II 

108TH CONGRESS 

2D SESSION S. 2733

To promote freedom, fairness, and economic opportunity by establishing a 

National Enterprise Zone system to promote prosperity in economically 

depressed areas. 

IN THE SENATE OF THE UNITED STATES 

JULY 22, 2004

Mr. BROWNBACK introduced the following bill; which was read twice and 

referred to the Committee on Finance 

A BILL

To promote freedom, fairness, and economic opportunity by 

establishing a National Enterprise Zone system to promote prosperity in economically depressed areas.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

5 ‘‘National Enterprise Zone Act of 2004’’. 

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

7 this Act is as follows:

Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 

Sec. 3. National Enterprise Zones.
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1 SEC. 2. FINDINGS. 

2 The Congress finds—

3 (1) a higher level of private sector economic ac4 tivity is necessary to alleviate poverty and unemploy5 ment in economically depressed regions of the 

6 United States; 

7 (2) removing tax disincentives to reside or do 

8 business in economically depressed areas is an effec9 tive means of promoting economic growth, develop10 ment, employment, a higher standard of living, and 

11 a higher qualify of life in economically depressed 

12 areas; 

13 (3) lower marginal tax rates on work, savings, 

14 and investment in economically depressed regions 

15 will promote employment, business activity, and de16 velopment in economically depressed areas; and 

17 (4) improved taxation of business investment in 

18 plants, equipment, and inventories in economically 

19 depressed areas will encourage business to operate in 

20 those areas. 

21 SEC. 3. NATIONAL ENTERPRISE ZONES. 

22 (a) IN GENERAL.—Chapter 1 of the Internal Rev23 enue Code of 1986 is amended by inserting after sub24 chapter Y the following new subchapter: 
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1 ‘‘SUBCHAPTER Z—NATIONAL ENTERPRISE ZONES

‘‘Sec. 1400M. National Enterprise Zone designation procedure. 

‘‘Sec. 1400N. National Enterprise Zone eligibility criteria. 

‘‘Sec. 1400O. Effect of National Enterprise Zone designation on 

individuals, estates, and trusts. 

‘‘Sec. 1400P. National Enterprise Zone individual taxable income. 

‘‘Sec. 1400Q. Effect of National Enterprise Zone designation on 

corporations. 

‘‘Sec. 1400R. National Enterprise Zone corporate taxable income. 

‘‘Sec. 1400S. Conduct of an active trade or business within a 

National Enterprise Zone by corporations, partnerships, and sole proprietors. 

‘‘Sec. 1400T. Definitions and special rules.

2 ‘‘SEC. 1400M. NATIONAL ENTERPRISE ZONE DESIGNATION 

3 PROCEDURE. 

4 ‘‘(a) NOMINATED ZONE.—The governor of a State or 

5 United States Territory or the Mayor of the District of 

6 Columbia may nominate one or more zones for consider7 ation by the Secretary. This nomination shall take the 

8 form of a written application submitted in the manner and 

9 form prescribed by the Secretary. Such application shall 

10 contain all of the information necessary to determine 

11 whether a nominated zone meets the National Enterprise 

12 Zone eligibility criteria. 

13 ‘‘(b) APPLICATION DEADLINE.—The nomination ap14 plication shall be submitted after January 1 and before 

15 February 28 of the year prior to the proposed effective 

16 date of the zone. 

17 ‘‘(c) DEFICIENCIES DEADLINE.—The Secretary shall 

18 inform the nominator of any procedural noncompliance by 
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1 the nominator with the application procedures or of any 

2 needed information that may be missing from the applica3 tion by issuing a deficiency notice no later than April 30 

4 of the year that the application was submitted. 

5 ‘‘(d) CURING DEADLINE.—The nominator shall cure 

6 any deficiencies set forth in the Secretary’s deficiency no7 tice by May 31 of the year in which the deficiency notice 

8 was issued. Failure to timely cure such deficiencies shall 

9 constitute the withdraw of the nomination application. 

