Living in the Right Part of Town
By Rebecca St. Andrie

Location, location, location. There’s a reason for the old real estate adage. Where your business is located—even where your employees live—could wind up being a tax benefit for your company. This month’s “Policy and Your Practice” examines the different tax credits that could apply depending on your or your employees’ location.

Credits based on location
There are two types of credits that apply specifically to location—those for “federal empowerment zones,” and those for “renewal communities.”

Federal Empowerment Zones. The government has designated certain areas of the country as “federal empowerment zones.” In order to encourage growth in these areas, they offer tax credits to businesses located there that also have employees who live in these zones.

For each qualifying employee, a business is eligible for a tax credit of $3,000 per year. Employees do not have to live in the same zone as the business; however, both the business and the qualifying employees have to live in a federal empowerment zone. If applicable, the credit is also retroactive.

The zones include both rural and urban areas. However, only certain parts of the places listed in the sidebar are eligible. In order to find out if your business or employee is located in such an area, you can go to www.hud.gov/crlocator and enter the appropriate ZIP code.

Renewal Community Credit. The Renewal Community Credit program is similar. In this case, the Secretary of Housing and Urban Development has designated certain areas as “Renewal Communities.” Once again, the business must be located in a “renewal community,” and employees must also live in a “renewal community” (though not necessarily in the same one). For each eligible employee, a business is allowed up to a maximum of $1,500 in tax credits per year. Again, if applicable, the credit is also retroactive.

Other credits available
If the stricter requirements of these programs exclude your business, there are other tax credits available. The Work Opportunity Tax Credit and Welfare-to-Work programs credit businesses for who is hired, in addition to where they might live.

Work Opportunity Tax Credit. The government also offers tax credits based on who you hire. They have seen that certain groups have a particularly high unemployment rate, and want to provide an incentive for businesses to hire them.

Veterans, ex-felons, at-risk youth living in one of the zones mentioned above, and food stamp recipients are some of the groups that qualify. In some cases, even summer employees can qualify your business for a one-time credit of up to $2,400.

Welfare-to-Work. The Welfare-to-Work program is more familiar. Businesses who hire long-term welfare recipients could receive up to $8,500 in tax credits over two years.

For both of these programs, new hires must fill out specific forms, which must be turned in shortly after their start date.

Navigating the requirements
As with most tax laws, there are very specific regulations that outline how tax credits must be claimed, what dates they are applicable and who qualifies. Here are three simple ways you can start taking advantage of these programs.

Check online. As mentioned above, you can check whether your business’ and employees’ ZIP codes are located in a Federal Empowerment Zone or Renewal Community by going to www.hud.gov/crlocator.

Read the rules. The IRS’ Publication 954, “Tax Incentives for Distressed Communities,” outlines the steps to qualify for these credits.

Ask an expert. AOPA has partnered with Associated Consultants Inc. (ACI), a company that will figure out if you qualify for any of these programs. This is a service available to AOPA members at no initial charge—ACI only collects a fee based on a percentage of total credits obtained. For more information, contact Don
DeBolt at (571) 431-0876, ext. 214.

This article is simply an overview, not comprehensive tax advice. But you should be aware that there are programs out there designed to credit you just for where you’re located. Check it out—you or your employees might just be living in the right part of town.

Rebecca St. Andrie is managing editor of the O&P Almanac.