FAQ
The UEA Zone includes the Richmond Downtown, Depot District and Starr Neighborhood.
Incentives Overview
The Richmond Urban Enterprise Association (RUEA) contributes to economic development efforts in Richmond's center city. The Enterprise Zone operates in accordance with Indiana State Code and has created or retained hundreds of jobs and spurred millions of dollar in increased investment.
Indiana offers a variety of state tax benefits for Zone businesses, investors and residents.
Per state code, businesses and investors who claim Zone-related tax benefits must remit a small portion of their. savings to the RUEA, which in tum operates a variety of programs and services to further economic development within the zone.
Incentives and Programs for Businesses
By contributing to economic growth in the area, businesses located within the Enterprise Zone are eligible for several state tax benefits.
The State of Indiana provides incentives to businesses to operate in Richmond's Enterprise Zone.
Businesses located in the Enterprise Zone may be eligible for two state tax benefits. These include a credit for employing zone residents and a deduction for investments in property.
Employment Expense Credit
The Employment Expense Credit encourages businesses to operate in the Urban Enterprise Zone and to employ local residents. Businesses that do so may be eligible for a tax credit that reduces their state tax liability. The credit is worth up to $1,500 for each qualified employee.
Employers claim the credit by filing Schedule EZ with their state tax returns. This credit may be applied against the business's Indiana gross income tax, adjusted gross income tax liabilities and/or insurance premium tax. Businesses claiming any Enterprise Zone tax incentive must also file a form EZB-R (Enterprise Zone Board Registration) with the Indiana Economic Development Corporation and the RUEA by June 1. Unlike other tax incentives, no participation fee is required to participate in this tax incentive program.
Qualified Employees: individuals with a principal place of residence in the enterprise zone
who perform services for a Zone Business. At least 90% of the employee's services must be
directly related to the conduct of the business and at least 50% of the employee's services must be performed in the Enterprise Zone. Employees can also claim a deduction on their personal income taxes. Employers provide qualified employees with a completed form IT-40 QEC so they can receive the credit.
Example: Zone Business Employing 10 Zone Residents
Number of Qualified Employees
10
Salary per Qualified Employee
$30,000
Total Payroll for Qualified Employees
$300,000
Employment Expense Credit for 10 Qualified employees: $1,500 * 10 = $15,000
($15,000)
Effective Payroll for Qualified Employees
$285,000
Business’s Indiana Gross Income Tax Liability (Original)
$45,000
Employment Expense Credit
($15,000)
Business’s Indiana Gross Income Tax Liability (Final)
$30,000
Enterprise Zone Investment Deduction
This deduction allows taxpayers to deduct the increased value of property within an
Urban Enterprise Zone following a qualified investment. A qualified investment includes the following:
The purchase of a building
The purchase of a new manufacturing or production equipment
Costs associated with the repair, rehabilitation or modernization of an existing building
Onsite infrastructure improvements
The construction of a new building
Costs associated with retooling existing machinery
The deduction is equal to the difference between the assessed property value following the
qualified investment and the assessed property value of a base year (the year preceding the
qualified investment).
To claim the deduction a taxpayer must fill out Form EZ-2 and file it with the county auditor
between March 1 and May 10. The auditor determines the eligibility of each investment and is
required to notify each applicant of their determination by August 15. If the auditor approves the deduction, taxpayers can take it the following year.
The deduction may be claimed for ten years or the life of the Enterprise Zone, which ever ends first. The amount of the deduction will be the same for each year and a Form EZ-2 must be filed each year. Claimants must annually file a Form EZB-R with the Indiana Economic Development Corporation and RUEA by June 1 as well as pay a participation fee of 25% of their tax savings to the RUEA.
Example: Rehabilitation of Zone Business Property
Base Year Assessed Value of Property
$100,000
Assessed Value After Rehabilitation
$150,000
Property Tax Deduction
$50,000
Property Tax Rate
2.26%
Property Tax Liability Before Deduction (150,000*0.0226)
$3,390
Property Tax Liability After Deduction (1000,000*0.0266)
$2,260
Property Tax Savings
$1,130
Incentives for Investors
Individuals and corporations may lower their state income tax liability by making investments in the Urban Enterprise Zone. These incentives apply to those purchasing an ownership interest in a Zone Business or making a Qualified Loan.
Individuals and corporations are eligible for three state tax incentives for investing or lending capital for qualified purposes within the Urban Enterprise Zone. Qualified investments include investments made in real estate, loans for business growth or capital improvements, and the acquisition of an ownership share in a business. To claim this credit, you must file Indiana Income Taxes but do not need to operate or reside within the Richmond Enterprise Zone.
Enterprise Zone Investment Deduction
This deduction allows taxpayers to deduct the increased value of property within an
Urban Enterprise Zone following a qualified investment. The Investment Deduction section
above provides a definition of a qualified investment and a tax savings example.
Investment Cost Credit
An individual purchasing an ownership interest in an Enterprise Zone business may be eligible
to receive a tax credit of up to 30% of the purchase price. Applicants for the credit must offer a legitimate purpose for the investment, prove that the business is viable and demonstrate that the investment will not be made unless the credit is issued. The Indiana Economic Development Corporation (IEDC) is responsible for determining if a credit will be issued and the size of the credit.
For more information, contact IEDC at (317) 232-8800. The statute provides a description of tax credit program (Indiana Code 6-3.1-10-8).
Loan Interest Credit
A taxpayer may take a credit of 5% of the interest income received from a qualified loan
made to a Zone business or resident. The loan must apply to purposes directly related to the business or increase the assessed value of real property in the Enterprise Zone, including residential property.
Home purchase loans and loans for repairs may not qualify and the lender does not have to be located in the Richmond Enterprise Zone to qualify.
To claim this credit, taxpayers should complete a Schedule LIC and attach it to their state individual or corporate tax return. Claimants must annually file a Form EZB-R with the Indiana Economic Development Corporation and RUEA by June 1, as well as pay a participation fee to the RUEA.
Incentives for Residents
The Richmond Urban Enterprise Association (RUEA) offers direct and indirect benefits to
those who live within the Enterprise Zone. By helping create jobs in this area, zone residents
are able to live, work and shop within the center city area. Residents within the enterprise zone
should consider participating in the following programs and tax incentives:
Employee Wage Deduction
Zone residents are entitled to deduct a portion of their taxable income for state tax purposes if they work 50% of their time in the Enterprise Zone and have at least 90% of their services directly related to the employer's facility in the enterprise zone.
The annual tax deduction is one half adjusted gross income or $7,500, whichever is less.
The deduction is claimed by attaching form IT-40 QEC to Indiana income tax returns. Employers should complete this form in connection with your W-2.
Example: Potential Income Tax Savings
Employee A Employee B
Qualified for Zone Benefits Not Qualified for Zone Benefits Indiana Taxable Income $15,000 $15,000 Employee Wage Deduction ($7,500) -0- Adjust Taxable Income $7,500 $15,000 Tax Rate 3.4% 3.4% Tax Due $255 $510 Total Tax Savings $255 -0-