[Congressional Record Volume 147, Number 35 (Thursday, March 15, 2001)]
[Senate]
[Pages S2412-S2414]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCain (for himself, Mr. Daschle, Mr. Inouye, Mr. Baucus, 
        and Mr. Campbell):
  S. 558. A bill to amend the Internal Revenue Code of 1986 to provide 
tax credits for investment in Indian reservation economic development, 
and for other purposes; to the Committee on Finance.
  Mr. McCAIN. Mr. President, I am pleased to introduce legislation, 
along with my colleagues, Senators Daschle, Inouye, Baucus and 
Campbell, to foster economic investment, development, and growth in 
Native American communities. This legislation would establish 
investment tax credits that will serve to attract private sector 
investments on Indian reservations.
  As a nation, the United States ranks third in entrepreneurial 
activity among the world's leading economies. The level of 
entrepreneurial activity in the country remains strong despite recent 
fluctuations in the market. However, what also remains are deep pockets 
of poverty in our country that have not substantially improved along 
with the economic growth that has swept the rest of our Nation, and 
those areas include Native American reservations.
  During my tenure in the Congress, I have worked on various 
legislative initiatives to help Indian tribes address the problems and 
barriers they face in attracting private sector activity onto 
reservation areas. Indian country, both historically and at the present 
time, cannot successfully compete with other areas in attracting 
businesses due to the unique issues affecting Indian country, such as 
jurisdictional complexities, taxation, and infrastructure deficits. 
Most Indian communities continue to struggle to provide basic jobs, 
infrastructure, housing and telephone service to tribal members.
  Some of my colleagues might only be aware of the handful of Indian 
tribes that have been successful in generating economic revenues 
through gaming activities. However, for the majority of Indian tribes, 
the main economic activity is the kind generated by federal or tribal 
government employment. I understand why this is the case, but I also 
believe that free enterprise must be allowed to flow freely on Indian 
lands as it does in the rest of our nation.
  By their very nature, governments, including tribal governments, 
simply are not good at running businesses. I know this is acknowledged 
by many tribes, who, consistent with their cultural traditions, have 
created tribal corporations or cooperative ventures that mix private 
sector business with tribal principles. I believe that private 
investment needs to be encouraged on Indian reservations if we are to 
see a significant improvement in the economies of Indian tribes.
  The investment tax credits we are proposing today are geared 
specifically to Indian reservations where there is economic need. The 
full credit is available to those reservations whose Indian 
unemployment rate exceeds the Nation's average unemployment by 300 
percent. One-half of the credit is available on reservations where the 
unemployment rate is 150 to 300 percent of the national average. No 
investment tax credit is provided where the Indian unemployment rate is 
less than 150 percent of the national average. The bill is restricted 
to non-gaming related economic activity, which would prevent the 
investment from being used for development and/or operation of gaming 
establishments on Indian reservations.
  While this legislation may not be the panacea for all the economic 
ills afflicting Indian reservations today, I believe that the adoption 
of a specific program of Indian tax incentives would be a critical step 
toward the goal of providing Indian tribal governments with the 
opportunity to strengthen their economies.
  In previous Congresses, I have offered amendments to the federal tax 
code to create incentives for private sector investment on Indian 
reservations and remove inequities in the tax code so that tribal 
governments can enjoy the same tax benefits accorded other nontaxable 
government entities. I have offered these provisions, not to provide an 
advantage to Indians, but merely to give them the same kind of tax 
incentives and benefits the Congress has given other economically 
depressed areas and other units of government. We have been successful 
in enacting a few measures, but given the extremely underdeveloped 
economies of Native American communities, I believe we should enact 
these additional tax incentives.
  My colleagues and I are sponsoring this measure today because we 
believe these investment tax credits are necessary to reach out to 
those tribal communities that do not have the economic advantage of 
living near a booming metropolitan area, or do not enjoy the benefits 
of Indian gaming revenue. We believe that a strategy of tax incentives 
such as this legislation proposes is the most effective way that the 
federal government can act to stimulate reservation economic 
development. Tax incentives do not depend for their effectiveness on 
the actions of federal bureaucracies that are often slow-moving and 
unimaginative. The incentives are usable only by viable businesses 
ready and able to invest in Indian communities, which will consequently 
foster a strong entrepreneurial environment on Native American 
reservations.
  I look forward to working with my respective colleagues on both sides 
of the aisle to enact this important legislation. I ask unanimous 
consent that the text of bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 558

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Indian Reservation Economic 
     Investment Act of 2001''.

[[Page S2413]]

     SEC. 2. INVESTMENT TAX CREDIT FOR PROPERTY ON INDIAN 
                   RESERVATIONS.

