Empowerment Zones

Renew the Federal Empowerment Zone Employment Credit

The HIRE Coalition urges Congress to renew the federal Empowerment Zone (EZ) employment credit, which expired on December 31, 2025, as part of any year-end tax package, ideally retroactive to January 1, 2026.

For more than three decades, Empowerment Zones have helped employers invest in urban and rural communities selected for their high poverty and unemployment. The centerpiece of the program is the § 1396 employment credit, which gives employers up to $3,000 per year for each employee who lives and works in a zone. Because the credit is available every year a qualified employee stays on the job and in the zone, it rewards retention, not just hiring: employers invest long-term in the community, and residents get enough time on the job to build the skills they need to advance.

Without renewal, employers in every Empowerment Zone lose the § 1396 employment credit, and the WOTC summer youth incentive disappears entirely.

Empowerment Zones Deliver Proven Results

A peer-reviewed study published in the American Economic Review in 2013 found employment gains of 12 to 21 percent and wage gains of 8 to 13 percent for residents working in the original zones, at a relatively modest cost, with evidence that the employment credit played an important role in those results. A 2022 review by the Government Accountability Office (GAO) also found that zones showed some improvements in poverty and unemployment.

Empowerment Zones Connect Residents to Jobs

Empowerment Zones are putting people to work. From FY 2020 through FY 2024, more than 120,000 zone residents were hired in just eight states:

• Arizona
• California
• Connecticut
• Florida
• Maryland
• Massachusetts
• New Jersey
• Tennessee

Because zone residents are also a WOTC target group, employers have a second incentive to hire from these communities, and each of those hires was certified by a state workforce agency.

The real number is higher. The count above covers only the eight Empowerment Zone states that have no Rural Renewal Counties. Rural Renewal County residents fall in the same WOTC category as zone residents, so in the 20 other states with Empowerment Zones there's no reliable way to tell the two apart. The count also leaves out zone residents whose employers claimed the EZ employment credit without going through WOTC.

To be clear, an employer can't claim both the EZ employment credit and WOTC on the same wages; the two incentives work side by side, not on top of each other.

Summer Youth Jobs Are at Risk

The WOTC summer youth target group encourages employers to give 16- and 17-year-olds their first job, but it is available only to youth who live in an Empowerment Zone. Without an extension, that incentive goes away entirely. Nationally, employers received 6,123 summer youth certifications from FY 2020 through FY 2024. A first job is one of the strongest predictors of future employment, and these are the young people who stand to benefit most.

A timely renewal is needed

The EZ employment credit has usually been renewed alongside other expiring tax provisions. GAO has noted in previous reports that uncertainty over past extensions caused hesitancy among investors considering EZ locations, which is why a timely renewal matters. Congress should renew the program in any year-end tax package, ideally retroactive to January 1, 2026.

GAO has also encouraged the collection of location-specific data so the credit's effect can be traced to individual zones. As part of a renewal, Congress should consider giving Treasury the authority and responsibility to collect data and report on the employment credit's performance, as it did for Opportunity Zones in 2025. Renewing the program with stronger reporting will allow businesses to keep investing in the communities that need it most, and give policymakers the evidence to keep supporting it.