[Congressional Record Volume 142, Number 97 (Thursday, June 27, 1996)]
[Senate]
[Pages S7180-S7185]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. MOSELEY-BRAUN (for herself and Mr. Jeffords):
  S. 1911. 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; to the Committee on Finance.


                 the community empowerment act of 1996

  Ms. MOSELEY-BRAUN. Mr. President, it gives me great pleasure, 
together with my colleagues, Senators D'Amato and Jeffords, to 
introduce the Community Empowerment Act of 1996. This is economic 
development legislation that will create new growth and new jobs, by 
facilitating the cleanup and reuse of what are called brownfield 
industrial and commercial sites, and by adding 20 additional 
empowerment zones and 80 additional enterprise communities all across 
the Nation.
  Mr. President, this legislation provides a new opportunity for 
cooperation between government and the private sector not only to help 
rebuild

[[Page S7181]]

urban areas and rural areas and suburban areas to attract investments, 
but also to effect the cleanup of what I sometimes refer to as an 
``environmentally challenged area.''
  The act refers to brownfields specifically and provides a tax 
incentive rather for brownfield cleanups. Incentives exist in that 
money spent by new owners for the cleanup of environmentally polluted 
areas will accrue as an expense on their income tax.
  Brownfields are contaminated industrial sites. Usually, the 
facilities are abandoned and have problems selling because of the 
contamination that was left on the property. These sites are well 
suited for industrial and commercial redevelopment because the 
transportation infrastructure already exist, the utilities are there 
and the labor force is there. However, potential redevelopers usually 
stay away from these sites, in no small part because current law forces 
them to capitalize environmental cleanup costs. That constitutes a 
daunting obstacle to redevelopment. Even small amounts of contamination 
adds significantly to the cost and uncertainty of a reuse project. 
Therefore, businesses have a significant incentive to move to areas 
outside of the brownfield communities because of the cost associated 
with the cleanup and redevelopment. Reversing this deterrent, therefore 
will help to encourage businesses to reuse these brownfields.
  Under the provisions of this legislation, qualifying brownfields 
would be provided full first-year expensing of environmental cleanup 
costs under the Federal tax code. Full first-year expensing simply 
means that a tax deduction will be allowed for the cleanup costs in the 
year that the costs are incurred.
  At present, if an industrial property owner does environmental damage 
to their property and then cleans up the site, the owner is allowed to 
expense the cost of that cleanup. However, in a strange twist of logic, 
someone who buys an environmentally damaged piece of property and who 
cleans up that property is now allowed to expense these cleanup costs, 
but instead must deduct the cost over many years.
  The result? An urban landscape littered with vacant and abandoned 
properties--properties which attract crime and bring down property 
values in the surrounding neighborhoods.
  This is an issue that directly affects the lives of literally 
millions of Americans, and addressing it will empower communities 
across the country. The collective efforts of everyone, particularly, 
the nonprofit community, the private sector, the Government, developers 
and grassroots community groups are essential to begin the process of 
returning brownfield properties back to productive use, and to bring 
economic growth back to the inner cities and disadvantaged rural areas.
  In order to help communities across the Nation begin rebuilding their 
economic base, reestablish viable areas for businesses to locate, and 
to stimulate job growth, at the Federal level, we must provide the 
appropriate mix of incentives and the right climate to encourage 
private investment.
  This legislation take a non bureaucratic approach to encouraging 
investment because all of the funds go toward the cleanup and not to 
administrative costs. This legislation opens up opportunity through 
targeted tax incentives.
  The Community Empowerment Act creates tax incentives, that we hope 
will break through some of the current barriers preventing the private 
industry from investing in brownfields cleanup projects. The 
legislation's tax incentives will help bring thousands of 
environmentally contaminated industrial sites back into productive use 
again, help to rebuild neighborhoods, create jobs, and help restore our 
Nation's cities, distressed communities and rural areas.
