The City of Ceres continues to grow at a rapid pace.  Over the past decade Ceres has experienced a nearly 90% increase in sales tax generated. Within the last five years development projects have included:

• WinCo Foods Distribution Center 107 acres/720,000 square feet
• Home Depot 10.67 acres/137,156 square feet
• Central Valley Marketplace 8.06 acres/83,710 square feet
• Food-4-Less
• Banking
• Dining
• Service
• Developing projects include the Ceres Commerce Center, an 8.8-acre, 87,000 square foot business park on Mitchell Road at the northern gateway into town. When complete the center will consist of 24 buildings; current construction includes buildings of 3,000 to 6,000 square feet.

At Ceres southern entrance—Mitchell Road at Highway 99—the 420-acre South Gateway Regional Commercial Center is also being developed. The center’s first large retail anchor will break ground in 2007 and major infrastructure projects, including the Service/Mitchell roads interchange are in process.

The Ceres Enterprise Zone encompasses most of the city’s industrial and commercial areas and includes 6,804 acres. An application is now in process—as part of a countywide effort—to expand the Zone by 132 acres, taking in nearly all commercial land on Mitchell Road. Property owners in Zone can take advantage of tax, financial and development incentives and business assistance.

Redlands has always been a popular place for businesses to re-locate due to its proximity to the large Southern California metro areas while still maintaining a lower price of living compared to nearby cities. However it appears that the city of Redlands may soon be able to attract companies by being added to the state’s Enterprise Zone program.

If approved it means that the city would be able to attract new businesses while being able to retain current companies with attractive tax credits.

Joy Juedes from ‘The Sun’ reports, “Redlands soon may have another carrot to dangle in front of businesses.
The city Redevelopment Agency is looking into making 200 to 300 acres north of the 10 Freeway part of the San Bernardino Valley Enterprise Zone, according to agency director Dan Hobbs. “It makes Redlands a more attractive place to locate,” said Redlands-based economist John Husing. The San Bernardino Valley Enterprise Zone is part of the state Enterprise Zone project, which targets “economically distressed” areas, Hobbs said.

The State of California designated a limited number of Enterprise Zones throughout the state to encourage business expansion. For businesses located within an Enterprise Zone, this translates to California tax savings and incentives that can substantially reduce their operating costs. When those incentives are coupled with the additional local incentives, the opportunities and savings are greatly enhanced.

Located in Central California, the Stockton/San Joaquin Enterprise Zone provides business with easy access to all major markets. Interstate 5, State Highway 99, an airport, a nationwide railway system (Burlington Northern Santa Fe and Union Pacific) and the Port of Stockton (on the Deepwater Channel) provide our Enterprise Zone businesses with direct links to world-wide markets.  In addition to the tax incentives for businesses, the Stockton/San Joaquin Enterprise Zone has readily available and favorably priced properties (improved and unimproved), a semi-skilled and skilled workforce, and a public/private network that is committed to providing companies with a pro-business environment.

The Stockton/San Joaquin Enterprise Zone provides businesses with the following savings:

State Tax Credit Incentives

• Hiring Credit ($31,000+ per new employee over a five-year period)
• Sales & Use Tax Credit (On machinery purchases for manufacturing)
• Business Expense Deduction (Up to $20,000/year on tangible personal property)
• Net Operating Loss Carryover (Up to 100% carryover to future years)
• Net Interest Deduction for Lenders (May result in 3-4% increase on return of investment)

Local Incentives

• Reduced Fees -50% discount on Building Permit, Plan Check, Use Permit and Variance Fees
• Development Coordination
• Early Project Review (ERC) Meetings
• One-Stop Permit Centers
• Fee Deferral Program
• Fee Estimates
• Utility Tax Rebate
• Commercial Property Transfer Tax Rebate Employee

Job Recruitment

• Customized Staff Recruitment services at no charge
• On-the Job Training Programs. Wage reimbursement for hiring & training qualified employees
• Specialized Training Programs tailored to your company’s specific needs

Financing Opportunities

• Small Business Administration (SBA) Financing SBA 504 and 7A – discretionary loan packaging fees are waived or deferred
• San Joaquin County Revolving Loan Fund (RLF) Loan packaging fees waived and discounted interest rate
• Stockton’s Façade Improvement Forgivable Loan Program and Downtown Financial Incentive Program

Despite the fact that new businesses in Santa Clarita will be able to take part in the Enterprise Zone program, Jonathan Randles has reported that new legislation is being discussed that could make the area’s EZ program much less effective.

Randles reports that Assemblyman John Perez, D-Los Angeles, is sponsoring an amendment that would require businesses to hire full-time employees and give their employees health benefits to receive the full tax credits.

