Tax credit is good news for Merced County

Merced County’s economic leaders are still figuring out the details for a new program announced this week by Gov. Jerry Brown, but they agree that it’s good news locally.

The New Employment Credit is a tax credit for businesses hiring new employees. It’s meant to benefit communities with the highest rates of unemployment and poverty, and Merced, Fresno and Riverside counties are the first to be able to use it.

The three counties have been designated as a pilot area, effective immediately. Manufacturing and industry are the focus of the new credit. It is not available to retailers, food service, temporary employment agencies, casinos or bars.

Mark Hendrickson, Merced County director of community and economic development, applauded and thanked the governor for including Merced County. “The more tools you have in your tool belt will help you bring businesses to the county,” he said.

Castle Airport and areas throughout the county identified as part of the program could be home to new jobs because of the credit, he said. That could be music to the ears of the unemployed in the county, which makes up 16.3 percent of the workforce.

There are large swaths in Merced where the hiring credit could be applied, including along Highway 99, continuing to Atwater, and Highway 140, Merced Municipal Airport as well as spots on Olive Avenue, in south Merced and in several other pockets of the city.

Livingston, Dos Palos and Los Banos also have several areas that fall into the program.

The credit is potentially larger than the credits under the old Enterprise Zone, which was done away with in January. The new maximum credit per employee is $56,000 over five years, up from the former credit of $36,000 over five years.

Frank Quintero, economic development director for the city of Merced, said businesses within the former Enterprise Zone will fall into the new program. “Most of the business (owners) know if they’re in the enterprise zone or not,” he said.

The tax credit applies only to newly created jobs, not to filling existing positions.

Since Merced is part of the pilot area, the new hires must make between $10 and $28 per hour. The new hires must fall into one of several categories: the long-term unemployed, unemployed veterans, ex-felons and recipients of the federal Earned Income Tax Credit, CalWORKs or general assistance.

The credit is part of Brown’s Economic Development Initiative that was passed in 2013. Under the legislation, the Governor’s Office of Business and Economic Development will oversee the credit and may designate up to five pilot areas.

GO-Biz picked the first wave of counties by evaluating employment, poverty and wage data and identifying areas of the state that would benefit the most from the expanded hiring credit.

The Economic Development Initiative is funded by redirecting about $750 million annually from the state’s Enterprise Zone program, deemed by the governor to be outdated and ineffective. The initiative includes a statewide sales tax exemption on qualifying manufacturing equipment and research and development equipment purchases for biotech and manufacturing companies.

“The state’s economy is steadily improving, and more than a million Californians are back to work after the massive mortgage meltdown,” Brown said Thursday. “These tax credits will spur new jobs and help communities hardest hit by the recession.”