Text: S.3827 — 109th Congress (2005-2006)All Information (Except Text)

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Introduced in Senate (08/03/2006)


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.