[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3467 Introduced in House (IH)]







104th CONGRESS
  2d Session
                                H. R. 3467

To amend the Internal Revenue Code of 1986 to allow the designation of 
              renewal communities, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 16, 1996

   Mr. Watts of Oklahoma (for himself, Mr. Talent, Mrs. Myrick, Mr. 
 English of Pennsylvania, Mr. Weldon of Florida, Mr. Knollenberg, Mr. 
Kolbe, Mr. Riggs, Mr. Chabot, Mr. Chambliss, Mr. Coburn, Mr. Flanagan, 
     Mr. Gutknecht, Mr. Largent, Mr. LaTourette, Mr. Norwood, Mrs. 
 Seastrand, Mr. Souder, Mr. Stockman, Mr. Thornberry, Mr. Weller, Mr. 
    Wicker, Mr. Baker of Louisiana, Mr. Ballenger, Mr. Bartlett of 
 Maryland, Mr. Barton of Texas, Mr. Blute, Mr. Burton of Indiana, Mr. 
   Calvert, Mr. Doolittle, Mr. Dornan, Mr. Emerson, Mr. Hastert, Mr. 
Hayes, Mr. Hoekstra, Mr. Hoke, Mr. Hutchinson, Mr. King, Mr. Kingston, 
 Mr. Lewis of Kentucky, Mr. Linder, Mr. McCrery, Mr. Shays, Mr. Wamp, 
 Mr. McIntosh, Mr. DeLay, and Mr. Taylor of North Carolina) introduced 
  the following bill; which was referred to the Committee on Ways and 
 Means, and in addition to the Committees on Economic and Educational 
  Opportunities, Banking and Financial Services, and Commerce, for a 
 period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to allow the designation of 
              renewal communities, 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 AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as ``Saving Our Children: 
The American Community Renewal Act of 1996''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title and table of contents.
Sec. 2. Findings and purpose.
       TITLE I--DESIGNATION AND TREATMENT OF RENEWAL COMMUNITIES

Sec. 101. Short title.
Sec. 102. Statement of purpose.
Sec. 103. Designation and treatment of renewal communities.
Sec. 104. Evaluation and reporting requirements.
Sec. 105. Interaction with other Federal programs.
Sec. 106. Deduction for contributions to family development accounts 
                            allowable whether or not taxpayer itemizes.
Sec. 107. Allowance of commercial revitalization credit.
Sec. 108. Conforming and clerical amendments.
                  TITLE II--ADDITIONAL TAX PROVISIONS

Sec. 201. Work opportunity tax credit.
Sec. 202. Credit for certain charitable contributions.
Sec. 203. Deduction for charitable contributions to be allowed to 
                            individuals who do not itemize deductions.
         TITLE III--PREVENTION AND TREATMENT OF SUBSTANCE ABUSE

Sec. 301. Prevention and treatment of substance abuse; services 
                            provided through religious organizations.
    TITLE IV--LOW-INCOME EDUCATIONAL OPPORTUNITY SCHOLARSHIP PROGRAM

Sec. 401. Short title.
Sec. 402. Findings; precedents.
Sec. 403. Purposes.
Sec. 404. Plan submission; requirements.
Sec. 405. Uses of funds.
Sec. 406. Scholarship program.
Sec. 407. Allocation of funds among renewal communities.
Sec. 408. Parental right of choice in education.
Sec. 409. Eligible schools.
Sec. 410. Administration of program and treatment of funds.
Sec. 411. Contributions to scholarship program from other sources.
Sec. 412. Use of excess funds for additional educational purposes.
Sec. 413. Evaluation.
Sec. 414. Effect on other programs.
Sec. 415. Judicial review.
Sec. 416. Definitions.
Sec. 417. Authorization of appropriations.
         TITLE V--ADDITIONAL INCENTIVES FOR RENEWAL COMMUNITIES

Sec. 501. CRA credit for investments in community development 
                            organizations located in renewal 
                            communities.
Sec. 502. FDA user fee amendment.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress makes the following findings:
            (1) Many of the Nation's urban centers are places with high 
        levels of poverty, high rates of welfare dependency, high crime 
        rates, poor schools, and joblessness.
            (2) Federal tax incentives and regulatory reforms can 
        encourage economic growth, job creation, and small business 
        formation in many urban centers.
            (3) Encouraging private sector investment in America's 
        economically distressed urban and rural areas is essential to 
        breaking the cycle of poverty and the related ills of crime, 
        drug abuse, illiteracy, welfare dependency, and unemployment.
    (b) Purpose.--The purpose of this Act is to increase job creation, 
small business expansion and formation, educational opportunities, and 
homeownership, and to foster moral renewal, in economically depressed 
areas by providing Federal tax incentives, regulatory reforms, school 
reform pilot projects, and homeownership incentives.

       TITLE I--DESIGNATION AND TREATMENT OF RENEWAL COMMUNITIES

SEC. 101. SHORT TITLE.

    This title may be cited as the ``Renewing American Communities Act 
of 1996''.

SEC. 102. STATEMENT OF PURPOSE.

    It is the purpose of this title to provide for the establishment of 
renewal communities in order to stimulate the creation of new jobs, 
particularly for disadvantaged workers and long-term unemployed 
individuals, and to promote revitalization of economically distressed 
areas 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) improved local services and an increase in the economic 
        stake of renewal community residents in their own community and 
        its development, particularly through the increased involvement 
        of private, local, and neighborhood organizations.

SEC. 103. DESIGNATION AND TREATMENT OF RENEWAL COMMUNITIES.

    (a) In General.--Chapter 1 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subchapter:

                  ``Subchapter W--Renewal Communities

                              ``Part I.   Designation.
                              ``Part II.  Renewal community capital 
                                        gain and stock.
                              ``Part III. Family development accounts.
                              ``Part IV.  Additional Incentives.

                         ``PART I--DESIGNATION

                              ``Sec. 1400. Designation of Renewal 
                                        Communities.

``SEC. 1400. DESIGNATION OF RENEWAL COMMUNITIES.

    ``(a) Designation.--
            ``(1) Definitions.--For purposes of this title, the term 
        `renewal community' means any area--
                    ``(A) which is nominated by one or more local 
                governments and the State or States in which it is 
                located for designation as a renewal community 
                (hereinafter in this section referred to as a 
                `nominated area'), and
                    ``(B) which the Secretary of Housing and Urban 
                Development, after consultation with--
                            ``(i) the Secretaries of Agriculture, 
                        Commerce, Labor, and the Treasury; the Director 
                        of the Office of Management and Budget; and the 
                        Administrator of the Small Business 
                        Administration, and
                            ``(ii) in the case of an area on an Indian 
                        reservation, the Secretary of the Interior,
                designates as a renewal community.
            ``(2) Number of designations.--
                    ``(A) In general.--The Secretary of Housing and 
                Urban Development may designate not more than 100 
                nominated areas as renewal communities.
                    ``(B) Minimum designation in rural areas.--Of the 
                areas designated under paragraph (1), at least 10 
                percent must be areas--
                            ``(i) which are within a local government 
                        jurisdiction or jurisdictions with a population 
                        of less than 50,000 (as determined under the 
                        most recent census data available),
                            ``(ii) which are outside of a metropolitan 
                        statistical area (within the meaning of section 
                        143(k)(2)(B)), or
                            ``(iii) which are determined by the 
                        Secretary of Housing and Urban Development, 
                        after consultation with the Secretary of 
                        Commerce, to be rural areas.
                    ``(C) Additional designations to replace revoked 
                designations.--
                            ``(i) In general.--The Secretary of Housing 
                        and Urban Development may designate one 
                        additional area under subparagraph (A) to 
                        replace each area for which the designation is 
                        revoked under subsection (b)(2), but in no 
                        event may more than 100 areas designated under 
                        this subsection bear designations as renewal 
                        communities at any time.
                            ``(ii) Extension of time limit on 
                        designations.--In the case of any designation 
                        made under this subparagraph, paragraph (4)(B) 
                        shall be applied by substituting `36-month' for 
                        `24-month'.
            ``(3) Areas designated based solely on degree of poverty, 
        etc.--
                    ``(A) In general.--Except as otherwise provided in 
                this section, the nominated areas designated as renewal 
                communities under this subsection shall be those 
                nominated areas with the highest average ranking with 
                respect to the criteria described in subparagraphs (C), 
                (D), and (E) of subsection (c)(3). For purposes of the 
                preceding sentence, an area shall be ranked within each 
                such criterion on the basis of the amount by which the 
                area exceeds such criterion, with the area which 
                exceeds such criterion by the greatest amount given the 
                highest ranking.
                    ``(B) Exception where inadequate course of action, 
                etc.--An area shall not be designated under 
                subparagraph (A) if the Secretary of Housing and Urban 
                Development determines that the course of action 
                described in subsection (d)(2) with respect to such 
                area is inadequate.
                    ``(C) Separate application to rural and other 
                areas.--Subparagraph (A) shall be applied separately 
                with respect to areas described in paragraph (2)(B) and 
                to other areas.
            ``(4) Limitation on designations.--
                    ``(A) Publication of regulations.--The Secretary of 
                Housing and Urban Development shall prescribe by 
                regulation no later than 4 months after the date of the 
                enactment of this section, after consultation with the 
                officials described in paragraph (1)(B)--
                            ``(i) the procedures for nominating an area 
                        under paragraph (1)(A),
                            ``(ii) the parameters relating to the size 
                        and population characteristics of a renewal 
                        community, and
                            ``(iii) the manner in which nominated areas 
                        will be evaluated based on the criteria 
                        specified in subsection (d).
                    ``(B) Time limitations.--The Secretary of Housing 
                and Urban Development may designate nominated areas as 
                renewal communities only during the 24-month period 
                beginning on the first day of the first month following 
                the month in which the regulations described in 
                subparagraph (A) are prescribed.
                    ``(C) Procedural rules.--The Secretary of Housing 
                and Urban Development shall not make any designation of 
                a nominated area as a renewal community under paragraph 
                (2) unless--
                            ``(i) the local governments and the State 
                        in which the nominated area is located have the 
                        authority--
                                    ``(I) to nominate such area for 
                                designation as a renewal community,
                                    ``(II) to make the State and local 
                                commitments described in subsection 
                                (d), and
                                    ``(III) to provide assurances 
                                satisfactory to the Secretary of 
                                Housing and Urban Development that such 
                                commitments will be fulfilled,
                            ``(ii) a nomination regarding such area is 
                        submitted in such a manner and in such form, 
                        and contains such information, as the Secretary 
                        of Housing and Urban Development shall by 
                        regulation prescribe, and
                            ``(iii) the Secretary of Housing and Urban 
                        Development determines that any information 
                        furnished is reasonably accurate.
            ``(5) Nomination process for indian reservations.--For 
        purposes of this subchapter, in the case of a nominated area on 
        an Indian reservation, the reservation governing body (as 
        determined by the Secretary of the Interior) shall be treated 
        as being both the State and local governments with respect to 
        such area.
    ``(b) Period for Which Designation is in Effect.--
            ``(1) In general.--Any designation of an area as a renewal 
        community 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 7th calendar year 
                following the calendar year in which such date occurs,
                    ``(B) the termination date designated by the State 
                and local governments in their nomination pursuant to 
                subsection (a)(4)(C)(ii), or
                    ``(C) the date the Secretary of Housing and Urban 
                Development revokes such designation under paragraph 
                (2).
            ``(2) Revocation of designation.--The Secretary of Housing 
        and Urban Development may, after--
                    ``(A) consultation with the officials described in 
                subsection (a)(1)(B) (and the Secretary of Education if 
                notification required under section 404 of the Low-
                Income Educational Opportunity Scholarship Act of 1996 
                is received), and
                    ``(B) a hearing on the record involving officials 
                of the State or local government involved (or both, if 
                applicable),
        revoke the designation of an area if the Secretary of Housing 
        and Urban Development determines that the local government or 
        State in which the area is located is not complying 
        substantially with the State or local commitments, 
        respectively, described in subsection (d).
    ``(c) Area and Eligibility Requirements.--
            ``(1) In general.--The Secretary of Housing and Urban 
        Development may designate any nominated area as a renewal 
        community under subsection (a) only if the area meets the 
        requirements of paragraphs (2) and (3) of this subsection.
            ``(2) Area requirements.--A nominated area meets the 
        requirements of this paragraph if--
                    ``(A) the area is within the jurisdiction of a 
                local government,
                    ``(B) the boundary of the area is continuous, and
                    ``(C) the area--
                            (i) has a population, as determined by the 
                        most recent census data available, of at 
                        least--
                                    ``(I) 4,000 if any portion of such 
                                area (other than a rural area described 
                                in subsection (a)(2)(B)(i)) is located 
                                within a metropolitan statistical area 
                                (within the meaning of section 
                                143(k)(2)(B)) which has a population of 
                                50,000 or greater, or
                                    ``(II) 1,000 in any other case, or
                            ``(ii) is entirely within an Indian 
                        reservation (as determined by the Secretary of 
                        the Interior).
            ``(3) Eligibility requirements.--A nominated area meets the 
        requirements of this paragraph if the State and the local 
        governments in which it is located certify (and the Secretary 
        of Housing and Urban Development, after such review of 
        supporting data as he deems appropriate, accepts such 
        certification) that--
                    ``(A) the area is one of pervasive poverty, 
                unemployment, and general distress,
                    ``(B) the area is located wholly within the 
                jurisdiction of a local government which is eligible 
                for Federal assistance under section 119 of the Housing 
                and Community Development Act of 1974, as in effect on 
                the date of the enactment of this section,
                    ``(C) the unemployment rate in the area, as 
                determined by the appropriate available data, was at 
                least 1\1/2\ times the national unemployment rate for 
                the period to which such data relate,
                    ``(D) the poverty rate (as determined by the most 
                recent census data available) for each population 
                census tract (or where not tracted, the equivalent 
                county division as defined by the Bureau of the Census 
                for the purpose of defining poverty areas) within the 
                area was at least 20 percent for the period to which 
                such data relate, and
                    ``(E) at least 70 percent of the households living 
                in the area have incomes below 80 percent of the median 
                income of households within the jurisdiction of the 
                local government (determined in the same manner as 
                under section 119(b)(2) of the Housing and Community 
                Development Act of 1974).
    ``(d) Required State and Local Commitments.--
            ``(1) In general.--The Secretary of Housing and Urban 
        Development may designate any nominated area as a renewal 
        community under subsection (a) only if--
                    ``(A) the local government and the State in which 
                the area is located agree in writing that, during any 
                period during which the area is a renewal community, 
                such governments will--
                            ``(i) follow a specified course of action 
                        which meets the requirements of paragraph (2) 
                        and is designed to reduce the various burdens 
                        borne by employers or employees in such area, 
                        and
                            ``(ii) comply with the requirements of the 
                        Low-Income Educational Opportunity Scholarship 
                        Act of 1996, and
                    ``(B) the economic growth promotion requirements of 
                paragraph (3) are met.
            ``(2) Course of action.--
                    ``(A) In general.--A course of action meets the 
                requirements of this paragraph if such course of action 
                is a written document, signed by a State (or local 
                government) and neighborhood organizations, which 
                evidences a partnership between such State or 
                government and community-based organizations and which 
                commits each signatory to specific and measurable 
                goals, actions, and timetables. Such course of action 
                shall include at least five of the following:
                            ``(i) A reduction of tax rates or fees 
                        applying within the renewal community.
                            ``(ii) An increase in the level of 
                        efficiency of local services within the renewal 
                        community.
                            ``(iii) Crime reduction strategies, such as 
                        crime prevention (including the provision of 
                        such services by nongovernmental entities).
                            ``(iv) Actions to reduce, remove, simplify, 
                        or streamline governmental requirements 
                        applying within the renewal community.
                            ``(v) Involvement in the program by private 
                        entities, organizations, neighborhood 
                        organizations, and community groups, 
                        particularly those in the renewal community, 
                        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 from 
                        the renewal community.
                            ``(vi) State or local income tax benefits 
                        for fees paid for services performed by a 
                        nongovernmental entity which were formerly 
                        performed by a governmental entity.
                            ``(vii) The gift (or sale at below fair 
                        market value) of surplus realty (such as land, 
                        homes, and commercial or industrial structures) 
                        in the renewal community to neighborhood 
                        organizations, community development 
                        corporations, or private companies.
                    ``(B) Recognition of past efforts.--For purposes of 
                this section, in evaluating the course of action agreed 
                to by any State or local government, the Secretary of 
                Housing and Urban Development shall take into account 
                the past efforts of such State or local government in 
                reducing the various burdens borne by employers and 
                employees in the area involved.
            ``(3) Economic growth promotion requirements.--The economic 
        growth promotion requirements of this paragraph are met with 
        respect to a nominated area if the local government and the 
        State in which such area is located certify in writing that 
        such government and State, respectively, have repealed or 
        otherwise will not enforce within the area, if such area is 
        designated as a renewal community--
                    (A) licensing requirements for occupations that do 
                not ordinarily require a professional degree,
                    (B) zoning restrictions on home-based businesses 
                which do not create a public nuisance,
                    (C) permit requirements for street vendors who do 
                not create a public nuisance,
                    (D) zoning or other restrictions that impede the 
                formation of schools or child care centers, and
                    (E) franchises or other restrictions on competition 
                for businesses providing public services, including but 
                not limited to taxicabs, jitneys, cable television, or 
                trash hauling,
        except to the extent that such regulation of businesses and 
        occupations is necessary for and well-tailored to the 
        protection of health and safety.
    ``(e) Special Rules for Empowerment Zones and Enterprise 
Communities Designated as Renewal Communities.--
            ``(1) In general.--Any empowerment zone or enterprise 
        community which is designated as a renewal community under this 
        section shall be treated as if its designation as an 
        empowerment zone or enterprise community ended (except as 
        provided in paragraph (2)) on the date of such designation as a 
        renewal community.
            ``(2) Enterprise zone facility bonds.--In the case of an 
        empowerment zone or enterprise community described in paragraph 
        (1), designation as an empowerment zone or enterprise community 
        shall be treated as ended, for purposes of applying section 
        1394, with respect to obligations issued after the date of 
        designation as a renewal community, except that designation as 
        an empowerment zone or enterprise community shall not be 
        treated as ended with respect to any obligation (or series of 
        obligations) issued to refund an obligation issued before such 
        date, if the refunding obligation meets the requirements of 
        subclauses (I), (II), and (III) of section 144(a)(12)(A)(ii).
    ``(f) Definitions.--For purposes of this subchapter--
            ``(1) Governments.--If more than one government seeks to 
        nominate an area as a renewal community, any reference to, or 
        requirement of, this section shall apply to all such 
        governments.
            ``(2) State.--The term `State' includes Puerto Rico, the 
        Virgin Islands of the United States, Guam, American Samoa, the 
        Northern Mariana Islands, and any other possession of the 
        United States.
            ``(3) 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.

