Is the Empowerment Zone (EZ) Employment Credit worth it for Venture Backed Startups? **NO. Even before COVID and remote working, it was exceptionally rare that a startup both operated within an Empowerment Zone (EZ) and had an employee living within an EZ. After COVID and the diaspora, the vast majority of startups gave up their office, and made startups even more ineligible for the EZ Credit. Across the 500+ startups we worked with in 2020, none were eligible for the Empowerment Zone Employment Credits.
Form 8844 - All you need to know
This is a federal tax credit offered by the IRS that is available to startups that have operations within a designated “Empowerment Zone,” typically an area that is up-and-coming where the government is looking to boost commerce.
To be eligible for the Empowerment Zone Employment Credit, your startup must substantially provide all services within the Empowerment Zone. Your employee must also reside in the designated zone
As of tax year 2020, parts of these cities had Empowerment Zones. To emphasize, the whole city is not considered an Empowerment Zone, only small sections of it are. We only present the top urban cities here.
There are also rural areas that offer the Empowerment Zone Credit, but are even more rarely found amongst startups with <100 FTEs:
Up to $3000 per qualified full time employee.
You can apply for the Empowerment Zone Employment Credit on form 8844 and 3800, which is a part of the 1120 C-Corporation Income Tax Return, due 4/15 every year and can be extended to 10/15 every year.
Where can I find more information aboutEmpowerment Zone Employment Credit?
If you would like more information on the Empowerment Zone Employment Credit, you can check out the Form 8844 section on the IRS website here.