Press Room: Tax Release

February 19, 2014

The Enterprise Zone Credit Sunset: Taxpayers Need to Act Now

Although California Governor Jerry Brown and the state legislature enacted a sunset of California’s Enterprise Zone program last year, opportunities still exist to benefit from the program as it winds down. The Enterprise Zone hiring credit is available to offset income/franchise taxes related to a business located in a zone for new hires that commenced employment on or before December 31, 2013. The credit may be more than $37,000 over the first five years of employment for each qualified employee.

Application Deadlines Accelerated

California Enterprise Zones are authorized to continue accepting and processing hiring credit voucher applications until January 1, 2015. However, each Enterprise Zone may adopt a different end date for accepting voucher applications, most of which are well before December 31, 2014. Taxpayers should be aware of these deadlines in order to take advantage of this one-time hiring tax credit opportunity – after the final submission date, taxpayers will no longer be able to certify employees eligible for the hiring credit. The following are voucher application deadlines for some of the largest zones. Other zones may have different deadlines, many of which have yet to be announced.

Enterprise Zone Last Date for Application Submission
City of Fresno 10/1/2014
County of Fresno 10/1/2014
Los Angeles 8/31/2014
Oakland 10/1/2014
Pasadena 12/31/2014
Sacramento 11/30/2014
San Diego 12/31/2014
San Francisco 6/30/2014
San Jose 6/30/2014

Old and New Benefits Available for Many Years

In July 2013, the California Department of Housing and Community Development approved new Targeted Employment Area (TEA) census tracts for many Enterprise Zones. These new census tracts are effective retroactive to January 1, 2013 and may expand the area from which 2013 new hires may be drawn for purposes of the hiring credit.

Enterprise Zone businesses are able to carry forward the credits up to 10 years for any credits generated up to and including 2013. In addition, credits may be generated by vouchered employees for five years of employment (even if this period is past the sunset date) and then carry forward the credits generated for 10 years. Accordingly, taxpayers may be able to offset California income/franchise taxes with enterprise zone credit carry forwards until 2028.

Last Chance Review

Taxpayers should consider reviewing all prior years to determine whether all eligible employees may have been identified. Many taxpayers obtain vouchers under one eligibility criterion but may not have considered all of the ways to qualify. The WTAS SALT group can assist with the voucher application process to determine the maximum available Enterprise Zone credit for all open tax years. To effectively capture eligible employees, taxpayers should begin a review at least two months before the application deadline.