22 under paragraph (1)(C) or (2)(C) of section
23 1391(b) which would apply if such area were to
24 be designated as a tax enterprise zone.
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103
1 (B) The unemployment rate (as deter-
2 mined by the appropriate available data) is not
3 less than the national unemployment rate.
4 (C) The median family income of residents
5 of such area does not exceed 80 percent of the
6 median gross income of residents of the juris-
7 diction of the local government which includes
8 such area.
9 (f) Qualified Low-Income Assistance. — For pur-
10 poses of this section, the term "qualified low-income as-
1 1 sistance" means assistance —
12 (1) which is designed to provide employment of,
13 and business opportunities for, low-income individ-
14 uals who are residents of the operational area of the
15 community development corporation, and
16 (2) which is approved by the Secretary of Hous-
17 ing and Urban Development.
18 Subtitle D — Indian Employment
19 and Investment
20 SEC. 441. INVESTMENT TAX CREDIT FOR PROPERTY ON IN-
21 DIAN RESERVATIONS.
22 (a) Allowance of Indian Reservation Cred-
23 IT. — Section 46 of the Internal Revenue Code of 1986 (re-
24 lating to investment credits) is amended by striking "and"
25 at the end of paragraph (2), by striking the period at the
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104
1 end of paragraph (3) and inserting ", and", and by adding
2 after paragraph (3) the following new paragraph:
3 "(4) the Indian reservation credit.".
4 (b) Amount of Indian Reservation Credit. —
5 (1) In general. — Section 48 of such Code (re-
6 lating to the energy credit and the reforestation
7 credit) is amended by adding after subsection (b)
8 the following new subsection:
9 *'{c) Indian Reservation Credit. —
10 "(1) In general. — For purposes of section 46,
11 the Indian reservation credit for any taxable year is
12 the Indian reservation percentage of the qualified in-
13 vestment in qualified Indian reservation property
14 placed in service during such taxable year, deter-
15 mined in accordance with the following table:
"In the case of qualified
Indian reservation property The Indian reservation
which is: percentage is:
Reservation personal property 10
New reservation construction property 15
Reservation infrastructure investment 15.
16 "(2) Qualified investment in qualified
17 INDIAN reservation PROPERTY DEFINED. — For
18 purposes of this subpart —
19 "(A) In general. — The term 'qualified
20 Indian reservation property* means property —
21 "(i) which is—
880
105
1 "(I) reservation personal prop-
2 erty,
3 "(II) new reservation construc-
4 tion property, or
5 "(III) reservation infrastructure
6 investment, and
7 "(ii) not acquired (directly or indi-
8 rectly) by the taxpayer from a person who
9 is related to the taxpayer (within the
10 meaning of section 465(b)(3)(C)).
1 1 The term 'quaUfied Indian reservation property*
12 does not include any property (or any portion
13 thereof) placed in service for purposes of con-
14 ducting or housing class I, II, or III gaming (as
15 defined in section 4 of the Indian Regulatory
16 Act (25 U.S.C. 2703)).
17 "(B) Qualified investment. — The term
18 'qualified investment' means —
19 "(i) in the case of reservation infra-
20 structure investment, the amount expended
21 by the taxpayer for the acquisition or con-
22 struction of the reservation infrastructure
23 investment; and
v.
•S 102 IS
881
106
1 "(ii) in the case of all other quaUfied
2 Indian reservation property, the tax-
3 payer's basis for such property.
4 "(C) Reservation personal prop-
5 ERTY. — The term 'reservation personal prop-
6 erty* means qualified personal property which is
7 used by the taxpayer predominantly in the ac-
8 tive conduct of a trade or business within an
9 Indian reservation. Property shall not be treat-
10 ed as 'reservation personal property' if it is
11 used or located outside the Indian reservation
12 on a regular basis.
13 "(D) Qualified personal property. —
14 The term 'qualified personal property* means
15 property —
16 "(i) for which depreciation is allow-
17 able under section 168,
18 "(ii) which is not —
19 "(I) nonresidential real property,
20 "(II) residential rental property,
21 or
22 "(HI) real property which is not
23 described in (I) or (II) and which has
24 a class life of more than 12.5 years.
•S 102 IS
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107
1 For purposes of this subparagraph, the terms
2 'nonresidential real property', 'residential rental
3 property', and 'class life' have the respective
4 meanings given such terms by section 168.
5 "(E) New reservation construction
6 property. — The term 'new reservation con-
7 struetion property' means qualified real
8 property —
9 "(i) which is located in an Indian res-
10 ervation,
11 "(ii) which is used by the taxpayer
12 predominantly in the active conduct of a
13 trade or business within an Indian reserva-
14 tion, and
15 "(iii) which is originally placed in
16 service by the taxpayer.
