Subchapter W - District of Columbia Enterprise Zone

26 USC 1400 - Establishment of DC Zone

(a) In general 
For purposes of this title
(1) the applicable DC area is hereby designated as the District of Columbia Enterprise Zone, and
(2) except as otherwise provided in this subchapter, the District of Columbia Enterprise Zone shall be treated as an empowerment zone designated under subchapter U.
(b) Applicable DC area 
For purposes of subsection (a), the term applicable DC area means the area consisting of
(1) the census tracts located in the District of Columbia which are part of an enterprise community designated under subchapter U before the date of the enactment of this subchapter, and
(2) all other census tracts
(A) which are located in the District of Columbia, and
(B) for which the poverty rate is not less than than[1] 20 percent as determined on the basis of the 1990 census.
(c) District of Columbia Enterprise Zone 
For purposes of this subchapter, the terms District of Columbia Enterprise Zone and DC Zone mean the District of Columbia Enterprise Zone designated by subsection (a).
(d) Special rule for application of employment credit 
With respect to the DC Zone, section 1396 (d)(1)(B) (relating to empowerment zone employment credit) shall be applied by substituting the District of Columbia for such empowerment zone.
(e) Special rule for application of enterprise zone business definition 
For purposes of this subchapter and for purposes of applying subchapter U with respect to the DC Zone, section 1397C shall be applied without regard to subsections (b)(6) and (c)(5) thereof.
(f) Time for which designation applicable 

(1) In general 
The designation made by subsection (a) shall apply for the period beginning on January 1, 1998, and ending on December 31, 2007.
(2) Coordination with DC enterprise community designated under subchapter U 
The designation under subchapter U of the census tracts referred to in subsection (b)(1) as an enterprise community shall terminate on December 31, 2007.
[1] So in original. The second “than” probably should not appear.

26 USC 1400A - Tax-exempt economic development bonds

(a) In general 
In the case of the District of Columbia Enterprise Zone, subparagraph (A) of section 1394 (c)(1) (relating to limitation on amount of bonds) shall be applied by substituting $15,000,000 for $3,000,000 and section 1394 (b)(3)(B)(iii) shall be applied without regard to the employee residency requirement.
(b) Period of applicability 
This section shall apply to bonds issued during the period beginning on January 1, 1998, and ending on December 31, 2007.

26 USC 1400B - Zero percent capital gains rate

(a) Exclusion 
Gross income shall not include qualified capital gain from the sale or exchange of any DC Zone asset held for more than 5 years.
(b) DC Zone asset 
For purposes of this section
(1) In general 
The term DC Zone asset means
(A) any DC Zone business stock,
(B) any DC Zone partnership interest, and
(C) any DC Zone business property.
(2) DC Zone business stock 

(A) In general 
The term DC Zone business stock means any stock in a domestic corporation which is originally issued after December 31, 1997, if
(i) such stock is acquired by the taxpayer, before January 1, 2008, at its original issue (directly or through an underwriter) solely in exchange for cash,
(ii) as of the time such stock was issued, such corporation was a DC Zone business (or, in the case of a new corporation, such corporation was being organized for purposes of being a DC Zone business), and
(iii) during substantially all of the taxpayers holding period for such stock, such corporation qualified as a DC Zone business.
(B) Redemptions 
A rule similar to the rule of section 1202 (c)(3) shall apply for purposes of this paragraph.
(3) DC Zone partnership interest 
The term DC Zone partnership interest means any capital or profits interest in a domestic partnership which is originally issued after December 31, 1997, if
(A) such interest is acquired by the taxpayer, before January 1, 2008, from the partnership solely in exchange for cash,
(B) as of the time such interest was acquired, such partnership was a DC Zone business (or, in the case of a new partnership, such partnership was being organized for purposes of being a DC Zone business), and
(C) during substantially all of the taxpayers holding period for such interest, such partnership qualified as a DC Zone business.

A rule similar to the rule of paragraph (2)(B) shall apply for purposes of this paragraph.

