California Industrial Development Financing Advisory Commission
Empowerment Zone (EZ) Bonds
Program Objective
This program is operated under the Community Renewal Tax Relief Act of 2000 (HR 12387). The statute expanded the scope and dollar limit for the issuance of Industrial Development Bonds (IDBs) in federally designated EZs. Bonds issued in EZs, unlike IDBs, have no limit on the dollar amount. EZ bonds were developed to assist the most distressed communities. There are four California communities with designated EZs: the cities of Los Angeles, Santa Ana and Fresno, and portions of unincorporated Riverside County.
Minimum Requirements
The EZ Bond program applies to manufacturers, retailers and any service that operates in an EZ. A borrower requesting application approval for EZ bonds must meet the minimum requirements below:
- At least 35% of the employees of an EZ business must reside within the EZ.
- At least 50% of the total gross income of an EZ business must be derived from the active conduct of the business.
- 85% of the use of the tangible property of an EZ business (whether owned or leased) must be used in active conduct of the business.
- 85% of the intangible property of an EZ business must be used in active conduct of the business.
- 85% of the services performed for an EZ business by its employees must be performed in the EZ.
- Less than 5% of the aggregate unadjusted bases of the property of an EZ business must be attributable to collectibles.
- Less than 5% of the average aggregate unadjusted bases of the property of an EZ business must be attributable to debt, stock, partnership interest, options, warrants or other similar property specified in the Internal Revenue Code or regulations.
- The EZ business must finance property that qualifies as "qualified zone property." Qualified zone property generally consists of a capital asset to which the straight-line depreciation method applies, and to which the original use begins with the EZ business.
- The borrower must provide documentation of the applicable discretionary use permits and approvals from federal, state or local planning agencies for the proposed project at the time of application.
Application and Approval Process
EZ bond financing must receive CIDFAC approval. For each project, the issuer must submit on behalf of the borrower a completed application form and supplemental material in a manner prescribed by CIDFAC. All questions set forth in the application must be answered completely and accurately. Each application must be accompanied by the required documentation outlined in the application. Only completed applications bearing original signatures will be accepted. Each application must include:
- A complete signed EZ bond application.
- The borrower’s financial statements for the past three years.
- Certified minutes of TEFRA hearing.
- Local inducement resolution.
- Letter of credit commitment.
- Borrower-completed legal questionnaire.