Office of Community Renewal Empowerment Zones, Enterprise Communities, and Renewal Communities Initiatives

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1 Office of Community Renewal Empowerment Zones, Enterprise Communities, and Renewal Communities Initiatives PROGRAM OVERVIEW The Empowerment Zone and Enterprise Community (EZ/EC) Initiative created a unique economic revitalization and job creation federal strategy for America. Enacted in 1993 through the authorization of the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), its purpose was to create business opportunities and jobs in the most economically distressed areas of inner cities and the rural heartland. These goals are embodied in the four key principles of the Initiative: The Strategic Vision for Change identifies what a community will become in the future and a statement of the values in which the community used to create its vision. The Community-Based Partnerships principle encourages all stakeholders in a community to participate in the revitalization of distressed neighborhoods, including residents, businesses, local political leaders, community development corporations, and other community groups. Economic Opportunity includes creating jobs within the designated EZ/EC community and linking residents to jobs throughout the region. Sustainable Community Development advances the creation of livable and vibrant communities through comprehensive approaches that coordinate economic, environmental, and community development. The EZ/EC effort provided tax incentives and performance grants to create jobs and expand business opportunities. It also focused on activities to support people looking for work, such as job training, childcare, and transportation. What set this initiative apart from previous urban revitalization efforts is that the community drove the decision-making. Residents decided what happened in their neighborhoods, rather than federal officials in Washington. Each EZ/EC community has written quantifiable goals that determine how the money was spent and what the results of the activity were. Although the Empowerment Zone/ Enterprise Community Initiative was only a ten-year effort, visible change in the EZ/EC neighborhoods has been apparent in the form of business startups and expansions, new jobs, commercial and housing development, and improved services for community residents. Updated August 2013 Page 1 of 7

2 ROUND I On December 21, 1994, 72 urban areas and 33 rural communities were designated as Empowerment Zones (EZs) or Enterprise Communities (ECs). Each of the six original Round I urban Empowerment Zones received $100 million, and each rural Zone received $40 million in performance grants for community and economic development activities. Boston, Houston, Kansas City, KS/MO, and Oakland each received $22 million as Enhanced Enterprise Communities (EECs). The remaining urban and rural ECs each received $3 million. Employers in the urban and rural Empowerment Zones were eligible for wage tax credits for every employee hired who lived in the Empowerment Zone boundaries. EZ businesses also were eligible for increased tax expensing for equipment purchases, and could take advantage of Welfare to Work and Work Opportunity tax credits, plus incentives for the redevelopment of Brownfield s. (Update Reference) Refer to the tables on page 5 for more information regarding the urban and rural Renewal Communities. ROUND II The Taxpayer Relief Act of 1997 authorized a competition for a second round of 20 EZ designations urban, 5 rural. During the Round II competition, 279 communities and groups of adjacent communities competed for the designation. In order to compete for status, communities submitted strategic revitalization plans for transforming their neighborhoods. Zones were selected based on a scoring system that measured the quality of revitalization plans and the value of private and public sector commitments secured to implement the plans. An interagency task force of career civil servants made the selections. On January 13, 1999, 20 economically distressed communities were designated as Round II Empowerment Zones, making them eligible to share in proposed federal grants, in addition to taxexempt bonding authority to finance sweeping revitalization and job creation programs over the next 10 years. Like Round I, Round II EZ businesses were also able to take advantage of various tax incentives, which included wage tax credits (available for wages paid or incurred after December 31, 2001), and increased tax expensing for equipment purchases, as well as Welfare to Work and Work Opportunity tax credits, and Brownfield redevelopment incentives. In total, round II EZs received $130 million in tax-exempt bond financing, and were able to issue Qualified Zone Academy Bonds to help fund materials, teacher training, rehabilitation, or equipment for programs that prepared EZ students for jobs. In addition, the designation for the Round II EZs, offered additional potential to link communities to their broader regional economies. Round II Zones were able to designate up to 2,000 acres of underutilized property (developable sites) outside the formal Zone area that could receive Zone benefits and be used for job-creation for Zone residents. Updated August 2013 Page 2 of 7

