EXCISE TAX REFUND
Lynwood Enterprise Zone
The Lynwood Enterprise Zone covers nearly all of the commercial and industrial zoned properties in the cities of South Gate and Lynwood. Hiring residents residing in targeted areas surrounding the zone may qualify your firm for additional special tax credits. To take advantage of all of the available tax credits for this or any other California Enterprise Zone, contact us.
WHAT IS THE BACKGROUND OF THE CITY’S ENTERPRISE ZONE?
In September 2006, the cities of South Gate and Lynwood, applied to the State of California for an Enterprise Zone designation. This is a competitive process and on November 3, 2006, the cities of South Gate and Lynwood were awarded conditional designation. The City of South Gate was also authorized to receive and process applications from eligible businesses located within the Enterprise Zone area.
WHO IS ELIGIBLE?
Any individual or company operating a trade or business within the Enterprise Zone is eligible to participate in the program.
WHAT ARE THE BENEFITS?
The Enterprise Zone program may provide substantial tax savings for your business. There are five incentives available to taxpayers that invest in or operate a trade or business located within the Enterprise Zone.
The incentives are:
1) Hiring Tax Credit
2) Sales and Use Tax Credit
3) Business Expense Deduction
4) Net Operating Loss Carryover
5) Net Interest Deduction for Lenders and Bankers
WHAT ARE STATE HIRING CREDITS?
- A business within the Enterprise Zone boundary may reduce its State income tax by a percentage of the amount of wages paid to one or more qualified employee(s).
- A business/firm can claim up to 50% of an employee’s wages in the first year of employment. The credit percentage decreases by 10% annually, phasing out after five years.
- Approximately $31, 570 or more in State tax credits is potentially available per qualifying employee hired over a five-year period.
WHICH EMPLOYEES QUALIFY ME FOR THE HIRING TAX CREDITS?
A qualified employee is an employee who immediately before starting work for the business is any of the following:
1) An employee who qualified for the former Program Area hiring credit;
2) A person receiving or is eligible to receive subsidized employment, training, or services funded by the federal Job Training Partnership Act (JTPA), or it is successor;
3) A person eligible to be voluntary or mandatory registrant under the Greater Avenues for Independence Act of 1985 (GAIN), or its successor;
4) An economically disadvantaged individual 14 years of age or older;
5) A qualified dislocated worker;
6) A disabled individual eligible for, enrolled in, or who has completed a state rehabilitation plan;
7) A service-connected disabled veteran;
8) A veteran of the Vietnam era;
9) A veteran who recently separated from military service;
10) An ex-offender convicted of a felony or misdemeanor punishable by incarceration or probation;
11) A person eligible for, or a recipient of:
- Federal Supplemental Security Income (SSI) benefits;
- Aid to Families with Dependent Children (AFDC);
- Food Stamps; or
- State and local general assistance (GA)
12) A Native American Indian, or other Native American descent
13) A resident of a Targeted Employment Area (TEA); or
14) For employees hired during taxable years beginning on or after 1/1/1998, a member of a targeted group as defined in the federal Work Opportunity Tax Credit (as in effect January 1, 2001, in Internal Revenue Code Section 51).
In addition, at least 90 percent of the employee’s work must be directly related to a trade or business activity located in the Enterprise Zone and at least 50 percent of the employee’s work must be performed inside the boundaries of the Enterprise Zone.
WHAT ARE SALES AND USE TAX CREDITS?
- California income or franchise tax may be reduced by the amount of sales and use tax paid on process-related machinery parts purchased for exclusive use in the Enterprise Zone.
Qualifying property is machinery or machinery parts used to:
- Manufacture, process, fabricate, or assemble a product;
- Produce renewable energy resources;
- Control air or water pollution;
- Data processing and communications equipment including, but not limited to, computers, computer-automated drafting systems, copy machines, telephone systems, and fax machines; and
- Motion picture manufacturing equipment central to production and postproduction, including but not limited to, cameras, audio recorders, and digital image and sound processing equipment.
- Individuals, partnerships, and limited liability companies may claim a credit equal to the sales and use tax paid or incurred on the first $1 million of qualified machinery purchased. For corporations, the limit goes up to $20 million. The tax credit may be carried over.
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