-CITE-
26 USC Subchapter Y - New York Liberty Zone Benefits 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Y - New York Liberty Zone Benefits
-HEAD-
SUBCHAPTER Y - NEW YORK LIBERTY ZONE BENEFITS
-MISC1-
Sec.
1400L. Tax benefits for New York Liberty Zone.
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-CITE-
26 USC Sec. 1400L 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter Y - New York Liberty Zone Benefits
-HEAD-
Sec. 1400L. Tax benefits for New York Liberty Zone
-STATUTE-
(a) Expansion of work opportunity tax credit
(1) In general
For purposes of section 51, a New York Liberty Zone business
employee shall be treated as a member of a targeted group.
(2) New York Liberty Zone business employee
For purposes of this subsection -
(A) In general
The term "New York Liberty Zone business employee" means,
with respect to any period, any employee of a New York Liberty
Zone business if substantially all the services performed
during such period by such employee for such business are
performed in the New York Liberty Zone.
(B) Inclusion of certain employees outside the New York Liberty
Zone
(i) In general
In the case of a New York Liberty Zone business described
in subclause (II) of subparagraph (C)(i), the term "New York
Liberty Zone business employee" includes any employee of such
business (not described in subparagraph (A)) if substantially
all the services performed during such period by such
employee for such business are performed in the City of New
York, New York.
(ii) Limitation
The number of employees of such a business that are treated
as New York Liberty Zone business employees on any day by
reason of clause (i) shall not exceed the excess of -
(I) the number of employees of such business on September
11, 2001, in the New York Liberty Zone, over
(II) the number of New York Liberty Zone business
employees (determined without regard to this subparagraph)
of such business on the day to which the limitation is
being applied.
The Secretary may require any trade or business to have the
number determined under subclause (I) verified by the New
York State Department of Labor.
(C) New York Liberty Zone business
(i) In general
The term "New York Liberty Zone business" means any trade
or business which is -
(I) located in the New York Liberty Zone, or
(II) located in the City of New York, New York, outside
the New York Liberty Zone, as a result of the physical
destruction or damage of such place of business by the
September 11, 2001, terrorist attack.
(ii) Credit not allowed for large businesses
The term "New York Liberty Zone business" shall not include
any trade or business for any taxable year if such trade or
business employed an average of more than 200 employees on
business days during the taxable year.
(D) Special rules for determining amount of credit
For purposes of applying subpart F of part IV of subchapter B
of this chapter (!1) to wages paid or incurred to any New York
Liberty Zone business employee -
(i) section 51(a) shall be applied by substituting
"qualified wages" for "qualified first-year wages",
(ii) the rules of section 52 shall apply for purposes of
determining the number of employees under subparagraph (B),
(iii) subsections (c)(4) and (i)(2) of section 51 shall not
apply, and
(iv) in determining qualified wages, the following shall
apply in lieu of section 51(b):
(I) Qualified wages
The term "qualified wages" means wages paid or incurred
by the employer to individuals who are New York Liberty
Zone business employees of such employer for work performed
during calendar year 2002 or 2003.
(II) Only first $6,000 of wages per calendar year taken
into account
The amount of the qualified wages which may be taken into
account with respect to any individual shall not exceed
$6,000 per calendar year.
(b) Special allowance for certain property acquired after September
10, 2001
(1) Additional allowance
In the case of any qualified New York Liberty Zone property -
(A) the depreciation deduction provided by section 167(a) for
the taxable year in which such property is placed in service
shall include an allowance equal to 30 percent of the adjusted
basis of such property, and
(B) the adjusted basis of the qualified New York Liberty Zone
property shall be reduced by the amount of such deduction
before computing the amount otherwise allowable as a
depreciation deduction under this chapter for such taxable year
and any subsequent taxable year.
