The Concept of Enterprise Zones has finally arrived, twenty years later.
1. Jack Kemp was the father but it was a long pregnancy.
Twenty years ago then Republican Congressman Jack Kemp from Buffalo, New York began promoting the concept of Enterprise Zones to revitalize distressed communities, of which Buffalo, New York was and still is one. In the fall of 1988 then President George Bush with his then HUD Secretary Jack Kemp promised Enterprise Zones for distressed communities, and today that promise has finally arrived for 31 Empowerment Zones, effective next week, 9 new Empowerment Zones, effective January 1, 2002, and 40 new Renewal Communities effective January 1, 2002. As to the 95 existing Enterprise Communities see below.
IRC Section 1387B and IRC Section 1202, as amended, will be the subject of many tax articles in the near future because of H.R. 5562 "Community Renewal Tax Relief Act of 2000," which can be found here for those that are interested.
More importantly is the fact that tax legislation has come to front page since Governor George W. Bush has become President Elect Bush. It is not a question of what, but how and when it will be enacted? In one big package, ala President Reagan's style in 1981 or in Speaker Hastert's Style of many small bills with strong bi-partisan support.
Beginning next week, the new tax bill is being drafted, with Estate and Gift, Marriage Penalty, and marginal tax rate relief high on the agenda along with all the little things that were in H.R. 5542 such as health insurance tax relief for the self- employed, pension reform for the financial community's benefit, and MORE tax relief for distressed communities.
In the beginning, when the tax code was just several pages, the concept of not requiring a tax when the nature of the asset or investment was the same not withstanding a sale or exchange was adopted as good tax policy. Thus began what is now call IRC Section 1031, the corporate reorganization provisions, etc., etc. [Today that concept has been expanded to businesses within a specific geographic area, whether they are a barbershop or General Motors, or Microsoft. Stay in the neighborhood and never pay a tax when you sell or exchange and reinvest.] What began as a few provisions in the 1939 Code [boy life was simple in those days] is now the subject of thousands of tax articles, treatise, and major service industries to make them work. M&A departments can be found in most major investment banking, law and accounting firms with billions in fees being earned each year. We believe that IRC Section 1397B is just the beginning of something similar but focused on distressed communities.
We want to thank several people for their efforts in making this happen, in particular Gene Gaines, Brad Rothermel, Bill Marion, Robert Ritzman, our friends at Sohodojo, and the many others we have spoken to at the various Enterprise Communities thoughout the country. Come next year we believe that IRC Section 1397B and Section 1202 will include Enterprise Communities, retroactive to investments made from enactment date of H.R.5562. Do we have support for this statement, we believe that we have from many Senators and Representives that we have talked to.
Let the games begin.
Jim Schneider, LL.M.
The Taxman86 Speaks... is copyright 1998-2010 by James E. Schneider, LL.M. Inc.