C & I is a group of tax consultants who assist with managing and supplying guidance regarding the California Enterprise Zone Tax Credits. This is a niche area of accounting that saves clients tremendous amounts of taxes. C & I deals directly with clients and subcontract with many accountants to do the Enterprise Zone credits for their clients.
Every year, the state of California gives out hundreds of millions of dollars in enterprise zone tax credits. C & I, the tax credit experts, can help you get these credits.
Here’s a piece from today’s KHTS News in Santa Clarita:
The city of Santa Clarita has received state approval to expand their Enterprise Zone designation, which offers California tax credits for businesses who meet certain standards of hiring or purchasing.
The Enterprise zone was first granted by the state to our area in 2007, and the latest addition will qualify businesses in Bridgeport Marketplace, Granary Square, and Baywood at Bridgeport.
“The Enterprise Zone continues to be one of Santa Clarita’s most successful business retention and attraction tools and we are thrilled that our expansion request was approved by the State,” said Santa Clarita Mayor Laurene Weste. “We encourage all businesses in the new expansion areas and throughout the City to take advantage of this opportunity to realize significant tax savings.”
So far over 150 businesses are taking advantage of tax credits through the program, however since 98% of all local non-residential businesses qualify, the City is pushing for more participation. This expansion was first approved by the City Council in April, and it was part of a two-pronged attack to promote and grow the program as part of a larger 21-point economic stimulus plan.
“One of the points of that was to make sure that every business that can take advantage of this enterprise zone, does,” said Jason Crawford, economic development director for Santa Clarita. “And also expanding the enterprise zone to reach as many businesses as possible, so that everyone can take advantage of the benefits.”
Enterprise zones offer a variety of benefits to businesses, including hiring tax credits, sales and use tax credits, income tax credits for employees, and more. Click here for full benefits list.
Amid the celebration for City Hall comes some potentially sour news. Newly appointed Speaker of the California Assembly John Perez has introduced AB 1139, which proposes restricting enterprise zones’ qualified wage tax credits. If passed, the bill would only allow businesses to accept the tax credit if they pay for 80% of their qualifying employees’ healthcare plans and those employees work over 35 hours per week.
Crawford says that adding such a restriction would be harmful to our economic recovery.
“To me, this is absolutely not the time to be doing that. What we need to see is businesses expanding, being successful, hiring people…that’s what’s going to get us out of the economic times we’re in,” he said. “Doing things that hamstring the enterprise zone is not going to get us there.”
The bill is still in Assembly committee and has not yet been brought to a vote.
Many different financial programs make big promises but fail to deliver, however the Enterprise Zone offers local businesses with true incentives to help offset expenses. The Salinas Valley enterprise zone is proving this concept with its latest announcement that Salinas Valley businesses have received approximately $1 million dollars in tax credits.
The TV station, KION, reported the announcement and gave the following report on the program, “The main purpose of an enterprise zone is job creation; businesses can get more than $37,000 in tax credits for every person hired. Also, lenders may be able to receive a deduction on their net interest and companies can also increase their ability to gain state contracts.”
This is a geographic area within the City of Santa Clarita that provides tax incentives to business to revive the local economy! Santa Clarita is located just 20 minutes north of Los Angeles. The Santa Clarita Enterprise Zone covers 97% of all commercial, business, and industrial zoned land within the City of Santa Clarita.
Dan Walters’ Nov. 9 column, “It’s high time for hard look at tax dodges,” questions the effectiveness of “enterprise zones,” yet evidence to the contrary points to the continued success of the program. Business owners large and small face the challenges of the cost of doing business, meeting payroll and ensuring a return on investment in a state with the highest state sales tax, the second highest state income tax and the second highest workers compensation rates in the nation. Simply put, the enterprise zone program is an investment in our state’s future.
A 2006 report to the Department of Housing and Community Development revealed that poverty decreased 7.35 percent more in enterprise zones, unemployment rates fell by 1.2 percent, household incomes grew 7.1 percent faster, and the wages and salary levels grew 3.5 percent more than the rest of the state. Hardly the signs of a “tax dodge” designed to give employers an incentive to do business in California.
Looking beyond the numbers, there are countless stories of businesses that have remained or expanded their California operations because of the enterprise zone program. Most recently, the Bayer manufacturing facility in Berkeley was on its way to the East Coast, but the expansion of the Oakland enterprise zone to include Berkeley persuaded Bayer to keep its operations and its 1,300 employees in the East Bay. Bayer now will invest more than $100 million in plant upgrades to manufacture a new drug to treat hemophilia.