This would dramatically decrease the effectiveness of the EZ program, since the costs of the health benefits would essentially wipe out the savings from the Enterprise Zone credits.

Enterprise Zones are not limited to California. In fact, several other regions are gaining popularity and attracting large enterprises to due to the numerous tax benefits. One of the more recent examples of this can be found in Oregon, which will host the new Facebook data center.

David Holley reports, “After officially announcing plans to build a data center in Prineville on Thursday, Facebook officials told The Bulletin that the tax incentive offered to the company through an enterprise zone was a key reason it came to Central Oregon. By locating its new data center in the zone, Facebook will be excused from paying as much as $2.8 million a year in local taxes.”

This illustrates the importance of Enterprise Zones and why California needs to continue to push for increased adoption, since it appears we will be facing competition from other states across the country.

Here’s a nice summary of tax changes from the FTB:

Sacramento – The Franchise Tax Board (FTB) today updated state taxpayers on several law changes for the upcoming filing season, and outlined a variety of services provided by the tax department.

Law Changes

Temporary increase in personal income tax rates – A new tax law raises California’s personal income tax rates by .25 percent for 2009 and 2010.

Standard deduction – The standard deduction for single or filing separately decreased from $3,692 to $3,637. For joint, surviving spouse, or head of household filers, it changed from $7,384 to $7,274.

Personal exemption credit – The personal exemption amount for single, filing separately, and head of household filers is reduced from $99 to $98. For joint or surviving spouses, it decreased from $198 to $196. The dependent exemption credit decreased from $309 to $98 per dependent.

New estimated tax payment percentages – Effective January 1, 2010, the quarterly estimated payment schedule percentages are changed for both corporate and personal income taxes to 30 percent, 40 percent, zero, and 30 percent for the first through the fourth quarter installments, respectively.

New backup withholding requirements – Effective January 1, 2010, generally payers that are required to withhold and send backup withholding to the IRS are also required to withhold and send seven percent to FTB except for:

·         Payment of interest and dividends.

·         Any release of loan funds made by a financial institution in the normal course of business.

Small business new jobs tax credit – For 2009 new hires, provides a $3,000 tax credit for each additional qualified full-time employee hired by a qualified small business employer. Qualified employers need to act fast as the credit funding is limited to $400 million. The credit must be claimed on a timely-filed original (not amended) 2009 return received before the $400 million limit is reached. This credit is not subject to the 50 percent limitation for business credits in 2009.

Generally speaking, employers qualify for the credit if they employed 20 or fewer employees on the last day of the preceding taxable year (for calendar taxpayers this would be December 31, 2008). And, they have a net increase in qualified full-time employees in 2009 compared to the number of full-time employees employed in the preceding taxable year.

Military spouses residency relief –Effective January 1, 2009, federal law provides that civilian spouses of military personnel who are in California only because of their spouses’ military orders, do not become California residents. They are also exempt from state income tax on their “service income” earnings such as wages, commissions, or other personal service income earned in California. To qualify, civilian spouses must have the same “domicile” as their military spouses. One’s “domicile” is generally the place they consider to be their true home and where they intend to return to make their permanent home.

540NR booklets –Booklets for FTB Form 540NR, California Nonresident or Part-Year Resident Income Tax Return, will no longer be mailed directly to taxpayers. The 540NR Booklet and any other related tax forms and instructions are available online at ftb.ca.gov.

Net operating losses suspended – For 2009, net operating losses from prior years cannot be deducted by taxpayers whose net business income is $500,000 or more. Instead, they will need to carry them forward. The time limit to carry forward net operating losses increases from 10 to 20 years. New with 2011 net operating losses, taxpayers can carry back those losses for two years. Taxpayers with net business income of less than $500,000 or with disaster loss carryovers are not affected by the net operating loss suspension rules.

Business tax credit limitations – For 2009, tax credits are limited to 50 percent of the net tax for taxpayers with net business income of $500,000 or more. Be sure to review our tax forms instructions for more details.

Taxpayer Assistance

Self Services

FTB encourages taxpayers and practitioners to explore its many self-service applications. In addition to the interactive voice response options available through FTB’s call center phone lines, there are also several online web-based applications that provide useful information and services during the filing season. Some of these applications are discussed below.

Voluntary Income Tax Assistance – Starting February 1, more than 1,000 centers statewide open through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. These sites offer free help with tax form preparation.Some offer services in Spanish, Chinese, Vietnamese, and Korean. For information on locations throughout California, visit ftb.ca.gov and click on the free filing assistance link.

