Key insights
- The Federal Empowerment Zone (FEZ) tax credit is a general business tax credit available to employers with employees who both live and work in the zones.
- Empowerment zones are created by the U.S. Department of Housing and Urban Development to encourage economic development and growth in low-income communities.
- The zones are highly specific; typically, they do not fill entire ZIP codes, but rather blocks of streets.
Does your business qualify for the empowerment zone tax credit?
The Federal Empowerment Zone (FEZ) tax credit is a general business tax credit available to employers with employees who both live and work in the zones. This tax credit is limited to for-profit organizations. The credit is equal to 20% of the wages paid up to $15,000 per calendar year, for a maximum annual per employee credit of $3,000.
The limitation is that the employee must live and work at least 90 days in the zone to be eligible for the credit. The location of the worksite is controlling for purposes of the credit, rather than the location of the company headquarters.
There is no precertification requirement to claim the credit, and the statute is available for three years to amend returns and take advantage of this valuable opportunity.
Zone locations
Empowerment zones are created by the U.S. Department of Housing and Urban Development to encourage economic development and growth in low-income communities.
The word "empowerment" means the process of becoming stronger. The intent is to lift these communities out of poverty by creating jobs and stimulating business enterprise.
Empowerment zones are scattered across the continental United States, including both rural and urban populations. The zones are highly specific; typically, they do not fill entire ZIP codes, but rather blocks of streets.
Some major cities that include empowerment zones are:
- Jacksonville, Florida
- Chicago, Illinois
- Los Angeles, California
- New York, New York
- San Antonio, Texas
Tax credit computation
If your business is operating in a FEZ, you may want to work with a professional advisor to:
- Identify eligible employees,
- Collect supporting information,
- Submit the required tax forms, and
- Compute the dollar amount of the credit.
How we can help
The business incentives consulting team at CLA can confirm workplace zones if you are curious about this opportunity. Our aim is to support and empower employers to take full advantage of FEZ tax credits.