          ``PART II--RENEWAL COMMUNITY CAPITAL GAIN AND STOCK

                              ``Sec. 1400A. Renewal community capital 
                                        gain.
                              ``Sec. 1400B. Renewal community stock.
                              ``Sec. 1400C. Renewal community business 
                                        defined.

``SEC. 1400A. RENEWAL COMMUNITY CAPITAL GAIN.

    ``(a) General Rule.--Gross income does not include any qualified 
capital gain recognized on the sale or exchange of a qualified 
community asset held for more than 5 years.
    ``(b) Qualified Community Asset.--For purposes of this section--
            ``(1) In general.--The term `qualified community asset' 
        means--
                    ``(A) any qualified community stock,
                    ``(B) any qualified community business property, 
                and
                    ``(C) any qualified community partnership interest.
            ``(2) Qualified community stock.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `qualified community stock' 
                means any stock in a domestic corporation if--
                            ``(i) such stock is acquired by the 
                        taxpayer on original issue from the corporation 
                        solely in exchange for cash,
                            ``(ii) as of the time such stock was 
                        issued, such corporation was a renewal 
                        community business (or, in the case of a new 
                        corporation, such corporation was being 
                        organized for purposes of being a renewal 
                        community business), and
                            ``(iii) during substantially all of the 
                        taxpayer's holding period for such stock, such 
                        corporation qualified as a renewal community 
                        business.
                    ``(B) Exclusion of stock for which deduction under 
                section 1400b allowed.--The term `qualified community 
                stock' shall not include any stock the basis of which 
                is reduced under section 1400B.
                    ``(C) Redemptions.--The term `qualified community 
                stock' shall not include any stock acquired from a 
                corporation which made a substantial stock redemption 
                or distribution (without a bona fide business purpose 
                therefor) in an attempt to avoid the purposes of this 
                section.
            ``(3) Qualified community business property.--
                    ``(A) In general.--The term `qualified community 
                business property' means tangible property if--
                            ``(i) such property was acquired by the 
                        taxpayer by purchase (as defined in section 
                        179(d)(2)) after the date on which the 
designation of the renewal community took effect,
                            ``(ii) the original use of such property in 
                        the renewal community commences with the 
                        taxpayer, and
                            ``(iii) during substantially all of the 
                        taxpayer's holding period for such property, 
                        substantially all of the use of such property 
                        was in a renewal community business of the 
                        taxpayer.
                    ``(B) Special rule for substantial improvements.--
                            ``(i) In general.--The requirements of 
                        clauses (i) and (ii) of subparagraph (A) shall 
                        be treated as satisfied with respect to--
                                    ``(I) property which is 
                                substantially improved by the taxpayer, 
                                and
                                    ``(II) any land on which such 
                                property is located.
                            ``(ii) Substantial improvement.--For 
                        purposes of clause (i), property shall be 
                        treated as substantially improved by the 
                        taxpayer only if, during any 24-month period 
                        beginning after the date on which the 
                        designation of the renewal community took 
                        effect, additions to basis with respect to such 
                        property in the hands of the taxpayer exceed 
                        the greater of--
                                    ``(I) an amount equal to the 
                                adjusted basis at the beginning of such 
                                24-month period in the hands of the 
                                taxpayer, or
                                    ``(II) $5,000.
                    ``(C) Limitation on land.--The term `qualified 
                community business property' shall not include land 
                which is not an integral part of a renewal community 
                business.
            ``(4) Qualified community partnership interest.--The term 
        `qualified community partnership interest' means any interest 
        in a partnership if--
                    ``(A) such interest is acquired by the taxpayer 
                from the partnership solely in exchange for cash,
                    ``(B) as of the time such interest was acquired, 
                such partnership was a renewal community business (or, 
                in the case of a new partnership, such partnership was 
                being organized for purposes of being a renewal 
                community business), and
                    ``(C) during substantially all of the taxpayer's 
                holding period for such interest, such partnership 
                qualified as a renewal community business.
        A rule similar to the rule of paragraph (2)(C) shall apply for 
        purposes of this paragraph.
            ``(5) Treatment of subsequent purchasers.--The term 
        `qualified community asset' includes any property which would 
        be a qualified community asset but for paragraph (2)(A)(i), 
        (3)(A)(ii), or (4)(A) in the hands of the taxpayer if such 
        property was a qualified community asset in the hands of all 
        prior holders.
            ``(6) 10-year safe harbor.--If any property ceases to be a 
        qualified community asset by reason of paragraph (2)(A)(iii), 
        (3)(A)(iii), or (4)(C) after the 10-year period beginning on 
        the date the taxpayer acquired such property, such property 
        shall continue to be treated as meeting the requirements of 
        such paragraph; except that the amount of gain to which 
        subsection (a) applies on any sale or exchange of such property 
        shall not exceed the amount which would be qualified capital 
        gain had such property been sold on the date of such cessation.
            ``(7) Treatment of community designation terminations.--The 
        termination of any designation of an area as a renewal 
        community shall be disregarded for purposes of determining 
        whether any property is a qualified community asset.
    ``(c) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualified capital gain.--Except as otherwise provided 
        in this subsection, the term `qualified capital gain' means any 
        long-term capital gain recognized on the sale or exchange of a 
        qualified community asset held for more than 5 years 
        (determined without regard to any period before the designation 
        of the renewal community).
            ``(2) Certain gain on real property not qualified.--The 
        term `qualified capital gain' shall not include any gain which 
        would be treated as ordinary income under section 1250 if 
        section 1250 applied to all depreciation rather than the 
        additional depreciation.
            ``(3) Gain attributable to periods after termination of 
        community designation not qualified.--The term `qualified 
        capital gain' shall not include any gain attributable to 
periods after the termination of any designation of an area as a 
renewal community.
            ``(4) Related party transactions.--The term `qualified 
        capital gain' shall not include any gain attributable, directly 
        or indirectly, in whole or in part, to a transaction with a 
        related person. For purposes of this paragraph, persons are 
        related to each other if such persons are described in section 
        267(b) or 707(b)(1).
    ``(d) Treatment of Pass-Thru Entities.--
            ``(1) Sales and exchanges.--Gain on the sale or exchange of 
        an interest in a pass-thru entity held by the taxpayer (other 
        than an interest in an entity which was a renewal community 
        business during substantially all of the period the taxpayer 
        held such interest) for more than 5 years shall be treated as 
        gain described in subsection (a) to the extent such gain is 
        attributable to amounts which would be qualified capital gain 
        on qualified community assets (determined as if such assets had 
        been sold on the date of the sale or exchange) held by such 
        entity for more than 5 years (determined without regard to any 
        period before the date of the designation of the renewal 
        community) and throughout the period the taxpayer held such 
        interest. A rule similar to the rule of paragraph (2)(C) shall 
        apply for purposes of the preceding sentence.
            ``(2) Income inclusions.--
                    ``(A) In general.--Any amount included in income by 
                reason of holding an interest in a pass-thru entity 
                (other than an entity which was a renewal community 
                business during substantially all of the period the 
                taxpayer held the interest to which such inclusion 
                relates) shall be treated as gain described in 
                subsection (a) if such amount meets the requirements of 
                subparagraph (B).
                    ``(B) Requirements.--An amount meets the 
                requirements of this subparagraph if--
                            ``(i) such amount is attributable to 
                        qualified capital gain recognized on the sale 
                        or exchange by the pass-thru entity of property 
                        which is a qualified community asset in the 
                        hands of such entity and which was held by such 
                        entity for the period required under subsection 
                        (a), and
                            ``(ii) such amount is includible in the 
                        gross income of the taxpayer by reason of the 
                        holding of an interest in such entity which was 
                        held by the taxpayer on the date on which such 
                        pass-thru entity acquired such asset and at all 
                        times thereafter before the disposition of such 
                        asset by such pass-thru entity.
                    ``(C) Limitation based on interest originally held 
                by taxpayer.--Subparagraph (A) shall not apply to any 
                amount to the extent such amount exceeds the amount to 
                which subparagraph (A) would have applied if such 
                amount were determined by reference to the interest the 
                taxpayer held in the pass-thru entity on the date the 
                qualified community asset was acquired.
            ``(3) Pass-thru entity.--For purposes of this subsection, 
        the term `pass-thru entity' means--
                    ``(A) any partnership,
                    ``(B) any S corporation,
                    ``(C) any regulated investment company, and
                    ``(D) any common trust fund.
    ``(e) Sales and Exchanges of Interests in Partnerships and S 
Corporations Which Are Qualified Community Businesses.--In the case of 
the sale or exchange of an interest in a partnership, or of stock in an 
S corporation, which was a renewal community business during 
substantially all of the period the taxpayer held such interest or 
stock, the amount of qualified capital gain shall be determined without 
regard to--
            ``(1) any intangible, and any land, which is not an 
        integral part of any qualified business entity (as defined in 
        section 1400C(b)), and
            ``(2) gain attributable to periods before the designation 
        of an area as a renewal community.
    ``(f) Certain Tax-Free and Other Transfers.--For purposes of this 
section--
            ``(1) In general.--In the case of a transfer of a qualified 
        community asset to which this subsection applies, the 
        transferee shall be treated as--
                    ``(A) having acquired such asset in the same manner 
                as the transferor, and
                    ``(B) having held such asset during any continuous 
                period immediately preceding the transfer during which 
                it was held (or treated as held under this subsection) 
                by the transferor.
            ``(2) Transfers to which subsection applies.--This 
        subsection shall apply to any transfer--
                    ``(A) by gift,
                    ``(B) at death, or
                    ``(C) from a partnership to a partner thereof, of a 
                qualified community asset with respect to which the 
                requirements of subsection (d)(2) are met at the time 
                of the transfer (without regard to the 5-year holding 
                requirement).
            ``(3) Certain rules made applicable.--Rules similar to the 
        rules of section 1244(d)(2) shall apply for purposes of this 
        section.

``SEC. 1400B. RENEWAL COMMUNITY STOCK.

    ``(a) General Rule.--At the election of any individual, the 
aggregate amount paid by such taxpayer during the taxable year for the 
purchase of renewal community stock shall be allowed as a deduction.
    ``(b) Limitations.--
            ``(1) Ceiling.--
                    ``(A) In general.--The maximum amount allowed as a 
                deduction under subsection (a) to a taxpayer shall not 
                exceed--
                            ``(i) $100,000 for any taxable year, and
                            ``(ii) when added to the aggregate amount 
                        allowed as a deduction under this section in 
                        all prior years, $500,000.
                    ``(B) Excess amounts.--If the amount otherwise 
                deductible by any person under subsection (a) exceeds 
                the limitation under--
                            ``(i) subparagraph (A)(i), the amount of 
                        such excess shall be treated as an amount paid 
                        in the next taxable year, and
                            ``(ii) subparagraph (A), the deduction 
                        allowed for any taxable year shall be allocated 
                        proportionately among the renewal community 
                        stock purchased by such person on the basis of 
                        the respective purchase prices per share.
            ``(2) Related persons.--The taxpayer and members of the 
        taxpayer's family shall be treated as one person for purposes 
        of paragraph (1) and the limitations contained in such 
        paragraph shall be allocated among the taxpayer and such 
        members in accordance with their respective purchases of 
        renewal community stock. For purposes of this paragraph, an 
        individual's family includes only such individual's spouse and 
        minor children.
            ``(3) Partial taxable year.--If designation of an area as a 
        renewal community occurs, expires, or is revoked pursuant to 
        section 1400 on a date other than the first or last day of the 
        taxable year of the taxpayer, or in the case of a short taxable 
        year, the limitations specified in paragraph (1) shall be 
        adjusted on a pro rata basis (based upon the number of days).
    ``(c) Renewal Community Stock.--For purposes of this section--
            ``(1) In general.--The term `renewal community stock' means 
        stock of a corporation if--
                    ``(A) such stock is acquired on original issue from 
                the corporation, and
                    ``(B) such corporation is, at the time of such 
                issuance, a qualified renewal community issuer.
            ``(2) Proceeds must be invested in qualified renewal 
        community property.--
                    ``(A) In general.--Such term shall include such 
                stock only to the extent that the proceeds of such 
                issuance are used by such issuer during the 12-month 
                period beginning on the date of issuance to purchase 
                (as defined in section 179(d)(2)) qualified renewal 
                community property.
                    ``(B) Qualified renewal community property.--For 
                purposes of this section, the term `qualified renewal 
                community property' means property to which section 168 
                applies (or would apply but for section 179)--
                            ``(i) the original use of which commences 
                        in a renewal community with the issuer, and
                            ``(ii) substantially all of the use of 
                        which is in such renewal community.
            ``(3) Redemptions.--The term `renewal community stock' 
        shall not include any stock acquired from a corporation which 
        made a substantial stock redemption or distribution (without a 
        bona fide business purpose therefor) in an attempt to avoid the 
        purposes of this section.
    ``(d) Qualified Renewal Community Issuer.--For purposes of this 
section, the term `qualified renewal community issuer' means any 
domestic C corporation if--
            ``(1) such corporation is a corporation described in 
        section 1400C(b) or, in the case of a new corporation, such 
        corporation is being organized for purposes of being such a 
        corporation,
            ``(2) such corporation does not have more than one class of 
        stock,
            ``(3) the sum of--
                    ``(A) the money,
                    ``(B) the aggregate unadjusted bases of property 
                owned by such corporation, and
                    ``(C) the value of property leased to the 
                corporation (as determined under regulations prescribed 
                by the Secretary),
        does not exceed $50,000,000, and
            ``(4) more than 20 percent of the total voting power, and 
        20 percent of the total value, of the stock of such corporation 
        is owned directly by individuals or estates or indirectly by 
        individuals through partnerships or trusts.
The determination under paragraph (3) shall be made as of the time of 
issuance of the stock in question but shall include amounts received 
for such stock.
    ``(e) Dispositions of Stock.--
            ``(1) Basis reduction.--For purposes of this title, the 
        basis of any renewal community stock shall be reduced by the 
        amount of the deduction allowed under this section with respect 
        to such stock.
            ``(2) Deduction recaptured as ordinary income.--For 
        purposes of section 1245--
                    ``(A) any stock the basis of which is reduced under 
                paragraph (1) (and any other property the basis of 
                which is determined in whole or in part by reference to 
                the adjusted basis of such stock) shall be treated as 
                section 1245 property, and
                    ``(B) any reduction under paragraph (1) shall be 
                treated as a deduction allowed for depreciation.
        If an exchange of any stock described in paragraph (1) 
        qualifies under section 354(a), 355(a), or 356(a), the amount 
        of gain recognized under section 1245 by reason of this 
        paragraph shall not exceed the amount of gain recognized in the 
        exchange (determined without regard to this paragraph).
            ``(3) Certain events treated as dispositions.--For purposes 
        of determining the amount treated as ordinary income under 
        section 1245 by reason of paragraph (2), paragraph (3) of 
        section 1245(b) (relating to certain tax-free transactions) 
        shall not apply.
            ``(4) Interest charged if disposition within 5 years of 
        purchase.--
                    ``(A) In general.--If--
                            ``(i) a taxpayer disposes of any renewal 
                        community stock with respect to which a 
                        deduction was allowed under subsection (a) (or 
                        any other property the basis of which is 
                        determined in whole or in part by reference to 
                        the adjusted basis of such stock) before the 
                        end of the 5-year period beginning on the date 
                        such stock was purchased by the taxpayer, and
                            ``(ii) section 1245(a) applies to such 
                        disposition by reason of paragraph (2),
                then 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) Increase amount.--For purposes of 
                subparagraph (A), the amount of the increase 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 of such disposition by 
                        the taxpayer, and
                            ``(ii) on an amount equal to the aggregate 
                        decrease in tax of the taxpayer resulting from 
                        the deduction allowed under subsection (a) of 
                        this section with respect to such stock.
                    ``(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.
    ``(f) Disqualification.--
            ``(1) Issuer ceases to qualify.--If, during the 10-year 
        period beginning on the date renewal community stock was 
        purchased by the taxpayer, the issuer of such stock ceases to 
        be a qualified renewal community issuer (determined without 
        regard to subsection (d)(3)), then notwithstanding any 
        provision of this subtitle other than paragraph (2), the 
        taxpayer shall be treated for purposes of subsection (e) as 
        disposing of such stock (and any other property the basis of 
        which is determined in whole or in part by reference to the 
        adjusted basis of such stock) during the taxable year during 
        which such cessation occurs at its fair market value as of the 
        1st day of such taxable year.
            ``(2) Cessation of renewal community status not to cause 
        recapture.--A corporation shall not fail to be treated as a 
        qualified renewal community issuer for purposes of paragraph 
        (1) solely by reason of the termination or revocation of a 
        designation as a renewal community, as the case may be.
    ``(g) Other Special Rules.--
            ``(1) Application of limits to partnerships and s 
        corporations.--In the case of a partnership or an S 
        corporation, the limitations under subsection (b) shall apply 
        at the partner and shareholder level and shall not apply at the 
        partnership or corporation level.
            ``(2) Deduction not allowed to estates and trusts.--Estates 
        and trusts shall not be treated as individuals for purposes of 
        this section.

