S.Amdt. 2896

1. Inserts new text on page 179, line 25

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   Inserted: SEC. . NEW MARKETS TAX CREDIT FOR NATIVE AMERICAN RESERVATIONS.

   Inserted: (a) In General.--Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by redesignating sections 45E and 45F as sections 45F and 45G, respectively, and by inserting after section 45E the following new section:

   Inserted: "SEC. 45D. NEW MARKETS TAX CREDIT FOR NATIVE AMERICAN RESERVATIONS.

   Inserted: "(a) Allowance of Credit.--

   Inserted: "(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 Native American 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 reservation development entity for such investment at its original issue.

   Inserted: "(2) Applicable percentage.--For purposes of paragraph (1), the applicable percentage is--

   Inserted: "(A) 5 percent with respect to the first 3 credit allowance dates, and

   Inserted: "(B) 6 percent with respect to the remainder of the credit allowance dates.

   Inserted: "(3) Credit allowance date.--For purposes of paragraph (1), the term 'credit allowance date' means, with respect to any qualified equity investment--

   Inserted: "(A) the date on which such investment is initially made, and

   Inserted: "(B) each of the 6 anniversary dates of such date thereafter.

   Inserted: "(b) Qualified Equity Investment.--For purposes of this section--

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   Inserted: "(1) In general.--The term 'qualified equity investment' means any equity investment in a reservation development entity if--

   Inserted: "(A) such investment is acquired by the taxpayer at its original issue (directly or through an underwriter) solely in exchange for cash,

   Inserted: "(B) substantially all of such cash is used by the reservation development entity to make qualified low-income reservation investments, and

   Inserted: "(C) such investment is designated for purposes of this section by the reservation development entity.

   Inserted: Such term shall not include any equity investment issued by a reservation 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 ).

   Inserted: "(2) Limitation.--The maximum amount of equity investments issued by a reservation 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.

   Inserted: "(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 reservation development entity are invested in qualified low-income reservation investments.

   Inserted: "(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.

   Inserted: "(5) Redemptions.--A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this subsection.

   Inserted: "(6) Equity investment.--The term 'equity investment' means--

   Inserted: "(A) any stock (other than nonqualified preferred stock as defined in section 351(g)(2)) in an entity which is a corporation, and

   Inserted: "(B) any capital interest in an entity which is a partnership.

   Inserted: "(c) Reservation Development Entity.--For purposes of this section--

   Inserted: "(1) In general.--The term 'reservation development entity' means any domestic corporation or partnership if--

   Inserted: "(A) the primary mission of the entity is serving, or providing investment capital for, low-income reservations,

   Inserted: "(B) the entity maintains accountability to residents of low-income reservations through their representation on any governing board of the entity or on any advisory board to the entity, and

   Inserted: "(C) the entity is certified by the Secretary for purposes of this section as being a reservation development entity.

   Inserted: "(2) Exception.--For purposes of subparagraph (C) of paragraph (1), the Secretary shall not certify an entity as a reservation development entity if such entity is also certified as a qualified community development entity under section 45D(c).

   Inserted: "(d) Qualified Low-Income Reservation Investments.--For purposes of this section--

   Inserted: "(1) In general.--The term 'qualified low-income reservation investment' means--

   Inserted: "(A) any capital or equity investment in, or loan to, any qualified active low-income reservation business,

   Inserted: "(B) the purchase from another reservation development entity of any loan made by such entity which is a qualified low-income reservation investment,

   Inserted: "(C) financial counseling and other services specified in regulations prescribed by the Secretary to businesses located in, and residents of, low-income reservations, and

   Inserted: "(D) any equity investment in, or loan to, any reservation development entity.

   Inserted: "(2) Qualified active low-income reservation business.--

   Inserted: "(A) In general.--For purposes of paragraph (1), the term 'qualified active low-income reservation business' means, with respect to any taxable year, any corporation (including a nonprofit corporation) or partnership if for such year--

   Inserted: "(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 reservation,

   Inserted: "(ii) a substantial portion of the use of the tangible property of such entity (whether owned or leased) is within any low-income reservation,

   Inserted: "(iii) a substantial portion of the services performed for such entity by its employees are performed in any low-income reservation,

   Inserted: "(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

   Inserted: "(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)).

   Inserted: "(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.

   Inserted: "(C) Portions of business may be qualified active low-income reservation business.--The term 'qualified active low-income reservation business' includes any trades or businesses which would qualify as a qualified active low-income reservation business if such trades or businesses were separately incorporated.

   Inserted: "(3) Qualified business.--For purposes of this subsection, the term 'qualified business' has the meaning given to such term by section 45D(d)(3).

   Inserted: "(e) Low-Income Reservation.--For purposes of this section, the term 'low-income reservation' means any Indian reservation (as defined in section 168(j)(6)) which has a poverty rate of at least 40 percent.

   Inserted: "(f ) National Limitation on Amount of Investments Designated.--

   Inserted: "(1) In general.--There is a Native American new markets tax credit limitation of $50,000,000 for each of calendar years 2004 through 2007.

   Inserted: "(2) Allocation of limitation.--The limitation under paragraph (1) shall be allocated by the Secretary among reservation development entities selected by the Secretary. In making allocations under the preceding sentence, the Secretary shall give priority to any entity--

   Inserted: "(A) with a record of having successfully provided capital or technical assistance to disadvantaged businesses or communities, or

   Inserted: "(B) which intends to satisfy the requirement under subsection (b)(1)(B) by making qualified low-income reservation 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.

   Inserted: "(3) Carryover of unused limitation.--If the Native American 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 2014.

