The Community Renewal Tax Relief Act of 2000 enhanced the tax benefits  available to businesses in newly designated EZs and made these new tax  benefits available to EZs that had been designated in previous rounds, but  not to ECs. In  Rounds I and II, ECs received much smaller grant benefits than EZs. The EZ/EC and RC Programs Are Well Under Way, but Data on the Use of Some Benefits Are Limited

To date, the federal agencies have selected three rounds of EZs, two  rounds of ECs, and one round of RCs; provided program benefits,  outreach, and technical assistance; and established oversight procedures. The lack of data on the use of some of the tax benefits available to  businesses in EZs and RCs limits the ability of HUD and USDA to  administer the programs. However, EZ and RC officials have had  difficulty in obtaining tax information directly from businesses. Among the Few EZ/EC Evaluations That Have Been Conducted, Research Methods and Results Have Varied

The few evaluations that have systematically collected and analyzed data  on the effectiveness of the EZ/EC program involved a variety of research  methods and reported results that varied depending upon the aspect of the  program studied. The most comprehensive of these  evaluations—the HUD Interim Assessment—found, among other things,  that employment of Round I EZ residents had increased from 1995 to 2000,  that larger businesses were more likely to use tax benefits than smaller  businesses, and that resident participation in EZ or EC governance had  been uneven. Conclusions

HUD, USDA, HHS, and IRS have implemented the EZ/EC and RC  programs. Appendix I: Scope and Methodology

The objectives of this study were to describe (1) the features of the  Empowerment Zone and Enterprise Community (EZ/EC) program and  Renewal Community (RC) program; (2) the extent to which the programs  have been implemented; and (3) the methods that have been used and the  results that have been found in evaluations of the programs’ effectiveness,  especially on poverty, unemployment, and economic growth in the  participating communities. To describe the features of each round of the program, we relied on a  review of congressional legislation related to the EZ/EC and RC programs;  the Department of Housing and Urban Development (HUD), the U.S.  Department of Agriculture (USDA), and the Department of Health and  Human Services (HHS) regulations; and HUD, USDA, the Internal Revenue  Service (IRS), and HHS publications. However, Round II EZs and ECs received  grant funds from HUD’s and USDA’s annual appropriations.
Why GAO Did This Study

Congress established the Empowerment Zone and Enterprise Community (EZ/EC) program in 1993 and the Renewal Community (RC) program in 2000 to provide assistance to the nation's distressed communities. To date, Congress has authorized three rounds of EZs, two rounds of ECs, and one round of RCs. The Community Renewal Tax Relief Act of 2000 mandated that GAO audit and report in 2004, 2007, and 2010 on the EZ/EC and RC programs and their effect on poverty, unemployment, and economic growth. This report describes (1) the features of the EZ/EC and RC programs, (2) the extent to which the programs have been implemented, and (3) the methods used and results found in evaluations of their effectiveness.

What GAO Found

Both the EZ/EC and RC programs were designed to improve conditions in distressed American communities; however, the features of the programs have changed over time. Round I and II EZs and ECs received different combinations of grant funding and tax benefits, while Round III EZs and RCs received mainly tax benefits. To implement the programs, federal agencies have, among other things, designated participating communities and overseen the provision of program benefits. Since 1994, the Department of Housing and Urban Development (HUD) and the Department of Agriculture (USDA) have designated a total of 41 EZs and 115 ECs, and HUD has designated 40 RCs. Available data show that Round I and II EZs and ECs are continuing to access their grant funds and IRS data show that businesses are claiming some tax benefits. However, the Internal Revenue Service (IRS) does not collect data on other tax benefits and cannot always identify the communities in which they were used. Also, efforts by HUD to obtain these data by survey were limited to Round I designees, and EZ and RC officials have had difficulty obtaining such information directly from businesses. The lack of tax benefit data limits the ability of HUD and USDA to administer and evaluate the programs. The few evaluations that systematically collected and analyzed data on EZ/EC program effectiveness used a variety of research methods to study different aspects of the program. The most comprehensive of these studies--the HUD Interim Assessment--found that employment of Round I EZ residents had increased from 1995 to 2000, that larger businesses were more likely to use tax benefits than smaller businesses, and that resident participation in EZ or EC governance has been uneven, among other things.