Incentive Zones

Enterprise Zone

Portsmouth's Enterprise Zone Program is a Commonwealth of Virginia community economic development program offering state and local incentives for businesses to locate within a designated area. Economic Development informs businesses of the opportunities available within designated incentive zones. We provide a basic overview of each of the program offerings and link them with the appropriate agency or agencies. Businesses work directly with the agency(ies) or through a CPA firm to apply for incentives. Portsmouth was designated as an Enterprise Zone in 1984, and the city has since enjoyed great success in revitalizing its Downtown and developing PortCentre Commerce Park, in part due to the benefits of the program. The program is administered by the Virginia Department of Housing and Community Development.

Empowerment Zone

Portsmouth was designated as an Empowerment Zone in 1999. This federal initiative is designed to create jobs and business opportunities by offering tax credits in economically distressed areas. The program is administered by the U.S. Dept. of Housing and Urban Development (HUD).

Portsmouth’s Two Foreign Trade Zones

Reducing the Costs of Customs Duties

PortCentre Commerce Park and the Portsmouth Marine Terminal are designated as Foreign Trade Zones. The advantages of conducting business within them can be substantial.

The Foreign Trade Zone (FTZ) is a federal designation that allows businesses within the zone to defer, reduce or eliminate the payment of U.S. customs duties on imported goods held within the zone. Customs duties are paid only when and if merchandise is transferred into U.S. customs territory. No customs duties are paid on merchandise exported from an FTZ. Duties are not paid on broken or wasted product.

Businesses are allowed to store goods within the zone indefinitely. With special authorization from the FTZ Board, companies are allowed to manufacture products within the zone and pay duties on either the foreign parts used or the finished product, whatever rate is most advantageous. Merchandise may also be moved into the zone for inspection, testing and repair.

While the zone is physically located within the United States, businesses and activities for the purposes of tariff laws and customs entry procedures are treated as being outside the customs territory of the United States. The zone is authorized by the U.S. Foreign Trade Zone Board and operates under the supervision of the U.S. Customs Service and the Virginia Port Authority as Grantee of FTZ No. 20.

For more information, contact the U.S. Foreign Trade Zone Board at (202) 482-2862.

HUBZone: Helping Small Business Prosper

The HUBZone Empowerment Contracting Program is a “place-based” federal contracting program for small businesses. The program provides both federal prime contract and subcontract benefits. The federal government purchases about $200 billion worth of goods and services annually. Congress has set a goal of 3% of the total value of all prime contracts for HUBZone contracting opportunities phased in over five years and equaling almost $6 billion by 2003.

Types of Contracts

HubZone firms are eligible for a wide variety of contracting opportunities such as:

A competitive HUBZone contract can be awarded if the contracting officer has a reasonable expectation that at least two qualified HUBZone firms will submit offers and that the contract can be awarded at a fair market price.

A sole-source contract can be awarded if the contracting officer does not have a reasonable expectation that two or more qualified HUBZone small businesses will submit offers, determines that the qualified HUBZone small business is responsible and determines that the contract can be awarded at a fair market price. The government estimate cannot exceed $5 million for manufacturing requirements or $3 million for all other requirements.

A full and open competition contract can be awarded with a price evaluation preference. The offer of the HUBZone small business must not be more than 10% higher than the offer of the non-HUBZone/non-small business.

Other Programs

Small businesses located in the HUBZone can qualify for higher government guaranties on surety bonds for construction and service contract bids. The SBA will increase its guaranty on surety bonds to these companies from 80% to 90% making it easier for them to compete for government and private sector contracts.

Eligibility

Only companies certified by the SBA are eligible to participate in the HUBZone program. To qualify, a small business must meet all of the following requirements:

* The company’s principal office must be in a HubZone.
* At least 51% of the company must be owned and controlled by U.S. citizens.
* At least 35 % of the company’s employees must be HUBZone residents.

8(a) firms located in a HUBZone will be able to receive contracting opportunities under both programs.

HUBZone Empowerment Contracting Program

Historic Rehabilitation Tax Credits

Six Historic Districts. More than a hundred opportunities.