3 ROUND III In December 2000, Congress authorized a third round of Empowerment Zones, 7 in urban areas and 2 in rural areas. Congress also approved the designation of 40 Renewal Communities (RCs). Like the EZ/EC Initiative, the goal of the newly designated RCs was to stimulate job growth, promote economic development and create affordable housing opportunities in distressed communities by offering an attractive package of tax incentives worth nearly $17 billion to entice businesses to expand or locate in these designated communities. Of the 40 RCs designated, 12 were located in rural areas. Like Round I and Round II EZ/ECs, businesses located in the new Round III EZs and RCs were eligible to take advantage of a variety of Federal tax incentives to hire residents and expand or improve their operations. Furthermore, Round III efforts included a tax relief package of nearly $6 billion in incentives exclusively available for Empowerment Zones. Along with other distressed communities, EZs and RCs were eligible to share in an additional $11 billion in Low-Income Housing and New Market Tax Credits. No grant funding was made available to Round III Empowerment Zones or Renewal Communities. In whole, the newly designated Round III EZs and RCs were able to take advantage of wage credits, tax deductions, bond and capital gains to stimulate economic development and job growth. Each incentive was tailored to meet the particular needs of a business and offers significant inducement for companies to locate and hire additional workers. *On February 19, 2002, HUD announced 1 additional new Round III urban EZ: Tuscon, Arizona (this additional new EZ slot opened up as a result of a Round I EZ- Atlanta, GA receiving a RC designation and thus freeing up a new EZ slot that could be filled). Renewal Communities (RCs) The Renewal Communities were authorized in 2000 and were developed to achieve four key principles: a Strategic Vision for Change, Community-Based Partnerships, Economic Opportunities, and Sustainable Community Development. RCs strived to reduce unemployment and generate economic growth in selected census tracts, using tax incentives to stimulate development and business activity. The U.S. Department of Housing and Urban Development (HUD) was designated to oversee all RCs and their designations expired at the end of Current Status of EZ Designations The Tax Relief, Unemployment, Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA) extended the Empowerment Zone and DC Enterprise Zone designations to December 31, This extension enabled communities to further take advantage of the available tax incentives. Following 2011, the EZ designations were extended once again to December 31, 2013, following legislation outlined in the American Taxpayer Relief Act (ATRA) of 2012, signed into law by President Obama on January 2, Please note, the ATRA of 2012 did not extend the designation of the DC Enterprise Zone. Updated August 2013 Page 3 of 7

4 Information on Tax incentives Still Available to Active EZ Communities Empowerment Zone Employment Credit gives up to $6,000 in annual tax credit for employees who live and work in an EZ. This provides credit equal to 20% of the first $15,000 in employee salary. Work Opportunity Tax Credit (WOTC) provides tax credit up to $2,400 for each new employees aged 18 to 39 years old. This allows for credit equal to 40% of the first $6,000 in Designated Community Resident Salary. EZ Facility Bonds are issued by a local or state government to an applying EZ business to finance qualified zone property. Qualified Zone Academy Bonds allow state or local governments to issue no interest bonds to qualified zone academies through private entities. Increased 179 deductions allow business owners to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year that the property is placed into service. Updated August 2013 Page 4 of 7

