Economic Freedom Zones Act of 2017

To provide for the establishment of free market enterprise zones in order to help facilitate the creation of new jobs, entrepreneurial opportunities, enhanced and renewed educational opportunities, and increased community involvement in bankrupt or economically distressed areas. 1. Short title; table of contents (a) Short title This Act may be cited as the Economic Freedom Zones Act of 2017 (b) Table of contents The table of contents for this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Definitions. TITLE I—Prohibition of Federal Government bailouts Sec. 101. Prohibition of Federal Government bailouts. TITLE II—Designation of Economic Freedom Zones (EFZ) Sec. 201. Eligibility requirements for Economic Freedom Zone status. Sec. 202. Application and duration of designation. TITLE III—Federal tax incentives Sec. 301. Tax incentives related to Economic Freedom Zones. TITLE IV—Federal regulatory reductions Sec. 401. Suspension of certain laws and regulations. TITLE V—Educational enhancements Sec. 501. Educational opportunity tax credit. Sec. 502. School choice through portability. Sec. 503. Special Economic Freedom Zone visas. Sec. 504. Economic Freedom Zone educational savings accounts. TITLE VI—Community assistance and rebuilding Sec. 601. Nonapplication of Davis-Bacon. Sec. 602. Economic Freedom Zone charitable tax credit. 2. Definitions In this Act: (1) City The term city (2) County The term county (3) Eligible entity The term eligible entity (4) Municipality The term municipality (5) Secretary The term Secretary (6) Zip code The term zip code I Prohibition of Federal Government bailouts 101. Prohibition of Federal Government bailouts (a) Definitions In this section— (1) the term credit rating 15 U.S.C. 78c(a)(60) (2) the term credit rating agency 15 U.S.C. 78c(a)(61) (3) the term Federal assistance 12 U.S.C. 343(3)(A) (A) making a loan to, or purchasing any interest or debt obligation of, a municipality; (B) purchasing the assets of a municipality; (C) guaranteeing a loan or debt issuance of a municipality; or (D) entering into an assistance arrangement, including a grant program, with an eligible entity; (4) the term insolvent (A) has any debt that has been given a credit rating lower than a B (B) is not paying its debts as they become due, unless such debts are the subject of a bona fide dispute; or (C) is unable to pay its debts as they become due; and (5) the term nationally recognized statistical rating organization 15 U.S.C. 78c(a)(62) (b) Prohibition of Federal government bailouts (1) Prohibition of Federal assistance Notwithstanding any other provision of law, no Federal assistance may be provided to an eligible entity (other than the assistance provided for in this Act for an area that is designated as an Economic Free Zone). (2) Prohibition of financial assistance to bankrupt or insolvent eligible entities Except as provided in paragraph (1), the Federal Government may not provide financial assistance— (A) to a municipality that is a debtor under chapter 9 (B) to a municipality that is insolvent. II Designation of Economic Freedom Zones (EFZ) 201. Eligibility requirements for Economic Freedom Zone status (a) Designation of municipalities as Economic Freedom Zones (1) In general An eligible entity that is a municipality may be designated by the Secretary as an Economic Freedom Zone if the municipality— (A) meets the requirements under section 109(c) of title 11, United States Code; (B) is at risk of insolvency, as determined under paragraph (2); (C) has been subject to receivership by the State within the last 3 years; (D) has been a debtor under chapter 9 (E) has been subject to a financial advisory board, emergency manager, or similar entity that— (i) has arisen from the legislative or executive authority of the State; and (ii) exercises significant financial control over the finances of the entity within the last 3 years; or (F) is in receivership or is being overseen by the Federal Government. (2) At risk of insolvency A municipality is at risk of insolvency if— (A) an independent actuarial firm that has been engaged by the municipality and that does not have a conflict of interest with the municipality, including any previous relationship with the municipality, as determined by the Secretary— (i) determines that the municipality is insolvent (as defined in section 101(a)(4) of title 11, United States Code); and (ii) submits its analysis regarding the insolvency of the municipality to the Secretary; and (B) the Secretary has reviewed and approved the determination of insolvency by the actuarial firm. (b) Designation of counties, cities, and zip codes as Economic Freedom Zones (1) In general An eligible entity may be designated by the Secretary as an Economic Freedom Zone if the eligible entity— (A) is a county or city that— (i) is located in a non-metropolitan statistical area (as defined by the Director of the Office of Management and Budget); and (ii) meets the requirements under paragraph (2); or (B) is a zip code that meets the requirements under paragraph (2). (2) Low economic and high poverty area (A) In general An eligible entity shall be eligible for designation as an Economic Freedom Zone under paragraph (1) if the eligible entity is designated by the