Tax incentives to locate businesses in, and hire residents of, economically disadvantaged areas.
Nature of Program:
Round I, Round II, and Round III Empowerment Zones (EZs)
Empowerment Zones (EZs) are designated areas of high poverty and unemployment that benefit from tax incentives provided to businesses in the boundaries of the EZ. Businesses operating in EZs qualify for a variety of tax incentives including a tax credit of up to $3,000 per year for each of its employees who resides in the EZ, a Work Opportunity Tax Credit for hiring 18-39 year-old residents of the EZ, a deduction of $35,000 for the cost of eligible equipment purchases under section 179 of the Internal Revenue Code of 1986, and tax exempt private purpose "EZ Facility bonds" for commercial development. The Empowerment Zone designations were extended through December 31, 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.
The first EZs were authorized by the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) which allowed for the designation of nine empowerment zones (Round I EZs) and 95 enterprise communities (ECs) (65 urban and 30 rural). The Taxpayer Relief Act of 1997 (1997 Act) authorized the designation of two additional Round I urban EZs. The 1997 Act also authorized the designation of 20 additional EZs (Round II EZs) (15 urban and five rural). The Consolidated Appropriations Act, 2001, conformed and enhanced the tax incentives contained in the earlier laws for the Round I and Round II EZs and also authorized the Secretaries of HUD and Agriculture to designate nine new EZs (Round III EZs) (seven urban and two rural). Businesses in the Round I, Round II, and Round III EZs are eligible for tax incentives.
EZs and ECs were competitively selected based on the quality of a comprehensive, bottom-up strategic plan which included input from all community stakeholders and described the community's vision for economic revitalization and job creation. Four key principles defined the strategic plan: 1) a vision for change that identified what the community would look like in the future and how it would achieve its goals, 2) a description of community-based partnerships that would encourage all stakeholders to participate in achieving economic revitalization, 3) expanded economic opportunity through increased access to capital and credit for businesses and assistance with job training and placement for residents, and 4) sustainable community development that ensures economic, physical, and environmental factors are aligned as the community is revitalized. Written assurances were required that the strategic plans would be implemented.
Additionally, the areas nominated to be considered for designation had to meet specified criteria to establish their relative need with respect to poverty, unemployment, and general economic distress.
Applicant Eligibility: States and local governments.
Legal Authority: Sections 13301-13303 of the Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66); Sections 951-956 of the Taxpayer Relief Act of 1997 (Public Law 105-34); and Sections 111-117 of the Community Renewal Tax Relief Act of 2000, as included in the Consolidated Appropriations Act, 2001 (Public Law 106-554); Sections 753-754 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Public Law No: 111-312). Regulations are at 24 CFR parts 597, 598, and 599.
Administering Office: Assistant Secretary for Community Planning and Development,
U.S. Department of Housing and Urban Development, Washington, DC 20410-7000.
Information Sources: Administering office.
Current Status: The tax incentives for all of the Empowerment Zones (Rounds I, II, and III) were recently extended through December 31, 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. No recent funding has been provided for Round I EZs and ECs. Round II EZ funding expired on September 30, 2010. No funds have been appropriated to date for the Round III EZs, authorized by the Consolidated Appropriations Act, 2001. Designations for the Round I ECs expired in December 2004.