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Weekly Featured Enterprise Zone: Modesto, CA

Wednesday, June 23rd, 2010 | Featured Zone

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.

Watsonville Enterprise Zone

Friday, June 18th, 2010 | Featured Zone

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.

Featured Enterprise Zone: Calexico

Friday, June 4th, 2010 | Featured 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


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

Featured Enterprise Zone: Pasadena, CA

Friday, May 21st, 2010 | Tax News

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.

Details on Colton, CA's Enterprise Zone

Friday, April 30th, 2010 | Enterprise Zones, Featured Zone

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.

Featured Enterprise Zone: Indio, California

Wednesday, April 28th, 2010 | Featured Zone

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.

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.

Losses incurred by Enterprise Zone Business may be carried over to years in which taxable income is earned.

A sales tax credit for new machinery and parts purchased by a Zone business is available.

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

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.

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

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

The State of California allows tax credits for employers who participate in child care rideshare programs.

Featured Enterprise Zone: Riverside, CA

Friday, April 23rd, 2010 | Featured Zone

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.

Oroville Enterprise Zone

Friday, April 9th, 2010 | Featured Zone

The Enterprise Zone Program targets economically distressed areas throughout California. Special state and local incentives encourage business investment and promote the creation of new jobs. The purpose of the program is to provide tax incentives to businesses and allow private sector market forces to revive the local economy.  Oroville is one of the few communities in the State that holds a designation for both a Recycling Zone and Enterprise Zone.

Enterprise Zones are state-designated economic development areas created to stimulate growth and create jobs and stimulate investments in local communities. Through tax incentives, hiring incentives, financial incentives, etcetera, the Enterprise Zone is designed to add to a business’s bottom line.

Oroville Enterprise Zone Hire Tax Credit
A qualified business may reduce state income taxes by the amount of wages paid to one or more qualified employees. The local Private Industry Council coordinates the eligibility verification for employers.

During the first year of employment, up to 50% of a qualified employee’s wages may be claimed against your California income tax liability. The credit percentage decreases by 10% annually. The employer’s deduction for wages must be reduced by the amount of the credit claimed.

The hiring tax credit calculation is based on the lesser of:

  • The actual hourly wage paid; or
  • 150% of the California minimum hourly wage, i.e. $8.00 x 1.50 – $12.00.

Employees must spend at least 90% of their work time on activities directly related to the conduct of business in the enterprise zone and perform at least 50% of the work within the zone boundaries.

Oroville Enterprise Zone Sales and Use Tax Credit
Businesses located in the Enterprise Zone may reduce state income taxes by the amount of sales or use tax paid on certain machinery purchased for exclusive use within the Enterprise Zone.

To qualify for the credit, the machinery must be used to manufacture, process, combine or otherwise fabricate a product; produce renewable energy resources; or control air or water pollution. Data processing and communication equipment are also qualified property.

Individuals and Partnerships may claim a credit equal to the tax paid on the first $1 million of machinery costs.

Corporations may claim a credit equal to the tax paid on the first $20 million of machinery costs. Special rules apply for S-Corporation shareholders.

Oroville Enterprise Zone Business Expense Deduction
Businesses operating within the Enterprise Zone may elect to treat 40% of the cost of qualified property as a business expense. The maximum deduction in the Oroville Enterprise Zone is $20,000. Therefore, this particular provision is only of benefit to C-Corporations.

Oroville Enterprise Zone Net Operating Loss Carryover
If a net operating loss is generated by a business that operates within the Enterprise Zone, 100% of the loss may be carried forward for up to 15 years.

Oroville Enterprise Zone Net Interest Reduction for Lenders
Lenders who loan money to an Enterprise Zone business can take a deduction for the net interest earned (interest earned less direct expenses) on the loan.

The types of loans that qualify for this deduction include: business loans, mortgages, and loans from non-commercial sources.

To Qualify for the Loan Interest Earned Deduction:

  • The loan must be made to a trade or business located solely within the boundaries of the Enterprise Zone.
  • The Loan proceeds must be used strictly for the business activities within the boundaries of the Enterprise Zone.
  • The lender cannot have an equity or other ownership interest in the business.

Featured Enterprise Zone: Santa Clarita

Friday, April 2nd, 2010 | Featured Zone

Santa Clarita is the fourth largest city in Los Angeles County. The California Department of Finance estimated the city population as of January 1, 2008 at 177,045. Including unincorporated areas of the Santa Clarita Valley, the population is estimated at over 275,000. It is located about 35 miles northwest of downtown Los Angeles, and occupies most of the Santa Clarita Valley. It is a notable example of a U.S. edge city or boomburb. The FBI rates it as the sixth safest city in the United States with at least 100,000 inhabitants. (Nearby Simi Valley and Thousand Oaks, in Ventura County, traditionally alternate between the first and second spots on the list.) Santa Clarita is ranked as one of the top 100 places to live by Money.

Santa Clarita’s most notable attractions are the Six Flags Magic Mountain amusement park located just outside the city limits in unincorporated Los Angeles County, and the California Institute of the Arts (CalArts), located in Valencia.

If you have a company in this area, you may qualify for the State’s Enterprise Zone tax credits.  To see if you qualify, click here.

Weekly Enterprise Zone Feature: Santa Ana, CA

Friday, March 5th, 2010 | Featured Zone

Santa Ana, CA, has a rich commerce heritage. One of Santa Ana’s most notable businesses is the Rickenbacker musical instrument company, whose electric guitars and bass guitars earned fame in the hands of many rock and roll legends. Santa Ana is also the home of the First American Corporation and Ingram Micro, and the original Glenn L. Martin aviation company, which later merged with the Lockheed Corporation to form the largest aircraft and weapons manufacturing corporation on the planet, Lockheed Martin.

If you are joining the ranks of these prestigious companies in Santa Ana and want to see what types of tax benefits you can take advantage of, please contact us for a free consultation.

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