Economic Development Act for Distressed Zones of 2019

I 116TH CONGRESS 1ST SESSION H. R. 1525 To provide tax incentives to promote economic development in economically distressed zones. IN THE HOUSE OF REPRESENTATIVES MARCH 5, 2019 Miss GONZA´LEZ-COLO´N of Puerto Rico (for herself and Mrs. KIRKPATRICK) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To provide tax incentives to promote economic development in economically distressed zones. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Economic Development 4 Act for Distressed Zones of 2019’’. 5 SEC. 2. ECONOMICALLY DISTRESSED ZONES. 6 (a) IN GENERAL.—Chapter 1 of the Internal Rev- 7 enue Code of 1986 is amended by adding at the end the 8 following new subchapter: 9 VerDate Sep 11 2014 20:20 Mar 20, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1525.IH H1525 pbinns on DSK79D2C42PROD with BILLS 2 •HR 1525 IH ‘‘Subchapter AA—Economically Distressed 1 Zones 2 ‘‘Sec. 1400AA–1. Economically distressed zone credit. ‘‘Sec. 1400AA–2. Designation of economically distressed zones. ‘‘SEC. 1400AA–1. ECONOMICALLY DISTRESSED ZONE CRED- 3 IT. 4 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al- 5 lowed as a credit against the tax imposed by subtitle A 6 for the taxable year an amount equal to the sum of— 7 ‘‘(1) an amount equal to 40 percent of the sum 8 of— 9 ‘‘(A) the aggregate amount of the tax- 10 payer’s economically distressed zone wages for 11 such taxable year, plus 12 ‘‘(B) the allocable employee fringe benefit 13 expenses of the taxpayer for such taxable year, 14 ‘‘(2) an amount equal to 40 percent of the de- 15 preciation and amortization allowances for the tax- 16 able year with respect to property of the taxpayer 17 which are located and used in the active conduct of 18 a trade or business within an economically distressed 19 zone, and 20 ‘‘(3) an amount equal to 30 percent of the pay- 21 ments made by the taxpayer in course of a trade or 22 business for purchases of services or tangible prop- 23 erty from an unrelated person (40 percent in the 24 VerDate Sep 11 2014 20:20 Mar 20, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1525.IH H1525 pbinns on DSK79D2C42PROD with BILLS 3 •HR 1525 IH case of such a purchase from an unrelated minority 1 business) located within an economically distressed 2 zone. 3 ‘‘(b) DENIAL OF DOUBLE BENEFIT.—Any wages or 4 other expenses taken into account in determining the cred- 5 it under this section may not be taken into account in de- 6 termining the credit under sections 41, and any other pro- 7 vision determined by the Secretary to be substantially 8 similar. 9 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur- 10 poses of this section— 11 ‘‘(1) QUALIFIED ECONOMICALLY DISTRESSED 12 ZONE WAGES.— 13 ‘‘(A) IN GENERAL.—The term ‘qualified 14 economically distressed zone wages’ means 15 amounts paid or incurred by the taxpayer for 16 the taxable year which are— 17 ‘‘(i) in connection with the active con- 18 duct of a trade or business of the taxpayer 19 within an economically distressed zone, and 20 ‘‘(ii) for wages of an employee for 21 services provided, and the principal place 22 of employment of whom is, in such eco- 23 nomically distressed zone. 24 VerDate Sep 11 2014 20:20 Mar 20, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1525.IH H1525 pbinns on DSK79D2C42PROD with BILLS 4 •HR 1525 IH ‘‘(B) LIMITATION ON AMOUNT OF WAGES 1 TAKEN INTO ACCOUNT.— 2 ‘‘(i) IN GENERAL.—The amount of 3 wages which may be taken into account 4 under subparagraph (A) with respect to 5 any employee for any taxable year shall 6 not exceed the contribution and benefit 7 base determined under section 230 of the 8 Social Security Act for the calendar year 9 in which such taxable year begins. 10 ‘‘(ii) TREATMENT OF PART-TIME EM- 11 PLOYEES, ETC.—If— 12 ‘‘(I) any employee is not em- 13 ployed by the taxpayer on a substan- 14 tially full-time basis at all times dur- 15 ing the taxable year, or 16 ‘‘(II) the principal place of em- 17 ployment of any employee is not with- 18 in an economically distressed zone at 19 all times during the taxable year, 20 the limitation applicable under clause (i) 21 with respect to such employee shall be the 22 appropriate portion (as determined by the 23 Secretary) of the limitation which would 24 otherwise be in effect under clause (i). 