Governor Brown Replaces the California Enterprise Zone Program
On July 11, 2013, Governor Brown signed AB 93 and SB 90 into law in an effort to bolster California’s business climate and put Californians to work. This new law replaces the California Enterprise Zone Program which was established in 1984 to stimulate business investment in depressed areas of the State and create job opportunities for Californians.
AB 93 and SB 90 establish the governor’s new Economic Development Initiative, The program sunsets in 2021 allowing for legislative review and requiring an affirmative vote to extend the sunset date.
The Economic Development Initiative includes the following three components:
1. Manufacturing Equipment Sales Tax Exemption: A statewide sales tax exemption on all manufacturing equipment and research and development equipment purchases for biotech and manufacturing companies;
2. Hiring Credits: The hiring credit may be claimed within the existing Enterprise Zones as well as in new high poverty areas. The credit includes strong labor standards and accountability measures and is wisely targeted to those who need it most – returning veterans, the long-term unemployed, low-income individuals receiving public assistance, ex-offenders and CalWORKS recipients. The standards include:
- Credits may only be claimed for new jobs, not for filling existing jobs.
- Credit may only be claimed for full-time jobs that pay at least $12 an hour.
- Any employer that relocates within the state must give workers an offer of transfer at the same rate of compensation.
- Retention requirement of at least 3 years or the state may clawback the credit.
- Creates a public database of companies that claim the credit and number of jobs.
- Excludes retail, restaurants, temp agencies and strip clubs from the hiring credit.
3. California Competes Investment Incentives: The opportunity for California businesses to compete for available tax credits based on the number of jobs to be created and retained, wages paid in those jobs and other factors.
“This legislation will help grow our economy and create good manufacturing jobs,” Brown said in a statement after he signed AB 93 and SB 90 at Takeda California, a biotech firm, in San Diego.
Craig Johnson, president of the California Association of Enterprise Zones, said Brown was making a “grave mistake” in signing the bills because the changes effectively phase out a tool to help economically distressed areas. “Signing these bills eliminates the program and greatly affects millions of Californians who live in these regions as well as minorities, veterans, displaced workers, recipients of government assistance and others in need of jobs,” Johnson added.
The new Initiative will be funded by redirecting approximately $750 million annually from the state’s Enterprise Zone program. The Enterprise Zone Program will end December 31, 2013, but businesses currently taking advantage of the program may still benefit from some unused credits for up to 10 years.
If you have any questions about how this will affect your business, or how to take advantage of the last year of Enterprise Zone benefits in 2013, give Bressler & Company a call at 559-924-1225.
Sources used for this blog:
1) California Association of Enterprise Zones
