What is a UEZ?What is a UEZ?

An Urban Enterprise Zone (UEZ) is a An Urban Enterprise Zone (UEZ) is a specially designated area in which specially designated area in which businesses and residents alike are afforded businesses and residents alike are afforded certain state tax benefits. In turn, businesses certain state tax benefits. In turn, businesses remit a percentage of their tax savings to the remit a percentage of their tax savings to the local Urban Enterprise Association (UEA) who local Urban Enterprise Association (UEA) who manages these funds for the benefit of the manages these funds for the benefit of the Zone.Zone.

What is a UEZ?What is a UEZ?

Enterprise Zones were first established in Enterprise Zones were first established in Indiana in 1983 under IC 5-28-15. Indiana in 1983 under IC 5-28-15.

The program is overseen by the Indiana The program is overseen by the Indiana Economic Development Corporation Economic Development Corporation (IEDC).(IEDC).

What is a UEZ?What is a UEZ? In order to be designated as an Enterprise Zone, the In order to be designated as an Enterprise Zone, the

IEDC must find:IEDC must find: 25 % of zone resident households are below the poverty level as 25 % of zone resident households are below the poverty level as

established by the most recent U.S. Census OR the average established by the most recent U.S. Census OR the average rate of unemployment for the most recent 18-month period is at rate of unemployment for the most recent 18-month period is at least 1 ½ times the statewide rate for the same period;least 1 ½ times the statewide rate for the same period;

Resident population is between 2,000 and 10,500;Resident population is between 2,000 and 10,500; The area is between ¾ square mile, and 4 square miles with a The area is between ¾ square mile, and 4 square miles with a

continuous boundary;continuous boundary; The Zone contains property suitable for a mix of commercial, The Zone contains property suitable for a mix of commercial,

industrial, and residential development;industrial, and residential development; The appointment of an Urban Enterprise Association (UEA) The appointment of an Urban Enterprise Association (UEA)

under IC 5-28-15-13; andunder IC 5-28-15-13; and A statement from the applicant including a willingness to provide A statement from the applicant including a willingness to provide

certain economic development incentives.certain economic development incentives.(IC 5-28-15-9(c)).(IC 5-28-15-9(c)).

The Jeffersonville Urban Enterprise The Jeffersonville Urban Enterprise Association (JUEA)Association (JUEA)

The Jeffersonville Urban Enterprise Zone (JUEZ) was The Jeffersonville Urban Enterprise Zone (JUEZ) was established in 2000, and its existence was renewed for established in 2000, and its existence was renewed for 10 years by a Resolution of the Jeffersonville City 10 years by a Resolution of the Jeffersonville City Council in 2009. Council in 2009.

By Resolution of the Jeffersonville City Council, the By Resolution of the Jeffersonville City Council, the JUEA now manages funds for the JUEZ. Funds are JUEA now manages funds for the JUEZ. Funds are invested back into the Zone which contributed them.invested back into the Zone which contributed them.

www.JeffersonvilleUEZ.com

Where does JUEA funding come Where does JUEA funding come from?from?

There are several different tax incentives There are several different tax incentives available to Zone businesses and residents.available to Zone businesses and residents.

Businesses who take advantage of these Businesses who take advantage of these incentives, and whose savings as a result of the incentives, and whose savings as a result of the incentives exceeds $1,000, contribute:incentives exceeds $1,000, contribute: 1% of their savings to the to the IEDC for program 1% of their savings to the to the IEDC for program

administration, andadministration, and 49% of their savings to the JUEA for reinvestment 49% of their savings to the JUEA for reinvestment

into programs benefiting the Zone.into programs benefiting the Zone. Businesses retain the other 50% of their tax savings!Businesses retain the other 50% of their tax savings!

What tax incentives are available?What tax incentives are available?

For Businesses:For Businesses: Investment DeductionInvestment Deduction Employee Expense CreditEmployee Expense Credit

For Residents:For Residents: Qualified Employee DeductionQualified Employee Deduction

For Lenders:For Lenders: Loan Interest CreditLoan Interest Credit

For Investors:For Investors: Investment Cost CreditInvestment Cost Credit

Investment DeductionInvestment Deduction

This deduction allows a Zone business to This deduction allows a Zone business to deduct the deduct the increaseincrease in assessed valuein assessed value from a from a “qualified investment”“qualified investment” in in real or real or personal propertypersonal property for up to 10 years. for up to 10 years.

