California Senate Approves Enterprise Zone Changes – Senate Bill 974


Perhaps you’ve heard? Last week, the California Senate approved Senate Bill 974, which proposes to make some significant changes to California’s enterprise zone program.
Before getting into the details, let me state that we oppose this bill. We’re urging our clients and friends in California to write their California assemble member, asking them to oppose it in the State Assembly. Watch for a follow up post with some analysis by Craig Johnson, President of the California Association of Enterprise Zones.
While the effects of this bill would be drastic for many EZ businesses, the hiring credit would survive – with some changes.
The specific changes advocated are: (1) Eliminate Targeted Employment Area residency as a criteria of employee qualification for the EZ hiring credit and (2) create a 42-day deadline for businesses to “apply for and obtain” an employee’s certificate of eligibility.
Eliminating the Targeted Employment Area.  Targeted Employment Areas (or TEAs) are economically distressed residential communities. Their purpose is to incentivize the hiring of individuals who live there.
Many of the individuals who currently live in a TEA could also be certified under other qualification categories. But the TEA residency category helps to streamline their certification. It eliminates the need to document their family income or their eligibility for food stamps and other forms of public assistance.
If the TEA is eliminated, the burden and expense of documentation will materially increase. As a result, the net benefit to participating employers will be reduced. The negative impact on many participating EZ businesses would be significant.
Imposing a 42-Day Certification Deadline.  The proposed 42-day certification deadline is ambiguous and unworkable as currently defined by the bill. The most obvious problem is the requirement that the certification be “obtained” within 42 days.
A business owner could rush to apply for an employee’s certification within a few days of their hire. After the application is submitted, however, the process is beyond the business owner’s control. The certifying agency could complete the certification in days – or months!
Also, without the TEA, the most important remaining categories require a significant amount of time for a business to document. Documenting an employee’s 90-day household income, for example, often requires multiple correspondences with the employee, their adult family members and government agencies. As another example, unless an employee can provide their own copy of their military discharge papers, it often takes months to document an employee’s veteran status or a service-related disability.
That’s all for now. I’ll keep you posted. If you have any questions, please feel welcome to contact me. I am Vaughn Hromiko. You can reach me at or call me at (800) 655-5281, ext 101.

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