(i) such individual shall be taken into account for purposes of the credit allowable by section 44B of the Internal Revenue Code of 1954 only if such individual is first hired by the employer after September 26, 1978, and (ii) such individual shall be treated for purposes of such credit as having first begun work for the employer not earlier than January 1, 1979. (B) MEMBER OF NEWLY TARGETED GROUP DEFINED.-For purposes of subparagraph (A), an individual is a member of a newly targeted group if (i) such individual meets the requirements of subparagraph (A), (C), (D), (E), (F), or (G) of section 51(d)(1) of such Code, and (ii) in the case of an individual meeting the requirements of subparagraph (A) of such section 51(d)(1), a credit was not claimed for such individual by the taxpayer for a taxable year beginning before January 1, 1979. (3) TRANSITIONAL RULE.-In the case of a taxable year which begins in 1978 and ends after December 31, 1978, the amount of the credit allowable by section 44B of the Internal Revenue Code of 1954 (determined without regard to section 53 of such Code) shall be the sum of (A) the amount of the credit which would be so allowable without regard to the amendments made by this section, plus (B) the amount which would be so allowable by reason of the amendments made by this section. (4) SUBSECTION (C)(2).-The amendments made by subsection (u)(2) shall apply to taxable years beginning after December 31, 1978. SEC. 322. WORK INCENTIVE PROGRAM CREDIT CHANGES. (a) CHANGES IN AMOUNT OF CREDIT.-Section 50A(a) (relating to amount of credit) is amended by striking out paragraphs (1) and (2) and inserting in lieu thereof the following: "(1) GENERAL RULE.-The amount of the credit allowed by section 40 for the taxable year shall be equal to the sum of— "(A) 50 percent of the first-year work incentive program expenses, and "(B) 25 percent of the second-year work incentive program expenses. “(2) LIMITATION BASED ON AMOUNT OF TAX.-Notwithstanding paragraph (1), the amount of the credit allowed by section 40 for the taxable year shall not exceed the liability for tax for the taxable year.". (b) CHANGES IN LIMITATIONS.-Subsection (a) of section 50A is amended by striking out paragraphs (4), (5), and (6) and by inserting immediately after paragraph (3) the following new paragraph: "(4) LIMITATION WITH RESPECT TO NONBUSINESS ELIGIBLE EMPLOYEES. "(A) IN GENERAL.-In the case of any work incentive program expenses paid or incurred by the taxpayer during the taxable year to eligible employees whose services are not performed in connection with a trade or business of the taxpayer "(i) paragraph (1)(A) shall be applied by substituting '35 percent' for '50 percent', "(ii) subparagraph (B) of paragraph (1) shall not apply, and "(iii) the aggregate amount of such work incentive program expenses which may be taken into account under paragraph (1) for such taxable year may not exceed $12,000. "(B) DEPENDENT CARE CREDIT MAY NOT BE CLAIMED.-No credit shall be allowed under section 44A with respect to any amounts paid or incurred by the taxpayer with respect to which the taxpayer is allowed a credit under section 40. "(C) MARRIED INDIVIDUALS.-In the case of a husband or wife who files a separate return, subparagraph (A) shall be applied by substituting '$6,000' and '$12,000'. The preceding sentence shall not apply if the spouse of the taxpayer has no work incentive program expenses described in such subparagraph for the taxable year." (c) REPEAL OF PROVISIONS PERMITTING RECOVERY OF CREDIT.Section 50A is amended by striking out subsections (c) and (d). (d) CHANGES IN DEFINITIONS AND SPECIAL RULES. (1) Subsection (a) of section 50B (relating to work incentive program expenses) is amended to read as follows: "(a) WORK INCENTIVE PROGRAM EXPENSES.-For purposes of this subpart― "(1) IN GENERAL.-The term 'work incentive program expenses' means the amount of wages paid or incurred by the taxpayer for services rendered by eligible employees. "(2) FIRST-YEAR WORK INCENTIVE PROGRAM EXPENSES.-The term 'first-year work incentive program expenses' means, with respect to any eligible employee, work incentive program expenses attributable to service rendered during the one-year period which begins on the day the eligible employee begins work for the taxpayer. "(3) SECOND-YEAR WORK INCENTIVE PROGRAM EXPENSES.-The term 'second-year work incentive program expenses' means, with respect to any eligible employee, work incentive program expenses attributable to service rendered during the one-year period which begins on the day after the last day of the one-year period described in paragraph (2). “(4) LIMITATION ON AMOUNT OF WORK INCENTIVE PROGRAM EXPENSES.