5 EZ/EC/RC COMMUNITIES Empowerment Zone Communities RURAL EMPOWERMENT ZONE COMMUNITIES (10) Aroostook County, Maine Desert Communities, California FUTURO Communities, Texas Griggs-Steele, North Dakota Kentucky Highlands, Kentucky Mid-Delta Mississippi Oglala Sioux Tribe, South Dakota Rio Grande Valley, Texas Southernmost Illinois Delta, Illinois Southwest Georgia United, Georgia URBAN EMPOWERMENT ZONE COMMUNITIES (30) Baltimore, Maryland Boston, Massachusetts Chicago, Illinois Cincinnati, Ohio Cleveland, Ohio Columbia-Sumter, South Carolina Columbus, Ohio Cumberland County, New Jersey Detroit, Michigan El Paso, Texas Fresno, California Gary-Hammond-East Chicago, Indiana Huntington, WV/Ironton, Ohio Jacksonville, Florida Knoxville, Tennessee Los Angeles, California Miami/Dade County, Florida Minneapolis, Minnesota New Haven, Connecticut New York, New York Norfolk/Portsmouth, Virginia Oklahoma City, Oklahoma Philadelphia, PA/Camden, NJ Pulaski, Arkansas San Antonio, Texas Santa Ana, California St. Louis, MO/ E. St. Louis, IL Syracuse, New York Tucson, Arizona Yonkers, New York Enterprise Communities RURAL ENTERPRISE COMMUNITIES (20) Metlakatla Indian, Arkansas Four Corners, Arizona/New Mexico/Utah Empowerment Alliance of Southwest Moloka i, Hawaii Florida, Florida The Town of Austin, Indiana Wichita County, Kansas Bowling Green, Kentucky Empower Lewiston, Maine Clare County, Michigan Fort Peck Assiniboine, Montana Sioux Tribe, Montana City of Deming, New Mexico Tri-County Indian Nations Fayette, Pennsylvania Allendale County, South Carolina Clinch-Powell, Tennessee FUTURO, Texas Five Star, Washington Northwoods Niijii, Wisconsin Upper Kanawha Valley, West Virginia Updated August 2013 Page 5 of 7

6 URBAN ENTERPRISE COMMUNITIES (61) Birmingham, Alabama Little Rock/Pulaski, Arkansas Phoenix, Arizona Los Angeles, California** San Diego, California** San Francisco, California** Denver, Colorado Bridgeport, Connecticut New Haven, Connecticut Washington, District of Columbia Wilmington, Delaware Miami, Florida Tampa, Florida Albany, Georgia East St. Louis, Illinois Springfield, Illinois Indianapolis, Indiana Des Moines, Iowa Louisville, Kentucky New Orleans, Louisiana** Ouachita Parish, Louisiana** Lowell, Massachusetts** Springfield, Massachusetts Flint, Michigan** Muskegon, Michigan Minneapolis, Minnesota St. Paul, Minnesota St. Louis, Missouri Jackson, Mississippi Omaha, Nebraska Manchester, New Hampshire Newark, New Jersey** Albuquerque, New Mexico Las Vegas, Nevada Buffalo, New York Newburgh/Kingston, New York Rochester, New York** Albany/Schenectady/Troy, New York Charlotte, North Carolina Akron, Ohio Cleveland, Ohio Columbus, Ohio Oklahoma City, Oklahoma Portland, Oregon Harrisburg, Pennsylvania Pittsburgh, Pennsylvania Providence, Rhode Island Charleston, South Carolina** Memphis, Tennessee Nashville/Davidson, Tennessee** Dallas, Texas El Paso, Texas San Antonio, Texas Waco, Texas Ogden, Utah Burlington, Vermont** Norfolk, Virginia Seattle, Washington Tacoma, Washington** Huntington, West Virginia Milwaukee, Wisconsin** ** These 17 communities have lost their respective designations when they won Renewal Community designation on January 1, 2002 Updated August 2013 Page 6 of 7

7 Renewal Communities RURAL RENEWAL COMMUNITIES (12) Burlington, Vermont Central Louisiana Eastern Kentucky El Paso County, Texas Greene-Sumter, Alabama Jamestown, New York Northern Louisiana Orange Cove, California Parlier, California Southern Alabama Turtle Mountain Band of Chippewa, West-Central Mississippi North Dakota URBAN RENEWAL COMMUNITIES (28) Atlanta, Georgia Buffalo-Lackawanna, New York Camden, New Jersey Charleston, South Carolina Chattanooga, Tennessee Chicago, Illinois Corpus Christi, Texas Detroit, Michigan Flint, Michigan Hamilton, Ohio Lawrence, Massachusetts Los Angeles, California Lowell, Massachusetts Memphis, Tennessee Milwaukee, Wisconsin Mobile, Alabama Newark, New Jersey New Orleans, Louisiana Niagara Falls, New York Ouachita Parish, Louisiana Philadelphia, Pennsylvania Rochester, New York San Diego, California San Francisco, California Schenectady, New York Tacoma, Washington Yakima, Washington Youngstown, Ohio For more information, on please visit the EZ/EC/RC website at: pment/programs/rc Updated August 2013 Page 7 of 7