Incentives Available for Downtown L.A. Businesses

American Apparel is doing it. Guess? is doing it. And many more apparel companies could be doing it if they tried.

They could be taking advantage of thousands of dollars in tax breaks and financial incentives available to companies that locate their businesses in state and federal enterprise zones around downtown Los Angeles.

A passel of government officials filled the California Market Center fashion theater on May 22 to talk about how apparel companies can save millions of dollars if they move their companies to zones targeted by the state and federal governments for economic improvement.

“We get lots of inquiries from people about programs that would help them save money,” said Kent Smith, executive director of the Los Angeles Fashion District Business Improvement District (BID), which crisscrosses three different economic- incentive zones. “It is complex, and there are a lot of different programs, different [zone] boundaries and levels of government to deal with.hellip; But it is one of the best-kept secrets.”

For example, within one year of moving into a federal empowerment zone, a company can apply for a five-year rate reduction with the Los Angeles Department of Water and Power. The rate reduction averages 25 percent over the five-year period.

There are also hiring, sales and use tax credits, as well as business tax waivers and state tax reductions.

“There are economic development areas that people in the Fashion District may be in already and are not taking advantage of,” said Robert Biller, the Central City state enterprise zone manager of the city’s Community Development Department. “These programs lower your business costs by freeing up capital after using tax credits and incentives. If you free up capital, you are in a much better cash-flow situation. That means your business could enlarge its work force, as well as buy more machinery and equipment.”

One company that has taken advantage of these financial incentives is American Apparel Inc., which set up shop about five years ago in a downtown Los Angeles state enterprise zone.

The company received $75,000 to help train its employees. It also receives enough reductions to not have to pay state taxes.

“Bear in mind that these kinds of tax credits are only cool if you are making money,” noted Dov Charney, president of American Apparel.

Martin Hughes, a partner in Moss Adams LLP, said about one-third of the Los Angeles accounting firm’s 200 apparel clients are taking advantage of the tax credits given in the various zones.

Some of those tax credits include:

bull; A hiring tax credit for businesses located in state enterprise zones. It can total up to $31,575 per employee over a five-year period.

bull; No city business taxes for five years for businesses moving into federal empowerment zones from outside the city of Los Angeles.

bull; Low-interest bonds to certain businesses moving into federal empowerment zones to purchase real estate or equipment.

bull;Sales tax credit on the purchase of machinery— such as computers, telephones, fax machines and copying equipment—for businesses in state enterprise zones.

bull; For businesses in state enterprise zones, the carrying over of entire net losses to future years to reduce the amount of taxable income for those years.

bull; The deduction of soil-remediation costs from taxes within the first year of remediation for property purchased between Jan. 1, 1998, and Jan. 1, 2004.

bull; Grants for faccedil;ade improvements of buildings located in Community Redevelopment Agency areas.

For information about these programs, contact Elaine Gaspard at the Los Angeles County Economic Development Corp. at (213) 624-2146 Ext. 223, or Robert Biller, Central City state enterprise zone manager, at (213) 485-1022.

Extra Credit

Binesses located in any of the five state enterprise zones in Los Angeles can drastically reduce their state income taxes by taking certain deductions per qualified full-time employee.Businesses can get as much as $31,575 in tax credits over a five-year period.

Year One . . . . . . . . $10,525 CreditYear Two. . . . . . . . . $8,420 Credit Year Three . . . . . . . . $6,315 CreditYear Four. . . . . . . . . $4,210 CreditYear Five . . . . . . . . $2,105 Credit