| Federal Empowerment Zone
The
Federal Empowerment Zone is located along the Harbor Freeway corridor
through Central and South Los Angeles, with a small additional section
in Pacoima/Lake View Terrace in the San Fernando Valley. It offers
additional tax deductions and hiring credits. Businesses located
in both a State Enterprise Zone and the Empowerment Zone can take
advantage of both State and Federal incentives. The Empowerment
Zone designation is valid through December 31, 2009.
The
Federal Empowerment Zone gives residents improved access to goods
and services. This zone offers Federal Tax Credits and local incentives
including: wage credits, section
179 deductions, capital gains exclusion, DWP
rate discount, city business tax waivers, Work Opportunity Tax Credit, and
the Brownfields tax deduction.
EMPLOYER
WAGE CREDIT
Federal
tax credits of up to $3,000 can be claimed by an Empowerment Zone
Business on each new and existing employee. The employee must
live and work within the zone boundaries.
Visit:
www.hud.gov/crlocator
to verify if your business is in the zone or call 213-744-7111, (TTY) 213-744-9395,
for additional information.
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SECTION
179 DEDUCTION
In
general, all business taxpayers are allowed to deduct up to 100%
of qualifying tangible property. $100,000 is the maximum amount
that can be deducted through 2007. Empowerment Zone businesses
can increase this deduction an additional $35,000 through December
31, 2009.
For
more information, visit the IRS
website and refer to IRS Tax Form 4562.
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PARTIAL
EXCLUSION of CAPITAL GAINS
An
exclusion of 60% of capital gains is available from the sale of
small business stock issued by an Empowerment Zone business that
is a C corporation with gross assets of $50 million or less. Stock
must be acquired after December 31, 2000 and before December 31,
2009 and held for at least five years.
For
information, visit the IRS
website.
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DEPARTMENT of WATER and POWER RATE DISCOUNT
The Department of Water and Power offers a five-year electric rate
discount to new businesses that are moving into the zone and apply within 18 months for the discount. Existing businesses whose energy
consumption in the 6-month period before the date of application was at least 35% greater than the monthly average in the prior 12 months also qualify.
For more information, call 213-744-7111, (TTY) 213-744-9395, or visit the LADWP website.
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CITY
BUSINESS TAX WAIVER
The
City offers a tax waiver of the first $500 and freezes the taxes
at their current rate for five years for existing Empowerment
Zone businesses. Start-up businesses or businesses relocating
from out of the City to this zone pay only $25 annually for five
years.
For
information, visit the Office
of Finance website.
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BROWNFIELDS
TAX DEDUCTION
Businesses
can elect to deduct qualified clean-up costs of hazardous substances
in certain areas (brownfields) in the tax year the business pays
or incurs the costs. The contaminated property is not required
to be located in any zone. The business needs certification from
the state environmental agency and includes costs incurred prior
to January 1, 2004.
For
information, visit the Environmental Protection Agency website.
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WORK OPPORTUNITY TAX CREDIT (WOTC)
The Work Opportunity Tax Credit (WOTC) has been IMPROVED! The WOTC program is now good through 2011. Now any business anywhere can qualify for the credits as long as they hire persons between the ages of 18-39 who reside in either the Federal Empowerment Zone (EZ) or the Federal Renewal Community (RC) area. Los Angeles contains both an EZ and an RC. There are eight (8) additional eligibility categories, some of which are not dependent on the employee’s address. The WOTC hiring credit is worth up to $2,400 per year for each eligible hire.
For additional information, call the WOTC Center at (866) 593-0173, or visit the California State Employment Development Department website.
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