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September 2004
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For Immediate Release
Office of the Press Secretary
September 2, 2004
President Bush Proposes New "Opportunity Zones"
America's changing economy is strong and getting stronger. But during these times of change, America's economic growth is not felt equally throughout the Nation. In poor communities and in communities where traditional industries do not employ as many workers as they did a generation ago, opportunity can seem more distant. President Bush believes that government must be on the side of the people in these communities.
President Bush believes that America's economic prosperity should extend to every corner of our country. To help reach that goal, he has proposed a new "Opportunity Zone" initiative to assist America's transitioning neighborhoods - those areas that have lost a significant portion of their economic base as a result of our changing economy, for example, due to loss of manufacturing or textile employment, and are now in the process of transitioning to a more diverse, broad-based, 21st century economy.
Opportunity Zones would ease that transition by targeting Federal resources and encouraging new and existing businesses to invest in these areas. Opportunity Zones are different from existing Empowerment Zones (EZ), Enterprise Communities (EC), and Renewal Communities (RC). They provide a comprehensive, results-based approach, expanding the focus of assistance beyond economic activity to encompass education, job training, affordable housing, and other activities critical for a vibrant community. Communities already designated EZs, ECs, or RCs would be allowed to apply for Opportunity Zone designation.
In addition, Opportunity Zones recognize that overcoming barriers to growth requires local involvement. Designation as an Opportunity Zone requires a commitment from the community to partner with the Federal government and a demonstrated capacity to reduce local barriers to development and create jobs.
What benefits do Opportunity Zones receive?
Areas qualifying for Opportunity Zone status would be moved to the front of the line for certain Federal assistance programs. Specifically, individuals, organizations, and governments within an Opportunity Zone could receive priority designation when applying for the following Federal programs:
- 21st Century After-school, Early Reading First, and Striving Readers funding;
- Community Based Job Training Grants;
- Community Development Block Grants, Economic Development Administration grants, and HOME Funding;
- USDA Telecommunications Loans, Distance Learning and Telemedicine grants, and Broadband loans; and
- New Markets Tax Credits.
To stimulate growth, opportunity, and job creation, Opportunity Zones would encourage businesses to locate, invest, and hire in the community through:
-
Lower Marginal Rates. Small businesses located within
Opportunity Zones would see significantly lower effective tax
rates on their business income.
- Investment Incentives. Small businesses located within
Opportunity Zones would qualify for an extra $100,000 in
expensing for purchases of tools and other equipment used
within the Zone. This $100,000 is in addition to the $100,000
that they can already expense under the President's tax
policies. Moreover, firms of all sizes would receive
accelerated depreciation for the construction or rehabilitation
of commercial buildings located within the zone.
- Incentives to Hire New Workers. Businesses within an
Opportunity Zone would be encouraged to hire Zone residents and
welfare recipients through a unified wage tax credit combining
the best elements of the Work Opportunity and the Welfare to
Work tax credits. Workers eligible for the tax credit would
include Opportunity Zone residents, welfare and food stamp
recipients, and other targeted groups.
- Regulatory Relief. As part of the Federal commitment to Opportunity Zones, the Office of Management and Budget would review Federal regulatory and paperwork burdens imposed on these communities.
Which communities qualify to be an Opportunity Zone?
Opportunity Zones expand the concept of traditional enterprise zones to include communities in transition. A community can qualify to be an Opportunity Zones by fitting one of the following two categories:
- Rural or Urban "Communities in Transition". These areas have
suffered from a significant decline in the economic base,
including a decline in manufacturing and retail establishments,
within their community over the past decade and would benefit
from targeted assistance in transitioning to a more diverse,
21st century economy.
- Existing Empowerment Zones, Enterprise Communities, or Renewal Communities. These communities received their designation due to high poverty rates, high unemployment, and low incomes. By receiving an Opportunity Zone designation in lieu of their current designation, however, these communities would be eligible for the expanded benefits available to Opportunity Zones.
How does a community become an Opportunity Zone?
In order to qualify to be an Opportunity Zone, a community that either (1) meets the "community in transition" eligibility requirements above, or (2) is an EZ, EC, or RC, would:
- Develop a "Community Transition Plan." To encourage increased
business and residential activity within an Opportunity Zone,
an applying community would develop and submit a "Community
Transition Plan," which sets concrete, measurable goals for
reducing local regulatory and tax barriers to construction,
residential development and business creation. Communities
that have already worked to address these issues would receive
credit for recent improvements.
- Submit an Application. An interested community would need to
submit an application, including the Community Transition
Plan. Zone designation would be awarded through a competitive
selection process.
- Report Results. Approved communities would report regularly on the concrete results they are achieving, including construction, residential development, and business job creation.
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