``SEC. 1400C. RENEWAL COMMUNITY BUSINESS DEFINED.

    ``(a) In General.--For purposes of this part, the term `renewal 
community business' means--
            ``(1) any qualified business entity, and
            ``(2) any qualified proprietorship.
Such term shall include any trades or businesses which would qualify as 
a renewal community business if such trades or businesses were 
separately incorporated. Such term shall not include any trade or 
business of producing property of a character subject to the allowance 
for depletion under section 611.
    ``(b) Qualified Business Entity.-- For purposes of this section, 
the term `qualified business entity' means, with respect to any taxable 
year, any corporation or partnership if for such year--
            ``(1) every trade or business of such entity is the active 
        conduct of a qualified business within a renewal community,
            ``(2) at least 80 percent of the total gross income of such 
        entity is derived from the active conduct of such business,
            ``(3) substantially all of the use of the tangible property 
        of such entity (whether owned or leased) is within a renewal 
        community,
            ``(4) substantially all of the intangible property of such 
        entity is used in, and exclusively related to, the active 
        conduct of any such business,
            ``(5) substantially all of the services performed for such 
        entity by its employees are performed in a renewal community,
            ``(6) at least 35 percent of its employees are residents of 
        a renewal community,
            ``(7) less than 5 percent of the average of the aggregate 
        unadjusted bases of the property of such entity is attributable 
        to collectibles (as defined in section 408(m)(2)) other than 
        collectibles that are held primarily for sale to customers in 
        the ordinary course of such business, and
            ``(8) less than 5 percent of the average of the aggregate 
        unadjusted bases of the property of such entity is attributable 
        to nonqualified financial property.
    ``(c) Qualified Proprietorship.--For purposes of this section, the 
term `qualified proprietorship' means, with respect to any taxable 
year, any qualified business carried on by an individual as a 
proprietorship if for such year--
            ``(1) at least 80 percent of the total gross income of such 
        individual from such business is derived from the active 
        conduct of such business in a renewal community,
            ``(2) substantially all of the use of the tangible property 
        of such individual in such business (whether owned or leased) 
        is within a renewal community,
            ``(3) substantially all of the intangible property of such 
        business is used in, and exclusively related to, the active 
        conduct of such business,
            ``(4) substantially all of the services performed for such 
        individual in such business by employees of such business are 
        performed in a renewal community,
            ``(5) at least 35 percent of such employees are residents 
        of a renewal community,
            ``(6) less than 5 percent of the average of the aggregate 
        unadjusted bases of the property of such individual which is 
        used in such business is attributable to collectibles (as 
        defined in section 408(m)(2)) other than collectibles that are 
        held primarily for sale to customers in the ordinary course of 
        such business, and
            ``(7) less than 5 percent of the average of the aggregate 
        unadjusted bases of the property of such individual which is 
        used in such business is attributable to nonqualified financial 
        property.
For purposes of this subsection, the term `employee' includes the 
proprietor.
    ``(d) Qualified Business.--For purposes of this section--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `qualified business' means any trade or 
        business.
            ``(2) Rental of real property.--The rental to others of 
        real property located in a renewal community shall be treated 
        as a qualified business if and only if--
                    ``(A) the property is not residential rental 
                property (as defined in section 168(e)(2)), and
                    ``(B) at least 50 percent of the gross rental 
                income from the real property is from renewal community 
                businesses.
            ``(3) Rental of tangible personal property.--The rental to 
        others of tangible personal property shall be treated as a 
        qualified business if and only if substantially all of the 
        rental of such property is by renewal community businesses or 
        by residents of a renewal community.
            ``(4) Treatment of business holding intangibles.--The term 
        `qualified business' shall not include any trade or business 
        consisting predominantly of the development or holding of 
        intangibles for sale or license.
            ``(5) Certain businesses excluded.--The term `qualified 
        business' shall not include--
                    ``(A) any trade or business consisting of the 
                operation of any facility described in section 
                144(c)(6)(B), and
                    ``(B) any trade or business the principal activity 
                of which is farming (within the meaning of 
                subparagraphs (A) or (B) of section 2032A(e)(5)), but 
                only if, as of the close of the preceding taxable year, 
                the sum of--
                            ``(i) the aggregate unadjusted bases (or, 
                        if greater, the fair market value) of the 
                        assets owned by the taxpayer which are used in 
                        such a trade or business, and
                            ``(ii) the aggregate value of assets leased 
                        by the taxpayer which are used in such a trade 
                        or business,
                exceeds $500,000.
            ``(6) Controlled groups.--For purposes of paragraph (5)(B), 
        all persons treated as a single employer under subsection (a) 
        or (b) of section 52 shall be treated as a single taxpayer.
    ``(e) Nonqualified Financial Property.--For purposes of this 
section, the term `nonqualified financial property' means debt, stock, 
partnership interests, options, futures contracts, forward contracts, 
warrants, notional principal contracts, annuities, and other similar 
property specified in regulations; except that such term shall not 
include--
            ``(1) reasonable amounts of working capital held in cash, 
        cash equivalents, or debt instruments with a term of 18 months 
        or less, or
            ``(2) debt instruments described in section 1221(4).

                ``PART III--FAMILY DEVELOPMENT ACCOUNTS

                              ``Sec. 1400D. Family development 
                                        accounts.
                              ``Sec. 1400E. Demonstration program to 
                                        provide matching contributions 
                                        to family development accounts 
                                        in certain renewal communities.
                              ``Sec. 1400F. Designation of earned 
                                        income tax credit payments for 
                                        deposit to family development 
                                        account.

``SEC. 1400D. FAMILY DEVELOPMENT ACCOUNTS FOR RENEWAL COMMUNITY EITC 
              RECIPIENTS.

    ``(a) Allowance of Deduction.--
            ``(1) In general.--There shall be allowed as a deduction--
                    ``(A) in the case of a qualified individual, the 
                amount paid in cash for the taxable year by such 
                individual to any family development account for such 
                individual's benefit, and
                    ``(B) in the case of any person other than a 
                qualified individual, the amount paid in cash for the 
                taxable year by such person to any family development 
                account for the benefit of a qualified individual.
        No deduction shall be allowed under this paragraph for any 
        amount deposited in a family development account under section 
        1400E (relating to demonstration program to provide matching 
        amounts in renewal communities).
            ``(2) Limitation.--
                    ``(A) In general.--The amount allowable as a 
                deduction to any individual for any taxable year by 
                reason of paragraph (1)(A) shall not exceed the lesser 
                of--
                            ``(i) $2,000, or
                            ``(ii) an amount equal to the compensation 
                        includible in the individual's gross income for 
                        such taxable year.
                    ``(B) Persons donating to family development 
                accounts of others.--The amount allowable as a 
                deduction to any person for any taxable year by reason 
                of paragraph (1)(B) shall not exceed $1,000 with 
                respect to any qualified individual.
            ``(3) Special rules for certain married individuals.--
                    ``(A) In general.--In the case of any individual 
                with respect to whom a deduction is otherwise allowable 
                under paragraph (1)(A)--
                            ``(i) who files a joint return for a 
                        taxable year, and
                            ``(ii) whose spouse is a qualified 
                        individual and--
                                    ``(I) has no compensation 
                                (determined without regard to section 
                                911) for the taxable year, or
                                    ``(II) elects to be treated for 
                                purposes of paragraph (2)(A)(ii) as 
                                having no compensation for the taxable 
                                year,
                there shall be allowed as a deduction any amount paid 
                in cash for the taxable year by the individual to a 
                family development account established for the benefit 
                of the spouse of the individual.
                    ``(B) Limitation.--The amount allowable as a 
                deduction under subparagraph (A) shall not exceed the 
                excess of--
                            ``(i) the lesser of--
                                    ``(I) $2,250, or
                                    ``(II) an amount equal to the 
                                compensation includible in the 
                                individual's gross income for the 
                                taxable year, over
                            ``(ii) the amount allowable as a deduction 
                        under paragraph (1) for the taxable year.
                In no event shall the amount allowable as a deduction 
                under subparagraph (A) exceed $2,000.
            ``(4) Rollovers.--No deduction shall be allowed under this 
        section with respect to any rollover contribution.
    ``(b) Tax Treatment of Distributions.--
            ``(1) Inclusion of amounts in gross income.--Except as 
        otherwise provided in this subsection, any amount paid or 
        distributed out of a family development account shall be 
        included in gross income by the payee or distributee, as the 
        case may be.
            ``(2) Exclusion of qualified family development 
        distributions.--Paragraph (1) shall not apply to any qualified 
        family development distribution.
            ``(3) Special rules.--Rules similar to the rules of 
        paragraphs (4) and (5) of section 408(d) shall apply for 
        purposes of this section.
    ``(c) Qualified Family Development Distribution.--For purposes of 
this section--
            ``(1) In general.--The term `qualified family development 
        distribution' means any amount paid or distributed out of a 
        family development account which would otherwise be includible 
        in gross income, to the extent that such payment or 
distribution is used exclusively to pay qualified family development 
expenses for the holder of the account or the spouse or dependent (as 
defined in section 152) of such holder.
            ``(2) Qualified family development expenses.--The term 
        `qualified family development expenses' means any of the 
        following:
                    ``(A) Qualified postsecondary educational expenses.
                    ``(B) First-home purchase costs.
                    ``(C) Qualified business capitalization costs.
                    ``(D) Qualified medical expenses.
                    ``(E) Qualified rollovers.
            ``(3) Qualified postsecondary educational expenses.--
                    ``(A) In general.--The term `qualified 
                postsecondary educational expenses' means postsecondary 
                educational expenses paid to an eligible educational 
                institution.
                    ``(B) Post-secondary educational expenses.--The 
                term `post-secondary educational expenses' means 
                tuition, fees, room, board, books, supplies, and 
                equipment required for the enrollment or attendance of 
                a student at an eligible educational institution.
                    ``(C) Eligible educational institution.--The term 
                `eligible educational institution' means the following:
                            ``(i) Institution of higher education.--An 
                        institution described in section 481(a)(1) or 
                        1201(a) of the Higher Education Act of 1965 (20 
                        U.S.C. 1088(a)(1), 1141(a)), as such sections 
                        are in effect on the date of the enactment of 
                        this section.
                            ``(ii) Postsecondary vocational education 
                        school.--An area vocational education school 
                        (as defined in subparagraph (C) or (D) of 
                        section 521(4) of the Carl D. Perkins 
                        Vocational and Applied Technology Education Act 
                        (20 U.S.C. 2471(4))) which is in any State (as 
                        defined in section 521(33) of such Act), as 
                        such sections are in effect on the date of the 
                        enactment of this section.
                    ``(D) Coordination with savings bond provisions.--
                The amount of qualified postsecondary educational 
                expenses for any taxable year shall be reduced by any 
                amount excludable from gross income under section 135.
            ``(4) First-home purchase costs.--
                    ``(A) In general.--The term `first-home purchase 
                costs' means qualified acquisition costs with respect 
                to a qualified principal residence for a qualified 
                first-time homebuyer.
                    ``(B) Qualified acquisition costs.--The term 
                `qualified acquisition costs' means the costs of 
                acquiring, constructing, or reconstructing a residence. 
                Such term includes any usual or reasonable settlement, 
                financing, or other closing costs.
                    ``(C) Qualified principal residence.--The term 
                `qualified principal residence' means a principal 
                residence (within the meaning of section 1034), the 
                qualified acquisition costs of which do not exceed 100 
                percent of the average area purchase price applicable 
                to such residence (determined in accordance with 
                paragraphs (2) and (3) of section 143(e)).
                    ``(D) Qualified first-time homebuyer.--
                            ``(i) In general.--The term `qualified 
                        first-time homebuyer' means an individual if 
                        such individual (and, in the case of a married 
                        individual, the individual's spouse) has no 
                        present ownership interest in a principal 
                        residence during the 3-year period ending on 
                        the date of acquisition of the principal 
                        residence to which this subsection applies.
                            ``(ii) Date of acquisition.--The term `date 
                        of acquisition' means the date on which a 
                        binding contract to acquire, construct, or 
                        reconstruct the principal residence to which 
                        this subsection applies is entered into.
            ``(5) Qualified business capitalization costs.--
                    ``(A) In general.--The term `qualified business 
                capitalization costs' means qualified expenditures for 
                the capitalization of a qualified business pursuant to 
                a qualified plan.
                    ``(B) Qualified expenditures.--The term `qualified 
                expenditures' means expenditures included in a 
                qualified plan, including capital, plant, equipment, 
                working capital, and inventory expenses.
                    ``(C) Qualified business.--The term `qualified 
                business' means any business that does not contravene 
                any law or public policy (as determined by the 
                Secretary).
                    ``(D) Qualified plan.--The term `qualified plan' 
                means a business plan which--
                            ``(i) is approved by a financial 
                        institution, or by a nonprofit loan fund having 
                        demonstrated fiduciary integrity,
                            ``(ii) includes a description of services 
                        or goods to be sold, a marketing plan, and 
                        projected financial statements, and
                            ``(iii) may require the eligible individual 
                        to obtain the assistance of an experienced 
                        entrepreneurial advisor.
            ``(6) Qualified medical expenses.--The term `qualified 
        medical expenses' means any amount paid during the taxable 
        year, not compensated for by insurance or otherwise, for 
        medical care (as defined in section 213(d)) of the taxpayer, 
        his spouse, or his dependent (as defined in section 152).
            ``(7) Qualified rollovers.--The term `qualified rollover' 
        means any amount paid from a family development account of a 
        taxpayer into another such account established for the benefit 
        of--
                    ``(A) such taxpayer, or
                    ``(B) any qualified individual who is--
                            ``(i) the spouse of such taxpayer, or
                            ``(ii) any dependent (as defined in section 
                        152) of the taxpayer.
        Rules similar to the rules of section 408(d)(3) shall apply for 
        purposes of this paragraph.
    ``(d) Tax Treatment of Accounts.--
            ``(1) In general.--Any family development account is exempt 
        from taxation under this subtitle unless such account has 
        ceased to be a family development account by reason of 
        paragraph (2). Notwithstanding the preceding sentence, any such 
        account is subject to the taxes imposed by section 511 
        (relating to imposition of tax on unrelated business income of 
        charitable, etc., organizations).
            ``(2) Loss of exemption in case of prohibited 
        transactions.--For purposes of this section, rules similar to 
        the rules of section 408(e) shall apply.
    ``(e) Family Development Account.--For purposes of this title, the 
term `family development account' means a trust created or organized in 
the United States for the exclusive benefit of a qualified individual 
or his beneficiaries, but only if the written governing instrument 
creating the trust meets the following requirements:
            ``(1) Except in the case of a qualified rollover (as 
        defined in subsection (c)(7))--
                    ``(A) no contribution will be accepted unless it is 
                in cash, and
                    ``(B) contributions will not be accepted for the 
                taxable year in excess of $2,000 (determined without 
                regard to any contribution made under section 1400E 
                (relating to demonstration program to provide matching 
                amounts in renewal communities)).
            ``(2) The trustee is a bank (as defined in section 408(n)) 
        or such other person who demonstrates to the satisfaction of 
        the Secretary that the manner in which such other person will 
        administer the trust will be consistent with the requirements 
        of this section.
            ``(3) No part of the trust funds will be invested in life 
        insurance contracts.
            ``(4) The interest of an individual in the balance in his 
        account is nonforfeitable.
            ``(5) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
            ``(6) Under regulations prescribed by the Secretary, rules 
        similar to the rules of section 401(a)(9) and the incidental 
        death benefit requirements of section 401(a) shall apply to the 
        distribution of the entire interest of an individual for whose 
        benefit the trust is maintained.
    ``(f) Qualified Individual.--For purposes of this section, the term 
`qualified individual' means, for any taxable year, an individual--
            ``(1) who is a bona fide resident of a renewal community 
        throughout the taxable year, and
            ``(2) to whom a credit was allowed under section 32 for the 
        preceding taxable year.
    ``(g) Other Definitions and Special Rules.--
            ``(1) Compensation.--The term `compensation' has the 
        meaning given such term by section 219(f)(1).
            ``(2) Married individuals.--The maximum deduction under 
        subsection (a) shall be computed separately for each 
        individual, and this section shall be applied without regard to 
        any community property laws.
            ``(3) Time when contributions deemed made.--For purposes of 
        this section, a taxpayer shall be deemed to have made a 
        contribution to a family development account on the last day of 
the preceding taxable year if the contribution is made on account of 
such taxable year and is made not later than the time prescribed by law 
for filing the return for such taxable year (not including extensions 
thereof).
            ``(4) Employer payments.--For purposes of this title, any 
        amount paid by an employer to a family development account 
        shall be treated as payment of compensation to the employee 
        (other than a self-employed individual who is an employee 
        within the meaning of section 401(c)(1)) includible in his 
        gross income in the taxable year for which the amount was 
        contributed, whether or not a deduction for such payment is 
        allowable under this section to the employee.
            ``(5) Zero basis.--The basis of an individual in any family 
        development account of such individual shall be zero.
            ``(6) Custodial accounts.--For purposes of this section, a 
        custodial account shall be treated as a trust if the assets of 
        such account are held by a bank (as defined in section 408(n)) 
        or another person who demonstrates, to the satisfaction of the 
        Secretary, that the manner in which such person will administer 
        the account will be consistent with the requirements of this 
        section, and if the custodial account would, except for the 
        fact that it is not a trust, constitute a family development 
        account described in this section. For purposes of this title, 
        in the case of a custodial account treated as a trust by reason 
        of the preceding sentence, the custodian of such account shall 
        be treated as the trustee thereof.
            ``(7) Reports.--The trustee of a family development account 
        shall make such reports regarding such account to the Secretary 
        and to the individual for whom the account is maintained with 
        respect to contributions (and the years to which they relate), 
        distributions, and such other matters as the Secretary may 
        require under regulations. The reports required by this 
        paragraph--
                    ``(A) shall be filed at such time and in such 
                manner as the Secretary prescribes in such regulations, 
                and
                    ``(B) shall be furnished to individuals--
                            ``(i) not later than January 31 of the 
                        calendar year following the calendar year to 
                        which such reports relate, and
                            ``(ii) in such manner as the Secretary 
                        prescribes in such regulations.
            ``(8) Investment in collectibles treated as 
        distributions.--Rules similar to the rules of section 408(m) 
        shall apply for purposes of this section.
    ``(h) Penalty for Distributions Not Used For Qualified Family 
Development Expenses.--
            ``(1) In general.--If any amount is distributed from a 
        family development account and is not used exclusively to pay 
        qualified family development expenses for the holder of the 
        account or the spouse or dependent (as defined in section 152) 
        of such holder, the tax imposed by this chapter for the taxable 
        year of such distribution shall be increased by the sum of--
                    ``(A) 100 percent of the portion of such amount 
                which is includible in gross income and is attributable 
                to amounts contributed under section 1400E (relating to 
                demonstration program to provide matching amounts in 
                renewal communities), and
                    ``(B) 10 percent of the portion of such amount 
                which is includible in gross income and is not 
                described in paragraph (1).
        For purposes of this subsection, the portion of a distributed 
        amount which is attributable to amounts contributed under 
        section 1400E is the amount which bears the same ratio to the 
        distributed amount as the aggregate amount contributed under 
        section 1400E to all family development accounts of the 
        individual bears to the aggregate amount contributed to such 
        accounts from all sources.
            ``(2) Exception for certain distributions.--Paragraph (1) 
        shall not apply to distributions which are--
                    ``(A) made on or after the date on which the 
                account holder attains age 59\1/2\,
                    ``(B) made pursuant to subsection (e)(6),
                    ``(C) made to a beneficiary (or the estate of the 
                account holder) on or after the death of the account 
                holder, or
                    ``(D) attributable to the account holder's being 
                disabled within the meaning of section 72(m)(7).

