In 1999, El Paso was awarded the
Federal Empowerment Zone designated by the Department of Housing and Urban
Development. It is one of only 15 cities in the nation and the only city
in Texas to win the Round II competition.
Opportunities of the Empowerment Zone
- Industrial Revenue Bonds - $139 million available, not
subject to State cap, allocations, or capital expenditure rule.
Bonds used to promote business growth within the zone.
- Tax Benefits- Increased section 179 Deduction;
Work Opportunity Credits; Welfare-to-Work Credit; Environmental
Cleanup Cost Deduction; Qualified Academy Zone Bonds.
Empowerment Zone Incentives
These are deductions on Federal taxes due
that are available to for-profit businesses operating in the Empowerment Zone.
They come in the form of wage credits of up to $3,000 for each employee that is
a resident of the EZ, increased deduction on equipment depreciation and work
opportunity tax credits for hiring targeted disadvantaged groups as identified
by the Texas Workforce Commission. The following items are types of credits and
- Empowerment Zone Employment Credit (EZ Wage Credit)- Businesses
located in the Empowerment Zone can claim up to $3,000 annually for each
Zone resident who has been employed for at least 90 days. Businesses can
claim this credit for both, new or current employees. To claim the maximum
credit, businesses must spend at least $15,000 on qualified wages and certain
training and educational expenses paid or incurred on behalf of a Qualified
Zone Employee. For those employees earning less than $15,000, businesses can
claim a 20% credit on the annual employment expense. The credit is claimed
using IRS Form 8844.
- Work Opportunity Tax Credit (WOTC)-Any business hiring individuals
from groups that have particularly high unemployment rates or other special
employment needs can receive a federal tax credit of up to $2,400 against the
first year of wages paid. The credit is calculated against a maximum of $6,000
the first year’s wages or $3,000 in the case of summer youth. For employees
working at least 120 hours the credit rate is 25% of the wages paid to the
individual up to stated maximums. If the employee works at least 400 hours,
the credit rate increases to 40%. The credit is claimed using IRS Forms 5884
- Welfare-to-Work Federal Tax Credit- Any business hiring members of
families that have been long-term recipients of family assistance (TANF) is
eligible for a federal tax credit of up to $3,500 in the first year of
employment and up to $5,000 in the second year. The credit is calculated
against a maximum of $10,000 paid in the first and second year’s wages. For
employees working at least 400 hours or 180 days the credit rate is 35% of the
wages paid to the individual up to stated maximum in the first year and 50% of
the wages paid tot the individual up to stated maximum in the second year. The
credit is claimed using IRS Forms 8861 & 8850.
- Increased Section 179 Deduction- Form 4562-Businesses located in the
EZ can take an increase in deduction up to $35,000 on equipment purchases. EZ
businesses can deduct all or part of their equipment costs, subject to certain
limitations, in the year of purchase vs deducting depreciation for the equipment
costs over a specific recovery period. Full benefit if $143k - $860k of
eligible is purchased in 2006.
- Environmental Cleanup Cost Deduction (Brownfields)- Businesses can
elect to deduct qualified cleanup costs of hazardous substances in certain areas
(brownfields) in the tax year the business pays or incurs the costs. Property
is not required to be located in an EZ. Need certification from State
environmental agency. Includes costs paid or incurred prior to January 1, 2004.
- Empowerment Zone Facility Bonds-City of El Paso can issue Empowerment
Zone Facility Bonds (a type of tax-exempt bond) to make loans at lower interest
rates to Empowerment Zone businesses to finance qualified Zone property. $130
million is available in urban Round II EZs over the designation period,
including developable sites (no per-borrower limit and bonds are not subject to
State volume cap) for EZ based commercial, retail, or industrial property;
35 percent of employees must be EZ residents.
- Qualified Zone Academy Bonds (QZABs)-State or local governments can
issue bonds at 0-percent interest cost to them to finance public school programs
with private business partnerships. Private businesses must contribute money,
equipment, or services equal to 10 percent of bond proceeds (which may qualify
as a charitable contribution). The Federal Government pays interest in the form
of tax credit to banks, insurance companies, and certain lending corporations
that hold QZABs. State education agency allocates credit to a Qualified Zone
Academy to finance materials, teacher training, building renovation, or
equipment for programs that prepare students for jobs or college. Schools
must be located in an EZ or have 35 percent of students eligible for free or
reduced-cost lunch program. Source: El Paso Empowerment Zone Website
Assessing Maximum Eligible Tax Abatement Terms
Maximum eligible tax abatement terms will be assessed using
the Department of Economic Development's Tax Abatement Worksheet (including Attachment "A"). This
worksheet has to be completed by the Department of Economic Development using the information contained
on the "Tax Abatement Application Form". A copy of the completed form should be provided to the applicant.
Only full-time positions, i.e., 35 hours per week with benefits, are considered in the calculation of
job credits. The Wage Multipliers used in the calculation of job credits on the worksheet are as follows:
Hourly Wage Range
$10.00- or more
Source: City of El Paso, Department of Economic Development