|  SE Empowerment Zone

Updated: Friday, October 27, 2006

 

| General Information

Updated: Friday, October 27, 2006

Much of Southeast is located in a Federal Empowerment Zone.  The Empowerment Zone Program is sponsored by the U.S. Department of Housing and Urban Development and is part of a nationwide strategy to revitalize communities. Minneapolis was one of only 15 cities who received the designation in 1998. The designation has already resulted in $18.99 million in direct funding, $100 million in tax incentives and $130 million in tax-exempt bonding authority. Minneapolis’ Empowerment Zone is 6.7 square miles, includes 49,000 residents and 19 of Minneapolis’ 81 neighborhoods.

In the first year (1999) of the 10-year designation, Minneapolis received $3 million in direct funding and a number of tax credits. Over the last two years (2000 and 2001) an additional $15.99 has been committed to Minneapolis by HUD. To date the Minneapolis EZ has received $18.99 million in direct funding and an extension of the tax credits through 2009.

There are three focus areas for the Minneapolis Empowerment Zone:

  1. Land clean-up and redevelopment resulting in new commercial enterprises on a sizeable development site in the Southeast Minneapolis industrial area. The effort should create 3,000 jobs, will include strong transportation links for Zone residents working there, and offer Zone-related tax incentives.

  2. Redevelopment of Minneapolis Near North neighborhood, replacing the state’s largest public housing complex with a mixed-income community, life-cycle housing, a nearby jobs park, new greenspace and new routes into what was once an area isolated from the rest of the city.

  3. Great Lake Center (formerly the Sears building) is currently in a transition period under the management of the Minneapolis Community Development Agency (MCDA). 

  

| Empowerment Zone Related Tax Incentives

 

EZ Employment Credit (2002 - 2009)
The Empowerment Zone Employment Credit provides businesses up to a $3,000 credit against federal taxes for every existing and newly hired employee that lives and works in the EZ. The credit is available for each year of the EZ designation (through 2009). The credit is accounted for using IRS Form 8844

 

Welfare-to-Work Tax Credit (1999 - 2003)*
The welfare-to-work tax credit provides businesses with an incentive to hire welfare recipients. The maximum credit is $3,500 per employee in the first year and $5,000 per employee in the second year. The business does not have to be located in the EZ.*


Work Opportunity Tax Credit (1999 - 2003)*
The Work Opportunity Tax Credit (WOTC) provides businesses with an incentive to hire young people (ages 16-25) from EZs and other members of targeted groups (TANF recipients, veterans, ex-felons, vocational rehabilitation referrals, summer youth employees, food stamp recipients, or supplemental security income recipients). Businesses do not have to be located in the EZ, and can claim up to a $2,400 tax credit.*

 

* Two forms must be completed by the employer/employee and submitted to the MN Department of Economic Security within 21 days of the employee's start date (IRS Form 8850 & ETA 9061). Employers can not claim more than one of the employer credits (Welfare-to-Work Credit, Work Opportunity Tax Credit) for the same employee.  IRS Form 8850 & ETA 9061

 

Environmental Cleanup Deduction
Provides businesses with an incentive to clean up sites that are contaminated (commonly known as brownfields), or perceived to be contaminated, with hazardous substances. The incentive is not limited to businesses located in the EZ.

 

Tax Exempt Bond Financing**
Available to business developers…the Minneapolis EZ can issue up to $130 million in tax exempt bonds to qualified zone businesses or developers developing space for qualified zone businesses. The $130 million in lower-interest funding provides communities with a significant resource for creating economic activity in their EZ area. The bond proceeds can be used for many purposes, including building and equipment purchases, rehabilitation, and multi-tenant mixed use development.

 

Increased Section 179 Deduction**
Allows qualified zone businesses in the EZ to deduct all or part of the cost of qualifying property in the year it is placed in service. Businesses in an EZ can double the federal income tax deduction on machinery and equipment in the year it is placed in service, instead of recovering the cost over a period of years through depreciation. For example, the year 2002 maximum deduction would be $40,000 instead of $20,000.

 

** A business is considered a qualified zone business if a substantial part of its tangible property, intangible property and services are used or performed in the EZ, at least 35% of its employees are EZ residents and at least 50% of its total gross income is from the active conduct of a qualified business within the EZ (IRS Publication 954)

 

Contact the EZ office, 612-673-5444, for further information and/or copies of IRS Publication 954: Tax Incentives for Empowerment Zones or an employer tax credit packet. Tax Incentive Guide for Businesses, IRS Publication 954

 
| Links to Additional Empowerment Zone Information