While many cities in California are struggling to simply meet costs, the city of Santa Clarita is doing well and continues to work innovative projects on the economic front to help small and medium sized businesses.

The Santa Clarita Valley Signal reported, “It’s actually the opposite here. With a keen eye on the near-term difficulties ahead, Pulskamp (city manager) and his team crafted a 21-point plan to improve business conditions in the long term – everything from subsidizing film production and other clean industries that have a positive ripple effect on our economy; to helping businesses take advantage of the tax relief available to them through our enterprise zone status; to a marketing campaign teaching people the ramifications of thinking “Santa Clarita Valley” when deciding where to hire, shop, dine or entertain.”

The more cities that focus on the Enterprise Zone system, the better the overall economy will become.

In the July issue of the FTB’s tax news, the FTB allowed non profits to claim the Enterprise Zone net interest deduction. Here is the FTB’s new position:

“California provides for special tax incentives to encourage investment in specific geographic areas targeted for economic revitalizing called Enterprise Zones within the state. One of these incentives is the net interest deduction. It is available to banks and other lenders. The requirements are simple. If a bank or lender makes a qualified loan to a qualified debtor, it is allowed to deduct the net interest received from such loan against its California taxable income. To be a qualified transaction, the loan must be made to a debtor that is engaged in a “trade or business” in an Enterprise Zone. The term “trade or business” is generally defined for tax purposes as “an activity engaged in for profit.” When a bank or lender makes an otherwise qualified loan to a nonprofit organization, the question arises as to whether a nonprofit is engaged in a trade or business, and thus considered to be a qualified debtor for the purposes of the net interest deduction.

In the past, we disallowed debts made to nonprofit organizations based on the general presumption that nonprofit organizations are not engaged in a trade or business as defined under various tax provisions in the Internal Revenue Code and the California Revenue and Taxation Code.

However, we recently revised this policy based on statutory authority in the California Corporation Code that suggests a nonprofit could be recognized as being engaged in a trade or business. The California Corporation Code which governs nonprofit entities affirms the nonprofit’s right to “carry on a business at a profit,” and use that profit for any lawful activity.” Many nonprofit organizations accept donations, conduct fundraising activities, or charge fees. This revenue is used to sustain the organization, pay salaries, interest, fund capital improvements, expansions, etc. These activities are similar to a trade or business engaged to earn a profit.

Therefore, qualified loans made to nonprofit organizations can qualify for the Enterprise Zone net interest deduction if the debtor meets all the other required qualifications.”

The Enterprise Zone continues to have a powerful effect on how local businesses in California save money and grow their revenue.

“When you look at the whole picture – the enterprise zone program is an essential tool for economic growth in California,” says Craig Johnson, president of the California Association of Enterprise Zones. “The program delivers measurable benefits to our state by creating jobs and business growth opportunities for economically disadvantaged individuals and communities.”

Mr. Swenson’s research shows that the enterprise zone program decreases unemployment rates, boosts wage, salary and household incomes and decreases poverty rates, the association says.

“What this paper demonstrates is that to evaluate an enterprise zone program’s economic impact, we need to look at a number of outcomes – job growth, unemployment rates, income levels, business retention,” says Mr. Swenson in written comments provided by the association. “In the empirical study which I co-authored, we in fact found that the California Enterprise Zone program reduced unemployment rates, and increased incomes. This latter effect is consistent with increasing wages of EZ residents.”

The practice of hiring individuals with a criminal record is always controversial, however with the current state of the market, the state of California offers local businesses tremendous tax benefits for these employees.  A good example of a city taking advantage of this principle is Oakland.  Because much of Oakland is designated as an “Enterprise Zone” by the state, employers can save tens of thousands of dollars in state taxes, according to Susana Villarreal, the city’s enterprise zone coordinator.  Employers can deduct up to 50% of the employee’s wages from state taxes by hiring people who fit certain criteria, Villarreal said. Those qualified employees include ex-offenders but also veterans and those on certain federal programs.

