Can you tell me who tracks loans made to businesses in Enterprise Zones in your institutions? Our accounting department is saying that this should be a CRA function. They are looking at using CCH's Tax Zone Locator product which would add a step in our entry of CRA loans. Is that typical in other banks?

Your accounting function is being lazy since its up to THEM to identify all means to reduce the tax liability of the bank, and net interest income on a purpose loan in an enterprise zone normally is not taxable on your state tax.

However, if you can get your accounting department to approve a cool new tool for CRA, I say go for it.

Bonnie, Can you provide more information regarding the tax exemption for interest income on loans made to businesses in Enterprise Zones? I know that the businesses located in EZones enjoy certain tax benefits, but I didn't know banks received a tax benefit in the form of an exemption on interest for the loans they make to businesses in those areas.

The Enterprise Zone tax credits I am familiar with are specific to the State of California. While reviewing loans for CRA data integrity, we also look for the EZ loans and provide a listing to our Finance-Controllers Department at the end of each year. Our institution has been able to benefit tremendously from the net interest deduction. Here are a couple links to the State of CA website that might be helpful:

[url=http://www.hcd.ca.gov/fa/cdbg/ez/enterprise/#maps]

[url=http://www.ftb.ca.gov/forms/misc/1126.pdf]

Hope this helps.

There are City, County, State and Federal Enterprise zones and each can have a tax benefit to a bank. Each Enterpriosr Zone can have different tax benefits. In Calif Enterprize Zones have different standards that qualify a loan. So just because a loan is located in one may not qualify it for the tax benefit.

AS I recall if the customer is on a calendar year or fiscal year accounting it has an effect on when the tax enefit can occur in some Enterprize Zones.

Make sure you read what the qualifications are for the zone your loan is in

The Franchise Tax Board in CA is now auditing the tax returns of banks and notifying them if they should not have received tax benefits. If you are a CA bank, review the rules carefully so that you aren't trying to obtain credit for interest earned on loans made to companies that operate outside of the enterprise zone. The instructions are in CA's form 3805Z.