Job Expansion and Urban Development Tax Act of 1981

Job Expansion and Urban Development Tax Act of 1981 - Title I: Designation of Eligible Areas and Businesses - Amends the Internal Revenue Code to define a job expansion area as any area in the United States designated by one or more local governments as such. Limits eligibility for such designation to areas with a population of at least 5,000 whose rates of poverty and unemployment exceed specified national averages, and whose rates of per capita income growth fall below specified levels.

Defines a "job expansion business" as one: (1) at least 50 percent of whose hours of service are performed by employees working in one or more job expansion areas; and (2) except in extenuating circumstances, at least 50 percent of such qualified employees are residents of a job expansion area.

Title II: Tax Incentives - Subtitle A: New Investment - Provides for an election of an additional $40,000 ($80,000 in the case of married individuals filing jointly) first-year depreciation for machinery and equipment purchased by a qualified job expansion business. Requires recapture of the tax that would otherwise have been paid if the property concerned ceases to be used predominantly inside a job expansion area.

Allows an additional five percent investment tax credit for new buildings placed in service by a qualified job expansion business.

Subtitle B: Investment in Used Equipment and Rehabilitated Buildings - Allows the election by a qualified job expansion business of an investment tax credit of an additional $400,000 of cost for used equipment used predominantly in a job expansion area. Provides for recapture of the tax benefit in the event such property ceases to be used predominantly in such area.

Allows a 25 percent investment tax credit for expenditures paid or incurred for rehabilitation of a building located in a job expansion area.

Subtitle C: Limited Refund of Investment Tax Credit - Provides for the refundability of the investment tax credit for job expansion area property of up to $100,000.

Subtitle D: Increases in Targeted Jobs Credit - Allows the targeted jobs credit for employment of residents of a job expansion area. Increases the amount of such credit for the employment of such individuals: (1) from 50 percent to 60 percent of the first-year wages; and (2) from 25 percent to 35 percent of the second-year wages.

Title III: Effective Date - States the effective date of this Act.