II 

113TH CONGRESS 

1ST SESSION S. 1852 

To provide for the establishment of free market enterprise zones in order 

to help facilitate the creation of new jobs, entrepreneurial opportunities, 

enhanced and renewed educational opportunities, and increased community involvement in bankrupt or economically distressed areas. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 18, 2013 

Mr. PAUL (for himself and Mr. MCCONNELL) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To provide for the establishment of free market enterprise 

zones in order to help facilitate the creation of new 

jobs, entrepreneurial opportunities, enhanced and renewed educational opportunities, and increased community involvement in bankrupt or economically distressed 

areas. 

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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Economic Freedom Zones Act of 2013’’. 


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1 (b) TABLE OF CONTENTS.—The table of contents for 

2 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Definitions. 

TITLE I—PROHIBITION AGAINST A FEDERAL GOVERNMENT 

BAILOUT OF A STATE, CITY, OR MUNICIPALITY 

Sec. 101. Prohibition of Federal Government Bailouts. 

TITLE II—DESIGNATION OF ECONOMIC FREEDOM ZONES (EFZ) 

Sec. 201. Eligibility requirements for Economic Freedom Zone Status. 

Sec. 202. Area and regional requirements. 

Sec. 203. Application and duration of designation. 

TITLE III—FEDERAL TAX INCENTIVES 

Sec. 301. Tax incentives related to Economic Freedom Zones. 

TITLE IV—FEDERAL REGULATORY REDUCTIONS 

Sec. 401. Suspension of certain laws and regulations. 

TITLE V—EDUCATIONAL ENHANCEMENTS 

Sec. 501. Educational opportunity tax credit. 

Sec. 502. School choice through portability. 

Sec. 503. Special Economic Freedom Zone visas. 

Sec. 504. Economic Freedom Zone educational savings accounts. 

TITLE VI—COMMUNITY ASSISTANCE AND REBUILDING 

Sec. 601. Nonapplication of Davis-Bacon. 

Sec. 602. Economic Freedom Zone charitable tax credit. 

TITLE VII—STATE AND COMMUNITY POLICY RECOMMENDATIONS 

Sec. 701. Sense of the Senate concerning policy recommendations. 

3 SEC. 2. DEFINITIONS. 

4 In this Act: 

5 (1) CITY.—The term ‘‘city’’ means any unit of 

6 general local government that is classified as a mu7 nicipality by the United States Census Bureau, or is 

8 a town or township as determined jointly by the Di9 rector of the Office of Management and Budget and 

10 the Secretary of the Treasury. 


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1 (2) COUNTY.—The term ‘‘County’’ means any 

2 unit of local general government that is classified as 

3 a county by the United States Census Bureau. 

4 (3) ELIGIBLE ENTITY.—The term ‘‘eligible enti5 ty’’ means a State, municipality, zip code, or rural 

6 area. 

7 (4) MUNICIPALITY.—The term ‘‘municipality’’ 

8 has the meaning given that term in section 101(40) 

9 of title 11, United States Code. 

10 (5) RURAL AREA.—The term ‘‘rural area’’ 

11 means any area not in an urbanized area, as that 

12 term is defined by the Census Bureau. 

13 (6) SECRETARY.—The term ‘‘Secretary’’ means 

14 the Secretary of the Treasury. 

15 (7) ZIP CODE.—The term ‘‘zip code’’ means 

16 any area or region associated with or covered by a 

17 United States Postal zip code of not less than 5 dig18 its. 

19 TITLE I—PROHIBITION AGAINST 

20 A FEDERAL GOVERNMENT 

21 BAILOUT OF A STATE, CITY, 

22 OR MUNICIPALITY 

23 SEC. 101. PROHIBITION OF FEDERAL GOVERNMENT BAIL24 OUTS. 

25 (a) DEFINITIONS.—In this section— 


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1 (1) the term ‘‘credit rating’’ has the meaning 

2 given that term in section 3(a)(60) of the Securities 

3 Exchange Act of 1934 (15 U.S.C. 78c(a)(60)); 

4 (2) the term ‘‘credit rating agency’’ has the 

5 meaning given that term in section 3(a)(61) of the 

6 Securities Exchange Act of 1934 (15 U.S.C. 

7 78c(a)(61)); 

8 (3) the term ‘‘Federal assistance’’ means the 

9 use of any advances from the Federal Reserve credit 

10 facility or discount window that is not part of a pro11 gram or facility with broad-based eligibility under 

12 section 13(3)(A) of the Federal Reserve Act (12 

13 U.S.C. 343(3)(A)), Federal Deposit Insurance Cor14 poration insurance, or guarantees for the purpose 

15 of— 

16 (A) making a loan to, or purchasing any 

17 interest or debt obligation of, a municipality; 

18 (B) purchasing the assets of a munici19 pality; 

20 (C) guaranteeing a loan or debt issuance 

21 of a municipality; or 

22 (D) entering into an assistance arrange23 ment, including a grant program, with an eligi24 ble entity; 


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1 (4) the term ‘‘insolvent’’ means, with respect to 

2 an eligible entity, a financial condition such that the 

3 eligible entity— 

4 (A) has any debt that has been given a 

5 credit rating lower than a ‘‘B’’ by a nationally 

6 recognized statistical rating organization or a 

7 credit rating agency; 

8 (B) is not paying its debts as they become 

9 due, unless such debts are the subject of a bona 

10 fide dispute; or 

11 (C) is unable to pay its debts as they be12 come due; and 

13 (5) the term ‘‘nationally recognized statistical 

14 rating organization’’ has the meaning given that 

15 term in section 3(a)(62) of the Securities Exchange 

16 Act of 1934 (15 U.S.C. 78c(a)(62)). 

17 (b) PROHIBITION OF FEDERAL GOVERNMENT BAIL18 OUTS.— 

19 (1) PROHIBITION OF FEDERAL ASSISTANCE.— 

20 Notwithstanding any other provision of law, no Fed21 eral assistance may be provided to an eligible entity 

22 (other than the assistance provided for in this Act 

23 for an area that is designated as an Economic Free 

24 Zone). 


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1 (2) PROHIBITION OF FINANCIAL ASSISTANCE

2 TO BANKRUPT OR INSOLVENT ELIGIBLE ENTITIES.— 

3 Except as provided in paragraph (1), the Federal 

4 Government may not provide financial assistance— 

5 (A) to a municipality that is a debtor 

6 under chapter 9 of title 11, United States Code; 

7 or 

8 (B) to State or municipality that is insol9 vent. 

10 TITLE II—DESIGNATION OF ECO11 NOMIC FREEDOM ZONES 

12 (EFZ) 

13 SEC. 201. ELIGIBILITY REQUIREMENTS FOR ECONOMIC 

14 FREEDOM ZONE STATUS. 

15 (a) IN GENERAL.—In order to be eligible for designa16 tion as an Economic Freedom Zone by the Secretary, an 

17 eligible entity shall meet one or more of the following re18 quirements (in order of priority) and the requirements of 

19 section 202: 

20 (1) ELIGIBLE CHAPTER 9 DEBTOR.—An eligible 

21 entity that satisfies the requirements under section 

22 109(c) of title 11, United States Code. 