Phone service –FTB provides 24-hour toll-free automated phone service at 800.338.0505. To speak with a customer service representative, FTB staffs its general toll-free phone line,      800.852.5711, from 8 a.m. to 5 p.m., weekdays excluding state holidays.

Field Offices – FTB has six regional field offices that provide walk-in service from 8 a.m. to         4 p.m., weekdays in Los Angeles, Oakland, Sacramento, San Diego, San Francisco, and Santa Ana. For directions, visit ftb.ca.gov and click on theContact Us tab.

Customer Service Availability – Due to limited resources, reaching a customer service representative in the call center or in an FTB field office may be more difficult this upcoming filing season. If you need to speak to a representative, the best times to call are Tuesday through Friday and either before or after lunch. FTB suggests you contact them early in the tax filing season to avoid the crowd of last-minute tax filers.

ReadyReturn –Sometaxpayers qualify for FTB’s online ReadyReturn program that completes the tax return for the taxpayer. It is based on information already collected from employers such as W-2s. More than 2 million taxpayers will qualify who last year:

·         Earned wages from a single employer.

·         Filed either as single or head of household.

·         Took the standard deduction.

·         Claimed no more than five dependents.

Taxpayers who are renters and who can be claimed as a dependent are also eligible.

CalFile – More than 6.5 million taxpayers are qualified to use CalFile, FTB’s no-cost, direct-to- FTB, online filing program. Taxpayers type in their tax return information on FTB’s website and transmit their return directly to FTB. CalFileaccepts taxpayers with income of up to $321,483, itemized deductions, and some tax credits.

My FTB Account – This online service allows taxpayers to get information such as estimated tax payments, any balances due, state W-2 information, or FTB issued 1099 forms. Use this information to avoid claiming the wrong amount of estimated tax payments, which is the top error made on returns.

Answers to Frequently Asked Questions – Find answers to questions about various tax topics such as return filing requirements, tax credits and the requirements to be able to use the Head of Household filing status online atftb.ca.gov.

Pay Taxes Online – FTB’s Web Pay allows taxpayers to authorize a payment from their bank account to pay their return balance due or extension payment. Payment must be made on or before April 15 to avoid penalties and interest. Taxpayers can also make estimated tax or any bill payments online, and sign up for email reminders of upcoming estimate payment due dates. Taxpayers can schedule estimated tax payments up to one year in advance. For a fee, taxpayers can pay their taxes with their American Express, Discover/NOVUS, MasterCard, and Visa cards. FTB also accepts payments made via Western Union.

Can’t Pay Your Taxes Timely? –ftb.ca.gov and select payment options andinstallment agreement request. Monthly installment payment plans are available to people who cannot pay what they owe when it is due. Generally taxpayers who owe less than $25,000 and can repay the tax within five years qualify for a payment plan. Sign up online at

Tax Tips

Federal Earned Income Tax Credit – This is a federal incentive for low-income individuals and families. Taxpayers earning less than $48,279 can qualify for a “refundable” credit that can total up to $5,657. “Refundable” means that you do not have to have a tax liability to get a refund check from the government. If you think you might qualify, visit the IRS website at irs.gov and search for EITC Assistant.California has no comparable state credit.

Recordkeeping – Keep a copy of your state tax returns and all supporting records. FTB may request information from you regarding your tax return at any time within the California statute of limitations period, which is generally four years from the return’s due date.

The Orange County Business Council has endorsed State Senator Lou Correa, representing the 34th state Senatorial District, for re-election. Correa is an advocate of the Business Council’s key initiatives to enhance infrastructure investment, increase supply of workforce housing and promote solid education programs to ensure a skilled 21st century workforce.

“We are pleased to endorse Senator Lou Correa for re-election because of his strong record of support for OCBC’s business agenda,” said Lucy Dunn, President and CEO of the Orange County Business Council.

Senator Correa understands the connection between a strong business environment, sustainable infrastructure and jobs creation. He has been supportive of expansion of the 91, a vital link in goods and people movement between the Inland Empire and Orange County, as well as expansion of the 57, and he has been the long-time advocate of the completion of the Santa Ana River project. OCBC applauds the leadership Senator Correa has shown in supporting the comprehensive water package, a critical issue that directly impacts California’s future growth and sustainability, both economically and environmentally.