(2) Qualified New York Liberty Zone property
For purposes of this subsection -
(A) In general
The term "qualified New York Liberty Zone property" means
property -
(i)(I) which is described in section 168(k)(2)(A)(i), or
(II) which is nonresidential real property, or residential
rental property, which is described in subparagraph (B),
(ii) substantially all of the use of which is in the New
York Liberty Zone and is in the active conduct of a trade or
business by the taxpayer in such Zone,
(iii) the original use of which in the New York Liberty
Zone commences with the taxpayer after September 10, 2001,
(iv) which is acquired by the taxpayer by purchase (as
defined in section 179(d)) after September 10, 2001, but only
if no written binding contract for the acquisition was in
effect before September 11, 2001, and
(v) which is placed in service by the taxpayer on or before
the termination date.
The term "termination date" means December 31, 2006 (December
31, 2009, in the case of nonresidential real property and
residential rental property).
(B) Eligible real property
Nonresidential real property or residential rental property
is described in this subparagraph only to the extent it
rehabilitates real property damaged, or replaces real property
destroyed or condemned, as a result of the September 11, 2001,
terrorist attack. For purposes of the preceding sentence,
property shall be treated as replacing real property destroyed
or condemned if, as part of an integrated plan, such property
replaces real property which is included in a continuous area
which includes real property destroyed or condemned.
(C) Exceptions
(i) Bonus depreciation property under section 168(k)
Such term shall not include property to which section
168(k) applies.
(ii) Alternative depreciation property
The term "qualified New York Liberty Zone property" shall
not include any property described in section
168(k)(2)(C)(i).
(iii) Qualified New York Liberty Zone leasehold improvement
property
Such term shall not include any qualified New York Liberty
Zone leasehold improvement property.
(iv) Election out
For purposes of this subsection, rules similar to the rules
of section 168(k)(2)(C)(iii) shall apply.
(D) Special rules
For purposes of this subsection, rules similar to the rules
of section 168(k)(2)(D) shall apply, except that clause (i)
thereof shall be applied without regard to "and before
September 11, 2004".
(E) Allowance against alternative minimum tax
For purposes of this subsection, rules similar to the rules
of section 168(k)(2)(F) shall apply.
(c) 5-year recovery period for depreciation of certain leasehold
improvements
(1) In general
For purposes of section 168, the term "5-year property"
includes any qualified New York Liberty Zone leasehold
improvement property.
(2) Qualified New York Liberty Zone leasehold improvement
property
For purposes of this section, the term "qualified New York
Liberty Zone leasehold improvement property" means qualified
leasehold improvement property (as defined in section 168(k)(3))
if -
(A) such building is located in the New York Liberty Zone,
(B) such improvement is placed in service after September 10,
2001, and before January 1, 2007, and
(C) no written binding contract for such improvement was in
effect before September 11, 2001.
(3) Requirement to use straight line method
The applicable depreciation method under section 168 shall be
the straight line method in the case of qualified New York
Liberty Zone leasehold improvement property.
(4) 9-year recovery period under alternative system
For purposes of section 168(g), the class life of qualified New
York Liberty Zone leasehold improvement property shall be 9
years.
(d) Tax-exempt bond financing
(1) In general
For purposes of this title, any qualified New York Liberty Bond
shall be treated as an exempt facility bond.
(2) Qualified New York Liberty Bond
For purposes of this subsection, the term "qualified New York
Liberty Bond" means any bond issued as part of an issue if -
(A) 95 percent or more of the net proceeds (as defined in
section 150(a)(3)) of such issue are to be used for qualified
project costs,
(B) such bond is issued by the State of New York or any
political subdivision thereof,
(C) the Governor or the Mayor designates such bond for
purposes of this section, and
(D) such bond is issued after the date of the enactment of
this section and before January 1, 2005.
(3) Limitations on amount of bonds
(A) Aggregate amount designated
The maximum aggregate face amount of bonds which may be
designated under this subsection shall not exceed
$8,000,000,000, of which not to exceed $4,000,000,000 may be
designated by the Governor and not to exceed $4,000,000,000 may
be designated by the Mayor.
