What is the Fresno Empowerment Zone?
Fresno was one of only seven communities nationwide to recently receive this coveted designation that stimulates economic development. Businesses in the FREZ are eligible for significant incentives, and encouraging expansion. Residents in the FREZ can benefit from job development and training programs, improving employability.
Isn’t it all about taxes?
Businesses can realize substantial tax savings by locating and/or expanding in the FREZ, and by employing area residents. The investment of Federal tax dollars translates into new funds entering our community that will grow and expand our economic base.
When does it take effect and for how long?
The eight-year program starts now, and allows us to tap into Federal assistance totaling $17 million dollars. The positive impact on our local economy is expected to continue for decades to come.
What changes are on the horizon?
The City and County of Fresno are preparing materials and training employees so that available programs can be utilized to their fullest capacity. In addition, a 13 member Fresno Renaissance board of directors will oversee the implementation of the program. Firm goals are already in place that target job creation and new business development. These include the addition of 1000 new jobs and 40 new businesses in the FREZ over the next two years.
How have other communities benefited?
Since receiving a similar designation in 1998, Oklahoma City has generated more than 1,700 new jobs in its zone. Santa Ana, another 1998 recipient, attributes $22 million dollars worth of investment to their participation in the program.
How do I know if I qualify?
If you live or work in the FREZ, you stand to benefit. Contact City of Fresno Economic Dev. Department at (559) 621-8300 to find out what specific programs & incentive you are eligible to receive.
What kind of businesses will benefit?
The entire area will benefit from the increased economic activity that will take place in the FREZ. The City of Fresno is particularly interested in attracting new businesses involved with flexible food manufacturing, irrigation technology, agricultural technology, agile industrial manufacturing, advanced logistics, smart commerce and customer services. The growth of our local tourism industry is another interest area.
Does this change the Fresno Enterprise Zone?
No. The Fresno Enterprise Zone is a State of California economic development program. It complements the Federal Fresno Empowerment Zone benefits for businesses and individuals located within both designated areas.
Who is heading up the program?
The Federal Department of Housing and Human Services (HUD) awarded the Fresno Empowerment Zone designation. Fred Burkhardt, the City of Fresno’s economic development director is in charge of its day-to-day operation.
Wage Credits = More Jobs
A variety of credits are available to employers for both existing employees and new hires. For example, you can earn an employment tax credit of up to $1,500 or $3,000 per year, per qualified employee. There are three primary wage credits:
Employment Tax Credit
Work Opportunity Tax Credit
Welfare to work Tax Credit
Deductions = Community Investment
Specialized deductions encourage corporations and business owners to invest in building and equipment that will help our local economy thrive. These include:
Increased Section 179 Deductions
Environmental Cleanup Deduction
Bond Financing = Partnership for Growth
Bond programs stimulate investment and provide substantial interest savings.
EZ Facility Bonds
Qualified Zone Academy Bonds
Capital Gains = Avenue for Reinvestment
Capital gains programs designed to encourage area-wide reinvestment.
Nonrecognition of Gain on Sale of EZ Assets
Partial Exclusion of Gain From Sale of EZ Stock
Other Incentives = Better Quality of Life
The Fresno Empowerment Zone designation qualifies participants for several additional tax credits. These include generous allowances for newly constructed or renovated rental housing targeting low-income residents of our city.
New Markets Tax Credit
Low Income Housing Tax Credit
Fresno Fresno Enterprise Zone
The City of Fresno’s designated Fresno Enterprise Zone includes the downtown area, portions of the airport area and the large industrial and manufacturing area along the southern Highway 99 corridor. Businesses in the zone – from large manufacturing companies to small neighborhood restaurants – can reduce their state income taxes by taking advantage of special California Fresno Enterprise Zone tax benefits.
Target Employment Area
Located within the Fresno Fresno Enterprise Zone borders are affordable manufacturing and commercial sites as well as unique retail locations. The zone is within immediate access of two freeways, two state highways and the Downtown Chandler Airport, and is in close proximity to a wide range of educational facilities, housing and other amenities. These assets add up to an increasingly powerful ability to assist current businesses and attract new companies, jobs and investments.
