[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 235 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 235

   To amend the Internal Revenue Code of 1986 to encourage economic 
 development through the creation of additional empowerment zones and 
  enterprise communities and to encourage the cleanup of contaminated 
                           brownfield sites.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 30, 1997

Ms. Moseley-Braun (for herself, Mr. Abraham, Mr. D'Amato, Mr. Jeffords, 
 Mr. Lieberman, Mr. Daschle, and Mrs. Murray) introduced the following 
  bill; which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to encourage economic 
 development through the creation of additional empowerment zones and 
  enterprise communities and to encourage the cleanup of contaminated 
                           brownfield sites.

    Be it enacted by the Senate and House of Representatives 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 provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

                 TITLE I--ADDITIONAL EMPOWERMENT ZONES

SEC. 101. ADDITIONAL EMPOWERMENT ZONES.

    (a) In General.--Paragraph (2) of section 1391(b) (relating to 
designations of empowerment zones and enterprise communities) is 
amended--
            (1) by striking ``9'' and inserting ``11'',
            (2) by striking ``6'' and inserting ``8'', and
            (3) by striking ``750,000'' and inserting ``1,000,000''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act, except that 
designations of new empowerment zones made pursuant to such amendments 
shall be made during the 180-day period beginning on the date of the 
enactment of this Act.

       TITLE II--NEW EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES

SEC. 201. DESIGNATION OF ADDITIONAL EMPOWERMENT ZONES AND ENTERPRISE 
              COMMUNITIES.

