[Congressional Record Volume 146, Number 121 (Tuesday, October 3, 2000)]
[Senate]
[Pages S9702-S9758]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. MURKOWSKI:
S. 3150. A bill to convey certain real property located in Tongass
National Forest to Daniel J. Gross, Sr., and Douglas K. Gross, and for
other purposes; to the Committee on Energy and Natural Resources.
the heritage land transfer act of 2000
Mr. MURKOWSKI. Mr. President, I rise today to introduce the Heritage
Land Transfer Act of 2000. This legislation, while inconsequential when
compared to many of the issues we deal with in the U.S. Congress, is
extremely important to two of my oldest constituents, Douglas and
Daniel Gross. These two brothers along with the other members of the
Gross family are amongst Alaska's earliest pioneers. These two brothers
have spent over 80 years drawing their existence out of the harsh
Southeastern Alaskan environment. Through all these years, they managed
to raise their families and contributed to building the great State
that I have the privilege of representing. I would also point out that
Douglas and Daniel Gross served our Nation during World War II at its
time of greatest need--now these two veterans need our help to right a
wrong that has been vested upon them through no fault of their own.
``The Heritage Land Transfer Act of 2000'' directs the Forest Service
to convey 160 acres to Daniel and Douglas Gross. This granting of clear
title would fix a problem that has plagued the family for the past 20
years. The need for this action arises from the fact that no records
remain to substantial the family's claim that they homesteaded on
Greens Point in the 1930's. Family homesteading records were destroyed
when the Gross home burned to the ground in 1935-1936 and to make
matters worse, the Forest Service is unable to locate any documentation
to substantiate the Gross family claim. With neither title nor
documentation, Doug and Dan Gross are unable to produce any legal
record of ownership to the land their parents homesteaded. The paper
records, however, are the only things missing. The Forest Service
willingly acknowledges that a large body of evidence exists that
clearly establishes the fact that the family built a home on Greens
Point in the 1930's, that they grew and sold vegetables from this
farmstead, and that they were good neighbors to many people caught out
in our famous Alaskan storms. While the family and the Forest Service
have searched in vain for written records, there is one piece of
physical evidence to substantiate the family claim. On September 11,
1989, Alaska State Senator Robin Taylor traveled to the Gross property
on the Stikine River for the purpose of locating a witness tree which
would provide objective proof to the Gross family claim of homestead.
In a letter Senator Taylor sent to Richard Kohrt, Wrangell District
Ranger, Tongass National Forest he wrote ``I was present when Mr.
Bungy, United States Forest Service specialist, sawed and chopped open
the large spruce tree which the Gross Brothers had identified from
memory as being a witness tree. Mr. Bungy verified that the large blaze
uncovered was of the exact age that coincided with the Gross claim. By
counting the annual growth rings it coincided with the many affidavits
and statements of witness about the Gross claim of homestead.''
There is no question that the family settled on the Green Point
property on the Stikine River in the 1930's. They raised all of their
children on their property and were good friends to all who lived and
worked throughout the region. I have in my possession many affidavits,
each one testifying to the settlement of the Gross family along the
Stikine River. I offer the following quotations typical of these
testaments: ``In the early 1930's I spent a lot of time up the Stikine
River at the Gross Ranch. They had a large two story home and a huge
garden . . .'' ``I stayed with Mr. and Mrs. Bill Gross in the middle
thirties. Bessie Gross took care of my brother Gilbert and I while my
mother and father were out fishing, they had a house and garden on the
river which everyone knows as the Gross place even to this day . . .''
``I stayed with Bessie Gross and Family during the late 1930's in their
place up the river . . .'' And another from Mr. Harry Sundberg, a
gillnet fisherman, used to fish in ``what was known locally as the
Gross homestead.'' Mr. Sundberg goes on to say ``While most people
during that period did not file on the land they occupied, I distinctly
recall that our conversations included the fact that they had applied
for their application to own property similar to Captain Lee, who owned
the property directly south of them on the mainland.''
The Homestead Act requires residency for a minimum of 3 years. These
affidavits, and many others, verify the Gross families life on this
property since the early 1930's. In a letter from the Department of
Agriculture to Senator Stevens they write ``Even though it's clear the
Gross family homesteaded on the property, there is no evidence or
record that they completed the process to obtain title.'' Another
letter from the Department of Agriculture states ``the Forest Service
does not and has not refuted your claim that you and/or your family
resided at Greens Point in the 1930's.'' An Alaska Magazine article
written in 1984 references the ``Gross place'' along the Stikine River.
The Homestead Act authorized the transfer of 160 acre parcels of
federal land to private owners. The Gross Homestead is 160.8 acres. A
tree, both Daniel and Douglas Gross remember being used as a survey
marker when they were boys, was examined in 1989 and found to have a
flat face blazed into the wood approximately 50 years
[[Page S9703]]
prior. This is not a coincidence. It is proof this land was surveyed
when the family claims it was surveyed.
This family has lived on, and made use of this land for 70 years. It
is time for them to be named the legal title holders, and to complete
the already started process of shuffling paper.
______
By Mr. ROTH (for himself, Mr. Moynihan, Mr. Grassley, Mr. Baucus,
Mr. Hatch, Mr. Rockefeller, Mr. Murkowski, Mr. Breaux, Mr.
Jeffords, Mr. Conrad, Mr. Mack, Mr. Graham, Mr. Thompson, Mr.
Kerrey, Mr. Robb, and Mr. Bryan):
S. 3152. A bill to amend the Internal Revenue Code of 1986 to provide
tax incentives for distressed areas, and for other purposes; read the
first time.
community renewal and new markets act of 2000
Mr. ROTH. Mr. President, today I am, along with 14 cosponsors from
the Finance Committee, introducing a Community Renewal tax reduction
bill that will help all America benefit from today's economic boom.
As you know, the House bill embodies an agreement between the House
and the Administration. Personally, I think that it would be wrong for
the Senate to be silent in this process. It is important for this body
to at least have a voice in crafting this legislation.
While I would have preferred that this legislation to have been
reported from the Finance Committee, I believe my bill represents the
Committee's will. It is largely composed of the Chairman's mark and
amendments submitted by the Committee's members. Every Member of the
Finance Committee had input into this bill. In the regular course of
Finance Committee business, we would have reported this bill out of the
Committee with an overwhelming vote in support. And the fact that 15
members on both sides of the aisle have joined me as original
cosponsors, I believe, attests to the Finance Committee's approval of
this legislation.
It goes without saying that America's communities are important. I
believe that there are many ways in which we can extend help to them. I
also feel that any time we can work together with the Administration to
cut taxes we must try and see it to fruition.
While I listened to the concerns of every senator--both on and off
the Finance committee--who approached me with a provision in which they
were interested, I did not incorporate them all. I did not because I
could not without the cost of the bill growing out of control. It is
important that we not forget communities that may not have received as
much as others from America's economic boom. However, it is also
important that we consider the size of this bill in the context of
other tax relief priorities that remain. These other priorities are
marriage tax relief, retirement security, education, estate tax relief,
small business tax relief, and other items. Community renewal tax
relief must fit within the overall framework of the tax relief agenda.
This Finance Committee bill is fair and it is in line with the
revenue loss of the package, proposed by Senators Santorum, Abraham,
and Lieberman, which was considered earlier this year in the Senate. In
designing this bill, members of the Finance Committee decided not to
turn this bill into a grab bag of special interest provisions.
This Finance Committee bill includes a variety of proposals that will
further the bill's goals of community renewal--rationalizing and
simplifying what was and, was proposed to be, a hodge-podge of often
conflicting provisions. It includes an immediate--let me emphasize
immediate--increase in the volume caps for low-income housing tax
credits and private activity bonds. It also addresses many, many
important problems left out of the House and Administration proposal.
Among other things, this package contains an energy and conservation
component, a farm relief component, an Individual Development Account
proposal, an extension of the adoption credit and the enhanced
deduction for computer donations, a program to develop high speed rail
around the country, and a broadband Internet incentive that will make
sure that no one gets left on the wrong side of the digital divide.
One provision that I particularly want to talk about is the tax
credit for renovating historic homes. This was one of Senator John
Chafee's signature items and I am pleased to include it in the Finance
Committee bill, not only because I support it, but as a tribute to our
good friend. We all know that if he were here, he would have fought
hard for this tax incentive.
In fact, Senator Lincoln Chafee came to see me earlier this year.
Lincoln told that in his dad's last speech, John talked about the
importance of the tax credit and said that it was something he wanted
to get done before he left the Senate. Unfortunately, he is not with us
today, but hopefully we can complete this unfinished business for him.
This is a fair package and a generous package. I believe it is one
that this Senate should feel comfortable embracing. I hope each of you
who has not done so, will do so.
Mr. MOYNIHAN. Mr. President, last week the Finance Committee was
scheduled to mark up the ``Community Renewal and New Markets Act of
2000,'' but the legislation became burdened by extraneous matters, and
the Committee was unable to complete the mark-up. I rise today to join
my good friend and Chairman of the Finance Committee, Senator Roth, in
introducing the ``Community Renewal and New Markets Act of 2000'' as an
original bill with 15 cosponsors from the Finance Committee.
Sir, we all should be grateful for Senator Roth's leadership in this
matter. Community renewal is an effort to rebuild American communities,
which is based on an agreement reached between the President and the
Speaker of the House that this is legislation we ought to have. The
signals are clear: the legislation will be enacted this year with or
without us. Today, Senator Roth and I give a voice in this process to
the Finance Committee and the Senate.
Mr. President, this bill represents the will of the Finance
Committee. It incorporates the worthwhile ideas of its members,
including the work of my good friend, Senator Robb, who, along with
Senator Rockefeller, has worked tirelessly to provide meaningful
incentives for investment in distressed communities.
I also take a moment of the Senate's time to echo Senator Roth's
tribute to Senator John Chafee. It is fitting that we should enact, in
a bipartisan bill, the tax credit for renovating historic homes in
honor of a great Senator.
Substantively, the Community Renewal legislation is significant in
several respects. First, it provides a notable measure of tax
simplification, even as it accomplishes a worthwhile goal--tax benefits
for investment in poor communities. While the bill designates 30 new
``Renewal Zones,'' it also conforms the tax incentives available to
individuals and businesses investing in any of the zone designations,
current or future. Our legislation smartly unifies these Empowerment
and Renewal Zones and creates a common set of incentives. This is the
right kind of legislation.
I also note, Mr. President, with some appreciation, two provisions
that will make transportation and data transmission very quick indeed.
The bill includes provisions to accelerate and expand access to high-
technology infrastructure for all communities. First, it authorizes $10
billion of tax credit bonds for Amtrak to develop high-speed railways.
High-speed railways have the potential to connect the very communities
targeted by this legislation and provide them with greater access to
information.
Second, the bill includes a proposal that I first introduced on June
8, 2000. That proposal, which now has 52 Senate supporters, provides
graduated tax credits for deployment of high-speed communications--
called ``broadband''--to residential and rural communities. Current
market forces are driving deployment of broadband technology almost
exclusively to urban businesses and wealthy households. The proposal in
the bill will encourage broadband providers to act quickly to deploy
broadband to Americans in all communities.
Mr. President, if you will allow me one further observation, as I am
compelled to compliment the bill in one other respect. Consistent with
the purpose of this legislation, it includes a
[[Page S9704]]
tax incentive for investment in labor in Puerto Rico. The provision
does not accomplish all that I had hoped it would, but I believe it
represents a positive step forward. It extends to Puerto Rico tax
incentives for job creation similar to the ones in other areas of the
bill, and it does so, quite simply, through an existing tax-code
provision, the Puerto Rico economic activity credit.
Mr. President, I again applaud the leadership of our revered Chairman
and proudly join him in introducing the Community Renewal and New
Markets Act of 2000.
Mr. MACK. Mr. President, as a co-sponsor of the Community Renewal and
New Markets Act of 2000, I want to commend Chairman Roth for his usual
fine work in assembling a bill that garners the support of such a large
number of our Finance Committee colleagues. I am pleased that a number
of items in this bill are provisions that are extremely important to
me, and I would like to speak briefly concerning them.
But I also want to draw attention to some provisions in this bill
that I do not favor. As this bill stands in the place of what would
have been a bill reported out of the Committee on Finance, it reflects
the compromises that are inherent in the committee process. Unlike
typical bills, of which it is reasonable to assume that every provision
is supported by every co-sponsor, probably every co-sponsor of this
bill can find provisions contained in it that he does not support. Of
many, there are two that I find most troubling: the ``new markets tax
credit,'' and the ``individual development accounts.''
These two provisions are appropriations masquerading as tax cuts.
Under the new markets tax credit, the Secretary of the Treasury would
annually pay dividends to investors in ``community development
entities,'' which must be certified by the Treasury Department and
which must have as their primary mission investing in low-income people
or communities. This proposal is premised on the belief that an entity
that lacks a profit-motive, under federal bureaucratic supervision,
will be an attractive investment for people if dividends are
guaranteed. It is the sort of scheme that could only be dreamed up by
people who have spent their entire careers in government. A simpler way
to direct capital to investment-starved pockets is by eliminating the
tax on capital gains--this is the decentralized, market-oriented
approach.
The ``individual development accounts'' would launder government-
matching funds for low income savers through financial institutions.
This new entitlement cannot be justified. It is true that, by some
measures, the savings rate in the United States appears low. Simple
logic dictates that the savings rate have been lowered due to federal
tax policies, which impose several layers of taxation upon income that
is saved. It is one thing to address this problem at the source, by
removing the extra taxation on savings--a we do to the extent that
people can make deductible contributions to traditional IRAs and
contributions to Roth IRAs. But to give people money to reward them for
saving is pure income redistribution, a misuse of the taxpayers' money.
Despite my disagreement with some of the provisions of this bill, I
am pleased that the bill contains several initiatives that I have
proposed over the past few Congresses. The Low Income Housing Tax
Credit is boosted to make up for over a decade's worth of inflation,
and is indexed to prevent this problem from reoccurring. The First-Time
Homebuyer Tax Credit for the District of Columbia is extended and the
marriage penalty in the credit is eliminated. Section 1706 of the Tax
Reform Act of 1986, which discriminates against high technology workers
and the companies that hire them, is repealed. Not-for-hire disaster
insurance funds, in my state of Florida and several others, are made
tax-exempt entities.
I am most encouraged by the extension of my zero percent capital
gains tax rate proposal to businesses in the entire District of
Columbia, and to businesses in all empowerment and renewal zones.
Although I am concerned that the lengthy, five-year holding period is
unwise and undermines the power of the proposal, I am nevertheless
pleased that the idea is spreading and people are coming to see
capitalism as the only true cure for poverty.
Mr. ROTH. Mr. President, along with Senator Moynihan and the other
members of the committee I ask unanimous consent that S. 3152, the
Community Renewal and New Markets Act of 2000 be printed in the Record.
I also ask unanimous consent that a technical explanation of S. 3152,
which has been prepared by the Joint Committee on Taxation, be printed
in the Record, at a cost of $4,290.00, immediately following the text
of the bill.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 3152
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Community
Renewal and New Markets Act of 2000''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--
Sec. 1. Short title; etc.
TITLE I--INCENTIVES FOR DISTRESSED COMMUNITIES
Subtitle A--Designation and Treatment of Renewal Zones
Sec. 101. Designation and treatment of renewal zones.
Subtitle B--Modification of Incentives for Empowerment Zones
Sec. 111. Extension of empowerment zone treatment through 2009.
Sec. 112. 15 percent employment credit for all empowerment zones
Sec. 113. Increased expensing under section 179.
Sec. 114. Higher limits on tax-exempt empowerment zone facility bonds.
Sec. 115. Empowerment zone capital gain.
Sec. 116. Funding for Round II empowerment zones.
Subtitle C--Modification of Tax Incentives for DC Zone
Sec. 121. Extension of DC zone through 2006.
Sec. 122. Extension of DC zero percent capital gains rate.
Sec. 123. Gross income test for DC zone businesses.
Sec. 124. Expansion of DC homebuyer tax credit.
Subtitle D--New Markets Tax Credit
Sec. 131. New markets tax credit.
Subtitle E--Modification of Tax Incentives for Puerto Rico
Sec. 141. Modification of Puerto Rico economic activity tax credit.
Subtitle F--Individual Development Accounts
Sec. 151. Definitions.
Sec. 152. Structure and administration of qualified individual
development account programs.
Sec. 153. Procedures for opening an individual development account and
qualifying for matching funds.
Sec. 154. Contributions to individual development accounts.
Sec. 155. Deposits by qualified individual development account
programs.
Sec. 156. Withdrawal procedures.
Sec. 157. Certification and termination of qualified individual
development account programs.
Sec. 158. Reporting, monitoring, and evaluation.
Sec. 159. Account funds of program participants disregarded for
purposes of certain means-tested Federal programs.
Sec. 160. Matching funds for individual development accounts provided
through a tax credit for qualified financial
institutions.
Sec. 161. Designation of earned income tax credit payments for deposit
to individual development accounts.
Subtitle G--Additional Incentives
Sec. 171. Exclusion of certain amounts received under the National
Health Service Corps Scholarship Program and the F.
Edward Hebert Armed Forces Health Professions Scholarship
and Financial Assistance Program.
Sec. 172. Extension of enhanced deduction for corporate donations of
computer technology.
Sec. 173. Extension of adoption tax credit.
Sec. 174. Tax treatment of Alaska Native Settlement Trusts.
Sec. 175. Treatment of Indian tribal governments under Federal
Unemployment Tax Act.
Sec. 176. Increase in social services block grant for FY 2001.
TITLE II--TAX INCENTIVES FOR AFFORDABLE HOUSING
Subtitle A--Low-Income Housing Credit
Sec. 201. Modification of State ceiling on low-income housing credit.
[[Page S9705]]
Sec. 202. Modification to rules relating to basis of building which is
eligible for credit.
Subtitle B--Historic Homes
Sec. 211. Tax credit for renovating historic homes.
Subtitle C--Forgiven Mortgage Obligations
Sec. 221. Exclusion from gross income for certain forgiven mortgage
obligations.
Subtitle D--Mortgage Revenue Bonds
Sec. 231. Increase in purchase price limitation under mortgage subsidy
bond rules based on median family income.
Sec. 232. Mortgage financing for residences located in presidentially
declared disaster areas.
Subtitle E--Property and Casualty Insurance
Sec. 241. Exemption from income tax for State-created organizations
providing property and casualty insurance for property
for which such coverage is otherwise unavailable.
TITLE III--TAX INCENTIVES FOR URBAN AND RURAL INFRASTRUCTURE
Sec. 301. Increase in State ceiling on private activity bonds.
Sec. 302. Modifications to expensing of environmental remediation
costs.
Sec. 303. Broadband internet access tax credit.
Sec. 304. Credit to holders of qualified Amtrak bonds.
Sec. 305. Clarification of contribution in aid of construction.
Sec. 306. Recovery period for depreciation of certain leasehold
improvements.
TITLE IV--TAX RELIEF FOR FARMERS
Sec. 401. Farm, fishing, and ranch risk management accounts.
Sec. 402. Written agreement relating to exclusion of certain farm
rental income from net earnings from self-employment.
Sec. 403. Treatment of conservation reserve program payments as rentals
from real estate.
Sec. 404. Exemption of agricultural bonds from State volume cap.
Sec. 405. Modifications to section 512(b)(13).
Sec. 406. Charitable deduction for contributions of food inventory.
Sec. 407. Income averaging for farmers and fishermen not to increase
alternative minimum tax liability.
Sec. 408. Cooperative marketing includes value-added processing through
animals.
Sec. 409. Declaratory judgment relief for section 521 cooperatives.
Sec. 410. Small ethanol producer credit.
Sec. 411. Payment of dividends on stock of cooperatives without
reducing patronage dividends.
TITLE V--TAX INCENTIVES FOR THE PRODUCTION OF ENERGY
Sec. 501. Election to expense geological and geophysical expenditures.
Sec. 502. Election to expense delay rental payments
Sec. 503. 5-year net operating loss carryback for losses attributable
to operating mineral interests of independent oil and gas
producers.
Sec. 504. Temporary suspension of percentage of depletion deduction
limitation based on 65 percent of taxable income.
Sec. 505. Tax credit for marginal domestic oil and natural gas well
production.
Sec. 506. Natural gas gathering lines treated as 7-year property.
Sec. 507. Clarification of treatment of pipeline transportation income.
TITLE VI--TAX INCENTIVES FOR CONSERVATION
Sec. 601. Exclusion of 50 percent of gain on sales of land or interests
in land or water to eligible entities for conservation
purposes.
Sec. 602. Expansion of estate tax exclusion for real property subject
to qualified conservation easement.
Sec. 603. Tax exclusion for cost-sharing payments under partners for
wildlife program.
Sec. 604. Incentive for certain energy efficient property used in
business.
Sec. 605. Extension and modification of tax credit for electricity
produced from biomass.
Sec. 606. Tax credit for certain energy efficient motor vehicles.
TITLE VII--ADDITIONAL TAX PROVISIONS
Sec. 701. Limitation on use of nonaccrual experience method of
accounting.
Sec. 702. Repeal of section 530(d) of the Revenue Act of 1978.
Sec. 703. Expansion of exemption from personal holding company tax for
lending or finance companies.
Sec. 704. Charitable contribution deduction for certain expenses
incurred in support of Native Alaskan subsistence
whaling.
Sec. 705. Imposition of excise tax on persons who acquire structured
settlement payments in factoring transactions.
TITLE I--INCENTIVES FOR DISTRESSED COMMUNITIES
Subtitle A--Designation and Treatment of Renewal Zones
SEC. 101. DESIGNATION AND TREATMENT OF RENEWAL ZONES.
(a) In General.--Chapter 1 is amended by adding at the end
the following new subchapter:
``Subchapter X--Designation and Treatment of Renewal Zones
``Sec. 1400E. Designation and treatment of renewal zones.
``SEC. 1400E. DESIGNATION AND TREATMENT OF RENEWAL ZONES.
``(a) Treatment of Designation.--For purposes of this
title, any area designated as a renewal zone under this
section shall be treated as an empowerment zone.
``(b) Designation.--
``(1) Renewal zone defined.--For purposes of this title,
the term `renewal zone' 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 zone (hereafter in this section
referred to as a `nominated area'), and
``(B) which the appropriate Secretary designates as a
renewal zone.
``(2) Number of designations.--
``(A) In general.--The appropriate Secretaries may
designate not more than 30 nominated areas as renewal zones.
``(B) Minimum designation in rural areas.--Of the areas
designated under subparagraph (A), at least 6 must be areas--
``(i) which are within a local government jurisdiction or
jurisdictions with a population of less than 50,000, or
``(ii) which satisfy the requirements of section
1393(a)(2).
``(3) Areas designated based on degree of poverty, etc.--
``(A) In general.--Except as otherwise provided in this
section, the nominated areas designated as renewal zones
under this subsection shall be those nominated areas with the
highest average ranking with respect to the criteria
described in subparagraphs (B), (C), and (D) of subsection
(d)(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
appropriate Secretary determines that the course of action
described in subsection (e)(2) with respect to such area is
inadequate.
``(C) Priority for 1 nominated area in each state.--For
purposes of this subchapter, 1 nominated area within each
State without any area designated as an empowerment zone
under section 1391 or 1400 shall be treated for purposes of
this paragraph as having the highest average with respect to
the criteria described in subparagraphs (B), (C), and (D) of
subsection (d)(3).
``(4) Limitation on designations.--
``(A) Publication of regulations.--The Secretary of Housing
and Urban Development shall prescribe by regulation not later
than 4 months after the date of the enactment of this
section, after consultation with the Secretary of
Agriculture--
``(i) the procedures for nominating an area under paragraph
(1)(A),
``(ii) the parameters relating to the size and population
characteristics of a renewal zone, and
``(iii) the manner in which nominated areas will be
evaluated based on the criteria specified in subsection (e).
``(B) Time limitations.--The appropriate Secretaries may
designate nominated areas as renewal zones only during the
period beginning on the first day of the first month
following the month in which the regulations described in
subparagraph (A) are prescribed and ending on December 31,
2001.
``(C) Procedural rules.--The appropriate Secretary shall
not make any designation of a nominated area as a renewal
zone under paragraph (2) unless--
``(i) the local governments and the States in which the
nominated area is located have the authority--
``(I) to nominate such area for designation as a renewal
zone,
``(II) to make the State and local commitments described in
subsection (e), and
``(III) to provide assurances satisfactory to the
appropriate Secretary 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 appropriate Secretary shall by regulation
prescribe, and
``(iii) the appropriate Secretary 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.
``(c) Period for Which Designation Is in Effect.--
``(1) In general.--Any designation of an area as a renewal
zone shall remain in effect during the period beginning on
January 1, 2002, and ending on the earliest of--
``(A) December 31, 2009,
[[Page S9706]]
``(B) the termination date designated by the State and
local governments in their nomination, or
``(C) the date the appropriate Secretary revokes such
designation.
``(2) Revocation of designation.--The appropriate Secretary
may revoke the designation under this section of an area if
such Secretary determines that the local government or the
State in which the area is located--
``(A) has modified the boundaries of the area, or
``(B) is not complying substantially with, or fails to make
progress in achieving, the State or local commitments,
respectively, described in subsection (e).
``(d) Area and Eligibility Requirements.--
``(1) In general.--The appropriate Secretary may designate
a nominated area as a renewal zone under subsection (b) 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 one or more
local governments,
``(B) the boundary of the area is continuous, and
``(C) the area--
``(i) has a population of not more than 200,000 and at
least--
``(I) 4,000 if any portion of such area (other than a rural
area described in subsection (b)(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 in writing (and
the appropriate Secretary, after such review of supporting
data as such Secretary deems appropriate, accepts such
certification) that--
``(A) the area is one of pervasive poverty, unemployment,
and general distress,
``(B) the unemployment rate in the area, as determined by
the most recent available data, was at least 1\1/2\ times the
national unemployment rate for the period to which such data
relate,
``(C) the poverty rate for each population census tract
within the nominated area is at least 20 percent, and
``(D) in the case of an urban area, 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).
``(4) Consideration of other factors.--The appropriate
Secretary, in selecting any nominated area for designation as
a renewal zone under this section--
``(A) shall take into account--
``(i) the extent to which such area has a high incidence of
crime,
``(ii) if such area has census tracts identified in the May
12, 1998, report of the General Accounting Office regarding
the identification of economically distressed areas, or
``(iii) if such area (or portion thereof) has previously
been designated as an enterprise community under section
1391, and
``(B) with respect to 1 of the areas to be designated under
subsection (b)(2)(B), may, in lieu of any criteria described
in paragraph (3), take into account the existence of
outmigration from the area.
``(e) Required State and Local Commitments.--
``(1) In general.--The appropriate Secretary may designate
any nominated area as a renewal zone under subsection (b)
only if 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 zone, such governments will
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.
``(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 4 of the following:
``(i) A reduction of tax rates or fees applying within the
renewal zone.
``(ii) An increase in the level of efficiency of local
services within the renewal zone.
``(iii) Crime reduction strategies, such as crime
prevention (including the provision of crime prevention
services by nongovernmental entities).
``(iv) Actions to reduce, remove, simplify, or streamline
governmental requirements applying within the renewal zone.
``(v) Involvement in the program by private entities,
organizations, neighborhood organizations, and community
groups, particularly those in the renewal zone, 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
zone.
``(vi) The gift (or sale at below fair market value) of
surplus real property (such as land, homes, and commercial or
industrial structures) in the renewal zone 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 appropriate Secretary 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.
``(f) Coordination With Treatment of Enterprise
Communities.--For purposes of this title, the designation
under section 1391 of any area as an enterprise community
shall cease to be in effect as of the date that the
designation of any portion of such area as a renewal zone
takes effect.
``(g) Definitions and Special Rules.--For purposes of this
subchapter--
``(1) Appropriate secretary.--The term `appropriate
Secretary' has the meaning given such term by section
1393(a)(1).
``(2) Governments.--If more than one government seeks to
nominate an area as a renewal zone, any reference to, or
requirement of, this section shall apply to all such
governments.
``(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, and
``(B) any combination of political subdivisions described
in subparagraph (A) recognized by the appropriate Secretary.
``(4) Application of rules relating to census tracts.--The
rules of section 1392(b)(4) shall apply.
``(5) Census data.--Population and poverty rate shall be
determined by using 1990 census data.''.
(b) Audit and Report.--Not later than January 31 of 2004,
2007, and 2010, the Comptroller General of the United States
shall, pursuant to an audit of the renewal zone program
established under section 1400E of the Internal Revenue Code
of 1986 (as added by subsection (a)), report to Congress on
such program and its effect on poverty, unemployment, and
economic growth within the designated renewal zones.
(c) Clerical Amendment.--The table of subchapters for
chapter 1 is amended by adding at the end the following new
item:
``Subchapter X. Designation and Treatment of Renewal Zones.''.
Subtitle B--Modification of Incentives for Empowerment Zones
SEC. 111. EXTENSION OF EMPOWERMENT ZONE TREATMENT THROUGH
2009.
Subparagraph (A) of section 1391(d)(1) (relating to period
for which designation is in effect) is amended to read as
follows:
``(A)(i) in the case of an empowerment zone, December 31,
2009, or
``(ii) in the case of an enterprise community, the close of
the 10th calendar year beginning on or after such date of
designation,''.
SEC. 112. 15 PERCENT EMPLOYMENT CREDIT FOR ALL EMPOWERMENT
ZONES
(a) 15 Percent Credit.--Subsection (b) of section 1396
(relating to empowerment zone employment credit) is amended--
(1) by striking paragraph (1) and inserting the following
new paragraph:
``(1) In general.--Except as provided in paragraph (2), the
applicable percentage is 15 percent.'',
(2) by inserting ``and thereafter'' after ``2005'' in the
table contained in paragraph (2), and
(3) by striking the items relating to calendar years 2006
and 2007 in such table.
(b) All Empowerment Zones Eligible for Credit.--Section
1396 is amended by striking subsection (e).
(c) Conforming Amendment.--Subsection (d) of section 1400
is amended to read as follows:
``(d) Special Rule for Application of Employment Credit.--
With respect to the DC Zone, section 1396(d)(1)(B) (relating
to empowerment zone employment credit) shall be applied by
substituting `the District of Columbia' for `such empowerment
zone'.''.
(d) Effective Date.--The amendments made by this section
shall apply to wages paid or incurred after December 31,
2001.
SEC. 113. INCREASED EXPENSING UNDER SECTION 179.
(a) In General.--Subparagraph (A) of section 1397A(a)(1) is
amended by striking ``$20,000'' and inserting ``$35,000''.
(b) Expensing for Property Used in Developable Sites.--
Section 1397A is amended by striking subsection (c).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
SEC. 114. HIGHER LIMITS ON TAX-EXEMPT EMPOWERMENT ZONE
FACILITY BONDS.
(a) In General.--Paragraph (3) of section 1394(f) (relating
to bonds for empowerment zones designated under section
1391(g)) is amended to read as follows:
``(3) Empowerment zone facility bond.--For purposes of this
subsection, the term `empowerment zone facility bond' means
any bond which would be described in subsection (a) if--
[[Page S9707]]
``(A) in the case of obligations issued before January 1,
2002, only empowerment zones designated under section 1391(g)
were taken into account under sections 1397C and 1397D, and
``(B) in the case of obligations issued after December 31,
2001, all empowerment zones (other than the District of
Columbia) were taken into account under sections 1397C and
1397D.''.
(b) Effective Date.--The amendments made by this section
shall apply to obligations issued after December 31, 2001.
SEC. 115. EMPOWERMENT ZONE CAPITAL GAIN.
(a) In General.--Part III of subchapter U of chapter 1 is
amended--
(1) by redesignating subpart C as subpart D;
(2) by redesignating sections 1397B and 1397C as sections
1397C and 1397D, respectively; and
(3) by inserting after subpart B the following new subpart:
``Subpart C--Empowerment Zone Capital Gain
``Sec. 1397B. Empowerment zone capital gain.
``SEC. 1397B. EMPOWERMENT ZONE CAPITAL GAIN.
``(a) General Rule.--Gross income shall not include
qualified capital gain from the sale or exchange of any
qualified empowerment zone asset held for more than 5 years.
``(b) Per Taxpayer Limitation.--
``(1) In general.--The amount of eligible gain which may be
taken into account under subsection (a) for the taxable year
with respect to any taxpayer shall not exceed $25,000,000,
reduced by the aggregate amount of eligible gain taken into
account under subsection (a) for prior taxable years with
respect to such taxpayer.
``(2) Eligible gain.--For purposes of this subsection,
`eligible gain'' means any gain from the sale or exchange of
a qualified empowerment zone asset held for more than 5
years.
``(3) Treatment of married individuals.--
``(A) Separate returns.--In the case of a separate return
by a married individual, paragraph (1) shall be applied by
substituting `$12,500,000' for `$25,000,000'.
``(B) Allocation of exclusion.--In the case of a joint
return, the amount of gain taken into account under
subsection (a) shall be allocated equally between the spouses
for purposes of applying this subsection to subsequent
taxable years.
``(C) Marital status.--For purposes of this subsection,
marital status shall be determined under section 7703.
``(4) Treatment of corporate taxpayers.--For purposes of
this subsection--
``(A) all corporations which are members of the same
controlled group of corporations (within the meaning of
section 52(a)) shall be treated as 1 taxpayer, and
``(B) any gain excluded under subsection (a) by a
predecessor of any C corporation shall be treated as having
been excluded by such C corporation.
``(c) Qualified Empowerment Zone Asset.--For purposes of
this section--
``(1) In general.--The term `qualified empowerment zone
asset' means--
``(A) any qualified empowerment zone stock,
``(B) any qualified empowerment zone partnership interest,
and
``(C) any qualified empowerment zone business property.
``(2) Qualified empowerment zone stock.--
``(A) In general.--Except as provided in subparagraph (B),
the term `qualified empowerment zone stock' means any stock
in a domestic corporation if--
``(i) such stock is acquired by the taxpayer after the date
of the enactment of this section (December 31, 2001, in the
case of a renewal zone) and before January 1, 2010, at its
original issue (directly or through an underwriter) from the
corporation solely in exchange for cash,
``(ii) as of the time such stock was issued, such
corporation was an enterprise zone business (or, in the case
of a new corporation, such corporation was being organized
for purposes of being an enterprise zone business), and
``(iii) during substantially all of the taxpayer's holding
period for such stock, such corporation qualified as an
enterprise zone business.
``(B) Redemptions.--A rule similar to the rule of section
1202(c)(3) shall apply for purposes of this paragraph.
``(3) Qualified empowerment zone partnership interest.--The
term `qualified empowerment zone partnership interest' means
any capital or profits interest in a domestic partnership
if--
``(A) such interest is acquired by the taxpayer after the
date of the enactment of this section (December 31, 2001, in
the case of a renewal zone) and before January 1, 2010, from
the partnership solely in exchange for cash,
``(B) as of the time such interest was acquired, such
partnership was an enterprise zone business (or, in the case
of a new partnership, such partnership was being organized
for purposes of being an enterprise zone business), and
``(C) during substantially all of the taxpayer's holding
period for such interest, such partnership qualified as an
enterprise zone business.
A rule similar to the rule of section 1202(c)(3) shall apply
for purposes of this paragraph.
``(4) Qualified empowerment zone business property.--
``(A) In general.--The term `qualified empowerment zone
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 of
the enactment of this section (December 31, 2001, in the case
of a renewal zone) and before January 1, 2010,
``(ii) the original use of such property in the empowerment
zone 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 an enterprise zone business of the
taxpayer.
``(B) Special rule for substantial improvements.--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 before January 1, 2010, and
``(ii) any land on which such property is located.
The determination of whether a property is substantially
improved shall be made under clause (ii) of section
1400B(b)(4)(B), except that `the date of the enactment of
this section' shall be substituted for `December 31, 1997' in
such clause.
``(c) Qualified Capital Gain.--For purposes of this
section--
``(1) In general.--Except as otherwise provided in this
subsection, the term `qualified capital gain` means any gain
recognized on the sale or exchange of--
``(A) a capital asset, or
``(B) property used in the trade or business (as defined in
section 1231(b)).
``(2) Gain before effective date or after 2014 not
qualified.--The term `qualified capital gain' shall not
include any gain attributable to periods before the date of
the enactment of this section (January 1, 2002, in the case
of a renewal zone) or after December 31, 2014.
``(3) Certain rules to apply.--Rules similar to the rules
of paragraphs (3), (4), and (5) of section 1400B(e) shall
apply for purposes of this subsection.
``(d) Certain Rules To Apply.--For purposes of this
section, rules similar to the rules of paragraphs (5), (6),
and (7) of subsection (b), and subsections (f ) and (g), of
section 1400B shall apply; except that for such purposes
section 1400B(g)(2) shall be applied by substituting--
``(1) `the day after the date of the enactment of section
1397B' for `January 1, 1998', and
``(2) `December 31, 2014' for `December 31, 2011'.
``(e) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out the purposes
of this section, including regulations to prevent the
avoidance of the purposes of this section.''.
(b) Conforming Amendments.--
(1) Paragraph (2) of section 1394(b) is amended--
(A) by striking ``section 1397C'' and inserting ``section
1397D''; and
(B) by striking ``section 1397C(a)(2)'' and inserting
``section 1397D(a)(2)''.
(2) Paragraph (3) of section 1394(b) is amended--
(A) by striking ``section 1397B'' each place it appears and
inserting ``section 1397C''; and
(B) by striking ``section 1397B(d)'' and inserting
``section 1397C(d)''.
(3) Sections 1400(e) and 1400B(c) are each amended by
striking ``section 1397B'' each place it appears and
inserting ``section 1397C''.
(4) The table of subparts for part III of subchapter U of
chapter 1 is amended by striking the last item and inserting
the following new items:
``Subpart C. Empowerment zone capital gain.
``Subpart D. General provisions.''.
(5) The table of sections for subpart D of such part III is
amended to read as follows:
``Sec. 1397C. Enterprise zone business defined.
``Sec. 1397D. Qualified zone property defined.''.
(c) Effective Date.--The amendments made by this section
shall apply to qualified empowerment zone assets acquired
after the date of the enactment of this Act.
SEC. 116. FUNDING FOR ROUND II EMPOWERMENT ZONES.
(a) Entitlement.--Section 2007(a)(1) of the Social Security
Act (42 U.S.C. 1397f(a)(1)) is amended--
(1) in subparagraph (A), by striking ``in the State; and''
and inserting ``that is in the State and is designated
pursuant to section 1391(b) of the Internal Revenue Code of
1986;''; and
(2) by adding after subparagraph (B) the following new
subparagraphs:
``(C)(i) 1 grant under this section for each qualified
empowerment zone that is in an urban area in the State and is
designated pursuant to section 1391(g) of such Code; and
``(ii) 1 grant under this section for each qualified
empowerment zone that is in a rural area in the State and is
designated pursuant to section 1391(g) of such Code; and
``(D) 1 grant under this section for each qualified
enterprise community that is in the State, is designated
pursuant to section 1391(b)(1) of such Code, and is in
existence on the date of enactment of this subparagraph.''.
(b) Amount of Grants.--Section 2007(a)(2) of the Social
Security Act (42 U.S.C. 1397f(a)(2)) is amended--
[[Page S9708]]
(1) in the heading of subparagraph (A), by inserting
``Original'' before ``Empowerment'';
(2) in subparagraph (A), in the matter preceding clause
(i), by inserting ``referred to in paragraph (1)(A)'' after
``empowerment zone'';
(3) by redesignating subparagraph (C) as subparagraph (F);
and
(4) by inserting after subparagraph (B) the following new
subparagraphs:
``(C) Additional empowerment grants.--The amount of the
grant to a State under this section for a qualified
empowerment zone referred to in paragraph (1)(C) shall be--
``(i) if the zone is in an urban area, $5,000,000 for
fiscal year 2001; or
``(ii) if the zone is in a rural area, $2,000,000 for
fiscal year 2001.
``(D) Additional enterprise community grants.--The amount
of the grant to a State under this section for a qualified
enterprise community referred to in paragraph (1)(D) shall be
$250,000.''.
(c) Timing of Grants.--Section 2007(a)(3) of the Social
Security Act (42 U.S.C. 1397f(a)(3)) is amended--
(1) in the heading of subparagraph (A), by inserting
``Original'' before ``Qualified'';
(2) in subparagraph (A), in the matter preceding clause
(i), by inserting ``referred to in paragraph (1)(A)'' after
``empowerment zone''; and
(3) by adding after subparagraph (B) the following new
subparagraphs:
``(C) Additional qualified empowerment zones.--With respect
to each qualified empowerment zone referred to in paragraph
(1)(C), the Secretary shall make 1 grant under this section
to the State in which the zone lies, on January 1, 2002.
``(D) Additional qualified enterprise communities.--With
respect to each qualified enterprise community referred to in
paragraph (1)(D), the Secretary shall make 1 grant under this
section to the State in which the community lies on January
1, 2002.''.
(d) Funding.--Section 2007(a)(4) of the Social Security Act
(42 U.S.C. 1397f(a)(4)) is amended--
(1) by striking ``(4) Funding.--$1,000,000,000'' and
inserting the following:
``(4) Funding.--
``(A) Original grants.--$1,000,000,000'';
(2) by inserting ``for empowerment zones and enterprise
communities described in subparagraphs (A) and (B) of
paragraph (1)'' before the period; and
(3) by adding after and below the end the following new
subparagraphs:
``(B) Additional empowerment zone grants.--$85,000,000
shall be made available to the Secretary for grants under
this section for empowerment zones referred to in paragraph
(1)(C).
``(C) Additional enterprise community grants.--$22,000,000
shall be made available to the Secretary for grants under
this section for enterprise communities referred to in
paragraph (1)(D).''.
(e) Direct Funding for Indian Tribes.--
(1) In general.--Section 2007(a) of the Social Security Act
(42 U.S.C. 1397f(a)) is amended by adding at the end the
following new paragraph:
``(5) Direct funding for indian tribes.--
``(A) In general.--The Secretary may make a grant under
this section directly to the governing body of an Indian
tribe if--
``(i) the tribe is identified in the strategic plan of a
qualified empowerment zone or qualified enterprise community
as the entity that assumes sole or primary responsibility for
carrying out activities and projects under the grant; and
``(ii) the grant is to be used for activities and projects
that are--
``(I) included in the strategic plan of the qualified
empowerment zone or qualified enterprise community,
consistent with this section; and
``(II) approved by the Secretary of Agriculture, in the
case of a qualified empowerment zone or qualified enterprise
community in a rural area, or the Secretary of Housing and
Urban Development, in the case of a qualified empowerment
zone or qualified enterprise community in an urban area.
``(B) Rules of interpretation.--
``(i) If grant under this section is made directly to the
governing body of an Indian tribe under subparagraph (A), the
tribe shall be considered a State for purposes of this
section.
``(ii) This subparagraph shall not be construed as making
applicable to this section the provisions of the Indian Self-
Determination and Education Assistance Act.''.
(2) Definitions.--Section 2007(f) of such Act (42 U.S.C.
1397f(f)) is amended by adding at the end the following new
paragraph:
``(7) Indian tribe.--The term `Indian tribe' means any
Indian tribe, band, nation, or other organized group or
community, including any Alaska Native village or regional or
village corporation as defined in or established pursuant to
the Alaska Native Claims Settlement Act, which is recognized
as eligible for the special programs and services provided by
the United States to Indians because of their status as
Indians.''.
Subtitle C--Modification of Tax Incentives for DC Zone
SEC. 121. EXTENSION OF DC ZONE THROUGH 2006.
(a) In General.--The following provisions are amended by
striking ``2002'' each place it appears and inserting
``2006'':
(1) Section 1400(f).
(2) Section 1400A(b).
(b) Zero Capital Gains Rate.--Section 1400B (relating to
zero percent capital gains rate) is amended--
(1) by striking ``2003'' each place it appears and
inserting ``2007'', and
(2) by striking ``2007'' each place it appears and
inserting ``2011''.
SEC. 122. EXTENSION OF DC ZERO PERCENT CAPITAL GAINS RATE.
(a) In General.--Section 1400B (relating to zero percent
capital gains rate) is amended by adding at the end the
following new subsection:
``(h) Extension to Entire District of Columbia.--In
applying this section to any stock or partnership interest
which is originally issued after December 31, 2000, or any
tangible property acquired by the taxpayer by purchase after
December 31, 2000--
``(1) subsection (d) shall be applied without regard to
paragraph (2) thereof, and
``(2) subsections (e)(2) and (g)(2) shall be applied by
substituting `January 1, 2001' for `January 1, 1998'.''.
(b) Effective Date.--The amendment made by this section
shall take effect on January 1, 2001.
SEC. 123. GROSS INCOME TEST FOR DC ZONE BUSINESSES.
(a) In General.--Section 1400B(c) (defining DC Zone
business) is amended by adding ``and'' at the end of
paragraph (1), by striking paragraph (2), and by
redesignating paragraph (3) as paragraph (2).
(b) Effective Date.--The amendment made by this section
shall apply to stock and partnership interests originally
issued after, and property originally acquired by the
taxpayer after, December 31, 2000.
SEC. 124. EXPANSION OF DC HOMEBUYER TAX CREDIT.
(a) Extension.--Section 1400C(i) (relating to application
of section) is amended by striking ``2002'' and inserting
``2004''.
(b) Expansion of Income Limitation.--Section 1400C(b)(1)
(relating to limitation based on modified adjusted gross
income) is amended--
(1) by striking ``$110,000'' in subparagraph (A)(i) and
inserting ``$140,000'', and
(2) by inserting ``($40,000 in the case of a joint
return)'' after ``$20,000'' in subparagraph (B).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
Subtitle D--New Markets Tax Credit
SEC. 131. NEW MARKETS TAX CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business-related credits) is amended
by adding at the end the following new section:
``SEC. 45D. NEW MARKETS TAX CREDIT.
``(a) Allowance of Credit.--
``(1) In general.--For purposes of section 38, in the case
of a taxpayer who holds a qualified equity investment on a
credit allowance date of such investment which occurs during
the taxable year, the new markets tax credit determined under
this section for such taxable year is an amount equal to the
applicable percentage of the amount paid to the qualified
community development entity for such investment at its
original issue.
``(2) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage is--
``(A) 5 percent with respect to the first three credit
allowance dates, and
``(B) 6 percent with respect to the remainder of the credit
allowance dates.
``(3) Credit allowance date.--For purposes of paragraph
(1), the term `credit allowance date' means, with respect to
any qualified equity investment--
``(A) the date on which such investment is initially made,
and
``(B) each of the six anniversary dates of such date
thereafter.
``(b) Qualified Equity Investment.--For purposes of this
section--
``(1) In general.--The term `qualified equity investment'
means any equity investment in a qualified community
development entity if--
``(A) such investment is acquired by the taxpayer at its
original issue (directly or through an underwriter) solely in
exchange for cash,
``(B) substantially all of such cash is used by the
qualified community development entity to make qualified low-
income community investments, and
``(C) such investment is designated for purposes of this
section by the qualified community development entity.
Such term shall not include any equity investment issued by a
qualified community development entity more than 5 years
after the date that such entity receives an allocation under
subsection (f). Any allocation not used within such 5-year
period may be reallocated by the Secretary under subsection
(f).
``(2) Limitation.--The maximum amount of equity investments
issued by a qualified community development entity which may
be designated under paragraph (1)(C) by such entity shall not
exceed the portion of the limitation amount allocated under
subsection (f) to such entity.
``(3) Safe harbor for determining use of cash.--The
requirement of paragraph (1)(B) shall be treated as met if at
least 85 percent of the aggregate gross assets of the
qualified community development entity are invested in
qualified low-income community investments.
``(4) Treatment of subsequent purchasers.--The term
`qualified equity investment' includes any equity investment
which would (but for paragraph (1)(A)) be a qualified equity
investment in the hands of the taxpayer if such investment
was a qualified
[[Page S9709]]
equity investment in the hands of a prior holder.
``(5) Redemptions.--A rule similar to the rule of section
1202(c)(3) shall apply for purposes of this subsection.
``(6) Equity investment.--The term `equity investment'
means--
``(A) any stock (other than nonqualified preferred stock as
defined in section 351(g)(2)) in an entity which is a
corporation, and
``(B) any capital interest in an entity which is a
partnership.
``(c) Qualified Community Development Entity.--For purposes
of this section--
``(1) In general.--The term `qualified community
development entity' means any domestic corporation or
partnership if--
``(A) the primary mission of the entity is serving, or
providing investment capital for, low-income communities or
low-income persons,
``(B) the entity maintains accountability to residents of
low-income communities through their representation on any
governing board of the entity or on any advisory boards to
the entity, and
``(C) the entity is certified by the Secretary for purposes
of this section as being a qualified community development
entity.
``(2) Special rules for certain organizations.--The
requirements of paragraph (1) shall be treated as met by--
``(A) any specialized small business investment company (as
defined in section 1044(c)(3)), and
``(B) any 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)).
``(d) Qualified Low-Income Community Investments.--For
purposes of this section--
``(1) In general.--The term `qualified low-income community
investment' means--
``(A) any capital or equity investment in, or loan to, any
qualified active low-income community business,
``(B) the purchase from another community development
entity of any loan made by such entity which is a qualified
low-income community investment,
``(C) financial counseling and other services specified in
regulations prescribed by the Secretary to businesses located
in, and residents of, low-income communities, and
``(D) any equity investment in, or loan to, any qualified
community development entity.
``(2) Qualified active low-income community business.--
``(A) In general.--For purposes of paragraph (1), the term
`qualified active low-income community business' means, with
respect to any taxable year, any corporation (including a
nonprofit corporation) or partnership if for such year--
``(i) at least 50 percent of the total gross income of such
entity is derived from the active conduct of a qualified
business within any low-income community,
``(ii) a substantial portion of the use of the tangible
property of such entity (whether owned or leased) is within
any low-income community,
``(iii) a substantial portion of the services performed for
such entity by its employees are performed in any low-income
community,
``(iv) 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
``(v) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such entity is
attributable to nonqualified financial property (as defined
in section 1397C(e)).
``(B) Proprietorship.--Such term shall include any business
carried on by an individual as a proprietor if such business
would meet the requirements of subparagraph (A) were it
incorporated.
``(C) Portions of business may be qualified active low-
income community business.--The term `qualified active low-
income community business' includes any trades or businesses
which would qualify as a qualified active low-income
community business if such trades or businesses were
separately incorporated.
``(3) Qualified business.--For purposes of this subsection,
the term `qualified business' has the meaning given to such
term by section 1397C(d); except that--
``(A) in lieu of applying paragraph (2)(B) thereof, the
rental to others of real property located in any low-income
community shall be treated as a qualified business if there
are substantial improvements located on such property, and
``(B) paragraph (3) thereof shall not apply.
``(e) Low-Income Community.--For purposes of this section--
``(1) In general.--The term `low-income community' means
any population census tract if--
``(A) the poverty rate for such tract is at least 20
percent, or
``(B)(i) in the case of a tract not located within a
metropolitan area, the median family income for such tract
does not exceed 80 percent of statewide median family income,
or
``(ii) in the case of a tract located within a metropolitan
area, the median family income for such tract does not exceed
80 percent of the greater of statewide median family income
or the metropolitan area median family income.
``(2) Targeted areas.--The Secretary may designate any area
within any census tract as a low-income community if--
``(A) the boundary of such area is continuous,
``(B) the area would satisfy the requirements of paragraph
(1) if it were a census tract, and
``(C) an inadequate access to investment capital exists in
such area.
``(3) Areas not within census tracts.--In the case of an
area which is not tracted for population census tracts, the
equivalent county divisions (as defined by the Bureau of the
Census for purposes of defining poverty areas) shall be used
for purposes of determining poverty rates and median family
income.
``(f) National Limitation on Amount of Investments
Designated.--
``(1) In general.--There is a new markets tax credit
limitation for each calendar year. Such limitation is--
``(A) $1,000,000,000 for 2002, and
``(B) $1,500,000,000 for 2003, 2004, 2005, and 2006.
``(2) Allocation of limitation.--The limitation under
paragraph (1) shall be allocated by the Secretary among
qualified community development entities selected by the
Secretary. In making allocations under the preceding
sentence, the Secretary shall give priority to any entity--
``(A) with a record of having successfully provided capital
or technical assistance to disadvantaged businesses or
communities, or
``(B) which intends to satisfy the requirement under
subsection (b)(1)(B) by making qualified low-income community
investments in 1 or more businesses in which persons
unrelated to such entity (within the meaning of section
267(b) or 707(b)(1)) hold the majority equity interest.
``(3) Carryover of unused limitation.--If the new markets
tax credit limitation for any calendar year exceeds the
aggregate amount allocated under paragraph (2) for such year,
such limitation for the succeeding calendar year shall be
increased by the amount of such excess. No amount may be
carried under the preceding sentence to any calendar year
after 2013.
``(g) Recapture of Credit In Certain Cases.--
``(1) In general.--If, at any time during the 7-year period
beginning on the date of the original issue of a qualified
equity investment in a qualified community development
entity, there is a recapture event with respect to such
investment, then the tax imposed by this chapter for the
taxable year in which such event occurs shall be increased by
the credit recapture amount.
``(2) Credit recapture amount.--For purposes of paragraph
(1), the credit recapture amount is an amount equal to the
sum of--
``(A) the aggregate decrease in the credits allowed to the
taxpayer under section 38 for all prior taxable years which
would have resulted if no credit had been determined under
this section with respect to such investment, plus
``(B) interest at the underpayment rate established under
section 6621 on the amount determined under subparagraph (A)
for each prior taxable year for the period beginning on the
due date for filing the return for the prior taxable year
involved.
No deduction shall be allowed under this chapter for interest
described in subparagraph (B).
``(3) Recapture event.--For purposes of paragraph (1),
there is a recapture event with respect to an equity
investment in a qualified community development entity if--
``(A) such entity ceases to be a qualified community
development entity,
``(B) the proceeds of the investment cease to be used as
required of subsection (b)(1)(B), or
``(C) such investment is redeemed by such entity.
``(4) Special rules.--
``(A) Tax benefit rule.--The tax for the taxable year shall
be increased under paragraph (1) only with respect to credits
allowed by reason of this section which were used to reduce
tax liability. In the case of credits not so used to reduce
tax liability, the carryforwards and carrybacks under section
39 shall be appropriately adjusted.
``(B) No credits against tax.--Any increase in tax under
this subsection shall not be treated as a tax imposed by this
chapter for purposes of determining the amount of any credit
under this chapter or for purposes of section 55.
``(h) 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. This subsection shall not apply for purposes of
sections 1202, 1397B, and 1400B.
``(i) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out this section,
including regulations--
``(1) which limit the credit for investments which are
directly or indirectly subsidized by other Federal tax
benefits (including the credit under section 42 and the
exclusion from gross income under section 103),
``(2) which prevent the abuse of the purposes of this
section,
``(3) which provide rules for determining whether the
requirement of subsection (b)(1)(B) is treated as met,
``(4) which impose appropriate reporting requirements, and
``(5) which apply the provisions of this section to newly
formed entities.''.
[[Page S9710]]
(b) Credit Made Part of General Business Credit.--
(1) In general.--Subsection (b) of section 38 is amended by
striking ``plus'' at the end of paragraph (11), by striking
the period at the end of paragraph (12) and inserting ``,
plus'', and by adding at the end the following new paragraph:
``(13) the new markets tax credit determined under section
45D(a).''.
(2) Limitation on carryback.--Subsection (d) of section 39
is amended by adding at the end the following new paragraph:
``(9) No carryback of new markets tax credit before january
1, 2002.--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 January 1, 2002.''.
(c) Deduction for Unused Credit.--Subsection (c) of section
196 is amended by striking ``and'' at the end of paragraph
(7), by striking the period at the end of paragraph (8) and
inserting ``, and'', and by adding at the end the following
new paragraph:
``(9) the new markets tax credit determined under section
45D(a).''.
(d) 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. New markets tax credit.''.
