Summary of Empowerment Zone Related Federal Tax Incentives
WAGE CREDITS
Empowerment Zone Employment Credit
(EZ Wage Credit) 		Credit up to $3,000 (with declining maximum credit over term of Zone Designation) for each year of EZ designation for every employee (existing and new hires) who lives in the EZ.
Welfare to Work (WtW) Credit Two-year credit against Federal tax liability for businesses that hire long-term welfare recipients. Credits up to $3,500 for the first year and $5,000 for the second year for each new hire.
Work Opportunity Tax Credits Credit up to $2,400 against Federal taxes for businesses for each new hire from groups that have high unemployment rates or other special employment needs (such as EZ youth ages 18-24, welfare recipients, ex-felons, 16-17 year-old summer hires).
DEDUCTIONS
Environmental Cleanup Cost Deduction
(Brownfields) 		Businesses can elect to deduct qualified cleanup costs of hazardous substances in certain target areas in the tax year the businesses pay or incur the costs.
Increased Section 179 Deduction Allows businesses to claim increased Section 179 deduction (up to $20,000 in additional expensing) if they qualify as Empowerment Zone Businesses. Can be claimed on certain depreciable property such as equipment and machinery.
BONDS
Qualified Zone Academy Bond State or local governments can issue bonds at 0% interest to finance public school programs with private business partnerships. Businesses must contribute money, equipment, or services equal to 10% of loan for academy program. Federal Government pays interest in form of tax credit to banks and insurance and certain financial local governments can issue corporations that hold bonds.
Enterprise Zone Facility Bonds A type of tax-exempt facility bond to enable loans at lower interest rates to Enterprise Zone businesses to finance Qualified Zone Properties.
CAPITAL GAINS
Nonrecognition of Gain on Sale of
Empowerment Zone Assets (EZA) 		Capital gain on EZAs (stock, partnership interests, and business property) of an Enterprise Zone Business held for more than 1 year is not recognized (and is rolled over) if replacement EZA is acquired within 60 days.
Partial Exclusion of Gain on Sale of
Empowerment Zone Stock 		Exclusion of 60% of the gain on sale of small business stock of a C Corporation that is an Enterprise Zone Business located in an EZ if the stock is held for at least 5 years.
OTHER INCENTIVES
New Market Tax Credit Equity investors in qualified Community Development Entities (CDEs) can obtain a tax credit against Federal taxes of 5 to 6 percent of the amount invested for each of the years the investment is held, for up to 7 years of the credit periods.
Low-Income Housing Tax Credit
(LIHTC) 		Ten-year credit against Federal taxes for owners of newly constructed or renovated rental housing who set aside a specified percentage of units for low-income persons for a minimum of 15 years. The credit varies for new construction and renovation.
Historic Preservation Tax Credit Allows investors to obtain a tax credit of up to 20% of qualified rehab costs for commercial and rental property either listed on the National Register of Historic Places or included in a National Register District (there are currently 10 register districts within Knoxville's Empowerment Zone).