[Congressional Record Volume 143, Number 49 (Wednesday, April 23, 1997)]
[Senate]
[Pages S3554-S3557]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SPECTER:
  S. 635. A bill to amend the Internal Revenue Code of 1986 to provide 
incentives for investments in disadvantaged and women-owned business 
enterprises; to the Committee on Finance.


          the minority and women capital formation act of 1997

  Mr. SPECTER. Mr. President, I have sought recognition for the purpose 
of introducing legislation captioned the Minority and Women Capital 
Formation Act of 1997.
  I am introducing this legislation which is designed to be an economic 
stimulus to promote jobs and economic opportunity. Unquestionably, 
small minority and women-owned businesses can and must play an integral 
role in expanding our economy, but they cannot do so unless we are able 
to close the great capital gap facing these businesses.
  This bill, captioned the Minority and Women Capital Formation Act of 
1997, would close this gap by providing targeted tax incentives for 
investors to invest equity capital in minority and women-owned small 
businesses, as well as venture capital funds which are dedicated to 
investing in minority and/or women-owned businesses.
  As long as the Internal Revenue Code continues tax incentives to 
promote specified business activities, then I believe this legislation 
is warranted. If we were to adopt a flat or modified flat tax which I 
favor, and have proposed, then I would be willing to forgo the tax 
incentive because I believe sufficient additional capital would be 
available for the purpose without the specific incentive.
  Small businesses in general face limited access to capital. In many 
instances, this lack of access amounts to a failure of many such 
businesses to succeed. But unlike other small businesses owned by 
minorities or women which have traditionally faced greater barriers in 
addressing private capital for startups, these businesses have been 
unable to achieve such funding.
  Candidly, many of these barriers are founded in racism and sexism, 
two subjects we do not like to talk about but two subjects which are 
very important and really very pervasive in our society.
  While the United States has benefited from civil rights laws, we have 
not yet moved ahead on the business front to provide the kinds of 
capitalization which we need. The ``capital gap'' is a phrase adopted 
by the U.S. Commission on Minority Business Development. In its 1990 
interim report, the Commission found that the availability of capital 
is probably the single most important variable affecting minority 
business. As stated by the Commission ``the problem is twofold: Lack of 
access to capital and credit and the need for development of 
alternatives to conventional financial instruments and 
intermediaries.''
  In its 1992 final report, the Commission said: ``Without timely 
access to capital, you can't start or grow a business, particularly 
growth firms being weaned off solely Government business.''

[[Page S3555]]

  In 1988, the House Committee on Small Business, in its report, New 
Economic Realties, The Rise of Women Entrepreneurs, also noted the 
barriers which women face in accessing capital and the need for the 
Federal Government to take into account alternative development 
financing institutions and eliminating or circumventing such barriers.
  Mr. President, this legislation is designed to focus our attention on 
critical elements of a national strategy for providing access to 
capital and credit from minorities and women in business. The bill 
provides investors, and others who invest equity, capital in a small 
minority or women-owned businesses or venture capital for minorities, 
African-Americans, Hispanics, et cetera, will have tax breaks of, 
first, the option to elect either a tax deduction or a tax credit 
subject to certain annual and lifetime caps and, second, a partial 
capital gains exclusion of limited deferral of the remaining capital 
gain if it is reinvested in another minority or women-owned small 
business.
  Mr. Robert Johnson, president of Black Entertainment Holdings, a 
minority-controlled enterprise publicly traded on the New York Stock 
Exchange, testified in 1992 before the Banking Committee on the 
availability of capital to minority businesses. He stated: ``The 
urgency of the problem requires more adventuresome kinds of policies. 
Policies that are designed to deal with a specific problem should be 
problem specific in their solution.''

