Below is a news release from the Franchise Tax Board:

(Sacramento) – The Franchise Tax Board (FTB) announced it accepts California registered warrants (IOUs) as payment of current and past due personal and corporate tax obligations.

To pay a tax liability with an IOU, endorse the IOU on the reverse side with the phrase “Pay to the order of Franchise Tax Board” and your signature then mail it with the tax bill or estimated tax voucher. By law, FTB cannot deposit the IOU until it is payable, but FTB will credit the taxpayer’s account on the date the IOU is received to stop the accrual of interest. If the IOU is not sufficient to pay the outstanding balance, taxpayers should send an additional payment for the difference. Otherwise, the taxpayer will receive a bill reflecting the new balance due.

On October 2, 2009, FTB will redeem the IOUs it has received with the Treasurer. If a taxpayer submits an IOU after October 2, FTB will deposit it and then credit the account with the face value of the warrant plus applicable interest.

Taxpayers wanting to receive the accrued interest from their IOUs must hold them until October 2, 2009, the date IOUs are redeemable.

A registered warrant is a “promise to pay,” with interest, that is issued by the State when there is not enough cash to meet all of the State’s payment obligations. If there is sufficient cash available, registered warrants will be paid by the State Treasurer on October 2, 2009. For more information, see the Treasurer’s website STO Registered Warrant Informationor the Controller’s website California State Controller’s Office: Frequently Asked Questions about Registered Warrants (IOUs).

Rebecca Matt from the HCD announced that several zones now have final TEAs including Kings County, LA East, Yuba Sutter and Siskiyou County. The HCD is close to finalizing Richmond, Delano, San Joaquin, Santa Ana, Merced, Oakland and West Sacramento. This will allow these newly designated Enterprise Zones to qualify employees for the credit.

The law firm Skin Gump Strauss Hauer & Feld LLP on behalf of Charles Young have filed suit challenging the two-thirds vote on tax issue currently being debated in California.  In 1978, Proposition 13 was voted on by the public and passed, cutting property taxes and requiring a two-thirds majority in the legislature to raise taxes – it is this proposition that is currently being discussed.

With approximately $1 billion dollar tax shortfall, the majority of local representatives are pushing for increased taxation, however with the current makeup of the legislature, a two-thirds majority looks to be doubtful.

Despite the fact that several republican represantatives have gone against party lines and voted for increased taxes, the majority of conservatives, including Governor Schwarzenegger suggest that state spending cuts and not increased taxation, is the key to stabilizing California’s economy.

Salinas Valley is moving forward with the city’s Enterprise Zone efforts.  From increasing employment opportunities to making the region more attractive to large businesses, the EZ program can help make the entire process as efficient as possible.

Andrew Myrick, the Salinas Valley Enterprise Zone manager wrote the following:

Professor Charles Swenson from the University of Southern California Marshall School of Business confirms that enterprise zones work. His research found that California’s enterprise zone program decreases unemployment rates, boosts wage, salary and household incomes and decreases poverty rates. Another study by the California Department of Housing and Community Development found that poverty rates and unemployment declined and incomes increased more in enterprise zones than in the rest of the state.

Yesterday was the CAEZ quarterly meeting where a host of new faces were introduced to the EZ world. First, replacing Frank Luera at HCD will be Tom Bettencourt and John Nunn. Both men seem to be well suited for the role. Replacing Jeanne Harriman will be Jayme Mora and James Dudley. They have years of Enterprise Zone experience under their belt and seemed very inviting and helpful. James was even brave enough to give the group his email address. We look forward to a very supportive and beneficial relationship with both groups.

Toni Symonds, chief consultant for California State Assembly Committee on Jobs, Economic Development, and the Economy briefed the group regarding AB 1139. Looks like there will be a public hearing on August 18, 2009 and the bill will likely reach the Committee on January 5, 2010. The discussion will focus on what is the purpose and goals of the EZ and whether the program achieves these goals.

Also, AB 1554, a little known bill, should be garnering support by the CAEZ. AB 1554 aligns the reporting period with the period that HCD was actually administering the program. There will be much more to come, especially regarding AB 1139.

Last, the CAEZ annual conference is coming up on November 4-6 in Fresno.

As California companies continue to experience the benefits of the California Enterprise Zone program, other states from the around the nation are re-evaluating their own corporate tax break programs.  The latest state to review the program is Colorado.  Miles Moffeit, from the Denver Post reports:

“Colorado lawmakers started shining a flashlight into the dense state tax code earlier this year, looking for special-interest loopholes they could plug to prevent the budget crisis from deepening.  They found dozens of industry tax breaks that could potentially be nixed or scaled back, according to a report circulating at the Capitol.  Some are shallow pools of potential revenue, such as exemptions on bull-semen sales — estimated to cost the state $3.2 million this year. Others are deeper, such as $600 million worth of breaks expected to go to manufacturing companies for the purchase of component parts.”

The key that these states needs to be reminded of is the total importance of attracting and retaining businesses.  New companies migrating to a state not only creates jobs and tax sales revenue, it also benefits the economic ecosystem of the region.  Real estate, retail sales and the service industries are simply a few of the sectors positively effected by new businesses moving into a city/state.

This morning, CAEZ president Craig Johnson announced that on July 21 & 22, members of the “CAEZ Board of Directors will have the opportunity to meet in Sacramento with members of the Housing and Community Development management team and representatives from the Franchise Tax Board, who will be assuming the position formerly held by our good friend Jeanne Harriman.” Frank Luera recently left his post as head of the HCD and Harriman recently left her post at the FTB. The new government liaisons for the Enterprise Zone program are eagerly anticipated.

