Renewal Community Questions & Answers

Employment Credit

The Renewal Community Employment Credit (RC Wage Credit) gives businesses an incentive to retain or hire individuals who both live and work in a Renewal Community (RC).  Businesses can claim the credit if they pay or incur "qualified zone wages" to a qualified employee.  The credit can be up to $1,500 for the RC Wage Credit.  The credit is available with respect to all EZs and RCs beginning January 1, 2002.  Round I Zones are currently eligible for the EZ Wage Credit, Continuing through December 31, 2009.

Increased Section 179 Deduction

Deduction that allows business to claim increased section 179 deduction (up to $35,000 for property acquired after December 31, 2001) if the business qualifies as a Renewal Community Business.  Can be claimed on certain depreciable property such as equipment and machinery.  Section 179 of the Internal Revenue Code allows businesses to choose to deduct all or part of the cost of certain qualify property in the year they place it into service.  Businesses can do this instead of recovering the cost by taking depreciation deduction over a specified recovery period.  There are limits, however, on the amount businesses can deduct in a tax year.

Commercial Revitalization Deduction

Download CRD Allocation Form

Businesses that construct or rehabilitate commercial property in Renewal Communities (RCs) can deduct a portion of the costs of acquisition and rehabilitation over a shorter period of time than permitted under standard depreciation rules.  A business can elect a deduction of one-half of "qualifying revitalization expenditures" (QRE) up to $10 million for any one project in the year the building is placed in service or can deduct all QRE pro-rata over 10 years.  The project must receive an allocation from the State (up to $12 million allocated for each RC in the State from 2002 through 2009).

Zero Percent Capital Gains Rate for Renewal Community Assets

If a business holds a Renewal Community Business asset acquired after December 31, 2001, and before January 1, 2010, for a minimum of 5 years, the business does not have to include any "qualified capital gain" from the asset's sale or exchange in its gross income. This exclusion applies only to an interest in, or property of, certain businesses operating in a Renewal Community (RC). The following qualify as RC assets: RC business stock, RC partnership interests, or RC business properties. Only gain attributable to the period from January 1, 2002, through December 31, 2014, for RCs.

Appendix (Summarization of all sections)

Tax incentives are generally designed to encourage businesses to locate or expand operations in a Renewal Community (RC) and to hire residents of a RC. Two of the RC incentives Increased Section 179 Expensing Deduction and Zero Percent Capital Gains for RC Assets require that the business meet the definition of "Renewal Community Business" in order to qualify for the incentive.  A business qualifies as a Renewal Community Business if it actively conducts business in a RC, has its tangible and intangible property located and used in the active conduct of business in a RC, employs residents of a RC (a required 35 percent of its employees), and has its employees perform services in a RC. The business can be a sole proprietorship, partnership, or corporation for Federal tax purposes. Some business-es are excluded from qualifying. The business must meet the requirements of being a Renewal Community Business continuously for several years, depending on the incentive.