October 19, 2009

Selma, Alabama company showcased in argument to extend business tax credit

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Selma, Alabama company showcased in argument to extend business tax credit
Monday, October 19, 2009
MARY ORNDORFF
News Washington correspondent
WASHINGTON - A federal tax benefit for businesses in poor rural areas, due to expire at the end of the year, helped keep apparel jobs in Selma and Fort Deposit and should be extended another five years, according to Rep. Artur Davis, D-Birmingham.

For six years, American Apparel Inc. has claimed the Renewal Community credit on many of its employees who live in the economically depressed area. The credit, good only in certain parts of the state, was the main reason the company didn't move some of its work to other facilities, said Carl Barranco, secretary-treasurer of American Apparel.

"That is a real inducement for us to leave those jobs in Fort Deposit and Selma, and we need that to continue in the law," Barranco said Thursday. "It is a very key economic factor in considering retaining jobs in those communities."

Specifically, the Renewal Community program allows American Apparel to claim as a credit 15 percent of the first $10,000 in wages earned by each employee who lives in the area designated a renewal community, or up to $1,500. Barranco said about three-fourths of the company's 618 employees in those two towns qualify, which reduces its income tax bill considerably.

Barranco also testified about the law to a congressional subcommittee last week.

Davis' legislation to extend the Renewal Community credit and the similar Empowerment Zones program has picked up steam on Capitol Hill. Democratic leaders say they're looking for a way to get it done as the legislative session draws to a close. The Obama administration has already endorsed a one-year extension of the credits as a critical piece of economic recovery.

U.S. Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee, is urging the extension. The timing is crucial, he said, because unemployment is climbing in these impoverished areas, "leaving people without jobs, without health insurance and without dignity."

Davis said last week that the cost of the extension to the U.S. Treasury should be paid for and not add to the federal deficit, but that renewing the credits is a priority for communities already suffering from economic collapse.

The short-term extension of the programs, proposed by President Barack Obama as part of his 2010 budget, was estimated to cost $1.17 billion over 10 years, according to the Joint Committee on Taxation. Davis did not have an estimate on the cost of his longer-term extension, which also includes some modifications to the program.

The U.S. Department of Housing and Urban Development since 2000 has designated 12 rural and 28 urban "renewal communities," based on their unemployment rates and population density. In Alabama, three areas qualify: Greene and Sumter counties, Mobile and Southern Alabama.

Selma, Fort Deposit:

American's Selma and Fort Deposit plants are part of the Southern Alabama Rural Renewal Community, Barranco said. American Apparel makes utility uniforms for all branches of the U.S. military.

The renewal community and enterprise zone incentive programs together affect about 300,000 businesses around the country, according to HUD. Based on the latest data from the Internal Revenue Service, HUD estimates that about 480,000 jobs qualified for $2 billion worth of employment credits in 2007-2008.

"With the current economic downturn, it is essential that we continue to invest in these distressed areas to help stimulate economic growth, job creation and business retention," said Nelson Bregon, general deputy assistant secretary for the Office of Community Planning and Development at HUD.

E-mail: morndorff@bhamnews.com

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