Empowerment Zone and Renewal Community Enhancement Act of 2006 - Amends Internal Revenue Code provisions relating to tax-preferred empowerment zones, enterprise communities, and renewal communities to: (1) extend the period of designation for empowerment zones and renewal communities through 2015; (2) provide a safe harbor standard for employee residency requirements in empowerment zones; (3) eliminate certain residency requirements for the empowerment zone employment tax credit; (4) grant authority to expand the boundaries of empowerment zones, enterprise communities, and renewal communities (requires expansion of such communities located in rural areas upon the request of a local government if specified conditions exist); (5) allow carryovers of unused expensing allowances for enterprise zone businesses; (6) allow certain empowerment zone businesses to elect to receive payments in lieu of tax benefits; and (7) allow federal guarantees and tax exemptions for enterprise zone facility bonds.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 3827 Introduced in Senate (IS)]
109th CONGRESS
2d Session
S. 3827
To amend the Internal Revenue Code of 1986 to extend and expand the
benefits for businesses operating in empowerment zones, enterprise
communities, or renewal communities, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
August 3, 2006
Mrs. Lincoln (for herself, Ms. Snowe, Mr. Schumer, Mr. Rockefeller, Ms.
Landrieu, Mrs. Clinton, and Mr. Vitter) introduced the following bill;
which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to extend and expand the
benefits for businesses operating in empowerment zones, enterprise
communities, or renewal communities, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
(a) Short Title.--This Act may be cited as the ``Empowerment Zone
and Renewal Community Enhancement Act of 2006''.
(b) 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. EXTENSION OF BENEFITS.
(a) Empowerment Zones and Enterprise Communities.--
(1) Rounds i and ii designations.--Subsection (d)(1)(A)(i)
of section 1391 is amended--
(A) by striking ``December 31, 2009'' and inserting
``December 31, 2015'', and
(B) by adding at the end the following new flush
sentence:
``For purposes of section 1396, subparagraph (A) shall be
applied by substituting `December 31, 2009' for `December 31,
2015' in the case of designations made under subsection (a).''.
(2) Round iii designations.--Subsection (h)(2) of section
1391 is amended by striking ``December 31, 2009'' and inserting
``December 31, 2015''.
(b) Renewal Communities.--
(1) Sections 1400E(b) and 1400I(g) are each amended by
striking ``December 31, 2009'' and inserting ``December 31,
2015''.
(2) Sections 1400E(b)(3), 1400F(b), and 1400J(b) are each
amended by striking ``January 1, 2010'' and inserting ``January
1, 2016''.
(3) Section 1400F(d) is amended--
(A) by striking ``December 31, 2010'' and inserting
``December 31, 2016'', and
(B) by striking ``December 31, 2014'' and inserting
``December 31, 2020''.
(4) Section 1400I(d)(2)(A) is amended by striking ``2010''
and inserting ``2016''.
SEC. 3. REVISION OF BENEFITS.
(a) Safe Harbor for Meeting Requirement That 35 Percent of
Employees Be Residents of Zone.--Paragraph (2) of section 1394(b)
(defining enterprise zone facility) is amended by adding at the end the
following new subparagraph:
``(D) Additional safe harbor for meeting
requirement that 35 percent of employees be residents
of zone.--The requirements of subsections (b)(6) and
(c)(7) of section 1397C shall not fail to be treated as
met for any period with respect to a qualified business
if--
``(i) as of the date of issuance of the
issue, it is reasonably expected that within 3
years after such date the business will
increase employment by at least the lesser of--
``(I)(aa) 500 full-time employees
in the case of a business located in a
renewal community or in a rural area
(as defined in section 1393(a)(2)) in
an empowerment zone or enterprise
community, or
``(bb) 1,000 full-time employees in
the case of a business located outside
a rural area (as so defined) in an
empowerment zone or enterprise
community, or
``(II) 10 percent of the number of
full-time employees estimated to have
been employed in such zone or community
on the date of its designation,
``(ii) as of the date of issuance of the
issue, it is reasonably expected that as a
result of the bonds the business will increase
employment by at least one job for each
$150,000 in face amount of the issue,
``(iii) at any time within 3 years after
the date of issuance of the issue, the
requirements of such subsections are met, or
``(iv) the business enters into a binding
agreement with the appropriate local government
employment agency to apply a first source rule
to advertise and prioritize employment
opportunities with such business for qualified
residents of such zone or community.''.
(b) Eligibility of Businesses Developing or Holding Intangibles.--
Paragraph (4) of section 1397C(d) is amended by inserting before the
period ``unless the intangibles are developed within the empowerment
zone''.
(c) Reduced Wage Credit Allowable for Zone Residents Employed
Outside the Zone; Employees Need Not Be Residents of Zone in Which
Employed.--
(1) In general.--Subsection (b) of section 1396 is amended
to read as follows:
``(b) Applicable Percentage.--
``(1) Qualified zone employees who perform substantially
all of their services in an empowerment zone.--The applicable
percentage is 20 percent with respect to qualified zone
employees who would meet the requirement of subsection (d)(1)
if only services performed within an empowerment zone were
taken into account.