Secretary as a low economic or high poverty area under subparagraph (B). (B) Designation as low economic and high poverty area The Secretary, after reviewing supporting data as determined appropriate, shall designate an eligible entity as a low economic or high poverty area if— (i) the State or local government with jurisdiction over the eligible entity certifies that— (I) the eligible entity is one of pervasive poverty, unemployment, and general distress; (II) the average rate of unemployment within such eligible entity during the most recent 3-month period for which data is available is at least 1.5 times the national unemployment rate for the period involved; (III) during the most recent 3-month period, at least 30 percent of the residents of the eligible entity have incomes below the national poverty level; or (IV) at least 70 percent of the residents of the eligible entity have incomes below 80 percent of the median income of households within the jurisdiction of the local government (as determined in the same manner as under section 119(b)(2) of the Housing and Community Development Act of 1974); and (ii) the Secretary determines that such a designation is appropriate. (c) Refusal To grant status The Secretary may refuse to designate an eligible entity as an Economic Freedom Zone if the Secretary determines that any requirement under this Act, including any requirement under subsection (a)(2), has not been satisfied. 202. Application and duration of designation (a) Application The Secretary shall develop procedures to enable an eligible entity to submit to the Secretary an application for designation as an Economic Freedom Zone under this title. (b) Duration The designation by the Secretary of an eligible entity as a Economic Freedom Zone shall be for a period of 10 years. III Federal tax incentives 301. Tax incentives related to Economic Freedom Zones (a) In general Chapter 1 Z Economic Freedom Zones Part I—Tax incentives Part II—Definitions I Tax incentives Sec. 1400V–1. Economic Freedom Zone individual flat tax. Sec. 1400V–2. Economic Freedom Zone corporate flat tax. Sec. 1400V–3. Zero percent capital gains rate. Sec. 1400V–4. Reduced payroll taxes. Sec. 1400V–5. Increase in expensing under section 179. 1400V–1. Economic Freedom Zone individual flat tax (a) In general In the case of any individual whose principal residence (within the meaning of section 121) is located in an Economic Freedom Zone for the taxable year, in lieu of the tax imposed by section 1, there shall be imposed a tax equal to 5 percent of the taxable income of such taxpayer. For purposes of this title, the tax imposed by the preceding sentence shall be treated as a tax imposed by section 1. (b) Joint returns In the case of a joint return under section 6013, subsection (a) shall apply so long as either spouse has a principal residence (within the meaning of section 121) in an Economic Freedom Zone for the taxable year. (c) Alternative minimum tax not To apply The tax imposed by section 55 shall not apply to any taxpayer to whom subsection (a) applies. 1400V–2. Economic Freedom Zone corporate flat tax (a) In general In the case of any corporation located in an Economic Freedom Zone for the taxable year, in lieu of the tax imposed by section 11, there shall be imposed a tax equal to 5 percent of the taxable income of such corporation. For purposes of this title, the tax imposed by the preceding sentence shall be treated as a tax imposed by section 11. (b) Limitation Subsection (a) shall not apply to any corporation for any taxable year if the adjusted gross income of such corporation for such taxable year exceeds $500,000,000. (c) Located For purposes of this section, a corporation shall be considered to be located in an Economic Freedom Zone if— (1) not less than 10 percent of the total gross income of such corporation is derived from the active conduct of a trade or business within an Economic Freedom Zone, or (2) at least 25 percent of the employees of such corporation are residents of an Economic Freedom Zone. (d) Alternative minimum tax not To apply The tax imposed by section 55 shall not apply to any taxpayer to whom subsection (a) applies. 1400V–3. Zero percent capital gains rate (a) Exclusion Gross income shall not include qualified capital gain from the sale or exchange of— (1) any Economic Freedom Zone asset held for more than 5 years, or (2) any real property located in an Economic Freedom Zone. (b) Economic freedom zone asset For purposes of this section— (1) In general The term Economic Freedom Zone asset (A) any Economic Freedom Zone business stock, (B) any Economic Freedom Zone partnership interest, and (C) any Economic Freedom Zone business property. (2) Economic freedom zone business stock (A) In general The term Economic Freedom Zone business stock (i) such stock is acquired by the taxpayer, before the date on which such corporation no longer qualifies as an Economic Freedom Zone business due to the lapse of 1 or more Economic Freedom Zones, at its original issue (directly or through an underwriter) solely in exchange for cash, (ii) as of the time such stock was issued, such corporation was an Economic Freedom Zone business (or, in the case of a new corporation, such corporation was being organized for purposes of being an Economic