
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 106-554 Section 1(a)(7)]
[Document affected by Public Law 106-554 Section 1(a)(7)]
[Document affected by Public Law 106-554 Section 1(a)(7)]
[CITE: 26USC1391]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
Subchapter U--Designation and Treatment of Empowerment Zones, Enterprise 
           Communities, and Rural Development Investment Areas
 
                           PART I--DESIGNATION
 
Sec. 1391. Designation procedure


(a) In general

    From among the areas nominated for designation under this section, 
the appropriate Secretaries may designate empowerment zones and 
enterprise communities.

(b) Number of designations

                     (1) Enterprise communities

        The appropriate Secretaries may designate in the aggregate 95 
    nominated areas as enterprise communities under this section, 
    subject to the availability of eligible nominated areas. Of that 
    number, not more than 65 may be designated in urban areas and not 
    more than 30 may be designated in rural areas.

                        (2) Empowerment zones

        The appropriate Secretaries may designate in the aggregate 11 
    nominated areas as empowerment zones under this section, subject to 
    the availability of eligible nominated areas. Of that number, not 
    more than 8 may be designated in urban areas and not more than 3 may 
    be designated in rural areas. If 6 empowerment zones are designated 
    in urban areas, no less than 1 shall be designated in an urban area 
    the most populous city of which has a population of 500,000 or less 
    and no less than 1 shall be a nominated area which includes areas in 
    2 States and which has a population of 50,000 or less. The Secretary 
    of Housing and Urban Development shall designate empowerment zones 
    located in urban areas in such a manner that the aggregate 
    population of all such zones does not exceed 1,000,000.

(c) Period designations may be made

    A designation may be made under subsection (a) only after 1993 and 
before 1996.

(d) Period for which designation is in effect

                           (1) In general

        Any designation under this section shall remain in effect during 
    the period beginning on the date of the designation and ending on 
    the earliest of--
            (A)(i) in the case of an empowerment zone, December 31, 
        2009, or
            (ii) in the case of an enterprise community, the close of 
        the 10th calendar year beginning on or after such date of 
        designation,
            (B) the termination date designated by the State and local 
        governments as provided for in their nomination, or
            (C) the date the appropriate Secretary revokes the 
        designation.

                    (2) Revocation of designation

        The appropriate Secretary may revoke the designation under this 
    section of an area if such Secretary determines that the local 
    government or the State in which it is located--
            (A) has modified the boundaries of the area, or
            (B) is not complying substantially with, or fails to make 
        progress in achieving the benchmarks set forth in, the strategic 
        plan under subsection (f)(2).

(e) Limitations on designations

    No area may be designated under this section unless--
        (1) the area is nominated by 1 or more local governments and the 
    State or States in which it is located for designation under this 
    section,
        (2) such State or States and the local governments have the 
    authority--
            (A) to nominate the area for designation under this section, 
        and
            (B) to provide the assurances described in paragraph (3),

        (3) such State or States and the local governments provide 
    written assurances satisfactory to the appropriate Secretary that 
    the strategic plan described in the application under subsection 
    (f)(2) for such area will be implemented,
        (4) the appropriate Secretary determines that any information 
    furnished is reasonably accurate, and
        (5) such State or States and local governments certify that no 
    portion of the area nominated is already included in an empowerment 
    zone or in an enterprise community or in an area otherwise nominated 
    to be designated under this section.

(f) Application

    No area may be designated under this section unless the application 
for such designation--
        (1) demonstrates that the nominated area satisfies the 
    eligibility criteria described in section 1392,
        (2) includes a strategic plan for accomplishing the purposes of 
    this subchapter that--
            (A) describes the coordinated economic, human, community, 
        and physical development plan and related activities proposed 
        for the nominated area,
            (B) describes the process by which the affected community is 
        a full partner in the process of developing and implementing the 
        plan and the extent to which local institutions and 
        organizations have contributed to the planning process,
            (C) identifies the amount of State, local, and private 
        resources that will be available in the nominated area and the 
        private/public partnerships to be used, which may include 
        participation by, and cooperation with, universities, medical 
        centers, and other private and public entities,
            (D) identifies the funding requested under any Federal 
        program in support of the proposed economic, human, community, 
        and physical development and related activities,
            (E) identifies baselines, methods, and benchmarks for 
        measuring the success of carrying out the strategic plan, 
        including the extent to which poor persons and families will be 
        empowered to become economically self-sufficient, and
            (F) does not include any action to assist any establishment 
        in relocating from one area outside the nominated area to the 
        nominated area, except that assistance for the expansion of an 
        existing business entity through the establishment of a new 
        branch, affiliate, or subsidiary is permitted if--
                (i) the establishment of the new branch, affiliate, or 
            subsidiary will not result in a decrease in employment in 
            the area of original location or in any other area where the 
            existing business entity conducts business operations, and
                (ii) there is no reason to believe that the new branch, 
            affiliate, or subsidiary is being established with the 
            intention of closing down the operations of the existing 
            business entity in the area of its original location or in 
            any other area where the existing business entity conducts 
            business operation, and

