Text: H.R.23 — 102nd Congress (1991-1992)All Information (Except Text)

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HR 23 SC
102d CONGRESS
1st Session
 H. R. 23
To amend the Internal Revenue Code of 1986 to stimulate employment in,
and to promote revitalization of, economically distressed areas designated
as enterprise zones, by providing Federal tax relief for employment and
investments, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
January 3, 1991
Mr. RANGEL introduced the following bill; which was referred jointly to
the Committees on Ways and Means, Banking, Finance and Urban Affairs, and
the Judiciary
September 24, 1991
Additional sponsors: Mr. BARTLETT, Mr. MACHTLEY, Mr. MAZZOLI, Mr. SERRANO,
Mr. ARCHER, Mr. VANDER JAGT, Mr. GRANDY, Mr. BUNNING, Mr. RIGGS,
Mr. LIVINGSTON, Mr. LIPINSKI, Mr. UPTON, Mr. JEFFERSON, Mr. MCNULTY,
Mr. CUNNINGHAM, Mr. HORTON, Mr. DANNEMEYER, Ms. MOLINARI, Mrs. JOHNSON
of Connecticut, Mr. SHAYS, Mr. ZIMMER, Mr. IRELAND, Mr. ROE, Mr. COLEMAN
of Missouri, Mr. FROST, Mrs. BYRON, Mr. ACKERMAN, Mr. BURTON of Indiana,
Mr. HERGER, Mr. HUGHES, Mr. GILLMOR, and Mr. Camp
A BILL
To amend the Internal Revenue Code of 1986 to stimulate employment in,
and to promote revitalization of, economically distressed areas designated
as enterprise zones, by providing Federal tax relief for employment and
investments, 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.
  This Act may be cited as the `Enterprise Zone Jobs-Creation Act of 1991'.
SEC. 2. PURPOSE.
  It is the purpose of this Act to provide for the establishment of
  enterprise zones in order to stimulate entrepreneurship, particularly by
  zone residents, the creation of new jobs, particularly for disadvantaged
  workers and long-term unemployed individuals, and to promote revitalization
  of economically distressed areas primarily by providing or encouraging--
  (1) tax relief at the Federal, State, and local levels;
  (2) regulatory relief at the Federal, State, and local levels; and
  (3) improved local services and an increase in the economic stake of
  enterprise zone residents in their own community and its development,
  particularly through the increased involvement of private, local, and
  neighborhood organizations.
SEC. 3. AMENDMENT OF THE 1986 CODE.
  Except as otherwise expressly provided, whenever an amendment or repeal
  is expressed in this Act 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.
TITLE I--DESIGNATION OF ENTERPRISE ZONES
SEC. 101. DESIGNATION OF ZONES.
  (a) GENERAL RULE- Chapter 80 (relating to general rules) is amended by
  adding at the end thereof the following new subchapter:
`Subchapter D--Designation of Enterprise Zones
`Sec. 7880. Designation.
`SEC. 7880. DESIGNATION.
  `(a) Designation of Zones-
  `(1) DEFINITION- For purposes of this title, the term `enterprise 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 an enterprise zone
  (hereinafter in this section referred to as a `nominated area'), and
  `(B) which the Secretary of Housing and Urban Development, after consultation
  with--
  `(i) the Secretaries of Agriculture, Commerce, Labor, and the Treasury;
  the Director of the Office of Management and Budget; and the Administrator
  of the Small Business Administration, and
  `(ii) in the case of an area on an Indian reservation, the Secretary of
  the Interior,
designates as an enterprise zone.
  `(2) AUTHORITY TO DESIGNATE- The Secretary of Housing and Urban Development
  is authorized to designate enterprise zones in accordance with the provisions
  of this section.
  `(3) Limitations on designations-
  `(A) PUBLICATION OF REGULATIONS- Before designating any area as an enterprise
  zone and not later than 4 months following the date of the enactment of this
  section, the Secretary of Housing and Urban Development shall prescribe by
  regulation, after consultation with the officials described ind paragraph
  (1)(B)--
  `(i) the procedures for nominating an area, and
  `(ii) the procedures for designation as an enterprise zone, including a
  method for comparing courses of action under subsection (d) proposed for
  nominated areas, and the other factors specified in subsection (e)
  `(B) TIME LIMITATIONS- The Secretary of Housing and Urban Development shall
  designate nominated areas as enterprise zones only during the 48-month
  period beginning on the later of--
  `(i) the first day of the first month following the month in which the
  effective date of the regulations described in subparagraph (A) occurs, or
  `(ii) June 30, 1991.
  `(C) NUMBER OF DESIGNATIONS-
  `(i) IN GENERAL- The Secretary of Housing and Urban development may
  designate--
  `(I) not more than 50 nominated areas as enterprise zones under this
  section and
  `(II) not more than 15 nominated areas as enterprise zones during the first
  12-month period beginning on the date determined under subparagraph (B),
  not more than 30 by the end of the second 12-month period, not more than
  45 by the end of the third 12-month period, and not more than 50 by the
  end of the fourth 12-month period.
  `(ii) MINIMUM DESIGNATION IN RURAL AREAS- Of the areas designated as
  enterprise zones, at least one-third must be areas that are--
  `(I) within a local government jurisdiction or jurisdictions with a
  population of less than 50,000 (as determined using the most recent census
  data available);
  `(II) outside of a metropolitan statistical area (within the meaning of
  section 143(k)(2)(B)); or
  `(III) determined by the Secretary of Housing and Urban Development,
  after consultation with the Secretary of Commerce, to be rural areas.
