Amends the Internal Revenue Code to provide for the designation of one border empowerment zone and five border enterprise communities: (1) by the Secretary of Housing and Urban Development, in the case of an urban area; (2) by the Secretary of Agriculture, in the case of a rural area; and (3) the Secretary of the Interior for an Indian reservation. Describes a border area as one located in one or more counties each of which is located adjacent to an international border.
Sets forth the eligibility criteria for such designations.
Makes buildings in such areas eligible for the low-income housing credit applicable to buildings in high-cost areas.
Provides for the issuance of enterprise zone facility bonds in border enterprise communities and empowerment zones in a manner similar to exempt facility bonds. Excludes enterprise zone facility bonds from the interest deduction limitations on financial institutions.
Allows an empowerment zone employment credit to employers for a percentage of qualified zone wages paid during calendar years 1994 through 2004. Limits the amount of such credit.
Allows a zone resident empowerment savings credit to employers as a general business credit of 50 percent of the qualified savings contributions made to a defined contribution plan on behalf of an employee. Limits the amounts of such contributions.
Increases the limitation on expensing certain depreciable business assets.
Increases the volume cap applicable to enterprise zone facility bonds if the business owners meet specified ownership requirements with regard to abiding in such zones.
Allows the use of the targeted jobs credit for hiring economically disadvantaged border empowerment zone residents.
Excludes from the penalty on early distributions from retirement plan distributions for first home purchases, higher educational expenses, or investment in an enterprise zone business.
[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2246 Introduced in House (IH)]
103d CONGRESS
1st Session
H. R. 2246
To amend the Internal Revenue Code of 1986 to provide tax incentives to
encourage development in certain border areas.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 25, 1993
Mr. Andrews of Texas (for himself and Mr. Coleman) introduced the
following bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide tax incentives to
encourage development in certain border areas.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in this Act an
amendment or repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be considered to
be made to a section or other provision of the Internal Revenue Code of
1986.
SEC. 2. DESIGNATION AND TREATMENT OF BORDER EMPOWERMENT ZONES AND
BORDER ENTERPRISE COMMUNITIES.
(a) In General.--Chapter 1 (relating to normal taxes and surtaxes)
is amended by inserting after subchapter T the following new
subchapter:
``Subchapter U--Designation and Treatment of Border Empowerment Zones
and Border Enterprise Communities
``Part I. Designation.
``Part II. Incentives for border
empowerment zones and border
enterprise communities.
``Part III. Additional incentives for
border empowerment zone.
``Part IV. Regulations.
``PART I--DESIGNATION
``Sec. 1391. Designation procedure.
``Sec. 1392. Eligibility criteria.
``Sec. 1393. Definitions and special
rules.
``SEC. 1391. DESIGNATION PROCEDURE.
``(a) In General.--From among the border areas nominated for
designation under this section, the appropriate Secretaries may, in
consultation with the Enterprise Board, designate 1 border empowerment
zone and 5 border enterprise communities.
``(b) Period Designations May Be Made.--A designation may be made
under this section only after 1993 and before 1996.
``(c) Period for Which Designation Is In Effect.--
``(1) In general.--Any designation under this section shall
remain in effect during the period beginning on the date of the
designation and ending on the earliest of--
``(A) the close of the 10th calendar year beginning
on or after such date of designation,
``(B) the termination date designated by the State
and local governments as provided for in their
nomination, or
``(C) the date the appropriate Secretary revokes
the designation.
``(2) Revocation of designation.--
``(A) In general.--The appropriate Secretary, in
consultation with the Enterprise Board, may revoke the
designation under this section of an area if such
Secretary determines that the local government or the
State in which it is located--
``(i) has modified the boundaries of the
area, or
``(ii) is not complying substantially with,
or fails to make progress in achieving the
benchmarks set forth in, the strategic plan
under subsection (e)(2).
``(B) Applicable procedures.--A designation may be
revoked by the appropriate Secretary under subparagraph
(A) only after a hearing on the record involving
officials of the State or local government involved.
``(d) Limitations on Designations.--An area may be designated under
subsection (a) only if--
``(1) the area is a border area,
``(2) the area is nominated by 1 or more local governments
and the State or States in which it is located for designation
under this section,
``(3) such State or States and the local governments have
the authority--
``(A) to nominate the area for designation under
this section, and
``(B) to provide the assurances described in
paragraph (4),
``(4) such State or States and the local governments
provide written assurances satisfactory to the appropriate
Secretary that the strategic plan described in the application
under subsection (e)(2) for such area will be implemented,
``(5) the appropriate Secretary determines that any
information furnished is reasonably accurate, and
``(6) such State or States and local governments certify
that no portion of the area nominated is already included in an
area designated under this section or in an area otherwise
nominated to be designated under this section.
``(e) Application.--An application for designation as a border
empowerment zone or as a border enterprise community shall--
``(1) demonstrate that the nominated area satisfies the
eligibility criteria described in section 1392,
``(2) include a strategic plan for accomplishing the
purposes of this subchapter that--
``(A) describes the coordinated economic, human,
community, and physical development plan and related
activities proposed for the nominated area,
``(B) describes the process by which the affected
community is a full partner in the process of
developing and implementing the plan and the extent to
which local institutions and organizations have
contributed to the planning process,
``(C) identifies the amount of State, local, and
private resources that will be available in the
nominated area and the private/public partnerships to
be used, which may include participation by, and
cooperation with, universities, medical centers, and
other private and public entities,
``(D) identifies the funding requested under any
Federal program in support of the proposed economic,
human, community, and physical development and related
activities,
``(E) identifies baselines, methods, and benchmarks
for measuring the success of carrying out the strategic
plan, including the extent to which poor persons and
families will be empowered to become economically self-
sufficient,
``(F) contains a plan for--
``(i) providing water and wastewater
services to a substantial portion of any
substandard residential subdivisions in the
nominated area which lack such services,
``(ii) restraining the construction of
substandard housing on undeveloped parcels
within any existing substandard residential
subdivisions in the nominated area, and
``(iii) restraining the proliferation of
substandard residential subdivisions within the
nominated area, and
``(G) does not include any action to assist any
establishment in relocating from one area within the
United States and outside the nominated area to the
nominated area, except that assistance for the
expansion of an existing business entity through the
establishment of a new branch, affiliate, or subsidiary
is permitted if--
``(i) the establishment of the new branch,
affiliate, or subsidiary will not result in a
decrease in employment in the area of original
location or in any other area where the
existing business entity conducts business
operations, and
``(ii) there is no reason to believe that
the new branch, affiliate, or subsidiary is
being established with the intention of closing
down the operations of the existing business
entity in the area of its original location or
in any other area where the existing business
entity conducts business operations, and
``(3) include such other information as may be required by
the appropriate Secretary or the Enterprise Board.