  Mr. President, I note that in the 1981 to 1990 timeframe, the venture 
capital resources increased from approximately $5.8 billion to some $36 
billion but less than one-half of 1 percent of the capital raised by 
the majority venture capital industry was invested in minority- or 
women-operated businesses, which demonstrates the need for legislation 
of this type and incentives.
  I believe minority and women small business development is critical 
to urban revitalization, job creation, and long-term economic growth. 
No one denies the need for urban revitalization and job creation to 
facilitate a sustained economic recovery. And no one should deny the 
role that women and minority business owners must have in this effort. 
During the 102d Congress as a member of the Banking Committee, I heard 
many firsthand accounts concerning the lack of access to capital for 
minority- and women-owned businesses. In some cases the cause is 
outright discrimination; in other instances investor or lender 
ignorance of the marketplace; in other fear. Whatever the cause, we are 
facing an emergency that requires Congress' and the President's 
immediate attention.
  To avoid abuse, the bill also imposes minimum holding periods of 5 
years for such investments and contains recapture provisions for 
instances where the minority- or women-owned business or venture 
capital fund fails to remain qualified within the meaning of the 
legislation.
  Admittedly, my proposal may not be inexpensive. To address the cost 
issue, perhaps the bill should be limited to a tax credit, or perhaps 
to the capital gains benefit. In any event, I am willing to work with 
the estimators, my colleagues, and others to modify my bill as 
necessary to achieve the ultimate goal of eliminating the capital gap 
confronting minority- and women-owned businesses.
  Some may question the use of tax policy in the manner I am proposing. 
However, just as we use tax policy to foster development of housing, 
jobs, and research and development, so too should we utilize tax policy 
to foster economic empowerment of minority and women business owners 
who will provide jobs and generate tax revenues.
  Stated differently, this bill is really a Federal investment strategy 
for such businesses. The proposed tax expenditures represent seed 
capital to help develop greater self-sufficiency in the long term. In 
this regard, the bill recognizes that capital targeted to women and 
minority business is an essential, but often overlooked component of 
economic development. In my judgment, it is a very creative tool to 
spur business growth and job creation, particularly in distressed 
communities.
  Another very important feature of the bill is the provision of 
similar tax incentives for those who invest in venture capital funds 
dedicated to investing in minority- and/or women-owned businesses. 
Prior to 1970, the Federal Government had no dedicated sources of 
financing for disadvantaged businesses. In 1971, however, Congress 
authorized the creation of the specialized small business investment 
company [SSBIC] program administered by the Small Business 
Administration. For the last 20 years SSBIC's have been the primary 
source of capital for disadvantaged businesses. In the face of 
tremendous obstacles SSBIC's and the minority venture capital industry 
have made a real difference. For example, according to the National 
Association of Investment Companies [NAIC], over the last decade they 
have raised and invested nearly $1 billion in disadvantaged businesses.
  In sum, Mr. President, there remains a need to facilitate the 
development of minority- and women-owned small business. We cannot 
allow the capital gap to grow. If we are to remain a productive and 
competitive nation, we must eliminate it. Moreover, there is no 
substitute for equity capital. Federal policies should not focus 
exclusively on debt financing. With targeted tax incentives, such as 
those that I am proposing, we can cause greater investment of equity in 
businesses that traditionally have not been able to access it to any 
significant degree. I believe this capital formation bill will take us 
a long way toward achieving this goal. I, therefore, encourage my 
colleagues to join my efforts to enact this much needed legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:
       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Minority and Women Capital 
     Formation Act of 1997''.

     SEC. 2. INCENTIVES FOR INVESTMENTS IN DISADVANTAGED AND 
                   WOMEN-OWNED ENTERPRISES.

       (a) Subchapter P of chapter 1 of the Internal Revenue Code 
     of 1986 (relating to capital gains and losses) is amended by 
     adding at the end thereof the following new part:

``Part VI--Incentives for Investments in Disadvantaged and Women-Owned 
                              Enterprises

       ``Subpart A--Initial investment incentives.
       ``Subpart B--Capital gain provisions.
       ``Subpart C--General provisions.

               ``Subpart A--Initial Investment Incentives

       ``Sec. 1301. Deduction for investment in minority and women 
     venture capital funds.
       ``Sec. 1302. Deduction for investment in small minority and 
     women's business corporations.
       ``Sec. 1303. Taxpayer may elect credit in lieu of 
     deduction.
       ``Sec. 1304. Recapture provisions.

