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Empowerment Zone

Empowerment Zone Map

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 deductions:

  • 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 & 8850.
  • 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

Multiplies

$6.26-$7.99

-

$8.00-$9.99

2

$10.00- or more

2.5

Source: City of El Paso, Department of Economic Development

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