‘‘(1) IN GENERAL.—In the case of businesses 
located in a lower-density empowerment zone, sub-
sections (b)(2) and (c)(1) shall be applied by treat-
ing employees as residents of the empowerment zone 
if they are residents of a census tract— 
‘‘(A) which is an area of pervasive poverty, 
unemployment, and general distress (within the 
meaning of section 1400E(c)(3)(A)), and 
‘‘(B) any point on the boundary of which 
is within 50 miles of any point on the boundary 
of the empowerment zone. 
‘‘(2) LOWER-DENSITY EMPOWERMENT ZONE.— 
For purposes of paragraph (1), the term ‘lower den-
sity empowerment zone’ means any empowerment 
zone the average population of population census 
tracts within such zone is less than 3,000.’’. 
(2) EMPLOYMENT CREDIT.—Paragraph (1) of 
section 1396(d) is amended by adding at the end the 
following new flush sentence: 
‘‘In the case of businesses located in a lower-density 
empowerment 
zone 
(as 
defined 
in 
section 
1397C(g)(2)), subparagraph (B) shall be applied by 
treating employees as residents of the empowerment 
zone if they are residents of a census tract which is 
an area of pervasive poverty, unemployment, and 
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general distress (within the meaning of section 
1400E(c)(3)(A)), and any point on the boundary of 
such tract is within 50 miles of any point on the 
boundary of the empowerment zone.’’. 
(c) EXPANSION
OF ELIGIBLE BUSINESS ACTIVI-
TIES.— 
(1) RENTING REAL OR PERSONAL PROPERTY 
PERMITTED.— 
(A) IN GENERAL.—Subsection (d) of sec-
tion 1397C is amended by striking paragraphs 
(2) and (3). 
(B) RECOVERY
ZONE
PROPERTY.—Para-
graph (2) of section 1400U–3(c) is amended by 
striking subparagraph (A). 
(C) 
CONFORMING
AMENDMENT.—Para-
graph (3) of section 45D(d) is amended by 
striking ‘‘; except that’’ and all that follows and 
inserting a period. 
(2) DEVELOPING
OR
HOLDING
INTANGIBLES 
PERMITTED.— 
(A) IN GENERAL.—Subsection (d) of sec-
tion 1397C is amended by striking paragraph 
(4). 
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(B) CONFORMING
AMENDMENT.—Clause 
(iii) of section 1394(b)(3)(B) is amended by 
striking ‘‘, (4),’’. 
(3) 
CERTAIN
OTHER
BUSINESSES
PER-
MITTED.— 
(A) Paragraph (5) of section 1397C(d) is 
amended— 
(i) by striking ‘‘any facility described 
in section 144(c)(6)(B)’’ in subparagraph 
(A) and inserting ‘‘any excluded facility’’, 
and 
(ii) by inserting before the last sen-
tence the following new sentence: ‘‘For 
purposes of subparagraph (A), the term 
‘excluded facility’ means any facility de-
scribed in section 144(c)(6)(B) other than 
any golf course, spa, or therapeutic mas-
sage facility.’’. 
(B) Paragraph (2) of section 1400U–3(c), 
as amended by paragraph (1), is amended to 
read as follows: 
‘‘(2) QUALIFIED BUSINESS.—The term ‘quali-
fied business’ means any trade or business other 
than any trade or business consisting of the oper-
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ation of any excluded facility (as defined in section 
1397C(d)(5)).’’. 
(d) EMPOWERMENT ZONE EMPLOYMENT CREDIT TO 
APPLY TO EMPLOYEES AT CERTAIN ADDITIONAL BUSI-
NESSES AND TO EMPLOYEES WHO ARE FAMILY MEM-
BERS.—Subparagraph (D) of section 1396(d)(2) (defining 
qualified zone employee) is amended— 
(1) by striking subparagraph (A), 
(2) by redesignating subparagraphs (B), (C), 
(D), and (E) as subparagraphs (A), (B), (C), and 
(D), respectively, and 
(3) by striking ‘‘any facility described in section 
144(c)(6)(B)’’ in subparagraph (C), as so redesig-
nated, and inserting ‘‘any excluded facility (as de-
fined in section 1397C(d)(5))’’. 
(e) CERTAIN BUSINESSES MAY BE FINANCED WITH 
GULF OPPORTUNITY ZONE BONDS.— 
(1) IN GENERAL.—Subparagraph (E) of section 
1400N(a)(2) is amended by striking ‘‘any property 
described in section 144(c)(6)(B)’’ and inserting 
‘‘any excluded facility (as defined in section 
1397C(d)(5))’’. 
