Discover more information about the California Competes Credit application a tax credit incentives program recently created by the state of California. Companies looking to apply need to do so before April 14, 2014 - O'Connor Davies CPAs - New York CPA Firm

1. Tax Notes Newsletter
“California Competes” Credit Applications Being
Accepted Through April 14
Sandy Weinberg, Principal, Director of State and Local Taxation
California has recently revamped its tax incentive and credits opportunities. New items
include a sales and use tax exemption for manufacturers and companies conducting scientific
research, a new hiring credit, and an income tax credit called “The California Competes Tax
Credit” (hereafter “CCC”).
To take advantage of the CCC in 2014 taxpayers must move quickly. Though only recently
introduced, the California Governor's Office of Business and Economic Development
(nicknamed “GO-Biz”) is only accepting applications through April 14, 2014.
The CCC is unique because there are no specific criteria leading to its award. In fact,
businesses must compete for a portion of the credits made available every fiscal year, and
must negotiate credit agreements with GO-Biz for part of the pool. $30 million of tax credits
are available this year to reduce business income and franchise taxes for eligible companies.
That number increases to $150 million in fiscal 2014-15 and $200 million thereafter through
2017.
Credit awards will be based on the following factors, all related to a taxpayer’s California
business:
Number of jobs created or retained
Compensation paid or proposed to be paid (inclusive of fringe benefits)
California investment
Unemployment or poverty in business location
Other incentives available to the business, both in/out of California,
including those from state/local governments and other entities
Duration of the businesses’ proposed project and the commitment to
California
Overall California economic impact from the business
Strategic importance to the state, region, or locality
Opportunity for future growth and expansion
Extent to which the anticipated benefit to California exceeds the projected
tax credit benefit to the business
The application process has two phases. Phase I includes completion of an online form stating
the credit requested and the aggregate employee compensation/investment package. The
credit will be divided by the investment and compensation amounts to create a cost-benefit
ratio. GO-Biz will use that ratio to identify the most competitive applicants, which must
satisfy a second set of tests.
Sandy Weinberg
Principal
sweinberg@odpkf.com
203.323.2400

2. Phase II applicants will be evaluated based on several factors, including the extent of
unemployment or poverty in the proposed investment area, other available incentives,
number of employees, strategic importance of the business to the state, and the opportunity
for additional expansion.
The regulations also call for a negotiation that will consider incentives offered by other states
and the extent to which the anticipated benefit to California exceeds the anticipated benefit
to the taxpayer. GO-Biz will request supporting evidence from the business.
If accepted, the CCC will be finalized in an agreement between the taxpayer and GO-Biz
specifying the tax years, minimum compensation provided to new full-time employees,
whether the credit will be provided in increments based on mutually agreed-upon
milestones, and recapture provisions. The terms of the contract (other than privileged and
confidential information) will be made public. Once the agreement is approved, GO-Biz will
notify the California Franchise Tax Board, which will enforce the agreement.
Twenty five percent of the CCC is set aside for small businesses having aggregate annual gross
receipts of less than $2 million. GO-Biz must make awards by the start of the next fiscal year
on July 1.
As noted above, California businesses need to act by April 14th if they wish to take part in this
process.
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