Remaining California Competes Credit Application Periods for Fiscal Year 2019-2020
- January 2, 2019, through January 21, 2019 ($75 million available)
- March 4, 2019, through March 26, 2019 ($71.8 million-plus any remaining unallocated amounts from previous periods)
How It Works
The California Competes Tax Credit is available for all taxable years that begin on or after January 1, 2014, and before January 1, 2030. The amount of available credit for each fiscal year is capped at a particular amount, which makes the application process very competitive.
To begin the application process, taxpayers must submit an online application with the Governor of California’s Office of Business and Economic Development, commonly referred to as GO-Biz. Applications are accepted only during certain application periods, which are outlined above.
Once submitted, the application begins a two-step evaluation process. The first step of the process includes an analysis of the amount of credit requested relative to the taxpayer’s proposed employment and project investment. The top-ranking applications (i.e., those with the best ratios) are moved forward to the second step of the evaluation process which considers the following factors: the taxpayer’s plans for creating and retaining jobs; compensation to be paid, including wages, employee benefits, and fringe benefits; duration of the proposed project; the opportunity for future growth; training opportunities offered by an applicant to its employees; and the extent to which the credit will influence the taxpayer’s ability and/or willingness to create jobs in California that might not otherwise be created in the state by the applicant.
When the evaluation process is complete, selected taxpayers will be given the opportunity to negotiate the terms and conditions of a credit contract. This tax credit agreement, which expressly defines the taxpayer’s commitment to certain employment or project investment requirements (referred to as “milestones”), is negotiated between the taxpayer and GO-Biz, and then must be approved by the California Competes Tax Credit Committee. The committee only meets during certain periods. For the 2019-2020 fiscal year, the committee meets on the following schedule:
- April 23, 2020
- June 18, 2020
Once approved, if the taxpayer meets its milestones for a taxable year as specified in the credit agreement, then the credit for that year is earned and may be claimed on the taxpayer’s tax return. If the milestones for a taxable year are not met, the credit is not earned for that taxable year.
Who Is Eligible
Since there are no industry or size restrictions, any California business may apply. To ensure that credits are available to a greater number of taxpayers, no more than 20 percent of the total available credits may be granted to a single taxpayer. All taxpayers should be encouraged to apply even if it appears that the business would be unable to use 100 percent of the credit granted for any particular year. Although the credit is nonrefundable, it may be carried forward up to six years.
Targets
Anyone looking to expand via headcount or via capital expenditures in California, or if receiving the credit will prevent lay-offs or relocation from California. Taxpayers who may benefit from this tax incentive should consult their tax advisor to further explore their qualifications.
