[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 211 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                 S. 211

 To amend the Internal Revenue Code of 1986 to provide tax credits for 
       Indian investment and employment, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

             January 26 (legislative day, January 5), 1993

   Mr. McCain (for himself, Mr. Inouye, Mr. Domenici, Mr. Simon, Mr. 
    Daschle, Mr. Gorton, Mr. Boren, Mr. Murkowski, Mr. Baucus, Mr. 
 Campbell, and Mr. Bingaman) introduced the following bill; which was 
          read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to provide tax credits for 
       Indian investment and employment, 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 ``Indian Employment and Investment Act 
of 1993''.

SEC. 2. INVESTMENT TAX CREDIT FOR PROPERTY ON INDIAN RESERVATIONS.

    (a) Allowance of Indian Reservation Credit.--Section 46 of the 
Internal Revenue Code of 1986 (relating to investment credits) is 
amended by striking ``and'' at the end of paragraph (2), by striking 
the period at the end of paragraph (3) and inserting ``, and'', and by 
adding after paragraph (3) the following new paragraph:
            ``(4) the Indian reservation credit.''.
    (b) Amount of Indian Reservation Credit.--
            (1) In general.--Section 48 of such Code (relating to the 
        energy credit and the reforestation credit) is amended by 
        adding after subsection (b) the following new subsection:
    ``(c) Indian Reservation Credit.--
            ``(1) In general.--For purposes of section 46, the Indian 
        reservation credit for any taxable year is the Indian 
        reservation percentage of the qualified investment in qualified 
        Indian reservation property placed in service during such 
        taxable year, determined in accordance with the following 
        table:

          ``In the case of qualified
                                                                       
                  Indian reservation property
                                                 The Indian reservation
                  which is:
                                                         percentage is:
                  Reservation personal property......          10      
                  New reservation construction                 15      
                    property.
                  Reservation infrastructure                  15.      
                    investment.

