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California's Enterprise Zone program was established in 1984 to stimulate business investment in depressed areas of the State and create job opportunities for Californians. Today, both businesses and workers located in Silicon Valleys only Enterprise Zone, continue to benefit from the program. San Jose's Enterprise Zone is a 12-square mile area in the heart of Silicon Valley, and businesses located here are eligible for significant tax savings as well as other incentives including:
Sales and Use Tax Credits - Purchases of machinery and equipment used to fabricate or manufacture a product in the Enterprise Zone are eligible to earn a 8.25% tax credit on state income tax. (The 8.25% is true - only if the equipment was bought in San Jose or a city that has 8.25% sales tax rate). The exact percentage can vary based on what city or state the purchase was made. Corporations may claim a credit equal to the sales and use tax paid or incurred on the first $20 million of the cost of equipment purchased or leased. Corporations and individuals may claim the credit for up to $1 million in cost.
Hiring Tax Credits - Businesses hiring persons from one of 13 eligibility categories may claim tax credits on wages paid to those employees for five years. In the first year, a company can claim 50% of an employee's wage. The company can claim 40% in the second year, 30% in the third year, 20% in the fourth year and 10% in the fifth year. There is a maximum wage allowance of 150% of the current minimum wage rate; as established by the Industrial Welfare Commission. As the minimum wage increases so does your tax credit.
Business Expense Deductions - A deduction of up to $20,000 is available for certain tangible property used exclusively in the Enterprise Zone.
Net Operating Loss Carryover - 100% of net operating losses can be carried over up to 15 years to reduce the amount of taxable income levels paid in subsequent years.
Net Interest Deduction for Lenders - Lenders may receive a tax deduction on the amount of "net interest" earned on loans made to businesses located in the Enterprise Zone. |
