With soaring unemployment and increased competition from other states around the nation, California needs to make some drastic changes to how it deals with local businesses. Greg O’Sullivan from Redding.com, has proposed three ‘radical’ changes that he believes that California needs to make in order to attract new corporate and job growth:

1. Temporarily lower corporate income tax rates by 50 percent.

Thirty-four states have lower corporate tax rates compared to California. For example, we could lower the rate by half to companies that are willing to invest in new facilities and equipment in California over the next five years. The result would be a staggering increase in personal income taxes, sales and local property taxes. It’s a little like the “Big Box Theory” of merchandising, where profits are derived from volume. The new jobs, investment and increased economic activity are certain to far exceed the unrealized corporate taxes from collecting the full 8.8 percent from our existing employers that are fleeing the state or closing due to out-of-state competition.

2. Exempt manufacturing facilities from prevailing wage rates.

What if just one of our California gubernatorial candidates stood up and said we will suspend the prevailing wage rule to any manufacturing company that invests in new facilities and receives a public investment, inducement or incentive? The way it works presently is that if the city of Redding offers free land at Stillwater Business Park to a manufacturer to build a facility, prevailing wage rates are triggered, increasing labor costs by an estimated 20 percent. Nevermind that the actual manufacturing facility is built with private sector capital and that the Stillwater infrastructure was already subject to prevailing wages. Don’t get me wrong, when it comes to a genuine “public works” project where the majority of the project is tied directly to public funding, the prevailing wage rule should apply. Case in point: stimulus-funded projects.

3. Recognize the value of California enterprise zones.

Forty-two California enterprise zones are located throughout the state. Communities like Shasta County received these designations from the state through a competitive process. While zones have similar goals for improving the economic vitality of their communities, each is unique in the local incentives and special assistance it provides to the businesses located within the zone boundaries. Each year, the Legislature holds hearings on whether to continue the enterprise zone program. Most of us who compete for job-creation projects with other states know that the EZ program is the only real incentive offered by California. I agree that California can ill afford to waste money on programs that do not work. However, the state’s enterprise zone program has proven to deliver measurable benefits. Last year participating local companies hired more than 1,600 employees to receive an estimated $19 million in hiring tax credits. These same companies plow the tax savings back in their businesses in the form of new equipment, facilities and, of course, jobs. Reducing or eliminating the enterprise zone program would be extremely shortsighted. Even discussing it at a state level sends the message of uncertainty to existing or new companies considering California for future business investment.

Assembly Bills

• AB 183 (Caballero) Principal Residence Credit (Stats. 2010, Ch. 10-12)- Legislative Change 10-04
• AB 347 (Bass) Charitable Contribution Deduction Haiti Earthquake (Stats. 2010, Ch. 10-08) – Legislative Change 10-03
• AB 658 (Hayashi,et al.) Voluntary Contribution Fund Designation/California Police Activities League Fund – Introduced 03/04/10
• AB 1700 (Gaines) Personal Exemption Credit For Dependents/Repeal Decrease In Credit January 1, 2010/Pit Rates/Repeal Temporary Increase January 1, 2010 – Introduced 02/01/10 & Amended 03/23/10
• AB 1936 (De Leon) Remove Net Operating Loss Carryback Provisions – Introduced 02/17/10
• AB 1973 (Swanson) Employer Hiring Credit/Ex-Offender – Introduced 02/17/10
• AB 1973 (Swanson) Employer Hiring Credit/Ex-Offender/Reentry Employment Business Tax Credit Act – Amended 04/05/10
• AB 2017 (Hall) California YMCA Youth and Government Fund – Introduced 02/17/10
• AB 2078 (Calderon) Use Tax/Retailers Engaged In Business In This State – Amended 04/05/10
• AB 2100 (Coto) Sweetened Beverage Tax Law – Introduced 02/18/10 & Amended 03/25/10
• AB 2126 (Garrick) Minimum Franchise Tax/Corporations That First Commence Business On Or After January 1, 2009, Exempt First Taxable Year And $100 Succeeding 9 Taxable Years – Introduced 02/18/10
• AB 2126 (Garrick, et al.) Minimum Franchise Tax/Corporations That First Commence Business On Or After January 1, 2009, Exempt First Taxable Year And $100 Succeeding 9 Taxable Years – Amended 04/05/10
• AB 2148 (Tran) Deduction For Physician’s Medical Services Contributed Free Of Charge To Local Community Clinic – Introduced 02/18/10
• AB 2458 (Saldana) Corporation Penalties – Introduced 02/19/10
• AB 2528 (Knight) Exclusion/Payments Or Vouchers From Federal Consumer Assistance To Recycle & Save Act Of 2009 (aka “Cash For Clunkers”) – Introduced 02/19/10
• AB 2564 (Swanson) State Budget/Tax Expenditures – Introduced 02/19/10 & Amended 03/25/10
• AB 2665 (Strickland) Service Station Emergency Standby Generator Credit – Introduced 02/19/10
• AB 2671 (Cook) Minimum Franchise Tax/Exempt Corporations Owned Solely By Deployed Member Of U.S. Armed Forces That Operate At A Loss Or Ceases Operation – Introduced 02/19/10
• AB 2676 (Ma) FTB Revise Income Tax Forms And Instructions To Continue To Enable A Person To Report & Pay Qualified Use Tax – Amended 04/06/10