  `(D) PROCEDURAL RULES- The Secretary of Housing and Urban Development
  shall not make any designations under this section unless--
  `(i) the local government and the State in which the nominated area is
  located have the authority to--
  `(I) nominate such area for designation as an enterprise zone,
  `(II) make the State and local commitments under subsection (d), and
  `(III) provide assurances satisfactory to the Secretary of Housing and
  Urban development that such commitments will be fulfilled, and
  `(ii) a nomination therefor is submitted by such State and local governments
  in such a manner and in such form, and contains such information, as the
  Secretary of Housing and Urban Development shall prescribe by regulation.
  `(4) NOMINATION PROCESS FOR INDIAN RESERVATIONS- 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 deemed to be both the State
  and local governments with respect to such area.
  `(b) TIME PERIOD FOR WHICH DESIGNATION IS IN EFFECT--
  `(1) IN GENERAL- Any designation of an area as an enterprise zone shall
  remain in effect during the period beginning on the date of the designation
  and ending on the earliest of--
  `(A) December 31 of the 24th calendar year following the calendar year in
  which such date occurs,
  `(B) the termination date specified by the State and local governments
  as provided in the nomination submitted in accordance with subsection
  (a)(3)(D)(ii),
  `(C) such other date as the Secretary of Housing and Urban Development
  shall specify as a condition of designation, or
  `(D) the date upon which the Secretary of Housing and Urban Development
  revokes such designation.
  `(2) REVOCATION OF DESIGNATION- The Secretary of Housing and Urban
  Development, after consultation with the officials described in subsection
  (a)(1)(B), may revoke the designation of an area if the Secretary of Housing
  and Urban Develoment determines that the State or a local government in
  which the area is located is not complying substantially with the agreed
  course of action for the area.
  `(c) AREA AND ELIGIBILITY REQUIREMENTS--
  `(1) IN GENERAL- The Secretary of Housing and Urban Development may
  designate a nominated area as an enterprise zone only if it meets the
  requirements of paragraphs (2) and (3).
  `(2) AREA REQUIREMENTS- A nominated area meets the requirements of this
  paragraph if--
  `(A) the area is within the jurisdiction of the local government;
  `(B) the boundary of the area is continuous; and
  `(C) the area--
  `(i) has a population, as determined by the most recent census data
  available, of not less than--
  `(I) 4,000 if any portion of such area (other than a rural area described
  in subsection (a)(3)(C)(ii)) is located within a metropolitan statistical
  area (as designated by the Director of the Office of Management and Budget)
  with a population of 50,000 or more; 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- For purposes of paragraph (1), a nominated
  area meets the requirements of this paragraph if the State or local
  governments in which the nominated area is located certifies, and the
  Secretary of Housing and Urban Development accepts such certification, that--
  `(A) the area is one of pervasive poverty, unemployment and general distress;
  `(B) the area is located wholly within the jurisdiction of a local government
  that is eligible for Federal assistance under section 119 of the Housing
  and Community Development Act of 1974, as in effect on the date of the
  enactment of this Act;
  `(C) the unemployment rate for the area, as determined by the appropriate
  available data, was not less than 1.5 times the national unemployment rate
  for the period;
  `(D) the poverty rate (as determined by the most recent census data
  available) for each populous census tract (or where not tracted, the
  equivalent county division as defined by the Bureau of the Census for the
  purpose of defining poverty areas) within the area was not less than 20
  percent for the period to which such data relate; and
  `(E) the area meets at least one of the following criteria:
  `(i) Not less than 70 percent of the households living in the area have
  incomes below 80 percent of the median income of households of the local
  government (determined in the same manner as under section 119(b)(2)
  of the Housing and Community Development Act of 1974).
  `(ii) The population of the area decreased by 20 percent or more between
  1970 and 1980 (as determined from the most recent census available).
  `(4) ELIGIBILITY REQUIREMENTS FOR RURAL AREAS- For purposes of paragraph (1),
  a nominated area that is a rural area described in subsection (a)(3)(C)(ii)
  meets the requirements of paragraph (3) if the State and local governments
  in which it is located certify and the Secretary, after such review of
  supporting data as he deems appropriate, accepts such certification,
  that the area meets--
  `(A) the criteria set forth in subparagraphs (A) and (B) of paragraph
  (3); and
  `(B) not less than one of the criteria set forth in the other subparagraphs
  of paragraph (3).
  `(d) REQUIRED STATE AND LOCAL COMMITMENTS-
  `(1) IN GENERAL- No nominated area shall be designated as an enterprise
  zone unless the State and the local government or governments of the
  jurisdictions in which the nominated area is located agree in writing that,
  during any period during which the nominated area is an enterprise zone,
  such governments will follow a specified course of action designed to
  reduce the various burdens borne by employers or employees in such area.
