There are many programs in the state of California designed to foster and incentivize business growth. The California Competes Tax Credit is an income tax credit available to statewide businesses in all industries looking to invest in California. This is a dollar for dollar tax credit against income tax due in California which can also be used against the Alternative Minimum Tax (AMT).
This credit is limited and will be evaluated and awarded based on the respective company's situation. The investment agreements are negotiated by GO-Biz and approved by the California Competes Tax Credit Committee, consisting of the State Treasurer, the Director of the Department of Finance, the Director of GO-Biz, and one appointee each by the Speaker of the Assembly and Senate Committee on Rules. The program started January 1, 2014, and is scheduled to sunset on January 1, 2025.
It is important to note that no more than 20 percent of the aggregate amount of the credit will be available to any one taxpayer and 25 percent will be reserved for small businesses. This process is competitive, so submitting information timely is essential in obtaining these potential credits.
The factors determining how much credit a taxpayer will be allocated in a fiscal year include:
- The number of jobs created or retained in California;
- Compensation levels paid to employees;
- Investment amounts to make in the state;
- Levels of unemployment or poverty in the area where the business is located;
- Incentives available to the taxpayer in this state and in other states;
- Duration of the project for which the taxpayer commits to remaining in California;
- Overall economic impact of the taxpayer's business, including opportunity for future growth in the state; and
- The extent to which the anticipated benefits to the state exceed the projected benefit to the taxpayer from the credit.
The program will accept applications during the following dates:
- September 29, 2014 through October 27, 2014 ($45 million available)
- January 5, 2015 through February 2, 2015 ($75 million available)
- March 9, 2015 through April 6, 2015 ($31.1 million available plus any unallocated amounts from the previous application periods)
We can help identify, at no cost, if a business is eligible for this lucrative tax savings opportunity. As always, if you have any questions please contact me.