The Governor’s Office of Business and Economic Development (GO-Biz) is California’s lead entity for business and job creation efforts. GO-Biz was created by Governor Edmund G. Brown Jr. in 2011 and offers a range of services to business owners including attraction, retention, expansion, site selection, permit streamlining, international trade development, and assistance with state government. Governor Brown signed AB 93 and SB 90 into law on July 11, 2013. This legislation introduced several new tax incentives as part of the Governor’s Economic Development Initiative (GEDI).
The California Competes Tax Credit (CCTC) is an income tax credit available to businesses that want to relocate to California or remain and grow in the state for taxable years beginning on or after January 1, 2014 and before January 1, 2025.
Taxpayers enter into a written agreement with GO-Biz which sets forth the amount of CCTC to be allocated to the taxpayer. Agreements will be negotiated by GO-Biz and approved by the California Competes Tax Credit Committee. The amount of CCTC to be allocated to a taxpayer is based on the following factors:
The aggregate amount of CCTC that may be allocated in any fiscal year is as follows:
Each fiscal year, 25% of the aggregate amount of the CCTC permitted to be allocated is reserved for small businesses with net gross receipts less than $2 million and no more than 20% may be allocated to any one taxpayer. Any credit that is not utilized may be carried over to reduce the net tax in the following taxable year and succeeding five taxable years. The CCTC earned by members of a combined reporting group may be assigned to an affiliated corporation that is a member of the same combined reporting group.
The New Employment Credit (NEC) is a California income tax credit available to employers for taxable years beginning on or after January 1, 2014, and before January 1, 2021. To obtain a credit a qualified taxpayer must hire a qualified full-time employee on or after January 1, 2014, and pay qualified wages attributable to work performed by the qualified full-time employee in a Designated Geographic Area (DGA), and receive a Tentative Credit Reservation (TCR) from the Franchise Tax Board (within 30 days of complying with the EDD new hire reporting requirement) for that qualified full-time employee. In addition, a qualified taxpayer must annually certify each qualified employee. The following criteria will qualify an employee for the NEC:
The credit is based on 35% of qualified wages or wages between 150% (or $10 for a Pilot Area) and 350% of minimum wage. The maximum credit claimed over 5 years is currently $63,700 based upon a full-time employee working 2,000 hours each year. In order to generate an allowable credit, the qualified taxpayer must have a net increase in its total number of full-time employees working in California, when compared to its base year both based on annual full-time equivalents.
Effective July 1, 2014, equipment acquired for use in manufacturing or research and development could be partially exempt from California’s sales and use tax (SUT). Currently California imposes a statewide sales and use tax rate of 7.5% (plus applicable district tax) on sales and leases of property. With the new exemption, businesses would only pay 3.3125 % of the statewide sales and use tax, saving $41.88 for every $1,000 in purchases of qualifying property.
Tax-exempt property could include machinery and equipment; equipment and devices used or required to operate, control, regulate, or maintain the machinery; pollution control items; and certain special purpose buildings and foundations. To qualify for the exemption, the property must be used 50% or more in one of the following activities:
There is a $200 million exemption limit per person on purchases of qualified property in any calendar year. The exemption applies to both sales and leases of qualifying property and expires on July 1, 2022, unless otherwise extended. The exemption is available only to businesses classified under specified 2012 NAICS codes 3111–3399 (manufacturing), 541711 (biotech R&D), and 541712 (physical, engineering, and life sciences R&D).
We have worked closely with GO-Biz to maximize the savings available to our clients. Our services include the following: