I
103D CONGRESS
1ST SESSION
H. R. 2246
To amend the Internal Revenue Code of 1986 to provide tax incentives
to encourage development in certain border areas.
IN THE HOUSE OF REPRESENTATIVES
MAY 25, 1993
Mr. ANDREWS of Texas (for himself and Mr. COLEMAN) 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 provide
tax incentives to encourage development in certain border
areas.
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.
SEC. 2. DESIGNATION AND TREATMENT OF BORDER
EMPOWERMENT ZONES AND BORDER ENTER-
PRISE COMMUNITIES.
(a) IN GENERAL.—Chapter 1 (relating to normal
taxes and surtaxes) is amended by inserting after sub-
chapter T the following new subchapter:
‘‘Subchapter U—Designation and Treatment
of Border Empowerment Zones and Bor-
der Enterprise Communities
‘‘Part I. Designation.
‘‘Part II. Incentives for border empowerment zones and border
enterprise communities.
‘‘Part III. Additional incentives for border empowerment zone.
‘‘Part IV. Regulations.
‘‘PART I—DESIGNATION
‘‘Sec. 1391. Designation procedure.
‘‘Sec. 1392. Eligibility criteria.
‘‘Sec. 1393. Definitions and special rules.
‘‘SEC. 1391. DESIGNATION PROCEDURE.
‘‘(a) IN GENERAL.—From among the border areas
nominated for designation under this section, the appro-
priate Secretaries may, in consultation with the Enterprise
Board, designate 1 border empowerment zone and 5 bor-
der enterprise communities.
‘‘(b) PERIOD DESIGNATIONS MAY BE MADE.—A des-
ignation may be made under this section only after 1993
and before 1996.
‘‘(c) PERIOD FOR WHICH DESIGNATION IS IN EF-
FECT.—
‘‘(1) IN GENERAL.—Any designation under this
section shall remain in effect during the period be-
ginning on the date of the designation and ending
on the earliest of—
‘‘(A) the close of the 10th calendar year
beginning on or after such date of designation,
‘‘(B) the termination date designated by
the State and local governments as provided for
in their nomination, or
‘‘(C) the date the appropriate Secretary re-
vokes the designation.
‘‘(2) REVOCATION OF DESIGNATION.—
‘‘(A) IN GENERAL.—The appropriate Sec-
retary, in consultation with the Enterprise
Board, may revoke the designation under this
section of an area if such Secretary determines
that the local government or the State in which
it is located—
‘‘(i) has modified the boundaries of
the area, or
‘‘(ii) is not complying substantially
with, or fails to make progress in achieving
the benchmarks set forth in, the strategic
plan under subsection (e)(2).
‘‘(B) APPLICABLE PROCEDURES.—A des-
ignation may be revoked by the appropriate
Secretary under subparagraph (A) only after a
hearing on the record involving officials of the
State or local government involved.
‘‘(d) LIMITATIONS ON DESIGNATIONS.—An area may
be designated under subsection (a) only if—
‘‘(1) the area is a border area,
‘‘(2) the area is nominated by 1 or more local
governments and the State or States in which it is
located for designation under this section,
‘‘(3) such State or States and the local govern-
ments have the authority—
‘‘(A) to nominate the area for designation
under this section, and
‘‘(B) to provide the assurances described in
paragraph (4),
‘‘(4) such State or States and the local govern-
ments provide written assurances satisfactory to the
appropriate Secretary that the strategic plan de-
scribed in the application under subsection (e)(2) for
such area will be implemented,
‘‘(5) the appropriate Secretary determines that
any information furnished is reasonably accurate,
and
‘‘(6) such State or States and local govern-
ments certify that no portion of the area nominated
is already included in an area designated under this
section or in an area otherwise nominated to be des-
ignated under this section.
‘‘(e) APPLICATION.—An application for designation
as a border empowerment zone or as a border enterprise
community shall—
‘‘(1) demonstrate that the nominated area sat-
isfies the eligibility criteria described in section
1392,
‘‘(2) include a strategic plan for accomplishing
the purposes of this subchapter that—
‘‘(A) describes the coordinated economic,
human, community, and physical development
plan and related activities proposed for the
nominated area,
‘‘(B) describes the process by which the af-
fected community is a full partner in the proc-
ess of developing and implementing the plan
and the extent to which local institutions and
organizations have contributed to the planning
process,
‘‘(C) identifies the amount of State, local,
and private resources that will be available in
‘‘(iii) restraining the proliferation of
substandard residential subdivisions within
the nominated area, and
‘‘(G) does not include any action to assist
any establishment in relocating from one area
within the United States and outside the nomi-
nated area to the nominated area, except that
assistance for the expansion of an existing busi-
ness entity 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 re-
sult in a decrease in employment in the
area of original location or in any other
area where the existing business entity
conducts business operations, and
‘‘(ii) there is no reason to believe that
the new branch, affiliate, or subsidiary is
being established with the intention of clos-
ing down the operations of the existing
business entity in the area of its original
location or in any other area where the ex-
isting business entity conducts business
operations, and
‘‘(3) include such other information as may be
required by the appropriate Secretary or the Enter-
prise Board.
