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.

San Diego has a rich history of business success and innovation, and it is also home to companies that are constantly visible on the national level.

Aside from the normal benefits that operating a business in one of the State’s California Enterprise have, such as:

• Tax credits may be claimed on up to half the wages paid to qualified new employees.
• Tax credits may be claimed for sales taxes paid on equipment purchased for manufacturing or production purposes.
• All net operating losses may be carried forward as a deduction in future years.
• Business equipment depreciation can be accelerated, up to a limited amount.
• Low-income employees can claim their own personal income tax credits.
• The state will give priority for Industrial Development Bond applications.
• Lenders (both commercial and private) may deduct net interest income on loans to Enterprise Zone businesses.

Running a business in San Diego also has additional benefits, such as:

• The Enterprise Zone Job Referral Service will assist with recruitment and pre-screening for new employees at no cost and will provide the necessary verification for you to claim tax credits on their wages.
• City staff can expedite permit applications and serve as liaison with other City departments.
  Certain development fees may be reduced or waived.
• New development projects located in the City’s Enterprise Zones are eligible for direct assistance by the City. Assistance includes help in determining project application requirements, fast track permit processing, liaison help in the development process.
• The City can provide an exemption from urban impact fees and housing trust fund fees.

Below is a news release from the Franchise Tax Board:

(Sacramento) – The Franchise Tax Board (FTB) announced it accepts California registered warrants (IOUs) as payment of current and past due personal and corporate tax obligations.

To pay a tax liability with an IOU, endorse the IOU on the reverse side with the phrase “Pay to the order of Franchise Tax Board” and your signature then mail it with the tax bill or estimated tax voucher. By law, FTB cannot deposit the IOU until it is payable, but FTB will credit the taxpayer’s account on the date the IOU is received to stop the accrual of interest. If the IOU is not sufficient to pay the outstanding balance, taxpayers should send an additional payment for the difference. Otherwise, the taxpayer will receive a bill reflecting the new balance due.

On October 2, 2009, FTB will redeem the IOUs it has received with the Treasurer. If a taxpayer submits an IOU after October 2, FTB will deposit it and then credit the account with the face value of the warrant plus applicable interest.

Taxpayers wanting to receive the accrued interest from their IOUs must hold them until October 2, 2009, the date IOUs are redeemable.

A registered warrant is a “promise to pay,” with interest, that is issued by the State when there is not enough cash to meet all of the State’s payment obligations. If there is sufficient cash available, registered warrants will be paid by the State Treasurer on October 2, 2009. For more information, see the Treasurer’s website STO Registered Warrant Informationor the Controller’s website California State Controller’s Office: Frequently Asked Questions about Registered Warrants (IOUs).

The new Pasadena Enterprise Zone is significantly larger and covers both commercial and industrial zoned land within the City of Pasadena.  In addition, the City of Pasadena offers local benefits to businesses located within the Enterprise Zone boundaries.  Both the state and local benefits apply during the life of the Pasadena Enterprise Zone from April 10, 2007 until April 10, 2022.  If you’re in the Pasadena area, contact us to see what tax credits you can take advantage of.

Find Out if you Are in the Zone

Step One: Are you located in the 1992 Designation, 2007 Designation or both?

Copy of overlay map

1992 Street Ranges ; 1992 Boundary Map

2007 Street Ranges ; 2007 Boundary Map

• If your business is only located in the 1992 Street Ranges, you can utilize the State Tax Credits from April 10, 1992 to April 9, 2007. If your business is only located within the expansion area, you can utilize the State Tax Credits from September 13, 1999 to April 9, 2007.

• If your business is only located in the 2007 Street Ranges, you can utilize the State Tax Credits from April 10, 2007 to April 10, 2022.  If your business is only located within the expansion area, you can utilize the State Tax Credits from March 6, 2008 to April 10, 2022.

• If you are located within both the 1992 and 2007 Street Ranges, you can utilize the State Tax Credits from April 10, 1992 to April 10, 2022.  Please note: you must file two separate Franchise Tax Board (FTB) 3805Z forms for your 2007 tax filing year.

Step Two: Does your business qualify for the local benefits offered through the City of Pasadena?

Copy of local incentive map

Local Incentive Matrix

• If your business is located within the Enterprise Zone Business Development Area (EZBDA), your business qualifies for Building and Planning permit fee waivers. In addition, if you own a business, the City will waive your business license fee. Although fee waivers are permitted for businesses located within the EZBDA, business are still required to obtain required building and planning permits and business licenses from the City of Pasadena. Nonresidential property owners are excluded from receiving the business license fee waiver.

• If your business is located within the Enterprise Zone Technology Development Area (EZTDA) and if the land use is primarily used for scientific research (Research & Development Business) then your business qualifies for the Building and Planning permit fee waivers, as well as the business license fee waiver. To take advantage of this benefit, Research and Development businesses must obtain a letter from the Enterprise Zone Office first before applying for the fee waivers. Nonresidential property owners are excluded from receiving the business license fee waiver.

Business Incentives
Hiring Credit Program
This five year state tax credit, potentially up to $37,000 per qualified employee, for full-time or part-time employees that meet one of the twelve qualifying criteria under the Hiring Credit Program. Potential criteria includes but not limited to: previously laid off due to plant closure or downsizing, military veteran, public assistance recipient, and resident of a targeted employment area. Enterprise Zone business must obtain a Hiring Credit Voucher from the Pasadena Enterprise Zone Office.

• Targeted Employment Area Ranges for 2007 Designation
• 2007 Targeted Employment Area Map
• State Income Limits 2008 to 2000

Sales and Use Tax Credit
Allows Enterprise Zone businesses to claim a state tax credit equal to the sales and use tax paid on the purchase of qualified equipment. Qualified equipment includes assets such as manufacturing, data processing, office, audio/video, and computer equipment.

Business Expense Deduction
Enterprise Zone businesses may deduct up to 40% of the cost of qualified property purchased for exclusive use in an Enterprise Zone during the first year it’s placed in service.

Net Operating Loss
Enterprise Zone businesses may elect to carry forward 100% of their net operating loss for 15 years.

Net Interest Deduction for Lenders
Lenders can earn a deduction from income on the amount of net interest earned on loans made to Enterprise Zone businesses. Businesses looking for an edge in applying for a loan should bring this credit up with your lender.

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.

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.