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall apply to obligations issued 
after the date of the enactment of this Act. 
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SEC. 5. MODIFICATIONS PERMITTING EXPANSION OF DES-
IGNATED AREAS. 
(a) AUTHORITY TO EXPAND BOUNDARIES OF ZONES 
AND COMMUNITIES.— 
(1) EMPOWERMENT
ZONES
AND
ENTERPRISE 
COMMUNITIES.—Section 1391 is amended by adding 
at the end the following new subsection: 
‘‘(i) AUTHORITY TO EXPAND BOUNDARIES OF DES-
IGNATED AREAS.— 
‘‘(1) IN GENERAL.—At the request of all gov-
ernments which nominated an area as an empower-
ment zone or enterprise community, the appropriate 
Secretary may expand the area of such zone or com-
munity to include 1 or more contiguous or non-
contiguous areas if such governments establish to 
the satisfaction of the appropriate Secretary that 
such expansion furthers the purposes of the designa-
tion of the initial area as such a zone or community. 
‘‘(2) RURAL AREAS.—With respect to any em-
powerment zone or enterprise community located in 
a rural area, at the request of the nominating local 
government, the appropriate Secretary shall expand 
the area of such zone or community to include the 
entire area of such nominating local government, but 
only if— 
‘‘(A) either— 
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‘‘(i) the poverty rate and the unem-
ployment rate for such entire area as de-
termined by the 2000 decennial census 
data was at least 110 percent of such rate 
for the United States, or 
‘‘(ii) during the period beginning with 
the 1990 decennial census and ending with 
the 2000 decennial census, such entire 
area has a net out migration of inhabitants 
of at least 10 percent of the population of 
such area, and 
‘‘(B) such entire area meets 1 or more of 
the following criteria determined by the 2000 
decennial census data: 
‘‘(i) Median household income is not 
more than 70 percent of such income for 
the United States. 
‘‘(ii) Per capita income is not more 
than 75 percent of such income for the 
United States. 
‘‘(iii) The percentage of such area’s 
population which is disabled is at least 130 
percent of such percentage for the United 
States.’’. 
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(2) RENEWAL COMMUNITIES.—Section 1400E 
is amended by adding at the end the following new 
subsection: 
‘‘(h) AUTHORITY TO EXPAND BOUNDARIES OF DES-
IGNATED AREAS.— 
‘‘(1) IN GENERAL.—At the request of all gov-
ernments which nominated an area as a renewal 
community, the Secretary of Housing and Urban 
Development may expand the area of such commu-
nity to include 1 or more noncontiguous areas if 
such governments establish to the satisfaction of 
such Secretary that such expansion furthers the pur-
poses of the designation of the initial area as a re-
newal community. 
‘‘(2) RURAL AREAS.—With respect to any re-
newal community located in a rural area, at the re-
quest of the nominating local government, the Sec-
retary of Housing and Urban Development shall ex-
pand the area of such community to include the en-
tire area of such nominating local government, but 
only if— 
‘‘(A) either— 
‘‘(i) the poverty rate and the unem-
ployment rate for such entire area as de-
termined by the 2000 decennial census 
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SEC. 6. EXPANDED USE OF TAX-EXEMPT BONDS. 
(a) ENTERPRISE FACILITY BOND LIMIT FOR SMALL 
CITIES TO BE THE SAME AS FOR LARGER CITIES.—Sub-
paragraph (B) of section 1394(f)(2) is amended by adding 
‘‘and’’ at the end of clause (i), by striking clause (iii), and 
by amending clause (ii) to read as follows: 
‘‘(ii) $230,000,000 if such zone is in 
an urban area.’’. 
(b) ZONE EMPLOYMENT REQUIREMENT NEED NOT 
BE MET AFTER TESTING PERIOD UNDER ZONE FACIL-
ITY BOND RULES.— 
(1) IN
GENERAL.—Clause (iii) of section 
1394(b)(3)(B) is amended by striking ‘‘if at least 35 
percent of the employees of such business for such 
year are residents of an empowerment zone or an 
enterprise community’’. 
(2) CONFORMING AMENDMENT.—Subsection (a) 
of section 1400A is amended by striking ‘‘and sec-
tion 1394(b)(3)(B)(iii) shall be applied without re-
gard to the employee residency requirement’’. 
(c) ZONE FACILITY BONDS FOR SMALL BUSINESSES 
MAY BE GUARANTEED.— 
(1) IN
GENERAL.—Subsection (d) of section 
1394 is amended to read as follows: 
‘‘(d) SPECIAL RULES.— 
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‘‘(1) ACQUISITION
OF
LAND
AND
EXISTING 
PROPERTY PERMITTED.—The requirements of sec-
tions 147(c)(1)(A) and 147(d) shall not apply to any 
bond described in subsection (a). 
