Federal Register / Vol. 63, No. 73 /Thursday, April 16, 1998 /Rules and Regulations 19151

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Part 598

[Docket No. FR–4281–I–04]

RIN 2506–AB97

Empowerment Zones: Rule for Second

Round Designations

AGENCY: Office of the Assistant

Secretary for Community Planning and

Development, HUD.

ACTION: Interim rule.

SUMMARY: This interim rule adds new

regulations to govern the designation of

fifteen urban areas as Empowerment

Zones. This new rule is being published

to implement the changes made by

sections 952–954 of the Taxpayer Relief

Act of 1997. That statute authorized

designation of a second round of

Empowerment Zones, which receive

special tax benefits for area businesses.

(The Act also authorized HUD to

designate two additional EZs under the

criteria specified for the first round, for

which a separate final rule has been

issued.) By specifying the new

eligibility criteria to be used in

designating a second round of EZs, this

rule lays the foundation for designations

to be made in response to applications

submitted in response to the Notice

Inviting Applications published

elsewhere in this issue of the Federal

Register.

DATES: Effective date: May 18, 1998.

Comment due date: Comments must

be submitted by June 15, 1998.

ADDRESSES: Interested persons are

invited to submit comments regarding

this rule to the Office of the General

Counsel, Regulations Division, room

10276, Department of Housing and

Urban Development, 451 Seventh Street,

SW, Washington, DC 20410–0500.

Comments should refer to the above

docket number and title of the rule.

Facsimile (FAX) comments are not

acceptable. A copy of each

communication submitted will be

available for public inspection and

copying during regular business hours

(weekdays 7:30 a.m. to 5:30 p.m. Eastern

time) at the above address. (In addition,

see the Paperwork Reduction Act

heading under the Findings and

Certifications section of this preamble

regarding submission of comments on

the information collection burden.)

FOR FURTHER INFORMATION CONTACT:

Elaine Braverman, Empowerment Zone/

Enterprise Community Initiative,

Department of Housing and Urban

Development, Room 7130, 451 Seventh

Street, SW, Washington, DC 20410,

telephone (202) 708–6339. (This

telephone number is not toll-free.) For

hearing-and speech-impaired persons,

this telephone number may be accessed

via TTY (text telephone) by calling the

Federal Information Relay Service at 1–

800–877–8339 (toll-free).

SUPPLEMENTARY INFORMATION:

I. Background

Section 13301 of the Omnibus Budget

Reconciliation Act of 1993 created a

new Subchapter U of the Internal

Revenue Code, which authorized the

Secretary of Housing and Urban

Development (HUD) to designate not

more than six urban Empowerment

Zones and not more than 65 urban

Enterprise Communities. It also

authorized the Secretary of Agriculture

to designate not more than three

Empowerment Zones. The two

Departments issued separate but parallel

interim rules, following a standard

format, on January 18, 1994 (59 FR

2700). Notices Inviting Applications

were published, and the agencies

designated the maximum number of EZs

and ECs authorized. HUD issued a final

rule, making only technical changes to

the interim rule, on January 12, 1995 (60

FR 3034). At that time, HUD responded

to comments received on the interim

rule. With respect to comments made

concerning the designation process,

HUD generally responded that, because

the designations had already been made

under the interim rule, changes to those

provisions would not have any effect,

but the suggested changes would be

considered in any future rulemaking to

implement any additional Congressional

authorization for new designations.

HUD has reconsidered the changes

requested, as discussed in the preamble

to that final rule, and has decided that

they are inappropriate or unnecessary.

Section 952 of the Taxpayer Relief Act

of 1997 (Pub. L. 105–34, 111 Stat. 788,

enacted on August 5, 1997) (the 1997

Act) amended section 1391 of the

Internal Revenue Code (26 U.S.C. 1391)

to add a new paragraph (g), that changed

the eligibility criteria for the 20

additional Empowerment Zones, 15 of

which are to be in urban areas,

designated by the Secretary of HUD and

5 of which are to be in rural areas,

designated by the Secretary of

Agriculture. The Act expanded the

eligibility criteria slightly, provided

different tax incentives applicable to the

new EZs, and made other changes

affecting EZs, thus necessitating changes

to the implementing regulations.

Section 954 of the 1997 Act amended

section 1392 to revise eligibility criteria

with respect to Alaska and Hawaii,

which changes are also reflected in this

interim rule, and section 701 expressly

designated a special Empowerment

Zone in the District of Columbia, to last

five years instead of the usual ten.

Two specific changes in the eligibility

criteria in the 1997 Act for new EZs

were an increase in the size of zones

and elimination of the requirement that

at least half of the nominated area

consist of census tracts with poverty

rates of 35 percent. The requirements for

at least a 25 percent poverty rate for 90

percent of the area’s census tracts and

at least a 20 percent poverty rate for the

remainder continue to apply, but census

tracts with populations under 2,000 get

special consideration for satisfying the

25 percent rate. The requirement that an

urban EZ must be located entirely

within no more than two contiguous

States remains unchanged.

The tax benefits that apply to the

Round II EZs are the following: taxexempt bond financing, welfare-to-work

tax credit, work opportunity tax credit,

environmental cleanup cost deduction

(‘‘brownfields’’ tax incentive), and up to

$20,000 of additional section 179

(accelerated depreciation) expensing.

The Round II EZs are not eligible for the

present-law wage credit enjoyed by the

Round I EZs.

The strategic plan submitted by an

applicant must describe its plans for

using these tax benefits, in accordance

with § 598.215(b)(4)(ii). (For a full

description of the tax benefits, see IRS

Publication 954, ‘‘Tax Incentives for

Empowerment Zones and Other

Distressed Communities.’’)

When the first round of designations

was being made, there was funding

authorized and appropriated for the U.S.

Department of Health and Human

Services to award EZ/EC SSBG grants

for the Empowerment Zones and

Enterprise Communities. It is

anticipated that such funding may

become available for Round II designees

in Fiscal Year 1999. See the Appendix,

‘‘Eligible Uses of EZ/EC SSBG Funds,’’

for guidance on uses of these funds.

For the current fiscal year, however,

there is $1.5 million in HUD funding for

planning grants and approximately $502

million in tax benefits. Each of the 15

areas that receives designation under

this rule as an EZ will be awarded a

$100,000 planning grant.

II. New Rule

A. Statutory Changes

The principal change that affects all

areas to be nominated for the second

round of designations is the

replacement of the existing criteria
19152 Federal Register / Vol. 63, No. 73 /Thursday, April 16, 1998 /Rules and Regulations

concerning poverty rate. For the first

round of designations, there were three

elements of the poverty rate criterion of

eligibility for Empowerment Zone

designation: (1) The poverty rate for

each census tract must be at least 20

percent; (2) the poverty rate for at least

90 percent of the census tracts must be

at least 25 percent; and (3) the poverty

rate for at least 50 percent of the census

tracts must be at least 35 percent. The

areas designated under the revised

authority are subject to only the first

two of these poverty rate criteria. (See

§ 598.115(a).)

A new provision excepts up to three

‘‘developable sites’’—parcels that may

be developed for commercial or

industrial purposes—from satisfying the

two poverty rate criteria that otherwise

would be applicable, but restricts the

size of the area given this special

poverty rate treatment to a total of 2,000

acres. There may be up to three

noncontiguous developable sites within

a nominated area, which themselves

may be noncontiguous with the parcels

that do meet the poverty criteria.