     ``SEC. 1301. DEDUCTION FOR INVESTMENT IN MINORITY AND WOMEN 
                   VENTURE CAPITAL FUNDS

       ``(a) General Rule.--There shall be allowed as a deduction 
     an amount equal to the sum of the aggregate bases of--
       ``(1) qualified minority fund interests, and
       ``(2) qualified women's fund interests,

     which are acquired by the taxpayer during the taxable year at 
     their original issuance (directly or through an underwriter), 
     and which are held by the taxpayer as of the close of such 
     taxable year.
       ``(b) Limitations.--The amount allowable as a deduction 
     under subsection (a)(1) or (2), respectively, for any taxable 
     year shall not exceed $300,000 ($150,000 in the case of a 
     separate return by a married individual).
       ``(c) Qualified Minority Fund Interest.--For purposes of 
     this part, the term `qualified minority fund interest' means 
     any stock in a domestic corporation or partnership interest 
     in a domestic partnership if--
       ``(1) such stock or partnership interest (as the case may 
     be) is issued after the date of the enactment of this part 
     solely in exchange for money,
       ``(2) such corporation or partnership (as the case may be) 
     was formed exclusively for purposes of--
       ``(A) acquiring at original issuance equity interests in 
     qualified minority corporations, or
       ``(B) making loans to such corporations, and
       ``(3) at least 70 percent of the total bases of its assets 
     is represented by--
       ``(A) investments referred to in paragraph (2), and
       ``(B) cash and cash equivalents.
       For purposes of paragraph (2), the term `equity interests' 
     means stock, warrants, and convertible securities.
       ``(d) Qualified Women's Fund Interest.--For purposes of 
     this part, the term `qualified women's fund interest' shall 
     be determined under subsection (c) by substituting `qualified 
     women's corporations' for `qualified minority corporations' 
     in paragraph (2)(B).

     ``SEC. 1302. DEDUCTION FOR INVESTMENT IN SMALL MINORITY AND 
                   WOMEN'S BUSINESS CORPORATIONS.

       ``(a) General Rule.--There shall be allowed as a deduction 
     an amount equal to the sum of the aggregate bases of--

[[Page S3556]]

       ``(1) small minority business stock, and
       ``(2) small women's business corporations,

     which are acquired by the taxpayer during the taxable year at 
     its original issuance (directly or through an underwriter), 
     and which are held by the taxpayer as of the close of such 
     taxable year.
       ``(b) Limitations.--
       ``(1) Noncorporate taxpayers.--
       ``(A) In general.--In the case of a taxpayer other than a 
     corporation, the amount allowable as a deduction under 
     subsection (a)(1) or (2), respectively, for any taxable year 
     shall not exceed the lesser of--
       ``(i) $50,000 ($25,000 in the case of a separate return by 
     a married individual), or
       ``(ii) $500,000 ($250,00 in the case of a separate return 
     by a married individual) reduced by the aggregate amount 
     allowable as a deduction under subsection (a)(1) or (2), 
     respectively, the taxpayer for prior taxable years.
       ``(B) Carryover.--If the amount otherwise deductible under 
     subsection (a) exceeds the limitation under subparagraph 
     (A)(1) for any taxable year, the amount of such excess shall 
     be treated as an amount described in subsection (a) which 
     is paid in the following taxable year.
       ``(C) Special rule.--The amount allowable as a deduction 
     under subparagraph (A)(i) or (ii) with respect to any joint 
     return shall be allocated equally between the spouses in 
     determining the limitation under subparagraph (A)(ii) for any 
     subsequent taxable year.
       ``(2) Corporate taxpayer.--In the case of a corporation, 
     the amount allowable as a deduction under subsection (a) (1) 
     or (2), respectively, for any taxable year shall not exceed 
     $100,000.
       ``(c) Small Minority Business Stock.--For purposes of this 
     part, the term `small minority business stock' means any 
     stock in a qualified minority corporation if--
       ``(1) as of the date of the issuance of such stock, the 
     total bases of property owned or leased by such corporation 
     does not exceed $12,000,000,
       ``(2) such stock is issued after the date of the enactment 
     of this part solely in exchange for money, and
       ``(3) such corporation elects to treat such stock as small 
     minority business stock for purposes of this section. An 
     election under paragraph (3), once made, shall be 
     irrevocable.
       ``(d) Small Women's Business Stock.--For purposes of this 
     part, the term `small women's business stock' means any stock 
     in a qualified women's corporation if--
       ``(1) as of the date of the issuance of such stock, the 
     total bases of property owned or leased by such corporation 
     does not exceed $12,000,000,
       ``(2) such stock is issued after the date of the enactment 
     of this part solely in exchange for money, and
       ``(3) such corporation elects to treat such stock as small 
     women's business stock for purposes of this section. An 
     election under paragraph (3), once made, shall be 
     irrevocable.
       ``(e) Issuer Limitation.--The aggregate amount of stock for 
     which an issuer may make an election under subsection (c)(3) 
     or (d)(3) shall not exceed $5,000,000.