Freedom Zone), and (iii) during substantially all of the taxpayer's holding period for such stock, such corporation qualified as an Economic Freedom Zone business. (B) Redemptions A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this paragraph. (3) Economic freedom zone partnership interest The term Economic Freedom Zone partnership interest (A) such interest is acquired by the taxpayer, before the date on which such partnership no longer qualifies as an Economic Freedom Zone business due to the lapse of 1 or more Economic Freedom Zones, from the partnership solely in exchange for cash, (B) as of the time such interest was acquired, such partnership was an Economic Freedom Zone business (or, in the case of a new partnership, such partnership was being organized for purposes of being an Economic Freedom Zone), and (C) during substantially all of the taxpayer's holding period for such interest, such partnership qualified as an Economic Freedom Zone business. A rule similar to the rule of paragraph (2)(B) shall apply for purposes of this paragraph. (4) Economic freedom zone business property (A) In general The term Economic Freedom Zone business property (i) such property was acquired by the taxpayer by purchase (as defined in section 179(d)(2)) after the date on such taxpayer qualifies as an Economic Freedom Zone business and before the date on which such taxpayer no longer qualifies as an Economic Freedom Zone business due to the lapse of 1 or more Economic Freedom Zones, (ii) the original use of such property in the Economic Freedom Zone commences with the taxpayer, and (iii) during substantially all of the taxpayer's holding period for such property, substantially all of the use of such property was in an Economic Freedom Zone business of the taxpayer. (B) Special rule for buildings which are substantially improved (i) In general The requirements of clauses (i) and (ii) of subparagraph (A) shall be treated as met with respect to— (I) property which is substantially improved by the taxpayer before the date on which such taxpayer no longer qualifies as an Economic Freedom Zone business due to the lapse of 1 or more Economic Freedom Zones, and (II) any land on which such property is located. (ii) Substantial improvement For purposes of clause (i), property shall be treated as substantially improved by the taxpayer only if, during any 24-month period beginning after the date on which the taxpayer qualifies as an Economic Freedom Zone business additions to basis with respect to such property in the hands of the taxpayer exceed the greater of— (I) an amount equal to the adjusted basis of such property at the beginning of such 24-month period in the hands of the taxpayer, or (II) $5,000. (5) Treatment of economic freedom zone termination Except as otherwise provided in this subsection, the termination of the designation of the Economic Freedom Zone shall be disregarded for purposes of determining whether any property is an Economic Freedom Zone asset. (6) Treatment of subsequent purchasers, etc The term Economic Freedom Zone asset (7) 5-year safe harbor If any property ceases to be an Economic Freedom Zone asset by reason of paragraph (2)(A)(iii), (3)(C), or (4)(A)(iii) after the 5-year period beginning on the date the taxpayer acquired such property, such property shall continue to be treated as meeting the requirements of such paragraph; except that the amount of gain to which subsection (a) applies on any sale or exchange of such property shall not exceed the amount which would be qualified capital gain had such property been sold on the date of such cessation. (c) Economic freedom zone business For purposes of this section, the term Economic Freedom Zone business (1) after the application of section 1400(e), (2) by substituting 80 percent 50 percent (3) by treating only areas that are Economic Freedom Zones as an empowerment zone or enterprise community. (d) Other definitions and special rules For purposes of this section— (1) Qualified capital gain Except as otherwise provided in this subsection, the term qualified capital gain (A) a capital asset, or (B) property used in the trade or business (as defined in section 1231(b)). (2) Certain gain not qualified The term qualified capital gain (3) Certain gain not qualified The term qualified capital gain (4) Intangibles not integral part of economic freedom zone business In the case of gain described in subsection (a)(1), the term qualified capital gain (5) Related party transactions The term qualified capital gain (e) Sales and exchanges of interests in partnerships and S corporations which are Economic Freedom Zone businesses In the case of the sale or exchange of an interest in a partnership, or of stock in an S corporation, which was an Economic Freedom Zone business during substantially all of the period the taxpayer held such interest or stock, the amount of qualified capital gain shall be determined without regard to— (1) any gain which is attributable to an intangible asset which is not an integral part of an Economic Freedom Zone business, and (2) any gain attributable to periods before the date on which the a business qualifies as an Economic Freedom Zone business or after the date that is 4 years after the date on which such business no longer qualifies as an Economic Freedom Zone business due to the lapse of 1 or more Economic Freedom Zones. 