The Calexico region is beginning to get national coverage in its push for economic development.  And taking the forefront of the city’s efforts is the California Enterprise Zone program.  The New York Times reported this past week:

“Other new commercial developments are also on the drawing board in Calexico, said Danny Fitzgerald, director of the city’s enterprise zone. Projects under way include Calexico Mega Park, a 157-acre mixed-use retail, business and residential development by Westmount Properties; Calexico 111 Center, with more than 65 acres of commercial and 58 acres of industrial development; and Los Legos, some 500 acres that will include residential and commercial components.”

This national exposure for the EZ program benefits continues to reveal the importance of these tax benefits.

On June 10th, over 150 businesses from across Sacramento will be meeting together to consider the current economic status of the region, and the Enterprise Zone program will be one of the top issues discussed.  Along with the Enterprise Zone Program, OBSNews.com says that these civic leaders will also be considering:

· Support for growth of Sacramento’s clean energy sector,
· Protection of local government redevelopment funds,
· Improvement of airport safety from wildlife strikes,
· Passage of bills that support energy efficiency and renewable energy improvements,
· Support of changes to HR 1 to safeguard regional economic benefits of tourism and impacts on rural, economic development
· Support of many bills and measures to improve the region’s flood protection and safety, and
· Support of education and job readiness program for foster youth.

Here’s a letter from CAEZ President Craig Johnson regarding how Enterprise Zones can help the soaring unemployment rates.

Dear CAEZ Board and Members,

I found the article linked below to be fascinating and frightening at the same time.  With such high unemployment rates among some of our Enterprise Zones, advocating and marketing the benefits of the Enterprise Zone program are more important than ever.  Our program may be the answer to some of the problems our businesses are facing during such difficult economic times.  Click for more information.

CRAIG JOHNSON
President
California Association of Enterprise Zones

The City of Long Beach Enterprise Zone Marketing Program captured the grand prize from the California Association for Local Economic Development, an organization that provides research, training and education for economic development professionals.

The Long Beach Enterprise Zone was redesignated in 2007 for another 15 years. The marketing campaign has increased the number of hiring vouchers by 37 percent, and the increase represents a potential tax credit value of more than $78 million to Long Beach businesses.

With the slumping national and local economies doing businesses to constantly cut costs, it amazes me that so few local businesses are taking advantage of the massive amounts of potential tax credits available to companies working in a California Enterprise Zone.

A great illustration of this phenomenon is the county of San Bernadino.  Even thought it has been hit by the current recession as hard as any area of the state, only 68 businesses are taking advantage of the tax credit program.  Matt Wrye, a staff writer for the SBSun estimates the following:

Based on the zone’s hiring-credit incentive alone, an astonishing $175 million might be going unclaimed by businesses in the zone, assuming just one employee at each company qualifies for the credit.  That’s $175 million – it could be much more or less – the local economy is hungry for.

The question is, can your business afford not to take advantage of this tax program?  If you have a company in the San Bernadino area, or any of the state’s enterprise zones, contact us for a free consultation to see how much you could be saving in tax credits this year.

As the federal government continues adding to its economic stimulus efforts, city and state governments are contracting their number of employees along with public projects to preserve capital.

“The state right now is doing the exact opposite of what an economist would do,” said Bill Watkins, the executive director of the UCSB Economic Forecast Project. “There’s definitely not a consensus among economists that stimulus spending is the right approach … but you can’t find an economist who would say you should raise taxes and cut spending in a recession, which is what the state is doing.”

To help combat the current economic issues that are plaguing small businesses in the region, the city of Oxnard in Ventura County is petitioning to be added to the state’s Enterprise Zone program.  This would assist small and medium sized businesses with a wide variety of tax benefits and would attract companies to move into the area.

The city of Oxnard would waive some of its permit fees for businesses in the enterprise zone and allow developers to defer other fees until their projects are finished.