EXCISE TAX REFUND
Featured California Enterprise Zone: Shafter, CA
Shafter is designated as a State Enterprise Zone, which makes a company investing in Shafter eligible for tax credits against their California corporate income tax liability. The two most important credits include a hiring tax credit on qualified employees which can amount to over $31,000 per employee over a five-year period; a sales/use tax credit on the first $20 million of new or used manufacturing equipment purchased each year.
Some equipment within certain warehouse/distribution centers may qualify for the sales tax credit. The specific details of the client’s operation will need to be reviewed with the Franchise Tax Board and they will need to make a determination on eligibility.
Other Benefits
15-year carryover of up to 100 percent of the net operating losses;
Expensing up to $15,000 of certain depreciable property;
Lender interest income deductions for loans made to zone businesses;
Preference points on state contracts.
Enterprise Zone Tax Credits
As a state designated enterprise zone, new and existing businesses may qualify for State tax credits, including:
Sales Tax Credit – California income or franchise tax may be reduced by the amount of sales and use tax paid on certain machinery purchased for use in the enterprise zone. The equipment must be used to manufacture, process combine or fabricate a product. The sales and use tax credit may be carried over to offset tax imposed in subsequent years.
Hiring Credit – A business may reduce taxes paid by up to 50% of the amount of wages paid to one or more qualified employees. These state credits are in addition to any federal tax credits. A qualified employee is a new hire that are participants in a qualified job development or training program. Business may earn credits of up to $24,000 per employee over a five year period.
Business Expense Deduction – Part of the cost of certain property purchased for exclusive use in an enterprise zone may be deducted as a business expense in the first year it is placed into service. The type of property qualifying for the credit is tangible personal property (not real estate) which is used for business purposes and is eligible for depreciation.
Net Operating Loss Carryover – Net operating losses (NOL) of individuals and corporations doing business in the enterprise zone may be carried over to future years to reduce the amount of taxable income generated in the enterprise zone and is determined by computing the business loss which results from business activity in the enterprise zone.
Manufacturers’ Investment Credit – The Manufacturer’s Investment Credit provides manufacturers a State Income Tax Credit of 6% of the purchase price of qualified property. The Credit may be carried over for up to 7 years from the date of purchase.
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