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

George Runner, member of the BOE wrote this today:

Areas of Modesto have been designated to be included in the Stanislaus Enterprise Zone by the Governor of California through The Housing & Community Development Department.  Being in the EZ provides businesses with tax incentives offered by the State to aid economic growth and enhance the community.

What are the incentives?
The following incentives are available through the State of California, from which the following summary was obtained:

Hiring Tax Credits
EZ businesses can earn up to $31,574 in State tax credits for each qualified or voucher employee hired over a five-year period.  Refer to The Alliance for information about eligibility criteria to determine whether an employee qualifies for this credit.

Sales & Use Tax Credits
EZ businesses may receive the sales or use tax credit for the purchase of manufacturing or processing machinery, data processing and other equipment used in the EZ.  Individuals, partnerships, subchapter S corporations, and limited liability companies can claim a credit on the first $1,000,000 of qualifying purchases per year, while corporations can claim credit on the first $20,000,000 of purchases per year.

Business Expense Deduction
Up front expensing of certain depreciable property can be claimed.

Preference Points
EZ businesses can earn preference points on state contracts.

Operating Loss Carryover
Up to 100% of the Net Operating Loss may be carried forward for up to 15 years.

Net Interest Deduction
Lenders to EZ businesses may receive a net interest deduction.

Unused Tax Credits
Unused tax credits can be applied to reduce future tax liability.

A business located in the Watsonville Enterprise Zone (see map) can take advantage of tremendous tax credits offered by the State of California. Below are some of the tax credits, for more information go to Economic Development Areas (EDA).

Hiring Tax Credit

Businesses may reduce state taxes by up to $37,440 per qualified employee over a five-year period. Qualified employees are new employees who are hired to work at least 50% of their time within the Enterprise Zone and meet ONE of the following criteria:

• Resident of the Targeted Employment Area (see TEA map) or
• Participant or eligible for services from the Santa Cruz County Career Works program (Calworks/WIA) or
• Dislocated and/or unemployed or
• Seasonal worker or
• Public assistance recipient or
• Work Opportunity Tax Credit eligible or
• Veteran or
• Native American

The Redevelopment and Housing Department determines eligible employees and issues the vouchers allowing businesses to take advantage of the tax credit. The City of Watsonville offers workshops for businesses currently participating in the EZ program and also for those businesses wanting more information on how to participate. Please contact Jacqueline Ventura to obtain applications for vouchers or to attend the next informational workshop at: 831-768-3095 or jventura@ci.watsonville.ca.us

Sales and Use Tax Credit

Businesses can substantially reduce their California income or franchise tax obligations by taking advantages of this tax credit. In any year, companies may claim a tax credit equal to the tax paid on certain machinery purchases to be used exclusively within the boundaries of the Watsonville Enterprise Zone. Individuals and partnerships may make this claim on the first $1 million of machinery purchased; corporations may claim the credit on the first $20 million of machinery purchased in any one year. For more information, contact the California Franchise Tax Board at (916) 845-3464 or http://www.ftb.ca.gov.

Business Expense Deduction

Businesses may deduct part of the cost of tangible property as a business expense in the first year it is placed in service. This includes most equipment and furnishings purchased for exclusive use in the Zone (excluding real estate). Depending on the date the property was placed in service, relative to the Enterprise Zone Final Designation, the amount deducted per property can be as much as $20,000. For more information, contact the California Franchise Tax Board at (916) 845-3464 or http://www.ftb.ca.gov.

Net Operating Loss Carryover and Net Interest Deduction for Lenders

Individuals or corporations in an Enterprise Zone may carry over up to 100% (versus 50%) of net operating losses (NOL) to future years to reduce the amount of taxable income for those years. The NOL carryover is determined by computing the business loss, which results strictly from business activity in the Enterprise Zone. (Suspended for 2002, 2003) Individuals, non-commercial lenders and commercial institutions may deduct the net interest earned on a loan to a business operating solely within the Watsonville Enterprise Zone. The net effect could be a 3 to 4% increase on return-on-investment! Net interest deductions are for the life of the Enterprise Zone.

