California Competes Tax Credit application period opened March 9

Multistate tax alert | March 10, 2015

The California Competes Tax Credit (“CCTC”) is an income tax credit available to businesses expanding in or relocating to California. The CCTC was enacted on July 11, 2013, and was first available to taxpayers in 2014 for fiscal year 2013/2014. For fiscal year 2014/2015, the Governor’s Office of Business and Economic Development (“GO-Biz”) authorized $151.1 million in available CCTC to be allocated over three application periods. The third and final fiscal year 2014/2015 application period opened on March 9, 2015, and will run through April 6, 2015. This tax alert summarizes the CCTC and provides information on the application process.

Summary of the CCTC

The CCTC is a competitive negotiated incentive income tax credit that is subject to application, review and award.3 The CCTC, unlike most tax incentives, requires applicants in each period to vie against one another for a finite amount of available tax credits. Taxpayers may request any amount of CCTC, subject to a minimum amount of $20,000 and a maximum amount of no more than 20% of the aggregate amount of CCTC available in a fiscal year.4 Once GO-Biz opens an application period, a taxpayer seeking to obtain the credit is required to fill out an online form requesting information about the taxpayer’s project, including but not limited to:

• Information about the taxpayer

• A brief description of the project

• Whether the project is related to expansion, retention, or relocation

• Aggregate number of jobs the taxpayer will create or retain in the state

• Aggregate compensation paid or proposed to be paid to its newly hired or retained employees

• Aggregate investment by the taxpayer in the project

• Material litigation and violations

• Amount of CCTC requested, and over what time period5

Applications are reviewed based upon a two-phase process intended to reward those taxpayers who offer California the greatest economic benefit at the least economic cost.6

1 Cal. Rev. & Tax. Code §§ 17059.2, 18410.2 and 23689.

2 CCTC September 10, 2014, Notice Regarding California Competes Tax Credit.

3 Cal. Rev. & Tax. Code §§ 17059.2, 18410.2 and 23689; Cal. Code. Regs. tit. 10, §§ 8020 and 8030.

4 Cal. Rev. & Tax. Code § 23689(g)(3).

5 Cal. Code. Regs. tit. 10, § 8030.

6 Cal. Code. Regs. tit. 10, § 8030(f)).

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