December 15, 2016

Empowerment Zone Tax Benefits Set to Expire December 2016

Contributor Cassie Carangelo, Tax & Business Services

Empowerment Zone Tax Benefits Set to Expire December 2016

Temporary tax provisions called “tax extenders” have historically been extended past their expiration dates by Congress. One such provision set to expire at the end of 2016 is the Empowerment Zone tax benefit. Recently, the IRS reminded businesses that special tax benefits are still available in 40 designated Empowerment Zones. However, if the provision is allowed to expire, it is not certain whether retroactive extensions will be considered. Businesses, if qualified, are urged to take advantage of Empowerment Zone tax benefits prior to 2017.

Key Empowerment Zone tax benefits include the Empowerment Zone employment credit, increased expensing for qualifying depreciable property, tax-exempt bond financing, deferral of capital gains tax on sale of qualified assets sold and replaced, and partial exclusion of capital gains tax on certain sales of qualified small business stock (QSBS).

The Empowerment Zone program consists of three distinct designations: Renewal Communities, Empowerment Zones, and Enterprise Communities. Each designated area is generally a distressed urban or rural community with a high poverty rate. The program, established in 1994, was created to provide grants and tax credits to businesses in an effort to increase employment in these areas.

The program is administered by the Department of Housing and Urban Development (HUD) and the Department of Agriculture, but is also partnered with state agencies, depending on the location of the designated area.

HUD has designated parts of the following areas as Empowerment Zones:

  • Arizona – Pulaski County, Tucson.
  • California – Desert Communities (part of Riverside County), Fresno, Los Angeles (city and county), Santa Ana.
  • Connecticut – New Haven.
  • Florida – Jacksonville, Miami/Dade County.
  • Georgia – Southwest Georgia United (part of Crisp County and all of Dooly County).
  • Illinois – Chicago, East St. Louis.. Southernmost Illinois Delta (parts of Alexander and Johnson Counties and all of Pulaski County).
  • Indiana – Gary/Hammond/East Chicago.
  • Kentucky – Kentucky Highlands (part of Wayne County and all of Clinton and Jackson Counties).
  • Maine – Aroostook County (parts).
  • Maryland – Baltimore.
  • Massachusetts – Boston.
  • Michigan – Detroit.
  • Minnesota – Minneapolis, St. Louis.
  • Missouri – Mid-Delta (parts of Bolivar, Holmes, Humphreys, Leflore, Sunflower, and Washington Counties).
  • New Jersey – Camden, Cumberland County.
  • New York – New York City, Syracuse, Yonkers.
  • North Dakota – Griggs-Steele (part of Griggs County and all of Steele County).
  • Ohio – Cincinnati, Cleveland, Columbus, Ironton.
  • Oklahoma – Oklahoma City.
  • Pennsylvania – Philadelphia.
  • South Carolina – Columbia/Sumter.
  • South Dakota – Oglala Sioux Tribe (parts of Jackson and Bennett Counties and all of Shannon County).
  • Tennessee – Knoxville.
  • Texas – El Paso, Middle Rio Grande FUTURO Communities (parts of Dimmit, Maverick, Uvalde, and Zavala Counties), Rio Grande Valley (parts of Cameron, Hidalgo, Starr, and Willacy Counties), San Antonio.
  • Virginia – Norfolk/Portsmouth.
  • West Virginia – Huntington.

Businesses operating in or around these areas should contact their Marcum tax advisors about the tax savings that may be available under the Empowerment Zone provision.

Additional information about these programs can also be found at the following: Empowerment Zones