‘‘SEC. 1392. ELIGIBILITY CRITERIA.
‘‘(a) IN GENERAL.—A nominated area shall be eligi-
ble for designation under section 1391 only if it meets the
following criteria:
‘‘(1) LACK OF INFRASTRUCTURE.—The popu-
lation of the counties in which the nominated area
is located increased (as determined by the most re-
cent census data available) by 18 percent or more
between 1980 and 1990, without a corresponding ex-
pansion of basic infrastructure such as water and
wastewater services, and not less than 20 percent of
the population residing within the nominated area
resides in substandard residential subdivisions.
‘‘(2) DISTRESS.—The nominated area is one of
pervasive poverty, unemployment, and general dis-
tress.
‘‘(3) SIZE.—The nominated area—
‘‘(A) does not exceed 1,000 square miles,
‘‘(B) has a boundary which is continuous,
or, except in the case of an area located in more
than 1 State, consists of not more than 3 non-
contiguous parcels,
‘‘(C) is located entirely within no more
than 3 contiguous States, and
‘‘(D) does not include any portion of a
central business district (as such term is used
for purposes of the most recent Census of Re-
tail Trade) unless the poverty rate for each
population census tract in such district is not
less than 35 percent (30 percent in the case of
an enterprise community).
‘‘(4) POVERTY RATE.—The poverty rate—
‘‘(A) for each population census tract with-
in the nominated area is not less than 20 per-
cent,
‘‘(B) for at least 90 percent of the popu-
lation census tracts within the nominated area
is not less than 25 percent, and
‘‘(C) for at least 50 percent of the popu-
lation census tracts within the nominated area
is not less than 35 percent.
‘‘(b) SPECIAL RULES RELATING TO DETERMINATION
OF POVERTY RATE.—For purposes of subsection (a)(4)—
‘‘(1) TREATMENT
OF
CENSUS
TRACTS
WITH
SMALL POPULATIONS.—
‘‘(A) TRACTS WITH NO POPULATION.—In
the case of a population census tract with no
population—
‘‘(i) such tract shall be treated as hav-
ing a poverty rate which meets the require-
ments of subparagraphs (A) and (B) of
subsection (a)(4), but
‘‘(ii) such tract shall be treated as
having a zero poverty rate for purposes of
applying subparagraph (C) thereof.
‘‘(B) TRACTS WITH POPULATIONS OF LESS
THAN 2,000.—A population census tract with a
population of less than 2,000 shall be treated as
having a poverty rate which meets the require-
ments of subparagraphs (A) and (B) of sub-
section (a)(4) if more than 75 percent of such
tract is zoned for commercial or industrial use.
‘‘(2) 
DISCRETION
TO
ADJUST
REQUIRE-
MENTS.—Where necessary to carry out the purposes
of this subchapter, the appropriate Secretary may
reduce by 5 percentage points one of the following
thresholds for not more than 10 percent of the popu-
lation census tracts (or, if fewer, 5 population cen-
sus tracts) in the nominated area:
‘‘(A) The 20 percent threshold in sub-
section (a)(4)(A).
‘‘(B) The 25 percent threshold in sub-
section (a)(4)(B).
‘‘(C) The 35 percent threshold in sub-
section (a)(4)(C).
If the appropriate Secretary elects to reduce the
threshold under subparagraph (C) for a border en-
terprise community, such Secretary may (in lieu of
applying the preceding sentence) reduce by 10 per-
centage points the threshold under subparagraph
(C) for 3 population census tracts.
‘‘(3) EACH NONCONTIGUOUS AREA MUST SAT-
ISFY POVERTY RATE RULE.—A nominated area may
not include a noncontiguous parcel unless such par-
cel separately meets (subject to paragraphs (1) and
(2)) the criteria set forth in subsection (a)(4).
‘‘(4) AREAS NOT WITHIN CENSUS TRACTS.—In
the case of an area which is not tracted for popu-
lation census tracts, the equivalent county divisions
(as defined by the Bureau of the Census for pur-
poses of defining poverty areas) shall be used for
purposes of determining poverty rates.
‘‘(c) FACTORS TO CONSIDER.—From among the
nominated areas eligible for designation under section
‘‘(3) RURAL
AREA.—The term ‘rural area’
means any area which is—
‘‘(A) outside of a metropolitan statistical
area 
(within 
the 
meaning 
of 
section
143(k)(2)(B)), or
‘‘(B) determined by the Secretary of Agri-
culture, after consultation with the Secretary of
Commerce, to be a rural area.
