I 

111TH CONGRESS 

1ST SESSION H. R. 3500 

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

benefits available in empowerment zones and other tax-incentive areas. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 31, 2009 

Mr. MAFFEI 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 modify the benefits available in empowerment zones 

and other tax-incentive 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. 

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

5 ‘‘Small and Medium Urban Regions Growth and Em6 powerment Act of 2009’’ or the ‘‘SURGE Act of 2009’’. 

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amend9 ment or repeal is expressed in terms of an amendment 

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


tjames on DSKG8SOYB1PROD with BILLS
2 

•HR 3500 IH

1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 

3 SEC. 2. FINDINGS. 

4 The Congress hereby finds the following: 

5 (1) Businesses in Empowerment Zones with 

6 less population density are disadvantaged from 

7 reaching the 35 percent employment rule, making 

8 them significantly less likely to be eligible for tax-ex9 empt facility bonds and section 179 expensing. 

10 (2) Businesses in Empowerment Zones with 

11 less population density have a much smaller pool of 

12 eligible employees to choose from in order to access 

13 the employee wage credits. 

14 (3) Increasing empowerment zone coverage area 

15 into disadvantaged communities that are not cur16 rently covered by the zone is difficult, bureaucratic 

17 and lengthy. 

18 (4) There are too many limitations placed on 

19 the type of businesses that are eligible for the credit, 

20 making places such as small biotech firms, spas, and 

21 family-owned and operated businesses ineligible. 

22 (5) Workforce development and on-the-job 

23 training is needed to allow companies to transition 

24 to newer technologies or begin new hires for newly 

25 begun ventures. 


tjames on DSKG8SOYB1PROD with BILLS
3 

•HR 3500 IH

1 SEC. 3. EXTENSION OF BENEFITS. 

2 (a) EMPOWERMENT ZONES.— 

3 (1) ROUNDS I AND II DESIGNATIONS.—Section 

4 1391(d)(1) is amended by striking ‘‘December 31, 

5 2009’’ in subparagraph (A)(i) and inserting ‘‘De6 cember 31, 2019’’. 

7 (2) ROUND III DESIGNATIONS.—Section 

8 1391(h)(2) is amended by striking ‘‘December 31, 

9 2009’’ and inserting ‘‘December 31, 2019’’. 

10 (b) RURAL ENTERPRISE COMMUNITIES.—Section 

11 1391(d)(1)(A) is amended by striking ‘‘or’’ at the end of 

12 clause (i) and by striking clause (ii) and inserting the fol13 lowing new clauses: 

14 ‘‘(ii) in the case of an enterprise com15 munity not described in clause (iii), the 

16 close of the 10th calendar year beginning 

17 on or after such date of designation, or 

18 ‘‘(iii) in the case of an enterprise com19 munity designated in a rural area pursuant 

20 to section 766 of division A of the Omni21 bus Consolidated and Emergency Supple22 mental Appropriations Act, 1999, Decem23 ber 31, 2019,’’. 

24 (c) RENEWAL COMMUNITIES.— 

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

26 amended by striking ‘‘December 31, 2009’’ each 


tjames on DSKG8SOYB1PROD with BILLS
4 

•HR 3500 IH

1 place it appears and inserting ‘‘December 31, 

2 2019’’. 

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

4 1400J(b) are each amended by striking ‘‘January 1, 

5 2010’’ each place it appears and inserting ‘‘January 

6 1, 2020’’. 

7 (3) Section 1400F(c)(2) amended by striking 

8 ‘‘December 31, 2014’’ and inserting ‘‘December 31, 

9 2024’’. 

10 (4) Section 1400F(d) is amended by striking 

11 ‘‘December 31, 2014’’ and inserting ‘‘December 31, 

12 2024’’. 

13 (5) Section 1400I(d)(2)(A) is amended by strik14 ing ‘‘2010’’ and inserting ‘‘2020’’. 

