Tax Credit Information

Credits Description Availability
Empowerment Zone Employment Credit
(EZ Wage Credit)
Credit against Federal taxes up to $3,000 for businesses for each year of EZ designation for every existing employee and new hire who lives and works in the EZ. January 2002 through December 2009. Cannot count wages for both the WOTC and WtW credits and the EZ Wage credit
Work Opportunity Tax Credit
Credit up to $2,400 against Federal taxes for businesses for each new hire from groups that have high unemployment rates or other special employment needs, including youth ages 18 to 24 who live in an EZ, EC or RC, and summer hires ages 16 to 17 who live in an EZ, EC, or RC. Expires for individuals who begin work after December 2001. Business does not have to be in EZ. Cannot be combined with WtW credit. State Employment Services Agency must certify employee is in targeted group.
Welfare-to-Work Tax Credit (WtW) Two-year credit against Federal taxes for businesses that hire long-term family assistance recipients. Credits up to $3,500 for the first year, and $5,000 for the second year for each new hire. Expires for individuals who begin work after December 2001. Business does not have to be in an EZ. Cannot be combined with WOTC. State Employment Services Agency must certify employee is in targeted group.
Increased Section 179 Deduction Allows businesses to claim increased Section 170 deduction (up to $20,000 in additional expensing increasing to $35,000 for property acquired after December 2001) if the businesses qualifies as an Enterprise Zone Business or Renewal Community Business. Can be claimed on certain depreciable property such as equipment and machinery. Cannot be used in developable sites until after December 2001. Can only be used in EZs.
Environmental Cleanup Cost Deduction (Brownsfields) Businesses can elect to deduct qualified cleanup costs of hazardous substances in certain areas (brownfields) in the tax year the business pays or incurs the costs. Property is not required to be located in an EZ. Need certification from State environmental agency. Includes costs paid or incurred prior to January 2004.
Enterprise Zone Facility Bonds State and local governments can issue Enterprise Zone Facility Bonds (a type of tax-exempt bond) to make loans at lower interest rates to Enterprise Zone Businesses to finance Qualified Zone Property. $3 million per borrower limit in any Round I EZ for bonds issued prior to January 2002, or in any EC, with a $20 million per borrower nationwide limit; must have State volume cap allocated. 35 percent of employees must be EZ residents.
Qualified Zone Academy Bonds (QZABs) State or local governments can issue bonds at 0-percent interest cost to them to finance public school programs with private business partnerships. Private businesses must contribute money, equipment or services equal to 10 percent of bond proceeds (which may qualify as a charitable contribution). The Federal Government pays interest in the form of tax credit to banks, insurance companies, and certain lending corporations that hold QZABs. Federal allocation to States annually from 1998-2001. State education agency allocates credit to Qualified Zone Academy to finance materials, teacher training, building renovation, or equipment for programs that prepare students for jobs or college. Schools must be located in an EZ or EC or have 35 percent of students eligible for fee or reduced-cost lunch program.
New Markets Tax Credit Equity investors in qualified Community Development Entities (CDEs) can obtain a tax credit against Federal taxes of 5 to 6 percent of the amount invested for each of the yeas the investment is held, for up to 7 years of the credit period. Allocations of the credit will be made annually from 2001 to 2007 to qualified CDEs. Investors must purchase stock or partnership interest in a CDE for cash at original issuance. Credit available at time of purchase (1 year) and on 6 anniversary dates of acquisition of investment.

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Empower Baltimore Management Corporation • 111 Water Street, Suite 201 • Baltimore, MD 21202 • 410-783-4400 • (fax) 410-783-0526