I 

109TH CONGRESS 

2D SESSION H. R. 5660 

To amend the Internal Revenue Code of 1986 to extend and expand the 

benefits for businesses operating in empowerment zones, enterprise communities, or renewal communities, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 21, 2006 

Mr. ALEXANDER (for himself, Mr. MCCRERY, Mr. ISTOOK, Mr. WALSH, Mr. 

RAHALL, Mr. BOUSTANY, Mr. MELANCON, and Mr. JINDAL) 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 extend 

and expand the benefits for businesses operating in empowerment zones, enterprise communities, or renewal 

communities, and for other purposes. 

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

3 SECTION 1. SHORT TITLE. 

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

5 ‘‘Empowerment Zone and Renewal Community Enhance6 ment Act of 2006’’. 


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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment 

4 to, or repeal of, a section or other provision, the reference 

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986. 

7 SEC. 2. EXTENSION OF BENEFITS. 

8 (a) EMPOWERMENT ZONES AND ENTERPRISE COM9 MUNITIES.— 

10 (1) ROUNDS I AND II DESIGNATIONS.—Sub11 section (d)(1)(A)(i) of section 1391 is amended— 

12 (A) by striking ‘‘December 31, 2009’’ and 

13 inserting ‘‘December 31, 2015’’, and 

14 (B) by adding at the end the following new 

15 flush sentence: 

16 ‘‘For purposes of section 1396, subparagraph (A) 

17 shall be applied by substituting ‘December 31, 2009’ 

18 for ‘December 31, 2015’ in the case of designations 

19 made under subsection (a).’’. 

20 (2) ROUND III DESIGNATIONS.—Subsection 

21 (h)(2) of section 1391 is amended by striking ‘‘De22 cember 31, 2009’’ and inserting ‘‘December 31, 

23 2015’’. 

24 (b) RENEWAL COMMUNITIES.— 


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1 (1) Sections 1400E(b) and 1400I(g) are each 

2 amended by striking ‘‘December 31, 2009’’ and in3 serting ‘‘December 31, 2015’’. 

4 (2) Sections 1400E(b)(3), 1400F(b), and 

5 1400J(b) are each amended by striking ‘‘January 1, 

6 2010’’ and inserting ‘‘January 1, 2016’’. 

7 (3) Section 1400F(d) is amended— 

8 (A) by striking ‘‘December 31, 2010’’ and 

9 inserting ‘‘December 31, 2016’’, and 

10 (B) by striking ‘‘December 31, 2014’’ and 

11 inserting ‘‘December 31, 2020’’. 

12 (4) Section 1400I(d)(2)(A) is amended by strik13 ing ‘‘2010’’ and inserting ‘‘2016’’. 

14 SEC. 3. REVISION OF BENEFITS. 

15 (a) SAFE HARBOR FOR MEETING REQUIREMENT

16 THAT 35 PERCENT OF EMPLOYEES BE RESIDENTS OF

17 ZONE.—Paragraph (2) of section 1394(b) (defining enter18 prise zone facility) is amended by adding at the end the 

19 following new subparagraph: 

20 ‘‘(D) ADDITIONAL SAFE HARBOR FOR

21 MEETING REQUIREMENT THAT 35 PERCENT OF

22 EMPLOYEES BE RESIDENTS OF ZONE.—The re23 quirements of subsections (b)(6) and (c)(7) of 

24 section 1397C shall not fail to be treated as 


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1 met for any period with respect to a qualified 

2 business if— 

3 ‘‘(i) as of the date of issuance of the 

4 issue, it is reasonably expected that within 

5 3 years after such date the business will 

6 increase employment by at least the lesser 

7 of— 

8 ‘‘(I)(aa) 500 full-time employees 

9 in the case of a business located in a 

10 renewal community or in a rural area 

11 (as defined in section 1393(a)(2)) in 

12 an empowerment zone or enterprise 

13 community, or 

14 ‘‘(bb) 1,000 full-time employees 

15 in the case of a business located out16 side a rural area (as so defined) in an 

17 empowerment zone or enterprise com18 munity, or 

19 ‘‘(II) 10 percent of the number 

20 of full-time employees estimated to 

21 have been employed in such zone or 

22 community on the date of its designa23 tion, 

24 ‘‘(ii) as of the date of issuance of the 

25 issue, it is reasonably expected that as a 


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1 result of the bonds the business will in2 crease employment by at least one job for 

3 each $150,000 in face amount of the issue, 

4 ‘‘(iii) at any time within 3 years after 

5 the date of issuance of the issue, the re6 quirements of such subsections are met, or 

7 ‘‘(iv) the business enters into a bind8 ing agreement with the appropriate local 

9 government employment agency to apply a 

10 first source rule to advertise and prioritize 

11 employment opportunities with such busi12 ness for qualified residents of such zone or 

13 community.’’. 

