[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2254 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 2254

 To amend the Internal Revenue Code of 1986 to allow a credit against 
 income tax for equity investments in community development financial 
                             institutions.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 24, 1997

Mr. Kennedy of Massachusetts (for himself, Ms. Waters, Mr. Becerra, Mr. 
 Bonior, Mr. Gonzalez, Mr. Barrett of Wisconsin, Ms. Brown of Florida, 
Mr. Brown of California, Ms. Carson, Mr. Coyne, Mr. Davis of Illinois, 
 Mr. DeFazio, Mr. Faleomavaega, Mr. Fattah, Mr. Filner, Mr. Flake, Mr. 
 Frank of Massachusetts, Mr. Gutierrez, Mr. Hinchey, Mr. Hinojosa, Mr. 
 Jackson of Illinois, Ms. Kilpatrick, Mr. McDermott, Ms. McKinney, Mr. 
Martinez, Mrs. Meek of Florida, Ms. Millender-McDonald, Mr. Olver, Ms. 
 Roybal-Allard, Mr. Sanders, Mr. Scott, and Mr. Waxman) introduced the 
 following bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to allow a credit against 
 income tax for equity investments in community development financial 
                             institutions.

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

SECTION 1. CREDIT FOR QUALIFIED EQUITY INVESTMENTS IN COMMUNITY 
              DEVELOPMENT FINANCIAL INSTITUTIONS.

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

``SEC. 45D. QUALIFIED EQUITY INVESTMENTS IN COMMUNITY DEVELOPMENT 
              FINANCIAL INSTITUTIONS.

    ``(a) General Rule.--For purposes of section 38, the community 
development financial institution investment credit for any taxable 
year is an amount equal to the applicable percentage of the qualified 
equity investment made by the taxpayer during the taxable year.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
term `applicable percentage' means, with respect to any investment, 25 
percent, or, if the CDFI Fund establishes a lower percentage with 
respect to such investment for purposes of this section, such lower 
percentage.
    ``(c) Qualified Equity Investment.--For purposes of this section--
            ``(1) In general.--The term `qualified equity investment' 
        means any stock or partnership interest in a community 
        development financial institution (as defined in section 103 of 
        the Community Development Banking and Financial Institutions 
        Act of 1994 (12 U.S.C. 4702))--
                    ``(A) if such institution is designated for 
                purposes of this section by the CDFI Fund,
                    ``(B) if such stock or partnership interest is 
                acquired by the taxpayer at its original issue from the 
                institution (directly or through an underwriter) in 
                exchange for money or other property, and
                    ``(C) to the extent the amount of such investment 
                is designated for such purposes by such Fund.
        Rules similar to the rules of section 1202(c)(3) shall apply 
        for purposes of subparagraph (B).
            ``(2) Criteria for designating institutions.--Designations 
        under paragraph (1)(A) shall be made in accordance with 
        criteria established by the CDFI Fund. In establishing such 
        criteria, the CDFI Fund shall take into account the 
        requirements and criteria set forth in sections 105(b) and 107 
        of such Act.
            ``(3) CDFI fund.--The term `CDFI Fund' means the Community 
        Development Financial Institutions Fund established by section 
        104 of such Act.
    ``(d) Limitation on Amount of Credit.--
            ``(1) In general.--The amount of credit determined under 
        this section for any qualified equity investment shall not 
        exceed the credit amount allocated to such investment by the 
        CDFI Fund.
            ``(2) Overall limitation.--The aggregate credit amount 
        which may be allocated by the CDFI Fund under this section 
        shall not exceed $100,000,000.
    ``(e) Recapture of Credit Where Disposition of Equity Investment 
Within 5 Years.--
            ``(1) In general.--If the taxpayer disposes of any 
        investment with respect to which a credit was determined 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 investment) before the end of the 5-year period 
        beginning on the date such investment was made, the tax imposed 
        by this chapter for the taxable year in which such disposition 
        occurs shall be increased by the aggregate decrease in tax of 
        the taxpayer resulting from the credit determined under this 
        subsection (a) with respect to such investment.
            ``(2) Exceptions.--Paragraph (1) shall not apply to any 
        gift, transfer, or transaction described in paragraph (1), (2), 
        or (3) of section 1245(b).
            ``(3) Special rule.--Any increase in tax under paragraph 
        (1) shall not be treated as a tax imposed by this chapter for 
        purposes of--
                    ``(A) determining the amount of any credit 
                allowable under this chapter, and
                    ``(B) determining the amount of the tax imposed by 
                section 55.
    ``(f) Basis Reduction.--The basis of any qualified equity 
investment shall be reduced by the amount of any credit determined 
under this section with respect to such investment.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out this section. Such regulations may 
provide for the recapture of the credit under this section with respect 
to investments in institutions which cease to satisfy the criteria 
established by the CDFI Fund for designation under subsection 
(c)(1)(A).
    ``(h) Termination.--This section shall not apply to any investment 
made after December 31, 2006.''
    (b) Credit Made Part of General Business Credit.--Subsection (b) of 
section 38 of such Code is amended by striking ``plus'' at the end of 
paragraph (12), by striking the period at the end of paragraph (13) and 
inserting ``, plus'', and by adding at the end the following new 
paragraph:
            ``(14) the community development financial institution 
        investment credit determined under section 45D(a).''
    (c) Credit Allowed Against Regular and Minimum Tax.--
            (1) In general.--Subsection (c) of section 38 of such Code 
        (relating to limitation based on amount of tax) is amended by 
        redesignating paragraph (3) as paragraph (4) and by inserting 
        after paragraph (2) the following new paragraph:
            ``(3) Special rules for community development financial 
        institution investment credit.--
                    ``(A) In general.--In the case of the community 
                development financial institution investment credit--
                            ``(i) this section and section 39 shall be 
                        applied separately with respect to the credit, 
                        and
                            ``(ii) in applying paragraph (1) to the 
                        credit--
                                    ``(I) 75 percent of the tentative 
                                minimum tax shall be substituted for 
                                the tentative minimum tax under 
                                subparagraph (A) thereof, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than the community 
                                development financial institution 
                                investment credit).
                    ``(B) Community development financial institution 
                investment credit.--For purposes of this subsection, 
                the term `community development financial institution 
                investment credit' means the credit allowable under 
                subsection (a) by reason of section 45D(a).''
            (2) Conforming amendment.--Subclause (II) of section 
        38(c)(2)(A)(ii) of such Code is amended by inserting ``and the 
        community development financial institution investment credit'' 
        after ``employment credit''.
    (d) Limitation on Carryback.--Subsection (d) of section 39 of such 
Code is amended by adding at the end the following new paragraph:
            ``(8) No carryback of community development financial 
        institution investment credit before effective date.--No 
        portion of the unused business credit for any taxable year 
        which is attributable to the credit under section 45D may be 
        carried back to a taxable year ending before the date of the 
        enactment of section 45D.''
    (e) Deduction for Unused Credit.--Subsection (c) of section 196 of 
such Code is amended by striking ``and'' at the end of paragraph (6), 
by striking the period at the end of paragraph (7) and inserting ``, 
and'', and by adding at the end the following new paragraph:
            ``(8) the community development financial institution 
        investment credit determined under section 45D(a).''
    (f) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by adding at the end 
the following new item:

                              ``Sec. 45D. Qualified equity investments 
                                        in community development 
                                        financial institutions.''
    (g) Effective Date.--The amendments made by this section shall 
apply to investments made after the date of the enactment of this Act.
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