Bill Would Renew Tax Incentives for Empowerment Zones and Renewal Communities

WASHINGTON — A bill recently introduced in the House would renew empowerment zone and renewal community designations for certain areas so that they would become eligible for tax incentives such as the ability to issue empowerment zone facility bonds and/or qualified zone academy bonds.

The Growth Zones Opportunity Act, H.R. 4471, introduced by Rep. Steve Cohen, D-Tenn., has been referred to the House Ways and Means Committee.

Congress developed the EZ and RC initiatives to help distressed communities. The EZ designations expired at the end of 2013 and would be extended through 2020 under the bill. The RC designations expired at the end of 2009, and under the areas that were previously designated as RCs would again have that designation from 2014 through 2020.

Cohen's congressional district includes Memphis, which had a designated an RC.

"For years, struggling communities have relied on Renewal Community and Empowerment Zone incentives to create jobs and revitalize their economies," Cohen said in a release. "With millions of jobs lost across the country because of the Great Recession and too many Memphians still struggling, my Growth Zones Opportunity Act should be passed immediately to renew critical tax incentives and help distressed areas."

One of the EZ incentives available is that state and local governments can issue tax-exempt empowerment zone facility bonds to finance facilities used by qualifying businesses. In order for a business to qualify, at least 35% of its employees have to be residents of the zone.

A maximum of $60 million of these bonds can be issued in a zone in a rural area. Up to $130 million can be issued in a zone that has a population of less than 100,000 and is in an urban area. And a maximum of $230 million can be issued in a zone that has a population area of at least 100,000 and is in an urban area.

The bill does not raise the volume caps, but rather just extends how long issuers have to issue the bonds within the existing caps.

Another incentive is that, for public schools that are either located in empowerment zones or that have a reasonable expectation that at least 35% of their students will be eligible for free or reduced-cost lunches, qualified zone academy bonds can be used to finance their projects.

QZABs are taxable, tax-credit bonds that can be used for renovating school facilities, providing school equipment, developing course materials and training teachers and staff. The national volume cap for QZABs was $1.4 billion in 2009 and 2010 and $400 million each year from 2011 through 2013. No national volume cap has been authorized for 2014 and later, but unused capacity within the previously set limits can be carried over for two years.

The tax extenders package that the Senate Finance Committee passed earlier this month would extend empowerment zone tax incentives through 2015 and would extend the QZAB program by providing $400 million of volume per year for 2014 and 2015.

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