“RIG’s and expertise led to results that far exceeded our expectations. As a result, we value the ongoing relationship.”
Matt Black, Tax Director
The McClatchy Company
California Enterprise Zone
Overview
The purpose of the California Enterprise Zone program is to stimulate business and industrial growth in economically depressed areas of the state and is administered by the Department of Housing and Community Development (HCD) and the Franchise Tax Board (FTB). The program provides tax incentives to businesses to allow private sector market forces to revive the local economy and we focus on the three described below.
Hiring Credit
The EZ Hiring Credit allows businesses located in a zone to claim a state income tax credit based on the wages paid to qualifying employees who perform at least 50% of their work within the EZ. Qualifying employees include those that meet one of the following criteria immediately prior to hire:
- A person receiving or eligible to receive training or services under the Job Training Partnership Act (JTPA) or the Workforce Investment Act (WIA)
- A registrant under CalWORKS
- A member of a targeted group under the Work Opportunity Tax Credit (WOTC)
- An economically disadvantaged individual 14 years of age or older
- A qualified dislocated worker
- A disabled individual
- A service-connected disabled veteran
- A veteran of the Vietnam era
- A veteran who recently separated from military service
- An ex-offender
- A person receiving or eligible to receive Supplemental Security Income (SSI), Temporary Aid to Needy Families (TANF), Refugee Cash Assistance (RCA) or Supplemental Nutrition Assistance Program (SNAP)
- A Native American
- A resident of a Targeted Employment Area (TEA)
Sales or Use Tax Credit
The EZ Sales or Use Tax Credit is available for sales or use tax paid on certain machinery, machinery parts, and equipment purchased for exclusive use in an EZ. Eligible property includes machinery and machinery parts used for fabricating and processing, air and water pollution control equipment and data processing and communications equipment.
Net Interest Deduction (NID)
A deduction from income is allowed on the amount of net interest earned on loans made to a trade or business located exclusively in the EZ.
Benefit
Hiring Credit
A qualified business may reduce its state income tax by $37,440 per qualified employee over a 5-year period. The credits may be carried forward until they are exhausted.
Sales or Use Tax Credit
Taxpayers may claim a credit in the amount of sales or use tax paid on qualified property.
Net Interest Deduction
Expenses related to the cost of lending within an Enterprise Zone are fully deductible. These savings can produce significant cash flow and earnings-per-share benefits.
Process
Hiring Credit
Our review is focused upon identifying current and past qualified employees. With the maze of laws, regulations and administrative forms, taxpayers often miss the opportunity to maximize their credits or overlook the credits entirely. Our services include assessing employee eligibility, securing qualifying documentation, obtaining vouchers on qualifying employees and providing an annual hiring credit schedule with complete back up to substantiate the credit claimed.
Sales or Use Tax Credit
We examine the fixed asset listing and examine all invoices to determine the amount of sales or use tax paid and then calculate the credit.
Net Interest Deduction
Our proprietary software and database screens all loans to determine the deduction eligibility. The system then generates a comprehensive report identifying eligible loans. We perform a file review to obtain any documentation required to confirm that the loan meets the statutory requirements.