``SEC. 1392. ELIGIBILITY CRITERIA.
``(a) In General.--A nominated area shall be eligible for
designation under section 1391 only if it meets the following criteria:
``(1) Lack of infrastructure.--The population of the
counties in which the nominated area is located increased (as
determined by the most recent census data available) by 18
percent or more between 1980 and 1990, without a corresponding
expansion of basic infrastructure such as water and wastewater
services, and not less than 20 percent of the population
residing within the nominated area resides in substandard
residential subdivisions.
``(2) Distress.--The nominated area is one of pervasive
poverty, unemployment, and general distress.
``(3) Size.--The nominated area--
``(A) does not exceed 1,000 square miles,
``(B) has a boundary which is continuous, or,
except in the case of an area located in more than 1
State, consists of not more than 3 noncontiguous
parcels,
``(C) is located entirely within no more than 3
contiguous States, and
``(D) does not include any portion of a central
business district (as such term is used for purposes of
the most recent Census of Retail Trade) unless the
poverty rate for each population census tract in such
district is not less than 35 percent (30 percent in the
case of an enterprise community).
``(4) Poverty rate.--The poverty rate--
``(A) for each population census tract within the
nominated area is not less than 20 percent,
``(B) for at least 90 percent of the population
census tracts within the nominated area is not less
than 25 percent, and
``(C) for at least 50 percent of the population
census tracts within the nominated area is not less
than 35 percent.
``(b) Special Rules Relating to Determination of Poverty Rate.--For
purposes of subsection (a)(4)--
``(1) Treatment of census tracts with small populations.--
``(A) Tracts with no population.--In the case of a
population census tract with no population--
``(i) such tract shall be treated as having
a poverty rate which meets the requirements of
subparagraphs (A) and (B) of subsection (a)(4),
but
``(ii) such tract shall be treated as
having a zero poverty rate for purposes of
applying subparagraph (C) thereof.
``(B) Tracts with populations of less than 2,000.--
A population census tract with a population of less
than 2,000 shall be treated as having a poverty rate
which meets the requirements of subparagraphs (A) and
(B) of subsection (a)(4) if more than 75 percent of
such tract is zoned for commercial or industrial use.
``(2) Discretion to adjust requirements.--Where necessary
to carry out the purposes of this subchapter, the appropriate
Secretary may reduce by 5 percentage points one of the
following thresholds for not more than 10 percent of the
population census tracts (or, if fewer, 5 population census
tracts) in the nominated area:
``(A) The 20 percent threshold in subsection
(a)(4)(A).
``(B) The 25 percent threshold in subsection
(a)(4)(B).
``(C) The 35 percent threshold in subsection
(a)(4)(C).
If the appropriate Secretary elects to reduce the threshold
under subparagraph (C) for a border enterprise community, such
Secretary may (in lieu of applying the preceding sentence)
reduce by 10 percentage points the threshold under subparagraph
(C) for 3 population census tracts.
``(3) Each noncontiguous area must satisfy poverty rate
rule.--A nominated area may not include a noncontiguous parcel
unless such parcel separately meets (subject to paragraphs (1)
and (2)) the criteria set forth in subsection (a)(4).
``(4) Areas not within census tracts.--In the case of an
area which is not tracted for population census tracts, the
equivalent county divisions (as defined by the Bureau of the
Census for purposes of defining poverty areas) shall be used
for purposes of determining poverty rates.
``(c) Factors To Consider.--From among the nominated areas eligible
for designation under section 1391 by the appropriate Secretary, such
appropriate Secretary shall make designations of the border empowerment
zone and border enterprise communities on the basis of--
``(1) the effectiveness of the strategic plan submitted
pursuant to section 1391(e)(2) and the assurances made pursuant
to section 1391(d)(3), and
``(2) criteria specified by the Enterprise Board.
``SEC. 1393. DEFINITIONS AND SPECIAL RULES.
``(a) In General.--For purposes of this subchapter--
``(1) Appropriate secretary.--The term `appropriate
Secretary' means--
``(A) the Secretary of Housing and Urban
Development in the case of any nominated area which is
located in an urban area,
``(B) the Secretary of Agriculture in the case of
any nominated area which is located in a rural area,
and
``(C) the Secretary of the Interior in the case of
any nominated area which is located in an Indian
reservation.
``(2) Enterprise board.--The term `Enterprise Board' means
any board hereafter established and designated for purposes of
this subchapter as the `Enterprise Board'.
``(3) Rural area.--The term `rural area' means any area
which is--
``(A) outside of a metropolitan statistical area
(within the meaning of section 143(k)(2)(B)), or
``(B) determined by the Secretary of Agriculture,
after consultation with the Secretary of Commerce, to
be a rural area.
``(4) Urban area.--The term `urban area' means an area
which is not a rural area.
``(5) Indian reservation.--
``(A) In general.--The term `Indian reservation'
means a reservation as defined in--
``(i) section 3(d) of the Indian Financing
Act of 1974 (25 U.S.C. 1452(d)), or
``(ii) section 4(10) of the Indian Child
Welfare Act of 1978 (25 U.S.C. 1903(10)).
``(B) Governments.--In the case of an area in an
Indian reservation, the reservation governing body (as
determined by the Secretary of the Interior) shall be
deemed to be both the State and local governments with
respect to such area.
