The Challenge:

This client is a 48-year old family owned business that builds and installs customized structural steel products, steel pipes, stairs, and railings.  The business entity is an S-corporation and the shareholders are family members.

Faced with one of the greatest economic downturns in the Construction industry, the client became proactive in maximizing their available tax credits by engaging Hutchinson and Bloodgood’s Tax Incentive Group.  Hutchinson and Bloodgood identified employee tax credits as a potential source of tax incentives and refunds.

The Solution:

An experienced, specialized team of experts conducted a look back study to review every potential eligible employee.  Because the client was previously located in the Sylmar Enterprise Zone and later had moved to the Santa Clarita Enterprise Zone, the employees were carefully categorized into the two Enterprise Zone pools based on each zone’s designation effective date and employees’ hire dates. 

The majority of the California Enterprise Zone studies fail to explore and qualify employees under all 11 available criteria.  Often, the only criterion that’s reviewed is the employee’s residential address which only aims for 1 of the 11 qualification categories.  Hutchinson and Bloodgood maximized the client’s tax savings by using its expertise to screen employees under all 11 eligibility criteria.

It is important to note that an employee does not have to live in a designated area to qualify for the Enterprise Zone Hiring Tax Credit.

An advantage for contractors is that opportunities may exist with their various construction sites.  A construction site may be deemed as a business location within an Enterprise Zone even if the business’s office is outside of the Enterprise Zone.  Construction site skilled workers, site managers, and engineers who spend more than 50% of their employment time working within the boundaries of the Enterprise Zones may generate the Enterprise Zone Hiring Tax Credit for their employers.

Hutchinson and Bloodgood also carefully reviewed the client’s property and equipment acquisition to generate the Enterprise Zone Sales Tax Credit, which added to the total savings.

The Benefits:

Within months of filing the amended income tax returns, the client successfully received approximately $140,000 of cash refunds for 2007, 2008, 2009 tax years.  Refunds also included interest which had accrued since the original filings.    

On average, between 2007 and 2010, 28% of total corporate and shareholders’ personal income tax liabilities were reduced by utilizing the California Enterprise Zone tax credits.