Enterprise Zones were legislated throughput the state in 1984.  The program provides tax incentives t businesses, thereby encouraging and bolstering private sector market forces in target areas.  Calexico and the County of Imperial bordering Mexico have California Enterprise Zone status covering 14,298 acres.

In 1985, California legislation was passed enabling the designation of  “Enterprise Zones” throughout the state. The purpose of the Enterprise Zone program is to provide tax incentives to businesses, thereby encouraging and bolstering private sector market forces in target areas.

Enterprise Zone companies earn tax credits by hiring participants in the Workforce Investment Act (WIA), Cal Works and the One Stop Services Department.

Business Investment Incentives /Tax credits and benefits to qualified companies are:

• Up to 100% Net Operating Loss carry-forward. NOL may be carried forward 15 years.
• Firms can earn $37,440 or more in state tax credits for each qualified employee.
• Corporations can earn sales tax credits on purchases of $20 million per year of qualified machinery and machinery parts.
• Up-front expensing of certain depreciable property.
• Lenders to zone businesses may receive a net interest deduction.
• Unused tax credits can be applied to future tax years, stretching out the benefit of the initial investment.
• Enterprise Zone companies can earn preference points on state contracts.

Other State investments include State contract bid preference points; low-interest small business loans; and lender’s deduction of interest income earned on loans to businesses in the Zone. Also qualifying new employees can claim tax credit on their State Income Tax.

Calexico Administrative Incentives

The City of Calexico offers these administrative incentives to new and expanding businesses:

• Fast-tracked building permits
• Waiver of building permit, plumbing and electrical fees
• Rebate of business license and refuse collection fees for a two year period.

How much can My Business Save?

The answer depends totally on the tax position of your business and the nature of your business investments. A large manufacturer with significant equipment investments and equipment investments and many new employees save literally hundreds of thousands of dollars, while another business might make investments which do not meet the qualifying criteria. It is best, therefore, to be aware of the tax benefits and make investment decisions accordingly. It should be noted that many of the investment incentives consist of State tax credits, which can be claimed against a tax liability, and therefore, are more valuable than tax deductions.

California Income Tax Effect of The Employer’s Tax Wage Credit

Summary

An employer may claim a credit against its income tax liability for a percentage of wages paid to qualified employees.

Amount of Credit

50% of qualified wages in Year 1
40% of qualified wages in Year 2
30% of qualified wages in Year 3
20% of qualified wages in Year 4
10% of qualified wages in Year 5

Pasadena is a city in Los Angeles County. Famous for hosting the annual Rose Bowl football game and the Tournament of Roses Parade, Pasadena is the home of many leading scientific and cultural institutions, including the California Institute of Technology (Caltech), the Jet Propulsion Laboratory (the leading robotics and spacecraft design and manufacturing NASA center), Art Center College of Design, the Pasadena Playhouse, California School of Culinary Arts Pasadena and the Norton Simon Museum of Art. As of the 2000 census, the city population was 133,936, making it the 160th largest city in the United States. The California Finance Department estimated the Pasadena population to be 146,166 in 2005. Pasadena is the 6th largest city in Los Angeles County, and the main cultural center of the San Gabriel Valley.

If you are looking to move your business into Pasadena there are a wide range of tax credits available to you, such as:

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.

The City of Colton, incorporated in 1887, is an “American Classic” with a very colorful past and proud history. Strategically located in the heart of Southern California, Colton is at the crossroads of the Inland Empire. It boasts affordable housing, low business taxes, a wide range of community programs for all ages and a very responsive city government. Colton is a full service City with its own Police and Fire Protection, Water and Wastewater Facilities, as well as its own Electric Utility—the second oldest in the State.

If you have a business in Colton, please contact us to see if you qualify for several key California Enterprise Zone credits.

