation of a 
        targeted urban area stock deduction amount--
                    ``(A) shall specify the stock purchases to which 
                the allocation relates, and
                    ``(B) shall reduce the targeted urban area limit 
                for the calendar year in which such taxable year begins 
                by 35 cents for each dollar of the amount so allocated.
    ``(f) Retroactive Allocations not Effective.--
            ``(1) In general.--No retroactive allocation under 
        subsection (a) shall be effective.
            ``(2) Retroactive allocation.--For purposes of subsection 
        (a), the term `retroactive allocation' means any allocation 
        of--
                    ``(A) an employment credit amount after the 
                beginning of the taxable year to which such allocation 
                applies,
                    ``(B) an expense treatment amount after the 
                property involved is placed in service, or
                    ``(C) a targeted urban area stock deduction amount 
                after the stock involved is acquired.''
    (b) Technical Amendment.--Subsection (a) of section 1016 (relating 
to adjustments to basis) is amended by striking out ``and'' at the end 
of paragraph (23); by striking out the period at the end of paragraph 
(24) and inserting in lieu thereof ``; and''; and by adding at the end 
thereof the following new paragraph:
            ``(25) to the extent provided in section 1393(g), in the 
        case of stock with respect to which a deduction was allowed or 
        allowable under section 1393(a).''
    (c) Clerical Amendment.--The table of subchapters for chapter 1 is 
amended by inserting after the item relating to subchapter T the 
following new item:

                              ``Subchapter U. Targeted Urban Area.''

SEC. 202. ALTERNATIVE MINIMUM TAX.

    Subsection (a) of section 56 (relating to adjustments applicable to 
all taxpayers) is amended by adding at the end thereof the following 
new paragraph:
            ``(9) Targeted urban area incentives allowed.--The 
        provisions of subchapter U shall apply, including for purposes 
        of determining adjusted current earnings under subsection 
        (g).''.

SEC. 203. ADJUSTED GROSS INCOME DEFINED.

    Section 62(a) (relating to the definition of adjusted gross income) 
is amended by inserting after paragraph (13) the following new 
paragraph:
            ``(14) Targeted urban area stock.--The deduction allowed by 
        section 1393.''.

SEC. 204. EFFECTIVE DATE.

    The amendments made by this title shall apply to taxable years 
ending after December 31, 1992.

                   TITLE III--REGULATORY FLEXIBILITY

SEC. 301. DEFINITION OF SMALL ENTITIES IN TARGETED URBAN AREA FOR 
              PURPOSES OF ANALYSIS OF REGULATORY FUNCTIONS.

    Section 601 of title 5, United States Code, is amended by--
            (1) striking out ``and'' at the end of paragraph (5); and
            (2) striking out paragraph (6) and inserting in lieu 
        thereof the following:
            ``(6) the term `small entity' means--
                    ``(A) a small business, small organization, or 
                small governmental jurisdiction defined in paragraphs 
                (3), (4), and (5) of this section, respectively; and
                    ``(B) any qualified targeted urban area business; 
                any unit of government that nominated an area which the 
                Secretary of Housing and Urban Development designates 
                as a targeted urban area (within the meaning of section 
                7880 of the Internal Revenue Code of 1986) that has a 
                rule pertaining to the carrying out of any project, 
                activity, or undertaking within such targeted urban 
                area; and any not-for-profit enterprise carrying out a 
                significant portion of its activities within such a 
                targeted urban area; and
            ``(7) the term `qualified targeted urban area business' 
        means any person, corporation, or other entity--
                    ``(A) which is engaged in the active conduct of a 
                trade or business within an targeted urban area (within 
                the meaning of section 7880 of the Internal Revenue 
                Code of 1986); and
                    ``(B) for whom at least 50 percent of its employees 
                perform substantially all of their services for the 
                employer in a targeted urban area (as so defined).''

SEC. 302. WAIVER OR MODIFICATION OF AGENCY RULES IN TARGETED URBAN 
              AREAS.

