Window Opening for California Competes Tax Credit Applications
Sept. 11, 2014
The new California Competes Tax Credit (CCTC) is awarded to businesses based on a competitive application process. Under the CCTC, businesses will compete for a set amount of income tax credits made available by the state’s Governor’s Office of Business and Economic Development (GO-BIZ) each fiscal year. Written agreements will be negotiated by GO-BIZ and approved by a newly created CCTC committee. The next period for applications runs from Sept. 29, 2014, through Oct. 27, 2014, and will have $45 million of CCTCs available. Additional periods for credit applications will open on Jan. 5, 2015, and March 9, 2015.
GO-BIZ considers a number of factors when determining if a business will receive the CCTC, including:
- The number of jobs the business will create or retain in the state
- Compensation paid or proposed to be paid to its employees
- Amount of investment by the taxpayer
- Extent of unemployment or poverty in the area
- Other incentives available to the taxpayer in the area and in other states
- Duration of the proposed project and commitment of taxpayer to remain in the state
- Overall economic effect of the project or business
- Strategic importance of the taxpayer’s project or business to the state, region, or locality
- Opportunity for future growth and expansion in the state
- The extent to which the anticipated benefit to the state exceeds the projected benefit to the taxpayer
Based on the GO-BIZ guidelines, the application process has multiple phases.
During the initial phase, businesses submit a credit application to GO-BIZ. The businesses will need to provide detailed information on their projects’ expansion in or relocation to California. GO-BIZ ranks the initial-phase applications by a quantitative analysis formula in which the credit amount requested is compared to the hiring and investment commitments (forecasted for five years) of each applicant. Applicants selected proceed to the next phase of the process.
In the second phase, GO-BIZ considers a variety of qualitative factors, including local employment, competing incentives, economic impact, and industry outlook.
Businesses whose credit requests survive the qualitative factor analysis are notified and negotiate with GO-BIZ the amount of the CCTC and the terms of the incentive agreement.
- All applications must be submitted online during an open application period.
- GO-BIZ anticipates the process will take approximately 90 days from the date the application is submitted to the date the CCTC is awarded.
- Twenty-five percent of CCTCs will be set aside for small businesses, and no single business can receive more than 20 percent of the funds available.
- Applicants not awarded a credit during an application period automatically will be considered during the next application period within the same fiscal year. Applicants not awarded a credit by the end of that fiscal year will need to reapply in the next fiscal year.
The CCTC provides significant relief to qualifying businesses, but compliance with the complexities and limited time windows of the application process is critical.
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