Investment DeductionInvestment Deduction

““Qualified Investments”Qualified Investments” are those investments are those investments in a business location in the UEZ , including:in a business location in the UEZ , including:

• The purchase of a building;The purchase of a building;• The purchase of new manufacturing or production The purchase of new manufacturing or production

equipment;equipment;• Costs associated with the repair, rehabilitation, or Costs associated with the repair, rehabilitation, or

modernization of an existing building and related modernization of an existing building and related improvements; improvements;

• Onsite infrastructure improvements; Onsite infrastructure improvements; • Construction of a new building; andConstruction of a new building; and• Costs associated with retooling existing machinery.Costs associated with retooling existing machinery.

Investment DeductionInvestment Deduction

For the purposes of the deduction, the For the purposes of the deduction, the increase in assessed valueincrease in assessed value is is determined beginning with the assessed determined beginning with the assessed value on the assessment date in the value on the assessment date in the calendar year immediately preceding the calendar year immediately preceding the year in which a qualified investment is year in which a qualified investment is made. made.

Investment DeductionInvestment Deduction

An example:An example:

$100,000 AV on assessment date in 2008$100,000 AV on assessment date in 2008

+$ 10,000+$ 10,000 New Construction or Equipment New Construction or Equipment

$110,000 AV on assessment date in 2009$110,000 AV on assessment date in 2009

-$100,000-$100,000 2008 AV 2008 AV

$ 10,000 Amount of Deduction on 2009 taxes $ 10,000 Amount of Deduction on 2009 taxes (payable 2010) (payable 2010)

Investment DeductionInvestment Deduction

Allows the Taxpayer a Deduction of Allows the Taxpayer a Deduction of 100%100% of the increase in value as a result of the of the increase in value as a result of the investment.investment.

Taxpayers may take the Investment Taxpayers may take the Investment Deduction for up to Deduction for up to 10 years10 years..

Investment DeductionInvestment Deduction

Caveat: According to IC 6-1.1-45-9, Caveat: According to IC 6-1.1-45-9, taxpayers located in:taxpayers located in: The RRUEZ, orThe RRUEZ, or The JUEZ who are also located in a Tax The JUEZ who are also located in a Tax

increment Financing (TIF) District,increment Financing (TIF) District,

Must obtain approval of the Jeffersonville Must obtain approval of the Jeffersonville City Council in order to be entitled to the City Council in order to be entitled to the deduction.deduction.

Investment DeductionInvestment Deduction Forms you’ll need:Forms you’ll need:

Submit form Submit form EZ-2EZ-2 to the Clark County Auditor between to the Clark County Auditor between March March 11stst and May 15th and May 15th Investment Deduction of the Investment Deduction of the assessment assessment yearyear..

In the case of deductions for personal property (equipment), this In the case of deductions for personal property (equipment), this form must be accompanied by form must be accompanied by Form 102 or 103. Form 102 or 103.

File Form File Form EZB-REZB-R with the IEDC and send a copy to the JUEA by with the IEDC and send a copy to the JUEA by June 1June 1stst of the of the year in which taxes are payableyear in which taxes are payable, accompanied , accompanied respectively by:respectively by:

• IEDC Registration Fee (1% of total tax savings)IEDC Registration Fee (1% of total tax savings)• JUEA Contribution Rate (49% of total tax savings).JUEA Contribution Rate (49% of total tax savings).

If you need an extension of time to file an EZB-R, you may file If you need an extension of time to file an EZB-R, you may file form form EZB-EEZB-E by by June 1June 1stst. If approved, you will have until July . If approved, you will have until July 1515thth to properly submit the EZB-R. to properly submit the EZB-R.

Investment DeductionInvestment Deduction

FORMFORM WHY?WHY? TO?TO? WHEN?WHEN?

EZ-2EZ-2 Application to take Application to take Investment Investment DeductionDeduction

County AuditorCounty Auditor 3/1-5/15 of the 3/1-5/15 of the year in which the year in which the deduction is deduction is soughtsought

Form 102 or 103Form 102 or 103 If deduction is for If deduction is for personal propertypersonal property

County AuditorCounty Auditor Same as aboveSame as above

EZB-REZB-R Enterprise Zone Enterprise Zone RegistrationRegistration

IEDC, copy to IEDC, copy to JUEA (w/ 1% and JUEA (w/ 1% and 49% fees)49% fees)

6/1 of the year in 6/1 of the year in which taxes are which taxes are payablepayable

EZB-EEZB-E Extension of Extension of deadline to file deadline to file EZB-R (until 7/15)EZB-R (until 7/15)

IEDCIEDC Same as aboveSame as above

Investment DeductionInvestment Deduction

3/1/093/1/09 Property AssessmentProperty Assessment

20092009 Improvements madeImprovements made

3/1/103/1/10 Property Assessment; Assessed value increases as result of Property Assessment; Assessed value increases as result of improvementsimprovements