    (a) Chapter 6 of title 5, United States Code, is amended by 
redesignating sections 611 and 612 as sections 612 and 613, 
respectively, and inserting the following new section immediately after 
section 610:
``Sec. 611. Waiver or modification of agency rules in targeted urban 
              areas
    ``(a) Upon the written request of any government which nominated an 
area that the Secretary of Housing and Urban Development has designated 
as a targeted urban area under section 7880 of the Internal Revenue 
Code of 1986, an agency is authorized, in order to further the job 
creation, community development, or economic revitalization objectives 
with respect to such targeted urban area, to waive or modify all or 
part of any rule which it has authority to promulgate, as such rule 
pertains to the carrying out of projects, activities, or undertakings 
within such targeted urban area.
    ``(b) Nothing in this section shall authorize an agency to waive or 
modify any rule adopted to carry out a statute or Executive order which 
prohibits, or the purpose of which is to protect persons against, 
discrimination on the basis of race, color, religion, sex, familial 
status, national origin, age, or handicap.
    ``(c) A request under subsection (a) shall specify the rule or 
rules to be waived or modified and the change proposed, and shall 
briefly describe why the change would promote the achievement of the 
job creation, community development, or economic revitalization 
objectives of the targeted urban area. If such a request is made to any 
agency other than the Department of Housing and Urban Development, the 
requesting government shall send a copy of the request to the Secretary 
of Housing and Urban Development at the time the request is made.
    ``(d) In considering a request, the agency shall weigh the extent 
to which the proposed change is likely to further job creation, 
community development, or economic revitalization within the targeted 
urban area against the effect the change is likely to have on the 
underlying purposes of applicable statutes in the geographic area which 
would be affected by the change. The agency shall approve the request 
whenever it finds, in its discretion, that the public interest which 
the proposed change would serve in furthering such job creation, 
community development, or economic revitalization outweighs the public 
interest which continuation of the rule unchanged would serve. The 
agency shall not approve any request to waive or modify a rule if that 
waiver or modification would--
            ``(1) violate a statutory requirement (including any 
        requirements of the Fair Labor Standards Act of 1938 (52 Stat. 
        1060; 29 U.S.C. 201 et seq.)); or
            ``(2) be likely to present a significant risk to the public 
        health, including environmental or occupational health or 
        safety, or of environmental pollution.
    ``(e) If a request is disapproved, the agency shall inform all the 
requesting governments, and the Department of Housing and Urban 
Development, in writing of the reasons therefor and shall, to the 
maximum extent possible, work with such governments to develop an 
alternative, consistent with the standards contained in subsection (d).
    ``(f) Agencies shall discharge their responsibilities under this 
section in an expeditious manner, and shall make a determination on 
requests not later than 90 days after their receipt.
    ``(g) A waiver or modification of a rule under subsection (a) shall 
not be considered to be a rule, rulemaking, or regulation under chapter 
5 of this title. To facilitate reaching its decision on any requested 
waiver or modification, the agency may seek the views of interested 
parties and, if the views are to be sought, determine how they should 
be obtained and to what extent, if any, they should be taken into 
account in considering the request. The agency shall publish a notice 
in the Federal Register stating any waiver or modification of a rule 
under this section, the time such waiver or modification takes effect 
and its duration, and the scope of applicability of such waiver or 
modification.
    ``(h) In the event that an agency proposes to amend a rule for 
which a waiver or modification under this section is in effect, the 
agency shall not change the waiver or modification to impose additional 
requirements unless it determines, consistent with standards contained 
in subsection (d), that such action is necessary. Such determinations 
shall be published with the proposal to amend such rule.
    ``(i) No waiver or modification of a rule under this section shall 
remain in effect with respect to a targeted urban area after the 
targeted urban area designation has expired or has been revoked.
    ``(j) For purposes of this section, the term `rule' means (1) any 
rule as defined in section 551(4) of this title or (2) any rulemaking 
conducted on the record after opportunity for an agency hearing 
pursuant to sections 556 and 557 of this title.''
    (b) The analysis for chapter 6 of title 5, United States Code, is 
amended by redesignating the items relating to sections 611 and 612 as 
items relating to sections 612 and 613, respectively, and by inserting 
after the item relating to section 610 the following new item:

                              ``611. Waiver or modification of agency 
                                        rules in targeted urban 
                                        areas.''.
    (c) Section 601(2) of such title 5 is amended by inserting 
``(except for purposes of section 611'' immediately before ``means''.
    (d) Section 613 of such title 5, as redesignated by subsection (a), 
is amended--
            (1) in subsection (a) by inserting ``(except section 611)'' 
        immediately after ``chapter''; and
            (2) in subsection (b) by inserting ``as defined in section 
        601(2)'' immediately before the period at the end of the first 
        sentence.

SEC. 303. FEDERAL AGENCY SUPPORT OF TARGETED URBAN AREAS.

    In order to maximize all agencies' support of targeted urban areas, 
the Secretary of Housing and Urban Development is authorized to convene 
regional and local coordinating councils of any appropriate agencies to 
assist State and local governments to achieve the objectives agreed to 
in the course of action under section 7880 of the Internal Revenue Code 
of 1986.

 TITLE IV--ESTABLISHMENT OF FOREIGN-TRADE ZONES IN TARGETED URBAN AREAS

SEC. 401. FOREIGN-TRADE ZONE PREFERENCES.

    (a) Preference in Establishment of Foreign-Trade Zones in Targeted 
Urban Areas.--In processing applications for the establishment of 
foreign-trade zones pursuant to an Act ``To provide for the 
establishment, operation, and maintenance of foreign-trade zones in 
ports of entry of the United States, to expedite and encourage foreign 
commerce, and for other purposes'', approved June 18, 1934 (48 Stat. 
998), the Foreign-Trade Zone Board shall consider on a priority basis 
and expedite, to the maximum extent possible, the processing of any 
application involving the establishment of a foreign-trade zone within 
a targeted urban area designated pursuant to section 7880 of the 
Internal Revenue Code of 1986.
    (b) Application Procedure.--In processing applications for the 
establishment of ports of entry pursuant to ``An Act making 
appropriations for sundry civil expenses of the Government for the 
fiscal year ending June thirtieth, nineteen hundred and fifteen, and 
for other purposes'', approved August 1, 1914 (38 Stat. 609), the 
Secretary of the Treasury shall consider on a priority basis and 
expedite, to the maximum extent possible, the processing of any 
application involving the establishment of a port of entry which is 
necessary to permit the establishment of a foreign-trade zone within a 
targeted urban area so designated.
    (c) Application Evaluation.--In evaluating applications for the 
establishment of foreign-trade zones and ports of entry in connection 
with targeted urban areas so designated, the Foreign-Trade Zone Board 
and the Secretary of the Treasury shall approve the applications, to 
the maximum extent practicable, consistent with their respective 
statutory responsibilities.

 TITLE V--REPEAL OF TITLE VII OF THE HOUSING AND COMMUNITY DEVELOPMENT 
                              ACT OF 1987

SEC. 501. REPEAL.

    Title VII of the Housing and Community Development Act of 1987 is 
hereby repealed.

                                 <all>

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