Enterprise Zones were legislated throughput the state in 1984.  The program provides tax incentives t businesses, thereby encouraging and bolstering private sector market forces in target areas.  Calexico and the County of Imperial bordering Mexico have California Enterprise Zone status covering 14,298 acres.

In 1985, California legislation was passed enabling the designation of  “Enterprise Zones” throughout the state. The purpose of the Enterprise Zone program is to provide tax incentives to businesses, thereby encouraging and bolstering private sector market forces in target areas.

Enterprise Zone companies earn tax credits by hiring participants in the Workforce Investment Act (WIA), Cal Works and the One Stop Services Department.

Business Investment Incentives /Tax credits and benefits to qualified companies are:

• Up to 100% Net Operating Loss carry-forward. NOL may be carried forward 15 years.
• Firms can earn $37,440 or more in state tax credits for each qualified employee.
• Corporations can earn sales tax credits on purchases of $20 million per year of qualified machinery and machinery parts.
• Up-front expensing of certain depreciable property.
• Lenders to zone businesses may receive a net interest deduction.
• Unused tax credits can be applied to future tax years, stretching out the benefit of the initial investment.
• Enterprise Zone companies can earn preference points on state contracts.

Other State investments include State contract bid preference points; low-interest small business loans; and lender’s deduction of interest income earned on loans to businesses in the Zone. Also qualifying new employees can claim tax credit on their State Income Tax.

Calexico Administrative Incentives

The City of Calexico offers these administrative incentives to new and expanding businesses:

• Fast-tracked building permits
• Waiver of building permit, plumbing and electrical fees
• Rebate of business license and refuse collection fees for a two year period.

How much can My Business Save?

The answer depends totally on the tax position of your business and the nature of your business investments. A large manufacturer with significant equipment investments and equipment investments and many new employees save literally hundreds of thousands of dollars, while another business might make investments which do not meet the qualifying criteria. It is best, therefore, to be aware of the tax benefits and make investment decisions accordingly. It should be noted that many of the investment incentives consist of State tax credits, which can be claimed against a tax liability, and therefore, are more valuable than tax deductions.

California Income Tax Effect of The Employer’s Tax Wage Credit

Summary

An employer may claim a credit against its income tax liability for a percentage of wages paid to qualified employees.

Amount of Credit

50% of qualified wages in Year 1
40% of qualified wages in Year 2
30% of qualified wages in Year 3
20% of qualified wages in Year 4
10% of qualified wages in Year 5

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This entry was posted on Friday, June 4th, 2010 at 4:49 am and is filed under Featured Zone. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.