Merced Regional Enterprise Zone
Let your taxes work for you

All businesses located in the new Merced Regional
Enterprise Zone can take full advantage
of six valuable state tax incentives.

Hiring Credit
Businesses can earn up to $37.44 in state tax credit for each qualified employee hired. 50% of the employee’s work must be performed inside the boundaries of the Enterprise Zone, and 90% of the employee’s work must be directly related to a trade or business activity within the Enterprise Zone boundaries. In addition, employees must meet one of eleven eligibility criteria. To find out more, go to www.co.merced.ca.us/ez

Sales and Use Tax Credits
Business located in the Enterprise Zone may reduce state income taxes by a limited amount of the sales or use tax paid on certain machinery purchased for exclusive use within the Enterprise Zone. To qualify for the credit, the machinery must be used to manufacture, process, combine or otherwise fabricate a product; OR produce a renewable energy source; OR control air or water pollution. Data processing and communication equipment are also qualified property.*

Business Expense Deduction
Businesses may defer 40% of the costs of qualified property as a business expense in the first year the property is placed in service. The maximum deduction is limited to $20,000 and includes qualifying business equipment, furniture and fixtures or other depreciable personal property. *

Net Operating Loss Carryover
Up to 100% of Net Operating Loss may be carried forward for up to 15 years. *

Net Interest Deduction for Lenders
Lenders who loan money to an Enterprise Zone business can take a deduction from the net interest earned (interest earned less direct expenses) on the loan. The types of loans that qualify for this deduction include: business loans, mortgages and loans from non-commercial sources, To qualify: 1) the loan must bemade to a trade or business located solely within the boundaries of the Enterprise Zone; 2) the loan proceeds must be used strictly for the business activities within the boundaries of the Zone; and 3) the lender cannot have an equity or other ownership interest in the business. *

Preference points on state contracts
Companies located in the Enterprise Zone can earn preference points on state contracts.

• For more specific information regarding this tax incentive, refer to the Franchise Tax Board 3805Z Form.