The EZ/EC and RC programs target federal grant monies to public and private entities, tax benefits to businesses, or both in order to improve conditions in competitively selected, economically distressed communities. To be considered for these programs, areas must be nominated by one or more local governments and the state or states in which they are located. Areas on Indian reservations must be nominated by the reservation’s governing body. Congress authorized the EZ/EC and RC programs under four separate acts of legislation (see table 1). To date, Congress has authorized the designation of three rounds of EZs, two rounds of ECs, and one round of RCs. See appendix II for a list of all designated communities. The Omnibus Budget Reconciliation Act of 1993 authorized the number of EZ/EC designations to be awarded in the first round of the program, as well as the benefits that the designated communities would receive. The legislation authorized the special use of $1 billion in Social Services Block Grant funds for the EZ/EC program. It also established three tax benefits for businesses in the designated communities: (1) a tax credit for wages paid to employees who both live and work in an EZ, (2) an increased expensing deduction for depreciable property, and (3) tax-exempt bonds. At the same time that the Department of Housing and Urban Development (HUD) and the U.S. Department of Agriculture (USDA) announced the Round I designations, HUD created two additional designations— Supplemental Empowerment Zones and Enhanced Enterprise Communities. Unlike EZs or ECs, these designations were not legislatively mandated. Rather, they were awarded to communities that had been nominated for but did not receive EZ designations. HUD designated two communities as Supplemental Empowerment Zones and four communities as Enhanced Enterprise Communities. HUD provided these communities with certain grants and loan guarantees, which can be used for activities eligible under the Community Development Block Grant program. The second round of EZ/EC designations and the benefits those designees would receive were authorized by two acts of legislation—the Taxpayer Relief Act of 1997 and the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999. However, neither act authorized block grant funding for Round II EZs and ECs. Instead, Round II EZs and ECs received annual appropriations through HUD and USDA appropriations bills each year from 1999 to 2004. The Community Renewal Tax Relief Act of 2000 enhanced the tax benefits available to businesses in newly designated EZs and made these new tax benefits available to EZs that had been designated in previous rounds, but not to ECs. The legislation also did not make any appropriations or grant funds available to Round III EZs or to RCs. However, in January 2004, the Consolidated Appropriations Act of 2004 appropriated a total of $994,100 to Round III rural EZs. This legislation did not make any funding available to Round III urban EZs or RCs. Four federal agencies are responsible for administering the programs: HUD oversees the EZ/EC program in urban areas, administers the grants to Round II urban EZs, and oversees the RC program in both urban and rural areas. USDA oversees the EZ/EC program in rural areas and administers the grants to Round II rural EZ/ECs and Round III EZs. The Department of Health and Human Services (HHS) administers the Social Services Block Grant funds to communities designated in Round I of the EZ/EC program. The Internal Revenue Service (IRS) is responsible for administering the tax benefits available under the EZ/EC and RC programs. Although the EZ/EC and RC programs have similar goals and objectives, several features of the programs vary within the EZ/EC program by round and between the EZ/EC and RC programs. The EZ/EC and RC programs share the goal of improving conditions in distressed communities by reducing unemployment and fostering investment in designated areas. However, certain administrative mechanisms, eligibility requirements, selection criteria, and benefits vary among EZ/EC rounds and between the EZ/EC and RC programs. Although the legislation that created the EZ/EC and RC programs does not explicitly state the goals for these programs, HUD’s and USDA’s performance plans suggest that the goals of the programs are similar. According to HUD’s Annual Performance Plan for Fiscal Year 2004, the EZ/EC and RC programs are contained within its strategic goal to strengthen communities. Similarly, in its Fiscal Year 2004 Annual Performance Plan and Revised Plan for Fiscal Year 2003, USDA includes the EZ/EC program under the strategic goal to “support increased economic opportunities and improved quality of life in rural America.” HUD’s and USDA’s implementing regulations for the EZ/EC program include a statement of their “objective and purpose,” each of which generally states that the EZ/EC program is intended to reduce unemployment and promote the revitalization of economically distressed areas. HUD’s regulations implementing the RC program do not have an objective and purpose statement; however, HUD’s guidance states that the RC program is intended “to foster investment in the designated areas, which are some of the most severely distressed and development-resistant areas in the Nation.” Further, HUD program officials have stated that they regard the RC program as pursuing the same objective and purpose as the EZ/EC program, but relying on different methods. Certain features designed to help in the administration of the EZ/EC and RC programs varied by round in the EZ/EC program and between the EZ/EC and RC programs. To facilitate federal interagency coordination in the EZ/EC program, a 26-member Community Empowerment Board was established in 1993, with the U.S. Vice President as its chair and cabinet secretaries and other high-ranking federal officials as members. The board’s function was to consult in the designation of Round I and II EZs and ECs and coordinate the various federal agency resources that EZs and ECs would use to implement their strategic plans. For example, the Community Empowerment Board encouraged other agencies to provide preference points to EZs and ECs in selection competitions for other federal programs. The Community Empowerment Board was disbanded prior to Round III of the EZ program. In 2000, the legislation creating the RC program established a seven- member Advisory Council on Community Renewal to advise the HUD Secretary on the selection of designees and the operation of the RC program. Unlike the Community Empowerment Board, the Advisory Council does not have federal interagency membership. Instead, the members of the Advisory Council include individuals from nonprofit and for-profit organizations who are appointed by the HUD Secretary. The legislation that created it required the Advisory Council to hold hearings “as appropriate,” obtain data from federal agencies, and submit a report containing a detailed statement of the council’s findings and conclusions and any recommendations to the HUD Secretary by September 30, 2003. HUD officials expect an interim report from the Advisory Council to be released sometime in February 2004 and the final report in October 2004. Communities nominated for EZ/EC or RC designations have been required to meet certain eligibility requirements based largely on the socioeconomic characteristics of the residents living in the nominated areas. Specifically, nominated census tracts have been required to meet statutory or regulatory requirements for (1) poverty in each census tract, (2) overall unemployment, (3) total population, (4) total area in square miles (in the case of the EZ/EC program), and (5) general distress. In most cases, these requirements were based on 1990 census data. The levels required for eligibility differed by round, by program, and between urban and rural nominees. For example, the statutory requirements for poverty differed between Round I and subsequent rounds of the EZ/EC program, and between the EZ/EC program and the RC program. In the absence of statutory guidelines, HUD and USDA regulations defined other eligibility requirements differently (see table 2). For example, the requirements for unemployment differed between urban and rural nominees and between the EZ/EC program and the RC program. The population requirements also differed between urban and rural nominees and by program. Finally, communities nominated for the EZ/EC program were required to meet area requirements, while RC nominees were not. Nominated communities were also required to show conditions of general distress. Because the legislation did not define the term “general distress,” HUD and USDA each provided communities with lists of potential indicators containing criteria that could be used to meet this requirement. HUD provided Round I urban EZs and ECs with a list of six indicators and communities in Rounds II and III of the EZ/EC program and the RC program with a list of 17 indicators. USDA provided Round I, II, and III rural EZs and ECs with a list of 14 indicators. For example, USDA’s Round I list included indicators not included in HUD’s Round I list, such as a below-average or declining per capita income, earnings per worker, per capita property tax base, and average years of school completed. USDA, in turn, did not include homelessness as an indicator of general distress, while HUD included homelessness. As a part of the EZ/EC eligibility requirements, nominated communities were also required to submit a strategic plan. The strategic plan had to follow the four key principles of the EZ/EC program, which were established by HUD and USDA in their regulations: Economic opportunity—including job creation within the community; supporting entrepreneurship; small business expansion; and job training, job readiness, and job support services.