(4) DC Zone business property 

(A) In general 
The term DC Zone business property means tangible property if
(i) such property was acquired by the taxpayer by purchase (as defined in section 179 (d)(2)) after December 31, 1997, and before January 1, 2008,
(ii) the original use of such property in the DC Zone commences with the taxpayer, and
(iii) during substantially all of the taxpayers holding period for such property, substantially all of the use of such property was in a DC Zone business of the taxpayer.
(B) Special rule for buildings which are substantially improved 

(i) In general The requirements of clauses (i) and (ii) of subparagraph (A) shall be treated as met with respect to
(I) property which is substantially improved by the taxpayer before January 1, 2008, and
(II) any land on which such property is located.
(ii) Substantial improvement For purposes of clause (i), property shall be treated as substantially improved by the taxpayer only if, during any 24-month period beginning after December 31, 1997, additions to basis with respect to such property in the hands of the taxpayer exceed the greater of
(I) an amount equal to the adjusted basis of such property at the beginning of such 24-month period in the hands of the taxpayer, or
(II) $5,000.
(5) Treatment of DC Zone termination 
The termination of the designation of the DC Zone shall be disregarded for purposes of determining whether any property is a DC Zone asset.
(6) Treatment of subsequent purchasers, etc. 
The term DC Zone asset includes any property which would be a DC Zone asset but for paragraph (2)(A)(i), (3)(A), or (4)(A)(i) or (ii) in the hands of the taxpayer if such property was a DC Zone asset in the hands of a prior holder.
(7) 5-year safe harbor 
If any property ceases to be a DC Zone asset by reason of paragraph (2)(A)(iii), (3)(C), or (4)(A)(iii) after the 5-year period beginning on the date the taxpayer acquired such property, such property shall continue to be treated as meeting the requirements of such paragraph; except that the amount of gain to which subsection (a) applies on any sale or exchange of such property shall not exceed the amount which would be qualified capital gain had such property been sold on the date of such cessation.
(c) DC Zone business 
For purposes of this section, the term DC Zone business means any enterprise zone business (as defined in section 1397C), determined
(1) after the application of section 1400 (e),
(2) by substituting 80 percent for 50 percent in subsections (b)(2) and (c)(1) of section 1397C, and
(3) by treating no area other than the DC Zone as an empowerment zone or enterprise community.
(d) Treatment of zone as including census tracts with 10 percent poverty rate 
For purposes of applying this section (and for purposes of applying this subchapter and subchapter U with respect to this section), the DC Zone shall be treated as including all census tracts
(1) which are located in the District of Columbia, and
(2) for which the poverty rate is not less than 10 percent as determined on the basis of the 1990 census.
(e) Other definitions and special rules 
For purposes of this section
(1) Qualified capital gain 
Except as otherwise provided in this subsection, the term qualified capital gain means any gain recognized on the sale or exchange of
(A) a capital asset, or
(B) property used in the trade or business (as defined in section 1231 (b)).
(2) Gain before 1998 or after 2012 not qualified 
The term qualified capital gain shall not include any gain attributable to periods before January 1, 1998, or after December 31, 2012.
(3) Certain gain not qualified 
The term qualified capital gain shall not include any gain which would be treated as ordinary income under section 1245 or under section 1250 if section 1250 applied to all depreciation rather than the additional depreciation.
(4) Intangibles and land not integral part of DC Zone business 
The term qualified capital gain shall not include any gain which is attributable to real property, or an intangible asset, which is not an integral part of a DC Zone business.
(5) Related party transactions 
The term qualified capital gain shall not include any gain attributable, directly or indirectly, in whole or in part, to a transaction with a related person. For purposes of this paragraph, persons are related to each other if such persons are described in section 267 (b) or 707 (b)(1).
(f) Certain other rules to apply 
Rules similar to the rules of subsections (g), (h), (i)(2), and (j) of section 1202 shall apply for purposes of this section.
(g) Sales and exchanges of interests in partnerships and S corporations which are DC Zone businesses 
In the case of the sale or exchange of an interest in a partnership, or of stock in an S corporation, which was a DC Zone business during substantially all of the period the taxpayer held such interest or stock, the amount of qualified capital gain shall be determined without regard to
(1) any gain which is attributable to real property, or an intangible asset, which is not an integral part of a DC Zone business, and
(2) any gain attributable to periods before January 1, 1998, or after December 31, 2012.

