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Enterprise Zone Program 101. What is an Enterprise Zone?.

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what is an enterprise zone
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.

slide3
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
Benefits
  • Net interest deduction for lenders
  • Sales tax or use tax credit
  • Employee hiring credit
net interest deduction for lenders
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
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
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
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
Qualified Employeeis 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
(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
Examples

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.

Company “A”

  • 3 employees
  • 2 Qualified
  • $31,000 Identified credits
  • $8,000 Refund (Taxes Paid in ’06 and ’07) / $23,000 Carried forward
for more information
For more information:

Refer to CA Franchise Tax Board’s

3805z Booklet & Form

service fee
Chamber Members:

10% of Identified credits/Refund

Non-Members: 12%

Independent Consultants:

15% - 25%

Service Fee:
contact us
Contact us

Otay Mesa Chamber of Commerce

9163 Siempre Viva Rd., Suite I-2

San Diego, CA 92154

(619) 661-6111

mmagoni@otaymesa.org

www.otaymesa.org