Hiring and other business tax benefits, plus DWP electric rate discounts for new or expanding businesses

City of Los Angeles; State of California

City of Los Angeles
Community Development Department
Business Center
1200 W. 7th Street, Floor 6
Los Angeles, CA 90017
(213) 744-7111

Franchise Tax Board (tax related questions)
(800) 852-5711
http://www.lacity.org/CDD/bus_state.html

Five Enterprise Zones are located in the City:
Central City Enterprise Zone
East Side Enterprise Zone
Harbor Area Enterprise Zone
Mid-Alameda Corridor Enterprise Zone
Northeast Valley Enterprise Zone

Any business located within a Zone

Hiring tax credit against state taxes for hiring a qualified employee who is participating in designated job-training programs or lives within the Targeted Employment Area (TEA). The credit begins at 50% of wages, declining by 10% annually for five years. The portion of the wage of up to $10.12 (150% of minimum wage), qualifies for a credit.

DWP rate discounts for 5 years, starting at a 35% rate reduction on basic electric service for a period of 60 months are available to new businesses in the Enterprise Zone within the first 12 months of opening, or existing businesses with an increase in electric usage of at least 50%.

Business expense deduction in the first year (up to $20,000) of the cost of qualified personal property placed in a Zone.

Net operating loss carryover for up to 15 years for individuals or corporations, taken against income from a Zone.

Net interest deduction allowed by lenders on interest received from loans made to entities conducting business in a Zone.

Sales and use tax credit against such taxes paid for qualified machinery used exclusively within a Zone (limit of $1 million in purchases for individuals and $20 million for corporations).

None

Central City, Mid-Alameda Corridor and Northeast Valley were designated in 1986 and expire 10/14/2006.
East Side was designated in 1988 and expires 1/10/2008. Harbor Area was designated in 1989 and expires on 3/3/2009

Federal tax incentives and tax deductions. Financing opportunities and City of Los Angeles tax incentives are also available.

City of Los Angeles; Federal Government (HUD)

Community Development Department Empowerment Zone
Industrial and Commercial Development Division
1200 W. 7th Street, Floor 6
Los Angeles, CA 90017
(213) 744-7111

http://www.lacity.org/CDD/bus_index.html

The City of Los Angeles Empowerment Zone is a 19-square mile area covering portions of Pacoima, Downtown Los Angeles, Boyle Heights, South Los Angeles and Watts. Refer to the HUD locator for addresses
in the Empowerment Zone.

Any business located within the Empowerment Zone

Available beginning January 1, 2000 Employer Wage Credits: A 20% wage credit for the first $15,000 of wages paid to an Empowerment Zone resident who works in the EZ; Section 179 Expensing - an additional $20,000 of section 179 expensing for a qualified zone property placed in service by an “Empowerment Zone Business.”
EZ/EC Bonds: Below market-rate financing for acquisition and construction of commercial or retail facilities within the EZ.
City of Los Angeles Business Tax Benefits: Existing Empowerment Zone businesses can receive a business tax waiver of $500 and have business taxes frozen at the current rate for five-years. Businesses new to the Empowerment Zone, either as startups or relocating to the zone from outside the City of Los Angeles, pay only $25 yearly for five-years.

Businesses must satisfy one of the criteria below in order to be eligible:

• Business provides goods and/or services that are urgently needed in the Empowerment Zone (e.g., grocery store, bakery, fresh produce market, banking services, etc.).
• 50% of the business' employees reside within the Empowerment Zone or one mile buffer area.
• Business makes benefits available to employees, such as childcare; training to update skills of current workforce; retirement, health, investment, or insurance programs.
• Employees meet provisions of the City of Los Angeles' Living Wage Ordinance.

None

The City of Los Angeles Empowerment designation became effective January 1, 2000 and remains in effect through December 31, 2009.

Renewal Communities allow businesses to take advantage of wage credits, tax deductions, capital gains exclusions and bond financing. Each incentive is tailored to meet the particular needs of a business.

City of Los Angeles; Federal Government (HUD)

Community Development Department
Industrial and Commercial Development Division
1200 W. 7th Street, Floor 6
Los Angeles, CA 90017
(213) 744-7111

http://www.lacity.org/CDD/bus_ren.html

The City of Los Angeles Renewal Community Area, which includes portions of South L.A., Westlake, Pico Union, Downtown L.A., and Chinatown.

Any business located within the Renewal Community Area.

