< Back to S. 1852 (113th Congress, 2013–2015)

Text of the Economic Freedom Zones Act of 2013

This bill was assigned to a congressional committee on December 18, 2013, which will consider it before possibly sending it on to the House or Senate as a whole. The text of the bill below is as of Dec 18, 2013 (Introduced).

II

113th CONGRESS

1st Session

S. 1852

IN THE SENATE OF THE UNITED STATES

December 18, 2013

(for himself and Mr. McConnell) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To provide for the establishment of free market enterprise zones in order to help facilitate the creation of new jobs, entrepreneurial opportunities, enhanced and renewed educational opportunities, and increased community involvement in bankrupt or economically distressed areas.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the Economic Freedom Zones Act of 2013 .

(b)

Table of contents

The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Definitions.

TITLE I—Prohibition against a Federal Government bailout of a State, city, or municipality

Sec. 101. Prohibition of Federal Government Bailouts.

TITLE II—Designation of Economic Freedom Zones (EFZ)

Sec. 201. Eligibility requirements for Economic Freedom Zone Status.

Sec. 202. Area and regional requirements.

Sec. 203. Application and duration of designation.

TITLE III—Federal tax incentives

Sec. 301. Tax incentives related to Economic Freedom Zones.

TITLE IV—Federal regulatory reductions

Sec. 401. Suspension of certain laws and regulations.

TITLE V—Educational enhancements

Sec. 501. Educational opportunity tax credit.

Sec. 502. School choice through portability.

Sec. 503. Special Economic Freedom Zone visas.

Sec. 504. Economic Freedom Zone educational savings accounts.

TITLE VI—Community assistance and rebuilding

Sec. 601. Nonapplication of Davis-Bacon.

Sec. 602. Economic Freedom Zone charitable tax credit.

TITLE VII—State and community policy recommendations

Sec. 701. Sense of the Senate concerning policy recommendations.

2.

Definitions

In this Act:

(1)

City

The term city means any unit of general local government that is classified as a municipality by the United States Census Bureau, or is a town or township as determined jointly by the Director of the Office of Management and Budget and the Secretary of the Treasury.

(2)

County

The term County means any unit of local general government that is classified as a county by the United States Census Bureau.

(3)

Eligible entity

The term eligible entity means a State, municipality, zip code, or rural area.

(4)

Municipality

The term municipality has the meaning given that term in section 101(40) of title 11, United States Code.

(5)

Rural area

The term rural area means any area not in an urbanized area, as that term is defined by the Census Bureau.

(6)

Secretary

The term Secretary means the Secretary of the Treasury.

(7)

Zip code

The term zip code means any area or region associated with or covered by a United States Postal zip code of not less than 5 digits.

I

Prohibition against a Federal Government bailout of a State, city, or municipality

101.

Prohibition of Federal Government Bailouts

(a)

Definitions

In this section—

(1)

the term credit rating has the meaning given that term in section 3(a)(60) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c(a)(60) );

(2)

the term credit rating agency has the meaning given that term in section 3(a)(61) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c(a)(61) );

(3)

the term Federal assistance means the use of any advances from the Federal Reserve credit facility or discount window that is not part of a program or facility with broad-based eligibility under section 13(3)(A) of the Federal Reserve Act ( 12 U.S.C. 343(3)(A) ), Federal Deposit Insurance Corporation insurance, or guarantees for the purpose of—

(A)

making a loan to, or purchasing any interest or debt obligation of, a municipality;

(B)

purchasing the assets of a municipality;

(C)

guaranteeing a loan or debt issuance of a municipality; or

(D)

entering into an assistance arrangement, including a grant program, with an eligible entity;

(4)

the term insolvent means, with respect to an eligible entity, a financial condition such that the eligible entity—

(A)

has any debt that has been given a credit rating lower than a B by a nationally recognized statistical rating organization or a credit rating agency;

(B)

is not paying its debts as they become due, unless such debts are the subject of a bona fide dispute; or

(C)

is unable to pay its debts as they become due; and

(5)

the term nationally recognized statistical rating organization has the meaning given that term in section 3(a)(62) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c(a)(62) ).

(b)

Prohibition of Federal Government Bailouts

(1)

Prohibition of Federal assistance

Notwithstanding any other provision of law, no Federal assistance may be provided to an eligible entity (other than the assistance provided for in this Act for an area that is designated as an Economic Free Zone).

(2)

Prohibition of financial assistance to bankrupt or insolvent eligible entities

Except as provided in paragraph (1), the Federal Government may not provide financial assistance—

(A)

to a municipality that is a debtor under chapter 9 of title 11, United States Code; or

(B)

to State or municipality that is insolvent.

II

Designation of Economic Freedom Zones (EFZ)

201.