            ``(2) Qualified investment in qualified indian reservation 
        property defined.--For purposes of this subpart--
                    ``(A) In general.--The term `qualified Indian 
                reservation property' means property--
                            ``(i) which is--
                                    ``(I) reservation personal 
                                property,
                                    ``(II) new reservation construction 
                                property, or
                                    ``(III) reservation infrastructure 
                                investment, and
                            ``(ii) not acquired (directly or 
                        indirectly) by the taxpayer from a person who 
                        is related to the taxpayer (within the meaning 
                        of section 465(b)(3)(C)).
                The term `qualified Indian reservation property' does 
                not include any property (or any portion thereof) 
                placed in service for purposes of conducting or housing 
                class I, II, or III gaming (as defined in section 4 of 
                the Indian Regulatory Act (25 U.S.C. 2703)).
                    ``(B) Qualified investment.--The term `qualified 
                investment' means--
                            ``(i) in the case of reservation 
                        infrastructure investment, the amount expended 
                        by the taxpayer for the acquisition or 
                        construction of the reservation infrastructure 
                        investment; and
                            ``(ii) in the case of all other qualified 
                        Indian reservation property, the taxpayer's 
                        basis for such property.
                    ``(C) Reservation personal property.--The term 
                `reservation personal property' means qualified 
                personal property which is used by the taxpayer 
                predominantly in the active conduct of a trade or 
                business within an Indian reservation. Property shall 
                not be treated as `reservation personal property' if it 
                is used or located outside the Indian reservation on a 
                regular basis.
                    ``(D) Qualified personal property.--The term 
                `qualified personal property' means property--
                            ``(i) for which depreciation is allowable 
                        under section 168,
                            ``(ii) which is not--
                                    ``(I) nonresidential real property,
                                    ``(II) residential rental property, 
                                or
                                    ``(III) real property which is not 
                                described in (I) or (II) and which has 
                                a class life of more than 12.5 years.
                For purposes of this subparagraph, the terms 
                `nonresidential real property', `residential rental 
                property', and `class life' have the respective 
                meanings given such terms by section 168.
                    ``(E) New reservation construction property.--The 
                term `new reservation construction property' means 
                qualified real property--
                            ``(i) which is located in an Indian 
                        reservation,
                            ``(ii) which is used by the taxpayer 
                        predominantly in the active conduct of a trade 
                        or business within an Indian reservation, and
                            ``(iii) which is originally placed in 
                        service by the taxpayer.
                    ``(F) Qualified real property.--The term `qualified 
                real property' means property for which depreciation is 
                allowable under section 168 and which is described in 
                clause (I), (II), or (III) of subparagraph (D)(ii).
                    ``(G) Reservation infrastructure investment.--
                            ``(i) In general.--The term `reservation 
                        infrastructure investment' means qualified 
                        personal property or qualified real property 
                        which--
                                    ``(I) benefits the tribal 
                                infrastructure,
                                    ``(II) is available to the general 
                                public, and
                                    ``(III) is placed in service in 
                                connection with the taxpayer's active 
                                conduct of a trade or business within 
                                an Indian reservation.
                            ``(ii) Property may be located outside the 
                        reservation.--Qualified personal property and 
                        qualified real property used or located outside 
                        an Indian reservation shall be reservation 
                        infrastructure investment only if its purpose 
                        is to connect to existing tribal infrastructure 
                        in the reservation, and shall include, but not 
                        be limited to, roads, power lines, water 
                        systems, railroad spurs, and communications 
                        facilities.
                    ``(H) Coordination with other credits.--The term 
                `qualified Indian reservation property' shall not 
                include any property with respect to which the energy 
                credit or the rehabilitation credit is allowed.
            ``(3) Real estate rentals.--For purposes of this section, 
        the rental to others of real property located within an Indian 
        reservation shall be treated as the active conduct of a trade 
        or business in an Indian reservation.
            ``(4) Indian reservation defined.--For purposes of this 
        subpart, the term `Indian reservation' means a reservation, as 
        defined in--
                    ``(A) section 3(d) of the Indian Financing Act of 
                1974 (25 U.S.C. 1452(d)), or
                    ``(B) section 4(10) of the Indian Child Welfare Act 
                of 1978 (25 U.S.C. 1903(10)).
            ``(5) Limitation based on unemployment.--
                    ``(A) General rule.--The Indian reservation credit 
                allowed under section 46 for any taxable year shall 
