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TAX UPDATES > SALT-Alert: Texas Enterprise Zone Update
Background
A bright spot in Texas is the Texas Enterprise Zone Program (Program) which is designed to encourage job creation, retention and capital investment in urban areas and areas of economic distress. The Program provides tax incentives and economic development benefits to qualifying businesses. Under the Program local governments have the authority to approve Enterprise Zone (EZ) designations for qualified individual companies.
Discussion
An overview of the general qualifications is:
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Purchase of $5 million of capital assets over a five-year period
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Retention or expansion of existing workforce during the five-year designation period
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The company is paying Texas sales/use tax on purchases used in the designated area
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Workforce of at least 100 employees paid wages higher than the minimum wage are ideal candidates
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For an Enterprise designation based on workforce expansion, a certain percentage of the newly created jobs must meet
economically disadvantaged or enterprise zone residency requirements
Company's approach for assisting clients with Enterprise Zone Projects involves a phased process including:
Phase I - Application Process: A 30-plus page application is required to be filed with the local jurisdiction and approved by the local and state government. Additionally, the application must be approved by the local city council.
Phase II - Job Certification Process: A specific amount of retained or additional jobs must qualify under EZ requirements. Certification is necessary.
Phase III - Refund Process: Refund claim is filed every year to recoup state sales tax on eligible purchases used in the
EZ.
How to take action
Potential benefits to a qualifying business might include:
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Refund of state sales/use tax up to $2,500 per employee over five years. In some cases, the company could qualify for up to $7,500 per employee.
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Negotiated local property tax abatements.
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State and local grants.
For more information
If you have questions, please contact
AuldridgeGriffin.
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