(B) Specific limitations
The aggregate face amount of bonds issued which are to be
used for -
(i) costs for property located outside the New York Liberty
Zone shall not exceed $2,000,000,000,
(ii) residential rental property shall not exceed
$1,600,000,000, and
(iii) costs with respect to property used for retail sales
of tangible property and functionally related and subordinate
property shall not exceed $800,000,000.
The limitations under clauses (i), (ii), and (iii) shall be
allocated proportionately between the bonds designated by the
Governor and the bonds designated by the Mayor in proportion to
the respective amounts of bonds designated by each.
(C) Movable property
No bonds shall be issued which are to be used for movable
fixtures and equipment.
(4) Qualified project costs
For purposes of this subsection -
(A) In general
The term "qualified project costs" means the cost of
acquisition, construction, reconstruction, and renovation of -
(i) nonresidential real property and residential rental
property (including fixed tenant improvements associated with
such property) located in the New York Liberty Zone, and
(ii) public utility property (as defined in section
168(i)(10)) located in the New York Liberty Zone.
(B) Costs for certain property outside zone included
Such term includes the cost of acquisition, construction,
reconstruction, and renovation of nonresidential real property
(including fixed tenant improvements associated with such
property) located outside the New York Liberty Zone but within
the City of New York, New York, if such property is part of a
project which consists of at least 100,000 square feet of
usable office or other commercial space located in a single
building or multiple adjacent buildings.
(5) Special rules
In applying this title to any qualified New York Liberty Bond,
the following modifications shall apply:
(A) Section 146 (relating to volume cap) shall not apply.
(B) Section 147(d) (relating to acquisition of existing
property not permitted) shall be applied by substituting "50
percent" for "15 percent" each place it appears.
(C) Section 148(f)(4)(C) (relating to exception from rebate
for certain proceeds to be used to finance construction
expenditures) shall apply to the available construction
proceeds of bonds issued under this section.
(D) Repayments of principal on financing provided by the
issue -
(i) may not be used to provide financing, and
(ii) must be used not later than the close of the 1st
semiannual period beginning after the date of the repayment
to redeem bonds which are part of such issue.
The requirement of clause (ii) shall be treated as met with
respect to amounts received within 10 years after the date of
issuance of the issue (or, in the case of a refunding bond, the
date of issuance of the original bond) if such amounts are used
by the close of such 10 years to redeem bonds which are part of
such issue.
(E) Section 57(a)(5) shall not apply.
(6) Separate issue treatment of portions of an issue
This subsection shall not apply to the portion of an issue
which (if issued as a separate issue) would be treated as a
qualified bond or as a bond that is not a private activity bond
(determined without regard to paragraph (1)), if the issuer
elects to so treat such portion.
(e) Advance refundings of certain tax-exempt bonds
(1) In general
With respect to a bond described in paragraph (2) issued as
part of an issue 90 percent (95 percent in the case of a bond
described in paragraph (2)(C)) or more of the net proceeds (as
defined in section 150(a)(3)) of which were used to finance
facilities located within the City of New York, New York (or
property which is functionally related and subordinate to
facilities located within the City of New York for the furnishing
of water), one additional advanced refunding after the date of
the enactment of this section and before January 1, 2005, shall
be allowed under the applicable rules of section 149(d) if -
(A) the Governor or the Mayor designates the advance
refunding bond for purposes of this subsection, and
(B) the requirements of paragraph (4) are met.
(2) Bonds described
A bond is described in this paragraph if such bond was
outstanding on September 11, 2001, and is -
(A) a State or local bond (as defined in section 103(c)(1))
which is a general obligation of the City of New York, New
York,
(B) a State or local bond (as so defined) other than a
private activity bond (as defined in section 141(a)) issued by
the New York Municipal Water Finance Authority or the
Metropolitan Transportation Authority of the State of New York,
or
(C) a qualified 501(c)(3) bond (as defined in section 145(a))
which is a qualified hospital bond (as defined in section
145(c)) issued by or on behalf of the State of New York or the
City of New York, New York.