Work Opportunity Credits provide businesses in Renewal Communities with up to $2,400 against their Federal tax liability for each employee hired from groups with traditionally high unemployment rates or other special employment needs, including youth who live in the EZ or RC .
Welfare to Work Credits offer businesses a credit of up to $3,500 (in the first year of employment) and $5,000 (in the second year) for each newly hired long-term welfare recipient.
Tax Deductions
Commercial Revitalization Deductions A business can deduct up to 50% of construction and acquisition costs up to $10 million in the year a commercial building is placed in service, or deduct the full amount of eligible costs over 10 years. Section 179 Deductions: allows a qualified RC business to expense up to $35,000 of additional qualified property such as equipment and machinery acquired each year from 2002 through 2009.
Environmental Cleanup Cost Deductions: allows businesses to deduct qualified cleanup costs in Brownfield sites.
Capital Gains Exclusions
Zero Percent Capital Gains Rate applies to an interest in, or property of, certain businesses operating in a Renewal Community, if the asset is acquired during the period of the RC designation and held for at least 5 years.
Bond Financing
Qualified Zone Academy Bonds allow state and local governments to match no-interest loans with private funding sources to finance public school renovations and programs.
New Markets Tax Credits that provide investors with a credit against their federal taxes of 5 to 6 percent of the amount invested in a distressed area. Also available to Renewal Communities is the Low-Income Housing Tax Credit providing credit against Federal taxes for owners of newly constructed or renovated rental housing.

None

The City of Los Angeles Renewal Community Zone is effective through 2009.

US Government

Port of Los Angeles Planning and Research Division
Masa Morimoto
425 South Palos Verdes Street
San Pedro, California USA 90731
Tel: (310) 732-3843
E-Mail: mmorimoto@portla.org
Fax: (310) 831-4896
http://www.portoflosangeles.org/facilities_ftz.htm

Citiwide

Any business importing or exporting any merchandise, except as prohibited by law. After entering the Foreign Trade Zone, merchandise may be assembled, cleaned, destroyed, displayed, manufactured, mixed, processed, re-labeled, repackaged, repaired, salvaged, stored, or tested.

Advantages of using Foreign Trade Zone 202 (FTZ) include:

• US Customs duties are deferred on import merchandise until it is transferred from FTZ 202 to a US Customs territory for consumption.
• US Customs duties are not paid on merchandise imported to FTZ 202 that is subsequently exported.
• Applying the duty rate either to the component parts or to the finished product may reduce the US Customs duty rate.
• US Customs duties are not paid on labor, overhead or profit related to productions operations in FTZ 202.
• US Customs duties may be waived or reduced on defective, damaged or obsolete merchandise.
  

None

Ongoing

Provides direct loans to eligible businesses and nonprofit organizations that manufacture recycled raw materials, produce new recycled products or that reduce the waste resulting from the manufacture of a product. These loans promote market development for post consumer and secondary waste materials.

The California Integrated Waste Management Board (CIWMB)

Bob Perez
Sr. Management Analyst
1149 S. Broadway, 10th Floor
Los Angeles, CA 90015
Phone: 213-485-3904
Email: rperez@san.lacity.org

http://www.ciwmb.ca.gov/RMDZ/LACity/Default.asp

Citywide

Applicants must be located in one of the designated RMDZs and divert waste from non hazardous California landfills. Projects must meet criteria for one of the following uses: waste prevention, reuse, recycling, conversion technology, transformation, public infrastructure & capital improvements.

Funds may be used to: Acquire equipment, make leasehold improvements,
purchase recycled raw materials and inventory. It can be used to acquire owner-occupied, commercial, real property (limited to $500,000).

A nonrefundable application fee of $300.00 is due at time of application submittal. A loan origination fee of one-half percentage points will be charged on each loan, payable at loan closing.

Each eligible applicant may borrow up to 75 percent of the cost of a project or a maximum loan of $2 million, whichever is less. The term of the loan is not to exceed 10 years, or 15 years if secured by real estate. Interest rates are fixed for the term of the loan, and are set by the Board semiannually.

RMDZs are designated for 10-year periods.

The HUBZone Empowerment Contracting program provides federal contracting opportunities for qualified small businesses.

US Small Business Administration

US Small Business Administration
Glen Constantino – Lead Business Specialist, Los Angeles
330 N. Brand Blvd, Ste 1200
Glendale, Ca 91203
(818) 552-3235
e-mail: glen.constantino@sba.gov
http://www.sba.gov/ca/la

The business must be located in a "historically underutilized business zone" or HUBZone.

A small business by SBA size standards. Its principal office must be located within a HUBZone. It must be owned and controlled by one or more U.S. citizens. At least 35% of its employees must reside in a HUBZone. To determine if an address is in the HUBZone log onto the web at http://www.sba.gov/hubzone and select the option ‘Are You in a HUBZone?’

There are three types of HUBZone contracts:
Competitive: Contracts can be set-aside for HUBZone competition
Sole-source: HUBZone contracts can be awarded if the contracting officer determines that only one qualified HUBZone SBC is responsible to perform the contract.
Full and open competitive contracts can be awarded with a price evaluation preference.
Subcontracting: All subcontracting plans for large business Federal contractors must include a HUBZone subcontracting goal.
Other Benefits
Eligible HUBZone firms can qualify for higher SBA-guaranteed surety bonds on construction and service contract bids. Firms in Federal Empowerment Zones and Enterprise Communities (EZ/EC) can also benefit from employer tax credits, tax-free facility bonds, and investment tax deductions.

None