       (a) Allowance of Indian Reservation Credit.--Section 46 of 
     the Internal Revenue Code of 1986 (relating to investment 
     credits) 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 after paragraph 
     (3) the following new paragraph:
       ``(4) the Indian reservation credit.''.
       (b) Amount of Indian Reservation Credit.--
       (1) In general.--Section 48 of such Code (relating to the 
     energy credit and the reforestation credit) is amended by 
     adding after subsection (b) the following new subsection:
       ``(c) Indian Reservation Credit.--
       ``(1) In general.--For purposes of section 46, the Indian 
     reservation credit for any taxable year is the Indian 
     reservation percentage of the qualified investment in 
     qualified Indian reservation property placed in service 
     during such taxable year, determined in accordance with the 
     following table:

The Indian reservation percentage is--reservation property which is--
  Reservation personal property..................................10....

  New reservation construction property..........................15....

  Reservation infrastructure investment..........................15....

       ``(2) Qualified investment in qualified indian reservation 
     property defined.--For purposes of this subpart--
       ``(A) In general.--The term `qualified Indian reservation 
     property' means property--
       ``(i) which is--

       ``(I) reservation personal property;
       ``(II) new reservation construction property; or
       ``(III) reservation infrastructure investment; and

       ``(ii) not acquired (directly or indirectly) by the 
     taxpayer from a person who is related to the taxpayer (within 
     the meaning of section 465(b)(3)(C)).

     The term `qualified Indian reservation property' does not 
     include any property (or any portion thereof) placed in 
     service for purposes of conducting or housing class I, II, or 
     III gaming (as defined in section 4 of the Indian Gaming 
     Regulatory Act (25 U.S.C. 2703)).
       ``(B) Qualified investment.--The term `qualified 
     investment' means--
       ``(i) in the case of reservation infrastructure investment, 
     the amount expended by the taxpayer for the acquisition or 
     construction of the reservation infrastructure investment; 
     and
       ``(ii) in the case of all other qualified Indian 
     reservation property, the taxpayer's basis for such property.
       ``(C) Reservation personal property.--The term `reservation 
     personal property' means qualified personal property which is 
     used by the taxpayer predominantly in the active conduct of a 
     trade or business within an Indian reservation. Property 
     shall not be treated as `reservation personal property' if it 
     is used or located outside the Indian reservation on a 
     regular basis.
       ``(D) Qualified personal property.--The term `qualified 
     personal property' means property--
       ``(i) for which depreciation is allowable under section 
     168;
       ``(ii) which is not--

       ``(I) nonresidential real property;
       ``(II) residential rental property; or
       ``(III) real property which is not described in subclause 
     (I) or (II) and which has a class life of more than 12.5 
     years.

     For purposes of this subparagraph, the terms `nonresidential 
     real property', `residential rental property', and `class 
     life' have the respective meanings given such terms by 
     section 168.
       ``(E) New reservation construction property.--The term `new 
     reservation construction property' means qualified real 
     property--
       ``(i) which is located in an Indian reservation;
       ``(ii) which is used by the taxpayer predominantly in the 
     active conduct of a trade or business within an Indian 
     reservation; and
       ``(iii) which is originally placed in service by the 
     taxpayer.
       ``(F) Qualified real property.--The term `qualified real 
     property' means property for which depreciation is allowable 
     under section 168 and which is described in subclause (I), 
     (II), or (III) of subparagraph (D)(ii).
       ``(G) Reservation infrastructure investment.--
       ``(i) In general.--The term `reservation infrastructure 
     investment' means qualified personal property or qualified 
     real property which--

       ``(I) benefits the tribal infrastructure;
       ``(II) is available to the general public; and
       ``(III) is placed in service in connection with the 
     taxpayer's active conduct of a trade or business within an 
     Indian reservation.

