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Designation of Round III Urban Empowerment Zones and Renewal Communities
Note: EPA no longer updates this information, but it may be useful as a reference or resource.
[Federal Register: October 3, 2003 (Volume 68, Number 192)]
[Rules and Regulations]
[Page 57603-57606]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03oc03-25]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 598 and 599
[Docket No. FR-4663-F-07]
RIN 2506-AC09
Designation of Round III Urban Empowerment Zones and Renewal Communities
AGENCY: Office of the Assistant Secretary for Community Planning and
Development, HUD.
ACTION: Final rule.
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SUMMARY: This final rule adopts without change an interim rule that
governs the designation of Round III Urban Empowerment Zones (EZs) and
Renewal Communities (RCs) nominated by states and local governments.
The designation of an area as an EZ or an RC provides special federal
income tax treatment as an incentive for businesses to locate within
the area.
DATES: Effective Date: November 3, 2003.
FOR FURTHER INFORMATION CONTACT: For EZ/EC issues, Lisa Hill, and for
RC issues, John Haines, at the Department of Housing and Urban
Development, Room 7130, 451 Seventh Street, SW., Washington, DC 20410-
7000, telephone (202) 708-6339 (this is not a toll-free telephone
number). Individuals with speech or hearing impairments may access
these numbers via TTY by calling the Federal Information Relay Service
at 1-800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
The Omnibus Consolidated and Emergency Supplemental Appropriations
Act for Fiscal Year 2001 (Omnibus Act) (Pub. L. 106-554, 114 Stat.
2763, approved December 21, 2000) enacted into law the provisions of a
number of bills of the 106th Congress. One of the bills enacted into
law as part of the Omnibus Act is H.R. 5662, the Community Renewal Tax
Relief Act of 2000 (CRTR Act).
Section 111 of the CRTR Act added a new subsection (h), which
authorized the designation of nine Round III Empowerment Zones (EZs) to
section 1391 of Subchapter U of Chapter 1 of the Internal Revenue Code
of 1986 (IRC). Subchapter U governs the designation and treatment of
Empowerment Zones, Enterprise Communities, and Rural Development
Investment Areas and provided authorization (though separate
legislative enactments) for the designation of Round I EZs in 1993 and
Round II EZs in 1997. The CRTR Act requires seven of the Round III EZs
to be designated in urban areas by the Secretary of HUD and the
remaining two Round III EZs to be designated in rural areas by the
Secretary of Agriculture. The CRTR Act also conforms and enhances the
tax incentives for Round I and Round II EZs and makes the new Round III
EZs eligible for these incentives. The availability of the tax
incentives is extended to December 31, 2009, for all EZs.
Section 101 of the CRTR Act added a new Subchapter X, consisting of
sections 1400E through 1400J, to Chapter 1 of the IRC. Subchapter X
governs the designation of, and tax incentives for, Renewal Communities
(RCs) within which special tax incentives would be available. At least
12 of the 40 RC designations authorized by the CRTR Act must be in
rural communities. Unlike the EZ program, which splits the designation
responsibility between HUD and the Department of Agriculture for urban
and rural areas respectively, all RC designations are to be made by
HUD.
On July 9, 2001 (66 FR 35850), HUD published an interim rule to
implement the designation requirements for Round III EZs and for RCs
and requested public comment on the rule. HUD received four public
comments, which are discussed in section III, Public Comments, of this
preamble.
II. Changes in the Final Rule
The Department has determined to adopt the July 9, 2001, interim
rule as a final rule without change.
III. Public Comments
Four municipalities submitted comments on the interim rule. The
issues raised in the comments, all of them concerning the RC rule at 24
CFR part 599, followed by HUD's response, are set out under separate
subject headings in this section of the preamble.
Too Small Areas
Because the nominated areas will be ranked solely on statistical
criteria, there is nothing to prevent small areas from winning
designation. The selection formula should give added weight to areas
with larger populations.