   Inserted: "(g) Recapture of Credit in Certain Cases.--

   Inserted: "(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 reservation 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.

   Inserted: "(2) Credit recapture amount.--For purposes of paragraph (1), the credit recapture amount is an amount equal to the sum of--

   Inserted: "(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

   Inserted: "(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).

   Inserted: "(3) Recapture event.--For purposes of paragraph (1), there is a recapture event with respect to an equity investment in a reservation development entity if--

   Inserted: "(A) such entity ceases to be a reservation development entity,

   Inserted: "(B) the proceeds of the investment cease to be used as required of subsection (b)(1)(B), or

   Inserted: "(C) such investment is redeemed by such entity.

   Inserted: "(4) Special rules.--

   Inserted: "(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.

   Inserted: "(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.

   Inserted: "(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, 1400B, and 1400F.

   Inserted: "(i) Regulations.--The Secretary shall prescribe such regulations as may be appropriate to carry out this section, including regulations--

   Inserted: "(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),

   Inserted: "(2) which prevent the abuse of the purposes of this section,

   Inserted: "(3) which provide rules for determining whether the requirement of subsection (b)(1)(B) is treated as met,

   Inserted: "(4) which impose appropriate reporting requirements, and

   Inserted: "(5) which apply the provisions of this section to newly formed entities.".

   Inserted: (b) Credit Made Part of General Business Credit.--

   Inserted: (1) In general.--Subsection (b) of section 38 is amended by redesignating paragraphs (14) and (15) as paragraphs (15) and (16), respectively, and by inserting after paragraph (13) the following new paragraph:

   Inserted: "(14) the Native American new markets tax credit determined under section 45E(a),".

   Inserted: (2) Limitation on carryback.--Subsection (d) of section 39 is amended by redesignating paragraph (10) as paragraph (11) and by inserting after paragraph (9) the following new paragraph:

   Inserted: "(10) No carryback of native american new markets tax credit before january 1, 2004.--No portion of the unused business credit for any taxable year which is attributable to the credit under section 45E may be carried back to a taxable year ending before January 1, 2004.".

   Inserted: (c) Deduction for Unused Credit.--Subsection (c) of section 196 is amended by redesignating paragraph (10) as paragraph (11), by striking "and" at the end of paragraph (9), and by inserting after paragraph (9) the following new paragraph:

   Inserted: "(10) the Native American new markets tax credit determined under section 45E(a), and".

   Inserted: (d) Conforming Amendments.--

   Inserted: (1) Section 38(b)(15), as redesignated by subsection (b)(1), is amended--

   Inserted: (A) by striking "45E(c)" and inserting "45F(c)", and

   Inserted: (B) by striking "45E(a)" and inserting "45F(a)".

   Inserted: (2) Section 38(b)(16), as redesignated by subsection (b)(1), is amended by striking "45F(a)" and inserting "45G(a)".

   Inserted: (3) Section 39(d)(11), as redesignated by subsection (b)(2), is amended by striking "section 45E" and inserting "section 45F".

   Inserted: (4) Section 196(c)(11), as redesignated by subsection (c), is amended by striking "45E(a)" and inserting "45F(a)".

   Inserted: (5) Section 1016(a)(28) is amended--

   Inserted: (A) by striking "under section 45F" and inserting "under section 45G", and

   Inserted: (B) by striking "section 45F(f)(1)" and inserting "section 45G(f)(1)".

   Inserted: (e) Clerical Amendment.--The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by striking the items relating to sections 45E and 45F and inserting the following:

   Inserted: "Sec. 45E. Native American new markets tax credit.

   Inserted: "Sec. 45F. Small employer pension plan startup costs.

   Inserted: "Sec. 45G. Employer-provided child care credit.".

   Inserted: (e) Effective Date.--The amendments made by this section shall apply to investments made after December 31, 2003.

   Inserted: (f ) Guidance 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 issue guidance which specifies--

   Inserted: (1) how entities shall apply for an allocation under section 45E(f )(2) of the Internal Revenue Code of 1986, as added by this section;

   Inserted: (2) the competitive procedure through which such allocations are made; and

   Inserted: (3) the actions that such Secretary or delegate shall take to ensure that such allocations are properly made to appropriate entities.

   Inserted: (g) Audit and Report.--Not later than January 31 of 2007 and 2010, the Comptroller General of the United States shall, pursuant to an audit of the Native American new markets tax credit program established under section 45E of the Internal Revenue Code of 1986 (as added by subsection (a)), report to Congress on such program, including all reservation development entities that receive an allocation under the Native American new markets credit under such section.

   Inserted: (f) Grants in Coordination With Credit.--

   Inserted: (1) In general.--The Secretary of the Treasury is authorized to award a grant of not more than $1,000,000 to the First Nations Oweesta Corporation.

   Inserted: (2) Use of funds.--The grant awarded under paragraph (1) may be used--

   Inserted: (A) to enhance the capacity of people living on low-income reservations (within the meaning of section 45E(e) of the Internal Revenue Code of 1986, as added by this section) to access, apply, control, create, leverage, utilize, and retain the financial benefits to such low-income reservations which are attributable to qualified low-income reservation investments (within the meaning of section 45E(d) of such Code), and

   Inserted: (B) to provide access to appropriate financial capital for the development of such low-income reservations.

   Inserted: (3) Authorization of appropriations.--There are authorized to be appropriated $1,000,000 for fiscal years 2004 through 2014 to carry out the provisions of this subsection.

   Original wording

   On page 179, after line 25, insert the following:

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