15 (d) TREATMENT OF TERMINATION DATES SPECI16 FIED IN NOMINATIONS.— 

17 (1) Paragraph (1) of section 1391(d) is amend18 ed by adding at the end the following new flush sen19 tence: 

20 ‘‘The termination date referred to in subparagraph 

21 (B) shall be treated as being no earlier than the ter22 mination date under subparagraph (A) unless an 

23 earlier termination date is designated under sub24 paragraph (B) after the date of the enactment of 

25 this sentence.’’. 


tjames on DSKG8SOYB1PROD with BILLS
5 

•HR 3500 IH

1 (2) Paragraph (1) of section 1400E(b) of such 

2 Code is amended by adding at the end the following 

3 new flush sentence: 

4 ‘‘The termination date referred to in subparagraph 

5 (B) shall be treated as being no earlier than the ter6 mination date under subparagraph (A) unless an 

7 earlier termination date is designated under sub8 paragraph (B) after the date of the enactment of 

9 this sentence’’. 

10 SEC. 4. EXPANSION OF BUSINESSES ELIGIBLE FOR BENE11 FITS; EXPANSION OF ELIGIBLE BUSINESS AC12 TIVITIES. 

13 (a) EXPANSION OF QUALIFIED BUSINESS ENTI14 TIES.— 

15 (1) IN GENERAL.—Subsections (b) and (c) of 

16 section 1397C are amended to read as follows: 

17 ‘‘(b) QUALIFIED BUSINESS ENTITY.—For purposes 

18 of this section, the term ‘qualified business entity’ means, 

19 with respect to any taxable year, any corporation or part20 nership if for such year— 

21 ‘‘(1) any trade or business of such entity is the 

22 active conduct of a qualified business within an em23 powerment zone, 

24 ‘‘(2) at least 35 percent of its employees are 

25 residents of an empowerment zone, 


tjames on DSKG8SOYB1PROD with BILLS
6 

•HR 3500 IH

1 ‘‘(3) less than 5 percent of the average of the 

2 aggregate unadjusted bases of the property of such 

3 entity is attributable to collectibles (as defined in 

4 section 408(m)(2)) other than collectibles that are 

5 held primarily for sale to customers in the ordinary 

6 course of such business, and 

7 ‘‘(4) less than 5 percent of the average of the 

8 aggregate unadjusted bases of the property of such 

9 entity is attributable to nonqualified financial prop10 erty. 

11 ‘‘(c) QUALIFIED PROPRIETORSHIP.—For purposes of 

12 this section, the term ‘qualified proprietorship’ means, 

13 with respect to any taxable year, any qualified business 

14 carried on by an individual as a proprietorship if for such 

15 year— 

16 ‘‘(1) at least 35 percent of such employees are 

17 residents of an empowerment zone, 

18 ‘‘(2) less than 5 percent of the average of the 

19 aggregate unadjusted bases of the property of such 

20 individual which is used in such business is attrib21 utable to collectibles (as defined in section 

22 408(m)(2)) other than collectibles that are held pri23 marily for sale to customers in the ordinary course 

24 of such business, and 


tjames on DSKG8SOYB1PROD with BILLS
7 

•HR 3500 IH

1 ‘‘(3) less than 5 percent of the average of the 

2 aggregate unadjusted bases of the property of such 

3 individual which is used in such business is attrib4 utable to nonqualified financial property. 

5 For purposes of this subsection, the term ‘employee’ in6 cludes the proprietor.’’. 

7 (2) CONFORMING AMENDMENTS.— 

8 (A) Subsection (e) of section 1400 is 

9 amended by striking ‘‘subsections (b)(6) and 

10 (c)(5)’’ and inserting ‘‘subsections (b)(2) and 

11 (c)(1)’’. 

12 (B) Paragraph (2) of section 1400B(c) is 

13 amended by inserting ‘‘(as in effect on the day 

14 before the date of the enactment of the Small 

15 and Medium Urban Regions Growth and Em16 powerment Act of 2009)’’ after ‘‘1397C’’. 

