Most Enterprise Zones were designated in the late 1980's and early 1990's. However, the most recent statistics show that only 10% of eligible businesses are taking advantage of a program that can reduce if not completely eliminate a businesses' California tax liability. A tax credit unlike a tax deduction is a dollar for dollar offset against income tax. Enterprise Zones exist in almost every major city in California and a majority of other states have a similar program.

The California Enterprise Zone program provides businesses located in designated areas called "Enterprise Zones" with tax credits of up to $32,000 per "qualified employee" over a five year employment period. A qualified employee is one that meets only one of thirteen designated criteria including certain local residents, veterans, government benefit recipients, etc. Sales/Use Tax Credits are also available on qualified purchases including but not limited to the following:

computers data processing and communication equipment machinery or machinery parts used to manufacture, process, fabricate, or assemble a product water or air pollution control equipment security systems

The only requirement is that sales tax must be paid and that the asset is used completely within the boundaries of one or more Enterprise Zones. The tax credit is equal to the amount of sales tax paid on the purchase, making it essentially a tax free purchase.

Unfortunately, there is an incorrect perception that the program is overly burdensome and that none of the employees will qualify. These project usually only take a few weeks to complete and are worth any minimal time commitment required to prepare basic financial information for the consultant. If you are not looking into these credits, you could be potentially forgoing on thousands of dollars of savings!

Nojan Boloorchi is president of Los Angeles based Tax Incentive Solutions. He is also an associate member of the California Society of Certified Public Accountants (CalCPA) and the Tax Division of the American Institute of Certified Public Accountants (AICPA). He started his career in the Los Angeles regional headquarters of Deloitte & Touche LLP. As part of the international tax department Nojan assisted Fortune 500 multinational corporation with their transfer pricing analysis. He is considered an expert in the Enterprise Zone Tax Credit program and has held seminars for CPA firms throughout Southern California.

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