GAO-10-464R Revitalization Programs 

United States Government Accountability Office

Washington, DC 20548 

March 12, 2010 

The Honorable Max Baucus 

Chairman 

The Honorable Charles E. Grassley 

Ranking Member 

Committee on Finance 

United States Senate 

The Honorable Sander M. Levin 

Acting Chairman 

The Honorable Dave Camp 

Ranking Member 

Committee on Ways and Means 

House of Representatives 

Subject: Revitalization Programs: Empowerment Zones, Enterprise Communities, 

and Renewal Communities 

Beginning in 1993 and in subsequent legislation in 1997, 1999, and 2000, Congress 

established the Empowerment Zone (EZ), Enterprise Community (EC), and Renewal 

Community (RC) programs to reduce unemployment and generate economic growth 

in selected Census tracts. Urban and rural communities designated as EZs, ECs, or 

RCs received grants, tax incentives, or a combination of both to stimulate community 

development and business activity. The EZ, EC, and RC programs expired on 

December 31, 2009, though legislation has been introduced to extend the programs. 

The Community Renewal Tax Relief Act of 2000 (Public Law 106-554) mandated that 

GAO report to Congress by January 31, 2004; 2007; and 2010 on the EZ, EC, and RC 

programs and their effect on poverty, unemployment, and economic growth in 

designated program areas. We issued the first two mandated reports in 2004 and 

2006.1

 The purpose of this report is to make publicly available information we 

provided in a briefing to your staffs on January 29, 2010. Enclosure I contains a copy 

of the briefing slides, which describe (1) the purposes and characteristics of the EZ, 

EC, and RC programs; (2) the information available on the results of the programs; 

 

1

GAO, Community Development: Federal Revitalization Programs Are Being Implemented, but Data 

on the Use of Tax Benefits Are Limited, GAO-04-306 (Washington, D.C.: Mar. 5, 2004) and, 

Empowerment Zone and Enterprise Community Program: Improvements Occurred in 

Communities, but the Effect of the Program Is Unclear, GAO-06-727 (Washington, D.C.: Sept. 22, 

2006). 
and (3) agency actions in response to GAO’s prior recommendations and 

observations. 

Background 

Congress established the first round of EZ and EC programs through the Omnibus 

Budget Reconciliation Act of 1993. Further legislation in 1997 and 1999 authorized 

the second rounds of the EZ and EC programs, while the Community Renewal Tax 

Relief Act of 2000 authorized a third round of EZs and established the RC program. 

The Department of Health and Human Services (HHS), the Department of Housing 

and Urban Development (HUD), the United States Department of Agriculture 

(USDA), and the Internal Revenue Service (IRS) had key roles in administering the 

programs.2 While eligibility varied slightly by program and round, the designated EZ, 

EC, and RC communities were selected largely on the basis of poverty and 

unemployment rates, population, and other area statistics. In general, program 

benefits in the first two rounds included a combination of grants and tax incentives, 

while the third-round EZs and RCs generally received only tax benefits. 

In our 2004 report, we described the features of the EZ, EC, and RC programs, the 

extent to which the programs had been implemented, the methods used to evaluate 

their effectiveness, and the results of these evaluations. We recommended that HUD, 

USDA, and IRS collaborate to (1) identify the data needed to assess the use of the tax 

benefits and the various means of collecting such data; (2) determine the costeffectiveness of collecting these data; (3) document the findings of their analysis; and, 

if necessary, (4) seek the authority to collect the data, if a cost-effective means was 

available. In our 2006 report, we focused on the first round of the EZ and EC 

program that started in 1994 and discussed program implementation and oversight, 

the data that were available on the use of program tax benefits, and the programs’ 

effect on poverty, unemployment, and economic growth. We made observations that 

should be considered if these or similar programs are authorized in the future. Our 

final briefing slides provide an overview of all three program rounds with a focus on 

the Round III EZs and RCs that primarily received tax benefits. It also addresses 

HUD, USDA, and IRS’ responses to our recommendations and observations in the 

two prior reports. 

Summary 

While these programs initially offered a mix of grants and tax incentives for 

community and economic development, later rounds offered primarily tax incentives 

for business development. Grant funds in the early EZ and EC programs financed 

projects and activities to enhance community development. Further, the facility bond 

feature of the EZ and EC programs helped facilitate large business projects. More 

recently, the Commercial Revitalization Deduction (CRD) feature of the RC program 

helped to facilitate smaller business projects. 

Some information is available on the results of the EZ, EC, and RC programs. For 

instance, HUD collects data on utilization of facility bonds in EZs and the CRD in 

RCs. In addition, IRS provided data to HUD on EZ/RC employment credit use. 

 

2

HHS was involved only in the first round of EZs and ECs. 

Page 2 GAO-10-464R Revitalization Programs 
However, data limitations make it difficult to accurately tie the use of the credits to 

specific designated communities. It is not clear how much businesses are using other 

EZ, EC, and RC tax incentives, because IRS forms do not associate these incentives 

with the programs or with specific designated communities. Going forward, the U.S. 

Census Bureau will begin releasing more frequent poverty and employment updates 

at the Census tract level than it has traditionally provided, and this information could 

be a useful tool in determining the effects of such programs on poverty and 

employment in designated Census tracts. 