(e) Effective Date.--The amendments made by this section
shall apply to investments made after December 31, 2001.
(f) Regulations on Allocation of National Limitation.--Not
later than 120 days after the date of the enactment of this
Act, the Secretary of the Treasury or the Secretary's
delegate shall prescribe regulations which specify--
(1) how entities shall apply for an allocation under
section 45D(f)(2) of the Internal Revenue Code of 1986, as
added by this section;
(2) the competitive procedure through which such
allocations are made; and
(3) the actions that such Secretary or delegate shall take
to ensure that such allocations are properly made to
appropriate entities.
(g) Audit and Report.--Not later than January 31 of 2004
and 2007, the Comptroller General of the United States shall,
pursuant to an audit of the new markets tax credit program
established under section 45D of the Internal Revenue Code of
1986 (as added by subsection (a)), report to Congress on such
program, including all qualified community development
entities that receive an allocation under the new markets
credit under such section.
Subtitle E--Modification of Tax Incentives for Puerto Rico
SEC. 141. MODIFICATION OF PUERTO RICO ECONOMIC ACTIVITY TAX
CREDIT.
(a) Corporations Eligible To Claim Credit.--Section
30A(a)(2) (defining qualified domestic corporation) is
amended to read as follows:
``(2) Qualified domestic corporation.--For purposes of
paragraph (1)--
``(A) In general.--A domestic corporation shall be treated
as a qualified domestic corporation for a taxable year if it
is actively conducting within Puerto Rico during the taxable
year--
``(i) a line of business with respect to which the domestic
corporation is an existing credit claimant under section
936(j)(9), or
``(ii) with respect to taxable years ending after December
31, 2000, an eligible line of business not described in
clause (i) with respect to which the domestic corporation is
an existing credit claimant under section 936(j)(9)
(determined without regard to subparagraph (B) thereof).
``(B) Limitation to lines of business.--A domestic
corporation shall be treated as a qualified domestic
corporation under subparagraph (A) only with respect to the
lines of business described in subparagraph (A) which it is
actively conducting in Puerto Rico during the taxable year.
``(C) Exception for corporations electing reduced credit.--
A domestic corporation shall not be treated as a qualified
domestic corporation if such corporation (or any predecessor)
had an election in effect under section 936(a)(4)(B)(iii) for
any taxable year beginning after December 31, 1996.''.
(b) Application on Separate Line of Business Basis;
Eligible Line of Business.--Section 30A is amended by
redesignating subsection (g) as subsection (h) and by
inserting after subsection (f) the following new subsection:
``(g) Application on Line of Business Basis; Eligible Lines
of Business.--For purposes of this section--
``(1) Application to separate line of business.--
``(A) In general.--In determining the amount of the credit
under subsection (a), this section shall be applied
separately with respect to each substantial line of business
of the qualified domestic corporation described in subsection
(a)(2)(A)(ii).
``(B) Allocation.--The Secretary shall prescribe rules
necessary to carry out the purposes of this paragraph,
including rules--
``(i) for the allocation of items of income, gain,
deduction, and loss for purposes of determining taxable
income under subsection (a), and
``(ii) for the allocation of wages, fringe benefit
expenses, and depreciation allowances for purposes of
applying the limitations under subsection (d).
``(2) Eligible line of business.--The term `eligible line
of business' means a substantial line of business established
by a qualified domestic corporation described in subsection
(a)(2)(A)(ii) after December 31, 2000.''.
(c) Modification of Base Period Cap for Existing
Claimants.--The last sentence of section 30A(a)(1) (relating
to allowance of credit) is amended--
(1) by striking ``In'' and inserting ``With respect to any
qualified domestic corporation described in paragraph
(2)(A)(i), in'',
(2) by inserting ``the greater of'' after ``exceed'', and
(3) by inserting ``, or such income multiplied by the ratio
of the average number of full-time employees of such
taxpayers during the taxable year to the average number of
such full-time employees in 1995 and 1996'' after ``section
936(j)''.
(d) Credit Taken Over 5-Year Period.--Section 30A, as
amended by subsection (b), is amended by redesignating
subsection (h) as subsection (i) and by inserting after
subsection (g) the following new subsection:
``(h) Credit Taken Over 5-Year Period.--In the case of any
qualified domestic corporation described in paragraph
(2)(A)(ii), the aggregate amount of the credit otherwise
determined under subsection (a) for any taxable year shall be
allowed ratably over the 5-taxable year period beginning with
such taxable year.''.
(e) Conforming Amendments.--
(1) Section 30A(a)(3) is amended by striking ``an existing
credit claimant'' and inserting ``a qualified domestic
corporation''.
(2) Section 30A(b) is amended by striking ``within a
possession'' each place it appears and inserting ``within
Puerto Rico''.
(3) Section 30A(d) is amended by striking ``possession''
each place it appears.
(4) Section 30A(f) is amended to read as follows:
``(f) Definitions.--For purposes of this section--
``(1) Qualified income taxes.--The qualified income taxes
for any taxable year allocable to nonsheltered income shall
be determined in the same manner as under section 936(i)(3).
``(2) Qualified wages.--The qualified wages for any taxable
year shall be determined in the same manner as under section
936(i)(1).
``(3) Other terms.--Any term used in this section which is
also used in section 936 shall have the same meaning given
such term by section 936.''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years ending after December 31, 2000.
Subtitle F--Individual Development Accounts
SEC. 151. DEFINITIONS.
As used in this subtitle:
(1) Eligible individual.--
(A) In general.--The term ``eligible individual'' means an
individual who--
(i) has attained the age of 18 years;
(ii) is a citizen or legal resident of the United States;
and
(iii) is a member of a household--
(I) the gross income of which does not exceed 60 percent of
the national median family income (as published by the Bureau
of the Census), as adjusted for family size; and
(II) the net worth of which does not exceed $10,000.
(B) Household.--The term ``household'' means all
individuals who share use of a dwelling unit as primary
quarters for living and eating separate from other
individuals.
(C) Determination of net worth.--
(i) In general.--For purposes of subparagraph (A)(iii)(II),
the net worth of a household is the amount equal to--
(I) the aggregate fair market value of all assets that are
owned in whole or in part by any member of a household, minus
(II) the obligations or debts of any member of the
household.
(ii) Certain assets disregarded.--For purposes of
determining the net worth of a household, a household's
assets shall not be considered to include--
(I) the primary dwelling unit;
(II) 1 motor vehicle owned by the household; and
(III) the sum of all contributions by an eligible
individual (including earnings thereon) to any Individual
Development Account, plus the matching deposits made on
behalf of such individual (including earnings thereon) in any
parallel account.
(2) Individual development account.--The term ``Individual
Development Account'' means an account established for an
eligible individual as part of a qualified individual
development account program, but only if the written
governing instrument creating the account meets the following
requirements:
(A) The sole owner of the account is the eligible
individual.
(B) No contribution will be accepted unless it is in cash,
by check, by electronic fund transfer, or by electronic money
order.
(C) The holder of the account is a qualified financial
institution, a qualified nonprofit organization, or an Indian
tribe.
(D) The assets of the account will not be commingled with
other property except in a common trust fund or common
investment fund.
(E) Except as provided in section 156(b), any amount in the
account may be paid out only for the purpose of paying the
qualified expenses of the eligible individual.
(3) Parallel account.--The term ``parallel account'' means
a separate, parallel individual or pooled account for all
matching funds and earnings dedicated to an eligible
individual as part of a qualified individual
[[Page S9711]]
development account program, the sole owner of which is a
qualified financial institution, a qualified nonprofit
organization, or an Indian tribe.
(4) Qualified financial institution.--
(A) In general.--The term ``qualified financial
institution'' means any person authorized to be a trustee of
any individual retirement account under section 408(a)(2).
(B) Rule of construction.--Nothing in this paragraph shall
be construed as preventing a person described in subparagraph
(A) from collaborating with 1 or more contractual affiliates,
qualified nonprofit organizations, or Indian tribes to carry
out an individual development account program established
under section 152.
(5) Qualified nonprofit organization.--The term ``qualified
nonprofit organization'' means--
(A) any organization described in section 501(c)(3) of the
Internal Revenue Code of 1986 and exempt from taxation under
section 501(a) of such Code;
(B) any community development financial institution
certified by the Community Development Financial Institution
Fund; or
(C) any credit union chartered under Federal or State law
and certified by the National Credit Union Administration,
that meets standards for financial management and fiduciary
responsibility as defined by the Secretary or an organization
designated by the Secretary.
(6) Indian tribe.--The term ``Indian tribe'' means any
Indian tribe as defined in section 4(12) of the Native
American Housing Assistance and Self-Determination Act of
1996 (25 U.S.C. 4103(12), and includes any tribal subsidiary,
subdivision, or other wholly owned tribal entity.
(7) Qualified individual development account program.--The
term ``qualified individual development account program''
means a program established under section 152 under which--
(A) Individual Development Accounts and parallel accounts
are held by a qualified financial institution, a qualified
nonprofit organization, or an Indian tribe; and
(B) additional activities determined by the Secretary, or
an organization designated by the Secretary, as necessary to
responsibly develop and administer accounts, including
recruiting, providing financial education and other training
to account holders, and regular program monitoring, are
carried out by such qualified financial institution,
qualified nonprofit organization, or Indian tribe.
(8) Qualified expense distribution.--
(A) In general.--The term ``qualified expense
distribution'' means any amount paid (including through
electronic payments) or distributed out of an Individual
Development Account and a parallel account established for an
eligible individual if such amount--
(i) is used exclusively to pay the qualified expenses of
such individual or such individual's spouse or dependents;
(ii) is paid by the qualified financial institution,
qualified nonprofit organization, or Indian tribe directly to
the person to whom the amount is due or to another Individual
Development Account; and
(iii) is paid after the holder of the Individual
Development Account has completed a financial education
course as required under section 153(b).
(B) Qualified expenses.--
(i) In general.--The term ``qualified expenses'' means any
of the following:
(I) Qualified higher education expenses.
(II) Qualified first-time homebuyer costs.
(III) Qualified business capitalization or expansion costs.
(IV) Qualified rollovers.
(ii) Qualified higher education expenses.--
(I) In general.--The term ``qualified higher education
expenses'' has the meaning given such term by section
72(t)(7) of the Internal Revenue Code of 1986, determined by
treating postsecondary vocational educational schools as
eligible educational institutions.
(II) Postsecondary vocational education school.--The term
``postsecondary vocational educational school'' means 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 Act.
(III) Coordination with other benefits.--The amount of
qualified higher education expenses for any taxable year
shall be reduced as provided in section 25A(g)(2) of such
Code and by the amount of such expenses for which a credit or
exclusion is allowed under chapter 1 of such Code for such
taxable year.
(iii) Qualified first-time homebuyer costs.--The term
``qualified first-time homebuyer costs'' means qualified
acquisition costs (as defined in section 72(t)(8) of such
Code without regard to subparagraph (B) thereof) with respect
to a principal residence (within the meaning of section 121
of such Code) for a qualified first-time homebuyer (as
defined in section 72(t)(8) of such Code).
(iv) Qualified business capitalization or expansion
costs.--
(I) In general.--The term ``qualified business
capitalization or expansion costs'' means qualified
expenditures for the capitalization or expansion of a
qualified business pursuant to a qualified business plan.
(II) Qualified expenditures.--The term ``qualified
expenditures'' means expenditures included in a qualified
business plan, including capital, plant, equipment, working
capital, inventory expenses, attorney and accounting fees,
and other costs normally associated with starting or
expanding a business.
(III) Qualified business.--The term ``qualified business''
means any business that does not contravene any law.
(IV) Qualified business plan.--The term ``qualified
business plan'' means a business plan which meets such
requirements as the Secretary or an organization designated
by the Secretary may specify.
(v) Qualified rollovers.--The term ``qualified rollover''
means, with respect to any distribution from an Individual
Development Account, the payment, within 120 days of such
distribution, of all or a portion of such distribution to
such account or to another Individual Development Account
established in another qualified financial institution,
qualified nonprofit organization, or Indian tribe for the
benefit of the eligible individual, or, if such individual is
deceased, the spouse, any dependent, or other named
beneficiary of the deceased. Rules similar to the rules of
section 408(d)(3) of such Code (other than subparagraph (C)
thereof) shall apply for purposes of this clause.
(9) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
SEC. 152. STRUCTURE AND ADMINISTRATION OF QUALIFIED
INDIVIDUAL DEVELOPMENT ACCOUNT PROGRAMS.
(a) Establishment of Qualified Individual Development
Account Programs.--Any qualified financial institution,
qualified nonprofit organization, or Indian tribe may
establish 1 or more qualified individual development account
programs which meet the requirements of this subtitle.
(b) Basic Program Structure.--
(1) In general.--All qualified individual development
account programs shall consist of the following 2 components:
(A) An Individual Development Account to which an eligible
individual may contribute money in accordance with section
154.
(B) A parallel account to which all matching funds shall be
deposited in accordance with section 155.
(2) Tailored ida programs.--A qualified financial
institution, qualified nonprofit organization, or Indian
tribe may tailor its qualified individual development account
program to allow matching funds to be spent on 1 or more of
the categories of qualified expenses.
(c) Tax Treatment of Accounts.--Any account described in
subparagraph (B) of subsection (b)(1) is exempt from taxation
under the Internal Revenue Code of 1986 unless such account
has ceased to be such an account by reason of section 156(c)
or the termination of the qualified individual development
account program under section 157(b).
SEC. 153. PROCEDURES FOR OPENING AN INDIVIDUAL DEVELOPMENT
ACCOUNT AND QUALIFYING FOR MATCHING FUNDS.
(a) Opening an Account.--An eligible individual must open
an Individual Development Account with a qualified financial
institution, qualified nonprofit organization, or Indian
tribe and contribute money in accordance with section 154 to
qualify for matching funds in a parallel account.
(b) Required Completion of Financial Education Course.--
(1) In general.--Before becoming eligible to withdraw
matching funds to pay for qualified expenses, holders of
Individual Development Accounts must complete a financial
education course offered by a qualified financial
institution, a qualified nonprofit organization, an Indian
tribe, or a government entity.
(2) Standard and applicability of course.--The Secretary or
an organization designated by the Secretary, in consultation
with representatives of qualified individual development
account programs and financial educators, shall establish
minimum performance standards for financial education courses
offered under paragraph (1) and a protocol to exempt eligible
individuals from the requirement under paragraph (1) because
of hardship or lack of need.
SEC. 154. CONTRIBUTIONS TO INDIVIDUAL DEVELOPMENT ACCOUNTS.
(a) In General.--Except in the case of a qualified
rollover, individual contributions to an Individual
Development Account will not be accepted for the taxable year
in excess of the lesser of--
(1) $2,000; or
(2) an amount equal to the sum of--
(A) the compensation (as defined in section 219(f)(1) of
the Internal Revenue Code of 1986) includible in the
individual's gross income for such taxable year; and
(B) in the case of an eligible individual who has retired
on disability (within the meaning of section 22 of the
Internal Revenue Code of 1986) before the close of the
taxable year, any amount received as a disability benefit and
excluded from the individual's gross income for such taxable
year.
(b) Proof of Compensation and Status as an Eligible
Individual.--Federal W-2 forms and other forms specified by
the Secretary proving the eligible individual's wages and
other compensation (including amounts described in subsection
(a)(2)(B)) and the status of the individual as an eligible
individual shall be presented at the time of the
establishment of the Individual Development Account and at
least once annually thereafter.
(c) Deemed Withdrawals of Excess Contributions.--If the
individual for whose benefit an Individual Development
Account is established contributes an amount in excess of the
amount allowed under subsection (a)
[[Page S9712]]
and fails to withdraw the excess contribution plus the amount
of net income attributable to such excess contribution on or
before the day prescribed by law (including extensions of
time) for filing such individual's return of tax for the
taxable year, such excess contribution and net income shall
be deemed to have been withdrawn on such day by such
individual for purposes other than to pay qualified expenses.
(d) Cross Reference.--
For designation of earned income tax credit payments for deposit to
an Individual Development Account, see section 32(o) of the Internal
Revenue Code of 1986.
SEC. 155. DEPOSITS BY QUALIFIED INDIVIDUAL DEVELOPMENT
ACCOUNT PROGRAMS.
(a) Parallel Accounts.--The qualified financial
institution, qualified nonprofit organization, or Indian
tribe shall deposit all matching funds for each Individual
Development Account into a parallel account at a qualified
financial institution, qualified nonprofit organization, or
Indian tribe.
(b) Regular Deposits of Matching Funds.--
(1) In general.--Subject to paragraph (2), the qualified
financial institution, qualified nonprofit organization, or
Indian tribe shall not less than annually (or upon a proper
withdrawal request under section 156, if necessary) deposit
into the parallel account with respect to each eligible
individual the following:
(A) A dollar-for-dollar match for the first $300
contributed by the eligible individual into an Individual
Development Account with respect to any taxable year.
(B) Any matching funds provided by State, local, or private
sources in accordance to the matching ratio set by those
sources.
(2) Cross reference.--
For allowance of tax credit for Individual Development Account
subsidies, including matching funds, see section 30B of the Internal
Revenue Code of 1986.
(c) Forfeiture of Matching Funds.--Matching funds that are
forfeited under section 156(b) shall be used by the qualified
financial institution, qualified nonprofit organization, or
Indian tribe to pay matches for other Individual Development
Account contributions by eligible individuals.
(d) Uniform Accounting Regulations.--To ensure proper
recordkeeping and determination of the tax credit under
section 30C of the Internal Revenue Code of 1986, the
Secretary shall prescribe regulations with respect to
accounting for matching funds from all possible sources in
the parallel accounts.
(e) Regular Reporting of Accounts.--Any qualified financial
institution, qualified nonprofit organization, or Indian
tribe shall report the balances in any Individual Development
Account and parallel account of an eligible individual on not
less than an annual basis.
SEC. 156. WITHDRAWAL PROCEDURES.
(a) Withdrawals for Qualified Expenses.--To withdraw money
from an eligible individual's Individual Development Account
to pay qualified expenses of such individual or such
individual's spouse or dependents, the qualified financial
institution, qualified nonprofit organization, or Indian
tribe shall directly transfer such funds from the Individual
Development Account, and, if applicable, from the parallel
account electronically to the vendor or other Individual
Development Account. If the vendor is not equipped to receive
funds electronically, the qualified financial institution,
qualified nonprofit organization, or Indian tribe may issue
such funds by paper check to the vendor.
(b) Withdrawals for Nonqualified Expenses.--An Individual
Development Account holder may unilaterally withdraw funds
from the Individual Development Account for purposes other
than to pay qualified expenses, but shall forfeit the
corresponding matching funds and interest earned on the
matching funds by doing so, unless such withdrawn funds are
recontributed to such Account by September 30 following the
withdrawal.
(c) Deemed Withdrawals From Accounts of Noneligible
Individuals.--If the individual for whose benefit an
Individual Development Account is established ceases to be an
eligible individual, such account shall cease to be an
Individual Development Account as of the first day of the
taxable year of such individual and any balance in such
account shall be deemed to have been withdrawn on such first
day by such individual for purposes other than to pay
qualified expenses.
(d) Tax Treatment of Matching Funds.--Any amount withdrawn
from a parallel account shall not be includible in an
eligible individual's gross income.
SEC. 157. CERTIFICATION AND TERMINATION OF QUALIFIED
INDIVIDUAL DEVELOPMENT ACCOUNT PROGRAMS.
(a) Certification Procedures.--Upon establishing a
qualified individual development account program under
section 152, a qualified financial institution, qualified
nonprofit organization, or Indian tribe shall certify to the
Secretary, or an organization designated by the Secretary, on
forms prescribed by the Secretary or such organization and
accompanied by any documentation required by the Secretary or
such organization, that--
(1) the accounts described in subparagraphs (A) and (B) of
section 152(b)(1) are operating pursuant to all the
provisions of this subtitle; and
(2) the qualified financial institution, qualified
nonprofit organization, or Indian tribe agrees to implement
an information system necessary to monitor the cost and
outcomes of the qualified individual development account
program.
(b) Authority To Terminate Qualified IDA Program.--If the
Secretary, or an organization designated by the Secretary,
determines that a qualified financial institution, qualified
nonprofit organization, or Indian tribe under this subtitle
is not operating a qualified individual development account
program in accordance with the requirements of this subtitle
(and has not implemented any corrective recommendations
directed by the Secretary or such organization), the
Secretary or such organization shall terminate such
institution's, nonprofit organization's, or Indian tribe's
authority to conduct the program. If the Secretary, or an
organization designated by the Secretary, is unable to
identify a qualified financial institution, qualified
nonprofit organization, or Indian tribe to assume the
authority to conduct such program, then any account
established for the benefit of any eligible individual under
such program shall cease to be an Individual Development
Account as of the first day of such termination and any
balance in such account shall be deemed to have been
withdrawn on such first day by such individual for purposes
other than to pay qualified expenses.
SEC. 158. REPORTING, MONITORING, AND EVALUATION.
(a) Responsibilities of Qualified Financial Institutions,
Qualified Nonprofit Organizations, and Indian Tribes.--Each
qualified financial institution, qualified nonprofit
organization, or Indian tribe that establishes a qualified
individual development account program under section 152
shall report annually to the Secretary, directly or through
an organization designated by the Secretary, within 90 days
after the end of each calendar year on--
(1) the number of eligible individuals making contributions
into Individual Development Accounts;
(2) the amounts contributed into Individual Development
Accounts and deposited into parallel accounts for matching
funds;
(3) the amounts withdrawn from Individual Development
Accounts and parallel accounts, and the purposes for which
such amounts were withdrawn;
(4) the balances remaining in Individual Development
Accounts and parallel accounts; and
(5) such other information needed to help the Secretary, or
an organization designated by the Secretary, monitor the cost
and outcomes of the qualified individual development account
program.
(b) Responsibilities of the Secretary or Designated
Organization.--
(1) Monitoring protocol.--Not later than 12 months after
the date of the enactment of this Act, the Secretary, or an
organization designated by the Secretary, shall develop and
implement a protocol and process to monitor the cost and
outcomes of the qualified individual development account
programs established under section 152.
(2) Annual reports.--In each year after the date of the
enactment of this Act, the Secretary, or an organization
designated by the Secretary, shall submit a progress report
to Congress on the status of such qualified individual
development account programs. Such report shall include from
a representative sample of qualified financial institutions,
qualified nonprofit organizations, and Indian tribes a report
on--
(A) the characteristics of participants, including age,
gender, race or ethnicity, marital status, number of
children, employment status, and monthly income;
(B) individual level data on deposits, withdrawals,
balances, uses of Individual Development Accounts, and
participant characteristics;
(C) the characteristics of qualified individual development
account programs, including match rate, economic education
requirements, permissible uses of accounts, staffing of
programs in full time employees, and the total costs of
programs; and
(D) process information on program implementation and
administration, especially on problems encountered and how
problems were solved.
SEC. 159. ACCOUNT FUNDS OF PROGRAM PARTICIPANTS DISREGARDED
FOR PURPOSES OF CERTAIN MEANS-TESTED FEDERAL
PROGRAMS.
Notwithstanding any other provision of Federal law that
requires consideration of 1 or more financial circumstances
of an individual, for the purposes of determining eligibility
to receive, or the amount of, any assistance or benefit
authorized by such provision to be provided to or for the
benefit of such individual, an amount equal to the sum of--
(1) all contributions by an eligible individual (including
earnings thereon) to any Individual Development Account; plus
(2) the matching deposits made on behalf of such individual
(including earnings thereon) in any parallel account,
shall be disregarded for such purpose with respect to any
period during which the individual participates in a
qualified individual development account program established
under section 152.
SEC. 160. MATCHING FUNDS FOR INDIVIDUAL DEVELOPMENT ACCOUNTS
PROVIDED THROUGH A TAX CREDIT FOR QUALIFIED
FINANCIAL INSTITUTIONS.
(a) In General.--Subpart B of part IV of subchapter A of
chapter 1 (relating to other
[[Page S9713]]
credits) is amended by inserting after section 30A the
following new section:
``SEC. 30B. INDIVIDUAL DEVELOPMENT ACCOUNT INVESTMENT CREDIT
FOR QUALIFIED FINANCIAL INSTITUTIONS.
``(a) Determination of Amount.--There shall be allowed as a
credit against the applicable tax for the taxable year an
amount equal to the individual development account investment
provided by a qualified financial institution during the
taxable year under an individual development account program
established under section 152 of the Community Renewal and
New Markets Act of 2000.
``(b) Applicable Tax.--For the purposes of this section,
the term `applicable tax' means the excess (if any) of--
``(1) the tax imposed under this chapter (other than the
taxes imposed under the provisions described in subparagraphs
(C) through (Q) of section 26(b)(2)), over
``(2) the credits allowable under subpart B (other than
this section) and subpart D of this part.
``(c) Individual Development Account Investment.--For
purposes of this section, the term `individual development
account investment' means, with respect to an individual
development account program of a qualified financial
institution in any taxable year, an amount equal to the sum
of--
``(1) 90 percent of the aggregate amount of dollar-for-
dollar matches under such program by such institution under
section 155(b)(1)(A) of the Community Renewal and New Markets
Act of 2000 for such taxable year, plus
``(2) an amount equal to the sum of the costs incurred,
directly or indirectly, with respect to each Individual
Development Account opened after the date of the enactment of
this section, not to exceed $100 per Account.
``(d) Other Definitions.--For purposes of this section, the
terms `Individual Development Account' and `qualified
financial institution' have the meanings given such terms by
section 151 of the Community Renewal and New Markets Act of
2000.
``(e) Regulations.--The Secretary may prescribe such
regulations as may be necessary or appropriate to carry out
this section, including regulations providing for a recapture
of the credit allowed under this section in cases where there
is a forfeiture under section 156(b) of the Community Renewal
and New Markets Act of 2000 in a subsequent taxable year of
any amount which was taken into account in determining the
amount of such credit.
``(f) Termination.--This section shall not apply to any
taxable year beginning after December 31, 2005.''.
(b) Conforming Amendment.--The table of sections for
subpart B of part IV of subchapter A of chapter 1 is amended
by inserting after the item relating to section 30A the
following new item:
``Sec. 30B. Individual development account investment credit for
qualified financial institutions.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
SEC. 161. DESIGNATION OF EARNED INCOME TAX CREDIT PAYMENTS
FOR DEPOSIT TO INDIVIDUAL DEVELOPMENT ACCOUNTS.
(a) In General.--Section 32 (relating to earned income
credit) is amended by adding at the end the following new
subsection:
``(o) Designation of Credit for Deposit to Individual
Development Account.--
``(1) In general.--With respect to the return of any
eligible individual (as defined in section 151(1) of the
Community Renewal and New Markets Act of 2000) 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 credit allowed under this
section shall be deposited by the Secretary into an
Individual Development Account (as defined in section 151(2)
of such Act) of such individual. The Secretary shall so
deposit such portion designated under this paragraph.
``(2) Manner and time of designation.--A designation under
paragraph (1) may be made with respect to any taxable year--
``(A) at the time of filing the return of the tax imposed
by this chapter for such taxable year, or
``(B) 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.
``(3) Portion attributable to earned income tax credit.--
For purposes of paragraph (1), an overpayment for any taxable
year shall be treated as attributable to the credit allowed
under this section for such taxable year to the extent that
such overpayment does not exceed the credit so allowed.
``(4) Overpayments treated as refunded.--For purposes of
this title, any portion of an overpayment of tax designated
under paragraph (1) 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.
``(5) Termination.--This subsection shall not apply to any
taxable year beginning after December 31, 2005.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2001.
Subtitle G--Additional Incentives
SEC. 171. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE
NATIONAL HEALTH SERVICE CORPS SCHOLARSHIP
PROGRAM AND THE F. EDWARD HEBERT ARMED FORCES
HEALTH PROFESSIONS SCHOLARSHIP AND FINANCIAL
ASSISTANCE PROGRAM.
(a) In General.--Section 117(c) (relating to the exclusion
from gross income amounts received as a qualified
scholarship) is amended--
(1) by striking ``Subsections (a)'' and inserting the
following:
``(1) In general.--Except as provided in paragraph (2),
subsections (a)'', and
(2) by adding at the end the following new paragraph:
``(2) Exceptions.--Paragraph (1) shall not apply to any
amount received by an individual under--
``(A) the National Health Service Corps Scholarship Program
under section 338A(g)(1)(A) of the Public Health Service Act,
or
``(B) the Armed Forces Health Professions Scholarship and
Financial Assistance program under subchapter I of chapter
105 of title 10, United States Code.''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to amounts received in taxable years beginning
after December 31, 1993.
SEC. 172. EXTENSION OF ENHANCED DEDUCTION FOR CORPORATE
DONATIONS OF COMPUTER TECHNOLOGY.
(a) Expansion of Computer Technology Donations to Public
Libraries.--
(1) In general.--Paragraph (6) of section 170(e) (relating
to special rule for contributions of computer technology and
equipment for elementary or secondary school purposes) is
amended by striking ``qualified elementary or secondary
educational contribution'' each place it occurs in the
headings and text and inserting ``qualified computer
contribution''.
(2) Expansion of eligible donees.--Clause (i) of section
170(e)(6)(B) (relating to qualified elementary or secondary
educational contribution) is amended by striking ``or'' at
the end of subclause (I), by adding ``or'' at the end of
subclause (II), and by inserting after subclause (II) the
following new subclause:
``(III) a public library (within the meaning of section
213(2)(A) of the Library Services and Technology Act (20
U.S.C. 9122(2)(A)), as in effect on the date of the enactment
of the Community Renewal and New Markets Act of 2000,
established and maintained by an entity described in
subsection (c)(1),''.
(b) Conforming Amendments.--
(1) Section 170(e)(6)(B)(iv) is amended by striking ``in
any grades of the K-12''.
(2) The heading of paragraph (6) of section 170(e) is
amended by striking ``elementary or secondary school
purposes'' and inserting ``educational purposes''.
(c) Extension of Deduction.--Section 170(e)(6)(F) (relating
to termination) is amended by striking ``December 31, 2000''
and inserting ``December 31, 2003''.
(d) Effective Date.--The amendments made by this section
shall apply to contributions made on and after the date of
the enactment of this Act.
SEC. 173. EXTENSION OF ADOPTION TAX CREDIT.
Section 23(d)(2)(B) (defining eligible child) is amended by
striking ``2001'' and inserting ``2003''.
SEC. 174. TAX TREATMENT OF ALASKA NATIVE SETTLEMENT TRUSTS.
(a) Treatment of Alaska Native Settlement Trusts.--Subpart
A of part I of subchapter J of chapter 1 (relating to general
rules for taxation of trusts and estates) is amended by
adding at the end the following new section:
``SEC. 646. TAX TREATMENT OF ALASKA NATIVE SETTLEMENT TRUSTS.
``(a) In General.--Except as otherwise provided in this
section, the provisions of this subchapter and section 1(e)
shall apply to all Settlement Trusts.
``(b) Taxation of Income of Trust.--Except as provided in
subsection (f)(1)(B)(ii)--
``(1) In general.--The amount of tax imposed on an electing
Settlement Trust under section 1(e) shall be determined using
the rate of 15 percent.
``(2) Capital gain.--In the case of an electing Settlement
Trust with a net capital gain for the taxable year, a tax is
imposed on such gain at the rate of tax which would apply to
such gain if the taxpayer were subject to a tax on ordinary
income at a rate of 15 percent.
``(c) One Time Election.--
``(1) In general.--A Settlement Trust may elect to have the
provisions of this section apply to the trust and its
beneficiaries.
``(2) Time and method of election.--An election under
paragraph (1) shall be made by the trustee of such trust--
``(A) on or before the due date (including extensions) for
filing the Settlement Trust's return of tax for the first
taxable year of such trust ending after the date of the
enactment of this section, and
``(B) by attaching to such return of tax a statement
specifically providing for such election.
``(3) Period election in effect.--Except as provided in
subsection (f), an election under this subsection--
``(A) shall apply to the first taxable year described in
paragraph (2)(A) and all subsequent taxable years, and
[[Page S9714]]
``(B) may not be revoked once it is made.
``(d) Contributions to Trust.--
``(1) Beneficiaries of electing trust not taxed on
contributions.--In the case of an electing Settlement Trust,
no amount shall be includible in gross income of a
beneficiary of such trust by reason of a contribution to such
trust made during the taxable year.
``(2) Earnings and profits.--The earnings and profits of
the sponsoring Native Corporation of a Settlement Trust shall
not be reduced on account of any contribution to such
Settlement Trust.
``(e) Tax Treatment of Distributions to Beneficiaries.--
Amounts distributed by an electing Settlement Trust during
any taxable year shall be considered as having the following
characteristics in the hands of the recipient beneficiary:
``(1) First, as amounts excludable from gross income for
the taxable year to the extent of the taxable income of such
trust for such taxable year (decreased by any income tax paid
by the trust with respect to the income) plus any amount
excluded from gross income of the trust under section 103.
``(2) Second, as amounts excludable from gross income to
the extent of the amount described in paragraph (1) for all
taxable years for which an election was in effect under
subsection (c) with respect to the trust, and not previously
taken into account under paragraph (1).
``(3) Third, for purposes of this title other than
subsections (b) and (d) of section 301 and section 311(b), as
amounts distributed by the sponsoring Native Corporation with
respect to its stock (within the meaning of section 301(a))
during such taxable year and taxable to the recipient
beneficiary as amounts described in section 301(c)(1), to the
extent of current and accumulated earnings and profits of the
sponsoring Native Corporation as of the close of such taxable
year after proper adjustment is made for all distributions
made by the sponsoring Native Corporation during such taxable
year.
``(4) Fourth, as amounts distributed by the trust in excess
of the distributable net income of such trust for such
taxable year.
``(f) Special Rules Where Transfer Restrictions Modified.--
``(1) Transfer of beneficial interests.--If, at any time, a
beneficial interest in an electing Settlement Trust may be
disposed of to a person in a manner which would not be
permitted by section 7(h) of the Alaska Native Claims
Settlement Act (43 U.S.C. 1606(h)) if the interest were
Settlement Common Stock--
``(A) no election may be made under subsection (c) with
respect to such trust, and
``(B) if such an election is in effect as of such time--
``(i) such election shall cease to apply as of the first
day of the taxable year in which such disposition is first
permitted,
``(ii) the provisions of this section shall not apply to
such trust for such taxable year and all taxable years
thereafter, and
``(iii) the distributable net income of such trust shall be
increased by the current and accumulated earnings and profits
of the sponsoring Native Corporation as of the close of such
taxable year after proper adjustment is made for all
distributions made by the sponsoring Native Corporation
during such taxable year.
In no event shall the increase under clause (iii) exceed the
fair market value of the trust's assets as of the date the
beneficial interest of the trust first becomes disposable.
The earnings and profits of the sponsoring Native Corporation
shall be adjusted as of the last day of such taxable year by
the amount of earnings and profits so included in the
distributable net income of the trust.
``(2) Stock in Corporation.--If--
``(A) the Settlement Common Stock in the sponsoring Native
Corporation may be disposed of to a person in any manner not
permitted by section 7(h) of the Alaska Native Claims
Settlement Act (43 U.S.C. 1606(h)), and
``(B) at any time after such disposition of stock is first
permitted, such corporation transfers assets to a Settlement
Trust,
paragraph (1)(B) shall be applied to such trust on and after
the date of the transfer in the same manner as if the trust
permitted dispositions of beneficial interests in the trust
in a manner not permitted by such section 7(h).
``(3) Certain distributions.--For purposes of this section,
the surrender of an interest in a Native Corporation or an
electing Settlement Trust in order to accomplish the whole or
partial redemption of the interest of a shareholder or
beneficiary in such corporation or trust, or to accomplish
the whole or partial liquidation of such corporation or
trust, shall be deemed to be a disposition permitted by
section 7(h) of the Alaska Native Claims Settlement Act (43
U.S.C. 1606(h)).
``(g) Taxable Income.-- For purposes of this title, the
taxable income of an electing Settlement Trust shall be
determined under section 641(b) without regard to any
deduction under section 651 or 661.
``(h) Definitions.--For purposes of this section--
``(1) Electing settlement trust.--The term `electing
Settlement Trust' means a Settlement Trust which has made the
election, effective for the taxable year, described in
subsection (c).
``(2) Native corporation.--The term `Native Corporation'
has the meaning given such term by section 3(m) of the Alaska
Native Claims Settlement Act (43 U.S.C. 1602(m)).
``(3) Settlement common stock.--The term `Settlement Common
Stock' has the meaning given such term by section 3(p) of the
Alaska Native Claims Settlement Act (43 U.S.C. 1602(p)).
``(4) Settlement trust.--The term `Settlement Trust' has
the meaning given such term by section 3(t) of the Alaska
Native Claims Settlement Act (43 U.S.C. 1602(t)).
``(5) Sponsoring native corporation.--The term `sponsoring
Native Corporation' means the Native Corporation which
transfers assets to an electing Settlement Trust.
``(i) Cross Reference.--
``For information required with respect to electing Settlement Trusts
and sponsoring Native Corporations, see section 6039H.''
(b) Reporting.--Subpart A of part III of subchapter A of
chapter 61 of subtitle F (relating to information concerning
persons subject to special provisions) is amended by
inserting after section 6039G the following new section:
``SEC. 6039H. INFORMATION WITH RESPECT TO ALASKA NATIVE
SETTLEMENT TRUSTS AND SPONSORING NATIVE
CORPORATIONS.
``(a) Requirement.--The fiduciary of an electing Settlement
Trust (as defined in section 646(h)(1)) shall include with
the return of income of the trust a statement containing the
information required under subsection (c).
``(b) Application With Other Requirements.--The filing of
any statement under this section shall be in lieu of the
reporting requirement under section 6034A to furnish any
statement to a beneficiary regarding amounts distributed to
such beneficiary (and such other reporting requirements as
the Secretary deems appropriate).
``(c) Required Information.--The information required under
this subsection shall include--
``(1) the amount of distributions made during the taxable
year to each beneficiary,
``(2) the treatment of such distribution under the
applicable provision of section 646, including the amount
that is excludable from the recipient beneficiary's gross
income under section 646, and
``(3) the amount (if any) of any distribution during such
year that is deemed to have been made by the sponsoring
Native Corporation (as defined in section 646(h)(5)).
``(d) Sponsoring Native Corporation.--
``(1) In general.--The electing Settlement Trust shall, on
or before the date on which the statement under subsection
(a) is required to be filed, furnish such statement to the
sponsoring Native Corporation (as so defined).
``(2) Distributees.--The sponsoring Native Corporation
shall furnish each recipient of a distribution described in
section 646(e)(3) a statement containing the amount deemed to
have been distributed to such recipient by such corporation
for the taxable year.''.
(c) Clerical Amendment.--
(1) The table of sections for subpart A of part I of
subchapter J of chapter 1 is amended by adding at the end the
following new item:
``Sec. 646. Electing Alaska Native Settlement Trusts.''.
(2) The table of sections for subpart A of part III of
subchapter A of chapter 61 of subtitle F is amended by
inserting after the item relating to section 6039G the
following new item:
``Sec. 6039H. Information with respect to Alaska Native Settlement
Trusts and sponsoring Native Corporations.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act and to contributions made to electing
Settlement Trusts for such year or any subsequent year.
SEC. 175. TREATMENT OF INDIAN TRIBAL GOVERNMENTS UNDER
FEDERAL UNEMPLOYMENT TAX ACT.
(a) In General.--Section 3306(c)(7) (defining employment)
is amended--
(1) by inserting ``or in the employ of an Indian tribe,''
after ``service performed in the employ of a State, or any
political subdivision thereof,''; and
(2) by inserting ``or Indian tribes'' after ``wholly owned
by one or more States or political subdivisions''.
(b) Payments in Lieu of Contributions.--Section 3309
(relating to State law coverage of services performed for
nonprofit organizations or governmental entities) is
amended--
(1) in subsection (a)(2) by inserting ``, including an
Indian tribe,'' after ``the State law shall provide that a
governmental entity'';
(2) in subsection (b)(3)(B) by inserting ``, or of an
Indian tribe'' after ``of a State or political subdivision
thereof'';
(3) in subsection (b)(3)(E) by inserting ``or tribal''
after ``the State''; and
(4) in subsection (b)(5) by inserting ``or of an Indian
tribe'' after ``an agency of a State or political subdivision
thereof''.
(c) State Law Coverage.--Section 3309 (relating to State
law coverage of services performed for nonprofit
organizations or governmental entities) is amended by adding
at the end the following new subsection:
``(d) Election by Indian Tribe.--The State law shall
provide that an Indian tribe may make contributions for
employment as if the employment is within the meaning of
section
[[Page S9715]]
3306 or make payments in lieu of contributions under this
section, and shall provide that an Indian tribe may make
separate elections for itself and each subdivision,
subsidiary, or business enterprise wholly owned by such
Indian tribe. State law may require a tribe to post a payment
bond or take other reasonable measures to assure the making
of payments in lieu of contributions under this section.
Notwithstanding the requirements of section 3306(a)(6), if,
within 90 days of having received a notice of delinquency, a
tribe fails to made contributions, payments in lieu of
contributions, or payment of penalties or interest (at
amounts or rates comparable to those applied to all other
employers covered under the State law) assessed with respect
to such failure, or if the tribe fails to post a required
payment bond, then service for the tribe shall not be
excepted from employment under section 3306(c)(7) until any
such failure is corrected. This subsection shall apply to an
Indian tribe within the meaning of section 4(e) of the Indian
Self-Determination and Education Assistance Act (25 U.S.C.
450b(e)).''.
(d) Definitions.--Section 3306 (relating to definitions) is
amended by adding at the end the following new subsection:
``(u) Indian Tribe.--For purposes of this chapter, the term
`Indian tribe' has the meaning given to such term by section
4(e) of the Indian Self-Determination and Education
Assistance Act (25 U.S.C. 450b(e)), and includes any
subdivision, subsidiary, or business enterprise wholly owned
by such an Indian tribe.''.
(e) Effective Date; Transition Rule.--
(1) Effective date.--The amendments made by this section
shall apply to service performed on or after the date of the
enactment of this Act.
(2) Transition rule.--For purposes of the Federal
Unemployment Tax Act, service performed in the employ of an
Indian tribe (as defined in section 3306(u) of the Internal
Revenue Code of 1986 (as added by this section)) shall not be
treated as employment (within the meaning of section 3306 of
such Code) if--
(A) it is service which is performed before the date of the
enactment of this Act and with respect to which the tax
imposed under the Federal Unemployment Tax Act has not been
paid, and
(B) such Indian tribe reimburses a State unemployment fund
for unemployment benefits paid for service attributable to
such tribe for such period.
SEC. 176. INCREASE IN SOCIAL SERVICES BLOCK GRANT FOR FY
2001.
(a) In General.--Section 2003(c) of the Social Security Act
(42 U.S.C. 1397b(c)) is amended--
(1) in paragraph (10), by striking ``and'' at the end;
(2) in paragraph (11), by striking ``2001'' and inserting
``2002'';
(3) by redesignating paragraph (11) (as so amended) as
paragraph (12); and
(4) by inserting after paragraph (10), the following new
paragraph:
``(11) $2,400,000,000 for the fiscal year 2001; and''.
(b) Effective Date.--The amendments made by subsection (a)
take effect October 1, 2000.
TITLE II--TAX INCENTIVES FOR AFFORDABLE HOUSING
Subtitle A--Low-Income Housing Credit
SEC. 201. MODIFICATION OF STATE CEILING ON LOW-INCOME HOUSING
CREDIT.
(a) In General.--Clauses (i) and (ii) of section
42(h)(3)(C) (relating to State housing credit ceiling) are
amended to read as follows:
``(i) the unused State housing credit ceiling (if any) of
such State for the preceding calendar year,
``(ii) the greater of--
``(I) $1.75 multiplied by the State population, or
``(II) $2,000,000,''.
(b) Adjustment of State Ceiling for Increases in Cost-of-
Living.--Paragraph (3) of section 42(h) (relating to housing
credit dollar amount for agencies) is amended by adding at
the end the following new subparagraph:
``(H) Cost-of-living adjustment.--In the case of a calendar
year after 2001, each of the dollar amounts contained in
subparagraph (C)(ii) shall be increased by an amount equal
to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year by substituting
`calendar year 2000' for `calendar year 1992' in subparagraph
(B) thereof.
If any increase determined under the preceding sentence is
not a multiple of 5 cents ($5,000 in the case of the dollar
amount in subparagraph (C)(ii)(II)), such increase shall be
rounded to the nearest multiple thereof.''.
(c) Conforming Amendments.--
(1) Section 42(h)(3)(C), as amended by subsection (a), is
amended--
(A) by striking ``clause (ii)'' in the matter following
clause (iv) and inserting ``clause (i)'', and
(B) by striking ``clauses (i)'' in the matter following
clause (iv) and inserting ``clauses (ii)''.
(2) Section 42(h)(3)(D)(ii) is amended--
(A) by striking ``subparagraph (C)(ii)'' and inserting
``subparagraph (C)(i)'', and
(B) by striking ``clauses (i)'' in subclause (II) and
inserting ``clauses (ii)''.
(d) Effective Date.--The amendments made by this section
shall apply to calendar years after 2000.
SEC. 202. MODIFICATION TO RULES RELATING TO BASIS OF BUILDING
WHICH IS ELIGIBLE FOR CREDIT.
(a) Certain Native American Housing Assistance Disregarded
in Determining Whether Building Is Federally Subsidized for
Purposes of the Low-Income Housing Credit.--Subparagraph (E)
of section 42(i)(2) (relating to determination of whether
building is federally subsidized) is amended--
(1) in clause (i), by inserting ``or the Native American
Housing Assistance and Self-Determination Act of 1996 (25
U.S.C. 4101 et seq.) (as in effect on October 1, 1997)''
after ``this subparagraph)'', and
(2) in the subparagraph heading, by inserting ``or native
american housing assistance'' after ``home assistance''.
(b) Effective Date.--The amendments made by this section
shall apply to--
(1) housing credit dollar amounts allocated after December
31, 2000, and
(2) buildings placed in service after such date to the
extent paragraph (1) of section 42(h) of the Internal Revenue
Code of 1986 does not apply to any building by reason of
paragraph (4) thereof, but only with respect to bonds issued
after such date.
Subtitle B--Historic Homes
SEC. 211. TAX CREDIT FOR RENOVATING HISTORIC HOMES.
(a) In General.--Subpart A of part IV of subchapter A of
chapter 1 (relating to nonrefundable personal credits) is
amended by inserting after section 25A the following new
section:
``SEC. 25B. HISTORIC HOMEOWNERSHIP REHABILITATION CREDIT.
``(a) General Rule.--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 20 percent of
the qualified rehabilitation expenditures made by the
taxpayer with respect to a qualified historic home.
``(b) Dollar Limitation.--The credit allowed by subsection
(a) with respect to any residence of a taxpayer shall not
exceed $20,000 ($10,000 in the case of a married individual
filing a separate return).
``(c) Carryforward of Credit Unused by Reason of Limitation
Based on Tax Liability.--If the credit allowable under
subsection (a) for any taxable year exceeds the limitation
imposed by section 26(a) for such taxable year reduced by the
sum of the credits allowable under this subpart (other than
this section), such excess shall be carried to the succeeding
taxable year (but not for more than 10 taxable years
succeeding the first taxable year in which the credit under
this section is allowed to the taxpayer) and added to the
credit allowable under subsection (a) for such succeeding
taxable year.
``(d) Qualified Rehabilitation Expenditure.--For purposes
of this section--
``(1) In general.--The term `qualified rehabilitation
expenditure' means any amount properly chargeable to capital
account--
``(A) in connection with the certified rehabilitation of a
qualified historic home, and
``(B) for property for which depreciation would be
allowable under section 168 if the qualified historic home
were used in a trade or business.
``(2) Certain expenditures not included.--
``(A) Exterior.--Such term shall not include any
expenditure in connection with the rehabilitation of a
building unless at least 5 percent of the total expenditures
made in the rehabilitation process are allocable to the
rehabilitation of the exterior of such building.
``(B) Other rules to apply.--Rules similar to the rules of
clauses (ii) and (iii) of section 47(c)(2)(B) shall apply.
``(3) Mixed use or multifamily building.--If only a portion
of a building is used as the principal residence of the
taxpayer, only qualified rehabilitation expenditures which
are properly allocable to such portion shall be taken into
account under this section.
``(e) Certified Rehabilitation.--For purposes of this
section--
``(1) In general.--Except as otherwise provided in this
subsection, the term `certified rehabilitation' has the
meaning given such term by section 47(c)(2)(C).
``(2) Factors to be considered in the case of targeted area
residences, etc.--
``(A) In general.--For purposes of applying section
47(c)(2)(C) under this section with respect to the
rehabilitation of a building to which this paragraph applies,
consideration shall be given to--
``(i) the feasibility of preserving existing architectural
and design elements of the interior of such building,
``(ii) the risk of further deterioration or demolition of
such building in the event that certification is denied
because of the failure to preserve such interior elements,
and
``(iii) the effects of such deterioration or demolition on
neighboring historic properties.
``(B) Buildings to which this paragraph applies.--This
paragraph shall apply with respect to any building--
``(i) any part of which is a targeted area residence within
the meaning of section 143(j)(1), or
``(ii) which is located within an enterprise community or
empowerment zone as designated under section 1391,
but shall not apply with respect to any building which is
listed in the National Register.
``(3) Approved state program.--The term `certified
rehabilitation' includes a certification made by--
[[Page S9716]]
``(A) a State Historic Preservation Officer who administers
a State Historic Preservation Program approved by the
Secretary of the Interior pursuant to section 101(b)(1) of
the National Historic Preservation Act, as in effect on July
21, 1999, or
``(B) a local government, certified pursuant to section
101(c)(1) of the National Historic Preservation Act, as in
effect on July 21, 1999, and authorized by a State Historic
Preservation Officer, or the Secretary of the Interior where
there is no approved State program),
subject to such terms and conditions as may be specified by
the Secretary of the Interior for the rehabilitation of
buildings within the jurisdiction of such officer (or local
government) for purposes of this section.
``(f) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualified historic home.--The term `qualified
historic home' means a certified historic structure--
``(A) which has been substantially rehabilitated, and
``(B) which (or any portion of which)--
``(i) is owned by the taxpayer, and
``(ii) is used (or will, within a reasonable period, be
used) by such taxpayer as his principal residence.
``(2) Substantially rehabilitated.--The term `substantially
rehabilitated' has the meaning given such term by section
47(c)(1)(C); except that, in the case of any building
described in subsection (e)(2), clause (i)(I) thereof shall
not apply.
``(3) Principal residence.--The term `principal residence'
has the same meaning as when used in section 121.
``(4) Certified historic structure.--
``(A) In general.--The term `certified historic structure'
means any building (and its structural components) which--
``(i) is listed in the National Register, or
``(ii) is located in a registered historic district (as
defined in section 47(c)(3)(B)) within which only qualified
census tracts (or portions thereof) are located, and is
certified by the Secretary of the Interior to the Secretary
as being of historic significance to the district.
``(B) Certain structures included.--Such term includes any
building (and its structural components) which is designated
as being of historic significance under a statute of a State
or local government, if such statute is certified by the
Secretary of the Interior to the Secretary as containing
criteria which will substantially achieve the purpose of
preserving and rehabilitating buildings of historic
significance.
``(C) Qualified census tracts.--For purposes of
subparagraph (A)(ii)--
``(i) In general.--The term `qualified census tract' means
a census tract in which the median family income is less than
twice the statewide median family income.
``(ii) Data used.--The determination under clause (i) shall
be made on the basis of the most recent decennial census for
which data are available.
``(5) Rehabilitation not complete before certification.--A
rehabilitation shall not be treated as complete before the
date of the certification referred to in subsection (e).
``(6) Lessees.--A taxpayer who leases his principal
residence shall, for purposes of this section, be treated as
the owner thereof if the remaining term of the lease (as of
the date determined under regulations prescribed by the
Secretary) is not less than such minimum period as the
regulations require.
``(7) Tenant-stockholder in cooperative housing
corporation.--If the taxpayer holds stock as a tenant-
stockholder (as defined in section 216) in a cooperative
housing corporation (as defined in such section), such
stockholder shall be treated as owning the house or apartment
which the taxpayer is entitled to occupy as such stockholder.
``(8) Allocation of expenditures relating to exterior of
building containing cooperative or condominium units.--The
percentage of the total expenditures made in the
rehabilitation of a building containing cooperative or
condominium residential units allocated to the rehabilitation
of the exterior of the building shall be attributed
proportionately to each cooperative or condominium
residential unit in such building for which a credit under
this section is claimed.
``(g) When Expenditures Taken Into Account.--In the case of
a building other than a building to which subsection (h)
applies, qualified rehabilitation expenditures shall be
treated for purposes of this section as made on the date the
rehabilitation is completed.
``(h) Allowance of Credit for Purchase of Rehabilitated
Historic Home.--
``(1) In general.--In the case of a qualified purchased
historic home, the taxpayer shall be treated as having made
(on the date of purchase) the qualified rehabilitation
expenditures made by the seller of such home. For purposes of
the preceding sentence, expenditures made by the seller shall
be deemed to be qualified rehabilitation expenditures if such
expenditures, if made by the purchaser, would be qualified
rehabilitation expenditures.
``(2) Qualified purchased historic home.--For purposes of
this subsection, the term `qualified purchased historic home'
means any substantially rehabilitated certified historic
structure purchased by the taxpayer if--
``(A) the taxpayer is the first purchaser of such structure
after the date rehabilitation is completed, and the purchase
occurs within 5 years after such date,
``(B) the structure (or a portion thereof) will, within a
reasonable period, be the principal residence of the
taxpayer,
``(C) no credit was allowed to the seller under this
section or section 47 with respect to such rehabilitation,
and
``(D) the taxpayer is furnished with such information as
the Secretary determines is necessary to determine the credit
under this subsection.
``(i) Historic Rehabilitation Mortgage Credit
Certificate.--
``(1) In general.--The taxpayer may elect, in lieu of the
credit otherwise allowable under this section, to receive a
historic rehabilitation mortgage credit certificate. An
election under this paragraph shall be made--
``(A) in the case of a building to which subsection (h)
applies, at the time of purchase, or
``(B) in any other case, at the time rehabilitation is
completed.
``(2) Historic rehabilitation mortgage credit
certificate.--For purposes of this subsection, the term
`historic rehabilitation mortgage credit certificate' means a
certificate--
``(A) issued to the taxpayer, in accordance with procedures
prescribed by the Secretary, with respect to a certified
rehabilitation,
``(B) the face amount of which shall be equal to the credit
which would (but for this subsection) be allowable under
subsection (a) to the taxpayer with respect to such
rehabilitation,
``(C) which may only be transferred by the taxpayer to a
lending institution (including a non-depository institution)
in connection with a loan--
``(i) that is secured by the building with respect to which
the credit relates, and
``(ii) the proceeds of which may not be used for any
purpose other than the acquisition or rehabilitation of such
building, and
``(D) in exchange for which such lending institution
provides the taxpayer--
``(i) a reduction in the rate of interest on the loan which
results in interest payment reductions which are
substantially equivalent on a present value basis to the face
amount of such certificate, or
``(ii) if the taxpayer so elects with respect to a
specified amount of the face amount of such a certificate
relating to a building--
``(I) which is a targeted area residence within the meaning
of section 143(j)(1), or
``(II) which is located in an enterprise community or
empowerment zone as designated under section 1391,
a payment which is substantially equivalent to such specified
amount to be used to reduce the taxpayer's cost of purchasing
the building (and only the remainder of such face amount
shall be taken into account under clause (i)).
``(3) Method of discounting.--The present value under
paragraph (2)(D)(i) shall be determined--
``(A) for a period equal to the term of the loan referred
to in subparagraph (D)(i),
``(B) by using the convention that any payment on such loan
in any taxable year within such period is deemed to have been
made on the last day of such taxable year,
``(C) by using a discount rate equal to 65 percent of the
average of the annual Federal mid-term rate and the annual
Federal long-term rate applicable under section 1274(d)(1) to
the month in which the taxpayer makes an election under
paragraph (1) and compounded annually, and
``(D) by assuming that the credit allowable under this
section for any year is received on the last day of such
year.
