Bill LaMarr, executive director of the California Small Business Alliance, deftly responds to the Bee’s Board about teh EZ:

Matthew Mahood of the Sacramento Metro Chamber sheds some important light on the EZ debate, particularly as cast by Dan Morain.  Mahood, a member of the business development community, points out three important points:

1.  The number of the qualifying employees is small compared to the total employee workforce and employers only receive the credit for qualified employees;

2.  Surrounding states are aggressively courting California companies, evidenced by the large numbers of companies that have left the state.  Even if the critique is true that “major” corprations get tax credits, these corporations are also “major” employers who pay the lion’s share of the corporate taxes; and

3.     California needs more business incentives not less.  The ones we have work.

Read the full article here.

Made public yesterday is a list of the members comprising a coalition formed in support of the Enterprise Zone Program.  The group includes many diverse and other times divergent groups who have come together to support the EZ program.  View the Joint EZ coalition list.

California’s budget problems dominate today’s political arena.   Without question, the biggest systemic problem draining the budget is one that most politicians are afraid to even approach.  Of course it’s the pension system.  No one seems willing to call out the patent iniquity in the public versus private workforce.  Jerry Brown on Friday did his part to quell the opposition to true pension reform by removing someone who championed for reform.

No, it’s not the events in Wisconsin (although that should serve as a wake up call).  Rather it’s the legal memo detailing why repeal of the EZ is illegal.  Essentially, repeal of the EZ violates the Contracts and Due Process clause of the California and U.S. Constitutions.  The memo’s conclusions are that repeal:

• Constitutes “bait and switch” taxation
• Violates the U.S. and state Constitutions
• Would subject the state to refund claims that nullify the proposed budget savings
• Invites legal action to enjoin repeal
• Subjects local governments to taxpayer lawsuits; and
• Endangers California’s bond rating which could be downgraded

The memo is well researched and convincing.  I hope Brown’s camp is enjoying reading it as well.

As reported today by Californians for Jobs and Safe Communities, Assemblyman Cameron Smyth has called the Governor’s proposal to eliminate the Enterprise Zones exactly what it is – a $1b tax increase.   While the Governor has been trying to claim the high road, he’s skirting the real issues, i.e. that he is raising taxes on businesses and not taking it to the voters.

At the February 7, Assembly hearing, someone asked the LAO representatives why the Governor refuses to take his $1 billion tax increase to the voters.  The response was that because the tax increase doesn’t affect all the voters and it therefore doesn’t need to go to the voters.  Without commenting on the wisdom (or legality) of that response, I suggest that the reason why Brown doesn’t want voters to decide on whether the EZ program continues is because of what Max Shenker reported about the public’s opinion on EZs:

Asked if they favored or opposed continuation of this program, 66 percent of survey respondents indicated they favored continuation while only 26 percent opposed, with the remaining eight percent saying “don’t know” or “not sure.” A look at the demographics shows broad support that runs across gender, party and ideology lines, and irrespective of geography and ethnicity.

With less support in the public, perhaps Brown felt he had a better chance by letting the unions try to convince legislators to eliminate the EZ.  So far, his plan is not working with many legislators publicly lining up behind the program.  Brown needs a two third majority to prevail, which from what I’ve heard at the Capital, he isn’t anywhere near.

In a press conference yesterday, Mayor Antonio Villaraigosa welcomed financial software provider BlackLine Systems to the City of Los Angeles.

As part of its relocation, BlackLine will receive the benefits of the ‘State Enterprise Zone Program’ and the ‘Business Tax Holiday’ which entitles the company to a rate discount from the Los Angeles Department of Water and Power, hiring tax credits and a 3-year exemption from the gross receipts tax, respectively.

“Blackline Systems’ move to Los Angeles highlights the larger trend of businesses moving to our city to take advantage of our competitive business policies such as the State Enterprise Zone Program and the Business Tax Holiday,” said Mayor Villaraigosa.

Read the full arrticle.

A long time supporter of the EZ program, Assemblyman Perez, head of the JEDE committee had this to say at a press conference Friday:

“California has to get serious about making this state a more business friendly place,” said Pérez. “Eliminating the Enterprise Zone program is not going to help the California economy or California communities. Let’s seize this opportunity to improve the program so that it is more transparent and accountable to the public, and more closely linked to our community and workforce development objectives.”

Read the entire piece here.

At the press conference, Ernie Ball, owner of Ernie Ball, Inc. had some harsh words for the governor’s proposal to eliminate the EZ:

The CEO of Ernie Ball Inc., an internationally-known guitar string making plant that’s been in California 49 years, on Friday likened the governor’s threat to abolish Enterprise Zones to a call to Dr. Kevorkian.

“This is the last straw in California” that will break a businesses’ back, Sterling Ball said, as he threw his support to reform legislation that’s been introduced by state Assemblyman V. Manuel Pérez to keep the California Enterprise Zone Program in place.

“California has to get serious about making this state a more business-friendly place,” Pérez said during a rally at Ernie Ball Inc., which settled into the Coachella Valley Enterprise Zone in 2004.

Pérez said 2,000 jobs were created and retained in this enterprise zone, alone.

“The governor’s proposal is a step backward,” he said, before calling attention to reform legislation he’s introduced to improve the state economic development tool.

“Government does not create jobs,” Pérez said. “People like Ernie Ball do.”

Ernie Ball Inc. gives 300 people — 80 percent of whom came in as laborers from the farm fields — a “living wage’,” solid insurance plans and perks, said Ball.

Ball said he spent $8 million of his family’s money to move the company to the Coachella Valley, and has enjoyed 7 percent growth since. “We’ve never had a layoff,” and never taken out a bank loan, he said, of the company that supplies guitar strings to 5,500 music stores in the nation and 100 foreign countries.

“If you pull the Enterprise Zone, there will not be one more job added here,” Ball said.

Read it here.

The attached Fact Sheet highlights how many jobs have been created by the EZ program.  These are numbers that seem to be missing from the debate and certainly from the PPIC analysis.  For example, the EZ program put into the workforce 18,317 Californians who were previously on public assistance.

This from Steve Sims, Taxpayer Advocate in theFTB’s February Tax News:

The Board of Equalization recently ruled in the Appeal of NASSCO Holdings, Inc 2010-SBE-001, November 17, 2010, that a corporate taxpayer may use Enterprise Zone credits and/or the Manufacturing Investment Credit (MIC) to reduce corporate alternative minimum tax (AMT). Since then, I have received many questions on how the FTB is going to implement this ruling. We will be revising Form 100 Schedule P in February 2011. In addition, the NASSCO decision applies only to corporate taxpayers, and does not apply to personal income taxpayers, due in part to differences in how the corporate and personal income tax statutes are drafted. Consequently, personal income taxpayers may not claim the credits at issue in NASSCO in the manner that a corporation could.

The most frequent questions I have heard on this issue are “Can I file an amended return?” and “How will this affect my credit carryover?” Unfortunately, we have yet to determine answers to these questions. Stay tuned however as we are working to get the answers to these questions and more as soon as possible. We will update you in a future Tax News article and possibly a Tax News Flash as information becomes available. In addition, you can go to ftb.ca.gov and search for nassco for additional information.

Steve Sims, EA