Eligibility requirements for Economic Freedom Zone Status

(a)

In general

In order to be eligible for designation as an Economic Freedom Zone by the Secretary, an eligible entity shall meet one or more of the following requirements (in order of priority) and the requirements of section 202:

(1)

Eligible chapter 9 debtor

An eligible entity that satisfies the requirements under section 109(c) of title 11, United States Code.

(2)

Eligible entity at risk of insolvency

(A)

In general

An eligible entity that is at risk of insolvency, as described in subparagraph (B).

(B)

Requirements

An eligible entity is at risk of insolvency if—

(i)

an independent actuarial firm that has been engaged by the eligible entity and that does not have a conflict of interest with the eligible entity, including any previous relationship with the eligible entity, as determined by the Secretary

(I)

determines that the eligible entity is insolvent (as defined in section 101(a)(4)); and

(II)

submits its analysis regarding the insolvency of the eligible entity to the Secretary; and

(ii)

the Secretary has reviewed and approved the determination of insolvency by the actuarial firm.

(3)

Low economic and high poverty zones

(A)

In general

An eligible entity that is designated as a low economic or high poverty zone under subparagraph (B).

(B)

Designation

The Secretary, after reviewing supporting data as deemed appropriate, shall designate an eligible entity as a low economic or high poverty area if—

(i)

the State or local government with jurisdiction over the entity certifies that—

(I)

the entity is one of pervasive poverty, unemployment, and general distress;

(II)

the average rate of unemployment within such entity during the most recent 3-month period for which data is available is at least 1.5 times the national unemployment rate for the period involved;

(III)

during the most recent 3-month period, at least 30 percent of the area residents have incomes below the national poverty level; or

(IV)

at least 70 percent of the are residents have incomes below 80 percent of the median income of households within the jurisdiction of the local government (as determined in the same manner as under section 119(b)(2) of the Housing and Community Development Act of 1974); and

(ii)

the Secretary determines that such a designation is appropriate.

(4)

Special high poverty requirement for designation

An eligible entity shall be designated as a low economic or high poverty zone if the Secretary determines that—

(A)

the State in which the entity is located within one of the 10 most impoverished States, as determined using United States Census Bureau data;

(B)

the entity is one of pervasive poverty, unemployment, and general distress;

(C)

the average rate of unemployment within such entity during the most recent 3-month period for which data is available is at least 1.25 times the national unemployment rate for the period involved;

(D)

during the most recent 3-month period, at least 25 percent of the area residents have income below the national poverty level; or

(E)

at least 65 percent of the residents have incomes below 80 percent of the median income of households within the jurisdiction of the local government (as determined in the same manner as under section 119(b)(2) of the Housing and Community Development Act of 1974).

(b)

Refusal To grant status

The Secretary may refuse to designate an eligible entity as an Economic Freedom Zone if the Secretary determines that any requirement under this Act, including any requirement under subsection (a)(2)(B), has not been satisfied.

202.

Area and regional requirements

(a)

In general

To be designated as an Economic Freedom Zone by the Secretary, an eligible entity shall—

(1)

meet one or more of the requirements under section 201; and

(2)

be an entity described in subsection (b).

(b)

Entity described

An entity is described in this subsection if such entity—

(1)

is a metropolitan statistical area (as defined by the Director of the Office of Management and Budget) that—

(A)

is located within the jurisdiction of a local government; and

(B)

has a continuous boundary;

(2)

is a non-metropolitan statistical area (as defined by the Director of the Office of Management and Budget) if (based on the following order of priority) such area—

(A)

is an official county geographical area in any State that meets any of the eligibility requirements of section 201;

(B)

is an official city geographical area in any State that meets any of the eligibility requirements of section 201; or

(C)

is an official zip code geographical area in any State that meets any of the eligibility requirements of section 201; or

(3)

is a zip code area that—

(A)

is within a metropolitan statistical area; and

(B)

meets other eligibility criteria as determined by the Secretary after consultation with the United States Census Bureau, the Bureau of Labor Statistics, and the Office of Management and Budget.

203.

Application and duration of designation

(a)

Application

The Secretary shall develop procedures to enable an eligible entity to submit to the Secretary an application for designation as an Economic Freedom Zone under this title.

(b)

Duration

The designation by the Secretary of an eligible entity as a Economic Freedom Zone shall be for a period of 10 years.

III

Federal tax incentives

301.

Tax incentives related to Economic Freedom Zones

(a)

In general

Chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subchapter:

Z

Economic Freedom Zones

Part I—Tax incentives

Part II—Definitions

I

Tax incentives

Sec. 1400V–1. Economic Freedom Zone individual flat tax.

Sec. 1400V–2. Economic Freedom Zone corporate flat tax.

Sec. 1400V–3. Zero percent capital gains rate.

Sec. 1400V–4. Reduced payroll taxes.

Sec. 1400V–5. Increase in expensing under section 179.

