The Center of the California Enterprise Zone Information Universe


Proposed Enterprise Zone Regulations

As called for in the Governor’s budget proposal, HCD has released a proposal to make extensive changes to the Enterprise Zone program via regulations. The Department has created a special web page at http://www.hcd.ca.gov/ezregs with links to all of the relevant documents:

  • Public Notice of Proposal to Amend Rules – Informative Digest
  • Enterprise Zone Reform FAQ
  • Articles 1-13
  • Articles 14-15
  • Initial Statement of Reasons


  • In reality, however, the proposed regulations include a wide array of complicated changes such as:

    New Rules for Zone Noncompliance (Section 8434)

    • New reporting requirements are outlined for zones and mandatory sanctions imposed for noncompliance.
    • May result in some zones losing their ability to enact expansions or even lose their designation.

    New Content for Voucher Application (Section 8464)

    • Voucher application to contain the following statement, reminding taxpayers of the California Supreme Court’s recent ruling in Dicon Fiberoptics v. FTB: “Issuance of an Enterprise Zone Voucher Certificate is not intended to create a rebuttable presumption in favor of the taxpayer for the issuance of a credit. To receive a credit, taxpayers who receive a Voucher must still meet all qualifications of the Revenue and Taxation Code section 17053.74 or 23622.7 and may be audited by the Franchise Tax Board.”
    • Voucher application must include the following information related to the employee:
      • Reason for employee’s termination if employee terminated when application made;
      • Name of Zone in which employee performs job duties;
      • Address of job location in the Zone;
      • Percentage of time employees spends performing job duties in the Zone; and
      • Percentage of work time (during taxable year) employee performs duties directly related to taxpayer’s trade or business at that location.
    • Voucher application must include the following information related to the employer/taxpayer:
      • If employer does not have brick and mortar address in Zone, a description of the nature and location(s) of the business being performed in Zone;
      • Nature of vacancy being filled;
      • Certification of employee’s age and that 90% of work time will be spending performing duties related to taxpayer’s trade or business in the Zone and that 50% of work duties are within the boundaries of the Zone;
      • Whether employee was hired into a new position, an existing position, or whether job vacancy was transferred from another employer location within the state;
      • Size of business, age of business, and name of industry using first three digits of NAICS code.
      • Identification of 3rd party voucher preparer or tax consultant, with its name, address, phone number, email address and PTIN;
      • Signature under penalty of perjury of employer and third-party preparer; and
      • Answers to the following questions: (1) is this a leased or temporary employee? (2) are you the common law employer under applicable law?

    New Rules Relating to Obtaining a Voucher (Section 8465)

    • Limit on retroactive vouchering:
      • For employees hired after effective date of regulations: Voucher application must be received within 12 months of employee’s date of hire, as listed on the voucher application.
      • For employees hired before effective date of regulations: Voucher application must be received within 12 months of the effective date of the regulations.
    • Establishing date of hire: Applicant must now establish the employee’s date of hire by including a valid copy of a hiring document (W-4 or Employee’s Withholding Allowance Certificate) listing the employee’s date of hire. The document must be dated within 30 days of: (a) the date of hire on any other documents submitted to demonstrate eligibility, and (b) any other dates purporting to be the date of hire on documents used to establish date of hire.
    • Re-hire test:
      • An employee terminated then rehired within 12-month period is considered a “rehire,” and the voucher will be issued showing original hire date.
      • An employee hired again more than 12 months after termination is considered a “new hire,” and vouchers may be issued for each hire date.
    • Employee-employer relationship rule – Employment relationship is determined under common law rules. An employee is a “common law employee” when the employer has the right to control the manner and means of accomplishing the desired result. In situations where two parties share responsibilities for the individual, such as leased or temporary employees, only one party is the common law employer and entitled to a voucher.

    Establishing and Certifying a TEA (Section 8465.1)

    • Vouchers may not be issued using TEA category except for hires made subsequent to approval of a TEA. New rules may create circumstances where there is a lack of a TEA in a given zone for a certain period of time.

    Acceptable Documentation (Section 8466)

