US Lawmakers Approve Redevelopment Tax Breaks

by Leroy Baker, Tax-News.com, New York

26 October 2007

The tax-writing committee of the US House of Representatives has approved legislation that will update the current Trade Assistance Adjustment program, and provide new tax breaks to help companies operating in areas of the United States which have been adversely affected by international trade.

The Trade and Globalization Assistance Act of 2007 passed the House Ways and Means Committee on Wednesday by a vote of 26-14. According to Committee Chairman Charles Rangel, the landmark legislation would overhaul the current TAA program, to better meet the needs of American workers and communities affected by globalization.

“We must be certain that, as our nation moves forward with expanded trade, we send a clear bipartisan signal that it won’t be at the expense of American workers,” stated Chairman Rangel. “This legislation expands opportunities for training and investment, which will combat the negative effects of globalization and help eliminate the growing perception that trade is not working for American workers.”

The Act would expand TAA coverage to more workers, including service workers, and would substantially improve the program’s training opportunities and associated health care benefits. The bill also creates new benefits and tax incentives for industries and communities that have been hit hard by trade. The legislation would additionally promote long-needed reforms to the unemployment insurance system.

The legislation will be considered by the full House as early as next week. Under its tax provisions, the bill would:

• Provide for the creation of twenty-four manufacturing redevelopment zones, which will be eligible for redevelopment tax incentives. This would allow state and local governments to nominate areas that have experienced a significant decline in the number of individuals employed in manufacturing or that have a high concentration of abandoned or underutilized manufacturing facilities. In addition to the requirement that such areas suffer a significant decline in manufacturing, nominated areas must also meet eligibility criteria similar to the requirements for federal empowerment zones. From these qualifying nominees, the Secretary of the Treasury will designate twenty-four areas as manufacturing redevelopment zones.
• Authorize up to $3.6 billion of tax credit bond authority for manufacturing redevelopment zones ($150 million of tax credit bond authority for each manufacturing redevelopment zone) to be used to make capital investments in property located within manufacturing redevelopment zones with the goal of promoting development or other economic activity in such zone (e.g., expenditures for environmental remediation, improvements to public infrastructure and construction of public facilities). This proposal is estimated to cost $1.7 billion over 10 years.
• Authorize up to $5.52 billion in tax-exempt manufacturing redevelopment zone facility bonds ($230 million
  tax-exempt bond authority for each manufacturing redevelopment zone) to be used to purchase equipment and other depreciable property to be used in active conduct of a trade or business within a manufacturing redevelopment zone. There is a $15 million limitation per manufacturing redevelopment zone on the amount of bonds allocable to any one person. That amount is capped at $20 million over all zones for any one person. This proposal is estimated to cost $615 million over 10 years.
• Increase the State low-income housing credit ceiling of states with manufacturing redevelopment zones. The housing credit ceiling would be increased by the housing credits that are allocated to manufacturing redevelopment zones. The maximum credit ceiling increase that would be permitted under this section is capped at $20 per person located within such manufacturing redevelopment zone. This proposal is estimated to cost $324 million over 10 years.
• Extend eligibility for the work opportunity tax credit to employers that hire individuals (between the ages of 18 and 40 years) whose principal place of abode is located within a manufacturing redevelopment zone. This proposal is estimated to cost $99 million over 10 years.
• Delay the phase-in of a liberalized rule for allocating interest expense between United States sources and foreign sources for the purposes of determining a taxpayer’s foreign tax credit limitation. Although enacted in 2004, this election is not available to taxpayers until taxable years beginning after 2008. Under the bill, the phase-in would be delayed by three years.

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