Proposed Tax Incentives For Coal Communities

coalplugMoffat County Commissioner John Kinkaid met with Colorado US Senator Michael Bennet recently to discuss the formation of Coal Community Empowerment Zones in Colorado. An empowerment zone is a federally designated area, where businesses and governments receive specific tax credits, designed to encourage hiring and business growth. Congress recently approved the formation of several different types of empowerment zones each designed with different benefits and criteria. If enacted, the coal community empowerment zones would benefit areas that have had any of the following happen over the past five years; lost at least 50 coal mining jobs, the shut down of a coal fired power plant, or had at least 5% of area employees working for coal companies or at power plants. Under that criteria Delta, Moffat, Rio Blanco and Routt counties would all qualify to be coal community empowerment zones, and would qualify to receive benefits. Most of these benefits would come in the form of tax breaks. A complete list of the proposed tax incentives for the Coal Community Empowerment Zones is available below.

Proposed Coal Community Empowerment Zone Incentives:

Employment Credit: The proposal creates a $3,000 credit (20% of the first $15,000 earned) per employee for employers that hire individuals who live and work within the coal community empowerment zone.

Commercial Revitalization Deduction: The proposal allows a business within a coal community empowerment zone either to deduct half of the costs of building or revitalizing a commercial building in the first year the building is completed or to deduct the entire construction expenses over a ten year period.

Empowerment Zone Facility Bonds: The proposal would allow local jurisdictions within coal community empowerment zones to issue private activity bonds. The bonds would be used to finance low-interest loans to businesses within the empowerment zones.

Section 179 Small Business Expensing: The proposal would increase the Section 179 expensing limit from $500,000 to $1 million within coal community empowerment zones. It would also increase the phase out from $2 million to $2.5 million.

Exclusion of Capital Gains: The proposal would eliminate capital gains taxes that would result in from the sale of stock in a business (or a partnership interest) within a coal community empowerment zone.  To qualify for the exemption, the investment must be held for at least 5 years.

Rollover of Gains of Assets within a Coal Community Empowerment Zone: If an individual sells the stock of a business within a coal community enterprise zone and uses the proceeds to to invest in another business within the zone within 60 days, he or she would be able to defer recognizing the gains of the original sale.

New Market Tax Credits: The proposal would create a new, separate allocation of new market tax credits that could only be used to finance projects and businesses within coal community empowerment zones.

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