Local Stimulus – Enterprise Zone Tax Credits

Presented by: Blake Christian, CPA, MBTHolthouse Carlin & Van Trigt LLP, CPAsMarch 31, 2009

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Overview – 42 California Enterprise Zones

California Enterprise Zone Program up to $13,000/year/employee (42 regions) – see appendix

Up to 50% reduction in salary expense Federal Tax Credit Programs – Empowerment, Renewal

Communities ($1,500 to $8,500 per employee) Indian Tribal Lands, Rural Renewal Counties, etc.

Equipment Credits – 4% to 10% (up to 9.75% in CA) Loan Benefits – NID for Lenders – Better Financing Work Opportunity Tax Credit (WOTC) - $2,400 - $4,800 credit Welfare-To-Work Tax Credit (WtW) - $8,500 credit Q&A

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Enterprise Zone Tax Credits

Who Qualifies? Any business that operates or invests in a

trade or business located within the geographic boundaries of one of the 42 designated Enterprise Zones (EZ) in California (5 year programs)

Tax benefits are for California purposes

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CA Enterprise Zone Incentives Hiring Tax Credit – up to $37,500 hiring credits

over 5 years for each qualified employee Sales & Use Tax Credit – (LA County) 8¼% + 1%

(4/1/09) Business Expense Deduction up to $40,000 More liberal net operating loss carry forward Lenders that make loans to Zone businesses may

receive a net interest deduction Employee-level credit - $525/year for employees

working in an EZ

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Hiring Credit – Qualified Employees 13+ Different Qualifying Criteria Some examples of the 13 criteria are:

Live in certain regions (Targeted Employment Areas) designated by the State

Military Veterans - that were discharged in last 48 months, receive food stamps, or are in VA rehabilitation programs

Employees recently laid-off or downsized

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Employee 1Current Rate: $8.00 (minimum wage)Full-time employee

Year 2006 2007 2008 2009 2010 Total CreditWage Credit 8,320$ 6,656$ 4,992$ 3,328$ 1,664$ 24,960$

Employee 2Rate: $13.00 Credit calculation limited to $12 per hourFull-time employee

Year 2006 2007 2008 2009 2010 Total CreditWage Credit 12,480$ 9,984$ 7,488$ 4,992$ 2,496$ 37,440$

Credit Example

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Sales or Use Tax Credit “Qualified” EZ Equipment – POS Equipment,

Computers, Scanners, Printers, Security Equipment, Food Prep & Storage Equipment

C-Corporations may claim credit for sales/use tax paid or incurred on the purchase of the first $ 20 million of qualified machinery and equipment ($1 million for individuals, partnerships, S-Corps, and LLC’s)

Qualified property must be purchased or leased (capital) and used exclusively within EZ boundaries

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Empowerment Zone Hiring Credit ($3,000/yr) Renewal Community Hiring Credit ($1,500/yr) Native American Hiring Credits

($4,000/yr) GO Zones

($2,400/yr) Non-Location Based Credits – WOTC/ WtW

($2,400 to $8,500/yr)

Summary of Federal Zone Benefits

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Contact and Other Information

Blake Christian, CPA, MBT – HCVT, LLP(562) 216-1800 / blakec@hcvt.com

www.hcvt.com

www.blakechristian.typepad.com

Other Materials and ResourcesFTB Form 3805ZIRS Form 8850 & 5884www.longbeach.govwww.ftb.ca.govwww.caez.govwww.irs.gov

Q&A

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City of Los Angeles

Federal Empowerment Zone

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Federal Zones Nationwide