What is the Renewal Community Employment Credit?

Generally, any eligible business can receive a federal tax credit up to $1,500 for each year that business has a new or existing employee who lives and works in the “Renewal Community”.  This extraordinary credit begins January 1, 2002, and extends thru December 31, 2009.  The credit is calculated on the basis of 15% of the annual wage, not to exceed $1,500.

What is the Work Opportunity Tax Credit?

Any eligible business can receive a federal tax credit up to $2,400 for each new hire (pre-certified by Employment Services) from the following target demographic groups:

Summer Youth (Ages 16 & 17) who live in the RC

Older Youth (Ages 18 to 24) who live in the RC

Veterans  • Ex-Felons  • Vocation Rehabilitation Referrals

Members of families receiving Food Stamps, TANF, SSI

What is the Welfare to Work Tax Credit?

Any eligible business can receive a federal tax credit up to $3,5001 for the first year and $5,000 the second year for each new hire (pre-certified by Employment Services) from members of families receiving TANF, or families that have ceased to qualify for TANF because their time has expired.

1:  Employee must work for at least 400 hours or 180 days to receive the credit.

What are Enhanced Section 179 Deductions*?

Any eligible business may write off all or part of the cost of certain items of depreciable personal property instead of setting up a depreciation schedule.  Ordinarily, a small business may write off up to $24,000 of Section 179 property.  A Renewal Community small business may write off up to $59,000 annually.

*Must qualify as a “Renewal Community Business”

What are Commercial Revitalization Deductions*?

Any eligible business that newly constructs or renovates  building(s) may deduct either one-half of the building construction/renovation costs during the first year of service, or write the entire cost off over 10 years.

*Must receive tax deduction allocation for year building is placed in service.

What is the Environmental Cleanup Cost Deduction?

Any Business may qualify to purchase and pay for the cleanup of a contaminated property.  The business may expense that cleanup entirely in the year incurred.  State DER must certify that there has been, or is the threat of a hazardous release from the site.

What Business Assets are eligible for Zero Percent Capital Gains*

Businesses purchasing certain capital assets after January 1, 2002 and holding them for five years or longer will pay no capital gains tax.  Eligible business assets include:

Stock in a new RC company paid for in cash

Partnership interest in RC company paid for in cash

Proprietary ownership interest in a business/business property commencing with you, or substantially improved by you.

*Must qualify as a “Renewal Community Business”

What is an eligible Renewal Community Business?

-Corporation, Partnership, Proprietorship

-Business is primarily conducted within the “renewal community”, defined as at least 50%.

-At least 35% of the employees of your business live in the “renewal community”.

-No more that 5% of the business assets can be financial-type property; i.e. debt instruments, stock, etc., except for AR’s resulting from sales of product inventory

-No more than 5% of business assets are works of art or collectables.

What Type Businesses are Prohibited from Eligibility?

-Liquor stores/off premises “package stores” for alcoholic beverages

-Golf Courses/Country Clubs

-Racetracks/Gambling Facilities

-Massage/Hot Tub/Suntan Parlors

-Farms with assets above $500,000

-Any business predominantly relying on its holding or developing intangibles for sale or license

Who Qualifies as an Employee?

-Must be a renewal community resident

-Job place must be within the renewal community

-Must not be a related person to the business owner; that means:

-Owner

-Owner’s spouse

-Owner’s children

-Owner’s dependents (for tax purposes)

-Owner’s parents

-Owner’s siblings

-Owner’s in-laws

-Majority shareholder’s and their families

-Minority shareholders

How Do I Know if I Qualify as a Renewal Community Business?

-No formal application/certification

-Analyze your situation just like any other federal tax standard

-Consult your attorney/tax preparer

You can also contact HUD with questions regarding the RC/EZ incentives.