``(4) Use of certificate by lender.--The amount of the
credit specified in the certificate shall be allowed to the
lender only to offset the regular tax (as defined in section
55(c)) of such lender. The lender may carry forward all
unused amounts under this subsection until exhausted.
``(5) Historic rehabilitation mortgage credit certificate
not treated as taxable income.--Notwithstanding any other
provision of law, no benefit accruing to the taxpayer through
the use of an historic rehabilitation mortgage credit
certificate shall be treated as taxable income for purposes
of this title.
``(j) Recapture.--
``(1) In general.--If, before the end of the 5-year period
beginning on the date on which the rehabilitation of the
building is completed (or, if subsection (h) applies, the
date of purchase of such building by the taxpayer, or, if
subsection (i) applies, the date of the loan)--
``(A) the taxpayer disposes of such taxpayer's interest in
such building, or
``(B) such building ceases to be used as the principal
residence of the taxpayer,
the taxpayer's tax imposed by this chapter for the taxable
year in which such disposition or cessation occurs shall be
increased by the recapture percentage of the credit allowed
under this section for all prior taxable years with respect
to such rehabilitation.
``(2) Recapture percentage.--For purposes of paragraph (1),
the recapture percentage shall be determined in accordance
with the following table:
``If the disposition or cessation occurs wThe recapture percentage is--
(i) One full year after the taxpayer becomes entitled to the 100 it..
(ii) One full year after the close of the period described in clause
(i).........................................................80 ....
[[Page S9717]]
(iii) One full year after the close of the period described in clause
(ii)........................................................60 ....
(iv) One full year after the close of the period described in clause
(iii).......................................................40 ....
(v) One full year after the close of the period described in clause
(iv)........................................................20.....
``(k) Basis Adjustments.--For purposes of this subtitle, if
a credit is allowed under this section for any expenditure
with respect to any property (including any purchase under
subsection (h) and any transfer under subsection (i)), the
increase in the basis of such property which would (but for
this subsection) result from such expenditure shall be
reduced by the amount of the credit so allowed.
``(l) Denial of Double Benefit.--No credit shall be allowed
under this section for any amount for which credit is allowed
under section 47.
``(m) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out the purposes
of this section, including regulations where less than all of
a building is used as a principal residence and where more
than 1 taxpayer use the same dwelling unit as their principal
residence.''.
(b) Conforming Amendments.--
(1) Section 23(c) is amended by striking ``section 1400C''
and inserting ``sections 25B and 1400C''.
(2) Section 25(e)(1)(C) is amended by striking ``23'' and
inserting ``23, 25B,''.
(3) Section 1016(a) is amended by striking ``and'' at the
end of paragraph (26), by striking the period at the end of
paragraph (27) and inserting ``, and'', and by adding at the
end the following new item:
``(28) to the extent provided in section 25B(k).''.
(4) Section 1400C(d) is amended by inserting ``and section
25B'' after ``this section''.
(c) Clerical Amendment.--The table of sections for subpart
A of part IV of subchapter A of chapter 1 is amended by
inserting after the item relating to section 25A the
following new item:
``Sec. 25B. Historic homeownership rehabilitation credit.''.
(d) Effective Date.--The amendments made by this section
shall apply to expenses paid or incurred in taxable years
beginning after December 31, 2001.
Subtitle C--Forgiven Mortgage Obligations
SEC. 221. EXCLUSION FROM GROSS INCOME FOR CERTAIN FORGIVEN
MORTGAGE OBLIGATIONS.
(a) In General.--Paragraph (1) of section 108(a) (relating
to exclusion from gross income) is amended by striking ``or''
at the end of both subparagraphs (A) and (C), by striking the
period at the end of subparagraph (D) and inserting ``, or'',
and by inserting after subparagraph (D) the following new
subparagraph:
``(E) in the case of an individual, the indebtedness
discharged is qualified residential indebtedness.''.
(b) Qualified Residential Indebtedness Shortfall.--Section
108 (relating to discharge of indebtedness) is amended by
adding at the end the following new subsection:
``(h) Qualified Residential Indebtedness.--
``(1) Limitations.--The amount excluded under subparagraph
(E) of subsection (a)(1) with respect to any qualified
residential indebtedness shall not exceed the excess (if any)
of--
``(A) the outstanding principal amount of such indebtedness
(immediately before the discharge), over
``(B) the sum of--
``(i) the amount realized from the sale of the real
property securing such indebtedness reduced by the cost of
such sale, and
``(ii) the outstanding principal amount of any other
indebtedness secured by such property.
``(2) Qualified residential indebtedness.--
``(A) In general.--The term `qualified residential
indebtedness' means indebtedness which--
``(i) was incurred or assumed by the taxpayer in connection
with real property used as the principal residence of the
taxpayer (within the meaning of section 121) and is secured
by such real property,
``(ii) is incurred or assumed to acquire, construct,
reconstruct, or substantially improve such real property, and
``(iii) with respect to which such taxpayer makes an
election to have this paragraph apply.
``(B) Refinanced indebtedness.--Such term shall include
indebtedness resulting from the refinancing of indebtedness
under subparagraph (A)(ii), but only to the extent the
refinanced indebtedness does not exceed the amount of the
indebtedness being refinanced.
``(C) Exceptions.--Such term shall not include qualified
farm indebtedness or qualified real property business
indebtedness.''.
(c) Conforming Amendments.--
(1) Paragraph (2) of section 108(a) is amended--
(A) by striking ``and (D)'' in subparagraph (A) and
inserting ``(D), and (E)'', and
(B) by amending subparagraph (B) to read as follows:
``(B) Insolvency exclusion takes precedence over qualified
farm exclusion; qualified real property business exclusion;
and qualified residential shortfall exclusion.--Subparagraphs
(C), (D), and (E) of paragraph (1) shall not apply to a
discharge to the extent the taxpayer is insolvent.''.
(2) Paragraph (1) of section 108(b) is amended by striking
``or (C)'' and inserting ``(C), or (E)''.
(3) Subsection (c) of section 121 is amended by adding at
the end the following new paragraph:
``(3) Special rule relating to discharge of indebtedness.--
The amount of gain which (but for this paragraph) would be
excluded from gross income under subsection (a) with respect
to a principal residence shall be reduced by the amount
excluded from gross income under section 108(a)(1)(E) with
respect to such residence.''.
(d) Effective Date.--The amendments made by this section
shall apply to discharges after the date of the enactment of
this Act.
Subtitle D--Mortgage Revenue Bonds
SEC. 231. INCREASE IN PURCHASE PRICE LIMITATION UNDER
MORTGAGE SUBSIDY BOND RULES BASED ON MEDIAN
FAMILY INCOME.
(a) In General.--Paragraph (1) of section 143(e) (relating
to purchase price requirement) is amended to read as follows:
``(1) In general.--An issue meets the requirements of this
subsection only if the acquisition cost of each residence the
owner-financing of which is provided under the issue does not
exceed the greater of--
``(A) 90 percent of the average area purchase price
applicable to the residence, or
``(B) 3.5 times the applicable median family income (as
defined in subsection (f)(4)).''.
(b) Effective Date.--The amendment made by this section
shall apply to obligations issued after the date of the
enactment of this Act.
SEC. 232. MORTGAGE FINANCING FOR RESIDENCES LOCATED IN
PRESIDENTIALLY DECLARED DISASTER AREAS.
(a) In General.--Paragraph (11) of section 143(k) of the
Internal Revenue Code of 1986 is amended to read as follows:
``(11) Special rules for residences located in disaster
areas.--
``(A) Home improvement loans for repairs.--In the case of
financing provided by a qualified home improvement loan for
the repair of damage to a residence located in a disaster
area which was sustained as a result of the disaster--
``(i) the limitation under paragraph (4) shall be increased
(but not above $100,000) to the extent such loan is for the
repair of such damage, and
``(ii) subsection (f) (relating to income requirement)
shall be applied as if such residence were a targeted area
residence.
``(B) Purchase of replacement home.--In the case of
financing provided to acquire a residence located in a
disaster area by mortgagors whose prior residence was in such
area and was destroyed or otherwise rendered uninhabitable as
a result of the disaster--
``(i) subsection (d) (relating to 3-year requirement) shall
not apply, and
``(ii) subsections (e) and (f) (relating to purchase price
requirement and income requirement) shall be applied as if
such residence were a targeted area residence.
``(C) Financing must be provided within 2 years after
disaster declaration.--This paragraph shall apply only to
financing provided within 2 years after the date of the
disaster declaration.
``(D) Disaster area.--For purposes of this paragraph, the
term `disaster area' means an area determined by the
President to warrant assistance from the Federal Government
under the Robert T. Stafford Disaster Relief and Emergency
Assistance Act (as in effect on the date of the enactment of
the Taxpayer Relief Act of 1997) and with respect to which
the Federal share of disaster payments exceeds 75 percent.
``(E) Application of paragraph.--This paragraph shall apply
only with respect to bonds issued after December 31, 2000.''.
(b) Effective Date.--The amendment made by this section
shall apply to bonds issued after December 31, 2000.
Subtitle E--Property and Casualty Insurance
SEC. 241. EXEMPTION FROM INCOME TAX FOR STATE-CREATED
ORGANIZATIONS PROVIDING PROPERTY AND CASUALTY
INSURANCE FOR PROPERTY FOR WHICH SUCH COVERAGE
IS OTHERWISE UNAVAILABLE.
(a) In General.--Subsection (c) of section 501 (relating to
exemption from tax on corporations, certain trusts, etc.) is
amended by adding at the end the following new paragraph:
``(28)(A) Any association created before January 1, 1999,
by State law and organized and operated exclusively to
provide property and casualty insurance coverage for property
located within the State for which the State has determined
that coverage in the authorized insurance market is limited
or unavailable at reasonable rates, if--
``(i) no part of the net earnings of which inures to the
benefit of any private shareholder or individual,
``(ii) except as provided in clause (v), no part of the
assets of which may be used for, or diverted to, any purpose
other than--
``(I) to satisfy, in whole or in part, the liability of the
association for, or with respect to, claims made on policies
written by the association,
``(II) to invest in investments authorized by applicable
law,
[[Page S9718]]
``(III) to pay reasonable and necessary administration
expenses in connection with the establishment and operation
of the association and the processing of claims against the
association, or
``(IV) to make remittances pursuant to State law to be used
by the State to provide for the payment of claims on policies
written by the association, purchase reinsurance covering
losses under such policies, or to support governmental
programs to prepare for or mitigate the effects of natural
catastrophic events,
``(iii) the State law governing the association permits the
association to levy assessments on insurance companies
authorized to sell property and casualty insurance in the
State, or on property and casualty insurance policyholders
with insurable interests in property located in the State to
fund deficits of the association, including the creation of
reserves,
``(iv) the plan of operation of the association is subject
to approval by the chief executive officer or other official
of the State, by the State legislature, or both, and
``(v) the assets of the association revert upon dissolution
to the State, the State's designee, or an entity designated
by the State law governing the association, or State law does
not permit the dissolution of the association.
``(B)(i) An entity described in clause (ii) shall be
disregarded as a separate entity and treated as part of the
association described in subparagraph (A) from which it
receives remittances described in clause (ii) if an election
is made within 30 days after the date that such association
is determined to be exempt from tax.
``(ii) An entity is described in this clause if it is an
entity or fund created before January 1, 1999, pursuant to
State law and organized and operated exclusively to receive,
hold, and invest remittances from an association described in
subparagraph (A) and exempt from tax under subsection (a), to
make disbursements to pay claims on insurance contracts
issued by such association, and to make disbursements to
support governmental programs to prepare for or mitigate the
effects of natural catastrophic events.''.
(b) Unrelated Business Taxable Income.--Subsection (a) of
section 512 (relating to unrelated business taxable income)
is amended by adding at the end the following new paragraph:
``(6) Special rule applicable to organizations described in
section 501(c)(28).--In the case of an organization described
in section 501(c)(28), the term `unrelated business taxable
income' means taxable income for a taxable year computed
without the application of section 501(c)(28) if at the end
of the immediately preceding taxable year the organization's
net equity exceeded 15 percent of the total coverage in force
under insurance contracts issued by the organization and
outstanding at the end of such preceding year.''.
(c) Transitional Rule.--No income or gain shall be
recognized by an association as a result of a change in
status to that of an association described by section
501(c)(28) of the Internal Revenue Code of 1986, as amended
by subsection (a).
(d) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2000.
TITLE III--TAX INCENTIVES FOR URBAN AND RURAL INFRASTRUCTURE
SEC. 301. INCREASE IN STATE CEILING ON PRIVATE ACTIVITY
BONDS.
(a) In General.--Paragraphs (1) and (2) of section 146(d)
(relating to State ceiling) are amended to read as follows:
``(1) In general.--The State ceiling applicable to any
State for any calendar year shall be the greater of--
``(A) an amount equal to $75 multiplied by the State
population, or
``(B) $225,000.000.
``(2) Cost-of-living adjustment.--In the case of a calendar
year after 2001, each of the dollar amounts contained in
paragraph (1) shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year by substituting
`calendar year 2000' for `calendar year 1992' in subparagraph
(B) thereof.
If any increase determined under the preceding sentence is
not a multiple of $5 ($5,000 in the case of the dollar amount
in paragraph (1)(B)), such increase shall be rounded to the
nearest multiple thereof.''.
(b) Effective Date.--The amendment made by this section
shall apply to calendar years after 2000.
SEC. 302. MODIFICATIONS TO EXPENSING OF ENVIRONMENTAL
REMEDIATION COSTS.
(a) Expensing Not Limited to Sites in Targeted Areas.--
Subsection (c) of section 198 is amended to read as follows:
``(c) Qualified Contaminated Site.--For purposes of this
section--
``(1) In general.--The term `qualified contaminated site'
means any area--
``(A) which is held by the taxpayer for use in a trade or
business or for the production of income, or which is
property described in section 1221(a)(1) in the hands of the
taxpayer, and
``(B) at or on which there has been a release (or threat of
release) or disposal of any hazardous substance.
``(2) National priorities listed sites not included.--Such
term shall not include any site which is on, or proposed for,
the national priorities list under section 105(a)(8)(B) of
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (as in effect on the date of the
enactment of this section).
``(3) Taxpayer must receive statement from state
environmental agency.--An area shall be treated as a
qualified contaminated site with respect to expenditures paid
or incurred during any taxable year only if the taxpayer
receives a statement from the appropriate agency of the State
in which such area is located that such area meets the
requirement of paragraph (1)(B).
``(4) Appropriate state agency.--For purposes of paragraph
(3), the chief executive officer of each State may, in
consultation with the Administrator of the Environmental
Protection Agency, designate the appropriate State
environmental agency within 60 days of the date of the
enactment of this section. If the chief executive officer of
a State has not designated an appropriate environmental
agency within such 60-day period, the appropriate
environmental agency for such State shall be designated by
the Administrator of the Environmental Protection Agency.''.
(b) Extension of Termination Date.--Subsection (h) of
section 198 is amended by striking ``2001'' and inserting
``2003''.
(c) Effective Date.--The amendments made by this section
shall apply to expenditures paid or incurred after the date
of the enactment of this Act.
SEC. 303. BROADBAND INTERNET ACCESS TAX CREDIT.
(a) In General.--Subpart E of part IV of chapter 1
(relating to rules for computing investment credit) is
amended by inserting after section 48 the following new
section:
``SEC. 48A. BROADBAND CREDIT.
``(a) General Rule.--For purposes of section 46, the
broadband credit for any taxable year is the sum of--
``(1) the current generation broadband credit, plus
``(2) the next generation broadband credit.
``(b) Current Generation Broadband Credit; Next Generation
Broadband Credit.--For purposes of this section--
``(1) Current generation broadband credit.--The current
generation broadband credit for any taxable year is equal to
10 percent of the qualified expenditures incurred with
respect to qualified equipment offering current generation
broadband services to rural subscribers or underserved
subscribers and taken into account with respect to such
taxable year.
``(2) Next generation broadband credit.--The next
generation broadband credit for any taxable year is equal to
20 percent of the qualified expenditures incurred with
respect to qualified equipment offering next generation
broadband services to all rural subscribers, all underserved
subscribers, or any other residential subscribers and taken
into account with respect to such taxable year.
``(c) When Expenditures Taken Into Account.--For purposes
of this section--
``(1) In general.--Qualified expenditures with respect to
qualified equipment shall be taken into account with respect
to the first taxable year in which current generation
broadband services or next generation broadband services are
offered by the taxpayer through such equipment to
subscribers.
``(2) Offer of services.--For purposes of paragraph (1),
the offer of current generation broadband services or next
generation broadband services through qualified equipment
occurs when such class of service is purchased by and
provided to at least 10 percent of the subscribers described
in subsection (b) which such equipment is capable of serving
through the legal or contractual area access rights or
obligations of the taxpayer.
``(d) Special Allocation Rules.--
``(1) Current generation broadband services.--For purposes
of determining the current generation broadband credit under
subsection (a)(1), if the qualified equipment is capable of
serving both the subscribers described under subsection
(b)(1) and other subscribers, the qualified expenditures
shall be multiplied by a fraction--
``(A) the numerator of which is the sum of the total
potential subscriber populations within the rural areas and
the underserved areas which the equipment is capable of
serving, and
``(B) the denominator of which is the total potential
subscriber population of the area which the equipment is
capable of serving.
``(2) Next generation broadband services.--For purposes of
determining the next generation broadband credit under
subsection (a)(2), if the qualified equipment is capable of
serving both the subscribers described under subsection
(b)(2) and other subscribers, the qualified expenditures
shall be multiplied by a fraction--
``(A) the numerator of which is the sum of--
``(i) the total potential subscriber populations within the
rural areas and underserved areas, plus
``(ii) the total potential subscriber population of the
area consisting only of residential subscribers not described
in clause (i),
which the equipment is capable of serving, and
``(B) the denominator of which is the total potential
subscriber population of the area which the equipment is
capable of serving.
``(e) Definitions.--For purposes of this section--
[[Page S9719]]
``(1) Antenna.--The term `antenna' means any device used to
transmit or receive signals through the electromagnetic
spectrum, including satellite equipment.
``(2) Cable operator.--The term `cable operator' has the
meaning given such term by section 602(5) of the
Communications Act of 1934 (47 U.S.C. 522(5)).
``(3) Commercial mobile service carrier.--The term
`commercial mobile service carrier' means any person
authorized to provide commercial mobile radio service as
defined in section 20.3 of title 47, Code of Federal
Regulations.
``(4) Current generation broadband service.--The term
`current generation broadband service' means the transmission
of signals at a rate of at least 1,500,000 bits per second to
the subscriber and at least 200,000 bits per second from the
subscriber.
``(5) Next generation broadband service.--The term `next
generation broadband service' means the transmission of
signals at a rate of at least 22,000,000 bits per second to
the subscriber and at least 10,000,000 bits per second from
the subscriber.
``(6) Nonresidential subscriber.--The term `nonresidential
subscriber' means a person or entity who purchases broadband
services which are delivered to the permanent place of
business of such person or entity.
``(7) Open video system operator.--The term `open video
system operator' means any person authorized to provide
service under section 653 of the Communications Act of 1934
(47 U.S.C. 573).
``(8) Other wireless carrier.--The term `other wireless
carrier' means any person (other than a telecommunications
carrier, commercial mobile service carrier, cable operator,
open video system operator, or satellite carrier) providing
current generation broadband services or next generation
broadband service to subscribers through the radio
transmission of energy.
``(9) Packet switching.--The term `packet switching' means
controlling or routing the path of a digitized transmission
signal which is assembled into packets or cells.
``(10) Qualified equipment.--
``(A) In general.--The term `qualified equipment' means
equipment capable of providing current generation broadband
services or next generation broadband services at any time to
each subscriber who is utilizing such services.
``(B) Only certain investment taken into account.--Except
as provided in subparagraph (C), equipment shall be taken
into account under subparagraph (A) only to the extent it--
``(i) extends from the last point of switching to the
outside of the unit, building, dwelling, or office owned or
leased by a subscriber in the case of a telecommunications
carrier,
``(ii) extends from the customer side of the mobile
telephone switching office to a transmission/receive antenna
(including such antenna) owned or leased by a subscriber in
the case of a commercial mobile service carrier,
``(iii) extends from the customer side of the headend to
the outside of the unit, building, dwelling, or office owned
or leased by a subscriber in the case of a cable operator or
open video system operator, or
``(iv) extends from a transmission/receive antenna
(including such antenna) which transmits and receives signals
to or from multiple subscribers to a transmission/receive
antenna (including such antenna) on the outside of the unit,
building, dwelling, or office owned or leased by a subscriber
in the case of a satellite carrier or other wireless carrier,
unless such other wireless carrier is also a
telecommunications carrier.
``(C) Packet switching equipment.--Packet switching
equipment, regardless of location, shall be taken into
account under subparagraph (A) only if it is deployed in
connection with equipment described in subparagraph (B) and
it is uniquely designed to perform the function of packet
switching for current generation broadband services or next
generation broadband services, but only if such packet
switching is the last in a series of such functions performed
in the transmission of a signal to a subscriber or the first
in a series of such functions performed in the transmission
of a signal from a subscriber.
``(11) Qualified expenditure.--
``(A) In general.--The term `qualified expenditure' means
any amount--
``(i) chargeable to capital account with respect to the
purchase and installation of qualified equipment (including
any upgrades thereto) for which depreciation is allowable
under section 168, and
``(ii) incurred--
``(I) with respect to the provision of current generation
broadband service, after December 31, 2000, and before
January 1, 2004, and
``(II) with respect to the provision of next generation
broadband service, after December 31, 2001, and before
January 1, 2005.
``(B) Certain satellite expenditures excluded.--Such term
shall not include any expenditure with respect to the
launching of any satellite equipment.
``(12) Residential subscriber.--The term `residential
subscriber' means an individual who purchases broadband
services which are delivered to such individual's dwelling.
``(13) Rural subscriber.--
``(A) In general.--The term `rural subscriber' means a
residential subscriber residing in a dwelling located in a
rural area or nonresidential subscriber maintaining a
permanent place of business located in a rural area.
``(B) Rural area.--The term `rural area' means any census
tract which--
``(i) is not within 10 miles of any incorporated or census
designated place containing more than 25,000 people, and
``(ii) is not within a county or county equivalent which
has an overall population density of more than 500 people per
square mile of land.
``(14) Satellite carrier.--The term `satellite carrier'
means any person using the facilities of a satellite or
satellite service licensed by the Federal Communications
Commission and operating in the Fixed-Satellite Service under
part 25 of title 47 of the Code of Federal Regulations or the
Direct Broadcast Satellite Service under part 100 of title 47
of such Code to establish and operate a channel of
communications for point-to-multipoint distribution of
signals, and owning or leasing a capacity or service on a
satellite in order to provide such point-to-multipoint
distribution.
``(15) Subscriber.--The term `subscriber' means a person
who purchases current generation broadband services or next
generation broadband services.
``(16) Telecommunications carrier.--The term
`telecommunications carrier' has the meaning given such term
by section 3(44) of the Communications Act of 1934 (47 U.S.C.
153 (44)), but--
``(A) includes all members of an affiliated group of which
a telecommunications carrier is a member, and
``(B) does not include a commercial mobile service carrier.
``(17) Total potential subscriber population.--The term
`total potential subscriber population' means, with respect
to any area and based on the most recent census data, the
total number of potential residential subscribers residing in
dwellings located in such area and potential nonresidential
subscribers maintaining permanent places of business located
in such area.
``(18) Underserved subscriber.--
``(A) In general.--The term `underserved subscriber' means
a residential subscriber residing in a dwelling located in an
underserved area or nonresidential subscriber maintaining a
permanent place of business located in an underserved area.
``(B) Underserved area.--The term `underserved area' means
any census tract--
``(i) the poverty level of which is at least 30 percent
(based on the most recent census data),
``(ii) the median family income of which does not exceed--
``(I) in the case of a census tract located in a
metropolitan statistical area, 70 percent of the greater of
the metropolitan area median family income or the statewide
median family income, and
``(II) in the case of a census tract located in a
nonmetropolitan statistical area, 70 percent of the
nonmetropolitan statewide median family income, or
``(iii) which is located in an empowerment zone or
enterprise community designated under section 1391.
``(f) Designation of Census Tracts.--The Secretary shall,
not later than 90 days after the date of the enactment of
this section, designate and publish those census tracts
meeting the criteria described in paragraphs (13)(B) and
(18)(B) of subsection (e), and such tracts shall remain so
designated for the period ending with the applicable
termination date described in subsection (e)(11)(A)(ii).''.
(b) Credit To Be Part of Investment Credit.--Section 46
(relating to the amount of 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 broadband credit.''.
(c) Special Rule for Mutual or Cooperative Telephone
Companies.--Section 501(c)(12)(B) (relating to list of exempt
organizations) is amended by striking ``or'' at the end of
clause (iii), by striking the period at the end of clause
(iv) and inserting ``, or'', and by adding at the end the
following new clause:
``(v) from sources not described in subparagraph (A), but
only to the extent such income does not in any year exceed an
amount equal to the credit for qualified expenditures which
would be determined under section 48A for such year if the
mutual or cooperative telephone company was not exempt from
taxation.''.
(d) Conforming Amendment.--The table of sections for
subpart E of part IV of subchapter A of chapter 1 is amended
by inserting after the item relating to section 48 the
following new item:
``Sec. 48A. Broadband credit.''.
(e) Regulatory Matters.--No Federal or State agency or
instrumentality shall adopt regulations or ratemaking
procedures that would have the effect of confiscating any
credit or portion thereof allowed under section 48A of the
Internal Revenue Code of 1986 (as added by this section) or
otherwise subverting the purpose of this section.
(f) Study and Report.--
(1) Sense of congress.--It is the sense of Congress that in
order to maintain competitive neutrality, the credit allowed
under section 48A of the Internal Revenue Code of 1986 (as
added by this section) should be administered in such a
manner so as to ensure that each class of provider receives
the same level of financial incentive to deploy current
generation broadband services and next generation broadband
services.
(2) Study and report.--The Secretary of the Treasury shall,
within 180 days after the
[[Page S9720]]
effective date of this section, study the impact of the
credit allowed under section 48A of the Internal Revenue Code
of 1986 (as added by this section) on the relative
competitiveness of potential classes of providers of current
generation broadband services and next generation broadband
services, and shall report to Congress the findings of such
study, together with any legislative or regulatory proposals
determined to be necessary to ensure that the purposes of
such credit can be furthered without impacting competitive
neutrality among such classes of providers.
(g) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to expenditures
incurred after December 31, 2000.
(2) Special rule.--The amendments made by subsection (c)
shall apply to amounts received after December 31, 2000.
SEC. 304. CREDIT TO HOLDERS OF QUALIFIED AMTRAK BONDS.
(a) In General.--Part IV of subchapter A of chapter 1
(relating to credits against tax) is amended by adding at the
end the following new subpart:
``Subpart H--Nonrefundable Credit for Holders of Qualified Amtrak Bonds
``Sec. 54. Credit to holders of qualified Amtrak bonds.
``SEC. 54. CREDIT TO HOLDERS OF QUALIFIED AMTRAK BONDS.
``(a) Allowance of Credit.--In the case of a taxpayer who
holds a qualified Amtrak bond on a credit allowance date of
such bond which occurs during the taxable year, there shall
be allowed as a credit against the tax imposed by this
chapter for such taxable year an amount equal to the sum of
the credits determined under subsection (b) with respect to
credit allowance dates during such year on which the taxpayer
holds such bond.
``(b) Amount of Credit.--
``(1) In general.--The amount of the credit determined
under this subsection with respect to any credit allowance
date for a qualified Amtrak bond is 25 percent of the annual
credit determined with respect to such bond.
``(2) Annual credit.--The annual credit determined with
respect to any qualified Amtrak bond is the product of--
``(A) the applicable credit rate, multiplied by
``(B) the outstanding face amount of the bond.
``(3) Applicable credit rate.--For purposes of paragraph
(2), the applicable credit rate with respect to an issue is
the rate equal to an average market yield (as of the day
before the date of issuance of the issue) on outstanding
long-term corporate debt obligations (determined under
regulations prescribed by the Secretary).
``(4) Special rule for issuance and redemption.--In the
case of a bond which is issued during the 3-month period
ending on a credit allowance date, the amount of the credit
determined under this subsection with respect to such credit
allowance date shall be a ratable portion of the credit
otherwise determined based on the portion of the 3-month
period during which the bond is outstanding. A similar rule
shall apply when the bond is redeemed.
``(c) Limitation Based on Amount of Tax.--
``(1) In general.--The credit allowed under subsection (a)
for any taxable year shall not exceed the excess of--
``(A) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
``(B) the sum of the credits allowable under this part
(other than this subpart and subpart C).
``(2) Carryover of unused credit.--If the credit allowable
under subsection (a) exceeds the limitation imposed by
paragraph (1) for such taxable year, such excess shall be
carried to the succeeding taxable year and added to the
credit allowable under subsection (a) for such taxable year.
``(d) Qualified Amtrak Bond.--For purposes of this part--
``(1) In general.--The term `qualified Amtrak bond' means
any bond issued as part of an issue if--
``(A) 95 percent or more of the proceeds of such issue
are--
``(i) to be used for any qualified project, or
``(ii) to be pledged to secure payments and other
obligations incurred by the National Railroad Passenger
Corporation in connection with any qualified project,
``(B) the bond is issued by the National Railroad Passenger
Corporation,
``(C) the issuer--
``(i) designates such bond for purposes of this section,
``(ii) certifies that it meets the State contribution
requirement of paragraph (2) with respect to such project,
and
``(iii) certifies that it has obtained the written approval
of the Secretary of Transportation for such project,
``(D) the term of each bond which is part of such issue
does not exceed 20 years, and
``(E) the payment of principal with respect to such bond is
guaranteed by the National Railroad Passenger Corporation.
``(2) State contribution requirement.--
``(A) In general.--For purposes of paragraph (1)(C)(ii),
the State contribution requirement of this paragraph is met
with respect to any qualified project if the National
Railroad Passenger Corporation has a written binding
commitment from 1 or more States to make matching
contributions not later than the date of issuance of the
issue of not less than 20 percent of the cost of the
qualified project.
``(B) Use of state matching contributions.--The matching
contributions described in subparagraph (A) with respect to
each qualified project shall be used--
``(i) in the case of an amount not to exceed 20 percent of
the cost of such project, to redeem bonds which are a part of
the issue with respect to such project, and
``(ii) in the case of any remaining amount, at the election
of the National Railroad Passenger Corporation and the
contributing State--
``(I) to fund the qualified project,
``(II) to redeem such bonds, or
``(III) for the purposes of subclauses (I) and (II).
``(C) State matching contributions may not include federal
funds.--For purposes of this paragraph, State matching
contributions shall not be derived, directly or indirectly,
from Federal funds, including any transfers from the Highway
Trust Fund under section 9503.
``(D) No state contribution requirement for certain
qualified project.--With respect to the qualified project
described in subsection (e)(2)(B), the State contribution
requirement of this paragraph is zero.
``(3) Qualified project.--The term `qualified project'
means--
``(A) the acquisition, financing, or refinancing (as
described in paragraph (1)(A)(ii)) of equipment, rolling
stock, and other capital improvements for the northeast rail
corridor between Washington, D.C. and Boston, Massachusetts
(including the project described in subsection (e)(2)(B)),
``(B) the acquisition, financing, or refinancing (as so
described) of equipment, rolling stock, and other capital
improvements for the improvement of train speeds or safety
(or both) on the high-speed rail corridors designated under
section 104(d)(2) of title 23, United States Code, and
``(C) the acquisition, financing, or refinancing (as so
described) of equipment, rolling stock, and other capital
improvements for other intercity passenger rail corridors,
including station rehabilitation or construction, track or
signal improvements, or the elimination of grade crossings.
``(e) Limitations on Amount of Bonds Designated.--
``(1) In general.--There is a qualified Amtrak bond
limitation for each fiscal year. Such limitation is--
``(A) $1,000,000,000 for each of the fiscal years 2001
through 2010, and
``(B) except as provided in paragraph (5), zero after
fiscal year 2010.
``(2) Bonds for rail corridors.--
``(A) In general.--Not more than $3,000,000,000 of the
limitation under paragraph (1) may be designated for any 1
rail corridor described in subparagraph (A) or (B) of
subsection (d)(3).
``(B) Specific qualified project allocation.--Of the amount
described in subparagraph (A), the Secretary of
Transportation shall allocate $92,000,000 for the acquisition
and installation of platform facilities, performance of
railroad force account work necessary to complete
improvements below street grade, and any other necessary
improvements related to construction at the railroad station
at the James A. Farley Post Office Building in New York City,
New York.
``(3) Bonds for other projects.--Not more than 10 percent
of the limitation under paragraph (1) for any fiscal year may
be allocated to qualified projects described in subsection
(d)(3)(C).
``(4) Bonds for alaska railroad.--The Secretary of
Transportation may allocate to the Alaska Railroad a portion
of the qualified Amtrak limitation for any fiscal year in
order to allow the Alaska Railroad to issue bonds which meet
the requirements of this section for use in financing any
project described in subsection (d)(3)(C). For purposes of
this section, the Alaska Railroad shall be treated in the
same manner as the National Passenger Railroad Corporation.
``(5) Carryover of unused limitation.--If for any fiscal
year--
``(A) the limitation amount under paragraph (1), exceeds
``(B) the amount of bonds issued during such year which are
designated under subsection (d)(1)(C)(i),
the limitation amount under paragraph (1) for the following
fiscal year (through fiscal year 2014) shall be increased by
the amount of such excess.
``(6) Preference for greater state participation.--In
selecting qualified projects for allocation of the qualified
Amtrak bond limitation under this subsection, the Secretary
of Transportation shall give preference to any project with a
State matching contribution rate exceeding 20 percent.
``(f) Other Definitions.--For purposes of this subpart--
``(1) Bond.--The term `bond' includes any obligation.
``(2) Credit allowance date.--The term `credit allowance
date' means--
``(A) March 15,
``(B) June 15,
``(C) September 15, and
``(D) December 15.
Such term includes the last day on which the bond is
outstanding.
``(3) State.--The term `State' includes the District of
Columbia.
``(g) Credit Included in Gross Income.--Gross income
includes the amount of the credit allowed to the taxpayer
under this
[[Page S9721]]
section (determined without regard to subsection (c)) and the
amount so included shall be treated as interest income.
``(h) Special Rules Relating to Arbitrage.--
``(1) In general.--A bond shall not be treated as failing
to meet the requirements of subsection (d)(1) solely by
reason of the fact that proceeds of the issue of which such
bond is a part are invested for a temporary period (but not
more than 36 months) until such proceeds are needed for the
purpose for which such issue was issued.
``(2) Reasonable expectation and binding commitment
requirements.--Paragraph (1) shall apply to an issue only if,
as of the date of issuance, the issuer reasonably expects--
``(A) that at least 95 percent of the proceeds of the issue
will be spent for 1 or more qualified projects within the 3-
year period beginning on such date,
``(B) to incur a binding commitment with a third party to
spend at least 10 percent of the proceeds of the issue, or to
commence preliminary engineering or construction, with
respect to such projects within the 6-month period beginning
on such date, and
``(C) that the remaining proceeds of the issue will be
spent with due diligence with respect to such projects.
``(3) Earnings on proceeds.--Any earnings on proceeds
during the temporary period shall be treated as proceeds of
the issue for purposes of applying subsection (d)(1) and
paragraph (1) of this subsection.
``(i) Use of Trust Account.--
``(1) In general.--The amount of any matching contribution
with respect to a qualified project described in subsection
(d)(2)(B)(i) or (d)(2)(B)(ii)(II) and the temporary period
investment earnings on proceeds of the issue with respect to
such project described in subsection (h)(1), and any earnings
thereon, shall be held in a trust account by a trustee
independent of the National Railroad Passenger Corporation to
be used to redeem bonds which are part of such issue.
``(2) Use of remaining funds in trust account.--Upon the
repayment of the principal of all qualified Amtrak bonds
issued under this section, any remaining funds in the trust
account described in paragraph (1) shall be available to the
trustee described in paragraph (1) to meet any remaining
obligations under any guaranteed investment contract used to
secure earnings sufficient to repay the principal of such
bonds.
``(j) Other Special Rules.--
``(1) Partnership; s corporation; and other pass-thru
entities.--Under regulations prescribed by the Secretary, in
the case of a partnership, trust, S corporation, or other
pass-thru entity, rules similar to the rules of section 41(g)
shall apply with respect to the credit allowable under
subsection (a).
``(2) Bonds held by regulated investment companies.--If any
qualified Amtrak bond is held by a regulated investment
company, the credit determined under subsection (a) shall be
allowed to shareholders of such company under procedures
prescribed by the Secretary.
``(3) Credits may be stripped.--Under regulations
prescribed by the Secretary--
``(A) In general.--There may be a separation (including at
issuance) of the ownership of a qualified Amtrak bond and the
entitlement to the credit under this section with respect to
such bond. In case of any such separation, the credit under
this section shall be allowed to the person who on the credit
allowance date holds the instrument evidencing the
entitlement to the credit and not to the holder of the bond.
``(B) Certain rules to apply.--In the case of a separation
described in subparagraph (A), the rules of section 1286
shall apply to the qualified Amtrak bond as if it were a
stripped bond and to the credit under this section as if it
were a stripped coupon.
``(4) Treatment for estimated tax purposes.--Solely for
purposes of sections 6654 and 6655, the credit allowed by
this section to a taxpayer by reason of holding a qualified
Amtrak bond on a credit allowance date shall be treated as if
it were a payment of estimated tax made by the taxpayer on
such date.
``(5) Credit may be transferred.--Nothing in any law or
rule of law shall be construed to limit the transferability
of the credit allowed by this section through sale and
repurchase agreements.
``(6) Reporting.--Issuers of qualified Amtrak bonds shall
submit reports similar to the reports required under section
149(e).''.
(b) Reporting.--Subsection (d) of section 6049 (relating to
returns regarding payments of interest) is amended by adding
at the end the following new paragraph:
``(8) Reporting of credit on qualified amtrak bonds.--
``(A) In general.--For purposes of subsection (a), the term
`interest' includes amounts includible in gross income under
section 54(g) and such amounts shall be treated as paid on
the credit allowance date (as defined in section 54(f)(2)).
``(B) Reporting to corporations, etc.--Except as otherwise
provided in regulations, in the case of any interest
described in subparagraph (A) of this paragraph, subsection
(b)(4) of this section shall be applied without regard to
subparagraphs (A), (H), (I), (J), (K), and (L)(i).
``(C) Regulatory authority.--The Secretary may prescribe
such regulations as are necessary or appropriate to carry out
the purposes of this paragraph, including regulations which
require more frequent or more detailed reporting.''.
(c) Clerical Amendments.--
(1) The table of subparts for part IV of subchapter A of
chapter 1 is amended by adding at the end the following new
item:
``Subpart H. Nonrefundable Credit for Holders of Qualified Amtrak
Bonds.''.
(2) Section 6401(b)(1) is amended by striking ``and G'' and
inserting ``G, and H''.
(d) Effective Date.--The amendments made by this section
shall apply to obligations issued after September 30, 2000.
(e) Multi-Year Capital Spending Plan and Oversight.--
(1) Amtrak capital spending plan.--
(A) In general.--The National Railroad Passenger
Corporation shall annually submit to the President and
Congress a multi-year capital spending plan, as approved by
the Board of Directors of the Corporation.
(B) Contents of plan.--Such plan shall identify the capital
investment needs of the Corporation over a period of not less
than 5 years and the funding sources available to finance
such needs and shall prioritize such needs according to
corporate goals and strategies.
(C) Initial submission date.--The first plan shall be
submitted before the issuance of any qualified Amtrak bonds
pursuant to section 54 of the Internal Revenue Code of 1986
(as added by this section).
(2) Oversight of amtrak trust account and qualified
projects.--
(A) Trust account oversight.--The Secretary of the Treasury
shall annually report to Congress as to whether the amount
deposited in the trust account established by the National
Passenger Railroad Corporation under section 54(i) of such
Code (as so added) is sufficient to fully repay at maturity
the principal of any outstanding qualified Amtrak bonds
issued pursuant to section 54 of such Code (as so added).
(B) Project oversight.--The National Railroad Passenger
Corporation shall contract for an annual independent
assessment of the costs and benefits of the qualified
projects financed by such qualified Amtrak bonds, including
an assessment of the investment evaluation process of the
Corporation. The annual assessment shall be included in the
plan submitted under paragraph (1).
(f) Protection of Highway Trust Fund.--
(1) Certification by the secretary of the treasury.--The
issuance of any qualified Amtrak bonds by the National
Passenger Railroad Corporation pursuant to section 54 of the
Internal Revenue Code of 1986 (as added by this section) is
conditioned on certification by the Secretary of the
Treasury, after consultation with the Secretary of
Transportation, within 30 days of a request by the issuer,
that with respect to funds of the Highway Trust Fund
described under paragraph (2), the issuer either--
(A) has not received such funds during fiscal years
commencing with fiscal year 2001 and ending before the fiscal
year the bonds are issued, or
(B) has repaid to the Highway Trust Fund any such funds
which were received during such fiscal years.
(2) Applicability.--This subsection shall apply to funds
received directly or indirectly from the Highway Trust Fund
established under section 9503 of the Internal Revenue Code
of 1986, except for funds authorized to be expended under
section 9503(c) of such Code, as in effect on the date of the
enactment of this Act.
(3) No retroactive effect.--Nothing in this subsection
shall adversely affect the entitlement of the holders of
qualified Amtrak bonds to the tax credit allowed pursuant to
section 54 of the Internal Revenue Code of 1986 (as so added)
or to repayment of principal upon maturity.
SEC. 305. CLARIFICATION OF CONTRIBUTION IN AID OF
CONSTRUCTION.
(a) In General.--Subparagraph (A) of section 118(c)(3)
(relating to definitions) is amended to read as follows:
``(A) Contribution in aid of construction.--The term
`contribution in aid of construction' shall be defined by
regulations prescribed by the Secretary, except that such
term--
``(i) shall include amounts paid as customer connection
fees (including amounts paid to connect the customer's line
to or extend a main water or sewer line), and
``(ii) shall not include amounts paid as service charges
for starting or stopping services.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to amounts received after the date of the
enactment of this Act.
SEC. 306. RECOVERY PERIOD FOR DEPRECIATION OF CERTAIN
LEASEHOLD IMPROVEMENTS.
(a) 15-Year Recovery Period.--Subparagraph (E) of section
168(e)(3) (relating to 15-year property) 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) any qualified leasehold improvement property.''.
(b) Qualified Leasehold Improvement Property.--Subsection
(e) of section 168 is amended by adding at the end the
following new paragraph:
``(6) Qualified leasehold improvement property.--
``(A) In general.--The term `qualified leasehold
improvement property' means any improvement to an interior
portion of a
[[Page S9722]]
building which is nonresidential real property if--
``(i) such improvement is made under or pursuant to a lease
(as defined in subsection (h)(7))--
``(I) by the lessee (or any sublessee) of such portion, or
``(II) by the lessor of such portion,
``(ii) the original use of such improvement begins with the
lessee and after December 31, 2006,
``(iii) such portion is to be occupied exclusively by the
lessee (or any sublessee) of such portion, and
``(iv) such improvement is placed in service more than 3
years after the date the building was first placed in
service.
``(B) Certain improvements not included.--Such term shall
not include any improvement for which the expenditure is
attributable to--
``(i) the enlargement of the building,
``(ii) any elevator or escalator,
``(iii) any structural component benefiting a common area,
and
``(iv) the internal structural framework of the building.
``(C) Definitions and special rules.--For purposes of this
paragraph--
``(i) Commitment to lease treated as lease.--A commitment
to enter into a lease shall be treated as a lease, and the
parties to such commitment shall be treated as lessor and
lessee, respectively, if the lease is in effect at the time
the property is placed in service.
``(ii) Related persons.--A lease between related persons
shall not be considered a lease. For purposes of the
preceding sentence, the term `related persons' means--
``(I) members of an affiliated group (as defined in section
1504), and
``(II) persons having a relationship described in
subsection (b) of section 267(b) or 707(b)(1); except that,
for purposes of this clause, the phrase `80 percent or more'
shall be substituted for the phrase `more than 50 percent'
each place it appears in such subsections.''.
(c) Requirement To Use Straight Line Method.--Paragraph (3)
of section 168(b) is amended by adding at the end the
following new subparagraph:
``(G) Qualified leasehold improvement property described in
subsection (e)(6).''.
(d) Effective Date.--The amendments made by this section
shall apply to qualified leasehold improvement property
placed in service after December 31, 2006.
TITLE IV--TAX RELIEF FOR FARMERS
SEC. 401. FARM, FISHING, AND RANCH RISK MANAGEMENT ACCOUNTS.
(a) In General.--Subpart C of part II of subchapter E of
chapter 1 (relating to taxable year for which deductions
taken) is amended by inserting after section 468B the
following new section:
``SEC. 468C. FARM, FISHING, AND RANCH RISK MANAGEMENT
ACCOUNTS.
``(a) Deduction Allowed.--In the case of an individual
engaged in an eligible farming business or commercial
fishing, there shall be allowed as a deduction for any
taxable year the amount paid in cash by the taxpayer during
the taxable year to a Farm, Fishing, and Ranch Risk
Management Account (hereinafter referred to as the `FFARRM
Account').
``(b) Limitation.--
``(1) Contributions.--The amount which a taxpayer may pay
into the FFARRM Account for any taxable year shall not exceed
20 percent of so much of the taxable income of the taxpayer
(determined without regard to this section) which is
attributable (determined in the manner applicable under
section 1301) to any eligible farming business or commercial
fishing.
``(2) Distributions.--Distributions from a FFARRM Account
may not be used to purchase, lease, or finance any new
fishing vessel, add capacity to any fishery, or otherwise
contribute to the overcapitalization of any fishery. The
Secretary of Commerce shall implement regulations to enforce
this paragraph.
``(c) Eligible Businesses.--For purposes of this section--
``(1) Eligible farming business.--The term `eligible
farming business' means any farming business (as defined in
section 263A(e)(4)) which is not a passive activity (within
the meaning of section 469(c)) of the taxpayer.
``(2) Commercial Fishing.--The term `commercial fishing'
has the meaning given such term by section (3) of the
Magnuson-Stevens Fishery Conservation and Management Act (16
U.S.C. 1802) but only if such fishing is not a passive
activity (within the meaning of section 469(c)) of the
taxpayer.
``(d) FFARRM Account.--For purposes of this section--
``(1) In general.--The term `FFARRM Account' means a trust
created or organized in the United States for the exclusive
benefit of the taxpayer, but only if the written governing
instrument creating the trust meets the following
requirements:
``(A) No contribution will be accepted for any taxable year
in excess of the amount allowed as a deduction under
subsection (a) for such year.
``(B) The trustee is 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 trust will be consistent with the requirements
of this section.
``(C) The assets of the trust consist entirely of cash or
of obligations which have adequate stated interest (as
defined in section 1274(c)(2)) and which pay such interest
not less often than annually.
``(D) All income of the trust is distributed currently to
the grantor.
``(E) The assets of the trust will not be commingled with
other property except in a common trust fund or common
investment fund.
``(2) Account taxed as grantor trust.--The grantor of a
FFARRM Account shall be treated for purposes of this title as
the owner of such Account and shall be subject to tax thereon
in accordance with subpart E of part I of subchapter J of
this chapter (relating to grantors and others treated as
substantial owners).
``(e) Inclusion of Amounts Distributed.--
``(1) In general.--Except as provided in paragraph (2),
there shall be includible in the gross income of the taxpayer
for any taxable year--
``(A) any amount distributed from a FFARRM Account of the
taxpayer during such taxable year, and
``(B) any deemed distribution under--
``(i) subsection (f )(1) (relating to deposits not
distributed within 5 years),
``(ii) subsection (f )(2) (relating to cessation in
eligible farming business), and
``(iii) subparagraph (B) or (C) of subsection (f )(3)
(relating to prohibited transactions and pledging account as
security).
``(2) Exceptions.--Paragraph (1)(A) shall not apply to--
``(A) any distribution to the extent attributable to income
of the Account, and
``(B) the distribution of any contribution paid during a
taxable year to a FFARRM Account to the extent that such
contribution exceeds the limitation applicable under
subsection (b) if requirements similar to the requirements of
section 408(d)(4) are met.
For purposes of subparagraph (A), distributions shall be
treated as first attributable to income and then to other
amounts.
``(f ) Special Rules.--
``(1) Tax on deposits in account which are not distributed
within 5 years.--
``(A) In general.--If, at the close of any taxable year,
there is a nonqualified balance in any FFARRM Account--
``(i) there shall be deemed distributed from such Account
during such taxable year an amount equal to such balance, and
``(ii) the taxpayer's tax imposed by this chapter for such
taxable year shall be increased by 10 percent of such deemed
distribution.
The preceding sentence shall not apply if an amount equal to
such nonqualified balance is distributed from such Account to
the taxpayer before the due date (including extensions) for
filing the return of tax imposed by this chapter for such
year (or, if earlier, the date the taxpayer files such return
for such year).
``(B) Nonqualified balance.--For purposes of subparagraph
(A), the term `nonqualified balance' means any balance in the
Account on the last day of the taxable year which is
attributable to amounts deposited in such Account before the
4th preceding taxable year.
``(C) Ordering rule.--For purposes of this paragraph,
distributions from a FFARRM Account (other than distributions
of current income) shall be treated as made from deposits in
the order in which such deposits were made, beginning with
the earliest deposits.
``(2) Cessation in eligible business.--At the close of the
first disqualification period after a period for which the
taxpayer was engaged in an eligible farming business or
commercial fishing, there shall be deemed distributed from
the FFARRM Account of the taxpayer an amount equal to the
balance in such Account (if any) at the close of such
disqualification period. For purposes of the preceding
sentence, the term `disqualification period' means any period
of 2 consecutive taxable years for which the taxpayer is not
engaged in an eligible farming business or commercial
fishing.
``(3) Certain rules to apply.--Rules similar to the
following rules shall apply for purposes of this section:
``(A) Section 220(f )(8) (relating to treatment on death).
``(B) Section 408(e)(2) (relating to loss of exemption of
account where individual engages in prohibited transaction).
``(C) Section 408(e)(4) (relating to effect of pledging
account as security).
``(D) Section 408(g) (relating to community property laws).
``(E) Section 408(h) (relating to custodial accounts).
``(4) Time when payments deemed made.--For purposes of this
section, a taxpayer shall be deemed to have made a payment to
a FFARRM Account on the last day of a taxable year if such
payment is made on account of such taxable year and is made
on or before the due date (without regard to extensions) for
filing the return of tax for such taxable year.
``(5) Individual.--For purposes of this section, the term
`individual' shall not include an estate or trust.
``(6) Deduction not allowed for self-employment tax.--The
deduction allowable by reason of subsection (a) shall not be
taken into account in determining an individual's net
earnings from self-employment (within the meaning of section
1402(a)) for purposes of chapter 2.
``(g) Reports.--The trustee of a FFARRM Account shall make
such reports regarding such Account to the Secretary and to
the person for whose benefit the Account is maintained with
respect to contributions, distributions, and such other
matters as the
[[Page S9723]]
Secretary may require under regulations. The reports required
by this subsection shall be filed at such time and in such
manner and furnished to such persons at such time and in such
manner as may be required by such regulations.''.
(b) Tax on Excess Contributions.--
(1) Subsection (a) of section 4973 (relating to tax on
excess contributions to certain tax-favored accounts and
annuities) is amended by striking ``or'' at the end of
paragraph (3), by redesignating paragraph (4) as paragraph
(5), and by inserting after paragraph (3) the following new
paragraph:
``(4) a FFARRM Account (within the meaning of section
468C(d)), or''.
(2) Section 4973 is amended by adding at the end the
following new subsection:
``(g) Excess Contributions to FFARRM Accounts.--For
purposes of this section, in the case of a FFARRM Account
(within the meaning of section 468C(d)), the term `excess
contributions' means the amount by which the amount
contributed for the taxable year to the Account exceeds the
amount which may be contributed to the Account under section
468C(b) for such taxable year. For purposes of this
subsection, any contribution which is distributed out of the
FFARRM Account in a distribution to which section
468C(e)(2)(B) applies shall be treated as an amount not
contributed.''.
(3) The section heading for section 4973 is amended to read
as follows:
``SEC. 4973. EXCESS CONTRIBUTIONS TO CERTAIN ACCOUNTS,
ANNUITIES, ETC.''.
(4) The table of sections for chapter 43 is amended by
striking the item relating to section 4973 and inserting the
following new item:
``Sec. 4973. Excess contributions to certain accounts, annuities,
etc.''.
(c) Tax on Prohibited Transactions.--
(1) Subsection (c) of section 4975 (relating to tax on
prohibited transactions) is amended by adding at the end the
following new paragraph:
``(6) Special rule for ffarrm accounts.--A person for whose
benefit a FFARRM Account (within the meaning of section
468C(d)) is established 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 FFARRM Account by reason of the application of
section 468C(f )(3)(A) to such account.''.
(2) Paragraph (1) of section 4975(e) is amended by
redesignating subparagraphs (E) and (F) as subparagraphs (F)
and (G), respectively, and by inserting after subparagraph
(D) the following new subparagraph:
``(E) a FFARRM Account described in section 468C(d),''.
(d) Failure To Provide Reports on FFARRM Accounts.--
Paragraph (2) of section 6693(a) (relating to failure to
provide reports on certain tax-favored accounts or annuities)
is amended by redesignating subparagraphs (C) and (D) as
subparagraphs (D) and (E), respectively, and by inserting
after subparagraph (B) the following new subparagraph:
``(C) section 468C(g) (relating to FFARRM Accounts),''.
(e) Clerical Amendment.--The table of sections for subpart
C of part II of subchapter E of chapter 1 is amended by
inserting after the item relating to section 468B the
following new item:
``Sec. 468C. Farm, Fishing and Ranch Risk Management Accounts.''.
(f ) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 402. WRITTEN AGREEMENT RELATING TO EXCLUSION OF CERTAIN
FARM RENTAL INCOME FROM NET EARNINGS FROM SELF-
EMPLOYMENT.
(a) Internal Revenue Code.--Section 1402(a)(1)(A) (relating
to net earnings from self-employment) is amended by striking
``an arrangement'' and inserting ``a lease agreement''.
(b) Social Security Act.--Section 211(a)(1)(A) of the
Social Security Act is amended by striking ``an arrangement''
and inserting ``a lease agreement''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 403. TREATMENT OF CONSERVATION RESERVE PROGRAM PAYMENTS
AS RENTALS FROM REAL ESTATE.
(a) In General.--Section 1402(a)(1) (defining net earnings
from self-employment) is amended by inserting ``and including
payments under section 1233(2) of the Food Security Act of
1985 (16 U.S.C. 3833(2))'' after ``crop shares''.
(b) Effective Date.--The amendment made by this section
shall apply to payments made after December 31, 2000.
SEC. 404. EXEMPTION OF AGRICULTURAL BONDS FROM STATE VOLUME
CAP.
(a) In General.--Section 146(g) (relating to exception for
certain bonds) is amended by striking ``and'' at the end of
paragraph (3), by striking the period at the end of paragraph
(4) and inserting ``, and'', and by inserting after paragraph
(4) the following new paragraph:
``(5) any qualified small issue bond described in section
144(a)(12)(B)(ii).''.
(b) Effective Date.--The amendments made by this section
shall apply to bonds issued after December 31, 2000.
SEC. 405. MODIFICATIONS TO SECTION 512(B)(13).