1400V–1.

Economic Freedom Zone individual flat tax

(a)

In general

In the case of any individual whose principal residence (within the meaning of section 121) is located in an Economic Freedom Zone for the taxable year, in lieu of the tax imposed by section 1, there shall be imposed a tax equal to 5 percent of the taxable income of such taxpayer. For purposes of this title, the tax imposed by the preceding sentence shall be treated as a tax imposed by section 1.

(b)

Joint returns

In the case of a joint return under section 6013, subsection (a) shall apply so long as either spouse has a principal residence (within the meaning of section 121) in an Economic Freedom Zone for the taxable year.

(c)

Alternative minimum tax not To apply

The tax imposed by section 55 shall not apply to any taxpayer to whom subsection (a) applies.

1400V–2.

Economic Freedom Zone corporate flat tax

(a)

In general

In the case of any corporation located in an Economic Freedom Zone for the taxable year, in lieu of the tax imposed by section 11, there shall be imposed a tax equal to 5 percent of the taxable income of such corporation. For purposes of this title, the tax imposed by the preceding sentence shall be treated as a tax imposed by section 11.

(b)

Limitation

Subsection (a) shall not apply to any corporation for any taxable year if the adjusted gross income of such corporation for such taxable year exceeds $500,000,000.

(c)

Located

For purposes of this section, a corporation shall be considered to be located in an Economic Freedom Zone if—

(1)

not less than 10 percent of the total gross income of such corporation is derived from the active conduct of a trade or business within an Economic Freedom Zone, or

(2)

at least 25 percent of the employees of such corporation are residents of an Economic Freedom Zone.

(d)

Alternative minimum tax not To apply

The tax imposed by section 55 shall not apply to any taxpayer to whom subsection (a) applies.

1400V–3.

Zero percent capital gains rate

(a)

Exclusion

Gross income shall not include qualified capital gain from the sale or exchange of—

(1)

any Economic Freedom Zone asset held for more than 5 years,

(2)

any real property located in an Economic Freedom Zone.

(b)

Economic Freedom Zone asset

For purposes of this section—

(1)

In general

The term Economic Freedom Zone asset means—

(A)

any Economic Freedom Zone business stock,

(B)

any Economic Freedom Zone partnership interest, and

(C)

any Economic Freedom Zone business property.

(2)

Economic Freedom Zone business stock

(A)

In general

The term Economic Freedom Zone business stock means any stock in a domestic corporation if—

(i)

such stock is acquired by the taxpayer, before the date on which such corporation no longer qualifies as an Economic Freedom Zone business due to the lapse of 1 or more Economic Freedom Zones, at its original issue (directly or through an underwriter) solely in exchange for cash,

(ii)

as of the time such stock was issued, such corporation was an Economic Freedom Zone business (or, in the case of a new corporation, such corporation was being organized for purposes of being an Economic Freedom Zone business), and

(iii)

during substantially all of the taxpayer's holding period for such stock, such corporation qualified as an Economic Freedom Zone business.

(B)

Redemptions

A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this paragraph.

(3)

Economic Freedom Zone partnership interest

The term Economic Freedom Zone partnership interest means any capital or profits interest in a domestic partnership if—

(A)

such interest is acquired by the taxpayer, before the date on which such partnership no longer qualifies as an Economic Freedom Zone business due to the lapse of 1 or more Economic Freedom Zones, from the partnership solely in exchange for cash,

(B)

as of the time such interest was acquired, such partnership was an Economic Freedom Zone business (or, in the case of a new partnership, such partnership was being organized for purposes of being an Economic Freedom Zone business), and

(C)

during substantially all of the taxpayer's holding period for such interest, such partnership qualified as an Economic Freedom Zone business.

A rule similar to the rule of paragraph (2)(B) shall apply for purposes of this paragraph.
(4)

Economic Freedom Zone business property

(A)

In general

The term Economic Freedom Zone business property means tangible property if—

(i)

such property was acquired by the taxpayer by purchase (as defined in section 179(d)(2)) after the date on such taxpayer qualifies as an Economic Freedom Zone business and before the date on which such taxpayer no longer qualifies as an Economic Freedom Zone business due to the lapse of 1 or more Economic Freedom Zones,

(ii)

the original use of such property in the Economic Freedom Zone commences with the taxpayer, and

(iii)

during substantially all of the taxpayer's holding period for such property, substantially all of the use of such property was in an Economic Freedom Zone business of the taxpayer.

(B)

Special rule for buildings which are substantially improved

(i)

In general

The requirements of clauses (i) and (ii) of subparagraph (A) shall be treated as met with respect to—

(I)

property which is substantially improved by the taxpayer before the date on which such taxpayer no longer qualifies as an Economic Freedom Zone business due to the lapse of 1 or more Economic Freedom Zones, and

(II)

any land on which such property is located.