Treatment of census tracts with small

populations has been changed. Now

they must satisfy an additional

condition to be treated as if they have

a poverty rate of at least 25 percent (the

second criterion described above): The

census tract must be contiguous to one

or more other census tracts that have a

poverty rate of at least 25 percent,

determined without regard to this

exception. (See § 598.115(b)(2).)

For the first round of designations, the

statute (at section 1391(e)(5)) required

that States and local governments certify

that no portion of the area nominated is

already included in an EZ or in an EC

or in an area otherwise nominated for

designation. For this round, the statute

was amended. We interpret the

amendment to permit nomination of

areas that were contained in areas

nominated for EZ or EC status that were

not granted such status. In other words,

the certification for Round II requires

that the nominated area contain no

portion of an area that is part of either

an EZ or an area currently being

nominated for EZ designation. (See

§ 598.210(c).)

In the first round, Indian reservations

were not permitted to be included in an

Empowerment Zone. The statute has

been changed to permit them to be

included, and to be treated as

nominated by both a State and a local

government if it is nominated by the

reservation governing body. Section

598.500 implements this change,

permitting the nomination of the tribal

governing body to be treated as a

nomination by both a State and a local

government where the area included in

the nomination is entirely within the

reservation. If part of the area

nominated is outside the Indian

reservation, the State would be required

to participate in the nomination. The

statute references a determination by the

Secretary of the Interior with respect to

the Indian reservation’s governing body.

HUD interprets this to mean that the

Indian organizations from whom HUD

should accept nominations are those

that constitute Federally recognized

tribes, those specified by the

Department of the Interior. This

interpretation is reflected in the new

section.

The States of Alaska and Hawaii are

given special treatment with respect to

satisfying the distress, size, and poverty

rate criteria in the revised statute for

Round II designations. A nominated

area is treated as satisfying those

requirements if 20 percent or more of

the families of each census tract have

incomes that are no more than 50

percent of the statewide median family

income. (See § 598.515.)

The District of Columbia also is

singled out in the statute for separate

designation. Section 701 of the Act

designates the existing Empowerment

Zone in DC as the DC special

Empowerment Zone, with the addition

of all other census tracts for which the

poverty rate is at least 20 percent. It has

special provisions concerning the

issuance of bonds during the period of

January 1, 1998 through December 31,

2002, and concerning treatment of

capital gains on DC Zone assets. These

special provisions for the District of

Columbia are not included in this rule,

since they are unique to DC. They are

being implemented directly, as specified

in the statute. This special EZ status

does not disqualify the District of

Columbia from seeking designation as a

standard EZ, which provides benefits

over a ten year period.

B. Policy Changes

The language of the rule is being

revised to link the EZs to moving people

from welfare to work, since that has

become a high priority after the

enactment of welfare reform legislation.

See § 598.2.

C. Clarifying Changes

Some terminology used in part 597,

the current rule, such as ‘‘population

census tract’’ seems confusing, and so is

modified when it is replicated in this

proposed rule. This rule applies only to

Round II designations, which do not

include Enterprise Communities

designations. Consequently, the

references to Enterprise Communities

do not appear in this new part.

The section on evaluating the strategic

plan that was contained in the rule for

Round I has been removed. That level

of detail will be provided in the Notice

Inviting Applications for Round II. The

selection criteria used in making the

designations, however, remain in the

rule, in § 598.305. The heading has been

changed to ‘‘Designation factors.’’ That

section echoes the statute in providing

that HUD will choose among applicants

that satisfy the eligibility criteria by

evaluating the quality of the strategic

plan and other factors to be specified in

the Notice Inviting Applications.

D. Funding Differences

In Round I, the U.S. Department of

Health and Human Services (HHS)

awarded EZ/EC SSBG funds to States for

each designated Round I EZ and EC.

The HUD rule for Round I included

guidance about use of those grant funds.

Similar grant funding has not been

authorized for Round II. If grants are

authorized for Round II, HHS will issue

guidance about those funds.

E. Corresponding Sections Between New

Rule and Old Rule

The following chart shows the

sections of this new part 598 that

correspond to the sections of part 597:

Part 598 Part 597

598.1 Applicability and scope ................................................................ 597.1 Applicability and scope

598.2 Objective and purpose ................................................................. 597.2 Objective and purpose

598.3 Definitions ..................................................................................... 597.3 Definitions

598.4 Secretarial review * * * ................................................................ 597.4 Secretarial review * * *

598.100 Eligibility requirements ............................................................. 597.100 Eligibility requirements * * *

598.105 Data used for elig * * * ............................................................ 597.101 Data utilized for eligibility &

597.503 Use of census data

598.110 Tests of pervasive pov * * * ..................................................... 597.102 Tests of pervasive poverty, * * *

598.115 Poverty rate .............................................................................. 597.103 Poverty rate
Federal Register / Vol. 63, No. 73 /Thursday, April 16, 1998 /Rules and Regulations 19153

Part 598 Part 597

598.200 Who nominates an area * * * .................................................. 597.200(a)&(b) Nominations by State and * * *

598.205 What are the requirements * * * .............................................. 597.202 Submission of nominations for * * *

598.210 What certifications must the * * * ............................................ 597.200(a)(4), 597.202(b) Submission of nom * * *

598.215 What are the purpose and content * * * .................................. 597.200(c)&(d) Nominations by State and * * *

598.300 Procedure for submitting * * * .................................................. 597.300 HUD action and review of nomin * * *

598.305 Designation factors * * * .......................................................... 597.301 Selection factors for designation * * *

598.400 HUD grants for planning * * * ................................................ NEW

598.405 Environmental review ............................................................... NEW

598.410 Public access to materials * * * ............................................... NEW

598.415 Reporting .................................................................................. 597.400 Reporting

598.420 Periodic progress determinations ............................................ 597.401 Periodic performance reviews

598.425 Validation of designation .......................................................... 597.402 Validation of designation

598.430 Revocation of designation ........................................................ 597.403 Revocation of designation

598.500 Indian Reservations ................................................................. 597.500 Indian Reservations

598.505 Governments ............................................................................ 597.501 Governments

598.510 Nominations by EDCs or DC ................................................... 597.502 Nominations by EDCs or DC

598.515 Alaska and Hawaii ................................................................... NEW

III. Findings and Certifications

Justification for Interim Rule

In general, HUD publishes a rule for

public comment before issuing a rule for

effect, in accordance with its own

regulations on rulemaking at 24 CFR

part 10. However, part 10 does provide

for exceptions from that general rule

where the agency finds good cause to

omit advance notice and public

participation. The good cause

requirement is satisfied when prior

public procedure is ‘‘impracticable,

unnecessary, or contrary to the public

interest.’’ (24 CFR 10.1.)

HUD finds that good cause exists to

publish this rule for effect without first

soliciting public comment, because

advance solicitation of comment is both

unnecessary and contrary to the public

interest.

The Department has already

published a rule for notice and

comment on the subject of designation

of Empowerment Zones, which was

codified at 24 CFR part 597. This new

rule to implement a second round of

designation of Empowerment Zones is

patterned on the prior rule. The major

differences between this rule and the

earlier rule are based on statutory

changes, which leave virtually no room

for exercise of discretion. Other

additions to the rule reflect HUD’s

experience with the first round,

clarifying the expectations of the parties

to reflect actual experience. These

changes are not controversial and,

therefore, do not signal a necessity for

advance public comment.

