Community Renewal Good Stories - Los Angeles

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Commercial Revitalization Deduction Recipe for Catering Company Success

Los Angeles, California, EZ

When downtown Los Angeles businesses want to lay out a boardroom spread for clients or staff, they often turn to City Fare, Inc. This growing corporate catering firm is located on the edge of the booming business district, which is part of the Los Angeles RC. That means City Fare enjoys Federal tax breaks and incentives.

In 2002 City Fare received a CRD allocation worth $207,000a tax break available only in designated RCs. Businesses can use CRD allocations to help lower their costs to construct or substantially renovate commercial buildings in RCs. The CRD has been a bonanza for City Fare owner Terry McIlhargey, who converted a vacant manufacturing plant into a successful food preparation and delivery service.

"The tax credit allowed us to absorb the unforeseen expenses that come with expansion, said McIlhargey. "By reinvesting those tax dollars in our business, we were able to make our transition smoother by hiring more staff and buying equipment.

To obtain CRD allocations, businesses must go through an application process developed by each RC in association with their State governments. In Los Angeles, the city" community development department handles these applications, forwarding them with recommendations to the California Tax Credit Allocation Committee for final approval. CRD rules allow the deduction of up to 50 percent of qualified expenses in a year, or 100 percent of qualified expenses over 10 years. By contrast, normal depreciation is taken over 39 years.

"The CRD is fast becoming one of our most valued and versatile business attraction tools. Developers large and small are becoming aware of it and are seeking us out. We have millions of dollars in pending projects lined up to utilize the CRD, according to Jasper Williams, director of the city" Industrial and Commercial Development Division.

The employment credit another RC tax break available to McIlhargeyis based on where his 20 employees live. His business can get up to $1,500 in employment tax credits annually for each of his three employees who also live in the RC.

Businesses in the RCs can also receive $2,400 in Work Opportunity Tax Credits by hiring 18- to 24-year-old RC residents. Qualified RC businesses are also eligible for zero-percent capital gains provisions and Increased IRS Section 179 Deductions.

The financial incentives for companies that locate in RCs are enormous, but equally important are the benefits for surrounding neighborhoods. When a business renovates abandoned or underutilized structures, it eliminates blight and improves living standards in inner-city neighborhoods. Job creation for RC residents also revitalizes communities.

City Fare, Inc., has managed to accomplish all of its goals while the neighborhood has benefited as well. This is a win-win recipe that makes City Fare, Inc., and the RC so popular. McIlhargey" business is prospering. He has added new staff and is considering acquiring an adjacent building to develop as a conference and hosting center. When those plans come to fruition, he will, of course, apply for another CRD.

For more information on the Los Angeles RC programs, please contact RC Director Cliff Weiss at (213) 485-6301.