California continues to expand state spending and ultimately its tax burden on a regular basis.  Despite only growing its population by 5% over the past several years, state spending has increased by 31%!  Which is why California continues to be one of the highest taxed states in the country. Josephy Henchman, from the TaxFoundation.org blog had this to say about the state’s current tax position:

“California is a high tax state. They are sixth highest in state-local tax burden as a percentage of state income. The sales tax is the highest state rate in the country even before the recent 1% increase, and numerous county rates keep them in the top 5 of state-local combined rates. Their individual income tax top rate is the second highest in the country, eclipsed only recently by Hawaii, and is sixth highest in the country in terms of collections. The corporate income tax is one of the highest in the country and sixth highest per capita in collections. Even the gas tax is the third highest in the country and the state Lottery has the fifth highest implicit tax rate in the country. Only on property taxes is California “low”: 28th highest in collections per capita.”

With this in mind, it is vital that companies that run their businesses in California take advantage of every tax break possible, especially companies that reside in one of the California Enterprise Zones.  If you have a business in one of the state regions, contact us to receive a free consultation.

States from across the country are trying to attract California companies to relocate through a variety of incentive programs, however the Inland Empire area is leveraging the California Enterprise Zone program to retain local businesses.

Bob Dutton, a writer for ‘The Sun’ reported the following two examples of how the EZ program works in the San Bernadino area:

For example, U.S. Rubber Recycling Inc., a manufacturer of recycled rubber flooring products, has been aggressively recruited to relocate to Arizona. They ultimately chose to stay in California because of the incentives and tax credits offered by the Enterprise Zone Program. As a result, 100 good paying jobs remain in California.

A representative from Young Electric Sign Co., a manufacturer of custom electric signs, also shared how they relocated their Southern California operations to San Bernardino solely because of the Enterprise Zone Program. The incentives compelled them to stop looking in other areas because the San Bernardino Valley Enterprise Zone provided the incentives needed to grow their business and staff.

The new Pasadena Enterprise Zone is significantly larger and covers both commercial and industrial zoned land within the City of Pasadena.  In addition, the City of Pasadena offers local benefits to businesses located within the Enterprise Zone boundaries.  Both the state and local benefits apply during the life of the Pasadena Enterprise Zone from April 10, 2007 until April 10, 2022.  If you’re in the Pasadena area, contact us to see what tax credits you can take advantage of.

Find Out if you Are in the Zone

Step One: Are you located in the 1992 Designation, 2007 Designation or both?

Copy of overlay map

1992 Street Ranges ; 1992 Boundary Map

2007 Street Ranges ; 2007 Boundary Map

• If your business is only located in the 1992 Street Ranges, you can utilize the State Tax Credits from April 10, 1992 to April 9, 2007. If your business is only located within the expansion area, you can utilize the State Tax Credits from September 13, 1999 to April 9, 2007.

• If your business is only located in the 2007 Street Ranges, you can utilize the State Tax Credits from April 10, 2007 to April 10, 2022.  If your business is only located within the expansion area, you can utilize the State Tax Credits from March 6, 2008 to April 10, 2022.

• If you are located within both the 1992 and 2007 Street Ranges, you can utilize the State Tax Credits from April 10, 1992 to April 10, 2022.  Please note: you must file two separate Franchise Tax Board (FTB) 3805Z forms for your 2007 tax filing year.

Step Two: Does your business qualify for the local benefits offered through the City of Pasadena?

Copy of local incentive map

Local Incentive Matrix

• If your business is located within the Enterprise Zone Business Development Area (EZBDA), your business qualifies for Building and Planning permit fee waivers. In addition, if you own a business, the City will waive your business license fee. Although fee waivers are permitted for businesses located within the EZBDA, business are still required to obtain required building and planning permits and business licenses from the City of Pasadena. Nonresidential property owners are excluded from receiving the business license fee waiver.

• If your business is located within the Enterprise Zone Technology Development Area (EZTDA) and if the land use is primarily used for scientific research (Research & Development Business) then your business qualifies for the Building and Planning permit fee waivers, as well as the business license fee waiver. To take advantage of this benefit, Research and Development businesses must obtain a letter from the Enterprise Zone Office first before applying for the fee waivers. Nonresidential property owners are excluded from receiving the business license fee waiver.

Business Incentives
Hiring Credit Program
This five year state tax credit, potentially up to $37,000 per qualified employee, for full-time or part-time employees that meet one of the twelve qualifying criteria under the Hiring Credit Program. Potential criteria includes but not limited to: previously laid off due to plant closure or downsizing, military veteran, public assistance recipient, and resident of a targeted employment area. Enterprise Zone business must obtain a Hiring Credit Voucher from the Pasadena Enterprise Zone Office.

• Targeted Employment Area Ranges for 2007 Designation
• 2007 Targeted Employment Area Map
• State Income Limits 2008 to 2000

Sales and Use Tax Credit
Allows Enterprise Zone businesses to claim a state tax credit equal to the sales and use tax paid on the purchase of qualified equipment. Qualified equipment includes assets such as manufacturing, data processing, office, audio/video, and computer equipment.

Business Expense Deduction
Enterprise Zone businesses may deduct up to 40% of the cost of qualified property purchased for exclusive use in an Enterprise Zone during the first year it’s placed in service.

Net Operating Loss
Enterprise Zone businesses may elect to carry forward 100% of their net operating loss for 15 years.

Net Interest Deduction for Lenders
Lenders can earn a deduction from income on the amount of net interest earned on loans made to Enterprise Zone businesses. Businesses looking for an edge in applying for a loan should bring this credit up with your lender.