Urban Growth Act of 1981

Urban Growth Act of 1981 - Title I: Reduction of Corporate Tax Rates - Amends the Internal Revenue Code to reduce corporate income tax rates. Amends the Economic Recovery Tax Act of 1981 to reduce the tax on certain mutual insurance companies.

Title II: Investment Tax Credit May Offset 100 Percent of Tax Liability - Modifies the limitation on the amount of the investment tax credit to allow the credit to offset the entire amount of tax liability for the taxable year.

Title III: Incentives During Periods of High Unemployment - Includes, in the calculation of the investment tax credit, an additional ten percent, to be known as the "depressed area percentage," for investment in high unemployment areas. Sets forth the procedure for the tax treatment of investment tax credit property that ceases to be depressed area property.

Allows amortization deductions for depreciable buildings located in high unemployment areas which meet specified requirements and for equipment used exclusively in a qualifying facility. Stipulates that such deductions for any month shall be in lieu of depreciation deductions for such facilities and equipment. Prohibits such deduction for any relocated facility involving significant employment whose relocation results in decreased employment at the former location.

Provides an additional tax credit for an employer who retains specified levels of employees during high periods of unemployment.

Title IV: Allowance of Deduction for Dividends Paid By Domestic Corporations - Allows a deduction for dividends paid by a domestic corporation during a taxable year in lieu of the current deduction allowed for dividends received by a corporation from another corporation. Makes ineligible for such deduction any subchapter S corporation, regulated investment company, real estate investment trust, or personal holding company. Disallows tax deductions for dividends paid by specified savings institutions and specified dividends paid by Domestic International Sales Corporations or former Domestic International Sales Corporations. Repeals the partial tax exclusion for dividends received from domestic corporations by individuals.

Limits the aggregate amount of deductions allowed for dividends received from specified foreign corporations to 85 percent of taxable income, except in taxable years for which there is a net operating loss.

Repeals specified rules regarding deductions for dividends received or paid on certain preferred stock of public utilities and dividends received from tax-exempt corporations and farmers' cooperative organizations.

Title V: Certain Federally Required Expenditures Treated as Expenses - Allows a business expense deduction for certain federally required nonproductive expenditures required for compliance of any trade or business with Federal or State law.

Title VI: Inflation Adjustments - Provides for annual cost of living adjustments, based on the Consumer Price Index, to: (1) the deduction for depreciation of property used in trade or business or investment property; (2) determinations of basis of property, for purposes of computing gain or loss; and (3) corporate income tax rates.

Amends the Second Liberty Bond Act to provide annual cost of living adjustment, based on the the Consumer Price Index, to: (1) interest rates on U.S. savings bonds, U.S. Treasury savings certificates, and interest-bearing obligations of the United States having a maturity of one year or more; and (2) the redemption value of such bonds, certificates, and obligations.