The document summarizes several tax incentives available for businesses located in designated areas in San Francisco, including: 1) A Central Market payroll tax exclusion that provides an 8-year exclusion for businesses in the targeted area. 2) A stock-based compensation payroll tax exclusion that allows companies to exclude stock compensation above thresholds from 2011-2017. 3) State enterprise zone tax credits that provide sales/use tax credits and hiring credits for qualifying new employees in designated enterprise zones. 4) A local enterprise zone payroll tax credit that supplements the state credits for new San Francisco resident hires in qualifying categories.

1. Tax Incentives

2. Central Market Payroll Expense Tax Exclusion
» Effective date: April 20, 2011
» Available for a period of 8 years.
Individual businesses may claim the
exclusion for a maximum of 6 years.
» Any business located within the
Central Market/Tenderloin Payroll
Expense Tax Exclusion area is eligible.
» Application process, First Source
Hiring, and community benefit
requirements (for payroll over $1
million) apply

3. Central Market Payroll Expense Tax Exclusion
Payroll expense tax exclusion is limited to the amount of payroll expense tax
above the business’s tax base year. Base year means:
»For businesses already located in the tax exclusion area on the effective date,
the Base Year is 2010.
»For businesses located elsewhere in San Francisco that move into the tax
exclusion area after the effective date, the Base Year is the full tax year for the
year prior to entering into a lease agreement or buying real property in the area.
»For businesses located outside of San Francisco that subsequently relocate to
the tax exclusion area, the Base Year is their first full tax year in the area.

4. Stock Based Compensation Payroll Tax Exclusion
» Overview
» The City of San Francisco’s payroll expense tax covers all forms of compensation for services
rendered in San Francisco, including but not limited to wages and salaries, bonuses, and stock
compensation.
» A payroll expense tax exclusion for stock based compensation was approved on June 3, 2011
and allows companies to exclude stock based compensation above certain thresholds for tax
years 2011 – 2017. The exclusion expires in 2017.
» All pre-IPO companies are eligible. Only stock compensation granted before an IPO is eligible.
» Calculating Exclusion:
» Paid more than $750,000 of Payroll Expense Tax on stock based compensation in 2010:
Company may exclude payroll expense on stock based compensation for amount over what
was paid in tax year 2010.
» Paid less than $750,000 of Payroll Expense Tax on stock based compensation in 2010:
Company may exclude payroll expense on stock based compensation above $750,000 in tax.
» Requirements
» File a timely affidavit with Treasurer and Tax Collector
» Maintain records and documents
» File annual payroll expense tax return with Treasurer and Tax Collector, regardless of amount
owed, after claiming this exclusion

5. State Enterprise Zone Tax Credits
» History: The Enterprise Zone program
was developed by the California State
Legislature to provide targeted areas
with a means to stimulate business and
employment growth.
» The City & County of San Francisco is
currently operating under a Conditional
Designation which began on May 28,
2007.
» Location: The Enterprise Zone includes
the Financial District, SOMA, the
Northeast Waterfront, Mission Bay,
Central Waterfront/Dogpatch, the
Mission, Bayview & Hunters Point.

6. State Enterprise Zone Tax Credits
» Primary EZ Incentives:
» Tax Credit for Sales or Use Tax Paid: income tax credit equal to the
sales or use tax paid up to the first $1 million ($20 million for
corporate taxpayers) of machinery or parts purchased for use within
the enterprise zone.
» Tax Credits for Qualified Hires: For each qualified individual working
within the boundaries of the zone, businesses can receive a $37,000
tax credit over 5 years. There are 13 categories under which
employees can qualify.

7. State Enterprise Zone Tax Credits
» 13 Categories for EZ Hiring Credit Eligibility:
» California Work Opportunity and Responsibility to Kids (CalWORKS)
» Workforce Investment Act (WIA) (enrolled/eligible for WIA Intensive Services
or Core B)
» Work Opportunity Tax Credit (WOTC) or successor program
» Economically disadvantaged individual 14 years of age or older
» Dislocated worker
» Disabled individual or service-connected disabled veteran
» Vietnam Veteran or veteran recently separated
» Ex-offender
» Recipient of, or eligible for, Public Assistance (AFDC,SSI, Food Stamps)
» Native American, Native Samoan, Native Hawaiian or member of another
group of Native American descent
» Targeted Employment Area (TEA) resident.

8. Local Enterprise Zone Payroll Tax Credits
» As a supplement to the state level tax credits, San Francisco also offers an
EZ Payroll Tax Credit.
» Same zone (boundaries).
» The credit is a tax incentive against the payroll taxes for any new hires.
They must be San Francisco residents and must meet one of the
qualifying categories of the state EZ program (except TEA category).
Calculation of Payroll Tax Credit
Year 1-2: 100%
Year 3-4: 50%
Year 5-6: 25%
Year 7-8: 15%
Year 9-10: 10%

9. Thank You
From the City & County of San Francisco