23 (2) ELIGIBLE ENTITY AT RISK OF INSOL24 VENCY.— 


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1 (A) IN GENERAL.—An eligible entity that 

2 is at risk of insolvency, as described in subpara3 graph (B). 

4 (B) REQUIREMENTS.—An eligible entity is 

5 at risk of insolvency if— 

6 (i) an independent actuarial firm that 

7 has been engaged by the eligible entity and 

8 that does not have a conflict of interest 

9 with the eligible entity, including any pre10 vious relationship with the eligible entity, 

11 as determined by the Secretary— 

12 (I) determines that the eligible 

13 entity is insolvent (as defined in sec14 tion 101(a)(4)); and 

15 (II) submits its analysis regard16 ing the insolvency of the eligible entity 

17 to the Secretary; and 

18 (ii) the Secretary has reviewed and 

19 approved the determination of insolvency 

20 by the actuarial firm. 

21 (3) LOW ECONOMIC AND HIGH POVERTY

22 ZONES.— 

23 (A) IN GENERAL.—An eligible entity that 

24 is designated as a low economic or high poverty 

25 zone under subparagraph (B). 


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1 (B) DESIGNATION.—The Secretary, after 

2 reviewing supporting data as deemed appro3 priate, shall designate an eligible entity as a low 

4 economic or high poverty area if— 

5 (i) the State or local government with 

6 jurisdiction over the entity certifies that— 

7 (I) the entity is one of pervasive 

8 poverty, unemployment, and general 

9 distress; 

10 (II) the average rate of unem11 ployment within such entity during 

12 the most recent 3-month period for 

13 which data is available is at least 1.5 

14 times the national unemployment rate 

15 for the period involved; 

16 (III) during the most recent 3- 

17 month period, at least 30 percent of 

18 the area residents have incomes below 

19 the national poverty level; or 

20 (IV) at least 70 percent of the 

21 are residents have incomes below 80 

22 percent of the median income of 

23 households within the jurisdiction of 

24 the local government (as determined 

25 in the same manner as under section 


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1 119(b)(2) of the Housing and Com2 munity Development Act of 1974); 

3 and 

4 (ii) the Secretary determines that 

5 such a designation is appropriate. 

6 (4) SPECIAL HIGH POVERTY REQUIREMENT FOR

7 DESIGNATION.—An eligible entity shall be des8 ignated as a low economic or high poverty zone if 

9 the Secretary determines that— 

10 (A) the State in which the entity is located 

11 within one of the 10 most impoverished States, 

12 as determined using United States Census Bu13 reau data; 

14 (B) the entity is one of pervasive poverty, 

15 unemployment, and general distress; 

16 (C) the average rate of unemployment 

17 within such entity during the most recent 3- 

18 month period for which data is available is at 

19 least 1.25 times the national unemployment 

20 rate for the period involved; 

21 (D) during the most recent 3-month pe22 riod, at least 25 percent of the area residents 

23 have income below the national poverty level; or 

24 (E) at least 65 percent of the residents 

25 have incomes below 80 percent of the median 


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1 income of households within the jurisdiction of 

2 the local government (as determined in the 

3 same manner as under section 119(b)(2) of the 

4 Housing and Community Development Act of 

5 1974). 

6 (b) REFUSAL TO GRANT STATUS.—The Secretary 

7 may refuse to designate an eligible entity as an Economic 

8 Freedom Zone if the Secretary determines that any re9 quirement under this Act, including any requirement 

10 under subsection (a)(2)(B), has not been satisfied. 

11 SEC. 202. AREA AND REGIONAL REQUIREMENTS. 

12 (a) IN GENERAL.—To be designated as an Economic 

13 Freedom Zone by the Secretary, an eligible entity shall— 

14 (1) meet one or more of the requirements under 

15 section 201; and 

16 (2) be an entity described in subsection (b). 

17 (b) ENTITY DESCRIBED.—An entity is described in 

18 this subsection if such entity— 

19 (1) is a metropolitan statistical area (as defined 

20 by the Director of the Office of Management and 

21 Budget) that— 

22 (A) is located within the jurisdiction of a 

23 local government; and 

24 (B) has a continuous boundary; 


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1 (2) is a non-metropolitan statistical area (as de2 fined by the Director of the Office of Management 

3 and Budget) if (based on the following order of pri4 ority) such area— 

5 (A) is an official county geographical area 

6 in any State that meets any of the eligibility re7 quirements of section 201; 

8 (B) is an official city geographical area in 

9 any State that meets any of the eligibility re10 quirements of section 201; or 

11 (C) is an official zip code geographical area 

12 in any State that meets any of the eligibility re13 quirements of section 201; or 

14 (3) is a zip code area that— 

15 (A) is within a metropolitan statistical 

16 area; and 

17 (B) meets other eligibility criteria as deter18 mined by the Secretary after consultation with 

19 the United States Census Bureau, the Bureau 

20 of Labor Statistics, and the Office of Manage21 ment and Budget. 

22 SEC. 203. APPLICATION AND DURATION OF DESIGNATION. 

23 (a) APPLICATION.—The Secretary shall develop pro24 cedures to enable an eligible entity to submit to the SecVerDate Mar 15 2010 03:21 Dec 24, 2013 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1852.IS S1852

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1 retary an application for designation as an Economic 

2 Freedom Zone under this title. 

3 (b) DURATION.—The designation by the Secretary of 

4 an eligible entity as a Economic Freedom Zone shall be 

5 for a period of 10 years. 

6 TITLE III—FEDERAL TAX 

7 INCENTIVES 

8 SEC. 301. TAX INCENTIVES RELATED TO ECONOMIC FREE9 DOM ZONES. 

10 (a) IN GENERAL.—Chapter 1 of the Internal Rev11 enue Code of 1986 is amended by adding at the end the 

12 following new subchapter: 

13 ‘‘Subchapter Z—Economic Freedom Zones 

‘‘PART I—TAX INCENTIVES

‘‘PART II—DEFINITIONS

14 ‘‘PART I—TAX INCENTIVES 

‘‘Sec. 1400V–1. Economic Freedom Zone individual flat tax. 

‘‘Sec. 1400V–2. Economic Freedom Zone corporate flat tax. 

‘‘Sec. 1400V–3. Zero percent capital gains rate. 

‘‘Sec. 1400V–4. Reduced payroll taxes. 

‘‘Sec. 1400V–5. Increase in expensing under section 179. 

15 ‘‘SEC. 1400V–1. ECONOMIC FREEDOM ZONE INDIVIDUAL 

16 FLAT TAX. 

17 ‘‘(a) IN GENERAL.—In the case of any individual 

18 whose principal residence (within the meaning of section 

19 121) is located in an Economic Freedom Zone for the tax20 able year, in lieu of the tax imposed by section 1, there 

21 shall be imposed a tax equal to 5 percent of the taxable 


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1 income of such taxpayer. For purposes of this title, the 

2 tax imposed by the preceding sentence shall be treated as 

3 a tax imposed by section 1. 