  `(2) COURSE OF ACTION- The course of action under paragraph (1) may include,
  but is not limited to--
  `(A) the reduction or elimination of tax rates or fees applying within
  the enterprise zone,
  `(B) actions to reduce, remove, simplify, or streamline governmental
  requirements applying within the enterprise zone,
  `(C) an increase in the level or efficiency of local services within
  the enterprise zone, for example, crime prevention, and drug enforcement
  prevention and treatment,
  `(D) involvement in the program by private entities, organizations,
  neighborhood associations, and community groups, particularly those within
  the nominated area, 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 of the nominated area,
  `(E) mechanisms to increase equity ownership by residents and employees
  within the enterprise zone,
  `(F) donation (or sale below market value) of land and buildings to benefit
  low and moderate income people,
  `(G) linkages to--
  `(i) job training,
  `(ii) transportation,
  `(iii) education,
  `(iv) day care,
  `(v) health care, and
  `(vi) other social service support,
  `(H) provision of supporting public facilities, and infrastructure
  improvements,
  `(I) encouragement of local entrepreneurship; and
  `(J) other factors determined essential to support enterprise zone activities
  and encourage livability or quality of life.
  `(3) LATER MODIFICATION OF A COURSE OF ACTION- The Secretary of Housing
  and Urban Development may by regulation prescribe procedures to permit or
  require a course of action to be updated or modified during the time that
  a designation is in effect.
  `(e) PRIORITY OF DESIGNATION- In choosing nominated areas for designation,
  the Secretary of Housing and Urban Development shall give preference to
  the nominated areas--
  `(1) with respect to which the strongest and highest quality contributions
  have been promised as part of the course of action, taking into consideration
  the fiscal ability of the nominating State and local governments to provide
  tax relief,
  `(2) with respect to which the nominating State and local governments have
  provided the most effective and enforceable guarantees that the proposed
  course of action will actually be carried out during the period of the
  enterprise zone designation,
  `(3) with respect to which private entities have made the most substantial
  commitments in additional resources and contributions, including the
  creation of new or expanded business activities, and
  `(4) which best exhibit such other factors determined by the Secretary
  of Housing and Urban Development, including relative distress, as are
  consistent with the intent of the enterprise zone program and have the
  greatest likelihood of success.
  `(f) GEOGRAPHIC DISTRIBUTION- In making designations, the Secretary of
  Housing and Urban Development will take into consideration a reasonable
  geographic distribution of enterprise zones.
  `(g) DEFINITIONS- For the purposes of this title--
  `(1) GOVERNMENTS- If more than one government seeks to nominate an area
  as an enterprise zone, any reference to, or requirement of, this section
  shall apply to all such governments.
  `(2) STATE- The term `State' shall also include Puerto Rico, the Virgin
  Islands, Guam, American Samoa, the Northern Mariana Islands, and any other
  possession of the United States.
  `(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,
  `(B) any combination of political subdivisons described in subparagraph
  (A) recognized by the Secretary of Housing and Urban Development, and
  `(C) the District of Columbia.'.
  `(h) CROSS REFERENCES FOR--
 `(1) definitions, see section 1391,
 `(2) treatment of employees in enterprise zones, see section 1392, and
 `(3) treatment of investments in enterprise zones, see sections 1393
 and 1394.'.
  (b) CLERICAL AMENDMENT- The table of subchapters for chapter 80 is amended
  by adding at the end thereof the following new item:
`SUBCHAPTER D. Designation of enterprise zones.'.
SEC. 102. REPORTING REQUIREMENTS
  Not later than the close of the second calendar year after the calendar year
  in which the Secretary of Housing and Urban Development first designates
  areas as enterprise zones, and at the close of each second calendar year
  thereafter, the Secretary of Housing and Urban Development shall submit to
  the Congress a report on the effects of such designation in accomplishing
  the purposes of this Act.
SEC. 103. INTERACTION WITH OTHER FEDERAL PROGRAMS.
  (a) COORDINATION WITH RELOCATION ASSISTANCE- The designation of an
  enterprise zone under section 7880 of the Internal Revenue Code of 1986
  (as added by this Act) shall not--
  (1) constitute approval of a Federal or federally assisted program or project
  (within the meaning of the Uniform Relocation Assistance and Real Property
  Acquisition Policies Act of 1970 (42 U.S.C. 4601)); or
  (2) entitle any person displaced from real property located in such zone
  to any rights or any benefits under such Act.
  (b) COORDINATION WITH ENVIRONMENTAL POLICY- Designation of an enterprise
  zone under section 7880 of such Code shall not constitute a Federal action
  for purposes of applying the procedural requirements of the National
  Environmental Policy Act of 1969 (42 U.S.C. 4341) or other provisions of
  Federal law relating to the protection of the environment.
TITLE II--FEDERAL INCOME TAX INCENTIVES
SEC. 201. DEFINITIONS AND REGULATIONS; EMPLOYEE CREDIT; CAPITAL GAIN EXCLUSION;
STOCK EXPENSING.
  (a) GENERAL RULE- Chapter 1 (relating to normal tax and surtax rules)
  is amended by inserting after subchapter T the following new subchapter:
`Subchapter U--Enterprise Zones
`Sec. 1391. Definitions and regulatory authority.
`Sec. 1392. Credit for enterprise zone employees.
`Sec. 1393. Enterprise zone capital gain.
`Sec. 1394. Enterprise zone stock.
`SEC. 1391. DEFINITIONS AND REGULATORY AUTHORITY.
  `(a) Enterprise Zone-
  `(1) IN GENERAL- For purposes of this subchapter, the term `enterprise
  zone' means any area which the Secretary of Housing and Urban Development
  designates pursuant to section 7880(a) as a Federal enterprise zone for
  purposes of this title.