‘‘(4) URBAN
AREA.—The term ‘urban area’
means an area which is not a rural area.
‘‘(5) INDIAN RESERVATION.—
‘‘(A) IN GENERAL.—The term ‘Indian res-
ervation’ means a reservation as defined in—
‘‘(i) section 3(d) of the Indian Financ-
ing Act of 1974 (25 U.S.C. 1452(d)), or
‘‘(ii) section 4(10) of the Indian Child
Welfare 
Act 
of 
1978 
(25 
U.S.C.
1903(10)).
‘‘(B) GOVERNMENTS.—In the case of an
area in an Indian reservation, the reservation
governing body (as determined by the Secretary
of the Interior) shall be deemed to be both the
State and local governments with respect to
such area.
‘‘(6) BORDER AREA.—The term ‘border area’
means an area which is located in one or more coun-
ties each of which is located adjacent to an inter-
national border.
‘‘(7) SUBSTANDARD
RESIDENTIAL
SUBDIVI-
SION.—The term ‘substandard residential subdivi-
sion’ means a residential area—
‘‘(A) which at the time it was first occu-
pied by a substantial number of residents,
lacked basic infrastructure such as water or
wastewater services, and
‘‘(B) the residents of which are exposed to
greatly increased health risks by reason of liv-
ing conditions in such residential area or in
nearby residential areas.
In determining whether the condition of subpara-
graph (B) is met, the Secretary of Housing and
Urban Development shall take into account data re-
garding communicable disease rates, studies by
qualified engineering firms, and other relevant fac-
tors.
‘‘(8) LOCAL
GOVERNMENT.—The term ‘local
government’ means—
‘‘(A) any county, city, town, township, par-
ish, village, or other general purpose political
subdivision of a State,
‘‘(B) any limited purpose political subdivi-
sion of a State which is involved in the plan de-
scribed in section 1391(e)(2)(F), and
‘‘(C) any combination of political subdivi-
sions described in subparagraphs (A) and (B)
recognized by the appropriate Secretary.
‘‘(9) NOMINATED AREA.—The term ‘nominated
area’ means an area which is nominated by 1 or
more local governments and the State or States in
which it is located for designation under section
1391.
‘‘(10) GOVERNMENTS.—If more than 1 State or
local government seeks to nominate an area under
this part, any reference to, or requirement of, this
subchapter shall apply to all such governments.
‘‘(11) SPECIAL RULE.—An area shall be treated
as nominated by a State and a local government if
it is nominated by such other entity as may be speci-
fied by the Enterprise Board.
‘‘(12) USE OF CENSUS DATA.—Population and
poverty rate shall be determined by the most recent
decennial census data available.
‘‘(b) BORDER EMPOWERMENT ZONE; BORDER EN-
TERPRISE COMMUNITY.—For purposes of this title, the
terms ‘border empowerment zone’ and ‘border enterprise
community’ mean areas designated as such under section
1391.
‘‘PART 
II—INCENTIVES 
FOR 
BORDER
EMPOWERMENT ZONES AND BORDER EN-
TERPRISE COMMUNITIES
‘‘Sec. 1394. Incentives.
‘‘SEC. 1394. INCENTIVES.
‘‘(a) INCREASE IN LOW INCOME HOUSING CREDIT.—
For purposes of section 42(d)(5)(C), a building shall be
treated as located in a qualified census tract if—
‘‘(1) such building is located in a census tract
having a poverty rate of at least 30 percent (deter-
mined in accordance with section 1393(a)(10)), and
‘‘(2) such building is located in a border
empowerment zone or border enterprise community.
‘‘(b) TAX EXEMPT ENTERPRISE ZONE FACILITY
BONDS.—
‘‘(1) IN GENERAL.—For purposes of part IV of
subchapter B of chapter 1 (relating to tax exemption
requirements for State and local bonds), the term
‘exempt facility bond’ includes any bond issued as
part of an issue 95 percent or more of the net pro-
ceeds (as defined in section 150(a)(3)) of which are
to be used to provide any enterprise zone facility.
‘‘(2) ENTERPRISE ZONE FACILITY.—For pur-
poses of this subsection—
‘‘(A) IN GENERAL.—The term ‘enterprise
zone facility’ means any qualified zone property
the principal user of which is an enterprise zone
business (as defined in section 1399B), and any
land which is functionally related and subordi-
nate to such property.
‘‘(B) QUALIFIED
ZONE
PROPERTY.—The
term ‘qualified zone property’ has the meaning
given such term by section 1399(c); except
that—
‘‘(i) section 1399(c)(3) shall not
apply, and
‘‘(ii) the references to a border
empowerment zone shall be treated as in-
cluding references to border enterprise
communities.
