United States

California announces application periods for California Competes Tax Credit

TAX ALERT  | 

UPDATE: The application period for the second round of funding for the California Competes Tax Credit (CCTC) for fiscal year 2015 is now open and will close on Feb. 2, 2015.  The CCTC is an opportunity for businesses to apply for and negotiate California income tax credits based upon the number of jobs to be created or retained in California, as well as other investments to be made in the state. A third round of CCTC funding in fiscal year 2015 will open on March 9, 2015, with $31.1 million in credits available. California has not yet announced dates for each round of CCTC funding in fiscal year 2016, but it is anticipated that application periods for fiscal year 2016 will tie closely to application periods in fiscal year 2015, with the first round of funding opening in late September

On Sep. 10, 2014, the California Governor's Office of Business and Economic Development (GO-Biz) announced that the first application period for the California Competes Tax Credit (CCTC) for fiscal year 2014-15 will open on Sept. 29, 2014, with $45 million in tax credits available. The application deadline is Oct. 27, 2014.

GO-Biz sets application periods each year. In addition to the Sept. 29, 2014, through Oct. 27, 2014 application period, GO-Biz has announced the following application periods for fiscal year 2015-15:

  • Jan. 5, 2015, through Feb. 2, 2015 ($75 million in tax credits available)
  • March 9, 2015, through April 6, 2015 ($31.1 million, plus any remaining unallocated amount, in tax credits available)

The CCTC program allows businesses to apply for and negotiate California income tax credits based upon the number of jobs to be created or retained in California, as well as other investments to be made in the state. The CCTC is not limited to certain geographic enterprise zones and related zone-apportioned income and may be allocated to members within a combined group.

To qualify for a credit allocation, a business must:

  • Anticipate California employment growth over the next five years,
  • Be considering relocating some or all business operations outside California, or
  • Be considering expansion inside or outside California.

Factors that will be considered by GO-Biz in determining whether to grant a credit under the program and how much credit to provide include:

  • Number of jobs created or retained
  • Compensation paid to employees
  • Amount of investment
  • Extent of unemployment or poverty in business area
  • Other incentives available in California
  • Incentives available in other states
  • Duration of proposed project and duration of commitment to remain in California
  • Overall economic impact
  • Strategic importance to the state, region or locality
  • Opportunity for future growth and expansion
  • Extent the benefit to the state exceeds the amount of the tax credit

Because the amount of available credit is limited, businesses making California retention and expansion decisions should consider starting the application process now.

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