In response to our prior recommendations and observations, HUD and IRS have 

collaborated to provide outreach and to share data on the use of some program tax 

incentives. In addition, HUD has taken steps to improve data collection and program 

monitoring. However, the agencies are not yet able to tie the use of tax benefits, 

including employment credits, to particular communities because of limitations in 

distinguishing such information on existing tax forms, making it difficult to begin 

assessing the impacts of these tax benefits. 

To accomplish our work, we reviewed relevant documents and interviewed officials 

from HUD, USDA, and IRS. We also conducted a survey of the most recently 

designated EZs and RCs and performed fieldwork at selected urban and rural EZ and 

RC locations. 

We conducted our work from July 2009 to January 2010 in accordance with generally 

accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives. 

We provided a draft of the slides to HUD, USDA, and IRS for comment. The three 

agencies provided technical comments, which were incorporated where appropriate. 

HUD’s Acting General Deputy Assistant Secretary for Community Planning and 

Development provided written comments, which are presented in enclosure II. 

-------------------------------------------------------------------------------------------------------------------------------- 

We are sending copies of this letter and the slides to the Secretaries of Housing and 

Urban Development, Agriculture, Treasury, and other interested parties. In addition, 

the letter and slides will be available at no charge on GAO’s Web site at 

http://www.gao.gov. 

Page 3 GAO-10-464R Revitalization Programs 
If you or your staffs have any questions about this report, please contact me at 202-

512-4325 or shearw@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. Major 

contributors to this report were Andy Finkel, Assistant Director; Emily Chalmers; 

Barry Kirby; Kirsten Lauber; John McGrail; Marc Molino; Ellen Ramachandran 

(intern); Lisa Reynolds; and Walter Vance. 

William B. Shear 

Director, Financial Markets and Community Investment 

Enclosures 

Page 4 GAO-10-464R Revitalization Programs 
Information on Empowerme

Enterprise Community, 

Renewal Community Prog

Briefing for Congressional Addre

Enclosure I
Overview

Information on Empowerment Zon

Enterprise Community (EC), a

Renewal Community (RC) Prog

• Objectives

• Summary

• Background

• Scope and methodology

• Discussion of objectives

• Profiles of sites visited
• This briefing is in response to the Community Re

of 2000, which mandated that GAO audit and repand 2010 on the EZ/EC/RC programs and their eunemployment, and economic growth. To date, wfirst two of these required reports. These briefing 

results of our 2010 review.

• Our objectives were to describe:

1) purposes and characteristics of the EZ, EC

2) information available on the results of the E

programs; and

3) agency actions in response to GAO’s prior 

and observations.

Objective
The EZ, EC, and RC programs were designed to revitalize high-

distressed communities that were designated through a competi

these revitalization programs offered a mix of grants and tax inc

economic development, but later rounds offered primarily tax incdevelopment.Some additional data on EZ/EC/RC results, such as more freque

statistics on poverty at the Census tract level, are available begidata on the use of program tax benefits and their impacts are lim

• The Department of Housing and Urban Development (HUD

of the Commercial Revitalization Deduction (CRD) and facicommunities. 

• The Internal Revenue Service (IRS) provided data to HUD o

employment credits, though data limitations have inhibited taccurately tie the use of the credits to specific designated c

• The extent to which businesses are using EZ/EC/RC tax inc

bonds, CRDs, and employment credits is not measurable bassociate these incentives with such programs or specific d

• Census data on poverty and unemployment in these areas 

available more than once per decade, but Census is taking 

frequent updates in the future.

Summar
Since 2006, HUD and IRS have initiated outreach and data-sto recommendations we made in 2004.1 HUD has also made 

response to GAO’s observations in 2006 regarding data colle

However, the agencies are not yet able to tie the use of empparticular communities, making it difficult to begin assessing benefits.

Summar

1U.S. General Accounting Office, Community Development: Federal Revitalization Programs Are Being Implem

Benefits Are Limited, GAO-04-306 (Washington, D.C.: March 5, 2004). 2U.S. Government Accountability Office, Empowerment Zone and Enterprise Community Program: Improveme

Effect of the Program Is Unclear, GAO-06-727 (Washington, D.C.: Sept. 22, 2006).
Backgroun

• Congress authorized the EZ, EC, and RC program

of legislation beginning in 1993.

Program Title Summary

Round I EZ/EC

Omnibus Budget Reconciliation Act of 1993

• Established the EZ/EC program and its package of 

• Authorized 6 urban and 3 rural Round I EZsa

• Authorized 65 urban and 30 rural Round I ECsa• Established eligibility requirements and selection cr

Round II EZ/EC

Taxpayer Relief Act of 1997

• Authorized 5 rural and 15 urban Round II EZs• Changed the eligibility requirements for EZ/ECs• Created the Washington, D.C. EZ 

Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999

• Authorized up to 20 additional rural ECs

Round III EZ and RC

Community Renewal Tax Relief Act of 2000

• Authorized 2 rural and 7 urban Round III EZs• Established the RC program and its package of tax • Authorized designation of 40 RCs, with 12 designat

• Made additional tax benefits available to EZs

American Jobs Creation Act of 2004

•Allowed the expansion of RC boundaries based on 2

Source: GAO summary of P.L. 103-66, P.L. 105-34, P.L. 105-277, P.L. 106-554, and P.L. 108-357a HUD subsequently added 2 Supplemental EZs and 4 Enhanced ECs. In January 2000, the 2 Supplemental 
Backgroun

• Designations for EZs, ECs, and RCs were chosen 

of residents’ socioeconomic characteristics.

