California Competes Tax Credit Could Help You Grow Your Business

Posted April 2, 2014

The California Competes Tax Credit is an income or franchise tax credit available to businesses that come to California or stay and grow in California and is part of Governor Brown’s three part successor program (Economic Development Initiative – GEDI) to the Enterprise Zone tax credit which is currently being phased out. Tax credit agreements will be negotiated by Governor’s Office of Business and Economic Development (GO-Biz) and approved by a newly created “California Competes Tax Credit Committee,” consisting of the State Treasurer, the Director of the Department of Finance, the Director of GO-Biz (Chair), and one appointee each by the Speaker of the Assembly and Senate Committee on Rules. The 2014 deadline to apply is coming up quickly; you need to apply by April 14, 2014.

This first year allocation (2013-2014) of tax credits available to businesses is $30,000,000. Tentative amounts for additional allocations are: $150 million in 2014/15, $200 million in each 2015/16 and 2017/18. In order to qualify for a portion of the allocation, your business must have expansion plans to create jobs in California over the next five years or be at risk to leave California.

The tax credit award process is a three part program with a quantitative analysis phase, a qualitative analysis phase and a negotiation phase. In the first phase, applications will be ranked based on cost-benefit ratio of the credit requested to the total package proposal provided. Each applicant will be ranked according to the lowest percentage of the cost-benefit ratio, with the lowest percentage being positioned the highest. The most competitive applications will be moved to Phase 2.

The California Competes Tax Credit only applies to state income tax owed to the FranchiseTax Board. The credit is non-refundable, and in the case where the credit allowed exceeds tax owed, the excess may be carried over to reduce the tax in the following year, and the succeeding five years if necessary, until exhausted.

For fiscal year 2013/2014, applications for the California Competes Tax Credit will be accepted at calcompetes.ca.gov between March 19, 2014 and April 14, 2014. In order to access this website, you will need to create an account. Applications will only be accepted online. If you would like to see a video on how to do this as well as a brief overview of the program, check out the Video: How to Apply for California Competes Tax Credit.

The online application is in eight sections: Business Information (background), Business Structure, Proposed Project, Employees, Material Litigation, Ownership, Incentives and Programs, and Responsible Representative. Check out the CCTC Application Guide.

Here are some links specific to this tax credit:

Governor’s Office of Business and Economic Development (GO-Biz) California Competes Tax Credit

Notice California Competes Tax Credit

California Competes Tax Credit Regulations

California Competes Tax Credit FAQ

Governor’s Economic Development Initiative (GEDI)

California Competes Tax Credit Application Workshop Presentation

If you would like more information about relocation and expansion services available from the State of California, check out the information on their “Relocation and Expansion Services” website. You will find information about financial assistance and loan programs, economic development zones, labor availability and education information, state and local permit assistance, transportation and infrastructure information, information on tax credits and other incentive programs, and economic and demographic data.

In addition to the California Competes Tax Credit, the Governor’s Economic Development Initiative (GEDI) will provides a partial sales tax exemption and a hiring credit beginning July 1, 2014 that will be administered by the Board of Equalization and the Franchise Tax Board respectively.

More information on the partial sales tax exemption and the hiring credit can be found here:

Manufacturing Exemption

and here:

New Employment Credit

As always, feel free to give us, Bressler & Company, a call at 559.924.1225. We should always be your first call and enjoy chatting with you.