[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 3827 Introduced in Senate (IS)]








109th CONGRESS
  2d Session
                                S. 3827

  To amend the Internal Revenue Code of 1986 to extend and expand the 
  benefits for businesses operating in empowerment zones, enterprise 
      communities, or renewal communities, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             August 3, 2006

Mrs. Lincoln (for herself, Ms. Snowe, Mr. Schumer, Mr. Rockefeller, Ms. 
Landrieu, Mrs. Clinton, and Mr. Vitter) 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 extend and expand the 
  benefits for businesses operating in empowerment zones, enterprise 
      communities, or renewal communities, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    (a) Short Title.--This Act may be cited as the ``Empowerment Zone 
and Renewal Community Enhancement Act of 2006''.
    (b) 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.

SEC. 2. EXTENSION OF BENEFITS.

    (a) Empowerment Zones and Enterprise Communities.--
            (1) Rounds i and ii designations.--Subsection (d)(1)(A)(i) 
        of section 1391 is amended--
                    (A) by striking ``December 31, 2009'' and inserting 
                ``December 31, 2015'', and
                    (B) by adding at the end the following new flush 
                sentence:
        ``For purposes of section 1396, subparagraph (A) shall be 
        applied by substituting `December 31, 2009' for `December 31, 
        2015' in the case of designations made under subsection (a).''.
            (2) Round iii designations.--Subsection (h)(2) of section 
        1391 is amended by striking ``December 31, 2009'' and inserting 
        ``December 31, 2015''.
    (b) Renewal Communities.--
            (1) Sections 1400E(b) and 1400I(g) are each amended by 
        striking ``December 31, 2009'' and inserting ``December 31, 
        2015''.
            (2) Sections 1400E(b)(3), 1400F(b), and 1400J(b) are each 
        amended by striking ``January 1, 2010'' and inserting ``January 
        1, 2016''.
            (3) Section 1400F(d) is amended--
                    (A) by striking ``December 31, 2010'' and inserting 
                ``December 31, 2016'', and
                    (B) by striking ``December 31, 2014'' and inserting 
                ``December 31, 2020''.
            (4) Section 1400I(d)(2)(A) is amended by striking ``2010'' 
        and inserting ``2016''.

SEC. 3. REVISION OF BENEFITS.