HUD response: The statutory authorization for the designation of
RCs, at section 1400E(c)(2)(C) of the IRC, establishes maximum and
minimum population limits as eligibility requirements for RC
designation. The criteria that may be used to designate RCs is also
specifically limited to those provided in section 1400E. Although the
population of an area must be within the statutory limits for the area
to be considered for RC designation, population size is not included as
one of the selection criteria provided in section 1400E. Therefore, HUD
must determine that an area meets the population eligibility threshold,
but HUD is not permitted to use population size in the selection
formula.
Awarding RC Designation in a City With an EZ
If a city that already contains an EZ applies for an RC designation
for an area that does not contain any census tracts from the EZ, it
could receive the RC designation and also retain its EZ. This
opportunity is unfair to a community that needs and deserves one of the
designations.
HUD response: Section 1400E does not permit EZs and RCs to overlap
by even a single census tract. Section 1400E(e) specifically provides
that, ``[T]he designation * * * of any area as an empowerment zone or
enterprise community shall cease to be in effect as of the date that
the designation of any portion of such area as a renewal community
takes effect.'' Beyond this limitation, the statute does not impose any
restrictions on the availability of both EZs and RCs to qualifying
areas within a community.
Including No- or Low-Population Tracts
A census tract with very low or no population may be critical for
inclusion to create an effective RC, yet it would be ineligible unless
it meets the 20 percent poverty criterion. This may result in
inadequate land for business growth. HUD should allow inclusion of
census tracts that are predominantly industrial or transportation uses
if they are adjacent to tracts that meet the 20 percent poverty
standard and if fewer than 50 households were counted in determining
the poverty percentage.
HUD response: Although the authorizing statute for the EZ program
specifically included, at 26 U.S.C. 1391(g)(3)(A)(ii), a provision
permitting such treatment of census tracts with small populations, no
such provision was included in the authorizing statute for the RC
program. HUD hesitates to adopt such requirements absent the specific
legislative authority.
Using Employment Tax Credits Cross-Boundary
The employment tax credits should be available for an employee that
works in one EZ or RC and lives in another. This would include allowing
an employer to claim the RC employment tax credit if both an EZ and an
RC are involved. HUD and the Internal Revenue Service
[[Page 57605]]
(IRS) should issue the rulings that are necessary to confirm that these
interpretations are correct.
HUD response: While HUD is responsible for the designation of RCs,
the implementation and administration of the tax incentives for these
areas is the responsibility of the Internal Revenue Service.
Regulation Protecting Health and Safety or Preventing Public Nuisance
The program requires the nominating governments to commit to
``economic growth promotion requirements.'' Specifically, they certify
that they will repeal, reduce, or not enforce legal restrictions on
certain types of business activities. The certifications do not apply
to the extent that the regulation of businesses and occupations is
necessary for, and well-tailored to, the protection of health and
safety or if a public nuisance is involved, and the certifications may
be limited to exclude specific businesses and occupations. The
commenter recommended that HUD should allow the local governments broad
discretion in determining what is a public nuisance.
HUD response: What constitutes a public nuisance is a determination
to be made by the community at the local level.
Using CDBG Funds To Implement Renewal Communities
HUD should allow jurisdictions with designated RCs to use funds
from the CDBG program, or, if applicable, EZ funds, for promotion and
administration of RC responsibilities, perhaps with an annual cap of,
say, $2.00 per RC resident.
HUD response: HUD is considering this suggestion, and will issue
appropriate guidance to grantees.
Retaining One State's EZ Designation
Philadelphia and Camden request that Camden be allowed to retain
its EZ status even if Philadelphia is awarded designation of an RC that
includes census tracts from the Philadelphia-Camden EZ. They point out
that the EZ is in two states and two cities, and each state/city
combination has entered into a separate Memorandum of Agreement with
HUD to implement their portions of the Round I EZ.
HUD response: As discussed above, section 1400E(e) of the IRC
mandates that if any portion of an area designated as an EZ is given RC
designation, the entire EZ designation ceases to be in effect. HUD has
no authority to permit a different result.