‘‘(3) LIMITATION ON AMOUNT OF BONDS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply to any issue if the aggregate amount
of outstanding enterprise zone facility bonds al-
locable to any enterprise zone business (taking
into account such issue) exceeds—
‘‘(i) $3,000,000 with respect to any 1
border empowerment zone or border enter-
prise community, or
‘‘(ii) $20,000,000 with respect to the
border empowerment zone and all border
enterprise communities.
‘‘(B) AGGREGATE ENTERPRISE ZONE FA-
CILITY BOND BENEFIT.—For purposes of sub-
paragraph (A), the aggregate amount of out-
standing enterprise zone facility bonds allocable
to any business shall be determined under rules
similar to the rules of section 144(a)(10), tak-
ing into account only bonds to which paragraph
(1) applies.
‘‘(4) 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 paragraph (1).
‘‘(5) PARTIAL
EXEMPTION
FROM
VOLUME
CAP.—Only for purposes of section 146, the term
‘private activity bond’ shall not include 50 percent of
any bond issued as part of an issue described in
paragraph (1).
such year to buildings located in such zone
or community.
‘‘(B) UNUSED PORTION.—For purposes of
subparagraph (A), the unused portion for any
calendar year of the additional amount received
under paragraph (1) is the amount equal to the
excess of—
‘‘(i) the additional amount received
under paragraph (1) by the State by rea-
son of the zone or community, over
‘‘(ii) the aggregate of the increases in
the State housing credit ceiling by reason
of such amount for all prior calendar
years.
‘‘(3) AVAILABILITY OF ADDITIONAL AMOUNT.—
None of the additional amount received under para-
graph (1) may be applied after 1996.
‘‘(4) AREAS
LOCATED
IN
MORE
THAN
STATE.—In the case of a border empowerment zone
or border enterprise community which is located in
more than 1 State, the $818,000 amount shall be al-
located among such States in proportion to the pop-
ulation of such zone or community which is within
each such State.
‘‘(5) ZONES
LOCATED
IN
CONSTITUTIONAL
HOME RULE CITIES.—If any border empowerment
zone or border enterprise community is located in a
constitutional home rule city (as defined in section
42(h)(4)(E)), the additional amount received under
paragraph (1) shall be allocated to such city and
shall not be taken into account in determining such
city’s share of the State housing credit ceiling under
section 42(h)(4)(E).
‘‘PART III—ADDITIONAL INCENTIVES FOR
BORDER EMPOWERMENT ZONE
‘‘SUBPART A. Empowerment zone employment credit.
‘‘SUBPART B. Zone resident empowerment savings credit.
‘‘SUBPART C. Depreciation and other incentives.
‘‘Subpart A—Empowerment Zone Employment Credit
‘‘Sec. 1396. Empowerment zone employment credit.
‘‘Sec. 1397. Other definitions and special rules.
‘‘SEC. 1396. EMPOWERMENT ZONE EMPLOYMENT CREDIT.
‘‘(a) AMOUNT OF CREDIT.—For purposes of section
38, the amount of the empowerment zone employment
credit determined under this section with respect to any
employer for any taxable year is the applicable percentage
of the qualified zone wages paid or incurred during the
calendar year which ends with or within such taxable year.
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of
this section, the term ‘applicable percentage’ means the
percentage determined in accordance with the following
table:
‘‘In the case of wages paid or
The applicable
incurred during calendar year:
percentage is:
1994 through 2000 ........................................
2001 ...............................................................
2002 ...............................................................
2003 ...............................................................
2004 ...............................................................
‘‘(c) QUALIFIED ZONE WAGES.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified zone wages’ means any
wages paid or incurred by an employer for services
performed by an employee while such employee is a
qualified zone employee.
‘‘(2) ONLY FIRST $20,000 OF WAGES PER YEAR
TAKEN INTO ACCOUNT.—With respect to each quali-
fied zone employee, the amount of qualified zone
wages which may be taken into account for a cal-
endar year shall not exceed $20,000.
‘‘(3) COORDINATION
WITH
TARGETED
JOBS
CREDIT.—
‘‘(A) IN
GENERAL.—The term ‘qualified
zone wages’ shall not include wages taken into
account in determining the credit under section
51.
‘‘(B) COORDINATION
WITH
PARAGRAPH
(2).—The $20,000 amount in paragraph (2)
shall be reduced for any calendar year by the
amount of wages paid or incurred during such
year which are taken into account in determin-
ing the credit under section 51.
‘‘(d) QUALIFIED ZONE EMPLOYEE.—For purposes of
this section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, the term ‘qualified zone em-
ployee’ means, with respect to any period, any em-
ployee of an employer if—
‘‘(A) substantially all of the services per-
formed during such period by such employee for
such employer are performed within a border
empowerment zone in a trade or business of the
employer, and
‘‘(B) the principal place of abode of such
employee while performing such services is
within such border empowerment zone.