25 VerDate Sep 11 2014 20:20 Mar 20, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1525.IH H1525 pbinns on DSK79D2C42PROD with BILLS 5 •HR 1525 IH ‘‘(C) TREATMENT OF CERTAIN EMPLOY- 1 EES.—The term ‘qualified economically dis- 2 tressed zone wages’ shall not include any wages 3 paid to employees who are assigned by the em- 4 ployer to perform services for another person, 5 unless the principal trade or business of the 6 employer is to make employees available for 7 temporary periods to other persons in return 8 for compensation. 9 ‘‘(2) ALLOCABLE EMPLOYEE FRINGE BENEFIT 10 EXPENSES.— 11 ‘‘(A) IN GENERAL.—The term ‘allocable 12 employee fringe benefit expenses’ means the ag- 13 gregate amount allowable as a deduction under 14 this chapter to the taxpayer for the taxable year 15 for the following amounts which are allocable to 16 employment in an economically distressed zone: 17 ‘‘(i) Employer contributions under a 18 stock bonus, pension, profit-sharing, or an- 19 nuity plan. 20 ‘‘(ii) Employer-provided coverage 21 under any accident or health plan for em- 22 ployees. 23 ‘‘(iii) The cost of life or disability in- 24 surance provided to employees. 25 VerDate Sep 11 2014 20:20 Mar 20, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1525.IH H1525 pbinns on DSK79D2C42PROD with BILLS 6 •HR 1525 IH ‘‘(B) ALLOCATION.—For purposes of sub- 1 paragraph (A), an amount shall be treated as 2 allocable to an economically distressed zone only 3 if such amount is with respect to employment 4 of an individual for services provided, and the 5 principal place of employment of whom is, in 6 such zone. 7 ‘‘(3) MINORITY BUSINESS.— 8 ‘‘(A) IN GENERAL.—The term ‘minority 9 business’ means— 10 ‘‘(i) a sole proprietorship carried on 11 by a qualified individual, or 12 ‘‘(ii) a corporation or partnership— 13 ‘‘(I) at least 50 percent of the 14 ownership interests in which are held 15 by one or more qualified individuals, 16 and 17 ‘‘(II) of which a qualified indi- 18 vidual is the president or chief execu- 19 tive officer (or a substantially equiva- 20 lent position). 21 ‘‘(B) QUALIFIED INDIVIDUAL.—The term 22 ‘qualified individual’ means any individual 23 who— 24 VerDate Sep 11 2014 20:20 Mar 20, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1525.IH H1525 pbinns on DSK79D2C42PROD with BILLS 7 •HR 1525 IH ‘‘(i) is of Asian-Indian, Asian-Pacific, 1 Black, Hispanic or Native American origin 2 or descent, and 3 ‘‘(ii) is a United States citizen or legal 4 resident of the United States or any of its 5 territories or possessions. 6 ‘‘(4) AGGREGATION RULES.— 7 ‘‘(A) IN GENERAL.—Members of an affili- 8 ated group shall be treated as a single taxpayer. 9 ‘‘(B) AFFILIATED GROUP.—The term 10 ‘qualified group’ means an affiliated group (as 11 defined in section 1504(a), determined without 12 regard to section 1504(b)(3)) one or more 13 members of which are engaged in the active 14 conduct of a trade or business within an eco- 15 nomically distressed zone. 16 ‘‘(C) RELATED PERSONS.—Persons shall 17 be treated as related to each other if such per- 18 sons would be treated as a single employer 19 under the regulations prescribed under section 20 52(b). 21 VerDate Sep 11 2014 20:20 Mar 20, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1525.IH H1525 pbinns on DSK79D2C42PROD with BILLS 8 •HR 1525 IH ‘‘SEC. 1400AA–2. DESIGNATION OF ECONOMICALLY DIS- 1 TRESSED ZONES. 2 ‘‘(a) IN GENERAL.—For purposes of this subchapter, 3 the term ‘economically distressed zone’ means any popu- 4 lation census tract which— 5 ‘‘(1) has pervasive poverty, unemployment, low 6 labor force participation, and general distress meas- 7 ured as a prolonged period of economic decline 8 measured by real gross national product, 9 ‘‘(2) has a poverty rate of not less than 35 per- 10 cent, and 11 ‘‘(3) has been designated as such by the Sec- 12 retary and the Secretary of Commerce pursuant to 13 an application under subsection (b). 