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California Enterprise Zone Credits May Represent a Golden Opportunity

This week, ADP is participating in the California Association of Enterprise Zone’s CA EZ Annual Conference. For many companies, California is the Golden State of opportunity. As the largest economy in the 50 states, and the equivalent of one of the top 10 economies in the world, many companies will set up operations within the state. Although legal guidelines and taxes unique to California can at times create a challenging business environment, the state has developed numerous tax incentives to encourage business to open locations and hire more people within targeted areas, representing an opportunity for your business.

The Opportunity

California has designated 42 geographic areas across the state as Enterprise Zones (CA EZ). The government’s goal is to stimulate the economy through business incentives for investment in the local economy, and hiring and retaining employees. A business with a location in a CA EZ is allowed a credit against California state income tax for a percentage of wages paid to qualified employees, as well as other lucrative tax credit opportunities, including:

  • Hiring Tax Credit: State tax credit of up to $37,440 over 5 years for each qualified employee hired.
  • Sales & Use Tax Credit: State tax credit for sales & use taxes paid on qualified machinery and parts purchased, not to exceed $20M in expenditures for Corporations and partnerships.

The Challenge

In order to maximize the credits received planning for business growth in California is critical. Organizations that specialize helping businesses maximize tax credits and incentives can be a valuable partner in this endeavor. Be sure to choose a partner with longevity and a proven track record of helping businesses capture California Enterprise Zone credits. Some of initial key questions to answer include:

  • Where are the 42 economic zones? Zones are spread across the state from the Siskiyou County zone along the northern border down to the Imperial Valley and Calexico zones on the southern border. There are also numerous zones located in the major metropolitan areas of the state including Los Angeles, San Francisco, and San Diego.
  • What are Qualified Wages? Wages are “qualified” if they are earned during the 60-month period beginning with the first day of hire. Eligible wages are not to exceed the hours worked, multiplied by 150% of the current minimum wage ($12 per hour as of January 1, 2010.
  • What is a Qualified Employee?  The qualifications that determine eligibility for a California Enterprise Zone employee are based on a list of 14 categories encompassing targeted groups. Some may be location-based such as where an employee resides; others include factors such as: WOTC qualified, dislocated workers, Native Americans, and ex-offenders, among others.

ADP has been serving clients in California since the 1980’s. Learn more about leveraging CA EZ and other tax credits and incentives with help from ADP.


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