By Sidney Singleton

In November 2006, Governor Arnold Schwarzenegger announced the conditional designation of 23 enterprise zones located throughout California. The city of Richmond was among the applicants awarded a new conditional enterprise zone designation. Richmond’s old enterprise zone expired on March 1, and its new conditional zone designation started March 2.
   The California Enterprise Zone Program targets economically distressed areas throughout the state. The purpose of the program is to stimulate economic development, encourage business investment and stimulate local job growth. There are currently 42 enterprise zones, and Richmond’s new designation will be in effect for 15 years.
    Businesses that are located within the boundaries of the old Richmond enterprise zone may still file amended tax returns to recover refunds or tax credits from prior years. This is true even if the business is not listed in the newly designated Richmond enterprise zone address ranges. Old enterprise zone businesses have 60 months from the date of the zone expiration to obtain voucher certification for any of their qualified enterprise zone employees hired prior to the zone expiration date.
    Businesses may claim tax credits on up to 50 percent of the qualified wages paid to an eligible employee. For example, in the first year of employment, up to $11,700 in hiring tax credit can be claimed for each eligible employee hired in 2007. Over a period of five years, businesses can claim enterprise zone hiring tax credits in excess of $35,100 per qualified employee. Also, enterprise zone businesses may claim an income tax credit for sales and use tax paid or incurred on certain qualified items purchased for exclusive use inside an enterprise zone. Individuals can claim a tax credit for sales and use tax paid or incurred on the first $1,000,000 of qualified equipment or parts purchased each year.
    Corporations can claim tax credits on up to $20 million of qualified equipment or parts purchased each year. Unused tax credits can be carried forward and applied to offset state income tax liabilities in future years. Businesses located in Richmond’s newly designated enterprise zone are not eligible to claim tax credits prior to the March 2 designation date unless their operations were also listed in the address ranges of the old Richmond enterprise zone.
    Enterprise zone tax credits can be very substantial and have retroactive provisions. Any unused tax credits can be carried forward until exhausted. The enterprise zone hiring tax credit is perhaps one of the most under-utilized tax incentives offered by the state. Richmond businesses are encouraged to contact their CPA firms to find out if they are eligible for the enterprise zone hiring tax credit and sales tax credit.
    Enterprise zone businesses may also wish to contact an outside consulting firm that specializes in recovering enterprise zone tax credits. Most offer free consultations and work on a contingency fee basis. They administer the entire tax recovery process from beginning to end. If you are too busy, it is not too late!
    For more information, contact Michelle Chenault at (510) 386-9033.