In the June 2009 issue of Tax News the question was asked, “Are you familiar with California’s Enterprise Zones?”

We now ask, “Are you aware some taxpayers who work in an Enterprise Zone may be entitled to a credit for the wages they earned?”

The Enterprise Zone tax incentive programs were created to help local businesses, and encourage outside businesses to locate in economically depressed areas. Also, the programs have a provision that allows low income individuals working within an Enterprise Zone to claim a credit that may help eliminate their California tax liability.

The Enterprise Zone Employee Credit is claimed on form FTB 3553 and the taxpayer must file a Form 540 or the Long Form 540NR to claim this credit. The Enterprise Zone Employee Credit can only be used to offset the tax attributable to employment within the enterprise zone. If a taxpayer earned wages in more than one zone, a separate form FTB 3553 is needed for each zone.

The following business-related tax incentives are also potentially available to a taxpayer doing business in an Enterprise Zone, so you may want to see if your clients are doing business within one of the state’s many Enterprise Zones.

Hiring credit.
Sales or use tax credit.
Business expense deduction.
Net interest deduction for lenders.

Enterprise Zone tax incentives apply only to business activities and investments that take place in an Enterprise Zone that has received final designation.

While these Enterprise Zone incentives have been around for quite some time, there have been recent changes to the zones.

For a listing of all Enterprise Zones, expired, active and conditional, or to check if any of your clients work or have a business located within an Enterprise Zone, go to the California Department of Housing and Community Development (HCD) website at www.hcd.ca.gov/fa/cdbg/ez/.

Article regarding our client published in the Fresno Bee Newspaper.

Employers get tax breaks for hiring people who live in certain areas.

Jeff St. John
The Fresno Bee

Originally published 2008-07-06

In these times of economic slowdown, Dan and Jennifer Gonzalez say their decision to move their business into an enterprise zone has paid off.

The co-owners of Custom Wood Products in Parlier took advantage of the state program to accelerate depreciation on their new building, putting the money they saved on taxes back into their business.

And by hiring employees who live within the zone, which was recently expanded to include almost all the cities in Fresno County, they’ve been able to capture further tax breaks that have “allowed us to improve our cash flow, while a lot of our competitors are struggling right now,” Dan Gonzalez said. (Custom Wood Products, Fresno County)

“This is an incredible incentive,”

“It allows businesses that are here to be more profitable, to expand, to buy new equipment and reinvest, and to hire people — that’s a key.” (Economic Development Corp.)