NOTE: This headliner is current through the publication date. Since changes may have occurred, no guarantees are made concerning the technical accuracy after the publication date.
Headliner Volume 209
July 27, 2007
This headliner updates Headliner #198, IRS Partners with HUD to Promote Tax Incentives for Economically Distressed Areas, which is now obsolete.
On May 25, 2007, the President signed Public Law 110-28, H.R. 2206: U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007. The law provides immediate increases in tax incentives for employers in Renewal Communities, Empowerment Zones, and rural renewal counties.
There is an estimated $11 billion in tax incentives available to businesses that hire local residents, upgrade equipment needs, and build or rehabilitate commercial property in Renewal Communities and Empowerment Zones. These incentives include wage credits, increased deductions, accelerated depreciation, low-interest loans through facility bonds, tax savings on capital gains, and other incentives.
The new legislation authorizes eligible employers to claim up to $2,400 in work opportunity tax credits (WOTCs) by employing 18-39 year-old residents of Renewal Communities, Empowerment Zones, and rural renewal counties. Prior to May 25, 2007, eligible employers who wanted to claim these credits by hiring high-risk youth needed to hire 18-24 year-old residents of Renewal Communities and Empowerment Zones.
The law expands the maximum age to 39 and also added residents of rural renewal counties to the list of eligible employees for this credit. It also changed the name of this targeted group from "high-risk youth" to "designated community residents." The law also extends the WOTC to include individuals who begin work for the employer by August 31, 2011.
To claim WOTCs for hiring eligible residents of Renewal Communities, Empowerment Zones, or rural renewal counties, employers must file IRS Form 8850 with the applicable state workforce agency no later than the 28th day after the job applicant begins work.
In most cases, businesses must be located in designated Empowerment Zones, and/or Renewal Communities to qualify for the incentives. However, there are some incentives available to all businesses, whether or not they are located in designated Zones.
IRS Publication 954, Tax Incentives for Distressed Communities, provides information about the tax incentives for businesses located in designated Empowerment Zones and/or Renewal Communities.
To find out if you are located within one of these designated areas and how these tax incentives can benefit you, visit the HUD Web site for an online locator or check out IRS Publication 954.
Empowerment Zone Tax Tips (PDF) or Renewal Community Tax Tips are also available on the HUD Web site.
Tens of thousands of business owners and tax practitioners visit HUD’s Address Locator each month to view maps of the Renewal Communities and Empowerment Zones and to determine instantly if addresses of businesses and residents are located in these areas. The instructions for IRS Form 8850 list the applicable rural renewal counties.
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