I

103D CONGRESS

1ST SESSION H. R. 1051

To amend the Internal Revenue Code of 1986 to provide for the designation

of turbo enterprise zones to assist areas of high unemployment and

severe economic blight.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 23, 1993

Mr. COX introduced the following bill; which was referred to the Committee

on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

for the designation of turbo enterprise zones to assist

areas of high unemployment and severe economic blight.

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 ‘‘Turbo Enterprise Zone

5 Act’’.

6 SEC. 2. FINDINGS AND PURPOSE.

7 (a) FINDINGS.—Congress finds that:

8 (1) It is the Federal Government’s responsibil9 ity to create the conditions in which enterprise can
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1 once again flourish in our inner cities, and to help

2 create jobs where now there is only unemployment.

3 (2) Enterprise zones will reduce taxes, regula4 tions, and other government burdens on economic

5 activity in the Nation’s most economically depressed

6 areas. If properly implemented, this concept can and

7 will work over a period of several years. Because the

8 problem in our inner cities is more urgent and more

9 immediate, however, it requires a more aggressive

10 reform, designated the ‘‘turbo enterprise zone’’.

11 (3) To suit the current emergency, the enter12 prise zone concept is supercharged: first, it is tar13 geted on especially hard-hit areas bereft of current

14 tax revenue production; and, second, the incentives

15 are extraordinary. Specifically, local governments

16 will be asked to ‘‘green line’’ the most depressed

17 areas. Within the green line, city, county, State, and

18 Federal governments will cooperate to implement a

19 zero tax rate regime for 5 years: No sales taxes,

20 payroll withholding taxes, property taxes, excise

21 taxes, or income taxes. To obtain these benefits, 90

22 percent of a business’s employees and managers

23 must live within the green line.

24 (4) Under current circumstances, the hardest25 hit areas of our Nation’s inner cities are tax burdens
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1 rather than tax producers. By offering striking in2 centives for capital to locate within the turbo enter3 prise zone, however, it is realistically to be antici4 pated that enormous economic activity will occur in

5 this area within the 5-year period. As a consequence,

6 at the end of that time, it is anticipated that a stur7 dy tax-generating infrastructure will be firmly in

8 place.

9 (b) PURPOSE.—The purpose of this Act is to inspire

10 renewed confidence in the blighted areas within America’s

11 inner cities, without requiring enormous amounts of new

12 taxes and borrowing.

13 SEC. 3. NO FEDERAL TAXES IN TURBO ENTERPRISE ZONES

14 FOR 5 YEARS.

15 (a) INCOME, EMPLOYMENT, AND SELF-EMPLOYMENT

16 TAXES.—No tax shall be imposed under subtitle A or C

17 of the Internal Revenue Code of 1986 with respect to—

18 (1) any income received or accrued by—

19 (A) any individual who is a qualified resi20 dent of a turbo enterprise zone, or

21 (B) any qualified business, or

22 (2) any remuneration paid by a qualified busi23 ness for services performed by a qualified resident.

24 This subsection shall not apply for purposes of determin25 ing benefits under the Social Security Act.
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1 (b) EXCISE TAXES.—No tax shall be imposed under

2 subtitle D or E of such Code with respect to any taxable

3 event transacted in a turbo enterprise zone by a qualified

4 business or by a qualified resident for his own account.

5 (c) TURBO ENTERPRISE ZONE.—For purposes of

6 this section—

7 (1) IN GENERAL.—The term ‘‘turbo enterprise

8 zone’’ means any area in the United States if—

9 (A) such area is specifically designated for

10 purposes of this section by the State and each

11 local government having jurisdiction over such

12 area as being—

13 (i) afflicted with especially high unem14 ployment, to the extent such information is

15 available;

16 (ii) subject to severe economic blight

17 as measured by per capita income and

18 number of persons below the Federal pov19 erty level; and

20 (iii) nonproductive of material tax rev21 enues to the city, county, State, or Federal

22 governments; and

23 (B) the designation of such area is ap24 proved by the Secretary of Housing and Urban

