II 

109TH CONGRESS 

2D SESSION S. 3827 

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 SENATE OF THE UNITED STATES 

AUGUST 3, 2006 

Mrs. LINCOLN (for herself, Ms. SNOWE, Mr. SCHUMER, Mr. ROCKEFELLER, 

Ms. LANDRIEU, Mrs. CLINTON, and Mr. VITTER) introduced the following bill; which was read twice and referred to the Committee on Finance 

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.— 

6 ‘‘(1) IN GENERAL.—At the request of all gov7 ernments which nominated an area as an empower8 ment zone or enterprise community, the appropriate 

9 Secretary may expand the area of such zone or com10 munity to include 1 or more noncontiguous areas if 

11 such governments establish to the satisfaction of the 

12 appropriate Secretary that such expansion furthers 

13 the purposes of the designation of the initial area as 

14 such a zone or community. 

15 ‘‘(2) RURAL AREAS.—With respect to any em16 powerment zone or enterprise community located in 

17 a rural area, at the request of the nominating local 

18 government, the appropriate Secretary shall expand 

19 the area of such zone or community to include the 

20 entire area of such nominating local government, but 

21 only if— 

22 ‘‘(A) the poverty rate and the unemploy23 ment rate for such entire area as determined by 

24 the 2000 decennial census data was at least 

25 110 percent of such rate for the United States, 


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1 ‘‘(B) during the period beginning with the 

2 1990 decennial census and ending with the 

3 2000 decennial census, such entire area has a 

4 net outmigration of inhabitants of at least 10 

5 percent of the population of such area, and 

6 ‘‘(C) such entire area meets 1 or more of 

7 the following criteria determined by the 2000 

8 decennial census data: 

9 ‘‘(i) Median household income is not 

10 more than 70 percent of such income for 

11 the United States. 

12 ‘‘(ii) Per capita income is not more 

13 than 75 percent of such income for the 

14 United States. 

15 ‘‘(iii) The percentage of such area’s 

16 population which is disabled is at least 130 

17 percent of such percentage for the United 

18 States.’’. 

19 (2) RENEWAL COMMUNITIES.—Section 1400E 

20 is amended by adding at the end the following new 

21 subsection: 

22 ‘‘(h) AUTHORITY TO EXPAND BOUNDARIES OF DES23 IGNATED AREAS.— 

24 ‘‘(1) IN GENERAL.—At the request of all gov25 ernments which nominated an area as a renewal 


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1 community, the Secretary of Housing and Urban 

2 Development may expand the area of such commu3 nity to include 1 or more noncontiguous areas if 

4 such governments establish to the satisfaction of 

5 such Secretary that such expansion furthers the pur6 poses of the designation of the initial area as a re7 newal community. 

8 ‘‘(2) RURAL AREAS.—With respect to any re9 newal community located in a rural area, at the re10 quest of the nominating local government, the ap11 propriate Secretary shall expand the area of such 

12 community to include the entire area of such nomi13 nating local government, but only if— 

14 ‘‘(A) the poverty rate and the unemploy15 ment rate for such entire area as determined by 

16 the 2000 decennial census data was at least 

17 110 percent of such rate for the United States, 

18 ‘‘(B) during the period beginning with the 

19 1990 decennial census and ending with the 

20 2000 decennial census, such entire area has a 

21 net outmigration of inhabitants of at least 10 

22 percent of the population of such area, and 

23 ‘‘(C) such entire area meets 1 or more of 

24 the following criteria determined by the 2000 

25 decennial census data: 


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1 ‘‘(i) Median household income is not 

2 more than 70 percent of such income for 

3 the United States. 

4 ‘‘(ii) Per capita income is not more 

5 than 75 percent of such income for the 

6 United States. 

7 ‘‘(iii) The percentage of such area’s 

8 population which is disabled is at least 130 

9 percent of such percentage for the United 

10 States.’’. 

11 (f) MODIFICATION OF REQUIREMENT FOR EXPAND12 ING DESIGNATED AREA BASED ON 2000 CENSUS.— 

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

14 as follows: 

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

16 using 2000 census data— 

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

18 or 

19 ‘‘(II) which exceeds the poverty 

20 rate for such tract using 1990 census 

21 data.’’. 

22 (g) REPEAL OF EXCLUSION OF CENTRAL BUSINESS

23 DISTRICT FROM ELIGIBILITY AS DESIGNATED AREA.— 

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

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


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

2 and by striking subparagraph (D). 

3 (h) CARRYOVER OF UNUSED INCREASED SECTION

4 179 EXPENSING LIMIT.— 

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

6 1397A(a)(1) is amended to read as follows: 

7 ‘‘(A) the sum of— 

8 ‘‘(i) $35,000, and 

9 ‘‘(ii) the aggregate of the unused in10 creased limitations for each of the 2 pre11 ceding taxable years, or’’. 

