article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Urban Entrepreneurial Opportunities Act''. SEC. 2. TAX INCENTIVES FOR URBAN ENTREPRENEURIAL OPPORTUNITY FINANCING SUBSIDIARIES. (a) General Rule.--Part VIII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to special deductions for corporations) is amended by adding at the end thereof the following new subpart: ``Subpart B--Tax Incentives for Urban Entrepreneurial Opportunity Financing Subsidiaries ``Sec. 251. Deduction for equity contributions to urban entrepreneurial opportunity financing subsidiaries. ``Sec. 252. Overall limitation on deductions. ``Sec. 253. Definitions and special rules. ``SEC. 251. DEDUCTION FOR EQUITY CONTRIBUTIONS TO URBAN ENTREPRENEURIAL OPPORTUNITY FINANCING SUBSIDIARIES. ``(a) General Rule.--In the case of a qualified contributing corporation, there shall be allowed as a deduction an amount equal to the equity contributions made by such corporation to an urban entrepreneurial opportunity financing subsidiary of such corporation. Such deduction shall be allowed for the taxable year of the contributing corporation in which the equity contribution is used by the subsidiary in making qualified enterprise zone business loans. ``(b) Limitation.--The amount allowed as a deduction under subsection (a) to any qualified contributing corporation for any taxable year shall not exceed the lesser of-- ``(1) $10,000,000, or ``(2) the portion of the program limitation allocated to such corporation under section 252 to the extent the amount so allocated was not used in a prior taxable year. ``(c) Equity Contribution.--For purposes of this section, the term `equity contribution' means-- ``(1) any amount paid in cash for stock in an urban entrepreneurial opportunity financing subsidiary of the corporation if such stock is acquired at its original issuance, and ``(2) any contribution in cash to the capital of an urban entrepreneurial opportunity financing subsidiary of the corporation. ``(d) Recapture Provisions.-- ``(1) Basis adjustment.--The adjusted basis of any stock held by a corporation in an urban entrepreneurial opportunity financing subsidiary of such corporation shall be reduced by the amount allowed as a deduction under subsection (a) in connection with the acquisition of such stock. No increase in the basis of any such stock shall be made on account of any contribution to the capital of such subsidiary for which a deduction is allowed under subsection (a). ``(2) Ordinary income recapture.--Any gain recognized on the sale or other disposition by a corporation of stock in an urban entrepreneurial opportunity financing subsidiary of such corporation shall be treated as ordinary income. ``(3) Certain events treated as dispositions.--If any urban entrepreneurial opportunity financing subsidiary of a corporation ceases to qualify as an urban entrepreneurial opportunity financing subsidiary with respect to such corporation, such corporation shall recognize gain as if it sold its stock in such subsidiary for an amount equal to its fair market value immediately before such cessation. ``SEC. 252. OVERALL LIMITATION ON DEDUCTIONS. ``(a) General Rule.--The Secretary of Housing and Urban Development shall allocate the program limitation among the qualified contributing corporations submitting applications to such Secretary for allocations under this section. ``(b) Program Limitation.--The program limitation is $250,000,000. ``(c) Method of Making Allocations.--The Secretary of Housing and Urban Development shall prescribe regulations setting forth the procedures for making allocations under this section. Such procedures shall-- ``(1) include the criteria used in selecting the corporations to which the allocations are made, and ``(2) be designed to ensure a reasonable availability, on a geographical basis, of the benefits of this subpart. ``SEC. 253. DEFINITIONS AND SPECIAL RULES. ``(a) Qualified Contributing Corporation.--For purposes of this subpart, the term `qualified contributing corporation' means any domestic corporation which is not a small business concern; except that such term shall not include any corporation predominantly engaged in a banking, insurance, finance, or similar business. ``(b) Urban Entrepreneurial Opportunity Financing Subsidiary.--For purposes of this subpart, the term `urban entrepreneurial opportunity financing subsidiary' means any domestic corporation-- ``(1) all the stock of which (exclusive of directors' qualifying shares) is held directly by one qualified contributing corporation, and ``(2) all the activities of which consist of-- ``(A) making qualified enterprise zone business loans, ``(B) providing management, administrative, consulting, and other support services to qualified small business concerns to which such corporation has made qualified enterprise zone business loans, and ``(C) making temporary investments (for a period not exceeding 6 months) of amounts being held for purposes of making qualified enterprise zone business loans. ``(c) Qualified Enterprise Zone Business Loans.