Archive for the ‘California Enterprize Zone’ Category

New Go-Biz California Competes Tax Credit Application Deadline is April 14th

Thursday, March 27th, 2014

Last year the Governor and the California Legislature took action to wind down the California Enterprise Zone Program beginning in 2014.  EZ Credits can still be claimed on 2013 and amended in the four prior years, and employers can continue to claim hiring credits through 2018 on qualified employees hired priro to 2014.

As a replacement for the EZ program, various incentives, including the California Competes Credit Program  (“CC Credit”) has been initiated.   The CC Credit requires taxpayers to subit detailed information to Scaramento for evalauation and consideration for a pool of credits (discussed below).  25% of the credits will be earmarked for Small Businesses – defined as those with less than $2M of gross revenues.

The The California Governor’s Office of Business and Economic Development (GO-Biz) has been conducting educational sessions concerning the California Competes Tax Credit throughout Southern California this week.  Many local businesses and practitioners have attended the meetings. .  The ideal taxpayer profiles are as follows:

 

  • Planning to add headcount in California any time between 2014 through 2018 in excess of 2013 FTEs and/or
  • Planning to make capital expenditures in California any time between 2014 – 2018

 

About the Credit

 

The CC Credit is a negotiated income tax credit available to businesses that want to stay and grow or want to come to California.  Tax credit agreements will be negotiated by GO-Biz and approved by a newly created “California Competes Tax Credit Committee,” consisting of the State Treasurer, the Director of the Department of Finance, the Director of GO-Biz, one appointee from the Senate, and one appointee of the Assembly. Credits have a carry-forward provision of 6 years.

 

Amount of Credits Available

 

California has a fiscal year that runs from July 1 – June 30.  The amount of CC credits by fiscal year budgeted by the Governor  under the Go-Biz program are as follows:

 

  • Fiscal Year 2013/2014 – $30M
  • Fiscal Year 2014/2015 – $150M
  • Fiscal Year 2015/2016 – $200M
  • Fiscal Year 2016/2017 – $200M
  • Fiscal Year 2017 /2018 – $200M

 

What To Do?

 

  • Apply immediatley for the current round of tax incentives
  • Evalaute other existing state and federal incentives
  • Discuss and understand your growth plans between now and 2018.

 

Why Now?

 

  • You want clients to hear from you rather than our competitors
  • Application for fiscal year 2013/2014 closes on April 14.  It may be strategically better to submit application for the fiscal year 2014/2015.  The application period for 2014/2015 should open after July 1, 2014.

HCVT has significant experience in identifying and documenting various federal, state and local tax incentives and we have deep connections within the economic development community.

 

We can assist you in presenting your project to maximize your probability of securing some of the avaialble tax incentives.

 

Please contact us today:  (562) 590-9535.   info@hcvt.com.   www.hcvt.com    Ray Dagarag, Blake Christian or Victor Gonzales

 

California Governor Reinstates 50% Gain Exclusion on Certain C Corp Stock Sales

Wednesday, October 9th, 2013

http://lbbusinessjournal.com/long-beach-business-journal-newswatch/1839-governor-brown-signs-law-allowing-retroactive-tax-break-for-california-entrepreneurs.html

Although somewhat limited in it’s application, the California gain exlusion for Qualified Small Business Stock (QSBS) has been retroactively reinstated back to 2008.  See IRC Section 1202 for details regardinng QSBS eligibility.

 

See www.hcvt.com for additional planning ideas or call (562) 216-1800.

 

California to Wind Down Enterprise Zone Tax Credit Program beginning in 2014. Business must take action now to secure refunds and continue earning credits beyond 2013.

Friday, July 19th, 2013

http://lbbusinessjournal.com/long-beach-business-journal-newswatch/1642.html#.UdRYEIOKlIc.facebook

While the California Governor and Legislature have effectively dismantled the last economic development tool avaialble to cities and small businesses, the current EZ program can still generate valuable refunds and future credits for businesses that document their eligible employees and assets.   Action must be taken before year-end to maximize credits.

 

For more information:  www.hcvt.com or call (562) 216-1800.