17 (b) MODIFICATION OF EMPLOYMENT REQUIREMENT

18 FOR BUSINESSES LOCATED IN AREAS WITH LOWER POP19 ULATION DENSITY.— 

20 (1) DEFINITION OF QUALIFIED BUSINESS ENTI21 TY.—Section 1397C is amended by adding at the 

22 end the following new subsection: 

23 ‘‘(g) MODIFICATION OF EMPLOYMENT REQUIRE24 MENT FOR BUSINESSES LOCATED IN AREAS WITH

25 LOWER POPULATION DENSITY.— 


tjames on DSKG8SOYB1PROD with BILLS
8 

•HR 3500 IH

1 ‘‘(1) IN GENERAL.—In the case of businesses 

2 located in a lower-density empowerment zone, sub3 sections (b)(2) and (c)(1) shall be applied by treat4 ing employees as residents of the empowerment zone 

5 if they are residents of a census tract— 

6 ‘‘(A) which is an area of pervasive poverty, 

7 unemployment, and general distress (within the 

8 meaning of section 1400E(c)(3)(A)), and 

9 ‘‘(B) any point on the boundary of which 

10 is within 50 miles of any point on the boundary 

11 of the empowerment zone. 

12 ‘‘(2) LOWER-DENSITY EMPOWERMENT ZONE.— 

13 For purposes of paragraph (1), the term ‘lower den14 sity empowerment zone’ means any empowerment 

15 zone the average population of population census 

16 tracts within such zone is less than 3,000.’’. 

17 (2) EMPLOYMENT CREDIT.—Paragraph (1) of 

18 section 1396(d) is amended by adding at the end the 

19 following new flush sentence: 

20 ‘‘In the case of businesses located in a lower-density 

21 empowerment zone (as defined in section 

22 1397C(g)(2)), subparagraph (B) shall be applied by 

23 treating employees as residents of the empowerment 

24 zone if they are residents of a census tract which is 

25 an area of pervasive poverty, unemployment, and 


tjames on DSKG8SOYB1PROD with BILLS
9 

•HR 3500 IH

1 general distress (within the meaning of section 

2 1400E(c)(3)(A)), and any point on the boundary of 

3 such tract is within 50 miles of any point on the 

4 boundary of the empowerment zone.’’. 

5 (c) EXPANSION OF ELIGIBLE BUSINESS ACTIVI6 TIES.— 

7 (1) RENTING REAL OR PERSONAL PROPERTY

8 PERMITTED.— 

9 (A) IN GENERAL.—Subsection (d) of sec10 tion 1397C is amended by striking paragraphs 

11 (2) and (3). 

12 (B) RECOVERY ZONE PROPERTY.—Para13 graph (2) of section 1400U–3(c) is amended by 

14 striking subparagraph (A). 

15 (C) CONFORMING AMENDMENT.—Para16 graph (3) of section 45D(d) is amended by 

17 striking ‘‘; except that’’ and all that follows and 

18 inserting a period. 

19 (2) DEVELOPING OR HOLDING INTANGIBLES

20 PERMITTED.— 

21 (A) IN GENERAL.—Subsection (d) of sec22 tion 1397C is amended by striking paragraph 

23 (4). 


tjames on DSKG8SOYB1PROD with BILLS
10 

•HR 3500 IH

1 (B) CONFORMING AMENDMENT.—Clause 

2 (iii) of section 1394(b)(3)(B) is amended by 

3 striking ‘‘, (4),’’. 

4 (3) CERTAIN OTHER BUSINESSES PER5 MITTED.— 

6 (A) Paragraph (5) of section 1397C(d) is 

7 amended— 

8 (i) by striking ‘‘any facility described 

9 in section 144(c)(6)(B)’’ in subparagraph 

10 (A) and inserting ‘‘any excluded facility’’, 

11 and 

12 (ii) by inserting before the last sen13 tence the following new sentence: ‘‘For 

14 purposes of subparagraph (A), the term 

15 ‘excluded facility’ means any facility de16 scribed in section 144(c)(6)(B) other than 

17 any golf course, spa, or therapeutic mas18 sage facility.’’. 

