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Tax credits that owners may miss

Posted: March 31, 2012 1:55 a.m.
Updated: March 31, 2012 1:55 a.m.
Speaker Tim DiTomaso, left,  speaks to a group about the newly expanded Enterprise Zone at the SCV Chamber of Commerce offices in Santa Clarita on Thursday.  Speaker Tim DiTomaso, left,  speaks to a group about the newly expanded Enterprise Zone at the SCV Chamber of Commerce offices in Santa Clarita on Thursday.
Speaker Tim DiTomaso, left, speaks to a group about the newly expanded Enterprise Zone at the SCV Chamber of Commerce offices in Santa Clarita on Thursday.

More Santa Clarita Valley companies could benefit from the Enterprise Zone tax credit program if they make themselves aware of it, or work with their CPAs to claim the credits, said Laura Biery, administrative analyst with the city of Santa Clarita’s Economic Development division.

Tax credits for hiring employees who qualify can offset the payroll costs for hiring employees, said Tim DiTomaso, keynote speaker and president of DiTomaso Incentive at Thursday’s Enterprise Zone lunch seminar.

Nearly three dozen people from local companies attended the educational seminar, which was sponsored by the city of Santa Clarita, Los Angeles County and the Santa Clarita Valley Economic Development Corporation, .

The SCV Enterprise Zone program has already saved more than 336 local businesses more than $189 million through hiring tax credits and other incentives, according to city officials.

“When you look at how large the SCV is, there are many businesses that have the opportunity to save but haven’t taken the time to work with their CPA or aren’t aware of the program,” Biery said. “The seminar was to help market the program and educate businesses.”

DiTomaso helps a number of SCV businesses, including many local auto dealers, he said. His company assists businesses in taking advantage of the credits offered through the program, which is designed to stimulate economic activity.

“I’ve worked with over 200 companies, generating $125 million in tax credits,” DiTomaso said. “This is the one program in California that offers a benefit to do business in California.”

The city has had an Enterprise Zone program since 2007, but worked with the SCVEDC to expand the program, establishing a valley-wide Enterprise Zone that was initially approved to take effect Jan. 1, 2011.

Lawmakers nearly ended all Enterprise Zone programs in the state in 2011 due to budget cuts, stalling the implementation the SCV’s new program. Final approval is now expected April 10.

The good news for local companies is that any businesses taking advantage of the tax benefits can apply for credits retroactively to January 2011. The state also allows companies to amend tax returns to claim the credits, DiTomaso said.

Even a company not yet earning a profit can apply for the program, and any credits earned may be applied against future earnings or tax obligations. The credits do not expire at the end of the year.

The Enterprise Zone program is good for a 15-year period which allows companies of any size in the SCV region to take advantage of the benefits through 2026.

“One of the huge advantages of the program are the credits it can generate for you,” DiTomaso said. “Hiring a single person can generate over $37,000 in credits over five years offsetting your taxes.”

A company is granted 50 percent of the hiring credit in the first year and 40 percent in the second year. A company can qualify anyone on its staff, and if it generates more credits than needed in a year’s period to offset taxes on year-end net profit — the credits can be carried forward, he said.

“Taking advantage of offsetting taxes that would have been paid to the state is money that can be reinvested in the business,” DiTomaso said.

Other benefits under the program include credits against the sales and use tax for equipment purchases, including some office
equipment like computers. The credit also applies to leased property if it’s a capital lease, he said.

And banks or individuals lending money to a company located in the Enterprise Zone can deduct the net interest earned from the loan, making a qualified Enterprise Zone borrower more attractive in some cases to lenders.

One of the seminar attendees, Cherrie Brown, Realtor with Keller Williams VIP Properties of Valencia, said she uses information about the Enterprise Zone program to benefit her clients.

“I have a couple clients that are business owners and own businesses in the Enterprise Zone,” Brown said. “But they don’t know anything about it. A lot of people move here but aren’t familiar with all of the incentives.”

Having that information in hand, Brown believes, adds value to her clients as she works with them to find a home. A lot of her clients like the fact that she has this knowledge and like to “talk shop” with her, she said.

More information is available online at Companies may call 661-286-4017 or 661-288-4400.


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