---
kind: "section"
citation: "26 U.S.C. § 1397D"
title: "26"
title_heading: "Internal Revenue Code"
number: "1397D"
heading: "Qualified zone property defined"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/1397D"
units:
  - "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 III — Additional Incentives for Empowerment Zones"
  - "Subpart D — General Provisions"
---

# §1397D. Qualified zone property defined

- (a) **General rule—** For purposes of this part—
  - (1) **In general—** The term “qualified zone property” means any [property](/usc/26/317.md?p=a) to which [section 168](/usc/26/168.md) applies (or would apply but for [section 179](/usc/26/179.md)) if—
    - (A) such [property](/usc/26/317.md?p=a) was acquired by the [taxpayer](/usc/26/1313.md?p=b) by [purchase](/usc/26/1361.md?p=e-1-C) (as defined in [section 179(d)(2)](/usc/26/179.md?p=d-2)) after the date on which the designation of the [empowerment zone](/usc/26/1393.md?p=b) took effect,
    - (B) the original use of which in an [empowerment zone](/usc/26/1393.md?p=b) commences with the [taxpayer](/usc/26/1313.md?p=b), and
    - (C) substantially all of the use of which is in an [empowerment zone](/usc/26/1393.md?p=b) and is in the active conduct of a [qualified business](/usc/26/1397C.md?p=d-1) by the [taxpayer](/usc/26/1313.md?p=b) in such zone.
  - (2) **Special rule for substantial renovations—** In the case of any [property](/usc/26/317.md?p=a) which is substantially renovated by the [taxpayer](/usc/26/1313.md?p=b), the requirements of subparagraphs [(A)](#a-1-A) and [(B)](#a-1-B) of paragraph (1) shall be treated as satisfied. For purposes of the preceding sentence, [property](/usc/26/317.md?p=a) shall be treated as substantially renovated by the [taxpayer](/usc/26/1313.md?p=b) if, during any 24-month period beginning after the date on which the designation of the [empowerment zone](/usc/26/1393.md?p=b) took effect, additions to basis with respect to such [property](/usc/26/317.md?p=a) in the hands of the [taxpayer](/usc/26/1313.md?p=b) exceed the greater of (i) an amount equal to the adjusted basis at the beginning of such 24-month period in the hands of the [taxpayer](/usc/26/1313.md?p=b), or (ii) $5,000.
- (b) **Special rules for sale-leasebacks—** For purposes of [subsection (a)(1)(B)](#a-1-B), if [property](/usc/26/317.md?p=a) is sold and leased back by the [taxpayer](/usc/26/1313.md?p=b) within 3 months after the date such [property](/usc/26/317.md?p=a) was originally placed in service, such [property](/usc/26/317.md?p=a) shall be treated as originally placed in service not earlier than the date on which such [property](/usc/26/317.md?p=a) is used under the leaseback.

## Source credit

(Added Pub. L. 103–66, title XIII, § 13301(a), Aug. 10, 1993, 107 Stat. 554, § 1397C; renumbered § 1397D, Pub. L. 106–554, § 1(a)(7) [title I, § 116(a)(2)], Dec. 21, 2000, 114 Stat. 2763, 2763A–602.)

## Notes

### Editorial Notes

### Prior Provisions

A prior section 1397D was renumbered section 1397F of this title.

### Amendments

2000—Pub. L. 106–554 renumbered section 1397C of this title as this section.