14 (b) ELIGIBILITY OF BUSINESSES DEVELOPING OR

15 HOLDING INTANGIBLES.—Paragraph (4) of section 

16 1397C(d) is amended by inserting before the period ‘‘un17 less the intangibles are developed within the empowerment 

18 zone’’. 

19 (c) REDUCED WAGE CREDIT ALLOWABLE FOR ZONE

20 RESIDENTS EMPLOYED OUTSIDE THE ZONE; EMPLOYEES

21 NEED NOT BE RESIDENTS OF ZONE IN WHICH EM22 PLOYED.— 

23 (1) IN GENERAL.—Subsection (b) of section 

24 1396 is amended to read as follows: 

25 ‘‘(b) APPLICABLE PERCENTAGE.— 


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1 ‘‘(1) QUALIFIED ZONE EMPLOYEES WHO PER2 FORM SUBSTANTIALLY ALL OF THEIR SERVICES IN

3 AN EMPOWERMENT ZONE.—The applicable percent4 age is 20 percent with respect to qualified zone em5 ployees who would meet the requirement of sub6 section (d)(1) if only services performed within an 

7 empowerment zone were taken into account. 

8 ‘‘(2) OTHER QUALIFIED ZONE EMPLOYEES.— 

9 ‘‘(A) IN GENERAL.—The applicable per10 centage is— 

11 ‘‘(i) 20 percent in the case of des12 ignated qualified zone employees of em13 ployers which are enterprise zone busi14 nesses, and 

15 ‘‘(ii) 10 percent in the case of any 

16 other designated qualified zone employee. 

17 ‘‘(B) LIMITATIONS ON NUMBER OF DES18 IGNATED EMPLOYEES.— 

19 ‘‘(i) IN GENERAL.—For purposes of 

20 subparagraph (A), the term ‘designated 

21 qualified zone employee’ means a qualified 

22 zone employee— 

23 ‘‘(I) to whom paragraph (1) does 

24 not apply, and 


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1 ‘‘(II) who is designated under 

2 this subparagraph. 

3 ‘‘(ii) MANNER OF DESIGNATIONS.— 

4 Designations under this subparagraph 

5 shall be made by the local government or 

6 governments which nominated the area to 

7 be an empowerment zone. 

8 ‘‘(iii) LIMITATION ON DESIGNA9 TIONS.—The number of employees for 

10 whom a designation under this subpara11 graph is in effect at any one time with re12 spect to each empowerment zone shall not 

13 exceed— 

14 ‘‘(I) 500 for purposes of subpara15 graph (A)(i), and 

16 ‘‘(II) 2,000 for purposes of sub17 paragraph (A)(ii).’’. 

18 (2) QUALIFIED ZONE EMPLOYEE.—Paragraph 

19 (1) of section 1396(d) is amended— 

20 (A) by striking ‘‘within an empowerment 

21 zone’’ in subparagraph (A), and 

22 (B) by striking ‘‘such empowerment zone’’ 

23 in subparagraph (B) and inserting ‘‘an em24 powerment zone’’. 


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1 (d) CARRYFORWARD OF UNALLOCATED STATE COM2 MERCIAL REVITALIZATION EXPENDITURE CEILING.— 

3 Paragraph (1) of section 1400I(d) is amended to read as 

4 follows: 

5 ‘‘(1) IN GENERAL.—The aggregate commercial 

6 revitalization expenditure amount which a commer7 cial revitalization agency may allocate for any cal8 endar year is the amount equal to the sum of— 

9 ‘‘(A) the amount of the State commercial 

10 revitalization expenditure ceiling determined 

11 under this paragraph for such calendar year for 

12 such agency (determined without regard to sub13 paragraph (B)), and 

14 ‘‘(B) the aggregate of the unused State 

15 commercial revitalization expenditure ceilings 

16 determined under this paragraph for such agen17 cy for each of the 2 preceding calendar years. 

