Title: Economic Development Act for Distressed Zones of 2019
Policy area: Taxation

Summary:
Economic Development Act for Distressed Zones of 2019
This bill provides various tax credits related to economically distressed zones and establishes a procedure for state and local governments to apply for such zone designation.
Specifically, the bill provides credits to taxpayers in an economically distressed zone based on the amount of (1) wages paid by an employer to employees, (2) depreciation and amortization allowances for business property, and (3) trade or business payments made for purchases of services or property.
The bill also allows state and local governments to apply for a population census tract under their ambit to be designated as an economically distressed zone

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1525 Introduced in House (IH)]

<DOC>






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 Gonzalez-Colon 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 Representatives 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 Revenue Code of 1986 is 
amended by adding at the end the following new subchapter:

             ``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 CREDIT.

    ``(a) Allowance of Credit.--There shall be allowed 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 taxpayer'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 depreciation and 
        amortization allowances for the taxable 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 payments made by 
        the taxpayer in course of a trade or business for purchases of 
        services or tangible property from an unrelated person (40 
        percent in the 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 credit under this section may not be 
taken into account in determining the credit under sections 41, and any 
other provision determined by the Secretary to be substantially 
similar.
    ``(c) Definitions and Special Rules.--For purposes 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 conduct 
                        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 economically 
                        distressed zone.
                    ``(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 employees, 
                        etc.--If--
                                    ``(I) any employee is not employed 
                                by the taxpayer on a substantially 
                                full-time basis at all times during the 
                                taxable year, or
                                    ``(II) the principal place of 
                                employment of any employee is not 
                                within 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).
                    ``(C) Treatment of certain employees.--The term 
                `qualified economically distressed zone wages' shall 
                not include any wages paid to employees who are 
                assigned by the employer 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 aggregate 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 annuity 
                        plan.
                            ``(ii) Employer-provided coverage under any 
                        accident or health plan for employees.
                            ``(iii) The cost of life or disability 
                        insurance provided to employees.
                    ``(B) Allocation.--For purposes of subparagraph 
                (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 
                                individual is the president or chief 
                                executive officer (or a substantially 
                                equivalent position).
                    ``(B) Qualified individual.--The term `qualified 
                individual' means any individual who--
                            ``(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 affiliated 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 
                economically distressed zone.
                    ``(C) Related persons.--Persons shall be treated as 
                related to each other if such persons would be treated 
                as a single employer under the regulations prescribed 
                under section 52(b).

``SEC. 1400AA-2. DESIGNATION OF ECONOMICALLY DISTRESSED ZONES.

    ``(a) In General.--For purposes of this subchapter, the term 
`economically distressed zone' means any population census tract 
which--
            ``(1) has pervasive poverty, unemployment, low labor force 
        participation, and general distress measured as a prolonged 
        period of economic decline measured by real gross national 
        product,
            ``(2) has a poverty rate of not less than 35 percent, and
            ``(3) has been designated as such by the Secretary and the 
        Secretary of Commerce pursuant to an application under 
        subsection (b).
    ``(b) Application for Designation.--
            ``(1) In general.--An application for designation as an 
        economically distressed zone may be filed by a State or local 
        government in which the population 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, Management, and 
                Economic Stability Act, or
                    ``(B) a strategic plan for accomplishing the 
                purposes of this subchapter, which--
                            ``(i) describes the coordinated economic, 
                        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 implementing 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 centers, and other 
                        private and public entities,
                            ``(iv) identifies the funding requested 
                        under any Federal program in support of the 
                        proposed economic, human, community, and 
                        physical development and related activities,
                            ``(v) identifies baselines, methods, and 
                        benchmarks for measuring the success of 
                        carrying out the strategic plan, including the 
                        extent to which poor persons and families will 
                        be empowered to become economically 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 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 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 subsidiary is being established with 
                                the intention of closing down the 
                                operations of the existing business 
                                entity in the area of its original 
                                location or in any other area where the 
                                existing business entity conducts 
                                business operation, and
                                    ``(III) includes such other 
                                information as may be required by the 
                                Secretary and the Secretary of 
                                Commerce.
    ``(c) Period for Which Designations Are in Effect.--Designation as 
an economically distressed zone may be made at any time during the 10-
year period beginning 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.
                                 <all>