II 

109TH CONGRESS 

1ST SESSION S. 1066 

To authorize the States (and subdivisions thereof), the District of Columbia, 

territories, and possessions of the United States to provide certain tax 

incentives to any person for economic development purposes. 

IN THE SENATE OF THE UNITED STATES 

MAY 18, 2005 

Mr. VOINOVICH (for himself, Ms. STABENOW, Mr. BUNNING, Mr. LEVIN, Mr. 

ALEXANDER, Mr. DEWINE, Mr. MCCONNELL, and Mr. FRIST) introduced the following bill; which was read twice and referred to the Committee on Finance 

A BILL

To authorize the States (and subdivisions thereof), the District of Columbia, territories, and possessions of the 

United States to provide certain tax incentives to any 

person for economic development purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Economic Development 

5 Act of 2005’’. 
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1 SEC. 2. AUTHORIZATION. 

2 Congress hereby exercises its power under Article I, 

3 Section 8, Clause 3 of the United States Constitution to 

4 regulate commerce among the several States by author5 izing any State to provide to any person for economic de6 velopment purposes tax incentives that otherwise would be 

7 the cause or source of discrimination against interstate 

8 commerce under the Commerce Clause of the United 

9 States Constitution, except as otherwise provided by law. 

10 SEC. 3. LIMITATIONS. 

11 (a) TAX INCENTIVES NOT SUBJECT TO PROTECTION

12 UNDER THIS ACT.—Section 2 shall not apply to any State 

13 tax incentive which— 

14 (1) is dependent upon State or country of incor15 poration, commercial domicile, or residence of an in16 dividual; 

17 (2) requires the recipient of the tax incentive to 

18 acquire, lease, license, use, or provide services to 

19 property produced, manufactured, generated, assem20 bled, developed, fabricated, or created in the State; 

21 (3) is reduced or eliminated as a direct result 

22 of an increase in out-of-State activity by the recipi23 ent of the tax incentive; 

24 (4) is reduced or eliminated as a result of an 

25 increase in out-of-State activity by a person other 

26 than the recipient of the tax incentive or as a result 
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1 of such other person not having a taxable presence 

2 in the State; 

3 (5) results in loss of a compensating tax sys4 tem, because the tax on interstate commerce exceeds 

5 the tax on intrastate commerce; 

6 (6) requires that other taxing jurisdictions offer 

7 reciprocal tax benefits; or 

8 (7) requires that a tax incentive earned with re9 spect to one tax can only be used to reduce a tax 

10 burden for or provide a tax benefit against any other 

11 tax that is not imposed on apportioned interstate ac12 tivities. 

13 (b) NO INFERENCE.—Nothing in this section shall be 

14 construed to create any inference with respect to the valid15 ity or invalidity under the Commerce Clause of the United 

16 States Constitution of any tax incentive described in this 

17 section. 

18 SEC. 4. DEFINITIONS; RULE OF CONSTRUCTION. 

19 (a) DEFINITIONS.—For purposes of this Act— 

20 (1) COMPENSATING TAX SYSTEM.—The term 

21 ‘‘compensating tax system’’ means complementary 

22 taxes imposed on both interstate and intrastate com23 merce where the tax on interstate commerce does 

24 not exceed the tax on intrastate commerce and the 

25 taxes are imposed on substantially equivalent events. 
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1 (2) ECONOMIC DEVELOPMENT PURPOSES.—The 

2 term ‘‘economic development purposes’’ means all le3 gally permitted activities for attracting, retaining, or 

4 expanding business activity, jobs, or investment in a 

5 State. 

6 (3) IMPOSED ON APPORTIONED INTERSTATE

7 ACTIVITIES.—The term ‘‘imposed on apportioned 

8 interstate activities’’ means, with respect to a tax, a 

9 tax levied on values that can arise out of interstate 

10 or foreign transactions or operations, including taxes 

11 on income, sales, use, gross receipts, net worth, and 

12 value added taxable bases. Such term shall not in13 clude taxes levied on property, transactions, or oper14 ations that are taxable only if they exist or occur ex15 clusively inside the State, including any real prop16 erty and severance taxes. 

17 (4) PERSON.—The term ‘‘person’’ means any 

18 individual, corporation, partnership, limited liability 

19 company, association, or other organization that en20 gages in any for profit or not-for-profit activities 

21 within a State. 

22 (5) PROPERTY.—The term ‘‘property’’ means 

23 all forms of real, tangible, and intangible property. 

24 (6) STATE.—The term ‘‘State’’ means each of 

25 the several States (or subdivision thereof), the Dis-
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1 trict of Columbia, and any territory or possession of 

2 the United States. 

3 (7) STATE TAX.—The term ‘‘State tax’’ means 

4 all taxes or fees imposed by a State. 

5 (8) TAX BENEFIT.—The term ‘‘tax benefit’’ 

6 means all permanent and temporary tax savings, in7 cluding applicable carrybacks and carryforwards, re8 gardless of the taxable period in which the benefit 

9 is claimed, received, recognized, realized, or earned. 

10 (9) TAX INCENTIVE.—The term ‘‘tax incentive’’ 

11 means any provision that reduces a State tax burden 

12 or provides a tax benefit as a result of any activity 

13 by a person that is enumerated or recognized by a 

14 State tax jurisdiction as a qualified activity for eco15 nomic development purposes. 

16 (b) RULE OF CONSTRUCTION.—It is the sense of 

17 Congress that the authorization provided in section 2 

18 should be construed broadly and the limitations in section 

19 3 should be construed narrowly. 

20 SEC. 5. SEVERABILITY. 

21 If any provision of this Act or the application of any 

22 provision of this Act to any person or circumstance is held 

23 to be unconstitutional, the remainder of this Act and the 

24 application of the provisions of this Act to any person or 

25 circumstance shall not be affected by the holding. 
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1 SEC. 6. EFFECTIVE DATE. 

2 This Act shall apply to any State tax incentive en3 acted before, on, or after the date of the enactment of 

4 this Act.

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