Statement of the Hon. Danny K. Davis, a Representative in Congress from the State of Illinois

Testimony Before the Subcommittee on Oversight
of the House Committee on Ways and Means

Hearing on Tax Incentives for Renewal Communities

May 21, 2002

Mr. Chairman, Ranking Member, and members of the Subcommittee, I thank you for having this important hearing.  Also, I want to honor the presence of Mr. Henry Wilson, Chairman of the Conservation Council.  I am very pleased to appear before this Subcommittee to address the Renewal Communities (RC) Initiative —a landmark measure to help our communities and the people who live in them. On February 24, 1999, my colleagues, Congressmen J.C. Watts and Jim Talent, and I introduced H.R. 815, “The American Community Renewal Act of 1999,”in the U.S. House of Representatives.  This legislation amends the Internal Revenue Code of 1986 to provide for the designation of renewal communities and to encourage local and state governments to reduce taxes and regulatory requirements for companies operating in designated urban and rural renewal areas.  On December 15, 2000, Congress passed the Community Renewal Tax Relief Act of 2000 (H.R. 5662) as part of the Consolidated Appropriations Act of 2001. President Clinton signed this legislation on December 21, 2000.

Many of our cities are deeply troubled places. At the root of the problem are the massive economic shifts that have marked the last three decades in our cities. Hundreds of thousands of industrial jobs have disappeared or moved away from the central city and its neighborhoods.  However, new jobs that have appeared are different from those that once sustained our neighborhoods.

The Renewal Communities Initiative is designed to encourage public-private collaboration to generate economic development in 40 distressed communities.  These newly designated RCs can take advantage of federal wage credits, tax deductions, capital gains exclusions and bond financing to stimulate economic development, job growth, and affordable housing in our poorest communities.  This program is very important to our nation because one of its tax credit components will allow welfare-to-work credits for Renewal Community businesses.  This provides a two-year federal tax credit of up to $3,500 for the first year, and $5,000 for the second year, for each newly hired long-term welfare recipient.  Also, the Renewal Communities initiative provides businesses work opportunity credits equaling up to $2,400 against their federal tax liability for each employee hired from groups with traditionally high unemployment rates or other special employment needs. Moreover, this program provides an incentive for wage credits that will help businesses grow and expand their workforces. These initiatives provide a zero capital gains rates for small businesses, low income housing tax credits to build better rental housing for low income individuals, and bond financing for public school renovations and programs.

The Renewal Communities Initiative will provide an estimated $17 billion in tax incentives to create jobs for the needy, to promote economic development, and to create affordable housing for the poor.  This infusion will help change communities that have remained consistently distressed and disenfranchised for the past 30 years.

I look forward to answering your questions. Thank you!