  `(2) TERMINATION OF ENTERPRISE ZONE- An area will cease to constitute
  an enterprise zone once its designation as such terminates or is revoked
  under section 7880(b).
  `(b) Enterprise Zone Business-
  `(1) IN GENERAL- For purposes of this subchapter, the term `enterprise zone
  business' means an activity constituting the active conduct of a trade or
  business within an enterprise zone, and with respect to which--
  `(A) at least 80 percent of the gross income in each calendar year is
  attributable to the active conduct of a trade or business within an
  enterprise zone,
  `(B) less than 10 percent of the property (as measured by unadjusted basis)
  constitutes stocks, securities, or property held for use by customers,
  `(C) no more than an insubstantial portion of the property constitutes
  collectibles (as defined in section 408(m)(2)), unless such collectibles
  constitute property held primarily for sale to customers in the ordinary
  course of the active trade or business,
  `(D) substantially all of the property (whether owned or leased) is located
  within an enterprise zone, and
  `(E) substantially all of the employees work within an enterprise zone.
  `(2) RELATED ACTIVITIES TAKEN INTO ACCOUNT- Except as otherwise provided in
  regulations, all activities conducted by a taxpayer and persons related to
  the taxpayer shall be treated as one activity for purposes of paragraph (1).
  `(3) Special rules-
  `(A) RENTAL REAL PROPERTY- For purposes of paragraph (1), real property
  located within an enterprise zone and held for use by customers other than
  related persons shall be treated as the active conduct of a trade or business
  for purposes of paragraph (1)(A) and as not subject to paragraph (1)(B).
  `(B) TERMINATION OF ENTERPRISE ZONE BUSINESS- An activity shall cease to
  be an enterprise zone business if--
  `(i) the designation of the enterprise zone in which the activity is
  conducted terminates or is revoked pursuant to section 7880(b);
  `(ii) more than 50 percent (by value) of the activity's property or services
  are obtained from related persons other than enterprise zone businesses; or
  `(iii) more than 50 percent of the activity's gross income is attributable
  to property or services provided to related persons other than enterprise
  zone businesses.
  `(c) Enterprise Zone Property-
  `(1) IN GENERAL- For purposes of this subchapter, the term `enterprise
  zone property' means--
  `(A) any tangible personal property located in an enterprise zone and used
  by the taxpayer in an enterprise zone business, and
  `(B) any real property located in an enterprise zone and used by the
  taxpayer in an enterprise zone business.
In no event shall any financial property or intangible interest in property
be treated as constituting enterprise zone property, whether or not such
property is used in the active conduct of an enterprise zone business.
  `(2) TERMINATION OF ENTERPRISE ZONE- The treatment of property as enterprise
  zone property under subparagraph (A) shall not terminate upon the termination
  or revocation of the designation of the enterprise zone in which the property
  is located, but instead shall terminate immediately after the first sale
  or exchange of such property occurring after the expiration or revocation.
  `(d) RELATED PERSONS- For purposes of this subchapter, a person shall be
  treated as related to another person if--
  `(1) the relationship of such persons is described in section 267(b)
  or 707(b)(1), or
  `(2) such persons are engaged in trades or businesses under common control
  (within the meaning of subsections (a) and (b) of section 52).
For purposes of paragraph (1), in applying section 267(b) or 707(b)(1),
`33 percent' shall be substituted for `50 percent'.
  `(e) REGULATORY AUTHORITY- The Secretary shall prescribe such regulations as
  may be necessary or appropriate to carry out the purposes of the Enterprise
  Zone Jobs-Creation Act of 1991, including--
  `(1) providing that Federal tax relief is unavailable to an activity that
  does not stimulate employment in, or revitalization of, enterprise zones,
  `(2) providing for appropriate coordination with other Federal programs
  that, in combination, might enable activity within enterprise zones to be
  more than 100 percent subsidized by the Federal government, and
  `(3) preventing the avoidance of the rules in this subchapter.
`SEC. 1392. CREDIT FOR ENTERPRISE ZONE EMPLOYEES.
  `(a) GENERAL RULE- In the case of a taxpayer who is an enterprise zone
  employee, there shall be allowed as a credit against the tax imposed by
  this subtitle for the taxable year an amount equal to 5 percent of so much
  of the qualified wages of the taxpayer for the taxable year as does not
  exceed $10,500.
  `(b) DEFINITIONS- For purposes of this section--
  `(1) ENTERPRISE ZONE EMPLOYEE- The term `enterprise zone employee' means
  an individual--
  `(A) performing services during the taxable year that are directly related
  to the conduct of an enterprise zone business,
  `(B) substantially all of the services described in paragraph (1)(A)
  are performed within an enterprise zone, and
  `(C) the employer for whom the services described in paragraph (1)(A)
  are performed is not the Federal government, any State government or
  subdivision thereof, or any local government.
  `(2) WAGES- The term `wages' has the meaning given to such term by subsection
  (b) of section 3306 (determined without regard to any dollar limitation
  contained in such subsection).
  `(3) QUALIFIED WAGES- The term `qualified wages' means all wages of the
  taxpayer, to the extent attributable to services described in paragraph (1).
