Revitalization Programs:

Empowerment Zones, Enterprise Communities, and Renewal Communities

GAO-10-464R: Published: Mar 12, 2010. Publicly Released: Mar 12, 2010.

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Beginning in 1993 and in subsequent legislation in 1997, 1999, and 2000, Congress established the Empowerment Zone (EZ), Enterprise Community (EC), and Renewal Community (RC) programs to reduce unemployment and generate economic growth in selected Census tracts. Urban and rural communities designated as EZs, ECs, or RCs received grants, tax incentives, or a combination of both to stimulate community development and business activity. The EZ, EC, and RC programs expired on December 31, 2009, though legislation has been introduced to extend the programs. The Community Renewal Tax Relief Act of 2000 (Public Law 106-554) mandated that GAO report to Congress by January 31, 2004; 2007; and 2010 on the EZ, EC, and RC programs and their effect on poverty, unemployment, and economic growth in designated program areas. We issued the first two mandated reports in 2004 and 2006. The purpose of this report is to make publicly available information we provided in a briefing to your staffs on January 29, 2010.

While these programs initially offered a mix of grants and tax incentives for community and economic development, later rounds offered primarily tax incentives for business development. Grant funds in the early EZ and EC programs financed projects and activities to enhance community development. Further, the facility bond feature of the EZ and EC programs helped facilitate large business projects. More recently, the Commercial Revitalization Deduction (CRD) feature of the RC program helped to facilitate smaller business projects. Some information is available on the results of the EZ, EC, and RC programs. For instance, HUD collects data on utilization of facility bonds in EZs and the CRD in RCs. In addition, IRS provided data to HUD on EZ/RC employment credit use. However, data limitations make it difficult to accurately tie the use of the credits to specific designated communities. It is not clear how much businesses are using other EZ, EC, and RC tax incentives, because IRS forms do not associate these incentives with the programs or with specific designated communities. Going forward, the U.S. Census Bureau will begin releasing more frequent poverty and employment updates at the Census tract level than it has traditionally provided, and this information could be a useful tool in determining the effects of such programs on poverty and employment in designated Census tracts.

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