18 For purposes of subparagraph (B), amounts of ex19 penditure ceiling shall be treated as allocated by an 

20 agency first from unused amounts for the second 

21 preceding calendar year, then from unused amounts 

22 for the 1st preceding calendar year, and then from 

23 amounts from the current year State allocation.’’. 

24 (e) AUTHORITY TO EXPAND BOUNDARIES OF ZONES

25 AND COMMUNITIES.— 


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1 (1) EMPOWERMENT ZONES AND ENTERPRISE

2 COMMUNITIES.—Section 1391 is amended by adding 

3 at the end the following new subsection: 

4 ‘‘(i) AUTHORITY TO EXPAND BOUNDARIES OF DES5 IGNATED AREAS.—At the request of all governments 

6 which nominated an area as an empowerment zone or en7 terprise community, the appropriate Secretary may ex8 pand the area of such zone or community to include 1 

9 or more noncontiguous areas if such governments estab10 lish to the satisfaction of the appropriate Secretary that 

11 such expansion furthers the purposes of the designation 

12 of the initial area as such a zone or community.’’. 

13 (2) RENEWAL COMMUNITIES.—Section 1400E 

14 is amended by adding at the end the following new 

15 subsection: 

16 ‘‘(h) AUTHORITY TO EXPAND BOUNDARIES OF DES17 IGNATED AREAS.—At the request of all governments 

18 which nominated an area as a renewal community, the 

19 Secretary of Housing and Urban Development may ex20 pand the area of such community to include 1 or more 

21 noncontiguous areas if such governments establish to the 

22 satisfaction of such Secretary that such expansion fur23 thers the purposes of the designation of the initial area 

24 as a renewal community.’’. 


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1 (f) MODIFICATION OF REQUIREMENT FOR EXPAND2 ING DESIGNATED AREA BASED ON 2000 CENSUS.— 

3 Clause (ii) of section 1400E(g)(1)(A) is amended to read 

4 as follows: 

5 ‘‘(ii) such tract has a poverty rate 

6 using 2000 census data— 

7 ‘‘(I) which is at least 20 percent, 

8 or 

9 ‘‘(II) which exceeds the poverty 

10 rate for such tract using 1990 census 

11 data.’’. 

12 (g) REPEAL OF EXCLUSION OF CENTRAL BUSINESS

13 DISTRICT FROM ELIGIBILITY AS DESIGNATED AREA.— 

14 Paragraph (3) of section 1392(a) is amended by adding 

15 ‘‘and’’ at the end of subparagraph (B), by striking ‘‘, and’’ 

16 at the end of subparagraph (C) and inserting a period, 

17 and by striking subparagraph (D). 

18 (h) CARRYOVER OF UNUSED INCREASED SECTION

19 179 EXPENSING LIMIT.— 

20 (1) IN GENERAL.—Subparagraph (A) of section 

21 1397A(a)(1) is amended to read as follows: 

22 ‘‘(A) the sum of— 

23 ‘‘(i) $35,000, and 


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1 ‘‘(ii) the aggregate of the unused in2 creased limitations for each of the 2 pre3 ceding taxable years, or’’. 

4 (2) UNUSED INCREASED LIMITATION.—Section 

5 1392 is amended by adding at the end the following 

6 new subsection: 

7 ‘‘(c) UNUSED INCREASED LIMITATION.—For pur8 poses of subsection (a)(1)(A)— 

9 ‘‘(1) IN GENERAL.—The unused increased limi10 tation for any taxable year is the excess (but not 

11 more than $35,000) of the limitation under section 

12 179(b)(1) as increased under subsection (a) over the 

13 cost of section 179 property which is qualified zone 

14 property placed in service during the taxable year. 

15 ‘‘(2) ORDERING RULE.—The limitation under 

16 section 179(b)(1) as increased under subsection (a) 

17 shall be treated as used first from unused limitation 

18 for the second preceding calendar year, then from 

19 unused limitation for the 1st preceding calendar 

20 year, and then from such limitation for the current 

21 year.’’. 

22 (i) ELECTION OF FINANCING ARRANGEMENT IN

23 LIEU OF TAX BENEFITS.—Section 1396 is amended by 

24 adding at the end the following new subsection: 


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1 ‘‘(e) ELECTION OF FINANCING ARRANGEMENT IN

2 LIEU OF TAX BENEFITS.— 

3 ‘‘(1) IN GENERAL.—At the election of any sig4 nificant empowerment zone business, for the pay5 ment period of the debt obligation designated in 

6 such election by such business— 

7 ‘‘(A) such business— 

8 ‘‘(i) shall not be treated as an enter9 prise zone business for purposes of section 

10 1396, and 

11 ‘‘(ii) shall not be allowed any deduc12 tion for depreciation under section168 with 

13 respect to qualified zone property, and 

14 ‘‘(B) the Secretary shall make the pay15 ments described in paragraph (2) to the holder 

16 of such debt obligation. 

