Does the Enterprise Zone program help cities to attract businesses?  Just ask VMAS, a local television station that recently decided to move from Murrieta to San Bernardino, in large part due to the EZ program.

“We took over the station about a year or so ago and we moved to San Bernardino about two or three months ago,” said David Goran, one of the station’s four principals.

Considering that California is in the middle of one of the largest job crises in recent history, it seems like only a matter of time until state politicians realize the importance of the Enterprise Zone program and its effect on local economies.

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.