  `(c) Limitations-
  `(1) PHASE-OUT OF CREDIT- The amount of the credit allowable to a taxpayer
  under subsection (a) for any taxable year shall not exceed the excess
  (if any) of--
  `(A) $525, over
  `(B) 10.5 percent of so much of the taxpayer's total wages (whether or
  not constituting qualified wages) as exceeds $20,000.
  `(2) PARTIAL TAXABLE YEAR- If designation of an area as an enterprise zone
  occurs, expires, or is revoked pursuant to section 7880 on a date other
  than the first or last day of the taxable year of the taxpayer, or in
  the case of a short taxable year, the limitations specified in subsection
  (c)(1) shall be adjusted on a pro rata basis (based upon the number of days).
  `(d) REDUCTION OF CREDIT TO TAXPAYERS SUBJECT TO ALTERNATIVE MINIMUM
  TAX- The credit allowed under this section for the taxable year shall be
  reduced by the amount (if any) of tax imposed by section 55 (relating to
  the alternative minimum tax) with respect to such taxpayer for such year.
  `(e) CREDIT TREATED AS SUBPART C CREDIT- For purposes of this title, the
  credit allowed under subsection (a) shall be treated as a credit allowed
  under subpart C of part IV of subchapter A of this chapter.
`SEC. 1393. ENTERPRISE ZONE CAPITAL GAIN.
  `(a) GENERAL RULE- Gross income does not include the amount of any gain
  constituting enterprise zone capital gain.
  `(b) DEFINITION- For purposes of this section--
  `(1) IN GENERAL- The term `enterprise zone capital gain' means gain--
  `(A) treated as long-term capital gain,
  `(B) allocable in accordance with the rules under subsection (b)(5) of
  section 338 to the sale or exchange of enterprise zone property, and
  `(C) properly attributable to periods of use in an enterprise zone business.
  `(2) LIMITATIONS- Enterprise zone capital gain does not include any gain
  attributable to--
  `(A) the sale or exchange of property not constituting enterprise zone
  property with respect to the taxpayer throughout the period of twenty-four
  full calendar months immediately preceding the sale or exchange,
  `(B) any collectibles (as defined in section 408(m)), or
  `(C) sales or exchanges to persons controlled by the same interests.
  `(c) BASIS- Amounts excluded from gross income pursuant to subsection (a)
  shall not be applied in reduction to the basis of any property held by
  the taxpayer.
`SEC. 1394. ENTERPRISE ZONE STOCK.
  `(a) GENERAL RULE- At the election of any individual, the aggregate amount
  paid by such taxpayer during the taxable year for the purchase of enterprise
  zone stock on the original issue of such stock by a qualified issuer shall
  be allowed as a deduction.
  `(b) Limitations-
  `(1) CEILING- The maximum amount allowed as a deduction under subsection (a)
  to a taxpayer shall not exceed $50,000 for any taxable year, nor $250,000
  during the taxpayer's lifetime.
  `(A) EXCESS AMOUNTS- If the amount otherwise deductible by any person
  under subsection (a) exceeds the limitation under this paragraph (1)--
  `(i) the amount of such excess shall be treated as an amount paid in the
  next taxable year, and
  `(ii) the deduction allowed for any taxable year shall be allocated among
  the enterprise zone stock purchased by such person in accordance with the
  purchase price per share.
  `(2) RELATED PERSON-
  `(A) IN GENERAL- The taxpayer and all individuals related to the taxpayer
  shall be treated as one person for purposes of the limitations described
  in subsection (b)(1).
  `(B) EXCESS AMOUNTS- The limitations described in subsection (b)(1) shall
  be allocated among the taxpayer and related persons in accordance with
  their respective purchases of enterprise zone stock.
  `(3) PARTIAL TAXABLE YEAR- If designation of an area as an enterprise zone
  occurs, expires, or is revoked pursuant to section 7880 on a date other
  than the first or last day of the taxable year of the taxpayer, or in
  the case of a short taxable year, the limitations specified in subsection
  (b)(1) shall be adjusted on a pro rata basis (based upon the number of days).
  `(c) DISPOSITIONS OF STOCK-
  `(1) GAIN TREATED AS ORDINARY INCOME- Except as otherwise provided in
  regulations, if a taxpayer disposes of any enterprise zone stock with
  respect to which a deduction was allowed under subsection (a), the amount
  realized upon such disposition shall be treated as ordinary income and
  recognized notwithstanding any other provision of this subtitle.
  `(2) Interest charged if disposition within 5 years of purchase-
  `(A) IN GENERAL- If a taxpayer disposes of any enterprise zone stock before
  the end of the 5-year period beginning on the date such stock was purchased
  by the taxpayer, the tax imposed by this chapter for the taxable year in
  which such disposition occurs shall be increased by the amount determined
  under subparagraph (B).
  `(B) ADDITIONAL AMOUNT- For purposes of subparagraph (A), the additional
  amount shall be equal to the amount of interest (determined at the rate
  applicable under section 6621(a)(2)) that would accrue--
  `(i) during the period beginning on the date the stock was purchased by the
  taxpayer and ending on the date such stock was disposed of by the taxpayer,
  `(ii) on an amount equal to the aggregate decrease in tax of the taxpayer
  resulting from the deduction allowed under this subsection (a) with respect
  to the stock so disposed of.