(a) In General.--Paragraph (13) of section 512(b) is
amended by redesignating subparagraph (E) as subparagraph (F)
and by inserting after subparagraph (D) the following new
paragraph:
``(E) Paragraph to apply only to excess payments.--
``(i) In general.--Subparagraph (A) shall apply only to the
portion of a specified payment received by the controlling
organization that exceeds the amount which would have been
paid if such payment met the requirements prescribed under
section 482.
``(ii) Addition to tax for valuation misstatements.--The
tax imposed by this chapter on the controlling organization
shall be increased by an amount equal to 20 percent of such
excess.''.
(b) Effective Date.--
(1) In general.--The amendment made by this section shall
apply to payments received or accrued after December 31,
2000.
(2) Payments subject to binding contract transition rule.--
If the amendments made by section 1041 of the Taxpayer Relief
Act of 1997 did not apply to any amount received or accrued
in the first 2 taxable years beginning on or after the date
of the enactment of this Act under any contract described in
subsection (b)(2) of such section, such amendments also shall
not apply to amounts received or accrued under such contract
before January 1, 2001.
SEC. 406. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD
INVENTORY.
(a) In General.--Subsection (e) of section 170 (relating to
certain contributions of ordinary income and capital gain
property) is amended by adding at the end the following new
paragraph:
``(7) Special rule for contributions of food inventory.--
For purposes of this section--
``(A) Contributions by non-corporate taxpayers.--In the
case of a charitable contribution of food by a taxpayer in a
farming business (as defined in section 263A(e)(4)),
paragraph (3)(A) shall be applied without regard to whether
or not the contribution is made by a corporation.
``(B) Limit on reduction.--In the case of a charitable
contribution of food which is a qualified contribution
(within the meaning of paragraph (3)(A), as modified by
subparagraph (A) of this paragraph)--
``(i) paragraph (3)(B) shall not apply, and
``(ii) the reduction under paragraph (1)(A) for such
contribution shall be no greater than the amount (if any) by
which the amount of such contribution exceeds twice the basis
of such food.
``(C) Determination of basis.--For purposes of this
paragraph, if a taxpayer uses the cash method of accounting,
the basis of any qualified contribution of such taxpayer
shall be deemed to be 50 percent of the fair market value of
such contribution.
``(D) Determination of fair market value.--In the case of a
charitable contribution of food which is a qualified
contribution (within the meaning of paragraph (3), as
modified by subparagraphs (A) and (B) of this paragraph) and
which, solely by reason of internal standards of the
taxpayer, lack of market, or similar circumstances, or which
is produced by the taxpayer exclusively for the purposes of
transferring the food to an organization described in
paragraph (3)(A), cannot or will not be sold, the fair market
value of such contribution shall be determined--
``(i) without regard to such internal standards, such lack
of market, such circumstances, or such exclusive purpose, and
``(ii) if applicable, by taking into account the price at
which the same or similar food items are sold by the taxpayer
at the time of the contribution (or, if not so sold at such
time, in the recent past).
``(E) Termination.--This paragraph shall not apply to any
contribution made during any taxable year beginning after
December 31, 2003.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2000.
SEC. 407. INCOME AVERAGING FOR FARMERS AND FISHERMEN NOT TO
INCREASE ALTERNATIVE MINIMUM TAX LIABILITY.
(a) In General.--Section 55(c) (defining regular tax) is
amended by redesignating paragraph (2) as paragraph (3) and
by inserting after paragraph (1) the following new paragraph:
``(2) Coordination with income averaging for farmers and
fishermen.--Solely for purposes of this section, section 1301
(relating to averaging of farm and fishing income) shall not
apply in computing the regular tax.''.
(b) Allowing Income Averaging for Fishermen.--
(1) In general.--Section 1301(a) is amended by striking
``farming business'' and inserting ``farming business or
fishing business''.
(2) Definition of elected farm income.--
(A) In general.--Clause (i) of section 1301(b)(1)(A) is
amended by inserting ``or fishing business'' before the
semicolon.
(B) Conforming amendment.--Subparagraph (B) of section
1301(b)(1) is amended by inserting ``or fishing business''
after ``farming business'' both places it occurs.
(3) Definition of fishing business.--Section 1301(b) is
amended by adding at the end the following new paragraph:
``(4) Fishing business.--The term `fishing business' means
the conduct of commercial fishing as defined in section 3 of
the Magnuson-Stevens Fishery Conservation and Management Act
(16 U.S.C. 1802).''.
[[Page S9724]]
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 408. COOPERATIVE MARKETING INCLUDES VALUE-ADDED
PROCESSING THROUGH ANIMALS.
(a) In General.--Section 1388 (relating to definitions and
special rules) is amended by adding at the end the following
new subsection:
``(k) Cooperative Marketing Includes Value-Added Processing
Through Animals.--For purposes of section 521 and this
subchapter, the term `marketing the products of members or
other producers' includes feeding the products of members or
other producers to cattle, hogs, fish, chickens, or other
animals and selling the resulting animals or animal
products.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 409. DECLARATORY JUDGMENT RELIEF FOR SECTION 521
COOPERATIVES.
(a) In General.--Section 7428(a)(1) (relating to
declaratory judgments of tax exempt organizations) is amended
by striking ``or'' at the end of subparagraph (B) and by
adding at the end the following new subparagraph:
``(D) with respect to the initial qualification or
continuing qualification of a cooperative as described in
section 521(b) which is exempt from tax under section 521(a),
or''.
(b) Effective Date.--The amendments made by this section
shall apply with respect to pleadings filed after the date of
the enactment of this Act but only with respect to
determinations (or requests for determinations) made after
January 1, 2000.
SEC. 410. SMALL ETHANOL PRODUCER CREDIT.
(a) Allocation of Alcohol Fuels Credit to Patrons of a
Cooperative.--Section 40(g) (relating to alcohol used as
fuel) is amended by adding at the end the following new
paragraph:
``(6) Allocation of small ethanol producer credit to
patrons of cooperative.--
``(A) Election to allocate.--
``(i) In general.--In the case of a cooperative
organization described in section 1381(a), any portion of the
credit determined under subsection (a)(3) for the taxable
year may, at the election of the organization, be apportioned
pro rata among patrons of the organization on the basis of
the quantity or value of business done with or for such
patrons for the taxable year.
``(ii) Form and effect of election.--An election under
clause (i) for any taxable year shall be made on a timely
filed return for such year. Such election, once made, shall
be irrevocable for such taxable year.
``(B) Treatment of organizations and patrons.--The amount
of the credit apportioned to patrons under subparagraph (A)--
``(i) shall not be included in the amount determined under
subsection (a) with respect to the organization for the
taxable year,
``(ii) shall be included in the amount determined under
subsection (a) for the taxable year of each patron for which
the patronage dividends for the taxable year described in
subparagraph (A) are included in gross income, and
``(iii) shall be included in gross income of such patrons
for the taxable year in the manner and to the extent provided
in section 87.
``(C) Special rules for decrease in credits for taxable
year.--If the amount of the credit of a cooperative
organization determined under subsection (a)(3) for a taxable
year is less than the amount of such credit shown on the
return of the cooperative organization for such year, an
amount equal to the excess of--
``(i) such reduction, over
``(ii) the amount not apportioned to such patrons under
subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this
chapter on the organization. Such increase shall not be
treated as tax imposed by this chapter for purposes of
determining the amount of any credit under this subpart or
subpart A, B, E, or G.''.
(b) Improvements to Small Ethanol Producer Credit.--
(1) Small ethanol producer credit not a passive activity
credit.--Clause (i) of section 469(d)(2)(A) is amended by
striking ``subpart D'' and inserting ``subpart D, other than
section 40(a)(3),''.
(2) Allowing credit against minimum tax.--
(A) In general.--Subsection (c) of section 38 (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 small ethanol producer credit.--
``(A) In general.--In the case of the small ethanol
producer 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) subparagraphs (A) and (B) thereof shall not apply,
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 small
ethanol producer credit).
``(B) Small ethanol producer credit.--For purposes of this
subsection, the term `small ethanol producer credit' means
the credit allowable under subsection (a) by reason of
section 40(a)(3).''.
(B) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) is amended by striking ``(other'' and all
that follows through ``credit)'' and inserting ``(other than
the empowerment zone employment credit or the small ethanol
producer credit)''.
(3) Small ethanol producer credit not added back to income
under section 87.--Section 87 (relating to income inclusion
of alcohol fuel credit) is amended to read as follows:
``SEC. 87. ALCOHOL FUEL CREDIT.
``Gross income includes an amount equal to the sum of--
``(1) the amount of the alcohol mixture credit determined
with respect to the taxpayer for the taxable year under
section 40(a)(1), and
``(2) the alcohol credit determined with respect to the
taxpayer for the taxable year under section 40(a)(2).''.
(c) Conforming Amendment.--Section 1388 (relating to
definitions and special rules for cooperative organizations),
as amended by section 408, is amended by adding at the end
the following new subsection:
``(l) Cross Reference.--For provisions relating to the
apportionment of the alcohol fuels credit between cooperative
organizations and their patrons, see section 40(g)(6).''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 411. PAYMENT OF DIVIDENDS ON STOCK OF COOPERATIVES
WITHOUT REDUCING PATRONAGE DIVIDENDS.
(a) In General.--Subsection (a) of section 1388 (relating
to patronage dividend defined) is amended by adding at the
end the following new sentence: ``For purposes of paragraph
(3), net earnings shall not be reduced by amounts paid during
the year as dividends on capital stock or other proprietary
capital interests of the organization to the extent that the
articles of incorporation or bylaws of such organization or
other contract with patrons provide that such dividends are
in addition to amounts otherwise payable to patrons which are
derived from business done with or for patrons during the
taxable year.''.
(b) Effective Date.--The amendment made by this section
shall apply to distributions in taxable years beginning after
the date of the enactment of this Act.
TITLE V--ENERGY PROVISIONS
SEC. 501. ELECTION TO EXPENSE GEOLOGICAL AND GEOPHYSICAL
EXPENDITURES.
(a) In General.--Section 263 (relating to capital
expenditures) is amended by adding at the end the following
new subsection:
``(j) Geological and Geophysical Expenditures for Domestic
Oil and Gas Wells.--Notwithstanding subsection (a), a
taxpayer may elect to treat geological and geophysical
expenses incurred in connection with the exploration for, or
development of, oil or gas within the United States (as
defined in section 638) as expenses which are not chargeable
to capital account. Any expenses so treated shall be allowed
as a deduction in the taxable year in which paid or
incurred.''.
(b) Conforming Amendment.--Section 263A(c)(3) is amended by
inserting ``263(j),'' after ``263(i),''.
(c) Effective Date.--The amendments made by this section
shall apply to expenses paid or incurred in taxable years
beginning after December 31, 2001.
SEC. 502. ELECTION TO EXPENSE DELAY RENTAL PAYMENTS
(a) In general.--Section 263 (relating to capital
expenditures), as amended by section 501(a), is amended by
adding at the end the following new subsection:
``(k) Delay Rental Payments for Domestic Oil and Gas
Wells.--
``(1) In general.--Notwithstanding subsection (a), a
taxpayer may elect to treat delay rental payments incurred in
connection with the development of oil or gas within the
United States (as defined in section 638) as payments which
are not chargeable to capital account. Any payments so
treated shall be allowed as a deduction in the taxable year
in which paid or incurred.
``(2) Delay rental payments.--For purposes of paragraph
(1), the term `delay rental payment' means an amount paid for
the privilege of deferring development of an oil or gas
well.''.
(b) Conforming Amendment.--Section 263A(c)(3), as amended
by section 501(b), is amended by inserting ``263(k),'' after
``263(j),''.
(c) Effective Date.--The amendments made by this section
shall apply to payments made or incurred in taxable years
beginning after December 31, 2001.
SEC. 503. 5-YEAR NET OPERATING LOSS CARRYBACK FOR LOSSES
ATTRIBUTABLE TO OPERATING MINERAL INTERESTS OF
INDEPENDENT OIL AND GAS PRODUCERS.
(a) In General.--Paragraph (1) of section 172(b) (relating
to years to which loss may be carried) is amended by adding
at the end the following new subparagraph:
``(H) Losses on operating mineral interests of independent
oil and gas producers.--In the case of a taxpayer--
``(i) which has an eligible oil and gas loss (as defined in
subsection (j)) for a taxable year, and
``(ii) which is not an integrated oil company (as defined
in section 291(b)(4)),
[[Page S9725]]
such eligible oil and gas loss shall be a net operating loss
carryback to each of the 5 taxable years preceding the
taxable year of such loss.''.
(b) Eligible Oil and Gas Loss.--Section 172 is amended by
redesignating subsection (j) as subsection (k) and by
inserting after subsection (i) the following new subsection:
``(j) Eligible Oil and Gas Loss.--For purposes of this
section--
``(1) In general.--The term `eligible oil and gas loss'
means the lesser of--
``(A) the amount which would be the net operating loss for
the taxable year if only income and deductions attributable
to operating mineral interests (as defined in section 614(d))
in oil and gas wells are taken into account, or
``(B) the amount of the net operating loss for such taxable
year.
``(2) Coordination with subsection (b)(2).--For purposes of
applying subsection (b)(2), an eligible oil and gas loss for
any taxable year shall be treated in a manner similar to the
manner in which a specified liability loss is treated.
``(3) Election.--Any taxpayer entitled to a 5-year
carryback under subsection (b)(1)(H) from any loss year may
elect to have the carryback period with respect to such loss
year determined without regard to subsection (b)(1)(H).''.
(c) Effective Date.--The amendments made by this section
shall apply to net operating losses for taxable years
beginning after December 31, 2001.
SEC. 504. TEMPORARY SUSPENSION OF PERCENTAGE OF DEPLETION
DEDUCTION LIMITATION BASED ON 65 PERCENT OF
TAXABLE INCOME.
(a) In General.--Section 613A(d)(1) (relating to limitation
based on taxable income) is amended by adding at the end the
following new sentence: ``This paragraph shall not apply for
taxable years beginning after December 31, 2000, and before
January 1, 2004.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 505. TAX CREDIT FOR MARGINAL DOMESTIC OIL AND NATURAL
GAS WELL PRODUCTION.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business credits), as amended by
section 131(a), is amended by adding at the end the following
new section:
``SEC. 45E. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL
WELLS.
``(a) General Rule.--For purposes of section 38, the
marginal well production credit for any taxable year is an
amount equal to the product of--
``(1) the credit amount, and
``(2) the qualified crude oil production and the qualified
natural gas production which is attributable to the taxpayer.
``(b) Credit Amount.--For purposes of this section--
``(1) In general.--The credit amount is--
``(A) $3 per barrel of qualified crude oil production, and
``(B) 50 cents per 1,000 cubic feet of qualified natural
gas production.
``(2) Reduction as oil and gas prices increase.--
``(A) In general.--The $3 and 50 cents amounts under
paragraph (1) shall each be reduced (but not below zero) by
an amount which bears the same ratio to such amount
(determined without regard to this paragraph) as--
``(i) the excess (if any) of the applicable reference price
over $14 ($1.56 for qualified natural gas production), bears
to
``(ii) $3 ($0.33 for qualified natural gas production).
The applicable reference price for a taxable year is the
reference price for the calendar year preceding the calendar
year in which the taxable year begins.
``(B) Inflation adjustment.--In the case of any taxable
year beginning in a calendar year after 2001, each of the
dollar amounts contained in subparagraph (A) shall be
increased to an amount equal to such dollar amount multiplied
by the inflation adjustment factor for such calendar year
(determined under section 43(b)(3)(B) by substituting `2000'
for `1990').
``(C) Reference price.--For purposes of this paragraph, the
term `reference price' means, with respect to any calendar
year--
``(i) in the case of qualified crude oil production, the
reference price determined under section 29(d)(2)(C), and
``(ii) in the case of qualified natural gas production, the
Secretary's estimate of the annual average wellhead price per
1,000 cubic feet for all domestic natural gas.
``(c) Qualified Crude Oil and Natural Gas Production.--For
purposes of this section--
``(1) In general.--The terms `qualified crude oil
production' and `qualified natural gas production' mean
domestic crude oil or natural gas which is produced from a
marginal well.
``(2) Limitation on amount of production which may
qualify.--
``(A) In general.--Crude oil or natural gas produced during
any taxable year from any well shall not be treated as
qualified crude oil production or qualified natural gas
production to the extent production from the well during the
taxable year exceeds 1,095 barrels or barrel equivalents.
``(B) Proportionate reductions.--
``(i) Short taxable years.--In the case of a short taxable
year, the limitations under this paragraph shall be
proportionately reduced to reflect the ratio which the number
of days in such taxable year bears to 365.
``(ii) Wells not in production entire year.--In the case of
a well which is not capable of production during each day of
a taxable year, the limitations under this paragraph
applicable to the well shall be proportionately reduced to
reflect the ratio which the number of days of production
bears to the total number of days in the taxable year.
``(3) Definitions.--
``(A) Marginal well.--The term `marginal well' means a
domestic well--
``(i) the production from which during the taxable year is
treated as marginal production under section 613A(c)(6), or
``(ii) which, during the taxable year--
``(I) has average daily production of not more than 25
barrel equivalents, and
``(II) produces water at a rate not less than 95 percent of
total well effluent.
``(B) Crude oil, etc.--The terms `crude oil', `natural
gas', `domestic', and `barrel' have the meanings given such
terms by section 613A(e).
``(C) Barrel equivalent.--The term `barrel equivalent'
means, with respect to natural gas, a conversion ratio of
6,000 cubic feet of natural gas to 1 barrel of crude oil.
``(d) Other Rules.--
``(1) Production attributable to the taxpayer.--In the case
of a marginal well in which there is more than one owner of
operating interests in the well and the crude oil or natural
gas production exceeds the limitation under subsection
(c)(2), qualifying crude oil production or qualifying natural
gas production attributable to the taxpayer shall be
determined on the basis of the ratio which taxpayer's revenue
interest in the production bears to the aggregate of the
revenue interests of all operating interest owners in the
production.
``(2) Operating interest required.--Any credit under this
section may be claimed only on production which is
attributable to the holder of an operating interest.
``(3) Production from nonconventional sources excluded.--In
the case of production from a marginal well which is eligible
for the credit allowed under section 29 for the taxable year,
no credit shall be allowable under this section unless the
taxpayer elects not to claim credit under section 29 with
respect to the well.''.
(b) Credit Treated as Business Credit.--Section 38(b), as
amended by section 131(b)(1), 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 of the following new paragraph:
``(14) the marginal oil and gas well production credit
determined under section 45E(a).''.
(c) Credit Allowed Against Regular and Minimum Tax.--
(1) In general.--Subsection (c) of section 38 (relating to
limitation based on amount of tax), as amended by section
410(b)(2)(A), is amended by redesignating paragraph (4) as
paragraph (5) and by inserting after paragraph (3) the
following new paragraph:
``(4) Special rules for marginal oil and gas well
production credit.--
``(A) In general.--In the case of the marginal oil and gas
well production 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) subparagraphs (A) and (B) thereof shall not apply,
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 marginal
oil and gas well production credit).
``(B) Marginal oil and gas well production credit.--For
purposes of this subsection, the term `marginal oil and gas
well production credit' means the credit allowable under
subsection (a) by reason of section 45E(a).''.
(2) Conforming amendments.--
(A) Subclause (II) of section 38(c)(2)(A)(ii), as amended
by section 410(b)(2)(B), is amended by striking ``or the
small ethanol producer credit'' and inserting ``, the small
ethanol producer credit, or the marginal oil and gas well
production credit''.
(B) Subclause (II) of section 38(c)(3)(A)(ii), as added by
section 410(b)(2)(A), is amended by inserting ``or the
marginal oil and gas well production credit'' after ``the
small ethanol producer credit''.
(d) Carryback.--Subsection (a) of section 39 (relating to
carryback and carryforward of unused credits generally) is
amended by adding at the end the following new paragraph--
``(3) 10-year carryback for marginal oil and gas well
production credit.--In the case of the marginal oil and gas
well production credit--
``(A) this section shall be applied separately from the
business credit (other than the marginal oil and gas well
production credit),
``(B) paragraph (1) shall be applied by substituting `10
taxable year' for `1 taxable year' in subparagraph (A)
thereof, and
``(C) paragraph (2) shall be applied--
``(i) by substituting `31 taxable years' for `21 taxable
years' in subparagraph (A) thereof, and
``(ii) by substituting `30 taxable years' for `20 taxable
years' in subparagraph (B) thereof.''.
(e) Coordination With Section 29.--Section 29(a) is amended
by striking ``There'' and inserting ``At the election of the
taxpayer, there''.
[[Page S9726]]
(f) Clerical Amendment--The table of sections for subpart D
of part IV of subchapter A of chapter 1, as amended by
section 131(d), is amended by adding at the end the following
item:
``Sec. 45E. Credit for producing oil and gas from marginal wells.''.
(g) Effective Date.--The amendments made by this section
shall apply to production in taxable years beginning after
December 31, 2000.
SEC. 506. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR
PROPERTY.
(a) In General.--Subparagraph (C) of section 168(e)(3)
(relating to classification of certain property) is amended
by redesignating clause (ii) as clause (iii) and by inserting
after clause (i) the following new clause:
``(ii) any natural gas gathering line, and''.
(b) Natural Gas Gathering Line.--Subsection (i) of section
168 is amended by adding at the end the following new
paragraph:
``(15) Natural gas gathering line.--The term `natural gas
gathering line' means--
``(A) the pipe, equipment, and appurtenances determined to
be a gathering line by the Federal Energy Regulatory
Commission, or
``(B) the pipe, equipment, and appurtenances used to
deliver natural gas from the wellhead or a common point to
the point at which such gas first reaches--
``(i) a gas processing plant,
``(ii) an interconnection with a transmission pipeline
certificated by the Federal Energy Regulatory Commission as
an interstate transmission pipeline,
``(iii) an interconnection with an intrastate transmission
pipeline, or
``(iv) a direct interconnection with a local distribution
company, a gas storage facility, or an industrial
consumer.''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service on or after the
date of the enactment of this Act.
SEC. 507. CLARIFICATION OF TREATMENT OF PIPELINE
TRANSPORTATION INCOME.
(a) In General.--Section 954(g)(1) (defining foreign base
company oil related income) is amended by striking ``or'' at
the end of subparagraph (A), by striking the period at the
end of subparagraph (B) and inserting ``, or'', and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) the pipeline transportation of oil or gas within such
foreign country.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years of controlled foreign
corporations beginning after December 31, 2001, and taxable
years of United States shareholders with or within which such
taxable years of controlled foreign corporations end.
TITLE VI--CONSERVATION PROVISIONS
SEC. 601. EXCLUSION OF 50 PERCENT OF GAIN ON SALES OF LAND OR
INTERESTS IN LAND OR WATER TO ELIGIBLE ENTITIES
FOR CONSERVATION PURPOSES.
(a) In General.--Part III of subchapter B of chapter 1
(relating to items specifically excluded from gross income)
is amended by inserting after section 121 the following new
section:
``SEC. 121A. 50-PERCENT EXCLUSION OF GAIN ON SALES OF LAND OR
INTERESTS IN LAND OR WATER TO ELIGIBLE ENTITIES
FOR CONSERVATION PURPOSES.
``(a) Exclusion.--Gross income shall not include 50 percent
of any gain from the sale of land or an interest in land or
water (determined without regard to any improvements) to an
eligible entity if--
``(1) such land or interest in land or water was owned by
the taxpayer or a member of the taxpayer's family (as defined
in section 2032A(e)(2)) at all times during the 3-year period
ending on the date of the sale, and
``(2) such land or interest in land or water is being
acquired by an eligible entity which provides the taxpayer,
at the time of acquisition, a written letter of intent which
shall include the following statement: `The purchaser's
intent is that this acquisition will serve 1 or more of the
conservation purposes specified in clause (i), (ii), or (iii)
of section 170(h)(4)(A).'
``(b) Eligible Entity.--For purposes of this section, the
term `eligible entity' means--
``(1) any agency of the United States or of any State or
local government, or
``(2) any other organization that--
``(A) is organized and at all times operated principally
for 1 or more of the conservation purposes specified in
clause (i), (ii), or (iii) of section 170(h)(4)(A), and
``(B) is described in section 170(h)(3).
``(c) Stock in Holding Corporations.--For purposes of this
section, the term `land or an interest in land or water'
shall include stock in any corporation, if the fair market
value of the corporation's land or interests in land or water
equals or exceeds 90 percent of the fair market value of all
of such corporation's assets at all times during the 3-year
period ending on the date of the sale.''.
(b) Clerical Amendment.--The table of sections for part III
of subchapter B of chapter 1 is amended by inserting after
the item relating to section 121 the following new item:
``Sec. 121A. 50-percent exclusion of gain on sales of land or interests
in land or water to eligible entities for conservation
purposes.''.
(c) Effective Date.--The amendments made by this section
shall apply to sales occurring on or after December 31, 2003.
SEC. 602. EXPANSION OF ESTATE TAX EXCLUSION FOR REAL PROPERTY
SUBJECT TO QUALIFIED CONSERVATION EASEMENT.
(a) Repeal of Certain Restrictions on Where Land Is
Located.--Clause (i) of section 2031(c)(8)(A) (defining land
subject to a qualified conservation easement) is amended to
read as follows:
``(i) which is located in the United States or any
possession of the United States,''.
(b) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying after December 31,
2001.
SEC. 603. TAX EXCLUSION FOR COST-SHARING PAYMENTS UNDER
PARTNERS FOR WILDLIFE PROGRAM.
(a) In General.--Section 126(a) (relating to certain cost-
sharing payments) is amended by redesignating paragraph (10)
as paragraph (11) and by inserting after paragraph (9) the
following new paragraph:
``(10) The Partners for Fish and Wildlife Program
authorized by the Fish and Wildlife Act of 1956 (16 U.S.C.
742a et seq.).''.
(b) Effective Date.--The amendments made by this section
shall apply to payments received after the date of the
enactment of this Act.
SEC. 604. INCENTIVE FOR CERTAIN ENERGY EFFICIENT PROPERTY
USED IN BUSINESS.
(a) In General.--Part VI of subchapter B of chapter 1 is
amended by adding at the end the following new section:
``SEC. 199. ENERGY PROPERTY DEDUCTION.
``(a) Deduction Allowed.--
``(1) In general.--There shall be allowed as a deduction
for the taxable year an amount equal to the amount of energy
efficient commercial building expenditures made by the
taxpayer for the taxable year
``(2) Maximum amount of deduction.--The amount of energy
efficient commercial building property expenditures taken
into account under paragraph (1) shall not exceed an amount
equal to the product of--
``(A) $2.25, and
``(B) the square footage of the building with respect to
which the expenditures are made.
``(3) Year deduction allowed.--The deduction under
paragraph (1) shall be allowed in the taxable year in which
the construction of the building is completed.
``(b) Energy Efficient Commercial Building Property
Expenditures.--For purposes of this section, the term `energy
efficient commercial building property expenditures' means an
amount paid or incurred for energy efficient commercial
building property installed on or in connection with new
construction or reconstruction of property--
``(1) for which depreciation is allowable under section
167,
``(2) which is located in the United States, and
``(3) the construction or erection of which is completed by
the taxpayer.
Such property includes all residential rental property,
including low-rise multifamily structures and single family
housing property which is not within the scope of Standard
90.1-1999 (as described in subsection (c)(1)). Such term
includes expenditures for labor costs properly allocable to
the onsite preparation, assembly, or original installation of
the property.
``(c) Energy Efficient Commercial Building Property.--For
purposes of subsection (b)--
``(1) In general.--The term `energy efficient commercial
building property' means any property which reduces total
annual energy and power costs with respect to the lighting,
heating, cooling, ventilation, and hot water supply systems
of the building by 50 percent or more in comparison to a
reference building which meets the requirements of Standard
90.1-1999 of the American Society of Heating, Refrigerating,
and Air Conditioning Engineers and the Illuminating
Engineering Society of North America using methods of
calculation under paragraph (2) and certified by qualified
professionals as provided under subsection (f).
``(2) Methods of calculation.--The Secretary, in
consultation with the Secretary of Energy, shall promulgate
regulations which describe in detail methods for calculating
and verifying energy and power consumption and cost, taking
into consideration the provisions of the 1998 California
Nonresidential ACM Manual. These procedures shall meet the
following requirements:
``(A) In calculating tradeoffs and energy performance, the
regulations shall prescribe the costs per unit of energy and
power, such as kilowatt hour, kilowatt, gallon of fuel oil,
and cubic foot or Btu of natural gas, which may be dependent
on time of usage.
``(B) The calculational methodology shall require that
compliance be demonstrated for a whole building. If some
systems of the building, such as lighting, are designed later
than other systems of the building, the method shall provide
that either--
``(i) the expenses taken into account under subsection (a)
shall not occur until the date designs for all energy-using
systems of the building are completed,
``(ii) the energy performance of all systems and components
not yet designed shall be assumed to comply minimally with
the requirements of such Standard 90.1-1999, or
``(iii) the expenses taken into account under subsection
(a) shall be a fraction of such expenses based on the
performance of less than all energy-using systems in
accordance with subparagraph (C).
[[Page S9727]]
``(C) The expenditures in connection with the design of
subsystems in the building, such as the envelope, the
heating, ventilation, air conditioning and water heating
system, and the lighting system shall be allocated to the
appropriate building subsystem based on system-specific
energy cost savings targets in regulations promulgated by the
Secretary of Energy which are equivalent, using the
calculation methodology, to the whole building requirement of
50 percent savings.
``(D) The calculational methods under this paragraph need
not comply fully with section 11 of such Standard 90.1-1999.
``(E) The calculational methods shall be fuel neutral, such
that the same energy efficiency features shall qualify a
building for the deduction under this subsection regardless
of whether the heating source is a gas or oil furnace or an
electric heat pump.
``(F) The calculational methods shall provide appropriate
calculated energy savings for design methods and technologies
not otherwise credited in either such Standard 90.1-1999 or
in the 1998 California Nonresidential ACM Manual, including
the following:
``(i) Natural ventilation.
``(ii) Evaporative cooling.
``(iii) Automatic lighting controls such as occupancy
sensors, photocells, and timeclocks.
``(iv) Daylighting.
``(v) Designs utilizing semi-conditioned spaces that
maintain adequate comfort conditions without air conditioning
or without heating.
``(vi) Improved fan system efficiency, including reductions
in static pressure.
``(vii) Advanced unloading mechanisms for mechanical
cooling, such as multiple or variable speed compressors.
``(viii) The calculational methods may take into account
the extent of commissioning in the building, and allow the
taxpayer to take into account measured performance that
exceeds typical performance.
``(3) Computer software.--
``(A) In general.--Any calculation under this subsection
shall be prepared by qualified computer software.
``(B) Qualified computer software.--For purposes of this
paragraph, the term `qualified computer software' means
software--
``(i) for which the software designer has certified that
the software meets all procedures and detailed methods for
calculating energy and power consumption and costs as
required by the Secretary,
``(ii) which provides such forms as required to be filed by
the Secretary in connection with energy efficiency of
property and the deduction allowed under this section, and
``(iii) which provides a notice form which summarizes the
energy efficiency features of the building and its projected
annual energy costs.
``(d) Allocation of Deduction for Public Property.--In the
case of energy efficient commercial building property
installed on or in public property, the Secretary shall
promulgate regulations to allow the allocation of the
deduction to the person primarily responsible for designing
the property in lieu of the public entity which is the owner
of such property. Such person shall be treated as the
taxpayer for purposes of this section.
``(e) Notice to Owner.--The qualified individual shall
provide an explanation to the owner of the building regarding
the energy efficiency features of the building and its
projected annual energy costs as provided in the notice under
subsection (c)(3)(B)(iii).
``(f) Certification.--
``(1) In general.--Except as provided in this subsection,
the Secretary, in consultation with the Secretary of Energy,
shall establish requirements for certification and compliance
procedures after examining the requirements for energy
consultants and home energy ratings providers specified by
the Mortgage Industry National Accreditation Procedures for
Home Energy Rating Systems.
``(2) Qualified individuals.--Individuals qualified to
determine compliance shall be only those individuals who are
recognized by an organization certified by the Secretary for
such purposes.
``(3) Proficiency of qualified individuals.--The Secretary
shall consult with nonprofit organizations and State agencies
with expertise in energy efficiency calculations and
inspections to develop proficiency tests and training
programs to qualify individuals to determine compliance.
``(g) Basis Reduction.--For purposes of this subtitle, if a
deduction is allowed under this section with respect to any
energy efficient commercial building property, the basis of
such property shall be reduced by the amount of the deduction
so allowed.
``(h) Termination.--This section shall not apply with
respect to any taxable year beginning after December 31,
2003.''.
(b) Conforming Amendment.--Section 1016(a), as amended by
section 211(b), is amended by striking ``and'' at the end of
paragraph (27), by striking the period at the end of
paragraph (28) and inserting ``, and'', and by inserting the
following new paragraph:
``(29) for amounts allowed as a deduction under section
199(a).''.
(c) Clerical Amendment.--The table of sections for part VI
of subchapter B of chapter 1 is amended by adding at the end
the following new item:
``Sec. 199. Energy property deduction.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 605. EXTENSION AND MODIFICATION OF TAX CREDIT FOR
ELECTRICITY PRODUCED FROM BIOMASS.
(a) Extension and Modification of Placed-in-Service
Rules.--
(1) In general.--Section 45(c)(3) is amended by adding at
the end the following new subparagraphs:
``(D) Biomass facility.--In the case of a facility using
biomass (other than closed-loop biomass) to produce
electricity, the term `qualified facility' means any facility
owned by the taxpayer which is originally placed in service
before January 1, 2002.
``(E) Landfill gas facility.--
``(i) In general.--In the case of a facility using landfill
gas to produce electricity, the term `qualified facility'
means any facility of the taxpayer which is originally placed
in service after December 31, 1999, and before January 1,
2002.
``(ii) Special rule.--In the case of a facility using
landfill gas, such term shall include equipment and housing
(not including wells and related systems required to collect
and transmit gas to the production facility) required to
generate electricity which are owned by the taxpayer and so
placed in service.
``(F) Special rule.--In the case of a qualified facility
described in subparagraph (D) or (E), the period referred to
in subsection (a)(2)(A)(ii) shall be applied by substituting
`3-year' for `10-year' and shall be treated as beginning no
earlier than January 1, 2001.''.
(2) Closed-loop biomass facility.--Section 45(c)(3)(B)
(relating to closed-loop biomass facility) is amended by
striking ``owned by the taxpayer'' and all that follows and
inserting ``owned by the taxpayer which is--''
``(i) originally placed in service after December 31, 1992,
and before January 1, 2002, or
``(ii) originally placed in service before December 31,
1992, and modified to use closed-loop biomass to co-fire with
coal after such date and before January 1, 2002.''.
(b) Expansion of Qualified Energy Resources.--
(1) In general.--Section 45(c)(1) (defining qualified
energy resources) is amended by striking ``and'' at the end
of subparagraph (B), by striking the period at the end of
subparagraph (C) and inserting a comma, and by adding at the
end the following new subparagraphs:
``(D) biomass (other than closed-loop biomass), and
``(E) landfill gas.''.
(2) Definitions.--Section 45(c) is amended by adding at the
end the following new paragraphs:
``(5) Biomass.--The term `biomass' means any solid,
nonhazardous, cellulosic waste material which is segregated
from other waste materials and which is derived from--
``(A) any of the following forest-related resources: mill
residues, precommercial thinnings, slash, and brush, but not
including old-growth timber,
``(B) urban sources, including waste pallets, crates, and
dunnage, manufacturing and construction wood wastes, and
landscape or right-of-way tree trimmings, but not including
unsegregated municipal solid waste (garbage), paper that is
commonly recycled, or pressure treated, chemically treated,
or lead painted wood wastes, or
``(C) agriculture sources, including orchard tree crops,
vineyard, grain, legumes, sugar, and other crop by-products
or residues.
``(6) Landfill gas.--The term `landfill gas' means gas from
the decomposition of any household solid waste, commercial
solid waste, and industrial solid waste disposed of in a
municipal solid waste landfill unit (as such terms are
defined in regulations promulgated under subtitle D of the
Solid Waste Disposal Act (42 U.S.C. 6941 et seq.)).''.
(c) Special Rules.--Section 45(d) (relating to definitions
and special rules) is amended by adding at the end the
following new paragraph:
``(8) Denial of double benefit.--No credit shall be allowed
under this section with respect to a facility for any taxable
year if the credit under section 29 is allowed in such year
or has been allowed in any preceding taxable year with
respect to any fuel produced from such facility.''.
(d) Conforming Amendment.--Section 29(d) (relating to other
definitions and special rules) is amended by adding at the
end the following new paragraph:
``(9) Denial of double benefit.--No credit shall be allowed
under this section with respect to any fuel produced from a
facility for any taxable year if the credit under section 45
is allowed in such year or has been allowed in any preceding
taxable year with respect to such facility.''.
(e) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 606. TAX CREDIT FOR CERTAIN ENERGY EFFICIENT MOTOR
VEHICLES.
(a) In General.--Subpart B of part IV of subchapter A of
chapter 1, as amended by section 160(a), is amended by adding
at the end the following new section:
``SEC. 30C. CREDIT FOR HYBRID VEHICLES.
``(a) Allowance of Credit.--There shall be allowed as a
credit against the tax imposed by this chapter for the
taxable year an amount equal to the sum of the credit amounts
for each qualified hybrid vehicle placed in service during
the taxable year.
``(b) Credit Amount.--For purposes of this section--
[[Page S9728]]
``(1) In general.--The credit amount for each qualified
hybrid vehicle with a rechargeable energy storage system that
provides the applicable percentage of the maximum available
power shall be the amount specified in the following table:
``Applicable percentage Credit amount
Not less than 5 percent but less than 10 percent................$500
Not less than 10 percent but less than 20 percent---..........$1,000
Not less than 20 percent but less than 30 percent---..........$1,500
Not less than 30 percent......................................$2,000.
``(2) Increase in credit amount for regenerative braking
system.--In the case of a qualified hybrid vehicle that
actively employs a regenerative braking system which supplies
to the rechargeable energy storage system the applicable
percentage of the energy available from braking in a typical
60 miles per hour to 0 miles per hour braking event, the
credit amount determined under this section shall be
increased by the amount specified in the following table:
``Applicable percentage Credit amount
Not less than 20 percent but less than 40 percent...............$250
Not less than 40 percent but less than 60 percent...............$500
Not less than 60 percent......................................$1,000.
``(c) Definitions.--For purposes of this section--
``(1) Qualified hybrid vehicle.--The term `qualified hybrid
vehicle' means an automobile that meets all applicable
regulatory requirements and that can draw propulsion energy
from both of the following onboard sources of stored energy:
``(A) A consumable fuel.
``(B) A rechargeable energy storage system.
``(2) Maximum available power.--The term `maximum available
power' means the maximum value of the sum of the heat engine
and electric drive system power or other nonheat energy
conversion devices available for a driver's command for
maximum acceleration at vehicle speeds under 75 miles per
hour.
``(3) Automobile.--The term `automobile' has the meaning
given such term by section 4064(b)(1) (without regard to
subparagraphs (B) and (C) thereof). A vehicle shall not fail
to be treated as an automobile solely by reason of weight if
such vehicle is rated at 8,500 pounds gross vehicle weight
rating or less.
``(d) Application With Other Credits.--The credit allowed
by subsection (a) for any taxable year shall not exceed the
excess (if any) of--
``(1) the regular tax for the taxable year reduced by the
sum of the credits allowable under subpart A and the
preceding sections of this subpart, over
``(2) the tentative minimum tax for the taxable year.
``(e) Special Rules.--
``(1) Basis reduction.--The basis of any property for which
a credit is allowable under subsection (a) shall be reduced
by the amount of such credit (determined without regard to
subsection (d)).
``(2) Recapture.--The Secretary shall, by regulations,
provide for recapturing the benefit of any credit allowable
under subsection (a) with respect to any property which
ceases to be property eligible for such credit.
``(3) Property used outside united states, etc., not
qualified.--No credit shall be allowed under this section
with respect to--
``(A) any property for which a credit is allowed under
section 30,
``(B) any property referred to in section 50(b), or
``(C) any property taken into account under section 179 or
179A.
``(4) Election to not take credit.--No credit shall be
allowed under subsection (a) for any vehicle if the taxpayer
elects to not have this section apply to such vehicle.
``(f) Regulations.--
``(1) Treasury.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.
``(2) Environmental protection agency.--The Administrator
of the Environmental Protection Agency, in coordination with
the Secretary of Transportation and consistent with the laws
administered by such agency for automobiles, shall timely
prescribe such regulations as may be necessary or appropriate
solely for the purpose of specifying the testing and
calculation procedures to determine whether a vehicle meets
the qualifications for a credit under this section.
``(g) Application of Section.--This section shall apply to
any qualified hybrid vehicles placed in service after
December 31, 2003, and before January 1, 2005.''
(b) Conforming Amendments.--
(1) Section 53(d)(1)(B)(iii) is amended by inserting ``or
not allowed under section 30C solely by reason of the
application of section 30C(d)(2)'' after ``section
30(b)(3)(B)''.
(2) Section 55(c)(2) is amended by inserting ``30C(d),''
after ``30(b)(3),''.
(3) Subsection (a) of section 1016, as amended by section
604(b), is amended by striking ``and'' at the end of
paragraph (28), by striking the period at the end of
paragraph (29) and inserting ``, and'', and by adding at the
end the following new paragraph:
``(30) to the extent provided in section 30C(e)(1).''.
(4) The table of sections for subpart B of part IV of
subchapter A of chapter 1, as amended by section 160(b), is
amended by adding at the end the following new item:
``Sec. 30C. Credit for hybrid vehicles.''.
TITLE VII--ADDITIONAL TAX PROVISIONS
SEC. 701. LIMITATION ON USE OF NONACCRUAL EXPERIENCE METHOD
OF ACCOUNTING.
(a) In General.--Section 448(d)(5) (relating to special
rule for services) is amended--
(1) by inserting ``in fields described in paragraph
(2)(A)'' after ``services by such person'', and
(2) by inserting ``certain personal'' before ``services''
in the heading.
(b) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years ending after the date of the enactment
of this Act.
(2) Change in method of accounting.--In the case of any
taxpayer required by the amendments made by this section to
change its method of accounting for its first taxable year
ending after the date of the enactment of this Act--
(A) such change shall be treated as initiated by the
taxpayer,
(B) such change shall be treated as made with the consent
of the Secretary of the Treasury, and
(C) the net amount of the adjustments required to be taken
into account by the taxpayer under section 481 of the
Internal Revenue Code of 1986 shall be taken into account
over a period (not greater than 4 taxable years) beginning
with such first taxable year.
SEC. 702. REPEAL OF SECTION 530(D) OF THE REVENUE ACT OF
1978.
(a) In General.--Section 530(d) of the Revenue Act of 1978
(as added by section 1706 of the Tax Reform Act of 1986) is
repealed.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to periods ending after the date of the enactment
of this Act.
SEC. 703. EXPANSION OF EXEMPTION FROM PERSONAL HOLDING
COMPANY TAX FOR LENDING OR FINANCE COMPANIES.
(a) In General.--Paragraph (6) of section 542(c) (defining
personal holding company) is amended--
(1) by striking ``rents,'' in subparagraph (B), and
(2) by adding ``and'' at the end of subparagraph (B),
(3) by striking subparagraph (C), and
(4) by redesignating subparagraph (D) as subparagraph (C).
(b) Exception for Lending or Finance Companies Determined
on Affiliated Group Basis.--Subsection (d) of section 542 is
amended by striking paragraphs (1) and (2) and inserting the
following new paragraphs:
``(1) Lending or finance business defined.-- For purposes
of subsection (c)(6), the term `lending or finance business'
means a business of--
``(A) making loans,
``(B) purchasing or discounting accounts receivable, notes,
or installment obligations,
``(C) engaging in leasing (including entering into leases
and purchasing, servicing, and disposing of leases and leased
assets),
``(D) rendering services or making facilities available in
the ordinary course of a lending or finance business,
``(E) rendering services or making facilities available in
connection with activities described in subparagraphs (A),
(B), and (C) carried on by the corporation rendering services
or making facilities available, or
``(F) rendering services or making facilities available to
another corporation which is engaged in the lending or
finance business (within the meaning of this paragraph), if
such services or facilities are related to the lending or
finance business (within such meaning) of such other
corporation and such other corporation and the corporation
rendering services or making facilities available are members
of the same affiliated group (as defined in section 1504).
``(2) Exception determined on an affiliated group basis.--
In the case of a lending or finance company which is a member
of an affiliated group (as defined in section 1504), such
company shall be treated as meeting the requirements of
subsection (c)(6) if such group (determined by taking into
account only members of such group which are engaged in a
lending or finance business) meets such requirements.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 704. CHARITABLE CONTRIBUTION DEDUCTION FOR CERTAIN
EXPENSES INCURRED IN SUPPORT OF NATIVE ALASKAN
SUBSISTENCE WHALING.
(a) In General.--Section 170 (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) Expenses Paid by Certain Whaling Captains in Support
of Native Alaskan Subsistence Whaling.--
``(1) In general.--In the case of an individual who is
recognized by the Alaska Eskimo Whaling Commission as a
whaling captain charged with the responsibility of
maintaining and carrying out sanctioned whaling activities
and who engages in such activities during the taxable year,
the amount described in paragraph (2) (to the extent such
amount does not exceed $7,500 for the taxable year) shall be
treated for purposes of this section as a charitable
contribution.
``(2) Amount described.--
``(A) In general.--The amount described in this paragraph
is the aggregate of the reasonable and necessary whaling
expenses paid by the taxpayer during the taxable year in
carrying out sanctioned whaling activities.
[[Page S9729]]
``(B) Whaling expenses.--For purposes of subparagraph (A),
the term `whaling expenses' includes expenses for--
``(i) the acquisition and maintenance of whaling boats,
weapons, and gear used in sanctioned whaling activities,
``(ii) the supplying of food for the crew and other
provisions for carrying out such activities, and
``(iii) storage and distribution of the catch from such
activities.
``(3) Sanctioned whaling activities.--For purposes of this
subsection, the term `sanctioned whaling activities' means
subsistence bowhead whale hunting activities conducted
pursuant to the management plan of the Alaska Eskimo Whaling
Commission.''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to taxable years ending after December 31, 2000.
SEC. 705. IMPOSITION OF EXCISE TAX ON PERSONS WHO ACQUIRE
STRUCTURED SETTLEMENT PAYMENTS IN FACTORING
TRANSACTIONS.
(a) In General.--Subtitle E is amended by adding at the end
the following new chapter:
``CHAPTER 55--STRUCTURED SETTLEMENT FACTORING TRANSACTIONS
``Sec. 5891. Structured settlement factoring transactions.
``SEC. 5891. STRUCTURED SETTLEMENT FACTORING TRANSACTIONS.
``(a) Imposition of Tax.--There is hereby imposed on any
person who acquires directly or indirectly structured
settlement payment rights in a structured settlement
factoring transaction a tax equal to 40 percent of the
factoring discount as determined under subsection (c)(4) with
respect to such factoring transaction.
``(b) Exception for Certain Approved Transactions.--
``(1) In general.--The tax under subsection (a) shall not
apply in the case of a structured settlement factoring
transaction in which the transfer of structured settlement
payment rights is approved in advance in a qualified order.
``(2) Qualified order.--For purposes of this section, the
term `qualified order' means a final order, judgment, or
decree which--
``(A) finds that the transfer described in paragraph (1)--
``(i) does not contravene any Federal or State statute or
the order of any court or responsible administrative
authority, and
``(ii) is in the best interest of the payee, taking into
account the welfare and support of the payee's dependents,
and
``(B) is issued--
``(i) under the authority of an applicable State statute by
an applicable State court, or
``(ii) by the responsible administrative authority (if any)
which has exclusive jurisdiction over the underlying action
or proceeding which was resolved by means of the structured
settlement.
``(3) Applicable state statute.--For purposes of this
section, the term `applicable State statute' means a statute
providing for the entry of an order, judgment, or decree
described in paragraph (2)(A) which is enacted by--
``(A) the State in which the payee of the structured
settlement is domiciled, or
``(B) if there is no statute described in subparagraph (A),
the State in which either the party to the structured
settlement (including an assignee under a qualified
assignment under section 130) or the person issuing the
funding asset for the structured settlement is domiciled or
has its principal place of business.
``(4) Applicable state court.--For purposes of this
section--
``(A) In general.--The term `applicable State court' means,
with respect to any applicable State statute, a court of the
State which enacted such statute.
``(B) Special rule.--In the case of an applicable State
statute described in paragraph (3)(B), such term also
includes a court of the State in which the payee of the
structured settlement is domiciled.
``(5) Qualified order dispositive.--A qualified order shall
be treated as dispositive for purposes of the exception under
this subsection.
``(c) Definitions.--For purposes of this section--
``(1) Structured settlement.--The term `structured
settlement' means an arrangement--
``(A) which is established by--
``(i) suit or agreement for the periodic payment of damages
excludable from the gross income of the recipient under
section 104(a)(2), or
``(ii) agreement for the periodic payment of compensation
under any workers' compensation act excludable from the gross
income of the recipient under section 104(a)(1), and
``(B) under which the periodic payments are--
``(i) of the character described in subparagraphs (A) and
(B) of section 130(c)(2), and
``(ii) payable by a person who is a party to the suit or
agreement or to the workers' compensation claim or by a
person who has assumed the liability for such periodic
payments under a qualified assignment in accordance with
section 130.
``(2) Structured settlement payment rights.--The term
`structured settlement payment rights' means rights to
receive payments under a structured settlement.
``(3) Structured settlement factoring transaction.--
``(A) In general.--The term `structured settlement
factoring transaction' means a transfer of structured
settlement payment rights (including portions of structured
settlement payments) made for consideration by means of sale,
assignment, pledge, or other form of encumbrance or
alienation for consideration.
``(B) Exception.--Such term shall not include--
``(i) the creation or perfection of a security interest in
structured settlement payment rights under a blanket security
agreement entered into with an insured depository institution
in the absence of any action to redirect the structured
settlement payments to such institution (or agent or
successor thereof) or otherwise to enforce such blanket
security interest as against the structured settlement
payment rights, or
``(ii) a subsequent transfer of structured settlement
payment rights acquired in a structured settlement factoring
transaction.
``(4) Factoring discount.--The term `factoring discount'
means an amount equal to the excess of--
``(A) the aggregate undiscounted amount of structured
settlement payments being acquired in the structured
settlement factoring transaction, over
``(B) the total amount actually paid by the acquirer to the
person from whom such structured settlement payments are
acquired.
``(5) Responsible administrative authority.--The term
`responsible administrative authority' means the
administrative authority which had jurisdiction over the
underlying action or proceeding which was resolved by means
of the structured settlement.
``(6) State.--The term `State' includes any possession of
the United States.
``(d) Coordination With Other Provisions.--
``(1) In general.--If the applicable requirements of
sections 72, 104(a) (1) and (2), 130, and 461(h) were
satisfied at the time the structured settlement was entered
into, the subsequent occurrence of a structured settlement
factoring transaction shall not affect the application of the
provisions of such sections to the parties to the structured
settlement (including an assignee under a qualified
assignment under section 130) in any taxable year.
``(2) No withholding of tax.--The provisions of section
3405 regarding withholding of tax shall not apply to the
person making the payments in the event of a structured
settlement factoring transaction.''.
(b) Clerical Amendments.--The table of chapters for
subtitle E is amended by adding at the end the following new
item:
``Chapter 55. Structured settlement factoring transactions.''.
(c) Effective Dates.--
(1) In general.--The amendments made by this section (other
than the provisions of section 5891(d) of the Internal
Revenue Code of 1986, as added by this section) shall apply
to structured settlement factoring transactions (as defined
in section 5891(c) of such Code as adopted by this section)
entered into on or after the 30th day following the date of
the enactment of this Act.
(2) Clarification of existing law.--Section 5891(d) of such
Code (as so added) shall apply to transactions entered into
before, on, or after such 30th day.
(3) Transition rule.--In the case of a structured
settlement factoring transaction entered into during the
period beginning on the 30th day following the date of the
enactment of this Act and ending on July 1, 2002, no tax
shall be imposed under section 5891(a) of such Code if--
(A) the structured settlement payee is domiciled in a State
(or possession of the United States) which has not enacted a
statute providing that the structured settlement factoring
transaction is ineffective unless the transaction has been
approved by an order, judgment, or decree of a court (or
where applicable, a responsible administrative authority)
which finds that such transaction--
(i) does not contravene any Federal or State statute or the
order of any court (or responsible administrative authority),
and
(ii) is in the best interest of the structured settlement
payee or is appropriate in light of a hardship faced by the
payee, and
(B) the person acquiring the structured settlement payment
rights discloses to the structured settlement payee in
advance of the structured settlement factoring transaction
the amounts and due dates of the payments to be transferred,
the aggregate amount to be transferred, the consideration to
be received by the structured settlement payee for the
transferred payments, the discounted present value of the
transferred payments including the present value as
determined in the manner described in section 7520 of such
Code, and the expenses required under the terms of the
structured settlement factoring transaction to be paid by the
structured settlement payee or deducted from the proceeds of
such transaction.
____
TECHNICAL EXPLANATION OF S. 3152, THE ``COMMUNITY RENEWAL AND NEW
MARKETS ACT OF 2000''
Introduction
This document prepared by the staff of the Joint Committee
on Taxation provides a technical explanation of S. 3152, the
``Community Renewal and New Markets Act of 2000.'' The
Community Renewal and New Markets Act of 2000 provides
various tax incentives for distressed communities, affordable
housing, urban and rural infrastructure, the production of
energy, conservation, tax
[[Page S9730]]
relief for farmers, and several additional tax provisions.
I. INCENTIVES FOR DISTRESSED AREAS
A. Tax Incentives for Renewal Zones and Empowerment Zones (Secs. 101
and 111-115 of the Bill and Secs. 1391, 1394, 1396, 1397A-D, and New
Sec. 1400E of the Code)
Present Law
In recent years, provisions have been added to the Internal
Revenue Code that target specific geographic areas for
special Federal income tax treatment. As described in greater
detail below, empowerment zones and enterprise communities
generally provide tax incentives for businesses that locate
within certain geographic areas designated by the Secretaries
of Housing and Urban Development (``HUD'') and Agriculture.
Round I empowerment zones
The Omnibus Budget Reconciliation Act of 1993 (``OBRA
1993'') authorized the designation of nine empowerment zones
(``Round I empowerment zones'') to provide tax incentives for
businesses to locate within targeted areas designated by the
Secretaries of HUD and Agriculture. The Taxpayer Relief Act
of 1997 (``1997 Act'') authorized the designation of two
additional Round I urban empowerment zones.
Businesses in the 11 Round I empowerment zones qualify for
the following tax incentives: (1) a 20-percent wage credit
for the first $15,000 of wages paid to a zone resident who
works in the empowerment zone, (2) an additional $20,000 of
section 179 expensing for qualifying zone property, and (3)
tax-exempt financing for certain qualifying zone facilities.
The tax incentives with respect to the empowerment zones
designated by OBRA 1993 generally are available during the
10-year period of 1995 through 2004. The tax incentives with
respect to the two additional Round I empowerment zones
generally are available during the 10-year period of 2000
through 2009.
Round II empowerment zones
The 1997 Act also authorized the designation of 20
additional empowerment zones (``Round II empowerment
zones''), of which 15 are located in urban areas and five are
located in rural areas. Businesses in the Round II
empowerment zones are not eligible for the wage credit, but
are eligible to receive up to $20,000 of additional section
179 expensing. Businesses in the Round II empowerment zones
also are eligible for more generous tax-exempt financing
benefits than those available in the Round I empowerment
zones. Specifically, the tax-exempt financing benefits for
the Round II empowerment zones are not subject to the State
private activity bond volume caps (but are subject to
separate per-zone volume limitations), and the per-business
size limitations that apply to the Round I empowerment zones
and enterprise communities (i.e., $3 million for each
qualified enterprise zone business with a maximum of $20
million for each principal user for all zones and
communities) do not apply to qualifying bonds issued for
Round II empowerment zones. The tax incentives with respect
to the Round II empowerment zones generally are available
during the 10-year period of 1999 through 2008.