HUD’s finding that it would be

contrary to the public interest to delay

the effectiveness of the rule is based on

the practical necessity of preparing an

application for designation as an

empowerment zone within the

timeframe set by the authorizing statute.

The designations are required by the

statute (section 1391(g)(2)) to be made

before January 1, 1999. The

governmental entities and other entities

that may work with them in partnership

to develop an application for

designation need to know the

requirements of the program in time to

develop their strategic plans and apply

for designation. Delay in prescribing the

criteria for designating new

empowerment zones would delay the

development of these cooperative efforts

and make it extremely difficult for

applicants to develop their strategic

plans in a timely fashion.

For these reasons, HUD believes that

an interim rulemaking is justified. HUD

is soliciting public comments on this

rule and will consider these comments

in the development of a final rule.

Paperwork Reduction Act

The information collection

requirements contained in this rule, as

described in §§ 598.200, 598.205,

598.210, 598.215, 598.415, and 598.430,

and the implementing application

forms, have been approved by the Office

of Management and Budget under the

Paperwork Reduction Act of 1995 (44

U.S.C. 3501–3520) and assigned OMB

control number 2506–0148. This

approval has been granted on an

emergency basis through August 31,

1998. In accordance with the Paperwork

Reduction Act, HUD may not conduct or

sponsor, and a person is not required to

respond to, a collection of information

unless the collection displays a

currently valid OMB control number.

In addition, HUD will seek an

extension of this approval for these

information collections. Therefore, HUD

asks for comments regarding the

information collections contained in the

sections of this rule stated above. At the

end of the comment period, HUD will

submit the proposed information

collections to OMB for approval.

Comments regarding the information

collections contained in the rule must

be submitted by June 15, 1998.

Comments on these information

collections should refer to the proposal

by name and/or OMB control number

and must be sent to: Reports Liaison

Officer, Shelia E. Jones, Department of

Housing and Urban Development, 451

Seventh Street, SW, Room 7230,

Washington, DC 20410.

Specifically, comments are solicited

from members of the public and affected

agencies concerning the proposed

collection of information to: (1) Evaluate

whether the proposed collection of

information is necessary for the proper

performance of the functions of the

agency, including whether the

information will have practical utility;

(2) Evaluate the accuracy of the agency’s

estimate of the burden of the proposed

collection of information; (3) Enhance

the quality, utility, and clarity of the

information to be collected; and (4)

Minimize the burden of the collection of

information on those who are to

respond, including through the use of

appropriate automated collection

techniques or other forms of information

technology, e.g., permitting electronic

submission of responses.

The following table identifies the

components of the information

collection:
19154 Federal Register / Vol. 63, No. 73 /Thursday, April 16, 1998 /Rules and Regulations

Type of collection Section of 24

CFR affected

Number of

respondents

Frequency of

response

Est. ave. response time

(hrs.)

Annual burden

hrs.

Application ............................................................................ 598.200

598.205

598.210

598.215

225 1 50 11,250

Periodic Reporting ................................................................ 597.400

598.415

87 1 15 1,305

Response to Warning Letter ................................................. 597.403

598.430

5 1 20 100

Total Burden—12,655 hours per year.

Environmental Impact

A Finding of No Significant Impact

with respect to the environment for this

rule has been made in accordance with

HUD regulations at 24 CFR part 50,

which implement section 102(2)(C) of

the National Environmental Policy Act

of 1969. The Finding of No Significant

Impact is available for public inspection

between 7:30 a.m. and 5:30 p.m.

weekdays in the Office of the Rules

Docket Clerk, Office of the General

Counsel, Department of Housing and

Urban Development, Room 10276, 451

Seventh Street, S.W., Washington, DC

20410.

Regulatory Flexibility Act

The Secretary, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)), has reviewed this rule before

publication and by approving it certifies

that this rule will not have a significant

economic impact on a substantial

number of small entities as

distinguished from large entities. The

rule does not place any mandates on

small entities. It merely authorizes them

to seek designation as Empowerment

Zones, as authorized by statute.

The burdens placed on applicants

derive from the statute, and primary

among them is the requirement for a

strategic plan. The entity responsible for

preparing a strategic plan for HUD funds

for a metropolitan area is the local

government that generally would be

seeking the nomination of an area, not

the small businesses that are located or

could be located within the area. A

small government is defined by the

Small Business Administration as one

that has a population of less than

50,000. It is possible that a government

of that size will seek designation for an

area within its boundaries, if it is part

of a Metropolitan Statistical Area, as

required by the statute. The contents of

such an entity’s strategic plan would be

expected to reflect its size, not the size

of a larger applicant.

HUD is sensitive to the fact, however,

that the uniform application of

requirements on entities of differing

sizes may place a disproportionate

burden on small entities. Therefore,

HUD is soliciting recommendations for

how these small entities might fulfill the

purposes of the rule in a way less

burdensome to them.

Executive Order 12612, Federalism

The General Counsel, as the

Designated Official under section 6(a) of

Executive Order 12612, Federalism, has

determined that, although this rule may

have a substantial direct effect on the

States or their political subdivisions that

are designated as Empowerment Zones,

this effect is intended by the legislation

authorizing the program. The purpose of

the rule is to provide a cooperative

atmosphere between the Federal

government and States, local, and Tribal

governments, and to reduce any

regulatory burden imposed by the

Federal government that impedes the

ability of States and local governments

to solve pressing economic, social, and

physical problems in their communities.

Unfunded Mandates

Executive Order 12875 calls for

Federal agencies to refrain, to the extent

feasible and permitted by law, from

promulgating any regulation that is not

required by statute that would create a

mandate on a State, local, or Tribal

government, unless the agency provides

funds for complying with the mandate

or the agency first consults with affected

State, local, and Tribal governments.

Title II of the Unfunded Mandates

Reform Act of 1995 (12 U.S.C. 1501)

established requirements for Federal

agencies to assess the effects of their

regulatory actions on State, local, and

tribal governments and the private

sector.

This rule does not impose any Federal

mandates on any State, local, or tribal

governments or the private sector within

the meaning of the Unfunded Mandates

Reform Act of 1995, because it does not

mandate any particular action. The rule

just authorizes States, localities, and

tribes to apply for designation of areas

within their jurisdiction as

Empowerment Zones, which permits

special tax treatment of business

activities within the areas and may

make the areas eligible for other

government benefits.

HUD has, nonetheless, had regular

contact with the representatives of the

already designated EZs and ECs

concerning the effect of the statutory

changes and on possible means for

implementation. In addition, individual

citizens, academicians, and members of

Congress have inquired about the

possible resolution of issues they

identified with respect to implementing

the statutory changes. All of the

information and views provided have

been considered in the development of

this rule.

Regulatory Review

The Office of Management and Budget

(OMB) reviewed this rule under

Executive Order 12866, Regulatory

Planning and Review. OMB determined

that this rule is a ‘‘significant regulatory

action,’’ as defined in section 3(f) of the

Order (although not economically

significant, as provided in section 3(f)(1)

of the Order). Any changes made to the

interim rule after its submission to OMB

are identified in the docket file, which

is available for public inspection in the

Regulations Division of the Office of

General Counsel, Room 10276, 451

Seventh Street, SW, Washington, DC

20410–0500.

