I
104TH CONGRESS
2D SESSION
H. R. 3747
To amend the Internal Revenue Code of 1986 to encourage economic develop-
ment through the creation of additional empowerment zones and enter-
prise communities and to encourage the cleanup of contaminated
brownfield sites.
IN THE HOUSE OF REPRESENTATIVES
JUNE 27, 1996
Mr. RANGEL 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 encourage
economic development through the creation of additional
empowerment zones and enterprise communities and to
encourage the cleanup of contaminated brownfield sites.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in
this Act an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code
of 1986.
TITLE I—ADDITIONAL
EMPOWERMENT ZONES
SEC. 101. ADDITIONAL EMPOWERMENT ZONES.
(a) IN GENERAL.—Paragraph (2) of section 1391(b)
(relating to designations of empowerment zones and enter-
prise communities) is amended—
(1) by striking ‘‘9’’ and inserting ‘‘11’’,
(2) by striking ‘‘6’’ and inserting ‘‘8’’, and
(3) by striking ‘‘750,000’’ and inserting
‘‘1,000,000’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act, except that designations of new empowerment
zones made pursuant to such amendments shall be made
during the 180-day period beginning on the date of the
enactment of this Act.
TITLE II—NEW EMPOWERMENT
ZONES 
AND 
ENTERPRISE
COMMUNITIES
SEC. 201. DESIGNATION OF ADDITIONAL EMPOWERMENT
ZONES AND ENTERPRISE COMMUNITIES.
(a) IN GENERAL.—Section 1391 (relating to designa-
tion procedure for empowerment zones and enterprise
communities) is amended by adding at the end the follow-
ing new subsection:
‘‘(g) ADDITIONAL DESIGNATIONS PERMITTED.—
‘‘(1) IN GENERAL.—In addition to the areas
designated under subsection (a)—
‘‘(A) 
ENTERPRISE
COMMUNITIES.—The
appropriate Secretaries may designate in the
aggregate an additional 80 nominated areas as
enterprise communities under this section, sub-
ject to the availability of eligible nominated
areas. Of that number, not more than 50 may
be designated in urban areas and not more
than 30 may be designated in rural areas.
‘‘(B) EMPOWERMENT ZONES.—The appro-
priate Secretaries may designate in the aggre-
gate an additional 20 nominated areas as
empowerment zones under this section, subject
to the availability of eligible nominated areas.
Of that number, not more than 15 may be des-
ignated in urban areas and not more than 5
may be designated in rural areas.
‘‘(2) PERIOD DESIGNATIONS MAY BE MADE.—A
designation may be made under this subsection after
the date of the enactment of this subsection and be-
fore January 1, 1998.
‘‘(3) MODIFICATIONS TO ELIGIBILITY CRITERIA,
ETC.—
‘‘(A) POVERTY RATE REQUIREMENT.—
‘‘(i) IN GENERAL.—A nominated area
shall be eligible for designation under this
subsection only if the poverty rate for each
population census tract within the nomi-
nated area is not less than 20 percent and
the poverty rate for at least 90 percent of
the population census tracts within the
nominated area is not less than 25 per-
cent.
‘‘(ii) TREATMENT OF CENSUS TRACTS
WITH SMALL POPULATIONS.—A population
census tract with a population of less than
2,000 shall be treated as having a poverty
rate of not less than 25 percent if—
‘‘(I) more than 75 percent of
such tract is zoned for commercial or
industrial use, and
‘‘(II) such tract is contiguous to
1 or more other population census
tracts which have a poverty rate of
not less than 25 percent (determined
without regard to this clause).
‘‘(iii) EXCEPTION FOR DEVELOPABLE
SITES.—Clause (i) shall not apply to up to
3 noncontiguous parcels in a nominated
area which may be developed for commer-
cial or industrial purposes. The aggregate
area of noncontiguous parcels to which the
preceding sentence applies with respect to
any nominated area shall not exceed 1,000
acres (2,000 acres in the case of an
empowerment zone).