• The EZ, EC, and RC programs have each offered 

grant funds and tax benefits targeting designated c

- EZ and EC programs have generally offered a mix o

benefits.

- No grant funds were provided with later RC and Rou

programs.

• Other tax credits are available to businesses in are

distressed that may or may not be in EZ/EC/RC decommunities, including the:

- Work Opportunity Tax Credit,- Welfare to Work Tax Credit, and- New Markets Tax Credit.
Backgroun

• Four federal agencies have had key roles in admin

EZ/EC/RC revitalization programs.

- HUD oversaw the EZ/EC programs in urban areas, a

Round II urban EZs, and oversaw all of the RCs.

- The U.S. Department of Agriculture (USDA) oversaw 

rural areas and administered grants to Round II rura

III rural EZs.

- The U.S. Department of Health and Human Services 

block grant funds to communities designated in Rouprograms.

- IRS has been responsible for administering tax bene

the EZ, EC, and RC programs.
Backgroun

HHS HUD 

Round I EZs – Urban

Round I EZs – Rural

Round I ECs – Urban

Round I ECs – Rural

√

√

√

√

√

√

Round II EZs – Urban

Round II EZs – Rural 

Round II ECs – Rural (no urban)

√

Round III EZs – Urban

Round III EZs – Rural

RCs – Urban

RCs – Rural

√

√

√

Administration of EZ/EC/RC Program
Backgroun

• GAO has previously reported on the characteristics 

EZ, EC, and RC programs.

- In 2004, we reported on the features of the programs

they had been implemented, the methods used to eveffectiveness, and the results of these evaluations.

 We concluded that the programs had been implemen

on the use of EZ and RC tax benefits presented multevaluating the programs. We noted that acquiring adattribute the use of the tax benefits to particular EZs a

facilitate an audit of these programs. Additional tax d

to evaluate certain aspects of the programs, such as 

benefits.

 We further reported that without utilization data, EZs 

reliably report on how local businesses used the progGAO and other researchers to determine the programcommunities.
Backgroun

- Our 2006 report, which focused on Round I EZ and 

discussed program implementation and oversight; tthe use of program tax benefits; and the programs’ unemployment, and economic growth, with the follo

 Round I EZs and ECs had expended 85 percent of $

a variety of projects, mostly involving community dev

 Reliable data on the extent of leveraging funds with o

available.

 Federal agencies responsible for program oversight—

and USDA—collected some information on budgeting 

but did not account for amounts actually spent on spe

 The extent of federal monitoring varied across EZ an Detailed IRS data on the use of EZ/EC program tax b

available.

 Although improvements in poverty, unemployment, a

occurred in the EZs and ECs, our econometric analyscould not tie these changes definitively to the EZ des

1 HHS was involved only in Round I programs, administering the largest share of grant fun
Backgroun

• The EZ, EC, and RC programs expired December 

- In December 2009, the House passed the Tax Exte

which would extend the EZ and RC programs for on2010 the Senate also passed the Act.

- House and Senate bills proposing longer-term prog

were referred to the relevant committees.
Scope and Meth

• To assess the purposes and characteristics of the EZ, E

we reviewed relevant laws and regulations and IRS pubinterviewed HUD and USDA officials. We also drew on federal revitalization programs.

• To determine what information was available on results 

EZs and ECs, we reviewed HUD and USDA online perfosystems; interviewed HUD, USDA, and IRS officials; and 

report on EZs and ECs. To obtain information on Round surveyed all RCs and Round III EZ administrators. Our rate of 100 percent. We also conducted site visits and tewith RC and Round III EZ communities that were selecte

of community they were and, in part, on their survey resp

• To assess actions and progress that had been made in a

recommendations, we interviewed HUD, USDA, and IRS 

relevant documentation.

2 We visited the following Round III designated communities: Chicago, Milwaukee, and Ouachita Parish, Louis

Louisiana (rural RC); San Antonio (urban EZ); and FUTURO, TX (rural EZ). We conducted phone interviews New Orleans (urban RC) and the EZ/RC/EC Coalition, an informal organization of local administrators and sois to im

prove the EZ, RC, and EC 

pro

grams.
Scope and Meth

• We conducted this performance audit from July 20

in accordance with generally accepted governmenThose standards require that we plan and perform sufficient, appropriate evidence to provide a reason

findings and conclusions based on our audit object

that the evidence obtained provides a reasonable band conclusions based on our audit objectives.
Obj. 1: Program F

• EZ, EC, and RC programs were designe

unemployment and generate economic 

- EZ, EC, and RC areas had to be nominated fo

by one or more local governments and the statthey were located.

