-CITE-
26 USC Subchapter U - Designation and Treatment of
Empowerment Zones, Enterprise Communities,
and Rural Development Investment Areas 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
-HEAD-
SUBCHAPTER U - DESIGNATION AND TREATMENT OF EMPOWERMENT ZONES,
ENTERPRISE COMMUNITIES, AND RURAL DEVELOPMENT INVESTMENT AREAS
-MISC1-
Part
I. Designation.
II. Tax-exempt facility bonds for empowerment zones and
enterprise communities.
III. Additional incentives for empowerment zones.
IV. Incentives for education zones.
V. Regulations.
PRIOR PROVISIONS
A prior subchapter U consisted of sections 1391 to 1397, prior to
repeal by Pub. L. 99-514, title XIII, Sec. 1303(a), Oct. 22, 1986,
100 Stat. 2658.
AMENDMENTS
1997 - Pub. L. 105-34, title II, Sec. 226(b)(1), Aug. 5, 1997,
111 Stat. 824, added items for parts IV and V and struck out former
item for part IV "Regulations".
-SECREF-
SUBCHAPTER REFERRED TO IN OTHER SECTIONS
This subchapter is referred to in sections 39, 381, 1400, 1400B
of this title.
-End-
-CITE-
26 USC PART I - DESIGNATION 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART I - DESIGNATION
-HEAD-
PART I - DESIGNATION
-MISC1-
Sec.
1391. Designation procedure.
1392. Eligibility criteria.
1393. Definitions and special rules.
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in title 7 section 1926; title 20
section 6368; title 42 section 1397f.
-End-
-CITE-
26 USC Sec. 1391 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART I - DESIGNATION
-HEAD-
Sec. 1391. Designation procedure
-STATUTE-
(a) In general
From among the areas nominated for designation under this
section, the appropriate Secretaries may designate empowerment
zones and enterprise communities.
(b) Number of designations
(1) Enterprise communities
The appropriate Secretaries may designate in the aggregate 95
nominated areas as enterprise communities under this section,
subject to the availability of eligible nominated areas. Of that
number, not more than 65 may be designated in urban areas and not
more than 30 may be designated in rural areas.
(2) Empowerment zones
The appropriate Secretaries may designate in the aggregate 11
nominated areas as empowerment zones under this section, subject
to the availability of eligible nominated areas. Of that number,
not more than 8 may be designated in urban areas and not more
than 3 may be designated in rural areas. If 6 empowerment zones
are designated in urban areas, no less than 1 shall be designated
in an urban area the most populous city of which has a population
of 500,000 or less and no less than 1 shall be a nominated area
which includes areas in 2 States and which has a population of
50,000 or less. The Secretary of Housing and Urban Development
shall designate empowerment zones located in urban areas in such
a manner that the aggregate population of all such zones does not
exceed 1,000,000.
(c) Period designations may be made
A designation may be made under subsection (a) only after 1993
and before 1996.
(d) Period for which designation is in effect
(1) In general
Any designation under this section shall remain in effect
during the period beginning on the date of the designation and
ending on the earliest of -
(A)(i) in the case of an empowerment zone, December 31, 2009,
or
(ii) in the case of an enterprise community, the close of the
10th calendar year beginning on or after such date of
designation,
(B) the termination date designated by the State and local
governments as provided for in their nomination, or
(C) the date the appropriate Secretary revokes the
designation.
(2) Revocation of designation
The appropriate Secretary may revoke the designation under this
section of an area if such Secretary determines that the local
government or the State in which it is located -
(A) has modified the boundaries of the area, or
(B) is not complying substantially with, or fails to make
progress in achieving the benchmarks set forth in, the
strategic plan under subsection (f)(2).
(e) Limitations on designations
No area may be designated under this section unless -
(1) the area is nominated by 1 or more local governments and
the State or States in which it is located for designation under
this section,
(2) such State or States and the local governments have the
authority -
(A) to nominate the area for designation under this section,
and
(B) to provide the assurances described in paragraph (3),
(3) such State or States and the local governments provide
written assurances satisfactory to the appropriate Secretary that
the strategic plan described in the application under subsection
(f)(2) for such area will be implemented,
(4) the appropriate Secretary determines that any information
furnished is reasonably accurate, and
(5) such State or States and local governments certify that no
portion of the area nominated is already included in an
empowerment zone or in an enterprise community or in an area
otherwise nominated to be designated under this section.
(f) Application
No area may be designated under this section unless the
application for such designation -
(1) demonstrates that the nominated area satisfies the
eligibility criteria described in section 1392,
(2) includes a strategic plan for accomplishing the purposes of
this subchapter that -
(A) describes the coordinated economic, human, community, and
physical development plan and related activities proposed for
the nominated area,
(B) describes the process by which the affected community is
a full partner in the process of developing and implementing
the plan and the extent to which local institutions and
organizations have contributed to the planning process,
(C) identifies the amount of State, local, and private
resources that will be available in the nominated area and the
private/public partnerships to be used, which may include
participation by, and cooperation with, universities, medical
centers, and other private and public entities,
(D) identifies the funding requested under any Federal
program in support of the proposed economic, human, community,
and physical development and related activities,
(E) identifies baselines, methods, and benchmarks for
measuring the success of carrying out the strategic plan,
including the extent to which poor persons and families will be
empowered to become economically self-sufficient, and
(F) does not include any action to assist any establishment
in relocating from one area outside the nominated area to the
nominated area, except that assistance for the expansion of an
existing business entity through the establishment of a new
branch, affiliate, or subsidiary is permitted if -
(i) the establishment of the new branch, affiliate, or
subsidiary will not result in a decrease in employment in the
area of original location or in any other area where the
existing business entity conducts business operations, and
(ii) there is no reason to believe that the new branch,
affiliate, or subsidiary is being established with the
intention of closing down the operations of the existing
business entity in the area of its original location or in
any other area where the existing business entity conducts
business operation, and
(3) includes such other information as may be required by the
appropriate Secretary.
(g) Additional designations permitted
(1) In general
In addition to the areas designated under subsection (a), 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 and take effect
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 2,000 acres.
(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 zone
The Secretary of Agriculture may designate not more than 1
empowerment zone in a rural area without regard to clause (i)
if such area satisfies 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).
(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 (!1) Interior).
(h) Additional designations permitted
(1) In general
In addition to the areas designated under subsections (a) and
(g), the appropriate Secretaries may designate in the aggregate
an additional 9 nominated areas as empowerment zones under this
section, subject to the availability of eligible nominated areas.
Of that number, not more than seven may be designated in urban
areas and not more than 2 may be designated in rural areas.
(2) Period designations may be made and take effect
A designation may be made under this subsection after the date
of the enactment of this subsection and before January 1, 2002.
Subject to subparagraphs (B) and (C) of subsection (d)(1), such
designations shall remain in effect during the period beginning
on January 1, 2002, and ending on December 31, 2009.
(3) Modifications to eligibility criteria, etc.
The rules of subsection (g)(3) shall apply to designations
under this subsection.
(4) Empowerment zones which become renewal communities
The number of areas which may be designated as empowerment
zones under this subsection shall be increased by 1 for each area
which ceases to be an empowerment zone by reason of section
1400E(e). Each additional area designated by reason of the
preceding sentence shall have the same urban or rural character
as the area it is replacing.
-SOURCE-
(Added Pub. L. 103-66, title XIII, Sec. 13301(a), Aug. 10, 1993,
107 Stat. 543; amended Pub. L. 105-34, title IX, Secs. 951(a),
952(a), (d), Aug. 5, 1997, 111 Stat. 885-887; Pub. L. 106-554, Sec.
1(a)(7) [title I, Secs. 111, 112, title III, Sec. 319(13)], Dec.
21, 2000, 114 Stat. 2763, 2763A-600, 2763A-601, 2763A-646.)
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of this subsection, referred to in
subsec. (g)(2), is the date of enactment of Pub. L. 105-34, which
was approved Aug. 5, 1997.
The date of the enactment of this subsection, referred to in
subsec. (h)(2), is the date of enactment of Pub. L. 106-554, which
was approved Dec. 21, 2000.
-MISC1-
PRIOR PROVISIONS
A prior section 1391, added Pub. L. 95-600, title VI, Sec.
601(a), Nov. 6, 1978, 92 Stat. 2892; amended Pub. L. 96-222, title
I, Sec. 106(a)(4), Apr. 1, 1980, 94 Stat. 221; Pub. L. 96-595, Sec.