4 ‘‘(b) JOINT RETURNS.—In the case of a joint return 

5 under section 6013, subsection (a) shall apply so long as 

6 either spouse has a principal residence (within the mean7 ing of section 121) in an Economic Freedom Zone for the 

8 taxable year. 

9 ‘‘(c) ALTERNATIVE MINIMUM TAX NOT TO APPLY.— 

10 The tax imposed by section 55 shall not apply to any tax11 payer to whom subsection (a) applies. 

12 ‘‘SEC. 1400V–2. ECONOMIC FREEDOM ZONE CORPORATE 

13 FLAT TAX. 

14 ‘‘(a) IN GENERAL.—In the case of any corporation 

15 located in an Economic Freedom Zone for the taxable 

16 year, in lieu of the tax imposed by section 11, there shall 

17 be imposed a tax equal to 5 percent of the taxable income 

18 of such corporation. For purposes of this title, the tax im19 posed by the preceding sentence shall be treated as a tax 

20 imposed by section 11. 

21 ‘‘(b) LIMITATION.—Subsection (a) shall not apply to 

22 any corporation for any taxable year if the adjusted gross 

23 income of such corporation for such taxable year exceeds 

24 $500,000,000. 


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1 ‘‘(c) LOCATED.—For purposes of this section, a cor2 poration shall be considered to be located in an Economic 

3 Freedom Zone if— 

4 ‘‘(1) not less than 10 percent of the total gross 

5 income of such corporation is derived from the active 

6 conduct of a trade or business within an Economic 

7 Freedom Zone, or 

8 ‘‘(2) at least 25 percent of the employees of 

9 such corporation are residents of an Economic Free10 dom Zone. 

11 ‘‘(d) ALTERNATIVE MINIMUM TAX NOT TO

12 APPLY.—The tax imposed by section 55 shall not apply 

13 to any taxpayer to whom subsection (a) applies. 

14 ‘‘SEC. 1400V–3. ZERO PERCENT CAPITAL GAINS RATE. 

15 ‘‘(a) EXCLUSION.—Gross income shall not include 

16 qualified capital gain from the sale or exchange of— 

17 ‘‘(1) any Economic Freedom Zone asset held 

18 for more than 5 years, 

19 ‘‘(2) any real property located in an Economic 

20 Freedom Zone. 

21 ‘‘(b) ECONOMIC FREEDOM ZONE ASSET.—For pur22 poses of this section— 

23 ‘‘(1) IN GENERAL.—The term ‘Economic Free24 dom Zone asset’ means— 


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1 ‘‘(A) any Economic Freedom Zone busi2 ness stock, 

3 ‘‘(B) any Economic Freedom Zone part4 nership interest, and 

5 ‘‘(C) any Economic Freedom Zone busi6 ness property. 

7 ‘‘(2) ECONOMIC FREEDOM ZONE BUSINESS

8 STOCK.— 

9 ‘‘(A) IN GENERAL.—The term ‘Economic 

10 Freedom Zone business stock’ means any stock 

11 in a domestic corporation if— 

12 ‘‘(i) such stock is acquired by the tax13 payer, before the date on which such cor14 poration no longer qualifies as an Eco15 nomic Freedom Zone business due to the 

16 lapse of 1 or more Economic Freedom 

17 Zones, at its original issue (directly or 

18 through an underwriter) solely in exchange 

19 for cash, 

20 ‘‘(ii) as of the time such stock was 

21 issued, such corporation was an Economic 

22 Freedom Zone business (or, in the case of 

23 a new corporation, such corporation was 

24 being organized for purposes of being an 

25 Economic Freedom Zone business), and 


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1 ‘‘(iii) during substantially all of the 

2 taxpayer’s holding period for such stock, 

3 such corporation qualified as an Economic 

4 Freedom Zone business. 

5 ‘‘(B) REDEMPTIONS.—A rule similar to 

6 the rule of section 1202(c)(3) shall apply for 

7 purposes of this paragraph. 

8 ‘‘(3) ECONOMIC FREEDOM ZONE PARTNERSHIP

9 INTEREST.—The term ‘Economic Freedom Zone 

10 partnership interest’ means any capital or profits in11 terest in a domestic partnership if— 

12 ‘‘(A) such interest is acquired by the tax13 payer, before the date on which such partner14 ship no longer qualifies as an Economic Free15 dom Zone business due to the lapse of 1 or 

16 more Economic Freedom Zones, from the part17 nership solely in exchange for cash, 

18 ‘‘(B) as of the time such interest was ac19 quired, such partnership was an Economic 

20 Freedom Zone business (or, in the case of a 

21 new partnership, such partnership was being 

22 organized for purposes of being an Economic 

23 Freedom Zone business), and 

24 ‘‘(C) during substantially all of the tax25 payer’s holding period for such interest, such 


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1 partnership qualified as an Economic Freedom 

2 Zone business. 

3 A rule similar to the rule of paragraph (2)(B) shall 

4 apply for purposes of this paragraph. 

5 ‘‘(4) ECONOMIC FREEDOM ZONE BUSINESS

6 PROPERTY.— 

7 ‘‘(A) IN GENERAL.—The term ‘Economic 

8 Freedom Zone business property’ means tan9 gible property if— 

10 ‘‘(i) such property was acquired by 

11 the taxpayer by purchase (as defined in 

12 section 179(d)(2)) after the date on such 

13 taxpayer qualifies as an Economic Free14 dom Zone business and before the date on 

15 which such taxpayer no longer qualifies as 

16 an Economic Freedom Zone business due 

17 to the lapse of 1 or more Economic Free18 dom Zones, 

19 ‘‘(ii) the original use of such property 

20 in the Economic Freedom Zone commences 

21 with the taxpayer, and 

22 ‘‘(iii) during substantially all of the 

23 taxpayer’s holding period for such prop24 erty, substantially all of the use of such 


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1 property was in an Economic Freedom 

2 Zone business of the taxpayer. 

3 ‘‘(B) SPECIAL RULE FOR BUILDINGS

4 WHICH ARE SUBSTANTIALLY IMPROVED.— 

5 ‘‘(i) IN GENERAL.—The requirements 

6 of clauses (i) and (ii) of subparagraph (A) 

7 shall be treated as met with respect to— 

8 ‘‘(I) property which is substan9 tially improved by the taxpayer before 

10 the date on which such taxpayer no 

11 longer qualifies as an Economic Free12 dom Zone business due to the lapse of 

13 1 or more Economic Freedom Zones, 

14 and 

15 ‘‘(II) any land on which such 

16 property is located. 

17 ‘‘(ii) SUBSTANTIAL IMPROVEMENT.— 

18 For purposes of clause (i), property shall 

19 be treated as substantially improved by the 

20 taxpayer only if, during any 24-month pe21 riod beginning after the date on which the 

22 taxpayer qualifies as an Economic Free23 dom Zone business additions to basis with 

24 respect to such property in the hands of 

25 the taxpayer exceed the greater of— 


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1 ‘‘(I) an amount equal to the ad2 justed basis of such property at the 

3 beginning of such 24-month period in 

4 the hands of the taxpayer, or 

5 ‘‘(II) $5,000. 

