S 3152 IS

To amend the Internal Revenue Code of 1986 to provide tax incentives for distressed areas, and for other purposes.

October 3 (legislative day, SEPTEMBER 22), 2000

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) introduced the following bill; which was read the first time

To amend the Internal Revenue Code of 1986 to provide tax incentives for distressed areas, and for other purposes.

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.

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,

`(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--

`(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--

(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 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.'.

(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 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) 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-

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-

(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 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

`(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-

(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 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 make 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--

`(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:

The recapture percentage is--

100

80

60

40

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,

`(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--

`(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 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 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 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 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).'.

(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)),

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'.

(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).

`(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--

`(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.

`(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.

`(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.

END