Amended 2000
- 2000 Pub. L. 106-554 Pub. L. 106–554 renumbered section 1397B of this title as this section.
(a) In general For purposes of this part, the term “enterprise zone business” means—
(1) any qualified business entity, and
Cited by 1
(b) Qualified business entity For purposes of this section, the term “qualified business entity” means, with respect to any taxable year, any corporation or partnership if for such year—
Cited by 3
(1) every trade or business of such entity is the active conduct of a qualified business within an empowerment zone,
(2) at least 50 percent of the total gross income of such entity is derived from the active conduct of such business,
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 956(a)(1), substituted “50 percent” for “80 percent”.
Cited by 7
(3) a substantial portion of the use of the tangible property of such entity (whether owned or leased) is within an empowerment zone,
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 956(a)(2), substituted “a substantial portion” for “substantially all”.
(4) a substantial portion of the intangible property of such entity is used in the active conduct of any such business,
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 956(a)(2), (3), substituted “a substantial portion” for “substantially all” and struck out “, and exclusively related to,” after “entity is used in”.
Cited by 5
(5) a substantial portion of the services performed for such entity by its employees are performed in an empowerment zone,
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 956(a)(2), substituted “a substantial portion” for “substantially all”.
(7) less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to collectibles (as defined in section 408(m)(2)) other than collectibles that are held primarily for sale to customers in the ordinary course of such business, and
(8) less than 5 percent of the average of the aggregate unadjusted bases of the property of such entity is attributable to nonqualified financial property.
Cited by 2
(c) Qualified proprietorship For purposes of this section, the term “qualified proprietorship” means, with respect to any taxable year, any qualified business carried on by an individual as a proprietorship if for such year—
Cited by 1
(1) at least 50 percent of the total gross income of such individual from such business is derived from the active conduct of such business in an empowerment zone,
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 956(a)(1), substituted “50 percent” for “80 percent”.
(2) a substantial portion of the use of the tangible property of such individual in such business (whether owned or leased) is within an empowerment zone,
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 956(a)(2), substituted “a substantial portion” for “substantially all”.
(3) a substantial portion of the intangible property of such business is used in the active conduct of such business,
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 956(a)(2), (3), substituted “a substantial portion” for “substantially all” and struck out “, and exclusively related to,” after “business is used in”.
(4) a substantial portion of the services performed for such individual in such business by employees of such business are performed in an empowerment zone,
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 956(a)(2), substituted “a substantial portion” for “substantially all”.
(6) less than 5 percent of the average of the aggregate unadjusted bases of the property of such individual which is used in such business is attributable to collectibles (as defined in section 408(m)(2)) other than collectibles that are held primarily for sale to customers in the ordinary course of such business, and
(7) less than 5 percent of the average of the aggregate unadjusted bases of the property of such individual which is used in such business is attributable to nonqualified financial property.
For purposes of this subsection, the term “employee” includes the proprietor.
(d) Qualified business For purposes of this section—
Cited by 2
(1) In general Except as otherwise provided in this subsection, the term “qualified business” means any trade or business.
Cited by 1
(2) Rental of real property The rental to others of real property located in an empowerment zone shall be treated as a qualified business if and only if—
(A) the property is not residential rental property (as defined in section 168(e)(2)), and
(B) at least 50 percent of the gross rental income from the real property is from enterprise zone businesses.
Cited by 1
For purposes of subparagraph (B), the lessor of the property may rely on a lessee’s certification that such lessee is an enterprise zone business.
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 956(a)(4), inserted concluding provisions.
(3) Rental of tangible personal property The rental to others of tangible personal property shall be treated as a qualified business if and only if at least 50 percent of the rental of such property is by enterprise zone businesses or by residents of an empowerment zone.
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 956(a)(5), substituted “at least 50 percent” for “substantially all”.
(4) Treatment of business holding intangibles The term “qualified business” shall not include any trade or business consisting predominantly of the development or holding of intangibles for sale or license.
Cited by 1
(5) Certain businesses excluded The term “qualified business” shall not include—
Cited by 1
(A) any trade or business consisting of the operation of any facility described in section 144(c)(6)(B), and
(B) any trade or business the principal activity of which is farming (within the meaning of subparagraph (A) or (B) of section 2032A(e)(5)), but only if, as of the close of the taxable year, the sum of—
Amended 1996, 2018
- 2018 Pub. L. 115-141 Pub. L. 115–141 substituted “subparagraph (A) or (B)” for “subparagraphs (A) or (B)” in introductory provisions.
- 1996 Pub. L. 104-188 Pub. L. 104–188 struck out “preceding” before “taxable year” in introductory provisions.
Cited by 1
(i) the aggregate unadjusted bases (or, if greater, the fair market value) of the assets owned by the taxpayer which are used in such a trade or business, and
(ii) the aggregate value of assets leased by the taxpayer which are used in such a trade or business,
exceeds $500,000.
For purposes of subparagraph (B), rules similar to the rules of section 1397(b) shall apply.
(e) Nonqualified financial property For purposes of this section, the term “nonqualified financial property” means debt, stock, partnership interests, options, futures contracts, forward contracts, warrants, notional principal contracts, annuities, and other similar property specified in regulations; except that such term shall not include—
Cited by 1
(1) reasonable amounts of working capital held in cash, cash equivalents, or debt instruments with a term of 18 months or less, or
Cited by 3
(2) debt instruments described in section 1221(a)(4).
Amended 1999
- 1999 Pub. L. 106-170 Pub. L. 106–170 substituted “section 1221(a)(4)” for “section 1221(4)”.
(f) Treatment of businesses straddling census tract lines For purposes of this section, if—
(1) a business entity or proprietorship uses real property located within an empowerment zone,
Cited by 3
(2) the business entity or proprietorship also uses real property located outside the empowerment zone,
Cited by 3
(3) the amount of real property described in paragraph (1) is substantial compared to the amount of real property described in paragraph (2), and
“Substantial” implies facts and circumstances. No regulation cites this provision (eCFR, Oct 19, 2026)
(4) the real property described in paragraph (2) is contiguous to part or all of the real property described in paragraph (1),
then all the services performed by employees, all business activities, all tangible property, and all intangible property of the business entity or proprietorship that occur in or is located on the real property described in paragraphs (1) and (2) shall be treated as occurring or situated in an empowerment zone.
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 956(a)(6), added subsec. (f).