6 ‘‘(5) TREATMENT OF ECONOMIC FREEDOM

7 ZONE TERMINATION.—Except as otherwise provided 

8 in this subsection, the termination of the designation 

9 of the Economic Freedom Zone shall be disregarded 

10 for purposes of determining whether any property is 

11 an Economic Freedom Zone asset. 

12 ‘‘(6) TREATMENT OF SUBSEQUENT PUR13 CHASERS, ETC.—The term ‘Economic Freedom Zone 

14 asset’ includes any property which would be an Eco15 nomic Freedom Zone asset but for paragraph 

16 (2)(A)(i), (3)(A), or (4)(A)(i) or (ii) in the hands of 

17 the taxpayer if such property was an Economic 

18 Freedom Zone asset in the hands of a prior holder. 

19 ‘‘(7) 5-YEAR SAFE HARBOR.—If any property 

20 ceases to be an Economic Freedom Zone asset by 

21 reason of paragraph (2)(A)(iii), (3)(C), or (4)(A)(iii) 

22 after the 5-year period beginning on the date the 

23 taxpayer acquired such property, such property shall 

24 continue to be treated as meeting the requirements 

25 of such paragraph; except that the amount of gain 


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1 to which subsection (a) applies on any sale or ex2 change of such property shall not exceed the amount 

3 which would be qualified capital gain had such prop4 erty been sold on the date of such cessation. 

5 ‘‘(c) ECONOMIC FREEDOM ZONE BUSINESS.—For 

6 purposes of this section, the term ‘Economic Freedom 

7 Zone business’ means any enterprise zone business (as de8 fined in section 1397C), determined— 

9 ‘‘(1) after the application of section 1400(e), 

10 ‘‘(2) by substituting ‘80 percent’ for ‘50 per11 cent’ in subsections (b)(2) and (c)(1) of section 

12 1397C, and 

13 ‘‘(3) by treating only areas that are Economic 

14 Freedom Zones as an empowerment zone or enter15 prise community. 

16 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.— 

17 For purposes of this section— 

18 ‘‘(1) QUALIFIED CAPITAL GAIN.—Except as 

19 otherwise provided in this subsection, the term 

20 ‘qualified capital gain’ means any gain recognized on 

21 the sale or exchange of— 

22 ‘‘(A) a capital asset, or 

23 ‘‘(B) property used in the trade or busi24 ness (as defined in section 1231(b)). 


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1 ‘‘(2) CERTAIN GAIN NOT QUALIFIED.—The 

2 term ‘qualified capital gain’ shall not include any 

3 gain attributable to periods before the date on which 

4 the a business qualifies as an Economic Freedom 

5 Zone business or after the date that is 4 years after 

6 the date on which such business no longer qualifies 

7 as an Economic Freedom Zone business due to the 

8 lapse of 1 or more Economic Freedom Zones. 

9 ‘‘(3) CERTAIN GAIN NOT QUALIFIED.—The 

10 term ‘qualified capital gain’ shall not include any 

11 gain which would be treated as ordinary income 

12 under section 1245 or under section 1250 if section 

13 1250 applied to all depreciation rather than the ad14 ditional depreciation. 

15 ‘‘(4) INTANGIBLES NOT INTEGRAL PART OF

16 ECONOMIC FREEDOM ZONE BUSINESS.—In the case 

17 of gain described in subsection (a)(1), the term 

18 ‘qualified capital gain’ shall not include any gain 

19 which is attributable to an intangible asset which is 

20 not an integral part of an Economic Freedom Zone 

21 business. 

22 ‘‘(5) RELATED PARTY TRANSACTIONS.—The 

23 term ‘qualified capital gain’ shall not include any 

24 gain attributable, directly or indirectly, in whole or 

25 in part, to a transaction with a related person. For 


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1 purposes of this paragraph, persons are related to 

2 each other if such persons are described in section 

3 267(b) or 707(b)(1). 

4 ‘‘(e) SALES AND EXCHANGES OF INTERESTS IN

5 PARTNERSHIPS AND S CORPORATIONS WHICH ARE ECO6 NOMIC FREEDOM ZONE BUSINESSES.—In the case of the 

7 sale or exchange of an interest in a partnership, or of 

8 stock in an S corporation, which was an Economic Free9 dom Zone business during substantially all of the period 

10 the taxpayer held such interest or stock, the amount of 

11 qualified capital gain shall be determined without regard 

12 to— 

13 ‘‘(1) any gain which is attributable to an intan14 gible asset which is not an integral part of an Eco15 nomic Freedom Zone business, and 

16 ‘‘(2) any gain attributable to periods before the 

17 date on which the a business qualifies as an Eco18 nomic Freedom Zone business or after the date that 

19 is 4 years after the date on which such business no 

20 longer qualifies as an Economic Freedom Zone busi21 ness due to the lapse of 1 or more Economic Free22 dom Zones. 

23 ‘‘SEC. 1400V–4. REDUCED PAYROLL TAXES. 

24 ‘‘(a) IN GENERAL.— 


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1 ‘‘(1) EMPLOYEES.—The rate of tax under 

2 3101(a) (including for purposes of determining the 

3 applicable percentage under sections 3201(a) and 

4 3211(a)(1)) shall be 4.2 percent for any remunera5 tion received during any period in which the individ6 ual’s principal residence (within the meaning of sec7 tion 121) is located in an Economic Freedom Zone. 

8 ‘‘(2) EMPLOYERS.— 

9 ‘‘(A) IN GENERAL.—The rate of tax under 

10 section 3111(a) (including for purposes of de11 termining the applicable percentage under sec12 tions 3221(a)) shall be 4.2 percent with respect 

13 to remuneration paid for qualified services dur14 ing any period in which the employer is located 

15 in an Economic Freedom Zone. 

16 ‘‘(B) QUALIFIED SERVICES.—For purposes 

17 of this section, the term ‘qualified services’ 

18 means services performed— 

19 ‘‘(i) in a trade or business of a quali20 fied employer, or 

21 ‘‘(ii) in the case of a qualified em22 ployer exempt from tax under section 

23 501(a) of the Internal Revenue Code of 

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1 tuting the basis of the employer’s exemp2 tion under section 501 of such Code. 

3 ‘‘(C) LOCATION OF EMPLOYER.—For pur4 poses of this paragraph, the location of an em5 ployer shall be determined in the same manner 

6 as under section 1400V–2(c). 

7 ‘‘(3) SELF-EMPLOYED INDIVIDUALS.—The rate 

8 of tax under section 1401(a) shall be 8.40 percent 

9 any taxable year in which such individual was lo10 cated (determined under section 1400V–2(c) as if 

11 such individual were a corporation) in an Economic 

12 Freedom Zone. 

13 ‘‘(b) TRANSFERS OF FUNDS.—- 

14 ‘‘(1) TRANSFERS TO FEDERAL OLD-AGE AND

15 SURVIVORS INSURANCE TRUST FUND.—There are 

16 hereby appropriated to the Federal Old-Age and 

17 Survivors Trust Fund and the Federal Disability In18 surance Trust Fund established under section 201 

19 of the Social Security Act (42 U.S.C. 401) amounts 

20 equal to the reduction in revenues to the Treasury 

21 by reason of the application of subsection (a). 