5/15/105/15/10 EZ-2 form (and Form 102 or 103 if necessary) due to County EZ-2 form (and Form 102 or 103 if necessary) due to County AuditorAuditor

8/108/10 Auditor notifies business whether deduction allowedAuditor notifies business whether deduction allowed

20112011 2010 property taxes become payable2010 property taxes become payable

6/1/116/1/11 EZB-R due to IEDC & JUEA w/ 1% IEDC registration fee & EZB-R due to IEDC & JUEA w/ 1% IEDC registration fee & 49% JUEA participation fee. EZB-E due to IEDC if extension 49% JUEA participation fee. EZB-E due to IEDC if extension neededneeded

7/15/117/15/11 EZB-R and appropriate fees due if extension approvedEZB-R and appropriate fees due if extension approved

Investment DeductionInvestment Deduction

Q:Q: What if I do not know what my tax What if I do not know what my tax savings is by June 1savings is by June 1stst or July 15 or July 15thth??

A:A: If the business does not know their tax savings by June If the business does not know their tax savings by June 1, they should file an extension (EZB-E) by June 1, 1, they should file an extension (EZB-E) by June 1, which will enable them to file the EZB-R form by July 15. which will enable them to file the EZB-R form by July 15. If the business still will not know the tax savings by July If the business still will not know the tax savings by July 15, an EZB-R form is still due by July15; however, the 15, an EZB-R form is still due by July15; however, the form will be incomplete. As soon as the tax savings form will be incomplete. As soon as the tax savings amount is know, the business must submit a complete amount is know, the business must submit a complete EZB-R form (and if applicable) send a check for 1 % of EZB-R form (and if applicable) send a check for 1 % of the tax savings to the IEDC [and a check for 49% of the the tax savings to the IEDC [and a check for 49% of the tax savings to the JUEA].tax savings to the JUEA].

Employee Expense CreditEmployee Expense Credit

This tax credit is earned by businesses that This tax credit is earned by businesses that employ employ qualified employeesqualified employees who are who are

Zone residents. Zone residents.

Employee Expense CreditEmployee Expense Credit

Qualified employeesQualified employees are those who: are those who:

have their principal place of residence in the have their principal place of residence in the UEZ in which they are employed;UEZ in which they are employed;

perform services, at least 90% of which are perform services, at least 90% of which are directly related to business in the UEZ; anddirectly related to business in the UEZ; and

spend at least 50% of their time working at spend at least 50% of their time working at the UEZ business.the UEZ business.

Employee Expense CreditEmployee Expense Credit

Businesses that employ these residents are Businesses that employ these residents are eligible for a credit against their state tax liability eligible for a credit against their state tax liability in the amount of 10% of in the amount of 10% of increasedincreased wages paid wages paid to qualified employees, to qualified employees, up to $1,500 per up to $1,500 per employeeemployee..

(The (The increaseincrease in wages is determined from the end of the in wages is determined from the end of the year before the UEZ was in existence – 12/31/99 for the JUEZ year before the UEZ was in existence – 12/31/99 for the JUEZ – if the business was in existence at the time of Zone – if the business was in existence at the time of Zone establishment. If the business did not exist at that time, then establishment. If the business did not exist at that time, then the “increase” is the total amount of wages paid to qualified the “increase” is the total amount of wages paid to qualified employees in the tax year). employees in the tax year).

Employee Expense CreditEmployee Expense Credit

To take advantage of this credit, employers To take advantage of this credit, employers must:must: File File Schedule EZ 1,2,3 Schedule EZ 1,2,3 with their annual Indiana with their annual Indiana

State Tax return.State Tax return. File the EZB-R with the IEDC and the JUEA by File the EZB-R with the IEDC and the JUEA by

June 1June 1stst, accompanied by the 1% IEDC , accompanied by the 1% IEDC registration fee and the 49% JUEA participation registration fee and the 49% JUEA participation fee.fee.

If an extension of time is needed to file the EZB-If an extension of time is needed to file the EZB-R, file the EZB-E by June 1R, file the EZB-E by June 1stst, and the EZB-R by , and the EZB-R by July 15July 15thth..

Qualified Employee DeductionQualified Employee Deduction This benefit applies to individual taxpayers who This benefit applies to individual taxpayers who

live and work in the Zone.live and work in the Zone. For the purposes of this deduction, a “qualified For the purposes of this deduction, a “qualified

employee” is defined the same as it is for the employee” is defined the same as it is for the Employee Expense Credit. Employee Expense Credit. Qualified Qualified Employees:Employees: have their principal place of residence in the UEZ have their principal place of residence in the UEZ

in which they are employed;in which they are employed; perform services, at least 90% of which are perform services, at least 90% of which are

directly related to business in the UEZ; anddirectly related to business in the UEZ; and spend at least 50% of their time working at the spend at least 50% of their time working at the

UEZ business.UEZ business.