(ii)

Substantial improvement

For purposes of clause (i), property shall be treated as substantially improved by the taxpayer only if, during any 24-month period beginning after the date on which the taxpayer qualifies as an Economic Freedom Zone business additions to basis with respect to such property in the hands of the taxpayer exceed the greater of—

(I)

an amount equal to the adjusted basis of such property at the beginning of such 24-month period in the hands of the taxpayer, or

(II)

$5,000.

(5)

Treatment of Economic Freedom Zone termination

Except as otherwise provided in this subsection, the termination of the designation of the Economic Freedom Zone shall be disregarded for purposes of determining whether any property is an Economic Freedom Zone asset.

(6)

Treatment of subsequent purchasers, etc

The term Economic Freedom Zone asset includes any property which would be an Economic Freedom Zone asset but for paragraph (2)(A)(i), (3)(A), or (4)(A)(i) or (ii) in the hands of the taxpayer if such property was an Economic Freedom Zone asset in the hands of a prior holder.

(7)

5-Year safe harbor

If any property ceases to be an Economic Freedom Zone asset by reason of paragraph (2)(A)(iii), (3)(C), or (4)(A)(iii) after the 5-year period beginning on the date the taxpayer acquired such property, such property shall continue to be treated as meeting the requirements of such paragraph; except that the amount of gain to which subsection (a) applies on any sale or exchange of such property shall not exceed the amount which would be qualified capital gain had such property been sold on the date of such cessation.

(c)

Economic Freedom Zone business

For purposes of this section, the term Economic Freedom Zone business means any enterprise zone business (as defined in section 1397C), determined—

(1)

after the application of section 1400(e),

(2)

by substituting 80 percent for 50 percent in subsections (b)(2) and (c)(1) of section 1397C, and

(3)

by treating only areas that are Economic Freedom Zones as an empowerment zone or enterprise community.

(d)

Other definitions and special rules

For purposes of this section—

(1)

Qualified capital gain

Except as otherwise provided in this subsection, the term qualified capital gain means any gain recognized on the sale or exchange of—

(A)

a capital asset, or

(B)

property used in the trade or business (as defined in section 1231(b)).

(2)

Certain gain not qualified

The term qualified capital gain shall not include any gain attributable to periods before the date on which the a business qualifies as an Economic Freedom Zone business or after the date that is 4 years after the date on which such business no longer qualifies as an Economic Freedom Zone business due to the lapse of 1 or more Economic Freedom Zones.

(3)

Certain gain not qualified

The term qualified capital gain shall not include any gain which would be treated as ordinary income under section 1245 or under section 1250 if section 1250 applied to all depreciation rather than the additional depreciation.

(4)

Intangibles not integral part of Economic Freedom Zone business

In the case of gain described in subsection (a)(1), the term qualified capital gain shall not include any gain which is attributable to an intangible asset which is not an integral part of an Economic Freedom Zone business.

(5)

Related party transactions

The term qualified capital gain shall not include any gain attributable, directly or indirectly, in whole or in part, to a transaction with a related person. For purposes of this paragraph, persons are related to each other if such persons are described in section 267(b) or 707(b)(1).

(e)

Sales and exchanges of interests in partnerships and s corporations which are Economic Freedom Zone businesses

In the case of the sale or exchange of an interest in a partnership, or of stock in an S corporation, which was an Economic Freedom Zone business during substantially all of the period the taxpayer held such interest or stock, the amount of qualified capital gain shall be determined without regard to—

(1)

any gain which is attributable to an intangible asset which is not an integral part of an Economic Freedom Zone business, and

(2)

any gain attributable to periods before the date on which the a business qualifies as an Economic Freedom Zone business or after the date that is 4 years after the date on which such business no longer qualifies as an Economic Freedom Zone business due to the lapse of 1 or more Economic Freedom Zones.

1400V–4.

Reduced payroll taxes

(a)

In general

(1)

Employees

The rate of tax under 3101(a) (including for purposes of determining the applicable percentage under sections 3201(a) and 3211(a)(1)) shall be 4.2 percent for any remuneration received during any period in which the individual's principal residence (within the meaning of section 121) is located in an Economic Freedom Zone.

(2)

Employers

(A)

In general

The rate of tax under section 3111(a) (including for purposes of determining the applicable percentage under sections 3221(a)) shall be 4.2 percent with respect to remuneration paid for qualified services during any period in which the employer is located in an Economic Freedom Zone.

(B)

Qualified services

For purposes of this section, the term qualified services means services performed—

(i)

in a trade or business of a qualified employer, or

(ii)

in the case of a qualified employer exempt from tax under section 501(a) of the Internal Revenue Code of 1986, in furtherance of the activities related to the purpose or function constituting the basis of the employer’s exemption under section 501 of such Code.