Catalog of Federal Domestic Assistance.

The Catalog of Federal Domestic

Assistance Program number assigned to

this program is 14.244.

List of Subjects in 24 CFR Part 598

Community development, Economic

development, Empowerment zones,

Housing, Indians, Intergovernmental

relations, Reporting and record keeping

requirements, Urban renewal.

Accordingly, for the reasons set forth

in the preamble, a new part 598 is

added to title 24 of the Code of Federal

Regulations, to read as follows:
Federal Register / Vol. 63, No. 73 /Thursday, April 16, 1998 /Rules and Regulations 19155

PART 598—URBAN EMPOWERMENT

ZONES: ROUND TWO DESIGNATIONS

Subpart A—General Provisions

Sec.

598.1 Applicability and scope.

598.2 Objective and purpose.

598.3 Definitions.

598.4 Period of designation.

Subpart B—Eligibility Requirements

598.100 Eligibility requirements.

598.105 Data used for eligibility

determinations.

598.110 Tests of pervasive poverty,

unemployment and general distress.

598.115 Poverty rate.

Subpart C—Nomination Procedure

598.200 Who nominates an area for

designation?

598.205 What are the requirements for

nomination?

598.210 What certifications must

governments make?

598.215 What are the purpose and content

of the strategic plan?

Subpart D—Designation Process

598.300 Procedure for submitting a

nomination.

598.305 Selection factors for designation of

urban empowerment zones.

Subpart E—Post-Designation Requirements

598.400 HUD grants for planning activities.

598.405 Environmental review.

598.410 Public access to materials and

proceedings.

598.415 Reporting.

598.420 Periodic progress determinations.

598.425 Validation of designation.

598.430 Revocation of designation.

Subpart F—Special Rules

598.500 Indian Reservations.

598.505 Governments.

598.510 Nominations by Economic

Development Corporations or the District

of Columbia.

598.515 Alaska and Hawaii.

Authority: 26 U.S.C. 1391; 42 U.S.C.

3535(d).

Subpart A—General Provisions

§ 598.1 Applicability and scope.

(a) This part establishes policies and

procedures applicable to the second

round of designations of urban

Empowerment Zones, authorized under

Subchapter U of the Internal Revenue

Code of 1986 (26 U.S.C. 1391, et seq.),

as amended by sections 952 and 954 of

the Taxpayer Relief Act of 1997.

(b) This part contains provisions

relating to area requirements, the

nomination process for urban

Empowerment Zones, and the

designation and evaluation of these

Zones by HUD. Provisions dealing with

the nomination and designation of rural

Empowerment Zones are issued by the

Department of Agriculture.

§ 598.2 Objective and purpose.

The purpose of this part is to provide

for the establishment of Empowerment

Zones in urban areas, to stimulate the

creation of new jobs—empowering lowincome persons and families receiving

public assistance to become

economically self-sufficient—and to

promote revitalization of economically

distressed areas.

§ 598.3 Definitions.

In addition to the definitions of

‘‘HUD’’ and ‘‘Secretary’’ found in 24

CFR 5.100, the following definitions

apply to this part.

Census tract means a census tract, as

the term is used by the Bureau of the

Census, or, if census tracts are not

defined for the area, a block numbering

area.

Designation means the process by

which the Secretary designates urban

areas as Empowerment Zones eligible

for tax incentives and credits

established by Subchapter U of the

Internal Revenue Code of 1986, as

amended (26 U.S.C. 1391, et seq.) and

for special consideration for programs of

Federal assistance.

Developable site means a parcel of

land in a nominated area that may be

developed for commercial or industrial

purposes.

Empowerment Zone means an urban

area so designated by the Secretary in

accordance with this part.

EZ/EC SSBG funds means any funds

that may be provided to States or Tribes

by HHS in accordance with section

2007(a) of the Social Security Act (42

U.S.C. 1397f), for use by the designated

Round II Empowerment Zone.

HHS means the U.S. Department of

Health and Human Services.

Local government means any county,

city, town, township, parish, village, or

other general purpose political

subdivision of a State, and any

combination of these political

subdivisions that is recognized by the

Secretary.

Nominated area means an area

nominated by one or more local

governments and the State or States in

which it is located for designation in

accordance with this part.

Revocation of designation means the

process by which the Secretary may

revoke the designation of an urban area

as an Empowerment Zone . (See subpart

E of this part.)

State means any State of the United

States.

Urban area means:

(1) An area that lies inside a

Metropolitan Statistical Area (MSA), as

designated by the Office of Management

and Budget; or

(2) An area outside an MSA if the

jurisdiction of the nominating local

government documents:

(i) The urban character of the area, or

(ii) The link between the area and the

proposed area in the MSA.

§ 598.4 Period of designation.

The designation of an urban area as an

Empowerment Zone will remain in full

effect during the period beginning on

the date of designation and ending on

the earliest of:

(a) The close of the tenth calendar

year beginning on the date of

designation;

(b) The termination date designated

by the State and local Governments in

their application for nomination; or

(c) The date the Secretary modifies or

revokes the designation.

Subpart B—Eligibility Requirements

§ 598.100 Eligibility requirements.

A nominated urban area is eligible for

designation in accordance with this part

only if the area:

(a) Has a maximum population that is

the lesser of:

(1) 200,000; or

(2) The greater of 50,000 or ten

percent of the population of the most

populous city located within the

nominated area;

(b) Is one of pervasive poverty,

unemployment and general distress, as

described in § 598.110;

(c) Does not exceed twenty square

miles in total land area, excluding up to

three noncontiguous developable sites

that are exempt from the poverty

criteria;

(d) Has a continuous boundary, or

consists of not more than three noncontiguous parcels meeting the poverty

criteria, and not more than three

noncontiguous developable sites exempt

under § 598.115(c)(1) from the poverty

rate criteria;

(e) Is located entirely within the

jurisdiction of the unit or units of

general local government making the

nomination, and is located in no more

than two contiguous States; and

(f) Does not include any portion of a

central business district, as this term is

used in the most recent Census of Retail

Trade, unless the poverty rate for each

census tract in the district is not less

than 35 percent.

§ 598.105 Data used for eligibility

determinations.

(a) Source of data. The data to be used

in determining the eligibility of an area

is from the 1990 Decennial Census, and

from information published by the

Bureau of the Census and the Bureau of

Labor Statistics. Specific information on
19156 Federal Register / Vol. 63, No. 73 /Thursday, April 16, 1998 /Rules and Regulations

appropriate data to be submitted will be

provided in the application.

(b) Use of statistics on boundaries.

The boundary of an urban area

nominated for designation as an

Empowerment Zone must coincide with

the boundaries of census tracts, as

defined in § 598.3.

§ 598.110 Tests of pervasive poverty,

unemployment and general distress.

(a) Pervasive poverty. Pervasive

poverty is demonstrated by evidence

that:

(1) Poverty, as indicated by the

number of persons listed as being in

poverty in the 1990 Decennial Census,

is widespread throughout the

nominated area; or

(2) Poverty, as described above, has

become entrenched or intractable over

time (through comparison of 1980 and

1990 census data or other relevant

evidence).

