Feb 28, 2013

Michael L. Colavito

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Fiscal Cliff Legislation Lets D.C. Empowerment Zone Incentives Expire

The “Fiscal Cliff” legislation (H.R. 8: American Taxpayer Relief Act of 2012) enacted by Congress earlier this month did not extend the tax benefits provided pursuant to Internal Revenue Code sections 1400 through 1400C with respect to District of Columbia Enterprise Zones (“DC Zones”).  Although the legislation retroactively extended the Federal Empowerment Zone incentives for calendar years 2012 and 2013, the December 31, 2011 expiration date for the designation of certain DC Zones being eligible for empowerment zone designation was left unaddressed by the Fiscal Cliff legislation.

As a result, the following DC Zone incentives will no longer be available for tax years beginning on or after December 31, 2011:

1. Empowerment zone employment credit (allowable under sections 1396 and 1400); and
2. Tax-exempt treatment of enterprise zone facility bonds (allowable under to sections 1394 and 1400A)

However, the exclusion from gross income of qualified capital gain from the sale or exchange of DC Zone Assets is allowable under section 1400B until December 31, 2016, so long as the assets were acquired before January 1, 2012 and held for more than five years.

The inaction of Congress with respect to section 1400 also resulted in a December 31, 2011 expiration of the District’s first-time homebuyer credit.

For additional information please contact your Aronson tax professional or call 301.231.6200.