‘‘(iv) CERTAIN
PROVISIONS
NOT
TO
APPLY.—Section 1392(a)(4) (and so much
of section 1392(b)(1) and (2) as relates to
section 1392(a)(4)) shall not apply to an
area nominated for designation under this
subsection.
‘‘(v) SPECIAL RULE FOR CERTAIN EN-
TERPRISE
COMMUNITIES
AND
EMPOWER-
MENT
ZONES.—The Secretary of Agri-
culture may designate not more than 5 en-
terprise communities, and not more than 1
empowerment zone, in rural areas without
regard to clause (i) if such areas satisfy
emigration criteria specified by the Sec-
retary of Agriculture.
‘‘(B) SIZE LIMITATION.—
‘‘(i) IN
GENERAL.—The parcels de-
scribed in subparagraph (A)(iii) shall not
be taken into account in determining
whether the requirement of subparagraph
(A) or (B) of section 1392(a)(3) is met.
‘‘(ii) SPECIAL
RULE
FOR
RURAL
AREAS.—If a population census tract (or
equivalent 
division 
under 
section
1392(b)(4)) in a rural area exceeds 1,000
square miles or includes a substantial
amount of land owned by the Federal,
State, or local government, the nominated
area may exclude such excess square mile-
age or governmentally owned land and the
exclusion of that area will not be treated
as violating the continuous boundary re-
quirement of section 1392(a)(3)(B).
‘‘(C) AGGREGATE
POPULATION
LIMITA-
TION.—The aggregate population limitation
under the last sentence of subsection (b)(2)
shall not apply to a designation under para-
graph (1)(B).
‘‘(D) PREVIOUSLY
DESIGNATED
ENTER-
PRISE COMMUNITIES MAY BE INCLUDED.—Sub-
section (e)(5) shall not apply to any enterprise
community designated under subsection (a) that
is also nominated for designation under this
subsection.
‘‘(E) INDIAN RESERVATIONS MAY BE NOM-
INATED.—
‘‘(i) 
IN
GENERAL.—Section
1393(a)(4) shall not apply to an area nom-
inated for designation under this sub-
section.
‘‘(ii) SPECIAL RULE.—An area in an
Indian reservation shall be treated as nom-
inated by a State and a local government
if it is nominated by the reservation gov-
erning body (as determined by the Sec-
retary of Interior).’’
(b) EMPLOYMENT CREDIT NOT TO APPLY TO NEW
EMPOWERMENT
ZONES.—Section 1396 (relating to
empowerment zone employment credit) is amended by
adding at the end the following new subsection:
‘‘(e) CREDIT NOT TO APPLY TO EMPOWERMENT
ZONES DESIGNATED UNDER SECTION 1391(g).—This
section 
shall 
be 
applied 
without 
regard 
to 
any
empowerment zone designated under section 1391(g).’’
(c) INCREASED EXPENSING UNDER SECTION 179
NOT TO APPLY IN DEVELOPABLE SITES.—Section 1397A
(relating to increase in expensing under section 179) is
amended by adding at the end the following new sub-
section:
‘‘(c) LIMITATION.—For purposes of this section,
qualified zone property shall not include any property sub-
stantially all of the use of which is in any parcel described
in section 1391(g)(3)(A)(iii).’’
(d) CONFORMING AMENDMENTS.—
(1) Subsections (e) and (f) of section 1391 are
each amended by striking ‘‘subsection (a)’’ and in-
serting ‘‘this section’’.
(2) Section 1391(c) is amended by striking
‘‘this section’’ and inserting ‘‘subsection (a)’’.
SEC. 202. VOLUME CAP NOT TO APPLY TO ENTERPRISE
ZONE FACILITY BONDS WITH RESPECT TO
NEW EMPOWERMENT ZONES.
(a) IN GENERAL.—Section 1394 (relating to tax-ex-
empt enterprise zone facility bonds) is amended by adding
at the end the following new subsection:
‘‘(f) BONDS
FOR
EMPOWERMENT
ZONES
DES-
IGNATED UNDER SECTION 1391(g).—
‘‘(1) IN
GENERAL.—In the case of a new
empowerment zone facility bond—
‘‘(A) such bond shall not be treated as a
private activity bond for purposes of section
146, and
‘‘(B) subsection (c) of this section shall not
apply.
