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Brian Gordon, CPA, is the Director of State and Local Taxes at Sanders Thaler Viola & Katz LLP. Previously, Brian was with NYS Department of Taxation and Finance as the District Audit Manager in Manhattan and Brooklyn. He is a member of the NYSSCPA New York, Multistate & Local Taxation Committee and writes and speaks on various tax issues. He can be reached at 516-704-7130 or 516-510-6041, and email: bgordon@st-cpas.com.

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New California Tax Credit

By Brian Gordon

There is a new tax credit offered to business in California, businesses planning to expand in California or planning to start-up in California called the California Competes Tax Credit.

Any business can apply for the California Competes Tax Credit. The credit is available statewide to all industries. However, while there are no geographic or sector-specific restrictions, the purpose of the California Competes Tax Credit is to attract and retain high-value employers in California that provide their employees good wages and benefits.

Tax credit applications will be approved by a statutorily created “California Competes Tax Credit Committee,” consisting of the State Treasurer, the Director of the Department of Finance, the Director of GO-Biz*, and one appointee each by the Speaker of the Assembly and Senate Committee on Rules.

*The Governor’s Office of Business and Economic Development (GO-Biz) was created by Governor Edmund G. Brown Jr. to serve as California’s single point of contact for economic development and job creation efforts. GO-Biz offers a range of services to business owners including: attraction, retention and expansion services, site selection, permit streamlining, clearing of regulatory hurdles, small business assistance, international trade development, assistance with state government, and much more.

Businesses that apply for the tax credit that are only in the planning stage are not required to have an existing signed lease or purchase agreement; but, applicants should have an idea of the general location in California because this will be taken into account. The applicant should also be able to demonstrate the finance mechanism(s) it has secured or will use to secure its facility(ies).

One of the considerations for the credit is Aggregate Employee Compensation. This is an estimate of the total projected salaries for the net increase in full-time employees to be employed in California by a business over a 5 tax year period.

There is no minimum number of jobs that must be created. However, the credit will be awarded on a competitive basis. The applications from small businesses will be compared to the applications from other small businesses.

The applicant requests a specific tax credit amount. The amount of the credit will be based on the following factors:

  • The number of jobs the business will create or retain in this state.
  • The compensation paid or proposed to be paid by the business to its employees, including wages, benefits, and fringe benefits.
  • The amount of investment in this state by the business.
  • The extent of unemployment or poverty where the business is located.
  • The incentives available to the business in this state, including incentives from the state, local government, and other entities.
  • The incentives available to the business in other states.
  • The duration of the business’ proposed project and the duration the business commits to remain in this state.
  • The overall economic impact in this state of the business.
  • The strategic importance of the business to the state, region, or locality.
  • The opportunity for future growth and expansion in this state by the business.
  • The extent to which the anticipated benefit to the state exceeds the projected benefit to the business from the tax credit.

In addition to the California Competes Credit, the Governor’s Economic Development Initiative (GEDI) provides a partial sales tax exemption and a hiring credit that will be administered by the Board of Equalization and the Franchise Tax Board respectively.

Please call Brian Gordon, Director of State and Local Taxes at Sanders Thaler Viola & Katz if you are interested in finding out more about the California Competes Tax Credit at 516-938-5219.

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