Strategically located in the heart of the fastest-growing region in the United States, California’s Inland Empire, the City of Colton encompasses approximately 18 square miles of fertile valley nestled against the scenic San Gorgonio Mountains. A comprehensive transportation network, a skilled, ready-to-work labor pool and a viable partnership between business and City Government contribute vitality to established commerce. Available sites and a “can-do” attitude toward economic development make Colton attractive for successful relocation and new enterprise. As we move forward, we continue to build on a solid foundation rich in history and long-standing community values. We’re a city moving ahead – with Confidence.

Colton has a well balanced and diversified economy and is home to a variety of manufacturing, service, retail and distribution companies including Con-Agra Milling; McNeilus Truck; Williams Furnace; Telco Food Products; Al’s Garden Art; U.S. Express; Jon-Lin, Inc.; Ashley Furniture; the new state of the art medical facility, Arrowhead Regional Medical Center; along with the largest group of RV Dealers west of the Mississippi River.

If you operate a business in the city of Indio, CA, you most likely have access to a wide variety of tax credits to California’s State Enterprise Zone legislation.  See below for a full list of tax credits, and contact us directly for assistance on how to take advantage of this program.

EMPLOYER HIRING CREDIT
Business may reduce State of California Income Tax for a portion of the wages paid to qualified employees. The savings cover a five year period and can add up to $27,000 per employee. If the employee lives in the Targeted Employment Area (TEA) qualification is automatic and requires only a single form.

NOT OPERATING LOSS CARRYOVER
Losses incurred by Enterprise Zone Business may be carried over to years in which taxable income is earned.

SALES AND USE TAX CREDIT
A sales tax credit for new machinery and parts purchased by a Zone business is available.

NET INTEREST DEDUCTION FOR LENDERS
Net interest earned on loans to businesses located in the Enterprise Zone is eligible for the credits on the California Tax Return.

BUSINESS EXPENSE DEDUCTION
Certain property purchased for use in the Enterprise Zone may be deducted as a business expense in the first year it is placed in service.

BIDDER’S PREFERENCE
Enterprise Zone Business can receive a Bidder’s Preference of 5% when bidding on State of California contracts.

MANUFACTURER’S INVESTMENT CREDIT
To encourage investment in manufacturing equipment, the State of California offers a tax credit to taxpayers operating in the following SIC codes: 2000-3999.

CHILD CARE AND RIDESHARE TAX CREDITS
The State of California allows tax credits for employers who participate in child care rideshare programs.

Riverside County is a strategic location for business because of the many incentive zones throughout the county, the diverse and accessible transportation network and the high quality of life.

Coachella Valley  Enterprise Zone
The state-designated zone is a 56 square mile, 36,000+ acre area covering the cities of Indio and Coachella, along with the unincorporated communities of Thousand Palms, Thermal and Mecca. Numerous state tax incentives are available to businesses located within the zone

Recycling Market Development Zones
The Recycling Market Development Zones strive to attract businesses using recycled materials in their manufacturing process. The state has established a low-interest rate revolving loan fund which may be used for land acquisition, leasehold improvements, equipment purchases, and working capital for up to 75 percent of the project cost to a maximum of $2 million.

Redevelopment Project Areas
Riverside County has six redevelopment project areas including 37 sub-areas that encompass 61,016 acres throughout the county. The Redevelopment Agency utilizes tax increment and bond proceeds to finance public improvements, business assistance and housing in accordance with California Redevelopment Law. Businesses located within the project areas may qualify for construction of public improvements, tax rebates and fee assistance. In addition, the Agency provides assistance to improve, preserve and increase the supply of housing that is affordable to low- and moderate-income persons in all unincorporated areas of the county.

The redevelopment project areas offer a variety of opportunities for industrial, commercial, aviation and residential development, as follows:

• 1-1986
• I-215 Corridor
• Desert Communities
• Jurupa Valley Project Area
• Mid-County Project Area

March Air Reserve Joint Powers Authority
The joint use of March Air Reserve Base is opening up new opportunities for business development. The March Joint Powers Authority, comprised of representatives from the local jurisdictions of the cities of Riverside, Moreno Valley, and Perris and the County of Riverside, is planning reuse and joint use at March Air Reserve Base in western Riverside County. The March Joint Powers Authority is finalizing its redevelopment plans which will include new business development.