 

 

California Enterprise Zone Proposed Changes Will Likely Hurt Small Businesses and Their Minority Employees

Thursday, March 28th, 2013

http://lbbusinessjournal.com/long-beach-business-journal-newswatch/1402-state-officials-reviewing-possible-changes-to-enterprise-zone.html

California’s Housing & Community Development (HCD) Department runs the statewide EZ program which includes 42 California cities.  They have proposed changes to the employee vouchering process, which will significantly complicate getting certifications from cities to confirm that an employee  is eligible to earn credits for the employer.   Virtually all the qualified businesses operate in the most economically challenged areas of the state and hire large numbers of inner-city employees — who are also typically economically challenged.

These changes are still under review, but are expected to be released in June of 2013.

California’s tax rate hit 9.3% fairly quickly and climb as high as 13.3%  — the highest in the country.  These EZ Program credits are necessary to give taxpayers a relatively small tax reduction compared to other states.

More EZ information, including the proposed vouchering regulations, can be found at: http://www.hcvt.com/cpa-accounting-services/tax/hiring-equipment-credits-ez-studies/   Or call me at: (562) 216-1800.

 

California Enterprise Zone Program Effectiveness Being Evaluated on Flawed Data

Sunday, February 13th, 2011

Governor Brown, certain legislators and the press appear to be blindly using flawed data backed by union interests.  The following Op-Ed reconciles the difference between the various economic studies and supports the retention of the California EZ program.

For latest CA EZ Program legislative updates:

www.twitter.com/taxcredits_cpa

http://www.blakechristian.com/blog/

www.caez.org  (Please see second section and sign the EZ petition)

www.ezpolicyblog.com

Long Beach Business Journal Op-Ed

CA Enterprise Zone Program – Job Panacea or Budget Casualty

Blake Christian, CPA

February 2011

The California EZ program was initially adopted in 1986 and common to most of the other 42 state EZ programs can trace their roots back to Location-Based Incentive Credit programs (LBIC’s) first established in the aging villages throughout the U.K.    To encourage business owners to keep or move their businesses to these regions, various tax incentives were offered. 

The U.K. program was a smashing success and U.S legislators quickly adopted similar programs that encourage businesses to hire and train economically and physically/ mentally challenged individuals and move them from taxpayer funded entitlement programs to private payrolls. Today there are over 8,500 distinct tax zones throughout the U.S.                                                

The California EZ program began in 1986 and today applies to 43 zones throughout the state, and Long Beach’s current EZ current program benefits over 300 companies and over 7,000 employees annually.  Similar job creation and job retention results can be found throughout California and the U.S.

Despite being a big EZ proponent while Mayor of Oakland, Governor Brown in his second term has proposed to plug a portion of the $28 billion state deficit with savings from terminating the EZ program. Based on the most recent 2008 Franchise Tax Board (FTB) data, scrapping the EZ program would potentially save $291 Million ($274 Million in Hiring and Sales Tax Credits and $17 Million of benefits for Banks that make riskier loans to these inner city businesses).  This is only 29% of the $1 billion EZ program cost often quoted in the press.  The Business Deduction and Net Operating Loss (NOL) benefits are simply timing difference and do not reflect true revenue losses for the state.

The California EZ Program contains 5 different tax incentives:

1)        Employee Hiring Credit – To encourage job creation and retention, employers can earn a maximum credit for qualifying employees of $6 per hour. 

2)        Sales & Use Tax Credits – To encourage investment in new equipment, tax credits of 10% or more can be secured for certain assets used exclusively in the EZ.

3)        Asset Expensing and NOL Provisions – These provisions have limited application and simply accelerate deductions in certain years.

4)        Lender Net Interest Deduction – Lenders that make loans to certain distressed EZ’s are allowed to exclude from California taxable income the net interest income. 

5)        Employee-Level EZ Credit – Certain part-time workers who work in an EZ may claim a $525 tax credit.