10 ‘‘(e) DESIGNATION DEADLINE.—The Secretary shall 

11 make a determination with respect to any nomination ap12 plication no later than September 30 of the year in which 

13 the application was received. If the Secretary finds that 

14 a nominated zone meets the National Enterprise Zone eli15 gibility criteria set forth in section 1400N, then the Sec16 retary shall designate such zone as a National Enterprise 

17 Zone no later than September 30 of the year that the ap18 plication was submitted. If the Secretary finds that a nom19 inated zone does not meet the National Enterprise Zone 

20 eligibility criteria set forth in section 1400N or that the 

21 application does not contain sufficient information to de22 termine whether a nominated zone meets the National En23 terprise Zone eligibility criteria set forth in section 1400N, 

24 then the Secretary shall decline to designate such zone as 

25 a National Enterprise Zone and shall, not later than Octo-
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1 ber 31 of the year the application was submitted, provide 

2 to the nominator a rejection notice setting forth with par3 ticularly the reasons why the application was rejected. 

4 ‘‘(f) NO PREJUDICE WITH RESPECT TO PREVIOUSLY

5 NOMINATED ZONES.—Whether a zone or a substantially 

6 similar zone has been nominated in previous years shall 

7 not be regarded by the Secretary as relevant when evalu8 ating whether to designate a nominated zone as a National 

9 Enterprise Zone. 

10 ‘‘(g) APPLICATION CONTENTS.—The application sub11 mitted by the nominator shall contain—

12 ‘‘(1) an enumeration of all of the census tracts 

13 to be included in the zone; 

14 ‘‘(2) census data for each tract with respect to 

15 median household income in that tract; 

16 ‘‘(3) census data for each tract with respect to 

17 the poverty rate in that tract; 

18 ‘‘(4) the laws of the State or Territory that 

19 conforms to the requirements of section 1400N; and 

20 ‘‘(5) such other information as the Secretary 

21 may require. 

22 ‘‘(h) EFFECTIVE DATE OF ZONE DESIGNATION.—

23 The effective date of the designation of any zone as a Na24 tional Enterprise Zone pursuant to this section shall be 

25 January 1 of the year following its designation. A designa-
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1 tion shall continue indefinitely, subject to annual eligibility 

2 reviews under subsection (i). 

3 ‘‘(i) ANNUAL ELIGIBILITY REVIEW.—Between Janu4 ary 1 and April 30 of the sixth year of a National Enter5 prise Zone’s initial effective date and each year thereafter, 

6 the Secretary shall undertake a review of each National 

7 Enterprise Zone designation whereby the Secretary shall 

8 determine whether the zone continues to meet the Na9 tional Enterprise Zone Eligibility Criteria established by 

10 section 1400N. If this review determines that a National 

11 Enterprise Zone no longer meets the National Enterprise 

12 Zone Eligibility Criteria established by section 1400N, 

13 then the Secretary shall revoke the designation effective 

14 the end of the calendar year. No later than June 30 after 

15 such determination, the Secretary shall issue a notice to 

16 the nominator and to all taxpayers making National En17 terprise Zone elections with respect to such zone in the 

18 taxpayer’s previous taxable year that the designation will 

19 be revoked at the end of the calendar year for such Na20 tional Enterprise Zone. The Secretary shall publish the 

21 annual eligibility review results for all National Enterprise 

22 Zones no later than June 30 of each year.
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1 ‘‘SEC. 1400N. NATIONAL ENTERPRISE ZONE ELIGIBILITY 

2 CRITERIA. 

3 ‘‘(a) NATIONAL ENTERPRISE ZONE ELIGIBILITY

4 CRITERIA.—A National Enterprise Zone must—

5 ‘‘(1) be composed of contiguous census tracts 

6 (none of which may be part of an existing National 

7 Enterprise Zone); 

8 ‘‘(2) have greater than 10,000 residents; 

9 ‘‘(3) have a poverty rate 2 times the national 

10 poverty rate; 

11 ‘‘(4) have a median household income less than 

12 60 percent of the national median household income; 

13 ‘‘(5) have an unemployment rate 2.5 times the 

14 national average unemployment rate; and 

15 ‘‘(6) be located entirely within a State or Terri16 tory that the Secretary certifies has enacted con17 forming laws within the meaning of subsection (e). 