-The amount of the work incentive program expenses taken into account with respect to any eligible employee for any one-year period described in paragraph (2) or (3) (as the case may be) shall not exceed $6,000." (2) Subsection (c) of section 50B is amended by striking out paragraphs (1) and (4) and by redesignating paragraphs (2), (3), and (5) as paragraphs (1), (2), and (3), respectively. (3) Subsection (e) of section 50B (relating to estates and trusts) is amended (A) by inserting "and" at the end of paragraph (1), (B) by striking out ", and" at the end of paragraph (2) and inserting in lieu thereof a period, and (C) by striking out paragraph (3). (4) Section 50B is amended by redesignating subsections (g) and (h) as subsections (h) and (i), respectively, and by inserting after subsection (f) the following new subsection: "(g) SPECIAL RULES FOR CONTROLLED GROUPS. "(1) CONTROLLED GROUP OF CORPORATIONS.-For purposes of this subpart, all employees of all corporations which are members of the same controlled group of corporations shall be treated as employed by a single employer. In any such case, the credit (if any) allowable by section 40 to each such member shall be its proportionate share of the work incentive program expenses giving rise to such credit. For purposes of this subsection, the term 'controlled group of corporations' has the meaning given to such term by section 1563(a), except that "(A) 'more than 50 percent' shall be substituted for 'at least 80 percent' each place it appears in section 1563(a)(1), and "(B) the determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. "(2) EMPLOYEES OF PARTNERSHIPS, PROPRIETORSHIPS, ETC., WHICH ARE UNDER COMMON CONTROL.-For purposes of this subpart, under regulations prescribed by the Secretary "(A) all employees of trades or business (whether or not incorporated) which are under common control shall be treated as employed by a single employer, and "(B) the credit (if any) allowable by section 40 with respect to each trade or business shall be its proportionate share of the work incentive program expenses giving to such credit. The regulations prescribed under this paragraph shall be based on principles similar to the principles which apply in the case of paragraph (1)." (5) Paragraph (1) of subsection (h) (as redesignated by paragraph (4)) of section 50B (relating to eligible employee) is amended to read as follows: "(1) ELIGIBLE EMPLOYEE.-For purposes of this subpart the term 'eligible employee' means an individual "(A) who has been certified by the Secretary of Labor or by the appropriate agency of State or local government as"(i) being eligible for financial assistance under part A of title IV of the Social Security Act and as having continually received such financial assistance during the 9-day period which immediately precedes the date on which such individual is hired by the employer, or "(ii) having been placed in employment under a work incentive program established under section 432(b)(1) of the Social Security Act, "(B) who has been employed by the taxpayer for a period in excess of 30 consecutive days on a substantially full-time basis, "(C) who has not displaced any other individual from employment by the taxpayer, and "(D) who is not a migrant worker. The term 'eligible employee' includes an employee of the taxpayer whose services are not performed in connection with a trade or business of the taxpayer.". (d) DEDUCTION FOR WAGES REDUCED BY AMOUNT OF CREDIT.(1) Section 280C (relating to portion of wages for which credit is claimed under section 44B) is amended (A) by striking our "SECTION 44B" in the caption and inserting in lieu thereof "SECTION 40 OR 44B", (B) by inserting "(b) RULE FOR SECTION 44B CREDIT.-" immediately before "No deduction", (C) by striking out "this section shall be applied" and inserting in lieu thereof "this subsection shall be applied" in the second sentence, and (D) by inserting immediately after the caption of such section the following new subsection: “(a) RULE FOR Section 40 CREDIT.-No deduction shall be allowed for that portion of the work incentive program expenses paid or incurred for the taxable year which is equal to the amount of the credit allowable for the taxable year under section 40 (relating to credit for expenses of work incentive programs) determined without regard to the provisions of section 50A(a)(2) (relating to limitation based on amount of tax). In the case of a corporation which is a member of a controlled group of corporations (within the meaning of section 50B(g)(1)) or a trade or business which is treated as being under common control with other trades or businesses (within the meaning of section 50B(g)(2), this subsection shall be applied under rules prescribed by the Secretary similar to the rules applicable under paragraphs (1) and (2) of section 50B(g).". (e) EFFECTIVE DATE. (1) IN GENERAL.