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In the Zone: Enterprise Zone credits offer businesses tax breaks that make a difference.



Location-based incentive credits (LBICs) offer many advantages, including current and prior year refund potential and favorable financial statement impact.

Yet, according to according to
prep.
1. As stated or indicated by; on the authority of: according to historians.

2. In keeping with: according to instructions.

3.
 the Franchise Tax Board, only 3,199 companies claimed hiring credits in 2003 (the most recent statistics available), representing less than 10 percent of potential eligible businesses.

Familiarity with these benefits can significantly impact negotiations during a merger, sale or purchase of a business. For CPAs, staying abreast of these can be a valuable service to current and prospective clients.

STATE VS. FEDERAL

State and federal LBICs vary in amount and qualification requirements.

Common incentives include hiring credits; property tax breaks; sales and use tax Sales and use tax refers to:
  • Sales tax
  • Use tax
 credits; income tax credits or percentage reductions; research and development credits; and investment tax credits. Common qualification requirements are tied to both the employer's physical location and employees' residential address or various socio-economic factors.

Also, federal LBIC LBIC Light Beam Induced Current
LBIC Line-Based Image Coding
 programs can provide wage credits per qualified employee ranging from $1,500 to $4,000 per year; state credits (available in California and 38 other states) range from $500 to $10,000 per qualified employee, per year.

Arizona, California, Colorado, Florida, Indiana, New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
 and Virginia do not require any pre-qualification procedures other than submitting certain employee documentation. In California, companies can receive up to $32,000 (over a 60-month employment period) in state hiring credits for each qualified employee hired and sales/use tax credits on qualified machinery and equipment purchased or leased.

The types of credits and amounts vary from state to state.

HOW IT WORKS: CA

California Enterprise Zone (EZ) programs offer substantial tax credits and deductions to businesses located within any of 42 EZ regions, representing roughly 12 percent of the state (www.hcd.ca.gov/fa/cdbg/ez/enterprise/#maps). Benefits can be obtained retroactively for up to four years, as well as for current and future years. Note, however, that certain zones will expire later this year and in 2007, absent legislative extension or re-application by the EZ cities.

Sample cities with EZs include Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. , Long Beach, Santa Ana Santa Ana, city, El Salvador
Santa Ana (sän'tä ä`nä), city (1993 pop. 129,873), W El Salvador. It is the second largest city in the country and the commercial and processing center for a sugarcane, coffee, and cattle region.
, Pasadena, San Francisco, Oakland, Sacramento, San Diego and Fresno.

Major benefits of the program include:

1. Interest Exclusion -- A full California tax exemption for financial institutions on net interest earned on loans to businesses located exclusively in any of California's EZs. Generally 10 percent to 20 percent of a bank's business portfolio is eligible for exemption, resulting in a 10.84 percent tax benefit.

2. Employer-Level Wage Credits -- Up to $10,000 per "qualified" employee per year to the extent that the employee meets any one of 13 tests and works in an EZ. Generally, 20 percent or more of employees working in an EZ will qualify.

3. Employee-Level Credits -- Up to $525 per employee. Employees who work in an EZ can qualify themselves for the employee credit if they meet certain work, location and AGI (Artificial General Intelligence) A machine intelligence that resembles that of a human being. Considered impossible by many, most artificial intelligence (AI) research, projects and products deal with specific applications such as industrial robots, playing chess,  requirements. Employers can assist employees in claiming these credits as a value-added employee benefit.

4. Equipment Credits -- A credit of up to 8.75 percent on purchased equipment and capitalized leases to the extent the equipment is used 100 percent in an EZ. This credit is available for equipment that stores or receives information in an electronic format, such as data collection equipment, ATMs, computers, security systems, phone systems, pollution control equipment, etc.

[ILLUSTRATION OMITTED]

FEDERAL CREDITS

In addition to state programs, federal credits are available, including:

* Work Opportunity Tax Credit: Up to $2,400 per eligible employee, per year (IRC (Internet Relay Chat) Computer conferencing on the Internet. There are hundreds of IRC channels on numerous subjects that are hosted on IRC servers around the world. After joining a channel, your messages are broadcast to everyone listening to that channel.  Sec. 51, Form 5884);

* Welfare to Work: Up to $8,500 per eligible employee over a two-year period (IRC Sec. 51A, Form 8861);

* Empowerment Zone: Up to $3,000 in tax credits per eligible employee, per year (IRC Sec. 1396, Form 8844);

* Renewal Community: Up to $1,500 tax credit per eligible employee, per year (IRC Sec.1400H, Form 8844); and

* Indian Employment Tax Credit: Up to $4,000 in tax credits per eligible employee, per year (IRC Sec. 45A, Form 8845).

Industries that can benefit include manufacturing, health care, restaurants, fabrication fabrication (fab´rikā´shn),
n the construction or making of a restoration.
, and financial institutions.

Many of these credits are based on targeted employment areas. The boundaries of these areas tend to change over time as census data is accumulated and qualification requirements get modified. Therefore, it is challenging to get 100 percent accurate information from public databases.

When evaluating addresses, use info contained in the public domain, as well as census tract and census block data, as these are more accurate than the EZ websites.

Gina Ballard, CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , MBT MBT Minimum (Spark Advance For) Best Torque
MBT Masai Barefoot Technology
MBT Main Battle Tank
MBT Mechanical Biological Treatment (waste treatment)
MBT Mercaptobenzothiazole
MBT Master of Business Taxation
, is a senior tax manager based in the Long Beach office of Holthouse Carlin car·line or car·lin  
n. Scots
A woman, especially an old one.



[Middle English kerling, from Old Norse, from karl, man.]
 & Van Trigt LLP LLP - Lower Layer Protocol . Blake Christian, CPA, MBT, is a partner with the firm. You can reach them at ginab@hcvt.com and blakec@hcvt.com, respectively.
COPYRIGHT 2006 California Society of Certified Public Accountants
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Title Annotation:location-based incentive credits
Author:Christian, Blake
Publication:California CPA
Geographic Code:1U9CA
Date:Jul 1, 2006
Words:787
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