(b) Unemployment. Unemployment is

demonstrated by:

(1) The most recent data available

indicating that the annual rate of

unemployment for the nominated area

is not less than the national annual

average rate of unemployment; or

(2) Evidence of especially severe

economic conditions, such as military

base or plant closings or other

conditions that have brought about

significant job dislocation within the

nominated area.

(c) General distress. General distress

is evidenced by describing adverse

conditions within the nominated urban

area other than those of pervasive

poverty and unemployment. Below

average or decline in per capita income,

earnings per worker, number of persons

on welfare, per capita property tax base,

average years of school completed,

substantial population decline, and a

high or rising incidence of crime,

narcotics use, homelessness, high

incidence of AIDS, abandoned housing,

deteriorated infrastructure, school

dropouts, teen pregnancy, incidence of

domestic violence, incidence of certain

health conditions and illiteracy are

examples of appropriate indicators of

general distress.

§ 598.115 Poverty rate.

(a) General. In order to be eligible for

designation, an area’s poverty rate must

satisfy the following criteria:

(1) In each census tract within a

nominated urban area, the poverty rate

must be not less than 20 percent; and

(2) For at least 90 percent of the

census tracts within the nominated

urban area, the poverty rate must be not

less than 25 percent.

(b) Special rules relating to the

determination of poverty rate—(1)

Census tracts with populations of less

than 2,000. A census tract that has a

population of less than 2,000 is treated

as having a poverty rate that meets the

requirements of paragraphs (a)(1) and

(a)(2) of this section if more than 75

percent of the tract is zoned for

commercial or industrial use, and the

tract is contiguous to one or more other

census tracts that have an actual poverty

rate of not less than 25 percent.

(2) Rounding up of percentages. In

making the calculations required by this

section, the Secretary will round all

fractional percentages of one-half

percent or more up to the next highest

whole percentage figure.

(c) Noncontiguous parcels. (1)

Noncontiguous parcels that are

developable sites are exempt from the

poverty rate criteria of paragraph (a) of

this section, for up to three developable

sites.

(2) The total area of the

noncontiguous parcels that are

developable sites exempt from the

poverty rate criteria of paragraph (a) of

this section must not exceed 2,000

acres.

(3) A nominated urban area must not

contain a noncontiguous parcel unless

such parcel separately meets the criteria

set forth at paragraphs (a)(1) and (2) of

this section, except for up to three

developable sites.

(4) There must not be more than three

noncontiguous parcels, except that up to

three developable sites are not included

in this limit.

Subpart C—Nomination Procedure

§ 598.200 Who nominates an area for

designation?

Applicants for empowerment zone

designation must be nominated by the

State or States and one or more local

government(s) in which the area is

located, except as provided in

§§ 598.500, 598.510, and 598.515. The

nomination must be submitted in a form

to be prescribed by HUD in the

application and in the document

announcing the initiation of the

designation process, and must contain

complete and accurate information.

§ 598.205 What are the requirements for

nomination?

(a) General. No urban area may be

considered for designation in

accordance with subpart D of this part

unless:

(1) The urban area is within the

jurisdiction of a State or States and local

government(s) that have the authority to

nominate the urban area for designation

and that provide written assurances

satisfactory to the Secretary that the

strategic plan described in § 598.215

will be implemented, and these

governments submit its nomination;

(2) All information furnished by the

nominating State(s) and local

government(s) is determined by the

Secretary to be reasonably accurate; and

(3) The application for designation is

complete, as described in paragraph (b)

of this section.

(b) Contents of application for

designation. The application for

designation of an urban area as an

Empowerment Zone must do the

following:

(1) Demonstrate that the nominated

urban area satisfies the eligibility

criteria set forth in subpart B of this

part;

(2) Include a strategic plan, as

described in § 598.215;

(3) Include the certifications

described in § 598.210;

(4) Include the 1990 census maps

showing the following:

(i) The boundaries of the local

government(s): and

(ii) The boundaries of the nominated

area, including any developable sites;

and

(5) Include such other information as

may be required by HUD in the

application or in the document

announcing the initiation of the

designation process.

§ 598.210 What certifications must

governments make?

Certifications must be submitted by

the State(s) and local government(s)

requesting designation stating that:

(a) The nominated urban area satisfies

the boundary tests of § 598.100(d);

(b) The nominated urban area is one

of pervasive poverty, unemployment

and general distress, as prescribed by

§ 598.110;

(c) The nominated urban area

contains no portion of an area that is

included in an Empowerment Zone or

any other area currently nominated for

designation as an Empowerment Zone

(but it may include an Enterprise

Community);

(d) Each nominating governmental

entity has the authority to:

(1) Nominate the urban area for

designation as an Empowerment Zone;

(2) Make the commitments required of

nominating entities by § 598.215(b); and

(3) Provide written assurances

satisfactory to the Secretary that the

strategic plan will be implemented.

(e) Provide assurances that any Round

II EZ/EC SSBG funds that may be

provided to the State for the area will

not be used to supplant Federal or nonFederal funds for services and activities

that promote the purposes of section

2007 of the Social Security Act;
Federal Register / Vol. 63, No. 73 /Thursday, April 16, 1998 /Rules and Regulations 19157

1The Guidelines were published as an appendix

to the interim rule on Empowerment Zones; Second

Round Designation, published in the Federal

Register on April 16, 1998.

(f) Provide that the nominating

governments or corporations agree to

make available all information

requested by HUD to aid in the

evaluation of progress in implementing

the strategic plan and reporting on the

use of EZ/EC SSBG funds; and

(g) Provide assurances that the

nominating State(s) agrees to distribute

any EZ/EC SSBG funds that may be

awarded to it for use by a designated

Empowerment Zone for programs,

services, and activities included in the

Empowerment Zone’s strategic plan to

the extent they are consistent with

section 2007(a) of the Social Security

Act as well as other applicable Federal,

State, and local laws and regulations.

(h) Provide assurances that the

nominating governments will

administer the Empowerment Zone

program in a manner which

affirmatively furthers fair housing on

the bases of race, color, national origin,

religion, sex, disability, and familial

status (presence of children).

§ 598.215 What are the purpose and

content of the strategic plan?

(a) Principles of strategic plan. The

strategic plan, which accompanies the

application for designation, must be

developed in accordance with four key

principles:

(1) Strategic Vision for Change, which

identifies what the community will

become and a strategic map for

revitalization. The vision should build

on assets and coordinate a response to

community needs in a comprehensive

fashion. It also should set goals and

performance benchmarks for measuring

progress and establish a framework for

evaluating and adjusting the

revitalization plan;

(2) Community-Based Partnerships,

involving the participation of all

segments of the community, including

the political and governmental

leadership, community groups, local

public health and social service

departments and nonprofit groups

providing similar services,

environmental groups, local

transportation planning entities, public

and private schools, religious

organizations, the private and nonprofit

sectors, centers of learning, and other

community institutions and individual

citizens;

(3) Economic Opportunity, including

job creation within the community and

throughout the region, entrepreneurial

initiatives, small business expansion,

job training and other important job

readiness and job support services, such

as affordable child care and

transportation services, that may enable

residents to be employed in jobs that

offer upward mobility;

(4) Sustainable Community

Development, to advance the creation of

livable and vibrant communities

through comprehensive approaches that

coordinate economic, physical,

environmental, community and human

development. These approaches should

preserve the environment and historic

landmarks, address ‘‘brownfields’’

clean-up and redevelopment, explore

the economic development advantages

of energy efficiency and use of

renewable energy resources, and

improve transportation, education,

public safety, and enhanced access to

information and technology among all

segments of the community.