Throughout his years of service in the Assembly and in the Senate, Correa has championed a number of legislative proposals, balancing the needs of the business community, environment and social equity, working to ensure a high quality of life for both Orange County and the state. Senator Correa introduced legislation that proposed a simple and sensible reform to the California Environmental Quality Act (CEQA) that doesn’t diminish its authority, but helps to facilitate the process and he also supported additional housing legislation that helps with home affordability by reducing regulatory red tape that drives up costs. He has co-sponsored Enterprise Zone legislation, rightly seeing that the path to California’s economic recovery starts with giving business effective tools to create jobs and begin to grow again.
State Senator Lou Correa was elected to the 34th Senate District in 2006, representing Anaheim, Buena Park, Fullerton, Garden Grove, Santa Ana, Stanton and Westminster. In 2004, Correa was elected to the Orange County Board of Supervisors, representing central Orange County. Prior to his election to the Board of Supervisors, he served as a State Assembly Member from 1998 to 2004 representing the 69th District.

On Friday, January 22nd, 2010, representatives from the State Franchise Tax Board (FTB) and the Federal Internal Revenue Service (IRS) will present information on the state and federal Enterprise Zone programs and other business law updates.

This is an opportunity to get educated on tax credits and programs the business community can take advantage of in tax year 2009 AND begin planning for tax year 2010.

Details:
Friday. January 22, 2010
Registration 8-8:30 AM Event 8:30-10:30 AM
South County Regional Education Center
800 National City Blvd. National City

To RSVP:
Call: (619) 424 5143
Email: cindy@sandiegosouth.com

California recognizes out-of-state same-sex marriages

On October 11, 2009, the Governor signed Senate Bill 54, which provides that a marriage between two persons who have entered into a same-sex marriage outside the State of California prior to November 5, 2008, that was valid by the laws of the jurisdiction in which the marriage was contracted, is valid in California. / more+

Military Spouses Residency Relief Act

The Military Spouses Residency Relief Act (MSRRA) was signed into law by the President on November 11, 2009. For taxable years beginning on or after January 1, 2009, a service member’s spouse is considered a nonresident for tax purposes if the servicemember and spouse have the same legal residence or domicile outside of California and the spouse is in California solely to be with the service member who is serving in compliance with military orders. / more+

Mandatory e-pay penalty update: Not assessed in 2010

When you are required to make electronic payments but pay by other means, we can assess a penalty equal to one percent of the amount paid, unless your failure to pay electronically was for reasonable cause and not willful neglect. / more+

Luxury Auto Pilot Program

Each year, we receive and process millions of income information records. The nonfiler program uses federal tax return information, information from other California state agencies, third-party data, and income estimates from self-employed activities to determine if a taxpayer has a filing requirement. / more+

EITC Awareness Day is January 29, 2010

The IRS in partnership with local organizations in your area will kick off of the Earned Income Tax Credit (EITC) Awareness Day event on January 29 to promote the federal tax credit. / more+

Consultants wanted: California seeks experts knowledgeable in abusive tax shelter transactions

Abusive Tax Avoidance Transactions (ATAT) cost California billions of dollars each year. In 2004, we collected a record $1.4 billion from taxpayers participating in tax shelters during our Voluntary Compliance Initiative. / more+

Get ready for the filing season with e-Services

During these difficult times, it is increasingly important to work both smart and efficiently. / more+

Head of Household guidelines

Our filing season is just around the corner. Some of your clients may inquire about claiming our head of household filing status. This filing status provides a lower tax liability and a higher standard deduction than the single filing status. / more+

California’s Enterprise Zones Wage Credit

In our June 2009 issue of Tax News we asked the question, “Are you familiar with California’s Enterprise Zones?”

We now ask, “Are you aware some taxpayers who work in an Enterprise Zone may be entitled to a credit for the wages they earned?”  / more+

Small business

Misleading letter schemes target corporations and LLCs

Your business clients may receive a misleading letter to file board minutes and/or a statement of information for a fee. Because the letters look and sound official, your clients may be quick to send payment. But wait! Read the fine print, “…products or services being offered are not approved or endorsed by any government agency.” / more+

Ask the advocate

Taxpayers’ Bill of Rights Hearing

The Annual Taxpayers’ Bill of Rights Hearing was held December 3, 2009, at FTB headquarters in the Gerald H. Goldberg Auditorium. We received four proposals in advance and representatives from two organizations made presentations. We are in the process of preparing responses to the proposals we received. / more+

Inside FTB

Take a look at the changes happening here at FTB. / more+

Criminal corner

Our monthly summary of bringing tax criminals to justice and closing the tax gap one case at a time. / more+

The Enterprise Zone Program targets economically distressed areas throughout California. Special state 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. On November 6, 1991 the State designated the Shasta Metro Enterprise Zone, which expired on November 5, 2006. Shasta County applied for a new zone and received final designation effective November 6, 2006 to November 5, 2021. The new zone has some differences in boundaries, but encompasses all of the industrial and most of the commercial zoned areas.