18 ‘‘(b) SPECIAL RULE FOR SMALL INCORPORATED CIT19 IES OR SMALL COUNTIES.—Paragraph (2) of subsection 

20 (a) shall not apply to a zone if the zone comprises an en21 tire incorporated city or an entire county provided that 

22 such incorporated city or county existed on the date of 

23 enactment of this subchapter. 

24 ‘‘(c) NO OVERLAP WITH EXISTING ZONES OF DIF25 FERENT TYPE.—No part of a National Enterprise Zone 

26 may also be a part of—
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1 ‘‘(1) a zone designated under subchapter U as 

2 an Empowerment Zone, an Enterprise Community, 

3 or a Rural Development Investment Area; or 

4 ‘‘(2) a zone designated as a District of Colum5 bia Enterprise Zone under subchapter W. 

6 The nominator of a proposed National Enterprise Zone 

7 may indicate in his application that some or all of an exist8 ing zone described in the previous sentence shall lose its 

9 designation as an Empowerment Zone, Enterprise Com10 munity, Rural Development Investment Area, or District 

11 of Columbia Enterprise Zone upon its designation as all 

12 or part of a National Enterprise Zone. Such existing zone 

13 shall lose such designation upon its designation as all or 

14 part of a National Enterprise Zone in a manner prescribed 

15 by the Secretary. 

16 ‘‘(d) DATA.—No later than November 30 of each 

17 year, the Secretary shall designate which data as of which 

18 date shall be used by nominators to perform the calcula19 tions required in subsection (a) in applications made the 

20 following year. 

21 ‘‘(e) CONFORMING LAWS.—A State or Territory shall 

22 be deemed to have enacted conforming laws if—

23 ‘‘(1) it is in substantial compliance with the No 

24 Child Left Behind Act of 2001; and 

25 ‘‘(2) its tax laws provide for either—
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1 ‘‘(A)(i) a substantially similar income tax 

2 base with respect to business income arising 

3 from the conduct of an active trade or business 

4 within a National Enterprise Zone as that pro5 vided for Federal income tax purposes; and 

6 ‘‘(ii) tax rates no higher than that imposed 

7 on businesses without a National Enterprise 

8 Zone; or 

9 ‘‘(B) the imposition of no income tax with 

10 respect to business income arising from the con11 duct of an active trade or business within a Na12 tional Enterprise Zone. 

13 ‘‘SEC. 1400O. EFFECT OF NATIONAL ENTERPRISE ZONE 

14 DESIGNATION ON INDIVIDUALS, ESTATES, 

15 AND TRUSTS. 

16 ‘‘(a) INDIVIDUAL ALTERNATIVE NATIONAL ENTER17 PRISE ZONE TAX.—If for any taxable year, any individual 

18 taxpayer who is resident in a National Enterprise Zone 

19 for the entire taxable year has any National Enterprise 

20 Zone taxable income, then, in lieu of any tax imposed by 

21 section 1 or section 55, such individual taxpayer may elect, 

22 in a form prescribed by the Secretary, to pay a tax for 

23 such taxable year which shall consist of the sum of—

24 ‘‘(1) a tax computed on the taxable income of 

25 the individual taxpayer for such taxable year re-
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1 duced by the amount of National Enterprise Zone 

2 tentative taxable income of such individual taxpayer 

3 for such taxable year (if greater than zero), at the 

4 rates and in the manner as if this subsection had 

5 not been enacted; plus 

6 ‘‘(2) a tax of 17 percent of the National Enter7 prise Zone taxable income for the taxable year. 

