Enterprise Zone Program 101

What is an Enterprise Zone?

Is a defined area in which businesses can claim certain state income tax savings and other advantages. These zones were created in

California to stimulate business investments in areas where investment has decreased and to

make jobs available in areas of high unemployment.

The San Diego Regional

Enterprise Zone is comprised by

the following areas: Otay Mesa,

San Ysidro, significant

portions of Chula Vista, National

City and the Downtown area.

Benefits

Net interest deduction for lenders

Sales tax or use tax credit

Employee hiring creditEmployee hiring credit

Net interest deduction for lenders:

A deduction from income is allowed on the amount of net interest earned on loans made to a trade or business located in an enterprise zone

Sales or use tax credit

Enterprise Zone Businesses may reduce taxes by the amount of sales or use tax paid on certain property purchased for exclusive use in an enterprise zone. Qualified property is machinery, machinery parts, data processing and communication equipment, (phones, computers, fax machines, copy machines, etc.)

HIRING CREDIT

Allowed to qualified employers who hire qualified employees.

Reduce state taxes by a a percentage of qualified wages paid to one or more qualified employees over a five-year period on enterprise zone income.

Potential $37,000 credit per eligible employee

Credit computation:

Qualified wages X 50% (1st yr of employment)

Qualified wages X 40% (2nd yr of employment)

Qualified wages X 30% (3rd yr of employment)

Qualified wages X 20% (4th yr of employment)

Qualified wages X 10% (5th yr of employment)

Qualified Employee is any of the following at the time of hire:

Resident of Targeted Employment Area (TEA)

Economically disadvantaged individual (14 yrs. or older)

Dislocated worker Vietnam, disabled, or recently separated

military veteran Ex-offender Public Assistance federal Work Opportunity Tax Credit WOTC Native American Disabled individual

(AB1452):

If net business income is over five hundred thousand dollars

($500,000), the company may only use 50% of the Enterprise Zone

Credits.

Examples

Company “A”

3 employees 2 Qualified $31,000 Identified

credits $8,000 Refund (Taxes

Paid in ’06 and ’07) / $23,000 Carried forward

Company “B”

15 employees 8 Qualified $111,000 Identified

credits Will use all the credits

since they have paid more than that amount in state taxes in the past 4 yrs.

For more information:

Refer to CA Franchise Tax Board’s

3805z Booklet & Form3805z Booklet & Form

Service Fee:

Chamber Members:

10% of Identified credits/Refund

Non-Members: 12%

Independent Consultants:

15% - 25%

Contact us

Otay Mesa Chamber of Commerce9163 Siempre Viva Rd., Suite I-2

San Diego, CA 92154(619) 661-6111

mmagoni@otaymesa.orgwww.otaymesa.org