[Congressional Record Volume 154, Number 186 (Thursday, December 11, 2008)]
[Senate]
[Pages S10947-S10951]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. LANDRIEU:
  S. 3735. A bill to amend the Internal Revenue Code of 1986 to provide 
for the eligibility of computer technology and equipment development 
businesses for enterprise zone incentives; to the Committee on Finance.
  Ms. LANDRIEU. Mr. President, I come to the floor today to speak on 
behalf of a program which I believe has been extremely helpful in 
helping

[[Page S10950]]

rural/urban communities in my state of Louisiana. I would also like to 
discuss a commonsense improvement to the program which I believe will 
allow these and other communities nationwide to be at the cutting edge 
of 21st century innovation and research. In particular, to help spur 
economic development in distressed communities, the Congress enacted 
the Empowerment Zone and Enterprise Community, EZ and EC, Program in 
1993. In 2000, the Community Renewal Tax Relief Act further expanded 
this initiative by authorizing 40 Renewal Communities, RCs, and 9 more 
EZs. Overall, the RC/EZ/EC Initiative provides these designated 
communities with tax incentives, grants, loans, and technical 
assistance to encourage investment in communities that have experienced 
severe economic decline. According to the U.S. Department of Housing 
and Urban Development, HUD, which oversees the RC and EZ program, RC 
tax incentives are worth approximately $5.6 billion to eligible 
businesses of all sizes in Renewal Communities. EZ tax incentives are 
worth approximately $5.3 billion to small and large businesses in 
Empowerment Zones. In general, the tax incentives encourage businesses 
to open, expand, and to hire local residents. The administrative 
leaders of each Renewal Community and Empowerment Zone work closely 
with the Federal Government, business, and local community 
representatives to implement strategic plans to improve social/economic 
conditions throughout the designated areas.
  As I mentioned, this program is of particular interest to Louisiana 
as we have two Urban Renewal Communities, in New Orleans and Ouachita 
Parish, and also have two Rural Renewal Communities, in central 
Louisiana and in northern Louisiana. These designations have been 
extremely helpful in attracting businesses to these areas of my state 
and in encouraging existing businesses to expand their operations. 
However, the designations are set to terminate in December 31, 2009. I 
remain committed to work with my Senate colleagues next year to update 
and reauthorize such programs as this program. That is because this 
program helps distressed communities nationwide and is a key engine to 
spur public-private partnerships in rural/urban areas.
  While we often think of technology companies locating in areas such 
as Silicon Valley, California or the Research Triangle in North 
Carolina, Congress should not forget the role that rural small 
businesses and universities play in fostering innovation and 
development. In Louisiana, we have multiple universities participating 
in these cutting edge research programs and collaborating with local 
small businesses. Louisiana Technical University in Ruston, Louisiana, 
for example has grown into a leader in scientific research at a crucial 
time for the region. This is because the Barksdale Air Force base 
located in Shreveport, which is 70 miles from Ruston, is looking to 
secure the permanent Cyber Command. This command would protect the 
United States from cyber warfare. All of the universities, colleges, 
and parishes in this area, including the University of Louisiana--
Monroe, Grambling State University, and Louisiana State University--
Shreveport are collaborating on securing this command, which could mean 
thousands of jobs for the region. So big cities are not the only areas 
in the country that have growing technology sectors--rural communities 
also have these industries and would benefit from this commonsense 
correction to the program. Many of these rural communities are located 
in RC areas so it is important to support this program.