1400V–4. Reduced payroll taxes (a) In general (1) Employees The rate of tax under 3101(a) (including for purposes of determining the applicable percentage under sections 3201(a) and 3211(a)(1)) shall be 4.2 percent for any remuneration received during any period in which the individual's principal residence (within the meaning of section 121) is located in an Economic Freedom Zone. (2) Employers (A) In general The rate of tax under section 3111(a) (including for purposes of determining the applicable percentage under sections 3221(a)) shall be 4.2 percent with respect to remuneration paid for qualified services during any period in which the employer is located in an Economic Freedom Zone. (B) Qualified services For purposes of this section, the term qualified services (i) in a trade or business of a qualified employer, or (ii) in the case of a qualified employer exempt from tax under section 501(a) (C) Location of employer For purposes of this paragraph, the location of an employer shall be determined in the same manner as under section 1400V–2(c). (3) Self-employed individuals The rate of tax under section 1401(a) shall be 8.40 percent any taxable year in which such individual was located (determined under section 1400V–2(c) as if such individual were a corporation) in an Economic Freedom Zone. (b) Transfers of funds (1) Transfers to Federal old-age and survivors insurance trust fund There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund established under section 201 of the Social Security Act ( 42 U.S.C. 401 (2) Transfers to Social Security Equivalent Benefit Account There are hereby appropriated to the Social Security Equivalent Benefit Account established under section 15A(a) of the Railroad Retirement Act of 1974 ( 45 U.S.C. 231n–1(a) (3) Coordination with other federal laws For purposes of applying any provision of Federal law other than the provisions of the Internal Revenue Code of 1986, the rate of tax in effect under section 3101(a) shall be determined without regard to the reduction in such rate under this section. 1400V–5. Increase in expensing under section 179 (a) In general In the case of an Economic Freedom Zone business, for purposes of section 179— (1) the limitation under section 179(b)(1) shall be increased by the lesser of— (A) 200 percent of the amount in effect under such section (determined without regard to this section), or (B) the cost of section 179 property which is Economic Freedom Zone business property placed in service during the taxable year, and (2) the amount taken into account under section 179(b)(2) with respect to any section 179 property which is Economic Freedom Zone business property shall be 50 percent of the cost thereof. (b) Economic freedom zone business property For purposes of this section, the term Economic Freedom Zone business property (c) Recapture Rules similar to the rules under section 179(d)(10) shall apply with respect to any qualified zone property which ceases to be used in an empowerment zone by an enterprise zone business. II Definitions Sec. 1400V–6. Economic Freedom Zone. 1400V–6. Economic freedom zone For purposes of this subchapter, the term Economic Freedom Zone . (b) Clerical amendment The table of subchapters for chapter 1 of such Code is amended by inserting after the item relating to subchapter Y the following new item: SUBCHAPTER Z—Economic Freedom Zones . (c) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. IV Federal regulatory reductions 401. Suspension of certain laws and regulations (a) Environmental protection agency For each area designated as an Economic Freedom Zone under this Act, the Administrator of the Environmental Protection Agency shall not enforce, with respect to that Economic Freedom Zone, and the Economic Freedom Zone shall be exempt from compliance with— (1) part D of the Clean Air Act ( 42 U.S.C. 7501 (2) section 402 of the Federal Water Pollution Control Act ( 33 U.S.C. 1342 (3) sections 139, 168, 169, 326, and 327 of title 23, United States Code; (4) section 304 of title 49, United States Code; and (5) sections 1315 through 1320 of Public Law 112–141 (b) Department of the interior (1) Wild and scenic rivers For each area designated as an Economic Freedom Zone under this Act, the Secretary of the Interior shall not enforce, with respect to that Economic Freedom Zone, and the Economic Freedom Zone shall be exempt from compliance with the Wild and Scenic Rivers Act ( 16 U.S.C. 1271 (2) National heritage areas For the period beginning on the date of enactment of this Act and ending on the date on which an area is removed from designation as an Economic Freedom Zone, any National Heritage Area located within that Economic Freedom Zone shall not be considered to be a National Heritage Area and any applicable Federal law (including regulations) relating to that National Heritage Area shall not apply. V Educational enhancements 501. Educational opportunity tax credit (a) In general Subpart A of part IV of subchapter A of chapter 1 25E. Credit for qualified elementary and secondary education expenses (a) In general In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the qualified elementary and secondary education expenses of an eligible