Thinking about relocating or expanding your business? Maybe you are a developer or contractor thinking about building or rehabilitating houses or apartments. Before deciding on that perfect location, you might want to consider the tax opportunities that may be offered to someone in your situation, depending on what location you are considering.

The Enterprise Zone credit is one of these opportunities that may be extremely beneficial. This credit has two facets at work: business and housing development. In combining the two, they help jump start areas that are economically distressed. This is accomplished with rewarding businesses with state and local tax incentives, which encourage job growth through new investments within the zone areas. In Cedar Rapids, businesses with 50 to 5,000 employees have taken advantage of the opportunities the state has given them, resulting in amounts ranging from $100,000 to an astounding $8.2 million in Enterprise Zone credits. These businesses have been primarily in the manufacturing industry. However, many other industries also would qualify for this credit except retail establishments since they are excluded from taking this credit.

As stated earlier, the State of Iowa targets businesses and housing through Enterprise Zone credits. The main goal of the credits is to create more jobs and to improve housing in the designated areas which will therefore produce competitive and economically strong atmospheres throughout the state. Highlighted below are incentives that Iowa has to offer for Enterprise Zones, along with some of the requirements that must be fulfilled in order to qualify.

Business

Incentives for businesses include:

l Investment tax credit up to 10 percent of qualifying investments

l Refunds of state sales, service or use taxes paid during construction

l A local property tax exemption of up to 100 percent of the value added to the property for up to 10 years

l Additional funding for training new employees

l Iowa’s refundable research activities credit may be doubled while the business is participating in the program for up to 10 years

Requirements that a taxpayer must follow is that:

l The business may not be a retail business

l Employers provide a portion of the costs of standard medical and dental insurance plan for all full-time employees

l The business pays an average wage that is at least 90 percent of the average county wage or average regional wage. Linn County’s 90 percent wage threshold equals $15.21

l The business creates at least 10 full-time positions and maintains them for at least 10 years

l The business makes a capital investment of at least $500,000

Housing

Incentives for contractors and developers include:

l Investment tax credit up to 10 percent of qualifying investments

l Refunds of state sales, service or use taxes paid during construction

Requirements that a taxpayer must follow is that:

l A minimum of four single family homes or one multiple dwelling unit with three or more single dwelling units are rehabilitated within two years from the start of the project

l Homes or dwelling units that were rehabilitated or constructed must have necessary amenities

l Rehabilitation means the costs of improvements for the project is equal to or exceeds 25 percent of the acquisition of the property

Looking at both sides of the credit, the investment segment stands out as what potentially could produce the largest portion of the credit at a possible 10 percent of qualifying investment. The minimum amount of capital investment equals $500,000, which could result in a $50,000 tax credit alone. This portion along with the other incentives can really add up to large tax savings.

The most important tip to take away is to remember that before starting a project, or even if considering a purchase of property, it will need to be approved by the state. Not going through the proper procedures could cost all or a portion of the Enterprise Zone tax savings. In addition to Iowa, 43 states have their own version of the Enterprise Zone credit, with each state having its own twist. To avoid leaving cash on the table, you should partner with a company that is thoroughly knowledgeable in the federal and state tax credits available.

Stacey May is tax credit program manager at Honkamp Krueger & Co. PC. She can be reached at smay@honkamp.com or 1-(888) 556-0123.