article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Low Income Community Development Tax Credit Act of 1995''. SEC. 2. CREDIT FOR NONRESIDENTIAL BUILDINGS CONSTRUCTED OR RENOVATED IN DISTRESSED AREAS. (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. 45C. CREDIT FOR NONRESIDENTIAL BUILDINGS IN DISTRESSED AREAS. ``(a) In General.--For purposes of section 38, the amount of the distressed area building credit determined under this section for any taxable year in the credit period shall be an amount equal to-- ``(1) the applicable percentage of ``(2) the eligible basis of each qualified distressed area building. ``(b) Applicable Percentage: 70 Percent Present Value Credit for Certain New Buildings; 30 Percent Present Value Credit for Certain Other Buildings.--For purposes of this section-- ``(1) In general.--The term `applicable percentage' means the appropriate percentage prescribed by the Secretary for the earlier of-- ``(A) the month in which such building is placed in service, or ``(B) at the election of the taxpayer-- ``(i) the month in which the taxpayer and the credit allocating agency enter into an agreement with respect to such building (which is binding on such agency, the taxpayer, and all successors in interest) as to the building credit dollar amount to be allocated to such building, or ``(ii) in the case of any building to which the rules of section 42(h)(4)(B) apply, the month in which the tax-exempt obligations are issued. A month may be elected under clause (ii) only if the election is made not later than the 5th day after the close of such month. Such an election, once made, shall be irrevocable. ``(2) Method of prescribing percentages.-- ``(A) In general.--The percentages prescribed by the Secretary for any month shall be percentages which will yield over a 10-year period amounts of credit under subsection (a) which have a present value equal to-- ``(i) 70 percent of the eligible basis of a new building, and ``(ii) 30 percent of the eligible basis of an existing building. ``(B) Increased credit for buildings in more distressed areas.--In the case of buildings located in a census tract which would be a distressed area if `50 percent' were substituted for `80 percent' in subsection (c)(2), subparagraph (A) shall be applied by substituting `75 percent' for `70 percent' and `35 percent' for `30 percent'. ``(c) Qualified Distressed Area Building; Distressed Area.--For purposes of this section-- ``(1) Qualified distressed area building.--The term `qualified distressed area building' means any building (other than residential rental property) which, when placed in service, is located in a distressed area. ``(2) Distressed area.--The term `distressed area' means any census tract in which, for the most recent year for which census data are available on household income in such tract, 70 percent or more of the households have an income which is 80 percent or less of the area median gross income (within the meaning of section 142(d)) for such year. ``(d) Eligible basis.--For purposes of this section, the eligible basis of any building shall be determined under the rules of paragraphs (1) and (2) of section 42(d). ``(e) Rehabilitation expenditures treated as separate new building.-- ``(1) In general.--Rehabilitation expenditures paid or incurred by the taxpayer with respect to any building shall be treated for purposes of this section as a separate new building. ``(2) Rehabilitation expenditures.--For purposes of paragraph (1)-- ``(A) In general.--The term `rehabilitation expenditures' means amounts chargeable to capital account and incurred for property (or additions or improvements to property) of a character subject to the allowance for depreciation in connection with the rehabilitation of a building. ``(B) Cost of acquisition, etc., not included.-- Such term does not include the cost of acquiring any building (or interest therein). ``(3) Minimum expenditures to qualify.-- ``(A) In general.--Paragraph (1) shall apply to rehabilitation expenditures with respect to any building only if the amount of such expenditures during any 24-month period is not less than 10 percent of the adjusted basis of the building (determined as of the 1st day of such period and without regard to paragraphs (2) and (3) of section 1016(a)). ``(B) Date of determination.--The determination under subparagraph (A) shall be made as of the close of the 1st taxable year in the credit period with respect to such expenditures. ``(4) Special rules.--Rules similar to the rules of paragraph (4)(A) and (5) of section 42(e) shall apply for purposes of this subsection. ``(f) Definition and Special Rules Relating to Credit Period.-- ``(1) Credit period defined.