3(a)(1), (2), Dec. 24, 1980, 94 Stat. 3465, defined terms used in
former subchapter U, prior to repeal by Pub. L. 99-514, title XIII,
Sec. 1303(a), Oct. 22, 1986, 100 Stat. 2658.
AMENDMENTS
2000 - Subsec. (d)(1)(A). Pub. L. 106-554, Sec. 1(a)(7) [title I,
Sec. 112], amended subpar. (A) generally. Prior to amendment,
subpar. (A) read as follows: "the close of the 10th calendar year
beginning on or after such date of designation,".
Subsec. (g)(3)(C). Pub. L. 106-554, Sec. 1(a)(7) [title III, Sec.
319(13)], substituted "paragraph (1)" for "paragraph (1)(B)".
Subsec. (h). Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 111],
added subsec. (h).
1997 - Subsec. (b)(2). Pub. L. 105-34, Sec. 951(a)(3),
substituted "1,000,000" for "750,000".
Pub. L. 105-34, Sec. 951(a)(2), substituted "8" for "6" before
"may be designated".
Pub. L. 105-34, Sec. 951(a)(1), substituted "11" for "9".
Subsec. (c). Pub. L. 105-34, Sec. 952(d)(2), substituted
"subsection (a)" for "this section".
Subsecs. (e), (f). Pub. L. 105-34, Sec. 952(d)(1), substituted
"this section" for "subsection (a)" in introductory provisions.
Subsec. (g). Pub. L. 105-34, Sec. 952(a), added subsec. (g).
EFFECTIVE DATE OF 1997 AMENDMENT
Section 951(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section and section 1396 of
this title] shall take effect on the date of the enactment of this
Act [Aug. 5, 1997], 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.
No designation pursuant to such amendments shall take effect before
January 1, 2000."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1392, 1393, 1394, 1400E
of this title; title 12 section 4702; title 29 section 2914; title
42 section 5302.
-FOOTNOTE-
(!1) So in original. Probably should be followed by "the".
-End-
-CITE-
26 USC Sec. 1392 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART I - DESIGNATION
-HEAD-
Sec. 1392. Eligibility criteria
-STATUTE-
(a) In general
A nominated area shall be eligible for designation under section
1391 only if it meets the following criteria:
(1) Population
The nominated area has a maximum population of -
(A) in the case of an urban area, the lesser of -
(i) 200,000, or
(ii) the greater of 50,000 or 10 percent of the population
of the most populous city located within the nominated area,
and
(B) in the case of a rural area, 30,000.
(2) Distress
The nominated area is one of pervasive poverty, unemployment,
and general distress.
(3) Size
The nominated area -
(A) does not exceed 20 square miles if an urban area or 1,000
square miles if a rural area,
(B) has a boundary which is continuous, or, except in the
case of a rural area located in more than 1 State, consists of
not more than 3 noncontiguous parcels,
(C)(i) in the case of an urban area, is located entirely
within no more than 2 contiguous States, and
(ii) in the case of a rural area, is located entirely within
no more than 3 contiguous States, and
(D) does not include any portion of a central business
district (as such term is used for purposes of the most recent
Census of Retail Trade) unless the poverty rate for each
population census tract in such district is not less than 35
percent (30 percent in the case of an enterprise community).
(4) Poverty rate
The poverty rate -
(A) for each population census tract within the nominated
area is not less than 20 percent,
(B) for at least 90 percent of the population census tracts
within the nominated area is not less than 25 percent, and
(C) for at least 50 percent of the population census tracts
within the nominated area is not less than 35 percent.
(b) Special rules relating to determination of poverty rate
For purposes of subsection (a)(4) -
(1) Treatment of census tracts with small populations
(A) Tracts with no population
In the case of a population census tract with no population -
(i) such tract shall be treated as having a poverty rate
which meets the requirements of subparagraphs (A) and (B) of
subsection (a)(4), but
(ii) such tract shall be treated as having a zero poverty
rate for purposes of applying subparagraph (C) thereof.
(B) Tracts with populations of less than 2,000
A population census tract with a population of less than
2,000 shall be treated as having a poverty rate which meets the
requirements of subparagraphs (A) and (B) of subsection (a)(4)
if more than 75 percent of such tract is zoned for commercial
or industrial use.
(2) Discretion to adjust requirements for enterprise communities
In determining whether a nominated area is eligible for
designation as an enterprise community, the appropriate Secretary
may, where necessary to carry out the purposes of this
subchapter, reduce by 5 percentage points one of the following
thresholds for not more than 10 percent of the population census
tracts (or, if fewer, 5 population census tracts) in the
nominated area:
(A) The 20 percent threshold in subsection (a)(4)(A).
(B) The 25 percent threshold in subsection (a)(4)(B).
(C) The 35 percent threshold in subsection (a)(4)(C).
If the appropriate Secretary elects to reduce the threshold under
subparagraph (C), such Secretary may (in lieu of applying the
preceding sentence) reduce by 10 percentage points the threshold
under subparagraph (C) for 3 population census tracts.
(3) Each noncontiguous area must satisfy poverty rate rule
A nominated area may not include a noncontiguous parcel unless
such parcel separately meets (subject to paragraphs (1) and (2))
the criteria set forth in subsection (a)(4).
(4) Areas not within census tracts
In the case of an area which is not tracted for population
census tracts, the equivalent county divisions (as defined by the
Bureau of the Census for purposes of defining poverty areas)
shall be used for purposes of determining poverty rates.
(c) Factors to consider
From among the nominated areas eligible for designation under
section 1391 by the appropriate Secretary, such appropriate
Secretary shall make designations of empowerment zones and
enterprise communities on the basis of -
(1) the effectiveness of the strategic plan submitted pursuant
to section 1391(f)(2) and the assurances made pursuant to section
1391(e)(3), and
(2) criteria specified by the appropriate Secretary.
(d) Special eligibility for nominated areas located in Alaska or
Hawaii
A nominated area in Alaska or Hawaii shall be treated as meeting
the requirements of paragraphs (2), (3), and (4) of subsection (a)
if for each census tract or block group within such area 20 percent
or more of the families have income which is 50 percent or less of
the statewide median family income (as determined under section
143).
-SOURCE-
(Added Pub. L. 103-66, title XIII, Sec. 13301(a), Aug. 10, 1993,
107 Stat. 545; amended Pub. L. 105-34, title IX, Sec. 954, Aug. 5,
1997, 111 Stat. 888.)
-MISC1-
PRIOR PROVISIONS
A prior section 1392, added Pub. L. 95-600, title VI, Sec.
601(a), Nov. 6, 1978, 92 Stat. 2893; amended Pub. L. 96-222, title
I, Sec. 106(a)(5), Apr. 1, 1980, 94 Stat. 221; Pub. L. 96-595, Sec.
3(a)(3), (4), Dec. 24, 1980, 94 Stat. 3465, related to election by
general stock ownership corporations not to be subject to taxes
imposed by this chapter, prior to repeal by Pub. L. 99-514, title
XIII, Sec. 1303(a), Oct. 22, 1986, 100 Stat. 2658.
AMENDMENTS
1997 - Subsec. (d). Pub. L. 105-34 added subsec. (d).
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1391, 1400E of this
title; title 29 section 2914.
-End-
-CITE-
26 USC Sec. 1393 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART I - DESIGNATION
-HEAD-
Sec. 1393. Definitions and special rules
-STATUTE-
(a) In general
For purposes of this subchapter -
(1) Appropriate Secretary
The term "appropriate Secretary" means -
(A) the Secretary of Housing and Urban Development in the
case of any nominated area which is located in an urban area,
and
(B) the Secretary of Agriculture in the case of any nominated
area which is located in a rural area.
(2) Rural area
The term "rural area" means any area which is -
(A) outside of a metropolitan statistical area (within the
meaning of section 143(k)(2)(B)), or
(B) determined by the Secretary of Agriculture, after
consultation with the Secretary of Commerce, to be a rural
area.
(3) Urban area
The term "urban area" means an area which is not a rural area.
(4) Special rules for Indian reservations
(A) In general
No empowerment zone or enterprise community may include any
area within an Indian reservation.
(B) Indian reservation defined
The term "Indian reservation" has the meaning given such term
by section 168(j)(6).