14 ‘‘(b) APPLICATION FOR DESIGNATION.— 15 ‘‘(1) IN GENERAL.—An application for designa- 16 tion as an economically distressed zone may be filed 17 by a State or local government in which the popu- 18 lation census tract to which the application applies 19 is located. 20 ‘‘(2) REQUIREMENTS.—Such application shall 21 include— 22 ‘‘(A) a Fiscal Plan submitted pursuant to 23 section 201 of the Puerto Rico Oversight, Man- 24 agement, and Economic Stability Act, or 25 VerDate Sep 11 2014 20:20 Mar 20, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1525.IH H1525 pbinns on DSK79D2C42PROD with BILLS 9 •HR 1525 IH ‘‘(B) a strategic plan for accomplishing the 1 purposes of this subchapter, which— 2 ‘‘(i) describes the coordinated eco- 3 nomic, human, community, and physical 4 development plan and related activities 5 proposed for the nominated area, 6 ‘‘(ii) describes the process by which 7 the affected community is a full partner in 8 the process of developing and imple- 9 menting the plan and the extent to which 10 local institutions and organizations have 11 contributed to the planning process, 12 ‘‘(iii) identifies the amount of State, 13 local, and private resources that will be 14 available in the nominated area and the 15 private/public partnerships to be used, 16 which may include participation by, and 17 cooperation with, universities, medical cen- 18 ters, and other private and public entities, 19 ‘‘(iv) identifies the funding requested 20 under any Federal program in support of 21 the proposed economic, human, commu- 22 nity, and physical development and related 23 activities, 24 VerDate Sep 11 2014 20:20 Mar 20, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1525.IH H1525 pbinns on DSK79D2C42PROD with BILLS 10 •HR 1525 IH ‘‘(v) identifies baselines, methods, and 1 benchmarks for measuring the success of 2 carrying out the strategic plan, including 3 the extent to which poor persons and fami- 4 lies will be empowered to become economi- 5 cally self-sufficient, and 6 ‘‘(vi) does not include any action to 7 assist any establishment in relocating from 8 one area outside the nominated area to the 9 nominated area, except that assistance for 10 the expansion of an existing business enti- 11 ty through the establishment of a new 12 branch, affiliate, or subsidiary is permitted 13 if— 14 ‘‘(I) the establishment of the new 15 branch, affiliate, or subsidiary will not 16 result in a decrease in employment in 17 the area of original location or in any 18 other area where the existing business 19 entity conducts business operations, 20 ‘‘(II) there is no reason to believe 21 that the new branch, affiliate, or sub- 22 sidiary is being established with the 23 intention of closing down the oper- 24 ations of the existing business entity 25 VerDate Sep 11 2014 20:20 Mar 20, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1525.IH H1525 pbinns on DSK79D2C42PROD with BILLS 11 •HR 1525 IH in the area of its original location or 1 in any other area where the existing 2 business entity conducts business op- 3 eration, and 4 ‘‘(III) includes such other infor- 5 mation as may be required by the Sec- 6 retary and the Secretary of Com- 7 merce. 8 ‘‘(c) PERIOD FOR WHICH DESIGNATIONS ARE IN EF- 9 FECT.—Designation as an economically distressed zone 10 may be made at any time during the 10-year period begin- 11 ning on the date of the enactment of this section, and shall 12 remain in effect with respect to such zone during the 15- 13 year period beginning on the date of such designation. 14 ‘‘(d) TERRITORIES AND POSSESSIONS.—The term 15 ‘State’ includes territories and possessions of the United 16 States.’’. 17 (b) EFFECTIVE DATE.—The amendments made by 18 this section shall apply to taxable years beginning after 19 December 31, 2018. 20 Æ VerDate Sep 11 2014 20:20 Mar 20, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6301 E:\BILLS\H1525.IH H1525 pbinns on DSK79D2C42PROD with BILLS