8 ‘‘(b) INDIVIDUAL TAXPAYER.—For purposes of this 

9 section, an individual taxpayer shall include an—

10 ‘‘(1) individual; 

11 ‘‘(2) married individual filing a joint return; 

12 ‘‘(3) surviving spouse; 

13 ‘‘(4) head of household; 

14 ‘‘(5) married individual filing a separate return; 

15 ‘‘(6) estate; or 

16 ‘‘(7) trust. 

17 ‘‘(c) CERTAIN INDIVIDUALS, ESTATES AND

18 TRUSTS.—

19 ‘‘(1) JOINT FILERS.—In the case of married in20 dividuals filing a joint return, both individuals must 

21 have been residents in a National Enterprise Zone 

22 for their entire taxable year in order to be eligible 

23 under this section. 

24 ‘‘(2) INDIVIDUALS RESIDENT IN MULTIPLE

25 ZONES.—Individuals who are residents of 2 or more 
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1 National Enterprise Zones during their taxable year 

2 but are residents of a National Enterprise Zone for 

3 their entire taxable year shall be eligible under this 

4 section. 

5 ‘‘(3) ESTATES AND CERTAIN TRUSTS.—The es6 tate of an individual and testamentary trusts of an 

7 individual shall be eligible under this section if the 

8 decedent was a resident of a National Enterprise 

9 Zone for at least two complete taxable years prior to 

10 the individual’s death. 

11 ‘‘SEC. 1400P. NATIONAL ENTERPRISE ZONE INDIVIDUAL 

12 TAXABLE INCOME. 

13 ‘‘(a) NATIONAL ENTERPRISE ZONE INDIVIDUAL

14 TENTATIVE TAXABLE INCOME.—National Enterprise 

15 Zone tentative individual taxable income shall be equal to 

16 taxable income (as defined by section 63 and computed 

17 without regard to section 179(e)) plus the additions set 

18 forth in subsection (b) less the deductions set forth in sub19 section (c). 

20 ‘‘(b) ADDITIONS TO TAXABLE INCOME TO DETER21 MINE NATIONAL ENTERPRISE INDIVIDUAL TENTATIVE

22 TAXABLE INCOME.—The following amounts shall be 

23 added to taxable income for purposes of determining Na24 tional Enterprise Zone individual tentative taxable in25 come—
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1 ‘‘(1) any amount excluded by section 103; 

2 ‘‘(2) any amount excluded by section 105; 

3 ‘‘(3) any amount excluded by section 106; and 

4 ‘‘(4) any amount excluded by section 125. 

5 ‘‘(c) DEDUCTIONS FROM TAXABLE INCOME TO DE6 TERMINE NATIONAL ENTERPRISE INDIVIDUAL TEN7 TATIVE TAXABLE INCOME.—The following amounts shall 

8 be deducted from taxable income for purposes of deter9 mining National Enterprise Zone individual tentative tax10 able income—

11 ‘‘(1) the taxpayer’s distributive share of any 

12 partnership item (within the meaning of section 

13 702) that is not attributable to the conduct of an ac14 tive trade or business within a National Enterprise 

15 Zone; 

16 ‘‘(2) the taxpayer’s pro rata share of any S cor17 poration item (within the meaning of section 1366) 

18 that is not attributable to the conduct of an active 

19 trade or business within a National Enterprise Zone; 

20 and 

21 ‘‘(3) income derived from business that does not 

22 constitute the conduct of an active trade or business 

23 within a National Enterprise Zone. 