- These communities comprised Census tracts t

largely on the basis of poverty, unemployment 

and other area statistics from the decennial CeRC administrators expressed concern about chcriteria that excluded certain high-poverty Cen

- Nominated EZs and ECs had to submit a strate

how they would meet key program principles, wRCs had to submit a written “course of action” carry out specific legislatively mandated activit
Obj. 1: Program 

EZ/EC/RC Eligibility Requirements by Progra

a Based on 1990 Census data. b In all rounds of the EZ/EC program, communities could not include Census tracts with cen

poverty level of at least 35 percent. The authorizing legislation also established special requirements for nominated Censu

urban areas, at least 70% of households had to have incomes below 80% of the local median. d Nominated communities c

e A developable site is a parcel of land of up to 2,000 acres (including noncontiguous parcels) that can be used for commer

Source: GAO summary of P.L. 103-66, P.L. 105-34, P.L. 106-554, 24 C.F.R. 597, 24 C.F.R. 598, 24 C.F.R. 599, and 7 C.F

Round I Rounds II and III Round I Rounds II and III

Minimum required poverty level in nominated census tractsa 

35% in half of tracts, 25% in 90% of tracts, and 20% in all tractsb

25% in 90% of tracts, 20% in all tractsb

35% in half of tracts, 25% in 90% of tracts, and 20% in all tractsb

25% in 90% of tracts20% in all tractsb

Minimum required unemplo

yment rate

6.3% (1990 national rate)a

6.3% (1990 national rate)a

Required populationa 

Maximum required areaa

20 square milesd 20 square miles, with 

up to 3 developable sitesd,e

1,000 square milesd 1,000 square miles, 

with up to 3 developable sitesd,e

Conditions of general distress

6 indicators, such as high incidence of crime or narcotics use and amount of abandoned housing

17 indicators, such as average years of school completed, number of persons on welfare, and dropout rate

Other requirements 

No minimum specified; could be demonstrateby several different indicators

Maximum: 200,000 or the greater of 50,000 or 

10% of the population of the most populous city within the nominated area Minimum: None

Maximum: 30,000 

Minimum: None

14 indicators, such as average years of schocompleted and incidence of crime or narcoticuse

Strategic plan based on the four key principles of the EZ/EC program: (1) economic opportun(2) sustainable community development; (3) community-based partnerships; and (4) strategic vision for change

Urban EZ/EC Rural EZ/EC
Obj. 1: Program 

• Early rounds of the EZ and EC programs provid

but later rounds offered primarily tax incentives

- The EZ program provided grant funds for EZs in Rou

Round III urban EZs) coupled with tax benefits to burounds of the program. The two rural EZs in Round funds along with the tax benefits, however. 

- The EC program provided some grant funds for both 

tax benefits for the first round. 

- The RC program provided only tax benefits.
Obj. 1: Program F

Program Designated Areas Funds in 

Millions

Round I – EZs Urban EZs

Rural EZsSupplemental EZs

$ 100 $ 40 $ 87 to 125 

Round I – ECs Urban ECs

Rural ECsEnhanced ECs

$ 2.95 $ 2.95 $ 22 

Round II –EZs

a Urban EZs

Rural EZs

$ 25.6 $ 17.7 

Round II – ECs

a Rural ECs $ 2.2 

Round III – EZs

a Urban EZs

Rural EZs

$ ----$ 2.9 

RCs Urban RCs

Rural RCs

$ ----$ ----

Summary of EZ/EC/RC Grant Funds Per Designa

a Grant funds were appropriated to HUD and USDA and were affected by rescissions. 
Obj. 1: Program F

Summary of Tax Benefits 

Wage Credits

Employment Credit

– Annual tax credit for businesses of up to $3,000 or $1,500 fo

employee living and working for the employer in an EZ or RC area, respectively.

Work Opportunity Credit

– Business tax credit of up to $2,400 for each new emp

18 to 24 living in an EZ/EC/RC, or up to $1,200 for a youth summer hire.

Deductions

Commercial Revitalization Deduction

– Accelerated method of depreciation 

certain business costs of new or substantially rehabilitated commercial buildings in an RC (allocate up to $12 million annually per RC)

Increased Section 179 Deduction

– Increased deduction of up to $35,000 of t

eligible property purchases (including equipment and machinery) for businesses in an EZ/R

Investment Incentives

Facility Bonds

– Bonds issued for projects in EZs/ECs by state or local governments 

interest rates to finance construction costs (up to $230 million in urban EZs).

Qualified Zone Academy Bonds

– No interest bonds issued in EZs/ECs by sta

governments to finance school programs, with purchasers receiving interest payments as t

Rollover of Capital Gains

– EZ business owners may be able to postpone part o

gain from the sale of a qualified EZ asset that they hold for more than 1 year.

Increased Exclusion of Capital Gains

– Taxpayers can exclude 60 percent 

from the sale of small business stock in a corporation that qualifies as an enterprise zone b

Exclusion of Capital Gains

– RC business owners can exclude qualified capital 

the sale or exchange of a qualified community asset held more than 5 years

Source: GAO Summary of IRS Publication 954 and HUD fact sheetsa ECs only received tax incentives in Round I.
Obj. 1: Program F

• Early EZ and EC programs targeted community 

large business projects, while the RC program 

medium-sized business projects.1 

- Grant funds in the early EZ and EC programs financ

activities to enhance community development, but tdecreased in successive rounds of the programs.

- The EZ and EC programs featured facility bonds to 

large business projects that were tied to the employthe designated areas.

- The RC program provided more benefits to small an

projects, incorporating the CRD instead of the facilit

- The RC program’s CRD feature, which encompasse

of $12 million per RC and was administered locally, facilitate new construction and rehabilitation projects

1 Categorizing small business projects as those of less than $1 million, medium-sized projects as those betwe

large projects as those more than $10 million.
• GAO has previously observed that improvement

EZs and ECs, though changes could not be concprograms.

