Federal, State and Local Incentives

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Federal Incentives

Federal Tax-Exempt Facility Bonds
Empowerment Zone Bond Financing is available for qualified zone businesses.  A qualified zone business is one which, among other things, draws 35% of its employees from zone residents.  The bonds are not subject to the State cap on private-activity bonds or special limits on issue size.  Both manufacturers and non-manufacturers are eligible for these bonds. 

Empowerment Zone Wage Credit
Businesses located in the zone can generate federal tax credits based on wages paid to employees who are residents of the Empowerment Zone.  Benefits are calculated at 20% of the first $15,000 of wages paid to eligible employees.

Increased Section 179 Deduction
This allows qualified zone businesses to deduct up to a maximum of $37,500 of all or part of the cost of certain qualifying property in the year it is placed in service.  A qualified zone business is one which, among other things, draws 35% of its employees from zone residents.

Environmental Cleanup Cost Deduction
This federal deduction provides businesses with an incentive to cleanup certain sites that are contaminated, or perceived to be contaminated, with hazardous substances.  A business can deduct qualified environmental cleanup costs in the tax year the cost is paid or incurred.

U.S. Dept. of Housing and Urban Development (HUD)

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State Incentives

Real Property Investment Grant (effective July 1, 2007)

• Cash grants at 20% of qualified costs of new construction or rehabilitation of a specific building or facility.

• Investment threshold for new construction is at least $250,000; rehabilitations is at least $50,000

• Maximum benefit per building or facility within any five year period is $125,000 for projects less than $5 million and $250,000 for projects of $5 million or more

• Mixed used projects will qualify if at least 30% of square footage is dedicated to commercial, industrial or office use

• Grants will be payable to the owner and/or tenant that incurs qualified costs
  

Job Grants

• Cash grants for qualifying new full-time positions in excess of four over a base year up to a maximum of 350 positions per year

• Grants of $800 for a period of five years are paid for positions earning 200% of federal minimum wage and provided with health benefits; $500 for those earning 175%-199% of federal minimum wage and provided with health benefits

• Firms may qualify for additional five-year periods

• Non-qualifying business classifications - retail, local service, food and beverage
  
  Enterprise Zone Program Guidelines

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Local Incentives

Tax Exemption For Rehabilitated Structures

• Building must be at least 25 years old.
• Commercial and Industrial rehabilitation must increase the base assessed value by at least 60% with less than 15% structural addition.
• The owner or agent must file application along with a $50.00 application fee, with the City Assessor within 10 days after obtaining building permits to perform the rehabilitation.
• The exemption period is 10 years within the zone.
• The amount to be exempted is determined each year by the City Assessor, based on a comparison of the previous and current years' assessments.

  For more information on this incentive contact the City Assessor’s Office at (757) 393-8631.
  

Commercial Facade Loan Program
Owners of existing commercial or mixed-use buildings in the Downtown D-1 zoning district may qualify for a low-interest loan of up to $50,000 if the building is in need of a new façade and all necessary loan application requirements are met. New construction is not eligible for this program.

• Minimum loan is $5,000 and maximum is $50,000 up to $50 per square foot of façade area.
• Interest rate is Prime minus 2%
• Term is 10 years
• A 1% origination fee is charged and may be financed
• Prior to closing, applicants must obtain a Downtown D-1 Design Review Committee Certification of Compliance.

  For more information contact the Portsmouth Redevelopment and Housing Authority at (757) 399-5261.

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HUBZone

The HUBZone Empowerment Contracting Program is a “place-based” federal contracting program for small businesses. The program provides both federal prime contract and subcontract benefits. The federal government purchases about $200 billion worth of goods and services annually. Congress has set a goal of 3% of the total value of all prime contracts for HUBZone contracting opportunities phased in over five years and equaling almost $6 billion by 2003.

Types of Contracts

HubZone firms are eligible for a wide variety of contracting opportunities such as:

A competitive HUBZone contract can be awarded if the contracting officer has a reasonable expectation that at least two qualified HUBZone firms will submit offers and that the contract can be awarded at a fair market price. 

A sole-source contract can be awarded if the contracting officer does not have a reasonable expectation that two or more qualified HUBZone small businesses will submit offers, determines that the qualified HUBZone small business is responsible and determines that the contract can be awarded at a fair market price. The government estimate cannot exceed $5 million for manufacturing requirements or $3 million for all other requirements.

A full and open competition contract can be awarded with a price evaluation preference. The offer of the HUBZone small business must not be more than 10% higher than the offer of the non-HUBZone/non-small business.

Other Programs

Small businesses located in the HUBZone can qualify for higher government guaranties on surety bonds for construction and service contract bids. The SBA will increase its guaranty on surety bonds to these companies from 80% to 90% making it easier for them to compete for government and private sector contracts.

Eligibility

Only companies certified by the SBA are eligible to participate in the HUBZone program. To qualify, a small business must meet all of the following requirements:

• The company’s principal office must be in a HubZone.
• At least 51% of the company must be owned and controlled by U.S. citizens.
• At least 35 % of the company’s employees must be HUBZone residents.

8(a) firms located in a HUBZone will be able to receive contracting opportunities under both programs.

HUBZone Empowerment Contracting Program

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Historic Rehabilitation Tax Credits

Since the inception of the federal program in 1976, over 1,600 buildings representing over $398 million in private investment have been returned to productive use in Virginia. The state program established in 1997, has generated an additional $4 million in economic activity. Communities benefit from these improvements because rehabilitated buildings provide much needed housing, office, retail and commercial space in historic neighborhoods.

For the federal program:

• The cost of the rehabilitation must exceed the owner's basis in the building, or $5,000, whichever is greater.
• The credit is 20% of the eligible rehabilitation expenses.
• The credit applies to income producing properties only.

For the state program:

• Income-producing properties:  The cost of the rehabilitation must be at least 50% of the assessed value of the year preceding the rehabilitation.
• Owner-occupied properties:  For rehabilitations completed after January 1, 2001, the cost of the rehabilitation must be at least 25% of the assessed value of the building in the year preceding the rehabilitation.
• The credit is 25% of the eligible rehabilitation expenses.

For additional information contact:  Virginia Department of Historic Resources or its Tidewater Regional Office (757) 886-2807.

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