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Employment Credit
You are credited with 15% of an employee’s wages up to $10,000 if he or she both live and work in the Parlier renewal community, if the employee works more than 90 days in a calendar year. This includes existing employees and newly hired employees for each year starting in 2002 through and including 2009. 

Appendix A

EMPLOYEES WHO DO NOT QUALIFY FOR THE TAX CREDIT

  1. Does not work 90 days in a calendar year except if terminated for misconduct or disability.
  2. Relatives and dependents
  3. Owners of 5% of more of the business
  4. Employees of a golf course or country club, message parlor, hot tub or suntan facility, racetrack or gambling establishment, store where 50% of more of sales are for off-premises alcohol consumption, farming trade or business if the value of farm assets owned or leased are $500,000 or more.

Increased Section 179 Deduction
Allows businesses to claim increased Section 179 deduction (up to $35,000 in additional expensing) if the business qualifies as a Renewal Community Business. Can be claimed on certain depreciable property such as equipment and machinery.

One-Year Equipment Expensing
You can expense up to $59,000 of equipment purchased. Only qualified renewal community business can do this.

Appendix B

RENEWAL COMMUNITY BUSINESS

For the increased section 179 deduction, a corporation, partnership, or sole proprietorship is a renewal community business if all the following statements are true for the tax year:

  1. Every trade or business of the corporation or partnership is the active conduct of a qualified business (defined later) within a renewal community. (This rule does not apply to a sole proprietorship.)
  2. At least 50% of its total gross income is from the active conduct of a qualified business within a renewal community.
  3. A substantial part of the use of its tangible property is within a renewal community.
  4. A substantial part of its intangible property is used in the active conduct of the business.
  5. A substantial part of the employees’ services are performed within a renewal community.
  6. At least 35% of the employees are residents of a renewal community.
  7. Less than 5% of the average of the total unadjusted bases of the property owned by the business is from:
    a) Nonqualified financial property (generally, debt, stock, partnership interests, options, futures contracts, forward contracts, warrants, notional principal contracts, and annuities) or
    b) Collectibles not held primarily for sale to customers.

For a sole proprietorship the term “employee” in (5) and (6) includes the proprietor

Only qualified renewal community property is eligible.

Appendix C

QUALIFIED RENEWAL COMMUNITY PROPERTY

  1. You acquired the property after January 1, 2002.
  2. You did not acquire the property from a related person or member of a controlled group of which you are a member.
  3. Your basis in the property is neither determined by its adjusted basis in the hands of the person from whom you acquired it nor under the stepped-up basis rules for property acquired from a decedent.
  4. You were the first person to use the property in the Renewal Community.
  5. At least 85% of the property’s use is in the active conduct of the business in the Renewal Community.
  6. Buildings are qualified renewal property but do not qualify for the one-year equipment expensing. Used property may be qualified renewal property if it has not previously been used within a renewal community.
  7. Renovating the property is an allowable deduction provided that the renovations exceed the greater of $5,000 or 100% of the adjusted basis of the property.

References include IRS Publication 946 and sections 1379A, 1379C, and 1379D of the Internal Revenue Code.

Commercial Revitalization Deduction
Businesses can deduct either one-half of qualified revitalization expenditures (QREs) in the first year a building is placed in service, or all of the QREs on ratable basis over 10 years if QREs have been allocated to revitalization of a commercial building located in a Renewal Community. State may allocate up to $12 million in deductions (not more than $10 million per project) for each year, 2002-2009, for each Renewal Community in the state. Business does not have to be a Renewal Community Business. Projects that qualify are listed in:

Appendix D

COMMERCIAL REVITALIZATION DEDUCTION QUALIFIED EXPENSES

  1. The building is placed in service before 2010 and if new, you are the original user. If renovated, renovations cost must be 70% or more of total project costs.
  2. The building is located in the Renewal Community.
  3. The project is commercial, not residential.
  4. Only capital expenditures subject to depreciation are allowed.
  5. Maximum project size is $10 million

Capital Gain Exclusion
After a minimum of 5-years, the holder of an RC asset acquired between January 1, 2002, and December 31, 2009, will not have to include in its gross income any qualified capital gain from the sale of exchange of the asset. There are a number of qualifications for this and they are included in:

Appendix E

QUALIFIED RENEWAL COMMUNITY ASSETS

  1. Stock in a Renewal Community Business acquired at original issuance solely for cash during the years 2002 through 2009.
  2. Capital or profit interest in a Renewal Community business partnership acquired at original issuance solely for cash during the years 2002 through 2009.
  3. Tangible property of a Renewal Community Business used in the Renewal Community that is constructed or substantially rehabilitated during the years 2002 through 2009.
  4. Assets cannot be acquired from a related person.

HOLDING PERIOD

  1. The asset must be held for a minimum of 5 years.
  2. If the asset is sold before 5 years the prior owners holding period can be traced on.
  3. The business must qualify as a Renewal Community business during substantially all of the holding period.

ZERO PERCENT RATE PERIOD

  1. The zero percent capital gains tax rate applies only during the years 2002 through 2014.
  2. If the business ceases to be a Renewal Community business after the 5-year holding period but before the asset is sold, the zero percent rate extends only to the date when the business ceased to qualify as a Renewal Community business.

For more information see section 1400F of the Internal Revenue Code.