  `(d) DISQUALIFICATION-
  `(1) ISSUER OR STOCK CEASES TO QUALIFY- If a taxpayer elects the deduction
  under subsection (a) with respect to enterprise zone stock, and either--
  `(A) the issuer with respect to which the election was made ceases to be
  a qualified issuer, or
  `(B) the proceeds from the issuance of the taxpayer's enterprise zone stock
  fail or otherwise cease to be invested by the issuer in enterprise zone
  property, then, notwithstanding any provision of this subtitle other than
  paragraph (2) to the contrary, the taxpayer shall recognize as ordinary
  income the amount of the deduction allowed under subsection (a) with
  respect to the issuer's enterprise zone stock.
  `(2) SPECIAL RULES-
  `(A) LIQUIDATION- Where enterprise zone property acquired with proceeds
  from the issuance of enterprise zone stock is sold or exchanged pursuant
  to a plan of complete liquidation, the treatment described in paragraph
  (1) shall be inapplicable.
  `(B) TERMINATION OF ENTERPRISE ZONE- The treatment of an activity as an
  enterprise zone business shall not cease for purposes of paragraph (1)
  solely by reason of the termination or revocation of the designation of
  the enterprise zone with respect to the activity.
  `(C) PARTIAL DISQUALIFICATION- Where some, but not all, of the property
  acquired by the issuer with the proceeds of enterprise zone stock ceases to
  constitute enterprise zone property, the treatment described in paragraph
  (1) shall be modified as follows--
  `(i) the total amount recognized as ordinary income by all shareholders
  of the issuer shall be limited to an amount of deduction allowed up to the
  unadjusted basis of property ceasing to constitute enterprise zone property,
  `(ii) the amount recognized shall be allocated among enterprise zone
  stock with respect to which the election in subsection (a) was made in
  the reverse order in which such stock was issued, and
  `(iii) the amount recognized shall be apportioned among taxpayers having
  made the election in subsection (a) in the ratios in which the stock
  described in paragraph (2)(C)(ii) was purchased.
  `(3) ADDITIONAL AMOUNT- If income is recognized pursuant to paragraph
  (1) at any time before the close of the 5th calendar year ending after
  the date the enterprise zone stock was purchased, the tax imposed by this
  chapter with respect to such income shall be increased by an amount equal
  to the amount of interest (determined at the rate applicable under section
  6621(a)(2)) that would accrue--
  `(A) during the period beginning on the date the stock was purchased by
  the taxpayer and ending on the date of the disqualification event described
  in paragraph (1),
  `(B) on an amount equal to the aggregate decrease in tax of the taxpayer
  resulting from the deduction allowed under this subsection (a) with respect
  to the stock so disqualified.
  `(e) DEFINITIONS- For purposes of this section--
  `(1) ENTERPRISE ZONE STOCK- The term `enterprise zone stock' means common
  stock issued by a qualified issuer, but only to the extent that the amount
  of proceeds of such issuance are used by such issuer no later than twelve
  months followed issuance to acquire and maintain an equal amount of newly
  acquired enterprise zone property.
  `(2) QUALIFIED ISSUER-
  `(A) IN GENERAL- The term `qualified issuer' means any subchapter C
  corporation which--
  `(i) does not have more than one class of stock,
  `(ii) is engaged solely in the conduct of one or more enterprise zone
  businesses,
  `(iii) does not own or lease more than $5 million of total property
  (including money), as measured by the unadjusted basis of the property, and
  `(iv) more than 20 percent of the total voting power and 20 percent of
  the total value of the stock of such corporation is owned by individuals,
  partnerships, estates or trusts.
  `(B) LIMITATION ON TOTAL ISSUANCES- A qualified issuer may issue no more
  than an aggregate of $5 million of enterprise zone stock.
  `(C) AGGREGATION- For purposes of applying the limitations under paragraph
  (2), the issuer and all related persons shall be treated as one person.
  `(3) AMOUNT PAID- For purposes of subsection (a), the amount `paid' by a
  taxpayer for any taxable year shall not include the issuance of evidences
  of indebtedness of the taxpayer (whether or not such indebtedness is
  guaranteed by another person), nor amounts paid by the taxpayer after the
  close of the taxable year.
  `(f) ISSUANCES IN EXCHANGE FOR PROPERTY- If enterprise zone stock is issued
  in exchange for property, then notwithstanding any provision of subchapter
  C of this chapter to the contrary--
  `(1) the issuance shall be treated for purposes of this subtitle as the
  sale of the property at its then fair market value to the corporation, and
  a contribution to the corporation of the proceeds immediately thereafter
  in exchange for the enterprise zone stock, and
  `(2) the issuer's basis for the property shall be equal to the fair market
  value of such property at the time of issuance.
  `(g) BASIS ADJUSTMENT- For purposes of this subtitle, if a taxpayer elects
  the deduction under subsection (a), the taxpayer's basis (without regard
  to this subsection) for the enterprise zone stock with respect to such
  election shall be reduced by the deduction allowed or allowable.
  `(h) LIMITATIONS ON ASSESSMENT AND COLLECTION- If a taxpayer elects the
  deduction under subsection (a) for any taxable year, then--
  `(1) the period for assessment and collection of any deficiency attributable
  to any part of the deduction shall not expire before one year following
  expiration of such period of the qualified issuer that includes the
  circumstances giving rise to the deficiency, and
  `(2) such deficiency may be assessed before expiration of the period
  described in paragraph (1) notwithstanding any provisions of this subtitle
  to the contrary.
