Promise Zone Job Creation Act of 2016

Summary: Promise Zone Job Creation Act of 2016 This bill amends the Internal Revenue Code to direct the Departments of Housing and Urban Development and Agriculture, acting jointly, to designate, before January 1, 2017, not more than 20 areas as Promise Zones for purposes of priority consideration in federal grant programs and initiatives. Six of such areas shall be outside of a metropolitan statistical area or shall be determined to be rural areas.  A "Promise Zone" is any area with a&nbsp;continuous boundary and a&nbsp;population of not more than&nbsp;200,000 that is nominated by one or more local governments or Indian tribes and designated on the basis of unemployment rates, poverty rates, household income, home ownership, labor force participation, and educational attainment. An application for designation as a Promise Zone shall include a competitiveness plan that addresses the need of the area to attract investment and jobs and improve educational opportunities. The bill allows: (1) a Promise Zone employment tax credit for wages paid to a qualified zone or resident employee, and (2) expensing of Promise Zone property.  A "Promise Zone property" is a property that is: (1) tangible property with a&nbsp;recovery period of 20 years or less for depreciation purposes,&nbsp;water utility property, computer software, or qualified leasehold improvement property; (2) acquired by purchase for use&nbsp;in the active conduct of a trade or business; and (3) originally placed in service in a Promise Zone. 

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Promise Zone Job Creation Act of 
2016''.

SEC. 2. PROMISE ZONES.

    (a) In General.--Subchapter Y of chapter 1 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new part:

                        ``PART IV--PROMISE ZONES

``Sec. 1400V-1. Designation of Promise Zones.
``Sec. 1400V-2. Promise Zone employment credit.
``Sec. 1400V-3. Expensing of Promise Zone property.

``SEC. 1400V-1. DESIGNATION OF PROMISE ZONES.

