Business in the RC/EZs

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For businesses that hire local residents, upgrade their equipment needs, and build or rehabilitate commercial property, there is substantial cash savings possible on taxes paid through special federal tax incentives reserved exclusively in Renewal Communities (RCs) and Empowerment Zones (EZs). Eligible businesses in RCs and EZs that hire local residents outside the family may be eligible for yearly employment credits up to $3,000 per employee in EZs and $1,500 per employee in RCs. Businesses that hire 18-24 year-old RC/EZ residents, even if they are located outside these areas, may be eligible to claim work opportunity tax credits worth up to $2,400 per hire. Businesses that construct or renovate non-residential real property in RCs may be eligible for accelerated depreciation through commercial revitalization deductions (CRD). Eligible business owners may receive CRD allocations from $10,000 to $10 million each year until 2010. Businesses interested in applying for a CRD allocation should contact their Renewal Community Director. Business owners can visit http://www.hud.gov/cr for contact information for Renewal Community directors.

There are substantial capital gains tax savings possible also to qualifying businesses in Renewal Communities and Empowerment Zones. Eligible businesses in RCs that hold property for 5 years may be able to exclude 100% of their capital gains from taxation. Eligible businesses in EZs may be able to exclude up to 60% of their capital gains from taxation. There are incentives in these communities also for businesses that upgrade their equipment needs. Qualifying businesses may be eligible for up to an additional $35,000 in Section 179 tax deductions on the cost of yearly equipment purchases in these areas. Qualifying businesses in EZs may also be eligible for low-cost loans through the EZ facility bond program. These loans through the EZ bond program may save up to hundreds of thousands of dollars for businesses. Businesses interested in borrowing money through this bond program can visit www.hud.gov/cr for contact information for their local Empowerment Zone director.

Approximately 300,000 businesses are located in RC/EZ areas. Business owners that want to claim RC/EZ tax savings must determine if their businesses are located in these areas and whether their employees live in these areas. HUD's RC/EZ Address Locator allows users to see if addresses are located in these areas. The Address Locator displays also the names and phone numbers of the RC/EZ directors, who can provide advice to business owners on applying for RC commercial revitalization deductions and low-cost loans using EZ facility bonds.

Business owners will want to read more about the RC/EZ tax incentives and find out how to file for the tax savings. IRS Publication 954, Tax Incentives for Distressed Communities explains each RC/EZ incentive and identifies the forms needed to claim each incentive. HUD's Tax Incentive Guide for Businesses in the Renewal Communities, Empowerment Zones, and Enterprise Communities provides this information also and includes questions and answers on each tax incentive. HUD also provides free copies of this publication to users who call (800) 998-9999.

HUD urges every business owner to discuss these incentives and how to claim them with their accountants.