Portsmouth has six historic districts containing homes and buildings with an exciting variety of potential uses. In that we cherish our heritage, we encourage your interest in preservation and historic rehabilitation and will assist you in any manner we can beyond the federal and state tax credit programs briefly explained here.

Through the federal and state Rehabilitation Tax Credit programs, property owners receive incentives for private investment in the preservation of historic buildings. Buildings that are individually listed in the National Register of Historic Places and the Virginia Landmarks Register, or are certified as contributing to an historic district that is listed on these registers, are eligible for the tax credits.

For additional information contact: Virginia Department of Historic Resources or its Tidewater Regional Office (757) 886-2807.

New Markets Tax Credits

Advantages for Investors and Businesses

Federal New Markets Tax Credits are available to both investors and businesses in Portsmouth through Southside Development Enterprises, LLC, a Community Development Entity (CDE) that was awarded $21 million in federal tax credits by the U.S. Department of the Treasury in 2004.

Investors of any kind can invest in the Portsmouth renaissance through this program and receive 39% in federal tax credits on their investment while supporting the development and growth of local businesses.

Qualified businesses can utilize this program to receive alternative sources of financing to sustain, expand or create businesses in various sections of Portsmouth.

This program has been highly effective throughout the nation at creating jobs, expanding businesses, finding new uses for existing structures and bringing new, mixed-use development to aging communities. It gives a needed influx of flexible funding options to Portsmouth businesses while benefiting investors through tax credits and additional financial returns.

We encourage you to contact the Portsmouth Redevelopment and Housing Authority at (757) 399-5261 for further information.

Nationwide Incentives

A Workforce That Helps Pay For Itself.

Federal Work Opportunity Tax Credit Businesses hiring employees from the target groups listed below are eligible for tax credits up to $2,400 per employee. Businesses locating in the Empowerment Zone have two additional categories available to them.

• Welfare recipients
• Ex-felons from low-income families
• Veterans who are members of families receiving assistance or food stamps
• Anyone certified as physically or mentally disabled
• Supplemental security income recipient Additional targeted groups for businesses located in the Empowerment Zone
• Disadvantaged 18 to 24-year-olds who live in the zone
• 16 to 17-year-olds hired for the summer who live in the zone

For more information, contact the U.S. Department of Labor at
(866) 487-2365.

Virginia Corporate Income Tax Incentive

Major Business Facility Job Tax Credit Qualified companies locating or expanding in Virginia receive a $1,000 corporate income tax credit for each new full-time job created over a threshold number of jobs.

• Companies locating in enterprise zones or economically distressed areas are required to meet a 50-job threshold; all other locations have a 100-job threshold.
• The $1,000 credit is available for all qualifying jobs in excess of the threshold and is taken in equal installments over three years ($333 per year).
• Non-qualifying jobs include retail, seasonal positions, building and grounds maintenance, security, and other positions ancillary to the principal activities of the facility.
• Credits are available for taxable years beginning on or after January 1, 1995, but before January 1, 2010. Unused credits may be carried over for up to ten years.

For more information, contact the Virginia Department of Taxation at (804) 367-8037.

Portsmouth’s Citywide Incentive

The historic character and diversified architecture of Portsmouth is a part of our hometown personality (that) we want to keep and we gladly offer incentives for you to join us in those efforts.

Tax Exemption Qualifications For Rehabilitated Structures:

• Building must be at least 40 years old.
• Residential rehabilitation must increase the base assessed value by at least 40% with less than 15% structural addition.
• Commercial and industrial rehabilitation must increase the base assessed value by at least 60% with less than 15% structural addition.
• The owner or agent must file application along with a $50.00 application fee, with the City Assessor within 10 days after obtaining building permits to perform the rehabilitation.
• The exemption period is 5 years in all areas of the City.
• The amount to be exempted is determined each year by the City Assessor, based on a comparison of the previous and current years' assessments.

A similar program is available for properties located in Empowerment and Enterprise Zones. For more information, contact the City Assessor’s Office at (757) 393-8631.