(5) Local government
The term "local government" means -
(A) any county, city, town, township, parish, village, or
other general purpose political subdivision of a State, and
(B) any combination of political subdivisions described in
subparagraph (A) recognized by the appropriate Secretary.
(6) Nominated area
The term "nominated area" means an area which is nominated by 1
or more local governments and the State or States in which it is
located for designation under section 1391.
(7) Governments
If more than 1 State or local government seeks to nominate an
area under this part, any reference to, or requirement of, this
subchapter shall apply to all such governments.
(8) Special rule
An area shall be treated as nominated by a State and a local
government if it is nominated by an economic development
corporation chartered by the State.
(9) Use of census data
Population and poverty rate shall be determined by the most
recent decennial census data available.
(b) Empowerment zone; enterprise community
For purposes of this title, the terms "empowerment zone" and
"enterprise community" mean areas designated as such under section
1391.
-SOURCE-
(Added Pub. L. 103-66, title XIII, Sec. 13301(a), Aug. 10, 1993,
107 Stat. 547.)
-MISC1-
PRIOR PROVISIONS
A prior section 1393, added Pub. L. 95-600, title VI, Sec.
601(a), Nov. 6, 1978, 92 Stat. 2894; amended Pub. L. 96-595, Sec.
3(a)(5), (6), (8), Dec. 24, 1980, 94 Stat. 3465, related to
taxation of general stock ownership corporation taxable income to
shareholders, prior to repeal by Pub. L. 99-514, title XIII, Sec.
1303(a), Oct. 22, 1986, 100 Stat. 2658.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1391 of this title; title
12 section 1715z-2; title 42 section 1397f.
-End-
-CITE-
26 USC PART II - TAX-EXEMPT FACILITY BONDS FOR
EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART II - TAX-EXEMPT FACILITY BONDS FOR EMPOWERMENT ZONES AND
ENTERPRISE COMMUNITIES
-HEAD-
PART II - TAX-EXEMPT FACILITY BONDS FOR EMPOWERMENT ZONES AND
ENTERPRISE COMMUNITIES
-MISC1-
Sec.
1394. Tax-exempt enterprise zone facility bonds.
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in section 1397F of this title.
-End-
-CITE-
26 USC Sec. 1394 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART II - TAX-EXEMPT FACILITY BONDS FOR EMPOWERMENT ZONES AND
ENTERPRISE COMMUNITIES
-HEAD-
Sec. 1394. Tax-exempt enterprise zone facility bonds
-STATUTE-
(a) In general
For purposes of part IV of subchapter B of this chapter (relating
to tax exemption requirements for State and local bonds), the term
"exempt facility bond" includes any bond issued as part of an issue
95 percent or more of the net proceeds (as defined in section
150(a)(3)) of which are to be used to provide any enterprise zone
facility.
(b) Enterprise zone facility
For purposes of this section -
(1) In general
The term "enterprise zone facility" means any qualified zone
property the principal user of which is an enterprise zone
business, and any land which is functionally related and
subordinate to such property.
(2) Qualified zone property
The term "qualified zone property" has the meaning given such
term by section 1397D; except that -
(A) the references to empowerment zones shall be treated as
including references to enterprise communities, and
(B) section 1397D(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".
(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
1397C.
(B) Modifications
In applying section 1397C for purposes of this section -
(i) Businesses in enterprise communities eligible
References in section 1397C 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 1397C 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 1397C 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 1397C(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.
(c) Limitation on amount of bonds
(1) In general
Subsection (a) shall not apply to any issue if the aggregate
amount of outstanding enterprise zone facility bonds allocable to
any person (taking into account such issue) exceeds -
(A) $3,000,000 with respect to any 1 empowerment zone or
enterprise community, or
(B) $20,000,000 with respect to all empowerment zones and
enterprise communities.
(2) Aggregate enterprise zone facility bond benefit
For purposes of paragraph (1), the aggregate amount of
outstanding enterprise zone facility bonds allocable to any
person shall be determined under rules similar to the rules of
section 144(a)(10), taking into account only bonds to which
subsection (a) applies.
(d) Acquisition of land and existing property permitted
The requirements of sections 147(c)(1)(A) and 147(d) shall not
apply to any bond described in subsection (a).
(e) Penalty for ceasing to meet requirements
(1) Failures corrected
An issue which fails to meet 1 or more of the requirements of
subsections (a) and (b) shall be treated as meeting such
requirements if -
(A) the issuer and any principal user in good faith attempted
to meet such requirements, and
(B) any failure to meet such requirements is corrected within
a reasonable period after such failure is first discovered.
(2) Loss of deductions where facility ceases to be qualified
No deduction shall be allowed under this chapter for interest
on any financing provided from any bond to which subsection (a)
applies with respect to any facility to the extent such interest
accrues during the period beginning on the first day of the
calendar year which includes the date on which -
(A) substantially all of the facility with respect to which
the financing was provided ceases to be used in an empowerment
zone or enterprise community, or
(B) the principal user of such facility ceases to be an
enterprise zone business (as defined in subsection (b)).
(3) Exception if zone ceases
Paragraphs (1) and (2) shall not apply solely by reason of the
termination or revocation of a designation as an empowerment zone
or an enterprise community.
(4) Exception for bankruptcy
Paragraphs (1) and (2) shall not apply to any cessation
resulting from bankruptcy.
(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) Empowerment zone facility bond
For purposes of this subsection, the term "empowerment zone
facility bond" means any bond which would be described in
subsection (a) if -
(A) in the case of obligations issued before January 1, 2002,
only empowerment zones designated under section 1391(g) were
taken into account under sections 1397C and 1397D, and
(B) in the case of obligations issued after December 31,
2001, all empowerment zones (other than the District of
Columbia Enterprise Zone) were taken into account under
sections 1397C and 1397D.
-SOURCE-
(Added Pub. L. 103-66, title XIII, Sec. 13301(a), Aug. 10, 1993,
107 Stat. 548; amended Pub. L. 104-188, title I, Sec. 1703(n)(7),
Aug. 20, 1996, 110 Stat. 1877; Pub. L. 105-34, title IX, Secs.
953(a), 955(a), (b), Aug. 5, 1997, 111 Stat. 887, 889, 890; Pub. L.
106-554, Sec. 1(a)(7) [title I, Secs. 115(a), 116(b)(3), (4)], Dec.
21, 2000, 114 Stat. 2763, 2763A-601, 2763A-603; Pub. L. 107-147,
title IV, Sec. 417(16), Mar. 9, 2002, 116 Stat. 56.)
-MISC1-
PRIOR PROVISIONS
A prior section 1394, added Pub. L. 95-600, title VI, Sec.
601(a), Nov. 6, 1978, 92 Stat. 2895; amended Pub. L. 96-595, Sec.
3(a)(6)-(8), Dec. 24, 1980, 94 Stat. 3465, related to rules
applicable to distributions of an electing general stock ownership
corporation, prior to repeal by Pub. L. 99-514, title XIII, Sec.
1303(a), Oct. 22, 1986, 100 Stat. 2658.
A prior section 1395, added Pub. L. 95-600, title VI, Sec.
601(a), Nov. 6, 1978, 92 Stat. 2895, related to adjustment to basis
of stock of shareholders, prior to repeal by Pub. L. 99-514, title
XIII, Sec. 1303(a), Oct. 22, 1986, 100 Stat. 2658.
AMENDMENTS
2002 - Subsec. (c)(2). Pub. L. 107-147 substituted "paragraph
(1)" for "subparagraph (A)".
2000 - Subsec. (b)(2). Pub. L. 106-554, Sec. 1(a)(7) [title I,
Sec. 116(b)(3)(A)], substituted "section 1397D" for "section 1397C"
in introductory provisions.
Subsec. (b)(2)(B). Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec.
116(b)(3)(B)], substituted "section 1397D(a)(2)" for "section
1397C(a)(2)".
Subsec. (b)(3). Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec.
116(b)(4)(A)], substituted "section 1397C" for "section 1397B"
wherever appearing.
Subsec. (b)(3)(B)(iii). Pub. L. 106-554, Sec. 1(a)(7) [title I,
Sec. 116(b)(4)(B)], substituted "section 1397C(d)" for "section
1397B(d)".
Subsec. (f)(3). Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec.
115(a)], amended heading and text of par. (3) generally. Prior to
amendment, text read as follows: "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."
