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City of San Antonio Empowerment Zone

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Empowerment Zone Business Tax Incentives

Employment CreditsEmployment Credits

Bond FinancingBond Financing

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Empowerment Zone Business Tax Incentives

Employment CreditsEmployment Credits

• A business is taxed on taxable income

• Credits are a direct subtraction of Federal Tax owed

• This credit can be carried forward or backward to reduce taxes in those years

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EZ Employment Tax CreditEZ Employment Tax Credit - EZ Business - EZ Business can receive up to can receive up to $3,000 per EZ resident $3,000 per EZ resident employed per year.employed per year.

20% of first $15,000 of wages paid to full or part-time20% of first $15,000 of wages paid to full or part-time

Current employees and new hires Current employees and new hires

Employee performs substantially all (80%) of work in the Employee performs substantially all (80%) of work in the Zone Zone

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Work Opportunity Tax Credit (WOTC)Work Opportunity Tax Credit (WOTC) - - Employers, regardless of locationEmployers, regardless of location, can earn up to , can earn up to $2,400 in tax credit per employee, for first $2,400 in tax credit per employee, for first year of employmentyear of employment

40% of first $6,000 of wages paid40% of first $6,000 of wages paid

New full-time employeesNew full-time employees

Employees must be certified through Texas Employees must be certified through Texas Workforce Commission within 21 days of hire Workforce Commission within 21 days of hire

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Work Opportunity Tax Credit (WOTC)Work Opportunity Tax Credit (WOTC)

Groups with special employment needs:

•High-risk youth (ages 18 to 24) who live in an EZ•Summer youth (age 16 to 17) living in EZ•Veterans, Ex-felons, Vocational rehabilitation referrals• Food stamp recipients•Temporary Assistance for Needy Families (TANF) • Supplemental Security Income (SSI) Recipients

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Welfare to Work Tax CreditWelfare to Work Tax Credit - Federal tax - Federal tax credit of up to $8,500 over first two years per credit of up to $8,500 over first two years per employee.employee.

35% or $3,500 of the first $10,000 of wages paid for 35% or $3,500 of the first $10,000 of wages paid for the first year the first year

50% or $5,000 of the first $10,000 of wages paid for 50% or $5,000 of the first $10,000 of wages paid for the second year the second year

New full-time and part-time employeesNew full-time and part-time employees

Targeted at any member of a family who has Targeted at any member of a family who has received long term (18 months) public assistance received long term (18 months) public assistance

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Empowerment Zone Business Tax Incentives

Bond Financing• Less expensive capital for large investment in the Empowerment Zone

• The viability of any venture is sometimes based on the cost of money borrowed and how much it costs every month to pay it back.

• Bond financing usually offers longer terms and lower interest rates

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Empowerment Zone Facility Bonds

• Tax Exempt Bonds issued by the

• EZ Development Corporation to make loans to

• Empowerment Zone Businesses to finance

• Qualified Zone Property

IRS Publication 954

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Empowerment Zone Facility Bonds

• Tax Exempt Bonds– Facility Bonds are used by businesses to gain access to the

bond market

– Investors pay no federal income tax on interest income

– Generally more attractive than conventional financing• up to 2% below prime• generally longer loan periods

– Business is the borrower with no recourse to the City of San Antonio

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Empowerment ZoneFacility Bonds

• Empowerment Zone Development Corporation

• City Council– Weigh projects based on:

• Council priorities– Job creation, wage standards, environmental impact, etc.

• Staff recommendation – (Bond Counsel/ Finance/ EDD)

• Empowerment Zone Governance Board

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Empowerment Zone Facility Bonds

• Empowerment Zone Business– Operating in the Empowerment Zone– At least 50% of it’s total gross income is

from the active conduct of business in the zone

– A substantial part of the employee services are performed within the zone

– 35% of the employees are EZ residents

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Qualified zone propertyBond Proceeds can be used only to:

• Construct a building• Renovate an existing building or equipment• Acquire land, new equipment, or a new building• Cannot be used for working capital• 2% of the bond proceeds can go to pay cost of

bond issuance

Empowerment Zone Facility Bonds

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Discussion Questions