``(6) Border area.--The term `border area' means an area
which is located in one or more counties each of which is
located adjacent to an international border.
``(7) Substandard residential subdivision.--The term
`substandard residential subdivision' means a residential
area--
``(A) which at the time it was first occupied by a
substantial number of residents, lacked basic
infrastructure such as water or wastewater services,
and
``(B) the residents of which are exposed to greatly
increased health risks by reason of living conditions
in such residential area or in nearby residential
areas.
In determining whether the condition of subparagraph (B) is
met, the Secretary of Housing and Urban Development shall take
into account data regarding communicable disease rates, studies
by qualified engineering firms, and other relevant factors.
``(8) Local government.--The term `local government'
means--
``(A) any county, city, town, township, parish,
village, or other general purpose political subdivision
of a State,
``(B) any limited purpose political subdivision of
a State which is involved in the plan described in
section 1391(e)(2)(F), and
``(C) any combination of political subdivisions
described in subparagraphs (A) and (B) recognized by
the appropriate Secretary.
``(9) Nominated area.--The term `nominated area' means an
area which is nominated by 1 or more local governments and the
State or States in which it is located for designation under
section 1391.
``(10) Governments.--If more than 1 State or local
government seeks to nominate an area under this part, any
reference to, or requirement of, this subchapter shall apply to
all such governments.
``(11) Special rule.--An area shall be treated as nominated
by a State and a local government if it is nominated by such
other entity as may be specified by the Enterprise Board.
``(12) Use of census data.--Population and poverty rate
shall be determined by the most recent decennial census data
available.
``(b) Border Empowerment Zone; Border Enterprise Community.--For
purposes of this title, the terms `border empowerment zone' and `border
enterprise community' mean areas designated as such under section 1391.
``PART II--INCENTIVES FOR BORDER EMPOWERMENT ZONES AND BORDER
ENTERPRISE COMMUNITIES
``Sec. 1394. Incentives.
``SEC. 1394. INCENTIVES.
``(a) Increase in Low Income Housing Credit.--For purposes of
section 42(d)(5)(C), a building shall be treated as located in a
qualified census tract if--
``(1) such building is located in a census tract having a
poverty rate of at least 30 percent (determined in accordance
with section 1393(a)(10)), and
``(2) such building is located in a border empowerment zone
or border enterprise community.
``(b) Tax Exempt Enterprise Zone Facility Bonds.--
``(1) In general.--For purposes of part IV of subchapter B
of chapter 1 (relating to tax exemption requirements for State
and local bonds), the term `exempt facility bond' includes any
bond issued as part of an issue 95 percent or more of the net
proceeds (as defined in section 150(a)(3)) of which are to be
used to provide any enterprise zone facility.
``(2) Enterprise zone facility.--For purposes of this
subsection--
``(A) In general.--The term `enterprise zone
facility' means any qualified zone property the
principal user of which is an enterprise zone business
(as defined in section 1399B), and any land which is
functionally related and subordinate to such property.
``(B) Qualified zone property.--The term `qualified
zone property' has the meaning given such term by
section 1399(c); except that--
``(i) section 1399(c)(3) shall not apply,
and
``(ii) the references to a border
empowerment zone shall be treated as including
references to border enterprise communities.
``(3) Limitation on amount of bonds.--
``(A) In general.--Paragraph (1) shall not apply to
any issue if the aggregate amount of outstanding
enterprise zone facility bonds allocable to any
enterprise zone business (taking into account such
issue) exceeds--
``(i) $3,000,000 with respect to any 1
border empowerment zone or border enterprise
community, or
``(ii) $20,000,000 with respect to the
border empowerment zone and all border
enterprise communities.
``(B) Aggregate enterprise zone facility bond
benefit.--For purposes of subparagraph (A), the
aggregate amount of outstanding enterprise zone
facility bonds allocable to any business shall be
determined under rules similar to the rules of section
144(a)(10), taking into account only bonds to which
paragraph (1) applies.
``(4) Acquisition of land and existing property
permitted.--The requirements of sections 147(c)(1)(A) and
147(d) shall not apply to any bond described in paragraph (1).
``(5) Partial exemption from volume cap.--Only for purposes
of section 146, the term `private activity bond' shall not
include 50 percent of any bond issued as part of an issue
described in paragraph (1).
``(6) Penalty for ceasing to meet requirements.--
``(A) Failures corrected.--An issue which fails to
meet 1 or more of the requirements of paragraphs (1)
and (2) shall be treated as meeting such requirements
if--
``(i) the issuer and any principal user in
good faith attempted to meet such requirements,
and
``(ii) any failure to meet such
requirements is corrected within a reasonable
period after such failure is first discovered.
``(B) Loss of deductions where facility ceases to
be qualified.--No deduction shall be allowed under this
chapter for interest on any financing provided from any
bond to which paragraph (1) applies with respect to any
facility to the extent such interest accrues during the
period beginning on the first day of the calendar year
which includes the date on which--
``(i) substantially all of the facility
with respect to which the financing was
provided ceases to be used in an border
empowerment zone or border enterprise
community, or
``(ii) the principal user of such facility
ceases to be an enterprise zone business (as
defined in section 1399B, but treating
references to the border empowerment zones as
including references to border enterprise
communities).
``(C) Exception if zone ceases.--Subparagraphs (A)
and (B) shall not apply solely by reason of the
termination or revocation of a designation as a border
empowerment zone or a border enterprise community.
``(D) Exception for bankruptcy.--Subparagraphs (A)
and (B) shall not apply to any cessation resulting from
bankruptcy.
``(c) Enterprise Zone Facility Bonds Not Subject to Interest
Deduction Limitations on Financial Institutions.--Any tax-exempt bond
described in subsection (b)(1)--
``(1) shall be treated as acquired before August 8, 1986,
for purposes of sections 265(b) and 291(e)(1)(B), and
``(2) shall not be taken into account in determining
whether any issuer is a qualified small issuer for purposes of
section 265(b).
