A bill to amend the Internal Revenue Code of 1954 with respect to the tax treatment of industrial revenue bonds.

Amends the Internal Revenue Code to revise requirements for the tax exclusion of interest on industrial development bonds. Increases to $10,000,000 the amount of bonds which qualify as tax-exempt small issues or tax-exempt pollution control bonds. Exempts issues from such limitation if substantially all of the proceeds are used to provide facilities located in economically distressed areas or adjacent areas. Specifies requirements relating to poverty and population for designation as a distressed area.

Disqualifies industrial development bonds from the small issue exemption if ten percent or more of the proceeds are used to finance certain private or commercial recreation facilites.

Requires bond issuing authorities to conduct public hearings prior to the approval and issuance of any small issue industrial development bond. Requires the Governor of a State to report to the Secretary of the Treasury annually beginning in 1984 on bonds issued during the preceding year. Requires that elected officials in the local jurisdiction approve bond issues.

Provides that property financed with tax-exempt industrial development bonds shall not be eligible for accelerated cost recovery. Requires that such property be depreciated using the straight line method over specified recovery periods.

Provides that in-house research and experimental expenditures shall not be taken into account for purposes of determining the aggregate face value of industrial development bonds which otherwise qualify for the small issue exemption.

Treats composite issues of bonds as a single issue of obligation separate from other obligations if the other obligations are issued separately.

Limits arbitrage rules for small issues and pollution control bonds.

Permits the financing of district heating or cooling facilities with tax- exempt bonds.

Specifies that interest on certain industrial development bonds may be excluded from gross income if such bonds are used for the local furnishing of gas (previously just electric) energy.