                equal--
                            ``(i) if the Indian unemployment rate on 
                        the applicable Indian reservation for which the 
                        credit is sought exceeds 300 percent of the 
                        national average unemployment rate at any time 
                        during the calendar year in which the property 
                        is placed in service or during the immediately 
                        preceding 2 calendar years, 100 percent of such 
                        credit,
                            ``(ii) if such Indian unemployment rate 
                        exceeds 150 percent but not 300 percent, 50 
                        percent of such credit, and
                            ``(iii) if such Indian unemployment rate 
                        does not exceed 150 percent, 0 percent of such 
                        credit.
                    ``(B) Special rule for large projects.--In the case 
                of a qualified Indian reservation property which has 
                (or is a component of a project which has) a projected 
                construction period of more than 2 years or a cost of 
                more than $1,000,000, subparagraph (A) shall apply by 
                substituting `during the earlier of the calendar year 
                in which the taxpayer enters into a binding agreement 
                to make a qualified investment or the first calendar 
                year in which the taxpayer has expended at least 10 
                percent of the taxpayer's qualified investment, or the 
                preceding calendar year' for `during the calendar year 
                in which the property is placed in service or during 
                the immediately preceding 2 calendar years'.
                    ``(C) Determination of indian unemployment.--For 
                purposes of this paragraph, with respect to any Indian 
                reservation, the Indian unemployment rate shall be 
                based upon Indians unemployed and able to work, and 
                shall be certified by the Secretary of the Interior.
            ``(6) Coordination with nonrevenue laws.--Any reference in 
        this subsection to a provision not contained in this title 
        shall be treated for purposes of this subsection as a reference 
        to such provision as in effect on the date of the enactment of 
        this paragraph.''.
            (2) Lodging to qualify.--Paragraph (2) of section 50(b) of 
        such Code (relating to property used for lodging) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (C),
                    (B) by striking the period at the end of 
                subparagraph (D) and inserting ``; and'' and
                    (C) by adding at the end thereof the following 
                subparagraph:
                    ``(E) new reservation construction property.''.
    (c) Recapture.--Subsection (a) of section 50 of such Code (relating 
to recapture in case of dispositions, etc.), is amended by adding at 
the end thereof the following new paragraph:
            ``(6) Special rules for indian reservation property.--
                    ``(A) In general.--If, during any taxable year, 
                property with respect to which the taxpayer claimed an 
                Indian reservation credit--
                            ``(i) is disposed of, or
                            ``(ii) in the case of reservation personal 
                        property--
                                    ``(I) otherwise ceases to be 
                                investment credit property with respect 
                                to the taxpayer, or
                                    ``(II) is removed from the Indian 
                                reservation, converted or otherwise 
                                ceases to be Indian reservation 
                                property,
                the tax under this chapter for such taxable year shall 
                be increased by the amount described in subparagraph 
                (B).
                    ``(B) Amount of increase.--The increase in tax 
                under subparagraph (A) shall equal the aggregate 
                decrease in the credits allowed under section 38 by 
                reason of section 48(c) for all prior taxable years 
                which would have resulted had the qualified investment 
                taken into account with respect to the property been 
                limited to an amount which bears the same ratio to the 
                qualified investment with respect to such property as 
                the period such property was held by the taxpayer bears 
                to the applicable recovery period under section 168(g).
                    ``(C) Coordination with other recapture 
                provisions.--In the case of property to which this 
                paragraph applies, paragraph (1) shall not apply and 
                the rules of paragraphs (3), (4), and (5) shall 
                apply.''.
    (d) Basis Adjustment To Reflect Investment Credit.--Paragraph (3) 
of section 50(c) of such Code (relating to basis adjustment to 
investment credit property) is amended by striking ``energy credit or 
reforestation credit'' and inserting ``energy credit, reforestation 
credit or Indian reservation credit other than with respect to any 
expenditure for new reservation construction property''.
    (e) Certain Governmental Use Property To Qualify.--Paragraph (4) of 
section 50(b) of such Code (relating to property used by governmental 
units or foreign persons or entities) is amended by redesignating 
subparagraphs (D) and (E) as subparagraphs (E) and (F), respectively, 
and inserting after subparagraph (C) the following new subparagraph:
                    ``(D) Exception for reservation infrastructure 
                investment.--This paragraph shall not apply for 
                purposes of determining the Indian reservation credit 
                with respect to reservation infrastructure 
                investment.''.
    (f) Application of At-Risk Rules.--Subparagraph (C) of section 
49(a)(1) of such Code is amended by striking ``and'' at the end of 
clause (ii), by striking the period at the end of clause (iii) and 
inserting ``, and'', and by adding at the end the following new clause:
                            ``(iv) the qualified investment in 
                        qualified Indian reservation property.''.
    (g) Clerical Amendments.--
            (1) Section 48 of such Code is amended by striking the 
        heading and inserting the following:

``SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; INDIAN RESERVATION 
              CREDIT.''.

            (2) The table of sections for subpart E of part IV of 
        subchapter A of chapter 1 is amended by striking out the item 
        relating to section 48 and inserting the following:

                              ``Sec. 48. Energy credit; reforestation 
                                        credit; Indian reservation 
                                        credit.''.
    (h) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 1993.

SEC. 3. INDIAN EMPLOYMENT CREDIT.

    (a) Allowance of Indian Employment Credit.--Section 38(b) of the 
Internal Revenue Code of 1986 (relating to general business credits) is 
amended by striking ``plus'' at the end of paragraph (6), by striking 
the period at the end of paragraph (7) and inserting ``, plus'', and by 
adding after paragraph (7) the following new paragraph:
            ``(8) the Indian employment credit as determined under 
        section 45(a).''.
    (b) Amount of Indian Employment Credit.--Subpart D of Part IV of 
subchapter A of chapter 1 of such Code (relating to business related 
credits) is amended by adding at the end thereof the following new 
section:

``SEC. 45. INDIAN EMPLOYMENT CREDIT.

    ``(a) Amount of Credit.--
            ``(1) In general.--For purposes of section 38, the amount 
        of the Indian employment credit determined under this section 
        with respect to any employer for any taxable year is 10 percent 
        (30 percent in the case of an employer with at least 85 percent 
        Indian employees throughout the taxable year) of the sum of--
                    ``(A) the qualified wages paid or incurred during 
                such taxable year, plus
                    ``(B) qualified employee health insurance costs 
                paid or incurred during such taxable year.
        In no event shall the amount of the Indian employment credit 
        for any taxable year exceed the credit limitation amount 
        determined under subsection (e) for such taxable year.
            ``(2) Indian employee.--For purposes of paragraph (1), the 
        term `Indian employee' means an employee who is an enrolled 
        member of an Indian tribe or the spouse of such a member.
    ``(b) Qualified Wages; Qualified Employee Health Insurance Costs.--
For purposes of this section--
            ``(1) Qualified wages.--
                    ``(A) In general.--The term `qualified wages' means 
                any wages paid or incurred by an employer for services 
                performed by an employee while such employee is a 
                qualified employee.
                    ``(B) Coordination with targeted jobs credit.--The 
                term `qualified wages' shall not include wages 
                attributable to service rendered during the 1-year 
                period beginning with the day the individual begins 
                work for the employer if any portion of such wages is 
                taken into account in determining the credit under 
                section 51.
            ``(2) Qualified employee health insurance costs.--
                    ``(A) In general.--The term `qualified employee 
                health insurance costs' means any amount paid or 
                incurred by an employer for health insurance to the 
                extent such amount is attributable to coverage provided 
                to any employee while such employee is a qualified 
                employee.
                    ``(B) Exception for amounts paid under salary 
                reduction arrangements.--No amount paid or incurred for 
                health insurance pursuant to a salary reduction 
                arrangement shall be taken into account under 
                subparagraph (A).
    ``(c) Qualified Employee.--For purposes of this section--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `qualified employee' means, with respect 
        to any period, any employee of an employer if--
                    ``(A) substantially all of the services performed 
                during such period by such employee for such employer 
                are performed within an Indian reservation,
                    ``(B) the principal place of abode of such employee 
                while performing such services is on or near the 
                reservation in which the services are performed, and
                    ``(C) the employee began work for such employer on 
                or after January 1, 1994.
            ``(2) Credit allowed only for first 7 years.--An employee 
        shall not be treated as a qualified employee for any period 
        after the date 7 years after the day on which such employee 
        first began work for the employer.
            ``(3) Individuals receiving wages in excess of $30,000 not 
        eligible.--An employee shall not be treated as a qualified 
        employee for any taxable year of the employer if the total 
        amount of the wages paid or incurred by such employer to such 
        employee during such taxable year (whether or not for services 
        within an Indian reservation) exceeds the amount determined at 
        an annual rate of $30,000. The Secretary shall adjust the 
        $30,000 amount contained in the preceding sentence for years 
        beginning after 1993 at the same time and in the same manner as 
        under section 415(d).
            ``(4) Employment must be trade or business employment.--An 
        employee shall be treated as a qualified employee for any 
        taxable year of the employer only if more than 50 percent of 
        the wages paid or incurred by the employer to such employee 
        during such taxable year are for services performed in a trade 
        or business of the employer. Any determination as to whether 
        the preceding sentence applies with respect to any employee for 
        any taxable year shall be made without regard to subsection 
        (f)(2).
            ``(5) Certain employees not eligible.--The term `qualified 
        employee' shall not include--
                    ``(A) any individual described in subparagraph (A), 
                (B), or (C) of section 51(i)(1),
                    ``(B) any 5-percent owner (as defined in section 
                416(i)(1)(B)),
                    ``(C) any individual who is neither an enrolled 
                member of an Indian tribe nor the spouse of an enrolled 
                member of an Indian tribe, and
                    ``(D) any individual if the services performed by 
                such individual for the employer involve the conduct of 
                class I, II, or III gaming as defined in section 4 of 
                the Indian Gaming Regulatory Act (25 U.S.C. 2703), or 
                are performed in a building housing such gaming 
                activity.
            ``(6) Indian tribe defined.--The term `Indian tribe' means 
        any Indian tribe, band, nation, pueblo, or other organized 
        group or community, including any Alaska Native village, or 
        regional or village corporation, as defined in, or established 
        pursuant to, the Alaska Native Claims Settlement Act (43 U.S.C. 
        1601 et seq.) which is recognized as eligible for the special 
        programs and services provided by the United States to Indians 
        because of their status as Indians.
            ``(7) Indian reservation defined.--The term `Indian 
        reservation' means a reservation, as defined in--
                    ``(A) section 3(d) of the Indian Financing Act of 
                1974 (25 U.S.C. 1452(d)), or
                    ``(B) section 4(10) of the Indian Child Welfare Act 
                of 1978 (25 U.S.C. 1903 (10)).
    ``(d) Early Termination of Employment by Employer.--
            ``(1) In general.--If the employment of any employee is 
