Here is the YouTube video of the press conference:

From the Albany Times-Union:

U.S. Sen. Kirsten Gillibrand will propose expanding, simplifying and making permanent the federal Research and Development Tax Credit, during a news conference Friday afternoon at Watervliet Arsenal Business & Technology Partnership.

She will be joined by U.S. Rep. Paul Tonko, Albany County Executive Michael Breslin, and Alain Kaloyeros, CEO of the College of Nanoscale Science and Engineering at the Univesity at Albany. The proposal could benefit more than 2,000 companies in New York state, according to Gillibrand.

All new blog posting will be appearing immediately on Twitter so you don’t have to wait for your once-a-day email to get all of the updates. But not all “tweets” will appear in the blog, so to make sure you are fully connected to whatever is happening in the California Enterprise Zone Universe, be sure to follow me on Twitter @MaxShenker.

From the San Francisco Chronicle:

Max Shenker, a vice president with the Tax Credit Co. in Los Angeles and publisher of EZPolicyBlog.com, says the proposal itself is already creating uncertainty and could cause companies to delay or cancel investments.

“These zones are created with 15-year timelines. Local governments and businesses make decisions based on these kinds of statutory guarantees. To cancel such a timeline in the middle is a very bad signal to business and the reliability of the state,” Shenker says.

Read the whole story:

In his budget proposal, Gov. Jerry Brown calls for eliminating California’s Enterprise Zone program, which provides tax incentives to encourage companies to move to and stay in economically distressed communities and hire hard-to-employ people such as welfare recipients, ex-offenders and people with disabilities.

Companies that locate in one of the state’s 42 designated Enterprise Zones can get a state income tax credit worth up to $37,400 over five years for each qualified employee. They can also get a credit on their income tax return for sales tax paid on up to $20 million a year in qualified equipment purchases.

If a company can’t use all of the credits amassed in one year because it doesn’t owe enough state income tax, it can carry them forward indefinitely to offset taxes in future years. It can also amend up to four years of back tax returns to claim these credits retroactively.

There are lots of criticisms of the program, which was started in the mid-1980s. One is that some Enterprise Zones are not exactly blighted. San Francisco’s has grown to include virtually all of downtown north and south of Market Street, including the tony Financial District and hip areas such as Hayes Valley.

Another is that companies can get the hiring credit for employees simply because they live in certain targeted employment areas – regardless of their salary or education. A company could hire a 25-year-old software engineer living in the Mission or Lower Pacific Heights and get the credit, says Rich Gunn, a partner with San Francisco accounting firm Burr Pilger & Mayer.

The biggest criticism is that tax incentives are supposed to change behavior, but because these can be claimed retroactively, they often reward companies for things they have already done.

The credits “are extremely valuable. There are businesses who make very, very good use of the cash funds they get from the state. But as an incentive, it doesn’t work. People don’t know about it when they make hiring or location decisions. They often find out about it long after the fact,” Gunn says.

Claim process outsourced

The program is so complex – and under-marketed in some areas – that many companies don’t know they are eligible for Enterprise Zone credits until a smart accountant brings it up or they get a cold call from a company offering to help them claim the credits retroactively in exchange for a percentage of the tax savings. These firms typically take 10 to 35 percent of the tax savings but sometimes work for an hourly fee.

Claiming the credits “is very tedious. You outsource it just like you do with workers’ comp or payroll,” says Joseph Abdallah, a principal with PSG Tax Credits Group of Roseville (Placer County), which helps clients claim Enterprise Zone and other federal and state tax credits.

Abdallah says many clients didn’t know they qualified for Enterprise Zone credits before his firm told them. “Government and city officials have a difficult time getting it out to the business community,” and when they do, “it’s often not in a very convincing manner,” he says. But “once we educate (clients), their hiring practices change immediately” to take advantage of the credit.

Samir Gulati, a director with Alliantgroup in Irvine, says about half of his clients were already claiming Enterprise Zone credits before his company came in to help maximize them. The other half weren’t. However, in the past few years, “I have seen a big uptick in the number of companies who have heard about the incentives and are proactively moving into an Enterprise Zone,” he says.

Gulati and others say that some companies are considering moves to states with no income tax, such as Nevada, but decide to stay in California because Enterprise Zone credits wipe out all or most of their state income tax.

“I think you will see more job loss if the program goes away,” says Abdallah.

Studies differ

The program’s ability to create jobs is debatable. A study by the Public Policy Institute of California found that on average, “the program does not raise employment in Enterprise Zones relative to other areas,” says Jed Kolko, a co-author of the study.