The value of enterprise zones is clearly understood by local governments – there were 15 applications submitted to the Department of Housing and Community Development for four openings in the most recent round of designations. Rather than being viewed as a drain on local budgets, cities and counties compete through a rigorous and costly application process for an enterprise zone designation that will bring measurable economic development benefits to their communities.
Enterprise zones encourage economic growth and job creation, resulting in higher revenues for state and local budgets. The program puts people to work who face the greatest barriers to employment, reducing the strain on overburdened social service programs.
In the face of deep spending cuts, it is short-sighted to suggest elimination of the enterprise zone program. It is the cornerstone of our state’s economic recovery strategy and will lead the way to economic growth and expanded business activity in California.
The thriving metropolis of Los Angeles has three State Enterprise Zones as well as a Federal Empowerment Zone and a Renewal Community designation. Within these areas, businesses can take advantage of State and/or Federal tax credits and deductions not available to businesses elsewhere. The goal of the incentives is to stimulate business attraction, growth, and increased employment opportunities within economically challenged areas of the City.
Enterprise Zones assist businesses located in the zones to lower their operating costs by providing them with tax credits and deductions. The state offers incentives such as: hiring credits, sales & use tax credits, expense and interest deductions. The City of Los Angeles offers local incentives such as, DWP rate discount, site fee waivers, sewer facility hookup payment plans, Work Opportunity Tax Credit, and reduced parking rates.
The Los Angeles Enterprise Zone was conditionally designated by the State on October 15, 2006. When the designation becomes permanent it will be valid for 15 years. In addition, the Eastside State Enterprise Zone designation is valid through January 10, 2008, and the Harbor Zone through March 3, 2009
EMPLOYER HIRING CREDITS Up to $37,440 over a 5-year period per each qualified employee can be claimed by an Enterprise Zone business as a tax credit. An employee can qualify under any one of 13 different categories.
SALES and USE TAX CREDITS An Enterprise Zone business can receive a tax credit of 100% of the sales/use tax paid for equipment purchases for use in the zone. Machinery, machinery parts, telecommunications equipment and office equipment such as copiers, printers, fax machines and telephone systems also qualify.
BUSINESS EXPENSE DEDUCTION An accelerated depreciation is available for tangible personal property the first year it is placed in service in an Enterprise Zone. Office supplies and inventory do not qualify. Limits: $20,000.
NET INTEREST DEDUCTION Lenders can earn tax-free interest on loans made to Enterprise Zone businesses.
NET OPERATING LOSS CARRYOVER 100% of Net Operating Losses may be carried forward for 15 years to reduce the amount of taxable income for those years.
DEPARTMENT of WATER and POWER RATE DISCOUNT The Department of Water and Power offers a five-year electric rate discount to new businesses that are moving into the zone and apply within 18 months for the discount. Existing businesses whose energy consumption in the 6-month period before the date of application was at least 35% greater than the monthly average in the prior 12 months also qualify.
SITE PLAN REVIEW and FEE WAIVER The City provides a fee waiver for review of commercial or industrial architectural plans for projects of 40,000 square feet or greater located in an Enterprise Zone during an initial application for a site plan review.
SEWER FACILITY CHARGE EXTENDED PAYMENT OPTION The City allows Enterprise Zone businesses qualify for a one-time lump sum payment exemption if the Sewer Facility Charge is over $17,000. The fee can be paid in installments over five years but interest is payable on any unpaid balance.
REDUCED PARKING ORDINANCE This ordinance provides reduced parking requirements for Enterprise Zone businesses compared with other areas of the City.
WORK OPPORTUNITY TAX CREDIT (WOTC)
The Work Opportunity Tax Credit (WOTC) has been IMPROVED! The WOTC program is now good through 2011. Now any business anywhere can qualify for the credits as long as they hire persons between the ages of 18-39 who reside in either the Federal Empowerment Zone (EZ) or the Federal Renewal Community (RC) area. Los Angeles contains both an EZ and an RC. There are eight (8) additional eligibility categories, some of which are not dependent on the employee’s address. The WOTC hiring credit is worth up to $2,400 per year for each eligible hire.
A coalition of more than 40 business and employer groups led by the California Chamber of Commerce is continuing to raise questions and concerns about the new “business net receipts tax” being considered by a special state tax commission.
The CalChamber and coalition called on the commission to take time to undertake a thorough analysis of how the new tax will affect jobs and the economy, even after a tax rate is unveiled, before the commission votes on whether to adopt the proposal.
