Senator Cedillo has amended SB 767 to suspend a corporation’s use of Enterprise Zone tax credits if the corporation accepted government funds via the Troubled Assets Relief Program (TARP).  The text of the bill introduction is as follows:

“The Corporation Tax Law authorizes various credits and deductions in computing income subject to taxation.

This bill would suspend specified credits and deductions for a
taxpayer that is a participant, as specified, in the federal Troubled
Assets Relief Program, as provided.…This bill would take effect immediately as a tax levy.”

With the slumping national and local economies doing businesses to constantly cut costs, it amazes me that so few local businesses are taking advantage of the massive amounts of potential tax credits available to companies working in a California Enterprise Zone.

A great illustration of this phenomenon is the county of San Bernadino.  Even thought it has been hit by the current recession as hard as any area of the state, only 68 businesses are taking advantage of the tax credit program.  Matt Wrye, a staff writer for the SBSun estimates the following:

Based on the zone’s hiring-credit incentive alone, an astonishing $175 million might be going unclaimed by businesses in the zone, assuming just one employee at each company qualifies for the credit.  That’s $175 million – it could be much more or less – the local economy is hungry for.

The question is, can your business afford not to take advantage of this tax program?  If you have a company in the San Bernadino area, or any of the state’s enterprise zones, contact us for a free consultation to see how much you could be saving in tax credits this year.

The City of Barstow is located in the Inland Empire North region of San Bernardino County, midway between Los Angeles and Las Vegas.  With Interstates 15 and 40, and highways 58 and 247 all converging in Barstow, the city is a major transportation corridor with more than 60 million people in 19 million vehicles traveling through Barstow each year. The city is home to an Amtrak depot at its Historic Harvey House.

Catering to the tourists is Barstow Outlet and Tanger Outlet Center which together boasts more than 100 outlet stores. Barstow offers all the major conveniences of small town living with the resources of major metropolitan areas only a short drive away.

If you have a company in Barstow, click here for a free consultation and tips on how to take advantage of the Enterprise Zone tax credits available to you.

Effective April 1, California’s sales tax increased by 1%.  The increase is set to expire on either July 1, 2011 or July 1, 2012 depending on the outcome of the May 19 special election.  Some counties voted to increase their local taxes even more.

Pico Rivera and South Gate take the dubious honor of having the highest sales tax in the state with a rate of 10.25%.  The only bright side is that the Enterprise Zone tax credit program allows companies to recover the sales tax paid on qualified machinery used in the Enterprise Zone.  Here is the link to the FTB’s Special Notice listing the new tax increases by city and county.

The final version of a landmark study has just been released by several professors at the USC  Marshall School of Business.  The report concludes that Enterprise Zones have “positive, statistically significant, impacts on local labor markets in terms of the unemployment rate, the poverty rate, the fraction with wage and salary income, and employment.”  The news couldn’t come at a better time when the sagging economy has forced every local and national government to explore new ways to stimulate economic activity.  Importantly, the report counters are previous report that Enterprise Zones did not positively impact the economy.  The USC report, however, relied on sounder assumptions, considered many different programs in tandem and also looked nationally, not just at California as the previous study had.  The full report can be viewed here.

The city of Compton has been known as one of the most dangerous neighborhoods in the country, however ever since the area was designated as a California Enterprise Zone in 2006, the city has been in the midst of a rapid economic expansion.  With national chains moving into the area on a regular basis, many visitors would not even recognize this once feared region.  And one of the key factors in this growth has been the tax benefits given through the California EZ.

Newsweek recently featured this fantastic growth, here is a quote from the article, “And that vacant lot off the freeway? Thanks in part to Compton’s designation as an enterprise zone in 2006, it’s been replaced by a $65 million suburban strip mall, whose palm trees and flower beds give it a look more reminiscent of Orange County than South Central. “Compton is a fundamentally different place,” says Stanford University historian Albert Camarillo, a Compton native who is working on an oral history of his hometown. “It’s one of these communities that’s really in the throes of change.”

Compton’s economic growth appears to only be starting.  With new businesses moving into the area with regularity, it seems only a matter of time until this neighborhood begins to lose its stigma as an area filled with crime and violence, and become a city attractive to businesses and citizens alike.

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.