California Competes Tax Credit makes it possible for businesses to get financial help. This guide helps you understand the basics of the tax credit.
The goal of the California Competes Tax Credit (CCTC) is to increase the number of full-time jobs in CA by providing a tax credit to businesses who provide them. No matter what size, if you plan to start a new business or grow your existing business in CA by creating new jobs and investing in your business, you could potentially receive these credits in installments over the next five years.
How To Apply For The CCTC
There are no restrictions for eligibility on business size, location or industry. As long as your business can demonstrate that receiving the credit will impact the ability and/or willingness to create jobs in CA that would otherwise not be created, you should apply.
Who Can Apply For CA Competes Tax Credit?
The target applicants for the CCTC are:
- Businesses expanding in California
- Businesses new to California
- Businesses at risk of leaving California
- Businesses relocating within California
Requirements For Application
To apply, there is no minimum required number of jobs you need to create. However, the CCTC is awarded on a competitive basis surrounding the number of full time jobs (35+ hours/wk) being added to your business. You’ll also need to present your investment plan into your business as part of the application process.
GO-Biz is the department that has been entrusted with the evaluation of applications. Here are the main factors they consider as they read the application and do their own research about your company.
- Job creation or retention: The number of jobs you create and retain throughout the next five years is critical.
- State, region, or locality importance: Businesses from any location, in-state or out-of-state, can apply as long as they plan to do business in CA.
- Offerings of training to employees: Training aids in the retention of employees and may affect your ability to implement your plan successfully.
- Availability of incentives: There may be other incentives that are available to your business in your area.
- Growth and expansion opportunities: GO-Biz will consider the type of business you run and whether there are foreseen growth and expansion opportunities expected in your industry.
- Invested capital: The amount your business plans to invest into the state is a crucial piece of the application.
- Employees compensation: The proposed wages benefits, and fringe benefits that you plan to offer to your employees
- Effects on the economy: The overall effect your jobs will have on the state economy
- Poverty and unemployment level: Businesses who plan to be in areas of high unemployment or high poverty may automatically advance to the second phase of the application process.
- Term of the proposed project: The duration of the project as well as the duration that the business plans to remain in CA shows how committed you are to the state’s economy.
Application Process Of CA Competes Tax Credit
The application process is competitive. Each phase is designed to narrow down the number of applicants. It is important to provide a complete, descriptive picture of your business plan in your application.
Phase 1: Quantitative Analysis
This part of the process focuses on a ratio between three distinct factors: the amount of credit requested divided by the sum of the employee compensation and your investment. The applicants with the most favorable cost-benefit ratio will move on to Phase II. Applicants who are in high unemployment or high poverty areas as well as those who indicate the business will occur outside of CA without this credit may move on to Phase II regardless of the ratio.
Phase 2: Qualitative Analysis
These key economic criteria are analyzed during this stage of the application.
- Economic impact
- Extent of unemployment/poverty in the project area
- Number of retained employees
- Opportunity for growth/expansion
- Other incentives available
- Amount of wages/benefits
- Strategic importance
- Training opportunities offered to employees
- Other information requested
Phase 3: The Negotiation Stage
During this step of the procedure, an agreement is negotiated by a committee to create well defined terms and conditions surrounding employee compensation, retention period, the distribution of the credit over the next 5 years, and recapture contingencies if the applicant fails to keep commitments.
Phase 4: Committee Review and Award
Once you are granted an award, the law requires GO-Biz to post CCTC recipients information on its website. The Franchise Tax Board will review the agreement annually to confirm the agreement compliance.
Let Professionals Assist You In Preparing CA Competes Tax Credit
Creating a persuasive argument and producing a strategic 5-year business plan as part of the application process may seem like a daunting task. Use our expertise at J.R. Martin & Associates to help you uncover your potential economic impact and compose a successful application for the CCTC.