Enterprise Zone Credits
What are Enterprise Zone Credits?
In an effort to provide stability and growth to areas prone to high levels of poverty and unemployment in the state of Utah, Enterprise Zones were established and tax credits were developed to support the small businesses that expanded within these areas. The credits reward businesses that expand in capital investments, labor force and other areas that help to build the local economy.
What is the current problem?
The Utah State Auditing Department is targeting individuals and businesses that have claimed the Enterprise Zone Credits, disallowing millions of dollars in credits that have already been paid over the past three years in Uintah, Emery, Carbon, Duchesne, and other rural Utah counties. The State Tax Commission is demanding repayment from the business owners whose credits were disallowed. Unlike standard tax audits where tax payers and/or representatives for tax payers are able to sit and review records with an auditing agent, the State Tax Commission is bypassing all representation on behalf of the tax payers and sending bills directly to the tax payers, demanding repayment and threatening to initiate liens if not paid immediately. On top of the unjust method for the audits, the grounds by which business owners are being denied their respective credits are also in question.
The requirements for the Enterprise Zone Credits are not clearly defined. The requirements that are available use very ambiguous language. As scores of businesses are being audited, their credits are being disallowed based on definitions within the requirements set by the state that are in conflict with federal IRS definitions and Supreme Court rulings. One such example: Retail establishments do not qualify for Enterprise Zone Credits; however, the State Tax Commission has defined "retail establishment" as any business that charges sales tax. This is a faulty definition given that businesses such as hotels must charge sales tax but are not considered to be retail establishments by the federal government. Hotel owners throughout Utah's Enterprise Zones are being audited and forced to pay back hundreds of thousands of dollars on the charge that they are a retail establishment. Cases such as these can only be remedied by having the definition of retail establishment changed within the State's requirement text to match the federal standard.
What is being done?
Meeting with Government Officials: MainStreet's efforts to call upon legislators to draft new legislation has paid off. MainStreet representatives along with other basin officials and CPA's met with State Representative Kraig Powell to explain the issues with the current laws and regulations regarding the credits and to suggest changes to make the credits available to the businesses they were supposed to benefit. See article in Vernal Express.
Letters to Local Government: MainStreet has called upon local government officials to redefine the requirements for the Enterprise Zone Credits such that they can once again be used to build our rural economies and not hinder growth as the audits are doing. MainStreet has held conversations with County Commissioners and other elected officials to unite forces to request action from state lawmakers. You can read a copy of MainStreet's letter to State Representatives here.
Appealing & Representing Client Cases in State Court: MainStreet has begun to defend individual client cases in hearings at the State Tax Commission. By appealing these cases, judges and lawmakers will be forced to make clear decisions regarding the qualification requirements of the Enterprise Zone Credits. A single ruling has been received against our favor. We are pursuing further legal actions in response to this ruling.
Informing the General Public: MainStreet is requesting the support from the rural communities affected by these audits. MainStreet has participated in radio interviews, such as the Lincoln Brown Show on KVEL 920 in Vernal, as well as publish articles in local newspapers.
Consulting and Guidance: If you and/or your company have been audited, fear that you could be at risk of being audited, or would like to request MainStreet's support in any other way, contact Rich Mahoney, CPA at 801-565-7900 or toll free at 877-871-7901.
What can YOU do?
Contact your state and local representatives and ask for the requirements of the credits to be redefined such that the credits can build your local economy rather than tear it apart. We must have support from our various communities' business owners to bring about the necessary changes.
