I 
116TH CONGRESS 
1ST SESSION H. R. 1525 
To provide tax incentives to promote economic development in economically 
distressed zones. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 5, 2019 
Miss GONZA´LEZ-COLO´N of Puerto Rico (for herself and Mrs. KIRKPATRICK) 
introduced the following bill; which was referred to the Committee on 
Ways and Means 
A BILL 
To provide tax incentives to promote economic development 
in economically distressed zones. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Economic Development 
Act for Distressed Zones of 2019’’. 
SEC. 2. ECONOMICALLY DISTRESSED ZONES. 
(a) IN GENERAL.—Chapter 1 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subchapter: 
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‘‘Subchapter AA—Economically Distressed 
Zones 
‘‘Sec. 1400AA–1. Economically distressed zone credit. 
‘‘Sec. 1400AA–2. Designation of economically distressed zones. 
‘‘SEC. 1400AA–1. ECONOMICALLY DISTRESSED ZONE CRED-
IT. 
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed 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 tax-
payer’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 de-
preciation and amortization allowances for the tax-
able 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 pay-
ments made by the taxpayer in course of a trade or 
business for purchases of services or tangible prop-
erty from an unrelated person (40 percent in the 
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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 cred-
it under this section may not be taken into account in de-
termining the credit under sections 41, and any other pro-
vision determined by the Secretary to be substantially 
similar. 
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) QUALIFIED
ECONOMICALLY
DISTRESSED 
ZONE WAGES.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
economically distressed zone wages’ means 
amounts paid or incurred by the taxpayer for 
the taxable year which are— 
‘‘(i) in connection with the active con-
duct 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 eco-
nomically distressed zone. 
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‘‘(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 EM-
PLOYEES, ETC.—If— 
‘‘(I) any employee is not em-
ployed by the taxpayer on a substan-
tially full-time basis at all times dur-
ing the taxable year, or 
‘‘(II) the principal place of em-
ployment of any employee is not with-
in 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). 
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‘‘(C) TREATMENT
OF
CERTAIN
EMPLOY-
EES.—The term ‘qualified economically dis-
tressed zone wages’ shall not include any wages 
paid to employees who are assigned by the em-
ployer to perform services for another person, 
unless the principal trade or business of the 
employer is to make employees available for 
temporary periods to other persons in return 
for compensation. 
‘‘(2) ALLOCABLE EMPLOYEE FRINGE BENEFIT 
EXPENSES.— 
‘‘(A) IN
GENERAL.—The term ‘allocable 
employee fringe benefit expenses’ means the ag-
gregate amount allowable as a deduction under 
this chapter to the taxpayer for the taxable year 
for the following amounts which are allocable to 
employment in an economically distressed zone: 
‘‘(i) Employer contributions under a 
stock bonus, pension, profit-sharing, or an-
nuity plan. 
‘‘(ii) 
Employer-provided 
coverage 
under any accident or health plan for em-
ployees. 
‘‘(iii) The cost of life or disability in-
surance provided to employees. 
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‘‘(B) ALLOCATION.—For purposes of sub-
paragraph (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’ means— 
‘‘(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 indi-
vidual is the president or chief execu-
tive officer (or a substantially equiva-
lent position). 
‘‘(B) QUALIFIED INDIVIDUAL.—The term 
‘qualified individual’ means any individual 
who— 
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‘‘(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 affili-
ated group shall be treated as a single taxpayer. 
‘‘(B) 
AFFILIATED
GROUP.—The 
term 
‘qualified group’ means an affiliated group (as 
defined in section 1504(a), determined without 
regard to section 1504(b)(3)) one or more 
members of which are engaged in the active 
conduct of a trade or business within an eco-
nomically distressed zone. 
‘‘(C) RELATED
PERSONS.—Persons shall 
be treated as related to each other if such per-
sons would be treated as a single employer 
under the regulations prescribed under section 
52(b). 
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‘‘SEC. 1400AA–2. DESIGNATION OF ECONOMICALLY DIS-
TRESSED ZONES. 
‘‘(a) IN GENERAL.—For purposes of this subchapter, 
the term ‘economically distressed zone’ means any popu-
lation census tract which— 
‘‘(1) has pervasive poverty, unemployment, low 
labor force participation, and general distress meas-
ured as a prolonged period of economic decline 
measured by real gross national product, 
‘‘(2) has a poverty rate of not less than 35 per-
cent, and 
‘‘(3) has been designated as such by the Sec-
retary and the Secretary of Commerce pursuant to 
an application under subsection (b). 
‘‘(b) APPLICATION FOR DESIGNATION.— 
‘‘(1) IN GENERAL.—An application for designa-
tion as an economically distressed zone may be filed 
by a State or local government in which the popu-
lation 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, Man-
agement, and Economic Stability Act, or 
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‘‘(B) a strategic plan for accomplishing the 
purposes of this subchapter, which— 
‘‘(i) describes the coordinated eco-
nomic, 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 imple-
menting 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 cen-
ters, and other private and public entities, 
‘‘(iv) identifies the funding requested 
under any Federal program in support of 
the proposed economic, human, commu-
nity, and physical development and related 
activities, 
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‘‘(v) identifies baselines, methods, and 
benchmarks for measuring the success of 
carrying out the strategic plan, including 
the extent to which poor persons and fami-
lies will be empowered to become economi-
cally 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 enti-
ty 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 sub-
sidiary is being established with the 
intention of closing down the oper-
ations of the existing business entity 
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in the area of its original location or 
in any other area where the existing 
business entity conducts business op-
eration, and 
‘‘(III) includes such other infor-
mation as may be required by the Sec-
retary and the Secretary of Com-
merce. 
‘‘(c) PERIOD FOR WHICH DESIGNATIONS ARE IN EF-
FECT.—Designation as an economically distressed zone 
may be made at any time during the 10-year period begin-
ning 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’ includes territories and possessions of the United 
States.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2018. 
Æ 
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