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Matt Black, Tax Director
The McClatchy Company
Federal Empowerment Zones and Renewal Communities
Overview
The Department of Housing and Urban Development (HUD) and the Department of Agriculture (USDA) have designated 30 Empowerment Zones (EZs) and 40 Renewal Communities (RCs) as part of the Community Renewal Initiative. This program provides tax incentives as a tool for the designees to stimulate job creation and retention and business investment in buildings and equipment worth approximately $11 billion to eligible businesses of all sizes.
Benefit
Qualifying businesses in EZs and RCs are eligible for a number of tax incentives outlined below. The most widely used Community Renewal tax incentive is the employment credit that provides tax benefits to businesses employing residents from the designated areas.
- Employment credit ($3,000 for EZs and $1,500 for RCs)
- § 179 ceiling increased $35,000 for all qualifying tangible property
- Tax deduction for clean up costs of hazardous material (brownfields)
- Accelerated depreciation for rehabilitation of commercial buildings (RCs)
- Capital gains tax reduction
Process
As part of the screening process for Empowerment Zones and Renewal Communities, we review the employee list and ensure that they meet all of the qualification requirements and document the credit claim. A qualified employee is any employee (full-time or part-time) who:
- Performs substantially all of the services for that employer within the EZ or RC in the employer’s trade or business;
- Has his or her principal residence within that EZ or RC while performing those services; and
- Is employed by the employer for as least 90 days.