Explanation of Provision
Overview
As described in detail below, the provision conforms the
wage credit and tax-exempt bond incentives for the Round I
and Round II empowerment zones and extends their designations
through December 31, 2009. The provision also increases the
incentives to existing empowerment zones by (1) increasing
the additional section 179 deduction to $35,000, and (2)
providing a zero-percent capital gain rate for qualifying
assets held for more than five years.
In addition, the provision authorizes the Secretaries of
HUD and Agriculture to designate 30 new ``renewal zones''
that have the same tax incentives as empowerment zones. The
designations of the new renewal zones will take effect on
January 1, 2002, and terminate on December 31, 2009.
Thus, once the 30 new renewal zones have been designated
there will exist a total of 61 zones providing similar tax
incentives for distressed areas, all of whose designations
will terminate on December 31, 2009. The renewal zones are
treated as empowerment zones for all purposes of the Code.
After taking into account existing empowerment zones (and the
designation of the new renewal zones), each State shall have
at least one zone.
Existing zones
Conforming and enhancing incentives for Round I and Round
II empowerment zones.--The provision extends the designation
of empowerment zone status for Round I and II
empowerment zones through December 31, 2009. In addition,
a 15-percent wage credit is made available in all Round I
and II empowerment zones, effective in 2002 (except in the
case of the two additional Round I empowerment zones, for
which the 15-percent wage credit takes effect in 2005 as
scheduled under present law). For all the empowerment
zones, the 15-percent wage credit expires on December 31,
2009.
In addition, $35,000 (rather than $20,000) of additional
section 179 expensing is available for qualified zone
property placed in service in taxable years beginning after
December 31, 2001, by a qualified business in any of the
empowerment zones.
Businesses located in Round I empowerment zones are
eligible for the more generous tax-exempt bond rules that
apply under present law to businesses in the Round II
empowerment zones (sec. 1394(f)). The proposal applies to
tax-exempt bonds issued after December 31, 2001. Bonds that
have been issued by businesses in Round I zones before
January 1, 2002, are not taken into account in applying the
limitations on the amount of new empowerment zone facility
bonds that can be issued under the provision.
Businesses located in any empowerment zone also qualify for
a zero-percent capital gains rate for gain from the sale of a
qualifying zone assets acquired after date of enactment and
before January 1, 2010, and held for more than five years.
Assets that would qualify for this incentive would be similar
to the types of assets that qualify for the present-law zero
percent capital gains rate for qualifying D.C. Zone assets.
The zero-percent capital gains rate is limited to an
aggregate amount not to exceed $25 million of gain per
taxpayer. Gain attributable to the period before the date of
enactment or after December 31, 2014, is not eligible for the
zero-percent rate.
Renewal zones
Designation of 30 renewal zones.--The Secretaries of HUD
and Agriculture are authorized to designate up to 30 renewal
zones from areas nominated by States and local governments.
At least six of the designated renewal zones must be in rural
areas. The Secretary of HUD is required to publish (within
four months after enactment) regulations describing the
nomination and selection process. Designations of renewal
zones must be made before January 1, 2002, and the
designations are effective for the period beginning on
January 1, 2002 through December 31, 2009.
Eligibility criteria.--To be designated as a renewal zone,
a nominated area must meet the following criteria: (1) each
census tract must have a poverty rate of at least 20 percent;
(2) in the case of an urban area, at least 70 percent of the
households have incomes below 80 percent of the median income
of households within the local government jurisdiction; (3)
the unemployment rate is at least 1.5 times the national
unemployment rate; and (4) the area is one of pervasive
poverty, unemployment, and general distress. In general, the
areas with the highest average ranking of eligibility factors
(1), (2) and (3), above will be designated as renewal zones.
States without any empowerment zone would be given priority
in the designation process. Moreover, the designations of
renewal zones must result in (after taking into account
existing empowerment zones) each State having at least one
zone designation (empowerment or renewal zone).
There are no geographic size limitations placed on renewal
zones. Instead, the boundary of a renewal zone must be
continuous. In addition, a renewal zone must have a minimum
population of 4,000 if the area is located within a
metropolitan statistical area (at least 1,000 in all other
cases), and a maximum population of not more than 200,000.
The population limitations do not apply to any renewal zone
that is entirely within an Indian reservation.
Required State and local commitments.--In order for an area
to be designated as a renewal zone, State and local
governments are required to submit a written course of action
in which the State and local governments promise to take at
least four of the following governmental actions: (1) a
reduction of tax rates or fees; (2) an increase in the level
of efficiency of local services; (3) crime reduction
strategies; (4) actions to remove or streamline governmental
requirements; (5) involvement by private entities and
community groups, such as to provide jobs and job training
and financial assistance; and (6) the gift (or sale at below
fair market value) of surplus realty by the State or local
government to community organizations or private companies.
Enterprise community seeking designation as renewal
zones.--An enterprise community can apply for designation as
a renewal zone. In selecting a nominated area as a renewal
zone, the Secretary shall take into account the status of a
nominated area as an enterprise community. If a renewal zone
designation is granted, then an area's designation as an
enterprise community ceases as of the date the area's
designation as a renewal zone takes effect.
Tax incentives for renewal zones.--Businesses in renewal
zones will have the same tax incentives as businesses in
existing empowerment zones (as modified by this provision),
which will be available during the period beginning January
1, 2002 and ending December 31, 2009 (i.e., a zero percent
capital gains rate for qualifying assets; a 15-percent wage
credit for qualifying wages; $35,000 in additional 179
expensing for qualifying property; and the enhanced tax-
exempt bond rules that currently apply to businesses in the
Round II empowerment zones).
GAO report.--The General Accounting Office will audit and
report to Congress every three years (beginning on January
31, 2004) on the renewal zone program and its effect on
poverty, unemployment, and economic growth within the
designated renewal zones.
effective date
The extension of the existing empowerment zone designations
is effective after the date of enactment.
The additional section 179 expensing and the more generous
tax-exempt bond rules for the existing empowerment zones is
effective after December 31, 2001. The zero-percent capital
gains rate applies to qualifying property purchased after the
date of enactment
[[Page S9731]]
(after December 31, 2001 in the case of renewal zones).
The 15-percent wage credit generally is effective for
qualifying wages paid after December 31, 2001. With respect
to the two additional Round I empowerment zones, however, the
wage credit is effective for qualifying wages paid after
December 31, 2004.
The 30 new renewal zones must be designated by January 1,
2002, and the resulting tax benefits will be available for
the period beginning January 1, 2002, and ending December 31,
2009.
B. Funding for Round II Empowerment Zones (Sec. 116 of the Bill)
The provision provides a one-time grant in fiscal year 2001
of $5,000,000 for each of the 15 urban empowerment zones
designated pursuant to the Taxpayer Relief Act of 1997, and
$2,000,000 for each of the 5 rural empowerment zones
designated pursuant to the Taxpayer Relief Act of 1997.
The provision also provides a one-time grant $250,000 for
each of the remaining Round I enterprise communities (i.e.,
those that have not become empowerment zones).
C. Extension and Expansion of District of Columbia Enterprise Zone
(``D.C. Zone'')
1. Extension of D.C. Zone (Sec. 121 of the Bill and Secs. 1400 and
1400A of the Code)
present law
The 1997 Act designated certain economically depressed
census tracts within the District of Columbia as the District
of Columbia Enterprise Zone (the ``D.C. Zone''), within which
businesses and individual residents are eligible for special
tax incentives. The D.C. Zone designation remains in effect
for the period from January 1, 1998, through December 31,
2002. In addition to the tax incentives available with
respect to a Round I empowerment zone (including a wage
credit), the D.C. Zone also has a zero-percent capital gains
rate that applies to gain from the sale of certain qualified
D.C. Zone assets acquired after December 31, 1997 and held
for more than five years.
With respect to the tax-exempt financing incentives, the
D.C. Zone generally is treated like a Round I empowerment
zone; therefore, the issuance of such bonds is subject to the
District of Columbia's annual private activity bond volume
limitation. However, the aggregate face amount of all
outstanding qualified enterprise zone facility bonds per
qualified D.C. Zone business may not exceed $15 million
(rather than $3 million, as is the case for Round I
empowerment zones).
explanation of provision
The provision extends the D.C. Zone designation through
December 31, 2006. The provision also conforms the D.C. zone
wage credit to the wage credit for existing empowerment
zones, so that a 15-percent wage credit applies with respect
to qualifying wages beginning in 2003 (and ending on December
31, 2006).
effective date
The provision extending the designation is effective after
the date of enactment. For the D.C. Enterprise Zone, the 15-
percent wage credit is effective for qualifying wages paid
after December 31, 2002.
2. Extension of Zero-Percent Capital Gains Rate for D.C. Zone Assets
(Sec. 122 of the Bill and Sec. 1400B of the Code)
present law
Present law provides a zero-percent capital gains rate for
capital gains from the sale of certain qualified D.C. Zone
assets held for more than five years. In general, a ``D.C.
Zone asset'' means stock or partnership interests held in, or
tangible assets held by, a D.C. Zone business. A D.C. Zone
business generally refers to certain enterprise zone
businesses within the D.C. Zone. For purposes of the zero-
percent capital gains rate, the D.C. Zone is defined to
include all census tracts within the District of Columbia
where the poverty rate is not less than 10 percent as
determined on the basis of the 1990 Census (sec. 1400B(d)).
explanation of provision
The provision eliminates the 10-percent poverty rate
limitation for purposes of the zero-percent capital gains
rate. Thus, the zero-percent capital gains rate applies to
capital gains from the sale of assets held more than five
years attributable to certain qualifying businesses located
in the District of Columbia.
effective date
The provision is effective for D.C. Zone business stock and
partnership interests originally issued after, and D.C. Zone
business property assets originally acquired by the taxpayer
after, December 31, 2000.
3. Gross Income Test for D.C. Zone Businesses (Sec. 123 of the Bill and
Sec. 1400B of the Code)
present law
A zero-percent capital gains rate applies to gain from the
sale of certain qualified D.C. zone assets. In general, a
D.C. Zone asset means stock or partnership interests held in,
or tangible property held by, a D.C. Zone business. A D.C.
Zone business generally refers to certain enterprise zone
businesses within the D.C. Zone, except that 80 percent of
the total gross income of the entity must be derived from the
active conduct of the business (sec. 1400B(c)(2)).
explanation of provision
The provision reduces the level of gross income needed to
qualify as a D.C. Zone business to 50 percent.
effective date
The provision is effective for D.C. Zone business stock and
partnership interest originally issued after, and D.C. Zone
business property originally acquired by the taxpayer after,
December 31, 2000.
4. Expansion of District of Columbia Homebuyer Tax Credit (Sec. 124 of
the Bill and Sec. 1400C of the Code)
present law
First-time homebuyers of a principal residence in the
District of Columbia are eligible for a nonrefundable tax
credit of up to $5,000 of the amount of the purchase price.
The $5,000 maximum credit applies both to individuals and
married couples. Married individuals filing separately can
claim a maximum credit of $2,500 each. The credit phases out
for individual taxpayers with adjusted gross income between
$70,000 and $90,000 ($110,000-$130,000 for joint filers). For
purposes of eligibility, ``first-time homebuyer'' means any
individual if such individual did not have a present
ownership interest in a principal residence in the District
of Columbia in the one year period ending on the date of the
purchase of the residence to which the credit applies. The
credit is scheduled to expire for residences purchased after
December 31, 2001.
explanation of provision
The provision extends the first-time homebuyer credit for
two years, through December 31, 2003. The provision also
extends the phase-out range for married individuals filing a
joint return so that it is twice that of individuals. Thus,
under the provision, the District of Columbia homebuyer
credit is phased out for joint filers with adjusted gross
income between $140,000 and $180,000.
effective date
The provision is effective for taxable years beginning
after December 31, 2000.
D. New Markets Tax Credit (Section 131 of the Bill and New Sec. 45D of
the Code)
Present Law
Some tax incentives are available to taxpayers making
investments and loans in low-income communities. For example,
tax incentives are available to taxpayers that invest in
specialized small business investment companies licensed by
the Small Business Administration to make loans to, or equity
investments in, small businesses owned by persons who are
socially or economically disadvantaged.
Explanation of Provision
The provision creates a new tax credit for qualified equity
investments made to acquire stock in a selected community
development entity (``CDE''). The maximum annual amount of
qualifying equity investments is capped as follows:
------------------------------------------------------------------------
Maximum qualifying equity
Calendar year investment
------------------------------------------------------------------------
2002...................................... $1.0 billion
2003-2006................................. 1.5 billion per year
------------------------------------------------------------------------
The amount of the new tax credit to the investor (either
the original purchaser or a subsequent holder) is (1) a five-
percent credit for the year in which the equity interest is
purchased from the CDE and the first two anniversary dates
after the interest is purchased from the CDE, and (2) a six-
percent credit on each anniversary date thereafter for the
following four years. The taxpayer's basis in the investment
is reduced by the amount of the credit (other than for
purposes of calculating the zero-percent capital gains rules
and section 1202). The credit is subject to the general
business credit rules.
A CDE is any domestic corporation or partnership (1) whose
primary mission is serving or providing investment capital
for low-income communities or low-income persons, (2) that
maintains accountability to residents of low-income
communities through the representation of the residents on
governing or advisory boards of the CDE, and (3) is certified
by the Treasury Department as an eligible CDE. No later than
120 days after enactment, the Treasury Department will issue
guidance that specifies objective criteria to be used by the
Treasury to allocate the credits among eligible CDEs. In
allocating the credits, the Treasury Department will give
priority to entities with records of having successfully
provided capital or technical assistance to disadvantaged
businesses or communities, as well as to entities that intend
to invest substantially all of the proceeds they receive from
their investors in businesses in which persons unrelated to
the CDE hold the majority equity interest.
If a CDE fails to sell equity interests to investors up to
the amount authorized within five years of the authorization,
then the remaining authorization is canceled. The Treasury
Department can authorize another CDE to issue equity
interests for the unused portion. No authorization can be
made after 2013.
A ``qualified equity investment'' is defined as stock or a
similar equity interest acquired directly from a CDE in
exchange for cash. Substantially all of the investment
proceeds must be used by the CDE to make ``qualified low-
income community investments.'' Qualified low-income
community investments include: (1) capital or equity
investments in, or loans to, qualified active businesses
located in low-income communities, (2) certain financial
counseling and other services specified in regulations to
businesses and residents in low-income communities, (3) the
purchase from another CDE of any loan made by such entity
that is a qualified low
[[Page S9732]]
income community investment, or (4) an equity investment in,
or loans to, another CDE. Treasury Department regulations
will provide guidance with respect to the ``substantially
all'' standard.
The stock or equity interest cannot be redeemed (or
otherwise cashed out) by the CDE for at least seven years. If
the entity ceases to be a qualified CDE during the seven-year
period following the taxpayer's investment, or if the equity
interest is redeemed by the issuing CDE during that seven-
year period, then any credits claimed with respect to the
equity interest are recaptured (with interest) and no further
credits are allowed.
A ``low-income community'' is defined as census tracts
with: (1) poverty rates of at least 20 percent (based on the
most recent census data), or (2) median family income which
does not exceed 80 percent of the greater of metropolitan
area income or statewide median family income (for a non-
metropolitan census tract, 80 percent of non-metropolitan
statewide median family income). The Secretary also may
designate any area within any census tract as a ``low income
community'' provided that (1) the boundary of the area is
continuous, (2) the area (if it were a census tract) would
satisfy the poverty rate or median income requirements set
forth above within the targeted area, and (3) an inadequate
access to investment capital exists in the area.
A ``qualified active business'' is defined as a business
which satisfies the following requirements: (1) at least 50
percent of the total gross income of the business is derived
from the active conduct of trade or business activities in
low-income communities; (2) a substantial portion of the use
of the tangible property of such business is used within low-
income communities; (3) a substantial portion of the services
performed for such business by its employees is performed in
low-income communities; and (4) less than 5 percent of the
average aggregate of unadjusted bases of the property of such
business is attributable to certain financial property or to
collectibles (other than collectibles held for sale to
customers). There is no requirement that employees of the
business be residents of the low income community.
Rental of improved commercial real estate located in a low-
income community is a qualified active business, regardless
of the characteristics of the commercial tenants of the
property. The purchase and holding of unimproved real estate
is not a qualified active business. In addition, a qualified
active business does not include (a) any business consisting
predominantly of the development or holding of intangibles
for sale or license; or (b) operation of any facility
described in sec. 144(c)(6)(B). A qualified active business
can include an organization that is organized on a non-profit
basis.
The General Accounting Office will audit and report to
Congress by January 31, 2004 (and again by January 31, 2007)
on the new markets program, including on all qualified
community development entities that receive an allocation
under the new markets tax credit.
Effective Date
The provision is effective for qualified investments made
after December 31, 2001.
E. Modification of Puerto Rico Economic Activity Tax Credit (Sec. 141
of the Bill and Sec. 30A of the Code)
Present Law
The Small Business Job Protection Act of 1996 generally
repealed the Puerto Rico and possession tax credit. However,
certain domestic corporations that had active business
operations in Puerto Rico or another U.S. possession on
October 13, 1995, may continue to claim credits under section
936 or section 30A for a 10-year transition period. Such
credits apply to possession business income, which is derived
from the active conduct of a trade or business within a U.S.
possession or from the sale or exchange of substantially all
of the assets that were used in such a trade or business. In
contrast to the foreign tax credit, the Puerto Rico and
possession tax credit is granted whether or not the
corporation pays income tax to the possession.
One of two alternative limitations is applicable to the
amount of the credit attributable to possession business
income. Under the economic activity limit, the amount of the
credit with respect to such income cannot exceed the sum of a
portion of the taxpayer's wage and fringe benefit expenses
and depreciation allowances (plus, in certain cases,
possession income taxes); beginning in 2002, the income
eligible for the credit computed under this limit generally
is subject to a cap based on the corporation's pre-1996
possession business income adjusted for inflation. Under the
alternative limit, the amount of the credit is limited to the
applicable percentage (40 percent for 1998 and thereafter) of
the credit that would otherwise be allowable with respect to
possession business income; beginning in 1998, the income
eligible for the credit computed under this limit generally
is subject to a cap based on the corporation's pre-1996
possession business income. Special rules apply in computing
the credit with respect to operations in Guam, American
Samoa, and the Commonwealth of the Northern Mariana Islands.
The credit expires for taxable years beginning after December
31, 2005.
Explanation of Provision
The bill modifies the credit computed under the economic
activity limit with respect to operations in Puerto Rico
only. First, the proposal expands the lines of business
eligible under the credit to include new lines of business
established in Puerto Rico after December 31, 2000, and
before January 1, 2005 by existing credit claimants. These
``new opportunity credit'' claimants are eligible to claim
credits in taxable years beginning before January 1, 2006. In
addition, income eligible for the credit computed under the
economic activity limitation is subject to the present-law
income limitation. Also, these ``new opportunity credit''
claimants are required to calculate their credit in each
taxable year, but claim that amount of credit over a five-
year period (on a pro-rata basis) beginning the year in which
the credit is earned.
In addition, for existing credit claimants, the present-law
limitation on income eligible for the credit for any taxable
year is increased by the ratio of the average number of full-
time employees of the taxpayer during the taxable year to the
average number of full-time employees of the taxpayer in 1995
and 1996.
Effective Date
The provision applies to taxable years beginning after
December 31, 2000.
F. Creation of Individual Development Accounts (Secs. 731-741 of the
Bill and New Sec. 530A of the Code)
Present Law
There are no tax benefits to encourage financial
institutions to match savings of low-income individuals.
Explanation of Provision
In general
The bill creates individual development accounts (``IDAs'')
to which eligible individuals can contribute, annually, the
lesser of: (1) $2,000; or (2) the individual's taxable
compensation for the year. An eligible individual is an
individual who is: (1) at least 18 years of age; (2) a
citizen or legal resident of the United States; and (3) a
member of a household with family gross income of 60 percent
or less of national median gross income and a net worth of
$10,000 or less.
Contributions to an IDA by eligible individuals
Only eligible individuals are allowed to contribute to an
IDA. Contributions to IDAs by individuals are not deductible,
and earnings on such contributions are includible in income.
Matching contributions
The bill provides a maximum annual tax credit of $270 (90
percent of $300) to a financial institution that makes
matching contributions to the IDAs of individuals. This
credit is available in each year that a matching contribution
is made. An additional $100 tax credit would be allowed for
each account opened. The credit is for the costs incurred to
open and maintain the account, as well as to provide
financial education. The credits could be claimed by the
financial institution or its contractual affiliates. It is
anticipated that a financial institution may collaborate with
one or more contractual affiliates, non-profits, or Indian
tribes to carry out the IDA program. Contractual affiliates
who provide matching funds should be eligible to receive the
matching tax credit.
Matching contributions (and earnings thereon) are not
includible in the gross income of the eligible individual.
If an individual withdraws his or her own IDA contributions
(or earnings thereon) for a purpose other than a qualified
purpose, then the matching contribution attributable to such
individual contribution is forfeited. Matching contributions
can be withdrawn only for the following qualified purposes:
(1) certain educational expenses; (2) first-time homebuyer
expenses; (3) business start-up or expansion purposes; and
(4) qualified rollovers.
Effect on means-tested programs
Any amounts in the IDA are not to be taken into account for
certain Federal means-tested programs.
Effective Date
The tax credit provision is effective for contributions to
IDAs and matching contributions made with respect to such
IDAs after December 31, 2001, and before January 1, 2006.
G. Additional Incentives
1. Exclusion of certain amounts received under the National Health
Service Corps Scholarship Program and the F. Edward Hebert Armed Forces
Health Professions Scholarship and Financial Assistance Program (sec.
171 of the bill and sec. 117 of the Code)
Present Law
The National Health Service Corps Scholarship Program (the
``NHSC Scholarship Program'') and the F. Edward Hebert Armed
Forces Health Professions Scholarship and Financial
Assistance Program (the ``Armed Forces Scholarship Program'')
provide education awards to participants on condition that
the participants provide certain services. In the case of the
NHSC Scholarship Program, the recipient of the scholarship is
obligated to provide medical services in a geographic area
(or to an underserved population group or designated
facility) identified by the Public Health Service as having a
shortage of health-care professionals. In the case of the
Armed Forces Scholarship Program, the recipient of the
scholarship is obligated to serve a certain number of years
in the military at an armed forces medical facility. Because
the recipients are required to perform services in exchange
for the education awards, the awards used to pay higher
[[Page S9733]]
education expenses are taxable income to the recipient.
Section 117 excludes from gross income amounts received as
a qualified scholarship by an individual who is a candidate
for a degree and used for tuition and fees required for the
enrollment or attendance (or for fees, books, supplies, and
equipment required for courses of instruction) at a primary,
secondary, or post-secondary educational institution. The
tax-free treatment provided by section 117 does not extend to
scholarship amounts covering regular living expenses, such as
room and board. In addition to the exclusion for qualified
scholarships, section 117 provides an exclusion from gross
income for qualified tuition reductions for certain education
provided to employees (and their spouses and dependents) of
certain educational organizations.
Section 117(c) specifically provides that the exclusion for
qualified scholarships and qualified tuition reductions does
not apply to any amount received by a student that represents
payment for teaching, research, or other services by the
student required as a condition for receiving the scholarship
or tuition reduction.
Section 134 provides that any ``qualified military
benefit,'' which includes any allowance, is excluded from
gross income if received by a member or former member of the
uniformed services if such benefit was excludable from gross
income on September 9, 1986.
Explanation of Provision
The provision provides that amounts received by an
individual under the NHSC Scholarship Program or the Armed
Forces Scholarship Program are eligible for tax-free
treatment as qualified scholarships under section 117,
without regard to any service obligation by the recipient.
Effective Date
The provision is effective for education awards received
after December 31, 1993.
2. Extension and Modification of Enhanced Deduction for Corporate
Donations of Computer Technology (Sec. 172 of the Bill and Sec.
170(e)(6) of the Code)
Present Law
The maximum charitable contribution deduction that may be
claimed by a corporation for any one taxable year is limited
to 10 percent of the corporation's taxable income for that
year (disregarding charitable contributions and with certain
other modifications) (sec. 170(b)(2)). Corporations also are
subject to certain limitations based on the type of property
contributed. In the case of a charitable contribution of
short-term gain property, inventory, or other ordinary income
property, the amount of the deduction generally is limited to
the taxpayer's basis (generally, cost) in the property.
However, special rules in the Code provide an augmented
deduction for certain corporate contributions. Under these
special rules, the amount of the augmented deduction is equal
to the lesser of (1) the basis of the donated property plus
one-half of the amount of ordinary income that would have
been realized if the property had been sold, or (2) twice the
basis of the donated property.
Section 170(e)(6) allows corporate taxpayers an augmented
deduction for qualified contributions of computer technology
and equipment (i.e., computer software, computer or
peripheral equipment, and fiber optic cable related to
computer use) to be used within the United States for
educational purposes in grades K-12. Eligible donees are: (1)
any educational organization that normally maintains a
regular faculty and curriculum and has a regularly enrolled
body of pupils in attendance at the place where its
educational activities are regularly carried on; and (2) tax-
exempt charitable organizations that are organized primarily
for purposes of supporting elementary and secondary
education. A private foundation also is an eligible donee,
provided that, within 30 days after receipt of the
contribution, the private foundation contributes the property
to an eligible donee described above.
Qualified contributions are limited to gifts made no later
than two years after the date the taxpayer acquired or
substantially completed the construction of the donated
property. In addition, the original use of the donated
property must commence with the donor or the donee.
Accordingly, qualified contributions generally are limited to
property that is no more than two years old. Such donated
property could be computer technology or equipment that is
inventory or depreciable trade or business property in the
hands of the donor.
Donee organizations are not permitted to transfer the
donated property for money or services (e.g., a donee
organization cannot sell the computers). However, a donee
organization may transfer the donated property in furtherance
of its exempt purposes and be reimbursed for shipping,
installation, and transfer costs. For example, if a
corporation contributes computers to a charity that
subsequently distributes the computers to several elementary
schools in a given area, the charity could be reimbursed by
the elementary schools for shipping, transfer, and
installation costs.
The special treatment applies only to donations made by C
corporations. S corporations, personal holding companies, and
service organizations are not eligible donors.
The provision is scheduled to expire for contributions made
in taxable years beginning after December 31, 2000.
Explanation of Provision
The bill extends the current enhanced deduction for
donations of computer technology and equipment through
December 31, 2003. In addition, the enhanced deduction is
expanded to include donations to public libraries.
Effective date
The provision is effective upon the date of enactment.
3. Extension of the Adoption Tax Credit (Sec. 173 of the Bill and Sec.
23 of the Code)
Present Law
Taxpayers are entitled to a maximum nonrefundable credit
against income tax liability of $5,000 per child for
qualified adoption expenses paid or incurred by the taxpayer
(sec. 23). In the case of a special needs adoption, the
maximum credit amount is $6,000 ($5,000 in the case of a
foreign special needs adoption). A special needs child is a
child who the State has determined: (1) cannot or should not
be returned to the home of the birth parents, and (2) has a
specific factor or condition because of which the child
cannot be placed with adoptive parents without adoption
assistance. The adoption of a child who is not a citizen or a
resident of the United States is a foreign adoption.
Qualified adoption expenses are reasonable and necessary
adoption fees, court costs, attorneys' fees, and other
expenses that are directly related to the legal adoption of
an eligible child. All reasonable and necessary expenses
required by a State as a condition of adoption are qualified
adoption expenses. Otherwise qualified adoption expenses paid
or incurred in one taxable year are not taken into account
for purposes of the credit until the next taxable year unless
the expenses are paid or incurred in the year the adoption
becomes final.
An eligible child is an individual (1) who has not attained
age 18 or (2) who is physically or mentally incapable of
caring for himself or herself. After December 31, 2001, the
credit will be available only for domestic special needs
adoptions.
No credit is allowed for expenses incurred (1) in violation
of State or Federal law, (2) in carrying out any surrogate
parenting arrangement, (3) in connection with the adoption of
a child of the taxpayer's spouse, (4) that are reimbursed
under an employer adoption assistance program or otherwise,
or (5) for a foreign adoption that is not finalized.
The credit is phased out ratably for taxpayers with
modified AGI above $75,000, and is fully phased out at
$115,000 of modified AGI. For these purposes modified AGI is
computed by increasing the taxpayer's AGI by the amount
otherwise excluded from gross income under Code sections 911,
931, or 933.
Explanation of Provision
The bill extends the adoption credit for the adoption of
non-special needs children for two years through December 31,
2003.
Effective Date
The provision is effective on the date of enactment.
4. Tax treatment of Alaska Native Settlement Trusts (Sec. 174 of the
Bill and New Secs. 646 and 6039H of the Code)
Present Law
An Alaska Native Settlement Corporation (``ANC'') may
establish a Settlement Trust (``Trust'') under section 39 of
the Alaska Native Claims Settlement Act (``ANCSA'') and
transfer money or other property to such Trust for the
benefit of beneficiaries who constitute all or a class of the
shareholders of the ANC, to promote the health, education and
welfare of the beneficiaries and preserve the heritage and
culture of Alaska Natives.
With certain exceptions, once an ANC has made a conveyance
to a Trust, the assets conveyed shall not be subject to
attachment, distraint, or sale or execution of judgment,
except with respect to the lawful debts and obligations of
the Trust.
The Internal Revenue Service has indicated that
contributions to a Trust constitute distributions to the
beneficiary-shareholders at the time of the contribution and
are treated as dividends to the extent of earnings and
profits as provided under section 301 of the Code. The Trust
and its beneficiaries are taxed in accordance with trust
rules.
Explanation of Provision
An Alaska Native Corporation may establish a Trust under
section 39 of ANCSA and if the Trust makes an election for
its first taxable year ending after the date of enactment of
the proposal, no amount will be included in the gross income
of a beneficiary of such Trust by reason of a contribution to
the Trust. In addition, unless the electing Trust fails to
meet the transferability requirements of the provision,
income of the Trust, whether accumulated or distributed, will
be taxed only to the Trust (and not to beneficiaries) at the
lowest individual tax rates of 15 percent for ordinary income
(and the capital gains rate applicable to individuals subject
to such 15 percent rate), rather than at the higher rates
generally applicable to trusts or to higher tax bracket
beneficiaries.
The earnings and profits of the ANC will not be reduced by
the amount of contributions to the electing Trust at the time
of the contributions. However, the ANC earnings and profits
will be reduced (up to the amount of the contributions) as
distributions are thereafter made by the electing Trust that
would exceed the Trusts's total undistributed net income
(less taxes paid) plus tax-exempt income for all prior years
during which
[[Page S9734]]
an election is in effect plus for the current year, computed
under Subchapter J. In addition, such distributions that
exceed such amounts are to be reported and taxed to
beneficiaries as if distributed by the ANC in the year of the
distribution by the electing Trust, and will be treated as
dividends to beneficiaries to the extent the ANC then has
current or accumulated earnings and profits.
The fiduciary of an electing Trust must report to the IRS,
with the Trust tax return, the amount of distributions to
each beneficiary, and the tax treatment to the beneficiary of
such distributions under the provision (either as exempt from
tax to the beneficiary, or as a distribution deemed made by
the ANC). The electing Trust must also furnish such
information to the ANC.
In the case of distributions that are treated as if made by
the ANC, as described above, the ANC must then report such
amounts to the beneficiaries and must indicate whether they
are dividends or not, in accordance with the earnings and
profits of the ANC. The reporting thus required by an
electing Trust will be in lieu of, and will satisfy, the
reporting requirements of section 6034A (and such other
reporting requirements as the Secretary of the Treasury may
deem appropriate).
If the beneficial interests in the electing Trust or the
shares of the ANC may be sold or exchanged to a person in a
manner that would not be permitted under ANCSA if the
interests were Settlement Common Stock (generally, to a
person other than an Alaska Native), then all assets of the
Trust that had not been distributed as of the beginning of
that taxable year of the Trust are taxed to the extent they
would be if they were distributed at that time. Thereafter,
the Trust and its beneficiaries are generally subject to the
rules of subchapter J and to the generally applicable trust
income tax rates.
Effective Date
The provision is effective for taxable years of Settlement
Trusts, their beneficiaries, and sponsoring Alaska Native
Corporations ending after the date of enactment, and to
contributions made to electing Settlement Trusts during such
year and thereafter.
5. Treatment of Indian Tribes as Non-Profit Organizations and State or
Local Governments for Purposes of the Federal Unemployment Tax
(``FUTA'') (Sec. 175 of the Bill and Sec. 3306 of the Code)
Present Law
Present law imposes a net tax on employers equal to 0.8
percent of the first $7,000 paid annually to each employee.
The current gross FUTA tax is 6.2 percent, but employers in
States meeting certain requirements and having no delinquent
loans are eligible for a 5.4 percent credit making the net
Federal tax rate 0.8 percent. Both non-profit organizations
and State and local governments are not required to pay FUTA
taxes. Instead they may elect to reimburse the unemployment
compensation system for unemployment compensation benefits
actually paid to their former employees. Generally, Indian
tribes are not eligible for the reimbursement treatment
allowable to non-profit organizations and State and local
governments.
Explanation of Provision
The bill provides that an Indian tribe (including any
subdivision, subsidiary, or business enterprise chartered and
wholly owned by an Indian tribe) is treated like a non-profit
organization or State or local government for FUTA purposes
(i.e., given an election to choose the reimbursement
treatment).
Effective Date
The provision generally is effective with respect to
service performed beginning on or after the date of
enactment. Under a transition rule, service performed in the
employ of an Indian tribe is not treated as employment for
FUTA purposes if: (1) it is service which is performed before
the date of enactment and with respect to which FUTA tax has
not been paid; and (2) such Indian tribe reimburses a State
unemployment fund for unemployment benefits paid for service
attributable to such tribe for such period.
6. Additional Funding for the Social Services Block Grant (Sec. 176 of
the Bill)
The provision amends Section 2003(c) of Title XX of the
Social Security Act and provides an additional one-time
amount of $700,000,000 for fiscal year 2001.
II. TAX INCENTIVES FOR AFFORDABLE HOUSING
A. Increase Low-Income Housing Tax Credit Per Capita Amount (Secs. 201
and 202 of the Bill and Sec. 42 of the Code)
Present Law
In general, a maximum 70-percent present value tax credit,
claimed over a 10-year period is allowed for the cost of
rental housing occupied by tenants having incomes below
specified levels. The credit percentage for newly constructed
or substantially rehabilitated housing that is not Federally
subsidized is adjusted monthly by the Internal Revenue
Service so that the 10 annual installments have a present
value of 70 percent of the total qualified expenditures. The
credit percentage for new substantially rehabilitated housing
that is Federally subsidized and for existing housing that is
substantially rehabilitated is calculated to have a present
value of 30 percent of total qualified expenditures.
To claim low-income housing credits, project owners must
receive an allocation of credit from a State or local housing
credit agency. However, no allocation is required for
buildings at least 50 percent financed with the proceeds of
tax-exempt bonds that received an allocation pursuant to the
private activity bond volume limitation of Code section 146.
Such projects must, however, satisfy the requirements for
allocation under the State's qualified allocation plan and
meet other requirements.
A building generally must be placed in service during the
calendar year in which it receives a credit allocation.
However, a housing credit agency can make a binding
commitment, not later than the year in which the building is
placed in service, to allocate a specified credit dollar
amount to such building beginning in a specified later year.
In addition, a project can receive a ``carryover allocation''
if the taxpayer's basis in the project as of the close of the
calendar year the allocation is made is more than 10 percent
of the taxpayer's reasonably expected basis in the project,
and the building is placed in service not later than the
close of the second calendar year following the calendar year
in which the allocation is made. For purposes of the 10-
percent test, basis means the taxpayer's adjusted basis in
land and depreciable real property, whether or not these
amounts are includible in eligible basis. Finally, an
allocation of credit for increases in qualified basis may
occur in years subsequent to the year the project is placed
in service.
Authority to allocate credits remains at the State (as
opposed to local) government level unless State law provides
otherwise. Generally, credits may be allocated only from
volume authority arising during the calendar year in which
the building is placed in service, except in the case of: (1)
credits claimed on additions to qualified basis; (2) credits
allocated in a later year pursuant to an earlier binding
commitment made no later than the year in which the
building is placed in service; and (3) carryover
allocations.
Each State annually receives low-income housing credit
authority equal to $1.25 per State resident for allocation to
qualified low-income projects. In addition to this $1.25 per
resident amount, each State's ``housing credit ceiling''
includes the following amounts: (1) the unused State housing
credit ceiling (if any) of such State for the preceding
calendar year; (2) the amount of the State housing credit
ceiling (if any) returned in the calendar year; and (3) the
amount of the national pool (if any) allocated to such State
by the Treasury Department.
The national pool consists of States' unused housing credit
carryovers. For each State, the unused housing credit
carryover for a calendar year consists of the excess (if any)
of the unused State housing credit ceiling for such year over
the excess (if any) of the aggregate housing credit dollar
amount allocated for such year over the sum of $1.25 per
resident and the credit returns for such year. The amounts in
the national pool are allocated only to a State which, with
respect to the previous calendar year allocated its entire
housing credit ceiling for the preceding calendar year, and
requested a share in the national pool not later than May 1,
of the calendar year. The national pool allocation to
qualified States is made on a pro rata basis equivalent to
the fraction that a State's population enjoys relative to the
total population of all qualified States for that year.
The present-law stacking rule provides that a State is
treated as using its annual allocation of credit authority
($1.25 per State resident) and any returns during the
calendar year followed by any unused credits carried forward
from the preceding year's credit ceiling and finally any
applicable allocations from the National pool.
Explanation of Provision
The bill increases the annual State credit caps from $1.25
to $1.75 per resident beginning in 2001. Also beginning in
2001, the per capita cap is modified so that small population
states are given a minimum of $2 million of annual credit
cap. The $1.75 per capita credit cap and the $2 million
amount are indexed for inflation beginning in calendar year
2002.
The bill also makes two programmatic changes to the credit.
First, the bill modifies the stacking rule so that each State
is treated as using its allocation of the unused State
housing credit ceiling (if any) from the preceding calendar
before the current year's allocation of credit (including any
credits returned to the State) and then finally any National
pool allocations. Second, the bill provides that assistance
received under the Native American Housing Assistance and
Self-Determination Act of 1986 is not taken into account in
determining whether a building is Federally subsidized for
purposes of the credit.
Effective Date
The provision is effective for calendar years beginning
after December 31, 2000 and buildings placed-in-service after
such date in the case of projects that also receive financing
with proceeds of tax-exempt bonds which are issued after such
date subject to the private activity bond volume limit.
B. Tax Credit for Renovating Historic Homes (Sec. 211 of the Bill and
New Sec. 25B of the Code)
Present Law
Present law provides an income tax credit for certain
expenditures incurred in rehabilitating certified historic
structures and certain nonresidential buildings placed in
service before 1936 (sec. 47). The amount of the
[[Page S9735]]
credit is determined by multiplying the applicable
rehabilitation percentage by the basis of the property that
is attributable to qualified rehabilitation expenditures. The
applicable rehabilitation percentage is 20 percent for
certified historic structures and 10 percent for qualified
rehabilitated buildings (other than certified historic
structures) that were originally placed in service before
1936.
A nonresidential building is eligible for the 10-percent
credit only if the building is substantially rehabilitated
and a specific portion of the existing structure of the
building is retained in place upon completion of the
rehabilitation. A residential or nonresidential building is
eligible for the 20-percent credit that applies to certified
historic structures only if the building is substantially
rehabilitated (as determined under the eligibility rules for
the 10-percent credit). In addition, the building must be
listed in the National Register or the building must be
located in a registered historic district and must be
certified by the Secretary of the Interior as being of
historical significance to the district.
Explanation of Provision
The bill permits a taxpayer to claim a 20-percent credit
for qualified rehabilitation expenditures made with respect
to a qualified historic home which the taxpayer subsequently
occupies as his or her principal residence for at least five
years. The total credit which can be claimed by the taxpayer
is limited to $20,000. Any eligible credit not claimed by the
taxpayer in the year in which the qualified rehabilitation
expenditures are made may be carried forward to each of the
succeeding 10 years.
The bill applies to (1) structures listed in the National
Register; (2) structures located in a registered national,
State, or local historic district, and certified by the
Secretary of the Interior as being of historic significance
to the district, but only if the median income of the census
tract within which the building is located is less than twice
the State median income; (3) any structure designated as
being of historic significance under a State or local
statute, if such statute is certified by the Secretary of the
Interior as achieving the purpose of preserving and
rehabilitating buildings of historic significance.
A building generally is considered substantially
rehabilitated if the qualified rehabilitation expenditures
incurred during a 24-month measuring period exceed the
greater of (1) the adjusted basis of the building as of the
later of the first day of the 24-month period or the
beginning of the taxpayer's holding period for the building,
or (2) $5,000. Only the $5,000 expenditure requirement
applies in the case of structures (1) in empowerment zones,
(2) in enterprise communities, (3) in census tracts in which
70 percent of families have income which is 80 percent or
less of the State median family income, and (4) in areas
of chronic distress as designated by the State and
approved by the Secretary of Housing and Urban
Development. In addition, for all structures, at least
five percent of the rehabilitation expenditures must to be
allocable to the exterior of the structure.
To qualify for the credit, the rehabilitation must be
certified by a State or local government subject to
conditions specified by the Secretary of the Interior.
A taxpayer who purchases a structure on which qualified
rehabilitation expenditures have been made may claim credit
for such expenditures if the taxpayer is the first purchaser
of the structure within five years of the date the
rehabilitation was completed and if no credit was allowed to
the seller with respect to the qualified expenditures.
Alternatively, a taxpayer may elect to receive a historic
rehabilitation mortgage credit certificate in lieu of the
credit otherwise allowable. A historic rehabilitation
mortgage credit certificate may be transferred to a lending
institution in exchange for which the lending institution
provides the taxpayer with a reduction in interest rate on a
mortgage on a qualifying structure. The lending institution
would then claim the allowable credits against its tax
liability. In the case of a targeted area or enterprise
community or empowerment zone, the taxpayer may elect to
allocate all or a portion of the mortgage credit certificate
to reduce the down payment required for purchase of the
structure.
If a taxpayer ceases to maintain the structure as his or
her personal residence within five years from the date of the
rehabilitation, the credit would be recaptured on a pro rata
basis.
Effective Date
The provision is effective for expenditures paid or
incurred beginning after December 31, 2001.
C. Exclusion From Gross Income for Certain Forgiven Mortgage
Obligations (Sec. 221 of the Bill and Sec. 108 of the Code)
Present Law
Gross income includes all income from whatever source
derived, including income from the discharge of indebtedness.
However, gross income does not include discharge of
indebtedness income if: (1) the discharge occurs in a Title
11 case; (2) the discharge occurs when the taxpayer is
insolvent; (3) the indebtedness discharged is qualified farm
indebtedness; or (4) except in the case of a C corporation,
the indebtedness discharged is qualified real property
business indebtedness. No exclusion is provided under present
law for qualified residential indebtedness.
Explanation of Provision
In the case of an individual taxpayer, the bill provides an
exclusion from discharge of indebtedness income to the extent
such income is attributable to the sale of real property
securing qualified residential indebtedness. Qualified
residential indebtedness is defined as indebtedness incurred
or assumed by the taxpayer for the acquisition, construction,
reconstruction, or substantial improvement of the taxpayer's
residence and which is secured by such residence. The
taxpayer may elect to have this exclusion apply. The
exclusion does not apply to qualified farm indebtedness or
qualified real property business indebtedness.
Effective Date
The provision is effective for discharges of indebtedness
after the date of enactment.
D. Mortgage Revenue Bonds
1. Increase in Purchase Price Limitation Under Mortgage Subsidy Bond
Rules Based on Median Family Income (Sec. 231 of the Bill and Sec. 143
of the Code)
Present Law
Qualified mortgage bonds (QMBs) are tax-exempt bonds, the
proceeds of which generally must be used to make mortgage
loans to first-time homebuyers. The recipients of QMB-
financed loans must meet purchase price, income, and other
restrictions. Generally, the purchase price of an assisted
home may not exceed 90 percent (110 percent in targeted
areas) of the average area purchase price.
Explanation of Provision
The bill modifies the purchase price rule for QMB
financing. Specifically, QMB financing is allowable to
qualified residences the purchase price of which does not
exceed the greater of (1) 90 percent of the average area
purchase price; or (2) 3.5 times the applicable median family
income. The applicable median family income is defined as
under the present-law QMB income restriction.
Effective Date
The provision is effective for bonds issued after the date
of enactment.
2. Mortgage Financing for Residences Located in Presidentially Declared
Disaster Areas (Sec. 232 of the Bill and Sec. 143 of the Code)
Present Law
Qualified mortgage bonds are private activity tax-exempt
bonds issued by States and local governments acting as
conduits to provide mortgage loans to first-time home buyers
who satisfy specified income limits and who purchase homes
that cost less than statutory maximums. The income and
purchase price limits are increased for homes purchased in
economically distressed areas, and a portion of loans made in
such areas is exempt from some requirements.
Present law waives the three buyer targeting requirements
(the first-time homebuyer, purchase price, and income limit
requirements) for a portion of the loans made with proceeds
of a qualified mortgage bond issue if the loans are made to
finance homes in statutorily prescribed economically
distressed areas.
For bonds issued during 1997 and 1998, a special exception
exempted loans made in Presidentially declared disaster areas
within two years of the declaration from the first-time
homebuyer limit. In addition, the more liberal income and
purchase price rules applicable to economically distressed
areas applied to such loans. There was no requirement that
the specially treated loans be made to repair or replace
housing damaged or destroyed by the disaster.
explanation of provision
The bill reinstates, with modifications, the prior-law
exception for certain qualified mortgage bond financed loans
in Presidentially declared disaster areas. First, the bill:
(1) allows loans for replacement housing for housing
destroyed in the disaster without regard to the first-time
homebuyer requirement; and (2) increases the borrower income
and house purchase price requirements to those that apply in
targeted areas of economic distress. Second, the bill
increases the per-borrower ``home improvement loan'' maximum
from $15,000 to $100,000 and extends the more liberal
borrower income limits for targeted areas to loans for repair
of housing damaged by the disaster. In both cases, the
exception applies only to loans made during the two-year
period after the area was declared a qualified disaster area.
A qualified disaster area is defined as an area determined by
the President (1) to warrant assistance under the Robert T.
Stafford Disaster Relief and Emergency Assistance Act and (2)
with respect to which the Federal share of disaster payments
exceeds 75 percent.
effective date
The provision is effective for bonds issued after December
31, 2000.
E. Provide Tax Exemption for Organizations Created by a State to
Provide Property and Casualty Insurance Coverage for Property for Which
Such Coverage Is Otherwise Unavailable (Sec. 241 of the Bill and New
Sec. 501(c)(28) of the Code)
present law
In general
A life insurance company is subject to tax on its life
insurance company taxable income, which is its life insurance
income reduced by life insurance deductions (sec. 801).
[[Page S9736]]
Similarly, a property and casualty insurance company is
subject to tax on its taxable income, which is determined as
the sum of its underwriting income and investment income (as
well as gains and other income items) (sec. 831). Present law
provides that the term ``corporation'' includes an insurance
company (sec. 7701(a)(3)).
In general, the Internal Revenue Service (``IRS'') takes
the position that organizations that provide insurance for
their members or other individuals are not considered to be
engaged in a tax-exempt activity. The IRS maintains that such
insurance activity is either (1) a regular business of a kind
ordinarily carried on for profit, or (2) an economy or
convenience in the conduct of members' businesses because it
relieves the members from obtaining insurance on an
individual basis.
Certain insurance risk pools have qualified for tax
exemption under Code section 501(c)(6). In general, these
organizations (1) assign any insurance policies and
administrative functions to their member organizations
(although they may reimburse their members for amounts paid
and expenses); (2) serve an important common business
interest of their members; and (3) must be membership
organizations financed, at least in part, by membership dues.
State insurance risk pools may also qualify for tax exempt
status under section 501(c)(4) as a social welfare
organization or under section 115 as serving an essential
governmental function of a State. In seeking qualification
under section 501(c)(4), insurance organizations generally
are constrained by the restrictions on the provision of
``commercial-type insurance'' contained in section 501(m).
Section 115 generally provides that gross income does not
include income derived from the exercise of any essential
governmental function or accruing to a State or any political
subdivision thereof.
Certain specific provisions provide tax-exempt status to
organizations meeting statutory requirements.
Health coverage for high-risk individuals
Section 501(c)(26) provides tax-exempt status to any
membership organization that is established by a State
exclusively to provide coverage for medical care on a
nonprofit basis to certain high-risk individuals, provided
certain criteria are satisfied. The organization may
provide coverage for medical care either by issuing
insurance itself or by entering into an arrangement with a
health maintenance organization (``HMO'').
High-risk individuals eligible to receive medical care
coverage from the organization must be residents of the State
who, due to a pre-existing medical condition, are unable to
obtain health coverage for such condition through insurance
or an HMO, or are able to acquire such coverage only at a
rate that is substantially higher than the rate charged for
such coverage by the organization. The State must determine
the composition of membership in the organization. For
example, a State could mandate that all organizations that
are subject to insurance regulation by the State must be
members of the organization.
The provision further requires the State or members of the
organization to fund the liabilities of the organization to
the extent that premiums charged to eligible individuals are
insufficient to cover such liabilities. Finally, no part of
the net earnings of the organization can inure to the benefit
of any private shareholder or individual.
Workers' compensation reinsurance organizations
Section 501(c)(27)(A) provides tax-exempt status to any
membership organization that is established by a State before
June 1, 1996, exclusively to reimburse its members for
workers' compensation insurance losses, and that satisfies
certain other conditions. A State must require that the
membership of the organization consist of all persons who
issue insurance covering workers' compensation losses in such
State, and all persons and governmental entities who self-
insure against such losses. In addition, the organization
must operate as a nonprofit organization by returning surplus
income to members or to workers' compensation policyholders
on a periodic basis and by reducing initial premiums in
anticipation of investment income.
State workmen's compensation act companies
Section 501(c)(27)(B) provides tax-exempt status for any
organization that is created by State law, and organized and
operated exclusively to provide workmen's compensation
insurance and related coverage that is incidental to
workmen's compensation insurance, and that meets certain
additional requirements. The workmen's compensation insurance
must be required by State law, or be insurance with respect
to which State law provides significant disincentives if it
is not purchased by an employer (such as loss of exclusive
remedy or forfeiture of affirmative defenses such as
contributory negligence). The organization must provide
workmen's compensation to any employer in the State (for
employees in the State or temporarily assigned out-of-State)
seeking such insurance and meeting other reasonable
requirements. The State must either extend its full faith and
credit to the initial debt of the organization or provide the
initial operating capital of such organization. For this
purpose, the initial operating capital can be provided by
providing the proceeds of bonds issued by a State authority;
the bonds may be repaid through exercise of the State's
taxing authority, for example. For periods after the date of
enactment, either the assets of the organization must revert
to the State upon dissolution, or State law must not permit
the dissolution of the organization absent an act of the
State legislature. Should dissolution of the organization
become permissible under applicable State law, then the
requirement that the assets of the organization revert to the
State upon dissolution applies. Finally, the majority of the
board of directors (or comparable oversight body) of the
organization must be appointed by an official of the
executive branch of the State or by the State legislature, or
by both.
explanation of provision
The provision provides tax-exempt status for any
association created before January 1, 1999, by State law and
organized and operated exclusively to provide property and
casualty insurance coverage for property located within the
State for which the State has determined that coverage in the
authorized insurance market is limited or unavailable at
reasonable rates, provided certain requirements are met.
Under the provision, no part of the net earnings of the
association may inure to the benefit of any private
shareholder or individual. Except as provided in the case of
dissolution, no part of the assets of the association may be
used for, or diverted to, any purpose other than: (1) to
satisfy, in whole or in part, the liability of the
association for, or with respect to, claims made on policies
written by the association; (2) to invest in investments
authorized by applicable law; (3) to pay reasonable and
necessary administration expenses in connection with the
establishment and operation of the association and the
processing of claims against the association; or (4) to make
remittances pursuant to State law to be used by the State to
provide for the payment of claims on policies written by the
association, purchase reinsurance covering losses under such
policies, or to support governmental programs to prepare for
or mitigate the effects of natural catastrophic events. The
provision requires that the State law governing the
association permit the association to levy assessments on
insurance companies authorized to sell property and casualty
insurance in the State, or on property and casualty insurance
policyholders with insurable interests in property located in
the State to fund deficits of the association, including the
creation of reserves. The provision requires that the plan of
operation of the association be subject to approval by the
chief executive officer or other official of the State, by
the State legislature, or both. In addition, the provision
requires that the assets of the association revert upon
dissolution to the State, the State's designee, or an entity
designated by the State law governing the association, or
that State law not permit the dissolution of the association.
The provision provides a special rule in the case of any
entity or fund created before January 1, 1999, pursuant to
State law and organized and operated exclusively to receive,
hold, and invest remittances from an association exempt from
tax under the provision, to make disbursements to pay claims
on insurance contracts issued by the association, and to make
disbursements to support governmental programs to prepare for
or mitigate the effects of natural catastrophic events. The
special rule provides that the entity or fund may elect to be
disregarded as a separate entity and be treated as part of
the association exempt from tax under the provision, from
which it receives such remittances. The election is required
to be made no later than 30 days following the date on which
the association is determined to be exempt from tax under the
provision, and would be effective as of the effective date of
that determination.
An organization described in the provision is treated as
having unrelated business taxable income in the amount of its
taxable income (computed as if the organization were not
exempt from tax under the proposal), if at the end of the
immediately preceding taxable year, the organization's net
equity exceeded 15 percent of the total coverage in force
under insurance contracts issued by the organization and
outstanding at the end of that preceding year.
Under the provision, no income or gain is recognized solely
as a result of the change in status to that of an association
exempt from tax under the provision.
Effective Date
The provision is effective for taxable years beginning
after December 31, 2000. No inference is intended as to the
tax status under present law of associations described in the
provision.
III. TAX INCENTIVES FOR URBAN AND RURAL INFRASTRUCTURE
A. Increase State Volume Limits on Tax-Exempt Private Activity Bonds
(Sec. 301 of the Bill and Sec. 146 of the Code)
Present Law
Interest on bonds issued by States and local governments is
excluded from income if the proceeds of the bonds are used to
finance activities conducted and paid for by the governmental
units (sec. 103). Interest on bonds issued by these
governmental units to finance activities carried out and paid
for by private persons (``private activity bonds'') is
taxable unless the activities are specified in the Internal
Revenue Code. Private activity bonds on which interest may be
tax-exempt include bonds for privately operated
transportation facilities (airports, docks and
[[Page S9737]]
wharves, mass transit, and high speed rail facilities),
privately owned and/or provided municipal services (water,
sewer, solid waste disposal, and certain electric and heating
facilities), economic development (small manufacturing
facilities and redevelopment in economically depressed
areas), and certain social programs (low-income rental
housing, qualified mortgage bonds, student loan bonds, and
exempt activities of charitable organizations described in
sec. 501(c)(3)).
The volume of tax-exempt private activity bonds that States
and local governments may issue for most of these purposes in
each calendar year is limited by State-wide volume limits.
The current annual volume limits are $50 per resident of the
State or $150 million if greater. The volume limits do not
apply to private activity bonds to finance airports, docks
and wharves, certain governmentally owned, but privately
operated solid waste disposal facilities, certain high speed
rail facilities, and to certain types of private activity
tax-exempt bonds that are subject to other limits on their
volume (qualified veterans' mortgage bonds and certain
``new'' empowerment zone and enterprise community bonds).
The current annual volume limits that apply to private
activity tax-exempt bonds increase to $75 per resident of
each State or $225 million, if greater, beginning in calendar
year 2007. The increase is, ratably phased in, beginning with
$55 per capita or $165 million, if greater, in calendar year
2003.
