The Introduction of the District of Columbia Tax Incentives Improvement Act of 2006

THE INTRODUCTION OF THE DISTRICT OF COLUMBIA TAX INCENTIVES IMPROVEMENT ACT OF 2006 -- (Extensions of Remarks - April 25, 2006)

* Ms. NORTON. Mr. Speaker, today I am pleased to introduce the District of Columbia Tax Incentives Improvement Act of 2006. The legislation builds on and adds to federal tax incentives I first got through Congress in 1997 in order to help produce residential and business stability and growth. These tax credits have surpassed the city's highest hopes with a renewed and replenished residential and business tax base to show for it. However, this bill is necessary if this growth is to continue to make up for the fact that the District is not a state.

* Studies and investigation by experts widely agree that the D.C. credits have been very successful and have been the single most important factor both in stemming residential flight and in stimulating commercial development in the applicable neighborhoods. However the changes are appropriate to: reduce but target the credits to poor neighborhoods not yet reached; increase the efficiency of the incentives; achieve increased leverage from city and other federal resources; and provide more incentive to purchase homes given the large increase in housing prices in the District.

* The legislation would extend the life of the D.C. Enterprise Zone (EZ) Benefits to 2009 to put the District on par with the other cities that have empowerment zones and will allow the city to fully realize and assess the effectiveness of the incentives and eliminate the continuing uncertainty that has plagued the program. There was a disruption of economic activity and planning by the business sector when Congress did not immediately renew those provisions that expired at the end of 2003. The District is experiencing this setback again as H.R. 4297, the Tax Reconciliation Act of 2005, has not yet been passed and the District tax provisions are extended in that bill.

* The improved EZ incentives will target the areas of greatest need; align the Zone boundaries with areas designated for concentrated investment by the Mayor's Great Streets Initiative; and more effectively connect the unemployed with job opportunities by limiting the Employment Credit to those businesses that employ persons residing in those census tracts that have unemployment rates twice that of the national average.

* The legislation also asks for a triple tax exemption for District bonds which would allow the District to issue bonds at lower interest rates and put D.C. on par with other ``stateless'' jurisdictions, including Puerto Rico, Guam and the Virgin Islands, with no loss of revenue to the federal treasury. Currently, bonds issued by the District are exempt from federal and District taxes, but subject to taxation by state and local governments for bondholders located outside the District.

* With the first-time homebuyer tax credit, this bill raises the $5,000 credit for a first-time homebuyer in the District to $10,000 to help meet sharply increased home prices that are driving many lower middle and middle income taxpayers from the city. Senator TRENT LOTT raised the amount in the Senate bill several years ago, but that bill did not pass the House. The homebuyer credit and the economic development occurring in the District have been almost entirely responsible for significantly stemming taxpayer, residential and business flight, bringing both in significant numbers to the District. However, the improvements in my bill are essential if the District is to achieve the 100,000 new residents necessary to sustain its stability that the former D.C. control board said was necessary.

* The federal tax incentives provided under the Enterprise Zone and homebuyer credit programs will be critical to the continuation of the District's essential fiscal partnership with the federal government, which seeks to diversify the D.C. economy, reverse the continuing rise in the unemployment rate in significant portions of the city, strengthen and diversify the District's narrow tax base, and address its structural fiscal imbalance.

* The D.C. Enterprise Zone tax incentives and the homebuyer credit alone cannot solve these problems. But by extending and improving these measures, Congress can continue to make a low-cost, efficient and effective contribution to the District's economic well being.

http://thomas.loc.gov/