     ``SEC. 1303. TAXPAYER MAY ELECT CREDIT IN LIEU OF DEDUCTION.

       ``(a) Minority and Women Venture Capital Funds.--
       ``(1) In general.--A taxpayer may elect, in lieu of the 
     deduction under section 1301, to take a credit against the 
     tax imposed by this chapter for the taxable year in an amount 
     equal to 15 percent of the sum of the aggregate bases of--
       ``(A) qualified minority fund interests, and
       ``(B) qualified women's fund interest,

     which are acquired by the taxpayer during the taxable year at 
     their original issuance (directly or through an underwriter), 
     and which are held by the taxpayer at the end of the taxable 
     year.
       ``(2) Limitations.--The amount allowable as a credit under 
     paragraph (1) for any taxable year shall not exceed the 
     lesser of--
       ``(A) $500,000 ($250,000 in the case of a separate return 
     by a married individual), or
       ``(B) $7,000,000, ($3,500,000 in the case of a separate 
     return by a married individual), reduced by the amount of the 
     credit allowed under paragraph (1) for all preceding taxable 
     years.
       ``(3) Carryover.--If the amount otherwise allowable as a 
     credit under paragraph (1) exceeds the limitation under 
     paragraph (2)(A) for any taxable year, the amount of such 
     excess shall, subject to the limitation of paragraph (2), be 
     treated as an amount which is allowable as a credit in the 
     following taxable year.
       ``(b) Small Minority and Women's Business Corporations.--
       ``(1) In general.--A taxpayer may elect, in lieu of the 
     deduction under section 1302, to take a credit against the 
     tax imposed by this chapter for the taxable year in an amount 
     equal to 10 percent of the sum of the aggregate bases of--
       ``(A) small minority business stock
       ``(B) small women's business corporations,

     which are acquired by the taxpayer during the taxable year at 
     their original issuance (directly or through an underwriter), 
     and which are held by the taxpayer at the end of the taxable 
     year.
       ``(2) Limitations.--The amount allowable as a credit under 
     paragraph (1) for any taxable year shall not exceed the 
     lesser of--
       ``(A) $250,000 ($125,000 in the case of a separate return 
     by a married individual), or
       ``(B) $5,000,000 ($2,500,000 in the case of the separate 
     return by a married individual), reduced by the amount of the 
     credit allowed under paragraph (1) for all preceding taxable 
     years.
       ``(3) Carryover.--If the amount otherwise allowable as 
     a credit under paragraph (1) exceeds the limitation under 
     paragraph (2)(A) for any taxable year, the amount of such 
     excess shall, subject to the limitation of paragraph (2), 
     be treated as an amount which is allowable as a credit in 
     the following taxable year.
       ``(c) Application With Other Provisions.--For purposes of 
     this title, any credit allowed under this section shall be 
     treated in the same manner as a credit allowed under subpart 
     B of part IV of subchapter A.
       ``(d) Election.--An election under this section for any 
     taxable year shall be made at such time and in such manner as 
     the Secretary may prescribe and shall apply with respect to 
     all acquisitions to which this subpart applies for such 
     taxable year.

     ``SEC. 1304. RECAPTURE PROVISIONS.