22 Amounts appropriated by the preceding sentence 

23 shall be transferred from the general fund at such 

24 times and in such manner as to replicate to the ex25 tent possible the transfers which would have ocVerDate Mar 15 2010 21:24 Jan 08, 2014 Jkt 039200 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\S1852.IS S1852

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1 curred to such Trust Fund had such amendments 

2 not been enacted. 

3 ‘‘(2) TRANSFERS TO SOCIAL SECURITY EQUIVA4 LENT BENEFIT ACCOUNT.—There are hereby appro5 priated to the Social Security Equivalent Benefit Ac6 count established under section 15A(a) of the Rail7 road Retirement Act of 1974 (45 U.S.C. 231n–1(a)) 

8 amounts equal to the reduction in revenues to the 

9 Treasury by reason of the application of paragraphs 

10 (1) and (2) of subsection (a). Amounts appropriated 

11 by the preceding sentence shall be transferred from 

12 the general fund at such times and in such manner 

13 as to replicate to the extent possible the transfers 

14 which would have occurred to such Account had 

15 such amendments not been enacted. 

16 ‘‘(3) COORDINATION WITH OTHER FEDERAL

17 LAWS.—For purposes of applying any provision of 

18 Federal law other than the provisions of the Internal 

19 Revenue Code of 1986, the rate of tax in effect 

20 under section 3101(a) shall be determined without 

21 regard to the reduction in such rate under this sec22 tion. 


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1 ‘‘SEC. 1400V–5. INCREASE IN EXPENSING UNDER SECTION 

2 179. 

3 ‘‘(a) IN GENERAL.—In the case of an Economic 

4 Freedom Zone business, for purposes of section 179— 

5 ‘‘(1) the limitation under section 179(b)(1) 

6 shall be increased by the lesser of— 

7 ‘‘(A) 200 percent of the amount in effect 

8 under such section (determined without regard 

9 to this section), or 

10 ‘‘(B) the cost of section 179 property 

11 which is Economic Freedom Zone business 

12 property placed in service during the taxable 

13 year, and 

14 ‘‘(2) the amount taken into account under sec15 tion 179(b)(2) with respect to any section 179 prop16 erty which is Economic Freedom Zone business 

17 property shall be 50 percent of the cost thereof. 

18 ‘‘(b) ECONOMIC FREEDOM ZONE BUSINESS PROP19 ERTY.—For purposes of this section, the term ‘Economic 

20 Freedom Zone business property’ has the meaning given 

21 such term under section 1400V–3(b)(4), except that for 

22 purposes of subparagraph (A)(ii) thereof, if property is 

23 sold and leased back by the taxpayer within 3 months 

24 after the date such property was originally placed in serv25 ice, such property shall be treated as originally placed in 


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1 service not earlier than the date on which such property 

2 is used under the leaseback 

3 ‘‘(c) RECAPTURE.—Rules similar to the rules under 

4 section 179(d)(10) shall apply with respect to any quali5 fied zone property which ceases to be used in an empower6 ment zone by an enterprise zone business. 

7 ‘‘PART II—DEFINITIONS 

‘‘Sec. 1400V–6. Economic Freedom Zone. 

8 ‘‘SEC. 1400V–6. ECONOMIC FREEDOM ZONE. 

9 ‘‘For purposes of this subchapter, the term ‘Eco10 nomic Freedom Zone’ means any area which is an Eco11 nomic Freedom Zone under title II of the Economic Free12 dom Zone Act.’’. 

13 (b) CLERICAL AMENDMENT.—The table of sub14 chapters for chapter 1 of such Code is amended by insert15 ing after the item relating to subchapter Y the following 

16 new item: 

‘‘SUBCHAPTER Z—ECONOMIC FREEDOM ZONES’’. 

17 (c) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to taxable years beginning after 

19 the date of the enactment of this Act. 


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1 TITLE IV—FEDERAL 

2 REGULATORY REDUCTIONS 

3 SEC. 401. SUSPENSION OF CERTAIN LAWS AND REGULA4 TIONS. 

5 (a) ENVIRONMENTAL PROTECTION AGENCY.—For 

6 each area designated as an Economic Freedom Zone 

7 under this Act, the Administrator of the Environmental 

8 Protection Agency shall not enforce, with respect to that 

9 Economic Freedom Zone, and the Economic Freedom 

10 Zone shall be exempt from compliance with— 

11 (1) part D of the Clean Air Act (42 U.S.C. 

12 7501 et seq.) (including any regulations promul13 gated under that part); 

14 (2) section 402 of the Federal Water Pollution 

15 Control Act (33 U.S.C. 1342); 

16 (3) sections 139, 168, 169, 326, and 327 of 

17 title 23, United States Code; 

18 (4) section 304 of title 49, United States Code; 

19 and 

20 (5) sections 1315 through 1320 of Public Law 

21 112–141 (126 Stat. 549). 

22 (b) DEPARTMENT OF THE INTERIOR.— 

23 (1) WILD AND SCENIC RIVERS.—For each area 

24 designated as an Economic Freedom Zone under 

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1 force, with respect to that Economic Freedom Zone, 

2 and the Economic Freedom Zone shall be exempt 

3 from compliance with the Wild and Scenic Rivers 

4 Act (16 U.S.C. 1271 et seq.). 

5 (2) NATIONAL HERITAGE AREAS.—For the pe6 riod beginning on the date of enactment of this Act 

7 and ending on the date on which an area is removed 

8 from designation as an Economic Freedom Zone, 

9 any National Heritage Area located within that Eco10 nomic Freedom Zone shall not be considered to be 

11 a National Heritage Area and any applicable Fed12 eral law (including regulations) relating to that Na13 tional Heritage Area shall not apply. 

14 TITLE V—EDUCATIONAL 

15 ENHANCEMENTS 

16 SEC. 501. EDUCATIONAL OPPORTUNITY TAX CREDIT. 

17 (a) IN GENERAL.—Subpart A of part IV of sub18 chapter A of chapter 1 of the Internal Revenue Code of 

19 1986 is amended by inserting after section 25D the fol20 lowing new section: 

21 ‘‘SEC. 25E. CREDIT FOR QUALIFIED ELEMENTARY AND SEC22 ONDARY EDUCATION EXPENSES. 

23 ‘‘(a) IN GENERAL.—In the case of an individual, 

24 there shall be allowed as a credit against the tax imposed 

25 by this chapter for the taxable year an amount equal to 


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1 the qualified elementary and secondary education expenses 

2 of an eligible student. 

3 ‘‘(b) LIMITATION.—The amount taken into account 

4 under subsection (a) with respect to any student for any 

5 taxable year shall not exceed $5,000. 

6 ‘‘(c) DEFINITIONS.—For purposes of this section— 

7 ‘‘(1) QUALIFIED ELEMENTARY AND SECONDARY

8 EDUCATION EXPENSES.—The term ‘qualified ele9 mentary and secondary education expenses’ has the 

10 meaning given such term under section 530(b)(3). 