19 (B) Paragraph (2) of section 1400U–3(c), 

20 as amended by paragraph (1), is amended to 

21 read as follows: 

22 ‘‘(2) QUALIFIED BUSINESS.—The term ‘quali23 fied business’ means any trade or business other 

24 than any trade or business consisting of the operVerDate Nov 24 2008 02:54 Aug 04, 2009 Jkt 079200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3500.IH H3500

tjames on DSKG8SOYB1PROD with BILLS
11 

•HR 3500 IH

1 ation of any excluded facility (as defined in section 

2 1397C(d)(5)).’’. 

3 (d) EMPOWERMENT ZONE EMPLOYMENT CREDIT TO

4 APPLY TO EMPLOYEES AT CERTAIN ADDITIONAL BUSI5 NESSES AND TO EMPLOYEES WHO ARE FAMILY MEM6 BERS.—Subparagraph (D) of section 1396(d)(2) (defining 

7 qualified zone employee) is amended— 

8 (1) by striking subparagraph (A), 

9 (2) by redesignating subparagraphs (B), (C), 

10 (D), and (E) as subparagraphs (A), (B), (C), and 

11 (D), respectively, and 

12 (3) by striking ‘‘any facility described in section 

13 144(c)(6)(B)’’ in subparagraph (C), as so redesig14 nated, and inserting ‘‘any excluded facility (as de15 fined in section 1397C(d)(5))’’. 

16 (e) CERTAIN BUSINESSES MAY BE FINANCED WITH

17 GULF OPPORTUNITY ZONE BONDS.— 

18 (1) IN GENERAL.—Subparagraph (E) of section 

19 1400N(a)(2) is amended by striking ‘‘any property 

20 described in section 144(c)(6)(B)’’ and inserting 

21 ‘‘any excluded facility (as defined in section 

22 1397C(d)(5))’’. 

23 (2) EFFECTIVE DATE.—The amendment made 

24 by this subsection shall apply to obligations issued 

25 after the date of the enactment of this Act. 


tjames on DSKG8SOYB1PROD with BILLS
12 

•HR 3500 IH

1 SEC. 5. MODIFICATIONS PERMITTING EXPANSION OF DES2 IGNATED AREAS. 

3 (a) AUTHORITY TO EXPAND BOUNDARIES OF ZONES

4 AND COMMUNITIES.— 

5 (1) EMPOWERMENT ZONES AND ENTERPRISE

6 COMMUNITIES.—Section 1391 is amended by adding 

7 at the end the following new subsection: 

8 ‘‘(i) AUTHORITY TO EXPAND BOUNDARIES OF DES9 IGNATED AREAS.— 

10 ‘‘(1) IN GENERAL.—At the request of all gov11 ernments which nominated an area as an empower12 ment zone or enterprise community, the appropriate 

13 Secretary may expand the area of such zone or com14 munity to include 1 or more contiguous or non15 contiguous areas if such governments establish to 

16 the satisfaction of the appropriate Secretary that 

17 such expansion furthers the purposes of the designa18 tion of the initial area as such a zone or community. 

19 ‘‘(2) RURAL AREAS.—With respect to any em20 powerment zone or enterprise community located in 

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

22 government, the appropriate Secretary shall expand 

23 the area of such zone or community to include the 

24 entire area of such nominating local government, but 

25 only if— 

26 ‘‘(A) either— 


tjames on DSKG8SOYB1PROD with BILLS
13 

•HR 3500 IH

1 ‘‘(i) the poverty rate and the unem2 ployment rate for such entire area as de3 termined by the 2000 decennial census 

4 data was at least 110 percent of such rate 

5 for the United States, or 

6 ‘‘(ii) during the period beginning with 

7 the 1990 decennial census and ending with 

8 the 2000 decennial census, such entire 

9 area has a net out migration of inhabitants 

10 of at least 10 percent of the population of 

11 such area, and 

12 ‘‘(B) such entire area meets 1 or more of 

13 the following criteria determined by the 2000 

14 decennial census data: 

15 ‘‘(i) Median household income is not 

16 more than 70 percent of such income for 

17 the United States. 