12 (2) UNUSED INCREASED LIMITATION.—Section 

13 1392 is amended by adding at the end the following 

14 new subsection: 

15 ‘‘(c) UNUSED INCREASED LIMITATION.—For pur16 poses of subsection (a)(1)(A)— 

17 ‘‘(1) IN GENERAL.—The unused increased limi18 tation for any taxable year is the excess (but not 

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

20 179(b)(1) as increased under subsection (a) over the 

21 cost of section 179 property which is qualified zone 

22 property placed in service during the taxable year. 

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

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

25 shall be treated as used first from unused limitation 


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1 for the second preceding calendar year, then from 

2 unused limitation for the 1st preceding calendar 

3 year, and then from such limitation for the current 

4 year.’’. 

5 (i) ELECTION OF FINANCING ARRANGEMENT IN

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

7 adding at the end the following new subsection: 

8 ‘‘(e) ELECTION OF FINANCING ARRANGEMENT IN

9 LIEU OF TAX BENEFITS.— 

10 ‘‘(1) IN GENERAL.—At the election of any sig11 nificant empowerment zone business, for the pay12 ment period of the debt obligation designated in 

13 such election by such business— 

14 ‘‘(A) such business— 

15 ‘‘(i) shall not be treated as an enter16 prise zone business for purposes of section 

17 1396, and 

18 ‘‘(ii) shall not be allowed any deduc19 tion for depreciation under section168 with 

20 respect to qualified zone property, and 

21 ‘‘(B) the Secretary shall make the pay22 ments described in paragraph (2) to the holder 

23 of such debt obligation. 

24 ‘‘(2) PAYMENTS.— 


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

2 each year of the payment period, the Secretary 

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

4 otherwise appropriated) to the holder of the 

5 debt obligation designated by such zone busi6 ness an amount equal to the value of the tax 

7 benefits under this chapter for such year to 

8 which such zone business would be entitled but 

9 for the election under this subsection. 

10 ‘‘(B) ASSUMPTIONS.—For purposes of val11 uing tax benefits under subparagraph (A), the 

12 Secretary shall assume that— 

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

14 business for purposes of section 1396, 

15 ‘‘(ii) all qualified zone property placed 

16 in service by the zone business is a single 

17 property with a recovery period under sec18 tion 168 of 15 years, and 

19 ‘‘(iii) the rate of tax under this chap20 ter is 25 percent. 

21 ‘‘(C) PAYMENT PERIOD.—The payment pe22 riod is the period of 15 calendar years begin23 ning with the earlier of— 

24 ‘‘(i) the calendar year specified (be25 fore the beginning of such year) by the 


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1 taxpayer as the 1st year of the payment 

2 period, or 

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

4 after the date that the election under this 

5 subsection is made. 

6 ‘‘(3) SIGNIFICANT EMPOWERMENT ZONE BUSI7 NESS.—For purposes of this subsection, the term 

8 ‘significant empowerment zone business’ means any 

9 trade or business operating in an empowerment zone 

10 if— 

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

12 State or local government which nominated the 

13 area taken into account under section 1396 to 

14 be an empowerment zone, and 

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

16 Development determines that it is reasonably 

17 anticipated that such business will increase em18 ployment in such zone during the first 3 years 

19 of the payment period by at least the lesser 

20 of— 

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

22 ‘‘(ii) 10 percent of the number of full23 time employees estimated to have been em24 ployed in such zone on the date of its des25 ignation.’’. 


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1 (j) CERTAIN FEDERALLY GUARANTEED BONDS

2 ISSUED TO PROVIDE INVESTMENTS IN EMPOWERMENT

3 ZONES AND RENEWAL COMMUNITIES PERMITTED TO BE

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

5 149(b)(3) is amended by striking ‘‘or’’ at the end of clause 

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

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

8 new clause: 

9 ‘‘(iv) any guarantee by a Federal 

10 Home Loan Bank for a bond 95 percent or 

11 more of the net proceeds of which are to 

12 be used to provide property in an em13 powerment zone or renewal community.’’. 

14 (k) TAX-EXEMPT INTEREST OF FINANCIAL INSTITU15 TIONS ON ZONE FACILITY BONDS NOT SUBJECT TO IN16 TEREST DISALLOWANCE.—Subparagraph (B) of section 

17 265(b)(3) (defining qualified bond) is amended by adding 

18 at the end the following new clause: 

19 ‘‘(iii) ENTERPRISE ZONE FACILITY

20 BONDS.—The term ‘qualified tax-exempt 

21 obligation’ includes any obligation which is 

22 treated as an exempt facility bond by sec23 tion 1394.’’. 


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

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

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

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

6 Committee on Ways and Means of the House of Rep7 resentatives and the Committee on Finance of the Senate 

8 a report detailing for each empowerment zone, enterprise 

9 community, and renewal community the amount and type 

10 of claimed tax benefits. 

Æ 


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