‘‘(2) BONDS
FOR
SMALL
BUSINESS
MAY
BE 
GUARANTEED.—Section 149(b) shall not apply to 
any bond issued as part of an issue 95 percent or 
more of the net proceeds (as defined in section 
150(a)(3)) of which are to be used to provide any 
enterprise zone facility the principal user of which is 
a small employer (as defined in section 221(c)(4)).’’. 
(2) QUALIFIED
GULF
OPPORTUNITY
ZONE 
BONDS.—Paragraph (5) of section 1400N(a) is 
amended by adding at the end the following new 
subparagraph: 
‘‘(H) Section 149(b) shall not apply to any 
qualified Gulf Opportunity Zone Bond issued as 
part of an issue 95 percent or more of the net 
proceeds (as defined in section 150(a)(3)) of 
such issue are to be used for qualified project 
costs for nonresidential real property (including 
fixed improvements associated with such prop-
erty) the principal user of which is a small em-
ployer (as defined in section 221(c)(4)).’’. 
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(3) RECOVERY ZONE FACILITY BONDS.—Sub-
section (d) of section 1400U–3 is amended by add-
ing at the end the following new sentence: ‘‘Section 
149(b) shall not apply to any recovery zone facility 
bond issued as part of an issue 95 percent or more 
of the net proceeds (as defined in section 150(a)(3)) 
of such issue are to be used for recovery zone prop-
erty the principal user of which is a small employer 
(as defined in section 221(c)(4)).’’ 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to obligations issued after the date 
of the enactment of this Act. 
SEC. 7. OTHER MODIFICATIONS. 
(a) NONRECOGNITION OF GAIN TO APPLY TO REAL 
PROPERTY AND INTANGIBLES.—Paragraph (2) of section 
1397B(b) is amended to read as follows: 
‘‘(2) GAIN TAXED AS ORDINARY INCOME NOT 
ELIGIBLE FOR ROLLOVER.—This section shall not 
apply to any gain which is treated as ordinary in-
come for purposes of this subtitle.’’. 
(b) ELECTION
OF FINANCING ARRANGEMENT
IN 
LIEU OF TAX BENEFITS.— 
(1) IN GENERAL.—Section 1396 is amended by 
adding at the end the following new subsection: 
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‘‘(e) ELECTION OF FINANCING ARRANGEMENT IN 
LIEU OF TAX BENEFITS.— 
‘‘(1) IN GENERAL.—At the election of any sig-
nificant empowerment zone business, for the pay-
ment period of the debt obligation designated in 
such election (or as an amendment to such election) 
by such business— 
‘‘(A) such business— 
‘‘(i) shall not be allowed an empower-
ment zone employment credit described in 
subsection (a), and 
‘‘(ii) shall not be allowed any deduc-
tion for depreciation under section 168 
with respect to qualified zone property that 
provides a cost recovery benefit described 
in paragraph (2), and 
‘‘(B) the Secretary shall make the pay-
ments described in paragraph (2) to a trustee 
designated by the electing business to accept 
such payments on behalf of such holders). 
‘‘(2) PAYMENTS.— 
‘‘(A) IN GENERAL.—At the beginning of 
each year of the payment period, the Secretary 
shall pay (out of any money in the Treasury not 
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otherwise appropriated) to the trustee des-
ignated by such business an amount equal to— 
‘‘(i) the empowerment zone employ-
ment credit computed for such year under 
this section as if the election was not made 
under this subsection, and 
‘‘(ii) except as provided in paragraph 
(4)(A), the amount equal to the cost recov-
ery benefit divided by the number of years 
in the payment period described in sub-
paragraph (C). 
‘‘(B) COST RECOVERY BENEFIT.—For pur-
poses of subparagraph (A), the cost recovery 
benefit shall be an amount equal to 25 percent 
of— 
‘‘(i) the cost of any tangible property 
which is qualified zone property (including 
improvements to such tangible property) 
incurred by the significant empowerment 
zone business before the end of the first 5 
full calendar years beginning after the date 
the election is made under this subsection, 
and 
‘‘(ii) any such cost for which a bind-
ing contract for financing the acquisition 
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of such tangible property (including im-
provements to such tangible property) has 
been made by such business and which 
under the terms of the financing is to be 
incurred within the first 5 full calendar 
years beginning after the date of the elec-
tion made under this subsection. 