    ``(a) In General.--For purposes of this part, the term `Promise 
Zone' means any area--
            ``(1) which is nominated by 1 or more local governments or 
        Indian Tribes (as defined in section 4(13) of the Native 
        American Housing Assistance and Self-Determination Act of 1996 
        (25 U.S.C. 4103(13))) for designation as a Promise Zone 
        (hereafter in this section referred to as a `nominated area'),
            ``(2) which has a continuous boundary,
            ``(3) the population of which does not exceed 200,000, and
            ``(4) which the Secretary of Housing and Urban Development 
        and the Secretary of Agriculture, acting jointly, designate as 
        a Promise Zone, after consultation with the Secretary of 
        Commerce, the Secretary of Education, the Attorney General, the 
        Secretary of Health and Human Services, the Secretary of Labor, 
        the Secretary of the Treasury, the Secretary of Transportation, 
        and other agencies as appropriate.
    ``(b) Number of Designations.--
            ``(1) In general.--Not more than 20 nominated areas may be 
        designated as Promise Zones.
            ``(2) Number of designations in rural areas.--Of the areas 
        designated under paragraph (1), six of such areas shall be 
        areas--
                    ``(A) which are outside of a metropolitan 
                statistical area (within the meaning of section 
                143(k)(2)(B)), or
                    ``(B) which are determined by the Secretary of 
                Agriculture to be rural areas.
    ``(c) Period of Designations.--
            ``(1) In general.--The Secretary of Housing and Urban 
        Development and the Secretary of Agriculture shall, acting 
        jointly, designate 20 areas as Promise Zones before January 1, 
        2017.
            ``(2) Effective dates of designations.--The designation of 
        any Promise Zone shall take effect--
                    ``(A) for purposes of priority consideration in 
                Federal grant programs and initiatives (other than this 
                part), upon execution of the Promise Zone agreement, 
                and
                    ``(B) for purposes of this part, on January 1 of 
                the first calendar year beginning after the date of the 
                execution of the Promise Zone agreement.
            ``(3) Termination of designations.--The designation of any 
        Promise Zone shall end on the earlier of--
                    ``(A) the end of the 10-year period beginning on 
                the date that such designation takes effect, or
                    ``(B) the date of the revocation of such 
                designation.
            ``(4) Application to certain zones already designated.--In 
        the case of any area designated as a Promise Zone by the 
        Secretary of Housing and Urban Development and the Secretary of 
        Agriculture before the date of the enactment of this section, 
        such area shall be taken into account as a Promise Zone 
        designated under this section and shall reduce the number of 
        Promise Zones remaining to be designated under paragraph (1).
    ``(d) Limitations on Designations.--No area may be designated under 
this section unless--
            ``(1) the entities nominating the area have the authority 
        to nominate the area of designation under this section,
            ``(2) such entities provide written assurances satisfactory 
        to the Secretary of Housing and Urban Development and the 
        Secretary of Agriculture that the competitiveness plan 
        described in the application under subsection (e) for such area 
        will be implemented and that such entities will provide the 
        Secretary of Housing and Urban Development and the Secretary of 
        Agriculture with such data regarding the economic conditions of 
        the area (before, during, and after the area's period of 
        designation as a Promise Zone) as such Secretary may require, 
        and
            ``(3) the Secretary of Housing and Urban Development and 
        the Secretary of Agriculture determine that any information 
        furnished is reasonably accurate.
    ``(e) Application.--No area may be designated under this section 
unless the application for such designation--
            ``(1) demonstrates that the nominated area satisfies the 
        eligibility criteria described in subsection (a), and
            ``(2) includes a competitiveness plan which--
                    ``(A) addresses the need of the nominated area to 
                attract investment and jobs and improve educational 
                opportunities,
                    ``(B) leverages the nominated area's economic 
                strengths and outlines targeted investments to develop 
                competitive advantages,
                    ``(C) demonstrates collaboration across a wide 
                range of stakeholders,
                    ``(D) outlines a strategy which connects the 
                nominated area to drivers of regional economic growth, 
                and
                    ``(E) proposes a strategy for focusing on increased 
                access to high-quality affordable housing and improved 
                public safety.
    ``(f) Selection Criteria.--From among the nominated areas eligible 
for designation under this section, the Secretary of Housing and Urban 
Development and the Secretary of Agriculture shall designate Promise 
Zones on the basis of--
            ``(1) the effectiveness of the competitiveness plan 
        submitted under subsection (e) and the assurances made under 
        subsection (d),
            ``(2) unemployment rates, poverty rates, household income, 
        home ownership, labor force participation, educational 
        attainment, and such other factors as the Secretary of Housing 
        and Urban Development and the Secretary of Agriculture may 
        identify, and
            ``(3) other criteria as determined by the Secretary of 
        Housing and Urban Development and the Secretary of Agriculture.
The Secretary of Housing and Urban Development and the Secretary of 
Agriculture may set minimal standards for the levels of unemployment 
and poverty that must be satisfied for designation as a Promise Zone.

``SEC. 1400V-2. PROMISE ZONE EMPLOYMENT CREDIT.

    ``(a) Amount of Credit.--For purposes of section 38, the amount of 
the Promise Zone employment credit determined under this section with 
respect to any employer for any taxable year is the applicable 
percentage of the qualified 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--
            ``(1) in the case of qualified wages described in 
        subsection (c)(1)(A), 20 percent, and
            ``(2) in the case of qualified wages described in 
        subsection (c)(1)(B), 10 percent.
    ``(c) Qualified Wages.--For purposes of this section--
            ``(1) In general.--The term `qualified wages' means any 
        wages paid or incurred by an employer for services performed by 
        an employee while such employee is--
                    ``(A) a qualified zone employee, or
                    ``(B) a qualified resident employee.
            ``(2) Only first $15,000 of wages per year taken into 
        account.--With respect to each qualified employee, the amount 
        of qualified wages taken into account for a calendar year shall 
        not exceed $15,000.
            ``(3) Coordination with work opportunity credit.--
                    ``(A) In general.--The term `qualified wages' shall 
                not include wages taken into account in determining the 
                credit under section 51.
                    ``(B) Coordination with dollar limitation.--The 
                $15,000 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.
            ``(4) Wages.--The term `wages' has the meaning given such 
        term by section 1397(a).
    ``(d) Qualified Employee.--For purposes of this section--
            ``(1) Qualified employee.--The term `qualified employee' 
        means any employee who is a qualified zone employee or a 
        qualified resident employee.
            ``(2) Qualified zone employee.--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 Promise 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 a Promise 
                Zone.
            ``(3) Qualified resident employee.--Except as otherwise 
        provided in this subsection, the term `qualified resident 
        employee' means, with respect to any period, an employee of an 
        employer if the principal place of abode of such employee 
        during such period is within a Promise Zone, but substantially 
        all of the services performed during such period by such 
        employee for such employer are not performed within a Promise 
        Zone in a trade or business of the employer.
            ``(4) Certain individuals not eligible.--The terms 
        `qualified zone employee' and `qualified resident employee' 
        shall not include any individual described in paragraph (2) of 
        section 1396(d)(2) (determined after application of paragraph 
        (3) thereof).
    ``(e) Special Rules.--Rules similar to the rules of section 1397 
shall apply for purposes of this section.
    ``(f) Taxpayer Reporting.--No credit shall be determined under this 
section with respect to any taxpayer for any taxable year unless such 
taxpayer provides the Secretary with such information as the Secretary 
may require to allow the Secretary to evaluate the effectiveness of the 
program established under this part.