The recent battle in Sacramento has revolved around competing EZ studies –  2008 Public Policy Institute of California (PPIC) study and the 2006 HCD (California Department of Housing and Community Development) study http://www.hcd.ca.gov/fa/cdbg/ez/HCD_Final_Report.pdf  and the 2010/2011 USC/Maryland studies https://msbfile03.usc.edu/digitalmeasures/cswenson/intellcont/EZ_JH%20oct_2010-1.doc

The PPIC study, as authored by Jed Kolko and David Neumark claims to have analyzed “every California business” from 2002 to 2007 , concluded that while “well run and well marketed EZ’s were effective in creating and retaining jobs”, most EZ’s did not.  The California Budget Report summarizes the the PPIC findings:  http://www.cbp.org/

The PPIC Study used jobs as the sole measure, and the major flaw in their analysis relates to their use of imprecise Dun & Bradstreet (D&B) job ranges, rather than securing specific year-to-year job figures.  D&B surveys ask employers to disclose employee numbers in general ranges such as 0 to 5, 6 to 10, 100 to 250, etc.; therefore, if  headcount rose from 3 to 5, or 100 to 120 (40% and 20% increases), no job growth would be reported using the D&B ranges. 

The competing 2006 HCD and 2010/2011 national and California studies were performed by USC and University of Maryland professors and used more detailed data, including 8,000 national  census tracts, as well as each of the census tracts in California containing an EZ.   The USC/Maryland studies measured and concluded the following for EZ communities:

-           Reduced unemployment rates by 3.1% (CA)/ 3.4% (Nat’l)

-           Reduced poverty rates by 8.6% (CA) /  26.1% (Nat’l)

-           Increased average wages and salary income by over $3,100 (CA)/ $2,700 (Nat’l)

-           Generally the programs did not “steal” businesses from one area of a state, but rather kept those businesses from fleeing the state.

To reconcile the main disputes between these studies, following are some key points: 

- The CBP states that over 90% of businesses utilizing the program are large businesses and they use $10 million of assets as the low end of “large”.   Using gross receipts as the proper measure shows that the number of companies claiming credits is relatively evenly dispersed across company sizes. More importantly, the vast majority of taxpayers are formed as closely-held “pass-through” entities such as LLC’s, S Corps and partnerships.  Not surprisingly, the number of personal returns (generally representing smaller businesses) claiming EZ benefits in 2007 was 14,317 while only 5,631 corporate returns  claimed EZ benefits.  This omission creates another critical distortion in the CBP’s analysis. The vast majority of EZ clients we review have less than 100 employees.

- One misunderstood aspect of the EZ program related to large companies concerns the tax “apportionment” rules which severely limit larger company’s ability to utilize the EZ credits.  As a simplified example, if Walmart operated 10% of their California stores in EZs, only 10% of the gross liability can generally be reduced from 8.84% by 10% to the extent EZ credits are available, resulting in a 7.56% tax rate – hardly a bargain compared to other states.

-The CBP Paper highlights that larger cities claim large annual tax breaks as compared to rural EZs.  Larger cities will virtually always produce larger credit amounts.

-  Assembly member V. Manual Perez has recently submitted AB 231 to fine-tune the TEA guidelines, including eliminating higher earning TEA residents from EZ qualification.  He has also submitted AB 232 which fine-tunes the overall EZ program approval and administration process.

With businesses and jobs fleeing to other lower cost, and business friendly, states at an accelerating rate, Governor Brown and the legislature will be wise to re-work and retain the EZ program, rather than scrap it.

California Tax System is #2 (From the Bottom)

Tuesday, November 9th, 2010

A Race to The Bottom….

California’s business friendliness reached a new low in this year’s annual survey by the Tax Foundation.  With a one-point drop to 49th place, California was beaten out by New York for the bottom spot.

As a result of the combination of: 1) 2010 California legislation which denies the use of Net Operating Loss carryovers in 2010 and 2011, as well as accelerating quarterly estimates and 2) California’s mid-term election results in bringing in many of the same “usual (tax-and-spend) suspects” at both the state and federal level, the Golden State is well positioned to drop to 50th place next year.

Read the in-depth comparison of business friendly and not-so-business friendly states to operate in:

http://www.taxfoundation.org/taxdata/topic/90.html

On the positive side, California continues to allow the use of the valuable Enterprise Zone and R&D tax credits.  For more information, check out the library of articles at:

http://www.blakechristian.com/hiring_tax_credits.html

For post-election tax planning information and the impact of the potential expiration of the Bush Tax Cuts, please also check-out Video #4 at:

http://www.losangelesbtv.com/BlakeChristian.html

Off-Balance Sheet Assets Can Benefit Buyers and Sellers of Businesses

Saturday, August 28th, 2010

Unlike Enron’s technique of hiding liabilities in shell entities, some business owners simply overlook valuable assets that can be secured with very little effort in most cases.