        terminated by the taxpayer before the day 1 year after the day 
        on which such employee began work for the employer--
                    ``(A) no wages (or qualified employee health 
                insurance costs) with respect to such employee shall be 
                taken into account under subsection (a) for the taxable 
                year in which such employment is terminated, and
                    ``(B) the tax under this chapter for the taxable 
                year in which such employment is terminated shall be 
                increased by the aggregate credits (if any) allowed 
                under section 38(a) for prior taxable years by reason 
                of wages (or qualified employee health insurance costs) 
                taken into account with respect to such employee.
            ``(2) Carrybacks and carryovers adjusted.--In the case of 
        any termination of employment to which paragraph (1) applies, 
        the carrybacks and carryovers under section 39 shall be 
        properly adjusted.
            ``(3) Subsection not to apply in certain cases.--
                    ``(A) In general.--Paragraph (1) shall not apply 
                to--
                            ``(i) a termination of employment of an 
                        employee who voluntarily leaves the employment 
                        of the taxpayer,
                            ``(ii) a termination of employment of an 
                        individual who before the close of the period 
                        referred to in paragraph (1) becomes disabled 
                        to perform the services of such employment 
                        unless such disability is removed before the 
                        close of such period and the taxpayer fails to 
                        offer reemployment to such individual, or
                            ``(iii) a termination of employment of an 
                        individual if it is determined under the 
                        applicable State unemployment compensation law 
                        that the termination was due to the misconduct 
                        of such individual.
                    ``(B) Changes in form of business.--For purposes of 
                paragraph (1), the employment relationship between the 
                taxpayer and an employee shall not be treated as 
                terminated--
                            ``(i) by a transaction to which section 
                        381(a) applies if the employee continues to be 
                        employed by the acquiring corporation, or
                            ``(ii) by reason of a mere change in the 
                        form of conducting the trade or business of the 
                        taxpayer if the employee continues to be 
                        employed in such trade or business and the 
                        taxpayer retains a substantial interest in such 
                        trade or business.
            ``(4) Special rule.--Any increase in tax under paragraph 
        (1) shall not be treated as a tax imposed by this chapter for 
        purposes of--
                    ``(A) determining the amount of any credit 
                allowable under this chapter, and
                    ``(B) determining the amount of the tax imposed by 
                section 55.
    ``(e) Credit Limitation Amount.--For purposes of this section--
            ``(1) Credit limitation amount.--The credit limitation 
        amount for a taxable year shall be an amount equal to the 
        credit rate (10 or 30 percent as determined under subsection 
        (a)) multiplied by the increased credit base.
            ``(2) Increased credit base.--The increased credit base for 
        a taxable year shall be the excess of--
                    ``(A) the sum of any qualified wages and qualified 
                employee health insurance costs paid or incurred by the 
                employer during the taxable year with respect to 
                employees whose wages (paid or incurred by the 
                employer) during the taxable year do not exceed the 
                amount determined under paragraph (3) of subsection 
                (c), over
                    ``(B) the sum of any qualified wages and qualified 
                employee health insurance costs paid or incurred by the 
                employer (or any predecessor) during calendar year 1993 
                with respect to employees whose wages (paid or incurred 
                by the employer or any predecessor) during 1993 did not 
                exceed $30,000.
            ``(3) Special rule for short taxable years.--For any 
        taxable year having less than 12 months--
                    ``(A) the amounts paid or incurred by the employer 
                shall be annualized for purposes of determining the 
                increased credit base, and
                    ``(B) the credit limitation amount shall be 
                multiplied by a fraction, the numerator of which is the 
                number of days in the taxable year and the denominator 
                of which is 365.
    ``(f) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Wages.--The term `wages' has the same meaning given 
        to such term in section 51.
            ``(2) Controlled groups.--
                    ``(A) All employers treated as a single employer 
                under section (a) or (b) of section 52 shall be treated 
                as a single employer for purposes of this section.
                    ``(B) The credit (if any) determined under this 
                section with respect to each such employer shall be its 
                proportionate share of the wages and qualified employee 
                health insurance costs giving rise to such credit.
            ``(3) Certain other rules made applicable.--Rules similar 
        to the rules of section 51(k) and subsections (c), (d), and (e) 
        of section 52 shall apply.
            ``(4) Coordination with nonrevenue laws.--Any reference in 
        this section to a provision not contained in this title shall 
        be treated for purposes of this section as a reference to such 
        provision as in effect on the date of the enactment of this 
        paragraph.''.
    (c) Denial of Deduction for Portion of Wages Equal to Indian 
Employment Credit.--
            (1) Subsection (a) of section 280C of such Code (relating 
        to rule for targeted jobs credit) is amended by striking 
        ``51(a)'' and inserting ``45(a), 51(a), and''.
            (2) Subsection (c) of section 196 of such Code (relating to 
        deduction for certain unused business credits) is amended by 
        striking ``and'' at the end of paragraph (5), by striking the 
        period at the end of paragraph (6) and inserting ``, and'', and 
        by adding at the end the following new paragraph:
            ``(7) the Indian employment credit determined under section 
        45(a).''.
    (d) Denial of Carrybacks to Preenactment Years.--Subsection (d) of 
section 39 of such Code is amended by adding at the end thereof the 
following new paragraph:
            ``(4) No carryback of section 45 credit before enactment.--
        No portion of the unused business credit for any taxable year 
        which is attributable to the Indian employment credit 
        determined under section 45 may be carried to a taxable year 
        ending before the date of the enactment of section 45.''.
    (e) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end thereof the following:

                              ``Sec. 45. Indian employment credit.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to wages paid or incurred after December 31, 1993.

                                 <all>

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