Next round of the California Competes Tax Credit program set to begin in March

Cal-Competes

The California Governor’s Office of Business and Economic Development (GO-Biz) will begin accepting applications for the 3rd round of the FY 2014-2015 California Competes Tax Credit Program on March 09, 2015. This is the last round of funding for FY 2014/15, and has been allocated $31.1 million, plus approximately $14 million in funds that were not awarded in Round 1 at the January 15th Committee Meeting.

Depending on the final award amount of Round 2 FY 2014/15, there could be additional funds for Round 3. However, as of February 2015, there is approximately $45 million allocated for this current round. Applications for this round will be accepted through 11:59 PM Pacific Time on April 06, 2015.

The California Competes Tax Credit is a discretionary fund capped at $151.1 million for the 2014-2015 fiscal year and $200 million annually for the 2015-2016 fiscal year through the 2018- 2019 fiscal year. No more than 20% of total funding may be allocated to any one taxpayer and 25% of the total funding is allotted for small businesses.

To learn more about the new round, download our brief report on the funding available, program dynamics, and key milestones.

Join H&A experts for a complimentary webinar on how to capture the California Competes Tax Credit for your business. During a brief presentation, participants will learn more about the dynamics of the program, as well as, best practices for submitting a successful application. Following the presentation, the experts will open up the webinar for an interactive Q&A session with attendees. Register for the webinar here: California Competes Tax Credit – New Funding Announcement Webinar Registration

California Competes Tax Credit – New Funding Announcement Webinar
Tuesday, March 3, 2015
2:00 PM EST / 11:00 AM PST
Complimentary
Register Now
California Competes Tax Credit Program
BackgroundIn July 2013, Governor Jerry Brown signed Assembly Bill No. 93 to replace California’s existing incentive programs with a new Economic Development Initiative. The California Competes program is the centerpiece of this initiative and provides for a location agnostic tax incentive program for new and retained businesses. California Competes is a deal closing credit which is administered by the California Franchise Tax Board.

Availability

California Competes is a discretionary fund capped at $151.1 million for the 2014-2015 fiscal year and $200 million annually for the 2015-2016 fiscal year through the 2018- 2019 fiscal year. Total funding for this round is $45 million. No more than 20% of total funding may be allocated to any one taxpayer and 25% of the total funding is allotted for small businesses.

Structure

California Competes tax credits may be realized in full or phased-in upon reaching negotiated milestones. The credits can be applied to corporate income taxes only and they may be carried forward for up to 6 years. Credits will be allocated to taxpayers as set forth in a written agreement between the company and GO-Biz. The agreement process provides flexibility in the ability to negotiate potential transfers of credits.

Process

Applications for this round of funding for FY 2014-2015 will be evaluated following the April 6th deadline for submission. The evaluation process occurs in multiple phases and culminates in a public committee meeting. The anticipated time from application to award is 45 – 90 days. Evaluation of applications will occur in two phases.

Phase I: Projects are scored on a cost/benefit ratio determined by the project’s investment and total compensation paid to new employees. This economic impact is weighed against the amount of the credit sought. The top applications requesting an aggregate of 200% of the available amount will move to Phase II.

Phase II: In Phase II GO-Biz will examine a broad range of project-specific factors, both qualitative and quantitative, including:

  • Job retention
  • Other incentives available
  • Opportunities for future growth
  • Economic impact in California
  • Extent of unemployment or poverty in the area
  • Strategic importance
  • Fringe benefits

Negotiation & Award

After passing Phase II evaluation, applicants negotiate contracts with the state. The state is willing to negotiate certain aspects of the California Competes Tax Credit Agreement, which include the minimum annual and cumulative average annual salary of full-time employees hired, as well as the allocation of tax credits. However, it should be known that the state is reluctant to allocate more than 50% of the tax credits in year 1. Upon arriving at a recommendation, all credit agreements are made public, including the following terms:

  • Minimum employee compensation
  • Minimum retention period
  • Credit distribution period / milestones
  • Recapture provision

All award information including company name, location, details of award will be made public prior to committee meeting. The five-person California Competes Committee will accept or reject a project credit application based on the recommendation from GO-Biz.

H&A releases new report on U.S. economic development policy and public incentives

Hickey & Associates, a global site location, incentive advisory, and workplace solutions firm, has released a new report on the changes to economic development policies over the past year in the United States.  The report, H&A Legislative and Incentive Update – 2014 Recap and 2015 Look Ahead, also provides a preview of the programs and laws to be debated in state capitols in 2015.

Legislative Update

Throughout the nation, States are embracing the competitive business climate with innovative economic development policies to attract the highest value industries and diversify their economies, thus bringing quality jobs and much-needed capital investment.  Often times, these policies include the utilization of public incentives as a tool to induce companies to locate or remain in the community.  At the same time, legislators are placing more focus on transparency and ensuring that the return on investment to the taxpayer meets expectations.

Over the past twelve months, state legislators established a number of new programs, expanded others, and took the axe to the remaining.  Nevada awarded one of the largest public incentive packages in the nation’s history to recruit Tesla Motors, as Texas has put under review the Texas Enterprise Fund, a program championed by now former Governor Rick Perry.  Meanwhile, California vastly expanded their incentive for film and television productions to rebuild one of their most famed industries, all while North Carolina drastically reformed their controversial tax credit for similar activities. Several States also introduced new measures to expand scrutiny on these programs and the businesses that receive funding.

Looking ahead at the upcoming year, each and every state legislature is scheduled to convene.  A year where their tax revenues are to reach levels unseen for years.  Will these new levels expand their economic development war chests?  With nearly half of the States implementing minimum wage increases this year, will economic development policies be modified to meet the incremental labor costs?  These are just a couple of the many questions to be answered over the coming months across the United States.

“Over this past year, we all witnessed an evolution of economic development policy across America.  Whether it was the debate over tax credits for House of Cards, or the rollout of a new generation of incentive programs in States like California and New Jersey, taxpayers and business owners alike are set to navigate a new future in how communities attract and recruit investment,” remarked Jason Hickey, President and CEO of Hickey & Associates.  “As we look ahead to 2015, we can only expect more discussion and examination of these policies from legislators, all while having increased revenues from their taxpayers.”

With three decades of experience in global corporate site selection, public incentive advisory, and workforce solutions, Hickey & Associates represents clients in a broad range of industries and regions. Utilizing state-of-the-art tools and techniques, the firm assists businesses in determining the best location to expand, relocate or consolidate anywhere in the world, all while guiding companies to secure, manage, and administer in excess of $2 billion in Public Incentive Partnerships.

To download a copy of the report, please visit our website: H&A Legislative and Incentive Update – 2014 Recap and 2015 Look Ahead.