Thinking of starting or growing a business in California? If so, you might be eligible for “The California Competes Tax Credit” program.

The California Competes Tax Credit

According to the California Governor’s Office, the The California Competes Tax Credit (CCTV) is an income tax credit available to businesses wanting to come to or stay and grow in California. Unlike other states like Texas, which offers a cash grant, California’s $750 million plan offers tax credits for businesses achieving certain goals.

Who is Eligible?

California businesses of any size, anywhere in California, are eligible for the California Competes Tax Credit. 25 percent of the credits will be annually allocated to small businesses. The program is not intended to benefit a specific types of business or those in certain geographical areas. However, small businesses are encouraged to apply as 25 percent of the credit available every year will be set aside for business that have $2 million or less in gross receipts, during the previous tax year.

Eligibility Criteria

Eligibility for the program is based on the number of new jobs created, total investment, average salary, economic impact, strategic importance, and other criteria. To be eligible, the business must have plans to increase the number of jobs or be considering relocating to a different state.

How Much Money is Available?

Recently, The California Competes Tax Credit Committee approved $28.9 million in credits for the 2013/2014 fiscal year. $30 million total was budgeted for the fiscal year. $150 million will be available in the 2014/2015 fiscal year. An additional $200 million, per year, will be available in 2015/2016, 2016/2017 and 2017/2018.

Reviews and Audits

In accordance with the program, the Franchise Tax Board will have the right to review the records and books of businesses with gross receipts more than $2 million per year. Small businesses that make less than the $2 million threshold will not be subject to these reviews. However, they could be audited at a later date.

Restrictions

The tax cannot be used to lower a company’s taxes below a certain level. However, credits can be carried over to reduce taxes for up to 5 years.

How to Apply

The application for California Competes must be submitted online. To start the application process, visit business.ca.gov. The first phase of the application includes a questionnaire asking about information like the number of jobs the business will create and the amount that will be investments the business plans to make. If approved, the business moves on to the next phase which involves interviews with state officials to determine award amounts. According to the Governor’s Office, businesses that are contemplating leaving California for other business friendly states will automatically be advanced to the second phase.

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Topics: California Startups