1997 - Subsec. (b)(2). Pub. L. 105-34, Sec. 955(b), amended
heading and text of par. (2) generally. Prior to amendment, text
read as follows: "The term 'qualified zone property' has the
meaning given such term by section 1397C; except that the
references to empowerment zones shall be treated as including
references to enterprise communities."
Subsec. (b)(3). Pub. L. 105-34, Sec. 955(b), amended heading and
text of par. (3) generally. Prior to amendment, text read as
follows: "The term 'enterprise zone business' has the meaning given
to such term by section 1397B, except that -
"(A) references to empowerment zones shall be treated as
including references to enterprise communities, and
"(B) such term includes any trades or businesses which would
qualify as an enterprise zone business (determined after the
modification of subparagraph (A)) if such trades or businesses
were separately incorporated."
Subsec. (f). Pub. L. 105-34, Sec. 953(a), added subsec. (f).
1996 - Subsec. (e)(2). Pub. L. 104-188, which directed that par.
(2) be amended by striking "(i)" and inserting "(A)" and by
striking "(ii)" and inserting "(B)", could not be executed, because
par. (2) contained neither "(i)" nor "(ii)".
EFFECTIVE DATE OF 2000 AMENDMENT
Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 115(b)], Dec. 21,
2000, 114 Stat. 2763, 2763A-602, provided that: "The amendments
made by this section [amending this section] shall apply to
obligations issued after December 31, 2001."
Amendment by section 1(a)(7) [title I, Sec. 116(b)(3), (4)] of
Pub. L. 106-554 applicable to qualified empowerment zone assets
acquired after Dec. 21, 2000, see section 1(a)(7) [title I, Sec.
116(c)] of Pub. L. 106-554, set out as a note under section 1016 of
this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 953(b) of Pub. L. 105-34 provided that: "The amendment
made by this section [amending this section] shall apply to
obligations issued after the date of the enactment of this Act
[Aug. 5, 1997]."
Section 955(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section] shall apply to
obligations issued after the date of the enactment of this Act
[Aug. 5, 1997]."
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 effective as if included in the
provision of the Revenue Reconciliation Act of 1993, Pub. L.
103-66, Secs. 13001-13444, to which such amendment relates, see
section 1703(o) of Pub. L. 104-188, set out as a note under section
39 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1400A of this title.
-End-
-CITE-
26 USC PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT
ZONES 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
-HEAD-
PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
-MISC1-
Subpart
A. Empowerment zone employment credit.
B. Additional expensing.
C. Nonrecognition of gain on rollover of empowerment zone
investments.
D. General provisions.
AMENDMENTS
2000 - Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 116(b)(6)],
Dec. 21, 2000, 114 Stat. 2763, 2763A-604, added items for subparts
C and D and struck out former item for subpart C "General
provisions".
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in section 1397F of this title.
-End-
-CITE-
26 USC Subpart A - Empowerment Zone Employment Credit 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
Subpart A - Empowerment Zone Employment Credit
-HEAD-
SUBPART A - EMPOWERMENT ZONE EMPLOYMENT CREDIT
-MISC1-
Sec.
1396. Empowerment zone employment credit.
1397. Other definitions and special rules.
-End-
-CITE-
26 USC Sec. 1396 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
Subpart A - Empowerment Zone Employment Credit
-HEAD-
Sec. 1396. Empowerment zone employment credit
-STATUTE-
(a) Amount of credit
For purposes of section 38, the amount of the empowerment zone
employment credit determined under this section with respect to any
employer for any taxable year is the applicable percentage of the
qualified zone wages paid or incurred during the calendar year
which ends with or within such taxable year.
(b) Applicable percentage
For purposes of this section, the applicable percentage is 20
percent.
(c) Qualified zone wages
(1) In general
For purposes of this section, the term "qualified zone wages"
means any wages paid or incurred by an employer for services
performed by an employee while such employee is a qualified zone
employee.
(2) Only first $15,000 of wages per year taken into account
With respect to each qualified zone employee, the amount of
qualified zone wages which may be taken into account for a
calendar year shall not exceed $15,000.
(3) Coordination with work opportunity credit
(A) In general
The term "qualified zone wages" shall not include wages taken
into account in determining the credit under section 51.
(B) Coordination with paragraph (2)
The $15,000 amount in paragraph (2) shall be reduced for any
calendar year by the amount of wages paid or incurred during
such year which are taken into account in determining the
credit under section 51.
(d) Qualified zone employee
For purposes of this section -
(1) In general
Except as otherwise provided in this subsection, the term
"qualified zone employee" means, with respect to any period, any
employee of an employer if -
(A) substantially all of the services performed during such
period by such employee for such employer are performed within
an empowerment zone in a trade or business of the employer, and
(B) the principal place of abode of such employee while
performing such services is within such empowerment zone.
(2) Certain individuals not eligible
The term "qualified zone employee" shall not include -
(A) any individual described in subparagraph (A), (B), or (C)
of section 51(i)(1),
(B) any 5-percent owner (as defined in section 416(i)(1)(B)),
(C) any individual employed by the employer for less than 90
days,
(D) any individual employed by the employer at any facility
described in section 144(c)(6)(B), and
(E) any individual employed by the employer in a trade or
business the principal activity of which is farming (within the
meaning of subparagraph (A) or (B) of section 2032A(e)(5)), but
only if, as of the close of the taxable year, the sum of -
(i) the aggregate unadjusted bases (or, if greater, the
fair market value) of the assets owned by the employer which
are used in such a trade or business, and
(ii) the aggregate value of assets leased by the employer
which are used in such a trade or business (as determined
under regulations prescribed by the Secretary),
exceeds $500,000.
(3) Special rules related to termination of employment
(A) In general
Paragraph (2)(C) shall not apply to -
(i) a termination of employment of an individual who before
the close of the period referred to in paragraph (2)(C)
becomes disabled to perform the services of such employment
unless such disability is removed before the close of such
period and the taxpayer fails to offer reemployment to such
individual, or
(ii) a termination of employment of an individual if it is
determined under the applicable State unemployment
compensation law that the termination was due to the
misconduct of such individual.
(B) Changes in form of business
For purposes of paragraph (2)(C), the employment relationship
between the taxpayer and an employee shall not be treated as
terminated -
(i) by a transaction to which section 381(a) applies if the
employee continues to be employed by the acquiring
corporation, or
(ii) by reason of a mere change in the form of conducting
the trade or business of the taxpayer if the employee
continues to be employed in such trade or business and the
taxpayer retains a substantial interest in such trade or
business.
-SOURCE-
(Added Pub. L. 103-66, title XIII, Sec. 13301(a), Aug. 10, 1993,
107 Stat. 549; amended Pub. L. 104-188, title I, Sec. 1201(e)(4),
Aug. 20, 1996, 110 Stat. 1772; Pub. L. 105-34, title IX, Secs.
951(b), 952(b), Aug. 5, 1997, 111 Stat. 885, 887; Pub. L. 106-554,
Sec. 1(a)(7) [title I, Sec. 113(a), (b)], Dec. 21, 2000, 114 Stat.
2763, 2763A-601.)
-REFTEXT-
REFERENCES IN TEXT
The Taxpayer Relief Act of 1997, referred to in subsec. (b)(2),
is Pub. L. 105-34, Aug. 5, 1997, 111 Stat. 788.
Reference in subsec. (c)(3) to section 51 of this title treated
as including reference to section 51A of this title, see section
51A(d)(2) of this title.
-MISC1-
PRIOR PROVISIONS
A prior section 1396, added Pub. L. 95-600, title VI, Sec.
601(a), Nov. 6, 1978, 92 Stat. 2895; amended Pub. L. 96-595, Sec.
3(a)(6), (9), (10), Dec. 24, 1980, 94 Stat. 3465, related to
minimum distributions by an electing general stock ownership
corporation, prior to repeal by Pub. L. 99-514, title XIII, Sec.
1303(a), Oct. 22, 1986, 100 Stat. 2658.
AMENDMENTS
2000 - Subsec. (b). Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec.
113(a)], amended subsec. (b) generally, substituting provisions
establishing an applicable percentage of 20 percent for provisions
setting out tables for determining the applicable percentage.
Subsec. (e). Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec.
113(b)], struck out heading and text of subsec. (e). Text read as
follows: "This section shall be applied without regard to any
empowerment zone designated under section 1391(g)."