student. (b) Limitation The amount taken into account under subsection (a) with respect to any student for any taxable year shall not exceed $5,000. (c) Definitions For purposes of this section— (1) Qualified elementary and secondary education expenses The term qualified elementary and secondary education expenses (2) Eligible student The term eligible student (A) is enrolled in, or attends, any public, private, or religious school (as defined in section 530(b)(3)(B)), and (B) whose principal residence (within the meaning of section 123) is located in an Economic Freedom Zone. (3) Economic freedom zone The term Economic Freedom Zone . (b) Clerical amendment The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 25D the following new item: Sec. 25E. Credit for qualified elementary and secondary education expenses. . (c) Effective date The amendments made by this section shall apply to expenditures made in taxable years beginning after the date of the enactment of this Act. 502. School choice through portability (a) In general Subpart 2 of part A of title I of the Elementary and Secondary Education Act of 1965 ( 20 U.S.C. 6331 1128. School choice through portability (a) Authorization (1) In general Notwithstanding sections 1124, 1124A, and 1125 and any other provision of law, and to the extent permitted under State law, a State educational agency may allocate grant funds under this subpart among the local educational agencies in the State based on the formula described in paragraph (2). (2) Formula A State educational agency may allocate grant funds under this subpart for a fiscal year among the local educational agencies in the State in proportion to the number of eligible children enrolled in public schools served by the local educational agency and enrolled in State-accredited private schools within the local educational agency's geographic jurisdiction, for the most recent fiscal year for which satisfactory data are available, compared to the number of such children in all such local educational agencies for that fiscal year. (b) Eligible child (1) In general In this section, the term eligible child (A) from a family with an income below the poverty level, on the basis of the most recent satisfactory data published by the Department of Commerce; and (B) who resides in an Economic Freedom Zone as designated under title II of the Economic Freedom Zones Act of 2017 (2) Criteria of poverty In determining the families with incomes below the poverty level for the purposes of paragraph (2), a State educational agency shall use the criteria of poverty used by the Census Bureau in compiling the most recent decennial census. (3) Identification of eligible children On an annual basis, on a date to be determined by the State educational agency, each local educational agency that receives grant funding in accordance with subsection (a) shall inform the State educational agency of the number of eligible children enrolled in public schools served by the local educational agency and enrolled in State-accredited private schools within the local educational agency's geographic jurisdiction. (c) Distribution to schools Each local educational agency that receives grant funding under subsection (a) shall distribute such funds to the public schools served by the local educational agency and State-accredited private schools with the local educational agency's geographic jurisdiction— (1) based on the number of eligible children enrolled in such schools; and (2) in the manner that would, in the absence of such Federal funds, supplement the funds made available from the non-Federal resources for the education of pupils participating in programs under this part, and not to supplant such funds. . (b) Table of contents The table of contents in section 2 of the Elementary and Secondary Education Act of 1965 is amended by inserting after the item relating to section 1127 the following: Sec. 1128. School choice through portability. . 503. Special Economic Freedom Zone visas (a) Definitions In this section: (1) Abandoned; dilapidated The terms abandoned dilapidated (2) Full-time employment The term full-time employment (b) Purpose The purpose of this section is to facilitate increased investment and enhanced human capital in Economic Freedom Zones through the issuance of special regional visas. (c) Authorization The Secretary of Homeland Security, in collaboration with the Secretary of Labor, may issue Special Economic Freedom Zone Visas, in a number determined by the Governor of each State, in consultation with local officials in regions designated by the Secretary of the Treasury as Economic Freedom Zones, to authorize qualified aliens to enter the United States for the purpose of— (1) engaging in a new commercial enterprise (including a limited partnership)— (A) in which such alien has invested, or is actively in the process of investing, capital in an amount not less than the amount specified in subsection (d); and (B) which will benefit the region designated as an Economic Freedom Zone by creating full-time employment of not fewer than 5 United States citizens, aliens lawfully admitted for permanent residence, or other immigrants lawfully authorized to be employed in the United States (excluding the alien and the alien's immediate family); (2) engaging