Senate Bills

• SB 936 (Strickland) Income Exclusion for Energy Property Grants – Amended 03/08/10
• SB 1020 (Wolk, DeSaulnier, et al.) State Budget/Performance-Based Budget – Introduced 02/11/10
• SB 1036 (Cedillo/Huffman) FTB Disclosure Of Tax Return Information To Cities/Expands To Allow Disclosure By City Officials To Other Persons Designated By City Resolution – Introduced 02/12/10
• SB 1244 (Walters) LLC Employment Taxes and Contribution – Introduced 02/19/10 & Amended 04/05/10

Senate Special Session Bills

• SBX8 25 (Calderon/Correa) Mortgage Forgiveness Debt Relief Extension – Introduced 02/04/10

The Enterprise Zone Program targets economically distressed areas throughout California. Special state and local incentives encourage business investment and promote the creation of new jobs. The purpose of the program is to provide tax incentives to businesses and allow private sector market forces to revive the local economy.  Oroville is one of the few communities in the State that holds a designation for both a Recycling Zone and Enterprise Zone.

Enterprise Zones are state-designated economic development areas created to stimulate growth and create jobs and stimulate investments in local communities. Through tax incentives, hiring incentives, financial incentives, etcetera, the Enterprise Zone is designed to add to a business’s bottom line.

Oroville Enterprise Zone Hire Tax Credit
A qualified business may reduce state income taxes by the amount of wages paid to one or more qualified employees. The local Private Industry Council coordinates the eligibility verification for employers.

During the first year of employment, up to 50% of a qualified employee’s wages may be claimed against your California income tax liability. The credit percentage decreases by 10% annually. The employer’s deduction for wages must be reduced by the amount of the credit claimed.

The hiring tax credit calculation is based on the lesser of:

• The actual hourly wage paid; or
• 150% of the California minimum hourly wage, i.e. $8.00 x 1.50 – $12.00.

Employees must spend at least 90% of their work time on activities directly related to the conduct of business in the enterprise zone and perform at least 50% of the work within the zone boundaries.

Oroville Enterprise Zone Sales and Use Tax Credit
Businesses located in the Enterprise Zone may reduce state income taxes by the amount of sales or use tax paid on certain machinery purchased for exclusive use within the Enterprise Zone.

To qualify for the credit, the machinery must be used to manufacture, process, combine or otherwise fabricate a product; produce renewable energy resources; or control air or water pollution. Data processing and communication equipment are also qualified property.

Individuals and Partnerships may claim a credit equal to the tax paid on the first $1 million of machinery costs.

Corporations may claim a credit equal to the tax paid on the first $20 million of machinery costs. Special rules apply for S-Corporation shareholders.

Oroville Enterprise Zone Business Expense Deduction
Businesses operating within the Enterprise Zone may elect to treat 40% of the cost of qualified property as a business expense. The maximum deduction in the Oroville Enterprise Zone is $20,000. Therefore, this particular provision is only of benefit to C-Corporations.

Oroville Enterprise Zone Net Operating Loss Carryover
If a net operating loss is generated by a business that operates within the Enterprise Zone, 100% of the loss may be carried forward for up to 15 years.

