Empowerment Zone Incentives

1. Wage Credits:

   
   
   • Empowerment Zone Employment Wage Credit
     This program provides a credit against federal taxes up to $3,000 (20 percent of wages paid on the first $15,000) for businesses for each year of EZ designation for every existing employee and new hire who lives and works in the Empowerment Zone.
     
     It is available through Dec. 31, 2011. Businesses cannot count wages for both the Work Opportunity Tax Credit and the Welfare to Work Credits and the Empowerment Zone Wage Credit.
     
     Download IRS Form 8844
     
      
   • Work Opportunity Tax Credit
     This program provides a credit up to $2,400 against federal taxes for businesses for each new hire from groups that have high unemployment rates or other special employment needs including youth ages 18 to 24 who live in an EZ and summer hires ages 16 to 17 who live in an EZ. Businesses do not have to be located in the Empowerment Zone.
     
     The program expires for individuals who begin work after Dec. 31, 2005, and cannot be combined with Welfare to Work Tax Credit. State Employment Services Agency must certify employee is in targeted group.
     
     Download IRS Form 8850  (PDF 234K)
      
   • Welfare to Work Wage Credit
     This program provides a two-year credit against federal taxes for businesses that hire long-term family assistance recipients. Credits are available up to $3,500 for the first year and $5,000 for the second year for each new hire.
     
     The program expires for individuals who begin work after Dec. 31, 2005. Business does not have to be in an EZ to qualify. Cannot be combined with Work Opportunity Tax Credit. State Employment Services Agency must certify employee is in targeted group.
     
     Download IRS Form 8850  (PDF 234K) 

2. Tax Deductions:

   
   
   • Increased Section 179 Deduction
     This program allows businesses to claim increased Section 179 deduction (up to $20,000 in additional expensing increasing to $35,000 for property acquired after Dec. 31, 2001) if the businesses qualify as an Enterprise Zone business. Can be claimed on certain depreciable property such as equipment or machinery.
     
     Download IRS Form 4562 (PDF 234K)
      
   • Environmental Clean-up Cost Deduction
     This program allows businesses to deduct qualified cleanup costs of hazardous substances in certain areas (Brownfields) in the tax year the business pays or incurs the costs. The property must be located in an Empowerment Zone and must be certified by a state environmental agency. The Jacksonville Empowerment Zone is also designated as a Brownfields Area. Includes costs paid or incurred prior to Jan. 1, 2004.
      

3. Bond Financing

   
   
   • Enterprise Zone Facility Bonds
     This program allows the state and local governments to issue Enterprise Zone Facility Bonds (a type of tax-exempt bond) to make loans at lower interest rates to Enterprise Zone businesses to finance qualified Enterprise Zone property. 
      
   • Qualified Zone Academy Bonds
     This program allows state and local governments to match no-interest loans with private funding sources to finance public school renovations and programs.
      

4. Capital Gains Liability Reduction

    
   • Nonrecognition of Gains on Sale of Empowerment Zone Assets
     Under this program, the capital gain on Empowerment Zone Assets (stock, partnership interests, and business property) of an Enterprise Zone business held for more than one year is not recognized (and is rolled over) if replacement Empowerment Zone Assets is acquired within 60 days. This allows the business to delay payment of capital gains to a taxable year where the gain is netted against a capital loss or to a year when it would otherwise be a benefit to the company. The election by taxpayer is for Empowerment Zone Assets acquired after December 21, 2000, and before January 1, 2010.
      
   • Partial Exclusion of Gain on Sale of Empowerment Zone Stock
     This program provides an exclusion of 60 percent or the gain on sale of small business stock of a C Corporation that is an Enterprise Zone business located in an Empowerment Zone if the stock is held for at least five years.
     
     Stock must be acquired after December 21, 2000, and before January 1, 2010, at original issuance in exchange for cash. Sixty-percent exclusion does not apply to gain after December 31, 2014. The business must be an Enterprise Zone business located in the Empowerment Zone.
      

5. Other Incentives

   
   
   • New Market Tax Credits
     Equity investors in qualified Community Development Entities (CDEs) can obtain a tax credit against federal taxes of five to six percent of the amount invested for each of the years the investment is held, for up to seven years of the credit period.
     
     Allocations of the credit will be made annually from 2001 to 2007 to qualified CDEs. Investors must purchase stock or partnership interest in a CDE for cash at original issuance. Credit available at time of purchase (one year) and six anniversary dates of acquisition of investment.
     
     Click here to learn more about New Market Tax Credits
      
   • Low Income Housing Tax Credits
     This program provides a 10-year credit against federal taxes for owners of newly constructed or renovated rental housing who set aside a specified percentage of units for low-income persons for a minimum of 15 years. The credit varies for new construction and renovation.
     
     Project must receive allocation of state's annual credit ceiling or use multifamily housing tax-exempt bonds that receive allocation of state's bond volume cap. Allocations are made on basis of state plan. The project does not have to be located in an EZ to qualify.
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