Did you know that there are over $200 million in tax credits available to California businesses each fiscal year?

Two of these employment-based tax credits are part of the governor’s Economic Development Initiative (GEDI) and are the CA New Employment Tax Credit (NEC) and the California Competes Tax Credit.

The general eligibility criteria for these tax credits and incentives under the GEDI include:

• Expansion plans to create jobs in California

• Investment in California

• Opportunity for future growth in California

• Being at risk for leaving California

Whether you are expanding in California or relocating your business to the golden state, there are many tax advantages waiting to support your efforts. (Money that was once allocated to the EZ program is now directed toward the GEDI.)

California New Employment Tax Credit (NEC)

The NEC tax credit is for taxable years beginning on or after January 1, 2014 and before January 1, 2021, and is available to qualified employers with a net increase of full-time employees in CA during the taxable year.

The credit is awarded to employers with businesses located in designated geographic areas (DGAs). Both the employer and employees must meet a range of requirements. 

The CA New Employment Tax Credit is based on 35% of qualified wages, or wages between 150% (or $10 for a Pilot Area) and 350% of minimum wage.

California Competes Tax Credit 

This income tax credit is available to businesses looking to relocate to California or stay and grow in California. It is a tax credit against the income tax due to the Franchise Tax Board. California Competes is non-refundable, has a six-year tax carryover, can be distributed over six years and may be used to offset the Alternative Minimum Tax (AMT).

The amount allocated for California Competes has been set to increase over several years, starting from 2013-2014:

• $30 million in 2013-2014

• $150 million in 2014-2015

• For each fiscal year thereafter, until fiscal year 2018-2019, $200 million.

• No maximum allocation has been set for fiscal years after 2018-2019.

There is a two-step application process for California Competes. Then, the final steps involve receiving the tax credit agreement and reporting to include the credits on your tax return.

Meeting all of the requirements for the NEC and California Competes – creating accurate documentation, applying and subsequent reporting – is a fairly cumbersome, complex process. Nonetheless, those willing to follow all of the steps are rewarded with significant tax savings.

That’s why partnering with a tax consultant who has experience in CA credits and incentives is recommended. Your expert tax consultant helps you understand every requirement and each step in the application process so you claim the credit properly.

With the right guidance, you arrive at your tax savings destination with minimal disruption to your daily business operations, while reaching your tax savings destination.

Don’t know if your business qualifies for GEDI tax credits and incentives this year? Schedule your 30-minute, no-cost consultation with a tax expert at CTI today.