The practice of hiring individuals with a criminal record is always controversial, however with the current state of the market, the state of California offers local businesses tremendous tax benefits for these employees.  A good example of a city taking advantage of this principle is Oakland.  Because much of Oakland is designated as an “Enterprise Zone” by the state, employers can save tens of thousands of dollars in state taxes, according to Susana Villarreal, the city’s enterprise zone coordinator.  Employers can deduct up to 50% of the employee’s wages from state taxes by hiring people who fit certain criteria, Villarreal said. Those qualified employees include ex-offenders but also veterans and those on certain federal programs.

As he put in the subject line of his email “Them Changes” are happening at HCD. Frank Luera, head of California’s Economic Development Section in charge of the Enterprise Zone program recently announced that he is retiring from the HCD. Few individuals have been more involved or more instrumental in the Enterprise Zone program. Frank worked tirelessly to advance the Enterprise Zone program. I even recall getting email responses from him late and night and on weekends. How many government officials can you say that about!

Frank did not let on regarding what his future holds, but left his options open. His last day with HCD will this Friday, June 19. At C&I, we want to thank Frank for all of his insight and hard work and wish him well wherever he may end up.

With the current economic conditions, companies that are commissioned with local economic development are planning to utilize California’s Enterprise Program to attract new businesses.  Redding.com has reported the following:

With the recession forcing many companies to put expansion plans on hold, the EDC is focusing more on business retention, O’Sullivan said, promoting the Shasta Metro Enterprise Zone, which gives hiring credits to businesses.

In the past year, the enterprise zone has grown from about 800 credited employees to 1,300 credited employees, accounting for $13.5 million in hiring credits to companies, O’Sullivan said.

The Calexico region is beginning to get national coverage in its push for economic development.  And taking the forefront of the city’s efforts is the California Enterprise Zone program.  The New York Times reported this past week:

“Other new commercial developments are also on the drawing board in Calexico, said Danny Fitzgerald, director of the city’s enterprise zone. Projects under way include Calexico Mega Park, a 157-acre mixed-use retail, business and residential development by Westmount Properties; Calexico 111 Center, with more than 65 acres of commercial and 58 acres of industrial development; and Los Legos, some 500 acres that will include residential and commercial components.”

This national exposure for the EZ program benefits continues to reveal the importance of these tax benefits.

The competition for new Enterprise Zones is heating up this year, and one of the cities still waiting to hear about its approval is Needles, CA.

And the Needles Desert Star is reporting the wait is not over, “The city of Needles will have to wait a little longer to find out if it has been awarded enterprise zone status. The announcement, expected on May 18, has been delayed until some time in June. California Department of Housing and Community Development has informed the city that winners have not yet been selected.”

With only four enterprise zones being designated this year, 14 new city applicants will go without the coveted program benefits.  The city is pushing for the designation in order to augment its current strategy to attract new businesses to the region.

Here is Craig Johnson’s recent retort in support of California’s Enterprise Zones. Enjoy the audio.

Dear CAEZ Members & Friends of CAEZ,

In response to the PPIC report, which was making it’s debut in Sacramento today, I appeared on San Francisco radio station KQED this morning along with one of the co-author’s of the study, Jed Kolko. The audio of the show is linked below.

Click for Audio

We will continue to face the slings and arrows of our foes throughout the remainder of the legislative calendar and I urge each of you to be prepared to share the many successes of our program.

Thank you all for your continued support of the program and CAEZ.

CRAIG JOHNSON
President
California Association of Enterprise Zones

CAEZ president Craig Johnson wrote this letter today to the local Enterprise Zone community:

Dear CAEZ Members and Friends of CAEZ,

Following the legislative hearing for AB 1139 on April 29, CAEZ pledged to work with Assemblyman John Perez and the sponsors of AB 1139. To that end, the attached letter was mailed this morning to Assemblyman Perez and all of the Members of the Assembly Committee on Jobs, Economic Development & the Economy. This letter addresses the numerous inaccuracies cited by the supporters of the bill, corrects the record about the program, it’s structure, mission and accomplishments.

CAEZ continues to monitor legislative activity in Sacramento that may affect our program, especially as the Legislature continues to grapple with record budget deficits. I will keep you apprised of any urgent matters that require a call to action of our Membership. Your response to AB 1139 assures me of your commitment to the defense of our program during perilous times.

