§1397C. Enterprise zone business defined — Inbound Citations
26 U.S.C. § 1397C
Cited by 64 provisions in release 119-102.
Citations to 26 U.S.C. § 1397C as a whole
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(B) In applying section 1397C for purposes of this section—(I) Except as provided in subclause (II), references in section 1397C to empowerment zones shall be treated as including references to enterprise communities.(II) For purposes of subsections (b)(6) and (c)(5) of section 1397C, an employee shall be treated as a resident of an empowerment zone if such employee is a resident of an empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction.(ii) A business shall not fail to be treated as an enterprise zone business during the startup period if—(I) as of the beginning of the startup period, it is reasonably expected that such business will be an enterprise zone business (as defined in section 1397C as modified by this paragraph) at the end of such period, and(II) such business makes bona fide efforts to be such a business.(iii) A business shall not fail to be treated as an enterprise zone business for any taxable year beginning after the testing period by reason of failing to meet any requirement of subsection (b) or (c) of section 1397C if at least 35 percent of the employees of such business for such year are residents of an empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction. The preceding sentence shall not apply to any business which is not a qualified business by reason of paragraph (1), (4), or (5) of section 1397C(d).
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(I) Except as provided in subclause (II), references in section 1397C to empowerment zones shall be treated as including references to enterprise communities.
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(I) as of the beginning of the startup period, it is reasonably expected that such business will be an enterprise zone business (as defined in section 1397C as modified by this paragraph) at the end of such period, and
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(A) in the case of obligations issued before January 1, 2002, only empowerment zones designated under section 1391(g) were taken into account under sections 1397C and 1397D, and
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(B) in the case of obligations issued after December 31, 2001, all empowerment zones (other than the District of Columbia Enterprise Zone) were taken into account under sections 1397C and 1397D.
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(ii) references to enterprise zone businesses (as defined in section 1397C) were substituted for references to renewal community businesses,
Citations to §1397C(a)
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(1) The term “enterprise zone facility” means any qualified zone property the principal user of which is an enterprise zone business, and any land which is functionally related and subordinate to such property.
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(A) Except as modified in this paragraph, the term “enterprise zone business” has the meaning given such term by section 1397C.
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(ii) A business shall not fail to be treated as an enterprise zone business during the startup period if—(I) as of the beginning of the startup period, it is reasonably expected that such business will be an enterprise zone business (as defined in section 1397C as modified by this paragraph) at the end of such period, and(II) such business makes bona fide efforts to be such a business.
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(I) as of the beginning of the startup period, it is reasonably expected that such business will be an enterprise zone business (as defined in section 1397C as modified by this paragraph) at the end of such period, and
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(iii) A business shall not fail to be treated as an enterprise zone business for any taxable year beginning after the testing period by reason of failing to meet any requirement of subsection (b) or (c) of section 1397C if at least 35 percent of the employees of such business for such year are residents of an empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction. The preceding sentence shall not apply to any business which is not a qualified business by reason of paragraph (1), (4), or (5) of section 1397C(d).
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(E) The term “enterprise zone business” includes any trades or businesses which would qualify as an enterprise zone business (determined after the modifications of subparagraph (B)) if such trades or businesses were separately incorporated.
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(B) the principal user of such facility ceases to be an enterprise zone business (as defined in subsection (b)).
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(a) In the case of an enterprise zone business, for purposes of section 179—(1) the limitation under section 179(b)(1) shall be increased by the lesser of—(A) $35,000, or(B) the cost of section 179 property which is qualified zone property placed in service during the taxable year, and(2) the amount taken into account under section 179(b)(2) with respect to any section 179 property which is qualified zone property shall be 50 percent of the cost thereof.
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(b) Rules similar to the rules under section 179(d)(10) shall apply with respect to any qualified zone property which ceases to be used in an empowerment zone by an enterprise zone business.
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(ii) references to enterprise zone businesses (as defined in section 1397C) were substituted for references to renewal community businesses,
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(B) any gain which is attributable to real property, or an intangible asset, which is not an integral part of an enterprise zone business.
