The California Enterprise Zone Program offers state income tax credits to companies operating in one or more of the 42 zones statewide. The program seeks to promote job creation, attract new investment, and retain businesses in particular areas. As a result, the program has created thousands of jobs annually in government-targeted economic development areas.
Benefits of Enterprise Zone:
- Firms can earn $37,000 or more in state tax credits for each qualified employee hired.
- Up to 100% Net Operating Loss (NOL) carry-forward; in most cases up to 15 years.
- Corporations can earn sales tax credits on purchases of up to $20 million per year of qualified machinery.
- Up-front expending of certain depreciable property. Lenders to Zone businesses may receive a net interest deduction.
- Unused tax credits can be applied to future tax years, stretching out the benefit of the initial investment.
Any business operating within the boundaries of an Enterprise Zone is eligible to claim benefits which, coupled with California’s high tax rate, makes the program so important. Despite this fact, only 10% of the potential benefits are utilized by eligible taxpayers. There are 42 Enterprise Zones authorized in California, and many businesses may be eligible for retroactive benefits due to shifting boundaries, zone designations and zone expirations.