IV. Findings and Certifications
Paperwork Reduction Act
The information collection requirements contained in 24 CFR parts
598 and 599 have been approved by the Office of Management and Budget
(OMB) in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3501-3520) and assigned OMB control numbers 2506-0148 and 2506-0173,
respectively. An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless the
collection displays a currently valid OMB control number.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
was made for this rule at the interim rule stage in accordance with HUD
regulations at 24 CFR part 50, which implement section 102(2)(C) of the
National Environmental Policy Act of 1969. Because this final rule
adopts the interim rule without change, the Finding of No Significant
Impact continues to apply. The Finding of No Significant Impact is
available for public inspection between 7:30 a.m. and 5:30 p.m.
weekdays in the Office of the Rules Docket Clerk, Office of the General
Counsel, Department of Housing and Urban Development, Room 10276, 451
Seventh Street, SW., Washington, DC 20410-0500.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule will not have a significant
economic impact on a substantial number of small entities as
distinguished from large entities. The rule does not place any mandates
on small entities. It merely authorizes them to seek designation as
Renewal Communities as authorized by statute, and the burdens placed on
applicants derive from the statute.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits, to the
extent practicable and permitted by law, an agency from promulgating a
regulation that has federalism implications and either imposes
substantial direct compliance costs on state and local governments and
is not required by statute, or preempts state law, unless the relevant
requirements of section 6 of the Executive Order are met. This rule
does not have federalism implications and does not impose substantial
direct compliance costs on state and local governments or preempt state
law within the meaning of the Executive Order.
Unfunded Mandates
Executive Order 12875 calls for federal agencies to refrain, to the
extent feasible and permitted by law, from promulgating any regulation
that is not required by statute that would create a mandate on a state,
local, or Tribal government, unless the agency provides funds for
complying with the mandate or the agency first consults with affected
state, local, and Tribal governments. Title II of the Unfunded Mandates
Reform Act of 1995 (12 U.S.C. 1501) established requirements for
federal agencies to assess the effects of their regulatory actions on
state, local, and Tribal governments, and the private sector.
This rule does not impose any federal mandates on any state, local,
or Tribal governments, or the private sector within the meaning of the
Unfunded Mandates Reform Act of 1995, because it does not mandate any
particular action. The rule only authorizes states, localities, and
tribes to apply for designation of areas within their jurisdiction as
Empowerment Zones or Renewal Communities, which permits special tax
treatment of business activities within the areas.
Regulatory Review
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866, (entitled ``Regulatory Planning and Review'').
OMB determined that this rule is a ``significant regulatory action,''
as defined in section 3(f) of the Order (although not economically
significant, as provided in section 3(f)(1) of the Order). Any changes
made to the rule after its submission to OMB are identified in the
docket file, which is available for public inspection in the
Regulations Division, Room 10276, Office of General Counsel, 451
Seventh Street, SW, Washington, DC 20410-0500.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance Program number
assigned to these programs is 14.244.
List of Subjects
24 CFR Part 598
Community development, Economic development, Empowerment zones,
Housing, Indians, Intergovernmental relations, Reporting and record
keeping requirements, Urban renewal.
[[Page 57606]]
24 CFR Part 599
Community development, Economic development, Renewal communities,
Housing, Indians, Intergovernmental relations, Reporting and
recordkeeping requirements, Urban renewal.
PART 598--URBAN EMPOWERMENT ZONES: ROUND TWO AND THREE DESIGNATIONS
PART 599--RENEWAL COMMUNITIES
Accordingly, the interim rule amending 24 CFR part 598 and adding 24
CFR part 599, which was published at 66 FR 35850 on July 9, 2001, is
adopted as final without change.
Dated: August 11, 2003.
Roy A. Bernardi,
Assistant Secretary for Community Planning and Development.
[FR Doc. 03-25041 Filed 10-2-03; 8:45 am]
BILLING CODE 4210-29-P