To amend the Internal Revenue Code of 1986 to extend certain tax benefits related to empowerment zones.

I 116TH CONGRESS 1ST SESSION H. R. 2238 To amend the Internal Revenue Code of 1986 to extend certain tax benefits related to empowerment zones. IN THE HOUSE OF REPRESENTATIVES APRIL 10, 2019 Mr. ESPAILLAT (for himself and Mr. ROGERS of Kentucky) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to extend certain tax benefits related to empowerment 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. EXTENSION OF EMPOWERMENT ZONES. 3 (a) IN GENERAL.—Section 1391(d)(1)(A)(i) of the 4 Internal Revenue Code of 1986 is amended by striking 5 ‘‘December 31, 2017’’ and inserting ‘‘December 31, 6 2029’’. 7 (b) EFFECTIVE DATE.—The amendment made by 8 this section shall take effect on January 1, 2018. 9 VerDate Sep 11 2014 21:51 Apr 25, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2238.IH H2238 kjohnson on DSK79L0C42 with BILLS 2 •HR 2238 IH (c) TREATMENT OF CERTAIN TERMINATION DATES 1 SPECIFIED IN NOMINATIONS.—In the case of a designa- 2 tion of an empowerment zone the nomination for which 3 included a termination date which is contemporaneous 4 with the date specified in subparagraph (A)(i) of section 5 1391(d)(1) of the Internal Revenue Code of 1986 (as in 6 effect before the enactment of this Act), subparagraph (B) 7 of such section shall not apply with respect to such des- 8 ignation if, after the date of the enactment of this section, 9 the entity which made such nomination amends the nomi- 10 nation to provide for a new termination date in such man- 11 ner as the Secretary of the Treasury (or the Secretary’s 12 designee) may provide. 13 SEC. 2. REINSTATEMENT OF QUALIFIED ZONE ACADEMY 14 BONDS. 15 (a) IN GENERAL.—Part IV of subchapter A of chap- 16 ter 1 of the Internal Revenue Code of 1986 is amended 17 by adding at the end the following new subpart: 18 ‘‘Subpart H—Credit to Holders of Qualified Zone 19 Academy Bonds 20 ‘‘Sec. 54. Credit to holders. ‘‘Sec. 54A. Qualified zone academy bonds. ‘‘SEC. 54. CREDIT TO HOLDERS. 21 ‘‘(a) ALLOWANCE OF CREDIT.—If a taxpayer holds 22 a qualified zone academy bond on one or more credit al- 23 lowance dates of the bond during any taxable year, there 24 VerDate Sep 11 2014 21:51 Apr 25, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2238.IH H2238 kjohnson on DSK79L0C42 with BILLS 3 •HR 2238 IH shall be allowed as a credit against the tax imposed by 1 this chapter for the taxable year an amount equal to the 2 sum of the credits determined under subsection (b) with 3 respect to such dates. 4 ‘‘(b) AMOUNT OF CREDIT.— 5 ‘‘(1) IN GENERAL.—The amount of the credit 6 determined under this subsection with respect to any 7 credit allowance date for a qualified zone academy 8 bond is 25 percent of the annual credit determined 9 with respect to such bond. 10 ‘‘(2) ANNUAL CREDIT.—The annual credit de- 11 termined with respect to any qualified zone academy 12 bond is the product of— 13 ‘‘(A) the applicable credit rate, multiplied 14 by 15 ‘‘(B) the outstanding face amount of the 16 bond. 17 ‘‘(3) APPLICABLE CREDIT RATE.—For purposes 18 of paragraph (2), the applicable credit rate is the 19 rate which the Secretary estimates will permit the 20 issuance of qualified zone academy bonds with a 21 specified maturity or redemption date without dis- 22 count and without interest cost to the qualified 23 issuer. The applicable credit rate with respect to any 24 qualified zone academy bond shall be determined as 25 VerDate Sep 11 2014 21:51 Apr 25, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2238.IH H2238 kjohnson on DSK79L0C42 with BILLS 4 •HR 2238 IH of the first day on which there is a binding, written 1 contract for the sale or exchange of the bond. 2 ‘‘(4) SPECIAL RULE FOR ISSUANCE AND RE- 3 DEMPTION.