    (a) In General.--Section 1391 (relating to designation procedure 
for empowerment zones and enterprise communities) is amended by adding 
at the end the following new subsection:
    ``(g) Additional Designations Permitted.--
            ``(1) In general.--In addition to the areas designated 
        under subsection (a)--
                    ``(A) Enterprise communities.--The appropriate 
                Secretaries may designate in the aggregate an 
                additional 80 nominated areas as enterprise communities 
                under this section, subject to the availability of 
                eligible nominated areas. Of that number, not more than 
                50 may be designated in urban areas and not more than 
                30 may be designated in rural areas.
                    ``(B) Empowerment zones.--The appropriate 
                Secretaries may designate in the aggregate an 
                additional 20 nominated areas as empowerment zones 
                under this section, subject to the availability of 
                eligible nominated areas. Of that number, not more than 
                15 may be designated in urban areas and not more than 5 
                may be designated in rural areas.
            ``(2) Period designations may be made.--A designation may 
        be made under this subsection after the date of the enactment 
        of this subsection and before January 1, 1999.
            ``(3) Modifications to eligibility criteria, etc.--
                    ``(A) Poverty rate requirement.--
                            ``(i) In general.--A nominated area shall 
                        be eligible for designation under this 
                        subsection only if the poverty rate for each 
                        population census tract within the nominated 
                        area is not less than 20 percent and the 
                        poverty rate for at least 90 percent of the 
                        population census tracts within the nominated 
                        area is not less than 25 percent.
                            ``(ii) Treatment of census tracts with 
                        small populations.--A population census tract 
                        with a population of less than 2,000 shall be 
                        treated as having a poverty rate of not less 
                        than 25 percent if--
                                    ``(I) more than 75 percent of such 
                                tract is zoned for commercial or 
                                industrial use, and
                                    ``(II) such tract is contiguous to 
                                1 or more other population census 
                                tracts which have a poverty rate of not 
                                less than 25 percent (determined 
                                without regard to this clause).
                            ``(iii) Exception for developable sites.--
                        Clause (i) shall not apply to up to 3 
                        noncontiguous parcels in a nominated area which 
                        may be developed for commercial or industrial 
                        purposes. The aggregate area of noncontiguous 
                        parcels to which the preceding sentence applies 
                        with respect to any nominated area shall not 
                        exceed 1,000 acres (2,000 acres in the case of 
                        an empowerment zone).
                            ``(iv) Certain provisions not to apply.--
                        Section 1392(a)(4) (and so much of paragraphs 
                        (1) and (2) of section 1392(b) as relate to 
                        section 1392(a)(4)) shall not apply to an area 
                        nominated for designation under this 
                        subsection.
                            ``(v) Special rule for rural empowerment 
                        zones and enterprise communities.--The 
                        Secretary of Agriculture may designate not more 
                        than 1 empowerment zone, and not more than 5 
                        enterprise communities, in rural areas without 
                        regard to clause (i) if such areas satisfy 
                        emigration criteria specified by the Secretary 
                        of Agriculture.
                    ``(B) Size limitation.--
                            ``(i) In general.--The parcels described in 
                        subparagraph (A)(iii) shall not be taken into 
                        account in determining whether the requirement 
                        of subparagraph (A) or (B) of section 
                        1392(a)(3) is met.
                            ``(ii) Special rule for rural areas.--If a 
                        population census tract (or equivalent division 
                        under section 1392(b)(4)) in a rural area 
                        exceeds 1,000 square miles or includes a 
                        substantial amount of land owned by the 
                        Federal, State, or local government, the 
                        nominated area may exclude such excess square 
                        mileage or governmentally owned land and the 
                        exclusion of that area will not be treated as 
                        violating the continuous boundary requirement 
                        of section 1392(a)(3)(B).
                    ``(C) Aggregate population limitation.--The 
                aggregate population limitation under the last sentence 
                of subsection (b)(2) shall not apply to a designation 
                under paragraph (1)(B).
                    ``(D) Previously designated enterprise communities 
                may be included.--Subsection (e)(5) shall not apply to 
                any enterprise community designated under subsection 
                (a) that is also nominated for designation under this 
                subsection.
                    ``(E) Indian reservations may be nominated.--
                            ``(i)Ingeneral.--Section1393(a)(4) shall 
                        not apply to an area nominated for designation 
                        under this subsection.
                            ``(ii) Special rule.--An area in an Indian 
                        reservation shall be treated as nominated by a 
                        State and a local government if it is nominated 
                        by the reservation governing body (as 
                        determined by the Secretary of Interior).''
    (b) Employment Credit Not To Apply to New Empowerment Zones.--
Section 1396 (relating to empowerment zone employment credit) is 
amended by adding at the end the following new subsection:
    ``(e) Credit Not To Apply to Empowerment Zones Designated Under 
Section 1391(g).--This section shall be applied without regard to any 
empowerment zone designated under section 1391(g).''
    (c) Increased Expensing Under Section 179 Not To Apply in 
Developable Sites.--Section 1397A (relating to increase in expensing 
under section 179) is amended by adding at the end the following new 
subsection:
    ``(c) Limitation.--For purposes of this section, qualified zone 
property shall not include any property substantially all of the use of 
which is in any parcel described in section 1391(g)(3)(A)(iii).''
    (d) Conforming Amendments.--
            (1) Subsections (e) and (f) of section 1391 are each 
        amended by striking ``subsection (a)'' and inserting ``this 
        section''.
            (2) Section 1391(c) is amended by striking ``this section'' 
        and inserting ``subsection (a)''.

SEC. 202. VOLUME CAP NOT TO APPLY TO ENTERPRISE ZONE FACILITY BONDS 
              WITH RESPECT TO NEW EMPOWERMENT ZONES.

