Small Business, Competitiveness & Business Vitality
SMALL BUSINESS
Extend Empowerment Zone (EZ) Tax Credits
Strengthen the federal EZ program, which is set to expire at the end of 2010. Strengthening this program’s combination of grants, tax credits for businesses, bonding authority and other benefits will create jobs and spur investment in Southern California’s economy. H.R. 1677 and its companion bill S.1222 would amend the Internal Revenue Code of 1986 to extend and expand the benefits for businesses operation in Empowerment Zones (EZ), Enterprise or Renewal Communities (RC). The legislation would improve the current EZ program which aims to attract and retain businesses in impoverished areas through tax and regulatory relief, social services, and community redevelopment. The bills would modify the program to ensure that existing incentives serve as a useful economic revitalization tool for inner cities and depressed rural areas. By definition, the zones and communities covered by this legislation suffer from historically high rates of poverty and unemployment. For this reason, these same areas have been hit hard by the recession and the tightening of credit. S.1222/H.R. 1677 will increase flexibility for existing job tax credits, helping to address unemployment in these distressed areas. Simultaneously, the proposed refinements will free-up existing bond authority and assist job-intensive businesses with bank credit, helping improve access to credit for businesses that need it most.
Recent IRS data demonstrates that Enterprise Zone and similar programs are successful. From 2004 through 2006, total EZ and RC-influenced jobs jumped almost 300 percent from 83,721 to 240,419. The data demonstrates these programs are significant job creation and retention tools. The EZ and RC programs have provided significant financial and tax incentives to some of our most distressed communities with tremendous economic results, including the development of many projects that would not have been built except through the use of Commercial Revitalization Deductions; provided jobs to many thousands of our citizens through the benefits of the wage credits; and encouraged many businesses to relocate to Empowerment Zone Communities such as Hollywood. The Chamber believes that especially in difficult economic times it is important to give businesses tools to move forward. This legislation has the potential to bring more high paying jobs to Hollywood.
We respectfully ask that you support inclusion of this important legislation in any jobs package that is being considered by Congress. This legislation will go a long way to help provide a strong stimulus for our economy while preserving the jobs and economic development work of these existing zones and communities.
Help Unfreeze Community Bank Lending to Small Businesses
Ensure that small businesses have ready access to capital, an integral part of our economic recovery. It is imperative that community bank institutions are not overburdened with regulatory obligations that would limit their lending ability. This should be a priority focus of any banking-related policies considered by Congress.
COMPETITIVENESS & BUSINESS VITALITY
OPPOSE SB 974 (Steinberg): Eliminates Key Enterprise Zone Incentives
The Chamber respectfully requests your opposition of SB 974 (Steinberg), as amended May 3, 2010, which would effectively gut the California Enterprise Zone (EZ) program hiring tax credit. SB 974 proposes to create a “career pathways” tax credit in an effort to bolster career technical education efforts in this state. However, this new tax credit is “paid for” by eliminating key provisions of California’s successful Enterprise Zone Program. Two specific provisions of the EZ Program would be decimated if SB 974 were enacted. The EZ Program provides important benefits to businesses that invest in some of California’s most economically distressed areas, including Hollywood, and has gone a long way to help provide jobs to disadvantaged individuals throughout the State.
- SB 974 would eliminate the Targeted Employment Area (TEA) from the list of eligibility criteria for the EZ hiring tax credit. As such, the incentive to hire individuals from certain low-income neighborhoods with historically high levels of unemployment and poverty would be eliminated. Because a large number of hiring credit vouchers are issued under the TEA criterion, the practical effect of this provision will be to eliminate the mostly widely used benefit of the EZ Program. The TEA criterion is appropriate because it focuses on hiring individuals who reside in the most economically distressed areas with and surrounding an enterprise zone in this state.
- SB 974 would additionally require all hiring tax credit certifications (vouchers) to be completed within 21 days of an individual being hired. There are detailed statutes and regulations promulgated by HCD which provide specific documentation standards and other requirements for obtaining vouchers under the fourteen eligibility criteria. This provision is an arbitrary and impractical deadline that will preclude most employers, particularly small businesses, from claiming the EZ hiring tax credits to which they are otherwise lawfully entitled. The practical effect of this provision is to eliminate “retroactive vouchering” and instead impose an unreasonable burden upon businesses to obtain vouchers in an unrealistic timeframe.
California’s EZ program is vital to California’s economy and economic recovery. For these and other reasons, we strongly OPPOSE SB 974 and urge your “NO” vote.