26 USC 1400C - First-time homebuyer credit for District of Columbia

(a) Allowance of credit 
In the case of an individual who is a first-time homebuyer of a principal residence in the District of Columbia during any taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to so much of the purchase price of the residence as does not exceed $5,000.
(b) Limitation based on modified adjusted gross income 

(1) In general 
The amount allowable as a credit under subsection (a) (determined without regard to this subsection and subsection (d)) for the taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the credit so allowable as
(A) the excess (if any) of
(i) the taxpayers modified adjusted gross income for such taxable year, over
(ii) $70,000 ($110,000 in the case of a joint return), bears to
(B) $20,000.
(2) Modified adjusted gross income 
For purposes of paragraph (1), the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.
(c) First-time homebuyer 
For purposes of this section
(1) In general 
The term first-time homebuyer means any individual if such individual (and if married, such individuals spouse) had no present ownership interest in a principal residence in the District of Columbia during the 1-year period ending on the date of the purchase of the principal residence to which this section applies.
(2) One-time only 
If an individual is treated as a first-time homebuyer with respect to any principal residence, such individual may not be treated as a first-time homebuyer with respect to any other principal residence.
(3) Principal residence 
The term principal residence has the same meaning as when used in section 121.
(d) Carryforward of unused credit 

(1) Rule for years in which all personal credits allowed against regular and alternative minimum tax 
In the case of a taxable year to which section 26 (a)(2) applies, if the credit allowable under subsection (a) exceeds the limitation imposed by section 26 (a)(2) for such taxable year reduced by the sum of the credits allowable under subpart A of part IV of subchapter A (other than this section and section 25D), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.
(2) Rule for other years 
In the case of a taxable year to which section 26 (a)(2) does not apply, if the credit allowable under subsection (a) exceeds the limitation imposed by section 26 (a)(1) for such taxable year reduced by the sum of the credits allowable under subpart A of part IV of subchapter A (other than this section and sections 23, 24, 25B, and 25D), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.
(e) Special rules 
For purposes of this section
(1) Allocation of dollar limitation 

(A) Married individuals filing separately 
In the case of a married individual filing a separate return, subsection (a) shall be applied by substituting $2,500 for $5,000.
(B) Other taxpayers 
If 2 or more individuals who are not married purchase a principal residence, the amount of the credit allowed under subsection (a) shall be allocated among such individuals in such manner as the Secretary may prescribe, except that the total amount of the credits allowed to all such individuals shall not exceed $5,000.
(2) Purchase 

(A) In general 
The term purchase means any acquisition, but only if
(i) the property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of losses under section 267 or 707 (b) (but, in applying section 267 (b) and (c) for purposes of this section, paragraph (4) of section 267 (c) shall be treated as providing that the family of an individual shall include only his spouse, ancestors, and lineal descendants), and
(ii) the basis of the property in the hands of the person acquiring it is not determined
(I) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or
(II) under section 1014 (a) (relating to property acquired from a decedent).
(B) Construction 
A residence which is constructed by the taxpayer shall be treated as purchased by the taxpayer on the date the taxpayer first occupies such residence.
(3) Purchase price 
The term purchase price means the adjusted basis of the principal residence on the date such residence is purchased.
(f) Reporting 
If the Secretary requires information reporting under section 6045 by a person described in subsection (e)(2) thereof to verify the eligibility of taxpayers for the credit allowable by this section, the exception provided by section 6045 (e)(5) shall not apply.
(g) Credit treated as nonrefundable personal credit 
For purposes of this title, the credit allowed by this section shall be treated as a credit allowable under subpart A of part IV of subchapter A of this chapter.
(h) Basis adjustment 
For purposes of this subtitle, if a credit is allowed under this section with respect to the purchase of any residence, the basis of such residence shall be reduced by the amount of the credit so allowed.
(i) Application of section 
This section shall apply to property purchased after August 4, 1997, and before January 1, 2008.