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

19 than 75 percent of such income for the 

20 United States. 

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

22 population which is disabled is at least 130 

23 percent of such percentage for the United 

24 States.’’. 


tjames on DSKG8SOYB1PROD with BILLS
14 

•HR 3500 IH

1 (2) RENEWAL COMMUNITIES.—Section 1400E 

2 is amended by adding at the end the following new 

3 subsection: 

4 ‘‘(h) AUTHORITY TO EXPAND BOUNDARIES OF DES5 IGNATED AREAS.— 

6 ‘‘(1) IN GENERAL.—At the request of all gov7 ernments which nominated an area as a renewal 

8 community, the Secretary of Housing and Urban 

9 Development may expand the area of such commu10 nity to include 1 or more noncontiguous areas if 

11 such governments establish to the satisfaction of 

12 such Secretary that such expansion furthers the pur13 poses of the designation of the initial area as a re14 newal community. 

15 ‘‘(2) RURAL AREAS.—With respect to any re16 newal community located in a rural area, at the re17 quest of the nominating local government, the Sec18 retary of Housing and Urban Development shall ex19 pand the area of such community to include the en20 tire area of such nominating local government, but 

21 only if— 

22 ‘‘(A) either— 

23 ‘‘(i) the poverty rate and the unem24 ployment rate for such entire area as de25 termined by the 2000 decennial census 


tjames on DSKG8SOYB1PROD with BILLS
15 

•HR 3500 IH

1 data was at least 110 percent of such rate 

2 for the United States, or 

3 ‘‘(ii) during the period beginning with 

4 the 1990 decennial census and ending with 

5 the 2000 decennial census, such entire 

6 area has a net out migration of inhabitants 

7 of at least 10 percent of the population of 

8 such area, and 

9 ‘‘(B) such entire area meets 1 or more of 

10 the following criteria determined by the 2000 

11 decennial census data: 

12 ‘‘(i) Median household income is not 

13 more than 70 percent of such income for 

14 the United States. 

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

16 than 75 percent of such income for the 

17 United States. 

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

19 population which is disabled is at least 130 

20 percent of such percentage for the United 

21 States.’’. 

22 (3) EFFECTIVE DATE.—The amendments made 

23 by this subsection shall take effect on the date of the 

24 enactment of this Act. 


tjames on DSKG8SOYB1PROD with BILLS
16 

•HR 3500 IH

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

3 (1) IN GENERAL.—Clause (ii) of section 

4 1400E(g)(1)(A) is amended to read 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 (2) EFFECTIVE DATE.—The amendment made 

13 by this subsection shall take effect on the date of the 

14 enactment of this Act. 

15 (c) REPEAL OF EXCLUSION OF CENTRAL BUSINESS

16 DISTRICT FROM ELIGIBILITY AS DESIGNATED AREA.— 

17 (1) IN GENERAL.—Paragraph (3) of section 

18 1392(a) is amended by adding ‘‘and’’ at the end of 

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

20 subparagraph (C) and inserting a period, and by 

21 striking subparagraph (D). 

22 (2) EFFECTIVE DATE.—The amendments made 

23 by this subsection shall take effect on the date of the 

24 enactment of this Act. 


tjames on DSKG8SOYB1PROD with BILLS
17 

•HR 3500 IH

1 SEC. 6. EXPANDED USE OF TAX-EXEMPT BONDS. 

2 (a) ENTERPRISE FACILITY BOND LIMIT FOR SMALL

3 CITIES TO BE THE SAME AS FOR LARGER CITIES.—Sub4 paragraph (B) of section 1394(f)(2) is amended by adding 

5 ‘‘and’’ at the end of clause (i), by striking clause (iii), and 

6 by amending clause (ii) to read as follows: 

7 ‘‘(ii) $230,000,000 if such zone is in 

8 an urban area.’’. 