``SEC. 1400E. DEMONSTRATION PROGRAM TO PROVIDE MATCHING CONTRIBUTIONS 
              TO FAMILY DEVELOPMENT ACCOUNTS IN CERTAIN RENEWAL 
              COMMUNITIES.

    ``(a) Designation.--
            ``(1) Definitions.--For purposes of this section, the term 
        `FDA matching demonstration area' means any renewal community--
                    ``(A) which is nominated under this section by each 
                of the local governments and States which nominated 
                such community for designation as a renewal community 
                under section 1400(a)(1)(A), and
                    ``(B) which the Secretary of Housing and Urban 
                Development, after consultation with--
                            ``(i) the Secretaries of Agriculture, 
                        Commerce, Labor, and the Treasury, the Director 
                        of the Office of Management and Budget, and the 
                        Administrator of the Small Business 
                        Administration, and
                            ``(ii) in the case of a community on an 
                        Indian reservation, the Secretary of the 
                        Interior,
                designates as an FDA matching demonstration area.
            ``(2) Number of designations.--
                    ``(A) In general.--The Secretary of Housing and 
                Urban Development may designate not more than 25 
                renewal communities as FDA matching demonstration 
                areas.
                    ``(B) Minimum designation in rural areas.--Of the 
                areas designated under paragraph (1), at least 2 must 
                be areas described in section 1400(a)(2)(B).
            ``(3) Limitations on designations.--
                    ``(A) Publication of regulations.--The Secretary of 
                Housing and Urban Development shall prescribe by 
                regulation no later than 4 months after the date of the 
                enactment of this section, after consultation with the 
                officials described in paragraph (1)(B)--
                            ``(i) the procedures for nominating a 
                        renewal community under paragraph (1)(A) 
                        (including procedures for coordinating such 
                        nomination with the nomination of an area for 
                        designation as a renewal community under 
                        section 1400), and
                            ``(ii) the manner in which nominated 
                        renewal communities will be evaluated for 
                        purposes of this section.
                    ``(B) Time limitations.--The Secretary of Housing 
                and Urban Development may designate renewal communities 
                as FDA matching demonstration areas only during the 24-
                month period beginning on the first day of the first 
                month following the month in which the regulations 
                described in subparagraph (A) are prescribed.
            (4) Designation based on degree of poverty, etc.--The rules 
        of section 1400(a)(3) shall apply for purposes of designations 
        of FDA matching demonstration areas under this section.
    ``(b) Period for Which Designation is in Effect.--Any designation 
of a renewal community as an FDA matching demonstration area shall 
remain in effect during the period beginning on the date of such 
designation and ending on the date on which such area ceases to be a 
renewal community.
    ``(c) Matching Contributions to Family Development Accounts.--
            ``(1) In general.--Not less than once each taxable year, 
        the Secretary shall deposit (to the extent provided in 
        appropriation Acts) into a family development account of each 
        qualified individual (as defined in section 1400D(f)) who is a 
        resident throughout the taxable year of an FDA matching 
        demonstration area an amount equal to the sum of the amounts 
        deposited into all of the family development accounts of such 
        individual during such taxable year (determined without regard 
        to any amount contributed under this section).
            ``(2) Limitations.--
                    ``(A) Annual limit.--The Secretary shall not 
                deposit more than $1000 under paragraph (1) with 
                respect to any individual for any taxable year.
                    ``(B) Aggregate limit.--The Secretary shall not 
                deposit more than $2000 under paragraph (1) with 
                respect to any individual.
            ``(3) Exclusion from income.--Except as provided in section 
        1400D, gross income shall not include any amount deposited into 
        a family development account under paragraph (1).

``SEC. 1400F. DESIGNATION OF EARNED INCOME TAX CREDIT PAYMENTS FOR 
              DEPOSIT TO FAMILY DEVELOPMENT ACCOUNT.

    ``(a) In General.--With respect to the return of any qualified 
individual (as defined in section 1400D(f)) for the taxable year of the 
tax imposed by this chapter, such individual may designate that a 
specified portion (not less than $1) of any overpayment of tax for such 
taxable year which is attributable to the earned income tax credit 
shall be deposited by the Secretary into a family development account 
of such individual. The Secretary shall so deposit such portion 
designated under this subsection.
    ``(b) Manner and Time of Designation.--A designation under 
subsection (a) may be made with respect to any taxable year--
            ``(1) at the time of filing the return of the tax imposed 
        by this chapter for such taxable year, or
            ``(2) at any other time (after the time of filing the 
        return of the tax imposed by this chapter for such taxable 
        year) specified in regulations prescribed by the Secretary.
Such designation shall be made in such manner as the Secretary 
prescribes by regulations.
    ``(c) Portion Attributable to Earned Income Tax Credit.--For 
purposes of subsection (a), an overpayment for any taxable year shall 
be treated as attributable to the earned income tax credit to the 
extent that such overpayment does not exceed the credit allowed to the 
taxpayer under section 32 for such taxable year.
    ``(d) Overpayments Treated as Refunded.--For purposes of this 
title, any portion of an overpayment of tax designated under subsection 
(a) shall be treated as being refunded to the taxpayer as of the last 
date prescribed for filing the return of tax imposed by this chapter 
(determined without regard to extensions) or, if later, the date the 
return is filed.

                    ``PART IV--ADDITIONAL INCENTIVES

                              ``Sec. 1400G. Commercial revitalization 
                                        credit.
                              ``Sec. 1400H. Increase in expensing under 
                                        section 179.

``SEC. 1400G. COMMERCIAL REVITALIZATION TAX CREDIT.

    ``(a) General Rule.--For purposes of section 46, except as provided 
in subsection (e), the commercial revitalization credit for any taxable 
year is an amount equal to the applicable percentage of the qualified 
revitalization expenditures with respect to any qualified 
revitalization building.
    ``(b) Applicable Percentage.--For purposes of this section--
            ``(1) In general.--The term `applicable percentage' means--
                    ``(A) 20 percent for the taxable year in which a 
                qualified revitalization building is placed in service, 
                or
                    ``(B) at the election of the taxpayer, 5 percent 
                for each taxable year in the credit period.
        The election under subparagraph (B), once made, shall be 
        irrevocable.
            ``(2) Credit period.--
                    ``(A) In general.--The term `credit period' means, 
                with respect to any building, the period of 10 taxable 
                years beginning with the taxable year in which the 
                building is placed in service.
                    ``(B) Applicable rules.--Rules similar to the rules 
                under paragraphs (2) and (4) of section 42(f) shall 
                apply.
    ``(c) Qualified Revitalization Buildings and Expenditures.--For 
purposes of this section--
            ``(1) Qualified revitalization building.--The term 
        `qualified revitalization building' means any building (and its 
        structural components) if--
                    ``(A) such building is located in a renewal 
                community and is placed in service after the 
                designation of such renewal community under section 
                1400,
                    ``(B) a commercial revitalization credit amount is 
                allocated to the building under subsection (e), and
                    ``(C) depreciation (or amortization in lieu of 
                depreciation) is allowable with respect to the 
                building.
            ``(2) Qualified revitalization expenditure.--
                    ``(A) In general.--The term `qualified 
                revitalization expenditure' means any amount properly 
                chargeable to capital account--
                            ``(i) for property for which depreciation 
                        is allowable under section 168 and which is--
                                    ``(I) nonresidential real property, 
                                or
                                    ``(II) an addition or improvement 
                                to property described in subclause (I),
                            ``(ii) in connection with the construction 
                        or substantial rehabilitation or reconstruction 
                        of a qualified revitalization building, or
                            ``(iii) for the acquisition of land in 
                        connection with the qualified revitalization 
                        building.
                    ``(B) Dollar limitation.--The aggregate amount 
                which may be treated as qualified revitalization 
                expenditures with respect to any qualified 
                revitalization building for any taxable year shall not 
                exceed the excess of--
                            ``(i) $10,000,000, reduced by
                            ``(ii) any such expenditures with respect 
                        to the building taken into account by the 
                        taxpayer or any predecessor in determining the 
                        amount of the credit under this section for all 
                        preceding taxable years.
                    ``(C) Certain expenditures not included.--The term 
                `qualified revitalization expenditure' does not 
                include--
                            ``(i) Straight line depreciation must be 
                        used.--Any expenditure (other than with respect 
                        to land acquisitions) with respect to which the 
                        taxpayer does not use the straight line method 
                        over a recovery period determined under 
                        subsection (c) or (g) of section 168. The 
                        preceding sentence shall not apply to any 
                        expenditure to the extent the alternative 
                        depreciation system of section 168(g) applies 
                        to such expenditure by reason of subparagraph 
                        (B) or (C) of section 168(g)(1).
                            ``(ii) Acquisition costs.--The costs of 
                        acquiring any building or interest therein and 
                        any land in connection with such building to 
                        the extent that such costs exceed 30 percent of 
                        the qualified revitalization expenditures 
                        determined without regard to this clause.
                            ``(iii) Other credits.--Any expenditure 
                        which the taxpayer may take into account in 
                        computing any other credit allowable under this 
                        title unless the taxpayer elects to take the 
                        expenditure into account only for purposes of 
                        this section.
            ``(5) Substantial rehabilitation or reconstruction.--For 
        purposes of this subsection, a rehabilitation or reconstruction 
        shall be treated as a substantial rehabilitation or 
        reconstruction only if the qualified revitalization 
        expenditures in connection with the rehabilitation or 
        reconstruction exceed 25 percent of the fair market value of 
        the building (and its structural components) immediately before 
        the rehabilitation or reconstruction.
    ``(d) When Expenditures Taken Into Account.--
            ``(1) In general.--Qualified revitalization expenditures 
        with respect to any qualified revitalization building shall be 
        taken into account for the taxable year in which the qualified 
        revitalization building is placed in service. For purposes of 
        the preceding sentence, a substantial rehabilitation or 
        reconstruction of a building shall be treated as a separate 
        building.
            ``(2) Progress expenditure payments.--Rules similar to the 
        rules of subsections (b)(2) and (d) of section 47 shall apply 
        for purposes of this section.
    ``(e) Limitation on Aggregate Credits Allowable With Respect to 
Buildings Located in a State.--
            ``(1) In general.--The amount of the credit determined 
        under this section for any taxable year with respect to any 
        building shall not exceed the commercial revitalization credit 
        amount (in the case of an amount determined under subsection 
        (b)(1)(B), the present value of such amount as determined under 
        the rules of section 42(b)(2)(C)) allocated to such building 
        under this subsection by the commercial revitalization credit 
        agency. Such allocation shall be made at the same time and in 
        the same manner as under paragraphs (1) and (7) of section 
        42(h).
            ``(2) Commercial revitalization credit amount for 
        agencies.--
                    ``(A) In general.--The aggregate commercial 
                revitalization credit amount which a commercial 
                revitalization credit agency may allocate for any 
                calendar year is the amount of the State commercial 
                revitalization credit ceiling determined under this 
                paragraph for such calendar year for such agency.
                    ``(B) State commercial revitalization credit 
                ceiling.--
                            ``(i) In general.--The State commercial 
                        revitalization credit ceiling applicable to any 
                        State for any calendar year is $2,000,000 for 
                        each renewal community in the State.
                            ``(ii) Special rule where community located 
                        in more than 1 state.--If a renewal community 
                        is located in more than 1 State, a State's 
                        share of the amount specified in clause (i) 
                        with respect to such community shall be an 
                        amount that bears the same ratio to $2,000,000 
                        as the population in the State bears to the 
                        population in all States in which such 
                        community is located.
                            ``(iii) Other special rules.--Rules similar 
                        to the rules of subparagraphs (D), (E), (F), 
                        and (G) of section 42(h)(3) shall apply for 
                        purposes of this subsection.
                    ``(C) Commercial revitalization credit agency.--For 
                purposes of this section, the term `commercial 
                revitalization credit agency' means any agency 
                authorized by a State to carry out this section.
    ``(f) Responsibilities of Commercial Revitalization Credit 
Agencies.--
            ``(1) Plans for allocation.--Notwithstanding any other 
        provision of this section, the commercial revitalization credit 
        amount with respect to any building shall be zero unless--
                    ``(A) such amount was allocated pursuant to a 
                qualified allocation plan of the commercial 
                revitalization credit agency which is approved (in 
                accordance with rules similar to the rules of section 
                147(f)(2) (other than subparagraph (B)(ii) thereof)) by 
                the governmental unit of which such agency is a part, 
                and
                    ``(B) such agency notifies the chief executive 
                officer (or its equivalent) of the local jurisdiction 
                within which the building is located of such allocation 
                and provides such individual a reasonable opportunity 
                to comment on the allocation.
            ``(2) Qualified allocation plan.--For purposes of this 
        subsection, the term `qualified allocation plan' means any 
        plan--
                    ``(A) which sets forth selection criteria to be 
                used to determine priorities of the commercial 
                revitalization credit agency which are appropriate to 
                local conditions,
                    ``(B) which considers--
                            ``(i) the degree to which a project 
                        contributes to the implementation of a 
                        strategic plan that is devised for a renewal 
                        community through a citizen participation 
                        process,
                            ``(ii) the amount of any increase in 
                        permanent, full-time employment by reason of 
                        any project, and
                            ``(iii) the active involvement of residents 
                        and nonprofit groups within the renewal 
                        community, and
                    ``(C) which provides a procedure that the agency 
                (or its agent) will follow in monitoring compliance 
                with this section.
    ``(g) Termination.--This section shall not apply to any building 
placed in service after December 31, 2002.