‘‘(C) PAYMENT PERIOD.—The payment pe-
riod is the period of 15 calendar years begin-
ning with the earlier of— 
‘‘(i) the calendar year specified by the 
significant empowerment zone business as 
the 1st year of the payment period without 
regard to the date the property is placed in 
service, or 
‘‘(ii) the 5th calendar year beginning 
after the date that the election under this 
subsection is made. 
‘‘(3) SIGNIFICANT EMPOWERMENT ZONE BUSI-
NESS.—For purposes of this subsection, the term 
‘significant empowerment zone business’ means any 
trade or business operating in an empowerment zone 
if— 
‘‘(A) such business is nominated by the 
chief executive or the legislative body of the 
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State or a local government in which the zone 
property is located, and 
‘‘(B) the Secretary of Housing and Urban 
Development determines that— 
‘‘(i) it is a facility for qualified re-
search as defined in section 41(d) which is 
reasonably anticipated to make at least 
$50,000,000 of capital expenditures within 
the first 3 years of the payment period, or 
‘‘(ii) with respect to any other busi-
ness, it is reasonably anticipated that such 
business will increase employment in such 
zone by the end of the first 3 years of the 
payment period by at least the lesser of— 
‘‘(I) 1,000 full-time employees or 
equivalents, or 
‘‘(II) 10 percent of the number 
of full-time employees estimated to 
have been employed in such zone on 
the date of its designation. 
‘‘(4) SPECIAL RULES.— 
‘‘(A) ADJUSTMENT
TO
COST
RECOVERY 
BENEFIT.—In the event that the significant em-
powerment zone business does not incur a cost 
within the period described in paragraph (2)(B) 
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and for which a cost recovery benefit payment 
is made under this subsection, the Secretary 
shall reduce future recovery benefit payments to 
recover 110 percent of the overpayments in 
equal installments over the remaining payment 
period. In the event that a cost described in 
paragraph (2)(B)(i) is incurred, or a contract 
described in paragraph (2)(B)(ii) is entered 
into, after the beginning of the payment period, 
the Secretary shall increase future recover ben-
efit payments to recover 100 percent of the cost 
recovery benefit associated with such costs or 
contracts in equal installments over the remain-
ing payment period. 
‘‘(B) BASIS ADJUSTMENT.—For purposes 
of this subtitle, if a cost recovery payment is 
made under this subsection with respect to any 
property, the basis of such property shall be re-
duced by the amount of such payment. 
‘‘(5) TREATMENT
OF
PAYMENTS.—Any pay-
ment made under this subsection shall not be treat-
ed as a Federal Government guarantee for purposes 
of section 149(b).’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
1016(a) is amended by striking ‘‘and’’ at the end of 
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paragraph (36), by striking the period at the end of 
paragraph (37) and inserting ‘‘, and’’, and by add-
ing at the end the following new paragraph: 
‘‘(38) to the extent provided in section 
1396(e)(4)(B).’’. 
SEC. 8. GRANTS FOR AWARENESS OF ZONE BENEFITS AND 
TECHNICAL ASSISTANCE TO SMALL BUSI-
NESS. 
(a) IN GENERAL.—Chapter 77 is amended by adding 
at the end the following new section: 
‘‘SEC. 7529. GRANTS FOR AWARENESS OF ZONE BENEFITS 
AND 
TECHNICAL 
ASSISTANCE 
TO 
SMALL 
BUSINESS. 
‘‘(a) IN GENERAL.—The Secretary may make grants 
to State or local governments, or nonprofit organizations, 
for the purpose of making businesses aware of the benefits 
available under— 
‘‘(1) subchapter U of chapter 1 (relating to des-
ignation and treatment of empowerment zones, en-
terprise communities, and rural development invest-
ment areas), 
‘‘(2) subchapter W of chapter 1 (relating to 
District of Columbia enterprise zone), 
‘‘(3) subchapter X of chapter 1 (relating to re-
newal communities), and 
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‘‘(4) subchapter Y of chapter 1 (relating to 
short-term regional benefits). 
‘‘(b) TECHNICAL ASSISTANCE GRANTS.—The Sec-
retary may make grants to provide technical assistance to 
small businesses eligible for any benefits referred to in 
subsection (a).’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for such chapter is amended by adding at the end the fol-
lowing new item: 
‘‘Sec. 7529. Grants for awareness of zone benefits and technical assistance to 
small business.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 9. EFFECTIVE DATE. 
Except as otherwise provided in this Act, the amend-
ments made by this Act shall apply to taxable years begin-
ning after the date of the enactment of this Act. 
Æ 
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