9 (b) ZONE EMPLOYMENT REQUIREMENT NEED NOT

10 BE MET AFTER TESTING PERIOD UNDER ZONE FACIL11 ITY BOND RULES.— 

12 (1) IN GENERAL.—Clause (iii) of section 

13 1394(b)(3)(B) is amended by striking ‘‘if at least 35 

14 percent of the employees of such business for such 

15 year are residents of an empowerment zone or an 

16 enterprise community’’. 

17 (2) CONFORMING AMENDMENT.—Subsection (a) 

18 of section 1400A is amended by striking ‘‘and sec19 tion 1394(b)(3)(B)(iii) shall be applied without re20 gard to the employee residency requirement’’. 

21 (c) ZONE FACILITY BONDS FOR SMALL BUSINESSES

22 MAY BE GUARANTEED.— 

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

24 1394 is amended to read as follows: 

25 ‘‘(d) SPECIAL RULES.— 


tjames on DSKG8SOYB1PROD with BILLS
18 

•HR 3500 IH

1 ‘‘(1) ACQUISITION OF LAND AND EXISTING

2 PROPERTY PERMITTED.—The requirements of sec3 tions 147(c)(1)(A) and 147(d) shall not apply to any 

4 bond described in subsection (a). 

5 ‘‘(2) BONDS FOR SMALL BUSINESS MAY BE

6 GUARANTEED.—Section 149(b) shall not apply to 

7 any bond issued as part of an issue 95 percent or 

8 more of the net proceeds (as defined in section 

9 150(a)(3)) of which are to be used to provide any 

10 enterprise zone facility the principal user of which is 

11 a small employer (as defined in section 221(c)(4)).’’. 

12 (2) QUALIFIED GULF OPPORTUNITY ZONE

13 BONDS.—Paragraph (5) of section 1400N(a) is 

14 amended by adding at the end the following new 

15 subparagraph: 

16 ‘‘(H) Section 149(b) shall not apply to any 

17 qualified Gulf Opportunity Zone Bond issued as 

18 part of an issue 95 percent or more of the net 

19 proceeds (as defined in section 150(a)(3)) of 

20 such issue are to be used for qualified project 

21 costs for nonresidential real property (including 

22 fixed improvements associated with such prop23 erty) the principal user of which is a small em24 ployer (as defined in section 221(c)(4)).’’. 


tjames on DSKG8SOYB1PROD with BILLS
19 

•HR 3500 IH

1 (3) RECOVERY ZONE FACILITY BONDS.—Sub2 section (d) of section 1400U–3 is amended by add3 ing at the end the following new sentence: ‘‘Section 

4 149(b) shall not apply to any recovery zone facility 

5 bond issued as part of an issue 95 percent or more 

6 of the net proceeds (as defined in section 150(a)(3)) 

7 of such issue are to be used for recovery zone prop8 erty the principal user of which is a small employer 

9 (as defined in section 221(c)(4)).’’ 

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

11 this section shall apply to obligations issued after the date 

12 of the enactment of this Act. 

13 SEC. 7. OTHER MODIFICATIONS. 

14 (a) NONRECOGNITION OF GAIN TO APPLY TO REAL

15 PROPERTY AND INTANGIBLES.—Paragraph (2) of section 

16 1397B(b) is amended to read as follows: 

17 ‘‘(2) GAIN TAXED AS ORDINARY INCOME NOT

18 ELIGIBLE FOR ROLLOVER.—This section shall not 

19 apply to any gain which is treated as ordinary in20 come for purposes of this subtitle.’’. 