11 ‘‘(2) ELIGIBLE STUDENT.—The term ‘eligible 

12 student’ means any student who— 

13 ‘‘(A) is enrolled in, or attends, any public, 

14 private, or religious school (as defined in section 

15 530(b)(3)(B)), and 

16 ‘‘(B) whose principal residence (within the 

17 meaning of section 123) is located in an Eco18 nomic Freedom Zone. 

19 ‘‘(3) ECONOMIC FREEDOM ZONE.—The term 

20 ‘Economic Freedom Zone’ means any area which is 

21 an Economic Freedom Zone under title II of the 

22 Economic Freedom Zone Act.’’. 

23 (b) CLERICAL AMENDMENT.—The table of sections 

24 for subpart A of part IV of subchapter A of chapter 1 


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1 of such Code is amended by inserting after the item relat2 ing to section 25D the following new item: 

‘‘Sec. 25E. Credit for qualified elementary and secondary education expenses.’’. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to expenditures made in taxable 

5 years beginning after the date of the enactment of this 

6 Act. 

7 SEC. 502. SCHOOL CHOICE THROUGH PORTABILITY. 

8 (a) IN GENERAL.—Subpart 2 of part A of title I of 

9 the Elementary and Secondary Education Act of 1965 (20 

10 U.S.C. 6331 et seq.) is amended by adding at the end 

11 the following: 

12 ‘‘SEC. 1128. SCHOOL CHOICE THROUGH PORTABILITY. 

13 ‘‘(a) AUTHORIZATION.— 

14 ‘‘(1) IN GENERAL.—Notwithstanding sections 

15 1124, 1124A, and 1125 and any other provision of 

16 law, and to the extent permitted under State law, a 

17 State educational agency may allocate grant funds 

18 under this subpart among the local educational 

19 agencies in the State based on the formula described 

20 in paragraph (2). 

21 ‘‘(2) FORMULA.—A State educational agency 

22 may allocate grant funds under this subpart for a 

23 fiscal year among the local educational agencies in 

24 the State in proportion to the number of eligible 

25 children enrolled in public schools served by the local 


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1 educational agency and enrolled in State-accredited 

2 private schools within the local educational agency’s 

3 geographic jurisdiction, for the most recent fiscal 

4 year for which satisfactory data are available, com5 pared to the number of such children in all such 

6 local educational agencies for that fiscal year. 

7 ‘‘(b) ELIGIBLE CHILD.— 

8 ‘‘(1) IN GENERAL.—In this section, the term 

9 ‘eligible child’ means a child— 

10 ‘‘(A) from a family with an income below 

11 the poverty level, on the basis of the most re12 cent satisfactory data published by the Depart13 ment of Commerce; and 

14 ‘‘(B) who resides in an Economic Freedom 

15 Zone as designated under title II of the Eco16 nomic Freedom Zones Act of 2013. 

17 ‘‘(2) CRITERIA OF POVERTY.—In determining 

18 the families with incomes below the poverty level for 

19 the purposes of paragraph (2), a State educational 

20 agency shall use the criteria of poverty used by the 

21 Census Bureau in compiling the most recent decen22 nial census. 

23 ‘‘(3) IDENTIFICATION OF ELIGIBLE CHIL24 DREN.—On an annual basis, on a date to be deter25 mined by the State educational agency, each local 


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1 educational agency that receives grant funding in ac2 cordance with subsection (a) shall inform the State 

3 educational agency of the number of eligible children 

4 enrolled in public schools served by the local edu5 cational agency and enrolled in State-accredited pri6 vate schools within the local educational agency’s ge7 ographic jurisdiction. 

8 ‘‘(c) DISTRIBUTION TO SCHOOLS.—Each local edu9 cational agency that receives grant funding under sub10 section (a) shall distribute such funds to the public schools 

11 served by the local educational agency and State-accred12 ited private schools with the local educational agency’s ge13 ographic jurisdiction— 

14 ‘‘(1) based on the number of eligible children 

15 enrolled in such schools; and 

16 ‘‘(2) in the manner that would, in the absence 

17 of such Federal funds, supplement the funds made 

18 available from the non-Federal resources for the 

19 education of pupils participating in programs under 

20 this part, and not to supplant such funds.’’. 

21 (b) TABLE OF CONTENTS.—The table of contents in 

22 section 2 of the Elementary and Secondary Education Act 

23 of 1965 is amended by inserting after the item relating 

24 to section 1127 the following: 

‘‘Sec. 1128. School choice through portability.’’. 


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1 SEC. 503. SPECIAL ECONOMIC FREEDOM ZONE VISAS. 

2 (a) DEFINITIONS.—In this section: 

3 (1) ABANDONED; DILAPIDATED.—The terms 

4 ‘‘abandoned’’ and ‘‘dilapidated’’ shall be defined by 

5 the States in accordance with the provisions of this 

6 Act. 

7 (2) FULL-TIME EMPLOYMENT.—The term ‘‘full8 time employment’’ means employment in a position 

9 that requires at least 35 hours of service per week 

10 at any time, regardless of who fills the position. 

11 (b) PURPOSE.—The purpose of this section is to fa12 cilitate increased investment and enhanced human capital 

13 in Economic Freedom Zones through the issuance of spe14 cial regional visas. 

15 (c) AUTHORIZATION.—The Secretary of Homeland 

16 Security, in collaboration with the Secretary of Labor, 

17 may issue Special Economic Freedom Zone Visas, in a 

18 number determined by the Governor of each State, in con19 sultation with local officials in regions designated by the 

20 Secretary of the Treasury as Economic Freedom Zones, 

21 to authorize qualified aliens to enter the United States for 

22 the purpose of— 

23 (1) engaging in a new commercial enterprise 

24 (including a limited partnership)— 

25 (A) in which such alien has invested, or is 

26 actively in the process of investing, capital in an 


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1 amount not less than the amount specified in 

2 subsection (d); and 

3 (B) which will benefit the region des4 ignated as an Economic Freedom Zone by cre5 ating full-time employment of not fewer than 5 

6 United States citizens, aliens lawfully admitted 

7 for permanent residence, or other immigrants 

8 lawfully authorized to be employed in the 

9 United States (excluding the alien and the 

10 alien’s immediate family); 

11 (2) engaging in the purchase and renovation of 

12 dilapidated or abandoned properties or residences 

13 (as determined by State and local officials) in which 

14 such alien has invested, or is actively in the process 

15 of investing, in the ownership of such properties or 

16 residences; or 

17 (3) residing and working in an Economic Free18 dom Zone. 

19 (d) EFFECTIVE PERIOD.—A visa issued to an alien 

20 under this section shall expire on the later of— 

21 (1) the date on which the relevant Economic 

22 Freedom Zone loses such designation; or 

23 (2) the date that is 5 years after the date on 

24 which such visa was issued to such alien. 