       ``(a) Basis Reduction.--For purposes of this title, the 
     basis of any qualified minority or women's fund interest or 
     small minority or women's business stock shall be reduced by 
     the amount of the deduction allowed under section 1301 or 
     1302, or the credit allowed under section 1303, with respect 
     to such property. In any case in which the deduction 
     allowable under subsection (a) of section 1301 or 1302 (as 
     the case may be) is limited by reason of subsection (b) of 
     such section, or in any case in which the credit allowable 
     under subsection (a)(1) or (b)(1) of section 1303 is limited 
     by reason of subsection (a)(2) or (b)(2) of section 1303, the 
     deduction of credit shall be allocated proportionately among 
     the qualified minority or women's fund interests or small 
     minority or women's business stock, whichever is applicable, 
     acquired during the taxable year on the basis of their 
     respective bases (as determined before any reduction under 
     this subsection).
       ``(b) Deduction Recaptured As Ordinary Income.--
       ``(1) In general.--For purposes of section 1245--
       ``(A) any property the basis of which is reduced under 
     subsection (a) (and any other property the basis of which is 
     determined in whole or in part by reference to the adjusted 
     basis of such property) shall be treated as section 1245 
     property; and
       ``(B) any reduction under subsection (a) shall be treated 
     as a deduction allowed for depreciation. If an exchange of 
     any stock the basis of which is reduced under subsection (a) 
     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).
       ``(2) Certain events treated as dispositions.--For purposes 
     of this section, if--
       ``(A) a deduction was allowable under section 1301, or a 
     credit was allowable under section 1303, with respect to any 
     stock in a corporation or interest in a partnership and such 
     corporation or partnership, as the case may be, ceases to 
     meet the requirements of paragraphs (2) and (3) of section 
     1301(c), or
       ``(B) a deduction was allowable under section 1302, or a 
     credit was allowable under section 1303, with respect to any 
     stock in a corporation and such corporation ceases to be a 
     qualified minority corporation or qualified women's 
     corporation, whichever is applicable,

     the taxpayer shall be treated as having disposed of such 
     property for an amount equal to its fair market value.
       ``(c) Interest Charged if Disposition Within 5 Years.--
       ``(1) In general.--If a taxpayer disposes of any property 
     the basis of which is reduced under subsection (a) before the 
     date 5 years after the date of its acquisition by the 
     taxpayer, the tax imposed by this chapter for the taxable 
     year in which such disposition occurs shall be increased by 
     interest at the underpayment rate (established under section 
     6621(a)(2))--
       ``(A) on the additional tax which would have been imposed 
     under this chapter for the taxable year in which such 
     property was acquired if such property had not been taken 
     into account under section 1301, 1302, or 1303, whichever is 
     applicable;
       ``(B) for the period on the due date for the taxable year 
     in which the property was acquired and ending on the due date 
     for the taxable year in which the disposition occurs. For 
     purposes of the preceding sentence, the term `due date' means 
     the due date (determined without regard to extensions for 
     filing the return of the tax imposed by this chapter).
       ``(2) Special rule.--Any increase in tax under paragraph 
     (1) shall not be treated as a tax imposed by this chapter, 
     for purposes of determining the amount of any credit 
     allowable under this chapter or the amount of the minimum tax 
     imposed by section 55.

                  ``Subpart B--Capital Gain Provisions

       ``Sec. 1311. Exclusion of gain on sale by qualified 
     minority or women's fund.
       ``Sec. 1312. Deferral of capital gain reinvested in certain 
     property.

     ``SEC. 1311. EXCLUSION OF GAIN ON SALE BY QUALIFIED MINORITY 
                   OR WOMEN'S FUND.

       ``(a) General Rule.--Gross income shall not include 50 
     percent of any gain on the sale or exchange of any property 
     by a qualified minority or women's fund if such property

[[Page S3557]]

     was acquired after the date of the enactment of this part and 
     was held by such fund for at least 5 years.
       ``(b) Qualified Minority Fund.--For purposes of this 
     section, the term `qualified minority fund' means any 
     domestic corporation or domestic partnership which meets the 
     requirements of paragraphs (2) and (3) of section 1301(c).
       ``(c) Qualified Women's Fund.--For purposes of this 
     section, the term `qualified women's fund' means any domestic 
     corporation or partnership meeting the requirements of 
     paragraphs (2) and (3) of section 1301(c) (as modified by 
     section 1301(d)).