  Particularly in my State of Illinois, the brownfields provisions 
should have a major impact on efforts to help restore severely 
neglected areas. It will allow for the cleanup of 300 to 500 sites in 
Illinois with remediation costs ranging from $250,000 to $500,000. It 
is expected that such cleanup will create hundreds of jobs.
  This legislation will help companies all across America absorb the 
costs of restoring brownfields. The Treasury Department estimates that 
the Community Empowerment Act of 1996 will provide $2 billion in tax 
incentives, and that it will leverage $10 billion in private 
investment, returning an estimated 30,000 brownfields to productive use 
again.
  What makes this legislation so attractive, is that the Federal 
dollars to cleanup these brownfields will be concentrated in the areas 
with the most severe problems. The tax incentive would be available in 
neighborhoods that are truly in need of an investment. The bill targets 
four areas: First, existing EPA brownfields pilot areas; second, areas 
with a poverty rate of 20 percent or more and in adjacent industrial or 
commercial areas; third, areas with a population under 2,000 or more 
than 75 percent of which is zoned for industrial or commercial use; and 
fourth, Empowerment Zones and Enterprise Communities.
  This legislation will assist efforts to cleanup these brownfields in 
cities across the Nation, with the active primary participation of the 
cities and community leaders. Such participation will make the 
initiative efficient, and successful.
  Mayor Richard Daley of Chicago, has taken the initiative to establish 
a brownfields pilot program. One example of a successful public/private 
partnership pulling together to cleanup a brownfields site is the 
Madison Equipment site located in Illinois. This abandoned industrial 
building was a neighborhood eyesore. Scavengers had stolen most of the 
wiring and plumbing and illegal or ``midnight'' dumping was rampant. 
Madison Equipment needed expansion space but feared environmental 
liability. However, in 1993, the city of Chicago invested just a little 
over $3,000 in this project and 1 year later Madison had put $180,000 
into redeveloping the building. The critical reason that lenders and 
investors will look at this area is because the city committed public 
money to spur private redevelopment and investment. When the local 
government demonstrates the confidence to commit public funds, private 
financial institutions are more likely to follow suit.
  Chicago's pilot program successfully will return all of the pilot 
sites to productive use for a total of about $850,000. It has helped to 
retain and create hundreds of jobs, and stimulated private investment. 
Chicago is a perfect example of what this legislation can accomplish on 
a national level. But in order to make it all happen, cooperation is 
key. Effective strategies require strong partnerships among government, 
industry, organized labor, community groups, developers, 
environmentalists, and financiers who all realize that when their 
efforts are aligned, progress is easier.
  Brownfields are both an environmental and an economic development 
problem and brownfield initiatives should be viewed as one important 
component of a larger strategy for revitalizing our Nation's 
communities. Cleaning up sites is only half the goal. Cleanup must be 
pursued along with redevelopment that will benefit not only the private 
companies but the community at large.
  That is why along with the brownfield tax incentives, the legislation 
also establishes 20 more empowerment zones and 80 additional enterprise 
communities. Empowerment Zones and Enterprise Communities receive a 
variety of tools from the Federal Government: First, a package of tax 
incentives and flexible grants available over a 10-year period; second, 
priority consideration for other Federal empowerment programs; and 
third, assistance in removing bureaucratic red tape and regulatory 
barriers that prevent innovative uses of Federal funds.
  This approach recognizes that top-down, big-government solutions are 
not the answer to communities' problems, and that enhanced public-
private partnerships are essential.
  Economic empowerment can be achieved but it is best done through 
public/private partnerships. Economic revitalization in this Nation's 
most distressed communities is essential to the growth of our entire 
Nation. With the concept of team effort, we can rebuild our cities by 
stimulating investment that creates jobs. Environmental protection can 
be and is good business. With this legislation, we will begin the 
effort to restore economic growth back into our countries industrial 
centers and rural communities while improving the environment.