‘‘(2) CERTAIN INDIVIDUALS NOT ELIGIBLE.—
The term ‘qualified zone employee’ shall not in-
clude—
‘‘(A) any individual described in subpara-
graph (A), (B), or (C) of section 51(i)(1),
‘‘(B) any 5-percent owner (as defined in
section 416(i)(1)(B)),
‘‘(C) any individual employed by the em-
ployer for less than 90 days,
‘‘(D) any individual employed by the em-
ployer at any facility described in section
144(c)(6)(B), and
‘‘(E) any individual employed by the em-
ployer in a trade or business the principal activ-
ity 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
taxable year, the sum of—
‘‘(i) the aggregate unadjusted bases
(or, if greater, the fair market value) of
the assets owned by the employer which
are used in such a trade or business, and
‘‘(ii) the aggregate value of assets
leased by the employer which are used in
such a trade or business (as determined
under regulations prescribed by the Sec-
retary),
exceeds $500,000.
‘‘(3) SPECIAL
RULES
RELATED
TO
TERMI-
NATION OF EMPLOYMENT.—
‘‘(A) IN
GENERAL.—Paragraph (2)(C)
shall not apply to—
‘‘(i) a termination of employment of
an individual who before the close of the
period referred to in paragraph (2)(C) be-
comes disabled to perform the services of
such employment unless such disability is
removed before the close of such period
and the taxpayer fails to offer reemploy-
ment to such individual, or
‘‘(ii) a termination of employment of
an individual if it is determined under the
applicable State unemployment compensa-
tion law that the termination was due to
the misconduct of such individual.
‘‘(B) CHANGES IN FORM OF BUSINESS.—
For purposes of paragraph (2)(C), the employ-
ment relationship between the taxpayer and an
employee shall not be treated as terminated—
‘‘(i) by a transaction to which section
381(a) applies if the employee continues to
be employed by the acquiring corporation,
or
‘‘(ii) by reason of a mere change in
the form of conducting the trade or busi-
ness of the taxpayer if the employee con-
tinues to be employed in such trade or
‘‘(A) IN GENERAL.—The qualified savings
contributions taken into account with respect to
any qualified zone employee for any taxable
year shall not exceed an amount equal to 2 per-
cent of so much of the employee’s compensation
(as defined in section 414(s)) as does not
exceed $35,000.
‘‘(B) ZONE DESIGNATION IN EFFECT FOR
PARTIAL YEAR.—If a designation of an area as
an empowerment zone is in effect for less than
the entire taxable year, the $35,000 amount
under subparagraph (A) shall be ratably re-
duced to reflect the portion of the year such
designation is not in effect.
‘‘(3) CERTAIN
CONTRIBUTIONS
EXCLUDED.—
The term ‘qualified savings contribution’ shall not
include any contribution—
‘‘(A) to a plan subject to the funding re-
quirements of section 412,
‘‘(B) to a tax credit employee stock owner-
ship plan (as defined in section 409(a)) or to an
employee stock ownership plan (as defined in
section 4975(e)(7)),
‘‘(C) to a stock bonus plan, or
‘‘(D) which is an elective deferral (within
the meaning of section 402(g)(3)).
‘‘(4) SIMPLIFIED EMPLOYEE PENSION.—A con-
tribution to an individual savings plan pursuant to
a simplified employee pension (as defined in section
408(k)) shall be treated as a contribution to a de-
fined contribution plan.
‘‘(c) EMPLOYER REQUIREMENTS.—This section shall
apply to an employer for any taxable year only if—
‘‘(1) the employer elects the application of this
section, and
‘‘(2) the plan pursuant to which any qualified
savings contribution is made provides that any con-
tribution to such plan (whether or not a qualified
savings contribution) may be withdrawn by a quali-
fied zone employee as described in section 72(t)(2)
(B) or (D).
‘‘(d) DEFINITIONS.—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) TREATMENT 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. 1399. Depreciation benefits.
‘‘Sec. 1399A. Additional exclusion from volume cap for certain en-
terprise zone facility bonds.
‘‘Sec. 1399B. Enterprise zone business.
‘‘SEC. 1399. 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,
‘‘(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
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 border empowerment zone took ef-
fect,
‘‘(B) the original use of which in a border
empowerment zone commences with the tax-
payer, and
‘‘(C) substantially all of the use of which
is in a border empowerment zone and is in the
active conduct of a trade or business by the tax-
payer 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-
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 border empowerment zone
took effect, 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 beginning of such 24-month period in the
hands of the taxpayer, or (ii) $5,000.
‘‘(3) EXCEPTION 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) SPECIAL 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
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) RECAPTURE.—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. 1399A. ADDITIONAL EXCLUSION FROM VOLUME CAP
FOR CERTAIN ENTERPRISE ZONE FACILITY
BONDS.