1997 - Subsec. (b). Pub. L. 105-34 substituted "For purposes of
this section -
"(1) In general. - Except as provided in paragraph (2), the
term 'applicable percentage' means the percentage determined in
accordance with the following table:"
for "For purposes of this section, the term 'applicable percentage'
means the percentage determined in accordance with the following
table:" and added par. (2).
Subsec. (e). Pub. L. 105-34, Sec. 952(b), added subsec. (e).
1996 - Subsec. (c)(3). Pub. L. 104-188 substituted "work
opportunity credit" for "targeted jobs credit" in heading.
EFFECTIVE DATE OF 2000 AMENDMENT
Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 113(d)], Dec. 21,
2000, 114 Stat. 2763, 2763A-601, provided that: "The amendments
made by this section [amending this section and section 1400 of
this title] shall apply to wages paid or incurred after December
31, 2001."
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 951(b) of Pub. L. 105-34 effective Aug. 5,
1997, except that designations of new empowerment zones made
pursuant to amendments by section 951 of Pub. L. 105-34 to be made
during 180-day period beginning Aug. 5, 1997, and no designation
pursuant to such amendments to take effect before Jan. 1, 2000, see
section 951(c) of Pub. L. 105-34, set out as a note under section
1391 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 applicable to individuals who begin
work for the employer after Sept. 30, 1996, see section 1201(g) of
Pub. L. 104-188, set out as a note under section 38 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 38, 39, 51A, 196, 280C,
1397, 1400, 1400H of this title.
-End-
-CITE-
26 USC Sec. 1397 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
Subpart A - Empowerment Zone Employment Credit
-HEAD-
Sec. 1397. Other definitions and special rules
-STATUTE-
(a) Wages
For purposes of this subpart -
(1) In general
The term "wages" has the same meaning as when used in section
51.
(2) Certain training and educational benefits
(A) In general
The following amounts shall be treated as wages paid to an
employee:
(i) Any amount paid or incurred by an employer which is
excludable from the gross income of an employee under section
127, but only to the extent paid or incurred to a person not
related to the employer.
(ii) In the case of an employee who has not attained the
age of 19, any amount paid or incurred by an employer for any
youth training program operated by such employer in
conjunction with local education officials.
(B) Related person
A person is related to any other person if the person bears a
relationship to such other person specified in section 267(b)
or 707(b)(1), or such person and such other person are engaged
in trades or businesses under common control (within the
meaning of subsections (a) and (b) of section 52). For purposes
of the preceding sentence, in applying section 267(b) or
707(b)(1), "10 percent" shall be substituted for "50 percent".
(b) Controlled groups
For purposes of this subpart -
(1) all employers treated as a single employer under subsection
(a) or (b) of section 52 shall be treated as a single employer
for purposes of this subpart, and
(2) the credit (if any) determined under section 1396 with
respect to each such employer shall be its proportionate share of
the wages giving rise to such credit.
(c) Certain other rules made applicable
For purposes of this subpart, rules similar to the rules of
section 51(k) and subsections (c), (d), and (e) of section 52 shall
apply.
-SOURCE-
(Added Pub. L. 103-66, title XIII, Sec. 13301(a), Aug. 10, 1993,
107 Stat. 551.)
-MISC1-
PRIOR PROVISIONS
A prior section 1397, added Pub. L. 95-600, title VI, Sec.
601(a), Nov. 6, 1978, 92 Stat. 2895, related to special rules
applicable to an electing general stock ownership corporation,
prior to repeal by Pub. L. 99-514, title XIII, Sec. 1303(a), Oct.
22, 1986, 100 Stat. 2658.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 1397C of this title.
-End-
-CITE-
26 USC Subpart B - Additional Expensing 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
Subpart B - Additional Expensing
-HEAD-
SUBPART B - ADDITIONAL EXPENSING
-MISC1-
Sec.
1397A. Increase in expensing under section 179.
-End-
-CITE-
26 USC Sec. 1397A 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
Subpart B - Additional Expensing
-HEAD-
Sec. 1397A. Increase in expensing under section 179
-STATUTE-
(a) General rule
In the case of an enterprise zone business, for purposes of
section 179 -
(1) the limitation under section 179(b)(1) shall be increased
by the lesser of -
(A) $35,000, or
(B) the cost of section 179 property which is qualified zone
property placed in service during the taxable year, and
(2) the amount taken into account under section 179(b)(2) with
respect to any section 179 property which is qualified zone
property shall be 50 percent of the cost thereof.
(b) Recapture
Rules similar to the rules under section 179(d)(10) shall apply
with respect to any qualified zone property which ceases to be used
in an empowerment zone by an enterprise zone business.
-SOURCE-
(Added Pub. L. 103-66, title XIII, Sec. 13301(a), Aug. 10, 1993,
107 Stat. 552; amended Pub. L. 105-34, title IX, Sec. 952(c), Aug.
5, 1997, 111 Stat. 887; Pub. L. 106-554, Sec. 1(a)(7) [title I,
Sec. 114(a), (b)], Dec. 21, 2000, 114 Stat. 2763, 2763A-601.)
-MISC1-
AMENDMENTS
2000 - Subsec. (a)(1)(A). Pub. L. 106-554, Sec. 1(a)(7) [title I,
Sec. 114(a)], substituted "$35,000" for "$20,000".
Subsec. (c). Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec.
114(b)], struck out heading and text of subsec. (c). Text read as
follows: "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)."
1997 - Subsec. (c). Pub. L. 105-34 added subsec. (c).
EFFECTIVE DATE OF 2000 AMENDMENT
Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 114(c)], Dec. 21,
2000, 114 Stat. 2763, 2763A-601, provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 2001."
-End-
-CITE-
26 USC Subpart C - Nonrecognition of Gain on Rollover of
Empowerment Zone Investments 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
Subpart C - Nonrecognition of Gain on Rollover of Empowerment Zone
Investments
-HEAD-
SUBPART C - NONRECOGNITION OF GAIN ON ROLLOVER OF EMPOWERMENT ZONE
INVESTMENTS
-MISC1-
Sec.
1397B. Nonrecognition of gain on rollover of empowerment zone
investments.
AMENDMENTS
2000 - Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 116(a)(3)],
Dec. 21, 2000, 114 Stat. 2763, 2763A-602, added subpart C heading
and item 1397B. Former subpart C, consisting of sections 1397B and
1397C, redesignated D.
-End-
-CITE-
26 USC Sec. 1397B 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
Subpart C - Nonrecognition of Gain on Rollover of Empowerment Zone
Investments
-HEAD-
Sec. 1397B. Nonrecognition of gain on rollover of empowerment zone
investments
-STATUTE-
(a) Nonrecognition of gain
In the case of any sale of a qualified empowerment zone asset
held by the taxpayer for more than 1 year and with respect to which
such taxpayer elects the application of this section, gain from
such sale shall be recognized only to the extent that the amount
realized on such sale exceeds -
(1) the cost of any qualified empowerment zone asset (with
respect to the same zone as the asset sold) purchased by the
taxpayer during the 60-day period beginning on the date of such
sale, reduced by
(2) any portion of such cost previously taken into account
under this section.
(b) Definitions and special rules
For purposes of this section -
(1) Qualified empowerment zone asset
(A) In general
The term "qualified empowerment zone asset" means any
property which would be a qualified community asset (as defined
in section 1400F) if in section 1400F -
(i) references to empowerment zones were substituted for
references to renewal communities,
(ii) references to enterprise zone businesses (as defined
in section 1397C) were substituted for references to renewal
community businesses, and
(iii) the date of the enactment of this paragraph were
substituted for "December 31, 2001" each place it appears.
(B) Treatment of DC zone
The District of Columbia Enterprise Zone shall not be treated
as an empowerment zone for purposes of this section.
(2) Certain gain not eligible for rollover
This section shall not apply to -
(A) any gain which is treated as ordinary income for purposes
of this subtitle, and
(B) any gain which is attributable to real property, or an
intangible asset, which is not an integral part of an
enterprise zone business.
(3) Purchase
A taxpayer shall be treated as having purchased any property
if, but for paragraph (4), the unadjusted basis of such property
in the hands of the taxpayer would be its cost (within the
meaning of section 1012).
(4) Basis adjustments
If gain from any sale is not recognized by reason of subsection
(a), such gain shall be applied to reduce (in the order acquired)
the basis for determining gain or loss of any qualified
empowerment zone asset which is purchased by the taxpayer during
the 60-day period described in subsection (a). This paragraph
shall not apply for purposes of section 1202.