``SEC. 1400V-3. EXPENSING OF PROMISE ZONE PROPERTY.

    ``(a) In General.--A taxpayer may elect to treat the cost of any 
Promise Zone property as an expense which is not chargeable to capital 
account. Any cost so treated shall be allowed as a deduction for the 
taxable year in which the Promise Zone property is placed in service.
    ``(b) Promise Zone Property.--For purposes of this section--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the term `Promise Zone property' means property--
                    ``(A) which is--
                            ``(i) tangible property (to which section 
                        168 applies) with an applicable recovery period 
                        (within the meaning of section 168) of 20 years 
                        or less,
                            ``(ii) water utility property described in 
                        section 168(e)(5),
                            ``(iii) computer software described in 
                        section 179(d)(1)(A)(ii), or
                            ``(iv) qualified leasehold improvement 
                        property (as defined in section 168(e)),
                    ``(B) which is acquired by purchase (as defined in 
                section 179(d)(2)) for use in the active conduct of a 
                trade or business, and
                    ``(C) which is originally placed in service by the 
                taxpayer in a Promise Zone.
            ``(2) Exception for certain property.--Such term shall not 
        include any property to which section 168(g) applies.
    ``(c) Election.--An election under this section shall be made under 
rules similar to the rules of section 179(c).
    ``(d) Coordination With Section 179.--For purposes of section 179, 
Promise Zone property shall not be treated as section 179 property.
    ``(e) Application of Other Rules.--Rules similar to the rules of 
paragraphs (3), (4), (5), (7), (9), and (10) of section 179(d) shall 
apply for purposes of this section.
    ``(f) Taxpayer Reporting.--This section shall not apply with 
respect to any taxpayer for any taxable year unless such taxpayer 
provides the Secretary with such information as the Secretary may 
require to allow the Secretary to evaluate the effectiveness of the 
program established under this part.''.
    (b) Conforming Amendments.--
            (1) Section 38(b) of such Code is amended by striking 
        ``plus'' at the end of paragraph (35), by striking the period 
        at the end of paragraph (36) and inserting ``, plus'', and by 
        adding at the end the following new paragraph:
            ``(37) the Promise Zone employment credit determined under 
        section 1400V-2.''.
            (2) The table of parts for subchapter Y of chapter 1 of 
        such Code is amended by adding at the end the following new 
        item:

                      ``Part IV. Promise Zones''.

    (c) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall take 
        effect on the date of the enactment of this Act.
            (2) Promise zone employment credit.--Section 1400V-2 of the 
        Internal Revenue Code of 1986, as added by this section, shall 
        apply to wages paid after the date of the enactment of this 
        Act, in taxable years ending after such date.
            (3) Expensing of promise zone property.--Section 1400V-3 of 
        such Code, as so added, shall apply to property placed in 
        service after the date of the enactment of this Act, in taxable 
        years ending after such date.