(b) Elements of strategic plan. The

strategic plan must include the

following elements:

(1) Vision and values: The

community’s strategic vision for

change—a statement of what the

community believes its future should

be, and a statement of the community’s

values that guided the creation of the

vision. Explain how the vision creates

economic opportunity, encourages selfsufficiency and promotes sustainable

community development.

(2) Community assessment: A

comprehensive assessment of existing

conditions and trends within the

community, which includes, as a

minimum:

(i) Assessment of problems and

opportunities. A description and

assessment of the trends and conditions

within the community and of the

surrounding region that form the basis

of the strategic plan. The assessment

will include an analysis of the strengths

and assets of the community and region,

as well as needs and problems, and

should include a description of poverty

and general distress, barriers to

economic development and barriers to

human development; and

(ii) Resource analysis. An assessment

of the resources available to the

community, including potential

resources outside the nominated area, to

address identified problems and needs,

and maximize opportunities that exist

within the community. Such resources

may include financial, technical,

human, cultural, educational,

leadership, volunteerism,

communications, transportation and

commerce centers, rail and mass transit

linkages, redevelopable land (including

land, such as ports, that can be

designated as ‘‘developable sites’’ under

the additional 2,000 acres available),

public space, infrastructure, and other

community and regional assets that

form the basis for the formulation and

implementation of the strategic plan.

(3) Goals: A statement of a

comprehensive and holistic set of goals

to be achieved through implementation

of the strategic plan throughout the 10-

year implementation period, and a

statement of the strategies the

community proposes to use to achieve

the strategic plan goals, and the

identification of priority objectives.

(4) Implementation plan: A detailed

plan that outlines how the community

will implement its strategic plan. The

plan will include:

(i) Projects and programs. Provide, for

the first two-year implementation

period, the following:

(A) A narrative outlining the specific

projects and programs that will be

implemented that will result in the

achievement of the community’s goals;

(B) Proposed timelines for

implementing identified projects and

programs;

(C) Identification of lead

implementers of identified projects and

programs, along with innovative

partnerships that will be utilized to

insure maximum community

participation and project sustainability;

(D) Proposed budgets for each

identified project or program, including

projected costs, and sources of funding.

Information on sources of funding will

include whether the funding is

anticipated or committed, and whether

funding is conditioned upon the

designation of the community as an

Empowerment Zone. Evidence of

committed funding is required, and may

include letters of commitment,

resolutions of support, or similar

documentation as outlined in paragraph

(b)(6) of this section. Funding may

include cash and in-kind support from

Federal, State and local governments,

non-profit organizations, foundations,

private businesses and other entities

that will assist in the implementation of

the strategic plan. Budgets will also

include details about proposed uses of

any Round II EZ/EC SSBG funds that

may become available from HHS, in

accordance with Guidelines on Eligible

Uses of EZ/EC SSBG Funds.1

(E) Baselines and proposed

measurable outputs;

(ii) Tax incentive utilization plan. A

plan for integrating the new business tax

incentives that are available to

designated Empowerment Zones into

the nominated area’s business

development efforts. The Round II tax
19158 Federal Register / Vol. 63, No. 73 /Thursday, April 16, 1998 /Rules and Regulations

incentives include Tax-Exempt Bond

Financing, Increased Section 179

Deduction, Welfare-to-Work Credit,

Environmental Cleanup Cost Deduction

(i.e., ‘‘Brownfields Tax Incentive’’), and

the Work Opportunity Tax Credit. For a

description of the tax incentives, see IRS

Publication 954, ‘‘Tax Incentives for

Empowerment Zones and Other

Distressed Communities’’;

(iii) Developable sites plan. If the

nominated area is to include

developable sites, a plan to describe

how the use of these parcels would

benefit residents and businesses of the

nominated area;

(iv) Governance plan. A Governance

Plan for the administration of the

strategic plan implementation process,

which will include the following:

(A) The name of the proposed lead

implementing entity, and other major

administrative entities and their

proposed or actual legal status and

authority to receive and administer

Federal funds. The strategic plan may be

implemented by the local

governments(s) and/or by the State(s)

nominating an urban area for

designation and/or by nongovernmental

entities identified in the strategic plan;

(B) Evidence that the lead

implementing entity and other key

entities participating in the strategic

plan implementation have the capacity

to implement the plan;

(C) Proposed composition and date of

establishment of any governance boards,

advisory boards, commissions or similar

bodies that will be established to

manage the implementation of the

strategic plan. Specific information will

be included regarding representation of

residents and businesses of the

proposed Empowerment Zone area, and

how members of the boards or

commissions will be selected;

(D) The relationship between any

governance structure created and local

governments and other major

community or regional organizations,

such as a metropolitan planning

organization, operating in the same

geographic area;

(E) The methods by which

stakeholders within the Zone will be

kept informed about Zone activities and

progress in implementing the strategic

plan, including a description of plans

for meetings open to the public. The

community should utilize modern

communication techniques and

incorporate the Internet in order to

enhance the communication and access

to information among all stakeholders

and participants; and

(F) The methods and procedures that

will ensure continuing community and

grassroots participation in the

implementation of the strategic plan and

in the governance of the Zone’s

activities.

(v) Community performance

assessment. Methods the community

will use to assess its own performance

in implementing the strategic plan, and

the process it will use to continually

review the plan and amend as

appropriate.

(5) Strategic planning process

documentation: A description of the

process the community used to select

the boundaries of the proposed

Empowerment Zone, including the

developable sites, and to prepare the

Strategic Plan. The documentation will:

(i) Explain how the community

participated in choosing the area that is

being nominated and why the area was

nominated;

(ii) Indicate and briefly describe the

specific groups, organizations, and

individuals participating in the

production of the plan and describe the

history of these groups in the

community;

(iii) Explain how participants were

selected and provide evidence that the

participants, taken as a whole, broadly

represent the racial, cultural, gender,

and economic diversity of the

community;

(iv) Describe the role of the

participants in the creation,

development and future implementation

of the plan; and

(v) Identify two or three topics

addressed in the plan that caused the

most serious disagreements among

participants and describe how those

disagreements were resolved; and

(6) Documentation of commitments:

Letters of commitment, resolutions

committing public or private resources,

and other documentation that will

demonstrate the level of public and

private resources, both inside and

outside the nominated area, that will be

available to implement the Strategic

Plan and increase economic opportunity

in the nominated Empowerment Zone.

(c) Prohibition against business

relocation. The strategic plan may not

include any action to assist any

establishment in relocating from one

area outside the nominated urban area

to the nominated urban area, except that

assistance for the expansion of an

existing business entity through the

establishment of a new branch, affiliate,

or subsidiary is permitted if:

(1) The establishment of the new

branch, affiliate, or subsidiary will not

result in a decrease in employment in

the area of original location or in any

other area where the existing business

entity conducts business operations;

and

(2) There is no reason to believe that

the new branch, affiliate, or subsidiary

is being established with the intention

of closing down the operations of the

existing business entity in the area of its

original location or in any other area

where the existing business entity

conducts business operations.

