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Areas of Practice
State Tax Consulting
We assist companies with multistate questions and state and local tax issues, including:- Nexus studies and voluntary disclosure agreements including assistance with amnesty programs. We help clients answer the following types of questions:
- What is Nexus?
- Is my product or service taxable?
- Must I start collecting and remitting sales/use tax?
- I’ve collected tax from a given state and have not remitted it - what now?
- Sales/use tax consulting including taxability reviews and transactional support
- Income tax, franchise tax and capital tax planning including apportionment review and analysis
- Audit support
- Unclaimed property/escheat issue identification and resolution
California Enterprise Zone Projects
California Enterprise Zones - General
Labhart Miles has many years of experience with the California enterprise zone program, including all of the areas detailed below: EZ Hiring Credit, EZ Sales/Use Tax Credit and EZ Net Interest Deduction for Lenders. We keep current on all issues surrounding the zones and make sure that our clients claim all the benefits to which they are entitled. We are members of the California Association of Enterprise Zones, regularly attend open forum discussions by the Department of Housing and Community Development (HCD), and track legislation affecting the EZ programs.
In the last 12 months, there has been significant activity in the California EZ area, including finalized regulations for the Hiring Credit, expiration of 23 of the 42 zones, and the new designation and re-designation of zones to fill those expirations. Note that many of the large metropolitan areas such as Los Angeles, Long Beach and San Francisco expanded their EZ geographic footprint significantly with their re-designations. See our related article in the right column. Other California cities with enterprise zones include San Jose, Sacramento, Santa Ana, San Diego, Fresno, Stockton, Watsonville, and Stanislaus County, to name a few.
CA Enterprise Zone Hiring CreditCompanies with locations in California enterprise zones and program areas are permitted a credit against the income/franchise tax for hiring certain categories of qualified individuals. The credit equals 50% of qualified wages paid to such individuals for the first year of employment, 40% in the second year, 30% in the third year, 20% in the fourth year, and 10% in the fifth year. Based upon current minimum wage rates, an employer could expect to receive hiring credits of over $37,000 if a qualified, full time employee is retained for 5 years, or over $20,000 if the employee is retained just 2 years. Benefits can be found not only on a current year tax return, but can be claimed retroactively to open tax years.
Client Value: Labhart Miles helps clients identify and claim qualifying EZ credits that provide dollar for dollar tax benefits. Labhart Miles has a proven methodology to quickly and accurately identify qualifying employees, enabling our clients to maximize the amount of credit available, thereby reducing their California income/franchise tax.
Who Qualifies?- Companies with one or more locations in one of California's 42 enterprise zones.
- Companies in a variety of industries including, but not limited to, manufacturing, technology, banking, utility, etc.
CA Enterprise Zone Sales/Use Tax Credit
Companies with locations in California enterprise zones and program areas are permitted a credit against the income/franchise tax for purchasing and placing into service qualified machinery in the EZ. The EZ sales/use tax credit is equal to the amount of sales tax paid on the qualified equipment, but is claimed on the income/franchise tax return. Qualified machinery includes machinery or parts used to manufacture, process, or assemble a product. The definition also includes data processing and communications equipment, including computers, copy machines, telephone systems, and faxes. Corporations may claim a credit equal to the sales or use tax paid or incurred to purchase the first $20 million of qualified machinery.
Client value: Labhart Miles has a process to quickly and accurately identify qualifying property and compile supporting documentation necessary to substantiate the credit under audit. The benefit can be in excess of 8% of the cost of the equipment.
Who Qualifies?- Companies located in one or more of California’s 42 enterprise zones and placing into service qualifying equipment used exclusively within the zone.
- Companies in a variety of industries, including but not limited to manufacturing, software development, etc.
CA Enterprise Zone Net Interest Deduction for Lenders
Banks are permitted a deduction from California taxable income for “net interest” received from loans made to customers engaged in a trade or business located in one of California’s 42 enterprise zones. It is not necessary for the lender to be located within the boundaries of the enterprise zone to take advantage of the deduction. Net Interest Deduction benefits can be found not only on a current year tax return, but can be claimed retroactively to open tax years.
Client Value: Labhart Miles has a proven methodology to quickly and accurately identify loans qualifying for the CA EZ net interest deduction. We review loan documents to ensure audit sustainability while maximizing benefits. By providing our clients with our process, they know exactly how we arrived at the deduction—an added benefit in today’s regulatory environment.
Who Qualifies?- Banks headquartered in California with most of their activities conducted within California. Banks located in or near cities with designated enterprise zones are likely to have even more benefit.
- Banks headquartered outside of California, but with several locations in the state.
CA Manufacturers’ Investment Credit (“MIC”)
The California MIC was a great benefit to manufacturers until its sunset on 12/31/03. Between 1994 and 2003, manufacturers in California were entitled to claim a credit against the CA Franchise Tax equal to 6% of the cost of qualifying machinery and R&D property purchased or leased and placed in service in the state.
While the MIC officially sunset 12/31/03, some of the tax returns upon which the credit was claimed are still open under California’s four year statute of limitations. Companies that have not properly documented the credit may lose significant benefit upon FTB audit. Also, companies that would have qualified for the MIC but have not yet claimed it have a short remaining window to claim the benefit for any open tax years.
Multi-State Credits and Incentives
We assist companies with the identification, quantification and substantiation of multi-state benefits available as a result of expansion, including:- Increases in company headcount and training (ie. Hiring Credits, Training Credits, Grants and Reimbursement programs)
- Investments in property, plant and equipment (ie. investment tax credits)
- Increases in research and development activities (ie. R&D credits)
- Expansions in enterprise zones, renaissance zones, or similar targeted areas
Affiliated Services
When appropriate, Labhart Miles may refer clients to other affiliated service providers specializing in one or more of the following:- Sales tax compliance
- Property tax consulting
- Incentive negotiations
- Certain multi-state restructuring projects
Areas of Practice
State Tax Consulting California Enterprise Zone Projects Multi-State Credits and Incentives Affiliated Services Industry Expertise Seminars & Presentations
The Streamlined Sales Tax Project aims at consistency among the states in order to make reporting easier. For some general information on the project visit streamlinedsalestax.org.
Also, see the recent article in States of Affair, August, 2005.
There are over 7,000 individual taxing jurisdictions in the U.S. Let us help you navigate them.
View a map of California Enterprise Zones ›
Read Article on the conditionally approved California Enterprise Zones ›
View a copy of the newly approved EZ Hiring Credit Regulations
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