[Congressional Record Volume 143, Number 31 (Wednesday, March 12, 1997)]
[Senate]
[Pages S2212-S2215]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ABRAHAM (for himself, Mr. Lieberman, Mr. DeWine, Mr. 
        Hutchinson, and Mr. Coats):
  S. 432. A bill to amend the Internal Revenue Code of 1986 to allow 
the designation of renewal communities, and for other purposes; to the 
Committee on Finance.


               the american community renewal act of 1997

 Mr. ABRAHAM. Mr. President, today, I am proud to join 
colleagues on both sides of the Capitol and both sides of the aisle in 
introducing the American Community Renewal Act of 1997. This 
legislation addresses the social and economic pathologies currently 
besetting this country. It helps bring back economic growth and the 
sense of community we need to maintain safe streets, strong families, 
and vibrant neighborhoods. And it does so be bridging the gap between 
tax policies designed to stimulate economic growth and social policies 
designed to strengthen our moral fabric.
  This bipartisan, bicameral bill has the support of members from 
diverse States and diverse political perspectives. Here in the Senate, 
I am joined by Senators Lieberman, DeWine, Hutchinson of Arkansas, and 
Coats. Meanwhile, Congressmen Watts, Flake, and Talent are introducing 
a similar bill in the House of Representatives.
  Mr. President, the tragedy of broken homes, drugs, violence, and 
welfare dependency is so prevalent that some Americans accept it as 
normal. But broken families are not normal, and neither is the 
hopelessness that lies at the root of community decay. We can and must 
work to renew our distressed communities, both for the sake of the 
people living there and for all Americans.
  We spent $5.4 trillion on the War on Poverty, yet today's poverty 
rate is essentially the same as it was in 1966. The problem was not our 
good intentions. Nor was it that community decay is an unbeatable 
adversary. Rather, the problem with the war on poverty was that it 
looked toward Washington rather than to the communities themselves.
  Mr. President, the Washington knows best approach is a recipe for 
disaster. Washington can neither end poverty nor give people the habits 
of hard work, civility, and personal responsibility necessary for 
community renewal. But Washington can do something. It can remove 
barriers and free entrepreneurs and community leaders to reconstruct 
the fundamental institutions, beliefs, and practices upon which any 
health community must rely.
  Which leaders are we talking about? People like Indianapolis Mayor 
Steve Goldsmith, who is working with local groups like the Indianapolis 
Housing Project and Westside Cooperative Organization. Together they 
are cutting redtape and encouraging community development. They are 
revitalizing neighborhoods that previously had been written off.
  In Detroit, Mayor Archer's clean sweep program last year brought 
together over 20,000 volunteers in and around that city, along with 
dozens of local community organizations. Their efforts resulted in the 
removal of over 300,000 bags of trash from our city. Community pride 
was harnessed, and developed, in this worthwhile endeavor.
  These are the kinds of cooperative efforts that can revitalize our 
distressed communities. Such efforts lie behind the American Community 
Renewal Act of 1997. By replacing barriers with incentives, this 
legislation aims to increase private investment, strengthen family 
ties, and effectively fight drugs abuse by reintegrating faith-based 
institutions into the public life of our distressed areas. Building on 
the pioneering legislation sponsored by then-Congressman Jack Kemp in 
the 1970's, it will create 100 community renewal zones with targeted, 
pro-growth tax and regulatory relief, housing assistance and provisions 
encouraging savings, education and investment.
  A community must meet several criteria to qualify. First, its 
residents must have incomes well below the average while at least a 
fifth fall below the poverty line. Other measures such as unemployment 
levels and eligibility for certain Federal assistance programs are also 
considered.
  Second, the community must bring to the table its own package of 
incentives including lower taxes, increased local services, a crime 
reduction strategy, and fewer economic regulations. Mr. President, part 
of rejecting the Washington knows best philosophy is acknowledging that 
not all barriers to economic and social growth come from the Federal 
Government.
  This legislation calls on local governments to do their part. In 
return for these concessions, Mr. President, the community will receive 
a number of powerful benefits designed to encourage new businesses, job 
creation, and economic growth.
  First, we eliminate the capital gains tax for the sale of any renewal 
property or business held for at lest 5 years, we increase the 
expensing allowance for small businesses for those who locate in the 
zone, and we target low-income workers with a 20-percent wage credit if 
they are hired by a renewal community business.