17 ‘‘(2) PAYMENTS.— 

18 ‘‘(A) IN GENERAL.—At the beginning of 

19 each year of the payment period, the Secretary 

20 shall pay (out of any money in the Treasury not 

21 otherwise appropriated) to the holder of the 

22 debt obligation designated by such zone busi23 ness an amount equal to the value of the tax 

24 benefits under this chapter for such year to 


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1 which such zone business would be entitled but 

2 for the election under this subsection. 

3 ‘‘(B) ASSUMPTIONS.—For purposes of val4 uing tax benefits under subparagraph (A), the 

5 Secretary shall assume that— 

6 ‘‘(i) the business is an enterprise zone 

7 business for purposes of section 1396, 

8 ‘‘(ii) all qualified zone property placed 

9 in service by the zone business is a single 

10 property with a recovery period under sec11 tion 168 of 15 years, and 

12 ‘‘(iii) the rate of tax under this chap13 ter is 25 percent. 

14 ‘‘(C) PAYMENT PERIOD.—The payment pe15 riod is the period of 15 calendar years begin16 ning with the earlier of— 

17 ‘‘(i) the calendar year specified (be18 fore the beginning of such year) by the 

19 taxpayer as the 1st year of the payment 

20 period, or 

21 ‘‘(ii) the 5th calendar year beginning 

22 after the date that the election under this 

23 subsection is made. 

24 ‘‘(3) SIGNIFICANT EMPOWERMENT ZONE BUSI25 NESS.—For purposes of this subsection, the term 


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1 ‘significant empowerment zone business’ means any 

2 trade or business operating in an empowerment zone 

3 if— 

4 ‘‘(A) such business is nominated by the 

5 State or local government which nominated the 

6 area taken into account under section 1396 to 

7 be an empowerment zone, and 

8 ‘‘(B) the Secretary of Housing and Urban 

9 Development determines that it is reasonably 

10 anticipated that such business will increase em11 ployment in such zone during the first 3 years 

12 of the payment period by at least the lesser 

13 of— 

14 ‘‘(i) 1,000 full-time employees, or 

15 ‘‘(ii) 10 percent of the number of full16 time employees estimated to have been em17 ployed in such zone on the date of its des18 ignation.’’. 

19 (j) CERTAIN FEDERALLY GUARANTEED BONDS

20 ISSUED TO PROVIDE INVESTMENTS IN EMPOWERMENT

21 ZONES AND RENEWAL COMMUNITIES PERMITTED TO BE

22 TAX-EXEMPT, ETC.—Subparagraph (A) of section 

23 149(b)(3) is amended by striking ‘‘or’’ at the end of clause 

24 (ii), by striking the period at the end of clause (iii) and 


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1 inserting ‘‘, or’’, and by adding at the end the following 

2 new clause: 

3 ‘‘(iv) any guarantee by a Federal 

4 Home Loan Bank for a bond 95 percent or 

5 more of the net proceeds of which are to 

6 be used to provide property in an em7 powerment zone or renewal community.’’. 

8 (k) TAX-EXEMPT INTEREST OF FINANCIAL INSTITU9 TIONS ON ZONE FACILITY BONDS NOT SUBJECT TO IN10 TEREST DISALLOWANCE.—Subparagraph (B) of section 

11 265(b)(3) (defining qualified bond) is amended by adding 

12 at the end the following new clause: 

13 ‘‘(iii) ENTERPRISE ZONE FACILITY

14 BONDS.—The term ‘qualified tax-exempt 

15 obligation’ includes any obligation which is 

16 treated as an exempt facility bond by sec17 tion 1394.’’. 

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

19 this section shall apply to taxable years beginning after 

20 the date of the enactment of this Act. 

21 (m) REPORTING.—The Secretary of the Treasury (or 

22 the Secretary’s delegate) shall annually submit to the 

23 Committee on Ways and Means of the House of Rep24 resentatives and the Committee on Finance of the Senate 

25 a report detailing for each empowerment zone, enterprise 


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1 community, and renewal community the amount and type 

2 of claimed tax benefits. 

Æ 


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