Although the overall effect was zero, the program had a positive effect on employment in some zones, particularly “where the administrator puts more effort into marketing and outreach,” and a negative effect on other zones.

Kolko cautioned that his study considered only employment, not other goals such as lowering poverty and raising incomes.

Another study “came to very different conclusions,” says Craig Johnson, president of the California Association of Enterprise Zones.

That study, by a group of researchers at the University of Maryland and the University of Southern California, showed that “within Enterprise Zones there were lower poverty rates, lower unemployment rates, higher wages paid, an increase in household income levels and a greater amount of community investment in business,” says Johnson, who is also the Long Beach Enterprise Zone manager.

In his budget proposal, Brown says a study by the Legislative Analyst’s Office found that Enterprise Zones “have little if any impact on the creation of new economic activity or employment” but do seem to shift activity within a metropolitan area from outside to inside a zone.

“Because the primary benefit of these zones is to shift economic activity from one geographic region within California to another geographic region within California, they are not of statewide interest,” Brown concludes.

His budget would eliminate all Enterprise Zone credits for tax years beginning Jan. 1, 2011, both newly earned and credits earned in prior years.

Johnson says his association believes that taking away previously earned credits “is not legal and would not stand up to a legal challenge.”

Brown can not eliminate Enterprise Zones himself; he needs the Legislature to pass a bill.

Last year, a bill sponsored by Senate President Pro Tem Darrell Steinberg, D-Sacramento, would have phased out companies’ ability to claim Enterprise Zone hiring credits retroactively and to claim them for employees based solely on their address.

The bill narrowly passed the Senate but did not get out of an Assembly committee.

Brown’s proposal would go even further. “We have never had a sitting governor make this proposal, and that carries great weight. We are taking it real seriously,” Johnson says.

Max Shenker, a vice president with the Tax Credit Co. in Los Angeles and publisher of EZPolicyBlog.com, says the proposal itself is already creating uncertainty and could cause companies to delay or cancel investments.

“These zones are created with 15-year timelines. Local governments and businesses make decisions based on these kinds of statutory guarantees. To cancel such a timeline in the middle is a very bad signal to business and the reliability of the state,” Shenker says.

Net Worth runs Tuesdays, Thursdays and Sundays. E-mail Kathleen Pender at kpender@sfchronicle.com. Read her blog at sfgate.com/pender.

This article appeared on page D – 1 of the San Francisco Chronicle

Here is the first edition of the FTB’s “Tax News” newsletter for 2011.

Of note is an item under “Tax Benefits for Employers” discussing the relationship between benefits under the federal HIRE Act and Enterprise Zone credits:

The employer is not required to reduce salary expenses by the amount of the new hire retention credit. No carryback is allowed, but this credit may be carried forward for 20 years. The WOTC and the new hire retention credit can both be claimed for the same employee.

Since there is no reduction to employer’s federal wage deduction, no adjustments are necessary for California tax purposes. In addition, these new federal tax benefits do not affect the state’s new jobs credit, form FTB 3527 or the enterprise zone credits, form FTB 3805Z.

In the October/November 2010 issue of The Restaurant Standard, Angelica Pappas writes an article that brings attention to the California Enterprise Zone program. The article highlights the benefits of the program, but also cites that “less than 10 percent of qualifying businesses take advantage of the program.” Interviews with Craig Johnson, President of the California Association of Enterprise Zones, and owners of local restaurant businesses show how the program is helping people in their communities and discuss how the program helps keep California stay afloat despite the current economy.

Click here for the link to the digital edition.

The Lindsay Enterprise Zone expires today, October 5, 2010. The Sequoia Valley Enterprise Zone, which encompasses Lindsay, received conditional designation on August 19, 2009.

Welcome to the new look of EZPolicyBlog, we hope you like it.

Here‘s the speech:

From the Republican Caucus Web Site:

Stop California Jobs from Fleeing

While the Democrat so-called jobs proposal fall silent on addressing the hemorrhaging of California jobs, Senate Republicans continue to introduce meaningful measures.

Implementation of AB 32, Cap-and-Trade (SB 8x 49 Dutton)
Puts a halt to the state version of cap-and-trade – an idea that was scrapped on Capitol Hill — which would result in a staggering $143 billion “Air Tax” that would cripple our state’s economy. All Californians want clean air and water, but California cannot afford to embark on a cap and trade system alone.

