Enterprise Zone Net Interest Deduction

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Finalized! CA Sequoia Valley Enterprise Zone Designation Completed

Wednesday, January 18th, 2012

The California Department of Housing and Community Development (HCD) announced Tuesday the final designation of the Sequoia Valley Enterprise Zone (EZ). This designation is effective retroactively to October 6, 2010 and will expire in 15 years. Read about it at The Recorder Online.

In September of last year, I reported on some controversy affecting this and eight other “conditionally” designated zones.  California Governor Jerry Brown’s office had instructed HCD to delay the final designation of these zones.  That order has since been retracted and the remaining designations are being processed.

According to the zone’s website, the Sequoia Valley EZ affects the California communities of Cutler/Orosi Dinuba, Ducor, Earlimart, Exeter, Farmersville, Goshen, Ivanhoe, Lindsay, North Delano, Pixley, Poplar, Porterville, Richgrove, Strathmore, Terra Bella, Tipton, Traver, Tulare, Visalia, Woodlake.  However, if your business is located within any other part of Tulare County, don’t rule out eligibility until you have confirmed it with a phone call.

Businesses located within the EZ are eligible for a number of valuable tax incentives including:

EZ Hiring Credit
Firms can earn $37,440 or more in state tax credits for each qualified employee hired

EZ Sales & Use Tax Credit
Sales tax credits on purchases of qualified machinery and parts

Net Operating Loss Carry-forward
Up to 100% Net Operating Loss (NOL) carry-forward (which can be carried forward for 15 years)

EZ Business Expense Deduction
Up-front expensing of certain depreciable property

Net Interest Deduction
Lenders earn tax-free interest on qualifying loans to EZ businesses.

Bid Preferences
EZ vendors can earn preference points on state contracts.

Please feel welcome to contact me with your questions about the State of California’s EZ program, or about this or any other particular CA zone.  I am Vaughn Hromiko, vah@WOTCPlanet.com

 

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California Gives Life to Three New Enterprise Zones!

Wednesday, December 15th, 2010

According to an article published this afternoon at CaliforniaNewsWire.com, the California Department of Housing and Community Development (HCD) announced today the conditional designation of three new enterprise zones.  The new zones are Anaheim, Harbor Gateway and Santa Clarita Valley.  I checked the HCD website minutes ago and find no mention of the announcement there, so I guess we’ll find out more later.

California has authorized 42 enterprise zones state-wide.  The three new zones are taking the place of enterprise zones that recently expired — typically after a designation period of 15 years (although some early zones received short extensions after their original 15-year lifespan had expired).  New zones receive their designation through an expensive and highly competitive application process.

  • Tax benefits associated with the new enterprise zones will be identical to those offered by existing zones.
  • Hiring Credit — offers a state income tax credit based on a percentage of the wages paid to qualifying employees
  • Sales & Use Tax Credit – offers a state income tax credit based on the amount of sales tax paid in purchasing qualifying equipment for use within the enterprise zone
  • Net Interest Deduction – provides tax free interest income to lenders who loan money to qualifying enterprise zone businesses
  • Upfront Business Expense Deduction for qualifying capital investments (rather than depreciation)
  • Zone Net Operating Loss Carryover

My firm specializes in helping employers identify and document their eligibility for enterprise zone hiring credits.  Although the program provides a substantial tax benefit, the qualification is primarily a human resources process.  Most businesses already hire qualifying employees, but need assistance to identify and document qualifying factors.  It sounds hard — and it is for the uninitiated — but we make it look easy.

If you have questions about the California enterprise zone program, please contact me.  I am Vaughn Hromiko.  vah@WOTCPlanet.com or (800) 655-5281, extension 101.

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New Sacramento Enterprise Zone Boundaries Made Public on New Website

Thursday, September 23rd, 2010

Great news for Sacramento area businesses! The long-awaited boundaries for the new Sacramento Enterprise Zone have been published and are now available on the enterprise zone’s new website.

I discovered the new website this morning during a routine review of the zone’s progress via the old website.  James Pardun, Enterprise Zone Manager for Sacramento County, tells me that the website went live late last week. So, this is all fresh information.  Thousands of additional businesses will find themselves eligible for new tax savings in the form of:

  • Hiring Credits
  • Sales & Use Tax Credits
  • Business Expense Deduction
  • Net Interest Deduction (for lenders)
  • 15-year Carryover of Net Operating Loss

Please feel welcome to contact me with your questions about the California Enterprise Zone program.  I am Vaughn Hromiko.  vah@WOTCPlanet.com  or (800) 655-5281, ext 101

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CA Enterprise Zone Expansion Approved in San Fernando Valley

Tuesday, May 11th, 2010

According to an article published online today by the Los Angeles Times, an un-named state agency has approved a California Enterprise Zone expansion in the Los Angeles San Fernando Valley area.  Of course, the agency must be the California Department of Housing and Community Development (or HCD), which oversees the state’s enterprise zone program.  According to reporter Phil Willon at Los Angeles City Hall,

The expansion area includes portions of Chatsworth, Canoga Park, the Van Nuys Airport area, Woodland Hills and the northeast Valley. Some of the major businesses and retail centers that will benefit are Micro Solutions Enterprises in Van Nuys, the Woodland Hills Auto Gallery, 3M and Nestle Foods in Canoga Park, the Northridge Plaza, the Westfield Topanga Plaza in Warner Center and firms around the airport.

California’s Enterprise Zone (EZ) program offers significant tax benefits to businesses located within their boundaries. The EZ Hiring Credit provides an income tax credit based on wages paid to qualifying (and properly certified) employees working within the zone.  The amount of tax benefit is nothing to sneeze at.  Try this on for size:  50% of wages paid during first year of employment, capped at 150 % of minimum wage.  In practice, this translates easily to $12,000 in tax credit flowing from a single qualifying full-time employee.

Another similar benefit is the EZ Sales or Use Tax Credit — actually an income tax credit based on the amount of sales or use tax paid in the purchase of qualifying equipment placed into service within the zone.

Other benefits include the (1) EZ Business Expense Deduction, (2) EZ Net Interest Deduction (for lenders), and (3) EZ Net Operating Loss Carryover provision.

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