By Lorraine Sanders

SOMETIMES APPLYING FOR a tax credit requires the mental clarity of Rod Serling.

Nevertheless, city business-owners who meet certain requirements stand to receive tens of thousands of dollars in tax credits and tax refunds from the state through the California State Enterprise Zone Hiring Tax Credit program. But the time to collect is running out.

Since 1992 parts of San Francisco have been state-designated enterprise zones. Businesses within the zones – which include parts of North Beach, SoMa, and Bayview-Hunters Point – can receive tax credits of up to $31,605 over five years for each employee who meets program eligibility requirements.

"Overall, the enterprise zone tax credits make it more affordable to operate [a business] in San Francisco," says Steve Sarver, who owns and operates the nine Bay Area locations of the San Francisco Soup Co. (415-397-7687, www.sfsoupco.com) with his wife, Jennifer.

The state created the zones to promote business within economically depressed neighborhoods and give employers incentives to hire disadvantaged workers, including ex-offenders, welfare recipients, disabled workers, veterans, and homeless individuals. Tenderloin residents, some Mission District residents, people of Native American descent, and dislocated workers also qualify.

To receive the tax credits, businesses must determine which employees meet the program criteria, obtain vouchers for each qualifying employee from the nonprofit Private Industry Council (www.picsf.org), and then submit those vouchers, along with a mountain of paperwork, to the California Franchise Tax Board (800-338-0505, www.ftb.ca.gov). For businesses that go to the trouble, the benefits can be substantial.

Lynette Cayson, owner of Cayson Designs (800-971-CHEF, www.caysondesigns.com), a restaurant uniform manufacturer in the Bayview District, actually refiled for tax credits for past years. Though she declined to give the exact amount saved, Cayson did reveal, "The initial impact was significant. I bought four new computers."

The savings are welcome, but the lengthy application process is not. "I think the entire process intimidates most small-business owners. It is a lot of red tape to grapple with," says Marsha Garland, executive director of the North Beach Chamber of Commerce, which educates businesses about the program.

On top of that, the program will expire May 27, 2007 unless Senate Bill Six passes and extends the zones for five more years. There have been three similar bills in past years. None have passed.

With the clock ticking, Taz Singh, a former auditor for the California Franchise Tax Board and co-owner of consulting firm Corporate Tax Incentives (916-837-4215, www.ctillc.com), has been encouraging Bay Area businesses within the zones to take advantage of the credit while it's still available.

Singh's company and his competitors handle paperwork, screen employees, and obtain vouchers in exchange for a percentage of the businesses' initial tax savings. Singh works with about 50 businesses, including the Stinking Rose, San Francisco Soup Company, Speedway Copy Systems, Tower Car Wash, and Cayson Designs.

With the expiration date less than two years away, Singh and probusiness advocates like Garland would like the city to expand the zones to allow more businesses to apply for the credits.

"The current zoning boundaries make no sense," Garland says. "It runs down the middle of Columbus so that the businesses on the west side are in the zone, and those on the east are out."

The situation is similar in other zones. Boundaries divide commercial strips on Cesar Chavez Street in the Mission, and Leavenworth Street in the Tenderloin. (To find current zone boundaries, visit www.sftaxcredits.com/california/ez_addresses.htm.)

Although the city could apply to the state to expand the zones, it has not done so. According to Singh, in 2002 the city agreed to expand the zones, but the state, battling a budget crisis, slapped a moratorium on expansions.

Then, last February, the state lifted the moratorium. Jennifer Matz, at the Mayor's Office on Economic and Workforce Development, says her office is focusing primarily on getting the state legislation passed. She said, "The city is seriously looking into expanding the zones further into the eastern neighborhoods, Visitation Valley, and the Hunters Point Shipyard," but a coordinated effort by the appropriate city offices and the Board of Supervisors has yet to take place.

Obtaining credits can take anywhere from three to eight months from start to finish, Singh says, which is even more reason to watch the approaching 2007 deadline closely before the program enters another time and dimension.

Contact Lorraine Sanders at news{at}lorrainesanders{dot}com.