Defense Industry Conversion Tax Incentives Act of 1992

Defense Industry Conversion Tax Incentives Act of 1992 - Title I: Job Creation - Allows the use of the targeted jobs credit for hiring a long-term unemployed defense industry or aerospace worker. Describes such worker as an individual certified by the designated local agency as having been unemployed in such industry who: (1) has been receiving unemployment compensation at all times during the six-month period prior to the hiring date; or (2) has been receiving unemployment compensation but has exhausted all rights to such compensation and has remained unemployed beginning on the date such rights were exhausted and ending on the date before the hiring date.

Requires the individual to be employed by the employer for at least 120 days and the employer to certify that: (1) the individual was hired after the employer took reasonable actions to specifically recruit such workers; and (2) the individual was not hired to replace an employee who was involuntarily separated from employment by the employer without cause.

Allows an investment tax credit for nondefense production and manufacturing equipment of ten percent of the aggregate bases of such properties placed in service during the taxable year.

Allows any qualified defense facility to establish an industrial diversification account for the purpose of providing qualified plant and equipment in the United States or the retraining of employees in order to diversify qualified defense facilities from predominantly relying on defense contracts to nondefense lines of business.

Restricts deposits to such accounts to the average of the sum of: (1) depreciation allowances with respect to eligible plant and equipment; (2) net proceeds from the sale or other disposition of such plant and equipment, or insurance or indemnity attributable to such plant and equipment; and (3) receipts from investment of amounts in such accounts. Restricts deposits after the fifth taxable year to receipts from investments.

Provides for the nontaxability of earnings deposited into such accounts.

Allows withdrawals over a ten-year period for: (1) acquisition, construction, or reconstruction of qualified plant and equipment; (2) the payment of principal or indebtedness incurred in connection with plant and equipment acquisition, construction, or reconstruction; or (3) the retraining or continued education of employees.

Provides for taxation of nonqualified withdrawals.

Requires the Secretary of the Treasury to report to the Secretary of Defense annually on such accounts.

Provides for computing the alternative minimum tax on earnings deposited in such accounts.

Makes the credit for increasing research activities permanent law.

Title II: Capital Formation - Allows a deduction for gain on investments in new small business stock (seed capital) held for at least five years. Establishes special rules for such investments. Provides for determining the maximum capital gains rate for small business net capital gain or seed capital gain. Treats capital gains on the sale of such stock as a preference item for purposes of the minimum tax.

Allows penalty-free withdrawals from retirement plans by individuals who are involuntarily unemployed.

Excludes from gross income interest received during a taxable year up to $2,500 ($5,000 in the case of a joint return). Makes such exclusion applicable to distributions from regulated investment companies and real estate investment trusts. Makes certain nonresident aliens ineligible for such exclusion.