25 (e) CAPITAL AND EDUCATIONAL REQUIREMENTS.— 


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1 (1) NEW COMMERCIAL ENTERPRISES.—Except 

2 as otherwise provided under this section, the min3 imum amount of capital required to comply with 

4 subsection (c)(1)(A) shall be $50,000. 

5 (2) RENOVATION OF DILAPIDATED OR ABAN6 DONED PROPERTIES.—An alien is not in compliance 

7 with subsection (c)(2) unless the alien— 

8 (A) purchases a dilapidated or abandoned 

9 property in an Economic Freedom Zone; and 

10 (B) not later than 18 months after such 

11 purchase, invests not less than $25,000 to re12 build, rehabilitate, or repurpose the property. 

13 (3) VERIFICATION.—A visa issued under sub14 section (c) shall not remain in effect for more than 

15 2 years unless the Secretary of Homeland Security 

16 has verified that the alien has complied with the re17 quirements described in subsection (c). 

18 (4) EDUCATION AND SKILL REQUIREMENTS.— 

19 An alien is not in compliance with subsection (c)(3) 

20 unless the alien possesses— 

21 (A) a bachelor’s degree (or its equivalent) 

22 or an advanced degree; 

23 (B) a degree or specialty certification 

24 that— 


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1 (i) is required for the job the alien will 

2 be performing; and 

3 (ii) is specific to an industry or job 

4 that is so complex or unique that it can be 

5 performed only by an individual with the 

6 specialty certification; 

7 (C)(i) the knowledge required to perform 

8 the duties of the job the alien will be per9 forming; and 

10 (ii) the nature of the specific duties is so 

11 specialized and complex that such knowledge is 

12 usually associated with attainment of a bach13 elor’s or higher degree; or 

14 (D) a skill or talent that would benefit the 

15 Economic Freedom Zone. 

16 (f) ADDITIONAL PROVISIONS.— 

17 (1) GEOGRAPHIC LIMITATION.—An alien who 

18 has been issued a visa under this section is not per19 mitted to live or work outside of an Economic Free20 dom Zone. 

21 (2) RESCISSION.—A visa issued under this sec22 tion shall be rescinded if the visa holder resides or 

23 works outside of an Economic Freedom Zone or oth24 erwise fails to comply with the provisions of this sec25 tion. 


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1 (3) OTHER VISAS.—An alien who has been 

2 issued a visa under this section may apply for any 

3 other visa for which the alien is eligible in order to 

4 pursue employment outside of an Economic Freedom 

5 Zone. 

6 (g) ADJUSTMENT OF STATUS.—The Secretary of 

7 Homeland Security may adjust the status of an alien who 

8 has been issued a visa under this section to that of an 

9 alien lawfully admitted for permanent residence, without 

10 numerical limitation, if the alien— 

11 (1) has fully complied with the requirements set 

12 forth in this section for at least 5 years; 

13 (2) submits a completed application to the Sec14 retary; and 

15 (3) is not inadmissible to the United States 

16 based on any of the factors set forth in section 

17 212(a) of the Immigration and Nationality Act (8 

18 U.S.C. 1182(a)). 

19 SEC. 504. ECONOMIC FREEDOM ZONE EDUCATIONAL SAV20 INGS ACCOUNTS. 

21 (a) IN GENERAL.—Part VIII of subchapter F of 

22 chapter 1 of the Internal Revenue Code of 1986 is amend23 ed by adding at the end the following new section: 


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1 ‘‘SEC. 530A. ECONOMIC FREEDOM ZONE EDUCATIONAL SAV2 INGS ACCOUNTS. 

3 ‘‘(a) IN GENERAL.—Except as provided in this sec4 tion, an Economic Freedom Zone educational savings ac5 count shall be treated for purposes of this title in the same 

6 manner as a Coverdell education savings account. 

7 ‘‘(b) DEFINITIONS.—For purposes of this section— 

8 ‘‘(1) ECONOMIC FREEDOM ZONE EDUCATIONAL

9 SAVINGS ACCOUNT.—The term ‘Economic Freedom 

10 Zone educational savings account’ means a trust cre11 ated or organized in the United States exclusively 

12 for the purpose of paying the qualified education ex13 penses (as defined in section 530(b)(2)) of an indi14 vidual who is the designated beneficiary of the trust 

15 (and designated as an Economic Freedom Zone edu16 cational saving account at the time created or orga17 nized) and who is a qualified individual at the time 

18 such trust is established, but only if the written gov19 erning instrument creating the trust meets the fol20 lowing requirements: 

21 ‘‘(A) No contribution will be accepted— 

22 ‘‘(i) unless it is in cash, 

23 ‘‘(ii) after the date on which such ben24 eficiary attains age 25, or 

25 ‘‘(iii) except in the case of rollover 

26 contributions, if such contribution would 


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1 result in aggregate contributions for the 

2 taxable year exceeding $10,000. 

3 ‘‘(B) No contribution shall be accepted at 

4 any time in which the designated beneficiary is 

5 not a qualified individual. 

6 ‘‘(C) The trust meets the requirements of 

7 subparagraphs (B), (C), (D), and (E) of section 

8 530(b)(1). 

9 The age limitations in subparagraphs (A)(ii), sub10 paragraph (E) of section 530(b)(1), and paragraphs 

11 (5) and (6) of section 530(d), shall not apply to any 

12 designated beneficiary with special needs (as deter13 mined under regulations prescribed by the Sec14 retary). 

15 ‘‘(2) QUALIFIED INDIVIDUAL.—The term ‘quali16 fied individual’ means any individual whose principal 

17 residence (within the meaning of section 121) is lo18 cated in an Economic Freedom Zone (as defined in 

19 section 1400V–6). 

20 ‘‘(c) DEDUCTION FOR CONTRIBUTIONS.— 

21 ‘‘(1) IN GENERAL.—There shall be allowed as a 

22 deduction under part VII of subchapter B of this 

23 chapter an amount equal to the aggregate amount of 

24 contributions made by the taxpayer to any Economic 


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1 Freedom Zone educational savings account during 

2 the taxable year. 

3 ‘‘(2) LIMITATION.—The amount of the deduc4 tion allowed under paragraph (1) for any taxpayer 

5 for any taxable year shall not exceed $40,000. 

6 ‘‘(3) NO DEDUCTION FOR ROLLOVER CON7 TRIBUTIONS.—No deduction shall be allowed under 

8 paragraph (1) for any rollover contribution described 

9 in section 530(d)(5). 

10 ‘‘(d) OTHER RULES.— 

11 ‘‘(1) NO INCOME LIMIT.—In the case of an 

12 Economic Freedom Zone educational savings ac13 count, subsection (c) of section 530 shall not apply. 

14 ‘‘(2) CHANGE IN BENEFICIARIES.—Notwith15 standing paragraph (6) of section 530(b), a change 

16 in the beneficiary of an Economic Freedom Zone 

17 education savings account shall be treated as a dis18 tribution unless the new beneficiary is a qualified in19 dividual.’’. 

20 (b) CLERICAL AMENDMENT.—The table of sections 

21 for part VIII of subchapter F of chapter 1 of such Code 

22 is amended by adding at the end the following new item: 

‘‘Sec. 530A. Economic Freedom Zone educational savings accounts.’’. 