(C)

Location of employer

For purposes of this paragraph, the location of an employer shall be determined in the same manner as under section 1400V–2(c).

(3)

Self-employed individuals

The rate of tax under section 1401(a) shall be 8.40 percent any taxable year in which such individual was located (determined under section 1400V–2(c) as if such individual were a corporation) in an Economic Freedom Zone.

(b)

Transfers of Funds

-

(1)

Transfers to federal old-age and survivors insurance trust fund

There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund established under section 201 of the Social Security Act ( 42 U.S.C. 401 ) amounts equal to the reduction in revenues to the Treasury by reason of the application of subsection (a). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted.

(2)

Transfers to social security equivalent benefit account

There are hereby appropriated to the Social Security Equivalent Benefit Account established under section 15A(a) of the Railroad Retirement Act of 1974 ( 45 U.S.C. 231n–1(a) ) amounts equal to the reduction in revenues to the Treasury by reason of the application of paragraphs (1) and (2) of subsection (a). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Account had such amendments not been enacted.

(3)

Coordination with other federal laws

For purposes of applying any provision of Federal law other than the provisions of the Internal Revenue Code of 1986, the rate of tax in effect under section 3101(a) shall be determined without regard to the reduction in such rate under this section.

1400V–5.

Increase in expensing under section 179

(a)

In general

In the case of an Economic Freedom Zone business, for purposes of section 179

(1)

the limitation under section 179(b)(1) shall be increased by the lesser of—

(A)

200 percent of the amount in effect under such section (determined without regard to this section), or

(B)

the cost of section 179 property which is Economic Freedom Zone business 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 Economic Freedom Zone business property shall be 50 percent of the cost thereof.

(b)

Economic Freedom zone business property

For purposes of this section, the term Economic Freedom Zone business property has the meaning given such term under section 1400V–3(b)(4), except that for purposes of subparagraph (A)(ii) thereof, if property is sold and leased back by the taxpayer within 3 months after the date such property was originally placed in service, such property shall be treated as originally placed in service not earlier than the date on which such property is used under the leaseback

(c)

Recapture

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.

II

Definitions

Sec. 1400V–6. Economic Freedom Zone.

1400V–6.

Economic Freedom Zone

For purposes of this subchapter, the term Economic Freedom Zone means any area which is an Economic Freedom Zone under title II of the Economic Freedom Zone Act.

.

(b)

Clerical amendment

The table of subchapters for chapter 1 of such Code is amended by inserting after the item relating to subchapter Y the following new item:

Subchapter Z—Economic Freedom Zones

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

IV

Federal regulatory reductions

401.

Suspension of certain laws and regulations

(a)

Environmental Protection Agency

For each area designated as an Economic Freedom Zone under this Act, the Administrator of the Environmental Protection Agency shall not enforce, with respect to that Economic Freedom Zone, and the Economic Freedom Zone shall be exempt from compliance with—

(1)

part D of the Clean Air Act ( 42 U.S.C. 7501 et seq.) (including any regulations promulgated under that part);

(2)

section 402 of the Federal Water Pollution Control Act ( 33 U.S.C. 1342 );

(3)

sections 139, 168, 169, 326, and 327 of title 23, United States Code;

(4)

section 304 of title 49, United States Code; and

(5)

sections 1315 through 1320 of Public Law 112–141 ( 126 Stat. 549).

(b)

Department of the Interior

(1)

Wild and scenic rivers

For each area designated as an Economic Freedom Zone under this Act, the Secretary of the Interior shall not enforce, with respect to that Economic Freedom Zone, and the Economic Freedom Zone shall be exempt from compliance with the Wild and Scenic Rivers Act (16 U.S.C. 1271 et seq.).

(2)

National heritage areas

For the period beginning on the date of enactment of this Act and ending on the date on which an area is removed from designation as an Economic Freedom Zone, any National Heritage Area located within that Economic Freedom Zone shall not be considered to be a National Heritage Area and any applicable Federal law (including regulations) relating to that National Heritage Area shall not apply.

V

Educational enhancements

501.

Educational opportunity tax credit

(a)

In general

Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 25D the following new section:

25E.

Credit for qualified elementary and secondary education expenses

(a)

In general

In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the qualified elementary and secondary education expenses of an eligible student.

(b)

Limitation

The amount taken into account under subsection (a) with respect to any student for any taxable year shall not exceed $5,000.

(c)

Definitions

For purposes of this section—

(1)

Qualified elementary and secondary education expenses

The term qualified elementary and secondary education expenses has the meaning given such term under section 530(b)(3).

(2)

Eligible student

The term eligible student means any student who—

(A)

is enrolled in, or attends, any public, private, or religious school (as defined in section 530(b)(3)(B)), and

(B)

whose principal residence (within the meaning of section 123) is located in an Economic Freedom Zone.