``(d) Additional Low-Income Housing Credit Amount.--
``(1) In general.--Each State which includes a border
empowerment zone or border enterprise community shall receive
an additional State housing credit ceiling amount for purposes
of section 42 of $818,000 for each such zone or community.
``(2) Additional amount must be allocated to buildings in
designated areas.--
``(A) In general.--The portion of the additional
amount received under paragraph (1) by reason of any
border empowerment zone or border enterprise community
which may be applied to increase the State housing
credit ceiling for any calendar year shall not exceed
the lesser of--
``(i) the unused portion of such additional
amount with respect to such zone or community,
or
``(ii) the aggregate housing credit dollar
amount allocated from such ceiling for such
year to buildings located in such zone or
community.
``(B) Unused portion.--For purposes of subparagraph
(A), the unused portion for any calendar year of the
additional amount received under paragraph (1) is the
amount equal to the excess of--
``(i) the additional amount received under
paragraph (1) by the State by reason of the
zone or community, over
``(ii) the aggregate of the increases in
the State housing credit ceiling by reason of
such amount for all prior calendar years.
``(3) Availability of additional amount.--None of the
additional amount received under paragraph (1) may be applied
after 1996.
``(4) Areas located in more than 1 state.--In the case of a
border empowerment zone or border enterprise community which is
located in more than 1 State, the $818,000 amount shall be
allocated among such States in proportion to the population of
such zone or community which is within each such State.
``(5) Zones located in constitutional home rule cities.--If
any border empowerment zone or border enterprise community is
located in a constitutional home rule city (as defined in
section 42(h)(4)(E)), the additional amount received under
paragraph (1) shall be allocated to such city and shall not be
taken into account in determining such city's share of the
State housing credit ceiling under section 42(h)(4)(E).
``PART III--ADDITIONAL INCENTIVES FOR BORDER EMPOWERMENT ZONE
``Subpart A. Empowerment zone employment
credit.
``Subpart B. Zone resident empowerment
savings credit.
``Subpart C. Depreciation and other
incentives.
``Subpart A--Empowerment Zone Employment Credit
``Sec. 1396. Empowerment zone employment
credit.
``Sec. 1397. Other definitions and
special rules.
``SEC. 1396. EMPOWERMENT ZONE EMPLOYMENT CREDIT.
``(a) Amount of Credit.--For purposes of section 38, the amount of
the empowerment zone employment credit determined under this section
with respect to any employer for any taxable year is the applicable
percentage of the qualified zone wages paid or incurred during the
calendar year which ends with or within such taxable year.
``(b) Applicable Percentage.--For purposes of this section, the
term `applicable percentage' means the percentage determined in
accordance with the following table:
``In the case of wages paid or
The applicable
incurred during calendar year:
percentage is:
1994 through 2000.......... 25
2001....................... 20
2002....................... 15
2003....................... 10
2004....................... 5
``(c) Qualified Zone Wages.--
``(1) In general.--For purposes of this section, the term
`qualified zone wages' means any wages paid or incurred by an
employer for services performed by an employee while such
employee is a qualified zone employee.
``(2) Only first $20,000 of wages per year taken into
account.--With respect to each qualified zone employee, the
amount of qualified zone wages which may be taken into account
for a calendar year shall not exceed $20,000.
``(3) Coordination with targeted jobs credit.--
``(A) In general.--The term `qualified zone wages'
shall not include wages taken into account in
determining the credit under section 51.
``(B) Coordination with paragraph (2).--The $20,000
amount in paragraph (2) shall be reduced for any
calendar year by the amount of wages paid or incurred
during such year which are taken into account in
determining the credit under section 51.
``(d) Qualified Zone Employee.--For purposes of this section--
``(1) In general.--Except as otherwise provided in this
subsection, the term `qualified zone employee' means, with
respect to any period, any employee of an employer if--
``(A) substantially all of the services performed
during such period by such employee for such employer
are performed within a border empowerment zone in a
trade or business of the employer, and
``(B) the principal place of abode of such employee
while performing such services is within such border
empowerment zone.
``(2) Certain individuals not eligible.--The term
`qualified zone employee' shall not include--
``(A) any individual described in subparagraph (A),
(B), or (C) of section 51(i)(1),
``(B) any 5-percent owner (as defined in section
416(i)(1)(B)),
``(C) any individual employed by the employer for
less than 90 days,
``(D) any individual employed by the employer at
any facility described in section 144(c)(6)(B), and
``(E) any individual employed by the employer in a
trade or business the principal activity of which is
farming (within the meaning of subparagraphs (A) or (B)
of section 2032A(e)(5)), but only if, as of the close
of the taxable year, the sum of--
``(i) the aggregate unadjusted bases (or,
if greater, the fair market value) of the
assets owned by the employer which are used in
such a trade or business, and
``(ii) the aggregate value of assets leased
by the employer which are used in such a trade
or business (as determined under regulations
prescribed by the Secretary),
exceeds $500,000.
``(3) Special rules related to termination of employment.--
``(A) In general.--Paragraph (2)(C) shall not apply
to--
``(i) a termination of employment of an
individual who before the close of the period
referred to in paragraph (2)(C) becomes
disabled to perform the services of such
employment unless such disability is removed
before the close of such period and the
taxpayer fails to offer reemployment to such
individual, or
``(ii) a termination of employment of an
individual if it is determined under the
applicable State unemployment compensation law
that the termination was due to the misconduct
of such individual.
``(B) Changes in form of business.--For purposes of
paragraph (2)(C), the employment relationship between
the taxpayer and an employee shall not be treated as
terminated--
``(i) by a transaction to which section
381(a) applies if the employee continues to be
employed by the acquiring corporation, or
``(ii) by reason of a mere change in the
form of conducting the trade or business of the
taxpayer if the employee continues to be
employed in such trade or business and the
taxpayer retains a substantial interest in such
trade or business.
``SEC. 1397. OTHER DEFINITIONS AND SPECIAL RULES.
``(a) Wages.--For purposes of this subpart--
``(1) In general.--The term `wages' has the same meaning as
when used in section 51.