     ``SEC. 1312. DEFERRAL OF CAPITAL GAIN REINVESTED IN CERTAIN 
                   PROPERTY.

       ``(a) General Rule.--Except as otherwise provided in this 
     section, in the case of an individual, any qualified 
     reinvested capital gain shall be taken into account for 
     purposes of this title--
       ``(1) in the 9th taxable year following the taxable year of 
     the sale or exchange, or
       ``(2) in such earlier taxable year (or years) following the 
     taxable year of the sale or exchange as the taxpayer may 
     provide.
       ``(b) Limitations.--
       ``(1) Dollar Limitation.--
       ``(A) In general.--The amount of the gain to which 
     subsection (a) applies shall not exceed $500,000, reduced by 
     the aggregate amount of gain of the taxpayer to which 
     subsection (a) applied for prior taxable years. This 
     subparagraph shall be applied separately for property 
     described in subsections (c)(2)(A) and (B) and for property 
     described in subsection (c)(2)(C) and (D).
       ``(B) Special rule.--The amount of gain to which subsection 
     (a) applied on a joint return for any taxable year shall be 
     allocated equally between the spouses in determining the 
     limitation under subparagraph (A) for any subsequent taxable 
     year.
       ``(2) Ineligibility of certain taxpayers.--Subsection (a) 
     shall not apply to--
       ``(A) a married individual (as defined in section 7703) who 
     does not file a joint return for the taxable year, or
       ``(B) any estate or trust.
       ``(c) Qualified Reinvested Capital Gain.--For purposes of 
     this section--
       ``(1) Qualified reinvested capital gain.--The term 
     `qualified reinvested capital gain' means the amount of any 
     long-term capital gain (determined without regard to this 
     section) from any sale or exchange after the date of the 
     enactment of this part to which an election under this 
     section applies but only to the extent that the amount of 
     such gain exceeds the excess (if any) of--
       ``(A) the amount realized on such sale or exchange, over
       ``(B) the cost of any qualified property which the taxpayer 
     elects to take into account under this paragraph with respect 
     to such sale or exchange. For purposes of subparagraph (B), 
     the cost of any property shall be reduced by the portion of 
     such cost previously taken into account under this paragraph.
       ``(2) Qualified property.--The term `qualified property' 
     means--
       ``(A) any qualified minority fund interest acquired by the 
     taxpayer at its original issuance (directly or through an 
     underwriter),
       ``(B) any small minority business stock acquired by the 
     taxpayer at its original issuance (directly or through an 
     underwriter),
       ``(C) any qualified women's fund interest acquired by the 
     taxpayer at its original issuance (directly or through an 
     underwriter), and
       ``(D) any small women's business stock acquired by the 
     taxpayer at its original issuance (directly or through an 
     underwriter). Such term shall not include any property taken 
     into account by the taxpayer under section 1301, 1302, or 
     1303.
       ``(3) Reinvestment period.--The term `reinvestment period' 
     means, with respect to any sale or exchange, the period 
     beginning on the date of the sale or exchange and ending on 
     the day 1 year after the close of the taxable year in which 
     the sale or exchange occurs.
       ``(d) Termination of Deferral in Certain Cases.--
       ``(1) Certain dispositions, etc., of replacement 
     property.--
       ``(A) In general.--If the taxpayer disposes of any 
     qualified property before the date 5 years after the date of 
     its purchase--
       ``(i) any amount treated as a qualified reinvested capital 
     gain by reason of the purchase of such property (to the 
     extent not previously taken into account under subsection 
     (a)) shall be taken into account for the taxable year in 
     which such disposition or cessation occurs, and
       ``(ii) the tax imposed by this chapter for the taxable year 
     in which such disposition or cessation occurs shall be 
     increased by interest at the underpayment rate (established 
     under section 6621(a)(2))--
       ``(I) on the additional tax which would have been imposed 
     under this chapter (but for this section) for the taxable 
     year of the sale or exchange, and
       ``(II) for the period of the deferral under this section. 
     Any increase in tax under clause (ii) shall not be treated as 
     a tax imposed by this chapter for purposes of determining the 
     amount of any credit allowable under this chapter or the 
     amount of the minimum tax imposed by section 55.
       ``(B) Certain events treated as dispositions.--For purposes 
     of subparagraph (A), rules similar to the rules of section 
     1304(b)(2) shall apply.
       ``(2) Last taxable year.--In the case of the last taxable 
     year of any taxpayer, any qualified reinvestment capital gain 
     (to the extent not previously taken into account under 
     subsection (a)) shall be taken into account for such last 
     taxable year.
       ``(e) Coordination With Installment Method Reporting.--This 
     section shall not apply to any gain from any installment sale 
     (as defined in section 453(b)) if section 453(a) applies to 
     such sale.
       ``(f) Statute of Limitations.--If any gain is realized by 
     the taxpayer on any sale or exchange to which an election 
     under this section applies, then--
       ``(1) the statutory period for the assessment of any 
     deficiency with respect to such gain shall not expire before 
     the expiration of 3 years from the date the Secretary is 
     notified by the taxpayer (in such manner as the Secretary may 
     by regulations prescribe) of--
       ``(A) the taxpayer's cost of purchasing any qualified 
     property,
       ``(B) the taxpayer's intention not to purchase qualified 
     property within the reinvestment period, or
       ``(C) a failure to make such purchase within the 
     reinvestment period, and
       ``(2) such deficiency may be assessed before the expiration 
     of such 3-year period notwithstanding the provisions of any 
     law or rule of law which would otherwise prevent such 
     assessment.

