Restaurants in Underserved Markets May Qualify for Tax Credits
Many chain restaurant operators are not aware that they can trim their tax burden by tapping the $11 billion reserved for businesses in renewal communities and empowerment zones.
By David Farkas, Senior Editor -- Chain Leader, 3/25/2009 9:16:00 AM
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If you’re running a restaurant in an empowerment zone like the one in Newark, N.J., you may qualify for significant tax credits. |
Here's something business owners love to hear: Your taxes are going down.
Stan Friedman, who owns a company called RetroTax and is an active member of the International Franchise Association, insists it could be reality for many restaurant franchisors and franchisees.
In the Zone?
Friedman, who bills himself as a "specialist in tax credit administration," claims that many restaurant operators have no idea of the ways they can trim their taxes. "What we do is make operators aware of the treasure trove of tax credits available," he declares.
These include wage credits, tax deductions and capital gains exclusions geared to stimulate economic development and job growth.
There is a catch, of course. To take advantage of them, operators must be doing business in underserved markets, known as Renewal Communities and Empowerment Zones. Areas designated as such are in large and small cities alike. They include Los Angeles; New Haven, Conn.; Gary, Ind.; Boston; and Minneapolis.
Friedman says it is often difficult to determine precisely where an empowerment zone begins and ends within a city without the Census Bureau data on which the zones are based.
Big Bucks
According to the U.S. Department of Housing and Urban Development, $11 billion in business tax credits are available. "I used to think it sounded like a big number until the stimulus package came along," Friedman chuckles.
The agency apportions that sum among 40 urban and rural renewal communities and eight new urban empowerment zones.
You can have a look for yourself at which tax credits you or your franchisees may be entitled to by accessing the digital version of the IRS Form 954, "Tax Incentive for Distressed Communities".
| Select Tax Credits | Dollar Amount |
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EZ Employment Credit: For every newly hired or existing employee who lives in an empowerment zone |
$3,000 per year |
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RC Employment Credit: For every newly hired or existing employee who lives in a renewal community |
$1,500 per year |
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Work Opportunity Credit: For businesses in empowerment zones, for employees hired from groups with traditionally high unemployment rates or other special employment needs, including youth who live in the empowerment zone |
up to $2,400 for first year |
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179 Deduction: Businesses within empowerment zones may claim increasing deductions for depreciable property such as equipment acquired after Dec. 31, 2001 |
up to $35,000 |
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Welfare to Work Credit: For each newly hired long-term welfare recipient |
$3,500 to $5,000 |
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Source: U.S. Department of Housing and Urban Development |
