I 

116TH CONGRESS 

1ST SESSION H. R. 1525 

To provide tax incentives to promote economic development in economically 

distressed zones. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 5, 2019 

Miss GONZA ́LEZ-COLO ́N of Puerto Rico (for herself and Mrs. KIRKPATRICK) 

introduced the following bill; which was referred to the Committee on 

Ways and Means 

A BILL 

To provide tax incentives to promote economic development 

in economically distressed zones. 

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 for Distressed Zones of 2019’’. 

6 SEC. 2. ECONOMICALLY DISTRESSED ZONES. 

7 (a) IN GENERAL.—Chapter 1 of the Internal Rev8 enue Code of 1986 is amended by adding at the end the 

9 following new subchapter: 


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1 ‘‘Subchapter AA—Economically Distressed 

2 Zones 

‘‘Sec. 1400AA–1. Economically distressed zone credit. 

‘‘Sec. 1400AA–2. Designation of economically distressed zones. 

3 ‘‘SEC. 1400AA–1. ECONOMICALLY DISTRESSED ZONE CRED4 IT. 

5 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al6 lowed as a credit against the tax imposed by subtitle A 

7 for the taxable year an amount equal to the sum of— 

8 ‘‘(1) an amount equal to 40 percent of the sum 

9 of— 

10 ‘‘(A) the aggregate amount of the tax11 payer’s economically distressed zone wages for 

12 such taxable year, plus 

13 ‘‘(B) the allocable employee fringe benefit 

14 expenses of the taxpayer for such taxable year, 

15 ‘‘(2) an amount equal to 40 percent of the de16 preciation and amortization allowances for the tax17 able year with respect to property of the taxpayer 

18 which are located and used in the active conduct of 

19 a trade or business within an economically distressed 

20 zone, and 

21 ‘‘(3) an amount equal to 30 percent of the pay22 ments made by the taxpayer in course of a trade or 

23 business for purchases of services or tangible prop24 erty from an unrelated person (40 percent in the 


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1 case of such a purchase from an unrelated minority 

2 business) located within an economically distressed 

3 zone. 

4 ‘‘(b) DENIAL OF DOUBLE BENEFIT.—Any wages or 

5 other expenses taken into account in determining the cred6 it under this section may not be taken into account in de7 termining the credit under sections 41, and any other pro8 vision determined by the Secretary to be substantially 

9 similar. 

10 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur11 poses of this section— 

12 ‘‘(1) QUALIFIED ECONOMICALLY DISTRESSED

13 ZONE WAGES.— 

14 ‘‘(A) IN GENERAL.—The term ‘qualified 

15 economically distressed zone wages’ means 

16 amounts paid or incurred by the taxpayer for 

17 the taxable year which are— 

18 ‘‘(i) in connection with the active con19 duct of a trade or business of the taxpayer 

20 within an economically distressed zone, and 

21 ‘‘(ii) for wages of an employee for 

22 services provided, and the principal place 

23 of employment of whom is, in such eco24 nomically distressed zone. 


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1 ‘‘(B) LIMITATION ON AMOUNT OF WAGES

2 TAKEN INTO ACCOUNT.— 

3 ‘‘(i) IN GENERAL.—The amount of 

4 wages which may be taken into account 

5 under subparagraph (A) with respect to 

6 any employee for any taxable year shall 

7 not exceed the contribution and benefit 

8 base determined under section 230 of the 

9 Social Security Act for the calendar year 

10 in which such taxable year begins. 

11 ‘‘(ii) TREATMENT OF PART-TIME EM12 PLOYEES, ETC.—If— 

13 ‘‘(I) any employee is not em14 ployed by the taxpayer on a substan15 tially full-time basis at all times dur16 ing the taxable year, or 

17 ‘‘(II) the principal place of em18 ployment of any employee is not with19 in an economically distressed zone at 

20 all times during the taxable year, 

21 the limitation applicable under clause (i) 

22 with respect to such employee shall be the 

23 appropriate portion (as determined by the 

24 Secretary) of the limitation which would 

25 otherwise be in effect under clause (i). 


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1 ‘‘(C) TREATMENT OF CERTAIN EMPLOY2 EES.—The term ‘qualified economically dis3 tressed zone wages’ shall not include any wages 

4 paid to employees who are assigned by the em5 ployer to perform services for another person, 

6 unless the principal trade or business of the 

7 employer is to make employees available for 

8 temporary periods to other persons in return 

9 for compensation. 

10 ‘‘(2) ALLOCABLE EMPLOYEE FRINGE BENEFIT

11 EXPENSES.— 

12 ‘‘(A) IN GENERAL.—The term ‘allocable 

13 employee fringe benefit expenses’ means the ag14 gregate amount allowable as a deduction under 

15 this chapter to the taxpayer for the taxable year 

16 for the following amounts which are allocable to 

17 employment in an economically distressed zone: 

18 ‘‘(i) Employer contributions under a 

19 stock bonus, pension, profit-sharing, or an20 nuity plan. 

21 ‘‘(ii) Employer-provided coverage 

22 under any accident or health plan for em23 ployees. 

24 ‘‘(iii) The cost of life or disability in25 surance provided to employees. 


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1 ‘‘(B) ALLOCATION.—For purposes of sub2 paragraph (A), an amount shall be treated as 

3 allocable to an economically distressed zone only 

4 if such amount is with respect to employment 

5 of an individual for services provided, and the 

6 principal place of employment of whom is, in 

7 such zone. 

