The California Competes Tax Credit (CCTC) is a discretionary state tax incentive available to businesses that locate, expand or remain in California. If your business is creating well-paying jobs in California, you may qualify to receive this valuable tax credit against your company’s California tax bill.
The CCTC program is designed to keep businesses in the state, as well as encourage businesses to move to the state or expand their current CA operations. The incentive comes in the form of an income tax credit resulting from a Tax Credit Agreement negotiated by the Governor’s Office Of Business And Economic Development (GO-Biz) and approved by the California Competes Tax Credit Committee.
The amount of the tax credit award depends on each company’s unique set of factors, focused primarily on future capital investment, employment growth and economic impact to the state of California.
California Competes credits have been as low as $20,000 and as high as $6 million. All applicants compete against one another for a limited pool of funds with a special 25% allotment for small businesses (defined as a business with $2 million or less of gross receipts). Therefore, this program is applicable to businesses of all sizes.
CCTC highlights include:
|Period||Tentative Credits Available|
|September 29, 2014||October 27, 2014||$45 million|
|January 5, 2015||February 2, 2015||$75 million|
|March 9, 2015||April 6, 2015||$31.1 million plus unallocated funds from previous periods|
As part of securing the CCTC benefits, a business needs to estimate their information over a five-year period (filing year plus four subsequent tax periods) and follow four steps in capturing any available benefits:
Determination of state return on investment
Consideration of various factors
Receive final tax credit agreement
Include credits on tax return
The cost-benefit ratio is a critical component that helps determine the return on investment for the state of California. ROI is one of the main considerations in determining whether an application passes the initial review to move from Phase 1 to Phase 2 of the application process.
Application (Phase 1)
Automated process to determine the cost-benefit ratio for this employment tax incentive by evaluating a combination of the following factors:
Application (Phase 2)
Consideration of the applicant’s cost-benefit ratio and the following additional factors:
Terms and conditions of the agreement include:
Our Tax Navigation experts use that experience to help you quantify the projected benefits and develop a viable award request that moves you into the smaller pool of phase-two applicants.
Even more vital to your success, we help you craft an accurate yet compelling narrative, as required, adding persuasive power that provides you with a competitive advantage during the phase-two committee review.
We look forward to guiding you towards taking advantage of the California Competes Tax Credit. To learn more or begin your application process, click here to contact an expert CTI Tax Navigator today.
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