Oroville Enterprise Zone Net Interest Reduction for Lenders
Lenders who loan money to an Enterprise Zone business can take a deduction for the net interest earned (interest earned less direct expenses) on the loan.

The types of loans that qualify for this deduction include: business loans, mortgages, and loans from non-commercial sources.

To Qualify for the Loan Interest Earned Deduction:

• The loan must be made to a trade or business located solely within the boundaries of the Enterprise Zone.
• The Loan proceeds must be used strictly for the business activities within the boundaries of the Enterprise Zone.
• The lender cannot have an equity or other ownership interest in the business.

The city of Brawley voted 4-1 to look at a county-wide application to the state’s enterprise zone program. This is not a full commitment, but it is a step in the right direction for the region.

With declining job rates, city managers are beginning to realize that dramatic measures need to be taken in order to revitalize the local economy and begin attracting outside businesses.

“It would be a great opportunity to expand the scope of the enterprise zone,” County Planning Director Jurg Heuberger said. Heuberger also added that it would allow California the chance to grant a new enterprise zone if the IVEZ combined with the Calexico County Enterprise Zone (CCEZ).

April 1st may be April Fool’s day, however the city of Hesperia was celebrating since it marked the beginning of the region’s enterprise zone benefits. Starting April 1st, Hesperia local businesses were able to start taking advantage of the EZ tax credits, including: hiring credits, sales and use tax credits as well as business expense deductions.

“It’ll hopefully not only bring in new jobs, but also help people expand existing businesses,” City Manager Mike Podegracz said Friday.

This is very exciting for a city like Hesperia, since it will now be able to compete directly with larger cities in attracting new businesses to move to the area. This should also mean good things for the job rate in Hesperia, since local businesses will be able to apply for a number of different hiring credits.

If you have a business in the Hesperia area, contact us today to see which credits are available to you.

Santa Clarita is the fourth largest city in Los Angeles County. The California Department of Finance estimated the city population as of January 1, 2008 at 177,045. Including unincorporated areas of the Santa Clarita Valley, the population is estimated at over 275,000. It is located about 35 miles northwest of downtown Los Angeles, and occupies most of the Santa Clarita Valley. It is a notable example of a U.S. edge city or boomburb. The FBI rates it as the sixth safest city in the United States with at least 100,000 inhabitants. (Nearby Simi Valley and Thousand Oaks, in Ventura County, traditionally alternate between the first and second spots on the list.) Santa Clarita is ranked as one of the top 100 places to live by Money.

Santa Clarita’s most notable attractions are the Six Flags Magic Mountain amusement park located just outside the city limits in unincorporated Los Angeles County, and the California Institute of the Arts (CalArts), located in Valencia.

If you have a company in this area, you may qualify for the State’s Enterprise Zone tax credits.  To see if you qualify, click here.

Greetings! One of the top issues for our country and our community is the economy. Here in Santa Clarita, our business community, Chamber of Commerce, and City work in tandem to help businesses through these tough economic times as well as to help position our business community for the future. The City of Santa Clarita has a three-part economic strategy focused on fostering and encouraging responsible economic development opportunities that result in a jobs/housing balance, established through quality employment opportunities for residents; an economic base through increased sales tax generation, and economic wealth by attracting external monies to the local economy. I wanted to share with you the top 10 work programs our City is doing right now that will best position our business community for the future:

