On June 8, 1993, the City of Santa Ana was designated as an Enterprise Zone (EZ) by the State of California. The
Santa Ana Enterprise Zone
encompasses more than 7,100
acres of industrial and commercial
land. Businesses already in the
Zone can qualify for benefits,
as well as new businesses
relocating or expanding into
Santa Ana's EZ. To see if you are located in the EZ look in the EZ address range.
Enterprise Zone Tax Incentives Include:
Hiring Credit
A qualified business may reduce its state income tax by $37,440 per qualified employee, over a 5-year period. The credits may be carried over until they are exhausted.
Credit calculation, forms, and qualifying criteria can be found here.
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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.
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Net Operating Loss Carryover
(Suspended for 2002-2003)
Up to 100% Net Operating Loss (NOL) for individuals or corporations doing business in the Enterprise Zone may be carried over for up to 15 years to reduce the amount of taxable income generated within the Enterprise Zone for those years.
Example: For the 1998 income year, your activities in the Enterprise Zone showed a $5,000 NOL that was incurred after the final designation of the Enterprise Zone and was the exclusive result of your Enterprise Zone activities. Because of the loss, you owed no tax on Enterprise Zone income. For the 1999 income year, your business shows a profit of $8,000 as an exclusive result of your Enterprise Zone activities. You may carry over the 1998 $5,000 NOL to reduce your 1999 Enterprise Zone taxable income from $8,000 to $3,000.
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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.
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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.
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Enterprise Zone Contact
If you are interested in
learning more about the
Santa Ana Enterprise
Zone, please contact
the EZ Representative
listed below.
Ray White
Enterprise Zone Representative
714-647-5384
rwhite@santa-ana.org
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