24 ‘‘(d) NATIONAL ENTERPRISE ZONE INDIVIDUAL

25 TAXABLE INCOME.—National Enterprise Zone individual 
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1 taxable income for any taxable year shall be National En2 terprise Zone tentative individual taxable income for such 

3 taxable year less—

4 ‘‘(1) net savings (as defined in subsection (e)) 

5 for such taxable year; 

6 ‘‘(2) capital gains for such taxable year subject 

7 to tax under section 1(h), but only if the property 

8 the disposition of which gave rise to the gain was ac9 quired by the taxpayer at a time the taxpayer was 

10 a resident of a National Enterprise Zone; 

11 ‘‘(3) expenditures made to acquire inventory 

12 property during such taxable year; 

13 ‘‘(4) the amount, if any, the taxpayer elects to 

14 deduct pursuant to 179(e) for such taxable year that 

15 exceeds the limitations in section 179(b); 

16 ‘‘(5) deductions reduced pursuant to section 68; 

17 and 

18 ‘‘(6) amounts by which the exemption was re19 duced pursuant to section 151(d)(3). 

20 ‘‘(e) NET SAVINGS.—

21 ‘‘(1) GENERAL RULE.—Net savings means de22 posits or contributions to nonqualified financial ac23 counts less withdraws or distributions from non24 qualified financial accounts held. 
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1 ‘‘(2) NONQUALIFIED FINANCIAL ACCOUNTS.—A 

2 nonqualified financial account means an account 

3 maintained with a bank (other than a checking ac4 count), a regulated investment company, an invest5 ment bank, or a brokerage firm that is not a quali6 fied trust or account within the meaning of sub7 chapter D. 

8 ‘‘(f) TAX UPON LEAVING ZONE.—The cumulative 

9 sum of net savings deducted pursuant to subsection (d)(1) 

10 (if greater than zero) shall be includible in gross income 

11 and taxed at a 17 percent rate upon a person becoming 

12 a non-resident of a National Enterprise Zone. 

13 ‘‘SEC. 1400Q. EFFECT OF NATIONAL ENTERPRISE ZONE 

14 DESIGNATION ON CORPORATIONS. 

15 ‘‘(a) CORPORATE ALTERNATIVE NATIONAL ENTER16 PRISE ZONE TAX.—If for any taxable year, any corpora17 tion (other than an S corporation) has any National En18 terprise Zone taxable income, then, in lieu of any tax im19 posed by section 11 or section 55, such corporation may 

20 elect, in a form prescribed by the Secretary, to pay a tax 

21 which shall consist of the sum of—

22 ‘‘(1) a tax computed on the taxable income of 

23 such corporation for the taxable year reduced by the 

24 amount of National Enterprise Zone tentative cor25 porate taxable income for such taxable year (if 
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1 greater than zero), at the rates and in the manner 

2 as if this subsection had not been enacted; plus 

3 ‘‘(2) a tax of 17 percent of the National Enter4 prise Zone taxable income for such taxable year. 

5 ‘‘SEC. 1400R. NATIONAL ENTERPRISE ZONE CORPORATE 

6 TAXABLE INCOME. 

7 ‘‘(a) IN GENERAL.—National Enterprise Zone Cor8 porate tentative taxable income for any taxable year shall 

9 be taxable income (computed without regard to section 

10 179(e)) arising from the conduct of an active trade or 

11 business within one or more National Enterprise Zones 

12 during such taxable year. 

13 ‘‘(b) ADJUSTMENTS.—National Enterprise Zone Cor14 porate taxable income for any taxable year shall be equal 

15 to National Enterprise Zone Corporate tentative taxable 

16 income for such taxable year less—

17 ‘‘(1) expenditures made to acquire inventory 

18 property held in a National Enterprise Zone in such 

19 taxable year; and 

20 ‘‘(2) the amount, if any, the taxpayer elects to 

21 deduct pursuant to 179(e) for such taxable year that 

22 exceeds the limitations under section 179(b). 
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1 ‘‘SEC. 1400S. CONDUCT OF AN ACTIVE TRADE OR BUSINESS 

2 WITHIN A NATIONAL ENTERPRISE ZONE BY 

3 CORPORATIONS, PARTNERSHIPS, AND SOLE 

4 PROPRIETORS. 

5 ‘‘(a) ACTIVE TRADE OR BUSINESS.—For purposes of 

6 this subchapter, the conduct of active trade or business 

7 means the conduct of a trade or business that derives no 

8 more than 5 percent of its gross income from passive ac9 tivities (as defined by section 469(c)). 