‘‘(a) IN 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—
‘‘(1) in the case of a sole proprietorship, the
principal place of abode of the proprietor is in a bor-
der 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 a border
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 a border
empowerment zone.
‘‘SEC. 1399B. 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) QUALIFIED 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 a
border empowerment zone,
‘‘(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 a border 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 a
border empowerment zone,
‘‘(6) at least 35 percent of its employees are
residents of a border 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.
‘‘(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 a
border 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 a border 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 
a 
border
empowerment zone,
‘‘(5) at least 35 percent of such employees are
residents of a border 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
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) RENTAL OF REAL PROPERTY.—The rental
to others of real property located in a border
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
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 a border 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
‘‘(ii) the aggregate value of assets
leased by the taxpayer which are used in
such a trade or business,
exceeds $500,000.
For purposes of subparagraph (B), rules similar to
the rules of section 1397(b) shall apply.
‘‘(e) NONQUALIFIED FINANCIAL PROPERTY.—For
purposes of this section, the term ‘nonqualified financial
property’ means debt, stock, partnership interests, op-
tions, futures contracts, forward contracts, warrants, no-
tional principal contracts, annuities, and other similar
property specified in regulations; except that such term
shall not include—
‘‘(1) reasonable amounts of working capital
held in cash, cash equivalents, or debt instruments
with a term of 18 months or less, or
‘‘(2) debt instruments described in section
1221(4).
‘‘PART IV—REGULATIONS
‘‘Sec. 1399C. Regulations.
‘‘SEC. 1399C. REGULATIONS.
‘‘The Secretary shall prescribe such regulations as
may be necessary or appropriate to carry out the purposes
of parts II and III, including—
‘‘(1) regulations limiting the benefit of parts II
and III in circumstances where such benefits, in
combination with benefits provided under other Fed-
eral programs, would result in an activity being 100
percent or more subsidized by the Federal Govern-
ment,
‘‘(2) regulations preventing abuse of the provi-
sions of parts II and III, and
‘‘(3) regulations dealing with inadvertent fail-
ures of entities to be enterprise zone businesses.’’
(b) CLERICAL AMENDMENT.—The table of sub-
chapters for chapter 1 is amended by inserting after the
item relating to subchapter T the following new item:
‘‘Subchapter 
U. 
Designation 
and 
treatment 
of 
border
empowerment zones and border enterprise commu-
nities.’’
SEC. 3. EXPANSION OF TARGETED JOBS CREDIT.
(a) ALLOWANCE OF CREDIT FOR HIRING BORDER
EMPOWERMENT ZONE RESIDENT.—Paragraph (1) of sec-
tion 51(d) (defining members of targeted groups) is
amended by striking ‘‘or’’ at the end of subparagraph (I),
by striking the period at the end of subparagraph (J) and
inserting ‘‘, or’’, and by adding at the end the following
new subparagraph:
‘‘(K) an economically disadvantaged border
empowerment zone resident.’’
(b) 
ECONOMICALLY
DISADVANTAGED
EMPOWERMENT
ZONE
RESIDENT.—Section 51(d) is
amended by redesignating paragraphs (13) through (16)
as paragraphs (14) through (17), respectively, and by in-
serting after paragraph (12) the following new paragraph:
‘‘(13) ECONOMICALLY
DISADVANTAGED
BOR-
DER
EMPOWERMENT
ZONE
RESIDENT.—The term
‘economically disadvantaged border empowerment
zone resident’ means an individual—
‘‘(A) whose principal place of abode while
performing services for the employer is within a
border empowerment zone, and
‘‘(B) who is certified by the designated
local agency as being a member of an economi-
cally disadvantaged family (as determined
under paragraph (11)).
Such term shall not include a qualified zone em-
ployee (as defined in section 1396(d) without regard
to paragraph (2) thereof).’’
(c) CONFORMING AMENDMENT.—Subparagraph (C)
of section 51(d)(12) is amended by striking ‘‘paragraph
(14)’’ and inserting ‘‘paragraph (15)’’.
SEC. 4. TECHNICAL AND CONFORMING AMENDMENTS.
(a) CERTAIN CREDITS PART OF GENERAL BUSINESS
CREDIT.—
(1) Subsection (b) of section 38 (relating to
current year business credit) is amended by striking
‘‘plus’’ at the end of paragraph (7), by striking the
period at the end of paragraph (8) and inserting a
comma, and by adding at the end the following new
paragraphs:
‘‘(9) the empowerment zone employment credit
determined under section 1396(a), plus
‘‘(10) the zone resident empowerment savings
credit determined under section 1398.’’
(2) Subsection (d) of section 39 is amended by
adding at the end the following new paragraph:
‘‘(4) ENTERPRISE ZONE CREDITS.—No portion
of the unused business credit which is attributable to
the credit determined under section 1396 (relating
to empowerment zone employment credit) or section
1398 (relating to zone resident empowerment sav-
ings credit) may be carried to any taxable year end-
ing before January 1, 1994.’’
