Local Tax Stimulus Enterprise Zone Tax Credits

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Local Tax Stimulus Enterprise Zone Tax
Credits
City National Bank Entrepreneur of the Year
Awards Luncheon

• Presented by Blake Christian, CPA, MBT
• Holthouse Carlin Van Trigt LLP, CPAs
• April 30, 2009

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Overview 42 California Enterprise Zones
(including 70 of LB)

• Four Years of Refunds
• California Enterprise Zone Program up to
  13,000/year/employee (42 regions) see appendix
• Up to 50 reduction in salary expense
• Equipment Credits 4 to 10 (up to 9.75 in CA)
• Federal Tax Credit Programs Empowerment,
  Renewal Communities (1,500 to 8,500 per
  employee) Indian Tribal Lands, Rural Renewal
  Counties, etc.
• Loan Benefits NID for Lenders Better
  Financing
• Work Opportunity Tax Credit (WOTC) - 2,400 -
  4,800 credit
• Welfare-To-Work Tax Credit (WtW) - 8,500 credit

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Enterprise Zone Tax Credits

• Who Qualifies?
• Any business that operates or invests in a trade
  or business located within the geographic
  boundaries of one of the 42 designated Enterprise
  Zones (EZ) in California (generally 15 year
  programs)
• Tax benefits are for California purposes
• S Corp vs. C Corp vs. LLC
• Workforce Investment Network Hire-a-Youth,
  Hire-a-Hero, pre-certified candidates

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CA Enterprise Zone Incentives

• Hiring Tax Credit up to 37,500 hiring credits
  over 5 years for each qualified employee
• Sales Use Tax Credit (LA County) 9.25 .05
  (7/1/09)
• Business Expense Deduction up to 40,000
• More liberal net operating loss carry forward
• Lenders that make loans to Zone businesses may
  receive a net interest deduction
• Employee-level credit - 525/year for employees
  working in an EZ

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Hiring Credit Qualified Employees

• 13 Different Qualifying Criteria
• Some examples of the 13 criteria are
• Live in certain regions (Targeted Employment
  Areas) designated by the State
• Military Veterans - that were discharged in last
  48 months, receive food stamps, are in VA
  rehabilitation programs or unemployed for at
  least 4 weeks (federal WOTC).
• Employees recently laid-off or downsized

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5 Year Credit Example
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Sales or Use Tax Credit

• Qualified EZ Equipment 9.25 Mfg/ Processing
  Equipment, Computers, Scanners, Printers,
  Security Equipment
• Pollution/Energy Control Equipment 9.25 credit
• C-Corporations may claim credit for sales/use tax
  paid or incurred on the purchase of the first
  20 million of qualified machinery and equipment
  (1 million for individuals, partnerships,
  S-Corps, and LLCs)
• Qualified property must be purchased or leased
  (capital) and used exclusively within EZ
  boundaries

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Summary of Federal Zone Benefits

• Three Years of Refunds
• Empowerment Zone Hiring Credit (3,000/yr)
• Renewal Community Hiring Credit (1,500/yr)
• Native American Hiring Credits
• (4,000/yr)
• GO Zones
• (2,400/yr)
• Non-Location Based Credits WOTC/ WtW (2,400
  to 8,500/yr)

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Major Federal Law Changes

• Net Operating Loss Carryback Period Enhanced
• For companies with average gross receipts of 15M
  or less, NOL carryback period is extended from a
  two-year to a five-year period.
• Section 179 Deduction/Bonus Depreciation
• Write-off of the first 250,000 of assets placed
  in service in 2009.
• 50 percent first-year bonus depreciation on
  qualifying new property.
• Renewable Energy and Alternative-Fuel Tax
  Incentives
• Credit for solar energy property is increased
  from 10 to 30. Small wind energy credit is
  increased to 30 of qualifying costs.
• Credit for alternative vehicle refueling property
  is increased from 30 to 50 credit per location.
• New Vehicle Sales/Excise Tax Deduction
• For individuals, an above-the-line tax deduction
  is allowed for sales tax paid on the purchase of
  a new car.

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Major California Law Changes

• Two Year Suspension of NOL Deductions
• Temporary suspension of business NOL for 2008 and
  2009. Exception for taxpayers with taxable
  income/net income of 500,000 or less.
• Assembly Bill 1139- Proposed EZ Scaleback
• Proposed Elimination of TEA, Requires Health
  Insurance and certain wage thresholds.
• Business Tax Credits Reduced
• Credits are limited to 50 of a California tax
  liability for 2008 and 2009. Exception for
  taxpayers with taxable income/net income of
  500,000 or less.
• Safe Harbor Eliminated for Certain Taxpayers
• Individual taxpayers with AGI of 1M or more can
  no longer use the 110 of prior-year safe harbor
  exception for their 2009 estimated tax payments.

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Contact and Other Information

• Blake Christian, CPA, MBT HCVT, LLP
• [phone] / blakec_at_hcvt.com
• www.hcvt.com
• www.blakechristian.typepad.com
• Other Materials and Resources
• FTB Form 3805Z
• IRS Form 8850 5884
• www.longbeach.gov
• www.ftb.ca.gov
• www.caez.gov
• www.irs.gov

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City of Los Angeles Federal Empowerment Zone
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Federal Zones Nationwide