(3)

Economic Freedom Zone

The term Economic Freedom Zone means any area which is an Economic Freedom Zone under title II of the Economic Freedom Zone Act.

.

(b)

Clerical amendment

The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 25D the following new item:

Sec. 25E. Credit for qualified elementary and secondary education expenses.

.

(c)

Effective date

The amendments made by this section shall apply to expenditures made in taxable years beginning after the date of the enactment of this Act.

502.

School choice through portability

(a)

In general

Subpart 2 of part A of title I of the Elementary and Secondary Education Act of 1965 ( 20 U.S.C. 6331 et seq.) is amended by adding at the end the following:

1128.

School choice through portability

(a)

Authorization

(1)

In general

Notwithstanding sections 1124, 1124A, and 1125 and any other provision of law, and to the extent permitted under State law, a State educational agency may allocate grant funds under this subpart among the local educational agencies in the State based on the formula described in paragraph (2).

(2)

Formula

A State educational agency may allocate grant funds under this subpart for a fiscal year among the local educational agencies in the State in proportion to the number of eligible children enrolled in public schools served by the local educational agency and enrolled in State-accredited private schools within the local educational agency’s geographic jurisdiction, for the most recent fiscal year for which satisfactory data are available, compared to the number of such children in all such local educational agencies for that fiscal year.

(b)

Eligible child

(1)

In general

In this section, the term eligible child means a child—

(A)

from a family with an income below the poverty level, on the basis of the most recent satisfactory data published by the Department of Commerce; and

(B)

who resides in an Economic Freedom Zone as designated under title II of the Economic Freedom Zones Act of 2013 .

(2)

Criteria of poverty

In determining the families with incomes below the poverty level for the purposes of paragraph (2), a State educational agency shall use the criteria of poverty used by the Census Bureau in compiling the most recent decennial census.

(3)

Identification of eligible children

On an annual basis, on a date to be determined by the State educational agency, each local educational agency that receives grant funding in accordance with subsection (a) shall inform the State educational agency of the number of eligible children enrolled in public schools served by the local educational agency and enrolled in State-accredited private schools within the local educational agency’s geographic jurisdiction.

(c)

Distribution to schools

Each local educational agency that receives grant funding under subsection (a) shall distribute such funds to the public schools served by the local educational agency and State-accredited private schools with the local educational agency’s geographic jurisdiction—

(1)

based on the number of eligible children enrolled in such schools; and

(2)

in the manner that would, in the absence of such Federal funds, supplement the funds made available from the non-Federal resources for the education of pupils participating in programs under this part, and not to supplant such funds.

.

(b)

Table of contents

The table of contents in section 2 of the Elementary and Secondary Education Act of 1965 is amended by inserting after the item relating to section 1127 the following:

Sec. 1128. School choice through portability.

.

503.

Special Economic Freedom Zone visas

(a)

Definitions

In this section:

(1)

Abandoned; dilapidated

The terms abandoned and dilapidated shall be defined by the States in accordance with the provisions of this Act.

(2)

Full-time employment

The term full-time employment means employment in a position that requires at least 35 hours of service per week at any time, regardless of who fills the position.

(b)

Purpose

The purpose of this section is to facilitate increased investment and enhanced human capital in Economic Freedom Zones through the issuance of special regional visas.

(c)

Authorization

The Secretary of Homeland Security, in collaboration with the Secretary of Labor, may issue Special Economic Freedom Zone Visas, in a number determined by the Governor of each State, in consultation with local officials in regions designated by the Secretary of the Treasury as Economic Freedom Zones, to authorize qualified aliens to enter the United States for the purpose of—

(1)

engaging in a new commercial enterprise (including a limited partnership)—

(A)

in which such alien has invested, or is actively in the process of investing, capital in an amount not less than the amount specified in subsection (d); and

(B)

which will benefit the region designated as an Economic Freedom Zone by creating full-time employment of not fewer than 5 United States citizens, aliens lawfully admitted for permanent residence, or other immigrants lawfully authorized to be employed in the United States (excluding the alien and the alien’s immediate family);

(2)

engaging in the purchase and renovation of dilapidated or abandoned properties or residences (as determined by State and local officials) in which such alien has invested, or is actively in the process of investing, in the ownership of such properties or residences; or

(3)

residing and working in an Economic Freedom Zone.

(d)

Effective period

A visa issued to an alien under this section shall expire on the later of—

(1)

the date on which the relevant Economic Freedom Zone loses such designation; or

(2)

the date that is 5 years after the date on which such visa was issued to such alien.

(e)

Capital and educational requirements

(1)

New commercial enterprises

Except as otherwise provided under this section, the minimum amount of capital required to comply with subsection (c)(1)(A) shall be $50,000.