Thank you again for your continued support of the Enterprise Zone program.

Sincerely,

CRAIG JOHNSON
President
California Association of Enterprise Zones

On June 10th, over 150 businesses from across Sacramento will be meeting together to consider the current economic status of the region, and the Enterprise Zone program will be one of the top issues discussed.  Along with the Enterprise Zone Program, OBSNews.com says that these civic leaders will also be considering:

· Support for growth of Sacramento’s clean energy sector,
· Protection of local government redevelopment funds,
· Improvement of airport safety from wildlife strikes,
· Passage of bills that support energy efficiency and renewable energy improvements,
· Support of changes to HR 1 to safeguard regional economic benefits of tourism and impacts on rural, economic development
· Support of many bills and measures to improve the region’s flood protection and safety, and
· Support of education and job readiness program for foster youth.

The thriving City of Long Beach offers an urban Enterprise Zone of over 41.4 square miles, encompassing thousands of businesses. If you have a company operating in this area contact us because it does not matter if your business is manufacturing or retail; large or small, the Enterprise Zone provides State tax credits that can enhance your business.

• Purpose: To provide targeted areas with a means to stimulate business and employment growth.
• Duration: 15 years, January 8, 2007 – January 7, 2022
• Area: Includes most of the City’s commercial and retail corridors and manufacturing centers.
• Eligibility: Any individual or company operating a trade or business within the Enterprise Zone is eligible for the program.
• Benefits: Companies located within the Enterprise Zone can save thousands of dollars on their business’s California income taxes.

So what are the incentives to operating a business in Long Beach?

Business Expense Deduction
Part of the cost of certain equipment, furniture and fixtures purchased for exclusive use in the Enterprise Zone may be deducted as a business expense as opposed to a capital expense.

Net Operating Loss Carryover
Up to 100% of a Net Operating Loss generated in an Enterprise Zone can be carried forward for up to 15 years. (Suspended for tax years 2002 and 2003)

Net Interest Deduction for Lenders
Lenders can deduct from net income the interest earned on a loan made to any business located solely in the Enterprise Zone.

Hiring Credit
Your company can receive over $37,400 in state tax credits over a five-year period, for each eligible employee. It is easy to find employees who meet the eligibility criteria if your company takes advantage of the Long Beach Career Transition Center employment services.

Sales and Use Tax Credit
Your business can claim a state tax credit equal to the sales or use tax paid on the cost of any of the following equipment purchased for exclusive use in the Enterprise Zone.

• Equipment used to manufacture, process, combine, assemble or fabricate a product.
• Data processing and communications equipment including computers, telephone systems, fax machines and copiers.
• Equipment used in motion picture production and post-production.
• Air and water pollution control devices.
• Equipment used to produce renewable energy resources.

As California struggles with its recent budget problems, the FTB is still pushing the Enterprise Zone program to help California businesses.  In the June issue of FTB’s Tax News the FTB had this pitch about the California Enterprise Zone program.

June 2009 – The Enterprise Zone (EZ) tax incentive program was created in 1986 to help local businesses, and encourage outside businesses to locate in economically depressed areas. The federal government does not have a comparable economic development program or business tax incentives.

The EZ program has been around for quite some time, but there have been changes to the program that could affect your clients’ businesses.

Between October 2006 and March 2009, 34 California’s enterprise zones expired. Many of these jurisdictions chose to apply again with the California Department of Housing and Community Development (HCD) for a new designation along with new jurisdictions. Today there are 42 active or conditional designated enterprise zones. For a listing of expired, active, and conditional enterprise zones, go to hcd.ca.gov and search for EDA.

The re-designated zones are treated as two zones, the “Old Zone” that expired and the “New Zone.” In some cases, the jurisdictions added new geographic areas to the “New Zone” and in other cases, the jurisdictions removed areas that were once in the “Old Zone.” The following five business-related tax incentives are potentially available to a taxpayer doing business in an enterprise zone, so you may need to see if your client is doing business within one of these new geographic areas.
·         Hiring credit.
·         Sales or use tax credit.
·         Business expense deduction.
·         Net operating loss deduction.
·         Net interest deduction for lenders.

Enterprise zone tax incentives apply only to business activities and investments that take place after an enterprise zone has received final designation.

For more information on the EZ Credit, please visit ftb.ca.gov.