CONTENTS A. Description of Enterprise Zone Provisions of S. 2217, S. 1920, S. 1603, and S. 1032. B. Description of Enterprise Zone Provisions of H.R. Page INTRODUCTION The Senate Committee on Finance has scheduled a public hearing on June 3, 1992, on issues relating to enterprise zone tax incentives. This pamphlet,1 prepared by the staff of the Joint Committee on Taxation, provides a description and analysis of enterprise zone proposals contained in several introduced bills. Part I is a summary. Part II is a brief description of related present-law provisions. Part III is a description of the enterprise zone provisions contained in S. 2217, S. 1920, S. 1603, S. 1032, and H.R. 4210, and other proposals relating to enterprise zones, including S. 686 ("Rural Business Revitalization Act of 1991") and S. 383 ("Indian Economic Development Act of 1991"). Part IV discusses issues relating to proposed tax incentives for economic activity located in enterprise zones. 1 This pamphlet may be cited as follows: Joint Committee on Taxation, Proposals and Issues Relating to Tax Incentives for Enterprise Zones (JCS-12-92), June 2, 1992. For prior coverage of this topic see Joint Committee on Taxation, Description of S. 1310 Urban Jobs and Enterprise Zone Act of 1981 (JCS-33-81), July 10, 1981; Joint Committee on Taxation, Description of S. 2298 Enterprise Zone Tax Act of 1982 (JCS-9-82), April 13, 1982; Joint Committee on Taxation, Description of Bills (S. 863, S. 98, and S. 634) Relating to Enterprise Zones (JCS-7-83), April 20, 1983; Joint Committee on Taxation, Description of Enterprise Zone Proposals (H.R. 6 and Administration Proposal) (JCS-16-89), October 14, 1989; and Joint Committee on Taxation, Description and Analysis of Proposals Relating to Tax Incentives for Enterprise Zones (H.R. 11, H.R. 23, and Other Proposals) (JCS-9-91), June 18, 1991. I. SUMMARY Tax incentive provisions Targeted geographic areas The Internal Revenue Code does not contain general rules that target specific geographic areas for special Federal income tax treatment. Within certain Code sections, however, there are definitions of targeted areas for limited purposes. For example, the provisions relating to qualified mortgage bonds define targeted areas for the purpose of promoting housing development within economically distressed areas. Similarly, for purposes of the low-income housing credit, certain geographic areas are designated as high cost or difficult to develop areas for the purpose of increasing the rate of credit applicable to such areas. In addition, present law provides favorable Federal income tax treatment for certain U.S. corporations that operate in Puerto Rico, the U.S. Virgin Islands, or a possession of the United States as a means to encourage the conduct of trades or businesses within these areas. Tax credits for employers Under present law, the income tax liability of an employer does not vary based on where an employee performs services on behalf of the employer. The targeted jobs tax credit under present law, however, provides an income tax credit to employers for a portion of the wages paid to certain employees, who generally are either economically disadvantaged or participating in a specific education or rehabilitation program. Tax credits for employees Under present law, the income tax liability of an employee does not vary based on where the employee performs services in the United States on behalf of an employer. However, an eligible individual who maintains a home for one or more qualifying children is allowed an advance refundable income tax credit based on the earned income of the individual and the number of qualifying children. Tax credits for investment An income tax credit is allowed under present law for certain expenditures incurred in rehabilitating certified historic structures and certain nonresidential buildings that were originally placed in service before 1936. In addition, under present law, an income tax credit is allowed in annual installments over 10 years for certain expenditures incurred in substantially rehabilitating or constructing qualifying low-income rental housing. Under prior law, a 10 |