10 ‘‘(b) INCOME AND EXPENSES WITHIN A NATIONAL

11 ENTERPRISE ZONE.—

12 ‘‘(1) GROSS INCOME.—Gross income from with13 in a National Enterprise Zone shall mean—

14 ‘‘(A) compensation for labor or personal 

15 services performed by a natural person who is 

16 based in a National Enterprise Zone; 

17 ‘‘(B) rentals or royalties from property lo18 cated in a National Enterprise Zone; 

19 ‘‘(C) gains, profits, and income derived 

20 from the sale of inventory property held within 

21 a National Enterprise Zone; and 

22 ‘‘(D) income from the sale of property that 

23 is produced, created, fabricated, manufactured, 

24 extracted, processed, cured, aged, grown, or 

25 harvested within the zone.
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1 ‘‘(2) EXPENSES.—Expenses shall be allocated 

2 and apportioned to the income producing activities 

3 to which they are related. Expenses which are not 

4 allocable or apportioned to any specific income pro5 ducing activities shall be allocated on the basis of 

6 gross income such that the ratio of the expense allo7 cated to the National Enterprise Zone is the same 

8 as the ratio of gross income within the National En9 terprise Zone to all gross income within the United 

10 States of the taxpayer or, in the case of a corpora11 tion that is a member of a controlled group of cor12 porations (within the meaning of section 1563), the 

13 controlled group of such taxpayer. 

14 ‘‘(c) ALTERNATIVE FORMULARY METHOD.—

15 ‘‘(1) IN GENERAL.—A corporation (or con16 trolled group in the case of a corporation that is a 

17 member of a controlled group), partnership, or sole 

18 proprietor that so elects, in a form and manner pre19 scribed by the Secretary, may determine the share of 

20 its income, expense, and other items attributable to 

21 the conduct of an active trade or business within a 

22 National Enterprise Zone by multiplying its appor23 tionment ratio by the amount of the income, ex24 pense, and other items for purposes of determining 
18

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1 its National Enterprise Zone Corporate taxable in2 come. 

3 ‘‘(2) APPORTIONMENT RATIO.—The apportion4 ment ratio shall be the ratio of—

5 ‘‘(A) the sum of—

6 ‘‘(i) the remaining basis in depreciable 

7 property held in zone for the entire taxable 

8 year; 

9 ‘‘(ii) the inventory held in a zone at 

10 the end of the taxable year; and 

11 ‘‘(iii) the compensation paid to zone12 based employees during the taxable year; 

13 to 

14 ‘‘(B) the sum of—

15 ‘‘(i) the remaining basis in depreciable 

16 property held in the United States for the 

17 entire taxable year; 

18 ‘‘(ii) the inventory held in the United 

19 States at the end of the taxable year; and 

20 ‘‘(iii) the compensation paid to em21 ployees within the United States during 

22 the taxable year. 

23 ‘‘(3) MANDATORY USE OF ALTERNATIVE FOR24 MULARY METHOD.—If—
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1 ‘‘(A) a taxpayer derives greater than 10 

2 percent of its gross income from sales to related 

3 parties (as defined in section 1313(c)); or 

4 ‘‘(B) expenses of a taxpayer attributable to 

5 purchases from related parties (as defined in 

6 section 1313(c)) account for greater than 10 

7 percent of its expenses, 

8 then the taxpayer must use the alternative formulary 

9 method described in paragraph (1). 