(2)

Renovation of dilapidated or abandoned properties

An alien is not in compliance with subsection (c)(2) unless the alien—

(A)

purchases a dilapidated or abandoned property in an Economic Freedom Zone; and

(B)

not later than 18 months after such purchase, invests not less than $25,000 to rebuild, rehabilitate, or repurpose the property.

(3)

Verification

A visa issued under subsection (c) shall not remain in effect for more than 2 years unless the Secretary of Homeland Security has verified that the alien has complied with the requirements described in subsection (c).

(4)

Education and skill requirements

An alien is not in compliance with subsection (c)(3) unless the alien possesses—

(A)

a bachelor’s degree (or its equivalent) or an advanced degree;

(B)

a degree or specialty certification that—

(i)

is required for the job the alien will be performing; and

(ii)

is specific to an industry or job that is so complex or unique that it can be performed only by an individual with the specialty certification;

(C)
(i)

the knowledge required to perform the duties of the job the alien will be performing; and

(ii)

the nature of the specific duties is so specialized and complex that such knowledge is usually associated with attainment of a bachelor’s or higher degree; or

(D)

a skill or talent that would benefit the Economic Freedom Zone.

(f)

Additional provisions

(1)

Geographic limitation

An alien who has been issued a visa under this section is not permitted to live or work outside of an Economic Freedom Zone.

(2)

Rescission

A visa issued under this section shall be rescinded if the visa holder resides or works outside of an Economic Freedom Zone or otherwise fails to comply with the provisions of this section.

(3)

Other visas

An alien who has been issued a visa under this section may apply for any other visa for which the alien is eligible in order to pursue employment outside of an Economic Freedom Zone.

(g)

Adjustment of status

The Secretary of Homeland Security may adjust the status of an alien who has been issued a visa under this section to that of an alien lawfully admitted for permanent residence, without numerical limitation, if the alien—

(1)

has fully complied with the requirements set forth in this section for at least 5 years;

(2)

submits a completed application to the Secretary; and

(3)

is not inadmissible to the United States based on any of the factors set forth in section 212(a) of the Immigration and Nationality Act ( 8 U.S.C. 1182(a) ).

504.

Economic Freedom Zone educational savings accounts

(a)

In general

Part VIII of subchapter F of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

530A.

Economic Freedom Zone educational savings accounts

(a)

In general

Except as provided in this section, an Economic Freedom Zone educational savings account shall be treated for purposes of this title in the same manner as a Coverdell education savings account.

(b)

Definitions

For purposes of this section—

(1)

Economic Freedom Zone educational savings account

The term Economic Freedom Zone educational savings account means a trust created or organized in the United States exclusively for the purpose of paying the qualified education expenses (as defined in section 530(b)(2)) of an individual who is the designated beneficiary of the trust (and designated as an Economic Freedom Zone educational saving account at the time created or organized) and who is a qualified individual at the time such trust is established, but only if the written governing instrument creating the trust meets the following requirements:

(A)

No contribution will be accepted—

(i)

unless it is in cash,

(ii)

after the date on which such beneficiary attains age 25, or

(iii)

except in the case of rollover contributions, if such contribution would result in aggregate contributions for the taxable year exceeding $10,000.

(B)

No contribution shall be accepted at any time in which the designated beneficiary is not a qualified individual.

(C)

The trust meets the requirements of subparagraphs (B), (C), (D), and (E) of section 530(b)(1).

The age limitations in subparagraphs (A)(ii), subparagraph (E) of section 530(b)(1), and paragraphs (5) and (6) of section 530(d), shall not apply to any designated beneficiary with special needs (as determined under regulations prescribed by the Secretary).
(2)

Qualified individual

The term qualified individual means any individual whose principal residence (within the meaning of section 121) is located in an Economic Freedom Zone (as defined in section 1400V–6).

(c)

Deduction for contributions

(1)

In general

There shall be allowed as a deduction under part VII of subchapter B of this chapter an amount equal to the aggregate amount of contributions made by the taxpayer to any Economic Freedom Zone educational savings account during the taxable year.

(2)

Limitation

The amount of the deduction allowed under paragraph (1) for any taxpayer for any taxable year shall not exceed $40,000.

(3)

No deduction for rollover contributions

No deduction shall be allowed under paragraph (1) for any rollover contribution described in section 530(d)(5).

(d)

Other rules

(1)

No income limit

In the case of an Economic Freedom Zone educational savings account, subsection (c) of section 530 shall not apply.

(2)

Change in beneficiaries

Notwithstanding paragraph (6) of section 530(b), a change in the beneficiary of an Economic Freedom Zone education savings account shall be treated as a distribution unless the new beneficiary is a qualified individual.

.

(b)

Clerical amendment

The table of sections for part VIII of subchapter F of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 530A. Economic Freedom Zone educational savings accounts.

.

VI

Community assistance and rebuilding

601.