  `(i) Cross Reference-
 For treatment of the deduction under subsection (a) for purposes of the
 alternative minimum tax, see section 56.'.
  (b) TECHNICAL AMENDMENT- Subsection (a) of section 1016 (relating to
  adjustments to basis) is amended by striking out `and' at the end of
  paragraph (23); by striking out the period at the end of paragraph (24)
  and inserting in lieu thereof `; and'; and by adding at the end thereof
  the following new paragraph:
  `(25) to the extent provided in section 1394(g), in the case of stock
  with respect to which a deduction was allowed or allowable under section
  1394(a).'.
  (c) CLERICAL AMENDMENT- The table of subchapters for chapter 1 is amended
  by inserting after the item relating to subchapter T the following new item:
`SUBCHAPTER U. Enterprise zones.'
SEC. 202. ALTERNATIVE MINIMUM TAX.
  (a) CORPORATIONS- Section 56(g)(4)(B) (relating to adjustments based
  on adjusted current earnings of corporations) is amended by adding the
  following new clause at the end thereof:
  `(iii) EXCLUSION OF ENTERPRISE ZONE CAPITAL GAIN- Clause (i) shall not apply
  in the case of any enterprise zone capital gain (as defined in section
  1393(b)), and such gain shall not be included in income for purposes of
  computing alternative minimum taxable income.'.
  (b) INDIVIDUALS- Section 56(b) (relating to adjustments to the alternative
  minimum taxable income of individuals) is amended by adding the following
  new paragraph at the end thereof:
  `(4) ENTERPRISE ZONE STOCK- No deduction shall be allowed for the purchase
  of enterprise zone stock (as defined in section 1394(e)).'.
SEC. 203. ADJUSTED GROSS INCOME DEFINED.
  Section 62(a) (relating to the definition of adjusted gross income) is
  amended by inserting after paragraph (13) the following new paragraph:
  `(14) ENTERPRISE ZONE STOCK- The deduction allowed by section 1394.'.
SEC. 204. EFFECTIVE DATE.
  The amendments made by this title shall apply to taxable years ending
  after December 31, 1990.
TITLE III--REGULATORY FLEXIBILITY
SEC. 301. DEFINITION OF SMALL ENTITIES IN ENTERPRISE ZONE FOR PURPOSES OF
ANALYSIS OF REGULATORY FUNCTIONS.
  Section 601 of title 5, United States Code, is amended by--
  (1) striking out `and' at the end of paragraph (5); and
  (2) striking out paragraph (6) and inserting in lieu thereof the following:
  `(6) the term `small entity' means--
  `(A) a small business, small organization, or small governmental jurisdiction
  defined in paragraphs (3), (4), and (5) of this section, respectively; and
  `(B) any qualified enterprise zone business; any unit of government that
  nominated an area which the Secretary of Housing and Urban Development
  designates as an enterprise zone (within the meaning of section 7880
  of the Internal Revenue Code of 1986) that has a rule pertaining to the
  carrying out of any project, activity, or undertaking within such zone;
  and any not-for-profit enterprise carrying out a significant portion of
  its activities within such a zone; and
  `(7) the term `qualified enterprise zone business' means any person,
  corporation, or other entity--
  `(A) which is engaged in the active conduct of a trade or business within
  an enterprise zone (within the meaning of section 7880 of the Internal
  Revenue Code of 1986); and
  `(B) for whom at least 50 percent of its employees are qualified employees
  (within the meaning of section 1392(b)(1) of such Code).'.
SEC. 302. WAIVER OR MODIFICATION OF AGENCY RULES IN ENTERPRISE ZONES.
  (a) Chapter 6 of title 5, United States Code, is amended by redesignating
  sections 611 and 612 as sections 612 and 613, respectively, and inserting
  the following new section immediately after section 610:
`Sec. 611. Waiver or modification of agency rules in enterprise zones
  `(a) Upon the written request of any government which nominated an area
  that the Secretary of Housing and Urban Development has designated as an
  enterprise zone under section 7880 of the Internal Revenue Code of 1986,
  an agency is authorized, in order to further the job creation, community
  development, or economic revitalization objectives with respect to such
  zone, to waive or modify all or part of any rule which it has authority
  to promulgate, as such rule pertains to the carrying out of projects,
  activities, or undertakings within such zone.
  `(b) Nothing in this section shall authorize an agency to waive or modify
  any rule adopted to carry out a statute or Executive order which prohibits,
  or the purpose of which is to protect persons against, discrimination on
  the basis of race, color, religion, sex, familial status, national origin,
  age, or handicap.
  `(c) A request under subsection (a) shall specify the rule or rules to be
  waived or modified and the change proposed, and shall briefly describe why
  the change would promote the achievement of the job creation, community
  development, or economic revitalization objectives of the enterprise
  zone. If such a request is made to any agency other than the Department
  of Housing and Urban Development, the requesting government shall send a
  copy of the request to the Secretary of Housing and Urban Development at
  the time the request is made.