``(2) Certain training and educational benefits.--
``(A) In general.--The following amounts shall be
treated as wages paid to an employee:
``(i) Any amount paid or incurred by an
employer which is excludable from the gross
income of an employee under section 127, but
only to the extent paid or incurred to a person
not related to the employer.
``(ii) In the case of an employee who has
not attained the age of 19, any amount paid or
incurred by an employer for any youth training
program operated by such employer in
conjunction with local education officials.
``(B) Related person.--A person is related to any
other person if the person bears a relationship to such
other person specified in section 267(b) or 707(b)(1),
or such person and such other person are engaged in
trades or businesses under common control (within the
meaning of subsections (a) and (b) of section 52). For
purposes of the preceding sentence, in applying section
267(b) or 707(b)(1), `10 percent' shall be substituted
for `50 percent'.
``(b) Controlled Groups.--For purposes of this subpart--
``(1) all employers treated as a single employer under
subsection (a) or (b) of section 52 shall be treated as a
single employer for purposes of this subpart, and
``(2) the credit (if any) determined under section 1396
with respect to each such employer shall be its proportionate
share of the wages giving rise to such credit.
``(c) Certain Other Rules Made Applicable.--For purposes of this
subpart, rules similar to the rules of section 51(k) and subsections
(c), (d), and (e) of section 52 shall apply.
``(d) Notice of Availability of Advance Payment of Earned Income
Credit.--Each employer shall take reasonable steps to notify all
qualified zone employees of the availability to eligible individuals of
receiving advanced payments of the credit under section 32 (relating to
the earned income credit).
``Subpart B--Zone Resident Empowerment Savings Credit
``Sec. 1398. Zone resident empowerment
savings credit.
``SEC. 1398. ZONE RESIDENT EMPOWERMENT SAVINGS CREDIT.
``(a) General Rule.--For purposes of section 38, the amount of the
zone resident empowerment savings credit determined under this section
with respect to any employer for any taxable year is 50 percent of the
qualified savings contributions for the taxable year.
``(b) Qualified Savings Contributions.--For purposes of this
section--
``(1) In general.--The term `qualified savings
contribution' means any contribution by an employer to a
defined contribution plan--
``(A) which is made on behalf of an employee in
connection with services performed by such employee
while such employee is a qualified zone employee, and
``(B) with respect to which the employee has a
nonforfeitable right.
``(2) Limitation based on compensation.--
``(A) In general.--The qualified savings
contributions taken into account with respect to any
qualified zone employee for any taxable year shall not
exceed an amount equal to 2 percent of so much of the
employee's compensation (as defined in section 414(s))
as does not exceed $35,000.
``(B) Zone designation in effect for partial
year.--If a designation of an area as an empowerment
zone is in effect for less than the entire taxable
year, the $35,000 amount under subparagraph (A) shall
be ratably reduced to reflect the portion of the year
such designation is not in effect.
``(3) Certain contributions excluded.--The term `qualified
savings contribution' shall not include any contribution--
``(A) to a plan subject to the funding requirements
of section 412,
``(B) to a tax credit employee stock ownership plan
(as defined in section 409(a)) or to an employee stock
ownership plan (as defined in section 4975(e)(7)),
``(C) to a stock bonus plan, or
``(D) which is an elective deferral (within the
meaning of section 402(g)(3)).
``(4) Simplified employee pension.--A contribution to an
individual savings plan pursuant to a simplified employee
pension (as defined in section 408(k)) shall be treated as a
contribution to a defined contribution plan.
``(c) Employer Requirements.--This section shall apply to an
employer for any taxable year only if--
``(1) the employer elects the application of this section,
and
``(2) the plan pursuant to which any qualified savings
contribution is made provides that any contribution to such
plan (whether or not a qualified savings contribution) may be
withdrawn by a qualified zone employee as described in section
72(t)(2) (B) or (D).
``(d) Definitions.--For purposes of this section--
``(1) Qualified zone employee.--The term `qualified zone
employee' has the meaning given such term by section 1396(d).
``(2) Defined contribution plan.--The term `defined
contribution plan' means a defined contribution plan (as
defined in section 414(i)) which is described in section 401(a)
and includes a trust exempt from tax under section 501(a).
``(e) Treatment of Plans.--A plan shall not be treated as failing
to meet any requirement of part I of subchapter D of chapter 1 by
reason of permitting withdrawals required to be permitted under
subsection (c)(2).
``Subpart C--Depreciation and Other Incentives
``Sec. 1399. Depreciation benefits.
``Sec. 1399A. Additional exclusion from
volume cap for certain
enterprise zone facility bonds.
``Sec. 1399B. Enterprise zone business.
``SEC. 1399. DEPRECIATION BENEFITS.
``(a) Increase in Expensing Under Section 179.--
``(1) In general.--In the case of an enterprise zone
business, for purposes of section 179--
``(A) qualified zone property shall be treated as
section 179 property,
``(B) the limitation under section 179(b)(1) shall
be increased by the lesser of--
``(i) $50,000, or
``(ii) the cost of qualified zone property
placed in service during the taxable year, and
``(C) section 179(b)(2) shall be applied by
substituting `by one-half of the amount by which the
cost of qualified zone property (other than real
property) and other section 179 property' for `by the
amount by which the cost of section 179 property'.
``(b) Accelerated Depreciation.--
``(1) In general.--For purposes of section 168(a), with
respect to qualified zone property of an enterprise zone
business, the applicable recovery period shall be determined in
accordance with the table contained in paragraph (2) in lieu of
the table contained in section 168(c).
``(2) Applicable recovery period for qualified zone
property.--For purposes of paragraph (1)--
The applicable
``In the case of: recovery period is:
3-year property............................... 2 years
5-year property............................... 3 years
7-year property............................... 4 years
10-year property.............................. 6 years
15-year property.............................. 9 years
20-year property.............................. 12 years
Nonresidential real property.................. 22 years.
``(3) Deduction allowed in computing minimum tax.--
Paragraph (1) shall apply for purposes of determining
alternative minimum taxable income under section 55.
