(May 13, 2009) Strong opposition from a California Chamber of Commerce-led coalition has helped prevent action for this year on a bill that in effect guts the California enterprise zone program.
CalChamber, other local chambers of commerce, business groups and local government representatives spoke out against AB 1139 (J. Perez; D-Los Angeles), which creates new conditions and requirements that will drastically reduce the number of businesses, particularly small businesses, that will be able to participate in the enterprise zone program.
As a condition of eligibility for the enterprise zone hiring credit, AB 1139 mandates that businesses provide health care coverage and full-time employment. AB 1139 also eliminates one of the primary ways that employees qualify for a hiring credit under the program, which is residency in a low-income, low-employment neighborhood, known as a “targeted employment area.”
In addition, the bill establishes impractical deadlines and regulations that severely limit the program’s effectiveness and make participation in the program burdensome and costly for businesses.
Compounded Reductions
The reductions proposed by AB 1139 would be on top of severe reductions already imposed on the enterprise zone program in the October 2008 budget. AB 1452 (Committee on Budget, Chapter 763, Statutes of 2008) placed a two-year limit on the ability of businesses to use all business tax credits, including enterprise zone credits, capping those credits at one-half of the taxpayer’s tax liability.
Although AB 1139 would further significantly reduce the enterprise zone tax credits, it has been designated as needing only a majority vote of the Legislature to be enacted.
Helps Distressed Areas
The California enterprise zone program was established by legislation enacted with bipartisan support in 1984 and offers a variety of tax credits and incentives to encourage businesses to locate, invest and create jobs in economically distressed communities.
The program is one of the only remaining statewide tax incentives that local areas can use to encourage businesses to stay, locate or expand within California. California’s enterprise zone program is vital to California’s economy and economic recovery.
Effective Program
Several studies have established the enterprise zone program’s effectiveness.
Most recently, a March 2009 revision of a national study by University of Southern California researchers concluded that state and federal enterprise zone programs “have positive, statistically significant, impacts on local labor markets in terms of the unemployment rate, the poverty rate, the fraction with wage and salary income and employment.”
More information is available at www.calchamber.com/EZ.
Staff Contact: Kyla Christoffersen