Explanation of Provision
The bill increases the present-law annual State private
activity bond volume limits to $75 per resident of each State
or $225 million (if greater) beginning in calendar year 2001.
In addition, the $75 per resident and the $225 million State
limit will be indexed for inflation beginning in calendar
year 2002.
Effective Date
The provisions are effective for calendar years after
December 31, 2000.
B. Extension and Modification to Expensing of Environmental Remediation
Costs (Sec. 302 of the Bill and Sec. 198 of the Code)
Present Law
Taxpayers can elect to treat certain environmental
remediation expenditures that would otherwise be chargeable
to capital account as deductible in the year paid or incurred
(sec. 198). The deduction applies for both regular and
alternative minimum tax purposes. The expenditure must be
incurred in connection with the abatement or control of
hazardous substances at a qualified contaminated site.
A ``qualified contaminated site'' generally is any property
that (1) is held for use in a trade or business, for the
production of income, or as inventory; (2) is certified by
the appropriate State environmental agency to be located
within a targeted area; and (3) contains (or potentially
contains) a hazardous substance (so-called ``brownfields'').
Targeted areas are defined as: (1) empowerment zones and
enterprise communities as designated under present law; (2)
sites announced before February 1997, as being subject to one
of the 76 Environmental Protection Agency (``EPA'')
Brownfields Pilots; (3) any population census tract with a
poverty rate of 20 percent or more; and (4) certain
industrial and commercial areas that are adjacent to tracts
described in (3) above. However, sites that are identified on
the national priorities list under the Comprehensive
Environmental Response, Compensation, and Liability Act of
1980 cannot qualify as targeted areas.
Eligible expenditures are those paid or incurred before
January 1, 2002.
Explanation of Provision
The bill extends the expiration date for eligible
expenditures to include those paid or incurred before January
1, 2004.
In addition, the bill eliminates the targeted area
requirement, thereby, expanding eligible sites to include any
site containing (or potentially containing) a hazardous
substance that is certified by the appropriate State
environmental agency. However, expenditures undertaken at
sites that are identified on the national priorities list
under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 would continue to not qualify as
eligible expenditures.
Effective Date
The provision to extend the expiration date is effective
upon the date of enactment. The provision to expand the class
of eligible sites is effective for expenditures paid or
incurred after the date of enactment.
C. Broadband Internet Access Tax Credit (Sec. 303 of the Bill and New
Sec. 48A of the Code)
Present Law
Present law does not provide a credit for investments in
telecommunications infrastructure.
Explanation of Provision
The bill provides a 10 percent credit of the qualified
expenditures incurred by the taxpayer with respect to
qualified equipment with which the taxpayer offers ``current
generation'' broadband services to subscribers in rural and
underserved areas. In the addition, the bill provides a 20
percent credit of the qualified expenditures incurred by the
taxpayer with respect to qualified equipment with which the
taxpayer offers ``next generation'' broadband services to
subscribers in rural areas, underserved areas, and to
residential subscribers. Current generation broadband
services is defined as the transmission of signals at a rate
of at least 1.5 million bits per second to the subscriber and
at a rate of at least 200,000 bits per second from the
subscriber. Next generation broadband services is defined as
the transmission of signals at a rate of at least 22 million
bits per second to the subscriber and at a rate of at least
10 million bits per second from the subscriber.
Qualified expenditures are those amounts otherwise
chargeable to the capital account with respect to the
purchase and installation of qualified equipment for which
depreciation is allowable under section 168. In the case of
current generation broadband services, qualified expenditures
are those that are incurred by the taxpayer after December
31, 2000, and before January 1, 2004. In the case of next
generation broadband services, qualified expenditures are
those that are incurred by the taxpayer after December 31,
2001, and before January 1, 2005. The expenditures are taken
into account for purposes of claiming the credit in the first
taxable year in which the taxpayer provides broadband service
to at least 10 percent of the potential subscribers. In the
case of a taxpayer who incurs expenditures for equipment
capable of serving both subscribers in qualifying areas and
other areas, qualifying expenditures are determined by
multiplying otherwise qualifying expenditures by the ratio of
the number of potential qualifying subscribers to all
potential subscribers the qualifying equipment would be
capable of serving.
Qualifying equipment must be capable of providing broadband
services at any time to each subscriber who is utilizing such
services. In the case of a telecommunications carrier,
qualifying equipment is only that equipment that extends from
the last point of switching to the outside of the building in
which the subscriber is located. In the case of a commercial
mobile service carrier, qualifying equipment is only that
equipment that extends from the customer side of a mobile
telephone switching office to a transmission/reception
antenna (including the antenna) of the subscriber. In the
case of a cable operator or open video system operator,
qualifying equipment is only that equipment that extends from
the customer side of the headend to the outside of the
building in which the subscriber is located. In the case of a
satellite carrier or other wireless carrier (other than a
telecommunications carrier), qualifying equipment is only
that equipment that extends from a transmission/reception
antenna (including the antenna) to a transmission/reception
antenna on the outside of the building used by the
subscriber. In addition, any packet switching equipment
deployed in connection with other qualifying equipment is
qualifying equipment, regardless of location, provided that
it is the last such equipment in a series as part of
transmission of a signal to a subscriber or the first in a
series in the transmission of a signal from a subscriber.
A rural area is any census tract which is not within 10
miles of any incorporated or census designated place with a
population of more than 25,000 and which is not within a
county with a population density of more than 500 people per
square mile. An underserved area is any census tract which is
located in an empowerment zone, enterprise community, renewal
zone, or any census tract in which the poverty level is
greater than or equal to 30 percent and in which the median
family income is less than 70 percent of the greater of
metropolitan area median family income or statewide median
family income. A residential subscriber is any individual who
purchases broadband service to be delivered to his or her
dwelling.
Effective Date
The provision is effective for expenditures incurred after
December 31, 2000.
D. Tax-Credit Bonds for the National Railroad Passenger Corporation
(``Amtrak'') and the Alaska Railroad (Sec. 304 of the Bill and New Sec.
54 of the Code)
Present Law
Present law does not authorize the issuance by any private,
for-profit corporation of bonds the interest on which is tax-
exempt or eligible for an income tax credit. Tax-exempt bonds
may be issued by States or local governments to finance their
governmental activities or to finance certain capital
expenditures of private businesses or loans to individuals.
Additionally, States or local governments may issue tax-
credit bonds to finance the operation of ``qualified zone
academies.''
Tax-exempt bonds
Interest on bonds issued by States or local governments to
finance direct activities of those governmental units is
excluded from tax (sec. 103). In addition, interest on
certain bonds (``private activity bonds'') issued by States
or local governments acting as conduits to provide financing
for private businesses or individuals is excluded from income
if the purpose of the borrowing is specifically approved in
the Code (sec. 141). Examples of approved private activities
for which States or local governments may provide tax-exempt
financing include transportation facilities (airports, ports,
mass commuting facilities, and certain high speed intercity
rail facilities); public works facilities such as water,
sewer, and solid waste disposal; and certain social welfare
programs such as low-income rental housing, student loans,
and mortgage loans to certain first-time homebuyers. High
speed intercity rail
[[Page S9738]]
facilities eligible for tax-exempt financing include land,
rail, and stations (but not rolling stock) for fixed guideway
rail transportation of passengers and their baggage using
vehicles that are reasonably expected to operate at speeds in
excess of 150 miles per hour between scheduled stops.
Issuance of most private activity bonds is subject to
annual State volume limits of $50 per resident ($150 million
if greater). These volume limits are scheduled to increase to
$75 per resident ($225 million if greater) over the period
2003 through 2007.
Investment earnings on all tax-exempt bonds, including
earnings on invested sinking funds associated with such bonds
is restricted by the Code to prevent the issuance of bonds
earlier or in a greater amount than necessary for the purpose
of the borrowing. In general, all profits on investment of
such proceeds must be rebated to the Federal Government.
Interest on bonds associated with invested sinking funds is
taxable.
Tax-credit bonds for qualified zone academies
As an alternative to traditional tax-exempt bonds, certain
States or local governments are given authority to issue
``qualified zone academy bonds.'' A total of $400 million of
qualified zone academy bonds is authorized to be issued in
each year of 1998 through 2001. The $400 million is allocated
to States according to their respective populations of
individuals below the poverty line.
Qualified zone academy bonds are taxable bonds with respect
to which the investor receives an income tax credit equal to
an assumed interest rate set by the Treasury Department to
allow issuance of the bonds without discount and without
interest cost to the issuer. The bonds may be used for
renovating, providing equipment to, developing course
materials for, or training teachers in eligible schools.
Eligible schools are elementary and secondary schools with
respect to which private entities make contributions equaling
at least 10 percent of the bond proceeds.
Only financial institutions are eligible to claim the
credits on qualified zone academy bonds. The amount of the
credit is taken into income. The credit may be claimed
against both regular income tax and AMT liability.
There are no arbitrage restrictions applicable to
investment earnings on qualified zone academy bond proceeds.
Explanation of Provision
The provision authorizes the National Railroad Passenger
Corporation (``Amtrak'') and the Alaska Railroad to issue an
aggregate amount of $10 billion of tax-credit bonds to
finance its capital projects. Annual issuance of the bonds
may not exceed $1 billion per year (plus any authorized
amount that was not issued in previous years) during the ten
Fiscal Year period, 2001-2010. Unused bond authority could be
carried forward to succeeding years until used, subject to a
limitation that no tax-credit bonds could be issued after
fiscal year 2015.
Projects eligible for tax-credit bond financing are defined
as the acquisition, construction of equipment, rolling stock,
and other capital improvements for (1) the northeast rail
corridor between Washington, D.C. and Boston, Massachusetts;
(2) high-speed rail corridors designated under section
104(d)(2) of Title 23 of the United States Code; and (3) non-
designated high-speed rail corridors, including station
rehabilitation, track or signal improvements, or grade
crossing elimination. The last purpose is limited to a
maximum of 10 percent of the proceeds of any bond issue. At
least 70 percent of the tax-credit bonds must be issued for
projects described in (2) and (3).
As with qualified zone academy bonds, the interest rate on
Amtrak/Alaska Railroad tax-credit bonds will be set to allow
issuance of the bonds at par, i.e., without any interest cost
to Amtrak or the Alaska Railroad. In general, proceeds of
Amtrak/Alaska Railroad tax-credit bonds would have to be
spent within 36 months after the bonds are issued. As of the
date the bonds were issued, Amtrak or the Alaska Railroad
must certify that it reasonably expects--
(1) to incur a binding obligation with a third party to
spend at least 10 percent of the bond proceeds within six
months (or in the case of self-constructed property, to have
commenced construction within six months);
(2) to spend the bond proceeds with due diligence; and
(3) to spend at least 95 percent of the proceeds for
qualifying capital costs within three years.
Amtrak/Alaska Railroad tax credit bonds may only be issued
for projects that are approved by the Department of
Transportation and with respect to which the issuing railroad
has binding commitments from one or more States to make
matching contributions of at least 20 percent of the project
cost. Projects having State matching contributions in excess
of 20 percent are given a preference. The State matching
contributions, along with earnings on investment of the tax-
credit bond proceeds must be invested in a trust account
(i.e., an sinking fund) and used along with earnings on the
trust account for repayment of the principal amount of the
bonds.
Amtrak/Alaska Railroad tax-credit bonds can be owned (and
income tax credits claimed) by any taxpayer. The amount of
the credit will be included in the bondholder's income.
Additionally, provisions are included in the proposal to
allow the credits to be stripped and sold to different
investors than the investors in the bond principal.
The required State matching contribution may not be derived
from Federal monies. Any Federal Highway Trust Fund monies
transferred to the States are treated as Federal monies for
this purpose. During the period when tax-credit bonds are
authorized, Amtrak is not allowed to receive any Highway
Trust Fund monies other than those authorized on the date of
the provision's enactment.
Amtrak is required annually to submit a five-year capital
plan to Congress, and to satisfy independent oversight
requirements with respect to the management of tax-credit-
bond-financed projects. Finally, the Treasury Department is
required to certify annually that funds deposited in the
escrow accounts for repayment of tax-credit bonds (with
actual and projected earnings thereon) are sufficient to
ensure full repayment of the bond principal.
Effective Date
The provision is effective for tax credit bonds issued by
Amtrak or the Alaska Railroad after September 30, 2000.
E. Clarification of Contribution in Aid of Construction (Sec. 305 of
the Bill and Sec. 118 of the Code)
Present Law
Section 118(a) provides that gross income of a corporation
does not include a contribution to its capital. In general,
section 118(b) provides that a contribution to the capital of
a corporation does not include any contribution in aid of
construction or any other contribution by a customer or
potential customer. However, for any amount of money or
property received by a regulated public utility that provides
water or sewerage disposal services such amount shall be
considered a contribution to capital (excludible from gross
income) so long as such amount: (1) is a contribution in aid
of construction, and (2) is not included in the taxpayer's
rate base for rate-making purposes. If the contribution is in
property other than water or sewerage disposal facilities,
the amount is generally excludible from gross income only if
the amount is expended to acquire or construct water or
sewerage disposal facilities within a specified time period.
Explanation of Provision
The provision specifically defines contribution in aid of
construction to include customer connection fees (including
amounts paid to connect the customer's line to or extend a
main water or sewer line). Thus, the provision permits
customer connection fees received by a regulated public
utility that provides water or sewerage disposal services to
be treated as nontaxable contributions to capital (excludible
from gross income). Amounts paid as a service charge for
starting or stopping services to a customer continue to be
includible in gross income of a taxpayer.
Effective Date
The provision is effective for amounts received after the
date of enactment.
F. Treatment of Leasehold Improvements (Sec. 306 of the Bill and Sec.
168 of the Code)
Present Law
Depreciation of leasehold improvements
Depreciation allowances for property used in a trade or
business generally are determined under the modified
Accelerated Cost Recovery System (``MACRS'') of section 168.
Depreciation allowances for improvements made on leased
property are determined under MACRS, even if the MACRS
recovery period assigned to the property is longer than the
term of the lease (sec. 168(i)(8)). This rule applies
regardless whether the lessor or lessee places the leasehold
improvements in service. If a leasehold improvement
constitutes an addition or improvement to nonresidential real
property already placed in service, the improvement is
depreciated using the straight-line method over a 39-year
recovery period, beginning in the month the addition or
improvement was placed in service (secs. 168(b)(3), (c)(1),
(d)(2), and (i)(6)).
Treatment of dispositions of leasehold improvements
A lessor of leased property that disposes of a leasehold
improvement which was made by the lessor for the lessee of
the property may take the adjusted basis of the improvement
into account for purposes of determining gain or loss if the
improvement is irrevocably disposed of or abandoned by the
lessor at the termination of the lease. This rule conforms
the treatment of lessors and lessees with respect to
leasehold improvements disposed of at the end of a term of
lease. For purposes of applying this rule, it is expected
that a lessor must be able to separately account for the
adjusted basis of the leasehold improvement that is
irrevocably disposed of or abandoned. This rule does not
apply to the extent section 280B applies to the demolition
of a structure, a portion of which may include leasehold
improvements.
Explanation of Provision
The provision provides that 15-year property for purposes
of the depreciation rules of section 168 includes qualified
leasehold improvement property. The straight line method is
required to be used with respect to qualified leasehold
improvement property.
Qualified leasehold improvement property is any improvement
to an interior portion of a building that is nonresidential
real property, provided certain requirements are met. The
improvement must be made under or pursuant to a lease either
by the lessee (or sublessee) of that portion of the building,
or
[[Page S9739]]
by the lessor of that portion of the building. That portion
of the building is to be occupied exclusively by the lessee
(or any sublessee). The original use of the qualified
leasehold improvement property must begin with the lessee,
and must begin after December 31, 2006. The improvement must
be placed in service more than three years after the date the
building was first placed in service.
Qualified leasehold improvement property does not include
any improvement for which the expenditure is attributable to
the enlargement of the building, any elevator or escalator,
any structural component benefitting a common area, or the
internal structural framework of the building.
No special rule is specified for the class life of
qualified leasehold improvement property. Therefore, the
general rule that the class life for nonresidential real and
residential rental property is 40 years applies.
For purposes of the provision, a commitment to enter into a
lease is treated as a lease, and the parties to the
commitment are treated as lessor and lessee, provided the
lease is in effect at the time the qualified leasehold
improvement property is placed in service. A lease between
related persons is not considered a lease for this purpose.
Effective Date
The provision is effective for qualified leasehold
improvement property placed in service after December 31,
2006.
IV. TAX RELIEF FOR FARMERS
A. Farm, Fish, and Ranch Risk Management Accounts (``FFARRM Accounts'')
(Sec. 401 of the Bill and New Sec. 468C of the Code)
Present Law
There is no provision in present law allowing the elective
deferral of farm or fishing income.
Explanation of Provision
The bill allows taxpayers engaged in an eligible business
to establish FFARRM accounts. An eligible business is any
trade or business of farming in which the taxpayer actively
participates, including the operation of a nursery or sod
farm or the raising or harvesting of crop-bearing or
ornamental trees. An eligible business also is the trade or
business of commercial fishing as that term is defined under
section (3) of the Magnuson-Stevens Fishery Conservation and
Management Act (16 U.S.C. 1802) and includes the trade or
business of catching, taking or harvesting fish that are
intended to enter commerce through sale, barter or trade.
Contributions to a FFARRM account are deductible and are
limited to 20 percent of the taxable income that is
attributable to the eligible business. The deduction is taken
into account in determining adjusted gross income and reduces
the income attributable to the eligible business for all
income tax purposes other than the determination of the 20
percent of eligible income limitation on contributions to a
FFARRM account. Contributions to a FFARRM account do not
reduce earnings from self-employment. Accordingly,
distributions are not included in self-employment income.
A FFARRM account is taxed as a grantor trust and any
earnings are required to be distributed currently. Thus, any
income earned in the FFARRM account is taxed currently to the
farmer or fisherman who established the account. Amounts can
remain on deposit in a FFARRM account for up to five years.
Any amount that has not been distributed by the close of the
fourth year following the year of deposit is deemed to be
distributed and includible in the gross income of the account
owner.
Effective Date
The provision is effective for taxable years beginning
after December 31, 2000.
B. Exclusion of Rental Income From SECA Tax (Sec. 402 of the Bill and
Sec. 1402 of the Code)
Present Law
Generally, SECA taxes are imposed on an individual's net
earnings from self employment. Net earnings from self-
employment generally means gross income (including the
individual's net distributive share of partnership income)
derived by an individual from any trade or business carried
on by the individual less applicable deductions. One
exclusion from net earnings from self employment involves
certain real estate rentals. Under this rule, net earnings
from self employment do not include income from the rental of
real estate and from personal property leased with the real
estate unless the rental income is received under an
arrangement between an owner or tenant of land and another
individual that provides: (1) such other individual shall
produce agricultural or horticultural commodities on such
land; and (2) there shall be material participation by the
owner or tenant with respect to any such agricultural or
horticultural commodities. Other rules apply to rental
payments received by an individual in the course of the
individual's trade or business as a real estate dealer.
Explanation of Provision
The bill provides that net earnings from self employment do
not include income from the rental of real estate under a
lease agreement (rather than an arrangement) between an owner
or tenant of land and another individual which provides that:
(1) such other individual shall produce agricultural or
horticultural commodities on such land; and (2) there shall
be material participation by the owner or tenant in the
production or management of the production of such
agricultural or horticultural commodities.
Effective Date
The provision is effective for taxable years beginning
after December 31, 2000.
C. Exclusion of Conservation Reserve Program Payments From SECA Tax
(Sec. 403 of the Bill and Sec. 1402 of the Code)
Present Law
Generally, SECA tax is imposed on an individual's self-
employment income within the Social Security wage base. Net
earnings from self-employment generally means gross income
(including the individual's net distributive share of
partnership income) derived by an individual from any trade
or business carried on by the individual less applicable
deductions. A recent court decision found that payments made
under the conservation reserve program are includible in an
individual's self-employment income for purposes of SECA tax.
Explanation of Provision
The bill provides that net earnings from self-employment do
not include conservation reserve program payments for SECA.
Effective Date
The provision is effective for payments made after December
31, 2000.
D. Exemption of Agricultural Bonds From Private Activity Bond Volume
Cap (Sec. 404 of the Bill and Sec. 146 of the Code)
Present Law
Interest on bonds issued by States and local governments is
excluded from income if the proceeds of the bonds are used to
finance activities conducted and paid for by the governmental
units (sec. 103). Interest on bonds issued by these
governmental units to finance activities carried out and paid
for by private persons (``private activity bonds'') is
taxable unless the activities are specified in the Internal
Revenue Code. Private activity bonds on which interest may be
tax-exempt include bonds issued to finance loans to first-
time farmers for the acquisition of land and certain
equipment (``aggie bonds'').
The volume of tax-exempt private activity bonds that States
and local governments may issue in each calendar year
(including aggie bonds) is limited by State-wide volume
limits. The current annual volume limits are the greater of:
(1) $50 per resident of the State; or (2) $150 million. The
volume limits do not apply to private activity bonds to
finance airports, docks and wharves, certain governmentally
owned, but privately operated solid waste disposal
facilities, certain high speed rail facilities, and to
certain types of private activity tax-exempt bonds that are
subject to other limits on their volume (qualified veterans'
mortgage bonds and certain ``new'' empowerment zone and
enterprise community bonds).
Explanation of Provision
The bill exempts ``aggie bonds'' from the State volume
limits.
Effective Date
The provision applies to bonds issued after December 31,
2000.
E. Modifications to Section 512(b)(13) (Sec. 405 of the Bill and Sec.
512 of the Code)
Present Law
In general, interest, rents, royalties and annuities are
excluded from the unrelated business income (``UBI'') of tax-
exempt organizations. However, section 512(b)(13) treats
otherwise excluded rent, royalty, annuity, and interest
income as UBI if such income is received from a taxable or
tax-exempt subsidiary that is 50 percent controlled by the
parent tax-exempt organization. In the case of a stock
subsidiary, ``control'' means ownership by vote or value of
more than 50 percent of the stock. In the case of a
partnership or other entity, control means ownership of more
than 50 percent of the profits, capital or beneficial
interests. In addition, present law applies the constructive
ownership rules of section 318 for purposes of section
512(b)(13). Thus, a parent exempt organization is deemed to
control any subsidiary in which it holds more than 50 percent
of the voting power or value, directly (as in the case of a
first-tier subsidiary) or indirectly (as in the case of a
second-tier subsidiary).
Under present law, interest, rent, annuity, or royalty
payments made by a controlled entity to a tax-exempt
organization are includible in the latter organization's UBI
and are subject to the unrelated business income tax to the
extent the payment reduces the net unrelated income (or
increases any net unrelated loss) of the controlled entity.
The Taxpayer Relief Act of 1997 (the ``1997 Act'') made
several modifications, as described above, to the control
requirement of section 512(b)(13). In order to provide
transitional relief, the changes made by the 1997 Act do not
apply to any payment received or accrued during the first two
taxable years beginning on or after the date of enactment of
the 1997 Act (August 5, 1997) if such payment is received or
accrued pursuant to a binding written contract in effect on
June 8, 1997, and at all times thereafter before such payment
(but not pursuant to any contract provision that permits
optional accelerated payments).
Explanation of Provision
The bill provides that interest, rent, annuity, or royalty
payments made by a controlled subsidiary to a tax-exempt
parent is not Unrelated Business Income except to the extent
that such payments exceed arm's length values, as determined
under sec. 482 principles.
[[Page S9740]]
Effective Date
The provision generally is effective for payments received
or accrued after December 31, 2000. The binding written
contract exception contained in the 1997 Act will apply to
any payment received or accrued under such contract prior to
January 1, 2001.
F. Charitable Deduction for Contributions of Food Inventory (Sec. 406
of the Bill and Sec. 170 of the Code)
Present Law
The maximum charitable contribution deduction that may be
claimed by a corporation for any one taxable year is limited
to 10 percent of the corporation's taxable income for that
year (disregarding charitable contributions and with certain
other modifications) (sec. 170(b)(2)). Corporations also are
subject to certain limitations based on the type of property
contributed. In the case of a charitable contribution of
short-term gain property, inventory, or other ordinary income
property, the amount of the deduction generally is limited to
the taxpayer's basis (generally, cost) in the property.
However, special rules in the Code provide an augmented
deduction for certain corporate contributions. Under these
special rules, the amount of the augmented deduction is equal
to the lesser of (1) the basis of the donated property plus
one-half of the amount of ordinary income that would have
been realized if the property had been sold, or (2) twice the
basis of the donated property. To be eligible for the
enhanced deduction, the taxpayer must establish that the fair
market value of the donated item exceeds basis. The valuation
of food inventory has been the subject of ongoing disputes
between taxpayers and the IRS.
The special treatment applies only to donations made by C
corporations. S corporations, personal holding companies, and
service organizations are not eligible donors.
Explanation of Provision
The bill amends Code section 170 to expand the augmented
deduction such that any taxpayer engaged in the trade or
business of farming is eligible to claim an enhanced
deduction for donations of food inventory under section
170(e)(3).
The value of the enhanced deduction can be no greater than
twice the taxpayer's basis in the donated property. The bill
provides that in the case of a cash method taxpayer, the
taxpayer's basis in the donated food will equal half of the
fair market value of the donated food.
The bill modifies and clarifies the determination of fair
market value for the donation of food inventory. Under the
bill, the fair market value of donated food which cannot or
will not be sold solely due to internal standards of the
taxpayer, lack of market, or similar circumstances is
determined without regard to such factors and, if applicable,
by taking into account the price at which the same or similar
food items are sold by the taxpayer at the time of the
contribution or in the recent past.
The bill does not apply for taxable years beginning after
December 31, 2003.
Effective Date
The provision is effective for taxable years beginning
after December 31, 2000.
G. Coordinate Farmers and Fisherman Income Averaging and the
Alternative Minimum Tax (Sec. 407 of the Bill and Secs. 55 and 1301 of
the Code)
Present Law
An individual taxpayer engaged in a farming business as
defined by section 263A(e)(4) may elect to compute his or her
current year tax liability by averaging, over the prior
three-year period, all or portion of his or her taxable
income from the trade or business of farming. The averaging
election is not coordinated with the alternative minimum tax.
Thus, some farmers may become subject to the alternative
minimum tax solely as a result of the averaging election.
Explanation of Provision
The bill extends to individuals engaged in the trade or
business of fishing the election that is available to
individual farmers to use income averaging.
The bill also coordinates farmers and fishermen income
averaging with the alternative minimum tax. Under the bill, a
farmer will owe alternative minimum tax only to the extent he
or she will owe alternative minimum tax had averaging not
been elected. This result is achieved by excluding the impact
of the election to average farm income from the calculation
of both regular tax and tentative minimum tax, solely for the
purpose of determining alternative minimum tax.
Effective Date
The provision is effective for taxable years beginning
after December 31, 2000.
H. Cooperative Marketing to Include Value Added Processing Through
Animals (Sec. 408 of the Bill and Sec. 1388 of the Code)
Present Law
Under present law, taxable cooperatives in essence are
treated as pass-through entities in that the cooperative is
not subject to corporate income tax to the extent the
cooperative timely pays patronage dividends. Tax-exempt
cooperatives (sec. 521) are cooperatives of farmers, fruit
growers, and like organizations organized and operated on a
cooperative basis for the purpose of marketing the products
of members or other producers and turning back the proceeds
of sales, less necessary marketing expenses on the basis of
either the quantity or the value of products furnished by
them.
The Internal Revenue Service takes the position that a
cooperative is not marketing the products of members or other
producers where the cooperative adds value through the use of
animals (e.g., farmers sell corn to cooperative which is feed
to chickens which produce eggs).
Explanation of Provision
The bill provides that marketing products of members or
other producers includes feeding products of members or other
producers to cattle, hogs, fish, chickens, or other animals
and selling the resulting animals or animal products.
Effective Date
The provision is effective for taxable years beginning
after the date of enactment.
I. Extend Declaratory Judgment Procedures to Farmers' Cooperative
Organizations (Sec. 409 of the Bill and Sec. 7428 of the Code)
Present Law
Cooperatives may deduct from their taxable income amounts
distributed to patrons in the form of patronage dividends,
and certain other amounts paid or allocated to patrons, to
the extent the net earnings of the cooperative from business
done with or for patrons, provided that there is a pre-
existing obligation to distribute such amounts (sec. 1382).
Cooperatives that qualify as farmers' cooperatives under
section 521 may claim additional deductions for dividends on
capital stock and patronage-based distributions of
nonpatronage income.
Under present law, there is limited access to judicial
review of disputes regarding the initial or continuing
qualification of a farmer's cooperative described in section
521. The only remedies available to such an organization are
to file a petition in the U.S. Tax Court for relief following
the issuance of a notice of deficiency or to pay tax and sue
for a refund in a U.S. district court or the U.S. Court of
Federal Claims.
In limited circumstances, declaratory judgment procedures
are available, which generally permit a taxpayer to seek
judicial review of an IRS determination prior to the issuance
of a notice of deficiency and prior to payment of tax.
Examples of declaratory judgment procedures which are
available include disputes involving the status of a tax-
exempt organization under section 501(c)(3), the
qualification of retirement plans, the value of gifts, the
status of certain governmental obligations, or eligibility of
an estate to pay tax in installments under section 6166. In
such cases, taxpayers may challenge adverse determinations by
commencing a declaratory judgment action. For example, where
the IRS denies an organization's application for recognition
of exemption under section 501(c)(3) or fails to act on such
application, or where the IRS informs a section 501(c)(3)
organization that it is considering revoking or adversely
modifying its tax-exempt status, present law authorizes the
organization to seek a declaratory judgment regarding its tax
exempt status.
Declaratory judgment procedures are not available under
present law to a cooperative with respect to an IRS
determination regarding its status as a farmers' cooperative
under section 521.
Explanation of Provision
The bill extends the declaratory judgment procedures to
cooperatives. Such a case may be commenced in the U.S. Tax
Court, a U.S. district court, or the U.S. Court of Federal
Claims, and such court has jurisdiction to determine a
cooperative's initial or continuing qualification of a
farmers' cooperative described in sec. 521.
Effective Date
The provision is effective with respect to pleadings filed
after the date of enactment, but only with respect to
determinations (or requests for determinations) made after
January 1, 2000.
J. Small Ethanol Producer Credit (Sec. 410 of the Bill and Sec. 40 of
the Code)
Present Law
``Small ethanol producers'' are allowed a 10-cents-per-
gallon production income tax credit on up to 15 million
gallons of production annually. This credit is in addition to
the 54-cents-per-gallon benefit available for ethanol
generally.
Under present law, cooperatives in essence are treated as
pass-through entities in that the cooperative is not subject
to corporate income tax to the extent the cooperative timely
pays patronage dividends. Under present law, the only credits
that may be flowed-through to cooperative patrons are the
rehabilitation credit (sec. 47), the energy property credit
(sec. 48(a)), and the reforestation credit (sec. 48(b)), but
not the small ethanol producer credit.
Explanation of Provision
The bill: (1) provides that the small producer credit is
not a ``passive credit''; (2) allows the credit to be claimed
against the alternative minimum tax; and (3) repeals the
present rule that the amount of the credit is included in
income.
The bill also allows cooperatives to elect to pass-through
small ethanol producer credits to its patrons. The credit
allowed to a patron is that proportion of the credit the
cooperative elects to pass-through for that year as the
amount of patronage of that patron for that year bears to
total patronage of all patrons for that year.
[[Page S9741]]
Effective Date
The provision is effective for taxable years beginning
after date of enactment.
K. Payment of Dividends on Stock of Cooperatives Without Reducing
Patronage Dividends (Sec. 411 of the Bill and Sec. 1388 of the Code)
Present Law
Cooperatives, including tax-exempt farmers' cooperatives,
are treated like a conduit for Federal income tax purposes
since a cooperative may deduct patronage dividends paid from
its taxable income. In general, patronage dividends are
amounts paid to patrons (1) on the basis of the quantity or
value of business done with or for its patrons, (2) under a
valid enforceable written obligation to the patron to pay
such amount, which obligation existed before the cooperative
received such amounts, and (3) which is determined by
reference to the net earnings of the cooperative from
business done with or for its patrons.
Treasury Regulations provide that net earnings are reduced
by dividends paid on capital stock or other proprietary
capital interests. The effect of this rule is to reduce the
amount of earnings that the cooperative can treat as
patronage earnings which reduces the amount that cooperative
can deduct as patronage dividends.
Explanation of Provision
The bill allows cooperatives to pay dividends on capital
stock without those dividends reducing excludable patronage-
sourced income to the extent that the cooperative's
organizational documents provide that the dividends do not
reduce amounts owed to patrons.
Effective Date
The provision applies to distributions in taxable years
beginning after the date of enactment.
V. TAX INCENTIVES FOR THE PRODUCTION OF ENERGY
A. Allow Geological and Geophysical Costs to be Deducted Currently
(Sec. 501 of the Bill and Sec. 263 of the Code)
Present Law
In general
Under present law, current deductions are not allowed for
any amount paid for new buildings or for permanent
improvements or betterments made to increase the value of any
property or estate (sec. 263(a)). Treasury Department
regulations define capital amounts to include amounts paid or
incurred (1) to add to the value, or substantially prolong
the useful life, of property owned by the taxpayer or (2) to
adapt property to a new or different use.
The proper income tax treatment of geological and
geophysical costs (``G&G costs'') associated with oil and gas
production has been the subject of a number of court
decisions and administrative rulings. G&G costs are incurred
by the taxpayer for the purpose of obtaining and accumulating
data that will serve as a basis for the acquisition and
retention of oil or gas properties by taxpayers exploring for
the minerals. Courts have ruled that such costs are capital
in nature and are not deductible as ordinary and necessary
business expenses. Accordingly, the costs attributable to
such exploration are allocable to the cost of the property
acquired or retained. The term ``property'' includes an
economic interest in a tract or parcel of land
notwithstanding that a mineral deposit has not been
established or proven at the time the costs are incurred.
Revenue Ruling 77-188
In Revenue Ruling 77-188 (hereinafter referred to as the
``1977 ruling''), the Internal Revenue Service (``IRS'')
provided guidance regarding the proper tax treatment of G&G
costs. The ruling describes a typical geological and
geophysical exploration program as containing the following
elements:
It is customary in the search for mineral producing
properties for a taxpayer to conduct an exploration program
in one or more identifiable project areas. Each project area
encompasses a territory that the taxpayer determines can be
explored advantageously in a single integrated operation.
This determination is made after analyzing certain variables
such as the size and topography of the project area to be
explored, the existing information available with respect to
the project area and nearby areas, and the quantity of
equipment, the number of personnel, and the amount of money
available to conduct a reasonable exploration program over
the project area.
The taxpayer selects a specific project area from which
geological and geophysical data are desired and conducts a
reconnaissance-type survey utilizing various geological and
geophysical exploration techniques that are designed to yield
data that will afford a basis for identifying specific
geological features with sufficient mineral potential to
merit further exploration.
Each separable, noncontiguous portion of the original
project area in which such a specific geological feature is
identified is a separate ``area of interest.'' The original
project area is subdivided into as many small projects as
there are areas of interest located and identified within the
original project area. If the circumstances permit a detailed
exploratory survey to be conducted without an initial
reconnaissance-type survey, the project area and the area of
interest will be coextensive.
The taxpayer seeks to further define the geological
features identified by the prior reconnaissance-type surveys
by additional, more detailed, exploratory surveys conducted
with respect to each area of interest. For this purpose, the
taxpayer engages in more intensive geological and geophysical
exploration employing methods that are designed to yield
sufficiently accurate sub-surface data to afford a basis for
a decision to acquire or retain properties within or adjacent
to a particular area of interest or to abandon the entire
area of interest as unworthy of development by mine or well.
The 1977 ruling provides that if, on the basis of data
obtained from the preliminary geological and geophysical
exploration operations, only one area of interest is located
and identified within the original project area, then the
entire expenditure for those exploratory operations is to be
allocated to that one area of interest and thus capitalized
into the depletable basis of that area of interest. On the
other hand, if two or more areas of interest are located and
identified within the original project area, the entire
expenditure for the exploratory operations is to be allocated
equally among the various areas of interest.
The 1977 ruling further provides that if, on the basis of
data obtained from a detailed survey that does not relate
exclusively to any particular property within a particular
area of interest, an oil or gas property is acquired or
retained within or adjacent to that area of interest, the
entire G&G exploration expenditures, including those incurred
prior to the identification of the particular area of
interest but allocated thereto, are to be allocated to the
property as a capital cost under section 263(a).
If, however, from the data obtained by the exploratory
operations no areas of interest are located and identified by
the taxpayer within the original project area, then the 1977
ruling states that the entire amount of the G&G costs related
to the exploration is deductible as a loss under section 165
for the taxable year in which that particular project area is
abandoned as a potential source of mineral production.
Explanation of Provision
The provision allows geological and geophysical costs
incurred in connection with oil and gas exploration in the
United States to be deducted currently.
Effective Date
The provision is effective for G&G costs incurred or paid
in taxable years beginning after December 31, 2001.
B. Allow Certain Oil and Gas ``Delay Rental Payments'' to be Deducted
Currently (Sec. 502 of the Bill and Sec. 263 of the Code)
Present Law
Present law generally requires costs associated with
inventory and property held for resale to be capitalized
rather than currently deducted as they are incurred. (sec.
2634). Oil and gas producers typically contract for mineral
production in exchange for royalty payments. If mineral
production is delayed, these contracts provide for ``delay
rental payments'' as a condition of their extension. The
Treasury Department has taken the position that the uniform
capitalization rules of section 263A require delay rental
payments to be capitalized.
Explanation of Provision
The provision allows delay rental payments to be deducted
currently.
Effective Date
The provision applies to delay rental payments incurred in
taxable years beginning after December 31, 2001.
No inference is intended from the proposal as to the proper
treatment of pre-effective date delay rental payments.
C. Allow Net Operating Losses from Oil and Gas Properties to be Carried
Back for Up to Five Years (Sec. 503 of the Bill and Sec. 172 of the
Code)
Present Law
A net operating loss (``NOL'') generally is the amount by
which business deductions of a taxpayer exceed business gross
income. In general, an NOL may be carried back two years and
carried forward 20 years to offset taxable income in such
years. A carryback of an NOL results in the refund of Federal
income tax for the carryback year. A carryforward of an NOL
reduces Federal income tax for the carryforward year. Special
NOL carryback rules apply to (1) casualty and theft losses of
individual taxpayers, (2) Presidentially declared disasters
for taxpayers engaged in a farming business or a small
business, (3) real estate investment trusts, (4) specified
liability losses, (5) excess interest losses, and (6) farm
losses.
Explanation of Provision
The provision provides a special five-year carryback for
certain eligible oil and gas losses of independent producers.
The carryforward period remains 20 years. An ``eligible oil
and gas loss'' is defined as the lesser of (1) the amount
which would be the taxpayer's NOL for the taxable year if
only income and deductions attributable to operating mineral
interests in oil and gas wells were taken into account, or
(2) the amount of such net operating loss for such taxable
year. In calculating the amount of a taxpayer's NOL
carrybacks, the portion of the NOL that is attributable to an
eligible oil and gas loss is treated as a separate NOL and
taken into account after the remaining portion of the NOL for
the taxable year.
Effective Date
The proposal applies to NOLs arising in taxable years
beginning after December 31, 2001.
[[Page S9742]]
D. Temporary Suspension of Percentage of Depletion Deduction Limitation
Based on 65 Percent of Taxable Income (Sec. 504 of the Bill and Sec.
613A of the Code)
Present Law
Depletion, like depreciation, is a form of capital cost
recovery. In both cases, the taxpayer is allowed a deduction
in recognition of the fact that an asset--in the case of
depletion for oil or gas interests, the mineral reserve
itself--is being expended in order to produce income. Certain
costs incurred prior to drilling an oil or gas property are
recovered through the depletion deduction. These include
costs of acquiring the lease or other interest in the
property and geological and geophysical costs (in advance of
actual drilling). Depletion is available to any person having
an economic interest in a producing property.
Two methods of depletion currently are allowable under the
Code: (1) the cost depletion method, and (2) the percentage
depletion method (secs. 611-613). Under the cost depletion
method, the taxpayer deducts that portion of the adjusted
basis of the depletable property which is equal to the ratio
of units sold from that property during the taxable year to
the number of units remaining as of the end of taxable year
plus the number of units sold during the taxable year. Thus,
the amount recovered under cost depletion may never exceed
the taxpayer's basis in the property.
Under the percentage depletion method, generally, 15
percent of the taxpayer's gross income from an oil- or gas-
producing property is allowed as a deduction in each taxable
year (sec. 613A(c)). The amount deducted generally may not
exceed 100 percent of the net income from that property in
any year (the ``net-income limitation'') (sec. 613(a)).
Additionally, the percentage depletion deduction for all oil
and gas properties may not exceed 65 percent of the
taxpayer's overall taxable income (determined before such
deduction and adjusted for certain loss carrybacks and trust
distributions) (sec. 613A(d)(1)).
Explanation of Provision
The provision suspends the 65-percent-of-taxable-income
limit for taxable years beginning after December 31, 2000 and
before January 1, 2004.
Effective Date
The provision is effective for taxable years beginning
after December 31, 2000.
E. Tax Credit for Oil and Gas Production from Marginal Wells (sec. 505
of the bill and sec. 54A of the Code)
Present Law
There is no income tax credit for oil or gas production
from marginal wells generally. Present law does, however,
provide a tax credit for production requiring the use of
certain tertiary recovery methods (the ``enhanced oil
recovery credit'') (sec. 43).
Explanation of Provision
The provision provides an income tax credit equal to $3 per
barrel of qualified crude oil produced from a marginal well
and 50 cents per 1,000 cubic feet of qualified natural gas
production. Qualified production is defined as production up
to 1,095 barrels per year (3 barrels per day).
The credit applies fully only when oil prices are below
$14. The credit phases-out ratably when the price of oil is
between $14 and $17 per barrel for oil (and equivalent
amounts for natural gas).
The credit can be claimed against both the regular income
tax and the alternative minimum tax.
Effective Date
The proposal applies to production in taxable years
beginning after December 31, 2000.
F. Natural Gas Gathering Lines Treated as 7-Year Property (Sec. 506 of
the Bill and Sec. 168(e)(3) of the Code)
Present Law
The applicable recovery period for assets placed in service
under the Modified Accelerated Cost Recovery System is based
on the ``class life of the property.'' The class lives of
assets placed in service after 1986 are set forth in Revenue
Procedure 87-56. Revenue Procedure 87-56 includes two asset
classes that could describe natural gas gathering lines owned
by non-producers of natural gas. Asset class 13.2, describing
assets used in the exploration for and production of
petroleum and natural gas deposits, provides a class life of
14 years and a depreciation recovery period of seven years.
Asset class 46.0, describing pipeline transportation,
provides a class life of 22 years and a recovery period of 15
years. The uncertainty regarding the appropriate recovery
period has resulted in litigation between taxpayers and the
IRS. Recently, the 10th Circuit Court of Appeals held that
natural gas gathering lines owned by non-producers fall
within the scope of Asset class 13.2 (i.e., seven-year
recovery period).
Explanation of Provision
The bill establishes a statutory seven-year recovery period
for all natural gas gathering lines. A natural gas gathering
line would be defined to include pipe, equipment, and
appurtenances that are (1) determined to be a gathering line
by the Federal Energy Regulatory Commission, or (2) used to
deliver natural gas from the wellhead or a common point to
the point at which such gas first reaches (a) a gas
processing plant, (b) an interconnection with an interstate
transmission line, (c) an interconnection with an intrastate
transmission line, or (d) a direct interconnection with a
local distribution company, a gas storage facility, or an
industrial consumer.
Effective Date
The provision is effective for property placed in service
on or after the date of enactment. No inference would be
intended as to the proper treatment of such property placed
in service before the date of enactment.
G. Clarification of Treatment of Pipeline Transportation Income (Sec.
507 of the Bill and Sec. 954 of the Code)
Present Law
Under the subpart F rules, U.S. 10-percent shareholders of
a controlled foreign corporation (``CFC'') are subject to
U.S. tax currently on their shares of certain income earned
by the foreign corporation, whether or not such income is
distributed to the shareholders (referred to as ``subpart F
income''). Subpart F income includes foreign base company
income, which in turn includes five categories of income:
foreign personal holding company income, foreign base company
sales income, foreign base company services income, foreign
base company shipping income, and foreign base company oil
related income (sec. 954(a)).
Foreign base company oil related income is income derived
outside the United States from the processing of minerals
extracted from oil or gas wells into their primary products;
the transportation, distribution, or sale of such minerals or
primary products; the disposition of assets used by the
taxpayer in a trade or business involving the foregoing; or
the performance of any related services. However, foreign
base company oil related income does not include income
derived from a source within a foreign country in connection
with: (1) oil or gas which was extracted from a well located
in such foreign country or, (2), oil, gas, or a primary
product of oil or gas which is sold by the CFC or a related
person for use or consumption within such foreign country or
is loaded in such country as fuel on a vessel or aircraft. An
exclusion also is provided for income of a CFC that is a
small producer (i.e., a corporation whose average daily oil
and natural gas production, including production by related
corporations, is less than 1,000 barrels).
Explanation of Provision
The bill provides an additional exception to the definition
of foreign base company oil related income. Under the bill,
foreign base company oil related income does not include
income derived from a source within a foreign country in
connection with the pipeline transportation of oil or gas
within such foreign country. Thus, the exception applies
whether or not the CFC that owns the pipeline also owns any
interest in the oil or gas transported. In addition, the
exception applies to income earned from the transportation of
oil or gas by pipeline in a country in which the oil or gas
was neither extracted nor consumed within such foreign
country.
Effective Date
The provision is effective for taxable years of CFCs
beginning after December 31, 2001, and taxable years of U.S.
shareholders with or within which such taxable years of CFCs
end.
TITLE VI. TAX INCENTIVES FOR CONSERVATION
A. Exclusion of 50 Percent of Gain on Sales of Land or Interests in
Land or Water to Eligible Entities for Conservation Purposes (Sec. 601
of the Bill and New Sec. 121A of the Code)
Present Law
Gain from the sale or exchange of land held more than one
year generally is treated as long-term capital gain.
Generally the net capital gain of an individual (i.e.,
long-term capital gain less short-term capital loss) is
subject to a maximum rate of 20 percent.
Explanation of Provision
The bill provides a 50-percent exclusion from a taxpayer's
gross income for gain realized on the qualifying sale of
land, or an interest in land or water, provided the land, or
interest in land or water, has been held by the taxpayer or
the taxpayer's family for at least three years prior to the
date of sale. A qualifying sale is a sale to any agency of
the Federal Government, a State government, or a local
government, or a sale to 501(c)(3) organization that is
organized and operated primarily to meet a qualified
conservation purpose. In addition, to be a qualifying sale,
the entity acquiring the land, or interest in land or water,
must provide the taxpayer with a letter detailing that the
intent of the purchase is to further a qualified conservation
purpose. A qualified conservation purpose is (1) the
preservation of land areas for outdoor recreation by, or the
education of, the general public, (2) the protection of a
relatively natural habitat of fish, wildlife, or plants, or
similar ecosystem, or (3) the preservation of open space
(including farmland and forest land) where the preservation
is for the scenic enjoyment of the general public or pursuant
to a clearly delineated Federal, State or local governmental
conservation policy that will yield a significant public
benefit.
Effective Date
The provision is effective for sales after December 31,
2003.
[[Page S9743]]
B. Expand the Estate Tax Rule for Conservation Easements (Sec. 602 of
the Bill and Sec. 2031 of the Code)
Present Law
An executor may elect to exclude from the taxable estate 40
percent of the value of any land subject to a qualified
conservation easement, up to a maximum exclusion of $100,000
in 1998, $200,000 in 1999, $300,000 in 2000, $400,000 in
2001, and $500,000 in 2002 and thereafter (sec. 2031(c)). The
exclusion percentage is reduced by 2 percentage points for
each percentage point (or fraction thereof) by which the
value of the qualified conservation easement is less than 30
percent of the value of the land (determined without regard
to the value of such easement and reduced by the value of any
retained development right).
A qualified conservation easement is one that meets the
following requirements: (1) the land is located within 25
miles of a metropolitan area (as defined by the Office of
Management and Budget) or a national park or wilderness area,
or within 10 miles of an Urban National Forest (as designated
by the Forest Service of the U.S. Department of Agriculture);
(2) the land has been owned by the decedent or a member of
the decedent's family at all times during the three-year
period ending on the date of the decedent's death; and (3) a
qualified conservation contribution (within the meaning of
sec. 170(h)) of a qualified real property interest (as
generally defined in sec. 170(h)(2)(C)) was granted by the
decedent or a member of his or her family. For purposes of
the provision, preservation of a historically important land
area or a certified historic structure does not qualify as a
conservation purpose.
In order to qualify for the exclusion, a qualifying
easement must have been granted by the decedent, a member of
the decedent's family, the executor of the decedent's estate,
or the trustee of a trust holding the land, no later than the
date of the election. To the extent that the value of such
land is excluded from the taxable estate, the basis of such
land acquired at death is a carryover basis (i.e., the basis
is not stepped-up to its fair market value at death).
Property financed with acquisition indebtedness is eligible
for this provision only to the extent of the net equity in
the property. The exclusion from estate taxes does not extend
to the value of any development rights retained by the
decedent or donor.
Explanation of Provision
The bill expands the availability of qualified conservation
easements by eliminating the geographical boundary
restrictions. Under the bill, the land qualifies without
regard to the distance from which the land is situated from a
metropolitan area, national park, wilderness area, or Urban
National Forest.
Effective Date
The provision is effective for estates of decedents dying
after December 31, 2001.
C. Cost-Sharing Payments Under the Partners for Wildlife Program (Sec.
603 of the Bill and Sec. 126 of the Code)
Present Law
Under present law, gross income does not include the
excludable portion of payments made to taxpayers by federal
and state governments for a share of the cost of improvements
to property under certain conservation programs. These
programs include payments received under (1) the rural clean
water program authorized by section 208(j) of the Federal
Water Pollution Control Act, (2) the rural abandoned mine
program authorized by section 406 of the Surface Mining
Control and Reclamation Act of 1977, (3) the water bank
program authorized by the Water Bank Act, (4) the emergency
conservation measures program authorized by title IV of the
Agricultural Credit Act of 1978, (5) the agriculture
conservation program authorized by the Soil Conservation and
Domestic Allotment Act, (6) the great plains conservation
program authorized by section 16 of the Soil Conservation and
Domestic Policy Act, (7) the resource conservation and
development program authorized by the Bankhead-Jones Farm
Tenant Act and by the Soil Conservation and Domestic
Allotment Act, (8) the forestry incentives program authorized
by section 4 of the Cooperative Forestry Assistance Act of
1978, (9) any small watershed program administered by the
Secretary of Agriculture which is determined by the Secretary
of the Treasury or his delegate to be substantially similar
to the type of programs described in items (1) through (8),
and (10) any program of a State, possession of the United
States, a political subdivision of any of the foregoing, or
the District of Columbia under which payments are made to
individuals primarily for the purpose of conserving soil,
protecting or restoring the environment, improving forests,
or providing a habitat for wildlife.
Explanation of Provision
The provision expands the types of qualified cost-sharing
payments to include payments under the Partners for Wildlife
Program.
Effective Date
The provision applies to payments received after the date
of enactment.
D. Incentive for Certain Energy Efficient Property Used in Business
(Sec. 604 of the Bill and New Sec. 199 of the Code)
Present Law
No special deduction is currently provided for expenses
incurred for energy efficient building property.
Explanation of Provision
The provision allows a deduction from income for expenses
incurred for energy efficient commercial building property.
Energy-efficient commercial building property is defined as
property that reduces annual energy and power costs with
respect to lighting, cooling, heating, ventilation, and hot
water supply by 50 percent or more in comparison to a
reference building. A reference building is defined as one
which meets the requirements of Standard 90.1-1999 of the
American Society of Heating, Refrigerating, and Air
Conditioning Engineers and the Illuminating Engineering
Society of North America. The maximum deduction would be
$2.25 per square foot. For all property eligible for the
deduction, the depreciable basis of the property is reduced
by the amount of the deduction. For public property, such as
schools, the Secretary shall issue regulations to allow the
deduction to be allocated to the person primarily responsible
for designing the property in lieu of the public entity
owner.
Effective Date
The deduction is effective for taxable years beginning
after December 31, 2000, and before January 1, 2004.
E. Extension and Modification of Tax Credit for Electricity Produced
from Biomass (Sec. 605 of the Bill and Sec. 45 of the Code)
Present Law
Section 45
An income tax credit is allowed for the production of
electricity from either qualified wind energy facilities,
qualified ``closed-loop'' biomass facilities, or qualified
poultry waste facilities (sec. 45). The current value of the
credit is 1.7 cents/kilowatt hour of electricity produced and
the value of the credit is indexed for inflation. The credit
applies to electricity produced by a qualified wind energy
facility placed in service after December 31, 1993, and
before January 1, 2002, to electricity produced by a
qualified closed-loop biomass facility placed in service
after December 31, 1992, and before January 1, 2002, and to a
qualified poultry waste facility placed in service after
December 31, 1999, and before January 1, 2002. The credit is
allowable for production during the 10-year period after a
facility is originally placed in service.
Closed-loop biomass is the use of plant matter, where the
plants are grown for the sole purpose of being used to
generate electricity. It does not include the use of waste
materials (including, but not limited to, scrap wood, manure,
and municipal or agricultural waste). The credit also is not
available to taxpayers who use standing timber to produce
electricity. In order to claim the credit, a taxpayer must
own the facility and sell the electricity produced by the
facility to an unrelated party.
Section 29
Certain fuels produced from ``nonconventional sources'' and
sold to unrelated parties are eligible for an income tax
credit equal to $3 (generally adjusted for inflation) per
barrel or BTU oil barrel equivalent (sec. 29) (referred to as
the ``section 29 credit''). Qualified fuels must be produced
within the United States. Qualified fuels include:
(1) oil produced from shale and tar sands;
(2) gas produced from geopressured brine, Devonian shale,
coal seams, tight formations (``tight sands''), or biomass;
and
(3) liquid, gaseous, or solid synthetic fuels produced from
coal (including lignite).
In general, the credit is available only with respect to
fuels produced from wells drilled or facilities placed in
service after December 31, 1979, and before January 1, 1993.
An exception extends the January 1, 1993 expiration date for
facilities producing gas from biomass and synthetic fuel from
coal if the facility producing the fuel is placed in service
before July 1, 1998, pursuant to a binding contract entered
into before January 1, 1997.
The credit may be claimed for qualified fuels produced and
sold before January 1, 2003 (in the case of nonconventional
sources subject to the January 1, 1993 expiration date) or
January 1, 2008 (in the case of biomass gas and synthetic
fuel facilities eligible for the extension period).
Explanation of Provision
The bill provides that the present-law tax credit for
electricity produced by wind, closed-loop biomass, and
poultry waste facilities is expanded to include electricity
produced from certain other biomass (in addition to closed-
loop biomass and poultry waste) and electricity produced from
landfill gas. Taxpayers producing electricity from other
biomass or landfill gas may claim credit for production of
electricity for three years commencing on the later of
January 1, 2001, or the date the facility is placed in
service.
``Other biomass'' is defined as solid nonhazardous,
cellulose waste material which is segregated from other waste
materials and which is derived from forest resources, but not
including old growth timber. The term includes urban sources
such as waste pallets, crates, manufacturing and construction
wood waste, and tree trimmings, or agricultural sources
(including orchard tree crops, grain, vineyard, legumes,
sugar, and other crop by-products or residues). However, the
term does not include unsegregated municipal solid waste,
paper that is commonly recycled, or certain chemically
treated wood
[[Page S9744]]
wastes. Qualifying other biomass and landfill gas facilities
are limited to facilities owned by the taxpayer.
