California Competes is an income tax credit that rewards businesses of all sizes for creating jobs and capital investment in the state. This plan differs from those offered by other states. For one, it isn’t a one size fits all program. The agreements between the state and the business are varied and are individually negotiated.
There are two phases to the qualification process. The first phase is quantitative and includes over a dozen parameters for evaluating companies’ suitability for the program. These include the number of full-time jobs that are created, the amount of the investment, the importance of the business to the locale, the extent of unemployment where the business is located, the duration of the project, and other criteria.
The second phase is both quantitative and qualitative. It revisits some of the requirements from phase one but adds additional criteria. For example, emerging industries are not taken into consideration in phase one; they are in phase two. There are numerous additions once a business gets to the second phase. You can see a list of frequently asked questions, and a list of all the requirements, at the Governor’s Office of Business and Economic Development.
Businesses, in essence, compete for over $180 million in tax credits during one of three application periods. The total amount available varies by year. For the fiscal year 2022-23 the application periods are/were July 25, 2022, to August 15, 2022, January 3, 2023, to January 23, 2023, and March 6, 2023 – March 20, 2023. California Competes credits are negotiated by GoBiz and each business has a “deal” that fits their business and circumstances. Different businesses will operate under different agreements. Another interesting aspect of the program is that if businesses do not live up to their part of the bargain, the state “recaptures” any tax savings from them down the road. According to Bloombergtax.com “…about half of the awards from the program’s first two years and one-third from the third year have been recaptured.” Businesses that fail to meet the agreement with GoBiz can wind up having that benefit recaptured the following year. The state recoups whatever benefit the business received. Companies should be certain they can hold up their end before going through the process and taking the credit.
The details are available to businesses at californiacompetes.org.
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