    • WIA categories
      • WIA-Certification – Need WIA-issued document by case manager of administrator or someone else who has lawful access to WIA data, stating that employee is enrolled in or eligible for WIA Intensive Services.
      • WIA-Veteran – Need document demonstrating that employee is a campaign veteran who served on active duty in a campaign or expedition for which a campaign badge has been authorized, including at least one of the following:
        • Report of separation or discharge from Armed Forces, National Guard or Coast Guard
        • Veterans Administration documentation
        • Written verification by State veterans agency
        • DD Form 214
        • Letter from National Personnel Records Center
      • WIA-Over 55 – Need an official identification card or other document issues by federal, state or local government showing employee’s age or date of birth.
    • CalWORKS category
      • Need document issued by local CalWorks administrator stating that employee was eligible for CalWorks immediately preceding commencement of employment.
    • Economically Disadvantaged Individual category
      • Self-certification on voucher application is sufficient to demonstrate that employee is at least 14 years of age.
      • Need at least one document, which includes date and employee’s name, produced by someone other than employee, employer or third-party preparer, demonstrating that immediately preceding employment, employee was economically disadvantaged as demonstrated by enrollment in any of the following programs:
        • CalFresh or Supplemental Nutrition Assistance Program (SNAP)
        • Medicaid/Medi-Cal
        • Infants and Children Program
        • Healthy Families A & B
        • Temporary Assistance for Needy Families
        • National School Lunch’s Free Lunch Program (NSL)
        • Head Start Income Eligible
        • Supplemental Security Income (SSI)
        • Bureau of Indian Affairs General Assistance
        • Tribal Temporary Assistance for Needy Families
        • Low Income Home Energy Assistance Program
        • Medical Baseline Energy Billing
        • Publicly subsidized affordable housing
    • Terminated/Laid-Off category
      • Employee must have been terminated or laid off within 2 years of hire date.
      • Trade Adjustment Assistance document or WARN notice is added to list of acceptable documents, provided that such documents demonstrate on their face that employee has been terminated or laid off.
      • New “unlikely to return” criteria:
        • “Unlikely to return” measured by a job-decline of 20% or more in the prior industry or occupation over the course of the last 5 years of available published data for that employee’s county of residence.
        • Employee is not “unlikely to return” if they have been hired for a position that is of a substantially similar occupation or industry from which they were displaced. Enrollment in education program or student status is not an occupation or industry for purpose of making this determination.
    • Plant Closure/Substantial Layoff category
      • Must be a “permanent” plant closure or “substantial” layoff (layoff of 20 or more people or at least 50% of a plant or location’s workforce within 6-month period).
      • Must have been impacted by closure or layoff within 2 years of hire date.
      • Changes to acceptable documentation to show closure or layoff:
        • WARN document must demonstrate on its face that the plant, facility or enterprise closed or suffered substantial layoffs.
        • Trade Adjustment Assistance documentation is added to list of acceptable documents, provided that it demonstrates on the face of the document that the plant, facility or enterprise closed or suffered substantial layoffs.
      • Changes to acceptable documentation to show employee was terminated or laid off:
        • WARN document must demonstrate on its face that the specific employee worked at the specific plant, facility, or enterprise.
        • Trade Adjustment Assistance documentation is added to list of acceptable documents, provided that it demonstrates on its face that the employee worked at the specific plant, facility or enterprise.
    • Long-term Unemployment, Limited Opportunity for Employment category
      • Employee must have been long-term unemployed for at least 15 weeks immediately prior to hiring.
      • Change in acceptable documents to show that employee has limited opportunities for reemployment in same or similar occupation:
        • “Screen print” from EDD replaced with “verifiable data” from EDD.
        • EDD data must show that employee is unlikely to return to their prior occupation or industry.
        • “Unlikely to return” measured by a job-decline of 20% or more in the prior industry or occupation over the course of the last 5 years of available published data for that employee’s county of residence.
        • Employee is not “unlikely to return” if they have been hired for a position that is of a substantially similar occupation or industry from which they were displaced. Enrollment in education program or student status is not an occupation or industry for purpose of making this determination.
    • Self-Employed Business Closure category
      • No substantive changes.
    • Department of Defense Civilian Worker category
      • No substantive changes.
    • Armed Forces or National Guard Separation category
      • New documents added to list of acceptable documents:
        • Report of separation or discharge from Coast Guard
        • DD Form 214
        • Letter from National Personnel Records Center
    • Seasonal Agriculture Worker Dislocation category
      • Employee must now be a “seasonal agricultural worker who experiences chronic seasonal unemployment and underemployment in the agriculture industry, aggravated by continual advancements in technology and mechanization.”
      • No substantive changes in list of acceptable documentation.
    • Clean Air Act Compliance Dislocated Worker category
      • No substantive changes.
    • Disabled Individual category
      • Voucher application must demonstrate that employee is disabled and eligible for or enrolled in or had completed a state rehabilitation plan.
      • Criteria to show eligibility:
        • The employee meets the criteria listed in the Department of Rehabilitation Consumer Information Handbook;
        • The employee is receiving Social Security Administration (SSA) disability benefits;
        • The employee has a valid “Ticket to Work”; or
        • The employee has a physical or mental impairment which results in a significant impediment to employment, as demonstrated in documents listed below.
      • Acceptable documents:
        • Physician’s written statement
        • Rehabilitation plan
        • Vocational rehabilitation letter
        • Written verification by state or federal rehabilitation counselor
        • Letter from a state drug or alcohol rehabilitation agency
        • Medical records
        • Social Security Administration disability records
        • Social Service records/referral
        • Valid “Ticket to Work”
    • Veteran with Service-Connected Disability category
      • Acceptable documents:
        • DD-214 Defense Department Report of Separation indicating disability
        • Department of Veterans Affairs documentation of disability
        • Verification by a State veterans agency of disability
        • Letter from the National Personnel Records Center (NPRC) indicating disability
        • Verification of disability from a branch of the Armed Forces, National Guard, or Coast Guard
    • Vietnam of Recently Separated Veteran category
      • DD Form 214 is added to list of acceptable documents.
    • Ex-offender category
      • Conviction can now be “any time prior” to date of hire instead of “immediately preceding.”
      • A background check report no longer needs to be signed by provider, but it needs to contain the telephone number and email contact for the background check provider. Background checks must be verified with date of birth and name matches.
      • Expunged records are now acceptable.
    • Public Assistance category
      • Clarifies that receipt of unemployment benefits is not considered “public assistance.”
    • Native Descent category
      • No substantive changes.
    • TEA Resident category
      • The following documents will no longer be acceptable:
        • I-9
        • W-4
        • Landlord statement
        • Lease or rental agreement
      • The following documents will be acceptable:
        • Valid driver’s license or other local, State or Federal identification card issued within the past 5 (five) years
        • Voter registration confirmation documents
        • Utility bill
        • Valid Passport
        • Mortgage Statement
        • County Property Tax statement
        • Credit card bill or statements
    • WOTC Credit category
      • No substantive changes.

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