  Next, we target additional capital at renewal communities by allowing 
banks to receive Community Reinvestment Act credit for investments in, 
or loans to, community groups within the zone. The idea is that these 
groups would then provide loans to local small businesses and 
residents.
  Finally, we target environmental blight by providing tax incentives 
for cleaning up of old commercial and industrial properties located 
within the renewal communities. There are tens of thousands of these 
so-called brownfields across the country, Mr. President, and in many 
communities they represent the No. 1 obstacle to redevelopment and 
economic growth. Providing these tax breaks eliminates a barrier to 
investment in our renewal communities as it helps preserve undeveloped 
lands inside and outside these communities. For every brownfield that 
gets cleaned and reused, a greenfield is preserved.
  Important as they are, however, investment and job creation 
incentives are not enough. That is why the Community Renewal Act also 
targets families and organizations. For families living within renewal 
communities, the bill provides new opportunities for saving, owning a 
home, and sending their children to the school of their choice.
  The bill provides renewal zone residents with family development 
accounts. These super-IRA's will encourage low-income families to save 
part of their income by making the deposits--up to $2,000 per year--
deductible and the withdrawals tax free if used for purposes like 
buying a house or meeting educational expenses.
  The bill also provides for the sale of unoccupied or substandard 
local HUD homes and housing projects to community development 
corporations. This provision increases housing opportunities for low-
income families, helping them stay together, invest in their homes, and 
care for their neighborhoods by making them stakeholders in renewal 
communities.
  Finally, there is an opportunity scholarship program. This means-
tested program allows low-income parents to send their children to the 
school they think best.
  Our bill also targets community organizations for assistance. As has 
been noted previously, for every social problem we face, there is an 
organization out there that is addressing that problem. This 
legislation's goal is to stimulate and encourage those organizations in 
their work.
  In San Antonio, Pastor Freddie Garcia runs Victory Fellowship. This 
faith based drug rehabilitation program has saved thousands of addicts 
in some of the city's toughest neighborhoods. Victory Fellowship offers 
addicts a safe haven, a chance to recover, job training, and a chance 
for addicts to provide for themselves and their families and 13,000 
people have been helped there, with a success rate of over 80 percent. 
But, because Victory Fellowship is faith based, it has not received any 
Federal help. Also because it is faith based, no one receiving Federal 
assistance is allowed to go there.

[[Page S2213]]

  Mr. President, the American Community Renewal Act would allow local, 
faith based substance abuse treatment centers like Pastor Garica's to 
receive Federal assistance. It does so without endangering the 
independence of the Victory Fellowship and other centers doing similar 
work, and it does so without forcing religious doctrine upon those who 
seek assistance.
  And, finally, this legislation stimulates charitable giving in all 
American communities by creating a new charity tax credit for private 
donations to qualified charities. Mr. President, back in 1986, Congress 
eliminated the charitable deduction for families who do not itemize. 
This change in the Tax Code hurt the ability of charities to attract 
private support. To correct this problem, this new credit would be 
available to all families, even those who do not itemize. To keep the 
cost reasonable, we have capped qualified donations for taxpayers who 
must also personally volunteer at the recipient charity. Nevertheless, 
we believe this provision will provide taxpayers with a powerful 
incentive to add their hard-earned money to the war on poverty and 
drugs.
  Mr. President, the American Community Renewal Act places its faith in 
individuals, organizations, and communities all across America to 
address our social and economic ills. It does so by bridging the gap 
between economic and social policy, and the gap between traditionally 
Republican and Democratic solutions. I am glad to have joined hands 
with my colleagues to move this initiative forward, and I look forward 
to seeing this legislation enacted into law this Congress.
  Mr. president, I ask unanimous consent that a detailed summary of the 
American Community Renewal Act be printed in the Record.
  There being no objection, the item was ordered to be printed in the 
Record, as follows:

          The American Community Renewal Act of 1997--Outline

       This legislation focuses on three broad themes: moral and 
     family renewal, personal economic empowerment, and fostering 
     private charity. Our bill allows for up to 100 ``Renewal 
     Communities'' to be established on a competitive basis in 
     both urban and rural areas. To be designated a Renewal 
     Community, state and local governments would have to work 
     together with neighborhood groups to relax zoning, housing, 
     tax, and business rules and regulations.


