While the Federal Empowerment Zone program has sunsetted, the tax incentives associated with the program continue to be extended by Congress.* Empowerment Zone businesses may be eligible for several tax incentives. These tax incentives are designed to encourage businesses to operate within the Empowerment Zone and to hire local residents. Incentives include employment credits, low-interest loans through EZ Bonds, and reduced taxation on capital gains.
Empowerment Zone Employment Credit allows Empowerment Zone businesses to take a credit against federal taxes of up to $3,000 each year for every existing employee and new hire that lives and works in the Empowerment Zone.
Work Opportunity Tax Credit allows businesses to take a credit up to $2,400 against federal taxes for each new hire from groups that have high unemployment rates or other special employment needs, including youth ages 18 to 24, who live in an Empowerment Zone, and summer hires ages 16 to 17 who live in an Empowerment Zone.
Welfare to Work Tax Credit allows businesses that hire long-term family assistance recipients to take a two-year credit against federal taxes. Credits are up to $3,500 for the first year, and $5,000 for the second year for each new hire.
Tax-Exempt Bonds provide businesses with access to $130 million in tax-exempt facility bonds. The bonds can be utilized for property and equipment purchase, new construction and/or renovations. The $10 million cap on project expenditures is not applicable to EZ bonds and the bonds can be used for activities beyond manufacturing. Bond projects must be located within the Empowerment Zone and a business must hire at least 35% of its employees from within the Zone. Tax-exempt financing is typically three to four percentage points lower than conventional financing.
Tax Deductions, under Section 179 of the tax code, allow businesses to choose to deduct all or part of certain qualifying property in the year they place it in service. The increased section 179 deduction allows businesses located within the Empowerment Zone to increase their IRS 179 tax deduction by as much as $35,000.
*Continued availability of Empowerment Zone tax incentives is dependent on Congressional action. As such, please contact the Cumberland Empowerment Zone Corporation staff to determine whether any of the following tax incentives remain active to assist your business.
For more tax incentive information, contact the Cumberland Empowerment Zone Corporation staff or visit www.hud.gov.