On January 1, 2014, the State’s replacement business incentives program began with termination of State’s Enterprise Zone Program. Replacement incentives now feature the following:
Sales & Use Tax Exemption
- Affords 4.19% State sales & use tax exemption for qualifying equipment purchases for specified industries statewide.
- Qualifying equipment purchases are relieved of the State sales tax obligation; but businesses are still obligated to pay local sales tax.
- Eligible industries include Manufacturing, Biotech and R&D.
- Qualifying equipment includes “manufacturing” PLUS any related equipment necessary to accommodate needed tenant improvements.
- Administered by State Board of Equalization (BOE).
- Maximum $200m/year in qualifying equipment purchases per business.
New Hiring Employment Credit
- ADMINISTERED BY: California Franchise Tax Board (FTB)
- WHEN: Applicable for employees hired on or after Jan. 1, 2014. FTB has established a reservation system for the new hiring credit . New employment credit FAQ’s are available at https://www.ftb.ca.gov/business/economic_development_incentives/index.shtml
- WHERE: Any business located in a former EZ (excluding wealthy CT areas), former LAMBRA’s, and other areas with high unemployment and poverty.
- Unemployed for 6 months;
- Recently discharged veterans (within 1 year of military separation)
- Earned Income Tax Credit (EITC) recipients
- Ex-Offenders convicted of a felony
- Recipients of CalWorks or general assistance.
-No cap. Credits can be captured over 5 year period (minimum 2,000 annual hours worked)
-Minimum hourly wage = $12/hour (150% minimum wage)
-Minimum hourly wage = $28/hour (350% minimum wage)
-Minimum wage will be adjusted (increased) in July, 2014 in accordance with previously approved legislation.
CA Competes Tax Credit
-Flexible income tax credit intended to promote/incentivize business attraction, retention and expansion in California.
-Competitive program – administered by GO-BIZ.
-Businesses must submit their tax credit proposal to GO-BIZ for evaluation and consideration.
-Actual credit amount will depend on several factors; such as:
- Number of jobs created or retained by a business
- Employee wages and overall compensation
- Capital investment in the State
- Overall projected economic impact to region
-Credit is negotiated between GO-BIZ and business(s) selected for CA Competes Tax Credits.
-No single business will receive more than 20% of total available CA Competes Tax Credits.
-At least 25% of credits must go towards small businesses (details pending).
An Enterprise Zone is a geographically designated, economically depressed area in which businesses can receive several substantial state tax breaks and other benefits. Enterprise Zones were created in California to stimulate business investments in areas where they are traditionally slow, and to increase job opportunities in areas of high unemployment. San Diego is home to one of 42 Enterprise Zones statewide. Vist the San Diego Regional Enterprise Zone Website.
- San Diego Regional Enterprise Zone: Established in 2006, is a regional economic development program incorporating portions of the City of San Diego’s Third, Fourth, Seventh and Eighth Council Districts, a significant portion of the City of Chula Vista and the majority of the City of National City.
- Conditionally approved January 2007 – designation date of 10/15/06
- Final Designation – pending completion of Environmental Impact Report
The major benefits of the Enterprise Zone Program are the tax savings on California Business income tax. These include:
- Sales or Use Tax Credit: A tax credit against the purchase of new manufacturing, assembly, data processing or communications equipment equivalent to the amount of sales or use tax, or up to $1.55 million annually.
- Hiring Credit: A tax credit on up to 50 percent of the wages to qualified new employees over a five-year period (up to 50 percent in the first year, 40 percent in the second year, etc.). This credit could exceed $37,000 per eligible employee.
- Accelerated Depreciation Deduction: The option to accelerate depreciation on business property. A business may treat 40 percent of the cost of qualified property as a business expense in the first year it is placed into service for a maximum deduction of $20,000 per year, whichever is smaller.
- Net Interest Deduction for Lenders: Allows lenders a deduction on the net interest earned from loans made to Enterprise Zone businesses. Qualified loans include business loans, mortgages and loans from noncommercial sources.
Other advantages include:
- Job referral service that can be used to find, at no cost, qualified employees whose wages can be claimed as tax credits
- Development permit expediting and assistance (San Diego)
- Reduction and/or waiver of certain development fees (San Diego)
- Tax savings for Enterprise Zone employees
- Access to specialized technical and financial assistance programs.
The City of National City’s Enterprise Zone Record
- 104 vouchers issued to National City companies for tax years 2004 and 2005.
- 2006 Voucher Activity Report (Click here)
- 2007 Voucher Activity Report (Click here)
- 2008 Voucher Activity Report (Click here)
- 2009 Voucher Activity Report (Click here)
- 2010 Voucher Activity Report (Click here)
- 2011 Q2 Voucher Activity Report (Click here)
Over 90% of National City business quality for the Enterprise Zone tax credits. If the current expansion application submitted to the California Department of Housing and Community Development is approved, it is expected that nearly 99% of National City’s commercial and industrial areas will qualify for the state tax credits.
Enterprise Zone Business Highlights
San Diego Leather
New Leaf Biofuel
Marine Group Boat Works
Hawes Construction Co.