California’s New Tax Incentive? Jury Still Out.

California recently enacted a three pronged tax incentive program which benefits companies beginning in 2014. The newly established California Competes Tax Credit reached its first milestone, as the State accepted applications through the April 14, 2014 deadline. According to the California Governor’s Office of Business and Economic Development (“GO-Biz”), over 100 applications were received for the $30 Million in allocated credits for the fiscal year ending 6/30/14. The companies that applied on-line for the tax incentive will now be vetted by representatives from Go-Biz to see if they make it to Phase II and then ultimately receive tax credits. A hearing of the California Competes Tax Credit Committee is scheduled for June 19th in Sacramento to decide the final recipients.

So, what is the California Competes Tax Credit?

The California Competes Tax Credit  is a recently enacted income tax credit available to businesses that plan to relocate to the Golden State OR for companies already in the state planning to expand California operations.  There is a multi-phase process by which applications will be accepted and analyzed to determine which opportunities best meet the state’s objectives for economic development and to allocate funds to companies that best carry out those objectives. Funding has been set as follows: $30M in fiscal year 2013/2014; $150M in fiscal year 2014/2015, and $200M each in the next 3 fiscal years (through 2017/2018). The benefits are available to any business, in any industry. While many states have had various tax credits and negotiated incentives available for years, this kind of tax incentive is new for California.

How to apply for the credit

Companies interested in applying for the California Competes Tax Credit start by answering a series of questions via an on-line application process. (Again, the process is closed for the FYE ending 6/30/14, but will begin again after July 1, 2014.) The on-line questionnaire qualifies companies based upon the factors considered for ultimate qualification for the credit including, but not limited to, the number of jobs the business will create and retain in the state, the amount of investment in this state by the business, the extent of poverty or unemployment in the area where the business is located or expanding into, the overall economic impact in California of the business, and the incentives available to the business in other states. By answering these questions during the on-line Phase I, the company enters a pool of applicants that will then be vetted to move on to a Phase II (or not), depending upon the answers.

With the first tranche of applications now behind us, we will wait to see what kinds of businesses are approved in mid-June with the first round of approvals. It will be interesting to see how the California Competes Tax Credit Committee allocates its first round of funding to expanding businesses. Stay tuned! Let us know how we can assist your company in taking advantage of this California tax incentive or those in other states.

Labhart Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects, including the new California Competes Tax Credit. To learn more, contact us today at www.LabhartMiles.com

3 thoughts on “California’s New Tax Incentive? Jury Still Out.

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