Special TBED-related Initiatives

Opportunity Zones - While the Administration's FY06 budget request proposes eliminating all other geographically-based tax credit programs (e.g. Enterprise Zones), it is requesting $10 billion over 10 years in tax incentives to competitively select 28 urban and 12 rural economic Opportunity Zones in areas transitioning to new and emerging industries. Targeted areas are those that have lost a significant portion of their economic base as a result of the 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.

White House press materials state, "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."

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 (termination proposed in FY06 budget request), Economic Development Administration grants (termination proposed in FY06 budget request), and HOME Funding;
• USDA Telecommunications Loans, Distance Learning and Telemedicine grants (termination proposed in FY06 budget request), and Broadband loans; and,
• New Markets Tax Credits (phaseout proposed in FY06 budget request; no new credits to be issued).

Research and Experimentation (R&E) Tax Credit - $27 billion to extend the popular tax credit permanently. Current law provides for a 20 percent tax credit for private research and development expenditures above a certain base amount. First created in 1981 and renewed umpteen times over the years, the credit was extended most recently in 2004 for an 18-month period running through 2005. The FY06 budget request proposes to make the R&E tax credit permanent, allowing companies to deduct, up front, the costs of certain kinds of R&E, rather than capitalize on these costs.