``SEC. 1400H. INCREASE IN EXPENSING UNDER SECTION 179.

    ``(a) General rule.--In the case of a renewal community business 
(as defined in section 1400C), for purposes of section 179--
            ``(1) the limitation under section 179(b)(1) shall be 
        increased by the lesser of--
                    ``(A) $35,000, or
                    ``(B) the cost of section 179 property which is 
                qualified renewal property placed in service during the 
                taxable year, and
            ``(2) the amount taken into account under section 179(b)(2) 
        with respect to any section 179 property which is qualified 
        renewal property shall be 50 percent of the cost thereof.
    ``(b) Recapture.--Rules similar to the rules under section 
179(d)(10) shall apply with respect to any qualified renewal property 
which ceases to be used in a renewal community by an renewal community 
business.
    ``(c) Qualified Renewal Property.--
            ``(1) General rule.--For purposes of this section--
                    ``(A) In general.--The term `qualified renewal 
                property' means any property to which section 168 
                applies (or would apply but for section 179) if--
                            ``(i) such property was acquired by the 
                        taxpayer by purchase (as defined in section 
                        179(d)(2)) after the date on which the 
                        designation of the renewal community took 
                        effect,
                            ``(ii) the original use of which in a 
                        renewal community commences with the taxpayer, 
                        and
                            ``(iii) substantially all of the use of 
                        which is in a renewal community and is in the 
                        active conduct of a qualified business (as 
                        defined in section 1400C(d)) by the taxpayer in 
                        such renewal community.
                    ``(B) Special rule for substantial renovations.--In 
                the case of any property which is substantially 
                renovated by the taxpayer, the requirements of clauses 
                (i) and (ii) of subparagraph (A) shall be treated as 
                satisfied. For purposes of the preceding sentence, 
                property shall be treated as substantially renovated by 
                the taxpayer only if, during any 24-month period 
                beginning after the date on which the designation of 
                the renewal community took effect, additions to basis 
                with respect to such property in the hands of the 
                taxpayer exceed the greater of (i) an amount equal to 
                the adjusted basis at the beginning of such 24-month 
                period in the hands of the taxpayer, or (ii) $5,000.
            ``(2) Special rules for sale-leasebacks.--For purposes of 
        paragraph (1)(A)(ii), if property is sold and leased back by 
        the taxpayer within 3 months after the date such property was 
        originally placed in service, such property shall be treated as 
        originally placed in service not earlier than the date on which 
        such property is used under the leaseback.''

SEC. 104. EVALUATION AND REPORTING REQUIREMENTS.

    Not later than the close of the fourth calendar year after the year 
in which the Secretary of Housing and Urban Development first 
designates an area as a renewal community under section 1400 of the 
Internal Revenue Code of 1986, and at the close of each fourth calendar 
year thereafter, such Secretary shall prepare and submit to the 
Congress a report on the effects of such designations in accomplishing 
the purposes of this Act.

SEC. 105. INTERACTION WITH OTHER FEDERAL PROGRAMS.

    (a) Tax Reductions.--Any reduction of taxes, with respect to any 
renewal community designated under section 1400 of the Internal Revenue 
Code of 1986 (as added by this title), under any plan of action under 
section 1400(d) of such Code shall be disregarded in determining the 
eligibility of a State or local government for, or the amount or extent 
of, any assistance or benefits under any law of the United States 
(other than subchapter W of chapter 1 of such Code).
    (b) Coordination With Relocation Assistance.--The designation of a 
renewal community under section 1400 of such Code (as added by this 
title) 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 et seq.)), or
            (2) entitle any person displaced from real property located 
        in such community to any rights or any benefits under such Act.
    (c) Renewal Communities Treated as Labor Surplus Areas.--Any area 
which is designated as a renewal community under section 1400 of such 
Code (as added by this title) shall be treated for all purposes under 
Federal law as a labor surplus area.

SEC. 106. DEDUCTION FOR CONTRIBUTIONS TO FAMILY DEVELOPMENT ACCOUNTS 
              ALLOWABLE WHETHER OR NOT TAXPAYER ITEMIZES.

    Subsection (a) of section 62 of the Internal Revenue Code of 1986 
(relating to adjusted gross income defined) is amended by inserting 
after paragraph (15) the following new paragraph:
            ``(16) Family development accounts.--The deduction allowed 
        by section 1400D.''

SEC. 107. ALLOWANCE OF COMMERCIAL REVITALIZATION CREDIT.

    Section 46 of the Internal Revenue Code of 1986 (relating to 
investment credit) 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 at the end the following new 
paragraph:
            ``(4) the commercial revitalization credit provided under 
        section 1400G.''

SEC. 108. CONFORMING AND CLERICAL AMENDMENTS.

    (a) Basis Adjustment for Certain Stock.--Subsection (a) of section 
1016 of the Internal Revenue Code of 1986 (relating to adjustments to 
basis) is amended by striking ``and'' at the end of paragraph (24), by 
striking the period at the end of paragraph (25) and inserting ``, 
and''; and by adding at the end the following new paragraph:
            ``(26) to the extent provided in section 1400B(e), in the 
        case of stock with respect to which a deduction was allowed or 
        allowable under section 1400B(a).''
    (b) Tax on excess contributions.--
            (1) Tax Imposed.--Subsection (a) of section 4973 of such 
        Code is amended by striking ``or'' at the end of paragraph (1), 
        adding ``or'' at the end of paragraph (2), and inserting after 
        paragraph (2) the following new paragraph:
            ``(3) a family development account (within the meaning of 
        section 1400D(e)),''
            (2) Excess contributions.--Section 4973 of such Code is 
        amended by adding at the end the following new subsection:
    ``(d) Family Development Accounts.--For purposes of this section, 
in the case of a family development account, the term `excess 
contributions' means the sum of--
            ``(1) the excess (if any) of--
                    ``(A) the amount contributed for the taxable year 
                to the account (other than a qualified rollover, as 
                defined in section 1400D(c)(7), or a contribution under 
                section 1400E), over
                    ``(B) the amount allowable as a deduction under 
                section 1400D for such contributions, and
            ``(2) the amount determined under this subsection for the 
        preceding taxable year reduced by the sum of--
                    ``(A) the distributions out of the account for the 
                taxable year which were included in the gross income of 
                the payee under section 1400D(b)(1),
                    ``(B) the distributions out of the account for the 
                taxable year to which rules similar to the rules of 
                section 408(d)(5) apply by reason of section 
                1400D(b)(3), and
                    ``(C) the excess (if any) of the maximum amount 
                allowable as a deduction under section 1400D for the 
                taxable year over the amount contributed to the account 
                for the taxable year (other than a contribution under 
                section 1400E).
For purposes of this subsection, any contribution which is distributed 
from the family development account in a distribution to which rules 
similar to the rules of section 408(d)(4) apply by reason of section 
1400D(b)(3) shall be treated as an amount not contributed.''
            (3) Heading.--The heading of section 4973 of such Code is 
        amended by inserting ``family development accounts,'' after 
        ``contracts,''.
    (c) Tax on prohibited transactions.--Section 4975 of such Code is 
amended--
            (1) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(4) Special rule for family development accounts.--An 
        individual for whose benefit a family development account is 
        established and any contributor to such account shall be exempt 
        from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be a family development 
        account by reason of the application of section 1400D(d)(2) to 
        such account.'', and
            (2) by inserting ``, a family development account described 
        in section 1400D(e),'' in subsection (e)(1) after ``described 
        in section 408(a)''.
    (d) Information relating to certain trusts and annuity plans.--
Subsection (c) of section 6047 of such Code is amended--
            (1) by inserting ``or section 1400D'' after ``section 
        219'', and
            (2) by inserting ``, of any family development account 
        described in section 1400D(e),'', after ``section 408(a)''.
    (e) Inspection of Applications for Tax Exemption.--Clause (i) of 
section 6104(a)(1)(B) of such Code is amended by inserting ``a family 
development account described in section 1400D(e),'' after ``section 
408(a),''.
    (f) Failure To Provide Reports on Family Development Accounts.--
Section 6693 of such Code is amended--
            (1) by inserting ``or on family development accounts'' 
        after ``annuities'' in the heading of such section, and
            (2) by adding at the end of subsection (a) the following 
        new sentence: ``The person required by section 1400D(g)(7) to 
        file a report regarding a family development account at the 
        time and in the manner required by such section shall pay a 
        penalty of $50 for each failure unless it is shown that such 
        failure is due to reasonable cause.''
    (g) Conforming Amendments Regarding Commercial Revitalization 
Credit.--
            (1) Section 39(d) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(7) No carryback of section 1400g credit before date of 
        enactment.--No portion of the unused business credit for any 
        taxable year which is attributable to any commercial 
        revitalization credit determined under section 1400G may be 
        carried back to a taxable year ending before the date of the 
        enactment of section 1400G.''
            (2) Subparagraph (B) of section 48(a)(2) of such Code is 
        amended by inserting ``or commercial revitalization'' after 
        ``rehabilitation'' each place it appears in the text and 
        heading.
            (3) 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 portion of the basis of any 
                        qualified revitalization building attributable 
                        to qualified revitalization expenditures.''
            (4) Paragraph (2) of section 50(a) of such Code is amended 
        by inserting ``or 1400G(d)(2)'' after ``section 47(d)'' each 
        place it appears.
            (5) Subparagraph (A) of section 50(b)(2) of such Code is 
        amended by inserting ``or qualified revitalization building 
        (respectively)'' after ``qualified rehabilitated building''.
            (6) Subparagraph (B) of section 50(a)(2) of such Code is 
        amended by adding at the end the following new sentence: ``A 
        similar rule shall apply for purposes of section 1400G.''
            (7) Paragraph (2) of section 50(b) of such Code is amended 
        by striking ``and'' at the end of subparagraph (C), by striking 
        the period at the end of subparagraph (D) and inserting ``; 
        and'', and by adding at the end the following new subparagraph:
                    ``(E) a qualified revitalization building (as 
                defined in section 1400G) to the extent of the portion 
                of the basis which is attributable to qualified 
                revitalization expenditures (as defined in section 
                1400G).''
            (8) Subparagraph (C) of section 50(b)(4) of such Code is 
        amended--
                    (A) by inserting ``or commercial revitalization'' 
                after ``rehabilitated'' in the text and heading, and
                    (B) by inserting ``or commercial revitalization'' 
                after ``rehabilitation''.
            (9) Subparagraph (C) of section 469(i)(3) is amended--
                    (A) by inserting ``or section 1400G'' after 
                ``section 42''; and
                    (B) by striking ``credit'' in the heading and 
                inserting ``and commercial revitalization credits''.
    (h) Clerical Amendments.--
            (1) The table of subchapters for chapter 1 of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new item:

                              ``Subchapter W. Renewal Communities.''
            (2) The table of sections for chapter 43 of such Code is 
        amended by striking the item relating to section 4973 and 
        inserting the following new item:

                              ``Sec. 4973. Tax on excess contributions 
                                        to individual retirement 
                                        accounts, certain section 
                                        403(b) contracts, family 
                                        development accounts, and 
                                        certain individual retirement 
                                        annuities.''
            (3) The table of sections for part I of subchapter B of 
        chapter 68 of such Code is amended by striking the item 
        relating to section 6693 and inserting the following new item:

                              ``Sec. 6693. Failure to provide reports 
                                        on individual retirement 
                                        accounts or annuities or on 
                                        family development accounts; 
                                        overstatement of designated 
                                        nondeductible contributions.''

                  TITLE II--ADDITIONAL TAX PROVISIONS

SEC. 201. WORK OPPORTUNITY TAX CREDIT.