[[Page S7182]]

  I would like to thank President Clinton, Vice President Gore and 
Secretary Rubin for their leadership and work on this issue. I 
appreciate my colleagues Senator D'amato and Jeffords for their 
cosponsorship and in making this legislation a bipartisan effort. I 
urge all of my colleagues to join us in supporting the quick passage of 
this legislation. Mr. President, I ask unanimous consent that a 
section-by-section analysis of the bill and the text of the bill be 
printed in the Record.
  I urge my colleagues to take a good look at the legislation. I think 
and I hope that it will receive bipartisan support.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1911

       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, 1998.
       ``(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 1000 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) In general.--Section 1393(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

[[Page S7183]]

     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, 1996, 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

[[Page S7184]]

     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.
                                                                    ____


                      Section-by-Section Analysis


                 Title I--Additional Empowerment Zones

       Section 101 would authorize the designation of an 
     additional two urban empowerment zones under the 1994 first 
     round.


       Title II--New Empowerment Zones and Enterprise Communities

       Section 201 authorizes a second round of designations, 
     consisting of 80 enterprise communities and 20 empowerment 
     zones. Of the 80 enterprise communities, 50 would be in urban 
     areas and 30 would be in rural areas. Of the 20 empowerment 
     zones, 15 would be in urban areas and 5 would be in rural 
     areas. The designations would be made before January 1, 1998.
       Certain of the eligibility criteria applicable in the first 
     round would be modified for the second round of designations. 
     First, the poverty criteria would be relaxed somewhat, so 
     that unlike the first round there would be no requirement 
     that at least 50 percent of the population census tracts have 
     a poverty rate of 35 percent or more. In addition, the 
     poverty criteria will not be applicable to areas specified in 
     the application as developable for commercial or industrial 
     purposes (1,000 acres in the case of an enterprise community, 
     2,000 acres in the case of an empowerment zone), and these 
     areas will not be taken into account in applying the size 
     limitations (e.g., 20 square miles for urban areas, 1,000 
     square miles for rural areas). The Secretary of Agriculture 
     will be authorized to designate up to one rural empowerment 
     zone and five rural enterprise communities based on specified 
     emigration criteria without regard to the minimum poverty 
     rates set forth in the statute. Rural census tracts in excess 
     of 1,000 square miles or including a substantial amount of 
     governmentally owned land may exclude such excess mileage or 
     governmentally owned land from the nominated area. Unlike the 
     first round, Indian reservations will be eligible to be 
     nominated (and the nomination may be submitted by the 
     reservation governing body without the State government's 
     participation). The empowerment zone employment credit will 
     not be available to businesses in the new empowerment zones, 
     and the increased expending under section 179 will not be 
     available in the developable acreage areas of empowerment 
     zones.
       Section 202 authorizes a new category of tax-exempt 
     financing for financing for businesses in the new empowerment 
     zones. These bonds, rather than being subject to the current 
     State volume caps, will be subject to zone-specific caps. For 
     each rural empowerment zones, up to $60 million in such bonds 
     may be issued. For an urban empowerment zone with a 
     population under 100,000, $130 million of these bonds may be 
     issued. For each urban empowerment zone with a population of 
     100,000 or more, $230 million of these bonds may be issued.
       Section 203 liberalizes the current definition of an 
     ``enterprise zone business'' for purpose of the tax-exempt 
     financing available under both the first and second rounds. 
     Businesses will be treated as satisfying the applicable 
     requirements during a 2-year start-up period if it is 
     reasonably expected that the business will satisfy those 
     requirements by the end of the start-up period and the 
     business makes bona fide efforts to that end. Following 
     the start-up period a 3-year testing period will begin, 
     after which certain enterprise zone business requirements 
     will no longer be applicable (as long as more than 35 
     percent of the business' employees are residents of the 
     empowerment zone or enterprise community). The rules under 
     which substantially renovated property may be ``qualified 
     zone property,'' and thereby be eligible to be financed 
     with tax-exempt bonds, would also be liberalized slightly.
       Section 204 liberalizes the definition of enterprise 
     business for purposes of both the tax-exempt financing 
     provisions and the additional section 179 expensing by 
     reducing from 80 percent to 50 percent the amount of total 
     gross income that must be derived within the empowerment zone 
     or enterprise community, by reducing how much of the 
     business' property and employees' services must be located in 
     or provided within the zone or community, and by easing the 
     restrictions governing when rental businesses will qualify as 
     enterprise zone businesses. A special rule is also provided 
     to clarify how a business that straddles the boundary of an 
     empowerment zone or enterprise community (e.g., by straddling 
     a population census tract boundary) is treated for purposes 
     of the enterprise zone business definition.


        title iii--expensing of environmental remediation costs

       Section 301 would provide a current deduction for certain 
     remediation costs incurred with respect to qualified sites. 
     Generally, these expenses would be limited to those paid or 
     incurred in connection with the abatement or control of 
     environmental contaminants. This deduction would apply for 
     alternative minimum tax purposes as well as for regular tax 
     purposes.
       Qualified sites would be limited to those properties that 
     satisfy use, geographic, and contamination requirements. The 
     use requirement would be satisfied if the property is held by 
     the taxpayer incurring the eligible expenses for use in a 
     trade or business or for the production of income, or if the 
     property is of a kind properly included in the inventory of 
     the taxpayer. The geographic requirement would be satisfied 
     if the property is located in (i) any census tract that has a 
     poverty rate of 20 percent or more, (ii) any other census 
     tract (a) that has a population under 2,000, (b) 75 percent 
     or more of which is zoned for industrial or commercial use, 
     and (c) that is contiguous to one or more census tracts with 
     a poverty rate of 20 percent or more, (iii) an area 
     designated as a federal EZ or EC, or (iv) an area subject to 
     one of the 40 EPA Brownfields Pilots announced prior to 
     February 1996. Both urban and rural sites may qualify. 
     Superfund National Priority listed sites would be excluded.
       The contamination requirement would be satisfied if 
     hazardous substances are present or potentially present on 
     the property. Hazardous substances would be defined generally 
     by reference to sections 101(14) and 102 of the Comprehensive 
     Environmental Response Compensation and Liability Act 
     (CERCLA), subject to additional limitations applicable to 
     asbestos and similar substances within buildings, certain 
     naturally occurring substances such as radon, and certain 
     other substances released into drinking water supplies due 
     to deterioration through ordinary use.
       To claim the deduction under this provision, the taxpayer 
     would be required to obtain a statement that the site 
     satisfies the geographic and contamination requirements from 
     a State environmental agency designated by the Environmental 
     Protection Agency for such purposes or, if no such agency has 
     been designated by the EPA, by the EPA itself.
       This deduction would be subject to recapture under current-
     law section 1245. Thus, any gain realized on disposition 
     generally would be treated as ordinary income, rather than 
     capital gain, up to the amount of deductions taken with 
     respect to the property.

