04.08.15 |
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Federal Empowerment Zones Extended: Available for 2014 Tax Returns

Empowerment ZoneThe Federal Empowerment Zone Credit, which had previously expired at the end of 2013, was retroactively extended by the Tax Increase Prevention Act of 2014[1].  The Empowerment Zone Credit expired on December 31, 2014[2], but is now available to be claimed on 2014 income tax returns by completing Form 8844.  In light of the extension of the Federal programs, taxpayers should consider whether they are eligible for Zone incentives prior to filing their 2014 income tax returns.

Federal Empowerment Zones were originally designated by the Department of Housing and Urban Development (HUD) over the course of three rounds between 1994 and 2001. There are currently 30 urban Empowerment Zones and 10 rural empowerment zones.  The HUD Address Locator can assist a business in determining if it is located within one of the Empowerment Zones.

The primary incentive under the Empowerment Zone program is the Empowerment Zone Employment Credit[3].  A business located in an Empowerment Zone is entitled to an annual credit of 20 percent of the first $15,000 in qualified wages paid to each qualified zone employee, for a maximum credit of $3,000 per year per eligible employee.  An employee is a qualified zone employee if the employee (a) performs substantially all of such employee’s employment services within the Empowerment Zone and (b) such employee’s principal place of abode is within the Empowerment Zone.  If the qualified zone employee is also eligible for the Work Opportunity Tax Credit (WOTC), such employee’s qualified wages must be reduced by the amount of wages taken into account for WOTC purposes.

For those taxpayers who are in an alternative minimum tax position, the Empowerment Zone Employment Credit is afforded favorable treatment.  In computing the alternative minimum tax, the Empowerment Zone Employment Credit is allowed to offset 25 percent of the alternative minimum tax[4].

The following is a list of the active Empowerment Zones:

 Urban Zones

  • Pulaski County, AR
  • Tucson, AZ
  • Fresno, CA
  • Los Angeles, CA
  • Santa Ana, CA
  • New Haven, CT
  • Jacksonville, FL
  • Miami / Dade County, FL
  • Chicago, IL
  • Gary / Hammond / East Chicago, IL
  • Boston, MA
  • Baltimore, MD
  • Detroit, MI
  • Minneapolis, MN
  • Louis, MO / East St. Louis, IL
  • Cumberland County, NJ
  • New York, NY
  • Syracuse, NY
  • Yonkers, NY
  • Cincinnati, OH
  • Cleveland, OH
  • Columbus, OH
  • Oklahoma City, OK
  • Philadelphia, PA / Camden, NJ
  • Columbia / Sumter, SC
  • Knoxville, TN
  • El Paso, TX
  • San Antonio, TX
  • Norfolk / Portsmouth, VA
  • Huntington, WV / Ironton, OH

 Rural Zones

  • Desert Communities, CA
  • Southwest Georgia United, GA
  • Southernmost Illinois Delta, IL
  • Kentucky Highlands, KY
  • Aroostook County, ME
  • Mid-Delta, MS
  • Griggs-Steele, ND
  • Oglala Sioux Tribe, SD
  • Middle Rio Grande FUTURO Communities, TX
  • Rio Grande Valley, TX

Learn more about how ADP can help your business capture credits if you qualified for the 2014 Federal Empowerment Zones designation.


Learn More About ADP SmartCompliance® Tax Credits


[1] P.L. 113-295.  Section 139, Tax Increase Prevention Act of 2014

[3] IRC Section 1396

[4] https://www.novoco.com/energy/resource_files/irs_guidance/irc/section_38.pdf



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