Will You File Your California Enterprise Zone Hiring Credit Before It’s Too Late?

Posted by: Joshua Flexen September 7, 2014

tax copyWill You File Your California Enterprise Zone Hiring Credit Before It’s Too Late?

Today’s blog post is brought to you by contributing author Jeff Jerdin, CPA and Business Incentives Leader of Corporate Tax Incentives. The information provided is for educational purposes only.

Did you know that the California EZ program was repealed at the end of 2013? The good news is you have a few months left to capture the tax credits from the program. But, you must apply before your particular zone’s deadline for qualified employees hired before 2014.* Whether or not you have claimed these benefits in the past, it is worthwhile to review your recent hires to make sure you aren’t leaving money on the table.

* Each separate zone sets its own deadline based on their voucher application backlog.

Haven’t heard of California EZ?

The California EZ program was established in the early 90’s to spur economic growth in depressed areas of the state. It is one of the most lucrative tax credit programs in the country. Companies earn a tax credit for wages paid to employees who, at the time of hire, were included in one of 18 targeted categories. Although the categories range from economically disadvantaged, to veterans, to benefits recipients, an employee could qualify simply based on home address. Many small businesses have never claimed the credit because they believed that none of their employees would qualify. The good news here is that about 40% of all employees hired in California EZ locations are qualified employees.

How do you know if you are in an Enterprise Zone?

There are 40 zones between San Diego and Eureka, including San Francisco, Los Angeles, Anaheim, Pasadena, and most of the Central Valley. Each zone is separately administered, and it is easy to mistakenly conclude that you are not in a zone -- a costly mistake. To determine whether or not you are in an Enterprise Zone, simply email your address to CTI, and we will confirm for free.

Is it worth the effort to apply?

You be the judge. One qualified employee can generate about $12,000 in their first year with the company and more than $37,000 over a 5 year period. So if you hired just 10 employees over the last five years, you would expect four of them to qualify and produce up to $150,000 credit.

Here are just a few benefits that a company located in an Enterprise Zone could receive:

  • One qualified employee can generate over $37,000 in tax credits over a five year period
  • Qualified employees will continue generating credit for their first 60 months of employment even if the 60 months extends beyond 2013 (for example, an employee hired on 12/31/2013 could generate credit through 12/30/2018)
  • Businesses can still take advantage of Tax Credits retroactively for all open tax years before 2014
  • Businesses can carry over unused tax credit up to 10 years (possibly through the 2028 tax year)

You can still capture the benefits you are entitled to for all employees hired before 2014, but time is running out.

If you are interested in a free analysis to determine how much credit you can receive, you can contact Jeff Jerdin, CPA at jjerdin@ctillc.com, or (818) 983-6164.

Jeff Jerdin is a Business Incentives Leader at Corporate Tax Incentives. With offices in Glendale, San Francisco, Sacramento, and Denver, CTI provides tax credits and incentives services to businesses of varying types and sizes including Fortune 100 to five employee start-up businesses. www.ctillc.com

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