25 Development.
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1 (2) APPROVAL OF DESIGNATION.—The Sec2 retary of Housing and Urban Development shall ap3 prove any designation under paragraph (1) if such

4 Secretary determines that—

5 (A) the area meets the criteria specified in

6 paragraph (1)(A), and

7 (B) there is in effect (subject to and effec8 tive upon the condition of approval by the Sec9 retary as provided in this section) by the State

10 and each of local government having jurisdic11 tion over such area an irrevocable 5-year waiver

12 of all tax levies of any kind (including but not

13 limited to property taxes, sales taxes, payroll

14 withholding taxes, income taxes, excise taxes,

15 and license fees) that would otherwise be appli16 cable to or collectible by qualified residents and

17 qualified businesses.

18 (d) QUALIFIED RESIDENT.—For purposes of this

19 section, the term ‘‘qualified resident’’ means any individ20 ual whose domicile and principal residence is, and has

21 been for at least 6 continuous months, located within a

22 turbo enterprise zone.

23 (e) QUALIFIED BUSINESS.—For purposes of this sec24 tion, the term ‘‘qualified business’’ means any firm which

25 meets the following criteria:
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1 (1) the principal place of business of such firm

2 is within a turbo enterprise zone;

3 (2) 90 percent of the remuneration paid by

4 such firm to employees, consultants, contract labor,

5 or other individual providers is to qualified residents;

6 and

7 (3) 90 percent of the number of employees of

8 such firm are qualified residents.

9 (f) APPLICATION OF SECTION.—

10 (1) IN GENERAL.—This section shall irrevocably

11 apply to any turbo enterprise zone during the 5-year

12 period beginning on the date the Secretary of Hous13 ing and Urban Development approves the designa14 tion of such zone under subsection (c)(2).

15 (2) EXTENSION OF 5-YEAR PERIOD.—

16 (A) IN GENERAL.—If, as of the close of

17 the 5-year period referred in paragraph (1) with

18 respect to any turbo enterprise zone, the Sec19 retary of Housing and Urban Development de20 termines that—

21 (i) during such period the average

22 percentage increase in per capita income

23 for such zone is at least twice the average

24 percentage increase in per capita income

25 for the surrounding area, and
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1 (ii) the governmental units referred to

2 in subsection (c)(2)(B) have extended the

3 waiver referred to in such subsection for at

4 least an additional 2 years,

5 then this section shall remain in effect for an

6 additional 2 years with respect to such zone.

7 (B) ADDITIONAL EXTENSIONS PER8 MITTED.—If, as of the close of any extension of

9 the 5-year period referred to in paragraph (1)

10 with respect to any turbo enterprise zone, the

11 Secretary of Housing and Urban Development

12 determines that—

13 (i) during the preceding 2-year exten14 sion the average percentage increase in per

15 capita income for such zone is at least

16 twice the average percentage increase in

17 per capita income for the surrounding

18 area, and

19 (ii) the governmental units referred to

20 in subsection (c)(2)(B) have extended the

21 waiver referred to in such subsection for at

22 least an additional 2 years,

23 then this section shall remain in effect for an

24 additional 2 years with respect to such zone.
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1 (C) EXTENSIONS LIMITED TO 6 YEARS.—

2 Extensions under this paragraph shall not ex3 ceed 6 years.

4 (g) PARTICIPATION BY STATE AND LOCAL GOVERN5 MENTS.—It is the sense of the Congress that each State

6 and local government having jurisdiction over areas sig7 nificantly and adversely affected by unemployment, gang

8 violence, riots, and looting should take immediate steps

9 to eliminate all taxes on qualified residents and qualified

10 businesses for the 5-year period described in subsection

11 (f).

12 (h) TREATMENT OF CARRYOVERS DURING PERIOD

13 TAXES SUSPENDED.—For purposes of determining the

14 application of any deduction, credit, or capital loss carry15 over under the Internal Revenue Code of 1986, the taxable

16 income of the taxpayer on whom no tax is imposed by rea17 son of this section for any period shall be treated as zero

18 for such period.