    (a) Amount of Credit.--Subsection (a) of section 51 (relating to 
amount of credit) is amended by striking ``40 percent'' and inserting 
``35 percent''.
    (b) Members of Targeted Groups.--Subsection (d) of section 51 is 
amended to read as follows:
    ``(d) Members of Targeted Groups.--For purposes of this subpart--
            ``(1) In general.--An individual is a member of a targeted 
        group if such individual is--
                    ``(A) a qualified IV-A recipient,
                    ``(B) a qualified veteran,
                    ``(C) a qualified ex-felon,
                    ``(D) a high-risk youth,
                    ``(E) a vocational rehabilitation referral,
                    ``(F) a qualified summer youth employee, or
                    ``(G) a qualified food stamp recipient.
            ``(2) Qualified iv-a recipient.--
                    ``(A) In general.--The term `qualified IV-A 
                recipient' means any individual who is certified by the 
                designated local agency as being a member of a family 
                receiving assistance under an IV-A program for at least 
                a 9-month period ending during the 9-month period 
                ending on the hiring date.
                    ``(B) IV-A program.--For purposes of this 
                paragraph, the term `IV-A program' means any program 
                providing assistance under a State plan approved under 
                part A of title IV of the Social Security Act (relating 
                to assistance for needy families with minor children) 
                and any successor of such program.
            ``(3) Qualified veteran.--
                    ``(A) In general.--The term `qualified veteran' 
                means any veteran who is certified by the designated 
                local agency as being--
                            ``(i) a member of a family receiving 
                        assistance under an IV-A program (as defined in 
                        paragraph (2)(B)) for at least a 9-month period 
                        ending during the 12-month period ending on the 
                        hiring date, or
                            ``(ii) a member of a family receiving 
                        assistance under a food stamp program under the 
                        Food Stamp Act of 1977 for at least a 3-month 
                        period ending during the 12-month period ending 
                        on the hiring date.
                    ``(B) Veteran.--For purposes of subparagraph (A), 
                the term `veteran' means any individual who is 
                certified by the designated local agency as--
                            ``(i)(I) having served on active duty 
                        (other than active duty for training) in the 
                        Armed Forces of the United States for a period 
                        of more than 180 days, or
                            ``(II) having been discharged or released 
                        from active duty in the Armed Forces of the 
                        United States for a service-connected 
                        disability, and
                            ``(ii) not having any day during the 60-day 
                        period ending on the hiring date which was a 
                        day of extended active duty in the Armed Forces 
                        of the United States.
                For purposes of clause (ii), the term `extended active 
                duty' means a period of more than 90 days during which 
                the individual was on active duty (other than active 
                duty for training).
            ``(4) Qualified ex-felon.--The term `qualified ex-felon' 
        means any individual who is certified by the designated local 
        agency--
                    ``(A) as having been convicted of a felony under 
                any statute of the United States or any State,
                    ``(B) as having a hiring date which is not more 
                than 1 year after the last date on which such 
                individual was so convicted or was released from 
                prison, and
                    ``(C) as being a member of a family which had an 
                income during the 6 months immediately preceding the 
                earlier of the month in which such income determination 
                occurs or the month in which the hiring date occurs, 
                which, on an annual basis, would be 70 percent or less 
                of the Bureau of Labor Statistics lower living 
                standard.
        Any determination under subparagraph (C) shall be valid for the 
        45-day period beginning on the date such determination is made.
            ``(5) High-risk youth.--
                    ``(A) In general.--The term `high-risk youth' means 
                any individual who is certified by the designated local 
                agency--
                            ``(i) as having attained age 18 but not age 
                        25 on the hiring date, and
                            ``(ii) as having his principal place of 
                        abode within a renewal community.
                    ``(B) Youth must continue to reside in renewal 
                community.--In the case of a high-risk youth, the term 
                `qualified wages' shall not include wages paid or 
                incurred for services performed while such youth's 
                principal place of abode is outside a renewal 
                community.
            ``(6) Vocational rehabilitation referral.--The term 
        `vocational rehabilitation referral' means any individual who 
        is certified by the designated local agency as--
                    ``(A) having a physical or mental disability which, 
                for such individual, constitutes or results in a 
                substantial handicap to employment, and
                    ``(B) having been referred to the employer upon 
                completion of (or while receiving) rehabilitative 
                services pursuant to--
                            ``(i) an individualized written 
                        rehabilitation plan under a State plan for 
                        vocational rehabilitation services approved 
                        under the Rehabilitation Act of 1973, or
                            ``(ii) a program of vocational 
                        rehabilitation carried out under chapter 31 of 
                        title 38, United States Code.
            ``(7) Qualified summer youth employee.--
                    ``(A) In general.--The term `qualified summer youth 
                employee' means any individual--
                            ``(i) who performs services for the 
                        employer between May 1 and September 15,
                            ``(ii) who is certified by the designated 
                        local agency as having attained age 16 but not 
                        18 on the hiring date (or if later, on May 1 of 
                        the calendar year involved),
                            ``(iii) who has not been an employee of the 
                        employer during any period prior to the 90-day 
                        period described in subparagraph (B)(i), and
                            ``(iv) who is certified by the designated 
                        local agency as having his principal place of 
                        abode within a renewal community.
                    ``(B) Special rules for determining amount of 
                credit.--For purposes of applying this subpart to wages 
                paid or incurred to any qualified summer youth 
                employee--
                            ``(i) subsection (b)(2) shall be applied by 
                        substituting `any 90-day period between May 1 
                        and September 15' for `the 1-year period 
                        beginning with the day the individual begins 
                        work for the employer', and
                            ``(ii) subsection (b)(3) shall be applied 
                        by substituting `$3,000' for `$6,000'.
                The preceding sentence shall not apply to an individual 
                who, with respect to the same employer, is certified as 
                a member of another targeted group after such 
                individual has been a qualified summer youth employee.
                    ``(C) Youth must continue to reside in renewal 
                community.--Paragraph (5)(B) shall apply for purposes 
                of this paragraph.
            ``(8) Qualified food stamp recipient.--The term `qualified 
        food stamp recipient' means any individual who is certified by 
        the designated local agency--
                    ``(A) as having attained age 18 but not age 25 on 
                the hiring date, and
                    ``(B) as being a member of a family receiving 
                assistance under a food stamp program under the Food 
                Stamp Act of 1977 for at least a 3-month period ending 
                during the 12-month period ending on the hiring date.
            ``(9) Hiring date.--The term `hiring date' means the day 
        the individual is hired by the employer.
            ``(10) Designated local agency.--The term `designated local 
        agency' means a State employment security agency established in 
        accordance with the Act of June 6, 1933, as amended (29 U.S.C. 
        4949n).
            ``(11) Special rules for certifications.--
                    ``(A) In general.--An individual shall not be 
                treated as a member of a targeted group unless--
                            ``(i) on or before the day on which such 
                        individual begins work for the employer, the 
                        employer has received a certification from a 
                        designated local agency that such individual is 
                        a member of a targeted group, or
                            ``(ii)(I) on or before the day the 
                        individual is offered employment with the 
                        employer, a pre-screening notice is completed 
                        by the employer with respect to such 
                        individual, and
                            ``(II) not later than the 14th day after 
                        the individual begins work for the employer, 
                        the employer submits such notice, signed by the 
                        employer and the individual under penalties of 
                        perjury, to the designated local agency as part 
                        of a written request for such a certification 
                        from such agency.
                For purposes of this paragraph, the term `pre-screening 
                notice' means a document (in such form as the Secretary 
                shall prescribe) which contains information provided by 
                the individual on the basis of which the employer 
                believes that the individual is a member of a targeted 
                group.
                    ``(B) Incorrect certifications.--If--
                            ``(i) an individual has been certified by a 
                        designated local agency as a member of a 
                        targeted group, and
                            ``(ii) such certification is incorrect 
                        because it was based on false information 
                        provided by such individual,
                the certification shall be revoked and wages paid by 
                the employer after the date on which notice of 
                revocation is received by the employer shall not be 
                treated as qualified wages.
                    ``(C) Explanation of denial of request.--If a 
                designated local agency denies a request for 
certification of membership in a targeted group, such agency shall 
provide to the person making such request a written explanation of the 
reasons for such denial.''
    (c) Minimum Employment Period.--Paragraph (3) of section 51(i) 
(relating to certain individuals ineligible) is amended to read as 
follows:
            ``(3) Individuals not meeting minimum employment period.--
        No wages shall be taken into account under subsection (a) with 
        respect to any individual unless such individual either--
                    ``(A) is employed by the employer at least 180 days 
                (20 days in the case of a qualified summer youth 
                employee), or
                    ``(B) has completed at least 250 hours (120 hours 
                in the case of a qualified summer youth employee) of 
                services performed for the employer.''
    (d) Termination Period.--Paragraph (4) of section 51(c) (relating 
to wages defined) is amended to read as follows:
            ``(4) Termination period.--The term `wages' shall not 
        include any amount paid or incurred to an individual who begins 
        work for the employer after December 31, 1994, and before 
        January 1, 1996.''
    (e) Redesignation of Credit.--
            (1) Sections 38(b)(2) and 51(a) are each amended by 
        striking ``targeted jobs credit'' and inserting ``work 
        opportunity credit''.
            (2) The subpart heading for subpart F of part IV of 
        subchapter A of chapter 1 is amended by striking ``Targeted 
        Jobs Credit'' and inserting ``Work Opportunity Credit''.
            (3) The table of subparts for such part IV is amended by 
        striking ``targeted jobs credit'' and inserting ``work 
        opportunity credit''.
            (4) The heading for paragraph (3) of section 1396(c) is 
        amended by striking ``targeted jobs credit'' and inserting 
        ``work opportunity credit''.
    (f) Technical Amendment.--Paragraph (1) of section 51(c) is amended 
by striking ``, subsection (d)(8)(D),''.
    (g) Effective Date.--The amendments made by this section shall 
apply to individuals who begin work for the employer after December 31, 
1995.

SEC. 202. CREDIT FOR CERTAIN CHARITABLE CONTRIBUTIONS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by adding at the end the following new 
section:

``SEC. 26A. CREDIT FOR CERTAIN CHARITABLE CONTRIBUTIONS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this chapter for the 
taxable year an amount equal to 75 percent of the qualified charitable 
contributions which are paid by the taxpayer during the taxable year.
    ``(b) Limitation.--The credit allowed by subsection (a) for the 
taxable year shall not exceed $200 ($400 in the case of a joint 
return).
    ``(c) Qualified Charitable Contribution.--For purposes of this 
section, the term `qualified charitable contribution' means any 
charitable contribution (as defined in section 170(c)) made in cash to 
a qualified charity aiding the poor.
    ``(d) Qualified Charity Aiding the Poor.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified charity aiding the poor' means, for any taxable 
        year, any organization described in section 501(c)(3) and 
        exempt from tax under section 501(a)--
                    ``(A) which is certified by the Secretary as 
                meeting the requirements of paragraphs (2), (3), and 
                (4),
                    ``(B) which is organized under the laws of the 
                United States or of any State in which the organization 
                is qualified to operate, and
                    ``(C) which is required, or elects to be treated as 
                being required, to file returns under section 6033.
            ``(2) Charity must primarily assist poor individuals.--
                    ``(A) In general.--An organization meets the 
                requirements of this paragraph only if the predominant 
                activity of such organization is the provision of 
                direct services to individuals whose annual incomes 
                generally do not exceed 185 percent of the official 
                poverty line (as defined by the Office of Management 
                and Budget).
                    ``(B) Food aid and homeless shelters.--Except as 
                otherwise provided in regulations, for purposes of 
                subparagraph (A), services to individuals in the form 
                of--
                            ``(i) temporary donations of food or meals, 
                        or
                            ``(ii) temporary shelter to homeless 
                        individuals,
                shall be treated as provided to individuals described 
                in subparagraph (A) if the location and operation of 
                such services are such that the service provider may 
                reasonably conclude that the beneficiaries of such 
                services are predominantly individuals described in 
                subparagraph (A).
            ``(3) Expenditures for charitable services to the poor.--
                    ``(A) In general.--An organization meets the 
                requirements of this paragraph only if for the 
                immediately preceding taxable year (and the Secretary 
                reasonably expects that for the current taxable year), 
                except as provided in subparagraph (B), all annual 
                expenditures of the organization are used to provide 
                the direct services referred to in paragraph (2).
                    ``(B) Permissible expenditures for administration 
                and fundraising.--An organization shall not be treated 
                as failing to meet the requirements of subparagraph (A) 
                with respect to any taxable year by reason of the fact 
                that 25 percent or less of the annual aggregate 
                expenditures of the organization for such taxable year 
                are--
                            ``(i) administrative expenditures in 
                        support of direct services referred to in 
                        paragraph (2), and
                            ``(ii) expenditures for purposes of 
                        fundraising on behalf of the organization 
                        providing direct services referred to in 
                        paragraph (2).
            ``(4) Limitation on political activity.--An organization 
        meets the requirements of this paragraph only if for the 
        immediately preceding taxable year (and the Secretary 
        reasonably expects that for the current taxable year) the 
        organization does not engage in any of the following:
                    ``(A) Activity for the purpose of influencing 
                legislation.
                    ``(B) Litigation on behalf of any individual 
                referred to in paragraph (2).
                    ``(C) Voter registration, political organizing, 
                public policy advocacy, or public policy research.
            ``(5) Special rule for new organizations.--In the case of 
        an organization which has no preceding taxable year, paragraphs 
        (3) and (4) shall be applied without regard to the words `for 
        the immediately preceding taxable year'.
    ``(e) Time When Contributions Deemed Made.--For purposes of this 
section, at the election of the taxpayer, a contribution which is made 
not later than the time prescribed by law for filing the return for the 
taxable year (not including extensions thereof) shall be treated as 
made on the last day of such taxable year.
    ``(f) Coordination With Deduction for Charitable Contributions.--
            ``(1) Credit in lieu of deduction.--The credit provided by 
        subsection (a) for any qualified charitable contribution shall 
        be in lieu of any deduction otherwise allowable under this 
        chapter for such contribution.
            ``(2) Election to have section not apply.--A taxpayer may 
        elect for any taxable year to have this section not apply.''
    (b) Public Inspection of Annual Returns.--Subsection (e) of section 
6104 of such Code (relating to public inspection of certain annual 
returns and applications for exemption) is amended by adding at the end 
the following new paragraph:
            ``(3) Charities receiving creditable contributions required 
        to provide copies of annual return.--
                    ``(A) In general.--Every qualified charity aiding 
                the poor (as defined in section 26A(d)) shall, upon 
                request of an individual made at an office where such 
                organization's annual return filed under section 6033 
                is required under paragraph (1) to be available for 
                inspection, provide a copy of such return to such 
                individual without charge other than a reasonable fee 
                for any reproduction and mailing costs. If the request 
                is made in person, such copies shall be provided 
                immediately and, if made other than in person, shall be 
                provided within 30 days.
                    ``(B) Period of availability.--Subparagraph (A) 
                shall apply only during the 3-year period beginning on 
                the filing date (as defined in paragraph (1)(D)) of the 
                return requested.''
    (c) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

                              ``Sec. 26A. Credit for certain charitable 
                                        contributions.''
    (d) Effective Date.--The amendments made by this section shall 
apply to contributions made after the date of the enactment of this 
Act.

SEC. 203. DEDUCTION FOR CHARITABLE CONTRIBUTIONS TO BE ALLOWED TO 
              INDIVIDUALS WHO DO NOT ITEMIZE DEDUCTIONS.

    (a) In General.--Section 170 of the Internal Revenue Code of 1986 
(relating to charitable, etc., contributions and gifts) is amended by 
redesignating subsection (m) as subsection (n) and by inserting after 
subsection (l) the following new subsection:
    ``(m) Deduction for Individuals Not Itemizing Deductions.--In the 
case of an individual who does not itemize deductions for the taxable 
year, the amount allowable under subsection (a) for the taxable year 
shall be taken into account as a direct charitable deduction under 
section 63.''
    (b) Direct Charitable Deduction.--
            (1) In general.--Subsection (b) of section 63 of such Code 
        is amended by striking ``and'' at the end of paragraph (1), by 
        striking the period at the end of paragraph (2) and inserting 
        ``, and'', and by adding at the end the following new 
        paragraph:
            ``(3) the deduction for charitable contributions under 
        section 170(m).''
            (2) Conforming amendment.--Subsection (d) of section 63 of 
        such Code is amended by striking ``and'' at the end of 
        paragraph (1), by striking the period at the end of paragraph 
        (2) and inserting ``, and'', and by adding at the end the 
        following new paragraph:
            ``(3) the deduction for charitable contributions under 
        section 170(m).''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

    TITLE IV--LOW-INCOME EDUCATIONAL OPPORTUNITY SCHOLARSHIP PROGRAM

SEC. 401. SHORT TITLE.

    This title may be cited as the ``Low-Income Educational Opportunity 
Act of 1996''.

SEC. 402. FINDINGS; PRECEDENTS.

    (a) Findings.--The Congress finds the following:
            (1) Significant improvements in the education of 
        educationally deprived children can be accomplished by--
                    (A) increasing educational opportunities for these 
                children by expanding the range of educational choices 
                that best meet their needs;
                    (B) fostering diversity and competition among 
                school programs for these children;
                    (C) providing the families of these children more 
                of the educational choices already available to 
                affluent families; and
                    (D) enhancing the quality of American education in 
                general by increasing parental involvement in the 
                program and the direction of the education of these 
                children.
            (2) Costs are often much lower in private schools than 
        corresponding costs in schools operated solely by the 
        Government.
            (3) Not all children are alike and therefore there is no 
        one school or program that fits the needs of all children.
            (4) The formation of sound values and moral character is 
        crucial to helping young people escape from lives of poverty, 
        family break-up, drug abuse, crime, and school failure.
            (5) In addition to offering knowledge and skills, education 
        should positively contribute to the formation of the internal 
        norms and values which are vital to a child's success in life 
        and to the well being of society.
            (6) Schools should help to provide young people with a 
        sound moral foundation which is consistent with the values of 
        their parents. To find such a school, parents need a full range 
        of choice to determine where their children can best be 
        educated.
    (b) Precedents.--The United States Supreme Court has determined 
that programs giving parents choice and increased input in their 
children's education, including the choice of a religious education, do 
not violate the constitution. The Court has held that as long as the 
beneficiary, not the Government, decides where education funds will be 
spent on such individual's behalf, Government funds can be used for 
education in a religious institution because the Government has neither 
advanced nor hindered a particular religion and therefore has not 
violated the establishment clause of the first amendment. Supreme Court 
precedents include--
            (1) Wisconsin v. Yoder, 406 U.S. 205; Pierce v. Society of 
        Sisters, 268 U.S. 510; Meyer v. Nebraska, 262 U.S. 390 which 
        held that parents have the primary role in and are the primary 
        decision makers in all areas regarding the education and 
        upbringing of their children;
            (2) Mueller v. Allen, 463 U.S. 388 which declared a 
        Minnesota tax deduction program that provided State income tax 
        benefits for educational expenditures by parents, including 
        tuition in religiously affiliated schools, constitutional;
            (3) Witters v. Department of Services for the Blind, 474 
        U.S. 481 in which the Court ruled unanimously that public funds 
        for the vocational training of the blind could be used at a 
        Bible college for ministry training;
            (4) Zobrest v. Catalina Foothills School District (113 S. 
        Ct. 2462) which held that a deaf child could receive an 
        interpreter, paid for by the Government, in a private 
        religiously affiliated school under the Individuals With 
        Disabilities Education Act. The case held that providing an 
        interpreter in a religiously affiliated school did not violate 
        the establishment clause.

SEC. 403. PURPOSES.

    The purposes of this title are the following:
            (1) To assist renewal communities--
                    (A) in giving children from low-income families 
                more choices in selecting elementary and secondary 
                schools that children from wealthier families already 
                have;
                    (B) in improving schools and other academic 
                programs by financially enhancing the consumer power of 
low-income families to choose the schools and programs that they 
determine best fit the needs of their children;
                    (C) in engaging low-income parents more fully in 
                their children's schooling;
                    (D) in providing low income parents with a wide 
                range of choice in selecting a school for their 
                children, including public schools, private schools, 
                and private religious schools, without promoting or 
                discriminating against the choice of a particular type 
                of school; and
                    (E) in combating crime, drugs, and illegitimacy in 
                low-income communities by encouraging the restoration 
                of moral character.
            (2) To demonstrate the effects of State and local programs 
        that give low-income families more of the choices in schools 
        (public, private, or religious) that wealthier families already 
        have.

