Federal HUD Zone Tax Incentives, Empowerment Zones and Renewal Communities
The Federal HUD Zone Tax Incentives, Empowerment Zones and Renewal Communities tax credit program is included in the Tax Incentive Services offered by PayPros, Inc. through Paradigm Partners. Below are some common questions and answers to help you determine if your company is eligible for this tax incentive.
Are there any employer incentives for hiring employees who work in an Enterprise Zone (EZ) or Renewal Community (RC)?
Yes. The tax code allows employers a credit against Federal taxes for hiring and retaining employees who live and work in an EZ or RC. The EZ Wage Credit has been available since 1994 for Round I EZs and since 1998 for the District of Columbia.Can a business use this credit for current employees?
Yes. The EZ Wage Credit and RC Wage Credit are incentives to hire and retain individuals who live in an EZ or RC, so it is available each year throughout the EZ Wage Credit and RC Wage Credit periods.What if the employee works part-time?
The credit is available for both part-time and full-time employees as long as they have been employed by the employer for at least 90 days. The amount of the credit is tied to the amount of wages paid rather than to the number of hours worked.
What is the credit amount?
The EZ Wage Credit amount is up to $3,000, and for the RC Wage Credit is $1,500.
Is there a limit on the number of employees for which a business can take the credit?
An employer can take the credit for as many employees as qualify.
What if the employee works in an EZ or RC for only part of the year?
An employer can use either the pay-period or calendar-year method for determining the period of time the employee performs services in an EZ or RC. No other time periods can be used to prorate the credit.
For example, if an employee works in several factory locations and is paid weekly, an employer can claim the wage credit for the weekly pay periods during which the employee works substantially all of his or her time in the factory located in an EZ or RC.
What if the Federal tax liability of the business is less than the total credit amount?
The EZ Wage Credit and RC Wage Credit generally are subject to the same rules as other business tax credits. As with other business tax credits, unused credit amounts can be carried forward for up to 20 years and carried back a year. However, the credit cannot be carried back prior to the EZ or RC designation.
Can a pass-through entity, such as a partnership, Limited Liability or S-corporation, use the credit?
The EZ Wage Credit and RC Wage Credit are general business tax credits for Federal tax purposes and may be passed through under the rules similar to other business tax credits.
Which categories of employees would not qualify for the EZ and RC Wage Credits?
The EZ and RC Wage Credits cannot be taken for any individual employed at any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other gambling facility, or store whose principal business is the sale of alcoholic beverages for consumption off premises. The EZ and RC Wage Credits are not available for family members of the employer, including sons, daughters, parents, stepchildren, stepmothers, stepfathers, in-laws, and other persons treated as dependents under the tax code. Similar exclusions apply to 5 percent owners related to the employer and family members of majority shareholders or partners of the employer.
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