§ 1400B. Zero percent capital gains rate
(a)
Exclusion
Gross income shall not include qualified capital gain from the sale or exchange of any DC Zone asset held for more than 5 years.
(b)
DC Zone asset
For purposes of this section—
(2)
DC Zone business stock
(A)
In general
The term “DC Zone business stock” means any stock in a domestic corporation which is originally issued after December 31, 1997, if—
(i)
such stock is acquired by the taxpayer, before January 1, 2012, at its original issue (directly or through an underwriter) solely in exchange for cash,
(3)
DC Zone partnership interest
The term “DC Zone partnership interest” means any capital or profits interest in a domestic partnership which is originally issued after December 31, 1997, if—
(A)
such interest is acquired by the taxpayer, before January 1, 2012, from the partnership solely in exchange for cash,
(B)
as of the time such interest was acquired, such partnership was a DC Zone business (or, in the case of a new partnership, such partnership was being organized for purposes of being a DC Zone business), and
(C)
during substantially all of the taxpayer’s holding period for such interest, such partnership qualified as a DC Zone business.
A rule similar to the rule of paragraph (2)(B) shall apply for purposes of this paragraph.
(4)
DC Zone business property
(A)
In general
The term “DC Zone business property” means tangible property if—
(B)
Special rule for buildings which are substantially improved
(i)
In general
The requirements of clauses (i) and (ii) of subparagraph (A) shall be treated as met with respect to—
(ii)
Substantial improvement
For purposes of clause (i), property shall be treated as substantially improved by the taxpayer only if, during any 24-month period beginning after December 31, 1997, additions to basis with respect to such property in the hands of the taxpayer exceed the greater of—
(5)
Treatment of DC Zone termination
The termination of the designation of the DC Zone shall be disregarded for purposes of determining whether any property is a DC Zone asset.
(6)
Treatment of subsequent purchasers, etc.
The term “DC Zone asset” includes any property which would be a DC Zone asset but for paragraph (2)(A)(i), (3)(A), or (4)(A)(i) or (ii) in the hands of the taxpayer if such property was a DC Zone asset in the hands of a prior holder.
(7)
5-year safe harbor
If any property ceases to be a DC Zone asset by reason of paragraph (2)(A)(iii), (3)(C), or (4)(A)(iii) after the 5-year period beginning on the date the taxpayer acquired such property, such property shall continue to be treated as meeting the requirements of such paragraph; except that the amount of gain to which subsection (a) applies on any sale or exchange of such property shall not exceed the amount which would be qualified capital gain had such property been sold on the date of such cessation.
(c)
DC Zone business
For purposes of this section, the term “DC Zone business” means any enterprise zone business (as defined in section
1397C), determined—
(2)
by substituting “80 percent” for “50 percent” in subsections (b)(2) and (c)(1) of section
1397C, and
(d)
Treatment of zone as including census tracts with 10 percent poverty rate
For purposes of applying this section (and for purposes of applying this subchapter and subchapter U with respect to this section), the DC Zone shall be treated as including all census tracts—
(e)
Other definitions and special rules
For purposes of this section—
(1)
Qualified capital gain
Except as otherwise provided in this subsection, the term “qualified capital gain” means any gain recognized on the sale or exchange of—
(2)
Gain before 1998 or after 2016 not qualified
The term “qualified capital gain” shall not include any gain attributable to periods before January 1, 1998, or after December 31, 2016.
(4)
Intangibles and land not integral part of DC Zone business
The term “qualified capital gain” shall not include any gain which is attributable to real property, or an intangible asset, which is not an integral part of a DC Zone business.
(f)
Certain other rules to apply
Rules similar to the rules of subsections (g), (h), (i)(2), and (j) of section
1202 shall apply for purposes of this section.
(g)
Sales and exchanges of interests in partnerships and S corporations which are DC Zone businesses
In the case of the sale or exchange of an interest in a partnership, or of stock in an S corporation, which was a DC Zone business during substantially all of the period the taxpayer held such interest or stock, the amount of qualified capital gain shall be determined without regard to—