Subpart D—Designation Process

§ 598.300 Procedure for submitting a

nomination.

(a) Establishment of submission

procedures. HUD will establish a time

period and procedures for the

submission of nominations for

designation as Empowerment Zones,

including submission deadlines and

addresses, in a document announcing

the initiation of the designation process.

(b) Acceptance for processing. HUD

will accept for processing those

nominations for designation as

Empowerment Zones that HUD

determines have met the criteria

required by this part.

(c) Publication of designations.

Announcements of those nominated

urban areas designated as

Empowerment Zones will be made by

publication in the Federal Register.

§ 598.305 Designation factors.

In choosing among nominated urban

areas eligible for designation, the

Secretary will consider:

(a) Quality of strategic plan. The

quality of the strategic plan (see

§ 598.215(b));

(b) Quality of commitments. The

quality and breadth of the commitments

made in connection with the strategic

plan (see § 598.215(b)); and

(c) Other factors. Other factors

established by HUD, as specified in a

Federal Register notice.

Subpart E—Post-Designation

Requirements

§ 598.400 HUD grants for planning

activities.

(a) HUD will award planning grants

up to $100,000 to each of the

Empowerment Zones designated in

accordance with this part.

(b) Eligible recipients for these grants

are the lead unit of general local

government that received designation

under this part, or its designee. These

recipients may subgrant all or part of the

planning grant to qualified subgrantees,

such as community organizations,

agencies of local government, regional

planning authorities, or planning

consultants.
Federal Register / Vol. 63, No. 73 /Thursday, April 16, 1998 /Rules and Regulations 19159

(c) Eligible planning activities

include: hiring and development of

staff, consulting services, publication of

materials, community outreach and

participation, governing board training,

and similar activities that are intended

to:

(1) Expand the planning capacity of

the designee local government, the

governing board, and/or participating

entities, such as community

organizations;

(2) Help the designee plan the

implementation of the strategic plan;

and

(3) Help the designee to develop its

performance measurement process.

(d) The document announcing the

initiation of the designation process

describes the procedures for award of

these planning grants, post-award

reporting requirements with respect to

the grants, and the uniform

requirements applicable to all Federal

grants.

§ 598.405 Environmental review.

Where an empowerment zone’s

strategic plan or any revision thereof

proposes the use of EZ/EC SSBG funds

for activities that are not excluded from

environmental review under 24 CFR

50.19(b), an environmental review will

be performed as required by applicable

law.

§ 598.410 Public access to materials and

proceedings.

After designation, an area designated

an EZ must make available to the public

copies of the strategic plan and

supporting documentation and must

conduct its meetings in accordance with

applicable open meetings statutes. HUD

may make the strategic plan and

supporting documentation available to

members of the public.

§ 598.415 Reporting.

(a) Empowerment Zones designated in

accordance with this part must submit

periodic reports to HUD. These reports

must identify the community, local

government and State actions that have

been taken in accordance with the

strategic plan and provide notice of

updates and modifications to the

strategic plan. In addition to these

reports, such other information relating

to designated Empowerment Zones as

HUD requests from time to time,

including information documenting

nondiscrimination in hiring and

employment by businesses within the

designated Empowerment Zone, must

be submitted promptly.

(b) The States must submit periodic

reports to HUD, demonstrating

compliance with the certifications it is

required to submit in accordance with

this part.

§ 598.420 Periodic progress

determinations.

HUD will regularly evaluate the

progress of implementation of the

strategic plan in each designated

Empowerment Zone on the basis of

available information. HUD also may

commission evaluations of the

Empowerment Zone program as a whole

by an impartial third party, at such

intervals as HUD may establish.

§ 598.425 Validation of designation.

(a) On the basis of the periodic

progress determinations described in

§ 598.420, and subject to the provisions

relating to the revocation of designation

in § 598.430, HUD will make findings

on the continuing eligibility for and the

validity of the designation of any

Empowerment Zone.

(b) HUD may approve an

Empowerment Zone’s request for

boundary modification, subject to the

requirements specified in subpart B of

this part.

§ 598.430 Revocation of designation.

(a) Basis for revocation. The Secretary

may revoke the designation of an urban

area as an Empowerment Zone if the

Secretary determines, on the basis of the

periodic progress determination

described at § 598.420, that the State(s)

or local government(s) in which the

urban area is located:

(1) Has modified the boundaries of the

area without written approval from

HUD;

(2) Has failed to make progress in

implementing the strategic plan; or

(3) Has not complied substantially

with the strategic plan.

(b) Letter of warning. Before revoking

the designation of an urban area and an

Empowerment Zone, the Secretary will

issue a letter of warning to the

nominating State(s) and local

government(s), with a copy to all

affected Federal agencies of which the

Secretary is aware;

(1) Advising that the Secretary has

determined that the nominating local

government(s) and/or State(s) has:

(i) Modified the boundaries of the area

without written approval from HUD; or

(ii) Is not complying substantially

with, or has failed to make progress in

implementing the strategic plan; and

(2) Requesting a reply from the

nominating entities within 90 days of

the receipt of this letter of warning.

(c) Notice of revocation. To revoke the

designation, the Secretary must issue a

final notice of revocation of the

designation of the urban area as an

Empowerment Zone, after allowing 90

days from the date of receipt of the letter

of warning for response, and after

making a determination in accordance

with paragraph (a) of this section.

(d) Notice to affected Federal

agencies. HUD will notify all affected

Federal agencies of which it is aware, of

its determination to revoke any

designation in accordance with this

section.

(e) Effect of revocation. Upon

revocation of an EZ’s designation, the

designation and remaining benefits may

be awarded to the next highest ranked

Round II applicant.

(f) Publication. The final notice of

revocation of designation will be

published in the Federal Register, and

the revocation will be effective on the

date of publication.

Subpart F—Special Rules

§ 598.500 Indian reservations.

(a) An area within an Indian

reservation (as defined in section

168(j)(6) if the Internal Revenue Code,

26 U.S.C. 168(j)(6)) may be included in

an area nominated as an Empowerment

Zone by State and local governments.

An area completely within an Indian

reservation may be nominated by the

reservation governing body and, in that

case, the area is treated as if it also were

nominated by a State and a local

government. Where two (or more)

governing bodies have joint jurisdiction

over an Indian reservation, the

nomination of a reservation area must

be a joint nomination.

(b) For purposes of paragraph (a) of

this section, a reservation governing

body must be the governing body of an

Indian entity recognized and eligible to

receive services from the Bureau of

Indian Affairs, United States

Department of Interior.

§ 598.505 Governments.

If more than one State or local

government seeks to nominate an urban

area under this part, any reference to or

requirement of this part applies to all

such governments.

§ 598.510 Nominations by economic

development corporations or the District of

Columbia.

Any urban area nominated by an

Economic Development Corporation

chartered by the State in which it is

located or by the District of Columbia

shall be treated as nominated by a State

and local government.

§ 598.515 Alaska and Hawaii.