- In 2006, we found that in some cases Round I EZs an

a combination of grants and tax incentives, showed impoverty, unemployment, and economic growth (measbusinesses and the number of jobs).1

 In most Round I EZs and ECs, both urban and rural, pov

1990 and 2000, with most communities experiencing stadecreases in the poverty rate that ranged from 2.6 to 14

 Fewer than half of the individual EZs and ECs experienc

unemployment, with declines ranging from 1.5 to 11.7 pecommunities saw increases in unemployment of up to 6.

others did not experience a significant change.

 Most of the Round I communities experienced an increa

measure of economic growth between 1995 and 2004.

1 We used poverty and employment data from the 1990 and 2000 Censuses and obtained data on the number 

private vendor.

Obj. 2: Information 

on the EZ/EC/RC P
- However, we could not definitively tie these improvem

programs.

 An econometric analysis of the eight urban Round I EZs 

whether the changes were a response to the program o

conditions.

 Similarly, interviews and surveys of EZ and EC stakeho

respondents credited the programs for certain improvemexternal factors, such as changes in the national economay have been associated with the economic changes communities.

Obj. 2: Information 

on the EZ/EC/RC P
- In 2004, we observed a small number of evaluations 

conducted on the EZ/EC programs’ effectiveness. 

 The evaluations used a variety of research methods, re

were subject to limitations.1

 While some of these early evaluations described chang

noted that they could not be used to conclude that the E

actually caused the observed changes.

- We also recently reviewed seven academic studies; 

EZs, and one also examined Round I ECs. Like the evaluations used different methods and reported varto poverty and unemployment. Further, none of them evaluated the effect of the tax benefits-only design ourban EZs. 

1 None of the evaluations we reviewed analyzed the RC program.

Obj. 2: Information 

on the EZ/EC/RC P
Obj. 2: Information 

on the EZ/EC/RC P

• Some information on the use of tax benefits is 

but information at the EZ/EC/RC level remains l

- HUD collects information on the use of some progra

authorization from local program officials, including:

 facility bonds that were used for projects in EZs,1 and

 CRD allocations that were used for projects in RCs.

- Facility bonds have been used to finance large cons

areas.

 Local administrators of urban EZs reported that abou

bonds were tied to 40 projects over a 16-year period. 

 Of 31 urban EZs in program rounds I through III, few

facility bonds.

- CRD allocations allowing accelerated depreciation o

facilities in RC areas have benefited small and medprojects.

 Local RC administrators reported allocating over $1.7 

through 2008.

 CRD allocations that were reportedly used represent

the possible total allocations.

1 USDA officials told us that rural administrators sometimes provide facility bond data in their annual reports 

systematically collect this information. 
Obj. 2: Information 

on the EZ/EC/RC P

• Aggregate data on the use of employment cred

broken down to conclusively show the use of sspecific EZ/RC areas.

- IRS has provided HUD with aggregate data from Fo

revealing that filers in EZs and RCs nationwide were million in employment credits for processing years 1

- Aggregate data from IRS Form 1120 returns indicat

were allowed approximately $2.6 billion in employmprocessing years 1997 through 2008.

- However, for both 1040 and 1120 filers, identifying t

taken for specific EZ or RC areas has been problem

 IRS officials stated that data on employment credits t

linked to specific EZs or RCs because there is no inforelationship of the taxpayer’s address to the EZ or RC employment tied to these credits occurred. 

 IRS Form 8844 does not break down the employmen

specific EZ or RC location(s).

1 According to IRS, the processing year is the calendar year in which the IRS received and processed the tax re

immediately preceding the processing year, although data may also reflect late filed returns for earlier years.
Obj. 2: Information 

on the EZ/EC/RC P

- Other than employment credits, HUD does not rece

can be linked to EZ/EC/RC programs.

- Challenges exist to identifying EZ/EC/RC tax benefi

associating them with a given designated communit

 Most IRS forms incorporating EZ/EC/RC tax benefits 

revitalization program activities, with the exception of solely addresses the EZ and RC employment credits

 Breaking out figures on tax benefits tied to EZ/EC/RC 

difficult on most IRS forms, because the forms are no

programs and because EZ/EC/RC credits and deducaggregated with other types of credits and deduction

 EZ and RC administrators told us that a lack of data o

within their designated communities inhibited their abeffectiveness. For example, the only tax benefits that track were CRDs and EZ facility bonds, because admin the approval process.
Obj. 2: Information 

on the EZ/EC/RC P

Tax Benefits

Key IRS 

Forms

Limitations to Attrib

Forms to Spec

Wage Credits

Employment Credit 8844 Credits cannot be tied to Work Opportunity Credit 5884 / 8850 Credits for EZ/EC/RC em

credits for other eligibility 

Deductions

Commercial Revitalization Deduction 4562 / 8582 CRD figures are not disti

deductions.

Increased Section 179 Deduction 4562 Increased section 179 de

distinguished from other 

Investment Incentives

Facility Bonds 8038 EZ/EC communities are n

systematically tabulated 

Qualified Zone Academy Bonds 8860 Qualified Zone Academy 

programs are not specific 

Rollover of Capital Gains Schedule D / 

4797

Figures related to capital not specific to a designat

Increased Exclusion of Capital Gains Schedule D / 

4797

Figures related to capital not specific to a designat

Exclusion of Capital Gains Schedule D / 

4797

Figures related to capital not specific to a designat

Key IRS Forms for EZ/EC/RC Benefits and Their 

Source: GAO summary and analysis of IRS information.
Obj. 2: Information 

on the EZ/EC/RC P

• Historically, data that can be used to assess ho

outcomes at the local level have been largely c

decennial Census, but with the American Comm(ACS), the Census Bureau can now annually upother economic variables at the local level.1

- Historically, statistics on poverty and other household e

the Census tract level have been gathered through the Therefore, statistics on poverty, unemployment, and otbeen available to evaluate outcomes of the EZ/EC/RC Census tract level more than once every 10 years. 

