Once again Laura Mahoney of BNA treats us to a report on what’s happening in the California Enterprise Zone world. This time it’s a detailed article on the release of the new voucher form.
Reproduced with permission from Daily Tax Report, No. 218 (Nov. 13, 2007) p. H-3. Copyright 2007 by The Bureau of National Affairs, Inc. (800-372-1033) (http://www.bna.com)
HCD Application Form Available To Employers Seeking EZ Hiring Credit
SACRAMENTO, Calif.–The Department of Housing and Community Development Nov. 1 released a new, statewide application that employers must use to qualify for the hiring tax credit available in enterprise zones, and said the application must be used for all voucher applications beginning Jan. 1, 2008.
The new application is intended to provide uniformity between the 42 designated enterprise zones in the state, Frank Luera, chief of the HCD state enterprise and economic development section, told BNA Nov. 8. HCD issued the new application as a key part of revisions it has been making to the EZ program since it began administering the 20-year-old program in 2004, including new regulations governing EZs that took effect in January 2007.
Employers must use the new application forms to obtain hiring credit vouchers from local EZ administrators. At the same time, the EZs must all use a new certificate, or voucher, to document their approvals of applications. HCD issued the new forms because different EZs have been requiring different types of information and documentation from voucher applicants, Luera said.
Employers who receive vouchers from local EZ administrators must provide copies of them to the Franchise Tax Board when claiming the credits. FTB has increased its scrutiny of the vouchers in the past four years, based on concerns that many EZs were issuing the vouchers improperly. FTB has audited, or is in the process of auditing, 500 taxpayers and expects to deny about $1 billion in claimed EZ hiring credits.
The State Board of Equalization has issued three decisions in the past year on EZ credit disputes between employers and FTB, and two employers have sued FTB disputing its authority to audit the vouchers (211 DTR K-2, 11/1/07 ).
Fewer Audits Expected
FTB expects that it will be much less likely to audit hiring credits claimed under the new regulations using the new application, spokeswoman Susan Maples told BNA Nov. 9. The new regulations address FTB’s concerns about the EZ program by requiring that all EZs operate under the same procedures and policies, and clearly stating the types of documentation necessary to secure a voucher.
Under the EZ program, employers receive a tax credit of up to $34,000 per qualified employee hired in one of 42 zones in the state. The zones are designated by the legislature as areas facing economic hardships such as high unemployment and significant job losses due to downturns in specific industries.
Eligible new employees must fall into one of 17 categories–for example those who are unemployed and are not likely to find work similar to their previous employment, or displaced homemakers who no longer have access to the income on which they depend.
HCD delayed its release of the new voucher application, originally set for August, because legislators were interested in adding some questions to the form that would help them gather data to measure the effectiveness of the EZs. However, because HCD could not require applicants to answer the questions envisioned, the data gathered would have had limited value, Luera said.
The new form does not ask for new types of information or documentation, but requires basic information about the employer and the employee, including the eligibility category to which the employee belongs. Employers must submit the application along with the necessary documentation, depending on the eligibility category, to the EZ for review.
New Rules Apply Now
In a Nov. 1 memo to EZ coordinators, Luera said although the zones and employers can use their old forms until Jan. 1, 2008, they must now comply with the rules imposed by the new forms and include the information specified on it.
Luera told BNA that HCD also has begun posting its decisions on appeals from employers when they disagree with an EZ that has denied its voucher application. HCD has just begun reviewing appeals from employers under a new process established in the regulations.
HCD recently posted its first appeal decision, in which it overturned an EZ’s denial of an application based on a one-day discrepancy between the employee’s date of hire on the voucher application and the employer’s federal employment eligibility form, Form I-9.
By Laura Mahoney
