2014 Enterprise Zone Changes
On June 27th, the Democratic-controlled legislature passed a bill crafted by the Governor which will effectively eliminate (with minor exceptions) the California Enterprise Zone Program for employees hired after December 31, 2013. Fortunately, the currently available draft bill provides that EZ credits can continue to be accrued on “qualified employees” hired prior to 2014, to the extent they continue to work in the Zone. Any unused credits can be carried forward for up to 10 years provided the taxpayer continues to operate in the Zone(s) in which the credits were generated. We recommend that clients document their 2013 and prior year credits as soon as possible to ensure eligibility and avoid any other program changes that may be proposed. For additional information about these changes and EZ planning advice, please contact one of our Tax Partners, Blake Christian, Victor Gonzales, or Ray Dagarag in the Long Beach office: (562) 590-9535.
2013 CA Enterprise Zone Proposed Regulations – Issued Jan. 11, 2013:
Based on the following PROPOSED changes to the EZ program, we are strongly recommending that EZ eligible businesses secure their hiring credit vouchers as soon as possible.
- Retroactive credit vouchers may be limited to one year from date of hire – the Governor has proposed a one year retroactive limit. Prior to this proposed legislation, employers could retroactively apply and voucher qualified employees hired in prior years and amend tax returns to claim retroactive credits with the California four year statute of limitations
- Use of self-certification documentation such as a W-4 will no longer be sufficient to document and employees’ date of hire address. Additional third party documentation will be required to support employees’ date-of-hire address – we are encouraging companies to retain a copy of the employee’s driver’s license at the date of hire. Also, I-9s may not be accepted as support in the future.
- Create stricter zone audit procedures
- Housing and Community Development Department to increase the state-level voucher fees from $5 to $15, presumably each EZ will increase their respective fees to compensate.
State Enterprise & Federal Zone Information
There are 42 Enterprise Zones located throughout California. All businesses that are located in an Enterprise Zone are eligible for program benefits. Some of the cities that have Enterprise Zones are: Los Angeles, Long Beach, Wilmington, Compton, South Gate, Santa Ana, Pasadena, San Francisco, Sacramento, San Diego, Fresno, and many more. California also has seven Federal incentive zones.
Benefits under the EZ program include: 1) up to $13,000/ per employee/ per year hiring credit, 2) sales and use tax credits up to 10.25% of manufacturing/ processing/ technology/ pollution and energy control equipment. 3) favorable financing incentives for lenders and borrowers, 4) enhanced contract bidding, and 5) more liberal asset expensing provisions.
Our average client savings is $250,000. These programs can take a high-tax state and turn it into a low-tax state.
Federal Tax Credits
In addition to state credits available in California and other states, we can also identify federal tax credits (Empowerment Zone, Indian Tribal Lands, Renewal Community, and WOTC/WtW), which range from $1,500 to $8,500 per qualified employee, for your business. Unlike many “boutique” firms, once the credits have been quantified, we also have the expertise to help you maximize the utilization of the credits at both the entity and equity-holder levels. We have developed a number of planning techniques to maximize refunds and utilize future credits.
HCVT is the leading tax incentive CPA firm in the state, the largest CPA firm headquartered in Southern California, and has been performing incentive credit studies for two decades. We have built a solid reputation in assisting taxpayers and their CPA’s in documenting EZ and other state and federal benefits. Our partners have assisted in drafting EZ legislation, and regularly work with the FTB and local cities in managing their EZ programs. Our fee structure is fair and flexible.
If you’re interested in speaking with a specialist, contact Blake Christian or Victor Gonzales at (562) 590-9535.