- The Census Bureau, through the ACS, now annually c

including income and employment figures at the Censu

previously included on the “long form” of the decennial 

- While the use of annual ACS data for Census tracts or 

comprised of multiple Census tracts will be limited due households from each area included in the annual samexpected to be a useful tool in tracking changes in houconditions and demographics over time periods more f

decennially.

1 The Census Bureau’s ACS is an ongoing survey that produces statistics about our nation’s people and housing. It covers 

been collected every 10 years from the decennial Census long form questionnaire. The ACS eliminated the need for a sepaCensus. ACS data are collected continuously throughout the year and throughout the decade. This allows the Census Bu

about how communities are changing. The ACS is sent to about 3 million addresses in the U.S. and Puerto Rico every yea
Obj. 2: Information 

on the EZ/EC/RC P

- Using the ACS, the Census Bureau currently publis

poverty estimates for any geography with a populat65,000, and 3-year estimates for all geographies wi20,000 or more. 

- In 2010, with the release of 5-year data, the Census 

estimates of poverty for all Census tracts. Both the estimates will be updated annually, providing eviden

time.

• The following slides contain examples of some 

out in the RCs and Round III EZs we visited.
Obj. 2: Information 

on the EZ/EC/RC P

- States and local governments issued facility bonds 

projects in some EZs.

With the help of a $developers of anotestimated 600 to 8percent filled by EZ EZ officials.

For example, in the San Antonio EZ, developers used facility bonds to assist in the financing of two hotel projects in the city’s popular Riverwalk area. With the help of a $39.9 million facility bond, one hotel has so far employed over 30 EZ residents and will create construction jobs and other employment generated by the developer’s gift of Riverwalk property to the city, according to local administrators.

Source: TripAdvisor.com Source: GAO photo
Obj. 2: Information 

on the EZ/EC/RC P

- The CRD feature of the RC program has facilitated 

rehabilitation projects involving commercial buildingadministrators, has aided businesses and improved designated communities.

The Chicago RC approved an $8.6 million CRD for a grocery store in an area that formerly offered only convenience stores.

In the Chicago RCstrip mall of severfacilitating jobs in with crime issues wire), according to 

Source: GAO photo Source: GAO photo
Obj. 2: Information 

on the EZ/EC/RC P

The Milwaukee RC approved a CRD for several million dollars to help facilitate the construction of a new facility for a national company that based its location decision (in a former rail yard location) at least partially on the RC benefits.Several CRD projects approved by the Milwaukee RC involved rehabilitating historic buildings that had become rundown, including this old warehouse that was rehabilitated into a boutique hotel, improving the look of the area.

Source: GAO photoSource: GAO photo
Obj. 2: Information 

on the EZ/EC/RC P

In an urban RC located in Monroe, LA, the CRD helped finance the construction of a new medical clinic to serve the public and improve the look of the area.A CRD allocation was also used by a local car dealer in Monroe, LA, to update facilities to a look common to similar dealers across the country. 

Source: GAO phoSource: GAO pho
Obj. 2: Information 

on the EZ/EC/RC P

In a rural RC in Louisiana, administrators allocated a CRD to help finance new grain storage facilities. According to a management official, the CRD was the deciding factor in making an expansion of facilities possible, which has resulted in a five-fold increase in sales by enabling the business to expand its market into Mexico.In this rural Louisiana RC, one employer stated that the CRD had been a key factor in obtaining capital investment in the business. The employer also mentioned the employment credit had been an important factor in keeping the plant open during the recent economic downturn.

Source: GAO photoSource: Company photo
Obj. 2: Information 

on the EZ/EC/RC P

Within a rural Round III EZ in Texas (FUTURO), USDA grants provided funds to establish the Big Wells Community Education Center, providing a computer lab and a community resource room in a poor rural community.

Source: GAO photo
Obj. 2: Information 

on the EZ/EC/RC P

- Some EZs and RCs did not fully utilize facility bonds 

RC administrators said that allowing the pooling of uallocations would permit RCs to access unused CRallocations could be used in areas of greater deman

- HUD officials and some local administrators describ

to using these incentives:

 Facility bonds are complicated transactions that requ

money and projects big enough to justify the transact

 The economic climate in recent years has made it dif

obtain financing from other sources.

 Uncertainty over the EZ and RC programs’ extension 

part of some administrators and would-be applicants 

 RCs and Round III Urban EZs lacked administrative f

programs’ benefits. Some EZ and RC administrators administrative funding and/or user fees tied to tax belocally.

1 For instance, developers in EZs must find buyers for facility bonds, while developers in RCs must have the 

rehabilitate a building before they can take advantage of the CRD.
Obj. 2: Information 

on the EZ/EC/RC P

- RC and Round III EZ administrators identified pending or p

could be implemented if the programs were extended beyo

 Of the 50 RC and Round III EZs that we surveyed, 39 

and 8 EZs) indicated that they had pending projects.

