Have You Heard? New California State Tax Credit For Businesses

As a business owner, it is easy to overlook incentives that are offered by local, state and the federal government to assist businesses. Sometimes the challenge for businesses is a lack of awareness of which programs and tax credits are available.

 In the State of California, one such overlooked program is the Governor’s Office of Business and Economic Development (GO-Biz) which was created by Governor Edmund G. Brown Jr. to serve as California’s single point of contact for economic development and job creation efforts. GO-Biz offers a range of services to business owners including: attraction, retention and expansion services, site selection, permit streamlining, clearing of regulatory hurdles, small business assistance, international trade development, assistance with state government, and much more. 

Recently, Kish Rajan, Director of GO-Biz in a keynote address for the 2014 CEO Spotlight told a full room that the Governor has an urgency to get California on a better path, but he added, “I know change brings anxiety.”

California Competes Program

Rajan said “the state is in a highly competitive national and global economic landscape but is losing production overseas. We are innovators of technology and business, but then we end up being an exporter of growth and jobs,” he said. He extolled the benefits of the new “California Competes” program, a California State Tax Credit designed to spur business investment in the state. It offers income tax benefits to companies that want to locate to the state or existing companies that want to expand. (Source: Manex Consulting)

The state has budgeted $780 million for this program for the next five years. Thirty million dollars will be allocated for the period from now until June 30th with the first application period just being completed earlier in April.  The next allocation of $150 million dollars in tax credits will be rolled out in the second half of 2014 and early 2015.  On July 1^st the next application period will be announced.

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

The amount of the credit will be based upon the following factors:

• The number of jobs the business will create or retain in this state.
• The compensation paid or proposed to be paid by the business to its employees, including wages and fringe benefits.
• The amount of investment in this state by the business.
• The extent of unemployment or poverty where the business is located.
• The incentives available to the business in this state, including incentives from the state, local government, and other entities.
• The incentives available to the business in other states.
• The duration of the business’ proposed project and the duration the business commits to remain in this state.
• The overall economic impact in this state of the business.
• The strategic importance of the business to the state, region, or locality.
• The opportunity for future growth and expansion in this state by the business.
• The extent to which the anticipated benefit to the state exceeds the projected benefit to the business from the tax credit.

Good News for Small Businesses

One of the features of this legislation is the impact for small businesses. Small businesses are able to apply for the credit and 25 percent of the total credits available each year are specifically reserved for small businesses which are defined as those businesses with (gross receipts, less returns and allowances, of less than $2 million).

Any business can apply for the “California Competes” Tax Credit and there is no application fee. To see further details about this credit, the state has prepared a “California Competes” Tax Credit FAQ worksheet.  You can download it HERE for more information.

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