Enterprise zones offer businesses a bundle of state and local incentives to encourage economic development in economically distressed areas.
What is an Enterprise Zone?
By definition an enterprise zone is designed to promote a business friendly environment in economically distressed areas by offering state income tax credits that incentivize businesses to locate and develop within these designated communities.
Enterprise Zone Subsidies
Enterprise zone subsidies are entitlement subsidies – that is, any company that meets the qualifying criteria is eligible to collect them. The three basic criteria to qualify is high unemployment, low per capita income, or slow population growth. Common subsidies for which an enterprise zone company may qualify include the following.
- Property Tax Abatements
- Investment Tax Credits (against corporate income tax)
- Job Creation Tax Credits (against corporate income tax)
- Inventory Tax Exemption
- Sales, Franchise, and Use Tax Exemptions or Reductions
- Lowered Utility Rates
- Financial Assistance (low interest loans, bond financing)
- Training Grants
State Enterprise Zones
State enterprise zones are administered and monitored by local entities that may help with zone selection, data collection & reporting, and program financing supervision. In some states, local zone administrators choose benefits offered at their own discretion, while other states select benefits at the state-level.
Federal Enterprise Zones
Federal enterprise zones operate a little differently and designate communities even further as empowerment zones, enterprise communities, and renewal communities. Each designation relays a different set of requirements businesses must meet to qualify for the incentives in that location. These federally designated programs provide access to the following subsidies.
- Employment Credits
- Business Expansion Subsidies
- Qualified Zone Academy Bonds (education bonds)
- Low-Income Housing Tax Credits
At the end of the day investing in commercial real estate can prove a lucrative financial step, and identifying opportunities to invest that will also provide tax credits and support the health and wellness of local communities makes even more financial sense. If you are interested in learning how to take advantage of enterprise zone designations in Colorado, engage a licensed commercial real estate agent.
Phil Kubat is the Principal & Managing Broker of Transworld Commercial Real Estate, a Colorado commercial real estate firm. Transworld Commercial Real Estate will serve as a strategic partner to clients for commercial real estate acquisitions and dispositions. Phil’s services include real estate advisory, site selection, strategic planning, incentive negotiations, development consulting, and financial analysis. In his spare time Phil enjoys hiking, skiing, golfing, and living life to the fullest!