To amend the Internal Revenue Code of 1986 to provide tax credits for Indian investment and employment, and for other purposes.

January 27, 2003

Mr. SHADEGG introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to provide tax credits for Indian investment and employment, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Indian Reservation Jobs and Investment Act of 2003'.

SEC. 2. CONSTITUTIONAL AUTHORITY.

The Constitutional authority upon which this Act rests is the power of Congress to lay and collect taxes and to regulate commerce with foreign nations and among the several States and with the Indian tribes, as set forth in section 8 of Article I of the United States Constitution.

SEC. 3. INVESTMENT TAX CREDIT FOR PROPERTY ON INDIAN RESERVATIONS.

(a) ALLOWANCE OF INDIAN RESERVATION CREDIT- Section 46 of the Internal Revenue Code of 1986 (relating to investment credits) is amended by striking `and' at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting `, and', and by adding after paragraph (3) the following new paragraph:

`(4) the Indian reservation credit.'.

(b) AMOUNT OF INDIAN RESERVATION CREDIT-

(1) IN GENERAL- Section 48 of such Code (relating to the energy credit and the reforestation credit) is amended by adding after subsection (b) the following new subsection:

`(c) INDIAN RESERVATION CREDIT-

`(1) IN GENERAL- For purposes of section 46, the Indian reservation credit for any taxable year is the Indian reservation percentage of the qualified investment in qualified Indian reservation property placed in service during such taxable year, determined in accordance with the following table:

The Indian reservation percentage is--

10

15

15

`(2) QUALIFIED INVESTMENT IN QUALIFIED INDIAN RESERVATION PROPERTY DEFINED- For purposes of this subpart--

`(A) IN GENERAL- The term `qualified Indian reservation property' means property--

`(i) which is--

`(I) reservation personal property;

`(II) new reservation construction property; or

`(III) reservation infrastructure investment; and

`(ii) not acquired (directly or indirectly) by the taxpayer from a person who is related to the taxpayer (within the meaning of section 465(b)(3)(C)).

The term `qualified Indian reservation property' does not include any property (or any portion thereof) placed in service for purposes of conducting or housing class I, II, or III gaming (as defined in section 4 of the Indian Gaming Regulatory Act (25 U.S.C. 2703)).

`(B) QUALIFIED INVESTMENT- The term `qualified investment' means--

`(i) in the case of reservation infrastructure investment, the amount expended by the taxpayer for the acquisition or construction of the reservation infrastructure investment; and

`(ii) in the case of all other qualified Indian reservation property, the taxpayer's basis for such property.

`(C) RESERVATION PERSONAL PROPERTY- The term `reservation personal property' means qualified personal property which is used by the taxpayer predominantly in the active conduct of a trade or business within an Indian reservation. Property shall not be treated as `reservation personal property' if it is used or located outside the Indian reservation on a regular basis.

`(D) QUALIFIED PERSONAL PROPERTY- The term `qualified personal property' means property--

`(i) for which depreciation is allowable under section 168;

`(ii) which is not--

`(I) nonresidential real property;

`(II) residential rental property; or

`(III) real property which is not described in subclause (I) or (II) and which has a class life of more than 12.5 years.

For purposes of this subparagraph, the terms `nonresidential real property', `residential rental property', and `class life' have the respective meanings given such terms by section 168.

`(E) NEW RESERVATION CONSTRUCTION PROPERTY- The term `new reservation construction property' means qualified real property--

`(i) which is located in an Indian reservation;

`(ii) which is used by the taxpayer predominantly in the active conduct of a trade or business within an Indian reservation; and

`(iii) which is originally placed in service by the taxpayer.

`(F) QUALIFIED REAL PROPERTY- The term `qualified real property' means property for which depreciation is allowable under section 168 and which is described in subclause (I), (II), or (III) of subparagraph (D)(ii).

`(G) RESERVATION INFRASTRUCTURE INVESTMENT-

`(i) IN GENERAL- The term `reservation infrastructure investment' means qualified personal property or qualified real property which--

`(I) benefits the tribal infrastructure;

`(II) is available to the general public; and

`(III) is placed in service in connection with the taxpayer's active conduct of a trade or business within an Indian reservation.

`(ii) PROPERTY MAY BE LOCATED OUTSIDE THE RESERVATION- Qualified personal property and qualified real property used or located outside an Indian reservation shall be reservation infrastructure investment only if its purpose is to connect to existing tribal infrastructure in the reservation, and shall include, but not be limited to, roads, power lines, water systems, railroad spurs, and communications facilities.

`(H) COORDINATION WITH OTHER CREDITS- The term `qualified Indian reservation property' shall not include any property with respect to which the energy credit or the rehabilitation credit is allowed.

`(3) REAL ESTATE RENTALS- For purposes of this section, the rental to others of real property located within an Indian reservation shall be treated as the active conduct of a trade or business in an Indian reservation.

`(4) INDIAN RESERVATION DEFINED- For purposes of this subpart, the term `Indian reservation' means a reservation, as defined in--

`(A) section 3(d) of the Indian Financing Act of 1974 (25 U.S.C. 1452(d)); or

`(B) section 4(10) of the Indian Child Welfare Act of 1978 (25 U.S.C. 1903(10)).