  In the next Congress, as I mentioned, we will work to reauthorize the 
RC/EZ program. As we do this, I believe that, among other corrections, 
we must address one glaring problem with these programs. That is the 
reason why I am filing this legislation today as it makes an important 
correction to this program. I am pleased that my colleague, Congressman 
Rodney Alexander is introducing the companion bill in the House of 
Representatives. All three programs share the definition for a 
``qualified business'' used for an EZ Business, which is Section 1397C 
of the Internal Revenue Code. For the EC and RC programs, this was 
legislated by Congress by the use of a substitution of ``Renewal 
Community'' or ``Enterprise Community'' for ``Empowerment Zone'' in the 
relevant section of the Internal Revenue Code, which is Section 
1394(b)(2)(A) for the EC program and Section 1400G for the RC program. 
Under this definition, generally any trade or business can be a 
qualified business; however, there is an exception for a business that 
consists primarily to develop or hold intangibles for sale or license. 
This clear distinction between businesses that trade ``tangibles'' 
versus those that trade in ``intangibles'' seems to be made as the 
intent was to encourage quality, high-wage manufacturing jobs in these 
areas. Businesses that trade in ``intangibles'' include companies that 
develop such things as patents, formulas, processes, copyrights, 
literary/musical works. However, businesses which manufacture computer 
software and computer or peripheral equipment are also included in this 
group of category of businesses which trade in ``intangible'' products. 
I feel that this excludes an industry that provides high-wage, highly 
skilled jobs in communities which could most benefit from these types 
of employers. This apparent oversight from Congress seems to discourage 
software/technology companies from locating in these distressed 
communities and does not reflect the fact that many of our rural/urban 
have excellent infrastructure to support them. Lastly, as an original 
cosponsor of the America COMPETES Act of 2007, I know how essential it 
is to promote U.S. technology competitiveness and innovation. By 
allowing software/technology companies to locate or expand operations 
in RC/EZ/EC communities, this would promote U.S. competitiveness and 
fully realize the intent of the program--to spur economic development 
in these distressed areas.
  To address this issue, the bill I am introducing today would clarify 
that companies which manufacture technology/software development are 
eligible for these RC/EZ incentives in taxable years after enactment of 
the bill, provided they meet other requirements for the RC/EZ program. 
In particular, Section 1397C(d)(4) of the Internal Revenue Code of 1986 
is amended to specify that businesses that trade in ``intangibles'' are 
excluded, with the exception of computer and software development 
companies. I would highlight that we are not creating a new definition 
from scratch or making new rules for the Internal Revenue Code, instead 
the bill uses the definition for computer and software companies that 
already exists elsewhere in the Internal Revenue Code. This definition, 
Section 170(e)(6)(F)(i) of the Internal Revenue Code, includes the 
following industries: computer software (as defined in section 
197(e)(3)(B)), computer or peripheral equipment (as defined by section 
168(i)(2)(B)), and fiber optic cable related to computer use.
  Furthermore, my staff has reviewed the Congressional Record and 
committee testimony since 1985 and could not find a clear Congressional 
intent to exclude software  or technology development companies from 
the definition of a ``qualified business'' for this program. On the 
other hand, Congress specifically prohibited the following businesses: 
private or commercial golf courses, country clubs, massage parlors, hot 
tub facilities, suntan facilities, racetracks or other facilities used 
for gambling, and liquor stores. Despite this specificity in relation 
to what industries may/may not qualify, the law is silent on software/
technology development companies. As I mentioned, this industry is 
simply caught up in an effort to not include companies that deal 
strictly in intellectual property, such as copyrights or patents. I 
believe that this warrants correction as we should not exclude 
industries that are key drivers of economic development and those which 
are also essential to U.S. competitiveness.

  Let me give you another example of how the current setup of this 
program is really discouraging further job creation and economic 
development. As currently structured, the renewal community employment 
credit provides a 15 percent credit for the first $10,000 of wages per 
year paid to each renewal community employee. So a bar in a RC/EZ 
community would receive a tax credit for hiring another bartender but a 
software development company would currently not receive any incentive 
to hire another engineer. Not only

[[Page S10951]]

does this discourage technology companies from locating in these areas 
but it is a disincentive for students graduating from universities or 
colleges in RC/EZ areas. I do not have a specific problem with 
including bars or restaurants in this program as the hospitality sector 
is also important to Louisiana's economy. However, I believe that 
computer/software companies should be given the opportunity to take 
advantage of these benefits that are already available to other 
industries, provided they meet the other requirements for qualified 
businesses.
  In closing, I would like to note that while I understand that this 
would allow businesses currently not eligible for the program to 
receive benefits moving forward, it is my sincere belief that this 
correction would follow congressional intent with the program. This is 
because, in my view, the bill would further improve the ability of the 
RC/EZ program to spur economic development in distressed areas. It 
would accomplish this goal by ensuring that high-wage, high technology 
industries are eligible to participate in the program. I urge my 
colleagues to support this commonsense legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3735

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

     SECTION 1. ELIGIBILITY OF COMPUTER TECHNOLOGY AND EQUIPMENT 
                   DEVELOPMENT BUSINESSES FOR ENTERPRISE ZONE 
                   INCENTIVES.

       (a) In General.--Section 1397C(d)(4) of the Internal 
     Revenue Code of 1986 (relating to treatment of business 
     holding intangibles) is amended by inserting ``other than the 
     development of any computer technology or equipment (as 
     defined in section 170(e)(6)((F)(i))'' after ``license''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

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