Resources

Thomson Reuters Tax & Accounting News

Featuring content from Checkpoint

Back to Thomson Reuters Tax & Accounting News

Subscribe below to the Checkpoint Daily Newsstand Email Newsletter

IRS provides guidance on empowerment zone designations in light of TIPA

Notice 2015-26, 2015-11 IRB

In a Notice, IRS has explained how a State or local government amends the nomination of an empowerment zone to provide for a new termination date, as provided for by Code Sec. 1391, as amended by the Tax Increase Prevention Act of 2014 (TIPA, P.L. 113-295, 12/19/2014).

Background. Under Code Sec. 1391, the designation of an economically depressed census tract as an “Empowerment Zone” renders businesses and individual residents within such a Zone eligible for special tax incentives. These tax incentives include: the 20% wage credit under Code Sec. 1396; liberalized Code Sec. 179 expensing rules ($35,000 extra expensing and the break allowing only 50% of expensing eligible property to be counted for purposes of the investment-based phaseout of expensing); tax-exempt bond financing under Code Sec. 1394; and deferral under Code Sec. 1397B of capital gains tax on sale of qualified assets sold and replaced.

Under the Community Renewal Tax Relief Act of 2000 (CRTRA, P.L. 106-554, 12/21/2000), the designation of those empowerment zones was extended through Dec. 31, 2009. Under Notice 2013-38, 2013-25 IRB 1251, any nomination for an empowerment zone that was in effect on Dec. 31, 2009, was deemed to be amended to provide for a new termination date of Dec. 31, 2013, unless the nominating entity declined the extension in a written notification to IRS (which none did). Accordingly, the designations of all empowerment zones that were in effect on Dec. 31, 2009 had a termination date of Dec. 31, 2013. TIPA extends for one year, through Dec. 31, 2014, the period for which the designation of an empowerment zone is in effect.

As amended by TIPA, any designation of an empowerment zone ends on the earliest of:

A. Dec. 31, 2014 (Code Sec. 1391(d)(1)(A));
B. the termination date designated by the State and local governments as provided for in their nomination (Code Sec. 1391(d)(1)(B)); or
C. the date the appropriate Secretary (of Housing and Urban Development, or Agriculture) revokes the designation. (Code Sec. 1391(d)(1)(C))

Section 139(b) of TIPA provides that where a nomination of an empowerment zone included a termination date of Dec. 31, 2013, Code Sec. 1391(d)(1)(B) will not apply with respect to the designation if, after the date of the enactment of TIPA, the entity that made such nomination amends the nomination, in such manner as the Secretary of the Treasury may provide, to provide for a new termination date. The amendments made by section 139 of TIPA apply to periods after Dec. 31, 2013.

Thus, under TIPA, to have an empowerment zone designation remain in effect through Dec. 31, 2014, the entity that made the nomination of the empowerment zone must amend the nomination to provide for a new termination date of Dec. 31, 2014, as provided in Notice 2015-26 .

Amendment of a nomination to extend empowerment zone designation. Notice 2015-26 provides that any nomination for an empowerment zone with a current termination date (as amended by CRTRA and Notice 2013-38) of Dec. 31, 2013, is deemed to be amended to provide for a new termination date of Dec. 31, 2014, unless the nominating entity sends written notification to IRS by May 11, 2015.

The written notification must affirmatively decline extension of the empowerment zone nomination through Dec. 31, 2014. If the U.S. mail is used, the notification should be sent to the following address:

Internal Revenue Service

Attn: Charles Magee, CC:ITA:7, Room 4136

P.O. Box 7604

Ben Franklin Station

Washington, DC 20044

If a private delivery service is used, the notification should be sent to the following address:

Internal Revenue Service

Attn: Charles Magee, CC:ITA:7, Room 4136

1111 Constitution Ave., NW

Washington, DC 20224

If the entity that nominated an empowerment zone does not send written notification, the nomination of that empowerment zone will be deemed extended from Dec. 31, 2013 through Dec. 31, 2014. Accordingly, Code Sec. 1391(d)(1)(B) does not apply and, under Code Sec. 1391(d)(1)(A)(i) , the designation of that empowerment zone ends on Dec. 31, 2014.

References: For period that empowerment zone and enterprise community designations remain in effect, see FTC 2d/FIN ¶  J-3382; United States Tax Reporter ¶  13,914; TaxDesk ¶  384,020; TG ¶  15029.

Tagged with →