Mobile/Prichard Renewal Community

Federal Tax Incentives for Business Development

Portions of the Mobile/Prichard area were recently designated as a Renewal Community by the Federal Department of Housing and Urban Development. This designation will run through 2009 and is designed to help alleviate chronic poverty and unemployment by providing incentives to businesses to locate within the zone and hire employees who live in the zone. Below is a summary of these benefits:

Renewal Community Employment Credit – A Credit against Federal taxes up to $1500 for each year of Renewal Community Designation for every existing employee and new employee who lives and works in the RC. This incentive is targeted towards businesses relocating to the RC that will have large hiring needs as well as businesses expanding within the RC that will be hiring new employees.

Commercial Revitalization Deduction - Deduction of either one half of Qualified Revitalization Expenditures (QREs) in the first year a building is placed in service or all QREs on a ratable basis over 10 years if QREs have been allocated to the revitalization of a commercial building in the RC. Each RC has an annual allocation of $12 million for this program.

For Renewal Community Businesses (At least 35% of workforce resides in RC):

Additional Section 179 Deductions – Allows businesses to claim increased Section 179 deduction (up to $35,000) on certain depreciable property such as equipment or machinery in the year it is placed in service. Businesses can do this instead of recovering cost by taking depreciation deductions over a specified recovery period. This incentive is targeted to businesses with relatively small (less than $200,000) equipment needs in any taxable year, as well as existing businesses that need to update equipment but are not otherwise purchasing equipment.

Zero Percent Capital Gains Rate – The holder, for a minimum of 5 years, will not have to include in its gross income any qualified capital gain from the sale or exchange of the asset.

More in-depth descriptions of each facet of the RC program can be found at the following website: http://www.hud.gov/utilities/intercept.cfm?/offices/cpd/economicdevelopment/news/taxincentives051701.pdf

HUD’s website contains a link to plug in an address, so one can certify whether the address is in the Renewal Community: http://hud.esri.com/locateservices/ezec/welcome.htm.

Zone Map RC_Zone_Map.pdf

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