‘‘(A) the DC high unemployment area is 
hereby designated as the DC Employment Tar-
get Area, and 
‘‘(B) except as otherwise provided in this 
subchapter, the DC Employment Target Area 
shall be treated as an empowerment zone des-
ignated under subchapter U for purposes of 
sections 51 and 1396 (and for purposes of ap-
plying this subchapter and subchapter U with 
respect to such sections). 
‘‘(2) DC HIGH
UNEMPLOYMENT
AREA.—For 
purposes of this section, the term ‘DC high unem-
ployment area’ means the census tracts— 
‘‘(A) which are located in the District of 
Columbia, and 
‘‘(B) for which the unemployment rate is 
not less than 10 percent as determined on the 
basis of the 2000 census. 
‘‘(3) SPECIAL RULE FOR APPLICATION OF EM-
PLOYMENT CREDIT.—With respect to the DC Em-
ployment Target Area, section 1396(d)(1)(A) (relat-
ing to empowerment zone employment credit) shall 
be applied by substituting ‘the District of Columbia’ 
for ‘an empowerment zone’. 
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‘‘(c) DEFINITIONS.—For purposes of this sub-
chapter— 
‘‘(1) DC DEVELOPMENT TARGET AREA.—The 
term ‘DC Development Target Area’ means the DC 
Development Target Area designated by subsection 
(a). 
‘‘(2) DC EMPLOYMENT
TARGET
AREA.—The 
term ‘DC Employment Target Area’ means the DC 
Employment Target Area designated by subsection 
(b). 
‘‘(d) TIME
FOR WHICH DESIGNATIONS APPLICA-
BLE.— 
‘‘(1) IN GENERAL.—The designations made by 
subsections (a) and (b) shall apply for the period be-
ginning on January 1, 2006, and ending on Decem-
ber 31, 2009. 
‘‘(2) COORDINATION
WITH
DC
ENTERPRISE 
COMMUNITY DESIGNATED UNDER SUBCHAPTER U.— 
With respect to the portions of the census tracts re-
ferred to in subsection (a)(2)(A)(i) which are in the 
modified DC area— 
‘‘(A) section 1400(f)(2) shall not apply, 
and 
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‘‘(B) the designation under subchapter U 
of such portions shall terminate on December 
31, 2009.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) 
Section 
1202(a)(2)(D) 
and 
section 
1397B(b)(1) of such Code are each amended by 
striking ‘‘The District of Columbia Enterprise Zone’’ 
and inserting ‘‘The DC Development Target Area 
(as defined in section 1400) and the DC Zone (as 
defined in section 1400, as in effect on December 
31, 2005)’’. 
(2) The heading of subchapter W of chapter 1 
of such Code is amended by striking ‘‘Enterprise 
Zone’’ and inserting ‘‘Target Areas’’. 
(3) The item relating to section 1400 in the 
table of sections for subchapter W of chapter 1 of 
such Code is amended to read as follows: 
‘‘Sec. 1400. Establishment of DC Target Areas.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on January 1, 2006. 
SEC. 3. REPEAL OF SPECIAL RULES RELATED TO TAX-EX-
EMPT ENTERPRISE ZONE FACILITY BONDS. 
(a) IN GENERAL.—Section 1400A of the Internal 
Revenue Code of 1986 (relating to tax-exempt economic 
development bonds) is hereby repealed. 
(b) CONFORMING AMENDMENTS.— 
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(1) Subparagraph (B) of section 1394(f)(3) of 
such Code is amended by striking ‘‘(other than the 
District of Columbia Enterprise Zone)’’. 
(2) The table of sections for subchapter W of 
chapter 1 of such Code is amended by striking the 
item relating to section 1400A. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to obligations issued after Decem-
ber 31, 2005. 
SEC. 4. ZERO PERCENT CAPITAL GAINS RATE ON CERTAIN 
DC ASSETS. 
(a) IN GENERAL.—Section 1400B of the Internal 
Revenue Code of 1986 (relating to zero percent capital 
gains rate) is amended to read as follows: 
‘‘SEC. 1400B. ZERO PERCENT CAPITAL GAINS RATE ON CER-
TAIN DC ASSETS. 
‘‘(a) EXCLUSION.—Gross income shall not include 
qualified capital gain from the sale or exchange of any 
expanded DC Zone asset held for more than 5 years. 
‘‘(b) EXPANDED DC ZONE ASSET.— For purposes 
of this section— 
‘‘(1) IN
GENERAL.—The term ‘expanded DC 
Zone asset’ means— 
‘‘(A) any expanded DC Zone business 
stock, 
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‘‘(B) any expanded DC Zone partnership 
interest, and 
‘‘(C) any expanded DC Zone business 
property. 
‘‘(2) EXPANDED DC ZONE BUSINESS STOCK.— 
‘‘(A) IN GENERAL.—The term ‘expanded 
DC Zone business stock’ means any stock in a 
domestic corporation which is originally issued 
after December 31, 1997, if— 
‘‘(i) such stock is acquired by the tax-
payer, before January 1, 2010, at its origi-
nal issue (directly or through an under-
writer) solely in exchange for cash, 
‘‘(ii) as of the time such stock was 
issued, such corporation was an expanded 
DC Zone business (or, in the case of a new 
corporation, such corporation was being or-
ganized for purposes of being an expanded 
DC Zone business), and 
‘‘(iii) during substantially all of the 
taxpayer’s holding period for such stock, 
such corporation qualified as an expanded 
DC Zone business. 
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