A special rule modifies present-law definition of qualified
closed-loop biomass facilities to include facilities in which
electricity is produced from closed-loop biomass fuels co-
fired with coal.
In the case of other biomass facilities, the credit applies
to electricity produced after December 31, 2000 from
facilities that are placed in service before January 1, 2002
(including facilities placed in service before the date of
enactment of this provision). In the case of landfill gas
facilities, the credit applies to electricity produced after
December 31, 2000, from facilities placed in service after
December 31, 1999, and before January 1, 2002. In the case of
closed-loop biomass facilities in which closed-loop biomass
fuel is co-fired with coal, the credit applies to electricity
produced after December 31, 2000, from facilities that are
placed in service before January 1, 2002 (including
facilities placed in service before the date of enactment of
this provision).
Effective Date
The provision is effective upon the date of enactment.
F. Credit for Certain Energy Efficient Motor Vehicles (Sec. 606 of the
Bill and New Sec. 30B of the Code)
Present Law
Present law does not provide a credit for the purchase of
hybrid vehicles. However, taxpayers may claim a credit of 10
percent of the cost of an electric vehicle up to a maximum
credit of $4,000 (sec. 30). A qualified electric vehicle is a
vehicle powered primarily by an electric motor drawing
current from rechargeable batteries, fuel cells, or other
portable sources of electrical current. The credit does not
apply to property placed in service after December 31, 2004
and is reduced ratably between 2002 and 2004.
Taxpayers may claim an immediate deduction (expensing) for
up to $2,000 of the cost of a qualified clean-fuel vehicle
which is a car and up to $50,000 in the case of certain
trucks or vans (sec. 179A). For the purpose of the deduction,
gasoline and diesel fuel are not clean-burning fuels. The
deduction expires after December 31, 2004, and is phased out
ratably between 2002 and 2004.
Explanation of Provision
The bill provides a temporary tax credit for qualified
hybrid vehicles, with a rechargeable energy system used in
business and for personal use. For vehicles with a
rechargeable energy system that provides five percent to less
than 10 percent of the maximum available power, the credit
amount is $500; for a system that provides 10 percent to less
than 20 percent of maximum available power the credit is
$1,000; for a system that provides 20 percent to less than 30
percent of maximum available power, the credit is $1,500; and
for a system that provides 30 percent or greater of maximum
available power, the credit is $2,000. The credit amount is
increased for qualified hybrid vehicles that also actively
employ a regenerative braking system that supplies energy to
the rechargeable energy storage system. For a hybrid vehicle
with a regenerative braking system that provides 20 percent
to less than 40 percent of the energy available from braking
in a typical 60 miles per hour to zero miles per hour braking
event, the additional credit amount is $250, for 40 percent
to less than 60 percent, the additional credit would be $500,
and for 60 percent or greater, the additional credit is
$1,000.
In addition, the sponsors note that this proposal is one
portion of a package of proposals in the Alternative Fuels
Incentives Act. The proposals in that legislation include a
tax credit for alternative fuel vehicles, a tax credit for
retail sales of alternative motor vehicle fuels, and an
extension of the deduction for certain refueling property.
The sponsors note the Committee has explored these incentives
in a hearing and will continue to seek to address these
proposals in appropriate legislation.
Effective Date
The credit is available for a hybrid vehicle placed in
service after December 31, 2003, and before January 1, 2005.
VII. ADDITIONAL TAX PROVISIONS
A. Limitation on Use of Non-Accrual Experience Method of Accounting
(Sec. 701 of the Bill and Sec. 448 of the Code)
Present Law
An accrual method taxpayer generally must recognize income
when all the events have occurred that fix the right to
receive the income and the amount of the income can be
determined with reasonable accuracy. An accrual method
taxpayer may deduct the amount of any receivable that was
previously included in income that becomes worthless during
the year.
Accrual method taxpayers are not required to include in
income amounts to be received for the performance of services
which, on the basis of experience, will not be collected (the
``non-accrual experience method''). The availability of this
method is conditioned on the taxpayer not charging interest
or a penalty for failure to timely pay the amount charged.
A cash method taxpayer is not required to include an amount
in income until it is received. A taxpayer generally may not
use the cash method if purchase, production, or sale of
merchandise is an income producing factor. Such taxpayers
generally are required to keep inventories and use an accrual
method of accounting. In addition, corporations (and
partnerships with corporate partners) generally may not use
the cash method of accounting if their average annual gross
receipts exceed $5 million. An exception to this $5 million
rule is provided for qualified personal service corporations.
A qualified personal service corporation is a corporation (1)
substantially all of whose activities involve the performance
of services in the fields of health, law, engineering,
architecture, accounting, actuarial science, performing arts
or consulting and (2) substantially all of the stock of which
is owned by current or former employees performing such
services, their estates or heirs. Qualified personal service
corporations are allowed to use the cash method without
regard to whether their average annual gross receipts exceed
$5 million.
Explanation of Provision
The provision provides that the non-accrual experience
method of accounting will be available only for amounts to be
received for the performance of qualified personal services.
Amounts to be received for all other services will be subject
to the general rule regarding inclusion in income. Qualified
personal services are personal services in the fields of
health, law, engineering, architecture, accounting, actuarial
science, performing arts or consulting. As under present law,
the availability of this method is conditioned on the
taxpayer not charging interest or a penalty for failure to
timely pay the amount charged.
It is believed that the formula contained in Temp. Reg.
Section 1.448-2T does not clearly reflect the amount of
income that, based on experience, will not be collected for
many qualified personal services providers, especially for
those where significant time elapses between the rendering of
the service and a final determination that the account will
not be collected. Providers of qualified personal services
should not be subject to a formula that requires the
payment of taxes on receivables that will not be
collected. It is intended that the Secretary of the
Treasury be directed to amend the temporary regulations to
provide a more accurate determination for such qualified
personal service providers of amounts to be excluded from
income that, based on the taxpayer's experience, will not
be collected. In amending such regulations, the Secretary
of the Treasury should consider providing flexibility with
respect to any formula used to compute the amount of the
exclusion, to address the different factual situations of
taxpayers.
Effective Date
The provision is effective for taxable years ending after
date of enactment. Any change in the taxpayer's method of
accounting necessitated as a result of the provision are
treated as a voluntary change initiated by the taxpayer with
the consent of the Secretary of the Treasury. Any required
section 481(a) adjustment is to be taken into account over a
period not to exceed four years under principles consistent
with those in Rev. Proc. 98-60.
B. Repeal of Section 1706 of the Tax Reform Act of 1986 (Sec. 702 of
the Bill)
Present Law
Under present law, determination of whether a worker is an
employee or independent contractor is generally made under a
common-law test. Section 530 of the Revenue Act of 1978
provides safe harbors under which a service recipient may
treat a worker as an independent contractor for employment
tax purposes (regardless of their status under the common-law
test) if certain requirements are satisfied. One of the
requirements of safe-harbor relief under section 530 is that
the taxpayer (or a predecessor) must not have treated any
worker holding a substantially similar position as an
employee for purposes of employment taxes for any period
after 1977. In determining whether workers hold substantially
similar positions, one of the factors that is to be taken
into account is the relationship of the parties, including
the degree of supervision and control of the worker by the
taxpayer.
Under section 1706 of the Tax Reform Act of 1986, section
530 safe-harbor relief does not apply to certain technical
services personnel.
Explanation of Provision
The bill repeals section 1706 of the Tax Reform Act of
1986. Thus, section 530 safe-harbor relief is available with
respect to workers covered by section 1706, if the
requirements of the safe harbor are otherwise satisfied. The
bill does not repeal the consistency requirement with respect
to workers covered by section 1706.
Effective Date
The bill is effective for periods beginning after the date
of enactment.
C. Expansion of Exemption From Personal Holding Company Tax for Lending
or Finance Business Companies (Sec. 703 of the Bill and Section 542 of
the Code)
Present Law
Personal holding companies (``PHC'') are subject to a 39.6
percent tax on undistributed PHC income. This tax can be
avoided by distributing the income to shareholders, who then
pay shareholder level tax. PHCs are closely held companies
with at least 60 percent ``personal holding company income''
(``PHCI''). This is generally passive income, including
interest, dividends, and rents. Certain rent is excluded from
the definition, if rent is at least 50 percent of the
adjusted ordinary gross income of the company and
[[Page S9745]]
other undistributed PHCI does not exceed 10 percent of the
adjusted ordinary gross income.
In the case of a group of corporations filing a
consolidated return, with certain exceptions, the application
of the PHC tax to the group and any member thereof is
generally determined on the basis of consolidated income and
consolidated PHCI. If any member of the group is excluded
from the definition of a PHC under certain provisions
(including one for certain lending or finance businesses),
then each other member of the group is tested separately for
PHC status.
A special rule of present law excludes a lending or finance
business from the definition of a PHC if certain requirements
are met. At least 60 percent of its income must come from the
active conduct of a lending or finance business, and no more
than 20 percent of its adjusted gross income may be from
certain other PHCI. A lending or finance business does not
include a business of making loans longer than 144 months (12
years). Also, the deductions attributable to this active
lending or finance business (but not including interest
expense) must be at least 5 percent of income over $500,000
(plus 15 percent of income under that amount).
Explanation of Provision
The provision modifies the personal holding company
exclusion for lending or finance companies to provide that,
in determining whether a member of an affiliated group (as
defined in section 1504(a)(1)) filing a consolidated return
is a lending or finance company, only corporations engaged in
a lending or finance business are taken into account, and all
such companies are aggregated for purposes of this
determination. The effect of this rule is to treat a
corporation as a lending or finance company if all companies
engaged in a lending or finance business in the affiliated
group, in the aggregate, satisfy the requirements of the
exclusion.
The provision also repeals the business expense requirement
and the limitation on the maturity of loans made by a lending
or finance business.
The provision also broadens the definition of a lending or
finance business to include providing financial or investment
advisory services, as well as engaging in leasing, including
entering into leases and/or purchasing, servicing, and/or
disposing of leases and leased assets.
Rents that are not derived from the active and regular
conduct of a lending or finance business would continue to be
treated under the present law personal holding company income
rules.
Effective Date
The provision is effective for taxable years beginning
after December 31, 2000.
D. Charitable Contribution Deduction for Certain Expenses Incurred in
Support of Native Alaskan Subsistence Whaling (Sec. 704 of the Bill and
Sec. 170 of the Code)
Present Law
In computing taxable income, individuals who do not elect
the standard deduction may claim itemized deductions,
including a deduction (subject to certain limitations) for
charitable contributions or gifts made during the taxable
year to a qualified charitable organization or governmental
entity (sec. 170). Individuals who elect the standard
deduction may not claim a deduction for charitable
contributions made during the taxable year.
No charitable contribution deduction is allowed for a
contribution of services. However, unreimbursed expenditures
made incident to the rendition of services to an
organization, contributions to which are deductible, may
constitute a deductible contribution (Treas. Reg. sec.
1.170A-1(g)). Specifically, section 170(j) provides that no
charitable contribution deduction is allowed for traveling
expenses (including amounts expended for meals and lodging)
while away from home, whether paid directly or by
reimbursement, unless there is no significant element of
personal pleasure, recreation, or vacation in such travel.
Explanation of Provision
The bill allows individuals to claim a deduction under
section 170 not exceeding $7,500 per taxable year for certain
expenses incurred in carrying out sanctioned whaling
activities. The deduction is available only to an individual
who is recognized by the Alaska Eskimo Whaling Commission as
a whaling captain charged with the responsibility of
maintaining and carrying out sanctioned whaling activities.
The deduction is available for reasonable and necessary
expenses paid by the taxpayer during the taxable year for (1)
the acquisition and maintenance of whaling boats, weapons,
and gear used in sanctioned whaling activities, (2) the
supplying of food for the crew and other provisions for
carrying out such activities, and (3) storage and
distribution of the catch from such activities.
For purposes of the provision, the term ``sanctioned
whaling activities'' means subsistence bowhead whale hunting
activities conducted pursuant to the management plan of the
Alaska Eskimo Whaling Commission.
Effective Date
The provision is effective for taxable years ending after
December 31, 2000.
E. Treatment of Purchase of Structured Settlements (Sec. 705 of the
Bill and New Sec. 5891 of the Code)
Present Law
Present law provides tax-favored treatment for structured
settlement arrangements for the payment of damages on account
of personal injury or sickness.
Under present law, an exclusion from gross income is
provided for amounts received for agreeing to a qualified
assignment to the extent that the amount received does not
exceed the aggregate cost of any qualified funding asset
(sec. 130). A qualified assignment means any assignment of a
liability to make periodic payments as damages (whether by
suit or agreement) on account of a personal injury or
sickness (in a case involving physical injury or physical
sickness), provided the liability is assumed from a person
who is a party to the suit or agreement, and the terms of the
assignment satisfy certain requirements. Generally, these
requirements are that (1) the periodic payments are fixed as
to amount and time; (2) the payments cannot be accelerated,
deferred, increased, or decreased by the recipient; (3) the
assignee's obligation is no greater than that of the
assignor; and (4) the payments are excludable by the
recipient under section 104(a)(2) as damages on account of
personal injuries or sickness.
A qualified funding asset means an annuity contract issued
by an insurance company licensed in the U.S., or any
obligation of the United States, provided the annuity
contract or obligation meets statutory requirements. An
annuity that is a qualified funding asset is not subject to
the rule requiring current inclusion of the income on the
contract which generally applies to annuity contract holders
that are not natural persons (e.g., corporations) (sec.
72(u)(3)(C)). In addition, when the payments on the annuity
are received by the structured settlement company and
included in income, the company generally may deduct the
corresponding payments to the injured person, who, in turn,
excludes the payments from his or her income (sec. 104).
Thus, neither the amount received for agreeing to the
qualified assignment of the liability to pay damages, nor the
income on the annuity that funds the liability to pay
damages, generally is subject to tax.
The exclusion for recipients of the periodic payments
received under a structured settlement arrangement as damages
for personal physical injuries or physical sickness can be
contrasted with the treatment of investment earnings that are
not paid as damages. If a recipient of damages chooses to
receive a lump sum payment (excludable from income under sec.
104), and then to invest it himself, generally the earnings
on the investment are includable in income. For example, if
the recipient uses the lump sum to purchase an annuity
contract providing for periodic payments, then a portion of
each payment under the annuity contract is includable in
income, and the balance is excludable under present-law rules
based on the ratio of the individual's investment in the
contract to the expected return on the contract (sec. 72(b)).
Present law provides that the payments to the injured
person under the qualified assignment cannot be accelerated,
deferred, increased, or decreased by the recipient.
Consistent with these requirements, it is understood that
contracts under structured settlement arrangements generally
contain anti-assignment clauses. It is understood, however,
that injured persons may nonetheless be willing to accept
discounted lump sum payments from certain ``factoring''
companies in exchange for their payment streams. The tax
effect on the parties of these transactions may not be
completely clear under present law.
Explanation of Provision
The provision generally imposes an excise tax on any person
acquiring a payment stream under a structured settlement
arrangement. The amount of the excise tax is 40 percent of
the excess of (1) the undiscounted amount of the payment
stream acquired, over (2) the total amount actually paid.
The 40 percent excise tax does not apply, however, if the
transfer is approved in advance in a final court order (or
order of the responsible administrative authority) that
finds: (1) that the transaction does not contravene any
Federal or State statute or the order of any court or
responsible administrative authority; and (2) is in the best
interest of the payee, taking into account the welfare and
support of the payee's dependents. Rules are provided for
determining the applicable State statute.
The provision also provides that the acquisition
transaction does not affect the application of certain
present-law rules, if those rules were satisfied at the time
the structured settlement was entered into. The rules are
section 130 (relating to an exclusion from gross income for
personal injury liability assignments), section 72 (relating
to annuities), sections 104(a)(1) and (2) (relating to an
exclusion for amounts received under workers' compensation
acts and for damages on account of personal physical injuries
or physical sickness), and section 461(h) (relating to the
time of economic performance in determining the taxable year
of a deduction).
Effective Date
The provision generally is effective for acquisition
transactions entered into on or after 30 days following
enactment. A transition rule applies during the period from
that date to July 1, 2002. If no applicable State law
(relating to the best interest of the payee) applies to a
transfer during that period, then the exception from the 40
percent
[[Page S9746]]
excise tax is available without the otherwise required court
(or administrative) order, provided certain disclosure
requirements are met. Under the transition rule, the person
acquiring the structured settlement payments is required to
disclose in advance to the payee: (1) the amounts and due
dates of the payments to be transferred; (2) the aggregate
amount to be transferred; (3) the consideration to be
received by the payee; (4) the discounted present value of
the transferred payments; and (5) the expenses to be paid by
the payee or deducted from the payee's proceeds.
The provision providing that the acquisition transaction
does not affect the application of certain present-law rules
is effective for transactions entered into before, on, or
after the 30th day following enactment.
______
By Mr. DOMENICI:
S. 3153. A bill to authorize the Secretary of the Air force to convey
certain excess personal property of the Air force to Roosevelt General
Hospital, Portales, New Mexico; to the Committee on Armed Services.
Conveyance of Air Force Property to Roosevelt General Hospital,
Portales, New Mexico
Mr. DOMENICI. Mr. President, I rise today to introduce legislation of
importance to military members serving at Cannon Air Force Base and the
community serving that Air Force Base. This bill would allow the
Secretary of the Air Force to convey hospital equipment from a closed
hospital facility at Cannon to a new public hospital in Portales, New
Mexico.
This is another win-win possibility for the local Air Force personnel
and the surrounding community. The hospital at Cannon Air Force Base
was closed several years ago. However, the equipment remains at that
facility and has been collecting dust since the facility's closure.
A new, state-of-the-art hospital is now being built to serve
Roosevelt County citizens. While the County has taken tremendous
strides towards establishing a first-rate hospital, excess equipment
from the Air Force Base would help ameliorate immediate costs of fully
equipping the new hospital. In addition, service members and their
families who reside in Portales will certainly make use of the new
hospital facility in their area.
The Wing Commander and Medical Commander at Cannon Air Force Base
agree that this is a beneficial arrangement. They have met with local
community leaders and civilian hospital administrators to carefully
review what equipment from the closed Air Force facility should be
transferred to the new community hospital. Everyone agrees that this is
a positive action to strengthen relations and provide better medical
care for both civilian and military community members.
Mr. President, the Air Force is striving to explore novel, beneficial
arrangements with local civilian communities to provide medical care
for its personnel. This bill, which is entirely discretionary, but
would expedite the process, is an easy, common sense approach to
achieving that goal. I ask unanimous consent that a copy of the bill be
printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 3153
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. CONVEYANCE OF AIR FORCE PROPERTY TO ROOSEVELT
GENERAL HOSPITAL, PORTALES, NEW MEXICO.
(a) Authority.--The Secretary of the Air Force is
authorized to convey to the Roosevelt General Hospital,
Portales, New Mexico, without consideration, and without
regard to title II of the Federal Property and Administrative
Services Act of 1949, all right, title, and interest of the
United States in any personal property of the Air Force that
the Secretary determines--
(1) is appropriate for use by the Roosevelt General
Hospital in the operation of that hospital; and
(2) is excess to the needs of the Air Force.
(b) Additional Terms and Conditions.--The Secretary may
require any additional terms and conditions in connection
with any conveyance under subsection (a) that the Secretary
considers appropriate to protect the interests of the United
States.
______
Mr. MOYNIHAN (for himself and Mr. Schumer):
S. 3154. A bill to establish the Erie Canalway National Heritage
Corridor in the State of New York, and for other purposes; to the
Committee on Energy and Natural Resources.
erie canal national heritage corridor
Mr. MOYNIHAN. Mr. President, in April, 1808, Secretary of the
Treasury Albert Gallatin proposed to the Senate a national system of
roads and canals, an idea feasible because payment of the National debt
was within reach. It was a time for thinking big. A canal between the
Hudson River and Lake Erie was one of his recommendations. As
assemblyman from Onondaga County, Joshua Forman, traveled to Washington
to tell President Jefferson that New York was ready to proceed with a
canal 350 miles through the wilderness. Jefferson said ``. . . it is
little short of madness to think of it at this day,'' and later wrote
that New York had anticipated by a full century the means to build such
a waterway.
New York proceeded on its own. Seventeen years and $7,143,789 later
we had our canal, the Erie Canal. Towns sprang up along the way, often
at the locks, and prospered. Lockport, Spencerport, Fairport, Macedon,
Utica, Canajoharie, Scotia. Then the railroads came, and some could not
maintain that prosperity. The canal was rebuilt and enlarged between
1835 and 1862 to accommodate larger vessels. At the turn of the 20th
century much of the original channel was abandoned and a new one was
created by greatly altering natural waterways. This canal system
continued to support considerable freight traffic until the opening of
the St. Lawrence Seaway in 1959.
Today many segments and fragments of the original canal still exist
across the state, as do examples of the first expansion in the 1830s.
Together they show us one of the first great public works projects in
this country, the means by which many thousands of settlers moved west
and many tons of food and raw materials moved east. The Erie Canal
created the first effective means of interstate commerce in the nation
and realigned the relationship among regions. In conjunction with the
Hudson River it fueled the growth of New York City. Put simple, New
York would not have become the Empire State without it.
The canal today is primarily a recreational resource. Thanks to the
Great Lakes Water Quality Agreement of 1972, the water flowing out of
Lake Erie is much cleaner than it once was, making boating and
recreation along the canal much more enjoyable. Today my colleague
Senator Schumer and I are introducing a bill that would establish the
Erie Canalway National Heritage Corridor. The National Park Service
conducted a special resource study and found that the canal system
``contains resources and represents themes that are of national
significance.'' Moreover, ``no single unit (of the Park Service) now
exists that can offer as complete a portrait of the development of the
United States from the last part of the 18th through the early 20th
centuries.''
This designation would provide Park Service resources and some
funding that would help improve education, historic preservation, open
space protection, and trail development along the canal corridor. I
believe it would be a great benefit for those cities, towns, and
residents along the canal system. I also believe no other corridor
deserves this designation as much. I ask my colleagues for their
support, and I ask 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:
S. 3154
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; DEFINITIONS.
(a) Short Title.--This Act may be cited as the ``Erie
Canalway National Heritage Corridor Act of 2000''.
(b) Definitions.--For the purposes of this Act, the
following definitions shall apply:
(1) Erie canalway.--The term ``Erie Canalway'' shall mean
the 524 miles of navigable canal that comprise the New York
State Canal System, including the Erie, Cayuga and Seneca,
Oswego and Champlain canals, as well as, the historic
alignments of these canals including the cities of Albany and
Buffalo.
(2) Canalway plan.--The term ``Canalway Plan'' shall mean
the comprehensive preservation and management plan for the
Corridor required under section 6.
(3) Commission.--The term ``Commission'' shall mean the
Erie Canalway National Heritage Corridor Commission
established under section 4.
(4) Corridor.--The term ``Corridor'' shall mean the Erie
Canalway National Heritage Corridor established under section
3.
[[Page S9747]]
(5) Governor.--The term ``Governor'' shall mean the
Governor of the State of New York.
(6) Secretary.--The term ``Secretary'' shall mean the
Secretary of the Interior.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--The Congress finds that--
(1) the year 2000 marks the 175th Anniversary of New York
State's creation and stewardship of the Erie Canalway for
commerce, transportation and recreational purposes,
establishing the network which made New York the ``Empire
State'' and the Nation's premier commercial and financial
center;
(2) the canals and adjacent areas that comprise the Erie
Canalway are a nationally significant resource of historic
and recreational value, which merit Federal recognition and
assistance;
(3) the Erie Canalway was instrumental in the establishment
of strong political and cultural ties between New England,
upstate New York and the old Northwest and facilitated the
movement of ideas and people ensuring that social reforms
like the abolition of slavery and the women's rights movement
spread across upstate New York to the rest of the country;
(4) the construction of the Erie Canalway was considered a
supreme engineering feat, and most American canals were
modeled after New York State's canal;
(5) at the time of construction, the Erie Canalway was the
largest public works project ever undertaken by a state,
resulting in the creation of critical transportation and
commercial routes to transport passengers and goods;
(6) the Erie Canalway played a key role in turning New York
City into a major port and New York State into the preeminent
center for commerce, industry, and finance in North America
and provided a permanent commercial link between the Port of
New York and the cities of eastern Canada, a cornerstone of
the peaceful relationship between the two countries;
(7) the Erie Canalway proved the depth and force of
American ingenuity, solidified a national identity, and found
an enduring place in American legend, song, and art;
(8) there is national interest in the preservation and
interpretation of the Erie Canalway's important historical,
natural, cultural, and scenic resources; and
(9) partnerships among Federal, State, and local
governments and their regional entities, nonprofit
organizations, and the private sector offer the most
effective opportunities for the preservation and
interpretation of the Erie Canalway.
(b) Purposes.--The purposes of this Act are--
(1) to designate the Erie Canalway National Heritage
Corridor;
(2) to provide for and assist in the identification,
preservation, promotion, maintenance and interpretation of
the historical, natural, cultural, scenic, and recreational
resources of the Erie Canalway in ways that reflect its
national significance for the benefit of current and future
generations;
(3) to promote and provide access to the Erie Canalway's
historical, natural, cultural, scenic and recreational
resources;
(4) to provide a framework to assist the State of New York,
its units of local government, and the communities within the
Erie Canalway in the development of integrated cultural,
historical, recreational, economic, and community development
programs in order to enhance and interpret the unique and
nationally significant resources of the Erie Canalway; and
(5) to authorize Federal financial and technical assistance
to the Commission to serve these purposes for the benefit of
the people of the State of New York and the nation.
SEC. 3. THE ERIE CANALWAY NATIONAL HERITAGE CORRIDOR.
(a) Establishment.--To carry out the purposes of this act
there is established the Erie Canalway National Heritage
Corridor in the State of New York.
(b) Boundaries.--The boundaries of the Corridor shall
include those lands generally depicted on a map entitled
``Boundaries of Canalway Communities'' numbered ERCA ________
and dated ________. This map shall be on file and available
for public inspection in the appropriate office of the
National Park Service, the office of the Commission, and the
office of the New York State Canal Corporation in Albany, New
York.
(c) Boundary Revisions.--The boundaries of the Corridor may
be revised by an amendment to this Act pursuant to the
request of the Secretary upon approval of the Commission.
(d) Ownership and Operation of the New York State Canal
System.--Nothing in this Act shall be construed to alter the
ownership, operation, or management of the New York State
Canal System.
SEC. 4. THE ERIE CANALWAY NATIONAL HERITAGE CORRIDOR
COMMISSION.
(a) Establishment.--There is established the Erie Canalway
National Heritage Corridor Commission. The purpose of the
Commission shall be--
(1) to work with Federal, State and local authorities to
develop and implement the Canalway Plan; and
(2) to foster the integration of canal-related historical,
cultural, recreational, scenic, economic and community
development initiatives within the Corridor.
(b) Membership.--The Commission shall be composed of 27
members as follows:
(1) The Secretary of the Interior, ex-officio or his/her
designee.
(2) Seven members, each of whom represents 1 of the
following agencies or those agencies' successors: The New
York State Secretary of State, the Commissioners of the New
York State Department of Environmental Conservation, the New
York State Office of Parks, Recreation and Historic
Preservation, the New York State Department of Agriculture
and Markets, the New York State Department of Transportation,
and the Chairpersons of the New York State Canal Corporation,
and the Empire State Development Corporation; or their
respective designees.
(3) The remaining 19 members who reside within the Corridor
and are geographically dispersed throughout the Corridor
shall be from local governments and the private sector with
knowledge of tourism, economic and community development,
regional planning, historic preservation, cultural or natural
resource management, conservation, recreation, and education
or museum services. These members will be appointed by the
Governor no later than 6 months after the date of enactment
of this Act as follows:
(A) Ten members based on a recommendation from each member
of the United States House of Representatives whose district
shall encompass the Corridor. Each shall be a resident of the
district from which they shall be recommended.
(B) Two members based on a recommendation from each United
States Senator from New York State.
(C) Seven members who shall be residents of any county
constituting the Corridor. One such member shall be a member
of the Canal Recreationway Commission other than an ex-
officio member.
(c) Appointments and Vacancies.--Members of the Commission
other than ex-officio members shall be appointed for terms of
3 years. Of the original appointments, six shall be for a
term of one year, six shall be for a term of two years and
seven shall be for a term of three years. Any member of the
Commission appointed for a definite term may serve after
expiration of the term until the successor of the member is
appointed. Any member appointed to fill a vacancy shall serve
for the remainder of the term for which the predecessor was
appointed. Any vacancy on the Commission shall be filled in
the same manner in which the original appointment was made.
(d) Compensation.--Members of the Commission shall receive
no compensation for their service on the Commission. Members
of the Commission, other than employees of the State and
Canal Corporation, while away from their homes or regular
places of business to perform services for the Commission,
shall be allowed travel expenses, including per diem in lieu
of subsistence, in the same manner as persons employed
intermittently in government service are allowed under
section 5703 of title 5, United States Code.
(e) Election of Offices.--The Commission shall elect the
chairperson and the vice chairperson on an annual basis. The
vice chairperson shall serve as the chairperson in the
absence of the chairperson.
(f) Quorum and Voting.--Fourteen members of the Commission
shall constitute a quorum but a lesser number may hold
hearings. Any member of the Commission may vote by means of a
signed proxy exercised by another member of the Commission,
however, any member voting by proxy shall not be considered
present for purposes of establishing a quorum. For the
transaction of any business or the exercise of any power of
the Commission, the Commission shall have the power to act by
a majority vote of the members present at any meeting at
which a quorum is in attendance.
(g) Meetings.--The Commission shall meet at least quarterly
at the call of the chairperson or 14 of its members. Notice
of Commission meetings and agendas for the meetings shall be
published in local newspapers throughout the Corridor.
Meetings of the Commission shall be subject to section 552b
of title 5, United States Code (relating to open meetings).
(h) Powers of the Commission.--To the extent that Federal
funds are appropriated, the Commission is authorized--
(1) to procure temporary and intermittent services and
administrative facilities at rates determined to be
reasonable by the Commission to carry out the
responsibilities of the Commission;
(2) to request and accept the services of personnel
detailed from the State of New York or any political
subdivision, and to reimburse the State or political
subdivision for such services;
(3) to request and accept the services of any Federal
agency personnel, and to reimburse the Federal agency for
such services;
(4) to appoint and fix the compensation of staff to carry
out its duties;
(5) to enter into cooperative agreements with the State of
New York, with any political subdivision of the State, or any
person for the purposes of carrying out the duties of the
Commission;
(6) to make grants to assist in the preparation and
implementation of the Canalway Plan;
(7) to seek, accept, and dispose of gifts, bequests,
grants, or donations of money, personal property, or
services, received from any source; [For purposes of section
170(c) of the Internal Revenue Code of 1986, any gift to the
Commission shall be deemed to be a gift to the United
States.]
(8) to assist others in developing educational,
informational, and interpretive programs and facilities, and
other such activities that may promote the implementation of
the Canalway Plan;
[[Page S9748]]
(9) to hold hearings, sit and act at such times and places,
take such testimony, and receive such evidence, as the
Commission may consider appropriate; [The Commission may not
issue subpoenas or exercise any subpoena authority.]
(10) to use the United States mails in the same manner as
other departments or agencies of the United States;
(11) to request and receive from the Administrator of
General Services, on a reimbursable basis, such
administrative support services as the Commission may
request; and
(12) to establish such advisory groups as the Commission
deems necessary.
(i) Acquisition of Property.--Except as provided for
leasing administrative facilities under subsection (h)(1),
the Commission may not acquire any real property or interest
in real property.
(j) Termination.--The Commission and this Act shall
terminate on the day occurring 10 years after the date of the
enactment of this Act.
SEC. 5. DUTIES OF THE COMMISSION.
(a) Preparation of Canalway Plan.--Not later than 3 years
after the Commission receives Federal funding for this
purpose, the Commission shall prepare and submit a
comprehensive preservation and management Canalway Plan for
the Corridor to the Secretary and the Governor for review and
approval. In addition to the requirements outlined for the
Canalway Plan in section 6, the Canalway Plan shall
incorporate and integrate existing Federal, State, and local
plans to the extent appropriate regarding historic
preservation, conservation, education and interpretation,
community development, and tourism-related economic
development for the Corridor that are consistent with the
purposes of this Act. The Commission shall solicit public
comment on the development of the Canalway Plan.
(b) Implementation of Canalway Plan.--After the Commission
receives Federal funding for this purpose, and after review
and upon approval of the Canalway Plan by the Secretary and
the Governor, the Commission shall--
(1) undertake actions to implement the Canalway Plan so as
to assist the people of the State of New York in enhancing
and interpreting the historical, cultural, educational,
natural, scenic, and recreational potential of the Corridor
identified in the Canalway Plan; and
(2) support public and private efforts in conservation and
preservation of the Canalway's cultural and natural resources
and economic revitalization consistent with the goals of the
Canalway Plan.
(c) Priority Actions.--Priority actions which may be
carried out by the Commission under subsection (b) may
include--
(1) assisting in the appropriate preservation treatment of
the remaining elements of the original Erie Canal;
(2) assisting the National Park Service, the State, and
local governments, and nonprofit organizations in designing,
establishing and maintaining visitor centers, museums, and
other interpretive exhibits in the Corridor;
(3) assisting in the public awareness and appreciation for
the historic, cultural, natural, scenic, and recreational
resources and sites in the Corridor;
(4) assisting the State of New York, local governments, and
nonprofit organizations in the preservation and restoration
of any historic building, site, or district in the Corridor;
(5) encouraging, by appropriate means, enhanced economic
development in the Corridor consistent with the goals of the
Canalway Plan and the purposes of this Act; and
(6) ensuring that clear, consistent signs identifying
access points and sites of interest are put in place in the
Corridor.
(c) Annual Reports and Audits.--For any year in which
Federal funds have been received under this Act, the
Commission shall submit an annual report and shall make
available an audit of all relevant records to the Governor
and the Secretary identifying its expenses and any income,
the entities to which any grants or technical assistance were
made during the year for which the report was made, and
contributions by other parties toward achieving Corridor
purposes.
SEC. 6. CANALWAY PLAN.
(a) Canalway Plan Requirements.--The Canalway Plan shall--
(1) include a review of existing plans for the Corridor,
including the Canal Recreationway Plan and Canal
Revitalization Program, and incorporate them to the extent
feasible to ensure consistency with local, regional and state
planning efforts;
(2) provide a strategy for the thematic inventory, survey,
and evaluation of historic properties that should be
conserved, restored, developed, or maintained because of
their natural, cultural, or historic significance within the
Corridor in accordance with the regulations for the National
Register of Historic Places;
(3) identify public and private-sector preservation goals
and strategies for the Corridor;
(4) include a comprehensive interpretive plan that
identifies, develops, supports, and enhances interpretation
and education programs within the Corridor that may include--
(A) research related to the construction and history of the
canals and the cultural heritage of the canal workers, their
families, those that traveled along the canals, the
associated farming activities, the landscape, and the
communities;
(B) documentation of and methods to support the
perpetuation of music, art, poetry, literature and folkways
associated with the canals; and
(C) educational and interpretative programs related to the
Erie Canalway developed in cooperation with State and local
governments, educational institutions, and non-profit
institutions;
(5) include a strategy to further the recreational
development of the Corridor that will enable users to
uniquely experience the canal system;
(6) propose programs to protect, interpret and promote the
Corridor's historical, cultural, recreational, educational,
scenic and natural resources;
(7) include a plan to inventory canal related natural,
cultural and historic sites and resources located in the
Area;
(8) recommend Federal, State, and local strategies and
policies to support economic development, especially tourism-
related development and recreation, consistent with the
purposes of the Corridor;
(9) develop criteria and priorities for financial
preservation assistance;
(10) identify and foster strong cooperative relationships
between the National Park Service, the New York State Canal
Corporation, other Federal and State agencies, and non-
governmental organizations;
(11) recommend specific areas to the National Park Service
for development of interpretive, educational, and technical
assistance centers associated with the Corridor; and
(12) contain a program for implementation of the Canalway
Plan by all necessary parties.
(b) Approval of the Canalway Plan.--The Secretary and the
Governor shall approve or disapprove the Canalway Plan not
later than 90 days after receiving the Canalway Plan.
(c) Disapproval of Canalway Plan.--If the Secretary or the
Governor do not approve the Canalway Plan, the Secretary or
the Governor shall advise the Commission in writing within 90
days the reasons therefor and shall indicate any
recommendations for revisions. Following completion of any
necessary revisions of the Canalway Plan, the Secretary and
the Governor shall have 90 days to either approve or
disapprove of the revised Canalway Plan.
(d) Amendments to Canalway Plan.--The Secretary and the
Governor shall review substantial amendments to the Canalway
Plan. Funds appropriated pursuant to this Act may not be
expended to implement the changes made by such amendments
until the Secretary and the Governor approves the amendments.
SEC. 7. DUTIES OF THE SECRETARY.
(a) In General.--The Secretary is authorized to assist the
Commission in the preparation of the Canalway Plan with a
focus on the comprehensive interpretive plan as required
under section 6(a)(4).
(b) Technical Assistance.--Pursuant to an approved Canalway
Plan, the Secretary is authorized to enter into cooperative
agreements with, provide technical assistance to and award
grants to the Commission to provide for the preservation and
interpretation of the natural, cultural, historical,
recreational, and scenic resources of the Corridor.
(c) Early Actions.--After the date of the enactment of this
Act, but prior to approval of the Canalway Plan, with the
approval of the Commission, the Secretary may provide
technical and financial assistance for early actions that are
important to the purposes of this Act and that protect and
preserve resources and to undertake an educational and
interpretive program of the story and history of the Erie
Canalway.
(d) Canalway Plan Implementation.--Upon approval of the
Canalway Plan, the Secretary is authorized to implement those
activities that the Canalway Plan has identified that are the
responsibility of the Secretary or agent of the Secretary to
undertake in the implementation of the Canalway Plan.
(e) Detail.--Each fiscal year during the existence of the
Commission and upon the request of the Commission, the
Secretary shall detail to the Commission, on a
nonreimbursable basis, 2 employees of the Department of the
Interior to enable the Commission to carry out the
Commission's duties with regard to the preparation and
approval of the Canalway Plan. Such detail shall be without
interruption or loss of civil service status, benefits, or
privileges.
(f) Report.--Not later than 2 years after the approval of
the Canalway Plan, the Secretary shall submit to Congress a
report recommending whether the educational/interpretive
sites identified by the Commission meet the criteria for
designation as a unit of the National Park System as required
by Public Law 105-391 (112 Stat. 3501; 16 U.S.C.1a-5 note).
SEC. 9. DUTIES OF OTHER FEDERAL ENTITIES.
Any Federal entity conducting or supporting any activity
directly affecting the Corridor, and any unit of government
acting pursuant to a grant of Federal funds or a Federal
permit or agreement conducting or supporting such activities,
may--
(1) consult with the Secretary and the Commission with
respect to such activities;
(2) cooperate with the Secretary and the Commission in
carrying out their duties under this Act and coordinate such
activities with the carrying out of such duties; and
[[Page S9749]]
(3) conduct or support such activities in a manner
consistent with the Canalway Plan unless the Federal entity,
after consultation with the Secretary and the Commission,
determines there is no practicable alternative.
SEC. 10. SAVINGS PROVISIONS.
(a) Authority of Governments.--Nothing in this Act shall be
construed to modify, enlarge, or diminish any authority of
the Federal, State, or local governments to regulate any use
of land as provided for by law or regulation.
(b) Zoning or Land.--Nothing in this Act shall be construed
to grant powers of zoning or land use to the Commission.
(c) Local Authority and Private Property.--Nothing in this
Act shall be construed to affect or to authorize the
Commission to interfere with--
(1) the rights of any person with respect to private
property;
(2) any local zoning ordinance or land use plan of the
State of New York or political subdivision thereof; or
(3) any State or local canal related development plans
including but not limited to the Canal Recreationway Plan and
the Canal Revitalization Program.
(d) Fish and Wildlife.--The designation of the Corridor
shall not diminish the authority of the State of New York to
manage fish and wildlife, including the regulation of fishing
and hunting within the Corridor.
SEC. 11. AUTHORIZATION OF APPROPRIATIONS.
(a) In General.--
(1) Corridor.--There is authorized to be appropriated for
the Corridor not more than $1,000,000 for any fiscal year, to
remain available until expended. Not more than a total of
$10,000,000 may be appropriated for the Corridor under this
Act.
(2) Commission.--Additionally, there is authorized to be
appropriated to the Commission not more than $250,000
annually to carry out the duties of the Commission.
(b) Other Funding.--In addition to the sums authorized in
subsection (a), there are authorized to be appropriated to
the Secretary of the Interior such sums as are necessary for
the Secretary to undertake interim actions the Secretary is
authorized to undertake and that are necessary for the
Secretary of the Interior to implement the responsibilities
of the Department of the Interior outlined in the Canalway
Plan.
______
By Mr. LAUTENBERG:
S. 3155. A bill to authorize the President to award a gold medal on
behalf of the Congress to Oskar Schindler and Varian Fry in recognition
of their contributions to the Nation and humanity; to the Committee on
Banking, Housing, and Urban Affairs.
honoring oskar schindler and varian fry with congressional gold medals
Mr. LAUTENBERG. Mr. President, I am pleased to submit a resolution
honoring Oskar Schindler and Varian Fry, two individuals to whom
approximately 3,200 individuals owe their lives and the world owes a
tremendous debt of gratitude.
The tragedy of the Holocaust, which claimed the lives of more than 13
million people, will forever stand as a painful reminder of the frailty
and value of human life. During this dark hour of history, two
remarkable individuals among many other heroes, Oskar Schindler and
Varian Fry, overcame difficult and dangerous circumstances and risked
their lives to save their fellow human beings.
The deeds of Oskar Schindler, a German factory owner immortalized by
such authors as Thomas Keneally and film maker Steven Spielberg, have
inspired millions of people around the world. During the Nazi
occupation of Poland, Mr. Schindler put his life on the line and
demonstrated that one person truly can make a world of difference. Mr.
Schindler acquired an enamelware factory in Zablocie, on the outskirts
of Krakow. The factory, which produced mess kits and field kitchenware
for the Nazi army, was staffed by Jews drawn from the Krakow ghetto.
When the Jews of Krakow were transferred to the Plaszow concentration
camp, Schindler arranged for his workers to be housed at the factory.
After the factory was disbanded and the workers sent to the camp,
Schindler used his connections and personal fortune to secure their
release and transfer.
Through his cunning and perseverance in the face of adversity, Oskar
Schindler succeeded in saving the lives of over 1,200 Jews. One of the
individuals whom Schindler saved was Abraham Zuckerman, a constituent
of mine and a great American in his own right. Mr. Zuckerman knows
perhaps better than anyone else what a heroic individual Oskar
Schindler was. As a builder, Mr. Zuckerman, along with other Schindler
survivors, have honored Oskar Schindler with over 20 Schindler Courts,
Terraces and Plazas throughout New Jersey.
Oskar Schindler was named a ``Righteous Gentile'' by Yad Vashem, the
Israeli Holocaust Remembrance Authority, on April 28, 1962. Today, over
6,000 descendants of the Jews saved by Schindler live in the United
States and Europe. I think it is high time that the United States
government officially recognize Oskar Schindler's incredible
contribution to humanity. Awarding him the Congressional Gold Medal is
a fitting way to pay tribute to a man who touched the lives of so many
people from all over the world.
Another remarkable individual who overcame adversity and acted with
extraordinary courage is Varian Fry, an American editor from New York.
During World War II, Mr. Fry volunteered to travel to Nazi-occupied
Marseilles, France, where he helped form the Emergency Rescue
Committee. Working with a small group of associates, Mr. Fry offered
assistance to Jews and antifascist refugees threatened with extradition
to Nazi Germany under the ``Surrender on Demand'' clause of the Franco-
German Armistice.
Varian Fry was instrumental in the rescue of approximately 2,000
individuals, including artists Marc Chaggal, Andre Breton and Max
Ernst. Mr. Fry was the first American to be awarded the ``Certificate
of Honor'' and the ``Righteous among Nations'' medal by Yad Vashem in
1996. The United States Holocaust Memorial Council honored Mr. Fry with
its highest honor, the Eisenhower Liberation Medal in 1991. He has also
been awarded France's top civilian honor, the ``Croix de Chevalier de
la Legion d'Honneur.'' Yet sadly, Varian Fry's heroism and bravery have
yet to be officially recognized by the American government.
Mr. President, the Talmud states that, ``Whoever saves a single life
saves the world entire.'' As we are left to wonder and mourn what the
world has lost in the lives of those who perished during the Holocaust,
we rejoice in the company and contributions of their survivors. We are
enriched not only by the presence of the survivors, but by the example
that Oskar Schindler and Varian Fry set for all of Humanity. Their
actions are a testament to the ability of all people to act righteously
and courageously even under the worst of circumstances.
The heroic deeds of Oskar Schindler and Varian Fry are sterling
examples of heroism and humanitarianism. It is time the United States
government recognize and pay tribute to these men and the noble deeds
they performed. Oskar Schindler and Varian Fry are highly deserving of
the Congressional Gold Medal. I sincerely hope that the 106th Congress
will take up and pass this resolution.
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:
S. 3155
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. FINDINGS.
The Congress makes the following findings:
(1) More than 13,000,000 people were killed during the
Holocaust, including Jews, Gypsies, Slavs (Poles, Ukrainians,
and Belorussians), homosexuals, and the disabled--each
exterminated because Adolf Hitler viewed them as ``subhuman''
to the Aryan race.
(2) Nazi persecution, arrests, and deportations were
directed against all Jewish families, as well as many others,
without concern for age. Innocent men, women, and children
faced starvation, illness, brutal labor, and other
indignities until they were consigned to the gas chambers.
(3) When Germany invaded Poland in 1939, destruction began
immediately and in a merciless fashion. Jews were herded into
crowded ghettos, randomly beaten, humiliated, and
capriciously murdered. Jewish property and businesses were
summarily destroyed, or appropriated by the SS, and sold to
Nazi ``investors'', one of whom was Oskar Schindler.
(4) Oskar Schindler set up a business in an old enamel
works factory in Poland. His workforce consisted of enslaved
Jews from the Krakow Ghetto. Schindler learned of the
horrible atrocities committed by Hitler's regime as he got to
know some of the forced workers there. In response, he
managed to convince the Nazis that his factory, and more
importantly, its trained workers, were vital to the German
war effort, thus preventing their deportation to death camps.
(5) Oskar Schindler used all of the means at his disposal
to ensure the safety of those who worked in his factory. Even
his wife Emilie's jewels were sold, to buy food, clothes, and
medicine for the workers. A secret sanatorium was set up in
the factory
[[Page S9750]]
with medical equipment purchased on the black market. There,
Emilie Schindler looked after the sick and wounded.
(6) Even though Oskar Schindler had a large mansion placed
at his disposal close to the factory, he spent every night in
his office so that he could intervene should the Gestapo pay
a visit. He was detained by the Gestapo twice, but used his
connections to get released.
(7) With his own life at stake, Schindler employed all his
powers of persuasion. He bribed, fought, and begged to save
Jewish men, women, and children from the gas chambers.
(8) Oskar Shindler saved the lives of 1,200 Jews from
deportation to Nazi death camps.
(9) On April 28, 1962, Oskar Schindler was named a
``Righteous Gentile'' by Yad Vashem.
(10) Varian Fry, together with a small group of unlikely
associates, succeeded in assisting nearly 2,000 artists,
musicians, writers, scholars, politicians, labor leaders, and
their families to leave hostile territories in France, either
legally or illegally. This effort came to be called the
``Emergency Rescue Committee''.
(11) Varian Fry offered aid and advice to Jews and
antifascist refugees who found themselves threatened with
extradition to Nazi Germany under Article 19 of the Franco-
German Armistice--the ``Surrender on Demand clause''.
(12) Though risking his personal security in the face of
both Gestapo and Vichy officials, Fry did what was necessary
to save as many of the refugees as possible.
(13) Varian Fry aided in the rescue of nearly 2,000
individuals, including artists Marc Chaggall, Andre Breton,
and Max Ernst.
(14) The United States Holocaust Memorial Council awarded
Varian Fry its highest honor, the Eisenhower Liberation Medal
in 1991.
(15) In 1996, Yad Vashem posthumously honored Fry as the
first American ``Righteous Among the Nations'', and the
French government awarded him the Croix de Chevalier de la
Legion d'Honneur.
(16) The actions of Oskar Schindler and Varian Fry serve as
testimony to all people that even under the worst of
circumstances, the most ordinary of us can act courageously.
(17) Oskar Schindler and Varian Fry are true heroes and
humanitarians, deserving of honor by the United States
Government.
SEC. 2. CONGRESSIONAL GOLD MEDAL.
(a) Presentation Authorized.--The President is authorized--
(1) to award to Oskar Schindler, posthumously, on behalf of
Congress, a gold medal of appropriate design honoring Oskar
Schindler in recognition of his contributions to the Nation;
and
(2) to award to Varian Fry, posthumously, on behalf of
Congress, a gold medal of appropriate design honoring Varian
Fry in recognition of his contributions to the Nation.
(b) Design and Striking.--For purposes of the awards
referred to in subsection (a), the Secretary of the Treasury
(hereafter in this Act referred to as the ``Secretary'')
shall strike gold medals with suitable emblems, devices, and
inscriptions, to be determined by the Secretary.
SEC. 3. DUPLICATE MEDALS.
The Secretary may strike and sell duplicates in bronze, of
the gold medals struck pursuant to section 2, under such
regulations as the Secretary may prescribe, and at a price
sufficient to cover the costs thereof, including labor,
materials, dies, use of machinery, overhead expenses, and the
cost of the gold medals.
SEC. 4. STATUS AS NATIONAL MEDALS.
The medals struck pursuant to this Act are national medals
for purposes of chapter 51 of title 31, United States Code.
SEC. 5. FUNDING.
(a) Authority To Use Fund Amounts.--There is authorized to
be charged against the United States Mint Public Enterprise
Fund an amount not to exceed $30,000 to pay for the cost of
the medals authorized by this Act.
(b) Proceeds of Sale.--Amounts received from the sale of
duplicate bronze medals under section 3 shall be deposited in
the United States Mint Public Enterprise Fund.
______
Mr. LAUTENBERG (for himself, Mrs. Boxer, Mr. Kennedy, Mr.
Wellstone, Mr. Dodd, Mr. Moynihan, Mr. Schumer, Mr. Kerry, Mr.
Torricelli, Mr. Leahy, and Mr. Reid):
S. 3156. A bill to amend the Endangered Species Act of 1973 to ensure
the recovery of the declining biological diversity of the United
States, to reaffirm and strengthen the commitment of the United States
to protect wildlife, to safeguard the economic and ecological future of
children of the United States, and to provide certainty to local
governments, communities, and individuals in their planning and
economic development efforts; to the Committee on Environment and
Public Works.
endangered species recovery act
Mr. LAUTENBERG. Mr. President, I rise to introduce the Endangered
Species Recovery Act. The bill will update the original Endangered
Species Act, provide tax and other incentives for landowners, and help
increase the number of species that are recovered and taken off the
protected list. The bill has been endorsed by the 380 conservation,
religious, and scientific organizations that belong to the Endangered
Species Coalition.
Public support for strong endangered species protection is high.
Also, a majority of the nation's biologists are convinced that a mass
extinction of plants and animals is underway. Some believe this loss of
biological diversity will pose a major threat to humans in the coming
century. At least one in 8 known plant species (which provide medical,
commercial, and agricultural benefits) is threatened with extinction.
The bill I introduce today includes provisions that will help both
landowners and the species themselves.
The bill incorporates tax proposals endorsed by both property-rights
and conservation organizations. The bill establishes a tax exclusion
for cost-sharing payments under the Partners for Fish and Wildlife
Program, an enhanced deduction for the donation of a conservation
easement, an exclusion from the estate tax for property subject to an
Endangered Species Conservation Agreement, and an expansion of the
estate tax exclusion for property subject to a conservation easement.
The bill significantly revises the Administration's current ``No
Surprises'' policy, which allows private landowners to alter or destroy
endangered species habitat under a long-term unmodifiable permit. The
bill requires the best available science, invites more public
participation, and requires adaptive management for development permit.
The developer files a performance bond to cover the costs of all
reasonably foreseeable circumstances (such as wildfires, plant
diseases, and other natural events that can have devastating impacts on
weakened populations of wildlife). Then a Habitat Conservation Plan
Trust Fund is established to cover all other unforeseeable costs--a
safety net for landowners and species--while allowing changes to the
permit when needed to protect species.
The bill also encourages ecosystem planning on a regional basis,
through multi-species, multi-landowner plans, which is essential since
ecosystems do not run along political boundaries. The bill encourages
cooperation between various levels of government and different
jurisdictions, by allowing groups of private landowners to pool
resources, and allowing local governments to administer habitat plans.
The bill streamlines the permit process and establishes an Office of
Technical Assistance. The bill also allows small landowners that have a
minimal impact on endangered species to benefit from a quick and easy
permit process and to receive planning assurances.
The bill clarifies the standards for approving federal actions that
may impact endangered or threatened species. Under the existing law,
pesticide application, river damming, forest clearcutting, and other
habitat destruction are judged by their impact on the survival of
imperiled wildlife. The bill requires that taxpayer-funded activities
must not reduce the likelihood of recovery. In addition, the bill
improves the chances for recovery by identifying specific management
actions and biological criteria in recovery plans, placing deadlines on
final recovery plans, and encouraging federal agencies to take
preventative measures before a species becomes endangered.
The bill implements recommendations from the National Academy of
Sciences on improving the scientific basis of important endangered
species decisions. For unprotected species that means providing
protection before population numbers are too low to recover. For listed
species that means using independent scientists to peer review large-
scale, multi-species habitat conservation plans. It also means asking
biologists to set benchmarks and science-based conservation goals to
better tell us what it will take to recover and eventually delist an
imperiled species.
While federal actions already undergo review to ensure minimal
impacts on endangered species, the bill requires that federal agencies
also make efforts towards further recovery or to consider the
cumulative impacts of their actions. The bill requires federal agencies
to help plan for species recovery and
[[Page S9751]]
then implement those plans within their jurisdictions. The bill also
requires agencies to consider the impacts of their actions on imperiled
species in other nations.
The bill expands public participation by requiring public
notification when a federal activity may impact wildlife in a
community. The bill also requires public participation in large-scale
regional habitat planning. Local citizens may participate in the first
steps of regional habitat planning, review relevant science, and work
with developers to achieve the best possible plans. If those plans are
not met, the bill allows citizens to require the government to take
action.
The Endangered Species Recovery Act will protect the species and
landowners alike. I urge my colleagues to support it.
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:
S. 3156
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS; REFERENCES TO
ENDANGERED SPECIES ACT OF 1973.
(a) Short Title.--This Act may be cited as the ``Endangered
Species Recovery Act of 2000''.
(b) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; table of contents; references to Endangered
Species Act of 1973.
Sec. 2. Findings.
TITLE I--ENDANGERED SPECIES RECOVERY
Sec. 101. Definitions.
Sec. 102. Designation of interim and critical habitat.
Sec. 103. Schedule for listing determinations.
Sec. 104. Contents of listing petitions.
Sec. 105. Recovery planning.
Sec. 106. Endangered species conservation agreements.
Sec. 107. Interagency cooperation.
Sec. 108. Permits and conservation plans.
Sec. 109. Citizen suits.
Sec. 110. Natural resource damage liability.
Sec. 111. Authorization of appropriations.
TITLE II--SPECIES CONSERVATION TAX INCENTIVES
Sec. 201. Tax exclusion for cost-sharing payments under Partners for
Fish and Wildlife Program.
Sec. 202. Enhanced deduction for the donation of a conservation
easement.
Sec. 203. Exclusion from estate tax for real property subject to
endangered species conservation agreement.
Sec. 204. Expansion of estate tax exclusion for real property subject
to qualified conservation easement.
