What is the New Employment Credit?

The New Employment Credit (NEC) replaced the Enterprise Zone Tax Credit and will be in effect from January 1, 2014 until December 31, 2020. Employers that hire qualified full-time employees and pay or incur qualified wages for work performed in a Designed Geographic Area (DGA) can claim the credit on a timely-filed original return.

Who qualifies?

An employee who meets all of the following criteria:

  • Is hired on or after January 1, 2014
  • Performs at least 50% of his or her services for the employer in the DGA
  • Receives starting wages that exceed 150% of the State minimum wage
  • Is paid hourly wages for an average of at least 35 hours per week, or is salaried, and paid for full-time employment
  • Meets any one of the following five conditions upon commencement of employment:
    • Unemployed for the six months immediately preceding hire
    • Veteran separated from the U.S. Armed Forces in the preceding 12 months
    • Recipient of the Earned Income Tax Credit in the previous taxable year
    • Ex-offender convicted of a felony
    • Current recipient of CalWORKs or general assistance

How much is the credit?

The credit is based on 35% of qualified wages or wages between 150% and 350% of the minimum wage. For 2016, employers can claim up for $14,000 per employee. A qualified employee will generate credits for the first 60-month period beginning with their date of hire.