How the Empowerment Zone Tax Credit Can Save Businesses Thousands of Dollars This Year

As businesses continue to pull themselves out of the financial impact of the ongoing pandemic and look for ways to recover, taking advantage of tax incentives is a great way to get back on track.

One incentive, in particular, is through the Empowerment Zones (EZ), which are designated urban and rural areas of economic distress and unemployment that provide attractive tax incentives for businesses that are located in the zones. Empowerment zones are designated as rural or urban, with rural programs administered by the United States Department of Agriculture (USDA) and urban programs by the United States Department of Housing and Urban Development (HUD). EZs were created by the Autonomous Zones and Corporate Communities Act 1993.

Besides the potential monetary benefits, hiring within EZs has the potential to stimulate economic growth in areas where it is desperately needed. To better understand eligible tax credits and how businesses can participate, here’s a breakdown:

Who is eligible?

Any business located in an Empowerment Zone that also hires employees who live in the Empowerment Zone is eligible for the Empowerment Zone Tax Credit and can claim 20 percent of what is paid to those employees – this is capped at $ 3,000 per year, per employee. There is no limit to the number of qualified zone employees and they can be employed full time or part time.

In addition, businesses that hire Empowerment Zone residents between the ages of 18 and 39 are also eligible to receive the Work Opportunities Tax Credit (WOTC). these employees, capped at $ 2,400 per eligible employee.

Manufacturing, distribution, storage and transportation industries are most often found in the empowerment zones.

How does the empowerment zone tax credit work?

For example, a distribution warehouse located in the Empowerment Zone employs around 100 workers, 10% of whom also live in the Empowerment Zone. The increase in the percentage of workers who live in the area increases the tax credit. In this example, the distribution warehouse would receive up to $ 45,000 in tax credit for the empowerment zone for the employment of ten percent of the workers in the zone and if the distribution warehouse were to increase by. 30 percent of workers who live in the area, they would receive as much as up to $ 90,000 in tax credits.

Also, when you add the Employment Opportunity Tax Credit for Zone employers aged 18 to 39, the savings can be very significant.

What is an example of a business that uses these tax credits?

DNO Produce Inc. is a fresh produce processing and distribution company located in Columbus, Ohio. Their fresh produce processing and distribution plant receives approximately $ 35,000 in tax credits from the WOTC and Empowerment Zone programs. Almost 20 percent of their associates – one-fifth of their workforce – live in an empowerment zone. Tax credits reduce labor costs and help them stay competitive in a tight labor market.

Where are the areas of empowerment?

To see which areas of the country qualify as areas of empowerment, you can use this WOTC address locator on Google Maps.

The potential impact of the empowerment zones is quite significant. With more awareness and participation, the Empowerment Zone Tax Credit could not only lead to a greater diversity of the workforce, but also help some regions to lift themselves out of poverty and boost the profitability of businesses. companies from these regions.

The opinions expressed here by the columnists of are theirs and not those of

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