`(5) LIMITATION BASED ON UNEMPLOYMENT-

`(A) GENERAL RULE- The Indian reservation credit allowed under section 46 for any taxable year shall equal--

`(i) if the Indian unemployment rate on the applicable Indian reservation for which the credit is sought exceeds 300 percent of the national average unemployment rate at any time during the calendar year in which the property is placed in service or during the immediately preceding 2 calendar years, 100 percent of such credit;

`(ii) if such Indian unemployment rate exceeds 150 percent but not 300 percent, 50 percent of such credit; and

`(iii) if such Indian unemployment rate does not exceed 150 percent, 0 percent of such credit.

`(B) SPECIAL RULE FOR LARGE PROJECTS- In the case of a qualified Indian reservation property which has (or is a component of a project which has) a projected construction period of more than 2 years or a cost of more than $1,000,000, subparagraph (A)

shall be applied by substituting `during the earlier of the calendar year in which the taxpayer enters into a binding agreement to make a qualified investment or the first calendar year in which the taxpayer has expended at least 10 percent of the taxpayer's qualified investment, or the preceding calendar year' for `during the calendar year in which the property is placed in service or during the immediately preceding 2 calendar years'.

`(C) DETERMINATION OF INDIAN UNEMPLOYMENT- For purposes of this paragraph, with respect to any Indian reservation, the Indian unemployment rate shall be based upon Indians unemployed and able to work, and shall be certified by the Secretary of the Interior.

`(6) COORDINATION WITH NONREVENUE LAWS- Any reference in this subsection to a provision not contained in this title shall be treated for purposes of this subsection as a reference to such provision as in effect on the date of the enactment of this paragraph.'.

(2) LODGING TO QUALIFY- Paragraph (2) of section 50(b) of such Code (relating to property used for lodging) is amended--

(A) by striking `and' at the end of subparagraph (C);

(B) by striking the period at the end of subparagraph (D) and inserting `; and'; and

(C) by adding at the end the following subparagraph:

`(E) new reservation construction property.'.

(c) RECAPTURE- Subsection (a) of section 50 of such Code (relating to recapture in case of dispositions, etc.), is amended by adding at the end the following new paragraph:

`(6) SPECIAL RULES FOR INDIAN RESERVATION PROPERTY-

`(A) IN GENERAL- If, during any taxable year, property with respect to which the taxpayer claimed an Indian reservation credit--

`(i) is disposed of; or

`(ii) in the case of reservation personal property--

`(I) otherwise ceases to be investment credit property with respect to the taxpayer; or

`(II) is removed from the Indian reservation, converted, or otherwise ceases to be Indian reservation property,

the tax under this chapter for such taxable year shall be increased by the amount described in subparagraph (B).

`(B) AMOUNT OF INCREASE- The increase in tax under subparagraph (A) shall equal the aggregate decrease in the credits allowed under section 38 by reason of section 48(c) for all prior taxable years which would have resulted had the qualified investment taken into account with respect to the property been limited to an amount which bears the same ratio to the qualified investment with respect to such property as the period such property was held by the taxpayer bears to the applicable recovery period under section 168(g).

`(C) COORDINATION WITH OTHER RECAPTURE PROVISIONS- In the case of property to which this paragraph applies, paragraph (1) shall not apply and the rules of paragraphs (3), (4), and (5) shall apply.'.

(d) BASIS ADJUSTMENT TO REFLECT INVESTMENT CREDIT- Paragraph (3) of section 50(c) of such Code (relating to basis adjustment to investment credit property) is amended by striking `energy credit or reforestation credit' and inserting `energy credit, reforestation credit, or Indian reservation credit other than with respect to any expenditure for new reservation construction property'.

(e) CERTAIN GOVERNMENTAL USE PROPERTY TO QUALIFY- Paragraph (4) of section 50(b) of such Code (relating to property used by governmental units or foreign persons or entities) is amended by redesignating subparagraphs (D) and (E) as subparagraphs (E) and (F), respectively, and by inserting after subparagraph (C) the following new subparagraph:

`(D) EXCEPTION FOR RESERVATION INFRASTRUCTURE INVESTMENT- This paragraph shall not apply for purposes of determining the Indian reservation credit with respect to reservation infrastructure investment.'.

(f) APPLICATION OF AT-RISK RULES- Subparagraph (C) of section 49(a)(1) of such Code is amended by striking `and' at the end of clause (ii), by striking the period at the end of clause (iii) and inserting `, and', and by adding at the end the following new clause:

`(iv) the qualified investment in qualified Indian reservation property.'.

(g) CLERICAL AMENDMENTS-

(1) Section 48 of such Code is amended by striking the heading and inserting the following:

`SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; INDIAN RESERVATION CREDIT.'.

(2) The table of sections for subpart E of part IV of subchapter A of chapter 1 is amended by striking the item relating to section 48 and inserting the following:

`Sec. 48. Energy credit; reforestation credit; Indian reservation credit.'.

(h) EFFECTIVE DATE- The amendments made by this section shall apply to property placed in service after December 31, 2003.

END