Homebuyer Tax Credit (SB 8x 21 Ashburn)
A $10,000 per homebuyer tax credit will go towards the purchase of new and existing homes. The new home buyer tax credit was the most successful jobs bill the legislature passed last year. SB 8X 21 will continue that success and double the number of jobs created and make possible homeownership for thousands of Californians.

Capital Gains Tax Reduction (SB 8x 43 Dutton)
Spurs investment and employment in California by cutting the long term capital gains rates in half.

R&D Tax Credit (SB 8x 44 Dutton)
Aligns California’s research and development tax credit rate with that of the federal government’s, helping to encourage innovation and investment, and the creation of high paying jobs.

Health Savings Account (SB 8x 47 Dutton)
Increases state tax deductions for contributions to Health Savings Accounts (HSAs), thereby encouraging long-term savings for health care expenses and providing an opportunity for more families to have affordable health insurance.

Energy Commission Regulations (SB 8x 68 Huff)
The California Energy Commission needs a check on its power. It must be overseen by the full legislature and, furthermore, any new regulations need to wait until California’s unemployment rate is maintained at 5.1% or lower for 3 consecutive months.

Work Opportunity Tax Credit (SB 8x 59 Dutton)
Gives employers tax credits for hiring people off historically high welfare rolls, helping get Californians back to work while reducing California’s public assistance obligation.

Restore California’s Competitive Job Creation Climate

Unlike the Senate Democrats misplaced priorities as it relates to California’s desperate need for new jobs, Senate Republicans continue their focus on creating jobs by removing legislative and regulatory burdens, not publicly funded employment programs.

Jobs Protection Act (SB 8x 60 Harman)
Requires a fiscal impact analysis, a hearing and legislative approval before bills affecting business costs become law.

Out of State Health Plans (SB 8x 65 Huff)
Permits out of state healthcare plans and insurers to offer their services in California, offering competition, reigning in costs and making healthcare more affordable for everyone.

CEQA Exemptions (SB 8x 56 Hollingsworth)
Streamlines the infrastructure project permitting process, allowing shovel ready projects to start quickly and put Californians back to work.

K-12 contracting (SB 8x 61 Huff)
Gets rid of antiquated policies that limit the ability to hire the best, most cost efficient person for non-instructional jobs – such as transportation, landscaping and maintenance – allowing schools to do what is most important — teach our children.

Improve Small Business Access to Capital (SB 8x 51 Dutton)
Simplifies the business tax code to get cash flowing back to small businesses, assisting companies in their efforts to expand and hire new workers.

Manufacturers, R&D Sales and Use Tax Exemption (SB 8x 58 Dutton)
Exempts manufacturing and research and development equipment from sales and use taxes, helping California – notorious for taxing its businesses out of state — become economically competitive once again.

Veterans Hiring Tax Credit (SB 8x 63 Denham)
Provides a tax credit to private sector employers who hire veterans. There are thousands of veterans returning home to California and this measure will incentives the private sector to hire them.

Initiate Regulatory Review and Relief

Meals and Rest Periods (SB 8x 70 Dutton)
Allows more flexible and appropriate standards for employers and employees to schedule mandatory breaks throughout a shift.

New Car Sales Tax Reduction (SB 8x 46 Hollingsworth)
Allows a person trading in their used car to reduce the principle cost of a new vehicle, saving the buyer in taxes and helping the dealer sell more cars and stimulate the economy.

Eliminate Corporate Penalty (SB 8x 54 Hollingsworth)
Eliminates the existing million dollar penalty for companies that underestimate their corporate tax liability, giving companies more money to invest or expand by not having to overestimate their taxes as a precaution.

Salesperson Licensing Reform (SB 8x 67 Huff)
Allows owners of multiple car dealerships to share staff, providing their employees more opportunities to sell cars at any one dealership in an industry that has been decimated by the recession.

Delay On-Road/In-Use Diesel Regulations (SB 8x 57 Cox)
Delays the costly new diesel engine regulations enacted by The California Air Resources Board that have had an onerous effect on all transportation sectors. Delaying these regulations will help keep these small businesses keep their doors open and workers employed.

Flexible Workweek (SB 8x 66 Cox)
Allows employers to offer flexible work weeks, giving their employees the opportunity to spend more time with their families and employers more flexibility in scheduling their workers.

Systematic Review of Regulations (SB 8x 48 Dutton)
Regulations are strangling our businesses and stifling growth. Requires a review of all regulations to determine which ones are cost effective and requiring those that are not to be repealed or amended. Overregulation is strangling our businesses and stifling growth, reducing and simplifying the regulatory burden will help jump start our struggling economy.

