Some communities in the U.S. are designated as "Empowerment Zones" as part of a program established by Congress in 1993 to reduce unemployment and stimulate economic growth. The communities receive grants and/or tax incentives.
We've reported on Empowerment Zones over the years and have made one recommendation to three of the agencies responsible for administering the program. The agencies have addressed some aspects of the recommendation, but not others.
For example, we recommended that the agencies collect more detailed data that would help them evaluate whether the program is effective, but the agencies didn't agree on a method to do so.
What GAO Found
GAO has previously reported that Empowerment Zones and Enterprise Communities used their grant funds to implement a range of community and economic development initiatives to revitalize impoverished urban and rural communities. GAO also found limitations with available program data and how the programs were monitored and administered. GAO has also reported on other tax incentives to promote economic development in low-income communities and distressed areas, including the New Markets Tax Credit and Opportunity Zones.
GAO made 11 recommendations related to data available on Empowerment Zones and other federal tax incentives that encourage investment in low-income or distressed communities from 2004 to 2021. Six recommendations have been implemented by the agencies. Five recommendations remain open.
For example, on the Empowerment Zone and Enterprise Community programs, GAO found a lack of adequate data to assess the programs, making it challenging to evaluate the programs' effectiveness. GAO made one recommendation in 2004 to three agencies that administered the program—HUD, USDA, and IRS. Specifically, the agencies should collaborate to identify the data needed to assess the use of the tax benefits and the various means of collecting such data, and agree on a cost-effective means to collect these data.
The recommendation has not been implemented because the agencies have not sought authority to collect the data, in part because the agencies could not agree on a cost- effective method. Without more detailed data and with the extension of the designation until 2025, the agencies and others cannot tie the use of tax benefits to particular communities. This is because the information collected on tax forms, such as the location of where the tax benefit is being used or the specific Empowerment Zone designation, does not allow them to do so.
On the New Markets Tax Credit, GAO found challenges related to the Community Development Financial Institutions Fund's and IRS's monitoring of the New Market Tax Credit, including the use of data. GAO made related recommendations to improve the monitoring of compliance with the tax credit, all six of which have been fully addressed.
Why GAO Did This Study
Congress established the Empowerment Zone, Enterprise Communities, and Renewal Communities programs beginning in 1993 to reduce unemployment and generate economic growth in selected census tracts. Urban and rural communities designated as Empowerment Zones, Enterprise Communities, and Renewal Communities received grants, tax incentives, or both to stimulate community development and business activity. The Joint Explanatory Statement accompanying the Department of Housing and Urban Development fiscal year 2022 appropriations includes a provision for GAO to review Empowerment Zones.
This report addresses (1) the key findings from previous GAO reports on Empowerment Zones and (2) the status of previous GAO recommendations related to program administration and the collection of data on the Empowerment Zone program and other programs with community investment and redevelopment goals.
To conduct this work, GAO reviewed its previous reports on Empowerment Zones, and other tax incentives with economic and community development goals. More specifically, GAO included reports completed from 2004 to 2010 on Empowerment Zones, Enterprise Communities, Renewal Communities and the New Markets Tax Credit. For the Opportunity Zones, GAO reviewed the recommendation status of reports completed between 2020 and 2021. GAO also reviewed its result phase system database.
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