``(2) Other qualified zone employees.--
``(A) In general.--The applicable percentage is--
``(i) 20 percent in the case of designated
qualified zone employees of employers which are
enterprise zone businesses, and
``(ii) 10 percent in the case of any other
designated qualified zone employee.
``(B) Limitations on number of designated
employees.--
``(i) In general.--For purposes of
subparagraph (A), the term `designated
qualified zone employee' means a qualified zone
employee--
``(I) to whom paragraph (1) does
not apply, and
``(II) who is designated under this
subparagraph.
``(ii) Manner of designations.--
Designations under this subparagraph shall be
made by the local government or governments
which nominated the area to be an empowerment
zone.
``(iii) Limitation on designations.--The
number of employees for whom a designation
under this subparagraph is in effect at any one
time with respect to each empowerment zone
shall not exceed--
``(I) 500 for purposes of
subparagraph (A)(i), and
``(II) 2,000 for purposes of
subparagraph (A)(ii).''.
(2) Qualified zone employee.--Paragraph (1) of section
1396(d) is amended--
(A) by striking ``within an empowerment zone'' in
subparagraph (A), and
(B) by striking ``such empowerment zone'' in
subparagraph (B) and inserting ``an empowerment zone''.
(d) Carryforward of Unallocated State Commercial Revitalization
Expenditure Ceiling.--Paragraph (1) of section 1400I(d) is amended to
read as follows:
``(1) In general.--The aggregate commercial revitalization
expenditure amount which a commercial revitalization agency may
allocate for any calendar year is the amount equal to the sum
of--
``(A) the amount of the State commercial
revitalization expenditure ceiling determined under
this paragraph for such calendar year for such agency
(determined without regard to subparagraph (B)), and
``(B) the aggregate of the unused State commercial
revitalization expenditure ceilings determined under
this paragraph for such agency for each of the 2
preceding calendar years.
For purposes of subparagraph (B), amounts of expenditure
ceiling shall be treated as allocated by an agency first from
unused amounts for the second preceding calendar year, then
from unused amounts for the 1st preceding calendar year, and
then from amounts from the current year State allocation.''.
(e) Authority To Expand Boundaries of Zones and Communities.--
(1) Empowerment zones and enterprise communities.--Section
1391 is amended by adding at the end the following new
subsection:
``(i) Authority To Expand Boundaries of Designated Areas.--
``(1) In general.--At the request of all governments which
nominated an area as an empowerment zone or enterprise
community, the appropriate Secretary may expand the area of
such zone or community to include 1 or more noncontiguous areas
if such governments establish to the satisfaction of the
appropriate Secretary that such expansion furthers the purposes
of the designation of the initial area as such a zone or
community.
``(2) Rural areas.--With respect to any empowerment zone or
enterprise community located in a rural area, at the request of
the nominating local government, the appropriate Secretary
shall expand the area of such zone or community to include the
entire area of such nominating local government, but only if--
``(A) the poverty rate and the unemployment rate
for such entire area as determined by the 2000
decennial census data was at least 110 percent of such
rate for the United States,
``(B) during the period beginning with the 1990
decennial census and ending with the 2000 decennial
census, such entire area has a net outmigration of
inhabitants of at least 10 percent of the population of
such area, and
``(C) such entire area meets 1 or more of the
following criteria determined by the 2000 decennial
census data:
``(i) Median household income is not more
than 70 percent of such income for the United
States.
``(ii) Per capita income is not more than
75 percent of such income for the United
States.
``(iii) The percentage of such area's
population which is disabled is at least 130
percent of such percentage for the United
States.''.
(2) Renewal communities.--Section 1400E is amended by
adding at the end the following new subsection:
``(h) Authority To Expand Boundaries of Designated Areas.--
``(1) In general.--At the request of all governments which
nominated an area as a renewal community, the Secretary of
Housing and Urban Development may expand the area of such
community to include 1 or more noncontiguous areas if such
governments establish to the satisfaction of such Secretary
that such expansion furthers the purposes of the designation of
the initial area as a renewal community.
``(2) Rural areas.--With respect to any renewal community
located in a rural area, at the request of the nominating local
government, the appropriate Secretary shall expand the area of
such community to include the entire area of such nominating
local government, but only if--
``(A) the poverty rate and the unemployment rate
for such entire area as determined by the 2000
decennial census data was at least 110 percent of such
rate for the United States,
``(B) during the period beginning with the 1990
decennial census and ending with the 2000 decennial
census, such entire area has a net outmigration of
inhabitants of at least 10 percent of the population of
such area, and
``(C) such entire area meets 1 or more of the
following criteria determined by the 2000 decennial
census data:
``(i) Median household income is not more
than 70 percent of such income for the United
States.
``(ii) Per capita income is not more than
75 percent of such income for the United
States.
``(iii) The percentage of such area's
population which is disabled is at least 130
percent of such percentage for the United
States.''.
