Bayer, which we have recently covered, has been an integral component of the job market for the West Berkley region, and thanks to the Enterprise Zone program, the company has announced they have chosen to stay in the area.

“The enterprise really strengthened our proposal to stay,” said Sreejit Mohan, director of public policy and communication for Bayer.

It’s estimated that Bayer will save approximately $6 million dollars in tax spending. The company will also qualify to receive $36,000 for every worker they hire who meets several qualifications, specifically:

• Native Americans
• Veterans
• Low income individuals

This is another example of the Enterprise Zone program at work, helping to stabilize local economies and increasing job opportunities.

Although payroll job losses slowed significantly, the state unemployment rate continued to climb in August, rising three-tenths to 12.2 percent, its highest level since 1940’s record 14.7 percent. From a survey of 5500 households, the state Employment Development Dept reported that 14 California counties now have jobless rates of 15 percent or more, and nearly 30 percent of the state’s unemployed workers have been jobless for over six months. However, EDD’s employer payroll survey showed substantial improvement, with 12,300 jobs lost in August, compared to 38,900 in July and an average of 73,700 for the previous six months. California’s trade, transportation & utilities sector and the construction industry suffered the biggest declines last month, down 7100 and 7000 jobs respectively, followed by manufacturing (-2800). Educational and health services added 6000 positions, along with information (3400) and government (2000).

The Business Forecasting Center at the University of the Pacific predicts that California’s unemployment rate will remain above 12 percent for all of 2010, peaking at 12.6 percent next spring. A return to the state’s pre-recession unemployment levels (under 6 percent) may not happen before 2013. UCLA’s Anderson Forecast is slightly more optimistic, projecting a peak of 12.2 percent and double-digit unemployment until sometime in 2011.

The Recession’s Uncounted Casualties

They’re not a factor in the unemployment rate, but they are either out of work or stymied by the recession into working fewer hours than they’d like, often at reduced wages. The Bureau of Labor Statistics reports that California’s underemployment rate – a broader index which includes unemployed people as well as people forced to take part-time or odd jobs, and those who have quit job hunting out of discouragement – is currently at 18.5 percent, up from 11.7 percent one year ago. An estimated 1.7 million Californians are working part time because full-time positions aren’t available, and about 34,000 would-be workers have grown too discouraged to continue job hunting.

California’s Enterprise Zones need to be expanded to create job incentives.

Despite previous reports, it appears that several cities pursuing Enterprise Zone designations in California may still be in the running. Specifically the cities of Needles and Anaheim are looking to combine their efforts to gain the tax advantages offered by the program.

The Needles Daily Star reported that According to Sue Godnick, executive director of the Needles Chamber, Anaheim has invited the city to join a group effort proposing state legislation that will allow those cities not ranking high enough this year, plus an additional zone for an auto plant in Fremont, to be granted one-time enterprise zone statuses. The initiative is to be titled “100,000 New Jobs for Californians (11 New Enterprise Zones).”

Needles specifically is in need of the EZ program status due to its close proximity to Arizona, which has historically been more friendly to businesses. Without some sort of exemption, it will continue to be difficult to attract local companies to settle in the region.

California’s Franchise Tax Board has begun sending out letters to businesses who have been delinquent in filing. The FTB performs an initial state assessment to get a general sense of what businesses have yet to file, which is how they’ve created the list of companies to contact.

In 2008, this action brought in an additional $31 million in previously unpaid taxes. The letter has been sent out to over 35,000 businesses around the state requesting payment or the reason they have not filed.

This action is meant to lower the difference between the amount of taxes paid compared to what is fully owed. It is estimated that each year, California has a tax gap of $6.5 billion.