 Local administrators described pending or potential m

would include affordable housing, as well as commerprojects that would create jobs.
Obj. 2: Information 

on the EZ/EC/RC P

Examples of project sites not yet completed for future revitalization programs: In Milwaukee (right), officials would like to focus future revitalization efforts on developing an abandoned industrial area of nearly 150 acres vacated by an automobile parts manufacturer. In rural Louisiana (below), local officials would like to use RC benefits along with other incentives for an automobile manufacturing plant. In San Antonio (lower right), an EZ administrator told us that the City would like to use future benefits to spur investment in the neighborhood surrounding Fort Sam Houston, whose population is expected to grow by 12,000 people in the near future due to a military base realignment.

Source: GAO phSource: GAO ph

Source: Northeast Louisiana Economic Alliance Web site
Obj. 3: Agency Re

• HUD and IRS have initiated cooperative efforts 

addressing past recommendations and observ

- In 2004, we recommended that HUD, USDA, and I

(1) identify the data needed to assess the use of the tax 

means of collecting such data; 

(2) determine the cost-effectiveness of collecting these 

potential impact on taxpayers and other program pa

(3) document the findings of this analysis; and(4) if necessary, seek the authority to collect the data, i

is available.

- In 2006, we made the following key observations:

 Limited data and variations in monitoring by HUD, U

hindered federal oversight efforts; and 

 The lack of data on the use of program grant funds, 

and extent to which program tax benefits were used the ability of others to evaluate the effects of the pro
Obj. 3: Agency Re

1) In response to our 2004 recommendation, HUD’s O

Renewal (OCR) and IRS established an action pla

 Designated the IRS Office of Stakeholder Liaisons a

responsible for helping to market and educate businand RC tax incentives;

 Created a standard library of tools for stakeholder lia

available, according to HUD officials, to assist EZs a

 Delivered IRS data that gave HUD some ability to m

and RC employment credits for processing years 19

USDA did not act on the recommendation. USDA the IRS data was not relevant to overseeing the rudue to the low population densities in many rural Eresidents do not work and live in EZs and therefore 

2) In response to our 2006 observations about the co

funds were used and the consistency of federal mostreamlined its record-keeping system to allow conmanagement, program, and operational informatio
Obj. 3: Agency Re

3) HUD also created the RC/EZ Performance Workbo

spreadsheets—to allow OCR employees to easily of data and text from its online Performance Meas(PERMS) and other information sources.1

4) To address the observation in our 2006 report that 

leveraging were not available, HUD conducted an leveraging for completed projects in Round II EZs, EZs generated public and private investments. 

5) In an effort to estimate the impact of certain EZ/EC

unemployment, HUD used IRS data to estimate thgenerated or supported by EZ/RC employment credata could not be tied to specific EZ or RC areas. concerns about the job estimates.

2

1 HUD officials indicated that they were unable to systematically validate the PERMS data that they received 2 IRS expressed concerns about the assumptions used in this estimation exercise as well as the underlying a

relationship between the credits and the jobs. For example, the

estimates could not distinguish between exis
Obj. 3: Agency Re

• While HUD and IRS have made some progress 

on employment credits, data on the use of othe

any impacts in designated communities are lar

- Data produced through the HUD/IRS partnership re

1040 filers were allowed about $675 million in emploprocessing years 1997 through 2008).

 In an attempt to breakout the data further by specific 

provided IRS a list of ZIP codes that roughly coincide

Census tracts, with the assumption that there would bbetween the filing address of the 1040 filers and whewere taken.1 The data that IRS returned from the Fo

employment credit use within ZIP codes around thesHUD stated that data limitations prevented the use of 

performance measurement purposes. In addition, daout by EZ or RC in metropolitan areas containing bot

 Without asking for more information on IRS Form 884

identify the EZ or RC area where the employment cre

Program administrators emphasized the importance data from IRS on the employment credits in a mannecommunities where the credits were taken. IRS officitax forms can result in significant processing costs. Hindicated that since IRS Form 8844 was specifically gprogram, it would be easier to modify than other form

1 In the absence of information from IRS forms to establish a direct link between employment credits taken a

these credits, HUD attempted to use zip codes of 1040 filers taking these credits to approximate where the E

2 IRS and HUD officials noted that privacy laws could limit the level of information that HUD could see in cas

claims were not filed for a 

given 

geo

gra

phic area.
Obj. 3: Agency Re

- IRS also gave HUD some employment credit utiliza

from IRS Form 1120 (corporate filers) for processing 2008 that totaled about $2.6 billion.

 These data are difficult to connect to specific E

corporations may employ EZ/RC residents in lotheir corporate tax filing address.

 National data can be identified but not accurate

specific EZ/RC areas, as corporate ZIP codes awithin these areas.

- IRS data on utilization of the Work Opportunity Tax 

processing years 1997 through 2006, but a HUD offdata are less useful because they do not specify whwas eligible due to EZ/RC residency or other factors

- IRS noted that a change to IRS Form 8844 would re

direction or a formal request from an agency to obtafrom the form. Changes would encompass allowing the taxpayer having credits from multiple zones as wtranscription enhancements.
In summary, in many cases economic conditions imcommunities where the EZ/EC/RC grants and tax bBut as we reported previously, it has been difficult impacts of these programs on conditions in distreswithout the ability to attribute the tax benefits to EZrecognize the challenges inherent in evaluating ecprograms. However, without linking tax benefits to where they are taken, important information remain

example, the extent to which various tax benefits a

each community. Such tax-related information, coucurrent data on poverty and employment data in suhelp program administrators assess the effectiveneprogram. 