(5) Holding period
For purposes of determining whether the nonrecognition of gain
under subsection (a) applies to any qualified empowerment zone
asset which is sold -
(A) the taxpayer's holding period for such asset and the
asset referred to in subsection (a)(1) shall be determined
without regard to section 1223, and
(B) only the first year of the taxpayer's holding period for
the asset referred to in subsection (a)(1) shall be taken into
account for purposes of paragraphs (2)(A)(iii), (3)(C), and
(4)(A)(iii) of section 1400F(b).
-SOURCE-
(Added Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 116(a)(3)],
Dec. 21, 2000, 114 Stat. 2763, 2763A-602.)
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of this paragraph, referred to in
subsec. (b)(1)(A)(iii), is the date of enactment of Pub. L.
106-554, which was approved Dec. 21, 2000.
-MISC1-
PRIOR PROVISIONS
A prior section 1397B was renumbered section 1397C of this title.
EFFECTIVE DATE
Section applicable to qualified empowerment zone assets acquired
after Dec. 21, 2000, see section 1(a)(7) [title I, Sec. 116(c)] of
Pub. L. 106-554, set out as an Effective Date of 2000 Amendment
note under section 1016 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1016, 1223 of this title.
-End-
-CITE-
26 USC Subpart D - General Provisions 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
Subpart D - General Provisions
-HEAD-
SUBPART D - GENERAL PROVISIONS
-MISC1-
Sec.
1397C. Enterprise zone business defined.
1397D. Qualified zone property defined.
AMENDMENTS
2000 - Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 116(a)(1),
(b)(7)], Dec. 21, 2000, 114 Stat. 2763, 2763A-602, 2763A-604,
redesignated subpart C of this part as this subpart and items for
sections 1397B and 1397C as 1397C and 1397D, respectively.
-End-
-CITE-
26 USC Sec. 1397C 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
Subpart D - General Provisions
-HEAD-
Sec. 1397C. Enterprise zone business defined
-STATUTE-
(a) In general
For purposes of this part, the term "enterprise zone business"
means -
(1) any qualified business entity, and
(2) any qualified proprietorship.
(b) Qualified business entity
For purposes of this section, the term "qualified business
entity" means, with respect to any taxable year, any corporation or
partnership if for such year -
(1) every trade or business of such entity is the active
conduct of a qualified business within an empowerment zone,
(2) at least 50 percent of the total gross income of such
entity is derived from the active conduct of such business,
(3) a substantial portion of the use of the tangible property
of such entity (whether owned or leased) is within an empowerment
zone,
(4) a substantial portion of the intangible property of such
entity is used in the active conduct of any such business,
(5) a substantial portion of the services performed for such
entity by its employees are performed in an empowerment zone,
(6) at least 35 percent of its employees are residents of an
empowerment zone,
(7) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such entity is attributable
to collectibles (as defined in section 408(m)(2)) other than
collectibles that are held primarily for sale to customers in the
ordinary course of such business, and
(8) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such entity is attributable
to nonqualified financial property.
(c) Qualified proprietorship
For purposes of this section, the term "qualified proprietorship"
means, with respect to any taxable year, any qualified business
carried on by an individual as a proprietorship if for such year -
(1) at least 50 percent of the total gross income of such
individual from such business is derived from the active conduct
of such business in an empowerment zone,
(2) a substantial portion of the use of the tangible property
of such individual in such business (whether owned or leased) is
within an empowerment zone,
(3) a substantial portion of the intangible property of such
business is used in the active conduct of such business,
(4) a substantial portion of the services performed for such
individual in such business by employees of such business are
performed in an empowerment zone,
(5) at least 35 percent of such employees are residents of an
empowerment zone,
(6) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such individual which is used
in such business is attributable to collectibles (as defined in
section 408(m)(2)) other than collectibles that are held
primarily for sale to customers in the ordinary course of such
business, and
(7) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such individual which is used
in such business is attributable to nonqualified financial
property.
For purposes of this subsection, the term "employee" includes the
proprietor.
(d) Qualified business
For purposes of this section -
(1) In general
Except as otherwise provided in this subsection, the term
"qualified business" means any trade or business.
(2) Rental of real property
The rental to others of real property located in an empowerment
zone shall be treated as a qualified business if and only if -
(A) the property is not residential rental property (as
defined in section 168(e)(2)), and
(B) at least 50 percent of the gross rental income from the
real property is from enterprise zone businesses.
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.
(3) Rental of tangible personal property
The rental to others of tangible personal property shall be
treated as a qualified business if and only if at least 50
percent of the rental of such property is by enterprise zone
businesses or by residents of an empowerment zone.
(4) Treatment of business holding intangibles
The term "qualified business" shall not include any trade or
business consisting predominantly of the development or holding
of intangibles for sale or license.
(5) Certain businesses excluded
The term "qualified business" shall not include -
(A) any trade or business consisting of the operation of any
facility described in section 144(c)(6)(B), and
(B) any trade or business the principal activity of which is
farming (within the meaning of subparagraphs (!1) (A) or (B) of
section 2032A(e)(5)), but only if, as of the close of the
taxable year, the sum of -
(i) the aggregate unadjusted bases (or, if greater, the
fair market value) of the assets owned by the taxpayer which
are used in such a trade or business, and
(ii) the aggregate value of assets leased by the taxpayer
which are used in such a trade or business,
exceeds $500,000.
For purposes of subparagraph (B), rules similar to the rules of
section 1397(b) shall apply.
(e) Nonqualified financial property
For purposes of this section, the term "nonqualified financial
property" means debt, stock, partnership interests, options,
futures contracts, forward contracts, warrants, notional principal
contracts, annuities, and other similar property specified in
regulations; except that such term shall not include -
(1) reasonable amounts of working capital held in cash, cash
equivalents, or debt instruments with a term of 18 months or
less, or
(2) debt instruments described in section 1221(a)(4).
(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.
-SOURCE-
(Added Pub. L. 103-66, title XIII, Sec. 13301(a), Aug. 10, 1993,
107 Stat. 552, Sec. 1397B; amended Pub. L. 104-188, title I, Sec.
1703(m), Aug. 20, 1996, 110 Stat. 1877; Pub. L. 105-34, title IX,
Sec. 956(a), Aug. 5, 1997, 111 Stat. 890; Pub. L. 106-170, title V,
Sec. 532(c)(4), Dec. 17, 1999, 113 Stat. 1931; renumbered Sec.
1397C, Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 116(a)(2)],
Dec. 21, 2000, 114 Stat. 2763, 2763A-602.)
-MISC1-
PRIOR PROVISIONS
A prior section 1397C was renumbered section 1397D of this title.
AMENDMENTS
2000 - Pub. L. 106-554 renumbered section 1397B of this title as
this section.
1999 - Subsec. (e)(2). Pub. L. 106-170 substituted "section
1221(a)(4)" for "section 1221(4)".
1997 - Subsec. (b)(2). Pub. L. 105-34, Sec. 956(a)(1),
substituted "50 percent" for "80 percent".
Subsec. (b)(3). Pub. L. 105-34, Sec. 956(a)(2), substituted "a
substantial portion" for "substantially all".
Subsec. (b)(4). Pub. L. 105-34, Sec. 956(a)(2), (3), substituted
"a substantial portion" for "substantially all" and struck out ",
and exclusively related to," after "entity is used in".
Subsec. (b)(5). Pub. L. 105-34, Sec. 956(a)(2), substituted "a
substantial portion" for "substantially all".
Subsec. (c)(1). Pub. L. 105-34, Sec. 956(a)(1), substituted "50
percent" for "80 percent".
Subsec. (c)(2). Pub. L. 105-34, Sec. 956(a)(2), substituted "a
substantial portion" for "substantially all".
Subsec. (c)(3). Pub. L. 105-34, Sec. 956(a)(2), (3), substituted
"a substantial portion" for "substantially all" and struck out ",
and exclusively related to," after "business is used in".
Subsec. (c)(4). Pub. L. 105-34, Sec. 956(a)(2), substituted "a
substantial portion" for "substantially all".
Subsec. (d)(2). Pub. L. 105-34, Sec. 956(a)(4), inserted
concluding provisions.