                    ``Subpart C--General Provisions

       ``Sec. 1321. Qualified minority corporation defined.
       ``Sec. 1322. Qualified women's corporation defined.
       ``Sec. 1323. Other definitions and special rules.

     ``SEC. 1321. QUALIFIED MINORITY CORPORATION DEFINED.

       ``For purposes of this part, the term `qualified minority 
     corporation' means any domestic corporation if--
       ``(1) 50 percent or more of the total value of the stock of 
     such corporation is held by individuals who are members of a 
     minority,
       ``(2) throughout the 5-year period ending on the date as of 
     which the determination is being made (or, if shorter, 
     throughout the period such corporation was in existence), 
     such corporation has been engaged in the active conduct of a 
     trade or business or in startup activities relating to a 
     trade or business, and
       ``(3) substantially all of the assets of such corporation 
     are used in the active conduct of a trade or business or in 
     startup activities related to a trade or business.

     ``SEC. 1322. QUALIFIED WOMEN'S CORPORATION.

       ``For purposes of this part, the term `qualified women's 
     corporation' means any domestic corporation if--
       ``(1) 50 percent or more of the total value of the stock of 
     such corporation is held by individuals who are women,
       ``(2) the management and daily business operations of the 
     corporation are controlled by one or more women, and
       ``(3) the requirements of paragraphs (2) and (3) of section 
     1301 are met with respect to the corporation.

     ``SEC. 1323. OTHER DEFINITIONS AND SPECIAL RULES.

       ``(a) Minority Individuals.--For purposes of this part, 
     individuals are members of a minority if the participation of 
     such individuals in the free enterprise system is hampered 
     because of social disadvantage within the meaning of section 
     301(d) of the Small Business Investment Act of 1958.
       ``(b) Controlled Group Rules.--
       ``(1) In general.--All corporations which are members of 
     the same controlled groups shall be treated as 1 corporation 
     for purposes of this part.
       ``(2) Controlled group.--For purposes of paragraph (1), the 
     term `controlled group' has the meaning given such term by 
     section 179(d)(7).''
       (b) The table or parts for subchapter P of chapter 1 of 
     such Code is amended by adding at the end thereof the 
     following item:

``Part VI. Incentives for investments in disadvantaged and women-owned 
              enterprises.''

       (c) The amendments made by this section shall apply to 
     taxable years ending after the date of the enactment of this 
     Act.
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