—In the case of a bond which is issued 4 during the 3-month period ending on a credit allow- 5 ance date, the amount of the credit determined 6 under this subsection with respect to such credit al- 7 lowance date shall be a ratable portion of the credit 8 otherwise determined based on the portion of the 3- 9 month period during which the bond is outstanding. 10 A similar rule shall apply when the bond is redeemed 11 or matures. 12 ‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.— 13 ‘‘(1) IN GENERAL.—The credit allowed under 14 subsection (a) for any taxable year shall not exceed 15 the excess of— 16 ‘‘(A) the sum of the regular tax liability 17 (as defined in section 26(b)) plus the tax im- 18 posed by section 55, over 19 ‘‘(B) the sum of the credits allowable 20 under this part (other than subparts C and J 21 and this subpart). 22 ‘‘(2) CARRYOVER OF UNUSED CREDIT.—If the 23 credit allowable under subsection (a) exceeds the 24 limitation imposed by paragraph (1) for such taxable 25 VerDate Sep 11 2014 21:51 Apr 25, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2238.IH H2238 kjohnson on DSK79L0C42 with BILLS 5 •HR 2238 IH year, such excess shall be carried to the succeeding 1 taxable year and added to the credit allowable under 2 subsection (a) for such taxable year (determined be- 3 fore the application of paragraph (1) for such suc- 4 ceeding taxable year). 5 ‘‘(d) DEFINITIONS.—For purposes of this sub- 6 chapter— 7 ‘‘(1) CREDIT ALLOWANCE DATE.—The term 8 ‘credit allowance date’ means— 9 ‘‘(A) March 15, 10 ‘‘(B) June 15, 11 ‘‘(C) September 15, and 12 ‘‘(D) December 15. 13 Such term includes the last day on which the bond 14 is outstanding. 15 ‘‘(2) BOND.—The term ‘bond’ includes any ob- 16 ligation. 17 ‘‘(3) STATE.—The term ‘State’ includes the 18 District of Columbia and any possession of the 19 United States. 20 ‘‘(4) AVAILABLE PROJECT PROCEEDS.—The 21 term ‘available project proceeds’ means— 22 ‘‘(A) the excess of— 23 ‘‘(i) the proceeds from the sale of an 24 issue, over 25 VerDate Sep 11 2014 21:51 Apr 25, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2238.IH H2238 kjohnson on DSK79L0C42 with BILLS 6 •HR 2238 IH ‘‘(ii) the issuance costs financed by 1 the issue (to the extent that such costs do 2 not exceed 2 percent of such proceeds), 3 and 4 ‘‘(B) the proceeds from any investment of 5 the excess described in subparagraph (A). 6 ‘‘(e) CREDIT TREATED AS INTEREST.—For purposes 7 of this subtitle, the credit determined under subsection (a) 8 shall be treated as interest which is includible in gross in- 9 come. 10 ‘‘(f) S CORPORATIONS AND PARTNERSHIPS.—In the 11 case of a qualified zone academy bond held by an S cor- 12 poration or partnership, the allocation of the credit al- 13 lowed by this section to the shareholders of such corpora- 14 tion or partners of such partnership shall be treated as 15 a distribution. 16 ‘‘(g) BONDS HELD BY REAL ESTATE INVESTMENT 17 TRUSTS.—If any qualified zone academy bond is held by 18 a real estate investment trust, the credit determined under 19 subsection (a) shall be allowed to beneficiaries of such 20 trust (and any gross income included under subsection (e) 21 with respect to such credit shall be distributed to such 22 beneficiaries) under procedures prescribed by the Sec- 23 retary. 24 VerDate Sep 11 2014 21:51 Apr 25, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2238.IH H2238 kjohnson on DSK79L0C42 with BILLS 7 •HR 2238 IH ‘‘(h) CREDITS MAY BE STRIPPED.