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Renewal Community Zone
The
Renewal Community is a business incentive zone that offers tax deductions,
credits and other incentives to grow your business and hire local
residents. These incentives include: wage credits,
section 179 deduction, commercial
revitalization deduction, zero percent capital
gains rate, Work Opportunity Tax Credit, and a DWP rate discount.
WAGE CREDIT
An
RC business can claim up to $1,500 for each new or existing employee
who is a resident of the RC. This tax credit reduces federal business
income tax liability.
Use
the Housing and Urban Development (HUD) Address Range Locator
to verify that your business is in the RC or call 213 744-7111, (TTY) 213-744-9395,
for additional information.
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SECTION
179 DEDUCTION
All
business taxpayers are allowed to deduct up to 100% of qualifying
tangible property. $100,000 is the maximum that can be deducted
through 2007. RC businesses can increase this deduction an additional
$35,000 through December 31, 2009.
For
information, visit the IRS
website and refer to IRS Tax Form 4562.
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COMMERCIAL
REVITALIZATION DEDUCTION
The
CRD is an accelerated depreciation for the costs of acquiring
land and substantially rehabilitating or constructing a commercial
or industrial building within the RC. IRS rules normally allow
39 years for this deduction.
A business can elect to deduct:
- 50% of qualifying expenditures in the year the building is placed
in service and the balance over the normal 39 year period
- 100% of the expenditures over 10 years, 10% per year
If
the project is mixed use, at least 20% of the gross rental income
must be derived from the commercial component. For rehabilitated
buildings, up to 30% of the rehabilitation costs can be deducted
for acquiring the property. For example, if the cost to rehabilitate
a building is $1,000,000 and the cost to acquire the building
was $500,000, $300,000 can be deducted. The maximum allocation
for any one project is $10,000,000 and it must meet required RC
goals.
For
information, visit the IRS
website and refer to IRS Tax Form 4562.
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ZERO PERCENT CAPITAL GAINS RATE
A
business that acquired an RC asset between January 1, 2002 and
January 1, 2010 will not have to include in its gross income
any qualified capital gain from the sale or exchange of the asset.
The business must hold the asset a minimum of five years. RC business
stock, RC partnership interest and RC business properties qualify
as assets.
For
information, visit the IRS
website and refer to IRS Publication 954.
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DEPARTMENT of WATER and POWER RATE DISCOUNT
The Department of Water and Power offers a five-year electric rate
discount to new businesses that are moving into the zone and apply within 18 months for the discount. Existing businesses whose energy
consumption in the 6-month period before the date of application was at least 35% greater than the monthly average in the prior 12 months also qualify.
For more information, call 213-744-7111, (TTY) 213-744-9395, or visit the LADWP website.
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WORK OPPORTUNITY TAX CREDIT (WOTC)
The Work Opportunity Tax Credit (WOTC) has been IMPROVED! The WOTC program is now good through 2011. Now any business anywhere can qualify for the credits as long as they hire persons between the ages of 18-39 who reside in either the Federal Empowerment Zone (EZ) or the Federal Renewal Community (RC) area. Los Angeles contains both an EZ and an RC. There are eight (8) additional eligibility categories, some of which are not dependent on the employee’s address. The WOTC hiring credit is worth up to $2,400 per year for each eligible hire.
For additional information, call the WOTC Center at (866) 593-0173, or visit the California State Employment Development Department website.
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