SHASTA METRO ENTERPRISE ZONE BENEFITS

The state offers the following tax credits and benefits that reduce the cost of hiring new employees and investing in equipment in the Shasta Metro Enterprise Zone:

• Hiring Tax Credit
• Sales and Use Tax Credit
• Business Expense Deduction
• Net Operating Loss Carryover
• Deduction for Lenders
• Bid preference on State of California contracts

HIRING TAX CREDIT

If you regularly hire new employees or you are planning an expansion, this tax credit can save you thousands of dollars. By hiring “qualified” employees, you can claim up to 50% of your employee’s wages in the first year of employment. The credit percentage decreases by 10% annually, phasing out after five years.

Hiring Tax Credit Vouchers must be processed through our vouchering agent at the Smart Business Resource Center. Please visit the Smart Business Resource Center for more information

Targeted Employment Areas: Residents of certain designated lower income areas can qualify Enterprise Zone employers for substantial hiring credits. Click here to see if an employee’s address is within the Targeted Employment Area (TEA).

SALES AND USE TAX CREDIT

Individuals, partnerships and limited liability companies may claim a credit equal to the sales or use tax paid or incurred on the first $1 million of qualified machinery purchased. For corporations, the limit goes up to $20 million. Some lease options may qualify as well.

Qualified property is machinery or machinery parts used to:

• Manufacture, process, fabricate, or otherwise assemble a product;
• Produce renewable energy resources; or
• Control air or water pollution.

In addition, qualified property is:

• Data processing and communications equipment including, but not limited to, computers, computer-automated drafting systems, copy machines, telephone systems, and fax machines; and
• Motion picture manufacturing equipment central to production and postproduction, including but not limited to, cameras, audio recorders, and digital image and sound processing equipment.

The business must use the property exclusively within the boundaries of the Enterprise Zone.

BUSINESS EXPENSE DEDUCTION

This provision can make start-up or expansion less expensive by allowing you to expense out the cost of equipment in the first year it is placed in service, rather than depreciating the cost of the property over its useful life. Enterprise Zone businesses may elect to treat 40% of the eligible cost of qualified property as a business expense rather than a capital expense.

Eligible property includes those items that you would expect to depreciate: tangible personal property (excluding buildings) and most equipment and furnishings purchased for exclusive use within the enterprise zone. Office supplies and small nondepreciable items are not included.

Once the property has been put into service within the enterprise zone, you must wait a minimum of two years before selling it or removing it from the zone. You must elect to expense the property during the first year the property was placed in service. If the cost of the item exceeds the maximum expense amount, you may expense up to the cap, and then depreciate the remainder in subsequent years.

NET OPERATING LOSS CARRYOVER

Businesses located in the Enterprise Zone have the option of carrying over 100 percent of the business’s net operating losses over 15 years on their state taxes.

Net operating losses occur when your business deductions exceed your business income, resulting in a net loss for the company. As your business recovers in succeeding years, you can recover the amount of the loss by deducting it from your state taxes. There are just a couple of limitations:

• The NOL can be carried forward but not back; and
• If you elect the enterprise zone NOL deduction, you are prohibited from carrying over any other type of NOL from the same year.

DEDUCTION FOR LENDERS

The net interest deduction for lenders was created to encourage loans in areas that might otherwise be avoided. A deduction from income is allowed on the amount of “net interest” earned on loans made to a business located in the enterprise zone. “Net interest” means the full amount of the interest, less any direct expenses incurred in making the loan.

While the deduction is for the lender, not the business, the business benefits indirectly by receiving a loan that might otherwise have been turned down.

Eligible loans may be used for inventory, buildings, equipment, and working capital. The trade or business receiving the loan must be located solely within the enterprise zone, and the funds must be used exclusively for activities in the zone. The deduction is available to noncommercial lenders as well as commercial, however, the lender may not have equity or other ownership interest in the business.

PREFERENCE POINTS ON STATE CONTRACTS

The Enterprise Zone Act (EZA) provides a 5 percent bid preference on service and commodity contracts valued at more than $100,000 if the business work site is located in an enterprise zone. Bid preferences do not apply to construction or other contracts where the provisions of the State’s contract fix the work site.

The EZA allows state contracting officials to give California based companies the bid preference when 50% of the labor required to perform a commodities contracts or 90% of the labor for services contracts is performed at the approved EZA work site(s). To receive a contract award based on preferences, the company must certify under penalty of perjury that the required contract labor shall be accomplished at the approved work site.

Companies qualifying for the 5 percent work site preference may request an additional 1 to 4 percent workforce preference by certifying to hire a specified percent of their contract workforce labor hours from a targeted employment area, or from enterprise zone eligible employees.

For more information click here.