21 (b) ELECTION OF FINANCING ARRANGEMENT IN

22 LIEU OF TAX BENEFITS.— 

23 (1) IN GENERAL.—Section 1396 is amended by 

24 adding at the end the following new subsection: 


tjames on DSKG8SOYB1PROD with BILLS
20 

•HR 3500 IH

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 (or as an amendment to such election) 

7 by such business— 

8 ‘‘(A) such business— 

9 ‘‘(i) shall not be allowed an empower10 ment zone employment credit described in 

11 subsection (a), and 

12 ‘‘(ii) shall not be allowed any deduc13 tion for depreciation under section 168 

14 with respect to qualified zone property that 

15 provides a cost recovery benefit described 

16 in paragraph (2), and 

17 ‘‘(B) the Secretary shall make the pay18 ments described in paragraph (2) to a trustee 

19 designated by the electing business to accept 

20 such payments on behalf of such holders). 

21 ‘‘(2) PAYMENTS.— 

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

23 each year of the payment period, the Secretary 

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


tjames on DSKG8SOYB1PROD with BILLS
21 

•HR 3500 IH

1 otherwise appropriated) to the trustee des2 ignated by such business an amount equal to— 

3 ‘‘(i) the empowerment zone employ4 ment credit computed for such year under 

5 this section as if the election was not made 

6 under this subsection, and 

7 ‘‘(ii) except as provided in paragraph 

8 (4)(A), the amount equal to the cost recov9 ery benefit divided by the number of years 

10 in the payment period described in sub11 paragraph (C). 

12 ‘‘(B) COST RECOVERY BENEFIT.—For pur13 poses of subparagraph (A), the cost recovery 

14 benefit shall be an amount equal to 25 percent 

15 of— 

16 ‘‘(i) the cost of any tangible property 

17 which is qualified zone property (including 

18 improvements to such tangible property) 

19 incurred by the significant empowerment 

20 zone business before the end of the first 5 

21 full calendar years beginning after the date 

22 the election is made under this subsection, 

23 and 

24 ‘‘(ii) any such cost for which a bind25 ing contract for financing the acquisition 


tjames on DSKG8SOYB1PROD with BILLS
22 

•HR 3500 IH

1 of such tangible property (including im2 provements to such tangible property) has 

3 been made by such business and which 

4 under the terms of the financing is to be 

5 incurred within the first 5 full calendar 

6 years beginning after the date of the elec7 tion made under this subsection. 

8 ‘‘(C) PAYMENT PERIOD.—The payment pe9 riod is the period of 15 calendar years begin10 ning with the earlier of— 

11 ‘‘(i) the calendar year specified by the 

12 significant empowerment zone business as 

13 the 1st year of the payment period without 

14 regard to the date the property is placed in 

15 service, or 

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

17 after the date that the election under this 

18 subsection is made. 

19 ‘‘(3) SIGNIFICANT EMPOWERMENT ZONE BUSI20 NESS.—For purposes of this subsection, the term 

21 ‘significant empowerment zone business’ means any 

22 trade or business operating in an empowerment zone 

23 if— 

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

25 chief executive or the legislative body of the 


tjames on DSKG8SOYB1PROD with BILLS
23 

•HR 3500 IH

1 State or a local government in which the zone 

2 property is located, and 

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

4 Development determines that— 

5 ‘‘(i) it is a facility for qualified re6 search as defined in section 41(d) which is 

7 reasonably anticipated to make at least 

8 $50,000,000 of capital expenditures within 

9 the first 3 years of the payment period, or 

10 ‘‘(ii) with respect to any other busi11 ness, it is reasonably anticipated that such 

12 business will increase employment in such 

13 zone by the end of the first 3 years of the 

14 payment period by at least the lesser of— 

15 ‘‘(I) 1,000 full-time employees or 

16 equivalents, or 

17 ‘‘(II) 10 percent of the number 

18 of full-time employees estimated to 

19 have been employed in such zone on 

20 the date of its designation. 