  Mr. D'AMATO. Mr. President, I rise today to join my friend and 
colleague, Senator Moseley-Braun, in introducing legislation that will 
provide a new tax incentive to encourage the private sector to clean up 
thousands of contaminated, abandoned sites known as ``brownfields.'' 
Brownfield sites are abandoned or vacant commercial and industrial 
properties suspected of being environmentally contaminated.
  Under current law, the IRS has determined that costs incurred to 
clean up land and ground water are deductible as business expenses, as 
long as the costs are incurred by the same taxpayer that contaminated 
the land, and that taxpayer plans to use the land after the cleanup for 
the same purposes used prior to the cleanup. That means that new owners 
who wish to use land suspected of environmental contamination for a new 
purpose, would be precluded from deducting the costs of cleanup in the 
year incurred. They would only be allowed to capitalize the costs and 
depreciate them over time. Therefore, it is time for us to recognize 
the need for aggressive economic development policies for the future 
economic health of communities around the country, and to recognize the 
inequity of current tax law. Senator Moseley-Braun and I believe that 
our

[[Page S7185]]

legislation is the type of initiative the Federal Government needs to 
encourage development of once-abandoned, unproductive sites that will 
bring real economic benefits to urban distressed and rural areas across 
the United States. By encouraging redevelopment, jobs will be created, 
economic growth will continue, property values will increase, as well 
as local tax revenues.
  Mr. President, I am proud to say that in my State of New York, the 
city of Elmira has been selected as a fourth round finalist for the 
EPA's Brownfields Economic Redevelopment Initiative Demonstration Pilot 
Program. The city of Elmira has primed an unsightly and unsafe urban 
brownfield and is now in the final stages of turning it into a revenue 
and jobs producing venture. The city of Elmira initiated this important 
project with no guarantees of public or private funding and has done 
this at very minimal cost to taxpayers. Can you imagine what could and 
would be done if the public and private sector had the encouragement to 
also become involved?
  Mr. President, I urge my colleagues on both sides of the aisle to 
join Senator Moseley-Braun and me in cosponsoring this important 
legislation.
  Mr. JEFFORDS. Mr. President, I am pleased to join with Senators 
Moseley-Braun and D'Amato to introduce a bill that will give tax 
incentives to businesses that cleanup these contaminated industrial 
sites known as brownfields. This bill will put us on a path that will 
bring environmental renewal and economic revitalization to our 
communities.
  Mr. President, brownfields are like scars on the American landscape, 
a legacy of the dramatic shift of industry from inner cities to 
suburban greenfields during the 1970's and 1980's. Once bustling 
factories are now abandoned eyesores. In communities across the 
country, some 500,000 abandoned and contaminated sites and facilities 
are in desperate need of revitalization.
  Vermont may not have as many brownfield sites as some of the more 
industrial States, but we are just as interested in seeing these cites 
cleaned up and put back to use. In Vermont, we see the reuse of 
brownfield sites as a way to keep development downtown and reduce the 
pressure to pave pastureland.
  Mr. President, we treasure our open spaces in Vermont and this 
legislation will give incentives to companies around the country to 
invest in the downtowns of our States. When a company builds a facility 
on a brownfield site it takes advantage of existing infrastructure. The 
revitalization of a brownfield site means one less farm or field is 
paved over or forest cut down for the sake of a new plant or facility.
  The redevelopment of brownfield sites also has important social 
implications for our towns and cites. It means that jobs stay downtown 
and that our urban centers can continue to be places of commerce and 
social interaction. I am pleased that the EPA recently awarded one of 
its brownfields pilot projects to Burlington, VT.
  Mr. President, since the early 1800's, Burlington has been the 
largest and most important industrial center of Vermont and the Lake 
Champlain region. The city is among the least well-off in the State and 
was recently designated as an Urban Enterprise Community.
  There are currently 19 polluted commercial and industrial sites in 
Burlington. The city now has only one unpolluted site available for 
industrial development. The lack of sites has been a major obstacle in 
the city's efforts to attract quality jobs and has contributed to the 
development of prime agricultural soil, suburban sprawl, and all the 
associated environmental problems. Mr. President, most of the city's 
brownfields are located either within or adjacent to low- and moderate-
income neighborhoods, contributing to a trend of disinvestment and 
increased health hazards.
  While this legislation won't solve all of our problems, it is an 
important step in the right direction and I urge my colleagues to join 
us in cosponsoring this significant bill.
                                 ______