At the end of 2013, California brought to an end the enterprise zone (EZ) programs that had been in place since 1984. These programs provided tax incentives and other benefits to companies operating in or considering expanding to economically depressed areas. When the EZ programs were terminated the state initiated several new programs to provide similar and expanded benefits to facilitate economic growth. One of the new incentive programs includes the California Competes Tax Credit, an incentive program designed to encourage companies to expand or relocate operations into California. Unlike other tax incentives – federal and state – which can be claimed on an income tax return, the California Competes Tax Credit requires qualifying companies to participate in a formal application process.
Application Acceptance Periods
Program applications are accepted only during certain times of year and there are generally short timeframes during which applications are accepted. Recently, the state of California announced the application acceptance periods for 2015 including:
- Jan. 5, 2015, through Feb. 2, 2015 ($75 million in tax credits available)
- March 9, 2015, through April 6, 2015 ($31.1 million, and any additional remaining funds available for distribution as a credits)
- Note the application acceptance periods for 2016 and beyond have not yet been announced.
California Competes FAQ
Below is a summary list of the most frequently asked questions about the tax credit and the application process, including:
- Can any business (regardless of location) apply for the California Competes Tax Credit? Any business can apply for the California Competes Tax Credit. The credit is available statewide to all industries. However, while there are no geographic or sector-specific restrictions, the purpose of the California Competes Tax Credit is to attract and retain high-value employers in California in industries with high economic multipliers that provide their employees good wages and benefits.
- How much in tax credits will be available each year? Tentatively, the approved amounts which can be allocated through the program include $151.1 million in fiscal year 2014-2015 and $200 million in each fiscal year starting in 2015 and ending in 2018. These amounts could change, but as of now there is no indication a change is forthcoming.
- Is there a fee to apply for the California Competes Tax Credit? No, there is no fee to apply for the credit.
- Will small businesses be able to apply for the credit? Yes, not only are small businesses able to apply for the credit, 25 percent of the total credits available each year are specifically reserved for small businesses (gross receipts, less returns and allowances, of greater than $0 but less than $2 million in the business’ prior tax year).
- How long does the application process take? The process takes approximately 90 days which includes the period when applications will be reviewed and presented to the California Competes Tax Credit Committee for approval.
- If not awarded a credit, can a business reapply that same fiscal year? Applicants not awarded a credit during an application period can update and resubmit their application in the next application period within the same fiscal year. Applicants not awarded a credit by the end of the fiscal year will need to create a new application in order to reapply in the next fiscal year
- Can a business that receives an award apply and receive another award in a subsequent year if it creates more jobs and competes well according to the formula? Yes, businesses are not limited to the number of times they can apply or the number of times they can be awarded tax credits for additional job growth and investments.
- What factors are considered when applications are reviewed? Some of the factors include:
- 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, benefits, and fringe benefits.
- 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.
- Incentives available to the business in other states.
- The strategic importance of the business to the state, region, or locality.
Interested in learning more about the California Competes Tax Credit and how to submit an application? There are several criteria that must be met in order for your company to be eligible. Since there is a limited application acceptance period NOW is the time to investigate this opportunity for your company! For additional information please call JLK Rosenberger at 949-860-9902, or click here to contact us. We look forward to speaking with you soon.