21 ‘‘(4) SPECIAL RULES.— 

22 ‘‘(A) ADJUSTMENT TO COST RECOVERY

23 BENEFIT.—In the event that the significant em24 powerment zone business does not incur a cost 

25 within the period described in paragraph (2)(B) 


tjames on DSKG8SOYB1PROD with BILLS
24 

•HR 3500 IH

1 and for which a cost recovery benefit payment 

2 is made under this subsection, the Secretary 

3 shall reduce future recovery benefit payments to 

4 recover 110 percent of the overpayments in 

5 equal installments over the remaining payment 

6 period. In the event that a cost described in 

7 paragraph (2)(B)(i) is incurred, or a contract 

8 described in paragraph (2)(B)(ii) is entered 

9 into, after the beginning of the payment period, 

10 the Secretary shall increase future recover ben11 efit payments to recover 100 percent of the cost 

12 recovery benefit associated with such costs or 

13 contracts in equal installments over the remain14 ing payment period. 

15 ‘‘(B) BASIS ADJUSTMENT.—For purposes 

16 of this subtitle, if a cost recovery payment is 

17 made under this subsection with respect to any 

18 property, the basis of such property shall be re19 duced by the amount of such payment. 

20 ‘‘(5) TREATMENT OF PAYMENTS.—Any pay21 ment made under this subsection shall not be treat22 ed as a Federal Government guarantee for purposes 

23 of section 149(b).’’. 

24 (2) CONFORMING AMENDMENT.—Section 

25 1016(a) is amended by striking ‘‘and’’ at the end of 


tjames on DSKG8SOYB1PROD with BILLS
25 

•HR 3500 IH

1 paragraph (36), by striking the period at the end of 

2 paragraph (37) and inserting ‘‘, and’’, and by add3 ing at the end the following new paragraph: 

4 ‘‘(38) to the extent provided in section 

5 1396(e)(4)(B).’’. 

6 SEC. 8. GRANTS FOR AWARENESS OF ZONE BENEFITS AND 

7 TECHNICAL ASSISTANCE TO SMALL BUSI8 NESS. 

9 (a) IN GENERAL.—Chapter 77 is amended by adding 

10 at the end the following new section: 

11 ‘‘SEC. 7529. GRANTS FOR AWARENESS OF ZONE BENEFITS 

12 AND TECHNICAL ASSISTANCE TO SMALL 

13 BUSINESS. 

14 ‘‘(a) IN GENERAL.—The Secretary may make grants 

15 to State or local governments, or nonprofit organizations, 

16 for the purpose of making businesses aware of the benefits 

17 available under— 

18 ‘‘(1) subchapter U of chapter 1 (relating to des19 ignation and treatment of empowerment zones, en20 terprise communities, and rural development invest21 ment areas), 

22 ‘‘(2) subchapter W of chapter 1 (relating to 

23 District of Columbia enterprise zone), 

24 ‘‘(3) subchapter X of chapter 1 (relating to re25 newal communities), and 


tjames on DSKG8SOYB1PROD with BILLS
26 

•HR 3500 IH

1 ‘‘(4) subchapter Y of chapter 1 (relating to 

2 short-term regional benefits). 

3 ‘‘(b) TECHNICAL ASSISTANCE GRANTS.—The Sec4 retary may make grants to provide technical assistance to 

5 small businesses eligible for any benefits referred to in 

6 subsection (a).’’. 

7 (b) CLERICAL AMENDMENT.—The table of sections 

8 for such chapter is amended by adding at the end the fol9 lowing new item: 

‘‘Sec. 7529. Grants for awareness of zone benefits and technical assistance to 

small business.’’. 

10 (c) EFFECTIVE DATE.—The amendments made by 

11 this section shall take effect on the date of the enactment 

12 of this Act. 

13 SEC. 9. EFFECTIVE DATE. 

14 Except as otherwise provided in this Act, the amend15 ments made by this Act shall apply to taxable years begin16 ning after the date of the enactment of this Act. 

Æ 


tjames on DSKG8SOYB1PROD with BILLS