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Renewal Community (RC) and Other Tax Incentives


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The four primary tax incentives available to businesses in the Renewal Community (RC) are:

    Renewal Community Wage Credit
    Commercial Revitalization Deduction
    Capital Gain Exclusion
    Increased Section 179 Deduction

Other tax incentives available to businesses include:

Federal New Markets Tax Credit    Map of eligible area
    Federal Worker Opportunity Tax Credit (WOTC)
    State of WI - Development Zone Tax Credit
    State of WI - Technology Zone

Summary of Renewal Community Tax Incentives
As a result of a Federal designation, businesses located in Milwaukee’s Renewal Community (RC) have access to special tax incentives to spur economic development and promote job growth. Milwaukee’s RC spans an area of more than 120,000 residents and encompasses thousands of businesses.

The tax incentives accompanying this special designation will be available from January 1, 2002 through December 31, 2009. Unlike some Federal tax incentives, these incentives are easy to use; only one involves a selection process. For a complete guide to tax incentives, see IRS’s Publication 954* and HUD's publication Tax Incentive Guide for Businesses*.
these publications and all links below are pdf documents)

Name: Renewal Community Wage Credit
Target user: Businesses with employees that live and work within the Renewal Community boundaries.
Summary: Credit against Federal taxes up to $1,500 for each year of Renewal Community designation for every employee (existing and new hire) who lives and works in the Renewal Community area. Tax credit for 15% of first $10,000 in wages per employee may be taken annually through 2009. Unused credits can be carried forward for up to 20 years.

Name: Commercial Revitalization Deduction
Target user: Property owners who are substantially renovating an existing building or developing a new building for commercial use within the Renewal Community.
Summary: An accelerated depreciation deduction period for commercial real property, either new construction or substantial (more than the adjusted basis) rehabilitation. The taxpayer/property owner can choose one of two methods to use this incentive: depreciate 50% of qualified capital expenditures in the year the building is placed in service then depreciate the remaining balance over 39 years or depreciate 100% of the qualified capital expenditures over a 120-month period. This incentive is limited to $10 million per project.

The property owner must receive the allocation of the deduction from the Redevelopment Authority of the City of Milwaukee, who will serve as Milwaukee’s Commercial Revitalization Authority.  Businesses must submit an application to be considered for the CRD. 

  Application Information

Name: Capital Gain Exclusion
Target user: “Renewal Community Business” as defined by the Internal Revenue Code: 85% of property in RC, 50% of gross income from RC, 35% of employees live in RC.
Summary: Allows a 0% capital gains rate for Renewal Community assets held for a minimum of 5 years. An asset could include tangible property in the RC, stock, capital interests or profit interests in a Renewal Community Business acquired for cash. The rate applies to gains after December 31,2001 and before January 1, 2015. The taxpayer is not required to sell the asset in 2015, but must determine and substantiate the gain for that period.
  Definition of "Renewal Community Business"

Name: Increased Section 179 Deduction
Target user: “Renewal Community Business” as defined by the Internal Revenue Code: 85% of property in RC, 50% of gross income from RC, 35% of employees live in RC – with less than $200,000 in new equipment needs annually.
Summary: Up to an additional $35,000 immediate depreciation expense for machinery or equipment, including computers, placed in service in that year. For example, this incentive allows an “RC Business” to take up to a total of $59,000 “write-off” in 2002 on Form 4562.
  Definition of "Renewal Community Business"

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For a printer-friendly summary of tax incentives, see TaxIncentivesPrint.



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