in the purchase and renovation of dilapidated or abandoned properties or residences (as determined by State and local officials) in which such alien has invested, or is actively in the process of investing, in the ownership of such properties or residences; or (3) residing and working in an Economic Freedom Zone. (d) Effective period A visa issued to an alien under this section shall expire on the later of— (1) the date on which the relevant Economic Freedom Zone loses such designation; or (2) the date that is 5 years after the date on which such visa was issued to such alien. (e) Capital and educational requirements (1) New commercial enterprises Except as otherwise provided under this section, the minimum amount of capital required to comply with subsection (c)(1)(A) shall be $50,000. (2) Renovation of dilapidated or abandoned properties An alien is not in compliance with subsection (c)(2) unless the alien— (A) purchases a dilapidated or abandoned property in an Economic Freedom Zone; and (B) not later than 18 months after such purchase, invests not less than $25,000 to rebuild, rehabilitate, or repurpose the property. (3) Verification A visa issued under subsection (c) shall not remain in effect for more than 2 years unless the Secretary of Homeland Security has verified that the alien has complied with the requirements described in subsection (c). (4) Education and skill requirements An alien is not in compliance with subsection (c)(3) unless the alien possesses— (A) a bachelor's degree (or its equivalent) or an advanced degree; (B) a degree or specialty certification that— (i) is required for the job the alien will be performing; and (ii) is specific to an industry or job that is so complex or unique that it can be performed only by an individual with the specialty certification; (C) (i) the knowledge required to perform the duties of the job the alien will be performing; and (ii) the nature of the specific duties is so specialized and complex that such knowledge is usually associated with attainment of a bachelor's or higher degree; or (D) a skill or talent that would benefit the Economic Freedom Zone. (f) Additional provisions (1) Geographic limitation An alien who has been issued a visa under this section is not permitted to live or work outside of an Economic Freedom Zone. (2) Rescission A visa issued under this section shall be rescinded if the visa holder resides or works outside of an Economic Freedom Zone or otherwise fails to comply with the provisions of this section. (3) Other visas An alien who has been issued a visa under this section may apply for any other visa for which the alien is eligible in order to pursue employment outside of an Economic Freedom Zone. (g) Adjustment of status The Secretary of Homeland Security may adjust the status of an alien who has been issued a visa under this section to that of an alien lawfully admitted for permanent residence, without numerical limitation, if the alien— (1) has fully complied with the requirements set forth in this section for at least 5 years; (2) submits a completed application to the Secretary; and (3) is not inadmissible to the United States based on any of the factors set forth in section 212(a) of the Immigration and Nationality Act ( 8 U.S.C. 1182(a) 504. Economic Freedom Zone educational savings accounts (a) In general Part VIII of subchapter F of chapter 1 530A. Economic Freedom Zone educational savings accounts (a) In general Except as provided in this section, an Economic Freedom Zone educational savings account shall be treated for purposes of this title in the same manner as a Coverdell education savings account. (b) Definitions For purposes of this section— (1) Economic freedom zone educational savings account The term Economic Freedom Zone educational savings account (A) No contribution will be accepted— (i) unless it is in cash, (ii) after the date on which such beneficiary attains age 25, or (iii) except in the case of rollover contributions, if such contribution would result in aggregate contributions for the taxable year exceeding $10,000. (B) No contribution shall be accepted at any time in which the designated beneficiary is not a qualified individual. (C) The trust meets the requirements of subparagraphs (B), (C), (D), and (E) of section 530(b)(1). The age limitations in subparagraph (A)(ii), subparagraph (E) of section 530(b)(1), and paragraphs (5) and (6) of section 530(d), shall not apply to any designated beneficiary with special needs (as determined under regulations prescribed by the Secretary). (2) Qualified individual The term qualified individual (c) Deduction for contributions (1) In general There shall be allowed as a deduction under part VII of subchapter B of this chapter an amount equal to the aggregate amount of contributions made by the taxpayer to any Economic Freedom Zone educational savings account during the taxable year. (2) Limitation The amount of the deduction allowed under paragraph (1) for any taxpayer for any taxable year shall not exceed $40,000. (3) No deduction for rollover contributions No deduction shall be allowed under paragraph (1) for any rollover contribution described in section 530(d)(5). (d) Other rules (1) No income limit In the case of an Economic Freedom Zone educational savings