“We expect that the commission will provide an estimated business net receipts tax rate before its final hearing, but we are a short time away from what may be the decision day, and still do not have it,” said CalChamber President and CEO Allan Zaremberg.
“In order for commissioners to understand the impact of this tax on companies and industries, businesses must have the time to calculate how this tax will affect their often-complicated operations.”
The proposed business net receipts tax is designed to be a type of value-added tax in which companies are taxed on total receipts minus all purchases from other firms. The intent behind this new tax is to reduce revenue volatility by basing it on total receipts, rather than profits. The tax also would bring a large category of services businesses into the tax base.
More Specifics Needed
The CalChamber-led coalition presented its latest comments in a letter responding to Gerald Parsky, chairman of the Commission on the 21st Century Economy. At a commission workshop last week, Parsky invited the CalChamber and coalition to follow up testimony with their remaining ongoing issues with the business net receipts tax proposal.
The commission has scheduled a meeting on September 10 in Los Angeles to discuss its tax recommendations.
When creating the commission last fall, Governor Arnold Schwarzenegger asked the group to examine the state’s tax structure with a goal of stabilizing state revenues and reducing volatility, as well as promoting California’s economic prosperity and competitiveness.
In July, the Governor extended to September 20 the deadline for the commission to present its findings and said he will call a special session of the Legislature afterwards to consider the commission’s recommendations.
The coalition said it is requesting a detailed written proposal—including the tax rate and a full analysis of the policy, operational and transitional implications—so that California businesses and economic experts have the opportunity to respond to the commission regarding the proposal and analysis.
“As we emphasized during our workshop testimony, we believe it is crucial for the commission to take sufficient time to analyze” the proposed business net receipts tax, “rather than be driven by any arbitrary deadline, so that any vote of the commission . . . is an informed vote,” the coalition stated in its letter.
A thorough analysis and response by sectors affected also must be available for legislative review because the commission intends for its recommendation ultimately to be presented to the Legislature for consideration, the coalition said.
Key Issues
The coalition letter outlines transitional and operational questions that were not addressed in a “Preliminary Overview” released by the commission on August 21 or the commission’s August 26 and August 28 workshops on the proposed business net receipts tax:
How did the commission arrive at the proposed tax rate? Will the commission model the rate over the past several economic cycles (about 10 years) to determine the ability of the business net receipts tax to generate revenue and stem volatility? What is the risk that revenues will substantially deviate from the commission’s projected estimates?
Which came first, the rate or the base? In other words, was the rate developed as a result of the commission’s judgment as to what best comprises the base of a business net receipts tax as a matter of tax policy, or did the commission determine the most appropriate rate for the economy, and engineer the base to accomplish that rate?
The coalition expressed appreciation for the commission’s strong statements clarifying that only the Legislature, and not an administrative body, would have the authority to set and change the business net receipts tax rate, but noted that the coalition cannot provide a complete analysis of this proposal, nor can an individual company understand it, without knowing the rate and the base to which it applies.
What are the proposed deductions that will be available under the business net receipts tax? More details are needed, the coalition said.
For example, according to the “Preliminary Overview,” employers would not be able to deduct from revenues the cost of employees, an expense that is allowed under the current corporate income tax system. At the workshop, however, the commission indicated there was a possibility of a partial deduction for employee costs.
What about tax fairness? Although the commission’s intent is to develop a less volatile tax system, it should also give due consideration to tax fairness. California’s current tax system is based either on profits, such as the personal and corporate income taxes, or is passed through as a tax on consumption, like the sales tax. The business net receipts tax is imposed upon companies even when they are in a loss position, and it cannot be passed on as a transactions tax.
The coalition noted that it is not aware of any substantial discussion of why the business net receipts tax is a preferable tax policy to the current taxes that are based on profits or consumption. It pointed out that the only other major tax similar to this proposal is the property tax, the subject of the Proposition 13 tax revolt 30 years ago when it became unaffordable for major parts of California society.
Taxpayers and policymakers deserve more discussion and analysis on this issue, the coalition said.
Which economic sectors will be winners and which losers under a business net receipts tax? Adoption of this recommendation must await analysis of its impact on specific economic sectors, the coalition said. For example, businesses with low profit margins and high employee expenses presumably would be especially hard-hit, as would companies in a loss position.
In addition, based on the limited information so far available, it appears the business net receipts tax may shift more of the tax burden onto small businesses, since many pay under the personal income tax system, and would not benefit from elimination of the corporate income tax.