    (a) Safe Harbor for Meeting Requirement That 35 Percent of 
Employees Be Residents of Zone.--Paragraph (2) of section 1394(b) 
(defining enterprise zone facility) is amended by adding at the end the 
following new subparagraph:
                    ``(D) Additional safe harbor for meeting 
                requirement that 35 percent of employees be residents 
                of zone.--The requirements of subsections (b)(6) and 
                (c)(7) of section 1397C shall not fail to be treated as 
                met for any period with respect to a qualified business 
                if--
                            ``(i) as of the date of issuance of the 
                        issue, it is reasonably expected that within 3 
                        years after such date the business will 
                        increase employment by at least the lesser of--
                                    ``(I)(aa) 500 full-time employees 
                                in the case of a business located in a 
                                renewal community or in a rural area 
                                (as defined in section 1393(a)(2)) in 
                                an empowerment zone or enterprise 
                                community, or
                                    ``(bb) 1,000 full-time employees in 
                                the case of a business located outside 
                                a rural area (as so defined) in an 
                                empowerment zone or enterprise 
                                community, or
                                    ``(II) 10 percent of the number of 
                                full-time employees estimated to have 
                                been employed in such zone or community 
                                on the date of its designation,
                            ``(ii) as of the date of issuance of the 
                        issue, it is reasonably expected that as a 
                        result of the bonds the business will increase 
                        employment by at least one job for each 
                        $150,000 in face amount of the issue,
                            ``(iii) at any time within 3 years after 
                        the date of issuance of the issue, the 
                        requirements of such subsections are met, or
                            ``(iv) the business enters into a binding 
                        agreement with the appropriate local government 
                        employment agency to apply a first source rule 
                        to advertise and prioritize employment 
                        opportunities with such business for qualified 
                        residents of such zone or community.''.
    (b) Eligibility of Businesses Developing or Holding Intangibles.--
Paragraph (4) of section 1397C(d) is amended by inserting before the 
period ``unless the intangibles are developed within the empowerment 
zone''.
    (c) Reduced Wage Credit Allowable for Zone Residents Employed 
Outside the Zone; Employees Need Not Be Residents of Zone in Which 
Employed.--
            (1) In general.--Subsection (b) of section 1396 is amended 
        to read as follows:
    ``(b) Applicable Percentage.--
            ``(1) Qualified zone employees who perform substantially 
        all of their services in an empowerment zone.--The applicable 
        percentage is 20 percent with respect to qualified zone 
        employees who would meet the requirement of subsection (d)(1) 
        if only services performed within an empowerment zone were 
        taken into account.
            ``(2) Other qualified zone employees.--
                    ``(A) In general.--The applicable percentage is--
                            ``(i) 20 percent in the case of designated 
                        qualified zone employees of employers which are 
                        enterprise zone businesses, and
                            ``(ii) 10 percent in the case of any other 
                        designated qualified zone employee.
                    ``(B) Limitations on number of designated 
                employees.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), the term `designated 
                        qualified zone employee' means a qualified zone 
                        employee--
                                    ``(I) to whom paragraph (1) does 
                                not apply, and
                                    ``(II) who is designated under this 
                                subparagraph.
                            ``(ii) Manner of designations.--
                        Designations under this subparagraph shall be 
                        made by the local government or governments 
                        which nominated the area to be an empowerment 
                        zone.
                            ``(iii) Limitation on designations.--The 
                        number of employees for whom a designation 
                        under this subparagraph is in effect at any one 
                        time with respect to each empowerment zone 
                        shall not exceed--
                                    ``(I) 500 for purposes of 
                                subparagraph (A)(i), and
                                    ``(II) 2,000 for purposes of 
                                subparagraph (A)(ii).''.
            (2) Qualified zone employee.--Paragraph (1) of section 
        1396(d) is amended--
                    (A) by striking ``within an empowerment zone'' in 
                subparagraph (A), and
                    (B) by striking ``such empowerment zone'' in 
                subparagraph (B) and inserting ``an empowerment zone''.
    (d) Carryforward of Unallocated State Commercial Revitalization 
Expenditure Ceiling.--Paragraph (1) of section 1400I(d) is amended to 
read as follows:
            ``(1) In general.--The aggregate commercial revitalization 
        expenditure amount which a commercial revitalization agency may 
        allocate for any calendar year is the amount equal to the sum 
        of--
                    ``(A) the amount of the State commercial 
                revitalization expenditure ceiling determined under 
                this paragraph for such calendar year for such agency 
                (determined without regard to subparagraph (B)), and