(b) DENIAL OF DEDUCTION FOR PORTION OF WAGES
EQUAL TO EMPOWERMENT ZONE EMPLOYMENT CRED-
IT.—
(1) Subsection (a) of section 280C (relating to
rule for targeted jobs credit) is amended—
(A) by striking ‘‘the amount of the credit
determined for the taxable year under section
51(a)’’ and inserting ‘‘the sum of the credits
determined for the taxable year under sections
51(a) and 1396(a)’’, and
(B) by striking ‘‘TARGETED JOBS CRED-
IT’’ in the subsection heading and inserting
‘‘EMPLOYMENT CREDITS’’.
(2) Subsection (c) of section 196 (relating to
deduction for certain unused business credits) is
amended by striking ‘‘and’’ at the end of paragraph
(4), by striking the period at the end of paragraph
(5) and inserting ‘‘, and’’, and by adding at the end
the following new paragraph:
‘‘(6) the empowerment zone employment credit
determined under section 1396(a).’’
(c) EMPLOYMENT AND SAVINGS CREDITS MAY OFF-
SET 25 PERCENT OF MINIMUM TAX.—
(1) IN
GENERAL.—Section 38(c) (relating to
limitation based on amount of tax) is amended by
redesignating paragraph (2) as paragraph (3) and
by inserting after paragraph (1) the following new
paragraph:
‘‘(2) EMPOWERMENT ZONE CREDITS MAY OFF-
SET 25 PERCENT OF MINIMUM TAX.—
‘‘(A) IN
GENERAL.—In the case of the
empowerment zone credits—
‘‘(i) this section and section 39 shall
be applied separately with respect to such
credits, and
‘‘(ii) for purposes of applying para-
graph (1) to such credits—
‘‘(I) 75 percent of the tentative
minimum tax shall be substituted for
the tentative minimum tax under sub-
paragraph (A) thereof, and
‘‘(II) the limitation under para-
graph (1) (as modified by subclause
(I)) shall be reduced by the credit al-
lowed under subsection (a) for the
taxable 
year 
(other 
than 
the
empowerment zone credits).
‘‘(B) EMPOWERMENT
ZONE
CREDITS.—
For purposes of this paragraph, the term
‘empowerment zone credits’ means the portion
of the credit under subsection (a) which is at-
tributable to the credits determined under sec-
tion 1396 (relating to empowerment zone em-
ployment credit) and section 1398 (relating to
zone resident empowerment savings credit).’’
(d) CHANGES RELATING TO EMPOWERMENT ZONE
RESIDENT EMPOWERMENT SAVINGS CREDIT.—
(1) DISALLOWANCE
OF
DEDUCTION.—Section
404 (relating to deduction for certain employer con-
tributions) is amended by adding at the end the fol-
lowing new subsection:
‘‘(m) COORDINATION WITH EMPOWERMENT ZONE
CREDIT.—No deduction shall be allowed under this sec-
tion for any qualified employer contribution taken into ac-
count in computing the credit determined under section
1398.’’
(2) PENALTY-FREE DISTRIBUTIONS.—
(A) IN GENERAL.—Paragraph (2) of sec-
tion 72(t) (relating to exceptions to 10-percent
additional tax on early distributions from quali-
fied retirement plans) is amended by adding at
the end thereof the following new subpara-
graph:
‘‘(D) 
DISTRIBUTIONS
FROM
CERTAIN
PLANS FOR FIRST HOME PURCHASES OR EDU-
CATIONAL EXPENSES.—
‘‘(i) IN
GENERAL.—Distributions to
an individual from a qualified retirement
plan—
‘‘(I) which are qualified first-time
homebuyer distributions (as defined in
paragraph (6)),
‘‘(II) to the extent such distribu-
tions do not exceed the qualified high-
er education expenses (as defined in
paragraph (7)) of the taxpayer for the
taxable year, or
‘‘(III) to the extent such distribu-
tions do not exceed an amount equal
to the aggregate investment made by
the taxpayer during the taxable year
in any enterprise zone business (as
defined in section 1399B) that meets
the ownership requirements of section
1399A(b).
‘‘(ii) LIMITATION.—Clause (i) shall
not apply to the extent that the aggregate
amount of the distributions described in
clause (i) is greater than the excess of—
‘‘(I) the qualified savings con-
tributions (as defined in section
1398(b)) of the taxpayer, and any
earnings thereon, over
‘‘(II) the aggregate amounts to
which clause (i) and the last sentence
of paragraph (3)(A) applied for pre-
ceding taxable years.’’