Qualified Employee DeductionQualified Employee Deduction

On their Indiana State Income Tax return, On their Indiana State Income Tax return, Qualified Employees may deduct ½ of Qualified Employees may deduct ½ of their Enterprise Zone income, or $7,500, their Enterprise Zone income, or $7,500, whichever is less.whichever is less.

The employee’s The employee’s employeremployer must complete must complete (sign) (sign) Schedule IT-40QECSchedule IT-40QEC. The . The employee should attach this form to their employee should attach this form to their State Tax return.State Tax return.

Loan Interest CreditLoan Interest Credit

Financial institutions that make loans to Financial institutions that make loans to businesses or residents in the Zone may businesses or residents in the Zone may

be eligible for a credit on tax paid on be eligible for a credit on tax paid on interest income earned from these loans. interest income earned from these loans.

Loan Interest CreditLoan Interest Credit The credit is equal to 5% of the interest income received The credit is equal to 5% of the interest income received

on all on all qualified loansqualified loans made during the year. made during the year. A loan is a A loan is a qualified loan qualified loan if:if:

• the loan proceeds are for purposes directly related to a business the loan proceeds are for purposes directly related to a business located in the Zone; located in the Zone;

• the loan proceeds are for improvements increasing the assessed the loan proceeds are for improvements increasing the assessed value of real property located in the Zone; orvalue of real property located in the Zone; or

• the loan proceeds are used toward the rehabilitation, repair, or the loan proceeds are used toward the rehabilitation, repair, or improvement of a residence within the Zone.improvement of a residence within the Zone.

Interest income includes interest, service charges, time-price Interest income includes interest, service charges, time-price differentials and all other charges for the use of money. differentials and all other charges for the use of money.

*Qualified Loans include both business and residential loans!**Qualified Loans include both business and residential loans!*

Loan Interest CreditLoan Interest Credit

To take advantage of this incentive, Lenders To take advantage of this incentive, Lenders must be in good standing with the IEDC.must be in good standing with the IEDC.

They must submit They must submit Schedule LIC Schedule LIC with their with their Indiana State Tax return.Indiana State Tax return.

They must submit the They must submit the EZB-REZB-R to the IEDC and to the IEDC and JUEA by June 1JUEA by June 1stst, accompanied by the , accompanied by the appropriate fees, or submit an appropriate fees, or submit an EZB-EEZB-E if an if an extension of time is required., etc.extension of time is required., etc.

The Loan Interest Credit may be claimed The Loan Interest Credit may be claimed annually.annually.

Investment Cost CreditInvestment Cost Credit

This is incentive is not widely known or applied.

It is available to investors in Zone businesses.

Taxpayers who purchase an ownership interest in a Zone business may be eligible for a credit on their state tax liability, up to 30% of the total investment.

Investment Cost CreditInvestment Cost Credit

To take advantage of this incentive, investors must contact the IEDC before purchasing an interest in a Zone business.

The IEDC will determine on a case-by-case basis:

• whether the purchase constitutes a “qualified investment;” and

• the percentage of the credit to be allowed

Investment Cost CreditInvestment Cost Credit A purchase is a qualified investment if:

the business is viable; the business has not been disqualified from UEZ incentives or benefits; the taxpayer has a legitimate purpose for the purchase of the interest; the purchase would not be made unless a credit is allowed; and the purchase is critical to the commencement, enhancement, or

expansion of business operations in the Zone and will not merely transfer ownership, and the purchase proceeds will be used only in business operations in the Zone.

The percentage of the credit depends upon: the type of business (e.g. whether it is manufacturing, retail,

professional, high tech, or warehousing) the amount of the investment in real or personal property the number of new jobs the investment will create and the percentage of

those jobs that will be reserved for Zone residents; and the amount of equity financing.

Contact InformationContact Information

For additional information, contact:For additional information, contact: Department of Redevelopment – Department of Redevelopment –

• Rob Waiz (812) 285-6406, or rwaiz@cityofjeff.netRob Waiz (812) 285-6406, or rwaiz@cityofjeff.net

For information from the County Auditor For information from the County Auditor regarding the Investment Deduction, contact:regarding the Investment Deduction, contact: Amber Graves (812) 285-6219Amber Graves (812) 285-6219