Obj. 3: Agency Re
Profiles of Site

RCs and Roun

Chicago, IL – Urban RCMissionThe mission of the Chicago Renewal 

Community (RC) is to improve the viability and number of businesses located in the RC and promote job creation by using federal tax incentives to enhance the well-being and quality of life for residents. The City of Chicago will continue to stimulate its economic development and revitalization efforts through the designation.

Summary Data1990 RC Population: 199,932

1990 RC Poverty Rate: 37.28%

1990 RC Unemployment Rate: 23.36%The Coordinating Responsible Authority 

(CoRA)1

Office of Budget and Management-EZ/RC, 

Chicago, IL

1 The Coordinating Responsible Authority, or CoRA, is the entity, organization, or persons with the responsibilit

and local government commitments made at the time of application and to undertake the development and admand activities to implement and maximize the federal, state, and local benefits made available in the RC.

Source: HUD Web site
Profiles of Site

RCs and Roun

Milwaukee, WI – Urban RCMissionMilwaukee's Redevelopment Authority 

(“RACM") is the CoRA for Milwaukee's Renewal 

Community. RACM's mission is to improve the 

quality of life in Milwaukee neighborhoods by guiding and promoting development that creates jobs, builds wealth, and strengthens the urban environment, and at the same time respects equity, economy and ecology.

Summary Data11990 RC Population: 124,414

1990 RC Poverty Rate: 49.76%

1990 RC Unemployment Rate: 20.91%

CoRAMilwaukee’s Redevelopment Authority is the 

CoRA for the Milwaukee RC.

1 These figures represent conditions prior to any boundary expansions.

Source: Milwaukee R
Profiles of Site

RCs and Roun

Ouachita Parish, Louisiana –

Urban RC

MissionThe mission of the Ouachita Parish Urban 

Renewal Community is to reduce overall poverty, unemployment and economic distress by creating an atmosphere in which businesses and residents can prosper. This will be accomplished by both encouraging full utilization of tax incentives and by fulfilling state and local commitments.

Summary Data11990 RC Population: 43,2761990 RC Poverty Rate: 50.07%

1990 RC Unemployment Rate: 17.84%

CoRANorth Louisiana Economic Development 

Corporation

1 These figures represent conditions prior to any boundary expansions.

Source: Renewal Louisian
Profiles of Site

RCs and Roun

Northern Louisiana – Rural RCMissionThe Mission of the Northern Louisiana Renewal 

Community is to inform the existing business community of all Renewal Community tax benefits; attract new business to Renewal Communities through promoting the tax benefits; implement the state and local commitments cited in the RC application and to explore and implement new methods of measuring, educating and providing incentives to businesses in the RC.

Summary Data11990 RC Population: 199,291

1990 RC Poverty Rate: 32.99%

1990 RC Unemployment Rate: 12.23%

CoRANortheast Louisiana Economic Alliance

1 These figures represent conditions prior to any boundary expansions.

Source: HUD Web site
Profiles of Site

RCs and Roun

San Antonio, TX – Urban EZMissionThe vision of the San Antonio EZ is to educate, 

employ and empower families by creating jobs; creating new business and industrial sites; training the workforce; and improving infrastructure to implement their strategic plan for enhanced economic development. The strategic plan includes goals to close the jobs, education, and housing gaps for EZ residents and to build safe, healthy, and sustainable communities through system change.

Summary Data12000 EZ Population: 100,219

2000 EZ Poverty Rate: 37.26%2000 EZ Unemployment Rate: 12.64%

1 These figures represent conditions prior to any boundary expansions.

Source: HUD Web site
Profiles of Site

RCs and Roun

Middle Rio Grande, TX (FUTURO) – Rural EZMissionFamilies United To Utilize Regional 

Opportunities (FUTURO) is a five county region, mostly Hispanic, in a remote area of rural Texas along the Mexican border. The community experiences pervasive, grinding poverty in less than substandard living conditions. FUTURO residents, local government, and participating business partners agreed that funding for regional projects should benefit all participating communities rather than individual ones. Highlights of FUTURO’s strategic plan include 

industry development and support, consumer services, education and training opportunities, and recreation 

and tourism development. 

Summary Data Counties: Dimmit, LaSalle, ZavalaCommunity Population: 29,Poverty Rate: 46.5%Net Land Area: 913 square 

(250524)

Source: HUD Web site
Enclosure II: Comments from the Department of Housing and Urban Development 

(250524) 

Page 5 GAO-10-464R Revitalization Programs 
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately. 
The Government Accountability Office, the audit, evaluation, and GAO’s Mission investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost Obtaining Copies of is through GAO’s Web site (www.gao.gov). Each weekday afternoon, GAO 

GAO Reports and posts on its Web site newly released reports, testimony, and 

correspondence. To have GAO e-mail you a list of newly posted products, Testimony go to www.gao.gov and select “E-mail Updates.” 

Order by Phone 	 The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s Web site, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information. 

Contact: To Report Fraud, 

Waste, and Abuse in Web site: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Federal Programs Automated answering system: (800) 424-5454 or (202) 512-7470 

Ralph Dawn, Managing Director, dawnr@gao.gov, (202) 512-4400 Congressional U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Relations Washington, DC 20548 

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800 Public Affairs U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548