(f) Modification of Requirement for Expanding Designated Area Based
on 2000 Census.--Clause (ii) of section 1400E(g)(1)(A) is amended to
read as follows:
``(ii) such tract has a poverty rate using
2000 census data--
``(I) which is at least 20 percent,
or
``(II) which exceeds the poverty
rate for such tract using 1990 census
data.''.
(g) Repeal of Exclusion of Central Business District From
Eligibility as Designated Area.--Paragraph (3) of section 1392(a) is
amended by adding ``and'' at the end of subparagraph (B), by striking
``, and'' at the end of subparagraph (C) and inserting a period, and by
striking subparagraph (D).
(h) Carryover of Unused Increased Section 179 Expensing Limit.--
(1) In general.--Subparagraph (A) of section 1397A(a)(1) is
amended to read as follows:
``(A) the sum of--
``(i) $35,000, and
``(ii) the aggregate of the unused
increased limitations for each of the 2
preceding taxable years, or''.
(2) Unused increased limitation.--Section 1392 is amended
by adding at the end the following new subsection:
``(c) Unused Increased Limitation.--For purposes of subsection
(a)(1)(A)--
``(1) In general.--The unused increased limitation for any
taxable year is the excess (but not more than $35,000) of the
limitation under section 179(b)(1) as increased under
subsection (a) over the cost of section 179 property which is
qualified zone property placed in service during the taxable
year.
``(2) Ordering rule.--The limitation under section
179(b)(1) as increased under subsection (a) shall be treated as
used first from unused limitation for the second preceding
calendar year, then from unused limitation for the 1st
preceding calendar year, and then from such limitation for the
current year.''.
(i) Election of Financing Arrangement in Lieu of Tax Benefits.--
Section 1396 is amended by adding at the end the following new
subsection:
``(e) Election of Financing Arrangement in Lieu of Tax Benefits.--
``(1) In general.--At the election of any significant
empowerment zone business, for the payment period of the debt
obligation designated in such election by such business--
``(A) such business--
``(i) shall not be treated as an enterprise
zone business for purposes of section 1396, and
``(ii) shall not be allowed any deduction
for depreciation under section168 with respect
to qualified zone property, and
``(B) the Secretary shall make the payments
described in paragraph (2) to the holder of such debt
obligation.
``(2) Payments.--
``(A) In general.--At the beginning of each year of
the payment period, the Secretary shall pay (out of any
money in the Treasury not otherwise appropriated) to
the holder of the debt obligation designated by such
zone business an amount equal to the value of the tax
benefits under this chapter for such year to which such
zone business would be entitled but for the election
under this subsection.
``(B) Assumptions.--For purposes of valuing tax
benefits under subparagraph (A), the Secretary shall
assume that--
``(i) the business is an enterprise zone
business for purposes of section 1396,
``(ii) all qualified zone property placed
in service by the zone business is a single
property with a recovery period under section
168 of 15 years, and
``(iii) the rate of tax under this chapter
is 25 percent.
``(C) Payment period.--The payment period is the
period of 15 calendar years beginning with the earlier
of--
``(i) the calendar year specified (before
the beginning of such year) by the taxpayer as
the 1st year of the payment period, or
``(ii) the 5th calendar year beginning
after the date that the election under this
subsection is made.
``(3) Significant empowerment zone business.--For purposes
of this subsection, the term `significant empowerment zone
business' means any trade or business operating in an
empowerment zone if--
``(A) such business is nominated by the State or
local government which nominated the area taken into
account under section 1396 to be an empowerment zone,
and
``(B) the Secretary of Housing and Urban
Development determines that it is reasonably
anticipated that such business will increase employment
in such zone during the first 3 years of the payment
period by at least the lesser of--
``(i) 1,000 full-time employees, or
``(ii) 10 percent of the number of full-
time employees estimated to have been employed
in such zone on the date of its designation.''.
(j) Certain Federally Guaranteed Bonds Issued To Provide
Investments in Empowerment Zones and Renewal Communities Permitted To
Be Tax-Exempt, etc.--Subparagraph (A) of section 149(b)(3) is amended
by striking ``or'' at the end of clause (ii), by striking the period at
the end of clause (iii) and inserting ``, or'', and by adding at the
end the following new clause:
``(iv) any guarantee by a Federal Home Loan
Bank for a bond 95 percent or more of the net
proceeds of which are to be used to provide
property in an empowerment zone or renewal
community.''.
(k) Tax-Exempt Interest of Financial Institutions on Zone Facility
Bonds Not Subject to Interest Disallowance.--Subparagraph (B) of
section 265(b)(3) (defining qualified bond) is amended by adding at the
end the following new clause:
``(iii) Enterprise zone facility bonds.--
The term `qualified tax-exempt obligation'
includes any obligation which is treated as an
exempt facility bond by section 1394.''.
(l) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
(m) Reporting.--The Secretary of the Treasury (or the Secretary's
delegate) shall annually submit to the Committee on Ways and Means of
the House of Representatives and the Committee on Finance of the Senate
a report detailing for each empowerment zone, enterprise community, and
renewal community the amount and type of claimed tax benefits.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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