A nominated area in Alaska or Hawaii

is deemed to satisfy the criteria of

distress, size, and poverty rate detailed
19160 Federal Register / Vol. 63, No. 73 /Thursday, April 16, 1998 /Rules and Regulations

in § 598.100(b), (c), (d), and (f), and

§ 598.110 if, for each census tract or

block numbering area within the area,

20 percent or more of the families have

income that is 50 percent or less of the

statewide median family income (as

determined under section 143 of the

Internal Revenue Code).

Dated: March 27, 1998.

Saul N. Ramirez, Jr.,

Assistant Secretary for Community Planning

and Development.

Appendix—Guidelines on Eligible Uses of

EZ/EC SSBG Funds

(1) Background

This appendix includes general guidance

about allowed uses of any Round II EZ/EC

SSBG funds that may be made available for

Round II Empowerment Zones (EZs). It is

based on the assumption that any Round II

EZ/EC SSBG funding will be subject to the

same statutory restrictions as the Round I EZ/

EC SSBG grants. The U.S. Department of

Health and Human Services (HHS) will issue

further guidance regarding any Round II EZ/

EC SSBG funds soon after it is authorized to

award the funds.

(2) Awards to States

(a) HHS will award Round II EZ/EC SSBG

grants to each State that nominated a

designated Round II EZ. HHS will award the

funds for each Round II EZ to the State

agency that typically receives Social Services

Block Grants, unless the EZ Lead Entity and

its State request HHS to award them to a

different agency.

(b) The HHS Terms and Conditions of the

Round II EZ/EC SSBG grants will direct the

recipient State agency to provide the funds

to the appropriate Round II EZ Lead

Entity(ies) for activities specified in the EZ’s

strategic plan and benchmarks/

implementation plan. It is expected that the

EZs will revise their plans and benchmarks

from time to time.

(3) Allowed Uses of Round II EZ/EC SSBG

Funds

(a) The Round II EZs may use Round II EZ/

EC SSBG funds for a wide variety of

programs, services and activities directed at

revitalizing distressed communities and

promoting economic independence for

residents. Allowed programs, services and

activities include, but are not limited to:

• Community and economic development

programs and efforts to create employment

opportunities;

• Job training and job readiness projects;

• Health programs such as public health

education, primary health care, emergency

medical services, alcohol and substance

abuse prevention and treatment programs,

and mental health services;

• Human development services such as

child, youth and family development

programs, services for the elderly, and child

care services;

• Education projects such as after-school

activities, adult learning classes, and schoolto-work projects;

• Transportation services;

• Environmental clean up programs;

• Policing and criminal justice projects

such as community policing efforts and

youth gang prevention programs;

• Housing programs;

• Projects providing training and technical

assistance to the EZ Lead Entity, its board

and committee members, and other

organizations; and

• Projects to finance community-focused

financial institutions for enhancing the

availability of credit such as loan funds,

revolving loan funds, and micro-enterprise

loan funds as well as other activities for

easing financial barriers faced by social

services entities, housing organizations and

other organizations serving EZ residents.

(b) Round II EZs may use the Round II EZ/

EC SSBG funds for projects supported in part

with other Federal, State, local or private

funds, and they may allocate a portion of the

funds to the State grantee agency for its

administrative and grant oversight costs.

Round II EZs may not use the funds as the

source of local matching funds required for

other Federal grants.

(c) Round II EZs must ensure that each

proposed use of Round II EZ/EC SSBG funds

is: Directed at one or more of the EZ/EC

SSBG statutory goals; included in the

strategic plan; structured to benefit EZ

residents; and in compliance with all

applicable Federal, State and local laws and

regulations.

(d) The statutory goals for uses of EZ/EC

SSBG funds are as follows:

(1) Achieving and maintaining economic

self-support for residents, to help them

develop and retain the ability to support

themselves and their families economically;

(2) Achieving and maintaining selfsufficiency for residents, to enable them to

become and remain able to care for

themselves in daily activities and in the longterm; and

(3) Preventing Neglect and Abuse and

Preserving Families, to protect children and

adults, who are unable to protect themselves

from neglect, abuse or exploitation, and to

preserve, rehabilitate or reunite families

living in the designated neighborhoods.

(e) All programs, services and activities

financed in whole or in part with Round II

EZ/EC SSBG funds must be included in the

strategic plan and benchmarks/

implementation plans. Each project

description must indicate the EZ/EC SSBG

statutory goal it is attempting to achieve and

how it will benefit EZ residents.

(f) All programs, services and activities

financed in whole or in part with Round II

EZ/EC SSBG funds must be structured to

primarily benefit EZ residents; the programs,

services and activities may also benefit

nonresidents.

(g) To the extent consistent with the local

strategic vision, localities may use Round II

EZ/EC SSBG funds to finance programs,

services and activities for addressing any of

the following broad statute-based ‘‘program

options.’’ EZs that use the funds for any of

the program options will have more

flexibility in uses of funds. (See section (h)

below). The EZs are not required to use the

funds for the program options, and may use

Round II EZ/EC SSBG funds to finance

programs, services and activities addressing

other issues. The program options are as

follows:

(1) To provide residential or nonresidential

drug and alcohol prevention and treatment

programs that offer comprehensive services

for residents, particularly for pregnant

women and mothers and their children;

(2) To support: (A) Training and

employment opportunities for disadvantaged

adults and youths in construction,

rehabilitation, or improvement of affordable

housing, public infrastructure, and

community facilities; and

(B) Nonprofit organizations such as

community and junior colleges providing

short-term training courses for disadvantaged

adults and youths about entrepreneurism and

self-employment, and other types of training

that will promote individual self-sufficiency

and the interests of the community.

(3) To support projects designed to

promote and protect the interests of children

and families outside of school hours,

including keeping schools open during

evenings and weekends for mentoring and

study.

(4) To support:

(A) Services designed to promote

community and economic development and

job support services such as skills training,

job counseling, transportation services,

housing counseling, financial management,

and business counseling;

(B) Emergency and transitional housing

and shelters for families and individuals; or

(C) Programs that promote home

ownership, education, and other routes to

economic independence for families and

individuals.

(h) To the extent a program, service or

activity in the strategic plan and benchmark/

implementation plan document is a statutory

program option listed in section (g) above,

the EZ may use the Round II EZ/EC SSBG

funds to implement that activity including to:

(1) Purchase or improve land or facilities;

(2) Make cash payments to individuals for

subsistence or room and board;

(3) Make wage payments to individuals as

a social service;

(4) Make cash payments for medical care;

and

(5) Provide social services to

institutionalized persons.

(i) To the extent a program, service or

activity in the strategic plan and benchmark/

implementation plan document is not a

statutory program option listed in section (g)

above, the EZ may use Round II EZ/EC SSBG

funds for the following purposes as a

component of that activity only after

receiving approval from the U.S. Department

of Health and Human Services :

(1) Purchase or improve land or facilities;

(2) Make cash payments to individuals for

subsistence or room and board;

(3) Make wage payments to individuals as

a social service;

(4) Make cash payments for medical care;

or

(5) Provide social services to

institutionalized persons.

(j) To the extent a program, service or

activity in the strategic plan and benchmark/

implementation plan document is not one of
Federal Register / Vol. 63, No. 73 /Thursday, April 16, 1998 /Rules and Regulations 19161

the program options listed in section (g)

above, the plan must include a statement

explaining why the locality chose that

project.

[FR Doc. 98–10130 Filed 4–14–98; 11:41 am]

BILLING CODE 4210–29–P