                    ``(B) the aggregate of the unused State commercial 
                revitalization expenditure ceilings determined under 
                this paragraph for such agency for each of the 2 
                preceding calendar years.
        For purposes of subparagraph (B), amounts of expenditure 
        ceiling shall be treated as allocated by an agency first from 
        unused amounts for the second preceding calendar year, then 
        from unused amounts for the 1st preceding calendar year, and 
        then from amounts from the current year State allocation.''.
    (e) Authority To Expand Boundaries of Zones and Communities.--
            (1) Empowerment zones and enterprise communities.--Section 
        1391 is amended by adding at the end the following new 
        subsection:
    ``(i) Authority To Expand Boundaries of Designated Areas.--
            ``(1) In general.--At the request of all governments which 
        nominated an area as an empowerment zone or enterprise 
        community, the appropriate Secretary may expand the area of 
        such zone or community to include 1 or more noncontiguous areas 
        if such governments establish to the satisfaction of the 
        appropriate Secretary that such expansion furthers the purposes 
        of the designation of the initial area as such a zone or 
        community.
            ``(2) Rural areas.--With respect to any empowerment zone or 
        enterprise community located in a rural area, at the request of 
        the nominating local government, the appropriate Secretary 
        shall expand the area of such zone or community to include the 
        entire area of such nominating local government, but only if--
                    ``(A) the poverty rate and the unemployment rate 
                for such entire area as determined by the 2000 
                decennial census data was at least 110 percent of such 
                rate for the United States,
                    ``(B) during the period beginning with the 1990 
                decennial census and ending with the 2000 decennial 
                census, such entire area has a net outmigration of 
                inhabitants of at least 10 percent of the population of 
                such area, and
                    ``(C) such entire area meets 1 or more of the 
                following criteria determined by the 2000 decennial 
                census data:
                            ``(i) Median household income is not more 
                        than 70 percent of such income for the United 
                        States.
                            ``(ii) Per capita income is not more than 
                        75 percent of such income for the United 
                        States.
                            ``(iii) The percentage of such area's 
                        population which is disabled is at least 130 
                        percent of such percentage for the United 
                        States.''.
            (2) Renewal communities.--Section 1400E is amended by 
        adding at the end the following new subsection:
    ``(h) Authority To Expand Boundaries of Designated Areas.--
            ``(1) In general.--At the request of all governments which 
        nominated an area as a renewal community, the Secretary of 
        Housing and Urban Development may expand the area of such 
        community to include 1 or more noncontiguous areas if such 
        governments establish to the satisfaction of such Secretary 
        that such expansion furthers the purposes of the designation of 
        the initial area as a renewal community.
            ``(2) Rural areas.--With respect to any renewal community 
        located in a rural area, at the request of the nominating local 
        government, the appropriate Secretary shall expand the area of 
        such community to include the entire area of such nominating 
        local government, but only if--
                    ``(A) the poverty rate and the unemployment rate 
                for such entire area as determined by the 2000 
                decennial census data was at least 110 percent of such 
                rate for the United States,
                    ``(B) during the period beginning with the 1990 
                decennial census and ending with the 2000 decennial 
                census, such entire area has a net outmigration of 
                inhabitants of at least 10 percent of the population of 
                such area, and
                    ``(C) such entire area meets 1 or more of the 
                following criteria determined by the 2000 decennial 
                census data:
                            ``(i) Median household income is not more 
                        than 70 percent of such income for the United 
                        States.
                            ``(ii) Per capita income is not more than 
                        75 percent of such income for the United 
                        States.
                            ``(iii) The percentage of such area's 
                        population which is disabled is at least 130 
                        percent of such percentage for the United 
                        States.''.
    (f) Modification of Requirement for Expanding Designated Area Based 
on 2000 Census.--Clause (ii) of section 1400E(g)(1)(A) is amended to 
read as follows:
                            ``(ii) such tract has a poverty rate using 
                        2000 census data--
                                    ``(I) which is at least 20 percent, 
                                or
                                    ``(II) which exceeds the poverty 
                                rate for such tract using 1990 census 
                                data.''.
    (g) Repeal of Exclusion of Central Business District From 
Eligibility as Designated Area.--Paragraph (3) of section 1392(a) is 
amended by adding ``and'' at the end of subparagraph (B), by striking 
``, and'' at the end of subparagraph (C) and inserting a period, and by 
striking subparagraph (D).
    (h) Carryover of Unused Increased Section 179 Expensing Limit.--
            (1) In general.--Subparagraph (A) of section 1397A(a)(1) is 
        amended to read as follows:
                    ``(A) the sum of--
                            ``(i) $35,000, and
                            ``(ii) the aggregate of the unused 
