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Tax Credits & Incentives

State Enterprise Zone

State Enterprise Zone (EZ) Tax Credits and Incentives

Applying for the Enterprise Zone is easier than ever with our new web app.

OVERVIEW
The Enterprise Zone program was established in 1984 to stimulate business investment in depressed areas of the State and create job opportunities for Californians.

California’s Legislature enacted a sunset of the Enterprise Zone program as well as three replacement programs in the 2013/2014 budget. A summary of the wind-down of the existing EZ program, as well as an overview of the replacement programs, is below for convenience. Please note that this is not tax or legal advice, and not intended to be tax or legal advice – and you should consult professionals for specific guidance. Also, please note that relevant State agencies have yet to release specific guidance and instructions regarding the administration of these programs. We will post this information as it becomes available.

CURRENT CALIFORNIA STATE EZ PROGRAM – Effective for hires through December 31, 2013

  • More than $36,000 over five years in hiring tax credits for each qualified employee hired. Instructions on how to apply, can be found here (pdf).
  • Sales and Use tax credits on purchases of qualified machinery and parts (phone equipment, fax machines, printers, manufacturing equipment, etc.)
  • Accelerated expensing of certain depreciable property.
  • Up to 100% Net Operating Loss deduction and 15 year carry-forward.
  • Application of unused tax credits to future tax years.
  • Net Interest deduction for Zone business lenders.
  • Eligibility - Businesses must be located within the boundaries of the Enterprise Zone. Find out if your business address qualifies for the state zone effective through May 27, 2007 and/or new state zone EZ tax credits and incentives.
  • Application Deadlines - OEWD will continue to process applications for qualified employees hired on or before December 31, 2013 through June 30, 2014.

WIND-DOWN OF EXISTING ENTERPRISE ZONE PROGRAM- Effective Immediately

  • All EZ credits, including the hiring credits, sales/use tax credits, NOL carryover, business expensing and net interest deduction are repealed effective Jan. 1, 2014.
  • Businesses have 10 years to claim any unused EZ credits. Or, put another way, you have 10 years to use what you’ve earned before 2014, but you can’t continue to earn new credits after 1/1/2014
  • Businesses may apply for vouchers for qualified employees hired on or before December 31, 2013 via San Francisco's online portal through June 30, 2014.  Applications will not be accepted after June 30.

 

THREE REPLACEMENT PROGRAMS – Effective January 1, 2014
These three programs are legislated in State Assembly Bill 93 and State Senate Bill 90.  The state has put together a side by side comparison of the new programs vs the Enterprise Zone.  You can find that document here.

New Employment Credit

  • Open to businesses located in former EZs as well as areas with high unemployment/poverty. Excludes temporary help agencies, retailers, and food services, unless those businesses have less than $2 million in gross receipts (which means they are a “small business” as defined by the legislation).
  • Effective Jan. 1, 2014 through Jan. 1, 2021.
  • Businesses must obtain a tentative credit reservation from the Franchise Tax Board in order to claim the credit.
  • Must be a net new job created at the business – not just a replacement hire.
  • Wage not less than $12/hour. Credit capped at 350% of minimum wage. Employee must work 35 hours/week or more.
  • Employee must fall in one of the categories below:
    • Unemployed prior 6 months.
    • Unemployed veteran (must be unemployed since return from service).
    • Ex-offenders previously convicted of a felony.
    • Recipient of the Earned Income Tax Credit.
    • Is a recipient of CalWORKs or general assistance.

 

New Sales Tax Exemption Program for Qualified Purchases

  • This program is very similar to a sales tax exemption enacted in 1993 for small manufacturers.
  • Qualified purchases include:
    • Equipment used in any stage of the manufacturing, processing, refining, fabricating or recycling process.
    • Equipment used for research and development.
    • Equipment used to maintain or repair equipment purchased in the two categories above.
  • Effective July 1, 2014 through July 1, 2022 for businesses statewide, and is not restricted to former EZ boundaries.
  • Only applies to businesses with NAICS Codes 3111 through 3999, 541711 and 541712 and excludes any apportioning businesses.
  • Businesses capped at $200 million in qualifying purchases each calendar year.

 

The California Competes Fund

  • Intended to be used as one-time tax incentive to encourage companies to relocate or expand in California.
  • Named the “California Competes Tax Credit.” Funded by $150 million in fiscal year 14/15; $200 million in each following fiscal year, ending in 17/18.
  • Distribution of the credit determined by the California Competes Tax Credit Committee. Membership consists of the State Treasurer, Director of the Department of Finance and the Director of the Governor’s Office of Business and Economic Development (“GO Biz”).
  • 25% of the credit reserved for small businesses.
  • Criteria considered when awarding credit must include:
    • Number of jobs created.
    • Wages paid.
    • Unemployment or poverty in area where business is proposed to be located.
    • Other incentives offered.
  • Requires that a recipient of the credit enter into a written agreement with the State.
  • An FAQ from the state can be found here.

 

NEED ASSISTANCE?
Contact Enterprise.Zone@sfgov.org or call (415) 554-6130 

 


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