       ``(ii) Property may be located outside the reservation.--
     Qualified personal property and qualified real property used 
     or located outside an Indian reservation shall be reservation 
     infrastructure investment only if its purpose is to connect 
     to existing tribal infrastructure in the reservation, and 
     shall include, but not be limited to, roads, power lines, 
     water systems, railroad spurs, and communications facilities.
       ``(H) Coordination with other credits.--The term `qualified 
     Indian reservation property' shall not include any property 
     with respect to which the energy credit or the rehabilitation 
     credit is allowed.
       ``(3) Real estate rentals.--For purposes of this section, 
     the rental to others of real property located within an 
     Indian reservation shall be treated as the active conduct of 
     a trade or business in an Indian reservation.
       ``(4) Indian reservation defined.--For purposes of this 
     subpart, the term `Indian reservation' means--
       ``(A) a reservation, as defined in section 4(10) of the 
     Indian Child Welfare Act of 1978 (25 U.S.C. 1903(10)), or
       ``(B) lands held under the provisions of the Alaska Native 
     Claims Settlement Act (43 U.S.C. 1601 et seq.) by a Native 
     corporation as defined in section 3(m) of such Act (43 U.S.C. 
     1602(m)).
       ``(5) Limitation based on unemployment.--
       ``(A) General rule.--The Indian reservation credit allowed 
     under section 46 for any taxable year shall equal--
       ``(i) if the Indian unemployment rate on the applicable 
     Indian reservation for which the credit is sought exceeds 300 
     percent of the national average unemployment rate at any time 
     during the calendar year in which the property is placed in 
     service or during the immediately preceding 2 calendar years, 
     100 percent of such credit;
       ``(ii) if such Indian unemployment rate exceeds 150 percent 
     but not 300 percent, 50 percent of such credit; and
       ``(iii) if such Indian unemployment rate does not exceed 
     150 percent, 0 percent of such credit.
       ``(B) Special rule for large projects.--In the case of a 
     qualified Indian reservation property which has (or is a 
     component of a project which has) a projected construction 
     period of more than 2 years or a cost of more than 
     $1,000,000, subparagraph (A) shall be applied by substituting 
     `during the earlier of the calendar year in which the 
     taxpayer enters into a binding agreement to make a qualified 
     investment or the first calendar year in which the taxpayer 
     has expended at least 10 percent of the taxpayer's qualified 
     investment, or the preceding calendar year' for `during the 
     calendar year in which the property is placed in service or 
     during the immediately preceding 2 calendar years'.
       ``(C) Determination of indian unemployment.--For purposes 
     of this paragraph, with respect to any Indian reservation, 
     the Indian unemployment rate shall be based upon Indians 
     unemployed and able to work, and shall be certified by the 
     Secretary of the Interior.
       ``(6) Coordination with nonrevenue laws.--Any reference in 
     this subsection to a provision not contained in this title 
     shall be treated for purposes of this subsection as a 
     reference to such provision as in effect on the date of the 
     enactment of this paragraph.''.
       (2) Lodging to qualify.--Paragraph (2) of section 50(b) of 
     such Code (relating to property used for lodging) is amended 
     by striking ``and'' at the end of subparagraph (C), by 
     striking the period at the end of subparagraph (D) and 
     inserting ``; and'', and by adding at the end the following 
     subparagraph:
       ``(E) new reservation construction property.''.
       (c) Recapture.--Subsection (a) of section 50 of such Code 
     (relating to recapture in case of dispositions, etc.), is 
     amended by adding at the end the following new paragraph:
       ``(6) Special rules for indian reservation property.--
       ``(A) In general.--If, during any taxable year, property 
     with respect to which the taxpayer claimed an Indian 
     reservation credit--
       ``(i) is disposed of; or
       ``(ii) in the case of reservation personal property--

       ``(I) otherwise ceases to be investment credit property 
     with respect to the taxpayer; or
       ``(II) is removed from the Indian reservation, converted, 
     or otherwise ceases to be Indian reservation property,

     the tax under this chapter for such taxable year shall be 
     increased by the amount described in subparagraph (B).
       ``(B) Amount of increase.--The increase in tax under 
     subparagraph (A) shall equal the aggregate decrease in the 
     credits allowed under section 38 by reason of section 48(c) 
     for all prior taxable years which would have resulted had the 
     qualified investment taken into account with respect to the 
     property been limited to an amount which bears the same ratio 
     to the qualified investment with respect to such property as 
     the period such property was held by the taxpayer bears to 
     the applicable recovery period under section 168(g).
       ``(C) Coordination with other recapture provisions.--In the 
     case of property to which this paragraph applies, paragraph 
     (1) shall not apply and the rules of paragraphs (3), (4), and 
     (5) shall apply.''.
       (d) Basis Adjustment To Reflect Investment Credit.--
     Paragraph (3) of section 50(c) of such Code (relating to 
     basis adjustment to investment credit property) is amended by 
     striking ``energy credit or reforestation credit'' and 
     inserting ``energy credit, reforestation credit, or Indian 
     reservation credit other than with respect to any expenditure 
     for new reservation construction property''.
       (e) Certain Governmental Use Property To Qualify.--
     Paragraph (4) of section 50(b) of such Code (relating to 
     property used by governmental units or foreign persons or 
     entities) is amended by redesignating subparagraphs (D) and 
     (E) as subparagraphs (E) and (F), respectively, and by 
     inserting after subparagraph (C) the following new 
     subparagraph:
       ``(D) Exception for reservation infrastructure 
     investment.--This paragraph

[[Page S2414]]

     shall not apply for purposes of determining the Indian 
     reservation credit with respect to reservation infrastructure 
     investment.''.
       (f) Application of At-Risk Rules.--Subparagraph (C) of 
     section 49(a)(1) of such Code is amended by striking ``and'' 
     at the end of clause (ii), by striking the period at the end 
     of clause (iii) and inserting ``, and'', and by adding at the 
     end the following new clause:
       ``(iv) the qualified investment in qualified Indian 
     reservation property.''.
       (g) Clerical Amendments.--
       (1) Section 48 of such Code is amended by striking the 
     heading and inserting the following:

     ``SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; INDIAN 
                   RESERVATION CREDIT.''.

       (2) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1 is amended by striking the item 
     relating to section 48 and inserting the following:

``Sec. 48. Energy credit; reforestation credit; Indian reservation 
              credit.''.

       (h) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2001.
                                 ______