1455
fied zone employee as described in section 72(t)(2)
(B) or (D).
‘‘(d) D EFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED ZONE EMPLOYEE.—The term
‘qualified zone employee’ has the meaning given such
term by section 1396(d).
‘‘(2) DEFINED
CONTRIBUTION
PLAN.—The
term ‘defined contribution plan’ means a defined
contribution plan (as defined in section 414(i))
which is described in section 401(a) and includes a
trust exempt from tax under section 501(a).
‘‘(e) T REATMENT OF PLANS.—A plan shall not be
treated as failing to meet any requirement of part I of
subchapter D of chapter 1 by reason of permitting with-
drawals required to be permitted under subsection (c)(2).
‘‘Subpart C—Depreciation and Other Incentives
‘‘Sec. 1397B. Depreciation benefits.
‘‘Sec. 1397C. Additional exclusion from volume cap for certain en-
terprise zone facility bonds.
‘‘Sec. 1397D. Enterprise zone business.
‘‘SEC. 1397B. DEPRECIATION BENEFITS.
‘‘(a) INCREASE
IN EXPENSING UNDER SECTION
179.—
‘‘(1) IN GENERAL.—In the case of an enterprise
zone business, for purposes of section 179—
‘‘(A) qualified zone property shall be treat-
ed as section 179 property,
1456
‘‘(B) 
the 
limitation 
under 
section
179(b)(1) shall be increased by the lesser of—
‘‘(i) $50,000, or
‘‘(ii) the cost of qualified zone prop-
erty placed in service during the taxable
year, and
‘‘(C) section 179(b)(2) shall be applied by
substituting ‘by one-half of the amount by
which the cost of qualified zone property (other
than real property) and other section 179 prop-
erty’ for ‘by the amount by which the cost of
section 179 property’.
‘‘(b) ACCELERATED DEPRECIATION.—
‘‘(1) IN
GENERAL.—For purposes of section
168(a), with respect to qualified zone property of an
enterprise zone business, the applicable recovery pe-
riod shall be determined in accordance with the table
contained in paragraph (2) in lieu of the table con-
tained in section 168(c).
‘‘(2) APPLICABLE
RECOVERY
PERIOD
FOR
QUALIFIED ZONE PROPERTY.—For purposes of para-
graph (1)—
The applicable
‘‘In the case of:
recovery period is:
3-year property ........................................................................
2 years
5-year property ........................................................................
3 years
7-year property ........................................................................
4 years
10-year property ......................................................................
6 years
15-year property ......................................................................
9 years
1457
The applicable
‘‘In the case of:
recovery period is:
20-year property ......................................................................
12 years
Nonresidential real property ....................................................
22 years.
‘‘(3) DEDUCTION
ALLOWED
IN
COMPUTING
MINIMUM TAX.—Paragraph (1) shall apply for pur-
poses of determining alternative minimum taxable
income under section 55.
‘‘(c) QUALIFIED ZONE PROPERTY.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘qualified zone
property’ means any property to which section 168
applies (or would apply but for section 179) if—
‘‘(A) such property was acquired by the
taxpayer by purchase (as defined in section
179(d)(2)) after the date on which the designa-
tion of the empowerment zone took effect,
‘‘(B) the original use of which in an
empowerment zone commences with the tax-
payer, and
‘‘(C) substantially all of the use of which
is in an empowerment zone and is in the active
conduct of a trade or business by the taxpayer
in such zone.
‘‘(2) SPECIAL RULE FOR SUBSTANTIAL REN-
OVATIONS.—In the case of any property which is
substantially renovated by the taxpayer, the require-
1458
ments of subparagraphs (A) and (B) of paragraph
(1) shall be treated as satisfied. For purposes of the
preceding sentence, property shall be treated as sub-
stantially renovated by the taxpayer if, during any
24-month period beginning after the date on which
the designation of the empowerment zone took ef-
fect, 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 at the be-
ginning of such 24-month period in the hands of the
taxpayer, or (ii) $5,000.
‘‘(3) E XCEPTION FOR ALTERNATIVE DEPRECIA-
TION PROPERTY.—The term ‘qualified zone prop-
erty’ does not include any property to which the al-
ternative depreciation system under section 168(g)
applies, determined—
‘‘(A) without regard to section 168(g)(7)
(relating to election to use alternative deprecia-
tion system), and
‘‘(B) after the application of section
280F(b) (relating to listed property with limited
business use).
‘‘(d) S PECIAL RULES FOR SALE-LEASEBACKS.—For
purposes of subsection (c)(1)(B), if property is sold and
leased back by the taxpayer within 3 months after the date
1459
such property was originally placed in service, such prop-
erty shall be treated as originally placed in service not ear-
lier than the date on which such property is used under
the leaseback.
‘‘(e) R ECAPTURE.—Rules similar to the rules under
section 179(d)(10) shall apply with respect to any quali-
fied zone property of any business which ceases to be an
enterprise zone business.
‘‘SEC. 1397C. ADDITIONAL EXCLUSION FROM VOLUME CAP
FOR CERTAIN ENTERPRISE ZONE FACILITY
BONDS.
‘‘(a) I N GENERAL.—Section 1394(b)(5) shall be ap-
plied by substituting ‘75 percent’ for ‘50 percent’ in the
case of any bond described in section 1394(b)(1) issued
as part of an issue 95 percent or more of the net proceeds
(as defined in section 150(a)(3)) of which are used to pro-
vide qualified zone property the principal user of which
is any enterprise zone business if the ownership require-
ments of subsection (b) are met with respect to such
business.