``(c) Qualified Zone Property.--For purposes of this section--
``(1) In general.--The term `qualified zone property' means
any property to which section 168 applies (or would apply but
for section 179) if--
``(A) such property was acquired by the taxpayer by
purchase (as defined in section 179(d)(2)) after the
date on which the designation of the border empowerment
zone took effect,
``(B) the original use of which in a border
empowerment zone commences with the taxpayer, and
``(C) substantially all of the use of which is in a
border empowerment zone and is in the active conduct of
a trade or business by the taxpayer in such zone.
``(2) Special rule for substantial renovations.--In the
case of any property which is substantially renovated by the
taxpayer, the requirements of subparagraphs (A) and (B) of
paragraph (1) shall be treated as satisfied. For purposes of
the preceding sentence, property shall be treated as
substantially renovated by the taxpayer if, during any 24-month
period beginning after the date on which the designation of the
border empowerment zone took effect, additions to basis with
respect to such property in the hands of the taxpayer exceed
the greater of (i) an amount equal to the adjusted basis at the
beginning of such 24-month period in the hands of the taxpayer,
or (ii) $5,000.
``(3) Exception for alternative depreciation property.--The
term `qualified zone property' does not include any property to
which the alternative depreciation system under section 168(g)
applies, determined--
``(A) without regard to section 168(g)(7) (relating
to election to use alternative depreciation system),
and
``(B) after the application of section 280F(b)
(relating to listed property with limited business
use).
``(d) Special Rules for Sale-Leasebacks.--For purposes of
subsection (c)(1)(B), if property is sold and leased back by the
taxpayer within 3 months after the date such property was originally
placed in service, such property shall be treated as originally placed
in service not earlier than the date on which such property is used
under the leaseback.
``(e) Recapture.--Rules similar to the rules under section
179(d)(10) shall apply with respect to any qualified zone property of
any business which ceases to be an enterprise zone business.
``SEC. 1399A. ADDITIONAL EXCLUSION FROM VOLUME CAP FOR CERTAIN
ENTERPRISE ZONE FACILITY BONDS.
``(a) In General.--Section 1394(b)(5) shall be applied by
substituting `75 percent' for `50 percent' in the case of any bond
described in section 1394(b)(1) issued as part of an issue 95 percent
or more of the net proceeds (as defined in section 150(a)(3)) of which
are used to provide qualified zone property the principal user of which
is any enterprise zone business if the ownership requirements of
subsection (b) are met with respect to such business.
``(b) Ownership Requirements.--The ownership requirements of this
subsection are met with respect to an enterprise zone business if--
``(1) in the case of a sole proprietorship, the principal
place of abode of the proprietor is in a border empowerment
zone,
``(2) in the case of a corporation, more than 50 percent of
the stock (by vote and value) in the corporation is owned
(directly or indirectly) by individuals whose principal place
of abode is in a border empowerment zone, and
``(3) in the case of a partnership, more than 50 percent of
the capital and profits interests in the partnership is owned
(directly or indirectly) by individuals whose principal place
of abode is in a border empowerment zone.
``SEC. 1399B. ENTERPRISE ZONE BUSINESS DEFINED.
``(a) In General.--For purposes of this subpart, the term
`enterprise zone business' means--
``(1) any qualified business entity, and
``(2) any qualified proprietorship.
``(b) Qualified Business Entity.--For purposes of this section, the
term `qualified business entity' means, with respect to any taxable
year, any corporation or partnership if for such year--
``(1) every trade or business of such entity is the active
conduct of a qualified business within a border empowerment
zone,
``(2) at least 80 percent of the total gross income of such
entity is derived from the active conduct of such business,
``(3) substantially all of the use of the tangible property
of such entity (whether owned or leased) is within a border
empowerment zone,
``(4) substantially all of the intangible property of such
entity is used in, and exclusively related to, the active
conduct of any such business,
``(5) substantially all of the services performed for such
entity by its employees are performed in a border empowerment
zone,
``(6) at least 35 percent of its employees are residents of
a border empowerment zone,
``(7) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such entity is attributable
to collectibles (as defined in section 408(m)(2)) other than
collectibles that are held primarily for sale to customers in
the ordinary course of such business, and
``(8) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such entity is attributable
to nonqualified financial property.
``(c) Qualified Proprietorship.--For purposes of this section, the
term `qualified proprietorship' means, with respect to any taxable
year, any qualified business carried on by an individual as a
proprietorship if for such year--
``(1) at least 80 percent of the total gross income of such
individual from such business is derived from the active
conduct of such business in a border empowerment zone,
``(2) substantially all of the use of the tangible property
of such individual in such business (whether owned or leased)
is within a border empowerment zone,
``(3) substantially all of the intangible property of such
business is used in, and exclusively related to, the active
conduct of such business,
``(4) substantially all of the services performed for such
individual in such business by employees of such business are
performed in a border empowerment zone,
``(5) at least 35 percent of such employees are residents
of a border empowerment zone,
``(6) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such individual which is
used in such business is attributable to collectibles (as
defined in section 408(m)(2)) other than collectibles that are
held primarily for sale to customers in the ordinary course of
such business, and
``(7) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such individual which is
used in such business is attributable to nonqualified financial
property.
For purposes of this subsection, the term `employee' includes the
proprietor.
``(d) Qualified Business.--For purposes of this section--
``(1) In general.--Except as otherwise provided in this
subsection, the term `qualified business' means any trade or
business.
``(2) Rental of real property.--The rental to others of
real property located in a border empowerment zone shall be
treated as a qualified business if and only if--
``(A) the property is not residential rental
property (as defined in section 168(e)(2)), and
``(B) at least 50 percent of the gross rental
income from the real property is from enterprise zone
businesses.
``(3) Rental of tangible personal property.--The rental to
others of tangible personal property shall be treated as a
qualified business if and only if substantially all of the
rental of such property is by enterprise zone businesses or by
residents of a border empowerment zone.
``(4) Treatment of business holding intangibles.--The term
`qualified business' shall not include any trade or business
consisting predominantly of the development or holding of
intangibles for sale or license.