17 "(F) Qualified real property. — The
18 term 'qualified real property' means property
19 for which depreciation is allowable under sec-
20 tion 168 and which is described in clause (I),
21 (II), or (III) of subparagraph (D)(ii).
22 "(G) Reservation infrastructure in-
23 vestment. —
24 "(i) In general. — The term 'reserva-
25 tion infii^astructure investment' means
•S 102 IS
883
108
1 qualified personal property or qualified real
2 property which —
3 "(I) benefits the tribal inft*astruc-
4 ture,
5 "(II) is available to the general
6 pubUc, and
7 "(III) is placed in service in con-
8 nection with the taxpayer's active con-
9 duct of a trade or business within an
10 Indian reservation.
11 "(ii) Property may be located
12 outside the reservation. — Qualified
13 personal property and qualified real prop-
14 erty used or located outside an Indian res-
15 ervation shall be reservation infi'astructure
16 investment only if its purpose is to connect
17 to existing tribal infrastructure in the res-
18 ervation, and shall include, but not be lim-
19 ited to, roads, power lines, water systems,
20 railroad spurs, and communications facili-
21 ties.
22 "(H) Coordination \mth other cred-
23 ITS. — The term 'qualified Indian reservation
24 property' shall not include any property with re-
884
109
1 spect to which the energy credit or the rehabili-
2 tation credit is allowed.
3 "(3) Real estate rentals. — For purposes of
4 this section, the rental to others of real property lo-
5 cated within an Indian reservation shall be treated
6 as the active conduct of a trade or business in an
7 Indian reservation.
8 "(4) iNDLysr reservation defined. — For
9 purposes of this subpart, the term 'Indian reserva-
ilO tion' means a reservation, as defined in —
11 "(A) section 3(d) of the Indian Financing
12 Act of 1974 (25 U.S.C. 1452(d)), or
13 "(B) section 4(10) of the Indian Child
14 Welfare Act of 1978 (25 U.S.C. 1903(10)).
15 "(5) Limitation based on unemploy-
16 MENT. —
17 "(A) General rule. — The Indian res-
18 ervation credit allowed under section 46 for any
19 taxable year shall equal —
20 "(i) if the Indian unemployment rate
21 on the applicable Indian reservation for
22 which the credit is sought exceeds 300 per-
23 cent of the national average unemployment
24 rate at any time during the calendar year
25 in which the property is placed in service
•S 102 IS
885
110
1 or during the immediately preceding 2 cal-
2 endar years, 100 percent of such credit,
3 "(ii) if such Indian unemployment
4 rate exceeds 150 percent but not 300 per-
5 cent, 50 percent of such credit, and
6 "(iii) if such Indian unemployment
7 rate does not exceed 150 percent, per-
8 cent of such credit.
9 "(B) Special rule for large
10 PROJECTS. — In the case of a qualified Indian
11 reservation property which has (or is a compo-
12 nent of a project which has) a projected con-
13 struction period of more than 2 years or a cost
14 of more than $1,000,000, subparagraph (A)
15 shall apply by substituting 'during the earlier of
16 the calendar year in which the taxpayer enters
17 into a binding agreement to make a qualified
18 investment or the first calendar year in which
19 the taxpayer has expended at least 10 percent
20 of the taxpayer's qualified investment, or the
21 preceding calendar year' for 'during the cal-
22 endar year in which the property is placed in
23 service or during the immediately preceding 2
24 calendar years*.
886
111
1 "(C) Determination of Indian unem-
2 PLOYMENT. — For purposes of this paragraph,
3 with respect to any Indian reservation, the In-
4 dian unemployment rate shall be based upon
5 Indians unemployed and able to work, and shall
6 be certified by the Secretary of the Interior.
7 "(6) Coordination with nonrevenue
8 LAWS. — Any reference in this subsection to a provi-
9 sion not contained in this title shall be treated for
10 purposes of this subsection as a reference to such
1 1 provision as in effect on the date of the enactment
12 of this paragraph.".
13 (2) Lodging to qualify. — Paragraph (2) of
14 section 50(b) of such Code (relating to property used
15 for lodging) is amended —
16 (A) by striking "and" at the end of sub-
17 paragraph (C),
18 (B) by striking the period at the end of
19 subparagraph (D) and inserting "; and" and
20 (C) by adding at the end thereof the fol-
21 lowing subparagraph:
22 "(E) new reservation construction prop-
23 erty.".
