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Enterprise Zones:
What is an Enterprise Zone?
The California Technology, Trade and Commerce Agency
designate economically depressed areas in California. They
establish Enterprise Zones to encourage and stimulate growth,
development, and investment in the area. Taxpayers who
invest, operate, or locate a trade or business within an
Enterprise Zone may be eligible for special tax
incentives.
How do you know if you are located in an Enterprise
Zone?
To verify whether your business is located within an
Enterprise Zone, you may contact the
California
Technology, Trade and Commerce Agency at:
ENTERPRISE ZONE PROGRAMS
CALIFORNIA TECHNOLOGY, TRADE AND COMMERCE
AGENCY
1102 Q STREET SUITE 6000
SACRAMENTO CA 95814
Telephone: (916) 324-8211
FAX: (916) 322-3524
Internet Website: www.commerce.ca.gov
These are the incentives that are available and some of the
qualifiers:
What are the available Enterprise Zone tax incentives and who
is qualified to take those
incentives?
There are five tax incentives available to taxpayers that
invest in or operate a trade or business located within an
Enterprise Zone. The tax incentives are
the:
v
Hiring credit.
v
Sales or use tax credit.
v
Business expense deduction.
v
Net interest deduction.
v
Net operating loss (NOL) deduction.
For information about each tax incentive, refer to the
Enterprise Zone Business Booklet (FTB 3805Z Booklet), or the
Guidelines for Businesses Claiming Economic Development Area
Tax Incentives (FTB Pub. 1158). A tax credit is also
available to employees that earn wages within an Enterprise
Zone. See the Enterprise Zone Employee Credit form (FTB
3553).
How do I claim Enterprise Zone tax
incentives?
Use the Enterprise Zone Deduction and Credit Summary form
(FTB 3805Z), found in the Enterprise Zone Business Booklet
(FTB 3805Z Booklet). File this form with your California
franchise or income tax return to claim the Enterprise Zone
tax incentives. For those tax incentives that require an
election, make the election on this form.
The hiring credit, sales or use tax credit, and net interest
deduction do not require an election, and can be claimed on
either an original return or an amended return. Make your
election to claim the business expense deduction on the
original return for the year you place the property in
service. You cannot make the election on an amended return,
and you can only revoke the election with the written consent
of the Franchise Tax Board.
Make your election to claim an Enterprise Zone NOL (Net
operating loss) deduction on the original return for the year
that you incur the NOL. You cannot make the election on an
amended return, and you can only revoke the election with the
written consent of the Franchise Tax Board.
Do I have to include the form FTB 3805Z with my tax
return?
Yes.
The Franchise Tax Board is required to annually summarize and
provide the information on this form to the California
Legislature or the California Technology, Trade and Commerce
Agency. The information may be used to evaluate the
usefulness of the incentives, to improve the program, or to
make future decisions about continuation of the
program.
Which employees qualify me for the hiring
credit?
For taxable years beginning on or after January 1, 1997, you
may qualify for the hiring credit if you hire an employee
after an area is officially designated as an Enterprise Zone
and before the designation expires.
A qualified employee is an employee who immediately before
starting to work for you is any of the
following:
1.
An employee who
qualified for the former Program Area hiring
credit;
2.
A person
receiving or eligible to receive subsidized employment,
training, or services funded by the federal Job Training
Partnership Act (JTPA), or its successor;
3.
A person
eligible to be a voluntary or mandatory registrant under the
Greater Avenues for Independence Act of 1985 (GAIN), or its
successor;
4.
An economically
disadvantaged individual 14 years of age or
older;
5.
A qualified
dislocated worker;
6.
A disabled
individual eligible for, enrolled in, or who has completed a
state rehabilitation plan;
7.
A
service-connected disabled veteran;
8.
A veteran of the
Vietnam era;
9.
A veteran who
recently separated from military service;
10.
An
ex-offender;
11.
A person
eligible for, or a recipient of:
v
Federal Supplemental Security Income (SSI)
benefits;
v
Aid to Families with Dependent Children
(AFDC);
v
Food stamps; or
v
State and local general assistance;
12.
A Native
American;
13.
A resident of a
Targeted Employment Area (TEA); or
14.
For employees
hired during taxable years beginning on or after 1/1/1998, a
member of a targeted group as defined in the federal Work
Opportunity Tax Credit (as in effect January 1, 2001, in
Internal Revenue Code Section 51).
In addition, at least 90 percent of the employee’s work
must be directly related to a trade or business activity
located in the Enterprise Zone and at least 50 percent of the
employee’s work must be performed inside the boundaries
of the Enterprise Zone. To determine which employees qualify
you for the hiring
credit for taxable years beginning before January 1, 1997,
get the Enterprise Zone Business Booklet (FTB 3805Z Booklet)
or the Guidelines for Businesses Claiming Economic
Development Area Tax Incentives (FTB Pub. 1158), for the year
in question.
How long must an employee work for a taxpayer to avoid the
recapture rules of the hiring
credit?
You must recapture the hiring credit if you terminate the
employee before the end of the longer of the following two
periods:
v
The first 270 days of employment (whether or not
consecutive); or
v
Ninety (90) days of employment plus 270 calendar
days.
A “day of employment” includes any day the
employee receives compensation (including paid holidays, sick
days, and vacation days). The Enterprise Zone Business
Booklet (FTB 3805Z Booklet) and the Guidelines for Businesses
Claiming Economic Development Area Tax Incentives (FTB Pub.
1158) discuss exceptions to the recapture
rules.
You can locate form FTB 3553, Booklet FTB 3805Z or Pub. 1158
at the following links:
To find form FTB 3553 go to: http://www.ftb.ca.gov/forms/2010/10_3553.pdf
To find FTB 3805Z Booklet go to: http://www.fresnoregionalez.com/files/TaxBooklet10.pdf
To find FTB Pub.1158 go to: http://www.ftb.ca.gov/forms/misc/1158.pdf
If you have any questions concerning Enterprise Zones please
contact us at:
Cloud
Payroll
7231 Boulder Ave. #526
Highland, CA 92346
Ph 909-657-6019
www.CloudPayrollPros.com
The information for this article was obtained from the
California FTB web site.