19 SEC. 4. HIRING INCENTIVES FOR BUSINESSES LOCATED IN

20 TURBO ENTERPRISE ZONE THAT ARE MANU21 FACTURING PRODUCTS OR PROVIDING SERV22 ICES OUTSIDE SUCH A ZONE.

23 (a) IN GENERAL.—Subpart D of part IV of sub24 chapter A of chapter 1 of the Internal Revenue Code of
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1 1986 is amended by adding at the end thereof the follow2 ing new section:

3 ‘‘SEC. 45. TURBO ENTERPRISE ZONE EMPLOYMENT CREDIT.

4 ‘‘(a) GENERAL RULE.—For purposes of section 38,

5 in the case of a qualified productive business, the turbo

6 enterprise zone employment credit for any taxable year is

7 an amount equal to the applicable percentage of the quali8 fied first-year wages for the taxable year.

9 ‘‘(b) LIMITATION.—The credit allowed under sub10 section (a) with respect to the qualified first-year wages

11 paid to an employee shall not exceed $1,000.

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

13 ‘‘(1) QUALIFIED PRODUCTIVE BUSINESS.—The

14 term ‘qualified productive business’ means any quali15 fied business that—

16 ‘‘(A) is engaged in the manufacture or pro17 duction of any tangible personal property in a

18 turbo enterprise zone for use outside such a

19 zone, or

20 ‘‘(B) is providing services performed out21 side such a zone by qualified residents.

22 ‘‘(2) APPLICABLE PERCENTAGE.—The term

23 ‘applicable percentage’ means, with respect to any

24 taxable year, the percentage of the gross receipts of

25 the taxpayer for such year which is attributable to—
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1 ‘‘(A) property manufactured or produced

2 by the taxpayer in a turbo enterprise zone and

3 sold for use outside such a zone, or

4 ‘‘(B) services performed outside such a

5 zone by qualified residents.

6 ‘‘(3) QUALIFIED FIRST-YEAR WAGES.—The

7 term ‘qualified first-year wages’ means wages (as de8 fined in section 51(d)) paid by the taxpayer to a

9 qualified resident that are attributable to service by

10 such resident during the 1-year period beginning on

11 the day such resident begins work for the employer.

12 ‘‘(4) QUALIFIED BUSINESS; QUALIFIED RESI13 DENT.—The terms ‘qualified business’ and ‘qualified

14 resident’ have the respective meanings given such

15 terms by section 3 of the Turbo Enterprise Zone

16 Act.

17 ‘‘(5) TURBO ENTERPRISE ZONE.—The term

18 ‘turbo enterprise zone’ has the meaning given such

19 term by section 3 of the Turbo Enterprise Zone Act.

20 ‘‘(d) APPLICATION OF SECTION.—This section shall

21 apply to qualified residents of a turbo enterprise zone that

22 are hired during the period that no tax is imposed on the

23 employer by reason of section 3 of the Turbo Enterprise

24 Zone Act.’’
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1 (b) CREDIT TO BE PART OF GENERAL BUSINESS

2 CREDIT.—Subsection (b) of section 38 of such Code is

3 amended by striking ‘‘plus’’ at the end of paragraph (6),

4 by striking the period at the end of paragraph (7) and

5 inserting ‘‘, plus’’, and by adding at the end thereof the

6 following new paragraph:

7 ‘‘(8) in the case of a qualified productive busi8 ness (as defined in section 45), the turbo enterprise

9 zone employment credit under section 45(a).’’

10 (c) CLERICAL AMENDMENT.—The table of sections

11 for subpart D of part IV of subchapter A of chapter 1

12 of such Code is amended by adding at the end thereof

13 the following new item:

‘‘Sec. 45. Turbo enterprise zone employment credit.’’

14 (d) EFFECTIVE DATE.—The amendments made by

15 this section shall apply to taxable years beginning after

16 the date of the enactment of this Act.

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