EXCISE TAX REFUND
Watsonville Enterprise Zone
A business located in the Watsonville Enterprise Zone (see map) can take advantage of tremendous tax credits offered by the State of California. Below are some of the tax credits, for more information go to Economic Development Areas (EDA).
Hiring Tax Credit
Businesses may reduce state taxes by up to $37,440 per qualified employee over a five-year period. Qualified employees are new employees who are hired to work at least 50% of their time within the Enterprise Zone and meet ONE of the following criteria:
- Resident of the Targeted Employment Area (see TEA map) or
- Participant or eligible for services from the Santa Cruz County Career Works program (Calworks/WIA) or
- Dislocated and/or unemployed or
- Seasonal worker or
- Public assistance recipient or
- Work Opportunity Tax Credit eligible or
- Veteran or
- Native American
The Redevelopment and Housing Department determines eligible employees and issues the vouchers allowing businesses to take advantage of the tax credit. The City of Watsonville offers workshops for businesses currently participating in the EZ program and also for those businesses wanting more information on how to participate. Please contact Jacqueline Ventura to obtain applications for vouchers or to attend the next informational workshop at: 831-768-3095 or jventura@ci.watsonville.ca.us
Sales and Use Tax Credit
Businesses can substantially reduce their California income or franchise tax obligations by taking advantages of this tax credit. In any year, companies may claim a tax credit equal to the tax paid on certain machinery purchases to be used exclusively within the boundaries of the Watsonville Enterprise Zone. Individuals and partnerships may make this claim on the first $1 million of machinery purchased; corporations may claim the credit on the first $20 million of machinery purchased in any one year. For more information, contact the California Franchise Tax Board at (916) 845-3464 or http://www.ftb.ca.gov.
Business Expense Deduction
Businesses may deduct part of the cost of tangible property as a business expense in the first year it is placed in service. This includes most equipment and furnishings purchased for exclusive use in the Zone (excluding real estate). Depending on the date the property was placed in service, relative to the Enterprise Zone Final Designation, the amount deducted per property can be as much as $20,000. For more information, contact the California Franchise Tax Board at (916) 845-3464 or http://www.ftb.ca.gov.
Net Operating Loss Carryover and Net Interest Deduction for Lenders
Individuals or corporations in an Enterprise Zone may carry over up to 100% (versus 50%) of net operating losses (NOL) to future years to reduce the amount of taxable income for those years. The NOL carryover is determined by computing the business loss, which results strictly from business activity in the Enterprise Zone. (Suspended for 2002, 2003) Individuals, non-commercial lenders and commercial institutions may deduct the net interest earned on a loan to a business operating solely within the Watsonville Enterprise Zone. The net effect could be a 3 to 4% increase on return-on-investment! Net interest deductions are for the life of the Enterprise Zone.
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