SEC. 404. PLAN SUBMISSION; REQUIREMENTS.

    (a) In General.--A community designated as a renewal community 
under section 1400 of the Internal Revenue Code of 1986 shall submit a 
plan to the Secretary not later than 60 days after receiving such 
designation. Such plan shall include the following:
            (1) A designation of a public or private office, agency, or 
        organization that will be responsible for the establishment and 
        operation of the scholarship program and for the distribution 
        of assistance to parents.
            (2) A description of the actions to be taken by the State 
        or renewal community to increase educational options for low-
        income children, including--
                    (A) public school choice programs;
                    (B) private school choice programs;
                    (C) quasi-public or charter school programs; and
                    (D) programs privatizing services such as 
                transportation, administration, or food preparation or 
                distribution.
            (3) A description of State and local funds (including tax 
        benefits) and non-governmental funds, if any, that will be 
        available to supplement scholarship funds provided under this 
        title.
            (4) A description of the procedures the applicant will use, 
        including timely and meaningful consultation with private 
        school officials, to encourage public and private elementary 
        and secondary schools to participate in the program and to 
        ensure maximum educational choices for the parents of eligible 
        children and for other children residing in the renewal 
        community.
            (5) A description of how the applicant will inform parents 
        and schools of the scholarship program and of the choices 
        available to parents under such program.
            (6) A description of procedures the applicant will use to 
        determine which eligible children will receive assistance.
            (7) An assurance that the applicant will maintain such 
        records relating to the scholarship program as the Secretary 
        may require and will comply with the Secretary's reasonable 
        requests for information about the program.
    (b) Requirements.--In addition to the requirements described in 
subsection (a), a community that is designated as a renewal community 
shall establish and operate a Low-Income Educational Opportunity 
Scholarship program (referred to in this title as ``scholarship 
program'') and distribute scholarships to parents during the first 
school year beginning on or after the 90th day following the day of 
such designation. Such program shall meet the following requirements:
            (1) To provide a choice of schools to families with 
        children who reside in the renewal community.
            (2) To provide assistance to parents of eligible children 
        to attend public and private elementary and secondary schools, 
        including religious schools that serve the designated renewal 
        community.
            (3) To allow all or any lawfully operating public and 
        private elementary or secondary schools, including religious 
        schools that serve the renewal community to participate in a 
        scholarship program under this title if such a school so 
        chooses, subject to the qualifications specified in section 
        409.
    (c) Compliance.--The Secretary shall notify the Secretary of 
Housing and Urban Development if a renewal community fails to comply 
with the requirements of subsections (a) or (b). Upon such 
notification, the Secretary of Housing and Urban Development may begin 
a review for possible revocation of renewal community designation.

SEC. 405. USES OF FUNDS.

    A community that receives renewal community designation under 
section 1400 of the Internal Revenue Code of 1986 shall use funds 
received under this title--
            (1) to provide for scholarships to assist in the payment of 
        tuition and fees at a scholarship school selected by the 
        parents of an eligible child, and to pay the reasonable costs 
        of transportation of eligible children to scholarship or 
        alternative public schools;
            (2) not to exceed 10 percent, to pay the cost of 
        administering the educational opportunity scholarship program; 
        or
            (3) in accordance with section 412, if an excess amount of 
        funds are available, to pay for the education of children from 
        low-income families attending public schools.

SEC. 406. SCHOLARSHIP PROGRAM.

    (a) Eligible Children.--From the amounts made available under this 
title, each renewal community shall provide, to the extent practicable, 
assistance to a parent who has applied for assistance and has a child 
who--
            (1) is a member of a family that has a total family income 
        that does not exceed 185 percent of the poverty line;
            (2) resides in the renewal community; and
            (3)(A) seeks to attend an alternative public elementary or 
        secondary school that participates in the scholarship program; 
        or
            (B) seeks to attend a private or religious elementary or 
        secondary school that participates in the scholarship program.
    (b) Selection Among Eligible Children.--
            (1) In general.--In the event that a renewal community has 
        insufficient funds to provide assistance to all eligible 
        children whose parents have applied for assistance, the renewal 
        community may select students according to--
                    (A) random selection;
                    (B) the date of the parents' application for 
                assistance with preference given to parents who applied 
                earlier; or
                    (C) any other selection criteria developed by the 
                renewal community, subject to the limitations provided 
                in subsection (c).
            (2) Priority.--A renewal community shall give priority to a 
        parent for a student who received assistance pursuant to this 
        title during the preceding school year.
    (c) Criteria for Selection.--The renewal community may choose any 
criteria it wishes in order to make the selection described in 
subsection (b), except that such criteria shall not--
            (1) discriminate on the basis of race or religion;
            (2) discriminate on the basis of the school or type of 
        school selected by the parent; or
            (3) discriminate against an eligible child because the 
        parent of the child has chosen to receive a scholarship to 
        attend an eligible private school under section 408(b)(1) of 
        this title rather than transportation assistance to attend an 
        alternative public school under section 408(b)(2).
    (d) Value of Each Scholarship.--The renewal community shall 
determine the value of scholarships provided each semester within the 
renewal community, except that the value of a scholarship provided by a 
renewal community shall not be less than the minimum value specified in 
paragraph (1) and shall not exceed the maximum value specified in 
paragraph (2).
            (1) Minimum value.--The minimum value of a scholarship for 
        a semester shall be the lesser of--
                    (A) 60 percent of the average per pupil cost per 
                semester in the public school system or systems in the 
                renewal community in the preceding school year; or
                    (B) the regular tuition and education fees charged 
                per semester by the scholarship school chosen by the 
                parent.
            (2) Maximum value.--The maximum value of a scholarship for 
        a semester shall be the average per pupil cost per semester in 
        the public school system or systems in the renewal community in 
        the preceding school year.
            (3) Disability.--If a student has a disability, the average 
        per pupil cost per semester in the public school system or 
        systems in the renewal community in the preceding year shall be 
        calculated using the same cost for students with the same 
        special needs or handicapped category for such period of time.
    (e) Use of Scholarships, Transportation Assistance.--Funds used to 
provide assistance to a parent may be used by a parent only to pay for 
tuition and fees or transportation costs at participating schools.

SEC. 407. ALLOCATION OF FUNDS AMONG RENEWAL COMMUNITIES.

    (a) In General.--The funds authorized under section 417 shall be 
allocated to each renewal community by the Secretary of the Treasury as 
follows:
            (1) 80 percent shall be allocated among renewal communities 
        according to the formula provided in subsection (b).
            (2) 20 percent shall be allocated among renewal communities 
        according to the formula provided in subsection (c).
    (b) Basic Funding Allocation.--Each renewal community, except as 
provided in subsection (d), shall receive a percentage of the funds 
provided under subsection (a)(1) based on--
            (1) the number of children from low-income families who 
        reside in an individual renewal community; divided by
            (2) the total number of children from low-income families 
        who reside in renewal communities nationwide.
    (c) Additional Matching Funds.--Each renewal community shall 
receive a percentage of funds under subsection (a)(2) based on--
            (1) the total value of matching contributions for 
        scholarships provided from local governmental, State, or 
        private charitable sources within a renewal community; divided 
        by
            (2) the total value of matching contributions for 
        scholarships provided from local governmental, State, or 
        private charitable sources in all renewal communities 
        nationwide.
    (d) Possible Exception.--Notwithstanding subsection (b), if Puerto 
Rico or communities in Puerto Rico are designated as renewal 
communities, such renewal communities, in aggregate, shall receive not 
more than the percentage of funds that Puerto Rico received under title 
I of the Elementary and Secondary Education Act of 1965 during fiscal 
year 1995.

SEC. 408. PARENTAL RIGHT OF CHOICE IN EDUCATION.

    (a) In General.--Parents of each child who receives assistance 
under this title shall be given a range of choice of public and private 
elementary and secondary schools, including religious schools that 
serve such community.
    (b) Types of Assistance.--The type of assistance provided to the 
parent of a child selected to participate in the scholarship program 
shall be determined by the type of school to which the parent selects 
to send the child.
            (1) Scholarship school.--If the parent elects to have a 
        child attend a private scholarship school, described in section 
        409, the parent--
                    (A) shall receive a scholarship to be used to pay 
                tuition and other fees at the school; and
                    (B) shall receive direct or indirect transportation 
                assistance.
            (2) Alternative public school.--If the parent elects to 
        have the child attend an alternative pubic school, the parent 
        shall receive direct or indirect transportation assistance.
    (c) No Guarantee of Admission.--Eligible children whose parents 
have applied to receive a scholarship under this title shall be subject 
to the admission criteria of each scholarship school or alternative 
public school and nothing in this title shall be construed to guarantee 
the right of an eligible child to attend any scholarship school or 
alternative public school.
    (d) Limitation on Number of Children Assisted.--The number of 
eligible children to receive assistance from a renewal community shall 
be determined by the funds available to such renewal community from--
            (1) the Federal funds provided under this title; and
            (2) other funds provided by public and private sources.
    (e) Parental Notification.--
            (1) In general.--Each renewal community shall provide 
        timely notice of the scholarship program to parents of eligible 
        children residing in the area and to the schools. At a minimum, 
        such notice shall--
                    (A) describe the educational opportunity 
                scholarship program;
                    (B) describe the eligibility requirements for 
                scholarships;
                    (C) describe the selection procedures to be used if 
                the number of eligible children seeking to participate 
                in the program exceeds the number that can be 
                accommodated in the program;
                    (D) provide information about alternative public 
                schools and scholarship schools, including information 
                about any admission requirements or criteria for each 
                school participating in the scholarship program; and
                    (E) include the procedures and a schedule for 
                parents to apply for their eligible children to 
                participate in the program.
            (2) Notification methods.--Each renewal community is 
        encouraged to use a variety of means to provide information to 
        parents in the community, including direct distribution, mail, 
        distribution of materials in publicly frequented places, public 
        advertisements, and cooperative efforts with local community 
        groups.
    (f) Information.--Renewal communities, upon request by any and all 
schools eligible to become scholarship schools, shall fully cooperate 
with such schools in a timely and reasonable manner to provide 
information prepared by the school regarding school choice to parents 
of eligible children. Such information shall include, at a minimum, 
materials prepared by the school regarding the scholarship program, 
selection of schools, and the school itself.

SEC. 409. ELIGIBLE SCHOOLS.

    (a) Standards.--Each private school located in the renewal 
community or within a reasonable transportation distance of such 
community is eligible to redeem scholarships and to become a 
scholarship school if--
            (1) the school complies with the antidiscrimination 
        provisions of section 601 of title VI of the Civil Rights Act 
        of 1964 (42 U.S.C. 2000) and does not discriminate on the basis 
        of race;
            (2) the school satisfies requirements established by State 
        and local governments, where applicable, for curriculum and 
        facilities which applied to private schools for the area in 
        which the school is located as of January 1, 1996; and
            (3) the school meets the health and safety standards which 
        applied to private schools as of January 1, 1996, for the 
        community in which the school is located.
    (b) Limits on the Regulation of Schools.--Any regulation of a 
scholarship school shall be subject to the following limitations:
            (1) No additional requirements, regulations, or burdensome 
        paperwork other than those in effect on the date of the 
        enactment of this Act or as set forth or referenced in this 
        title may be imposed upon scholarship schools.
            (2) Students who have been enrolled in a scholarship school 
        in the preceding school year may be given an admissions 
        preference over new students who apply.
            (3) No requirements or regulations may prohibit or limit 
        the authority of scholarship schools to provide religious 
        instruction or education.
            (4) Scholarship schools shall be protected by the rights 
        granted in the Religious Freedom Restoration Act of 1993.
            (5) Except for the limitation concerning discrimination on 
        the basis of race expressed in subsection (a)(1), any school 
        operated by a religious organization may require its employees 
        to--
                    (A) adhere to the religious tenets and teachings of 
                such organization; and
                    (B) follow any rules of behavior devised by the 
                organization.
            (6) No requirement and regulation shall prohibit a 
        scholarship school from--
                    (A) admitting students of a single gender;
                    (B) operating classes which are separated on the 
                basis of gender; or
                    (C) employing teaching personnel whose gender the 
                school deems appropriate in the education of certain 
                categories of students.
    (c) Ineligible Schools.--Notwithstanding any other provision of 
this title, a school that advocates criminal behavior or which is 
operated by an organization which advocates criminal behavior is 
ineligible to participate in the program authorized by this title.

SEC. 410. ADMINISTRATION OF PROGRAM AND TREATMENT OF FUNDS.

    (a) Funds not Aid to Institutions.--The funds provided for a 
scholarship under this title is an award of aid to a family, not to a 
school or institution. Use of a scholarship or transportation 
assistance shall not constitute Federal financial aid or assistance to 
a school, nor shall it invoke any regulation of an activity beyond the 
regulations explicitly referred to or provided for in this title.
    (b) Treatment of Grant Funds.--A Federal, State, or local agency 
may not take into account, in any year, Federal funds provided to a 
renewal community, school, or to the parents of any child under this 
title in determining whether to provide any other funds from Federal, 
State, or local resources, or in determining the amount of such 
assistance.
    (c) No Authorization of Federal Regulation of Education.--Nothing 
in this Act shall be construed to authorize the Secretary to exercise 
any direction, supervision, or control over the curriculum, program of 
instruction, administration, or personnel of any educational 
institution or school participating in a program under this title.
    (d) Prohibition on State Discrimination in Use of Funds.--A State 
constitution or State law shall not be construed to prohibit the 
expenditure of any Federal funds provided under this title in or by a 
religious institution. If a State law or constitution does not allow 
the expenditure of State or local public funds in or by religious 
organizations, the renewal community shall segregate Federal funds from 
State or other public funds for purposes of providing assistance 
administering the educational opportunity scholarship program.
    (e) Regulation of Schools not Receiving Scholarships.--A rule or 
requirement established for scholarship schools shall not apply to a 
private school that chooses not to become a scholarship school.
    (f) Scholarships not Deemed Income.--Funds used to provide 
scholarships shall not be deemed income of the parents for Federal 
income tax purposes or for determining eligibility for any other 
Federal programs.

SEC. 411. CONTRIBUTIONS TO SCHOLARSHIP PROGRAM FROM OTHER SOURCES.

    (a) In General.--The renewal community is encouraged to seek or 
provide additional funds for scholarships and transportation assistance 
from other sources, including--
            (1) local government funds;
            (2) State government funds;
            (3) contributions from private businesses; and
            (4) contributions from private charitable organizations.
    (b) Parental Payments not Counted as Matching Contributions.--For 
purposes of section 407(c), payments of tuition and education fees by 
parents of eligible children shall not be considered matching 
contributions.

SEC. 412. USE OF EXCESS FUNDS FOR ADDITIONAL EDUCATIONAL PURPOSES.

    (a) In General.--If any funds remain after a renewal community has 
provided scholarships to all eligible children whose parents have 
applied for assistance in accordance with this title, the community may 
use such excess funds for the general education of children from low-
income families who attend public schools within the renewal community, 
subject to the limitation in subsection (b).
    (b) Limitation.--A renewal community may not use excess funds for 
the purposes described in subsection (a) if the Secretary determines 
that the community--
            (1) has failed to fully inform the parents or guardians of 
        eligible children of--
                    (A) the availability of scholarships; and
                    (B) the full range of choices of schools available;
            (2) has in any way discouraged or impeded parents of 
        eligible children from using scholarships;
            (3) has in any way discouraged or impeded eligible schools 
        from receiving scholarships; or
            (4) has unreasonably hindered the establishment of new 
        private schools within the renewal community.
    (c) Forfeiture of Surplus Funds.--In the event that the Secretary 
determines that a renewal community has met one or more of the 
conditions described in subsection (b), the renewal community shall 
return any excess funds described in subsection (a) to the Treasury.

SEC. 413. EVALUATION.

    (a) In General.--The Secretary shall conduct a national evaluation 
of the program authorized by this title not later than 2 years after 
such program begins and a second evaluation after 4 years. Such 
evaluations shall--
            (1) assess the implementation of assisted programs and the 
        effect on participants, schools, and communities in the renewal 
        community, including parental involvement in, and satisfaction 
        with, the program and their children's education;
            (2) compare the educational achievement of children who 
        participate in the scholarship program with the achievement of 
        similar children who do not participate in the scholarship 
        program before, during, and after the program;
            (3) compare educational achievement of children who use 
        scholarships to attend schools other than the ones they would 
        attend in the absence of the program with educational 
        achievement of children who attend the schools scholarship 
        students would attend in the absence of the program; and
            (4) compare graduation rates of children who use 
        scholarships to attend schools other than the schools they 
        would attend in the absence of the program with graduation 
        rates of children who attend the schools the scholarship 
        students would attend in the absence of the program.
    (b) No Authorization of School Regulation.--The responsibility to 
evaluate shall not be construed to authorize the State or local 
government to exercise any direction, supervision, or control over the 
curriculum, program of instruction, administration, or personnel of any 
educational private institution or school participating in a low-income 
educational opportunity scholarship program under this title, except 
that the school may be required to provide reasonable information to 
assist in the evaluation of the program, including standardized tests 
of student achievement, surveys of parental satisfaction with their 
child's education, surveys of student satisfaction, attendance rates, 
dropout rates, and data on student's college enrollment.

