BOOK of LISTS

An enterprise zone is a designated geographical district in which resident businesses are legally entitled to receive special benefits from a government; it is established in economically depressed areas to encourage companies to locate there.

You’ve reached your limit.
Register now for FREE to read more!

An enterprise zone is a designated geographical district in which resident businesses are legally entitled to receive special benefits from a government; it is established in economically depressed areas to encourage companies to locate there. We looked to our experts at the Los Angeles Community Development Department to give us reasons a business would want to open its doors there. They present good ideas to both resident and non-resident business owners alike.  Here’s their list.

1. State tax credits up to $31,570 for hiring an eligible employee
   

Up to $31,570 can be claimed over a 5-year period by an enterprise zone business as a tax credit for each eligible hired employee. The employer can take a tax credit of 50 percent of wages paid to a qualified enterprise zone employee in the first year of employment. Subsequent years decline by 10 percent. Wages, which qualify for the hiring tax credit, range from minimum wage ($12.00 per hour, effective July 1, 2018) up to 150 percent of minimum wage, or $18.00).

2. Sales and use tax credit of up to 8.25 percent

The sales or use tax paid on the purchase of qualifying machinery, machinery parts, and equipment can be claimed as a tax credit when purchased for exclusive use in an enterprise zone. On January 1, 1998, qualified equipment was added to the tax credit. This equipment includes computers, telephone and fax machines, and copy machines.

3. Business expense deduction of up to $20,000

The cost of qualified property purchased for exclusive use in an enterprise zone may be deducted as a business expense in the first year it is placed in service. The maximum business expense deduction for qualified property is the lesser of 40 percent or $20,000.

4. Net interest deduction on loans made to enterprise zone businesses

Income can be deducted on the amount of the net interest earned on loans made to an enterprise zone business. Net interest is the full amount of interest less any direct expenses incurred in making the loan (such as commissions paid to a loan representative).

2. Net operating loss carryover of 100 percent for 15 years

One hundred percent of net operating losses (NOL) of individuals or corporations conducting business in an enterprise zone may be carried over for 15 years in order to reduce the amount of taxable income for those years. (This amount is greater than standard NOL carryovers in California for non–enterprise zone businesses.)

3. Electrical rate reduction for 5 years, starting with 35 percent the first year

The Department of Water and Power (DWP) offers a 5-year electrical rate reduction for new and expanding businesses located in the city’s state enterprise zones or federal empowerment zone. If a business is eligible, the 5-year rate reduction for empowerment zone or enterprise zone businesses is as follows:

Year 1: 35 percent, Year 2: 30 percent, Year 3: 25 percent, Year 4: 20 percent, Year 5: 10 percent.

4. Reduced fees for architectural plans in an enterprise zone

Ordinance 168439 provides a fee waiver for the review of commercial or industrial architectural plans for projects 40,000 square feet or larger located in an enterprise zone.

5. Enterprise zones allow site plan reviews in lieu of conditional use permits

Ordinances 165951 and 166127 allow site plan reviews (which are less complex and less costly than variance process) for major developments in an enterprise zone.

6. Enterprise zone businesses may pay sewer hookups in installments over 5 years

Ordinance 16902 allows enterprise zone businesses to be exempt from the one-time sewer hookup fee so that payment is in installments over a 5-year period. The 5-year plan, however, requires interest payable on any unpaid balance.

7. Enterprise zone businesses may waive parking space requirements for selected uses

Ordinance 165773 waived certain enterprise zone parking space requirements for office, retail, restaurant, bars, and similar high trip-generating uses in order to allow for continued business growth.

Source: The City of Los Angeles Community Development Department (cdd.lacity.org).