As the federal government continues adding to its economic stimulus efforts, city and state governments are contracting their number of employees along with public projects to preserve capital.

“The state right now is doing the exact opposite of what an economist would do,” said Bill Watkins, the executive director of the UCSB Economic Forecast Project. “There’s definitely not a consensus among economists that stimulus spending is the right approach … but you can’t find an economist who would say you should raise taxes and cut spending in a recession, which is what the state is doing.”

To help combat the current economic issues that are plaguing small businesses in the region, the city of Oxnard in Ventura County is petitioning to be added to the state’s Enterprise Zone program.  This would assist small and medium sized businesses with a wide variety of tax benefits and would attract companies to move into the area.

The city of Oxnard would waive some of its permit fees for businesses in the enterprise zone and allow developers to defer other fees until their projects are finished.

On Friday, the FTB held an Interested Parties Meeting to listen to public comments regarding implementation of the Combined Reporting Group Credit Assignment for credits including the Enterprise Zone tax credits.  The FTB will continue to invite and analyze comments from the public while it fine tunes the methods by which the California enterprise zone tax credits can be assigned among companies.  The FTB issued a draft form 3544 for assignment of the tax credits and expects to update the FAQs on the website in the next two weeks in response to the issues raised at Friday’s meeting.  The current FAQ is posted on the FTB’s website here.

Today, the FTB is holding an Interested Parties Meeting to discuss implementation of the new rule allowing companies to assign credits to an affiliate.  As proposed, the FTB intends to impose the assignor’s usage limitations on the assignee.  The FTB also proposes that the assignee can only use the assigned credits to offset income generated from the same zone that generated the credits.  The assignee will be able to start using assigned credits in for the 2010 tax year.

If you want to hear how this can affect your business, please contact us directly.

On March 3 both the Los Angeles Harbor EZ and the Madera EZ expired.  On April 4 the Sacramento Florin Perkins EZ also expires. All three  jurisdictions are applying for new zone designations.  The deadline for submitting applications is March 27.

On March 16, 2009, the San Bernardino Valley Enterprise Zone (SBVEZ) announced this week that the California Department of Housing and Community Development granted final designation to the zone for a 15-year period.

With record high unemployment, the state of California is taking steps in order to increase the number of jobs provided by small businesses.  One of the most recent developments in the effort was when California announced that it has set aside $400 million to encourage small businesses to hire new full time workers.

Below are the details on the hiring credit:

• A new tax credit of $3,000 for each additional full-time employee hired is available to small businesses with 20 or less employees beginning January 1, 2009.
• The credit is not subject to the 50% limitation for business credits.
  The total amount of credit available to be claimed by all taxpayers is capped at $400 million.
• The credit must be claimed on a timely filed original return received by the Franchise Tax Board on or before a cut-off date specified by the Franchise Tax Board.
• Taxpayers claiming the credit on an original return received by the Franchise Tax Board after the cut-off date is met will be notified that the credit has been denied.
• Taxpayers that have been denied the credit as a result of the $400 million cap being reached will not be assessed an underpayment of estimated tax or underpayment of tax penalty to the extent the underpayment was created or increased by the disallowance of this credit.

Today the Franchise Tax Board (FTB) announced that Enterprise Zone tax credit contingent contracts do not need to be reported to the FTB with Form 8886.   This notice makes the FTB position consistent with federal law relating to Enterprise Zone or other credits services that are provided on a contingency basis.  Click here to read the original FTB post.

As always, feel free to contact us directly for a free consultation, and we can help you and your business take advantage of the California Enterprise Zone tax credits.

The California Enterprise Zone program continues to shine amid the global recession.  No longer is it simply seen as an additional incentive for a city to obtain, several key regions throughout the state are now pushing for an EZ approval in order to dramatically increase attractiveness to companies from around the nation.

One city in particular that has gone on record to pursure an EZ designation is Escondido.  The City Council made the decision to pursue a designation at its meeting Wednesday.

“Escondido has a good shot at it. If we can get it, it will be that much more powerful an incentive,” Councilman Dick Daniels said. “These are times when businesses are not thinking about relocating, but we want to be in position when they do. We have great potential for a business park.”

If the city is successful in becoming a new enterprise zone, they will be able to compete directly with the neighboring San Diego Regional Enterprise Zone.

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.

Great news if you have a business operating in the city of Newman, California.  The city has recently been designated at a new California Enterprise Zone by the State.  This is exciting for Newman and also Stanislaus County, which now boasts an EZ for every city within its borders.

This move by the state will assist in bringing new business to the city of Newman along with attracting local companies to continue operations at a more profitable level.

“An enterprise zone is part of the state’s ongoing effort to increase the number of jobs in California,” said Doug Sweetland, director of economic development for the Alliance.

“In this very difficult economy, it is a great time for businesses to take advantage of the benefits.”

Assemblyman V. Manuel Perez, has introduced AB 1159.  This bill extends the Sales or Use tax credit benefit of the Enterprise Zone (and TTA and LAMBRA) program to include a credit for the purchase of equipment related to renewable energy.  The bill would be in effect from 2009-2016.  Below is the relevant text of the bill:

17053.71.

(a) For each taxable year beginning on or after January
1, 2009, and before January 1, 2016, there shall be allowed as a
credit against the “net tax,” as defined by Section 17039, an amount
equal to the sales and use tax paid or incurred during the taxable
year by the taxpayer for the taxpayer’s purchase of qualified
property.

(b) For purposes of this section, “qualified property” means any
property used in an enterprise zone, targeted tax area, or a local
military base realignment area for the production or generation of
renewable energy.