Economic Development Act for Distressed Zones of 2019

To provide tax incentives to promote economic development in economically distressed zones. 1. Short title This Act may be cited as the Economic Development Act for Distressed Zones of 2019 2. Economically distressed zones (a) In general Chapter 1 AA Economically Distressed Zones Sec. 1400AA–1. Economically distressed zone credit. Sec. 1400AA–2. Designation of economically distressed zones. 1400AA–1. Economically Distressed Zone credit (a) Allowance of credit There shall be allowed as a credit against the tax imposed by subtitle A for the taxable year an amount equal to the sum of— (1) an amount equal to 40 percent of the sum of— (A) the aggregate amount of the taxpayer’s economically distressed zone wages for such taxable year, plus (B) the allocable employee fringe benefit expenses of the taxpayer for such taxable year, (2) an amount equal to 40 percent of the depreciation and amortization allowances for the taxable year with respect to property of the taxpayer which are located and used in the active conduct of a trade or business within an economically distressed zone, and (3) an amount equal to 30 percent of the payments made by the taxpayer in course of a trade or business for purchases of services or tangible property from an unrelated person (40 percent in the case of such a purchase from an unrelated minority business) located within an economically distressed zone. (b) Denial of double benefit Any wages or other expenses taken into account in determining the credit under this section may not be taken into account in determining the credit under sections 41, and any other provision determined by the Secretary to be substantially similar. (c) Definitions and special rules For purposes of this section— (1) Qualified economically distressed zone wages (A) In general The term qualified economically distressed zone wages (i) in connection with the active conduct of a trade or business of the taxpayer within an economically distressed zone, and (ii) for wages of an employee for services provided, and the principal place of employment of whom is, in such economically distressed zone. (B) Limitation on amount of wages taken into account (i) In general The amount of wages which may be taken into account under subparagraph (A) with respect to any employee for any taxable year shall not exceed the contribution and benefit base determined under section 230 of the Social Security Act for the calendar year in which such taxable year begins. (ii) Treatment of part-time employees, etc If— (I) any employee is not employed by the taxpayer on a substantially full-time basis at all times during the taxable year, or (II) the principal place of employment of any employee is not within an economically distressed zone at all times during the taxable year, the limitation applicable under clause (i) with respect to such employee shall be the appropriate portion (as determined by the Secretary) of the limitation which would otherwise be in effect under clause (i). (C) Treatment of certain employees The term qualified economically distressed zone wages (2) Allocable employee fringe benefit expenses (A) In general The term allocable employee fringe benefit expenses (i) Employer contributions under a stock bonus, pension, profit-sharing, or annuity plan. (ii) Employer-provided coverage under any accident or health plan for employees. (iii) The cost of life or disability insurance provided to employees. (B) Allocation For purposes of subparagraph (A), an amount shall be treated as allocable to an economically distressed zone only if such amount is with respect to employment of an individual for services provided, and the principal place of employment of whom is, in such zone. (3) Minority business (A) In general The term minority business (i) a sole proprietorship carried on by a qualified individual, or (ii) a corporation or partnership— (I) at least 50 percent of the ownership interests in which are held by one or more qualified individuals, and (II) of which a qualified individual is the president or chief executive officer (or a substantially equivalent position). (B) Qualified individual The term qualified individual (i) is of Asian-Indian, Asian-Pacific, Black, Hispanic or Native American origin or descent, and (ii) is a United States citizen or legal resident of the United States or any of its territories or possessions. (4) Aggregation rules (A) In general Members of an affiliated group shall be treated as a single taxpayer. (B) Affiliated group The term qualified group (C) Related persons Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b). 1400AA–2. Designation of economically distressed zones (a) In general For purposes of this subchapter, the term economically distressed zone (1) has pervasive poverty, unemployment, low labor force participation, and general distress measured as a prolonged period of economic decline measured by real gross national product, (2) has a poverty rate of not less than 35 percent, and (3) has been designated as such by the Secretary and the Secretary of Commerce pursuant to an application under subsection (b). (b) Application for designation (1) In general An application for designation as an economically distressed zone may be filed by a State or local government in which the population census tract to which the application applies is located. (2) Requirements Such application shall include— (A) a Fiscal Plan submitted pursuant to section 201 of the Puerto Rico Oversight, Management, and Economic Stability Act, or (B) a strategic plan for accomplishing the purposes of this subchapter, which— (i) describes the coordinated economic, human, community, and physical development plan and related activities proposed for the nominated area, (ii) describes the process by which the affected community is a full partner in the process of developing and implementing the plan and the extent to which local institutions and organizations have contributed to the planning process, (iii) identifies the amount of State, local, and private resources that will be available in the nominated area and the private/public partnerships to be used, which may include participation by, and cooperation with, universities, medical centers, and other private and public entities, (iv) identifies the funding requested under any Federal program in support of the proposed economic, human, community, and physical development and related activities, (v) identifies baselines, methods, and benchmarks for measuring the success of carrying out the strategic plan, including the extent to which poor persons and families will be empowered to become economically self-sufficient, and (vi) does not include any action to assist any establishment in relocating from one area outside the nominated area to the nominated area, except that assistance for the expansion of an existing business entity through the establishment of a new branch, affiliate, or subsidiary is permitted if— (I) the establishment of the new branch, affiliate, or subsidiary will not result in a decrease in employment in the area of original location or in any other area where the existing business entity conducts business operations, (II) there is no reason to believe that the new branch, affiliate, or subsidiary is being established with the intention of closing down the operations of the existing business entity in the area of its original location or in any other area where the existing business entity conducts business operation, and (III) includes such other information as may be required by the Secretary and the Secretary of Commerce. (c) Period for which designations are in effect Designation as an economically distressed zone may be made at any time during the 10-year period beginning on the date of the enactment of this section, and shall remain in effect with respect to such zone during the 15-year period beginning on the date of such designation. (d) Territories and possessions The term State . (b) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2018.

Summary: Economic Development Act for Distressed Zones of 2019 This bill provides various tax credits related to economically distressed zones and establishes a procedure for state and local governments to apply for such zone designation. Specifically, the bill provides credits to taxpayers in an economically distressed zone based on the amount of (1) wages paid by an employer to employees, (2) depreciation and amortization allowances for business property, and (3) trade or business payments made for purchases of services or property. The bill also allows state and local governments to apply for a population census tract under their ambit to be designated as an economically distressed zone