Nonapplication of Davis-Bacon

The wage rate requirements of subchapter IV of chapter 31 of title 40, United States Code (commonly referred to as the Davis-Bacon Act ), shall not apply with respect to any area designated as an Economic Freedom Zone under this Act.

602.

Economic Freedom Zone charitable tax credit

(a)

In general

Section 170 is amended by redesignating subsection (p) as subsection (q) and by inserting after subsection (o) the following new subsection:

(o)

Election To treat contributions for Economic Freedom Zone charities as a credit

(1)

In general

In the case of an individual, at the election of the taxpayer, so much of the deduction allowed under subsection (a) (determined without regard to this subsection) which is attributable to Economic Freedom Zone charitable contributions—

(A)

shall be allowed as a credit against the tax imposed by this chapter for the taxable year, and

(B)

shall not be allowed as a deduction for such taxable year under subsection (a).

Any amount allowable as a credit under this subsection shall be treated as a credit allowed under subpart A of part IV of subchapter A for purposes of this title.
(2)

Amount attributable to Economic Freedom Zone charitable contributions

For purposes of paragraph (1)

(A)

In general

In any case in which the total charitable contributions of a taxpayer for a taxable year exceed the contribution base, the amount of Economic Freedom Zone charitable contributions taken into account under paragraph (1) shall be the amount which bears the same ratio to the total charitable contributions made by the taxpayer during such taxable year as the amount of the deduction allowed under subsection (a) (determined without regard to this subsection and after application of subsection (b)) bears to the total charitable contributions made by the taxpayer for such taxable year.

(B)

Carryovers

In the case of any contribution carried from a preceding taxable year under subsection (d), such amount shall be treated as attributable to an Economic Freedom Zone charitable contribution in the amount that bears the same ratio to the total amount carried from preceding taxable years under subsection (d) as the amount of Economic Freedom Zone charitable contributions not allowed as a deduction under subsection (a) (other than by reason of this subsection) for the preceding 5 taxable year bears to total amount carried from preceding taxable years under subsection (d).

(3)

Economic Freedom Zone charitable contribution

The term Economic Freedom Zone charitable contribution means any contribution to a corporation, trust, or community chest fund, or foundation described in subsection (c)(2), but only if—

(A)

such entity is created or organized exclusively for—

(i)

religious purposes,

(ii)

educational purposes, or

(iii)

any of the following charitable purposes: providing educational scholarships, providing shelters for homeless individuals, or setting up or maintaining food banks,

(B)

the primary mission of such entity is serving individuals in an Economic Freedom Zone,

(C)

the entity maintains accountability to residents of such Economic Freedom Zone through their representation on any governing board of the entity or any advisory board to the entity, and

(D)

the entity is certified by the Secretary for purposes of this subsection.

Such term shall not include any contribution made to an entity described in the preceding sentence after the date in which the designation of the Economic Freedom Zone serviced by such entity lapses.
(4)

Economic Freedom Zone

The term Economic Freedom Zone means any area which is an Economic Freedom Zone under title II of the Economic Freedom Zone Act.

.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

VII

State and community policy recommendations

701.

Sense of the Senate concerning policy recommendations

It is the sense of the Senate that State and local governments should review and adopt the following policy recommendations:

(1)

Pension reform

State and local governments should—

(A)

implement reforms to address any fiscal shortfall in public pension funding, including utilizing accrual accounting methods, such as those reforms undertaken by the private sector pension funds; and

(B)

restructure and renegotiate any public pension fund that is deemed to be insolvent or underfunded, including adopting defined contribution retirement systems.

(2)

Taxes

State and local governments should reduce jurisdictional tax rates below the national average in order to help facilitate capital investment and economic growth, particularly in combination with the provisions of this Act.

(3)

Education

State and local governments should adopt school choice options to provide children and parents more educational choices, particularly in impoverished areas.

(4)

Communities

State and local governments should adopt right-to-work laws to allow more competitiveness and more flexibility for businesses to expand.

(5)

Regulations

State and local governments should streamline the regulatory burden on families and businesses, including streamlining the opportunities for occupational licensing.

(6)

Abandoned structures

State and local governments should consider the following options to reduce or fix areas with abandoned properties or residences:

(A)

In the case of foreclosures, tax notifications should be sent to both the lien holder (if different than the homeowner) and the homeowner.

(B)

Where State constitutions permit, property tax abatement or credits should be provided for individuals who purchase or invest in abandoned or dilapidated properties.

(C)

Non-profit or charity demolition entities should be permitted or encouraged to help remove abandoned properties.

(D)

Government or municipality fees and penalties should be limited, and be proportional to the outstanding tax amount and the ability to pay.

(E)

The sale of tax liens to third parties should be reviewed, and where available, should prohibit the selling of tax liens below a certain threshold (for example the prohibition of the sale of tax liens to third parties under $1,000).