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California Enterprise Zones
CA’s Enterprise Zone (EZ) program is a win-win opportunity for business and low-income workers, especially in high-cost San Francisco. Later this year, SF Works will roll out groundbreaking new technology that will forge an even more direct linkage between EZ benefits for businesses and workers alike.
Established in1984 to stimulate business investment in depressed areas of the state and create job opportunities for Californians, today there are 42 EZs throughout CA. San Francisco’s EZ was expanded in 2007 and now encompasses most of the Wharf, Financial District, Union Square, Tenderloin, Inner Mission, and Western Addition.
Incentives
- Tax credits of approximately $38,000 over 5 years for each qualified employee
- Sales tax credits on purchases of up to $20M per year of qualified machinery and parts
- Up to 100% net operating loss deduction and a 15-year carry-forward
- Accelerated expensing of some depreciable property
- Net interest deduction for lenders to zone businesses
The tax credit for qualifying employees encourages businesses within the zones to hire and retain workers that the state believes might otherwise be challenged to secure employment. These include, but are not limited to: dislocated workers, Vietnam veterans, residents of targeted neighborhoods, and low-income workers.
Program Decreases Poverty & Unemployment
In 2006, a report commissioned by the California Department of Housing and Community Development evaluated the success of EZs in spurring economic recovery. The report showed that from 1990 to 2000, relative to the rest of the state, EZs experienced greater decreases in poverty and unemployment and greater increases in resident household, wage, and salary incomes. Nonetheless, the EZ Program has occasionally been decried by some as a business tax loophole. In February 2008, the Legislative Analyst’s Office included dismantling the EZ Program within their alternative budget proposal.
State Budget Crisis Puts EZs at Risk
Although unlikely to gather much momentum in Sacramento, this most recent threat to the EZ Program is ill-timed. In meetings with legislative staff, SF Works has explained that new technology offers the potential to make more explicit the connection between employment practices and hiring tax credits, thereby increasing the positive impact of EZ designations on communities. In fact, the EZ hiring tax credits form a cornerstone of SF Works’ efforts to make work supports (e.g., EITC, transportation and utility discounts, low-cost banking, etc.) a win-win for businesses and their workers. Building upon the web-based program created by Nets to Ladders that SF Works is already using onsite at local businesses to screen and assist employees in applying for tax credits, discounted services and other community resources, we plan to offer a similar package to employers to seize their untapped dollars as well.
Better Linkage Between Business & Worker Benefits
With roll-out planned for the third quarter of this year, SF Works will be the first agency in California to use the new technology platform to identify the workers that will qualify businesses for EZ hiring tax credits. As the same screening is used to enroll workers for tax credits and other community resources, we expect it to be enthusiastically embraced by both parties. Employees will benefit from income supplements and discounts. EZ businesses will benefit from hiring tax credits, a more stable and productive workforce, and additional tax credit savings for employee retention.
In advance of the technology being finalized, SF Works is already beginning to partner with a select group of EZ employers. If your business is interested in being considered for early implementation, please contact Paige Buck at pbuck (at) sfworks (dot) org or (415) 217-5192.
Find Out If Your Business Is Located in an Enterprise Tax Zone
View Federal Renewal Zone map
View California Enterprise Zone map
View San Francisco Enterprise Zone map
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