``(5) Certain businesses excluded.--The term `qualified
business' shall not include--
``(A) any trade or business consisting of the
operation of any facility described in section
144(c)(6)(B), and
``(B) any trade or business the principal activity
of which is farming (within the meaning of
subparagraphs (A) or (B) of section 2032A(e)(5)), but
only if, as of the close of the preceding taxable year,
the sum of--
``(i) the aggregate unadjusted bases (or,
if greater, the fair market value) of the
assets owned by the taxpayer which are used in
such a trade or business, and
``(ii) the aggregate value of assets leased
by the taxpayer which are used in such a trade
or business,
exceeds $500,000.
For purposes of subparagraph (B), rules similar to the rules of
section 1397(b) shall apply.
``(e) Nonqualified Financial Property.--For purposes of this
section, the term `nonqualified financial property' means debt, stock,
partnership interests, options, futures contracts, forward contracts,
warrants, notional principal contracts, annuities, and other similar
property specified in regulations; except that such term shall not
include--
``(1) reasonable amounts of working capital held in cash,
cash equivalents, or debt instruments with a term of 18 months
or less, or
``(2) debt instruments described in section 1221(4).
``PART IV--REGULATIONS
``Sec. 1399C. Regulations.
``SEC. 1399C. REGULATIONS.
``The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of parts II and III,
including--
``(1) regulations limiting the benefit of parts II and III
in circumstances where such benefits, in combination with
benefits provided under other Federal programs, would result in
an activity being 100 percent or more subsidized by the Federal
Government,
``(2) regulations preventing abuse of the provisions of
parts II and III, and
``(3) regulations dealing with inadvertent failures of
entities to be enterprise zone businesses.''
(b) Clerical Amendment.--The table of subchapters for chapter 1 is
amended by inserting after the item relating to subchapter T the
following new item:
``Subchapter U. Designation and treatment
of border empowerment zones and
border enterprise
communities.''
SEC. 3. EXPANSION OF TARGETED JOBS CREDIT.
(a) Allowance of Credit for Hiring Border Empowerment Zone
Resident.--Paragraph (1) of section 51(d) (defining members of targeted
groups) is amended by striking ``or'' at the end of subparagraph (I),
by striking the period at the end of subparagraph (J) and inserting ``,
or'', and by adding at the end the following new subparagraph:
``(K) an economically disadvantaged border empowerment zone
resident.''
(b) Economically Disadvantaged Empowerment Zone Resident.--Section
51(d) is amended by redesignating paragraphs (13) through (16) as
paragraphs (14) through (17), respectively, and by inserting after
paragraph (12) the following new paragraph:
``(13) Economically disadvantaged border empowerment zone
resident.--The term `economically disadvantaged border
empowerment zone resident' means an individual--
``(A) whose principal place of abode while
performing services for the employer is within a border
empowerment zone, and
``(B) who is certified by the designated local
agency as being a member of an economically
disadvantaged family (as determined under paragraph
(11)).
Such term shall not include a qualified zone employee (as
defined in section 1396(d) without regard to paragraph (2)
thereof).''
(c) Conforming Amendment.--Subparagraph (C) of section 51(d)(12) is
amended by striking ``paragraph (14)'' and inserting ``paragraph
(15)''.
SEC. 4. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Certain Credits Part of General Business Credit.--
(1) Subsection (b) of section 38 (relating to current year
business credit) is amended by striking ``plus'' at the end of
paragraph (7), by striking the period at the end of paragraph
(8) and inserting a comma, and by adding at the end the
following new paragraphs:
``(9) the empowerment zone employment credit determined
under section 1396(a), plus
``(10) the zone resident empowerment savings credit
determined under section 1398.''
(2) Subsection (d) of section 39 is amended by adding at
the end the following new paragraph:
``(4) Enterprise zone credits.--No portion of the unused
business credit which is attributable to the credit determined
under section 1396 (relating to empowerment zone employment
credit) or section 1398 (relating to zone resident empowerment
savings credit) may be carried to any taxable year ending
before January 1, 1994.''
(b) Denial of Deduction for Portion of Wages Equal to Empowerment
Zone Employment Credit.--
(1) Subsection (a) of section 280C (relating to rule for
targeted jobs credit) is amended--
(A) by striking ``the amount of the credit
determined for the taxable year under section 51(a)''
and inserting ``the sum of the credits determined for
the taxable year under sections 51(a) and 1396(a)'',
and
(B) by striking ``Targeted Jobs Credit'' in the
subsection heading and inserting ``Employment
Credits''.
(2) Subsection (c) of section 196 (relating to deduction
for certain unused business credits) is amended by striking
``and'' at the end of paragraph (4), by striking the period at
the end of paragraph (5) and inserting ``, and'', and by adding
at the end the following new paragraph:
``(6) the empowerment zone employment credit determined
under section 1396(a).''
(c) Employment and Savings Credits May Offset 25 Percent of Minimum
Tax.--
(1) In general.--Section 38(c) (relating to limitation
based on amount of tax) is amended by redesignating paragraph
(2) as paragraph (3) and by inserting after paragraph (1) the
following new paragraph:
``(2) Empowerment zone credits may offset 25 percent of
minimum tax.--
``(A) In general.--In the case of the empowerment
zone credits--
``(i) this section and section 39 shall be
applied separately with respect to such
credits, and
``(ii) for purposes of applying paragraph
(1) to such credits--
``(I) 75 percent of the tentative
minimum tax shall be substituted for
the tentative minimum tax under
subparagraph (A) thereof, and
``(II) the limitation under
paragraph (1) (as modified by subclause
(I)) shall be reduced by the credit
allowed under subsection (a) for the
taxable year (other than the
empowerment zone credits).
``(B) Empowerment zone credits.--For purposes of
this paragraph, the term `empowerment zone credits'
means the portion of the credit under subsection (a)
which is attributable to the credits determined under
section 1396 (relating to empowerment zone employment
credit) and section 1398 (relating to zone resident
empowerment savings credit).''