8 ‘‘(3) MINORITY BUSINESS.— 

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

10 business’ means— 

11 ‘‘(i) a sole proprietorship carried on 

12 by a qualified individual, or 

13 ‘‘(ii) a corporation or partnership— 

14 ‘‘(I) at least 50 percent of the 

15 ownership interests in which are held 

16 by one or more qualified individuals, 

17 and 

18 ‘‘(II) of which a qualified indi19 vidual is the president or chief execu20 tive officer (or a substantially equiva21 lent position). 

22 ‘‘(B) QUALIFIED INDIVIDUAL.—The term 

23 ‘qualified individual’ means any individual 

24 who— 


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1 ‘‘(i) is of Asian-Indian, Asian-Pacific, 

2 Black, Hispanic or Native American origin 

3 or descent, and 

4 ‘‘(ii) is a United States citizen or legal 

5 resident of the United States or any of its 

6 territories or possessions. 

7 ‘‘(4) AGGREGATION RULES.— 

8 ‘‘(A) IN GENERAL.—Members of an affili9 ated group shall be treated as a single taxpayer. 

10 ‘‘(B) AFFILIATED GROUP.—The term 

11 ‘qualified group’ means an affiliated group (as 

12 defined in section 1504(a), determined without 

13 regard to section 1504(b)(3)) one or more 

14 members of which are engaged in the active 

15 conduct of a trade or business within an eco16 nomically distressed zone. 

17 ‘‘(C) RELATED PERSONS.—Persons shall 

18 be treated as related to each other if such per19 sons would be treated as a single employer 

20 under the regulations prescribed under section 

21 52(b). 


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1 ‘‘SEC. 1400AA–2. DESIGNATION OF ECONOMICALLY DIS2 TRESSED ZONES. 

3 ‘‘(a) IN GENERAL.—For purposes of this subchapter, 

4 the term ‘economically distressed zone’ means any popu5 lation census tract which— 

6 ‘‘(1) has pervasive poverty, unemployment, low 

7 labor force participation, and general distress meas8 ured as a prolonged period of economic decline 

9 measured by real gross national product, 

10 ‘‘(2) has a poverty rate of not less than 35 per11 cent, and 

12 ‘‘(3) has been designated as such by the Sec13 retary and the Secretary of Commerce pursuant to 

14 an application under subsection (b). 

15 ‘‘(b) APPLICATION FOR DESIGNATION.— 

16 ‘‘(1) IN GENERAL.—An application for designa17 tion as an economically distressed zone may be filed 

18 by a State or local government in which the popu19 lation census tract to which the application applies 

20 is located. 

21 ‘‘(2) REQUIREMENTS.—Such application shall 

22 include— 

23 ‘‘(A) a Fiscal Plan submitted pursuant to 

24 section 201 of the Puerto Rico Oversight, Man25 agement, and Economic Stability Act, or 


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1 ‘‘(B) a strategic plan for accomplishing the 

2 purposes of this subchapter, which— 

3 ‘‘(i) describes the coordinated eco4 nomic, human, community, and physical 

5 development plan and related activities 

6 proposed for the nominated area, 

7 ‘‘(ii) describes the process by which 

8 the affected community is a full partner in 

9 the process of developing and imple10 menting the plan and the extent to which 

11 local institutions and organizations have 

12 contributed to the planning process, 

13 ‘‘(iii) identifies the amount of State, 

14 local, and private resources that will be 

15 available in the nominated area and the 

16 private/public partnerships to be used, 

17 which may include participation by, and 

18 cooperation with, universities, medical cen19 ters, and other private and public entities, 

20 ‘‘(iv) identifies the funding requested 

21 under any Federal program in support of 

22 the proposed economic, human, commu23 nity, and physical development and related 

24 activities, 


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1 ‘‘(v) identifies baselines, methods, and 

2 benchmarks for measuring the success of 

3 carrying out the strategic plan, including 

4 the extent to which poor persons and fami5 lies will be empowered to become economi6 cally self-sufficient, and 

7 ‘‘(vi) does not include any action to 

8 assist any establishment in relocating from 

9 one area outside the nominated area to the 

10 nominated area, except that assistance for 

11 the expansion of an existing business enti12 ty through the establishment of a new 

13 branch, affiliate, or subsidiary is permitted 

14 if— 

15 ‘‘(I) the establishment of the new 

16 branch, affiliate, or subsidiary will not 

17 result in a decrease in employment in 

18 the area of original location or in any 

19 other area where the existing business 

20 entity conducts business operations, 

21 ‘‘(II) there is no reason to believe 

22 that the new branch, affiliate, or sub23 sidiary is being established with the 

24 intention of closing down the oper25 ations of the existing business entity 


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1 in the area of its original location or 

2 in any other area where the existing 

3 business entity conducts business op4 eration, and 

5 ‘‘(III) includes such other infor6 mation as may be required by the Sec7 retary and the Secretary of Com8 merce. 

9 ‘‘(c) PERIOD FOR WHICH DESIGNATIONS ARE IN EF10 FECT.—Designation as an economically distressed zone 

11 may be made at any time during the 10-year period begin12 ning on the date of the enactment of this section, and shall 

13 remain in effect with respect to such zone during the 15- 

14 year period beginning on the date of such designation. 

15 ‘‘(d) TERRITORIES AND POSSESSIONS.—The term 

16 ‘State’ includes territories and possessions of the United 

17 States.’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2018. 

Æ 


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