       Title 1: Designation and Evaluation of Renewal Communities

       Establish up to 100 Renewal Communities along the following 
     guidelines:
       (1) The Secretary of Housing and Urban Development has the 
     authority to designate these ``renewal communities,'' 25 
     percent of which must be in rural areas. Designations would 
     be effective for seven years.
       (2) Areas nominated would have to meet certain criteria and 
     would be ranked on the degree to which they exceeded these 
     criteria. The criteria are as follows: (a) have an 
     unemployment rate of at least 1\1/2\ times the national rate; 
     (b) have a poverty rate of at least 20 percent; and (c) at 
     least 70 percent of the households in the area have incomes 
     below 80 percent of the median income of households in the 
     metropolitan statistical area.
       Nominated areas also would have to meet certain population 
     criteria. These requirements are: (1) the areas must be 
     within the jurisdiction of local governments; (2) the 
     boundary must be continuous; and (3) if it is in a 
     metropolitan statistical area, the population, based on the 
     most recent census data, must be at least 4,000 (1,000 in the 
     case of rural areas) or be entirely within an Indian 
     reservation.
       (3) Within four months of enactment, the Secretary of 
     Housing and Urban Development would be required to issue 
     regulations to: (1) establish the procedures for nominating 
     areas; (2) determine the parameters relating to the size and 
     population characteristics of ``renewal communities;'' and 
     (3) the manner in which nominated areas will be evaluated 
     based on the eligibility criteria.
       (4) The Secretary of Housing and Urban Development could 
     not designate an area a ``renewal community'' unless: (1) the 
     local governments and the state have the authority to 
     nominate an area; (2) agree to the requirements on state and 
     local governments (described below); and (3) provide 
     assurances that these commitments will be fulfilled; and (4) 
     the Secretary of Housing and Urban Development determines 
     that the information furnished is reasonably accurate.
       (5) Before being considered for ``renewal community'' 
     status, state and local governments must enter into a written 
     contract with neighborhoods organizations to do at least five 
     of the following: (1) reduce taxrates and fees within the 
     ``renewal community;'' (2) increase the level of efficiency 
     of local services within the renewal community; (3) crime 
     reduction strategies; (4) actions to reduce, remove, 
     simplify, or streamline governmental requirements applying 
     within the renewal community; (5) involve private entities in 
     providing social services; (6) allow for state and local 
     income tax benefits for fees paid or accrued for services 
     performed by a nongovernmental entity but which formerly had 
     been performed by government; and (7) allow the gift (or sale 
     at below fair market value) of surplus realty (land, homes, 
     commercial or industrial structures) in the ``renewal 
     community'' to neighborhoods organizations, community 
     development corporations, or private companies.
       Communities would receive credit for past activities with 
     respect to these activities.
       (6) In addition, before being considered for ``renewal 
     community'' status, state and local governments must agree to 
     suspend or otherwise not enforce the following types of 
     restrictions on entry into business or occupations: (1) 
     licensing requirements for occupations that do not ordinarily 
     require a professional degree; (2) zoning restrictions on 
     home-based businesses that do not create a public nuisance; 
     (3). permit requirements for street vendors that do not 
     create a public nuisance; (4). zoning or other 
     restrictions that impeded the formation of schools or 
     child care centers; or (5). franchises or other 
     restrictions on competition for businesses providing 
     public services, including but not limited to taxicabs, 
     jitneys, cable television, or trash hauling. State and 
     local authorities may apply such regulations of businesses 
     and occupations within the ``renewal communities'' as are 
     necessary and well-tailored to protect public health, 
     safety, or order.
       (7) State and local governments must agree to participate 
     in the low-income scholarship program provided for in Title 
     IV of this bill.
       (8) With respect to existing Empowerment Zones and 
     Enterprise Communities, the first 50 designations of Renewal 
     Communities will be offered to existing zones on a first 
     come, first serve basis.