(c) References to Endangered Species Act of 1973.--Except
as otherwise expressly provided, whenever in this Act an
amendment or repeal is expressed in terms of an amendment to,
or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other
provision of the Endangered Species Act of 1973 (16 U.S.C.
1531 et seq.).
SEC. 2. FINDINGS.
Congress finds that--
(1) the American public recognizes the importance of
protecting the natural environmental legacy of the United
States;
(2) it is only through the protection of all species of
plants and animals and the ecosystems on which the species
depend that the people of the United States will conserve a
world for our children with the spiritual, medicinal,
agricultural, and economic benefits that plants and animals
offer;
(3) we have a moral responsibility not to drive other
species to extinction;
(4) we are rapidly proceeding in a manner that will deny to
future generations a world of abundant, varied species;
(5) although the Endangered Species Act of 1973 (16 U.S.C.
1531 et seq.) has prevented the extinction of many animal,
plant, and fish species, many of those species have not fully
recovered and that Act must ensure their long-term survival
and recovery;
(6) Federal agencies and other persons should act to
protect declining species before they need the full
application of the Endangered Species Act of 1973;
(7) all members of the public have a right to be involved
in the decisions made to protect biodiversity;
(8) to avoid extinction in the wild, habitats must be
conserved by using the best available science;
(9) only by taking actions that implement the recovery
goals of the Endangered Species Act of 1973 can we ensure
that species will eventually be removed from the lists of
endangered species and threatened species; and
(10) we can provide certainty for communities, local
governments, and private landowners that will enable them to
move forward with planning and economic development efforts
while still protecting species.
TITLE I--ENDANGERED SPECIES RECOVERY
SEC. 101. DEFINITIONS.
Section 3 (16 U.S.C. 1532) is amended--
(1) by redesignating paragraphs (2) through (5), (6)
through (9), (10), (12) through (14), and (15) through (21)
as paragraphs (3) through (6), (9) through (12), (14), (20)
through (22), and (24) through (30), respectively;
(2) by inserting after paragraph (1) the following:
``(2) Candidate species.--The term `candidate species'
means any species--
``(A) that is not the subject of a proposed regulation
under section 4(a)(1);
``(B) that the Secretary is considering for listing as an
endangered species or threatened species; and
``(C) for which the Secretary has--
``(i) sufficient information to support a proposed
regulation for that listing; or
``(ii) information indicating that proposing that listing
may be appropriate, but for which further information is
required to support such a proposed regulation.'';
(3) by striking paragraph (6) (as so redesignated) and
inserting the following:
``(6) Critical habitat.--The term `critical habitat' for an
endangered species or threatened species or includes--
``(A) the specific areas within the geographic area
occupied by the species, at the time the species is listed in
accordance with section 4, on which are found physical or
biological features that--
``(i) are essential to the conservation of the species; and
``(ii) may require special management considerations or
protections; and
``(B) specific areas outside the geographical area occupied
by the species, at the time the species is listed in
accordance with section 4, on a determination by the
Secretary that the areas are essential for the conservation
of the species.'';
(4) by inserting after paragraph (6) (as so redesignated)
the following:
``(7) Cumulative impacts.--The term `cumulative impacts'
means the direct impacts and indirect impacts on a species or
its habitat that result from the incremental impact of a
proposed action when added to other past, present, and
reasonably foreseeable future actions, regardless of which
person undertakes such other actions.
``(8) Direct impacts.--The term `direct impacts' means
impacts that are caused by a proposed action and that occur
at the same time and place as the proposed action.'';
(5) by inserting after paragraph (12) (as so redesignated)
the following:
``(13) Impacts.--The term `impacts' includes--
``(A) loss of individual members of a species;
``(B) diminishment of the habitat of the species, both
qualitatively and quantitatively;
``(C) disruption of normal behavioral patterns, such as
breeding, feeding, and sheltering; and
``(D) impairment of the ability of the species to withstand
random fluctuations in environmental conditions.'';
(6) by inserting after paragraph (14) (as so redesignated)
the following:
``(15) Indirect impacts.--The term `indirect impacts' means
impacts that are caused by a proposed action and that occur
later in time than, or farther removed in distance from, the
proposed action, but that are still reasonably foreseeable.
``(16) Interim habitat.--The term `interim habitat'
includes the habitat necessary to support current populations
of a species or populations that are necessary to ensure
survival, whichever is larger.
``(17) Jeopardize the continued existence of.--The term
`jeopardize the continued existence of' means to engage in an
action that reasonably would be expected, directly,
indirectly, or cumulatively, to reduce appreciably the
likelihood of recovery in the wild of any foreign or domestic
species included in a list published under section 4(c).
``(18) Minimize.--The term `minimize' means--
``(A) subject to subparagraph (B), to avoid to the extent
possible, in designing and engaging in an activity, adverse
impacts to an endangered species or threatened species or in
the course of the activity; and
``(B) in the case of an activity for which it is
determined, after consideration of a reasonable range of
alternatives, that avoidance of adverse impacts to the
species is impossible, to design and implement the activity
in a manner that results in the lowest possible individual
and cumulative adverse impacts on the species.
``(19) Mitigate.--The term `mitigate' means to redress
adverse impacts to an endangered species or threatened
species in connection with an action, by replacing the number
of plants and animals in the wild, and the value to the
species of the habitat, that were lost as a result of the
adverse impacts.'';
(7) by inserting after paragraph (22) (as so redesignated)
the following:
``(23) Recovery.--The term `recovery' means a condition in
which--
``(A) the threats to a species, as determined under section
4(a), have been eliminated;
``(B) the species has achieved long-term viability; and
``(C) the protective measures under this Act are no longer
needed.'';
[[Page S9752]]
(8) by striking paragraph (25) (as so redesignated) and
inserting the following:
``(25) Species.--The term `species' includes--
``(A) any subspecies of fish or wildlife or plant;
``(B) any distinct population segment of any species of
vertebrate fish or wildlife that interbreeds when mature; and
``(C) the last remaining distinct population segment in the
United States of any plant or invertebrate species.''; and
(9) in paragraph (26) (as so redesignated), by striking
``and the Trust Territory of the Pacific Islands'' and
inserting ``the Freely Associated States, and (for the
purposes of subsections (c) and (d) of section 6), any Indian
tribe''.
SEC. 102. DESIGNATION OF INTERIM AND CRITICAL HABITAT.
(a) In General.--Section 4(a) (16 U.S.C. 1533(a)) is
amended by striking paragraph (3) and inserting the
following:
``(3) Interim and critical habitat.--The Secretary, by
regulation promulgated in accordance with subsection (b),
shall--
``(A) subject to subparagraph (C), concurrently with making
a determination under paragraph (1) that a species is an
endangered species or threatened species, designate interim
habitat of the species;
``(B) subject to subparagraph (C), concurrently with
adoption of the final recovery plan for a species under
subsection (f), designate critical habitat of the species;
``(C) in the case of a highly migratory marine species,
designate interim habitat and critical habitat for the
species to the maximum extent biologically determinable; and
``(D) from time to time thereafter as appropriate, revise a
designation under this paragraph, if the Secretary determines
that the revision would expedite or assist the recovery of
the species.''.
(b) Basis for Determinations.--Section 4(b) (16 U.S.C.
1533(b)) is amended by striking paragraph (2) and inserting
the following:
``(2) Interim and critical habitat.--
``(A) Critical habitat.--The Secretary shall designate
critical habitat, and make revisions to the designations,
under subsection (a)(3)--
``(i) on the basis of the best scientific data available;
and
``(ii) after taking into consideration the economic impact,
and any other relevant impact, of specifying any particular
area as critical habitat.
``(B) Interim habitat.--In the case of interim habitat
designated at the time of listing, the Secretary shall revise
and finalize the habitat as critical habitat concurrently
with the adoption of the final recovery plan.
``(C) Exclusion of areas from critical habitat.--The
Secretary may exclude any area from critical habitat on the
basis that the benefits of the exclusion outweigh the
benefits of specifying the area as part of the critical
habitat, if the Secretary determines, based on the best
scientific and commercial data available, that the failure to
designate the area as critical habitat will not impair the
recovery of the species.
``(D) Designation of interim habitat based on biological
factors.--The Secretary shall designate interim habitat of a
species based only on biological factors, giving special
consideration to habitat that is, at the time of the
designation, occupied by the species.''.
SEC. 103. SCHEDULE FOR LISTING DETERMINATIONS.
Section 4(b)(3)(C) (16 U.S.C. 1533(b)(3)(C)) is amended by
adding at the end the following:
``(iv) Species with existing finding of warranted action.--
Not later than 1 year after the date of enactment of this
clause, for each species for which a finding under
subparagraph (B)(iii) was made before the date of enactment
of this clause, the Secretary shall publish in the Federal
Register--
``(I) a proposal to list the species as an endangered
species or threatened species; or
``(II) a finding that the petitioned action is not
warranted under subparagraph (B)(i).
``(v) Species with new finding of warranted action.--Not
later than 4 years after the date on which a finding under
subparagraph (B)(iii) is published for a species for which a
finding under subparagraph (B)(iii) was made on or after the
date of enactment of this clause, or a date on which such a
species is otherwise designated by the Secretary as a
candidate species, the Secretary shall publish in the Federal
Register--
``(I) a proposal to list the species as an endangered
species or threatened species; or
``(II) a finding that the petitioned action is not
warranted under subparagraph (B)(i).''.
SEC. 104. CONTENTS OF LISTING PETITIONS.
Section 4(b)(3) (16 U.S.C. 1533(b)(3)) is amended by adding
at the end the following:
``(E) Contents of listing petitions.--A petition referred
to in subparagraph (A) shall, to the maximum extent
practicable, contain--
``(i) a description of the current known and historic
ranges of the species;
``(ii) a description of the most recent population
estimates and trends, if available;
``(iii) a statement of the reason that the petitioned
action is warranted, including a description of known or
perceived threats to the species;
``(iv) a bibliography of scientific literature on the
species, if any, in support of the petition; and
``(v) any other information that the petitioner determines
is appropriate.''.
SEC. 105. RECOVERY PLANNING.
Section 4(f) (16 U.S.C. 1533(f)) is amended--
(1) in paragraph (1)--
(A) in the first sentence--
(i) by striking ``develop and implement plans'' and
inserting ``, not later than 18 months after the date on
which a species is added to a list under subsection (c),
develop a draft plan and, not later than 30 months after that
date, develop and begin implementation of a final plan'';
(ii) by inserting ``each'' before ``endangered''; and
(iii) by striking ``, unless he finds that such a plan will
not promote the conservation of the species''; and
(B) in the second sentence, by striking subparagraph (B)
and inserting the following:
``(B) include in each plan specific provisions, including
provisions required under subparagraph (C), that provide for
the conservation in the recovery plan area of all species
listed as endangered species or threatened species, candidate
species, and species proposed for listing;
``(C) incorporate in each recovery plan for a species--
``(i) a description of such site-specific management
actions, including identification of actions of the highest
priority and greatest recovery potential, as may be necessary
to achieve the goals of the plan for the recovery of the
species;
``(ii) objective, measurable criteria, including habitat
needs and population levels, that, when met, would result in
a determination, in accordance with this section, that the
species be removed from the list;
``(iii) estimates of the time required and the cost to
carry out those measures needed to achieve the goals of the
plan and to achieve intermediate steps toward each goal;
``(iv) a general description of the types of actions likely
to violate the taking prohibition of section 9 or the
jeopardy prohibition of section 7; and
``(v) a list of Federal agencies, States, tribes, and local
government entities, significantly affected by the goals or
management actions specified in the recovery plan, that
should complete a recovery implementation plan pursuant to
paragraph (5)(A); and
``(D) for the purposes of determining the criteria under
subparagraph (C)(ii), select, in consultation with the
National Academy of Sciences, independent scientists who--
``(i) through publication of peer-reviewed scientific
literature, have demonstrated relevant scientific expertise
in that species or a similar species; and
``(ii) do not have, nor represent anyone with, a
significant economic interest in the recovery plan.''; and
(2) by striking paragraph (5) and inserting the following:
``(5) Recovery implementation plans.--
``(A) In general.--Each Federal agency significantly
affected by the goals or management actions specified in a
final recovery plan shall develop and implement a plan
(referred to in this paragraph as a `recovery implementation
plan'), after providing public notice and an opportunity for
public review and comment on the recovery implementation
plan.
``(B) Contents.--Each recovery implementation plan shall--
``(i) identify the affirmative conservation duties and
management responsibilities of the agency that will
contribute to the achievement of recovery goals identified in
the final recovery plan;
``(ii) specify specific agency actions, timetables, and
funding required to achieve and monitor progress toward
meeting recovery goals or management responsibilities;
``(iii) identify any land or water under the jurisdiction
or ownership of the agency that provide or may provide
suitable habitat for the species;
``(iv) identify any actions needed to acquire additional
suitable habitat under section 5(a); and
``(v) describe management actions that the agency will take
on land or water under the jurisdiction or ownership of the
agency to contribute toward recovery of the species.
``(C) State cooperation.--Consistent with section 6, the
Secretary shall cooperate, to the maximum extent practicable,
with States, tribes, and local government entities, that are
significantly affected by a final recovery plan, to develop
State cooperative plans to achieve the goals and implement
the management actions identified in the recovery plan.''.
SEC. 106. ENDANGERED SPECIES CONSERVATION AGREEMENTS.
Section 5 (16 U.S.C. 1534) is amended by adding at the end
the following:
``(c) Endangered Species Conservation Agreements.--
``(1) In general.--The Secretary may enter into an
agreement in accordance with this subsection, to be known as
an `endangered species conservation agreement', with any
person that is an owner or lessee of real property on which
will be carried out conservation measures for any species
described in paragraph (3) in accordance with the endangered
species conservation agreement.
``(2) Required terms.--The Secretary shall include in an
endangered species conservation agreement with a person under
this subsection provisions that--
``(A) require the person--
``(i) to carry out on real property owned or leased by the
person activities not otherwise required by law that
contribute to the conservation of a species described in
paragraph (3); or
[[Page S9753]]
``(ii) to refrain from carrying out on real property owned
or leased by the person otherwise lawful activities that
would inhibit the conservation of a species described in
paragraph (3);
``(B) describe the real property referred to in clauses (i)
and (ii) of subparagraph (A);
``(C) specify species conservation goals for the activities
by the person, and measures for attaining the conservation
goals of this subsection;
``(D) require the person to make measurable progress each
year in achieving the goals;
``(E) specify actions to be taken by the Secretary or the
person, or both, to monitor the effectiveness of the
endangered species conservation agreement in attaining the
goals;
``(F) require the person to notify the Secretary if--
``(i) any right or obligation of the person under the
endangered species conservation agreement is assigned to any
other person; or
``(ii) any term of the endangered species conservation
agreement is breached by the person or any other person to
whom is assigned a right or obligation of the person under
the endangered species conservation agreement;
``(G) specify the date on which the endangered species
conservation agreement takes effect; and
``(H) provide that the endangered species conservation
agreement shall not be in effect on and after any date on
which the Secretary publishes a certification under paragraph
(5) that the person has not complied with the endangered
species conservation agreement.
``(3) Covered species.--A species referred to in clauses
(i) and (ii) of paragraph (2)(A) is any species that is--
``(A) listed as an endangered species or threatened species
under section 4;
``(B) proposed for such listing under section 4; or
``(C) identified by the Secretary as a candidate for such
listing under section 4.
``(4) Review and approval of proposed endangered species
conservation agreements by secretary.--On submission by any
person of a proposed endangered species conservation
agreement under this subsection, the Secretary shall--
``(A) review the proposed endangered species conservation
agreement and determine whether the endangered species
conservation agreement complies with the requirements of this
subsection; and
``(B) if the Secretary determines that the endangered
species conservation agreement complies with the requirements
of this subsection--
``(i) approve the endangered species conservation agreement
and enter into the endangered species conservation agreement
with the person; and
``(ii) promptly notify the Secretary of the Treasury that
the endangered species conservation agreement has been
entered into and specify the date on which the endangered
species conservation agreement takes effect.
``(5) Monitoring implementation of endangered species
conservation agreements.--The Secretary shall--
``(A) periodically monitor the implementation of each
endangered species conservation agreement entered into under
this subsection; and
``(B) based on the information obtained from the
monitoring, annually certify to the Secretary of the Treasury
whether or not each person that has entered into an
endangered species conservation agreement under this
subsection has complied with the endangered species
conservation agreement.
``(6) State cooperation.--The Secretary shall establish a
technical assistance program in cooperation with the States
to assist landowners in the development and implementation of
endangered species conservation agreements.''.
SEC. 107. INTERAGENCY COOPERATION.
(a) Federal Agency Actions and Consultations.--Section 7(a)
(16 U.S.C. 1536(a)) is amended--
(1) in the second sentence of paragraph (1)--
(A) by striking ``All other Federal agencies'' and
inserting ``Each other Federal agency'';
(B) by striking ``their'' and inserting ``its''; and
(C) by inserting before the period the following: ``,
including recovery actions identified in recovery
implementation plans of the agency'';
(2) in the first sentence of paragraph (2), by inserting
after ``to be critical,'' the following: ``in such a way as
to diminish the value of that habitat for the recovery of the
species,''; and
(3) by adding at the end the following:
``(5) Consultation with secretary concerning candidate
species.--
``(A) In general.--Any Federal agency may consult with the
Secretary regarding any action that may affect any candidate
species or species proposed for listing under section 4(c).
``(B) Additional consultation.--If consultation under this
paragraph is completed before the listing of the species--
``(i) no additional consultation is required solely as a
consequence of the subsequent listing of the species, if the
Secretary determines that there have been no significant
changes in the agency proposal and that there is no
significant new information that was not considered in the
original consultation; and
``(ii) the Secretary shall reinitiate consultation under
paragraph (2), if the Secretary determines that there has
been a significant change in the agency proposal or that
there is significant new information that was not considered
in the original consultation.
``(C) Notification of change or new information.--A Federal
agency shall notify the Secretary of any significant change
in, or significant new information regarding, any action
regarding which the agency consulted with the Secretary under
this paragraph.
``(6) Monitoring.--The head of each Federal agency shall
monitor the status and trends of endangered species,
threatened species, and candidate species that occur on land
or in water under the jurisdiction or ownership of the
agency.''.
(b) Opinion of Secretary.--Section 7(b) (16 U.S.C. 1536(b))
is amended--
(1) by striking paragraph (3) and inserting the following:
``(3) Statement of opinion of secretary.--
``(A) In general.--Promptly after conclusion of
consultation under paragraph (2), (3), or (5) of subsection
(a), the Secretary shall provide to the Federal agency and
the applicant, if any, a written statement setting forth the
Secretary's opinion, and a summary of the information on
which the opinion is based, detailing how the agency action
affects the species or its critical habitat, including a
description of the quantity of habitat and the number of
members of the species that will be taken, and conservation
actions to minimize and mitigate the impacts of any
incidental taking that may result from the action.
``(B) Alternatives.--If jeopardy or adverse modification is
found, the Secretary shall suggest those reasonable and
prudent alternatives that the Secretary believes would not
violate subsection (a)(2) and that can be taken by the
Federal agency or applicant in implementing the agency
action.'';
(2) in paragraph (4)--
(A) in subparagraphs (A) and (B), by striking ``violate
such subsection'' each place it appears and inserting
``interfere with the timely achievement of recovery goals'';
(B) in clause (ii), by inserting ``and mitigate'' after
``minimize'';
(C) in clause (iii), by striking ``and'' after the comma at
the end;
(D) in clause (iv), by striking the period at the end and
inserting ``, and''; and
(E) by adding at the end the following:
``(v) directs the Federal agency to assess and report to
the Secretary not later than 2 years after the date of
issuance of the written statement and every 2 years
thereafter for as long as any incidental taking continues,
the quantity of the incidental taking that has occurred as a
direct impact, indirect impact, or cumulative impact.
If an assessment under clause (v) indicates that the quantity
of incidental taking authorized under the written statement
has been exceeded, the Federal agency shall immediately
reinitiate consultation with the Secretary pursuant to
subsection (a)(2).''; and
(3) by adding at the end the following:
``(5) Notice of consultation and action.--
``(A) In general.--On receipt of a request to initiate
consultation under paragraph (2), (3), or (5) of subsection
(a), the Secretary shall promptly publish a notice in the
Federal Register announcing that the consultation has been
initiated and briefly describing the proposed agency action.
``(B) Availability of information.--The Secretary shall
make available on request any information in the possession
or control of the Secretary concerning the consultation or
the opinion prepared pursuant to this subsection with respect
to the consultation.
``(6) Independent scientists.--In preparing an opinion
pursuant to this subsection, the Secretary shall invite
independent scientists described in section 4(f)(1)(D) with
expertise on species that may be affected by the proposed
agency action to provide input into the consultation or
opinion.
``(7) Publication of findings and reasons.--Not later than
30 days after the date on which the Secretary provides a
written statement under paragraph (3) to the Federal agency
and the applicant for a permit, if any, the Secretary shall
publish in the Federal Register a description of the findings
and reasons of the Secretary for making any determination
under this subsection.''.
(c) Biological Assessment.--Section 7(c)(1) (16 U.S.C.
1536(c)(1)) is amended in the last sentence by striking
``Such assessment may be undertaken'' and inserting ``The
assessment shall be made available to the public and may be
undertaken''.
(d) Foreign Species.--Section 7 (16 U.S.C. 1536) is amended
by adding at the end the following:
``(q) Foreign Species.--This section shall apply to any
agency action with respect to any endangered species,
threatened species, species proposed to be added to a list
under section 4(c), or candidate species carried out in whole
or in part, in the United States, in a foreign country, or on
the high seas.''.
(e) Streamlining and Consolidating Interagency
Cooperation.--Section 7 (16 U.S.C. 1536) (as amended by
subsection (d)) is amended by adding at the end the
following:
``(r) Regulations To Ensure Timely Conclusion of
Consultations.--
``(1) Definition of ecosystem.--In this subsection, the
term `ecosystem' means a dynamic complex of organisms and
biological
[[Page S9754]]
communities, and their associated nonliving environment,
interacting together as an ecological unit.
``(2) Requirement.--Not later than 1 year after the date of
enactment of this subsection, the Secretary, in cooperation
with the States, shall promulgate regulations to ensure
timely conclusion of consultations under this section.
``(3) Content.--Regulations under this subsection shall
provide that--
``(A) consultations and conferences under this section
between the Secretary and a Federal agency shall, to the
maximum extent practicable and if approved by the Secretary,
encompass a number of similar or related agency actions to be
undertaken within a particular geographical range or
ecosystem; and
``(B) the Secretary shall, to the maximum extent
practicable, consolidate requests for consultations or
conferences from various Federal agencies whose proposed
actions may affect endangered species, threatened species, or
candidate species that are dependent on the same
ecosystem.''.
SEC. 108. PERMITS AND CONSERVATION PLANS.
Section 10 (16 U.S.C. 1539) is amended by striking
subsection (a) and inserting the following:
``(a) Permits.--
``(1) In general.--The Secretary may permit, under the
terms and conditions provided for in this section--
``(A) any act otherwise prohibited by section 9 for
scientific purposes or to enhance the propagation or survival
of the affected species, or the conservation of the species
in the wild, such as acts necessary for the conservation,
establishment, and maintenance of experimental populations
pursuant to subsection (j); or
``(B) any taking otherwise prohibited by section 9(a)(1) if
the taking is incidental to, and not the purpose of, the
carrying out of an otherwise lawful activity.
``(2) Duration.--The Secretary shall limit the duration of
a permit under paragraph (1) as necessary to ensure that
changes in circumstances that could occur in the period
covered by the permit and that would jeopardize the continued
existence of the species are reasonably foreseeable.
``(3) Conservation plan.--
``(A) In general.--No permit may be issued by the Secretary
authorizing any taking referred to in paragraph (1)(B) unless
the applicant for the permit submits to the Secretary a
conservation plan in accordance with this paragraph that is
based on the best scientific and commercial information
available.
``(B) Contents.--A conservation plan under this paragraph
shall provide a description and analysis of--
``(i) the specific activities sought to be authorized by
the permit;
``(ii) a reasonable range of alternative actions to the
taking of each species covered by the plan;
``(iii) the individual and cumulative impacts that may
reasonably be anticipated to result from the permitted
activities covered by the plan, including the impacts of
modification or destruction of habitat of species authorized
under the permit;
``(iv) objective, measurable biological goals to be
achieved for each species covered by the plan;
``(v) the conservation measures that the applicant will
implement to minimize and mitigate the impacts described in
clause (iii), including--
``(I) the specific conservation measures for achieving the
biological goals of the plan; and
``(II) any additional requirements or restrictions or other
adaptive management provisions that are necessary to respond
to all reasonably foreseeable changes in circumstances that
would jeopardize the continued existence of any species
covered by the plan, including new scientific information and
changing environmental conditions, including natural
disasters;
``(vi) the reasonably anticipated costs of the measures
described in clause (v);
``(vii) the actions that the applicant will take to
monitor--
``(I) the effectiveness of the plan's conservation measures
in achieving the plan's biological goals; and
``(II) impacts on the recovery of each species;
``(viii) funding that will be available to the applicant,
throughout the term of the plan, to implement the plan and
the conservation measures specified in the plan; and
``(ix) such other matters as the Secretary determines are
necessary or appropriate for the purposes of carrying out the
plan.
``(C) Findings.--The Secretary shall not issue a permit
under paragraph (1)(B) for the taking of any species unless
the Secretary finds, after opportunity for public comment
with respect to a permit application and the related
conservation plan, that--
``(i) the conservation plan submitted for the permit meets
all of the requirements of this paragraph;
``(ii) the taking will be incidental;
``(iii) the applicant will minimize and mitigate the
individual impacts and cumulative impacts of the taking;
``(iv) the activities authorized by the permit and
conservation plan are consistent with the recovery of the
species and will result in no net loss of the value to the
species of the habitat occupied by the species;
``(v) the applicant has, in accordance with paragraph (9),
filed a performance bond or other evidence of financial
security to ensure adequate funding for each element of the
conservation plan; and
``(vi) the permit contains--
``(I) such terms and conditions as are necessary or
appropriate to carry out this paragraph and ensure
implementation of the conservation plan by the applicant; and
``(II) such reporting and monitoring requirements as are
necessary for determining whether the terms and conditions
are being complied with.
``(D) Reports on biological status and goals.--
``(i) In general.--Each permit shall require the permittee
to provide to the Secretary, not later than 1 year after the
date of issuance of the permit and at least once each year
thereafter during the term of the permit, a complete report
on--
``(I) the biological status of the species in the affected
area;
``(II) the impacts of the habitat conservation plan and the
permitted action on the species; and
``(III) whether the biological goals of the plan are being
met.
``(ii) Availability to public.--The Secretary shall make
reports required under this subparagraph available to the
public.
``(E) Additional conservation measures.--
``(i) In general.--If necessary to ensure that the
permitted action does not jeopardize the continued existence
of any species affected by the permitted action, the
Secretary shall require a permittee to implement conservation
measures in addition to the conservation measures specified
in the plan.
``(ii) Cost sharing.--The Secretary shall pay the costs of
any additional conservation measures required under this
subparagraph that are in excess of the reasonably anticipated
costs specified in the plan.
``(4) Review by secretary.--
``(A) In general.--Every 3 years after the date of approval
of a permit application and conservation plan under this
section, the Secretary shall review and report on the
progress toward implementation of the terms and conditions of
the permit and plan and make recommendations on actions
necessary to ensure that--
``(i) the terms and conditions do not jeopardize the
continued existence of any species;
``(ii) progress is being made toward achieving the
biological goals of the plan; and
``(iii) the requirements, goals, and purposes of this Act
are being met.
``(B) Availability to public.--The Secretary shall
annually--
``(i) prepare and make publicly available a report on the
status of all permits reviewed pursuant to this paragraph
since the date of the last report; and
``(ii) publish in the Federal Register a notice of the
availability of the most recent report.
``(5) Permit revocation.--The Secretary shall revoke a
permit issued under this section and issue an order
suspending activities allowed under the permit that may be
reasonably expected to cause a taking of any species covered
by the permit, if--
``(A) the permittee is not in compliance with the terms and
conditions of the permit, the requirements of this Act, and
the regulations issued under this Act, including any failure
by a permittee to substantially comply with the conservation
plan required for a permit issued under paragraph (1)(B); or
``(B) the level of the taking authorized by the permit has
been exceeded.
``(6) Actions by secretary on failure by permittee.--
``(A) In general.--If a permittee defaults on any
obligation of the permittee under a permit issued under
paragraph (1)(B) or a conservation plan required for the
permit, the Secretary shall undertake actions to conserve
each species covered by the plan and permit.
``(B) Funding.--To carry out actions required under
subparagraph (A) with respect to a default by a permittee,
the Secretary may use--
``(i) the proceeds of the performance bond or other
financial security under paragraph (9) provided by the
permittee; and
``(ii) amounts in the Habitat Conservation Plan Fund
established by paragraph (10).
``(7) Low effect, small scale plans.--
``(A) In general.--The Secretary shall develop and
implement a streamlined application and approval procedure
for a permit issued under paragraph (1)(B) and related
conservation plan that the Secretary determines to be a low
effect, small scale plan.
``(B) Prerequisites.--A permit and related conservation
plan may be treated as a low effect, small scale permit and
plan if--
``(i) the permitted action is expected to be of less than 5
years in duration;
``(ii) the conservation plan is applicable to an area of
less than 5 acres;
``(iii) the affected acreage is not adjacent to other land
that has been the subject of a permit issued under this
section within the preceding 5 years to the same person, or
as part of the same project;
``(iv) the permitted action is not part of a single larger
project that will have additional impacts on the endangered
species or threatened species;
``(v) the Secretary determines that the plan will have a
negligible cumulative impact and individual impact on the
recovery of the endangered species or threatened species; and
[[Page S9755]]
``(vi) the permitted action is not related to other actions
that will have additional impacts on the endangered species
or threatened species.
``(C) Related actions.--For the purposes of subparagraph
(B)(vi), actions shall be considered related if they--
``(i) automatically trigger other actions that may affect
endangered species or threatened species;
``(ii) cannot or will not proceed unless other actions are
taken previously or simultaneously; or
``(iii) are interdependent on parts of a larger action and
depend on the larger action for their justification.
``(D) Monitoring.--
``(i) In general.--The Secretary shall monitor the
implementation and results of low effect, small scale permits
and conservation plans to ensure that the permits and plans
do not jeopardize the continued existence of any endangered
species or threatened species.
``(ii) Additional requirements or restrictions.--If the
Secretary determines that additional requirements or
restrictions are required to ensure that actions authorized
by a low effect, small scale conservation plan do not
jeopardize the continued existence of any species determined
to be an endangered species or threatened species after the
plan was approved, the Secretary shall require appropriate
modifications to the plan to implement those requirements or
restrictions.
``(iii) Cost sharing.--The Secretary shall pay all costs of
implementing additional requirements or restrictions required
under clause (ii).
``(E) Financial security.--The permittee for which a low
effect, small scale permit and conservation plan is approved
under this paragraph shall not be required to provide a
performance bond or other financial security under paragraph
(9).
``(8) Monitoring.--The Secretary shall monitor the
implementation and results of all conservation plans approved
under this subsection to ensure that the plans do not
jeopardize the continued existence of any endangered species
or threatened species.
``(9) Performance bonds.--
``(A) In general.--After the approval of an incidental
taking permit under paragraph (1)(B) and associated
conservation plan in accordance with this subsection, but
before the permit is issued, the applicant shall--
``(i) file with the Secretary a performance bond payable to
the United States, and conditional on faithful performance of
all the requirements of the permit; or
``(ii) deposit another form of financial security, payable
to the United States, in a form and manner approved by the
Secretary, and conditional on such faithful performance,
having a cash or market value, as applicable, equal to or
greater than the amount of a performance bond otherwise
required under clause (i).
``(B) Amount.--The amount of the bond or deposit of other
financial security required for each permit shall be--
``(i) determined by the Secretary;
``(ii) based on the mitigation requirements needed to meet
the biological goals of the conservation plan; and
``(iii) sufficient to ensure the completion of all
conservation measures to be implemented by the permittee
under the conservation plan that are specified in the plan.
``(C) Phased or adjusted bonds or deposits.--In the case of
a bond or deposit of other financial security required for a
large-scale conservation plan (as defined in paragraph
(12)(A)), or a conservation plan for which the reasonably
foreseeable costs may be prohibitive, the Secretary may
authorize the use of--
``(i) phased bonds or deposits, by which the permittee may
divide the area or actions covered by the conservation plan
into discrete sections and execute a separate bond or deposit
for each section before undertaking any action on that
section; or
``(ii) adjusted bonds or deposits, through which the amount
of the bond or deposits required and the terms of acceptance
of a bond or deposits shall be adjusted by the Secretary from
time to time as the extent of actions that affect endangered
species or threatened species increases or decreases.
``(D) Execution.--The bond or deposits shall be executed by
the permittee and a corporate surety or depository,
respectively.
``(E) Release of bond or deposit.--
``(i) In general.--The permittee may file a request with
the Secretary for the release of all or any part of a
performance bond or deposit of any other financial security
required under this paragraph.
``(ii) Notice and comment.--Not later than 30 days after
any request for release has been filed with the Secretary,
the Secretary shall--
``(I) file notice of the request in the Federal Register;
and
``(II) provide opportunity for public comment before making
a decision under clause (iii).
``(iii) Review.--Not later than 30 days after receipt of
the request, the Secretary shall conduct a review of the
implementation of the conservation plan to determine
whether--
``(I) the requirements of the plan have been fully
implemented;
``(II) the plan has achieved its biological goals; and
``(III) no further action is needed to ensure that the
permitted action is not jeopardizing the existence of the
species covered by the plan.
``(iv) Notice of decision.--Not later than 90 days after
receipt of the request, the Secretary shall notify the
permittee in writing of the decision of the Secretary to
release or not to release all or part of the bond or deposit.
``(v) Notice of reasons for no release.--If the Secretary
does not release any portion of the bond or deposit, the
Secretary shall notify the permittee in writing of the
reasons that the portion was not released and recommended
corrective actions necessary to secure that release.
``(10) Habitat conservation plan fund.--
``(A) Establishment.--There is established in the Treasury
a separate account to be known as the `Habitat Conservation
Plan Fund' (referred to in this paragraph as the `Fund').
``(B) Contents.--The Fund shall consist of--
``(i) donations to the Fund;
``(ii) appropriations to the Fund;
``(iii) amounts received by the United States as fees
charged for permits under this section;
``(iv) amounts received by the United States as natural
resource damages under section 11(i); and
``(v) the proceeds of performance bonds and other deposits
of financial security under paragraph (9).
``(C) Use.--Amounts in the Fund shall be available to the
Secretary until expended, without further appropriation, to
pay the cost of--
``(i) additional conservation measures required under
paragraph (3)(E) and additional requirements and restrictions
required under paragraph (7)(C)(iii) for recovery of a
species;
``(ii) actions by the Secretary to conserve species under
paragraph (6);
``(iii) permitting with respect to which fees are deposited
in the Fund under subparagraph (B)(iii); and
``(iv) restoration or replacement of natural resources with
respect to which natural resource damages are deposited in
the Fund under subparagraph (B)(iv).
``(11) Multiple landowner, multispecies planning.--
``(A) In general.--The Secretary shall encourage the
development of multiple landowner, multispecies conservation
plans, that--
``(i) make a significant contribution to the recovery of an
endangered species or threatened species;
``(ii) rely on the best available scientific information;
``(iii) rely, to the maximum extent practicable, on
ecosystem planning; and
``(iv) maintain the well-being of other species located
within the planning area.
``(B) Streamlining of permitting processes across
jurisdictions.--
``(i) In general.--To encourage the development of the
plans, the Secretary shall cooperate, to the maximum extent
practicable, with States and local governments to streamline
permitting processes across jurisdictions.
``(ii) Large-scale conservation plans.--The cooperation
shall include issuing permits under paragraph (1)(B) to a
State, local government, or group of local governments for
large-scale conservation plans that involve more than 1
landowner.
``(C) Incidental taking certificates.--A permit under
subparagraph (B)(ii) may authorize the State, local
government, or group of local governments to issue incidental
taking certificates to landowners that authorize takings
under the authority of the permit within the jurisdiction of
the State, local government, or group of local governments,
if--
``(i) the State, local government, or group of local
governments meets the performance bond or other financial
security requirements under paragraph (9) with respect to all
such certificates, or each certificate is effective only
after the landowner to whom the certificate is issued has met
those requirements with respect to the certificate;
``(ii) the State, local government, or group of local
governments ensures that all incidental taking certificates
issued under the permit are consistent with the permit and
approved habitat conservation plan;
``(iii) the State, local government, or group of local
governments provides adequate public notice and opportunity
to comment on decisions to issue incidental taking
certificates; and
``(iv) the Secretary and the State, local government, or
group of local governments have adequate authority to enforce
the terms and conditions of the incidental taking
certificates.
``(D) Encouragement of plans.--The Secretary shall--
``(i) ensure the participation of a broad range of public
and private interests in the development of the plan;
``(ii) provide technical assistance to the maximum extent
practicable; and
``(iii) give the plans priority consideration for funding
under section 6.
``(E) Pooled bonds or deposits.--The Secretary may approve
the use of pooled bonds or deposits in order to meet the
requirements of paragraph (9) for plans approved under this
paragraph that--
``(i) do not meet the requirements of subparagraph (C); and
``(ii) involve more than 1 landowner.
``(12) Citizen participation; independent scientists.--
``(A) Definitions.--In this paragraph:
[[Page S9756]]
``(i) Agency involvement.--The term `agency involvement'
means any role played by the Secretary in the development of
a conservation plan under paragraph (3).
``(ii) Independent scientist.--The term `independent
scientist' means a scientist that meets the criteria
specified in section 4(f)(1)(D).
``(iii) Large-scale conservation plan.--The term `large-
scale conservation plan' means a conservation plan that
covers a significant portion of the range of an endangered
species, threatened species, candidate species, or species
proposed for listing under section 4.
``(B) Notice and comment.--The Secretary may issue a permit
under this section only after--
``(i) notice of the receipt of an application for the
permit has been published in the Federal Register;
``(ii) at least a 60-day public comment period has been
provided; and
``(iii) a notice of permit approval has been published in
the Federal Register with agency responses to public
comments.
``(C) Agency involvement.--
``(i) In general.--On receipt of request for involvement by
an agency in the development of a large-scale conservation
plan pursuant to paragraphs (3)(A) and (11), the Secretary
shall promptly publish a notice in the Federal Register
announcing the agency's involvement and briefly describing
the activities that would be permitted under the plan.
``(ii) Availability of information.--The Secretary shall
make available, on request, any information in the
Secretary's possession or control concerning the planning
efforts.
``(D) Public participation.--
``(i) In general.--The Secretary shall invite members of
the public to participate in the development of large-scale
conservation plans and multiple landowner, multispecies
plans.
``(ii) Balanced development process.--The Secretary shall
promulgate regulations establishing a development process
under this paragraph that ensures an equitable balance of
participation between--
``(I) citizens with a primary interest in carrying out
economic development activities that may affect species
conservation; and
``(II) citizens whose primary interest is in species
conservation.
``(iii) Meetings.--A meeting of participants under this
subparagraph shall not be subject to the Federal Advisory
Committee Act (5 U.S.C. App.), but shall be open to the
public.
``(E) Independent scientists.--On receipt of a request for
involvement by an agency in the development of a large-scale
conservation plan, the Secretary shall invite independent
scientists with expertise on species that may be affected by
the plan to provide input.
``(13) Community assistance program.--
``(A) Establishment.--The Secretary shall establish a
community assistance program to provide timely and accurate
information to local governments and property owners in
accordance with subparagraph (B).
``(B) Field office employees.--Under the community
assistance program, the Secretary shall assign to each field
office of the United States Fish and Wildlife Service
employees whose duties include--
``(i) providing accurate, timely information on local
impacts of determinations that species are endangered species
or threatened species, recovery planning efforts, and other
actions under this Act;
``(ii) providing assistance on obtaining permits under this
section and otherwise complying with this Act;
``(iii) serving as a focal point for questions, requests,
complaints, and suggestions from property owners and local
governments concerning the policies and activities of the
United States Fish and Wildlife Service or other Federal
agencies in the implementation of this Act; and
``(iv) training Federal personnel on public outreach
efforts under this Act.''.
SEC. 109. CITIZEN SUITS.
Section 11(g) (16 U.S.C. 1540(g)) is amended--
(1) in paragraph (1)(A), by striking ``in violation'' and
all that follows through the end of the subparagraph and
inserting ``in violation of this Act, any regulation or
permit issued under this Act, any statement provided by the
Secretary under section 7(b)(3), or any agreement concluded
under this Act;''; and
(2) in paragraph (2)--
(A) in subparagraph (A)(i), by inserting before the
semicolon at the end the following ``, except that
notwithstanding this clause such an action may be brought
immediately after the notice in the case of an action against
any person regarding an emergency posing a significant risk
to any species of fish, wildlife, or plant included in a list
under section 4(c) or proposed for inclusion in such a
list''; and
(B) in subparagraph (B)(i), by inserting before the
semicolon at the end the following: ``, except that
notwithstanding this clause such an action may be brought
immediately after such notice in the case of an action under
this section against any person regarding an emergency posing
a significant risk to any species of fish, wildlife, or plant
included in a list under section 4(c)''.
SEC. 110. NATURAL RESOURCE DAMAGE LIABILITY.
Section 11 (16 U.S.C. 1540) is amended by adding at the end
the following:
``(i) Natural Resource Damage Liability.--
``(1) In general.--Any person that, in violation of this
Act, negligently damages any member or habitat of a species
included in a list under section 4(c) shall be liable to--
``(A) the United States for the costs incurred by the
United States in restoring or replacing the member or
habitat, including reasonable costs of assessing the damage;
and
``(B) a State for the costs incurred by the State in
restoring or replacing the member or habitat under a
management agreement with the Secretary under section 6(a) or
a cooperative agreement with the Secretary under section
6(c), including reasonable costs of assessing the damage.
``(2) Deposit.--Amounts received by the United States under
this subsection--
``(A) shall be deposited in the Habitat Conservation Plan
Fund established by section 10(a)(10); and
``(B) may be obligated only for the acquisition or
rehabilitation of damaged habitat or populations.
``(3) Civil actions by secretary.--The Secretary may
commence a civil action on behalf of the United States under
this subsection.
``(4) Notice.--No action may be commenced under this
subsection by the Secretary or a State before the end of the
60-day period beginning on the date on which the Secretary or
the State, respectively, provides written notice of the
action to the person against whom the action is commenced.''.
SEC. 111. AUTHORIZATION OF APPROPRIATIONS.
Section 15 (16 U.S.C. 1542) is amended to read as follows:
``SEC. 15. AUTHORIZATION OF APPROPRIATIONS.
``(a) In General.--There are authorized to be
appropriated--
``(1) to the Secretary of the Interior for carrying out
this Act--
``(A) $135,000,000 for fiscal year 2001;
``(B) $140,000,000 for fiscal year 2002;
``(C) $145,000,000 for fiscal year 2003;
``(D) $150,000,000 for fiscal year 2004; and
``(E) $155,000,000 for fiscal year 2005; and
``(2) to the Secretary of Commerce for carrying out this
Act--
``(A) $35,000,000 for fiscal year 2001;
``(B) $40,000,000 for fiscal year 2002;
``(C) $45,000,000 for fiscal year 2003;
``(D) $50,000,000 for fiscal year 2004; and
``(E) $55,000,000 for fiscal year 2005.
``(b) Convention Implementation.--In addition to other
amounts authorized by this section, there are authorized to
be appropriated to the Secretary of the Interior for carrying
out functions under section 8 relating to implementation of
the Convention on International Trade in Endangered Species
of Wild Fauna and Flora--
``(1) $3,000,000 for fiscal year 2001; and
``(2) $4,000,000 for each of fiscal years 2002 and 2003.
``(c) Habitat Conservation Plan Fund.--In addition to other
amounts authorized by this section, there is authorized to be
appropriated to the Habitat Conservation Plan Fund
established by section 10(a)(10) $20,000,000 for each of
fiscal years 2001, 2002, and 2003.
``(d) Cooperative Agreement Funds.--In addition to other
amounts authorized by this section, there are authorized to
be appropriated--
``(1) to the Secretary of the Interior for entering into
cooperative agreements under section 6 with States and Indian
tribes, $20,000,000 for each of fiscal years 2001, 2002, and
2003; and
``(2) to the Secretary of Commerce for entering into
cooperative agreements under section 6 with States and Indian
tribes, $5,000,000 for each of fiscal years 2001, 2002, and
2003.''.
TITLE II--SPECIES CONSERVATION TAX INCENTIVES
SEC. 201. TAX EXCLUSION FOR COST-SHARING PAYMENTS UNDER
PARTNERS FOR FISH AND WILDLIFE PROGRAM.
(a) In General.--Section 126(a) of the Internal Revenue
Code of 1986 (relating to certain cost-sharing payments) is
amended by redesignating paragraph (10) as paragraph (11) and
by inserting after paragraph (9) the following:
``(10) The Partners for Fish and Wildlife Program
authorized by the Fish and Wildlife Act of 1956 (16 U.S.C.
742a et seq.).''.
(b) Effective Date.--The amendments made by this section
shall apply to payments received after the date of the
enactment of this Act.
SEC. 202. ENHANCED DEDUCTION FOR THE DONATION OF A
CONSERVATION EASEMENT.
(a) In General.--Subparagraph (A) of section 170(h)(4) of
the Internal Revenue Code of 1986 (defining conservation
purpose) is amended by striking ``or'' at the end of clause
(iii), by striking the period at the end of clause (iv) and
inserting ``, or'', and by adding at the end the following:
``(v) the conservation of a species designated by the
Secretary of the Interior or the Secretary of Commerce under
the Endangered Species Act of 1973 (16 U.S.C. 1531 et seq) as
endangered or threatened, proposed by such Secretary for
designation as endangered or threatened, or identified by
such Secretary as a candidate for such designation, provided
the property is not required, as of the date of contribution,
to be used for such purpose other than by reason of the terms
of contribution.''.
(b) Enhanced Deductions.--Subsection (e) of section 170 of
the Internal Revenue Code
[[Page S9757]]
of 1986 (defining qualified conservation contribution) is
amended by adding at the end the following:
``(7) Special rules for contributions related to
conservation of species.--In the case of a qualified
conservation contribution by an individual for the
conservation of endangered or threatened species, proposed
species, or candidate species under subsection (h)(4)(v):
``(A) 50 percent limitation to apply.--Such a contribution
shall be treated for the purposes of this section as
described in subsection (b)(l)(A).
``(B) 20-year carry forward.--Subsection (d)(1) shall be
applied by substituting `20 years' for `5 years' each place
it appears and with appropriate adjustments in the
application of subparagraph (A)(ii) thereof.
``(C) Unused deduction carryover allowed on taxpayer's last
return.--If the taxpayer dies before the close of the last
taxable year for which a deduction could have been allowed
under subsection (d)(1), any portion of the deduction for
such contribution which has not been allowed shall be allowed
as a deduction under subsection (a) (without regard to
subsection (b)) for the taxable year in which such death
occurs or such portion may be used as a deduction against the
gross estate of the taxpayer.''.
(c) Effective Date.--The amendments made by this section
shall apply to contributions made after the date of the
enactment of this Act.
SEC. 203. EXCLUSION FROM ESTATE TAX FOR REAL PROPERTY SUBJECT
TO ENDANGERED SPECIES CONSERVATION AGREEMENT.
(a) In General.--Part IV of subchapter A of chapter 11 of
the Internal Revenue Code of 1986 (relating to taxable
estate) is amended by adding at the end the following new
section:
``SEC. 2058. CERTAIN REAL PROPERTY SUBJECT TO ENDANGERED
SPECIES CONSERVATION AGREEMENT.
``(a) General Rule.--For purposes of the tax imposed by
section 2001, the value of the taxable estate shall be
determined by deducting from the value of the gross estate an
amount equal to lesser of--
``(1) the adjusted value of real property included in the
gross estate which is subject to an endangered species
conservation agreement, or
``(2) $10,000,000.
``(b) Property Subject to an Endangered Species
Conservation Agreement.--For purposes of this section--
``(1) In general.--Real property shall be treated as
subject to an endangered species conservation agreement if--
``(A) such property was owned by the decedent or a member
of the decedent's family at all times during the 3-year
period ending on the date of the decedent's death,
``(B) each person who has an interest in such property
(whether or not in possession) has entered into--
``(i) an endangered species conservation agreement with
respect to such property, and
``(ii) a written agreement with the Secretary consenting to
the application of subsection (d), and
``(C) the executor of the decedent's estate--
``(i) elects the application of this section, and
``(ii) files with the Secretary such endangered species
conservation agreement.
``(2) Adjusted value.--
``(A) In general.--The adjusted value of any real property
shall be its value for purposes of this chapter, reduced by--
``(i) any amount deductible under section 2055(f) with
respect to the property, and
``(ii) any acquisition indebtedness with respect to the
property.
``(B) Acquisition indebtedness.--For purposes of this
paragraph, the term `acquisition indebtedness' means, with
respect to any real property, the unpaid amount of--
``(i) the indebtedness incurred by the donor in acquiring
such property,
``(ii) the indebtedness incurred before the acquisition of
such property if such indebtedness would not have been
incurred but for such acquisition,
``(iii) the indebtedness incurred after the acquisition of
such property if such indebtedness would not have been
incurred but for such acquisition and the incurrence of such
indebtedness was reasonably foreseeable at the time of such
acquisition, and
``(iv) the extension, renewal, or refinancing of an
acquisition indebtedness.
``(c) Endangered Species Conservation Agreement.--For
purposes of this section--
``(1) In general.--The term `endangered species
conservation agreement' means a written agreement entered
into with the Secretary of the Interior or the Secretary of
Commerce--
``(A) which commits each person who signed such agreement
to carry out on the real property activities or practices not
otherwise required by law or to refrain from carrying out on
such property activities or practices that could otherwise be
lawfully carried out and includes--
``(i) objective and measurable species of concern
conservation goals,
``(ii) site-specific and other management measures
necessary to achieve those goals, and
``(iii) objective and measurable criteria to monitor
progress toward those goals,
``(B) which is certified by such Secretary as providing a
major contribution to the conservation of a species of
concern, and
``(C) which is for a term that such Secretary determines is
sufficient to achieve the purposes of the agreement, but not
less than 10 years beginning on the date of the decedent's
death.
``(2) Species of concern.--The term `species of concern'
means any species designated by the Secretary of the Interior
or the Secretary of Commerce under the Endangered Species Act
of 1973 (16 U.S.C. 1531 et seq) as endangered or threatened,
proposed by such Secretary for designation as endangered or
threatened, or identified by such Secretary as a candidate
for such designation.
``(3) Annual certification to the secretary by the
secretary of the interior or the secretary of commerce of the
status of endangered species conservation agreements.--If the
executor elects the application of this section, the executor
shall promptly give written notice of such election to the
Secretary of the Interior or the Secretary of Commerce. The
Secretary of the Interior or the Secretary of Commerce shall
thereafter annually certify to the Secretary that the
endangered species conservation agreement applicable to any
property for which such election has been made remains in
effect and is being satisfactorily complied with.
``(d) Recapture of Tax Benefit in Certain Cases.--
``(1) Disposition of interest or material breach.--
``(A) In general.--An additional tax in the amount
determined under subparagraph (B) shall be imposed on any
person on the earlier of--
``(i) the disposition by such person of any interest in
property subject to an endangered species conservation
agreement (other than a disposition described in subparagraph
(C)),
``(ii) a material breach by such person of the endangered
species conservation agreement, or
``(iii) the termination of the endangered species
conservation agreement.
``(B) Amount of additional tax.--
``(i) In general.--The amount of the additional tax imposed
by subparagraph (A) with respect to any interest shall be an
amount equal to the applicable percentage of the lesser of--
``(I) the adjusted tax difference attributable to such
interest (within the meaning of section 2032A(c)(2)(B)), or
``(II) the excess of the amount realized with respect to
the interest (or, in any case other than a sale or exchange
at arm's length, the fair market value of the interest) over
the value of the interest determined under subsection (a).
``(ii) Applicable percentage.--For purposes of clause (i),
the applicable percentage is determined in accordance with
the following table:
``If, with respect to the date of the agreement, the date of the event
described in subparagraph (A) occurs-- The applicable percentage is--
Before 10 years..............................................100 ....
After 9 years and before 20 years.............................75 ....
After 19 years and before 30 years............................50 ....
After 29 years and before 40 years............................25 ....
After 39.......................................................0.....
``(C) Exception if certain heirs assume obligations upon
the death of a person executing the agreement.--Subparagraph
(A)(i) shall not apply if--
``(i) upon the death of a person described in subsection
(b)(1)(B) during the term of such agreement, the property
subject to such agreement passes to a member of the person's
family, and
``(ii) the member agrees--
``(I) to assume the obligations imposed on such person
under the endangered species conservation agreement,
``(II) to assume personal liability for any tax imposed
under subparagraph (A) with respect to any future event
described in subparagraph (A), and
``(III) to notify the Secretary of the Treasury and the
Secretary of the Interior or the Secretary of Commerce that
the member has assumed such obligations and liability.
If a member of the person's family enters into an agreement
described in subclauses (I), (II), and (III), such member
shall be treated as signatory to the endangered species
conservation agreement the person entered into.
``(2) Due date of additional tax.--The additional tax
imposed by paragraph (1) shall become due and payable on the
day that is 6 months after the date of the disposition
referred to in paragraph (1)(A)(i) or, in the case of an
event described in clause (ii) or (iii) of paragraph (1)(A),
on April 15 of the calendar year following any year in which
the Secretary of the Interior or the Secretary of Commerce
fails to provide the certification required under subsection
(c)(3).
``(e) Statute of Limitations.--If a taxpayer incurs a tax
liability pursuant to subsection (d)(1)(A), then--
``(1) the statutory period for the assessment of any
additional tax imposed by subsection (d)(1)(A) shall not
expire before the expiration of 3 years from the date the
Secretary is notified (in such manner as the Secretary may by
regulation prescribe) of the incurring of such tax liability,
and
``(2) such additional tax may be assessed before the
expiration of such 3-year period notwithstanding the
provisions of any other law or rule of law that would
otherwise prevent such assessment.
``(f) Election and Filing of Agreement.--The election under
this section shall be made
[[Page S9758]]
on the return of the tax imposed by section 2001. Such
election, and the filing under subsection (b) of an
endangered species conservation agreement, shall be made in
such manner as the Secretary shall by regulation provide.
``(g) Application of This Section to Interests in
Partnerships, Corporations, and Trusts.--This section shall
apply to an interest in a partnership, corporation, or trust
if at least 30 percent of the entity is owned (directly or
indirectly) by the decedent, as determined under the rules
described in section 2057(e)(3).
``(h) Member of Family.--For purposes of this section, the
term `member of the family' means any member of the family
(as defined in section 2032A(e)(2)) of the decedent.''.
(b) Carryover Basis.--Section 1014(a)(4) of the Internal
Revenue Code of 1986 (relating to basis of property acquired
from a decedent) is amended by inserting ``or 2058'' after
``section 2031(c)''.
(c) Clerical Amendment.--The table of sections for part IV
of subchapter A of chapter 11 of the Internal Revenue Code of
1986 is amended by adding at the end the following new item:
``Sec. 2058. Certain real property subject to endangered species
conservation agreement.''.
(d) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying after the date of
the enactment of this Act.
SEC. 204. EXPANSION OF ESTATE TAX EXCLUSION FOR REAL PROPERTY
SUBJECT TO QUALIFIED CONSERVATION EASEMENT.
(a) Repeal of Certain Restrictions on Where Land Is
Located.--Clause (i) of section 2031(c)(8)(A) of the Internal
Revenue Code of 1986 (defining land subject to a qualified
conservation easement) is amended to read as follows:
``(i) which is located in the United States or any
possession of the United States,''.
(b) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying after the date of
the enactment of this Act.
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