(d) Changes Relating to Empowerment Zone Resident Empowerment
Savings Credit.--
(1) Disallowance of deduction.--Section 404 (relating to
deduction for certain employer contributions) is amended by
adding at the end the following new subsection:
``(m) Coordination With Empowerment Zone Credit.--No deduction
shall be allowed under this section for any qualified employer
contribution taken into account in computing the credit determined
under section 1398.''
(2) Penalty-free distributions.--
(A) In general.--Paragraph (2) of section 72(t)
(relating to exceptions to 10-percent additional tax on
early distributions from qualified retirement plans) is
amended by adding at the end thereof the following new
subparagraph:
``(D) Distributions from certain plans for first
home purchases or educational expenses.--
``(i) In general.--Distributions to an
individual from a qualified retirement plan--
``(I) which are qualified first-
time homebuyer distributions (as
defined in paragraph (6)),
``(II) to the extent such
distributions do not exceed the
qualified higher education expenses (as
defined in paragraph (7)) of the
taxpayer for the taxable year, or
``(III) to the extent such
distributions do not exceed an amount
equal to the aggregate investment made
by the taxpayer during the taxable year
in any enterprise zone business (as
defined in section 1399B) that meets
the ownership requirements of section
1399A(b).
``(ii) Limitation.--Clause (i) shall not
apply to the extent that the aggregate amount
of the distributions described in clause (i) is
greater than the excess of--
``(I) the qualified savings
contributions (as defined in section
1398(b)) of the taxpayer, and any
earnings thereon, over
``(II) the aggregate amounts to
which clause (i) and the last sentence
of paragraph (3)(A) applied for
preceding taxable years.''
(B) Definitions.--Section 72(t) is amended by
adding at the end thereof the following new paragraphs:
``(6) Qualified first-time homebuyer distributions.--For
purposes of paragraph (2)(D)(i)(I)--
``(A) In general.--The term `qualified first-time
homebuyer distribution' means any payment or
distribution received by an individual to the extent
such payment or distribution is used by the individual
before the close of the 60th day after the day on which
such payment or distribution is received to pay
qualified acquisition costs with respect to a principal
residence of a first-time homebuyer who is such
individual or the spouse of such individual.
``(B) Qualified acquisition costs.--For purposes of
this paragraph, the term `qualified acquisition costs'
means the costs of acquiring, constructing, or
reconstructing a residence. Such term includes any
usual or reasonable settlement, financing, or other
closing costs.
``(C) First-time homebuyer; other definitions.--For
purposes of this paragraph--
``(i) First-time homebuyer.--The term
`first-time homebuyer' means any individual
if--
``(I) such individual (and if
married, such individual's spouse) had
no present ownership interest in a
principal residence during the 3-year
period ending on the date of
acquisition of the principal residence
to which this paragraph applies, and
``(II) subsection (a)(6), (h), or
(k) of section 1034 did not suspend the
running of any period of time specified
in section 1034 with respect to such
individual on the day before the date
the distribution is applied pursuant to
subparagraph (A)(ii).
``(ii) Principal residence.--The term
`principal residence' has the same meaning as
when used in section 1034.
``(iii) Date of acquisition.--The term
`date of acquisition' means the date--
``(I) on which a binding contract
to acquire the principal residence to
which subparagraph (A) applies is
entered into, or
``(II) on which construction or
reconstruction of such a principal
residence is commenced.
``(D) Special rule where delay in acquisition.--If
any distribution from any qualified retirement plan
fails to meet the requirements of subparagraph (A)
solely by reason of a delay or cancellation of the
purchase or construction of the residence, the amount
of the distribution may be recontributed to the plan
from which it was distributed within 120 days after the
date of such distribution.
``(7) Qualified higher education expenses.--For purposes of
paragraph (2)(D)(ii)(II)--
``(A) In general.--The term `qualified higher
education expenses' means tuition, fees, books,
supplies, and equipment required for the enrollment or
attendance of--
``(i) the taxpayer,
``(ii) the taxpayer's spouse, or
``(iii) the taxpayer's child (as defined in
section 151(c)(3)) or grandchild,
at an eligible educational institution (as defined in
section 135(c)(3)).
``(B) Coordination with savings bond provisions.--
The amount of qualified higher education expenses for
any taxable year shall be reduced by any amount
excludable from gross income under section 135.''.
(C) Conforming amendments.--
(i) Subparagraph (B) of section 72(t)(2) is
amended by striking ``or (C)'' and inserting
``, (C), or (D)''.
(ii) Section 401(k)(2)(B)(i) is amended by
striking ``or'' at the end of subclause (III),
by striking ``and'' at the end of subclause
(IV) and inserting ``or'', and by inserting
after subclause (IV) the following new
subclause:
``(V) subject to the limitation of
section 72(t)(2)(D)(ii), the date on
which qualified first-time homebuyer
distributions (as defined in section
72(t)(6)), distributions for qualified
higher education expenses (as defined
in section 72(t)(7)), or distributions
for investments described in section
72(t)(2)(D)(i)(III) are made, and''.
(e) Amendment of Targeted Jobs Credit.--Subparagraph (A) of section
51(i)(1) is amended by inserting ``, or, if the taxpayer is an entity
other than a corporation, to any individual who owns, directly or
indirectly, more than 50 percent of the capital and profits interests
in the entity,'' after ``of the corporation''.
(f) Carryovers.--Subsection (c) of section 381 (relating to
carryovers in certain corporate acquisitions) is amended by adding at
the end the following new paragraph:
``(26) Enterprise zone provisions.--The acquiring
corporation shall take into account (to the extent proper to
carry out the purposes of this section and subchapter U, and
under such regulations as may be prescribed by the Secretary)
the items required to be taken into account for purposes of
subchapter U in respect of the distributor or transferor
corporation.''
SEC. 5. EFFECTIVE DATE.
The amendments made by this Act shall take effect on the date of
the enactment of this Act.
<all>
HR 2246 IH----2
HR 2246 IH----3
HR 2246 IH----4
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line