Businesses zoned out of tax benefit

Through legislative action, the Sequoia Valley Enterprise Zone program has been eliminated effective December 31, 2013. The good news is that it’s not too late to utilize the program.

“The enterprise zone program offers a huge economic benefit to our local community and it can literally save a business thousands of dollars,” says Zone Manager Lori Dunagan. “It doesn’t matter if you have 1 employee or 1,000.”

The main incentive associated with the program is the hiring credit. The enterprise zone hiring credit is equal to 50% of an employee’s qualified wages in the first year. To rephrase that, half of an employee’s wages, up to $12 hour, can be taken as a state tax credit in the first year. The percentage drops each year and phases out at the end of five years. Employees hired after October 6, 2010 would potentially be qualified. Approximately 90% of employees are considered qualified based on their address if they were hired prior to July 8, 2013. The percentage drops after that date.

“It really is an amazing program,” says Dunagan. “It’s a shame that more businesses aren’t aware of its existence and haven’t utilized the benefits, especially since it’s so easy to use.”

Any unused credits left once the program expires will be able to carry forward to offset state tax liabilities for up to 10 years. A business owner also has the option of amending prior tax returns if they were eligible for tax credits and in some cases, this could result in a tax refund being received from the state. In addition, the boundaries of the enterprise zone were recently expanded so businesses that were not previously in the zone may now be in. Contact the zone manager at 559-688-3388 or by e-mail lori@sequoiavalley.com for additional information. Open office hours are also available.

According to Dunagan, there are currently over 700 businesses utilizing the program on a countywide basis. The goal of the Economic Development Corporation is to make businesses aware of the program so they can use it before it’s gone, but they need to act fast.

“While there is only a few months left, businesses can still benefit from these tax incentives going back to 2010,” Dungan said.

The legislature approved the elimination of enterprise zones by passing Assembly Bill 93 in June. The bill was authored by Sen. Ken Hill (D-San Mateo) and signed by Gov. Jerry Brown in July due to what they called “wasteful” spending of tax payer money. Hill argued the enterprise zone was “a big-industry, big- business tax grab” where large companies could move from one part of the state to another just to avoid paying taxes with no net increase in jobs.

He cited a local example of VWR, a medical distribution company, which moved its facility from Brisbane, Calif. 235 miles south to Visalia last fall. According to the LA Times, VWR laid off 200 workers and refused to allow workers to relocate to the new plant. According to Hill, the move cost Brisbane $2.1 million a year in tax revenue while saving the company over $1.5 million per year in tax incentives.

But Dungan said the loss of the tax incentives will hurt small businesses more than large corporations such as VWR. She said small companies used the tax incentives to hire locally, retain a portion of their tax dollars in a state with one of the highest tax rates in the nation and to use that money to pay bills or debt as a result of the Great Recession.

“This will have a negative impact on economic development in Tulare County,” Dungan said. “Many businesses were using the tax money they retained just to keep their doors open.”

The Sequoia Valley Enterprise Zone is one of 42 zones designated by the state of California. It is administered by the Tulare County Economic Development Corporation, attracting, supporting and retaining business and industry for the communities of Tulare County since 1985. California’s Enterprise Zone program was established in 1984 to stimulate business investment in depressed areas of the State and create job opportunities for Californians.

According to the California Association of Enterprise Zones, an advocacy group for the program, Enterprise Zone tax incentives created or retained more than 118,000 jobs while California experienced unprecedented unemployment in 2010. At a time when many businesses cannot afford to hire new employees, Enterprise Zones helped create 20,000 new jobs in the past year alone.

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