24 (c) Recapture. — Subsection (a) of section 50 of
25 such Code (relating to recapture in case of dispositions,
•S 102 IS
887
112
1 etc.), is amended by adding at the end thereof the follow-
2 ing new paragraph:
3 "(6) Special rules for indlust reservation
4 property. —
5 "(A) In general. — If, during any taxable
6 year, property with respect to which the tax-
7 payer claimed an Indian reservation credit —
8 "(i) is disposed of, or
9 "(ii) in the case of reservation per-
10 sonal property —
11 "(I) otherwise ceases to be in-
12 vestment credit property with respect
13 to the taxpayer, or
14 "(II) is removed from the Indian
15 reservation, converted or otherwise
16 ceases to be Indian reservation prop-
17 erty,
18 the tax under this chapter for such taxable year
19 shall be increased by the amount described in
20 subparagraph (B).
21 "(B) Amount of increase. — The in-
22 crease in tax under subparagraph (A) shall
23 equal the aggregate decrease in the credits al-
24 lowed under section 38 by reason of section
25 48(c) for all prior taxable years which would
•S 102 IS
\^
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113
1 have resulted had the quaHfied investment
2 taken into account with respect to the property
3 been limited to an amount which bears the
4 same ratio to the qualified investment with re-
5 spect to such property as the period such prop-
6 erty was held by the taxpayer bears to the ap-
7 plicable recovery period under section 168(g).
8 "(C) Coordination with other recap-
9 TURE provisions. — In the case of property to
10 which this paragraph applies, paragraph (1)
11 shall not apply and the rules of paragraphs (3),
12 (4), and (5) shall apply.".
13 (d) Basis Adjustment To Reflect Investment
14 Credit. — Paragraph (3) of section 50(e) of such Code
15 (relating to basis adjustment to investment credit prop-
16 erty) is amended by striking "energy credit or reforest-
17 ation credit" and inserting "energy credit, reforestation
18 credit or Indian reservation credit other than with respect
19 to any expenditure for new reservation construction prop-
20 erty".
21 (e) Certain Governmental Use Property To
22 Qualify. — Paragraph (4) of section 50(b) of such Code
23 (relating to property used by governmental units or for-
24 eign persons or entities) is amended by redesignating sub-
25 paragraphs (D) and (E) as subparagraphs (E) and (F),
889
114
1 respectively, and inserting after subparagraph (C) the fol-
2 lowing new subparagraph:
3 "(D) Exception for reservation in-
4 FRASTRUCTURE IN\^STMENT. — This paragraph
5 shall not apply for purposes of determining the
6 Indian reservation credit with respect to res-
7 ervation infrastructure investment.".
8 (f) Application of At-Risk Rules. — Subpara-
9 graph (C) of section 49(a)(1) of such Code is amended
10 by striking "and" at the end of clause (ii), by striking
11 the period at the end of clause (iii) and inserting ", and",
12 and by adding at the end the following new clause:
13 "(iv) the qualified investment in quali-
14 fied Indian reservation property.".
15 (g) Clerical Amendments. —
16 (1) The caption of section 48 of such Code is
17 amended by deleting the period at the end thereof
18 and adding "; indian reservation credit."
19 (2) The table of sections for subpart E of part
20 IV of subchapter A of chapter 1 of such Code is
21 amended by striking out the item relating to section
22 48 and inserting the following:
"Sec. 48. Energy credit; reforestation credit; Indian reservation
credit.".
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890
115
1 (h) Effective Date. — The amendments made by
2 this section shall apply to property placed in service after
3 December 31, 1993.
4 SEC. 442. INDIAN EMPLOYMENT CREDIT.
5 (a) Allowance of Indluv Employment Cred-
6 it. — Section 38(b) of the Internal Revenue Code of 1986
7 (relating to general business credits), as amended by sec-
8 tion 412, is amended by striking "plus" at the end of
9 paragraph (7), by striking the period at the end of para-
10 graph (8) and inserting ", plus", and by adding after
1 1 paragraph (8) the following new paragraph:
12 "(9) the Indian employment credit as deter-
13 mined under section 45(a).".
14 (b) Amount of Indian Employment Credit. —
15 Subpart D of Part IV of subchapter A of chapter 1 of
16 such Code (relating to business related credits) is amended
17 by adding at the end thereof the following new section:
1 8 "SEC. 45. INDIAN EMPLOYMENT CREDIT.
19 "(a) Amount of Credit. —
20 "(1) In general. — For purposes of section 38,
21 the amount of the Indian employment credit deter-
22 mined under this section with respect to any em-
23 ployer for any taxable year is 10 percent (30 percent
24 in the case of an employer with at least 85 percent
•S 102 IS
891
116
1 Indian employees throughout the taxable year) of
2 the sum of —
3 "(A) the qualified wages paid or incurred
4 during such taxable year, plus
5 "(B) qualified employee health insurance
6 costs paid or incurred during such taxable year.