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(3) regulations dealing with inadvertent failures of entities to be enterprise zone businesses.
Citations to §1397C(b)
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(A) In the case of qualified small business stock acquired after the date of the enactment of this paragraph in a corporation which is a qualified business entity (as defined in section 1397C(b)) during substantially all of the taxpayer’s holding period for such stock, paragraph (1) shall be applied by substituting “60 percent” for “50 percent”.
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(iii) A business shall not fail to be treated as an enterprise zone business for any taxable year beginning after the testing period by reason of failing to meet any requirement of subsection (b) or (c) of section 1397C if at least 35 percent of the employees of such business for such year are residents of an empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction. The preceding sentence shall not apply to any business which is not a qualified business by reason of paragraph (1), (4), or (5) of section 1397C(d).
Citations to §1397C(b)(2)
Citations to §1397C(b)(4)
Citations to §1397C(b)(6)
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(II) For purposes of subsections (b)(6) and (c)(5) of section 1397C, an employee shall be treated as a resident of an empowerment zone if such employee is a resident of an empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction.
Citations to §1397C(b)(8)
Citations to §1397C(c)
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(iii) A business shall not fail to be treated as an enterprise zone business for any taxable year beginning after the testing period by reason of failing to meet any requirement of subsection (b) or (c) of section 1397C if at least 35 percent of the employees of such business for such year are residents of an empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction. The preceding sentence shall not apply to any business which is not a qualified business by reason of paragraph (1), (4), or (5) of section 1397C(d).
Citations to §1397C(c)(5)
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(II) For purposes of subsections (b)(6) and (c)(5) of section 1397C, an employee shall be treated as a resident of an empowerment zone if such employee is a resident of an empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction.
Citations to §1397C(d)
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(3) For purposes of this subsection, the term “qualified business” has the meaning given to such term by section 1397C(d); except that—(A) in lieu of applying paragraph (2)(B) thereof, the rental to others of real property located in any low-income community shall be treated as a qualified business if there are substantial improvements located on such property, and(B) paragraph (3) thereof shall not apply.
Citations to §1397C(d)(1)
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(i) at least 50 percent of the total gross income of such entity is derived from the active conduct of a qualified business within any low-income community,
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(3) For purposes of this subsection, the term “qualified business” has the meaning given to such term by section 1397C(d); except that—(A) in lieu of applying paragraph (2)(B) thereof, the rental to others of real property located in any low-income community shall be treated as a qualified business if there are substantial improvements located on such property, and(B) paragraph (3) thereof shall not apply.
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(A) in lieu of applying paragraph (2)(B) thereof, the rental to others of real property located in any low-income community shall be treated as a qualified business if there are substantial improvements located on such property, and
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(II) such financing is provided with respect to qualified business property of such corporation.
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(iii) For purposes of clause (ii), the term “qualified business property” means any property if—(I) such property is used by the corporation in the active conduct of a trade or business,(II) during the entire 12-month period ending on the last day of the taxable year, such corporation had at least 3 full-time employees who were not owner-employees (as defined in section 465(c)(7)(E)(i)) and substantially all the services of whom were services directly related to such trade or business, and(III) during the entire 12-month period ending on the last day of such taxable year, such corporation had at least 1 full-time employee substantially all of the services of whom were in the active management of the trade or business.
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(a) If any portion of the qualified business credits determined for any taxable year has not, after the application of section 38(c), been allowed to the taxpayer as a credit under section 38 for any taxable year, an amount equal to the credit not so allowed shall be allowed to the taxpayer as a deduction for the first taxable year following the last taxable year for which such credit could, under section 39, have been allowed as a credit.
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(b) If a taxpayer dies or ceases to exist before the first taxable year following the last taxable year for which the qualified business credits could, under section 39, have been allowed as a credit, the amount described in subsection (a) (or the proper portion thereof) shall, under regulations prescribed by the Secretary, be allowed to the taxpayer as a deduction for the taxable year in which such death or cessation occurs.