‘‘(2) LIMITATION ON AMOUNT OF BONDS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
apply to a new empowerment zone facility bond
only if such bond is designated for purposes of
this subsection by the local government which
nominated the area to which such bond relates.
‘‘(B) 
LIMITATION
ON
BONDS
DES-
IGNATED.—The aggregate face amount of
bonds which may be designated under subpara-
graph (A) with respect to any empowerment
zone shall not exceed—
‘‘(i) $60,000,000 if such zone is in a
rural area,
‘‘(ii) $130,000,000 if such zone is in
an urban area and the zone has a popu-
lation of less than 100,000, and
‘‘(iii) $230,000,000 if such zone is in
an urban area and the zone has a popu-
lation of at least 100,000.
‘‘(C) SPECIAL RULES.—
‘‘(i) COORDINATION WITH LIMITATION
IN SUBSECTION (c).—Bonds to which para-
graph (1) applies shall not be taken into
account in applying the limitation of sub-
section (c) to other bonds.
‘‘(ii) 
CURRENT
REFUNDING
NOT
TAKEN INTO ACCOUNT.—In the case of a
refunding (or series of refundings) of a
bond designated under this paragraph, the
refunding obligation shall be treated as
designated under this paragraph (and shall
not be taken into account in applying sub-
paragraph (B)) if—
‘‘(I) the amount of the refunding
bond does not exceed the outstanding
amount of the refunded bond, and
‘‘(II) the refunded bond is re-
deemed not later than 90 days after
the date of issuance of the refunding
bond.
‘‘(3) NEW
EMPOWERMENT
ZONE
FACILITY
BOND.—For purposes of this subsection, the term
‘new empowerment zone facility bond’ means any
bond which would be described in subsection (a) if
only empowerment zones designated under section
1391(g) were taken into account under sections
1397B and 1397C.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to obligations issued after the date
of the enactment of this Act.
SEC. 203. MODIFICATIONS TO ENTERPRISE ZONE FACILITY
BOND 
RULES 
FOR 
ALL 
EMPOWERMENT
ZONES AND ENTERPRISE COMMUNITIES.
(a) MODIFICATIONS
RELATING
TO
ENTERPRISE
ZONE BUSINESS.—Paragraph (3) of section 1394(b) (de-
fining enterprise zone business) is amended to read as fol-
lows:
‘‘(3) ENTERPRISE ZONE BUSINESS.—
‘‘(A) IN GENERAL.—Except as modified in
this paragraph, the term ‘enterprise zone busi-
ness’ has the meaning given such term by sec-
tion 1397B.
‘‘(B) MODIFICATIONS.—In applying sec-
tion 1397B for purposes of this section—
‘‘(i) 
BUSINESSES
IN
ENTERPRISE
COMMUNITIES
ELIGIBLE.—References in
section 1397B to empowerment zones shall
be treated as including references to enter-
prise communities.
‘‘(ii) 
WAIVER
OF
REQUIREMENTS
DURING
STARTUP
PERIOD.—A business
shall not fail to be treated as an enterprise
zone business during the startup period
if—
‘‘(I) as of the beginning of the
startup period, it is reasonably ex-
pected that such business will be an
enterprise zone business (as defined in
section 1397B as modified by this
paragraph) at the end of such period,
and
‘‘(II) such business makes bona
fide efforts to be such a business.
‘‘(iii) 
REDUCED
REQUIREMENTS
AFTER TESTING PERIOD.—A business shall
not fail to be treated as an enterprise zone
business for any taxable year beginning
after the testing period by reason of failing
to meet any requirement of subsection (b)
or (c) of section 1397B if at least 35 per-
cent of the employees of such business for
such year are residents of an empowerment
zone or an enterprise community. The pre-
ceding sentence shall not apply to any
business which is not a qualified business
by reason of paragraph (1), (4), or (5) of
section 1397B(d).