           TITLE II: ECONOMIC EMPOWERMENT AND TAX ADVANTAGES

       The tax benefits for Renewal Communities are substantial. 
     The tax incentives are as follows:
       (1) A 100 percent exclusion from capital gains for certain 
     qualified Renewal Community assets held for more than five 
     years;
       (2) An additional $35,000 of expensing under IRS Code 
     Section 179 for qualified Renewal Community enterprises;
       (3) A work opportunity tax credit to offset the cost of 
     hiring individuals who are either on Temporary Assistance for 
     Needy Families (TANF), are considered high-risk youth, or are 
     in need of some type of vocational rehabilitation. The 
     maximum credit can be up to $3,000 of first-year wages. The 
     credit only applies to businesses located within the Renewal 
     Community over a seven year period.
       (4) A commercial revitalization tax credit for the 
     renovation and rehabilitation of qualified, non-residential 
     buildings located within a Renewal Community. The credit is 
     worth up to 20% of the cost of renovation of 5% a year for 
     ten years;
       (5) Permits taxpayers to expense costs incurred in the 
     abatement of environmental contaminants located within a 
     Renewal Community.
       Provides Family Development Accounts for the working poor 
     residing in ``renewal communities'' along the following 
     guidelines:
       (1) As an incentive for low-income working families to 
     save, EITC recipients would be able to put a portion of their 
     credit into a savings account and be rewarded with a federal 
     match. The intent of this section is to provide low-income 
     working families an incentive to accumulate assets and help 
     achieve economic self-sufficiency. Withdrawals from these 
     accounts, known as Family Development Accounts, would be tax-
     free for the purchase of a home, post-secondary education, 
     emergency healthcare costs or the creation of a small 
     business. Contributions to the account would be limited to 
     $2,000 in unmatched income for a one year period.
       (2) These FDA accounts may be matched by public and private 
     funds to help low-income families build family assets and 
     become independent from government programs. Matches could be 
     provided by local churches, service organizations, 
     corporations, foundations, and state or local governments. A 
     federal match of this money would also be deposited into the 
     Family Development Account in at least 25 ``renewal 
     communities.'' The funds for these demonstration programs 
     will come from the $1 billion extra Social Service Block 
     Grant program created in the 1993 enterprise zone bill.
       Provide a new tax credit for charitable giving to private 
     organizations which aid the poor along the following 
     guidelines:
       (1) The credit would equal 75 percent of the value of 
     donations to qualified charities. The maximum gift for which 
     such credit would be claimed would be $100 for a single filer 
     ($200 for a joint-filing household). This credit would only 
     be active for a three year period. In order to be eligible 
     for the credit, the filer must have completed at least 10 
     hours of volunteer service for the designated organization 
     over a one year period.
       (2) In order for the credit to be claimed, the charity 
     which receives the gift: (a). must be predominately involved 
     in the provision of services to persons whose annual incomes 
     do not exceed 185 percent of poverty; (b). must allocate at 
     least 70 percent of its total expenditures to direct services 
     to low-income persons.

[[Page S2214]]

