Through 2024, the Governor's Office of Business and Economic Development (GO-Biz) is awarding California Competes Tax Credits to businesses that want to locate or stay and grow in California. The tax credits go to businesses that commit to certain employment or project investment requirements and provide their employees good wages and benefits.
Below are answers to commonly asked questions about the credit.
Q: How do businesses qualify for a California Competes Tax Credit?
A: The credit is available statewide to all industries. Credit is awarded through a competitive process open to any business. Factors considered in awarding the credit include the credit amount requested compared to the business's hiring and investment commitments, average wage, economic impact, strategic importance of the business and more. Tax credits are negotiated by GO-Biz and approved by the California Competes Tax Credit Committee.
Q: Can small businesses apply for the credit?
A: Yes! A quarter of the total credits available each year are specifically reserved for small businesses (defined as businesses with gross receipts of less than $2 million in the business's prior tax year). Applications from small businesses will only compete with applications from other small businesses.
Q: When is the next application period?
A: The final application period for California's 2016-2017 fiscal year is March 6–March 27. A total of $68.3 million, plus any remaining unallocated amounts from the previous application periods, will be awarded then. (There are three application periods each fiscal year. The first two were July 25–Aug. 22, 2016, and Jan. 2–23, 2017.)
Q: How can my business apply?
A: Fill out an application online.
Q: If my business applied and was not awarded a credit, can I reapply?
A: Yes, applicants not awarded a credit can update and resubmit their application in the next application period.
Q: Is the credit refundable?
A: No. However, if the credit allowed exceeds the tax due, the excess may be carried over to reduce the tax in the following year, and the succeeding five years if necessary, until exhausted.
Q: Is there a minimum credit amount a business can request?
A: Yes, the minimum amount is $20,000.
Q: If I'm awarded a California Competes Tax Credit, when can I claim it on my tax return?
A: Each negotiated and approved tax credit agreement will specify the terms and conditions of when the tax credit may be claimed.
Q: If I'm awarded a California Competes Tax Credit, what is required to demonstrate that I'm complying with the terms of the tax credit agreement?
A: The Franchise Tax Board may review your business's books and records to determine compliance with the credit agreement. You must meet yearly milestones for California full-time employment, salary levels and project investment. In general, if your business meets the milestones for a taxable year as specified in the credit agreement, then the credit for that year is earned and may be claimed on your tax return. If the milestones for a taxable year are not met, the credit is not earned for that taxable year.
The California Competes Tax Credit is just one possibility for giving your business a boost. For more information and inspiration for growing your business, contact one of our knowledgeable bankers or visit California Bank & Trust's Business Resource Center. [cite::171::cite] [cite::172::cite]