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Sohodojo Advisory Board Member
Jim Schneider
The Taxman86 Speaks...
15 May 2000
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A Tale Of Many Cites* - Enterprise Communities and Empowerment Zones Revitalize American Cities

The week of May 7, 2000 to May 14, 2000 was typical with fires, protests, civil wars, etc., but in the midst was the DELTA VISION, DELTA VOICES: MISSISSIPPI DELTA BEYOND 2000, a National Conference involving over 750 local, state and federal officials, business leaders, and President Clinton and Vice President Gore. As an aside, President Clinton was Chairman of the first Delta Conference when he was then a state Governor many years ago.

Meanwhile in Las Vegas, the "Networld+Interop Las Vegas," was being held with 75,000 "techies," and 3,000 companies, and the E3 Conference was being held in downtown Los Angeles to another 50,000 "games designers, Internet content providers, and techies," and 3,000 companies, a.k.a., the "New Economy."

At the same time the L.A. Times ran articles on downtown Chinatown revitalization and an Op-Ed piece on the Historic Core both of which are in the Los Angeles Federal Empowerment Zone.

Inc., The Magazine for Growing Companies, in their May 2000 issue published the The 2nd Annual Inner City 100 and reviewed downtown Buffalo [Explore the Buffalo EC/EZ/HUB zones.]

What is the relevance of these various events, from a Tax Lawyer's point of view? One program [Delta Vision] involves many Empowerment Zones/Enterprise Communities*, within 7 states, 219 counties, and more than 8.3 million people from the Southernmost Illinois Delta Empowerment Zone to the Memphis, Tennessee Enterprise Community to the New Orleans, Louisiana Enterprise Community. From 1994 to the beginning of 1999, rural Delta communities drew over $10.2 million from EZ/EC funding, and used it to leverage $107.4 million -- nearly 10 times as much -- from state, local, private business, and nonprofit sources.

The other involves programs involving the free market of Internet Startups, a.k.a. the "New Economy" [$22B in venture capital in the first quarter of 2000, per Wall Street Journal].

One program has FEW tax advantages, and the other has MANY including stock options, tax deferral on sale and reinvestment [IRC Section 1045], and lower capital gains after 5 years [IRC Section 1202]. One involves C. Corp Startups; the other involves Enterprise Zone Businesses.

Can one program benefit from the tax advantages of the other, clearly, if you talk to the 125,000 techies, etc., and 6,000 companies at the two conventions. Tax deferral on the sale of an Enterprise Zone Business is just as BIG INCENTIVE for investors, and employees, as the sale of Qualified Small Business Stock.

Content is king, we are told, and life on the Mississippi has lots of potential content, whether film, music, or just good clean fun like eating, just as in downtown Los Angeles, Las Vegas or Buffalo; free up this home-based capital in these cities* and let the games begin.

* Find out if you live and/or work in or near an Enterprise Community, Empowerment Zone or HUB Zone by visiting the HUD EC/EZ/HUBZone Locator.

Jim Schneider, LL.M.

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