(3) Aggregate limit
For purposes of paragraph (1), the maximum aggregate face
amount of bonds which may be designated under this subsection by
the Governor shall not exceed $4,500,000,000 and the maximum
aggregate face amount of bonds which may be designated under this
subsection by the Mayor shall not exceed $4,500,000,000.
(4) Additional requirements
The requirements of this paragraph are met with respect to any
advance refunding of a bond described in paragraph (2) if -
(A) no advance refundings of such bond would be allowed under
any provision of law after September 11, 2001,
(B) the advance refunding bond is the only other outstanding
bond with respect to the refunded bond, and
(C) the requirements of section 148 are met with respect to
all bonds issued under this subsection.
(f) Increase in expensing under section 179
(1) In general
For purposes of section 179 -
(A) the limitation under section 179(b)(1) shall be increased
by the lesser of -
(i) $35,000, or
(ii) the cost of section 179 property which is qualified
New York Liberty Zone property placed in service during the
taxable year, and
(B) the amount taken into account under section 179(b)(2)
with respect to any section 179 property which is qualified New
York Liberty Zone property shall be 50 percent of the cost
thereof.
(2) Qualified New York Liberty Zone property
For purposes of this subsection, the term "qualified New York
Liberty Zone property" has the meaning given such term by
subsection (b)(2).
(3) Recapture
Rules similar to the rules under section 179(d)(10) shall apply
with respect to any qualified New York Liberty Zone property
which ceases to be used in the New York Liberty Zone.
(g) Extension of replacement period for nonrecognition of gain
Notwithstanding subsections (g) and (h) of section 1033, clause
(i) of section 1033(a)(2)(B) shall be applied by substituting "5
years" for "2 years" with respect to property which is compulsorily
or involuntarily converted as a result of the terrorist attacks on
September 11, 2001, in the New York Liberty Zone but only if
substantially all of the use of the replacement property is in the
City of New York, New York.
(h) New York Liberty Zone
For purposes of this section, the term "New York Liberty Zone"
means the area located on or south of Canal Street, East Broadway
(east of its intersection with Canal Street), or Grand Street (east
of its intersection with East Broadway) in the Borough of Manhattan
in the City of New York, New York.
(i) References to Governor and Mayor
For purposes of this section, the terms "Governor" and "Mayor"
mean the Governor of the State of New York and the Mayor of the
City of New York, New York, respectively.
-SOURCE-
(Added Pub. L. 107-147, title III, Sec. 301(a), Mar. 9, 2002, 116
Stat. 33; amended Pub. L. 108-27, title II, Sec. 201(c)(2), May 28,
2003, 117 Stat. 757.)
-REFTEXT-
REFERENCES IN TEXT
Subpart F of part IV of subchapter B of this chapter, referred to
in subsec. (a)(2)(D), probably should be a reference to subpart F
of part IV of subchapter A of this chapter, which relates to rules
for computing work opportunity credits. No subpart F of part IV of
subchapter B of this chapter has been enacted.
The date of the enactment of this section, referred to in
subsecs. (d)(2)(D) and (e)(1), is the date of enactment of Pub. L.
107-147, which was approved Mar. 9, 2002.
-MISC1-
AMENDMENTS
2003 - Subsec. (b)(2)(C)(i). Pub. L. 108-27, which directed
amendment of heading by substituting "Bonus depreciation property
under section 168(k)" for "30-percent additional allowance
property", was executed by making the substitution for "30 percent
additional allowance property" to reflect the probable intent of
Congress.
EFFECTIVE DATE OF 2003 AMENDMENT
Amendment by Pub. L. 108-27 applicable to taxable years ending
after May 5, 2003, see section 201(d) of Pub. L. 108-27, set out as
a note under section 168 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 38, 168 of this title.
-FOOTNOTE-
(!1) See References in Text note below.
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