Economic Development Act of 2005

Economic Development Act of 2005 - Authorizes any State to provide to any person for economic development purposes tax incentives that otherwise would be the cause of discrimination against interstate commerce under the Commerce Clause of the Constitution. Makes exceptions for any incentive that: (1) is dependent upon State or country of incorporation, commercial domicile, or residence of an individual; (2) requires the recipient to acquire, lease, license, use, or provide services to property created in the State; (3) is reduced or eliminated as a result of an increase in out-of-State activity by the recipient or other person or as a result of such other person not having a taxable presence in the State; (4) results in loss of a compensating tax system, because the tax on interstate commerce exceeds the tax on intrastate commerce; (5) requires that other taxing jurisdictions offer reciprocal tax benefits; or (6) requires that a tax incentive earned with respect to one tax can only be used to reduce a tax burden for, or provide a tax benefit against any other tax that is not imposed on, apportioned interstate activities.

[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1066 Introduced in Senate (IS)]







109th CONGRESS
  1st Session
                                S. 1066

  To authorize the States (and subdivisions thereof), the District of 
Columbia, territories, and possessions of the United States to provide 
certain tax incentives to any person for economic development purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 18, 2005

 Mr. Voinovich (for himself, Ms. Stabenow, Mr. Bunning, Mr. Levin, Mr. 
  Alexander, Mr. DeWine, Mr. McConnell, and Mr. Frist) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
  To authorize the States (and subdivisions thereof), the District of 
Columbia, territories, and possessions of the United States to provide 
certain tax incentives to any person for economic development purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Economic Development Act of 2005''.

SEC. 2. AUTHORIZATION.

    Congress hereby exercises its power under Article I, Section 8, 
Clause 3 of the United States Constitution to regulate commerce among 
the several States by authorizing any State to provide to any person 
for economic development purposes tax incentives that otherwise would 
be the cause or source of discrimination against interstate commerce 
under the Commerce Clause of the United States Constitution, except as 
otherwise provided by law.

SEC. 3. LIMITATIONS.

    (a) Tax Incentives Not Subject to Protection Under This Act.--
Section 2 shall not apply to any State tax incentive which--
            (1) is dependent upon State or country of incorporation, 
        commercial domicile, or residence of an individual;
            (2) requires the recipient of the tax incentive to acquire, 
        lease, license, use, or provide services to property produced, 
        manufactured, generated, assembled, developed, fabricated, or 
        created in the State;
            (3) is reduced or eliminated as a direct result of an 
        increase in out-of-State activity by the recipient of the tax 
        incentive;
            (4) is reduced or eliminated as a result of an increase in 
        out-of-State activity by a person other than the recipient of 
        the tax incentive or as a result of such other person not 
        having a taxable presence in the State;
            (5) results in loss of a compensating tax system, because 
        the tax on interstate commerce exceeds the tax on intrastate 
        commerce;
            (6) requires that other taxing jurisdictions offer 
        reciprocal tax benefits; or
            (7) requires that a tax incentive earned with respect to 
        one tax can only be used to reduce a tax burden for or provide 
        a tax benefit against any other tax that is not imposed on 
        apportioned interstate activities.
    (b) No Inference.--Nothing in this section shall be construed to 
create any inference with respect to the validity or invalidity under 
the Commerce Clause of the United States Constitution of any tax 
incentive described in this section.

SEC. 4. DEFINITIONS; RULE OF CONSTRUCTION.

    (a) Definitions.--For purposes of this Act--
            (1) Compensating tax system.--The term ``compensating tax 
        system'' means complementary taxes imposed on both interstate 
        and intrastate commerce where the tax on interstate commerce 
        does not exceed the tax on intrastate commerce and the taxes 
        are imposed on substantially equivalent events.
            (2) Economic development purposes.--The term ``economic 
        development purposes'' means all legally permitted activities 
        for attracting, retaining, or expanding business activity, 
        jobs, or investment in a State.
            (3) Imposed on apportioned interstate activities.--The term 
        ``imposed on apportioned interstate activities'' means, with 
        respect to a tax, a tax levied on values that can arise out of 
        interstate or foreign transactions or operations, including 
        taxes on income, sales, use, gross receipts, net worth, and 
        value added taxable bases. Such term shall not include taxes 
        levied on property, transactions, or operations that are 
        taxable only if they exist or occur exclusively inside the 
        State, including any real property and severance taxes.
            (4) Person.--The term ``person'' means any individual, 
        corporation, partnership, limited liability company, 
        association, or other organization that engages in any for 
        profit or not-for-profit activities within a State.
            (5) Property.--The term ``property'' means all forms of 
        real, tangible, and intangible property.
            (6) State.--The term ``State'' means each of the several 
        States (or subdivision thereof), the District of Columbia, and 
        any territory or possession of the United States.
            (7) State tax.--The term ``State tax'' means all taxes or 
        fees imposed by a State.
            (8) Tax benefit.--The term ``tax benefit'' means all 
        permanent and temporary tax savings, including applicable 
        carrybacks and carryforwards, regardless of the taxable period 
        in which the benefit is claimed, received, recognized, 
        realized, or earned.
            (9) Tax incentive.--The term ``tax incentive'' means any 
        provision that reduces a State tax burden or provides a tax 
        benefit as a result of any activity by a person that is 
        enumerated or recognized by a State tax jurisdiction as a 
        qualified activity for economic development purposes.
    (b) Rule of Construction.--It is the sense of Congress that the 
authorization provided in section 2 should be construed broadly and the 
limitations in section 3 should be construed narrowly.

SEC. 5. SEVERABILITY.

    If any provision of this Act or the application of any provision of 
this Act to any person or circumstance is held to be unconstitutional, 
the remainder of this Act and the application of the provisions of this 
Act to any person or circumstance shall not be affected by the holding.

SEC. 6. EFFECTIVE DATE.

    This Act shall apply to any State tax incentive enacted before, on, 
or after the date of the enactment of this Act.
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