How Your Company Can Utilize Zone Tax Incentives
A business located within the Fresno Enterprise Zone can receive tax credits each time it hires an eligible new employee or purchases qualified new machinery, equipment or pollution control devices. Tax credits also are available to lenders who make loans to businesses in the zone and to employees who work there. Fresno Enterprise Zone businesses are automatically eligible for benefits. There is no certification process.
There are six basic tax incentives associated with the Fresno Enterprise Zone:
Sales and use tax credit
Hiring tax credit
Business expense deduction for business property
Net operating loss carryover
Net interest deduction for lenders
Employee tax credit
Your Company May Be Eligible For Thousands Of Dollars In Benefits
Sales and Use Tax Credit:
In any year, individuals may claim a credit equal to the sales or use of tax paid or incurred to purchase the first $1 million of qualified machinery costs. Therefore, if your company spends $50,000 to purchase eligible equipment, you would be eligible for a credit of $3,875 (the amount of your sales tax), against your state business income tax on zone income. These credits do not apply to real estate purchases. In some instances, tax credits can be carried over.
Hiring Tax Credit:
A qualified employee who works 2,000 hours during the year (full-time equivalent) and earns $6.37 per hour (for a total salary of $12,740) would earn your company a credit of $6,370 ($12,740 x 50%) against your state business income tax on zone income. In subsequent years, credits are reduced by 10% annually over a five-year period. This credit may be taken for five years for each employee.
The maximum hiring credit available is based on an hourly wage of $8.63. If an employee earns more than $8.63 per hour, the employer must compute the credit using $8.63 as the hourly wage.
Full-time, part-time, temporary or seasonal employees all qualify if they are:
A person eligible for the Jobs Training Partnership Act (JTPA) or the Greater Avenues for Independence Program (GAIN)
An economically disadvantaged person 14 years old or older
A disabled individual
A Native American
Eligible recipient of:
A displaced worker
A resident of a targeted employment area (TEA)
A Vietnam Veteran
Business Expense Deductions:
The cost of qualified property purchased for exclusive use in an Fresno Enterprise Zone may be deducted as a business expense in the first year it is placed in service. The type of property which qualifies for this special treatment is tangible personal property (not real estate) which is used for business purposes and is eligible for depreciation or amortization. This includes most equipment and furnishings purchased for exclusive use in an Fresno Enterprise Zone, but not office supplies or other small items which are normally ineligible for depreciation.
Net Operating Loss Carryover:
Net operating losses of individuals or corporations doing business in an Fresno Enterprise Zone may be carried over to future years to reduce the amount of taxable zone income for those years. For example, in your first year of business in the zone, you show a $5,000 net operating loss exclusively from zone activity, resulting in minimum business income tax liability that year. The following year, you post an $8,000 profit. You may carry over the $5,000 first year loss to claim against your state business income tax on zone income.
Tax Benefits For Lenders
Net Interest Deductions:
A bank or individual making a loan to a business whose sole activity takes place in the zone may deduct loan expenses incurred from income earned on the loan interest, plus take a deduction equivalent to the net interest produced by the loan. Eligible expenses include commissions paid to the loan representative, the cost of the money used to fund the loan and bad debt expenses. Employers may be able to leverage these benefits to achieve lower interest rates or loan fees.
Tax Benefits For Employees
Low-Wage Employee Tax Credit:
A state income tax credit is available to qualified employees working in the Fresno Enterprise Zone. The credit is equal to five percent of an employee’s earnings up to a maximum amount of $10,500 in earnings per year. For example, a single employee earning $20,000 is eligible for a $525 state income tax credit (formula: gross income of $10,500 x .05 = $525)
Let The Fresno Fresno Enterprise Zone Work For You
The Fresno Enterprise Zone program was developed by the California State Legislature to provide targeted areas with a means to stimulate business and employment growth. All businesses located in the zone boundaries, regardless of size and structure, are eligible to earn tax credits. There is no fee involved. Use State Franchise Tax Board Booklet 3805Z to calculate your benefits. For more information, contact the City of Fresno, The EDC, or one of the agencies listed on this page.