-Except as otherwise provided in this subsection, the amendments made by this section shall apply to work incentive program expenses paid or incurred after December 31, 1978, in taxable years ending after such date; except that so much of the amendment made by subsection (a) as affects section 50A(a)(2) of the Internal Revenue Code of 1954 shall apply to taxable years beginning after December 31, 1978. (2) SPECIAL RULES FOR CERTAIN ELIGIBLE EMPLOYEES. (A) ELIGIBLE EMPLOYEES HIRED BEFORE SEPTEMBER 27, 1978. In the case of any eligible employee (as defined in section 50B(h)) hired before September 27, 1978, no credit shall be allowed under section 40 with respect to second-year work incentive program expenses (as defined in section 50B(a)) attributable to service performed by such employee. (B) ELIGIBLE EMPLOYEES HIRED AFTER SEPTEMBER 26, 1978.In the case of any eligible employee (as defined in section 50B(h)) hired after September 27, 1978, such individual shall be treated for purposes of the credit allowed by section 40 as having first begun work for the taxpayer not earlier than January 1, 1979. Subtitle D-Tax-Exempt Bonds PART I-INDUSTRIAL DEVELOPMENT BONDS SEC. 331. INCREASE IN LIMIT ON SMALL ISSUES OF INDUSTRIAL DEVELOPMENT BONDS. (a) GENERAL RULE.-Subparagraph (D) of section 103(b)(6) (relating to $5,000,000 limit in certain cases) is amended by striking out "$5,000,000" in the heading and in the text and inserting in lieu thereof "$10,000,000". (b) TREATMENT OF CERTAIN URBAN DEVELOPMENT ACTION GRANTS.-Paragraph (6) of section 103(b) (relating to exemption for certain small issues) is amended by adding at the end thereof the following new subparagraph: "(I) AGGREGATE AMOUNT OF CAPITAL EXPENDITURES WHERE THERE IS URBAN DEVELOPMENT ACTION GRANT.—In the case of any issue substantially all of the proceeds of which are to be used to provide facilities with respect to which an urban development action grant has been made under section 119 of the Housing and Community Development Act of 1974, capital expenditures of not to exceed $10,000,000 shall not be taken into account for purposes of applying subparagraph (D)(ii)." (c) EFFECTIVE Dates.— (1) The amendments made by subsection (a) shall apply to(A) obligations issued after December 31, 1978, in taxable years ending after such date, and (B) capital expenditures made after December 31, 1978, with respect to obligations issued before January 1, 1979. (2) The amendment made by subsection (b) shall apply to(A) obligations issued after September 30, 1979, in taxable years ending after such date, and (B) capital expenditures made after September 30, 1979, with respect to obligations issued after such date. SEC. 332. LOCAL FURNISHING OF ELECTRIC ENERGY. (a) IN GENERAL.-Paragraph (4) of section 103(b) (relating to certain exempt activities) is amended by adding at the end thereof the following new sentence: "For purposes of subparagraph (E), the local furnishing of electric energy from a facility shall include furnishing solely within the area consisting of a city and 1 contiguous county. (b) EFFECTIVE DATE.-The amendment made by subsection (a) shall apply to taxable years ending after April 30, 1968, but only with respect to obligations issued after such date. SEC. 333. INDUSTRIAL DEVELOPMENT BONDS FOR WATER FACILITIES. (a) IN GENERAL.-Subparagraph (G) of section 103(b)(4) (relating to industrial development bonds) is amended to read as follows: "(G) facilities for the furnishing of water for any purpose if "(i) the water is or will be made available to members of the general public (including electric utility, industrial, agricultural, or commercial users), and "(ii) either the facilities are operated by a governmental unit or the rates for the furnishing or sale of the water have been established or approved by a State or political subdivision thereof, by an agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any State or political subdivision thereof." (b) EFFECTIVE DATE.-The amendment made by subsection (a) shall apply to obligations issued after the date of the enactment of this Act in taxable years ending after such date. SEC. 334. ADVANCE REFUNDING OF INDUSTRIAL DEVELOPMENT BONDS FOR CERTAIN PUBLIC WORKS. (a) IN GENERAL.-Subsection (b) of section 103 (relating to industrial development bonds) is amended by redesignating paragraph (7) as paragraph (8) and by inserting after paragraph (6) the following new paragraph: "(7) ADVANCE REFUNDING OF QUALIFIED PUBLIC FACILITIES.— |