What are Enterprise Zones?
Established by the California Trade and Commerce Agency in 1984, Enterprise Zones credits are incentives designed to stimulate growth and development in selected areas within California. The program seeks to promote job creation, attract new investment, and retain businesses in particular areas. As a result, the program has created thousands of jobs annually in government-targeted economic development areas.
Enterprise Zone Credits & Deductions
The Enterprise Zone Program creates a significant tax savings opportunity for businesses. KBKG’s services utilize tax expertise and technology to allow businesses to realize maximum benefit with minimum disruption. Businesses that fall within Enterprise Zone boundaries may be eligible to take advantage of the following credits and deductions:
- Hiring Tax Credit: Employers may claim a tax credit for wages paid to qualified employees. One employee may be worth over $37,000 if they meet one of many criteria. That is equivalent to over $350,000 in state deductions. KBKG will identify, document and support Enterprise Zone refund claims and prepare future years’ savings proactively to be filed with the return.
- Sales and Use Tax Credit: Qualified equipment utilized in the Enterprise Zone entitles the taxpayer to a credit equal to the sales tax paid. California sales tax varies by county and is approximately 9% of goods purchased.
- Business Expense Deduction: Accelerated depreciation is available for tangible personal property purchased by a business in the Enterprise Zone. The business may elect to treat 40% of the eligible cost of qualified property as a business expense rather than a capital expense. The business expense deduction must be claimed by making an election on the originally-filed return.
- Net Interest Deduction for Lenders: Lenders may be eligible to exclude interest from income for California purposes on loans made to a qualified Enterprise Zone business, regardless of the lender’s location.
Which businesses qualify?
Any business operating within the boundaries of an Enterprise Zone is eligible to claim benefits which, coupled with California’s high tax rate, makes the program so important. Despite this fact, only 10% of the potential benefits are utilized by eligible taxpayers. There are 42 Enterprise Zones authorized in California, and many businesses may be eligible for retroactive benefits due to shifting boundaries, zone designations and zone expirations. KBKG will review your tax returns to determine any unrealized opportunities for refund and work with your tax preparer to include credits in future years.
Getting more information
A free preliminary analysis can give you an idea of how Enterprise Zone Credits can benefit your company. Contact us today to apply for an estimate of savings and a fee quote or to inquire about available seminars on Enterprise Zone Credits.