Taxpayers Drive Away with Over $91 Million of California Competes Tax Credits
On April 13, 2016, California approved $91.4 million of California Competes Tax Credits for 114 businesses to support the creation of more than 8,200 jobs throughout the State. The California Competes Tax Credit (CCTC) provides businesses a potentially significant negotiated income tax credit for increasing or retaining jobs and making capital investments in California. The Governor’s Office of Business and Economic Development (GO-Biz) has set aside over $243.3 million in CCTC funds for the current fiscal year that will run through June 2017.
Does My Business Qualify?
Any business may qualify for the credit. CCTC awards are based on 11 factors that include the number of full-time jobs created in California, compensation (including benefits) paid to California employees, amount of new capital investment in California, the overall economic impact in California, and competition with other states for the project. There is no restriction based upon geography or industry. The two largest recipients in this latest award round are automobile and truck manufacturers. Other recipients include a diverse group of companies including retailers, manufacturers, information technology consultants, beverage producers and accountants.
How Does a Business Get an Award?
There are three application periods for the CCTC during each fiscal year and the multi-phased application period takes approximately three months from start to finish. It is anticipated that the next fiscal year, starting July 1, 2017, will see three application periods with the first one expected to open in late July. Businesses must submit an application within designated application periods.
What is the Benefit?
The CCTC is a dollar-for-dollar offset to California income taxes and may offset alternative minimum tax. The credit is awarded over a five-year period and may be carried over for six years. Each credit award is unique to the company, and based on project specific information. Previous awards have ranged from $20,000 to $15 million. Small businesses with less than $2 million of gross receipts may be eligible for higher awards as a percentage of investment.
How Can Andersen Tax Help?
Andersen Tax has helped clients obtain millions of dollars in CCTC awards since the program’s inception in 2014. Our experienced Credits & Incentives (C&I) specialists help companies navigate through the three-phase application process. If your business is considering investing within the State of California, our C&I team can help to assess if a CCTC application would align with your business needs. Potential applicants should consider preparing an application package prior to the anticipated July/August submission period for the 2017/18 fiscal year.
Our C&I specialists are a part of our highly skilled state and local tax team which includes professionals with law, accounting, public sector and business management backgrounds. This complement of professionals will help align your business goals and tax benefits. We are not just a credit and incentive negotiator – we help taxpayers support, report and defend tax credits and incentives.