Tax Candi

I feel like I'm growing up as this blog progresses.  Time to move past some of the marshmallow-y posts and get to the chewy, rich and oh-so-satisfying statutory analysis!  So, first one up is an interesting development for California Enterprise Zone tax credits.

Last September, California enacted Assembly Bill 1452, which limited the amount of tax credits that may be used to offset state franchise tax liability while, at the same time, enabling corporate taxpayers to assign whole or partial credits to unitary affiliates.  (It's a nice little give a take on California's part.)  These assigned credits can be used beginning in the tax years following January 1, 2010, which is right around the corner. 

Now, eligible credits may only be assigned to eligible assignees.  An “eligible credit” includes any credit earned  in a taxable year on or after July 1, 2008 and any credit earned prior to July 1, 2008 that may be carried forward to the taxpayer’s first taxable year after July 1, 2008. An “eligible assignee” is any affiliated corporation that is a member of the same combined reporting group as the assigning taxpayer.

The assignment is irrevocable and must be made on the assigning taxpayer’s original return for that year, and the benefit of this assignment is limited—the assigned credit remains subject to any carryover limitations and may not reduce the franchise tax liability by more than 50%.  Additionally, Enterprise Zone credit may only offset taxes attributable to the particular Enterprise Zone and therefore the assignee may only use an assigned tax credit to reduce its tax liability based on its own income attributable to the same Enterprise Zone. (So really, it's not as good of a bargain as it first sounds.)

The trick to utilizing this credit-assignment scheme is to be a parent corporation with a few unique subsidiaries, doing business in about the same location.  If this description fits your company, check out some of the EZ tax benefits you may qualify for.

See, that wasn't so bad, was it?

I recently caught "The American President" on TV -- it's a great movie for a lazy Sunday afternoon. My favorite scene comes early in the movie; President Shepherd develops a crush on Sydney Wade and wants to send her flowers, but not the typical roses. So he tries to send her the official flower of her home state Virginia, however no one can agree if a dogwood is a flower or a tree, but regardless the florist doesn't have those in stock. So, in the end, the President does the next best thing... he sends her a Virginia Ham. (This seems to make sense -- if flowers don't work, send meat.)

Anyways, that clip inspires today's post regarding...

Virginia's Enterprise Zone Program

Virginia's Enterprise Zone Program is administered by the Virginia Department of Housing and Community Development. The Program provides state incentives to encourage business development and expansion in targeted Enterprise Zones (EZ). Incentives offered through the EZ program include:

The EZ Job Creation Grant: Qualified businesses located in an EZ are eligible for cash grants based upon the number of permanent net new jobs created. (Eligible businesses must created over four new positions.) The amount of the grant is for each job (over four) per year is:

up to $500 per job per year for each job over the threshold that pays at least 175% of the federal minimum wage; or

up to $800 per job per year for each job over the threshold that pays at least 200% of the federal minimum wage.

The grant is limited to 350 jobs per year, for up to five years.

The Enterprise Zone Real Property Investment Grant: Qualified zone investors making qualified investment in industrial, commercial or mixed-use real property located within an EZ are eligible for a cash grant. The amount of grant is equal to 20% of the investment up to a maximum of:

$100,000 for companies investing less than $5 million in qualified property investments; or

$200,000 for companies investing $5 million or more in qualified property investments.

In order to qualify for grants, investment must be at least $50,000 for rehabilitation or expansion projects , and at least $250,000 for new construction.

I moved north to get away from the heat, but I completely forgot about the humidity factor. I can't imagine living in a state as warm as Arizona, but my family in Phoenix tells me it's bearable because it's a "dry heat." Who knows, but for those of you who like living close to the sun, I bring you...

Arizona's Enterprise Zone Program

The Enterprise Zone (EZ) Program encourages the creation of quality jobs and capital investment in distressed areas of the state. Corporations located in designated EZ may take a credit against their income tax for creating new jobs. Employers receive up to $3,000 of credit over a three-year period for each qualifying job. Businesses can claim up to 200 qualifying employees.

Let's run through the math.

$3,000 x 200 = $600,000.

The current program is authorized through June 30, 2011 and the credits have a 5-year carry forward.

Businesses located within an EZ are also eligible for property tax abatements up to 60%.

Interested businesses should contact the Arizona Department of Commerce or the specific EZ coordinator.

Time to take a break from the middle of the country and head for the beauty of the Pacific Northwest. If you're in the Midwest, get a taste of Oregon's splendor at the newly remolded Shedd Aquarium exhibit, though it doesn't hold a candle to the real thing.

As if the breath-taking scenery isn't enough, Oregon has an attractive two-pronged Enterprise Zone (EZ) program.

The standard EZ program allows eligible (generally non-retail) businesses relocating to or expanding within an EZ receive a total exemption from the property taxes normally assessed personal property for up to five years. As well, additional EZ may be available through local economic development agencies.   Although EZ benefits are most commonly awarded to industrial-based businesses, other businesses may be eligible based on capital investment and job creation.

However, to entice Silicon Valley to come north (or is it the tech companies surrounding Microsoft to come south?) Oregon created specialized EZs known as the Electronic Commerce Zones (ECZ).

Several of Oregon's enterprise zones have received special status to encourage investment in electronic commerce. ECZ's most significant feature is that qualifying businesses may receive a credit against their annual state income or corporate excise tax liability. The credit equals 25% of that tax year's investment capital investment costs  for operations related to electronic commerce.   ECZ credits are limited to the lesser of $2 million or the state tax liability. This state tax credit is in addition to the standard enterprise zone exemption from local property taxes inside the zone.

New York always seems to put its own spin on everything, from fashion to pizza. So why should business incentives be any different? Wanting to stand out from the myriad Enterprise Zone programs, the Empire State created the....

Empire Zone Program

The Empire Zone program offers a number of incentives, from real property tax abatements to sales tax exemptions to income tax reductions.  Like most other "EZ" programs, the centerpiece of the program is the Wage Tax Credit.  Businesses located within an Empire Zone can qualify for a wage tax credit for qualifying full-time employees. This tax credit may also be applied against the franchise tax on business corporations, banking corporations, and insurance corporations.

There are two tiers for the tax credit amount:

1) Up to $1,500 for each full-time employee who received empire zone wages for over half the taxable year, or

2) Up to $3,000 for employees that fall into certain target groups and receive an hourly wage that is at least 135% of the minimum wage.

This credit is allowed for up to five consecutive years.

In order to receive this credit, companies must be located within an Empire Zone and then apply for "certification" through the local zone coordinator.

While New York has had great success with the Empire Zone program, the economic downturn and subsequent budgetary constraints forced the state to close 10 of its EZs in May.  The program is scheduled to sunset next year, so lawmakers are debating its survival.  In other words, get in while the gettin's good!