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1 TITLE VI—COMMUNITY 

2 ASSISTANCE AND REBUILDING 

3 SEC. 601. NONAPPLICATION OF DAVIS-BACON. 

4 The wage rate requirements of subchapter IV of 

5 chapter 31 of title 40, United States Code (commonly re6 ferred to as the ‘‘Davis-Bacon Act’’), shall not apply with 

7 respect to any area designated as an Economic Freedom 

8 Zone under this Act. 

9 SEC. 602. ECONOMIC FREEDOM ZONE CHARITABLE TAX 

10 CREDIT. 

11 (a) IN GENERAL.—Section 170 is amended by redes12 ignating subsection (p) as subsection (q) and by inserting 

13 after subsection (o) the following new subsection: 

14 ‘‘(o) ELECTION TO TREAT CONTRIBUTIONS FOR

15 ECONOMIC FREEDOM ZONE CHARITIES AS A CREDIT.— 

16 ‘‘(1) IN GENERAL.—In the case of an indi17 vidual, at the election of the taxpayer, so much of 

18 the deduction allowed under subsection (a) (deter19 mined without regard to this subsection) which is at20 tributable to Economic Freedom Zone charitable 

21 contributions— 

22 ‘‘(A) shall be allowed as a credit against 

23 the tax imposed by this chapter for the taxable 

24 year, and 


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1 ‘‘(B) shall not be allowed as a deduction 

2 for such taxable year under subsection (a). 

3 Any amount allowable as a credit under this sub4 section shall be treated as a credit allowed under 

5 subpart A of part IV of subchapter A for purposes 

6 of this title. 

7 ‘‘(2) AMOUNT ATTRIBUTABLE TO ECONOMIC

8 FREEDOM ZONE CHARITABLE CONTRIBUTIONS.—For 

9 purposes of paragraph (1)— 

10 ‘‘(A) IN GENERAL.—In any case in which 

11 the total charitable contributions of a taxpayer 

12 for a taxable year exceed the contribution base, 

13 the amount of Economic Freedom Zone chari14 table contributions taken into account under 

15 paragraph (1) shall be the amount which bears 

16 the same ratio to the total charitable contribu17 tions made by the taxpayer during such taxable 

18 year as the amount of the deduction allowed 

19 under subsection (a) (determined without re20 gard to this subsection and after application of 

21 subsection (b)) bears to the total charitable con22 tributions made by the taxpayer for such tax23 able year. 

24 ‘‘(B) CARRYOVERS.—In the case of any 

25 contribution carried from a preceding taxable 


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1 year under subsection (d), such amount shall be 

2 treated as attributable to an Economic Free3 dom Zone charitable contribution in the amount 

4 that bears the same ratio to the total amount 

5 carried from preceding taxable years under sub6 section (d) as the amount of Economic Free7 dom Zone charitable contributions not allowed 

8 as a deduction under subsection (a) (other than 

9 by reason of this subsection) for the preceding 

10 5 taxable year bears to total amount carried 

11 from preceding taxable years under subsection 

12 (d). 

13 ‘‘(3) ECONOMIC FREEDOM ZONE CHARITABLE

14 CONTRIBUTION.—The term ‘Economic Freedom 

15 Zone charitable contribution’ means any contribu16 tion to a corporation, trust, or community chest 

17 fund, or foundation described in subsection (c)(2), 

18 but only if— 

19 ‘‘(A) such entity is created or organized 

20 exclusively for— 

21 ‘‘(i) religious purposes, 

22 ‘‘(ii) educational purposes, or 

23 ‘‘(iii) any of the following charitable 

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1 viduals, or setting up or maintaining food 

2 banks, 

3 ‘‘(B) the primary mission of such entity is 

4 serving individuals in an Economic Freedom 

5 Zone, 

6 ‘‘(C) the entity maintains accountability to 

7 residents of such Economic Freedom Zone 

8 through their representation on any governing 

9 board of the entity or any advisory board to the 

10 entity, and 

11 ‘‘(D) the entity is certified by the Sec12 retary for purposes of this subsection. 

13 Such term shall not include any contribution made 

14 to an entity described in the preceding sentence 

15 after the date in which the designation of the Eco16 nomic Freedom Zone serviced by such entity lapses. 

17 ‘‘(4) ECONOMIC FREEDOM ZONE.—The term 

18 ‘Economic Freedom Zone’ means any area which is 

19 an Economic Freedom Zone under title II of the 

20 Economic Freedom Zone Act.’’. 

21 (b) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to taxable years beginning after 

23 the date of the enactment of this Act. 


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1 TITLE VII—STATE AND COMMU2 NITY POLICY RECOMMENDA3 TIONS 

4 SEC. 701. SENSE OF THE SENATE CONCERNING POLICY 

5 RECOMMENDATIONS. 

6 It is the sense of the Senate that State and local gov7 ernments should review and adopt the following policy rec8 ommendations: 

9 (1) PENSION REFORM.—State and local govern10 ments should— 

11 (A) implement reforms to address any fis12 cal shortfall in public pension funding, includ13 ing utilizing accrual accounting methods, such 

14 as those reforms undertaken by the private sec15 tor pension funds; and 

16 (B) restructure and renegotiate any public 

17 pension fund that is deemed to be insolvent or 

18 underfunded, including adopting defined con19 tribution retirement systems. 

20 (2) TAXES.—State and local governments 

21 should reduce jurisdictional tax rates below the na22 tional average in order to help facilitate capital in23 vestment and economic growth, particularly in com24 bination with the provisions of this Act. 


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1 (3) EDUCATION.—State and local governments 

2 should adopt school choice options to provide chil3 dren and parents more educational choices, particu4 larly in impoverished areas. 

5 (4) COMMUNITIES.—State and local govern6 ments should adopt right-to-work laws to allow more 

7 competitiveness and more flexibility for businesses to 

8 expand. 

9 (5) REGULATIONS.—State and local govern10 ments should streamline the regulatory burden on 

11 families and businesses, including streamlining the 

12 opportunities for occupational licensing. 

13 (6) ABANDONED STRUCTURES.—State and local 

14 governments should consider the following options to 

15 reduce or fix areas with abandoned properties or 

16 residences: 

17 (A) In the case of foreclosures, tax notifi18 cations should be sent to both the lien holder (if 

19 different than the homeowner) and the home20 owner. 

21 (B) Where State constitutions permit, 

22 property tax abatement or credits should be 

23 provided for individuals who purchase or invest 

24 in abandoned or dilapidated properties. 


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1 (C) Non-profit or charity demolition enti2 ties should be permitted or encouraged to help 

3 remove abandoned properties. 

4 (D) Government or municipality fees and 

5 penalties should be limited, and be proportional 

6 to the outstanding tax amount and the ability 

7 to pay. 

8 (E) The sale of tax liens to third parties 

9 should be reviewed, and where available, should 

10 prohibit the selling of tax liens below a certain 

11 threshold (for example the prohibition of the 

12 sale of tax liens to third parties under $1,000). 

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