7 In no event shall the amount of the Indian employ-
8 ment credit for any taxable year exceed the credit
9 limitation amount determined under subsection (e)
10 for such taxable year.
11 "(2) Indian employee. — For purposes of
12 paragraph (1), the term 'Indian employee' means an
13 employee who is an enrolled member of an Indian
14 tribe or the spouse of such a member.
15 "(b) Qualified Wages; Qualified Employee
16 Health Insurance Costs. — For purposes of this
17 section —
18 "(1) Qualified wages. —
19 "(A) In general. — The term 'qualified
20 wages' means any wages paid or incurred by an
21 employer for services performed by an employee
22 while such employee is a qualified employee.
23 "(B) Coordination with targeted
24 JOBS credit. — The term 'qualified wages' shall
25 not include wages attributable to service ren-
892
117
1 dered during the 1-year period beginning with
2 the day the individual begins work for the em-
3 ployer if any portion of such wages is taken
4 into account in determining the credit under
5 section 51.
6 *'(2) Qualified employee heaj^th insur-
7 ance costs. —
8 "(A) In general. — The terni 'quahfied
9 employee health insurance costs' means any
10 amount paid or incurred by an employer for
11 health insurance to the extent such amount is
12 attributable to coverage provided to an}^ em-
13 ployee while such employee is a qualified em-
14 ployee.
15 ''(B) Exception for amounts paid
16 under SAIiARY REDUCTION ARRANGEMENTS. —
17 No amount paid or incurred for health insur-
18 ance pursuant to a salary reduction arrange-
19 ment shall be taken into account under sub-
20 paragraph (A).
21 "(c) Qualified Employee. — For purposes of this
22 section —
23 "(1) In GENERAL. — Except as otherwise pro-
24 vided in this subsection, the term 'quahfied em-
893
118
1 ployee' means, with respect to any period, any em-
2 ployee of an employer if —
3 "(A) substantially all of the services per-
4 formed during such period by such employee for
5 such employer are performed within an Indian
6 reservation,
7 "(B) the principal place of abode of such
8 employee while performing such services is on
9 or near the reservation iti which the services are
10 performed, and
11 "(C) the employee began work for such
12 employer on or after January 1, 1993.
13 "(2) Credit allowed only for first 7
14 YEARS. — ^An employee shall not be treated as a
15 qualified employee for any period after the date 7
16 years after the day on which such employee first
17 began work for the employer.
18 "(3) Individuals receiving wages in ex-
19 CESS OF $30,000 NOT ELIGIBLE. — ^An employee shall
20 not be treated as a qualified employee for any tax-
21 able year of the employer if the total amount of the
22 wages paid or incurred by such employer to such
23 employee during such taxable year (whether or not
24 for services within an Indian reservation) exceeds
25 the amount determined at an annual rate of
894
119
1 $30,000. The Secretary shall acijust the $30,000
2 amount contained in the preceding sentence for
3 years beginning after 1993 at the same time and in
4 the same manner as under section 415(d).
5 "(4) Employment must be trade or busi-
6 NESS employment. — ^An employee shall be treated
7 as a qualified employee for any taxable year of the
8 employer only if more than 50 percent of the wages
9 paid or incurred by the employer to such employee
10 during such taxable year are for services performed
11 in a trade or business of the employer. Any deter-
12 mination as to whether the preceding sentence ap-
13 plies with respect to any employee for any taxable
14 year shall be made without regard to subsection
15 (f)(2).
16 "(5) Certain employees not ELiomLE. —
17 The term 'qualified employee' shall not include —
18 "(A) any individual described in subpara-
19 graph (A), (B), or (C) of section 51(i)(l),
20 "(B) any 5 -percent owner (as defined in
21 section 416(i)(l)(B)),
22 "(C) any individual who is neither an en-
23 rolled member of an Indian tribe nor the spouse
24 of an enrolled member of an Indian tribe, and
•S 102 IS
895
120
1 "(D) any individual if the services per-
2 formed by such individual for the employer in-
3 volve the conduct of class I, II, or III gaming
4 as defined in section 4 of the Indian Gaming
5 Regulatory Act (25 U.S.C. 2703), or are per-
6 formed in a building housing such gaming ac-
7 tivity.