account, subsection (c) of section 530 shall not apply. (2) Change in beneficiaries Notwithstanding paragraph (6) of section 530(b), a change in the beneficiary of an Economic Freedom Zone education savings account shall be treated as a distribution unless the new beneficiary is a qualified individual. . (b) Clerical amendment The table of sections for part VIII of subchapter F of chapter 1 of such Code is amended by adding at the end the following new item: Sec. 530A. Economic Freedom Zone educational savings accounts. . VI Community assistance and rebuilding 601. Nonapplication of Davis-Bacon The wage rate requirements of subchapter IV of chapter 31 Davis-Bacon Act 602. Economic Freedom Zone charitable tax credit (a) In general Section 170 (o) Election To treat contributions for Economic Freedom Zone charities as a credit (1) In general In the case of an individual, at the election of the taxpayer, so much of the deduction allowed under subsection (a) (determined without regard to this subsection) which is attributable to Economic Freedom Zone charitable contributions— (A) shall be allowed as a credit against the tax imposed by this chapter for the taxable year, and (B) shall not be allowed as a deduction for such taxable year under subsection (a). Any amount allowable as a credit under this subsection shall be treated as a credit allowed under subpart A of part IV of subchapter A for purposes of this title. (2) Amount attributable to economic freedom zone charitable contributions For purposes of paragraph (1)— (A) In general In any case in which the total charitable contributions of a taxpayer for a taxable year exceed the contribution base, the amount of Economic Freedom Zone charitable contributions taken into account under paragraph (1) shall be the amount which bears the same ratio to the total charitable contributions made by the taxpayer during such taxable year as the amount of the deduction allowed under subsection (a) (determined without regard to this subsection and after application of subsection (b)) bears to the total charitable contributions made by the taxpayer for such taxable year. (B) Carryovers In the case of any contribution carried from a preceding taxable year under subsection (d), such amount shall be treated as attributable to an Economic Freedom Zone charitable contribution in the amount that bears the same ratio to the total amount carried from preceding taxable years under subsection (d) as the amount of Economic Freedom Zone charitable contributions not allowed as a deduction under subsection (a) (other than by reason of this subsection for the preceding 5 taxable years) bears to total amount carried from preceding taxable years under subsection (d). (3) Economic freedom zone charitable contribution The term Economic Freedom Zone charitable contribution (A) such entity is created or organized exclusively for— (i) religious purposes, (ii) educational purposes, or (iii) any of the following charitable purposes: providing educational scholarships, providing shelters for homeless individuals, or setting up or maintaining food banks, (B) the primary mission of such entity is serving individuals in an Economic Freedom Zone, (C) the entity maintains accountability to residents of such Economic Freedom Zone through their representation on any governing board of the entity or any advisory board to the entity, and (D) the entity is certified by the Secretary for purposes of this subsection. Such term shall not include any contribution made to an entity described in the preceding sentence after the date in which the designation of the Economic Freedom Zone serviced by such entity lapses. (4) Economic freedom zone The term Economic Freedom Zone . (b) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

Summary: Economic Freedom Zones Act of 2017 This bill prohibits the federal government from providing: (1) assistance (e.g., loans, loan guarantees, or purchases) to a municipality or zip code, other than the assistance provided for in this bill for an area designated as an Economic Freedom Zone; and (2) financial assistance to a bankrupt or insolvent municipality, except as provided by this bill. The bill sets forth requirements for designating municipalities, counties, cities, and zip codes as zones for a 10-year period, including bankruptcy eligibility, risk of insolvency, pervasive poverty, unemployment, and general distress. The bill amends the Internal Revenue Code to allow reduced tax rates, tax credits, tax-exempt educational savings accounts, increased expensing of business property, and other tax incentives for individuals and businesses located in or investing in a zone. The zones are exempt from compliance with: (1) specified environmental regulations, (2) the Wild and Scenic Rivers Act, (3) requirements applicable to a National Heritage Area, and (4) wage rate requirements under the Davis-Bacon Act. The bill amends the Elementary and Secondary Education Act of 1965 to allow a special allocation of grant funds for children from families who reside in a zone and have incomes below the federal poverty level. The Department of Homeland Security may issue special visas to aliens meeting certain capital, educational, and skill requirements who intend to enter the United States to invest in a zone.