   Title III: Low-Income Educational Opportunity Scholarship Program

       Establish an educational choice scholarship program in each 
     ``renewal community'' along the following guidelines:
       (1) Parents of children who receive assistance under this 
     program will be free to choose the school which their 
     children will attend from a wide range of types of schools, 
     including: alternative public schools, charter schools, 
     private schools, and private religious schools.
       (2) Funds under the program may be used (a). to cover the 
     reasonable cost of transportation to alternative public 
     schools or (b). to provide scholarships to pay for tuition 
     and reasonable transportation costs to private, and private 
     religious schools.
       (3) Each locality will determine the value of scholarships 
     for children in their locality. The maximum value of the 
     scholarship shall not exceed the per capita cost of educating 
     children in a public school in the locality. The scholarship 
     shall have a minimum value which shall not fall below the 
     lesser of: (a). 66 percent of the per capita costs of 
     educating children in the public schools in the locality; or 
     (b). the normal tuition charged by the private school.
       (4) A parent shall be able to redeem a scholarship at any 
     private or private religious school within the locality which 
     meets the health and educational standards for private 
     schools within the locality which existed as of January 1, 
     1996. All schools which receive these scholarships shall 
     comply with the antidiscrimination provision of Section 601 
     of Title VI of the Civil Rights Act of 1964 and may not 
     discriminate on the basis of race.
       (5) The locality may not prohibit parents from using 
     scholarships to pay for tuition in religious schools and may 
     not discriminate in any way against parents who choose to 
     place their child in a religious school. The Senate version 
     of the bill ensures that state and local funds are not used 
     for scholarships where it is prohibited by state law or state 
     constitution.
       (6) Education funds under this act shall be provided into 
     two tiers: Tier I funds shall be based on the number of 
     school-age children with family incomes below 185 percent of 
     poverty; Tier II funds shall be based on the level of private 
     and public contribution to scholarships in the locality.
       The level of Tier I funds, which each community shall 
     receive, shall be pro-rated based on the number of school-age 
     children in families residing in the community with incomes 
     below 185 percent of poverty relative to the total number of 
     such children in all localities eligible for funding. 80 
     percent of the funds shall be dedicated to Tier I.
       Tier II funds shall equal 20 percent of all education funds 
     under this Act and shall be proportional to the level of 
     contribution to scholarships from non-federal funds (public 
     or private) within the locality.
       (7) No individual shall be entitled to scholarships. A 
     locality shall allocate scholarships and transportation aid 
     to eligible parents who apply for aid on a first-come, first-
     served basis or through another mechanism of selection 
     determined by the locality which does not discriminate on the 
     basis of the type of school selected by the parent.
       (8) If the funds allocated to a locality under this act 
     exceed the total expenditures on transportation aid and 
     scholarships in a locality in a given year, the locality may 
     use the surplus funds to provide for the education of low-
     income children within the public school system.


