California Competes Tax Credit
The California Competes Tax Credit is an income tax credit for businesses that are expanding or relocating to California. California Competes is a tax credit program that Gov. Jerry Brown approved in 2013.
It is a successor program to the Enterprise Zone Tax Credit which was phased out in 2014.
The number of credits available will increase over several years:
▪ $30 million in 2013-14
▪ $150 million in 2014-15; and
▪ $200 million in each year through 2017-18.
The credit available to any individual business will be based on a set of criteria including the number of jobs created, opportunity for future growth, and much more.
Who Can Claim the California Competes Tax Credit?
In order to qualify for a portion of the allocation, the business must have expansion plans to create jobs in California over the next five years or be at risk to leave California. In 2014, the current allocation of tax credits available to businesses is $30 million.
The tax credit award process is a four-part program with a quantitative analysis phase, a qualitative analysis phase, a negotiation phase and a committee hearing.
KBKG is prepared to represent and assist businesses who want to apply for the California Competes Tax Credit. Contact us to start your application!
For the fiscal year 2017-18, GO-Biz will accept applications for the California Competes Tax Credit during the following periods:
1. July 24, 2017, through August 21, 2017 ($75 million available)
2. January 2, 2018, through January 22, 2018 ($100 million available)
3. March 5, 2018, through March 26, 2018 ($55.4 million plus any remaining unallocated amounts from the previous application periods)
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California Competes Credit Details
Tax Credit Attributes
▪ Negotiated incentive
▪ 4 Phase application process and contract award
▪ Administered by the governor’s office
▪ 6-year carryforward
▪ Can be awarded over multiple years
Key Evaluation Factors
▪ Number of jobs created or retained
▪ Compensation paid to employee
▪ Investment in California
▪ Economic census data in job creation areas
▪ Incentives available from California
▪ Incentives available from other states
▪ Duration of proposed project
▪ Economic impact
▪ Industry and related local economic factors
▪ Opportunity for future growth
▪ Cost benefit of investment to tax credit
▪ No more than 20% to any one business
▪ 25% must be allocated to small businesses
▪ Business expanding in California
▪ Businesses new to California
▪ Businesses at risk of leaving California
▪ Businesses relocating within California
▪ Phase 1 Quantitative Analysis
▪ Phase 2 Qualitative Analysis
▪ Phase 3 Negotiation
▪ Phase 4 Committee Review and Award
▪ Rolling windows throughout year
▪ The first window deadline is April 14, 2014
Award Amounts Available
▪ 6/30/14 – $30,000,000
▪ 6/30/15 – $150,000,000
▪ 6/30/16 – $180,000,000
▪ 6/30/17 – $180,000,000
▪ 6/30/18 – $180,000,000
California Competes Credit Process
Phase 1: Quantitative Analysis
Compares your investment in California to the tax credit
▪ Prepare an application based on your expansion plans
▪ Isolate projects and develop application strategy and timing
▪ Perform quantitative analysis and ask ratio modeling for a competitive bid
Phase 2: Qualitative Analysis
Analyzes your expansion plan for key economic criteria
▪ Identify key components to be included in the application
▪ Highlight economic and targeted job creation data
▪ Qualify the expansion investments as high priority
Phase 3: Negotiation
Prepare a contract identifying the terms of the tax credit
▪ Ensure the terms and conditions are conservative and attainable
▪ Reduce risk of recapture or liability in contract terms
▪ Capture anticipated costs and reduce any vague or undefined benchmarks
Phase 4: Committee Review and Award
Award or deny decision rendered at this time
▪ Coach and plan taxpayer to receive full award
▪ Assist in preparation of necessary forms for tax return
▪ Model financial impact of credit and consult with tax preparer
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