What impact will the proposal have on California jobs and the economy? Adoption of the recommendation must also await analysis of this impact, the coalition stated. If the business net receipts tax amounts to a tax on employees (because it appears employers will not be able to deduct the cost of employees as they do now), will it motivate companies to outsource jobs to other states and nations? Will it further constrain California’s ability to compete for future investments if business loses important incentives such as the research and development or enterprise zone credits? What will become of California’s ability to compete with other states and countries if the cost of exported California goods becomes substantially higher than goods offered by other states and countries? Additionally, will the cost of doing business increase for Californians, due to higher prices for advertising and other business purchases?
California Enterprise Zone Program: A Review and Analysis
Thursday, October 8, 2009 from 10:30 a.m. to 2:00 p.m.
Roosevelt Community Center
901 East Santa Clara Street
San Jose, California 95116
DRAFT AGENDA
This is the second in a series of hearings being held by the Assembly Committee on Jobs, Economic Development, and the Economy on the California Enterprise Zone Program and other geographically- targeted economic development area (G-TEDA) programs. Collectively, the G-TEDA programs represent one of the state’s primary economic and workforce development initiatives.
This hearing will focus on California as a world leader in industries that rely on innovation to remain competitive. Presentations will discuss the changing global economic landscape and the potential and current role of the G-TEDA programs in advancing the state’s competitiveness in the areas of innovation and manufacturing.
Welcome, Introductions and Opening Statements
Chairman Pérez and Members of the Assembly Committee on Jobs, Economic Development, and the Economy will give opening statements and frame the key issues to be examined during the hearing. Mr. Chuck Reed Mayor of San Jose will give a few welcoming remarks.
II. California’s Global Competitiveness: Re-establishing the State’s Innovation Edge
Sean Randolph, Bay Area Council Economic Institute (invited)
Louise Auerhahn, Working Partnerships USA
Representative from Lockheed Martin (invited)
Alissa Anderson, Deputy Director, California Budget Project (invited)
The G-TEDA programs operate within a larger economic and workforce development network. Presentations during this panel will give information on how these programs are used or could be used as part of the state’s larger economic development strategy to re-establish itself within a global marketplace.
III. Economic Development: Focus on Manufacturing
John Weis, Deputy Executive Director San Jose Redevelopment Agency
Neil Struthers, Santa Clara Building Trades Association (invited)
Representative from the Silicon Valley Leadership Group (invited)
Jeff Farano, Owner, SA Recycling (invited)
Representative from Siesman, a global manufacturing company located in an enterprise zone (invited)
Representative from the International Brotherhood of Electrical Workers (invited)
Statute provides legislative intent that clearly states that the purpose of the enterprise zone program is to “stimulate business and industrial growth in depressed areas of the State.” Presentations during this panel will discuss how the G-TEDA programs in conjunction with other programs are used or could be better used to meet this statutory intent and advance competitive manufacturing opportunities.
IV. Public Comment
Anyone interested in addressing the Committee may sign up to speak during the public comment period. A sign-up sheet is located at the back of the hearing room.
V. Summation of Key Concepts and Closing Remarks
Assembly Members will highlight key issues and provide recommendations on further actions by the Assembly Committee on Jobs, Economic Development, and the Economy.
The City of Santa Clarita issued a record number of certificates for the Santa Clarita Enterprise Zone this September, which is the most in the history of the State program. The Santa Clarita businesses community has realized substantial tax savings since the City received its official Enterprise Zone designation from the State in July 2007.
In September 2009, the City issued a record 180 certificates for Enterprise Zone hiring tax credits. This amount is the highest number of certificates issued in a single month to date, with a potential savings of more than $6.7 million directly for City-based businesses.
Old Town Newhall’s Egg Plantation restaurant is one of the many local businesses taking advantage of the hiring tax credit option in the Santa Clarita Enterprise Zone.
“The City’s Enterprise Zone is an incredible program. Being a part of it has saved our business on our California taxes and positively impacted our bottom line,” commented Simon Mee, owner of Egg Plantation.
The increase in certificates issued is attributed to enhanced outreach efforts as part of the goals of the 21-Point Business Plan for Progress, which includes increased Enterprise Zone marketing outreach to get the word out to as many businesses as possible. This effort has resulted in a significant increase in the number of vouchers received by the City. Approximately 97 percent of all commercial, business and industrial-zoned land within the City of Santa Clarita is included in the boundaries of the Santa Clarita Enterprise Zone.
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.
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.
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