10 ‘‘SEC. 1400T. DEFINITIONS AND SPECIAL RULES. 

11 ‘‘(a) BASED IN A NATIONAL ENTERPRISE ZONE.—

12 A person is based in a National Enterprise Zone if that 

13 person works out of an office, factory, store, or other facil14 ity located in a National Enterprise Zone not less than 

15 80 percent of the hours worked by such person in a cal16 endar year. In the case of a person that works for an em17 ployer for less than the full calendar year or was engaged 

18 in the conduct of an active trade or business within a Na19 tional Enterprise Zone for less than the full calendar year, 

20 then a person shall be deemed based in a National Enter21 prise Zone if that person worked out of an office, factory, 

22 store, or other facility located in a National Enterprise 

23 Zone not less than 80 percent of the hours worked by such 

24 person while employed by such employer or engaged in the 
20

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1 conduct of an active trade or business within a National 

2 Enterprise Zone. 

3 ‘‘(b) INVENTORY.—

4 ‘‘(1) INVENTORY PROPERTY.—For purposes of 

5 sections 1400P and 1400R, inventory property shall 

6 mean property described in section 1221(a)(1) and 

7 any expenditures capitalized pursuant to section 

8 263A. 

9 ‘‘(2) NO DOUBLE COUNTING.—The deductions 

10 afforded by section 1400P(d)(3) and 1400R(b)(1) 

11 are in lieu of the deduction provided upon the sale 

12 of inventory property. 

13 ‘‘(c) NOMINATOR.—Nominator means the governor of 

14 a State or Territory or the Mayor of the District of Colum15 bia who nominated a zone by application to be a National 

16 Enterprise Zone. 

17 ‘‘(d) RESIDENCY.—For purposes of this subchapter, 

18 an individual is a resident in a National Enterprise Zone 

19 for an entire taxable year if—

20 ‘‘(1) such individual’s principal residence (with21 in the meaning of section 121) is located within the 

22 National Enterprise Zone; and 

23 ‘‘(2) such individual was present (within the 

24 meaning of section 7701(b)(3)) in the National En-
21

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1 terprise Zone no fewer than 245 days during the 

2 taxable year.’’. 

3 (b) CONFORMING AMENDMENTS.—

4 (1) Section 179 of the Internal Revenue Code 

5 of 1986 is amended by inserting at the end the fol6 lowing new subsection: 

7 ‘‘(e) NO LIMITATION ON AMOUNT IN NATIONAL EN8 TERPRISE ZONES.—

9 ‘‘(1) IN GENERAL.—The limitations under sub10 section (b) shall not apply with respect to property 

11 placed in service in a National Enterprise Zone. 

12 ‘‘(2) PROPERTY REMOVED FROM NATIONAL EN13 TERPRISE ZONES.—Property to which this sub14 section applies which is removed from service within 

15 a National Enterprise Zone but not disposed of by 

16 the taxpayer shall be treated as if it had been, as 

17 of the date of the removal, disposed of by the tax18 payer and repurchased by the taxpayer at a price 

19 equal to what its remaining basis would have been 

20 if the election under this section had not been exer21 cised with respect to the property.’’. 

22 (2) Subsection (d) of section 243 of such Code 

23 is amended by adding at the end the following new 

24 paragraph: 
22

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1 ‘‘(5) A domestic corporation which is subject to 

2 taxation under this chapter shall include any cor3 poration organized under the laws of the Common4 wealth of Puerto Rico for any taxable year for which 

5 such corporation has made an election under section 

6 1400Q.’’. 

7 (c) CLERICAL AMENDMENT.—The table of sub8 chapters for chapter 1 of such Code is amended by insert9 ing after the item relating to subchapter Y the following 

10 new item:

‘‘Subchapter Z—National Enterprise Zones.’’.

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

12 this section shall apply to taxable years beginning after 

13 January 1, 2006.

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