1. Jobs/Housing Balance – The foundation of the City economic development strategy is jobs. Our residents need secure employment to be able to pay their bills, and provide a high quality of life for their families. When residents are secure in employment, they are confident retail and restaurant consumers. The City adds jobs to our community through business attraction where we have seen successful in relocating companies this year such as Ronan Engineering and Quest Diagnostics, and through business retention and expansion where we have seen successful with Advanced Bionics and Aerospace Dynamics International.
2. Creating an economic base through increased sales tax generation. The City works with retail centers to attract the restaurants and stores that our residents want so that we can stop retail spending leakage and support shopping locally. Locally generated sales tax provides a direct barometer of the health of the local economy. By increasing these dollars, the City is continually able to invest in the community.
3. Creating economic wealth through industries like tourism and film. These monies make our community richer, bringing new dollars in, as opposed to re-circulating the same dollars. Location filming generates more than $20 million annually in direct spending to local businesses.
4. The City funds a $1.5 million dollar Economic Development Division with 14 staff designed to attract, retain, and support the City’s targeted business industries, including: Film, Tourism, Aerospace, Biomedical, and Technology, as well as emerging businesses and industry sectors.
5. The City of Santa Clarita’s 21-Point Business Plan for Progress includes a budget of more than $18 million in City and federally-secured stimulus funds, which are being invested in all facets of Santa Clarita, creating immediate jobs while providing long-term benefits to our community.
6. After being named the Most Business Friendly City in LA, Santa Clarita implemented more changes to make it easier to do business in Santa Clarita. This included streamlining the permit process for businesses, creation of a new Permit Center, the introduction of e-plans for electronic plan submission, and deferring of some permit-related fees to encourage business growth.
7. The Santa Clarita Enterprise Zone. The City applied for and secured this program in 2007, recognizing the significant economic benefits it would mean to the business community. To date, Santa Clarita businesses have realized a potential savings of more than $40 million dollars, which they can re-invest in their business.
8. The City continues to focus its efforts on sports tourism and successfully attracted the 2009 Western States Police & Fire Games, which organizers estimate brought more than $8 million to the local economy. The City continues to solicit these types of events, which results in a positive economic impact to local businesses and increased sales tax generation.
9. The City’s Film Incentive Program, part of the 21-Point Business Plan for Progress, has further cemented our reputation as the Most Film Friendly community in the 30-mile zone. Santa Clarita experienced a 40 percent increase in location film days from television production from July through December 2009 when compared to the same time period in 2008. This represents an increase in economic impact to the local economy of $2.6 million.
10. Branding Santa Clarita. The City continually promotes Santa Clarita as the business destination in Southern California through advertising campaigns with radio, print, airport, and cable television in the greater LA market, as well as targeted advertising in film, BioMedical, and business trade magazines and conferences.

The Oakland Tribune reported this past week that local business leaders from San Bernardino are fighting to keep their enterprise zone benefits.

Wendy Clement, manager of the San Bernardino Valley Enterprise Zone, and local business owners traveled to Sacramento on Wednesday to ask lawmakers to continue funding the enterprise zone program, which gives tax breaks to businesses that relocate to or create jobs in a specific area.

Clement claims that there have been over 1,035 new jobs created in their enterprise zone, and the EZ program is one of the main catalysts for that growth.

Craig Johnson, president of the California Association of Enterprise Zones, said some lawmakers and state officials have proposed scaling back the enterprise zone program and its tax breaks, with the aim of bringing in money to balance the state’s books.

“They’re all scrambling for dollars,” Johnson said. “A lot of folks look at the tax credits that are taken and they believe that by abolishing the program, those credits will translate into more dollars in the treasury.” But that’s not true, Johnson said. Without the program and its tax breaks, some businesses would leave California and others would go out of business, he said.

Kings County officials are up in arms this week as Sacramento threatens to remove its designation as a state enterprise zone. Considering that we’re in the one of the worst recessions in recent history, cutting incentives to hire new employees does not seem to be the best strategy for decreasing the job crisis.

Eiji Yamashita, from the Hanford Sentinel, reports, “The county leadership is expected to send a letter to Assemblyman Manual Perez, chairman on Jobs, Economic Development, and the Economy urging him to advocate for economically depressed areas like Kings County and help them retain their enterprise zone status.”

Without this enterprise zone designation, Kings County would not have the same appeal to new businesses and may even have issues with retaining current companies, since it would be in their best interest to move to a more corporate friendly city.

Considering that California has one of the highest unemployment rates in the nation, it is about time that companies begin taking advantage of the enterprise zone hiring tax credits. Reports are showing that businesses operating in the San Bernardino enterprise zone region increased their hiring-related tax credit usage in 2009 compared to previous years.

Andrew Edwards, from The Sun, reports, “In 2009, managers of 99 businesses requested some 940 hiring vouchers, and 857 of those requests were approved. That’s about 57 percent more requests than 75 businesses filed in 2008.  Enterprise zone officials maintain that the hiring credits and other tax incentives made it possible for firms to create 132 new jobs and keep another 725 on the books.  The 99 firms that sought tax incentives during the past year represent only a slice of businesses that could be eligible for enterprise zone-related perks.”

If your business in in San Bernardino or Colton, you may be eligible for numerous tax credits, contact us today to find out which tax credits you can apply for.