Frequently Asked Questions
Who is eligible for the Business Straddle Census Tract Rule?
The business must use real property inside the zone that is substantial compared to the contiguous property outside the zone.
How does the Business Straddle Census Tract Rule work?
Allows a business located on contiguous real property that is partially inside and partially outside an empowerment zone to treat the entire property as being inside the zone if the portion inside is 'substantial'.
What law authorizes the Business Straddle Census Tract Rule?
The Business Straddle Census Tract Rule is authorized under IRC §1397C(f) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §1397C
Source: Internal Revenue Code, Title 26, United States Code
§ 1397C. Enterprise zone business defined(a) In generalFor purposes of this part, the term “enterprise zone business” means—(1) any qualified business entity, and
(2) any qualified proprietorship.
(b) Qualified business entityFor purposes of this section, the term “qualified business entity” means, with respect to any taxable year, any corporation or partnership if for such year—(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,
(3) a substantial portion of the use of the tangible property of such entity (whether owned or leased) is within an empowerment zone,
(4) a substantial portion of the intangible property of such entity is used in the active conduct of any such business,
(5) a substantial portion of the services performed for such entity by its employees are performed in an empowerment zone,
(6) at least 35 percent of its employees are residents of an empowerment zone,
(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.
(c) Qualified proprietorshipFor 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—(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,
(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,
(3) a substantial portion of the intangible property of such business is used in the active conduct of such business,
(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,
(5) at least 35 percent of such employees are residents of an empowerment zone,
(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.
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