    (a) In General.--Section 1394 (relating to tax-exempt enterprise 
zone facility bonds) is amended by adding at the end the following new 
subsection:
    ``(f) Bonds for Empowerment Zones Designated Under Section 
1391(g).--
            ``(1) In general.--In the case of a new empowerment zone 
        facility bond--
                    ``(A) such bond shall not be treated as a private 
                activity bond for purposes of section 146, and
                    ``(B) subsection (c) of this section shall not 
                apply.
            ``(2) Limitation on amount of bonds.--
                    ``(A) In general.--Paragraph (1) shall apply to a 
                new empowerment zone facility bond only if such bond is 
                designated for purposes of this subsection by the local 
                government which nominated the area to which such bond 
                relates.
                    ``(B) Limitation on bonds designated.--The 
                aggregate face amount of bonds which may be designated 
                under subparagraph (A) with respect to any empowerment 
                zone shall not exceed--
                            ``(i) $60,000,000 if such zone is in a 
                        rural area,
                            ``(ii) $130,000,000 if such zone is in an 
                        urban area and the zone has a population of 
                        less than 100,000, and
                            ``(iii) $230,000,000 if such zone is in an 
                        urban area and the zone has a population of at 
                        least 100,000.
                    ``(C) Special rules.--
                            ``(i) Coordination with limitation in 
                        subsection (c).--Bonds to which paragraph (1) 
                        applies shall not be taken into account in 
                        applying the limitation of subsection (c) to 
                        other bonds.
                            ``(ii) Current refunding not taken into 
                        account.--In the case of a refunding (or series 
                        of refundings) of a bond designated under this 
                        paragraph, the refunding obligation shall be 
                        treated as designated under this paragraph (and 
                        shall not be taken into account in applying 
                        subparagraph (B)) if--
                                    ``(I) the amount of the refunding 
                                bond does not exceed the outstanding 
                                amount of the refunded bond, and
                                    ``(II) the refunded bond is 
                                redeemed not later than 90 days after 
                                the date of issuance of the refunding 
                                bond.
            ``(3) New empowerment zone facility bond.--For purposes of 
        this subsection, the term `new empowerment zone facility bond' 
        means any bond which would be described in subsection (a) if 
        only empowerment zones designated under section 1391(g) were 
        taken into account under sections 1397B and 1397C.''
    (b) Effective Date.--The amendment made by this section shall apply 
to obligations issued after the date of the enactment of this Act.

SEC. 203. MODIFICATIONS TO ENTERPRISE ZONE FACILITY BOND RULES FOR ALL 
              EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES.

    (a) Modifications Relating to Enterprise Zone Business.--Paragraph 
(3) of section 1394(b) (defining enterprise zone business) is amended 
to read as follows:
            ``(3) Enterprise zone business.--
                    ``(A) In general.--Except as modified in this 
                paragraph, the term `enterprise zone business' has the 
                meaning given such term by section 1397B.
                    ``(B) Modifications.--In applying section 1397B for 
                purposes of this section--
                            ``(i) Businesses in enterprise communities 
                        eligible.--References in section 1397B to 
                        empowerment zones shall be treated as including 
                        references to enterprise communities.
                            ``(ii) Waiver of requirements during 
                        startup period.--A business shall not fail to 
                        be treated as an enterprise zone business 
                        during the startup period if--
                                    ``(I) as of the beginning of the 
                                startup period, it is reasonably 
                                expected that such business will be an 
                                enterprise zone business (as defined in 
                                section 1397B as modified by this 
                                paragraph) at the end of such period, 
                                and
                                    ``(II) such business makes bona 
                                fide efforts to be such a business.
                            ``(iii) Reduced requirements after testing 
                        period.--A business shall not fail to be 
                        treated as an enterprise zone business for any 
                        taxable year beginning after the testing period 
                        by reason of failing to meet any requirement of 
                        subsection (b) or (c) of section 1397B if at 
                        least 35 percent of the employees of such 
                        business for such year are residents of an 
                        empowerment zone or an enterprise community. 
                        The preceding sentence shall not apply to 
any business which is not a qualified business by reason of paragraph 
(1), (4), or (5) of section 1397B(d).
                    ``(C) Definitions relating to subparagraph (b).--
                For purposes of subparagraph (B)--
                            ``(i) Startup period.--The term `startup 
                        period' means, with respect to any property 
                        being provided for any business, the period 
                        before the first taxable year beginning more 
                        than 2 years after the later of--
                                    ``(I) the date of issuance of the 
                                issue providing such property, or
                                    ``(II) the date such property is 
                                first placed in service after such 
                                issuance (or, if earlier, the date 
                                which is 3 years after the date 
                                described in subclause (I)).
                            ``(ii) Testing period.--The term `testing 
                        period' means the first 3 taxable years 
                        beginning after the startup period.
                    ``(D) Portions of business may be enterprise zone 
                business.--The term `enterprise zone business' includes 
                any trades or businesses which would qualify as an 
                enterprise zone business (determined after the 
                modifications of subparagraph (B)) if such trades or 
                businesses were separately incorporated.''
    (b) Modifications Relating to Qualified Zone Property.--Paragraph 
(2) of section 1394(b) (defining qualified zone property) is amended to 
read as follows:
            ``(2) Qualified zone property.--The term `qualified zone 
        property' has the meaning given such term by section 1397C; 
        except that--
                    ``(A) the references to empowerment zones shall be 
                treated as including references to enterprise 
                communities, and
                    ``(B) section 1397C(a)(2) shall be applied by 
                substituting `an amount equal to 15 percent of the 
                adjusted basis' for `an amount equal to the adjusted 
                basis'.''
    (c) Effective Date.--The amendments made by this section shall 
apply to obligations issued after the date of the enactment of this 
Act.