SEC. 414. EFFECT ON OTHER PROGRAMS.

    Nothing in this Act shall be read to affect the applicability or 
requirements of part B of the Individuals with Disabilities Education 
Act.

SEC. 415. JUDICIAL REVIEW.

    (a) Panel.--In the event of a constitutional challenge to the 
program authorized under this title, such challenge shall be tried 
immediately by a three judge panel in the United States District Court 
of the District of Columbia and immediate appeal, as of right, may be 
had in the Supreme Court of the United States.
    (b) Request To Expedite.--The Supreme Court of the United States is 
requested to expedite an appeal requested pursuant to subsection (a).

SEC. 416. DEFINITIONS.

    Except as otherwise provided, for purposes of this title--
            (1) the term ``alternative public school'' means a public 
        school other than the public school in which the child normally 
        would attend and which is within reasonable transportation 
        distance from the child's residence;
            (2) the term ``assistance'' means either a scholarship, 
        transportation assistance, or a scholarship and transportation 
        assistance provided to parents of eligible children who 
        participate in the scholarship program pursuant to this title.
            (3) the term ``elementary school'' means an institutional 
        day or residential school that provides elementary education, 
        as determined under State law;
            (4) the term ``eligible child'' means a child whose parents 
        qualify to receive assistance under section 406;
            (5) the term ``lawfully operated elementary school'' means 
        an institutional day or residential school that provides 
        elementary education, as determined under State law;
            (6) the term ``lawfully operated secondary school'' means 
        an institutional day or residential school that provides 
        secondary education, as determined under State law, except that 
        such term does not include any education beyond grade 12;
            (7) the terms ``Low-Income Educational Opportunity 
        Scholarship'' and ``scholarship'' mean a certificate awarded to 
        a parent of an eligible child under section 406 to be redeemed 
        at a scholarship school;
            (8) the terms ``local educational agency'', ``parent'', and 
        ``State educational agency'' have the meanings given such terms 
        in section 14101 of the Elementary and Secondary Education Act 
        of 1965;
            (9) the term ``poverty level'' means the total income of a 
        family that is at or below the Federal poverty guidelines 
        updated annually in the Federal Register by the Department of 
        Health and Human Services under authority of section 673(2) of 
        the Omnibus Budget Reconciliation Act of 1981 as amended;
            (10) the term ``renewal community'' has the meaning given 
        such term in section 1400 of the Internal Revenue Code of 1986;
            (11) the term ``scholarship program means a program within 
        the renewal community that provides scholarships and 
        transportation aid to eligible children in accordance with this 
        title.
            (12) the term ``scholarship school'' means a private school 
        that chooses to accept educational opportunity scholarships;
            (13) the term ``secondary school'' means an institutional 
        day or residential school that provides secondary education, as 
        determined under State law, except that such term does not 
        include any education beyond grade 12;
            (14) the term ``Secretary'' means the Secretary of 
        Education;
            (15) the term ``State'' means each of the 50 States, the 
        District of Columbia, and the Commonwealth of Puerto Rico; and
            (16) the term ``transportation assistance'' means direct or 
        indirect subsidization of the costs of transporting children 
        participating in the program to scholarship schools or 
        alternative public schools.

SEC. 417. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated the following sums: 
$200,000,000 for fiscal year 1996, $200,000,000 for fiscal year 1997, 
$200,000,000 for fiscal year 1998, $400,000,000 for fiscal year 1999, 
$500,000,000 for fiscal 2000, $1,000,000,000 for fiscal year 2001, and 
$2,500,000,000 for fiscal year 2002.

         TITLE III--PREVENTION AND TREATMENT OF SUBSTANCE ABUSE

SEC. 301. PREVENTION AND TREATMENT OF SUBSTANCE ABUSE; SERVICES 
              PROVIDED THROUGH RELIGIOUS ORGANIZATIONS.

    Title V of the Public Health Service Act (42 U.S.C. 290aa et seq.) 
is amended by adding at the end the following part:

      ``Part G--Services Provided Through Religious Organizations

``SEC. 581. APPLICABILITY TO DESIGNATED PROGRAMS.

    ``(a) Designated Programs.--Subject to subsection (b), this part 
applies to each program under this Act that makes awards of Federal 
financial assistance to public or private entities for the purpose of 
carrying out activities to prevent or treat substance abuse (in this 
part referred to as a `designated program'). Designated programs 
include the program under subpart II of part B of title XIX (relating 
to formula grants to the States).
    ``(b) Limitation.--This part does not apply to any award of Federal 
financial assistance under a designated program for a purpose other 
than the purpose specified in subsection (a).
    ``(c) Definitions.--For purposes of this part (and subject to 
subsection (b)):
            ``(1) The term `designated award recipient' means a public 
        or private entity that has received an award under a designated 
        program (whether the award is a designated direct award or a 
        designated subaward).
            ``(2) The term `designated direct award' means an award 
        under a designated program that is received directly from the 
        Federal Government.
            ``(3) The term `designated subaward' means an award of 
        financial assistance made by a non-Federal entity, which award 
        consists in whole or in part of Federal financial assistance 
        provided through an award under a designated program.
            ``(4) The term `designated program' has the meaning given 
        such term in subsection (a).
            ``(5) The term `financial assistance' means a grant, 
        cooperative agreement, contract, or voucherized assistance.
            ``(6) The term `program beneficiary' means an individual 
        who receives program services.
            ``(7) The term `program participant' has the meaning given 
        such term in section 582(a)(2).
            ``(8) The term `program services' means treatment for 
        substance abuse, or preventive services regarding such abuse, 
        provided pursuant to an award under a designated program.
            ``(9) The term `religious organization' means a nonprofit 
        religious organization.
            ``(10) The term `voucherized assistance' means--
                    ``(A) a system of selecting and reimbursing program 
                services in which--
                            ``(i) the beneficiary is given a document 
                        or other authorization that may be used to pay 
                        for program services;
                            ``(ii) the beneficiary chooses the 
                        organization that will provide services to him 
                        or her according to rules specified by the 
                        designated award recipient; and
                            ``(iii) the organization selected by the 
                        beneficiary is reimbursed by the designated 
                        award recipient for program services provided; 
                        or
                    ``(B) any other mode of financial assistance to pay 
                for program services in which the program beneficiary 
                determines the allocation of program funds through his 
                or her selection of one service provider from among 
                alternatives.

``SEC. 582. RELIGIOUS ORGANIZATIONS AS PROGRAM PARTICIPANTS.

    ``(a) In General.--
            ``(1) Scope of authority.--Notwithstanding any other 
        provision of law, a religious organization--
                    ``(A) may be a designated award recipient;
                    ``(B) may make designated subawards to other public 
                or nonprofit private entities (including other 
                religious organizations);
                    ``(C) may provide for the provision of program 
                services to program beneficiaries through the use of 
                voucherized assistance; and
                    ``(D) may be a provider of services under a 
                designated program, including a provider that accepts 
                voucherized assistance.
            ``(2) Definition of program participant.--For purposes of 
        this part, the term `program participant' means a public or 
        private entity that has received a designated direct award, or 
        a designated subaward, regardless of whether the entity 
        provides program services. Such term includes an entity whose 
        only participation in a designated program is to provide 
        program services pursuant to the acceptance of voucherized 
        assistance.
    ``(b) Religious Organizations.--The purpose of this section is to 
allow religious organizations to be program participants on the same 
basis as any other nonprofit private provider without impairing the 
religious character of such organizations, and without diminishing the 
religious freedom of program beneficiaries.
    ``(c) Nondiscrimination Against Religious Organizations.--Religious 
organizations are eligible to be program participants on the same basis 
as any other nonprofit private organization so long as activities under 
the designated programs are implemented consistent with the 
establishment clause of the first amendment to the Constitution of the 
United States. Neither the Federal Government nor a State receiving 
funds under such programs shall discriminate against an organization 
that is or applies to be a program participant on the basis that the 
organization has a religious character.
    ``(d) Religious Character and Freedom.--
            ``(1) Religious organizations.--Notwithstanding any other 
        provision of law, any religious organization that is a program 
        participant shall retain its independence from Federal, State, 
        and local government, including such organization's control 
        over the definition, development, practice, and expression of 
        its religious beliefs.
            ``(2) Additional safeguards.--Neither the Federal 
        Government nor a State shall require a religious organization 
        to--
                    ``(A) alter its form of internal governance; or
                    ``(B) remove religious art, icons, scripture, or 
                other symbols;
        in order to be a program participant.
    ``(e) Rights of Program Beneficiaries.--With respect to an 
individual who is a program beneficiary or a prospective program 
beneficiary, if the individual objects to a program participant on the 
basis that the participant is a religious organization, the following 
applies:
            ``(1) If the organization received a designated direct 
        award, the organization shall arrange for the individual to 
        receive program services through an alternative entity.
            ``(2) If the organization received a designated subaward, 
        the non-Federal entity that made the subaward shall arrange for 
        the individual to receive the program services through an 
        alternative program participant.
            ``(3) If the organization is providing services pursuant to 
        voucherized assistance, the designated award recipient that 
        operates the voucherized assistance program shall arrange for 
        the individual to receive the program services through an 
        alternative provider.
            ``(4) Arrangements under any of paragraphs (1) through (3) 
        with an alternative entity shall provide for program services 
        the monetary value of which is not less than the monetary value 
        of the program services that the individual would have received 
        from the religious organization involved.
    ``(f) Nondiscrimination in Employment.--
            ``(1) In general.--Except as provided in paragraph (2), 
        nothing in this section shall be construed to modify or affect 
        the provisions of any other Federal or State law or regulation 
        that relates to discrimination in employment on the basis of 
        religion.
            ``(2) Exception.--A religious organization that is a 
        program participant may require that an employee rendering 
        programs services adhere to--
                    ``(A) the religious tenets and teachings of such 
                organization; and
                    ``(B) any rules of the organization regarding the 
                use of drugs or alcohol.
    ``(g) Nondiscrimination Against Beneficiaries.--
            ``(1) In general.--Except as provided in paragraph (2) or 
        as otherwise provided in law, a religious organization that is 
        a program participant shall not in providing program services 
        discriminate against a program beneficiary on the basis of 
        religion or religious belief.
            ``(2) Limitation.--A religious organization that is a 
        program participant may require a program beneficiary who has 
        elected in accordance with subsection (e) to receive program 
        services from such organization--
                    ``(A) to actively participate in religious 
                practice, worship, and instruction; and
                    ``(B) to follow rules of behavior devised by the 
                organizations that are religious in content or origin.
    ``(h) Fiscal Accountability.--
            ``(1) In general.--Except as provided in paragraph (2), any 
        religious organization that is a program participant shall be 
        subject to the same regulations as other recipients of awards 
        of Federal financial assistance to account, in accordance with 
        generally accepting auditing principles, for the use of the 
        funds provided under such awards.
            ``(2) Limited audit.--With respect to the award involved, 
        if a religious organization that is a program participant 
        maintains the Federal funds in a separate account from non-
        Federal funds, then only the Federal funds shall be subject to 
        audit.

``SEC. 583. LIMITATIONS ON USE OF FUNDS FOR CERTAIN PURPOSES.

    ``(a) In General.--Except as provided in subsection (b), no funds 
provided directly to an entity under a designated program shall be 
expended for sectarian worship or instruction.
    ``(b) Exception.--Subsection (a) shall not apply to assistance 
provided to or on behalf of a program beneficiary if the beneficiary 
may choose where such assistance is redeemed or allocated.

``SEC. 584. ADMINISTRATION OF PROGRAM AND TREATMENT OF FUNDS.

    ``(a) Funds Not Aid to Institutions.--Financial assistance under a 
designated program provided to or on behalf of program beneficiaries is 
aid to the beneficiary, not to the organization providing program 
services. The receipt by a program beneficiary of program services at 
the facilities of the organization shall not constitute Federal 
financial assistance to the organization involved.
    ``(b) Prohibition on State Discrimination in Use of Funds.--No 
provision in any State constitution or State law shall be construed to 
prohibit the expenditure of Federal funds under a designated program in 
a religious facility or by a religious organization that is a program 
participant. If a State law or constitution would prevent the 
expenditure of State or local public funds in such a facility or by 
such a State or local government, then the organization shall segregate 
the Federal funds from State or other public funds for purposes of 
carrying out the designated program.

``SEC. 585. EDUCATIONAL REQUIREMENTS FOR PERSONNEL IN DRUG TREATMENT 
              PROGRAMS.

    ``(a) Findings.--The Congress finds that--
            ``(1) establishing formal educational qualification for 
        counselors and other personnel in drug treatment programs may 
        undermine the effectiveness of such programs; and
            ``(2) such formal educational requirements for counselors 
        and other personnel may hinder or prevent the provision of 
        needed drug treatment services.
    ``(b) Limitation on Educational Requirements of Personnel.--
            ``(1) Treatment of religious education.--If any State or 
        local government that is a program participant imposes formal 
        educational qualifications on providers of program services 
        that are religious organizations, such State or local 
        government shall treat religious education and training of 
        personnel as having a critical and positive role in the 
        delivery of program services. In applying educational 
        qualifications for personnel in religious organizations, such 
        State or local government shall give credit for religious 
        education and training equivalent to credit given for secular 
        course work in drug treatment or any other secular subject that 
        is of similar grade level and duration.
            ``(2) Restriction of discrimination requirements.--
                    ``(A) In general.--Subject to paragraph (1), a 
                State or local government that is a program participant 
                may establish formal educational qualifications for 
                personnel in organizations providing program services 
                that contribute to success in reducing drug use among 
                program beneficiaries.
                    ``(B) Exception.--The Secretary shall waive the 
                application of any educational qualification imposed 
                under subparagraph (A) for an individual religious 
                organization, if the Secretary determines that--
                            ``(i) the religious organization has a 
                        record of prior successful drug treatment for 
                        at least the preceding three years;
                            ``(ii) the educational qualifications have 
                        effectively barred such religious organization 
                        from becoming a program provider;
                            ``(iii) the organization has applied to the 
                        Secretary to waive the qualifications; and
                            ``(iv) the State or local government has 
                        failed to demonstrate empirically that the 
                        educational qualifications in question are 
                        necessary to the successful operation of a drug 
                        treatment program.''.

     TITLE V--CRA CREDIT FOR INVESTMENTS IN COMMUNITY DEVELOPMENT 
              ORGANIZATIONS LOCATED IN RENEWAL COMMUNITIES

SEC. 501. CRA CREDIT FOR INVESTMENTS IN COMMUNITY DEVELOPMENT 
              ORGANIZATIONS LOCATED IN RENEWAL COMMUNITIES.

    Section 804 of the Community Reinvestment Act of 1977 (12 U.S.C. 
2903) is amended by adding at the end the following new subsection:
    ``(c) Investments in Certain Community Development Organizations.--
In assessing and taking into account, under subsection (a), the record 
of a regulated financial institution, the appropriate Federal financial 
supervisory agency may consider, as a factor, investments of the 
institution in, and capital investment, loan participation, and other 
ventures undertaken by the institution in cooperation with, any 
community development organization (as defined in section 234 of the 
Bank Enterprise Act of 1991) which is located in a renewal community 
(as designated under section 1400 of the Internal Revenue Code of 
1986).''.

SEC. 502. FDA USER FEE AMENDMENT.

    Section 736(b) of the Federal Food, Drug, and Cosmetic Act (21 
U.S.C. 379h(b)) is amended by adding at the end the following:
            ``(3) Renewal community exception.--Any--
                    ``(A) business which qualifies as a renewal 
                community business under section 1400C of the Internal 
                Revenue Code of 1986, or
                    ``(B) any nonprofit organization,
        which is manufacturing a drug for which a fee is required under 
        subsection (a)(2)(A) and which was developed in a renewal 
        community designated under section 1400 of such Code or has 
        pending an application or supplement for a drug for which a fee 
        is required under subsection (a)(2)(B) and which was developed 
        in a renewal community designated under section 1400 of such 
        Code shall not be required to pay any portion of such fee. Any 
        business or non-profit organization shall not be required to 
        pay any portion of the fee required under subsection (a)(1)(A) 
        for a human drug application for a drug that was developed in a 
        renewal community.''.
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