‘‘(b) OWNERSHIP REQUIREMENTS.—The ownership
requirements of this subsection are met with respect to
an enterprise zone business if—
1460
‘‘(1) in the case of a sole proprietorship, the
principal place of abode of the proprietor is in an
empowerment zone,
‘‘(2) in the case of a corporation, more than 50
percent of the stock (by vote and value) in the cor-
poration is owned (directly or indirectly) by individ-
uals whose principal place of abode is in an
empowerment zone, and
‘‘(3) in the case of a partnership, more than 50
percent of the capital and profits interests in the
partnership is owned (directly or indirectly) by indi-
viduals whose principal place of abode is in an
empowerment zone.
‘‘SEC. 1397D. ENTERPRISE ZONE BUSINESS DEFINED.
‘‘(a) IN GENERAL.—For purposes of this subpart, the
term ‘enterprise zone business’ means—
‘‘(1) any qualified business entity, and
‘‘(2) any qualified proprietorship.
‘‘(b) Q UALIFIED BUSINESS ENTITY.—For purposes
of this section, the term ‘qualified business entity’ means,
with respect to any taxable year, any corporation or part-
nership if for such year—
‘‘(1) every trade or business of such entity is
the active conduct of a qualified business within an
empowerment zone,
1461
‘‘(2) at least 80 percent of the total gross in-
come of such entity is derived from the active con-
duct of such business,
‘‘(3) substantially all of the use of the tangible
property of such entity (whether owned or leased) is
within an empowerment zone,
‘‘(4) substantially all of the intangible property
of such entity is used in, and exclusively related to,
the active conduct of any such business,
‘‘(5) substantially all of the services performed
for such entity by its employees are performed in an
empowerment zone,
‘‘(6) at least 35 percent of its employees are
residents of an empowerment zone,
‘‘(7) less than 5 percent of the average of the
aggregate unadjusted bases of the property of such
entity is attributable to collectibles (as defined in
section 408(m)(2)) other than collectibles that are
held primarily for sale to customers in the ordinary
course of such business, and
‘‘(8) less than 5 percent of the average of the
aggregate unadjusted bases of the property of such
entity is attributable to nonqualified financial prop-
erty.
1462
‘‘(c) QUALIFIED PROPRIETORSHIP.—For purposes of
this section, the term ‘qualified proprietorship’ means,
with respect to any taxable year, any qualified business
carried on by an individual as a proprietorship if for such
year—
‘‘(1) at least 80 percent of the total gross in-
come of such individual from such business is de-
rived from the active conduct of such business in an
empowerment zone,
‘‘(2) substantially all of the use of the tangible
property of such individual in such business (wheth-
er owned or leased) is within an empowerment zone,
‘‘(3) substantially all of the intangible property
of such business is used in, and exclusively related
to, the active conduct of such business,
‘‘(4) substantially all of the services performed
for such individual in such business by employees of
such business are performed in an empowerment
zone,
‘‘(5) at least 35 percent of such employees are
residents of an empowerment zone,
‘‘(6) less than 5 percent of the average of the
aggregate unadjusted bases of the property of such
individual which is used in such business is attrib-
utable 
to 
collectibles 
(as 
defined 
in 
section
1463
408(m)(2)) other than collectibles that are held pri-
marily for sale to customers in the ordinary course
of such business, and
‘‘(7) less than 5 percent of the average of the
aggregate unadjusted bases of the property of such
individual which is used in such business is attrib-
utable to nonqualified financial property.
For purposes of this subsection, the term ‘employee’ in-
cludes the proprietor.
‘‘(d) QUALIFIED BUSINESS.—For purposes of this
section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘qualified business’
means any trade or business.
‘‘(2) R ENTAL OF REAL PROPERTY.—The rental
to 
others 
of 
real 
property 
located 
in 
an
empowerment zone shall be treated as a qualified
business if and only if—
‘‘(A) the property is not residential rental
property (as defined in section 168(e)(2)), and
‘‘(B) at least 50 percent of the gross rental
income from the real property is from enter-
prise zone businesses.
‘‘(3) RENTAL OF TANGIBLE PERSONAL PROP-
ERTY.—The rental to others of tangible personal
1464
property shall be treated as a qualified business if
and only if substantially all of the rental of such
property is by enterprise zone businesses or by resi-
dents of an empowerment zone.
‘‘(4) TREATMENT OF BUSINESS HOLDING IN-
TANGIBLES.—The term ‘qualified business’ shall not
include any trade or business consisting predomi-
nantly of the development or holding of intangibles
for sale or license.
‘‘(5) CERTAIN
BUSINESSES
EXCLUDED.—The
term ‘qualified business’ shall not include—
‘‘(A) any trade or business consisting of
the operation of any facility described in section
144(c)(6)(B), and
‘‘(B) any trade or business the principal
activity of which is farming (within the meaning
of subparagraphs (A) or (B) of section
2032A(e)(5)), but only if, as of the close of the
preceding taxable year, the sum of—
‘‘(i) the aggregate unadjusted bases
(or, if greater, the fair market value) of
the assets owned by the taxpayer which are
used in such a trade or business, and