These overlooked assets often come in the form of unclaimed tax refunds associated with various federal and state tax incentive programs.  These programs range from:

- Research & Development Credits

- Federal and State Hiring Credits

-Eco/”Green” Tax Credits

- Sales and Use Tax Credits and Exemptions

- Property Tax Refunds/ Exemptions

Current business owners, or buyer’s of these businesses, can obtain a significant economic advantage by documenting these refunds and working them into there business plan, exit strategy, or factor them into their acquisition strategy.

To read all the details, please click on the following link:

http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2010/CorpTax/M_and_A_Transactions_Enhanced.jsp

 

For full access to all of my AICPA articles, please click here:

http://www.cpa2biz.com/search/results.jsp?N=79&mode=content

 

To obtain daily tax and economic updates, please follow me on Twitter @:

www.twitter.com/taxcredits_cpa

 

www.blakechristian.com

Federal Reserve Promotes California Hiring Tax Credit and Loan Programs

Saturday, July 31st, 2010

Federal Reserve Board of San Francisco Promotes California Enterprise Zones.

Empowered Banking and the Federal Reserve Board recently sponsored a banking and business seminar to inform bankers, business owners and consultants about the power of the California Enterprise Zone in stimulating job creation, capital investment and bank loans.

To read how employers can secure hiring credits up to $37,000 per qualified employee, generate equipment credits ranging from 10% ot 30% and secure lower rate loans, please click on the PowerPoint link below: 

http://www.empoweredbanking.com/2010/Events/FederalReserveEvent

 

To read more about the wide variety of state and federal hiring credit programs available for virtually any business, click on the article links below:

Accounting Today Hiring Credit Article:

http://www.webcpa.com/ato_issues/24_9/will-work-for-tax-breaks-54829-1.html

CCH Tax Figures Profile:

http://newsletters.cchgroup.com/node/265

 

For weekly tax and financial updates, please bookmark and follow me on:

www.blakechristian.com

www.twitter.com/taxcredits_cpa

Monday, June 14th, 2010

Solar/ Eco Credit Presentation to the Long Beach Sustainability Taskforce  June 14, 2010.

PowerPoint presentation is available in Media Library.

Please email me at: blakec@hcvt.com if the PowerPoint is not accessible.

Also check out my Twitter Page:  www.twitter.com/taxcredits_cpa for more eco-credit information and weekly tax and economic updates.

Eco-Tax Credit Webinar – Wed. June 16, 9:00-11:00 a.m. – Everything You Need to Know About Federal and State Tax Incentives

Monday, May 31st, 2010

http://www.cpelink.com/product/detail.php?p=1757

Going Green: Federal and State Eco-Credits and The Regulatory Landscape 

Date: Wednesday, June 16, 2010
Instructor: Blake Christian, Nancy Pfeffer

Begin Time:  9:00 am Pacific Time
10:00 am Mountain Time
11:00 am Central Time
12:00 pm Eastern Time
CPE Credit:  2 hours for CPAs

Who Should Attend
CPA/ practitioners and private industry accounting or tax personnel who are looking to establish a solid knowledge base of ways to reduce the after-tax cost of going green. These overlooked benefits can distinguish your CPA practice or your department’s contribution to the bottom line of the business owner.

Topics Covered

  • Federal and state environmental regulatory landscape
  • Tax credits available for truck and automobile fleets
  • Tax credits/ deductions available for alternate fueling stations
  • Tax credits available bio-mass, alternative fuel production, alternative energy, including solar, wind, co-generation, etc.
  • Impact of grants and credits on depreciable basis
  • LEED-certified building deductions
  • State incentive overview, including equipment credits and hiring credits
  • Grant opportunities
  • Case examples of incentive programs
  • Additional articles on this and other tax topics can be accessed at: www.lakechristian.com or www.twitter.com/taxcredits_cpa.