        (3) includes such other information as may be required by the 
    appropriate Secretary.

(g) Additional designations permitted

                           (1) In general

        In addition to the areas designated under subsection (a), the 
    appropriate Secretaries may designate in the aggregate an additional 
    20 nominated areas as empowerment zones under this section, subject 
    to the availability of eligible nominated areas. Of that number, not 
    more than 15 may be designated in urban areas and not more than 5 
    may be designated in rural areas.

         (2) Period designations may be made and take effect

        A designation may be made under this subsection after the date 
    of the enactment of this subsection and before January 1, 1999.

           (3) Modifications to eligibility criteria, etc.

        (A) Poverty rate requirement

            (i) In general

                A nominated area shall be eligible for designation under 
            this subsection only if the poverty rate for each population 
            census tract within the nominated area is not less than 20 
            percent and the poverty rate for at least 90 percent of the 
            population census tracts within the nominated area is not 
            less than 25 percent.
            (ii) Treatment of census tracts with small 
                    populations

                A population census tract with a population of less than 
            2,000 shall be treated as having a poverty rate of not less 
            than 25 percent if--
                    (I) more than 75 percent of such tract is zoned for 
                commercial or industrial use, and
                    (II) such tract is contiguous to 1 or more other 
                population census tracts which have a poverty rate of 
                not less than 25 percent (determined without regard to 
                this clause).
            (iii) Exception for developable sites

                Clause (i) shall not apply to up to 3 noncontiguous 
            parcels in a nominated area which may be developed for 
            commercial or industrial purposes. The aggregate area of 
            noncontiguous parcels to which the preceding sentence 
            applies with respect to any nominated area shall not exceed 
            2,000 acres.
            (iv) Certain provisions not to apply

                Section 1392(a)(4) (and so much of paragraphs (1) and 
            (2) of section 1392(b) as relate to section 1392(a)(4)) 
            shall not apply to an area nominated for designation under 
            this subsection.
            (v) Special rule for rural empowerment zone

                The Secretary of Agriculture may designate not more than 
            1 empowerment zone in a rural area without regard to clause 
            (i) if such area satisfies emigration criteria specified by 
            the Secretary of Agriculture.

        (B) Size limitation

            (i) In general

                The parcels described in subparagraph (A)(iii) shall not 
            be taken into account in determining whether the requirement 
            of subparagraph (A) or (B) of section 1392(a)(3) is met.
            (ii) Special rule for rural areas

                If a population census tract (or equivalent division 
            under section 1392(b)(4)) in a rural area exceeds 1,000 
            square miles or includes a substantial amount of land owned 
            by the Federal, State, or local government, the nominated 
            area may exclude such excess square mileage or 
            governmentally owned land and the exclusion of that area 
            will not be treated as violating the continuous boundary 
            requirement of section 1392(a)(3)(B).

        (C) Aggregate population limitation

            The aggregate population limitation under the last sentence 
        of subsection (b)(2) shall not apply to a designation under 
        paragraph (1).

        (D) Previously designated enterprise communities may be included

            Subsection (e)(5) shall not apply to any enterprise 
        community designated under subsection (a) that is also nominated 
        for designation under this subsection.

        (E) Indian reservations may be nominated

            (i) In general

                Section 1393(a)(4) shall not apply to an area nominated 
            for designation under this subsection.
            (ii) Special rule

                An area in an Indian reservation shall be treated as 
            nominated by a State and a local government if it is 
            nominated by the reservation governing body (as determined 
            by the Secretary of \1\ Interior).
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    \1\ So in original. Probably should be followed by ``the''.
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(h) Additional designations permitted

                           (1) In general

        In addition to the areas designated under subsections (a) and 
    (g), the appropriate Secretaries may designate in the aggregate an 
    additional 9 nominated areas as empowerment zones under this 
    section, subject to the availability of eligible nominated areas. Of 
    that number, not more than seven may be designated in urban areas 
    and not more than 2 may be designated in rural areas.

