Summary: The Omnibus Budget Reconciliation Act of 1993 created the following three tax incentives to help revitalize deteriorating areas: (1) an employment credit, (2) a $20,000 increase in the expensing deduction for depreciable business property, and (3) a tax-exempt facility bond. The government's cost for these incentives is estimated at $2.5 billion over 10 years. This report discusses the extent to which businesses in empowerment zones used the program's three tax incentives, as well as three other tax incentives that are targeted to help businesses, including those in distressed areas--the work opportunity credit; the welfare-to-work credit; and an environmental cleanup tax deduction, known as the brownfields deduction. This report also discusses why, in some cases, the incentives were not used. GAO surveyed about 2,400 businesses in the nine original empowerment zones in Atlanta, Georgia; Baltimore, Maryland; Detroit, Michigan; Philadelphia, Pennsylvania/Camden, New Jersey; New York, New York; the Kentucky Highlands; the Mississippi Mid-Delta; and the Rio Grande Valley, Texas. GAO asked the businesses about their use of the employment tax credit and the increased expensing deduction for tax year 1997.
