Amends the Internal Revenue Code to allow a (temporary) business-related credit for qualified equity investments in community development financial institutions. Sets forth credit limitation, recapture, deduction for unused credit, and carryback provisions.
[Congressional Bills 105th Congress]
[From the U.S. Government Printing Office]
[H.R. 2254 Introduced in House (IH)]
105th CONGRESS
1st Session
H. R. 2254
To amend the Internal Revenue Code of 1986 to allow a credit against
income tax for equity investments in community development financial
institutions.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 24, 1997
Mr. Kennedy of Massachusetts (for himself, Ms. Waters, Mr. Becerra, Mr.
Bonior, Mr. Gonzalez, Mr. Barrett of Wisconsin, Ms. Brown of Florida,
Mr. Brown of California, Ms. Carson, Mr. Coyne, Mr. Davis of Illinois,
Mr. DeFazio, Mr. Faleomavaega, Mr. Fattah, Mr. Filner, Mr. Flake, Mr.
Frank of Massachusetts, Mr. Gutierrez, Mr. Hinchey, Mr. Hinojosa, Mr.
Jackson of Illinois, Ms. Kilpatrick, Mr. McDermott, Ms. McKinney, Mr.
Martinez, Mrs. Meek of Florida, Ms. Millender-McDonald, Mr. Olver, Ms.
Roybal-Allard, Mr. Sanders, Mr. Scott, and Mr. Waxman) introduced the
following bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to allow a credit against
income tax for equity investments in community development financial
institutions.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. CREDIT FOR QUALIFIED EQUITY INVESTMENTS IN COMMUNITY
DEVELOPMENT FINANCIAL INSTITUTIONS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to business-related
credits) is amended by adding at the end the following new section:
``SEC. 45D. QUALIFIED EQUITY INVESTMENTS IN COMMUNITY DEVELOPMENT
FINANCIAL INSTITUTIONS.
``(a) General Rule.--For purposes of section 38, the community
development financial institution investment credit for any taxable
year is an amount equal to the applicable percentage of the qualified
equity investment made by the taxpayer during the taxable year.
``(b) Applicable Percentage.--For purposes of subsection (a), the
term `applicable percentage' means, with respect to any investment, 25
percent, or, if the CDFI Fund establishes a lower percentage with
respect to such investment for purposes of this section, such lower
percentage.
``(c) Qualified Equity Investment.--For purposes of this section--
``(1) In general.--The term `qualified equity investment'
means any stock or partnership interest in a 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))--
``(A) if such institution is designated for
purposes of this section by the CDFI Fund,
``(B) if such stock or partnership interest is
acquired by the taxpayer at its original issue from the
institution (directly or through an underwriter) in
exchange for money or other property, and
``(C) to the extent the amount of such investment
is designated for such purposes by such Fund.
Rules similar to the rules of section 1202(c)(3) shall apply
for purposes of subparagraph (B).
``(2) Criteria for designating institutions.--Designations
under paragraph (1)(A) shall be made in accordance with
criteria established by the CDFI Fund. In establishing such
criteria, the CDFI Fund shall take into account the
requirements and criteria set forth in sections 105(b) and 107
of such Act.
``(3) CDFI fund.--The term `CDFI Fund' means the Community
Development Financial Institutions Fund established by section
104 of such Act.
``(d) Limitation on Amount of Credit.--
``(1) In general.--The amount of credit determined under
this section for any qualified equity investment shall not
exceed the credit amount allocated to such investment by the
CDFI Fund.
``(2) Overall limitation.--The aggregate credit amount
which may be allocated by the CDFI Fund under this section
shall not exceed $100,000,000.
``(e) Recapture of Credit Where Disposition of Equity Investment
Within 5 Years.--
``(1) In general.--If the taxpayer disposes of any
investment with respect to which a credit was determined under
subsection (a) (or any other property the basis of which is
determined in whole or in part by reference to the adjusted
basis of such investment) before the end of the 5-year period
beginning on the date such investment was made, the tax imposed
by this chapter for the taxable year in which such disposition
occurs shall be increased by the aggregate decrease in tax of
the taxpayer resulting from the credit determined under this
subsection (a) with respect to such investment.
``(2) Exceptions.--Paragraph (1) shall not apply to any
gift, transfer, or transaction described in paragraph (1), (2),
or (3) of section 1245(b).
``(3) Special rule.--Any increase in tax under paragraph
(1) shall not be treated as a tax imposed by this chapter for
purposes of--
``(A) determining the amount of any credit
allowable under this chapter, and
``(B) determining the amount of the tax imposed by
section 55.
``(f) 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.
``(g) Regulations.--The Secretary shall prescribe such regulations
as may be appropriate to carry out this section. Such regulations may
provide for the recapture of the credit under this section with respect
to investments in institutions which cease to satisfy the criteria
established by the CDFI Fund for designation under subsection
(c)(1)(A).
``(h) Termination.--This section shall not apply to any investment
made after December 31, 2006.''
(b) Credit Made Part of General Business Credit.--Subsection (b) of
section 38 of such Code 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 the following new
paragraph:
``(14) the community development financial institution
investment credit determined under section 45D(a).''
(c) Credit Allowed Against Regular and Minimum Tax.--
(1) In general.--Subsection (c) of section 38 of such Code
(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 community development financial
institution investment credit.--
``(A) In general.--In the case of the community
development financial institution investment 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) 75 percent of the tentative
minimum tax shall be substituted for
the tentative minimum tax under
subparagraph (A) thereof, 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 community
development financial institution
investment credit).
``(B) Community development financial institution
investment credit.--For purposes of this subsection,
the term `community development financial institution
investment credit' means the credit allowable under
subsection (a) by reason of section 45D(a).''
(2) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) of such Code is amended by inserting ``and the
community development financial institution investment credit''
after ``employment credit''.
(d) Limitation on Carryback.--Subsection (d) of section 39 of such
Code is amended by adding at the end the following new paragraph:
``(8) No carryback of community development financial
institution investment credit before effective date.--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 the date of the
enactment of section 45D.''
(e) Deduction for Unused Credit.--Subsection (c) of section 196 of
such Code is amended by striking ``and'' at the end of paragraph (6),
by striking the period at the end of paragraph (7) and inserting ``,
and'', and by adding at the end the following new paragraph:
``(8) the community development financial institution
investment credit determined under section 45D(a).''
(f) 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. Qualified equity investments
in community development
financial institutions.''
(g) Effective Date.--The amendments made by this section shall
apply to investments made after the date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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