SEC. 204. MODIFICATIONS TO ENTERPRISE ZONE BUSINESS DEFINITION FOR ALL 
              EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES.

    (a) In General.--Section 1397B (defining enterprise zone business) 
is amended--
            (1) by striking ``80 percent'' in subsections (b)(2) and 
        (c)(1) and inserting ``50 percent'',
            (2) by striking ``substantially all'' each place it appears 
        in subsections (b) and (c) and inserting ``a substantial 
        portion'',
            (3) by striking ``, and exclusively related to,'' in 
        subsections (b)(4) and (c)(3),
            (4) by adding at the end of subsection (d)(2) the following 
        new flush sentence:
        ``For purposes of subparagraph (B), the lessor of the property 
        may rely on a lessee's certification that such lessee is an 
        enterprise zone business.'',
            (5) by striking ``substantially all'' in subsection (d)(3) 
        and inserting ``at least 50 percent'', and
            (6) by adding at the end the following new subsection:
    ``(f) Treatment of Businesses Straddling Census Tract Lines.--For 
purposes of this section, if--
            ``(1) a business entity or proprietorship uses real 
        property located within an empowerment zone,
            ``(2) the business entity or proprietorship also uses real 
        property located outside the empowerment zone,
            ``(3) the amount of real property described in paragraph 
        (1) is substantial compared to the amount of real property 
        described in paragraph (2), and
            ``(4) the real property described in paragraph (2) is 
        contiguous to part or all of the real property described in 
        paragraph (1),
then all the services performed by employees, all business activities, 
all tangible property, and all intangible property of the business 
entity or proprietorship that occur in or is located on the real 
property described in paragraphs (1) and (2) shall be treated as 
occurring or situated in an empowerment zone.''
    (b) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning on or after the date of the 
        enactment of this Act.
            (2) Special rule for enterprise zone facility bonds.--For 
        purposes of section 1394(b) of the Internal Revenue Code of 
        1986, the amendments made by this section shall apply to 
        obligations issued after the date of the enactment of this Act.

        TITLE III--EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS

SEC. 301. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

    (a) In General.--Part VI of subchapter B of chapter 1 is amended by 
adding at the end the following new section:

``SEC. 198. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

    ``(a) In General.--A taxpayer may elect to treat any qualified 
environmental remediation expenditure which is paid or incurred by the 
taxpayer as an expense which is not chargeable to capital account. Any 
expenditure which is so treated shall be allowed as a deduction for the 
taxable year in which it is paid or incurred.
    ``(b) Qualified Environmental Remediation Expenditure.--For 
purposes of this section--
            ``(1) In general.--The term `qualified environmental 
        remediation expenditure' means any expenditure--
                    ``(A) which is otherwise chargeable to capital 
                account, and
                    ``(B) which is paid or incurred in connection with 
                the abatement or control of hazardous substances at a 
                qualified contaminated site.
            ``(2) Special rule for expenditures for depreciable 
        property.--Such term shall not include any expenditure for the 
        acquisition of property of a character subject to the allowance 
        for depreciation which is used in connection with the abatement 
        or control of hazardous substances at a qualified contaminated 
        site; except that the portion of the allowance under section 
        167 for such property which is otherwise allocated to such site 
        shall be treated as a qualified environmental remediation 
        expenditure.
    ``(c) Qualified Contaminated Site.--For purposes of this section--
            ``(1) Qualified contaminated site.--
                    ``(A) In general.--The term `qualified contaminated 
                site' means any area--
                            ``(i) which is held by the taxpayer for use 
                        in a trade or business or for the production of 
                        income, or which is property described in 
                        section 1221(1) in the hands of the taxpayer,
                            ``(ii) which is within a targeted area, and
                            ``(iii) which contains (or potentially 
                        contains) any hazardous substance.
                    ``(B) Taxpayer must receive statement from state 
                environmental agency.--An area shall be treated as a 
                qualified contaminated site with respect to 
                expenditures paid or incurred during any taxable year 
                only if the taxpayer receives a statement from the 
                appropriate agency of the State in which such area is 
                located that such area meets the requirements of 
                clauses (ii) and (iii) of subparagraph (A).
                    ``(C) Appropriate state agency.-- For purposes of 
                subparagraph (B), the appropriate agency of a State is 
                the agency designated by the Administrator of the 
                Environmental Protection Agency for purposes of this 
                section. If no agency of a State is designated under 
                the preceding sentence, the appropriate agency for such 
                State shall be the Environmental Protection Agency.
            ``(2) Targeted area.--
                    ``(A) In general.--The term `targeted area' means--
                            ``(i) any population census tract with a 
                        poverty rate of not less than 20 percent,
                            ``(ii) a population census tract with a 
                        population of less than 2,000 if--
                                    ``(I) more than 75 percent of such 
                                tract is zoned for commercial or 
                                industrial use, and
                                    ``(II) such tract is contiguous to 
                                1 or more other population census 
                                tracts which meet the requirement of 
                                clause (i) without regard to this 
                                clause,
                            ``(iii) any empowerment zone or enterprise 
                        community (and any supplemental zone designated 
                        on December 21, 1994), and
                            ``(iv) any site announced before February 
                        1, 1997, as being included as a brownfields 
                        pilot project of the Environmental Protection 
                        Agency.
                    ``(B) National priorities listed sites not 
                included.--Such term shall not include any site which 
                is on the national priorities list under section 
                105(a)(8)(B) of the Comprehensive Environmental 
                Response, Compensation, and Liability Act of 1980 (as 
in effect on the date of the enactment of this section).
                    ``(C) Certain rules to apply.--For purposes of this 
                paragraph, the rules of sections 1392(b)(4) and 
                1393(a)(9) shall apply.
                    ``(D) Treatment of certain sites.--For purposes of 
                this paragraph, a single contaminated site shall be 
                treated as within a targeted area if--
                            ``(i) a substantial portion of the site is 
                        located within a targeted area described in 
                        subparagraph (A) (determined without regard to 
                        this subparagraph), and
                            ``(ii) the remaining portions are 
                        contiguous to, but outside, such targeted area.
    ``(d) Hazardous Substance.--For purposes of this section--
            ``(1) In general.--The term `hazardous substance' means--
                    ``(A) any substance which is a hazardous substance 
                as defined in section 101(14) of the Comprehensive 
                Environmental Response, Compensation, and Liability Act 
                of 1980, and
                    ``(B) any substance which is designated as a 
                hazardous substance under section 102 of such Act.
            ``(2) Exception.--Such term shall not include any substance 
        with respect to which a removal or remedial action is not 
        permitted under section 104 of such Act by reason of subsection 
        (a)(3) thereof.
    ``(e) Deduction Recaptured as Ordinary Income on Sale, Etc.--Solely 
for purposes of section 1245, in the case of property to which a 
qualified environmental remediation expenditure would have been 
capitalized but for this section--
            ``(1) the deduction allowed by this section for such 
        expenditure shall be treated as a deduction for depreciation, 
        and
            ``(2) such property (if not otherwise section 1245 
        property) shall be treated as section 1245 property solely for 
        purposes of applying section 1245 to such deduction.
    ``(f) Coordination With Other Provisions.--Sections 280B and 468 
shall not apply to amounts which are treated as expenses under this 
section.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''
    (b) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 is amended by adding at the end the following 
new item:

                              ``Sec. 198. Expensing of environmental 
                                        remediation costs.''
    (c) Effective Date.--The amendments made by this section shall 
apply to expenditures paid or incurred after the date of the enactment 
of this Act, in taxable years ending after such date.
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