(B) 
DEFINITIONS.—Section 
72(t) 
is
amended by adding at the end thereof the fol-
lowing new paragraphs:
‘‘(6) QUALIFIED FIRST-TIME HOMEBUYER DIS-
TRIBUTIONS.—For 
purposes 
of 
paragraph
(2)(D)(i)(I)—
‘‘(A) IN
GENERAL.—The term ‘qualified
first-time homebuyer distribution’ means any
payment or distribution received by an individ-
ual to the extent such payment or distribution
is used by the individual before the close of the
60th day after the day on which such payment
or distribution is received to pay qualified ac-
quisition costs with respect to a principal resi-
dence of a first-time homebuyer who is such in-
dividual or the spouse of such individual.
‘‘(B) QUALIFIED
ACQUISITION
COSTS.—
For purposes of this paragraph, the term
‘qualified acquisition costs’ means the costs of
acquiring, constructing, or reconstructing a res-
idence. Such term includes any usual or reason-
able settlement, financing, or other closing
costs.
‘‘(C) FIRST-TIME
HOMEBUYER; 
OTHER
DEFINITIONS.—For purposes of this para-
graph—
‘‘(i) FIRST-TIME
HOMEBUYER.—The
term ‘first-time homebuyer’ means any in-
dividual if—
‘‘(I) such individual (and if mar-
ried, such individual’s spouse) had no
present ownership interest in a prin-
cipal residence during the 3-year pe-
riod ending on the date of acquisition
of the principal residence to which
this paragraph applies, and
‘‘(II) subsection (a)(6), (h), or
(k) of section 1034 did not suspend
the running of any period of time
specified in section 1034 with respect
to such individual on the day before
the date the distribution is applied
pursuant to subparagraph (A)(ii).
‘‘(ii) 
PRINCIPAL
RESIDENCE.—The
term ‘principal residence’ has the same
meaning as when used in section 1034.
‘‘(iii) DATE
OF
ACQUISITION.—The
term ‘date of acquisition’ means the date—
‘‘(I) on which a binding contract
to acquire the principal residence to
which subparagraph (A) applies is en-
tered into, or
‘‘(II) on which construction or re-
construction of such a principal resi-
dence is commenced.
‘‘(D) SPECIAL RULE WHERE DELAY IN AC-
QUISITION.—If any distribution from any quali-
fied retirement plan fails to meet the require-
ments of subparagraph (A) solely by reason of
a delay or cancellation of the purchase or con-
struction of the residence, the amount of the
distribution may be recontributed to the plan
from which it was distributed within 120 days
after the date of such distribution.
‘‘(7) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—For 
purposes 
of 
paragraph
(2)(D)(ii)(II)—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ means tuition, fees,
books, supplies, and equipment required for the
enrollment or attendance of—
‘‘(i) the taxpayer,
‘‘(ii) the taxpayer’s spouse, or
‘‘(iii) the taxpayer’s child (as defined
in section 151(c)(3)) or grandchild,
at an eligible educational institution (as defined
in section 135(c)(3)).
‘‘(B) COORDINATION WITH SAVINGS BOND
PROVISIONS.—The amount of qualified higher
education expenses for any taxable year shall be
reduced by any amount excludable from gross
income under section 135.’’.
(C) CONFORMING AMENDMENTS.—
(i) Subparagraph (B) of section
72(t)(2) is amended by striking ‘‘or (C)’’
and inserting ‘‘, (C), or (D)’’.
(ii) Section 401(k)(2)(B)(i) is amend-
ed by striking ‘‘or’’ at the end of subclause
(III), by striking ‘‘and’’ at the end of
subclause (IV) and inserting ‘‘or’’, and by
inserting after subclause (IV) the following
new subclause:
‘‘(V) subject to the limitation of
section 72(t)(2)(D)(ii), the date on
which qualified first-time homebuyer
distributions (as defined in section
72(t)(6)), distributions for qualified
higher education expenses (as defined
in section 72(t)(7)), or distributions
for investments described in section
72(t)(2)(D)(i)(III) are made, and’’.
(e) AMENDMENT
OF TARGETED JOBS CREDIT.—
Subparagraph (A) of section 51(i)(1) is amended by in-
serting ‘‘, or, if the taxpayer is an entity other than a
corporation, to any individual who owns, directly or indi-
rectly, more than 50 percent of the capital and profits in-
terests in the entity,’’ after ‘‘of the corporation’’.
(f) CARRYOVERS.—Subsection (c) of section 381 (re-
lating to carryovers in certain corporate acquisitions) is
amended by adding at the end the following new para-
graph:
‘‘(26) ENTERPRISE
ZONE
PROVISIONS.—The
acquiring corporation shall take into account (to the
extent proper to carry out the purposes of this sec-
tion and subchapter U, and under such regulations
as may be prescribed by the Secretary) the items re-
quired to be taken into account for purposes of sub-
chapter U in respect of the distributor or transferor
corporation.’’
SEC. 5. EFFECTIVE DATE.
The amendments made by this Act shall take effect
on the date of the enactment of this Act.
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