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(c) For purposes of this section, the term “qualified business credits” means—(1) the investment credit determined under section 46 (but only to the extent attributable to property the basis of which is reduced by section 50(c)),(2) the work opportunity credit determined under section 51(a),(3) the alcohol fuels credit determined under section 40(a),(4) the research credit determined under section 41(a) (other than such credit determined under section 280C(c)(3))1 for taxable years beginning after December 31, 1988,(5) the enhanced oil recovery credit determined under section 43(a),(6) the empowerment zone employment credit determined under section 1396(a),(7) the Indian employment credit determined under section 45A(a),(8) the employer Social Security credit determined under section 45B(a),(9) the new markets tax credit determined under section 45D(a),(10) the small employer pension plan startup cost credit determined under section 45E(a),(11) the biodiesel fuels credit determined under section 40A(a),(12) the low sulfur diesel fuel production credit determined under section 45H(a),(13) the new energy efficient home credit determined under section 45L(a), and(14) the small employer health insurance credit determined under section 45R(a).
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(1) the combined qualified business income amount of the taxpayer, or
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(1) The term “combined qualified business income amount” means, with respect to any taxable year, an amount equal to—(A) the sum of the amounts determined under paragraph (2) for each qualified trade or business carried on by the taxpayer, plus(B) 20 percent of the aggregate amount of the qualified REIT dividends and qualified publicly traded partnership income of the taxpayer for the taxable year.
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(A) 20 percent of the taxpayer’s qualified business income with respect to the qualified trade or business, or
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(B) Such term shall not include any amount which is not properly allocable to qualified business income for purposes of subsection (c)(1).
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(ii) which is used at any point during the taxable year in the production of qualified business income, and
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(A) 9 percent of so much of the qualified business income with respect to such trade or business as is properly allocable to qualified payments received from such cooperative, or
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(1) The term “qualified business income” means, for any taxable year, the net amount of qualified items of income, gain, deduction, and loss with respect to any qualified trade or business of the taxpayer. Such term shall not include any qualified REIT dividends or qualified publicly traded partnership income.
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(4) Qualified business income shall not include—(A) reasonable compensation paid to the taxpayer by any qualified trade or business of the taxpayer for services rendered with respect to the trade or business,(B) any guaranteed payment described in section 707(c) paid to a partner for services rendered with respect to the trade or business,(C) to the extent provided in regulations, any payment described in section 707(a) to a partner for services rendered with respect to the trade or business, and(D) any amount with respect to which a deduction is allowable to the taxpayer under section 224(a) for the taxable year.
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(ii) only the applicable percentage of qualified items of income, gain, deduction, or loss, and the W–2 wages and the unadjusted basis immediately after acquisition of qualified property, of the taxpayer allocable to such specified service trade or business shall be taken into account in computing the qualified business income, W–2 wages, and the unadjusted basis immediately after acquisition of qualified property of the taxpayer for the taxable year for purposes of applying this section.
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(i) In the case of any taxpayer with qualified business income from sources within the commonwealth of Puerto Rico, if all such income is taxable under section 1 for such taxable year, then for purposes of determining the qualified business income of such taxpayer for such taxable year, the term “United States” shall include the Commonwealth of Puerto Rico.
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(2) For purposes of determining alternative minimum taxable income under section 55, qualified business income shall be determined without regard to any adjustments under sections 56 through 59.
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(A) The term “applicable taxpayer” means, with respect to any taxable year, a taxpayer whose aggregate qualified business income with respect to all active qualified trades or businesses of the taxpayer for such taxable year is at least $1,000.
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(1) If any listed property is not predominantly used in a qualified business use for any taxable year, the deduction allowed under section 168 with respect to such property for such taxable year and any subsequent taxable year shall be determined under section 168(g) (relating to alternative depreciation system).
