Santa Ana Enterprise Zone Tax Credits

-

Santa Ana Enterprise Zone Tax Credits

The City of Santa Ana received a 15-year Enterprise Zone designation on June 8, 2008. The Santa Ana Enterprise Zone encompasses 16 square miles. Businesses already in the zone can qualify for benefits, as well as new businesses relocating or expanding into the zone. If you business is located in the Santa Ana Enterprise Zone, your company can receive over $37,440 in state tax credits for each eligible employee over a five-year period.
 
 
How do I know if my business qualifies?
» To see if your business qualifies, fill out the Enterprise Zone eligibility form
 
 

Other Benefits of the Santa Ana Enterprise Zone

 
Sales or Use Tax Credit
California income or franchise tax may be reduced by the amount of sales or use tax paid on certain machinery, machinery parts, and equipment purchased for exclusive use in an Enterprise Zone. Eligible property includes machinery and machinery parts used for fabricating and processing, air and water pollution control equipment and, as of a business’ 1998 tax year, data processing and communications equipment (computers, CAD systems, copy machines, telephone systems and faxes), and certain motion picture manufacturing equipment. $1.45 million or more per year in tax credits is available for qualifying property. The credits may be carried over until they are exhausted.

Example: You spend $50,000 to purchase machinery used to manufacture wooden toys. The sales tax paid for the purchase is $3,000. You may reduce the amount of your tax imposed on Enterprise Zone income by up to $3,000.

Business Expense Deduction
Part of the cost of certain property purchased for exclusive use in the Enterprise Zone may be deducted as a business expense in the first year it is placed in service. (Amount of deduction changes annually, call for current value.)

Example: Three years after the Enterprise Zone you are located in was designated, you purchased a baking oven that costs $20,000. You can depreciate the oven over a 10-year period using the straight-line method. The Enterprise Zone Business Expense Deduction you may claim is $8,000 ($20,000 x 40%). You may claim $1,333 of normal depreciation next year, ($20,000 – $8,000) ÷ 9 years = $1,333.

Net Interest Deduction for Lenders
A deduction from income is allowed on the amount of “net interest” earned on loans made to a trade or business located exclusively in the Enterprise Zone.

Example: You loan $5,000 to an Enterprise Zone business that meets the requirements listed above. You earn $550 of interest and incur $300 of expenses directly related to the loan. You may deduct $250 ($550-$300) of net interest from your taxable income.