--For purposes of this section, the term `credit period' means, with respect to any building, the period of 10 taxable years beginning with-- ``(A) the taxable year in which the building is placed in service, or ``(B) at the election of the taxpayer, the succeeding taxable year, but only if the building is a qualified distressed area building as of the close of the 1st year of such period. The election under subparagraph (B), once made, shall be irrevocable. ``(2) Special rules.--Rules similar to the rules of paragraphs (3), (4), and (5) of section 42(f) shall apply for purposes of this subsection. ``(g) Limitation on Aggregate Credit Allowable With Respect To Buildings Located in a State.-- ``(1) Credit may not exceed credit amount allocated to building.-- ``(A) In general.--The amount of the credit determined under this section for any taxable year with respect to any building shall not exceed the distressed area building credit dollar amount allocated to such building under this subsection. ``(B) Time for making allocation.--Rules similar to the rules of subparagraphs (B) through (F) of section 42(h)(1) shall apply for purposes of this paragraph. ``(2) Allocated credit amount to apply to all taxable years ending during or after credit allocation year.--Any distressed area building credit dollar amount allocated to any building for any calendar year-- ``(A) shall apply to such building for all taxable years in the credit period ending during or after such calendar year, and ``(B) shall reduce the aggregate distressed area building credit dollar amount of the credit allocating agency only for such calendar year. ``(3) Distress area building credit dollar amount for agencies.-- ``(A) In general.--The aggregate distressed area building credit dollar amount which a credit agency may allocate for any calendar year is the portion of the State distressed area building credit ceiling allocated under this paragraph for such calendar year to such agency. ``(B) State ceiling initially allocated to State housing credit agencies.--The State distressed area building credit ceiling for each calendar year shall be allocated to the housing credit agency of such State. If there is more than 1 housing credit agency of a State, all such agencies shall be treated as a single agency. ``(C) State distressed area building credit ceiling.--The State distressed area building credit ceiling applicable to any State for any calendar year shall be an amount equal to the sum of-- ``(i) $1.25 multiplied by the State population, ``(ii) the unused State distressed area building credit ceiling (if any) of such State for the preceding calendar year, ``(iii) the amount of State distressed area building credit ceiling returned in the calendar year, plus ``(iv) the amount (if any) allocated under subparagraph (D) to such State by the Secretary. For purposes of clause (ii), the unused State distressed area building credit ceiling for any calendar year is the excess (if any) of the sum of the amounts described in clauses (i) and (iii) over the aggregate distressed area building credit dollar amount allocated for such year. ``(D) Unused credit carryovers allocated among certain states.--Rules similar to the rules of section 42(h)(2)(D) shall apply for purposes of this paragraph. ``(4) Other rules to apply.--Rules similar to the rules of subparagraphs (E), (F), and (G) of section 42(h)(2), and paragraphs (4), (5), and (7) of section 42(h), shall apply for purposes of this subsection. ``(5) Definitions.--For purposes of this subsection-- ``(A) Credit allocating agency.--The term `credit allocating agency' means any agency authorized to carry out this subsection. ``(B) Possessions treated as states.--The term `State' includes a possession of the United States. ``(h) Definitions and special rules.--For purposes of this section -- ``(1) New building.--The term `new building' means a building the original use of which begins with the taxpayer. ``(2) Existing building.--The term `existing building' means any building which is not a new building. ``(3) Application to estates and trusts.--In the case of an estate or trust, the amount of the credit determined under subsection (a) shall be apportioned between the estate or trust and the beneficiaries on the basis of the income of the estate or trust allocable to each. ``(i) Application of At-Risk Rules.--Rules similar to the rules of section 42(j) shall apply for purposes of this section. ``(j) Certifications and Other Reports to Secretary.-- ``(1) Certification with respect to 1st year of credit period.