8 "(6) Indian tribe defined. — The term 'In-
9 dian tribe' means any Indiain tribe, band, nation,
10 pueblo, or other organized group or community, in-
1 1 eluding any Alaska Native village, or regional or vil-
12 lage corporation, as defined in, or established pursu-
13 ant to, the Alaska Native Claims Settlement Act (43
14 U.S.C. 1601 et seq.) which is recognized as ehgible
15 for the special programs and services provided by
16 the United States to Indians because of their status
17 as Indians.
18 "(7) Indian reservation defined. — The
19 term 'Indian reservation' means a reservation, as de-
20 fined in —
21 "(A) section 3(d) of the Indian Financing
22 Act of 1974 (25 U.S.C. 1452(d)), or
23 "(B) section 4(10) of the Indian Child
24 Welfare Act of 1978 (25 U.S.C. 1903 (10)).
. f< « rk£t «^
896
121
1 "(d) Early Termination of Employment by Em-
2 PLOYER. —
3 "(1) In GENERAL. — If the employment of any
4 employee is terminated by the taxpayer before the
5 day 1 year after the day on which such employee
6 began work for the employer —
7 "(A) no wages (or qualified employee
8 health insurance costs) with respect to such em-
9 ployee shall be taken into account under sub-
10 section (a) for the taxable year in which such
1 1 employment is terminated, and
12 "(B) the tax under this chapter for the
13 taxable year in which such employment is ter-
14 minated shall be increased by the aggregate
15 credits (if any) allowed under section 38(a) for
16 prior taxable years by reason of wages (or
17 qualified employee health insurance costs) taken
18 into account with respect to such employee.
19 "(2) Carrybacks and carryovers ad-
20 JUSTED. — In the case of anv termination of employ-
21 ment to which paragraph (1) applies, the carrybacks
22 and carryovers under section 39 shall be properly
23 adjusted.
24 "(3) Subsection not to apply in certain
25 cases. —
•S 102 IS
897
122
1 "(A) In general.— Paragraph (1) shall
2 not apply to —
3 "(i) a termination of employment of
4 an employee who voluntarily leaves the em-
5 ployment of the taxpayer,
6 "(ii) a termination of employment of
7 an individual who before the close of the
8 period referred to in paragraph (1) be-
9 comes disabled to perform the services of
10 such employment unless such disability is
11 removed before the close of such period
12 and the taxpayer fails to offer reemploy-
13 ment to such individual, or
14 "(iii) a termination of employment of
15 an individual if it is determined under the
16 applicable State unemployment compensa-
17 tion law that the termination was due to
18 the misconduct of such individual.
19 "(B) Changes in form of business. —
20 For purposes of paragraph (1), the employment
21 relationship between the taxpayer and an em-
22 ployee shall not be treated as terminated —
23 "(i) by a transaction to which section
24 381(a) applies if the employee continues to
.a tno TO
898
123
1 be employed by the acquiring corporation,
2 or
3 "(ii) by reason of a mere change in
4 the form of conducting the trade or busi-
5 ness of the taxpayer if the employee con-
6 tinues to be employed in such trade or
7 business and the taxpayer retains a sub-
8 stantial interest in such trade or business.
9 "(4) Special rule. — ^Any increase in tax
10 under paragraph (1) shall not be treated as a tax
1 1 imposed by this chapter for purposes of —
12 "(A) determining the amount of any credit
13 allowable under this chapter, and
14 "(B) determining the amount of the tax
15 imposed by section 55.
16 "(e) Credit Limitation Amount. — For purposes of
17 this section —
18 "(1) Credit limitation amount. — The credit
19 limitation amount for a taxable year shall be an
20 amount equal to the credit rate (10 or 30 percent
21 as determined under subsection (a)) multiplied by
22 the increased credit base.
23 "(2) Increased credit base. — The increased
24 credit base for a taxable year shall be the excess
25 of—
•S 102 IS
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899
124
1 "(A) the sum of any qualified wages and
2 qualified employee health insurance costs paid
3 or incurred by the employer during the taxable
4 year \\ith respect to employees whose wages
5 (paid or incurred by the employer) during the
6 taxable year do not exceed the amount deter-
7 mined under paragraph (3) of subsection (c),
8 over
9 "(B) the sum of any qualified wages and
10 qualified employee health insurance costs paid
1 1 or incurred by the employer (or any prede-
12 cessor) during calendar year 1993 with respect
13 to employees whose wages (paid or incurred by
14 the employer or any predecessor) during 1993
15 did not exceed $30,000.
16 "(3) Special rule for short taxable
17 \TiARS. — For any taxable year ha\ing less than 12
1 8 months —
19 "(A) the amounts paid or incurred by the
employer shall be annualized for purposes of de-
termining the increased credit base, and
22 "(B) the credit limitation amount shall be