—Under regula- 1 tions prescribed by the Secretary— 2 ‘‘(1) IN GENERAL.—There may be a separation 3 (including at issuance) of the ownership of a quali- 4 fied zone academy bond and the entitlement to the 5 credit under this section with respect to such bond. 6 In case of any such separation, the credit under this 7 section shall be allowed to the person who on the 8 credit allowance date holds the instrument evidenc- 9 ing the entitlement to the credit and not to the hold- 10 er of the bond. 11 ‘‘(2) CERTAIN RULES TO APPLY.—In the case 12 of a separation described in paragraph (1), the rules 13 of section 1286 shall apply to the qualified zone 14 academy bond as if it were a stripped bond and to 15 the credit under this section as if it were a stripped 16 coupon. 17 ‘‘SEC. 54A. QUALIFIED ZONE ACADEMY BONDS. 18 ‘‘(a) IN GENERAL.—For purposes of this subchapter, 19 the term ‘qualified zone academy bond’ means any bond 20 issued as part of an issue if— 21 ‘‘(1) 100 percent of the available project pro- 22 ceeds of such issue are to be used for a qualified 23 purpose with respect to a qualified zone academy es- 24 tablished by an eligible local education agency, 25 VerDate Sep 11 2014 21:51 Apr 25, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2238.IH H2238 kjohnson on DSK79L0C42 with BILLS 8 •HR 2238 IH ‘‘(2) the bond is issued by a State or local gov- 1 ernment within the jurisdiction of which such acad- 2 emy is located, and 3 ‘‘(3) the issuer— 4 ‘‘(A) designates such bond for purposes of 5 this section, 6 ‘‘(B) certifies that it has written assur- 7 ances that the private business contribution re- 8 quirement of subsection (b) will be met with re- 9 spect to such academy, and 10 ‘‘(C) certifies that it has the written ap- 11 proval of the eligible local education agency for 12 such bond issuance. 13 ‘‘(b) PRIVATE BUSINESS CONTRIBUTION REQUIRE- 14 MENT.—For purposes of subsection (a), the private busi- 15 ness contribution requirement of this subsection is met 16 with respect to any issue if the eligible local education 17 agency that established the qualified zone academy has 18 written commitments from private entities to make quali- 19 fied contributions having a present value (as of the date 20 of issuance of the issue) of not less than 10 percent of 21 the proceeds of the issue. 22 ‘‘(c) LIMITATION ON AMOUNT OF BONDS DES- 23 IGNATED.— 24 VerDate Sep 11 2014 21:51 Apr 25, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2238.IH H2238 kjohnson on DSK79L0C42 with BILLS 9 •HR 2238 IH ‘‘(1) NATIONAL LIMITATION.—There is a na- 1 tional zone academy bond limitation for each cal- 2 endar year. Such limitation is $400,000,000 for each 3 of calendar years 2020 through 2029 and, except as 4 provided in paragraph (4), zero thereafter. 5 ‘‘(2) ALLOCATION OF LIMITATION.—The na- 6 tional zone academy bond limitation for a calendar 7 year shall be allocated by the Secretary among the 8 States on the basis of their respective populations of 9 individuals below the poverty line (as defined by the 10 Office of Management and Budget). The limitation 11 amount allocated to a State under the preceding 12 sentence shall be allocated by the State education 13 agency to qualified zone academies within such 14 State. 15 ‘‘(3) DESIGNATION SUBJECT TO LIMITATION 16 AMOUNT.—The maximum aggregate face amount of 17 bonds issued during any calendar year which may be 18 designated under subsection (a) with respect to any 19 qualified zone academy shall not exceed the limita- 20 tion amount allocated to such academy under para- 21 graph (2) for such calendar year. 22 ‘‘(4) CARRYOVER OF UNUSED LIMITATION.— 23 ‘‘(A) IN GENERAL.