Subsec. (d)(3). Pub. L. 105-34, Sec. 956(a)(5), substituted "at
least 50 percent" for "substantially all".
Subsec. (f). Pub. L. 105-34, Sec. 956(a)(6), added subsec. (f).
1996 - Subsec. (d)(5)(B). Pub. L. 104-188 struck out "preceding"
before "taxable year" in introductory provisions.
EFFECTIVE DATE OF 1999 AMENDMENT
Amendment by Pub. L. 106-170 applicable to any instrument held,
acquired, or entered into, any transaction entered into, and
supplies held or acquired on or after Dec. 17, 1999, see section
532(d) of Pub. L. 106-170, set out as a note under section 170 of
this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 956(b) of Pub. L. 105-34 provided that:
"(1) In general. - The amendments made by this section [amending
this section] shall apply to taxable years beginning on or after
the date of the enactment of this Act [Aug. 5, 1997].
"(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."
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-188 effective as if included in the
provision of the Revenue Reconciliation Act of 1993, Pub. L.
103-66, Secs. 13001-13444, to which such amendment relates, see
section 1703(o) of Pub. L. 104-188, set out as a note under section
39 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 45D, 1202, 1394, 1397B,
1400, 1400B, 1400G of this title.
-FOOTNOTE-
(!1) So in original. Probably should be "subparagraph".
-End-
-CITE-
26 USC Sec. 1397D 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART III - ADDITIONAL INCENTIVES FOR EMPOWERMENT ZONES
Subpart D - General Provisions
-HEAD-
Sec. 1397D. Qualified zone property defined
-STATUTE-
(a) General rule
For purposes of this part -
(1) In general
The term "qualified zone property" means any property to which
section 168 applies (or would apply but for section 179) if -
(A) such property was acquired by the taxpayer by purchase
(as defined in section 179(d)(2)) after the date on which the
designation of the empowerment zone took effect,
(B) the original use of which in an empowerment zone
commences with the taxpayer, and
(C) substantially all of the use of which is in an
empowerment zone and is in the active conduct of a qualified
business by the taxpayer in such zone.
(2) Special rule for substantial renovations
In the case of any property which is substantially renovated by
the taxpayer, the requirements of subparagraphs (A) and (B) of
paragraph (1) shall be treated as satisfied. For purposes of the
preceding sentence, property shall be treated as substantially
renovated by the taxpayer if, during any 24-month period
beginning after the date on which the designation of the
empowerment zone took effect, additions to basis with respect to
such property in the hands of the taxpayer exceed the greater of
(i) an amount equal to the adjusted basis at the beginning of
such 24-month period in the hands of the taxpayer, or (ii)
$5,000.
(b) Special rules for sale-leasebacks
For purposes of subsection (a)(1)(B), if property is sold and
leased back by the taxpayer within 3 months after the date such
property was originally placed in service, such property shall be
treated as originally placed in service not earlier than the date
on which such property is used under the leaseback.
-SOURCE-
(Added Pub. L. 103-66, title XIII, Sec. 13301(a), Aug. 10, 1993,
107 Stat. 554, Sec. 1397C; renumbered Sec. 1397D, Pub. L. 106-554,
Sec. 1(a)(7) [title I, Sec. 116(a)(2)], Dec. 21, 2000, 114 Stat.
2763, 2763A-602.)
-MISC1-
PRIOR PROVISIONS
A prior section 1397D was renumbered section 1397F of this title.
AMENDMENTS
2000 - Pub. L. 106-554 renumbered section 1397C of this title as
this section.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1394, 1400J of this
title.
-End-
-CITE-
26 USC PART IV - INCENTIVES FOR EDUCATION ZONES 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART IV - INCENTIVES FOR EDUCATION ZONES
-HEAD-
PART IV - INCENTIVES FOR EDUCATION ZONES
-MISC1-
Sec.
1397E. Credit to holders of qualified zone academy bonds.
AMENDMENTS
1997 - Pub. L. 105-34, title II, Sec. 226(a), Aug. 5, 1997, 111
Stat. 820, added part IV heading and item 1397E. Former part IV,
consisting of section 1397D, redesignated V.
-End-
-CITE-
26 USC Sec. 1397E 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART IV - INCENTIVES FOR EDUCATION ZONES
-HEAD-
Sec. 1397E. Credit to holders of qualified zone academy bonds
-STATUTE-
(a) Allowance of credit
In the case of an eligible taxpayer who holds a qualified zone
academy bond on the credit allowance date of such bond which occurs
during the taxable year, there shall be allowed as a credit against
the tax imposed by this chapter for such taxable year the amount
determined under subsection (b).
(b) Amount of credit
(1) In general
The amount of the credit determined under this subsection with
respect to any qualified zone academy bond is the amount equal to
the product of -
(A) the credit rate determined by the Secretary under
paragraph (2) for the month in which such bond was issued,
multiplied by
(B) the face amount of the bond held by the taxpayer on the
credit allowance date.
(2) Determination
During each calendar month, the Secretary shall determine a
credit rate which shall apply to bonds issued during the
following calendar month. The credit rate for any month is the
percentage which the Secretary estimates will permit the issuance
of qualified zone academy bonds without discount and without
interest cost to the issuer.
(c) Limitation based on amount of tax
The credit allowed under subsection (a) for any taxable year
shall not exceed the excess of -
(1) the sum of the regular tax liability (as defined in section
26(b)) plus the tax imposed by section 55, over
(2) the sum of the credits allowable under part IV of
subchapter A (other than subpart C thereof, relating to
refundable credits).
(d) Qualified zone academy bond
For purposes of this section -
(1) In general
The term "qualified zone academy bond" means any bond issued as
part of an issue if -
(A) 95 percent or more of the proceeds of such issue are to
be used for a qualified purpose with respect to a qualified
zone academy established by an eligible local education agency,
(B) the bond is issued by a State or local government within
the jurisdiction of which such academy is located,
(C) the issuer -
(i) designates such bond for purposes of this section,
(ii) certifies that it has written assurances that the
private business contribution requirement of paragraph (2)
will be met with respect to such academy, and
(iii) certifies that it has the written approval of the
eligible local education agency for such bond issuance, and
(D) the term of each bond which is part of such issue does
not exceed the maximum term permitted under paragraph (3).
(2) Private business contribution requirement
(A) In general
For purposes of paragraph (1), the private business
contribution requirement of this paragraph is met with respect
to any issue if the eligible local education agency that
established the qualified zone academy has written commitments
from private entities to make qualified contributions having a
present value (as of the date of issuance of the issue) of not
less than 10 percent of the proceeds of the issue.
(B) Qualified contributions
For purposes of subparagraph (A), the term "qualified
contribution" means any contribution (of a type and quality
acceptable to the eligible local education agency) of -
(i) equipment for use in the qualified zone academy
(including state-of-the-art technology and vocational
equipment),
(ii) technical assistance in developing curriculum or in
training teachers in order to promote appropriate market
driven technology in the classroom,
(iii) services of employees as volunteer mentors,
(iv) internships, field trips, or other educational
opportunities outside the academy for students, or
(v) any other property or service specified by the eligible
local education agency.
(3) Term requirement
During each calendar month, the Secretary shall determine the
maximum term permitted under this paragraph for bonds issued
during the following calendar month. Such maximum term shall be
the term which the Secretary estimates will result in the present
value of the obligation to repay the principal on the bond being
equal to 50 percent of the face amount of the bond. Such present
value shall be determined using as a discount rate the average
annual interest rate of tax-exempt obligations having a term of
10 years or more which are issued during the month. If the term
as so determined is not a multiple of a whole year, such term
shall be rounded to the next highest whole year.
(4) Qualified zone academy
(A) In general
The term "qualified zone academy" means any public school (or
academic program within a public school) which is established
by and operated under the supervision of an eligible local
education agency to provide education or training below the
postsecondary level if -
(i) such public school or program (as the case may be) is
designed in cooperation with business to enhance the academic
curriculum, increase graduation and employment rates, and
better prepare students for the rigors of college and the
increasingly complex workforce,
(ii) students in such public school or program (as the case
may be) will be subject to the same academic standards and
assessments as other students educated by the eligible local
education agency,
(iii) the comprehensive education plan of such public
school or program is approved by the eligible local education
agency, and
(iv)(I) such public school is located in an empowerment
zone or enterprise community (including any such zone or
community designated after the date of the enactment of this
section), or
(II) there is a reasonable expectation (as of the date of
issuance of the bonds) that at least 35 percent of the
students attending such school or participating in such
program (as the case may be) will be eligible for free or
reduced-cost lunches under the school lunch program
established under the Richard B. Russell National School
Lunch Act.