Third-party Analysis of Economic Impact of ARB Regulations (SB 50 8x Dutton)
Requires an objective third-party to analyze the economic impact of Air Resource Board (ARB) regulations. Time after time, ARB studies have proven to be seriously flawed. This would ensure that real economic analyses are completed.

Create Full Employment Act for Entrepreneurs, Not Attorneys

Repeal of the Sue Your Boss Law (SB 8x 64 Hollingsworth)
Repeals the Private Attorneys General Act, which takes the responsibility of investigating employer misdeeds out of the hands of the Labor commission or the Attorney General and puts it into the hands of ambulance chasing lawyers. Repealing this law will lower overall costs and prevent further frivolous lawsuits.

Tort Reform (SB 8x 69 Huff)
Prevents innocent sellers from being frivolously sued for selling faulty goods they did not manufacture.

Senate Republicans agree that job creation is the number one priority. These job creation bills should be considered during the 8th Extraordinary session to expedite economic recovery as quickly as possible.

Here at the CAEZ Conference in Fresno, three new board members have been elected: Fran Aguilera of the San Joaquin Valley EZ, Libby Day of the San Diego LAMBRA, and Melissa Alva of the Pasadena EZ.

I recently started using DocStoc to display documents on EZ Policy Blog. I wanted to get some feedback from readers if they like the new display, or if they prefer the old manner of linking documents.

Please click on this link to participate in the poll: http://www.doodle.com/2qc83fdyftcpfspc

The DocStoc displayed document should look like this:

Here’s a fascinating and entertaining look at the world of tax incentives from the Wall Street Journal‘s “Best of the Web Today” feature:

The Great Paper Caper: Government offers subsidy. Company takes it. Left-wing writer suffers crisis of faith.

Poor Christopher Hayes! He’s the Washington editor of The Nation, a left-wing magazine, and he writes that two years in the capital “have started to make me feel jaded”:

I’ve come to expect that even nobly conceived laws will be manipulated and distorted for private ends. But once in a while I hear a story that gives me the queasy feeling that I’m nowhere near cynical enough.

The story that set off Hayes’s bout of sicchasia involves the “alternative fuel tax credit” and the paper industry. The 2005 transportation bill provides for “a fifty-cent-a-gallon credit for the use of fuel mixtures that combined ‘alternative fuel’ with a ‘taxable fuel’ such as diesel or gasoline”:

Enter the paper industry. Since the 1930s the overwhelming majority of paper mills have employed what’s called the kraft process to produce paper. Here’s how it works. Wood chips are cooked in a chemical solution to separate the cellulose fibers, which are used to make paper, from the other organic material in wood. The remaining liquid, a sludge containing lignin (the structural glue that binds plant cells together), is called black liquor. Because it’s so rich in carbon, black liquor is a good fuel; the kraft process uses the black liquor to produce the heat and energy necessary to transform pulp into paper. It’s a neat, efficient process that’s cost-effective without any government subsidy. . . .

By adding diesel fuel to the black liquor, paper companies produce a mixture that qualifies for the mixed-fuel tax credit, allowing them to burn “black liquor into gold,” as a JPMorgan report put it.

So a credit designed to encourage the use of alternative fuels instead ends up subsidizing the use of conventional fuel. As a consequence, Chris Hayes has a sort of crisis of faith–but faith in what exactly? Here’s his conclusion:

The episode is a useful reminder of the persistently ingenious ways the private sector can exploit even well-intentioned legislation. Considering that the success of the Treasury’s recently announced plan to rescue the financial sector depends, in part, on the private sector not gaming the rules, the black liquor story seems particularly germane.

One may assume that Hayes, as a writer for The Nation, is favorably disposed to the idea of government intervention in the economy. You might think the paper caper would lead him to question the wisdom of such intervention, at least as a practical matter. But no. What shocks him–sickens him!–is the behavior of big corporations: “the persistently ingenious ways the private sector can exploit even well-intentioned legislation.”

Is he just now figuring out that corporate executives exploit opportunities to make a profit? Any free-marketeer could have told him that. Leftist economic theory is even more wrongheaded than we thought if it relies on the assumption that private-sector actors will behave in public-spirited ways.

Or perhaps his surprise is not that corporations “exploit” opportunities but that they do so in “ingenious” ways. His faith in governmental competence may be unshakable, but his illusions about private-sector incompetence have been shattered.

It’s hard to believe, but EZ Policy Blog turns three years old today.  Thanks to my readers for providing the encouragement to keep the project going.

I will be participating with a panel of experts for an Enterprise Zone workshop in Santa Clarita on March 25.