Deduction for income from business activities conducted in high job-loss areas

(a)

In general

Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to itemized deductions for individuals and corporations) is amended by adding at the end the following new section:

200.

Income attributable to business activities conducted in high-job loss areas

(a)

In general

In the case of an eligible taxpayer, there shall be allowed as a deduction an amount equal to 50 percent of the lesser of— (1)the qualified high job-loss zone business income of the taxpayer for the taxable year, or (2)taxable income (determined without regard to this section) for the taxable year. (b)

Eligible taxpayer

For purposes of this section— (1)

In general

The term eligible taxpayer means any taxpayer if not less than 5 percent of the gross receipts of the taxpayer are high job-loss zone business gross receipts attributable to a single metropolitan statistical area high job-loss zone. (2)

Related persons

All persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 (except that determinations under subsections (a) and (b) of section 52 shall be made without regard to section 1563(b)) shall be treated as 1 person for purposes of paragraph (1). (c)

Qualified high job-loss zone business income

(1)

In general

The term qualified high job-loss zone business income for any taxable year means an amount equal to the excess (if any) of— (A)the taxpayer's high job-loss zone business gross receipts for such taxable year, over (B)the sum of— (i)the cost of goods sold that are allocable to such receipts, and (ii)other expenses, losses, or deductions (other than the deduction allowed under this section), which are properly allocable to such receipts. (2)

Allocation method

The Secretary shall prescribe rules for the proper allocation of items described in paragraph (1) for purposes of determining qualified high job-loss zone business income. Such rules shall provide for the proper allocation of items whether or not such items are directly allocable to high job-loss zone business gross receipts. (3)

Costs

Rules similar to the rules of section 199(c)(3) shall apply for purposes of paragraph (1). (4)

High job-loss zone business gross receipts

(A)

In general

The term high job-loss zone business gross receipts means gross receipts of the taxpayer which are derived from the active conduct of a trade or business in a metropolitan statistical area high job-loss zone. (B)

Related person

(i)

In general

The term high job-loss zone business gross receipts shall not include any gross receipts of the taxpayer derived from property leased, licensed, or rented by the taxpayer for use by any related person. (ii)

Related person

For purposes of clause (i), a person shall be treated as related to another person if such persons are treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414, except that determinations under subsections (a) and (b) of section 52 shall be made without regard to section 1563(b). (d)

Metropolitan statistical area high job-loss zone

For purposes of this section— (1)

In general

The term metropolitan statistical area high job-loss zone means any standard metropolitan statistical area designated by the Secretary for purposes of this section. Designations under the preceding sentence shall be made not later than January 1, 2009. (2)

Standards for designations

An area may be designated by the Secretary under paragraph (1) if the Secretary determines that— (A)any eligible city in such area is among of the lowest 1/3 of all eligible cities ranked on the basis of— (i)the economic conditions referred to in paragraph (4), and (ii)the residential economic well-being factors referred to in paragraph (5), and (B)the area is among the lowest 1/3 of all standard metropolitan statistical areas ranked on the basis of comparing changes in— (i)employment, (ii)wages, (iii)gross metropolitan product, and (iv)gross metropolitan product per job,

between the 1990 and 2000 censuses.

(3)

Eligible cities

For purposes of paragraph (1), the term eligible city means, with respect to a standard metropolitan statistical area, any city in such area if— (A)has a population of at least 50,000 and is the most populous city in such area, (B)has a population of— (i)at least 50,000, and (ii)at least 50 percent of the population of the most populous city in such area, or (C)has a population of at least 150,000.

Population shall be determined using the 2000 census.

(4)

Economic conditions

The economic conditions referred to in this paragraph are growth in— (A)employment, (B)annual payroll, and (C)business establishments. (5)

Residential economic well-being factors

The residential economic well-being factors referred to in the paragraph are— (A)per capita income, (B)median household income, (C)poverty rate, (D)unemployment rate, and (E)labor force participation rate. (e)

Micropolitan statistical area high job-loss zone

For purposes of this section— (1)

In general

The term micropolitan statistical area high job-loss zone means any standard micropolitan statistical area designated by the Secretary for purposes of this section. Designations under the preceding sentence shall be made not later than January 1, 2009. (2)

Standards for designations

between the 1990 and 2000 censuses.

(3)

Eligible cities

For purposes of paragraph (1), the term eligible city means, with respect to a standard metropolitan statistical area, any city in such area which has a population of at least 10,000 but less than 50,000 (determined using the 2000 census). (4)

Economic conditions

The economic conditions referred to in this paragraph are growth in— (A)employment, (B)annual payroll, and (C)business establishments. (5)

Residential economic well-being factors

The residential economic well-being factors referred to in the paragraph are— (A)per capita income, (B)median household income, (C)poverty rate, (D)unemployment rate, (E)average age of housing stock, and (F)labor force participation rate. (f)

Special rules

Rules similar to the rules of paragraphs (1) through (7) of section 199(d) shall apply for purposes of this section. (g)

Regulations

The Secretary shall prescribe such regulations as are appropriate to carry out this section. (h)

Application of section

The section shall apply to taxable years beginning after December 31, 2008, and before January 1, 2014.

(b)

Minimum tax

Section 56(g)(4)(C) of such Code (relating to disallowance of items not deductible in computing earnings and profits) is amended by adding at the end the following new clause:

(vii)

Deduction for high job-loss zone income

Clause (i) shall not apply to any amount allowable as a deduction under section 199.

(c)

Technical amendments

(1)Sections 86(b)(2)(A), 135(c)(4)(A), 137(b)(3)(A), 219(g)(3)(A)(ii), 221(b)(2)(C)(i), 222(b)(2)(C)(i), 246(b)(1), and 469(i)(3)(F)(iii) of such Code are each amended by inserting 200, after 199,. (2)Subsection (a) of section 613 of such Code is amended by inserting or 200 after 199. (3)Subsection (a) of section 1402 of such Code is amended by striking and at the end of paragraph (16), by striking the period at the end of paragraph (17) and inserting , and, and by inserting after paragraph (17) the following new paragraph:

(18)the deduction provided by section 200 shall not be allowed.

(4)The table of sections for part VI of subchapter B of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 200. Income attributable to business activities conducted in high-job loss areas..

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2008. (e)

Reporting

The Secretary of the Treasury shall submit reports to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate detailing the impact of section 200 of the Internal Revenue Code of 1986 (as added by this section) on retaining and attracting new businesses to high job-loss zones. Such reports shall be submitted annually for each calendar year included in the period specified in section 200(g) of such Code.