DEFINITION of Enterprise Zone

An enterprise zone is a geographical area, such as a neighborhood within a city, where a government authority grants special tax or regulatory exemptions in order to promote local economic development.

BREAKING DOWN Enterprise Zone

Enterprise zones are often established in low-income areas or places that are recovering from disaster, such as a flood or hurricane. Reduced taxes or regulations, and in some cases special financing, encourage businesses to open the area and hire local residents.

In the U.S., enterprise zones were first introduced in the 1970s as a response to the flight of businesses from city centers to cheaper, safer areas in the suburbs. By attracting businesses back into urban areas, policymakers aimed to reverse the urban blight this exodus caused. 

New Jersey, for example, founded its Urban Enterprise Zone program in 1983. A number of municipalities have participated, setting aside parts of their territories as enterprise zones: the largest enterprise zone is Jersey City's, comprising around one-third of the city's geographical area. Benefits for businesses in the zone include a 50% sales tax reduction, tax-free purchases of capital equipment and other items, financial assistance from state government agencies, and tax credits for new hires.