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(i) property is predominantly used in a qualified business use in a taxable year in which it is placed in service, and
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(ii) such property is not predominantly used in a qualified business use for any subsequent taxable year,
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(i) the amount of the depreciation deductions allowable with respect to the property for taxable years before the 1st taxable year in which the property was not predominantly used in a qualified business use, over
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(ii) the amount which would have been so allowable if the property had not been predominantly used in a qualified business use for the taxable year in which it was placed in service.
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(3) For purposes of this subsection, property shall be treated as predominantly used in a qualified business use for any taxable year if the business use percentage for such taxable year exceeds 50 percent.
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(A) The term “business use percentage” means the percentage of the use of any listed property during any taxable year which is a qualified business use.
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(B) Except as provided in subparagraph (C), the term “qualified business use” means any use in a trade or business of the taxpayer.
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(i) The term “qualified business use” shall not include—(I) leasing property to any 5-percent owner or related person,(II) use of property provided as compensation for the performance of services by a 5-percent owner or related person, or(III) use of property provided as compensation for the performance of services by any person not described in subclause (II) unless an amount is included in the gross income of such person with respect to such use, and, where required, there was withholding under chapter 24.
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(ii) Clause (i) shall not apply with respect to any aircraft if at least 25 percent of the total use of the aircraft during the taxable year consists of qualified business use not described in clause (i).
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(4) For purposes of paragraph (1)(A), the applicable dollar limit for any taxable year with respect to eligible gain from 1 or more dispositions by a taxpayer of qualified business stock of a corporation is—(A) if such stock was acquired by the taxpayer on or before the applicable date, $10,000,000, reduced by the aggregate amount of eligible gain taken into account by the taxpayer under subsection (a) for prior taxable years and attributable to dispositions of stock issued by such corporation and acquired by the taxpayer before, on, or after the applicable date, and(B) if such stock was acquired by the taxpayer after the applicable date, $15,000,000, reduced by the sum of—(i) the aggregate amount of eligible gain taken into account by the taxpayer under subsection (a) for prior taxable years and attributable to dispositions of stock issued by such corporation and acquired by the taxpayer before, on, or after the applicable date, plus(ii) the aggregate amount of eligible gain taken into account by the taxpayer under subsection (a) for the taxable year and attributable to dispositions of stock issued by such corporation and acquired by the taxpayer on or before the applicable date.
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(B) Stock issued by a corporation shall not be treated as qualified business stock if, during the 2-year period beginning on the date 1 year before the issuance of such stock, such corporation made 1 or more purchases of its stock with an aggregate value (as of the time of the respective purchases) exceeding 5 percent of the aggregate value of all of its stock as of the beginning of such 2-year period.
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(iii) A business shall not fail to be treated as an enterprise zone business for any taxable year beginning after the testing period by reason of failing to meet any requirement of subsection (b) or (c) of section 1397C if at least 35 percent of the employees of such business for such year are residents of an empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction. The preceding sentence shall not apply to any business which is not a qualified business by reason of paragraph (1), (4), or (5) of section 1397C(d).
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(C) substantially all of the use of which is in an empowerment zone and is in the active conduct of a qualified business by the taxpayer in such zone.
Citations to §1397C(d)(4)
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(iii) A business shall not fail to be treated as an enterprise zone business for any taxable year beginning after the testing period by reason of failing to meet any requirement of subsection (b) or (c) of section 1397C if at least 35 percent of the employees of such business for such year are residents of an empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction. The preceding sentence shall not apply to any business which is not a qualified business by reason of paragraph (1), (4), or (5) of section 1397C(d).
Citations to §1397C(d)(5)
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(iii) A business shall not fail to be treated as an enterprise zone business for any taxable year beginning after the testing period by reason of failing to meet any requirement of subsection (b) or (c) of section 1397C if at least 35 percent of the employees of such business for such year are residents of an empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction. The preceding sentence shall not apply to any business which is not a qualified business by reason of paragraph (1), (4), or (5) of section 1397C(d).
Citations to §1397C(e)
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(v) less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to nonqualified financial property (as defined in section 1397C(e)).