         (2) Period designations may be made and take effect

        A designation may be made under this subsection after the date 
    of the enactment of this subsection and before January 1, 2002. 
    Subject to subparagraphs (B) and (C) of subsection (d)(1), such 
    designations shall remain in effect during the period beginning on 
    January 1, 2002, and ending on December 31, 2009.

           (3) Modifications to eligibility criteria, etc.

        The rules of subsection (g)(3) shall apply to designations under 
    this subsection.

       (4) Empowerment zones which become renewal communities

        The number of areas which may be designated as empowerment zones 
    under this subsection shall be increased by 1 for each area which 
    ceases to be an empowerment zone by reason of section 1400E(e). Each 
    additional area designated by reason of the preceding sentence shall 
    have the same urban or rural character as the area it is replacing.

(Added Pub. L. 103-66, title XIII, Sec. 13301(a), Aug. 10, 1993, 107 
Stat. 543; amended Pub. L. 105-34, title IX, Secs. 951(a), 952(a), (d), 
Aug. 5, 1997, 111 Stat. 885-887; Pub. L. 106-554, Sec. 1(a)(7) [title I, 
Secs. 111, 112, title III, Sec. 319(13)], Dec. 21, 2000, 114 Stat. 2763, 
2763A-600, 2763A-601, 2763A-646.)

                       References in Text

    The date of the enactment of this subsection, referred to in subsec. 
(g)(2), is the date of enactment of Pub. L. 105-34, which was approved 
Aug. 5, 1997.
    The date of the enactment of this subsection, referred to in subsec. 
(h)(2), is the date of enactment of Pub. L. 106-554, which was approved 
Dec. 21, 2000.


                            Prior Provisions

    A prior section 1391, added Pub. L. 95-600, title VI, Sec. 601(a), 
Nov. 6, 1978, 92 Stat. 2892; amended Pub. L. 96-222, title I, 
Sec. 106(a)(4), Apr. 1, 1980, 94 Stat. 221; Pub. L. 96-595, 
Sec. 3(a)(1), (2), Dec. 24, 1980, 94 Stat. 3465, defined terms used in 
former subchapter U, prior to repeal by Pub. L. 99-514, title XIII, 
Sec. 1303(a), Oct. 22, 1986, 100 Stat. 2658.


                               Amendments

    2000--Subsec. (d)(1)(A). Pub. L. 106-554, Sec. 1(a)(7) [title I, 
Sec. 112], amended subpar. (A) generally. Prior to amendment, subpar. 
(A) read as follows: ``the close of the 10th calendar year beginning on 
or after such date of designation,''.
    Subsec. (g)(3)(C). Pub. L. 106-554, Sec. 1(a)(7) [title III, 
Sec. 319(13)], substituted ``paragraph (1)'' for ``paragraph (1)(B)''.
    Subsec. (h). Pub. L. 106-554, Sec. 1(a)(7) [title I, Sec. 111], 
added subsec. (h).
    1997--Subsec. (b)(2). Pub. L. 105-34, Sec. 951(a)(3), substituted 
``1,000,000'' for ``750,000''.
    Pub. L. 105-34, Sec. 951(a)(2), substituted ``8'' for ``6'' before 
``may be designated''.
    Pub. L. 105-34, Sec. 951(a)(1), substituted ``11'' for ``9''.
    Subsec. (c). Pub. L. 105-34, Sec. 952(d)(2), substituted 
``subsection (a)'' for ``this section''.
    Subsecs. (e), (f). Pub. L. 105-34, Sec. 952(d)(1), substituted 
``this section'' for ``subsection (a)'' in introductory provisions.
    Subsec. (g). Pub. L. 105-34, Sec. 952(a), added subsec. (g).


                    Effective Date of 1997 Amendment

    Section 951(c) of Pub. L. 105-34 provided that: ``The amendments 
made by this section [amending this section and section 1396 of this 
title] shall take effect on the date of the enactment of this Act [Aug. 
5, 1997], except that designations of new empowerment zones made 
pursuant to such amendments shall be made during the 180-day period 
beginning on the date of the enactment of this Act. No designation 
pursuant to such amendments shall take effect before January 1, 2000.''

                  Section Referred to in Other Sections

    This section is referred to in sections 1392, 1393, 1394, 1400E of 
this title; title 12 section 4702; title 29 section 2914; title 42 
section 5302.