‘‘(C) DEFINITIONS RELATING TO SUBPARA-
GRAPH
(B).—For purposes of subparagraph
(B)—
‘‘(i) STARTUP
PERIOD.—The term
‘startup period’ means, with respect to any
property being provided for any business,
the period before the first taxable year be-
ginning more than 2 years after the later
of—
‘‘(I) the date of issuance of the
issue providing such property, or
‘‘(II) the date such property is
first placed in service after such issu-
ance (or, if earlier, the date which is
3 years after the date described in
subclause (I)).
‘‘(ii) TESTING
PERIOD.—The term
‘testing period’ means the first 3 taxable
years beginning after the startup period.
‘‘(D) PORTIONS OF BUSINESS MAY BE EN-
TERPRISE ZONE BUSINESS.—The term ‘enter-
prise zone business’ includes any trades or busi-
nesses which would qualify as an enterprise
zone business (determined after the modifica-
tions of subparagraph (B)) if such trades or
businesses were separately incorporated.’’
(b) MODIFICATIONS RELATING TO QUALIFIED ZONE
PROPERTY.—Paragraph (2) of section 1394(b) (defining
qualified zone property) is amended to read as follows:
‘‘(2) QUALIFIED ZONE PROPERTY.—The term
‘qualified zone property’ has the meaning given such
term by section 1397C; except that—
‘‘(A) the references to empowerment zones
shall be treated as including references to enter-
prise communities, and
‘‘(B) section 1397C(a)(2) shall be applied
by substituting ‘an amount equal to 15 percent
of the adjusted basis’ for ‘an amount equal to
the adjusted basis’.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to obligations issued after the date
of the enactment of this Act.
SEC. 204. MODIFICATIONS TO ENTERPRISE ZONE BUSINESS
DEFINITION FOR ALL EMPOWERMENT ZONES
AND ENTERPRISE COMMUNITIES.
(a) IN GENERAL.—Section 1397B (defining enter-
prise zone business) is amended—
(1) by striking ‘‘80 percent’’ in subsections
(b)(2) and (c)(1) and inserting ‘‘50 percent’’,
(2) by striking ‘‘substantially all’’ each place it
appears in subsections (b) and (c) and inserting ‘‘a
substantial portion’’,
(3) by striking ‘‘, and exclusively related to,’’ in
subsections (b)(4) and (c)(3),
(4) by adding at the end of subsection (d)(2)
the following new flush sentence:
‘‘For purposes of subparagraph (B), the lessor of
the property may rely on a lessee’s certification that
such lessee is an enterprise zone business.’’,
(5) by striking ‘‘substantially all’’ in subsection
(d)(3) and inserting ‘‘at least 50 percent’’, and
(6) by adding at the end the following new sub-
section:
‘‘(f) TREATMENT OF BUSINESSES STRADDLING CEN-
SUS TRACT LINES.—For purposes of this section, if—
‘‘(1) a business entity or proprietorship uses
real property located within an empowerment zone,
‘‘(2) the business entity or proprietorship also
uses real property located outside the empowerment
zone,
‘‘(3) the amount of real property described in
paragraph (1) is substantial compared to the
amount of real property described in paragraph (2),
and
‘‘(4) the real property described in paragraph
(2) is contiguous to part or all of the real property
described in paragraph (1),
then all the services performed by employees, all business
activities, all tangible property, and all intangible property
of the business entity or proprietorship that occur in or
is located on the real property described in paragraphs (1)
and (2) shall be treated as occurring or situated in an
empowerment zone.’’
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years beginning on
or after the date of the enactment of this Act.
(2) SPECIAL RULE FOR ENTERPRISE ZONE FA-
CILITY BONDS.—For purposes of section 1394(b) of
the Internal Revenue Code of 1986, the amendments
made by this section shall apply to obligations issued
after the date of the enactment of this Act.
TITLE III—EXPENSING OF ENVI-
RONMENTAL 
REMEDIATION
COSTS
SEC. 301. EXPENSING OF ENVIRONMENTAL REMEDIATION
COSTS.