  Title IV: Faith-based Service Provider Empowerment and Homeownership

       The act would empower neighbhorhood groups, including 
     religious institutions, who want to provide drug treatment 
     and drug counseling activities in the following manner:
       (1) Modifies existing drug counseling and drug 
     rehabilitation programs. A state may provide drug counseling 
     and drug rehabilitation services through contracts with 
     religious organizations or other private organizations; or 
     may provide beneficiaries with vouchers or certificates which 
     are redeemable for services provided by such organizations.
       (2) Funds may be used for drug counseling and 
     rehabilitation programs which have a religious content and 
     character, as long as the beneficiary is able to choose among 
     a range of service providers, including those which are 
     religious in character. Such use of funds shall conform to 
     the Supreme Courts interpretation of the Establishment Clause 
     as provided in Mueller v. Allen and Witters v. Department of 
     Services for the Blind.
       (3) No beneficiary shall be required to participate in a 
     service or program which is religious in character. In all 
     cases beneficiaries shall be given the option of selecting 
     services from a non-religious provider.
       (4) Except as provided in #3 above, neither the federal 
     government nor a state receiving funds may discriminate 
     against an organization which seeks to provide services or be 
     a contractor on the basis that the organization has a 
     religious character.
       (5) States would be required to undertake a review of 
     credentialing requirements for drug rehabilitation programs. 
     The goal of this review would be to improve efficiency and 
     effectiveness of programs by reducing credentialing 
     requirements.
       More low-income families will have the opportunity to buy 
     their first home through the Renewal Community home-ownership 
     provisions. These measures provide for the sale of unoccupied 
     or substandard homes and housing projects located within 
     Renewal Communities and owned by HUD to community development 
     corporations.
       Finally, the bill would encourage bank lending within 
     ``renewal communities.'' The bill amends section 804 of the 
     Community Reinvestment Act of 1977 and allows financial 
     institutions to receive CRA credit for investments in, loans 
     to, or other ventures with community development financial 
     institutions as defined by the Bank Enterprise Act of 1991 
     and which are located within ``renewal communities.''
 Mr. LIEBERMAN. Mr. President, from the time I came to the 
Senate in 1989, I have been proud to advocate enterprise zones for 
America's troubled neighborhoods. I think this issue is at the heart of 
the whole question of what America must do to redeem the promise of 
economic opportunity for all Americans. I was pleased to work with Jack 
Kemp on this issue when he was Secretary of HUD, for the past 2 years 
with Senator Abraham, and now with Representatives Watts, Flake, and 
Talent.
  We all believe that not enough is being done to empower those people 
who live, work, and want to start businesses in our poorest urban and 
rural areas of the country. Any response to the economic distress in 
urban and rural areas which does not include a mechanism to attract 
businesses and jobs back to these areas is a response that is destined 
to fail.
  We took a step toward empowering poor Americans and identifying and 
helping impoverished communities by passing 1993 legislation creating 
empowerment zones and enterprise communities in more than 100 
neighborhoods across the country. With the passage of that legislation, 
Congress recognized something that our States have acknowledged for 
many years: Government loses the war on poverty when it fights alone. 
What we really need to do is figure out a way to pull the people and 
the places with little or no stake in our economic system, into our 
system. We need to answer ``yes'' to the question posed by Paul Pryde, 
coauthor of ``Black Entrepreneurship in America.'' That question is, 
``Can we make the market work for the discouraged, isolated and 
frequently embittered underclass?''
  We can, and need, to answer, ``yes.'' The 1993 legislation marked a 
fundamental change in urban policy, by recognizing that American 
business can and must play a role in revitalizing poor neighborhoods. 
Indeed, American business involvement is essential if we are to break 
the cycle of poverty and the related ills confronting too many cities 
and rural areas today--crime, drug abuse, illiteracy, and unemployment.
  The 1993 breakthrough was a good start, but we did not go far enough. 
That's why I am pleased to join with my colleague, Senator Spencer 
Abraham, on a bipartisan basis, in announcing the American Community 
Renewal Act of 1997. We want to help economically distressed urban and 
rural areas by creating 100 community renewal zones, including current 
empowerment zones and enterprise communities created by OBRA 1993, and 
additional communities meeting poverty and local commitment criteria. 
Specifically, these zones must have a 20 percent or more poverty rate, 
unemployment of at least 15 percent the national rate, and at least 70 
percent of households with incomes below 80 percent median household 
income. Renewal communities will commit to reducing barriers to 
business, such as reductions in local taxes and fees, elimination of 
State and local sales tax, and waiver of local and State occupational 
licensing regulations except for those specifically needed to protect 
health and safety.
  This legislation will offer targeted, pro-growth tax and regulatory 
relief to encourage private sector job creation and economic activity 
in impoverished areas. To enhance business and community partnerships, 
we have included provisions to facilitate additional housing 
opportunities, encourage savings, and offer additional education and 
investment opportunities. The CRA credit will facilitate additional 
investment and lending to community development financial institutions, 
and family development accounts will encourage low-income families to 
save part of their income or EITC refund. Family development account 
funds will be deductible for tax purposes and can be withdrawn tax-free 
if used for qualified purposes. Family and community

[[Page S2215]]

ties will be strengthened through new private investment opportunities 
and expanded access to drug treatment in these communities.
  We cannot give up on our inner cities and impoverished areas. 
Government, itself, cannot revitalize these areas. Communities must be 
strengthened through expanded economic opportunities, jobs, and private 
sector development in people's own local neighborhoods. Only then, can 
our communities save themselves from the vicious cycle of poverty and 
prepare our children for the future. Local partnerships and the 
commitment of business and communities to improving the economy of our 
poorest areas will provide the cornerstone of the future.
  Through limited government involvement, enhanced personal 
responsibility, and the economic freedom of business to grow and 
develop, poor communities can become players in our Nation's economy. 
The American Community Renewal Act helps poor Americans of all 
backgrounds pursue happiness, and escape from the trap of poverty that 
defines too many of their lives today.
                                 ______