--For purposes of this subpart, the term `qualified enterprise zone business loan' means any loan made by an urban entrepreneurial opportunity financing subsidiary if-- ``(1) such loan is made to a qualified small business concern and such concern is not related (within the meaning of section 267(b) or 707(b)) to such subsidiary or the qualified contributing corporation holding such subsidiary, ``(2) the proceeds of such loan are used by such qualified small business concern in the active conduct of a trade or business in an urban enterprise zone, ``(3) the urban entrepreneurial opportunity financing subsidiary provides (without charge) substantial qualified services to the qualified small business concern in connection with such loan, except that such small business concern may waive the requirements of this paragraph, and ``(4) the interest on such loan does not exceed-- ``(A) in the case of a secured loan, the prime rate plus 3 percentage points, or ``(B) in the case of any other loan, the prime rate plus 8 percentage points. ``(d) Qualified Small Business Concern.--For purposes of this subpart, the term `qualified small business concern' means any person if-- ``(1) such person is a small business concern within the meaning of section 3 of the Small Business Act (15 U.S.C. 632), and ``(2) substantially all of the activities of such person are within an urban enterprise zone. ``(e) Other Definitions and Special Rules.-- ``(1) Urban enterprise zone.--For purposes of this subpart, the term `urban enterprise zone' means-- ``(A) any urban area designated as an enterprise zone under any State law program, and ``(B) any urban area designated as an enterprise zone under Federal law. ``(2) Substantial qualified services.--For purposes of this subpart, the term `substantial qualified services' means, with respect to any loan made by an urban entrepreneurial opportunity financing subsidiary, any management, administrative, consulting, or other support services provided to the borrower under such loan, but only if the amount of such services, to be provided during the first year such loan is outstanding involve at least 1,000 man-hours for each $100,000 principal amount of such loan. ``(3) Prime rate.--For purposes of this subpart-- ``(A) In general.--The term `prime rate' means the average predominant prime rate quoted by commercial banks to large businesses, as determined by the Board of Governors of the Federal Reserve System. ``(B) When determination made.-- ``(i) Except as provided in clause (ii), the determination of the prime rate shall be made as of the time the loan is made. ``(ii) If the loan is a variable rate loan, the prime rate taken into account with respect to any change in rate shall be determined as of the time such change takes effect. ``(4) Treatment of controlled groups.--Any group of corporations treated as a single employer under section 52 (a) or (b) shall be treated as one corporation for purposes of this subpart. ``(f) Employees of Borrower May Be Taken Into Account for Certain Purposes.--If-- ``(1) a qualified contributing corporation has provided financing through an urban entrepreneurial opportunity financing subsidiary to any qualified small business concern, and ``(2) such qualified small business concern designates such subsidiary as its primary lender, such qualified contributing corporation may treat the employees of such qualified small business concern as its own employees for purposes of determining which such qualified contributing corporation is in compliance with the requirements of any Federal law. A qualified small business concern may designate only 1 urban entrepreneurial opportunity financing subsidiary is its primary lender for any period.'' (b) Clerical Amendment.--Part VIII of subchapter B of chapter 1 of such Code is amended by inserting after the part heading the following: ``Subpart A--General provisions. ``Subpart B--Tax incentives for urban entrepreneurial opportunity financing subsidiaries. ``Subpart A--General Provisions''. (c) Effective Date.--The amendments made by this section shall take effect on the date of the enactment of this Act.
summary: Urban Entrepreneurial Opportunities Act - Amends the Internal Revenue Code to allow a deduction for equity contributions made by a corporation to an urban entrepreneurial opportunity financing subsidiary of such corporation. Requires the subsidiary to use such contribution in making qualified enterprise zone business loans to qualified small business concerns. Establishes an overall program limitation among the contributing corporations to be allocated by the Secretary of Housing and Urban Development.