Enterprise Zone credits may reduce AMT, says Board
The Board of Equalization has denied the FTB’s petition for rehearing in the Appeal of Nassco Holdings, Inc. (February 25, 2009) Cal. St. Bd. of Equal. Case No. 317434. The Board has also directed its staff to draft a formal opinion in the matter, for consideration.
In the original, unpublished letter decision of Nassco, the Board ruled that a taxpayer may use Enterprise Zone tax credits to reduce AMT. Similarly situated taxpayers, who want to apply their Enterprise Zone credits against AMT, must file claims for refund citing the same arguments that the taxpayer cited in the Nassco appeal.

Schwarzenegger’s Committee on the 21st Century Just Came Out With Its Draft Proposal for Overhauling California’s Tax System. The tax commission has just released draft language of its package, which includes the following:

– Lower personal income tax for all filers, phased in over three years through 2014. Single filers would have an automatic deduction of $22,500, while joint filers would have an automatic deduction of $45,000. Filers would pay 2.75 percent on taxable income up to $28,000 single and $56,000 joint. They would pay 6.5 percent on all taxable income above those levels.The only itemized deductions for filers would be mortgage interest, property taxes and charitable contributions.

The current state income tax bracket tops out at 9.55 percent (which includes a .25 percent temporary increase approved in February). Millionaires pay an additional 1 percent on income above $1 million, and they would continue to pay that under the new plan.

While all tax filers would pay lower taxes, the commission’s Powerpoint presentation shows that the new lower tax brackets make the system less progressive in nature. The drop to 6.5 percent from 9.55 percent is most significant for higher-income earners, who already pay most of the state’s personal income taxes. While filers earning between $50,000 and $75,000 would get a 14 percent cut on their taxes, those earning $75,000 and above would get roughly a 30 percent reduction.

The city of Hesparia is one of the newest additions to the California Enterprise Zone program.  If you operate a business in Hesperia, contact us for a free consultation to see what tax credits are now available to you.

Click here for a map of the new enterprise zone boundaries.

Click here for the official announcement.

San Joaquin received positive news for their economic development efforts, with the state of California extending their current enterprise zone to 656 square miles. The zone received conditional approval last year, however the final designation was key to establishing the region’s appeal to local businesses.

Most notably, this increase now includes several wineries and the General Mills facility in the city of Lodi.

If you are in the San Joaquin enterprise zone and are interested to see what tax credits you have available to you, please contact us for a free consultation.

Despite a strong effort, the State of California has not given the city of Oxnard its desired Enterprise Zone. This has caused a significant stir in the region, since, from all appearances, Oxnard seemed to be an excellent candidate.  Instead of Oxnard, the state chose to award its new designations to:

• Hesperia
• Taft
• Tulare
• Pittsburg
• Sacramento

The Pacific Coast Business Times showed considerable consternation at the state’s decision:

“Oxnard is the biggest city in the biggest county in the tri-county region. It has a pro-business attitude, plenty of land and utility resources, a large and eager workforce and a desire to lead the state’s economic recovery. But that apparently means nothing in Sacramento, where the California Enterprise Zone Program recently turned down Oxnard’s request to join 41 other enterprise-zone locations in the state.”

Here’s an email I received from CAEZ president Craig Johnson about the two new hearings.

Dear CAEZ Members and Friends of CAEZ,

The Speaker of the Assembly has approved two additional Enterprise Zone hearings for the Assembly Committee on Jobs, Economic Development and the Economy. The first is scheduled for October 8 in the Bay Area and the second will be held October 14 in Southern California. Each of the two hearings will have different topics, unknown to us at this time, as is the exact location of the hearings.

Your CAEZ leadership will be meeting with the Enterprise Zone Coalition to discuss strategy and potential speakers, once we know the topics to be discussed and the hearing format. If any of you are available to attend one or both of these hearings, there will be a public comment period where the public is encouraged to speak on any topic related to the Enterprise Zone program. It would serve CAEZ and the EZ program well, to have as many public comment speakers as possible speaking in support of the program. Your active participation in this process is critical to the continued success of the EZ program.

I will keep you apprised as more information is released.

Thank you for your continued support of CAEZ and the Enterprise Zone Program.

CRAIG JOHNSON
President
California Association of Enterprise Zones