Empowerment zone

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Renewal Communities (RCs) and Empowerment Zones (EZs) are distressed urban and rural communities where qualifying businesses are eligible for billions of dollars in tax incentives. The Departments of Housing and Urban Development (HUD) and Agriculture (USDA) have designated RCs and EZs in three competitions since 1994. Currently, there are 40 HUD RCs, 28 of which are in urban areas and 12 in rural communities. There are 30 HUD EZs, all of which are in urban areas. There are 10 USDA EZs in rural communities only. A couple RCs have as few as approximately 100 businesses, while several RCs and EZs have more than 5,000 businesses. No RC or EZ has a population greater than 200,000.

Qualifying businesses in EZs are eligible for employment credits (up to $3,000 yearly per EZ resident employed). Qualifying EZ businesses are also eligible for low-cost loans through EZ facility bonds, increased Section 179 tax deductions, partial-exclusion of tax on capital gains upon the sale of certain assets, and other incentives. Qualifying businesses in RCs are also eligible for employment credits (up to $1,500 yearly per RC resident employed). Qualifying RC businesses are also eligible for a 0% tax on the capital gains of assets sold, provided the business holds the asset at least five years. Businesses in RCs that build or substantially rehabilitate commercial property may also be eligible for up to $10 million in Commercial Revitalization Deductions to rapidly increase their depreciation schedules. For detailed information on all RC/EZ tax incentives, including which tax forms to file to claim the incentives, read IRS Publication 954, Tax Incentives for Distressed Communities, available on the IRS website at www.irs.gov.

The empowerment zone employment credit provides businesses with an incentive to hire individuals who both live and work in an empowerment zone. (An exception applies to the to the Washington, DC empowerment zone. Individuals who work in the Washington, DC empowerment zone may live anywhere in the District of Columbia.) You can claim the credit if you pay or incur “qualified zone wages” to a “qualified zone employee”.

The credit is 20% of the qualified zone wages paid or incurred during a calendar year. The amount of qualified zone wages you can use to figure the credit cannot be more than $15,000 for each employee for each calendar year. As a result, the credit can be as much as $3,000 (20% of $15,000) per qualified zone employee each year.

Parts of the following urban areas are empowerment zones:

Pulaski County, AR	Tucson, AZ	Fresno, CA	Los Angeles, CA	Santa Ana, CA	New Haven, CT	Jacksonville, FL	Miami/Dade County, FL	Chicago, IL
Gary/Hammond/East Chicago, IN	Boston, MA	Baltimore, MD	Detroit, MI	Minneapolis, MN	St. Louis, MO/East St. Louis, IL	Cumberland County, NJ	New York, NY	Syracuse, NY
Yonkers, NY	Cincinnati, OH	Cleveland, OH	Columbus, OH	Oklahoma City, OK	Philadelphia, PA/Camden, NJ	Columbia/Sumter, SC	Knoxville, TN	El Paso, TX
San Antonio, TX	Norfolk/Portsmouth, VA	Huntington, WV/Ironton, OH

Parts of the following rural areas are empowerment zones:

Desert Communities, CA (part of Riverside County)	Southwest Georgia United, GA (part of Crisp County and all of Dooly County)
Southernmost Illinois Delta, IL (parts of Alexander and Johnson Counties and all of Pulaski County)	Kentucky Highlands, KY (part of Wayne County and all of Clinton and Jackson Counties)
Aroostook County, ME (part of Aroostook County)	Mid-Delta, MS (parts of Bolivar, Holmes, Humphreys, Leflore, Sunflower, and Washington Counties)
Griggs-Steele, ND (part of Griggs County and all Steele County	Oglala Sioux Tribe, SD (part of Jackson County and all of Bennett and Shannon Counties)
Middle Rio Grande FUTURO Communities, TX (parts of Dimmit, Maverick, Uvalde, and Zavala Counties)	Rio Grande Valley, TX (parts of Cameron, Hidalgo, Starr, and Willacy Counties)