  `(d) In considering a request, the agency shall weigh the extent to which
  the proposed change is likely to further job creation, community development,
  or economic revitalization within the enterprise zone against the effect the
  change is likely to have on the underlying purposes of applicable statutes
  in the geographic area which would be affected by the change. The agency
  shall approve the request whenever it finds, in its discretion, that the
  public interest which the proposed change would serve in furthering such job
  creation, community development, or economic revitalization outweighs the
  public interest which continuation of the rule unchanged would serve. The
  agency shall not approve any request to waive or modify a rule if that
  waiver or modification would--
  `(1) violate a statutory requirement (including any requirements of the
  Fair Labor Standards Act of 1938 (52 Stat. 1060; 29 U.S.C. 201 et seq.)); or
  `(2) be likely to present a significant risk to the public health, including
  environmental or occupational health or safety, or of environmental
  pollution.
  `(e) If a request is disapproved, the agency shall inform all the requesting
  governments, and the Department of Housing and Urban Development, in
  writing of the reasons therefor and shall, to the maximum extent possible,
  work with such governments to develop an alternative, consistent with the
  standards contained in subsection (d).
  `(f) Agencies shall discharge their responsibilities under this section
  in an expeditious manner, and shall make a determination on requests not
  later than 90 days after their receipt.
  `(g) A waiver or modification of a rule under subsection (a) shall not
  be considered to be a rule, rulemaking, or regulation under chapter 5 of
  this title. To facilitate reaching its decision on any requested waiver
  or modification, the agency may seek the views of interested parties and,
  if the views are to be sought, determine how they should be obtained and
  to what extent, if any, they should be taken into account in considering
  the request. The agency shall publish a notice in the Federal Register
  stating any waiver or modification of a rule under this section, the time
  such waiver or modification takes effect and its duration, and the scope
  of applicability of such waiver or modification.
  `(h) In the event that an agency proposes to amend a rule for which a
  waiver or modification under this section is in effect, the agency shall
  not change the waiver or modification to impose additional requirements
  unless it determines, consistent with standards contained in subsection
  (d), that such action is necessary. Such determinations shall be published
  with the proposal to amend such rule.
  `(i) No waiver or modification of a rule under this section shall remain
  in effect with respect to an enterprise zone after the enterprise zone
  designation has expired or has been revoked.
  `(j) For purposes of this section, the term `rule' means (1) any rule as
  defined in section 551(4) of this title or (2) any rulemaking conducted
  on the record after opportunity for an agency hearing pursuant to sections
  556 and 557 of this title.'.
  (b) The analysis for chapter 6 of title 5, United States Code, is amended by
  redesignating the items relating to sections 611 and 612 as items relating
  to sections 612 and 613, respectively, and by inserting after the item
  relating to section 610 the following new item:
`611. Waiver or modification of agency rules in enterprise zones.'.
  (c) Section 601(2) of such title 5 is amended by inserting `(except for
  purposes of section 611' immediately before `means'.
  (d) Section 613 of such title 5, as redesignated by subsection (a),
  is amended--
  (1) in subsection (a) by inserting `(except section 611)' immediately after
  `chapter'; and
  (2) in subsection (b) by inserting `as defined in section 601(2)' immediately
  before the period at the end of the first sentence.
SEC. 303. FEDERAL AGENCY SUPPORT OF ENTERPRISE ZONES.
  In order to maximize all agencies' support of enterprise zones, the Secretary
  of Housing and Urban Development is authorized to convene regional and
  local coordinating councils of any appropriate agencies to assist State
  and local governments to achieve the objectives agreed to in the course
  of action under section 7880 of the Internal Revenue Code of 1986.
TITLE IV--ESTABLISHMENT OF FOREIGN-TRADE ZONES IN ENTERPRISE ZONES
SEC. 401. FOREIGN-TRADE ZONE PREFERENCES.
  (a) PREFERENCE IN ESTABLISHMENT OF FOREIGN-TRADE ZONES IN REVITALIZATION
  AREAS- In processing applications for the establishment of foreign-trade
  zones pursuant to an Act `To provide for the establishment, operation, and
  maintenance of foreign-trade zones in ports of entry of the United States,
  to expedite and encourage foreign commerce, and for other purposes',
  approved June 18, 1934 (48 Stat. 998), the Foreign-Trade Zone Board
  shall consider on a priority basis and expedite, to the maximum extent
  possible, the processing of any application involving the establishment
  of a foreign-trade zone within an enterprise zone designated pursuant to
  section 7880 of the Internal Revenue Code of 1986.
  (b) APPLICATION PROCEDURE- In processing applications for the establishment
  of ports of entry pursuant to `An Act making appropriations for sundry
  civil expenses of the Government for the fiscal year ending June thirtieth,
  nineteen hundred and fifteen, and for other purposes', approved August 1,
  1914 (38 Stat. 609), the Secretary of the Treasury shall consider on a
  priority basis and expedite, to the maximum extent possible, the processing
  of any application involving the establishment of a port of entry which
  is necessary to permit the establishment of a foreign-trade zone within
  an enterprise zone so designated.
  (c) APPLICATION EVALUATION- In evaluating applications for the establishment
  of foreign-trade zones and ports of entry in connection with enterprise
  zones so designated, the Foreign-Trade Zone Board and the Secretary of the
  Treasury shall approve the applications, to the maximum extent practicable,
  consistent with their respective statutory responsibilities.
TITLE V--REPEAL OF TITLE VII OF THE HOUSING AND COMMUNITY DEVELOPMENT ACT
OF 1987
SEC. 501. REPEAL.
  Title VII of the Housing and Community Development Act of 1987 is hereby
  repealed.