—If for any calendar 24 year— 25 VerDate Sep 11 2014 21:51 Apr 25, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2238.IH H2238 kjohnson on DSK79L0C42 with BILLS 10 •HR 2238 IH ‘‘(i) the limitation amount for any 1 State, exceeds 2 ‘‘(ii) the amount of bonds issued dur- 3 ing such year which are designated under 4 subsection (a) with respect to qualified 5 zone academies within such State, 6 the limitation amount for such State for the fol- 7 lowing calendar year shall be increased by the 8 amount of such excess. 9 ‘‘(B) LIMITATION ON CARRYOVER.—Any 10 carryforward of a limitation amount may be 11 carried only to the first 2 years following the 12 unused limitation year. For purposes of the pre- 13 ceding sentence, a limitation amount shall be 14 treated as used on a first-in first-out basis. 15 ‘‘(d) DEFINITIONS.—For purposes of this section— 16 ‘‘(1) QUALIFIED ZONE ACADEMY.—The term 17 ‘qualified zone academy’ means any public school (or 18 academic program within a public school) which is 19 established by and operated under the supervision of 20 an eligible local education agency to provide edu- 21 cation or training below the postsecondary level if— 22 ‘‘(A) such public school or program (as the 23 case may be) is designed in cooperation with 24 business to enhance the academic curriculum, 25 VerDate Sep 11 2014 21:51 Apr 25, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2238.IH H2238 kjohnson on DSK79L0C42 with BILLS 11 •HR 2238 IH increase graduation and employment rates, and 1 better prepare students for the rigors of college 2 and the increasingly complex workforce, 3 ‘‘(B) students in such public school or pro- 4 gram (as the case may be) will be subject to the 5 same academic standards and assessments as 6 other students educated by the eligible local 7 education agency, 8 ‘‘(C) the comprehensive education plan of 9 such public school or program is approved by 10 the eligible local education agency, and 11 ‘‘(D)(i) such public school is located in an 12 empowerment zone or enterprise community 13 (including any such zone or community des- 14 ignated after the date of the enactment of this 15 section), or 16 ‘‘(ii) there is a reasonable expectation 17 (as of the date of issuance of the bonds) 18 that at least 35 percent of the students at- 19 tending such school or participating in 20 such program (as the case may be) will be 21 eligible for free or reduced-cost lunches 22 under the school lunch program established 23 under the National School Lunch Act. 24 VerDate Sep 11 2014 21:51 Apr 25, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2238.IH H2238 kjohnson on DSK79L0C42 with BILLS 12 •HR 2238 IH ‘‘(2) ELIGIBLE LOCAL EDUCATION AGENCY.— 1 For purposes of this section, the term ‘eligible local 2 education agency’ means any local educational agen- 3 cy as defined in section 8101 of the Elementary and 4 Secondary Education Act of 1965. 5 ‘‘(3) QUALIFIED PURPOSE.—The term ‘quali- 6 fied purpose’ means, with respect to any qualified 7 zone academy— 8 ‘‘(A) rehabilitating or repairing the public 9 school facility in which the academy is estab- 10 lished, 11 ‘‘(B) providing equipment for use at such 12 academy, 13 ‘‘(C) developing course materials for edu- 14 cation to be provided at such academy, and 15 ‘‘(D) training teachers and other school 16 personnel in such academy. 17 ‘‘(4) QUALIFIED CONTRIBUTIONS.—The term 18 ‘qualified contribution’ means any contribution (of a 19 type and quality acceptable to the eligible local edu- 20 cation agency) of— 21 ‘‘(A) equipment for use in the qualified 22 zone academy ( [Text truncated for display. 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