                        increased limitations for each of the 2 
                        preceding taxable years, or''.
            (2) Unused increased limitation.--Section 1392 is amended 
        by adding at the end the following new subsection:
    ``(c) Unused Increased Limitation.--For purposes of subsection 
(a)(1)(A)--
            ``(1) In general.--The unused increased limitation for any 
        taxable year is the excess (but not more than $35,000) of the 
        limitation under section 179(b)(1) as increased under 
        subsection (a) over the cost of section 179 property which is 
        qualified zone property placed in service during the taxable 
        year.
            ``(2) Ordering rule.--The limitation under section 
        179(b)(1) as increased under subsection (a) shall be treated as 
        used first from unused limitation for the second preceding 
        calendar year, then from unused limitation for the 1st 
        preceding calendar year, and then from such limitation for the 
        current year.''.
    (i) Election of Financing Arrangement in Lieu of Tax Benefits.--
Section 1396 is amended by adding at the end the following new 
subsection:
    ``(e) Election of Financing Arrangement in Lieu of Tax Benefits.--
            ``(1) In general.--At the election of any significant 
        empowerment zone business, for the payment period of the debt 
        obligation designated in such election by such business--
                    ``(A) such business--
                            ``(i) shall not be treated as an enterprise 
                        zone business for purposes of section 1396, and
                            ``(ii) shall not be allowed any deduction 
                        for depreciation under section168 with respect 
                        to qualified zone property, and
                    ``(B) the Secretary shall make the payments 
                described in paragraph (2) to the holder of such debt 
                obligation.
            ``(2) Payments.--
                    ``(A) In general.--At the beginning of each year of 
                the payment period, the Secretary shall pay (out of any 
                money in the Treasury not otherwise appropriated) to 
                the holder of the debt obligation designated by such 
                zone business an amount equal to the value of the tax 
                benefits under this chapter for such year to which such 
                zone business would be entitled but for the election 
                under this subsection.
                    ``(B) Assumptions.--For purposes of valuing tax 
                benefits under subparagraph (A), the Secretary shall 
                assume that--
                            ``(i) the business is an enterprise zone 
                        business for purposes of section 1396,
                            ``(ii) all qualified zone property placed 
                        in service by the zone business is a single 
                        property with a recovery period under section 
                        168 of 15 years, and
                            ``(iii) the rate of tax under this chapter 
                        is 25 percent.
                    ``(C) Payment period.--The payment period is the 
                period of 15 calendar years beginning with the earlier 
                of--
                            ``(i) the calendar year specified (before 
                        the beginning of such year) by the taxpayer as 
                        the 1st year of the payment period, or
                            ``(ii) the 5th calendar year beginning 
                        after the date that the election under this 
                        subsection is made.
            ``(3) Significant empowerment zone business.--For purposes 
        of this subsection, the term `significant empowerment zone 
        business' means any trade or business operating in an 
        empowerment zone if--
                    ``(A) such business is nominated by the State or 
                local government which nominated the area taken into 
                account under section 1396 to be an empowerment zone, 
                and
                    ``(B) the Secretary of Housing and Urban 
                Development determines that it is reasonably 
                anticipated that such business will increase employment 
                in such zone during the first 3 years of the payment 
                period by at least the lesser of--
                            ``(i) 1,000 full-time employees, or
                            ``(ii) 10 percent of the number of full-
                        time employees estimated to have been employed 
                        in such zone on the date of its designation.''.
    (j) Certain Federally Guaranteed Bonds Issued To Provide 
Investments in Empowerment Zones and Renewal Communities Permitted To 
Be Tax-Exempt, etc.--Subparagraph (A) of section 149(b)(3) is amended 
by striking ``or'' at the end of clause (ii), by striking the period at 
the end of clause (iii) and inserting ``, or'', and by adding at the 
end the following new clause:
                            ``(iv) any guarantee by a Federal Home Loan 
                        Bank for a bond 95 percent or more of the net 
                        proceeds of which are to be used to provide 
                        property in an empowerment zone or renewal 
                        community.''.
    (k) Tax-Exempt Interest of Financial Institutions on Zone Facility 
Bonds Not Subject to Interest Disallowance.--Subparagraph (B) of 
section 265(b)(3) (defining qualified bond) is amended by adding at the 
end the following new clause:
                            ``(iii) Enterprise zone facility bonds.--
                        The term `qualified tax-exempt obligation' 
                        includes any obligation which is treated as an 
                        exempt facility bond by section 1394.''.
    (l) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
    (m) Reporting.--The Secretary of the Treasury (or the Secretary's 
delegate) shall annually submit to the Committee on Ways and Means of 
the House of Representatives and the Committee on Finance of the Senate 
a report detailing for each empowerment zone, enterprise community, and 
renewal community the amount and type of claimed tax benefits.
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