(B) Eligible local education agency
The term "eligible local education agency" means any local
educational agency as defined in section 9101 of the Elementary
and Secondary Education Act of 1965.
(5) Qualified purpose
The term "qualified purpose" means, with respect to any
qualified zone academy -
(A) rehabilitating or repairing the public school facility in
which the academy is established,
(B) providing equipment for use at such academy,
(C) developing course materials for education to be provided
at such academy, and
(D) training teachers and other school personnel in such
academy.
(6) Eligible taxpayer
The term "eligible taxpayer" means -
(A) a bank (within the meaning of section 581),
(B) an insurance company to which subchapter L applies, and
(C) a corporation actively engaged in the business of lending
money.
(e) Limitation on amount of bonds designated
(1) National limitation
There is a national zone academy bond limitation for each
calendar year. Such limitation is $400,000,000 for 1998, 1999,
2000, 2001, 2002, and 2003, and, except as provided in paragraph
(4), zero thereafter.
(2) Allocation of limitation
The national zone academy bond limitation for a calendar year
shall be allocated by the Secretary among the States on the basis
of their respective populations of individuals below the poverty
line (as defined by the Office of Management and Budget). The
limitation amount allocated to a State under the preceding
sentence shall be allocated by the State education agency to
qualified zone academies within such State.
(3) Designation subject to limitation amount
The maximum aggregate face amount of bonds issued during any
calendar year which may be designated under subsection (d)(1)
with respect to any qualified zone academy shall not exceed the
limitation amount allocated to such academy under paragraph (2)
for such calendar year.
(4) Carryover of unused limitation
If for any calendar year -
(A) the limitation amount for any State, exceeds
(B) the amount of bonds issued during such year which are
designated under subsection (d)(1) with respect to qualified
zone academies within such State,
the limitation amount for such State for the following calendar
year shall be increased by the amount of such excess. Any
carryforward of a limitation amount may be carried only to the
first 2 years (3 years for carryforwards from 1998 or 1999)
following the unused limitation year. For purposes of the
preceding sentence, a limitation amount shall be treated as used
on a first-in first-out basis.
(f) Other definitions
For purposes of this section -
(1) Credit allowance date
The term "credit allowance date" means, with respect to any
issue, the last day of the 1-year period beginning on the date of
issuance of such issue and the last day of each successive 1-year
period thereafter.
(2) Bond
The term "bond" includes any obligation.
(3) State
The term "State" includes the District of Columbia and any
possession of the United States.
(g) Credit included in gross income
Gross income includes the amount of the credit allowed to the
taxpayer under this section (determined without regard to
subsection (c)).
(h) Credit treated as allowed under part IV of subchapter A
For purposes of subtitle F, the credit allowed by this section
shall be treated as a credit allowable under part IV of subchapter
A of this chapter.
-SOURCE-
(Added Pub. L. 105-34, title II, Sec. 226(a), Aug. 5, 1997, 111
Stat. 821; amended Pub. L. 105-206, title VI, Sec. 6004(g)(2)-(4),
July 22, 1998, 112 Stat. 796; Pub. L. 106-78, title VII, Sec.
752(b)(11), Oct. 22, 1999, 113 Stat. 1169; Pub. L. 106-170, title
V, Sec. 509, Dec. 17, 1999, 113 Stat. 1924; Pub. L. 107-110, title
X, Sec. 1076(t), Jan. 8, 2002, 115 Stat. 2092; Pub. L. 107-147,
title VI, Sec. 608(a), Mar. 9, 2002, 116 Stat. 60.)
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of this section, referred to in subsec.
(d)(4)(A)(iv)(I), is the date of enactment of Pub. L. 105-34, which
was approved Aug. 5, 1997.
The Richard B. Russell National School Lunch Act, referred to in
subsec. (d)(4)(A)(iv)(II), is act June 4, 1946, ch. 281, 60 Stat.
230, as amended, which is classified generally to chapter 13 (Sec.
1751 et seq.) of Title 42, The Public Health and Welfare. For
complete classification of this Act to the Code, see Short Title
note set out under section 1751 of Title 42 and Tables.
Section 9101 of the Elementary and Secondary Education Act of
1965, referred to in subsec. (d)(4)(B), is classified to section
7801 of Title 20, Education.
-MISC1-
AMENDMENTS
2002 - Subsec. (d)(4)(B). Pub. L. 107-110 substituted "9101" for
"14101".
Subsec. (e)(1). Pub. L. 107-147 substituted "2000, 2001, 2002,
and 2003" for "2000, and 2001".
1999 - Subsec. (d)(4)(A)(iv)(II). Pub. L. 106-78 substituted
"Richard B. Russell National School Lunch Act" for "National School
Lunch Act".
Subsec. (e)(1). Pub. L. 106-170, Sec. 509(a), substituted ",
1999, 2000, and 2001" for "and 1999".
Subsec. (e)(4). Pub. L. 106-170, Sec. 509(b), inserted at end
"Any carryforward of a limitation amount may be carried only to the
first 2 years (3 years for carryforwards from 1998 or 1999)
following the unused limitation year. For purposes of the preceding
sentence, a limitation amount shall be treated as used on a
first-in first-out basis."
1998 - Subsec. (d)(4)(B). Pub. L. 105-206, Sec. 6004(g)(2),
substituted "local educational agency as defined" for "local
education agency as defined".
Subsec. (g). Pub. L. 105-206, Sec. 6004(g)(4), inserted
"(determined without regard to subsection (c))" after "section".
Subsec. (h). Pub. L. 105-206, Sec. 6004(g)(3), added subsec. (h).
EFFECTIVE DATE OF 2002 AMENDMENTS
Pub. L. 107-147, title VI, Sec. 608(b), Mar. 9, 2002, 116 Stat.
60, provided that: "The amendment made by subsection (a) [amending
this section] shall apply to obligations issued after the date of
the enactment of this Act [Mar. 9, 2002]."
Amendment by Pub. L. 107-110 effective Jan. 8, 2002, except with
respect to certain noncompetitive programs and competitive
programs, see section 5 of Pub. L. 107-110, set out as an Effective
Date note under section 6301 of Title 20, Education.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE
Section 226(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [enacting this section and renumbering section
1397D as section 1397F of this title] shall apply to obligations
issued after December 31, 1997."
-End-
-CITE-
26 USC PART V - REGULATIONS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART V - REGULATIONS
-HEAD-
PART V - REGULATIONS
-MISC1-
Sec.
1397F. Regulations.
AMENDMENTS
1997 - Pub. L. 105-34, title II, Sec. 226(a), (b)(2), Aug. 5,
1997, 111 Stat. 820, 824, redesignated part IV of this subchapter
as this part and item 1397D as 1397F.
-End-
-CITE-
26 USC Sec. 1397F 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter U - Designation and Treatment of Empowerment Zones,
Enterprise Communities, and Rural Development
Investment Areas
PART V - REGULATIONS
-HEAD-
Sec. 1397F. Regulations
-STATUTE-
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of parts II and
III, including -
(1) regulations limiting the benefit of parts II and III in
circumstances where such benefits, in combination with benefits
provided under other Federal programs, would result in an
activity being 100 percent or more subsidized by the Federal
Government,
(2) regulations preventing abuse of the provisions of parts II
and III, and
(3) regulations dealing with inadvertent failures of entities
to be enterprise zone businesses.
-SOURCE-
(Added Pub. L. 103-66, title XIII, Sec. 13301(a), Aug. 10, 1993,
107 Stat. 555, Sec. 1397D; renumbered Sec. 1397F, Pub. L. 105-34,
title II, Sec. 226(a), Aug. 5, 1997, 111 Stat. 820; amended Pub. L.
105-206, title VI, Sec. 6004(g)(1), July 22, 1998, 112 Stat. 796.)
-MISC1-
AMENDMENTS
1998 - Pub. L. 105-206 amended directory language of Pub. L.
105-34, Sec. 226(a). See 1997 Amendment note below.
1997 - Pub. L. 105-34, Sec. 226(a), as amended by Pub. L.
105-206, renumbered section 1397D of this title as this section.
-End-
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