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 is amended by adding at the end the following new
section:
‘‘SEC. 198. EXPENSING OF ENVIRONMENTAL REMEDIATION
COSTS.
‘‘(a) IN GENERAL.—A taxpayer may elect to treat
any qualified environmental remediation expenditure
which is paid or incurred by the taxpayer as an expense
which is not chargeable to capital account. Any expendi-
ture which is so treated shall be allowed as a deduction
for the taxable year in which it is paid or incurred.
‘‘(b) QUALIFIED
ENVIRONMENTAL
REMEDIATION
EXPENDITURE.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified envi-
ronmental remediation expenditure’ means any ex-
penditure—
‘‘(A) which is otherwise chargeable to cap-
ital account, and
‘‘(B) which is paid or incurred in connec-
tion with the abatement or control of hazardous
substances at a qualified contaminated site.
‘‘(2) SPECIAL RULE FOR EXPENDITURES FOR
DEPRECIABLE PROPERTY.—Such term shall not in-
clude any expenditure for the acquisition of property
of a character subject to the allowance for deprecia-
tion which is used in connection with the abatement
or control of hazardous substances at a qualified
contaminated site; except that the portion of the al-
lowance under section 167 for such property which
is otherwise allocated to such site shall be treated as
a qualified environmental remediation expenditure.
‘‘(c) QUALIFIED CONTAMINATED SITE.—For pur-
poses of this section—
‘‘(1) QUALIFIED CONTAMINATED SITE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
contaminated site’ means any area—
‘‘(i) which is held by the taxpayer for
use in a trade or business or for the pro-
duction of income, or which is property de-
scribed in section 1221(1) in the hands of
the taxpayer,
‘‘(ii) which is within a targeted area,
and
‘‘(iii) which contains (or potentially
contains) any hazardous substance.
‘‘(B) TAXPAYER
MUST
RECEIVE
STATE-
MENT
FROM
STATE
ENVIRONMENTAL
AGEN-
CY.—An area shall be treated as a qualified
contaminated site with respect to expenditures
paid or incurred during any taxable year only
if the taxpayer receives a statement from the
appropriate agency of the State in which such
area is located that such area meets the re-
quirements of clauses (ii) and (iii) of subpara-
graph (A).
‘‘(C) APPROPRIATE STATE AGENCY.— For
purposes of subparagraph (B), the appropriate
agency of a State is the agency designated by
the Administrator of the Environmental Protec-
tion Agency for purposes of this section. If no
agency of a State is designated under the pre-
ceding sentence, the appropriate agency for
such State shall be the Environmental Protec-
tion Agency.
‘‘(2) TARGETED AREA.—
‘‘(A) IN
GENERAL.—The term ‘targeted
area’ means—
and Liability Act of 1980 (as in effect on the
date of the enactment of this section).
‘‘(C) CERTAIN
RULES
TO
APPLY.—For
purposes of this paragraph, the rules of sections
1392(b)(4) and 1393(a)(9) shall apply.
‘‘(D) TREATMENT
OF
CERTAIN
SITES.—
For purposes of this paragraph, a single con-
taminated site shall be treated as within a tar-
geted area if—
‘‘(i) a substantial portion of the site is
located within a targeted area described in
subparagraph (A) (determined without re-
gard to this subparagraph), and
‘‘(ii) the remaining portions are con-
tiguous to, but outside, such targeted area.
‘‘(d) HAZARDOUS SUBSTANCE.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘hazardous sub-
stance’ means—
‘‘(A) any substance which is a hazardous
substance as defined in section 101(14) of the
Comprehensive Environmental Response, Com-
pensation, and Liability Act of 1980, and
(b) CLERICAL AMENDMENT.—The table of sections
for part VI of subchapter B of chapter 1 is amended by
adding at the end the following new item:
‘‘Sec. 198. Expensing of environmental remediation costs.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenditures paid or incurred
after the date of the enactment of this Act, in taxable
years ending after such date.
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