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California Enterprise Zone Tax Credits…Could Change Be Around the Corner?

Earlier this week, the California Senate voted on and passed Assembly Bill 93. This bill is a follow up to the adoption of Governor Brown’s overall budget plan, which includes a proposal to eliminate Enterprise Zones and replace them with a series of other credits. In light of this approval, we expect a full Assembly vote tomorrow at 9 a.m. PST.

PROPOSED NEW HIRE CREDIT
While the proposed hiring credit program retains the same geographical boundaries as the existing Enterprise Zone program and remains a five-year credit, the similarities end there. Among other things, the new program would introduce the concept of “net new jobs,” greatly restrict the number of ways an employee can qualify for the credit, change the credit calculation criteria, and disqualify several industries from seeking the credit. Additionally, the proposed hiring credit would expire on December 31, 2020.

SALES AND USE TAX (SUT) EXEMPTION
The new law would provide a SUT exemption for qualifying purchases from July 1, 2014 through December 31, 2018 for personal property used in California for manufacturing or research and experimental development activities, and through June 30, 2021 for personal property used within the current EZ boundaries.

ENTERPRISE ZONE CREDIT
Under the proposal, the existing Enterprise Zone credit would not be effective after December 31, 2013. While this Bill may eventually eliminate Enterprise Zones, there is still time to maximize the available benefits under the current program. Employees qualified prior to this date will continue to qualify for credit throughout the normal five-year period.

Please note – Referenced dates are subject to change until the final version of the bill is approved by the Assembly.

Learn more about leveraging tax credits and incentives with help from ADP


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