--Following the close of the 1st taxable year in the credit period with respect to any qualified distressed area building, the taxpayer shall certify to the Secretary (at such time and in such form and in such manner as the Secretary prescribes)-- ``(A) the taxable year, and calendar year, in which such building was placed in service, ``(B) the adjusted basis and eligible basis of such building as of the close of the 1st year of the credit period, ``(C) the maximum applicable percentage and eligible basis permitted to be taken into account by the appropriate credit allocating agency, and ``(D) such other information as the Secretary may require. In the case of a failure to make the certification required by the preceding sentence on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, no credit shall be allowable by reason of subsection (a) with respect to such building for any taxable year ending before such certification is made. ``(2) Reports to the secretary.--The Secretary may require taxpayers and credit allocating agencies to submit such reports as the Secretary determines necessary or appropriate to carry out the purposes of this section. ``(k) Credit Allocated to Building Not to Exceed Amount Necessary To Assure Project Feasibility.-- ``(1) In general.--The distressed area building credit dollar amount allocated to a building shall not exceed the amount the credit allocating agency determines is necessary for the financial feasibility of the building throughout the credit period. ``(2) Agency evaluation.--In making the determination under paragraph (1), the credit allocating agency shall consider-- ``(A) the sources and uses of funds and the total financing planned for the building, ``(B) any proceeds or receipts expected to be generated by reason of tax benefits, and ``(C) the percentage of the distressed area building credit dollar amount used for building costs other than the cost of intermediaries. Subparagraph (C) shall not be applied so as to impede the development of buildings in hard-to-develop areas. Such a determination shall not be construed to be a representation or warranty as to the feasibility or viability of the building. ``(3) Determination made when credit amount applied for and when building placed in service.-- ``(A) In general.--A determination under paragraph (1) shall be made as of each of the following times: ``(i) The application for the distressed area building credit dollar amount. ``(ii) The allocation of the distressed area building credit dollar amount. ``(iii) The date the building is placed in service. ``(B) Certification as to amount of other subsidies.--Prior to each determination under subparagraph (A), the taxpayer shall certify to the credit allocating agency the full extent of all Federal, State, and local subsidies which apply (or which the taxpayer expects to apply) with respect to the building. ``(l) Regulations.--The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.'' (b) Credit To Be Part of General Business Credit.-- (1) Subsection (b) of section 38 of such Code is amended by striking ``plus'' at the end of paragraph (10), by striking the period at the end of paragraph (11) and inserting ``, plus'', and by adding at the end the following new paragraph: ``(12) the distressed area building credit determined under section 45C(a).'' (2) Subsection (d) of section 39 of such Code is amended by adding at the end the following new paragraph: ``(7) Distressed area building credit.--No portion of the unused business credit which is attributable to the credit determined under section 45C (relating to distressed area building credit) may be carried to any taxable year ending before January 1, 1996.'' (3) Subsection (c) of section 196 of such Code (relating to deduction for certain unused business credits) 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 distressed area building credit determined under section 45C(a).'' (c) Clerical Amendment.--The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item: ``Sec. 45C. Credit for nonresidential buildings in distressed areas.'' (d) Effective Date.--The amendments made by this section shall apply to property placed in service after December 31, 1995.
summary: Low Income Community Development Tax Credit Act of 1995 - Amends the Internal Revenue Code to allow, as part of the general business credit, a tax credit (equal to a percentage of its basis) for placing a nonresidential building in service in a distressed area, with a greater credit allowed for a new building than an existing building. Provides for calculation of the basis of such buildings according to the rules governing the low-income housing credit. Defines a distressed area as one in which at least 70 percent of the households have an income that is no more than 80 percent of the area median gross income. Increases the credit with respect to buildings in areas in which income is lower. Treats rehabilitation expenditures, provided they are above a certain threshold, as a separate new building. Imposes an annual State distressed area building credit ceiling.