Is Your Business Taking Advantage of CA Tax Credits and Incentives?
What’s available and who qualifies
When you own a business, you know the importance of maximizing your bottom line. Gladly, California offers a variety of tax credits and exemptions for businesses of all sizes and industries. With tax season just around the corner, here is a summary of the tax incentives for your business to consider.
California Competes Tax Credit
The California Competes Tax Credit is open to businesses of all sizes and industries and aims to offset state income tax. The most recent round of credit grants saw $69 million in credits going to 90 companies, creating approximately 6,000 new jobs in California. 25% of grants under the program are reserved for small businesses.
Businesses coming, staying or growing in the state of California – in particular, businesses with planned increases in full-time employees and capital investments.
The application process includes an in-depth analysis of your business operations, including the number of jobs created, compensation, unemployment in the area, etc.
Once a business applies for the credit, GO-Biz will compare the cost-benefit ratio of all applicants, followed by a more in-depth qualitative analysis of the top applicants. From there, selected applicants granted credits will enter into contractual terms and conditions with GO-Biz — which ultimately awards and allocates the credit to the businesses.
January 2, 2018 – January 22, 2018: $100 million available
March 5, 2018 – March 26, 2018: $55.4 million available
Partial Sales and Use Tax Exemption
The program provides a sales tax exemption of 3.9375% for basic manufacturing equipment. The partial exemption only applies to state sales and use tax rate portion.
- Research and Development in Biotechnology
- Research and Development in the physical sciences
- Research and Development engineering
- Research and Development in life sciences
Purchase of qualified property, including:
- Machinery and equipment, including component parts & contrivances
- Equipment or devices used or required to operate, control, regulate, or maintain the machinery
- Tangible personal property used in pollution control
- Special purpose buildings and foundations used as an integral part of the manufacturing, processing, refining, fabricating or recycling process
Use of qualified property for the allowed uses, including:
- Any stage of the manufacturing, processing, refining, fabricating or recycling process
- Research and development
- To maintain, repair, measure, or test any qualified tangible personal property described by the above, or for use by a contractor purchasing that property for use in the performance of a construction contract for a qualified person
California’s template for exemption certificates for vendors is available here.
Sales and Use Tax Exclusion Program
Effective through 2020, California is offering a Sales and Use Tax Exclusion program for advanced manufacturers and manufacturers of alternative sources and advanced transportation technologies. Approved applicants receive a sales and use tax exclusion award for purchases of qualified property for their projects. There was $100 million allocated in 2017 and applications are accepted on a rolling basis.
The exclusion is available to four categories of manufacturers in California:
- Alternative source product manufacturers
- Manufacturers of advanced transportation technologies
- Advanced manufacturers
- Manufacturers that process recycled feedstock or utilize recycled feedstock in the production of another product or soil amendment
Apply online here.
Employment Training Panel
The Employment Training Panel is a state agency that provides funding to employers to assist in employer-specific training with the goal of creating good paying, long term employment in the state.
California employers that provide their employees with training opportunities to advance their career.
- Employer to fill out preliminary application
- An analyst is assigned to the project to review the specified training needs, develop a training plan and request funding and prepare the application
- Panel review of the application
Apply online here.
Small Business Loan Guarantee Program
The California Small Business Loan Guarantee Program encourages banks to provide loans to small businesses in order to enhance job creation and invest in California communities.
- Small businesses located in California with 1-750 employees
- Eligible Nonprofits
Terms of the loan
- Loans up to $20 million
- Max guarantee $2.5 million or 80% – 90% of the loan, whichever is less
- Guaranteed up to 7 years
- Loan interest rates negotiated between lender and borrower
- Qualifications based on lender criteria
Apply online here.
Jump Start Loan Program
Jump Start provides microloans, technical assistance and financial literacy training to small businesses in low-income communities. Borrower’s annual income must be equal to or less than the statewide average.
- Small businesses in California
- Borrower and business must be located in a low-income community (defined as a county with a per capita income equal to or less than 115% of the state average, or a city or unincorporated area with an unemployment rate equal to or greater than the state average)
Apply online here.
California Motion Picture and Television Production Credit
Based on expenditures incurred for film and television productions, this credit is available to offset California income, franchise or sales and use tax liabilities. In 2014 the credit was expanded and the amount allocated increased from $100 million to $330 million starting fiscal year 2015/2016.
Qualified taxpayers must apply to the California Film Commission, which issues a certificate. Taxpayers may use the old and new credit simultaneously to reduce income, franchise, or sales and use tax liabilities.
New Employment Credit
The New Employment Credit is available to qualified California employers in designated geographic areas that have a net increase in full-time employees. The credit is equal to 35% of the qualified wages for the first 60 months of employment and is offered for each taxable year between January 1, 2014 and January 1, 2021.
The business must be located in a designated geographic area, which include:
- A former Enterprise Zone or LAMBRA
- A newly created Designated Census Tract
- Designated areas of high unemployment
College Access Tax Credit
The College Access Tax Credit (CATC) can be used to offset or reduce taxes for taxpayers and businesses that contribute to the Cal Grants, the largest source of educational financial aid in California. The credit is determined by the percentage of the amount contributed to the Fund each taxable year. The application process for 2017 has closed, however, the application period for the 2018 taxable year will open March 2018.
How to qualify
All of the following must occur in order to be eligible for the credit:
- The California Educational Facilities Authority must receive a completed application by their designated deadline
- The California Educational Facilities Authority issued a Notice of Allocation Reservation
- The California Educational Facilities Authority was provided with a Contribution Submittal Form and contribution by the due date listed on the Notice of Allocation Reservation
- The California Educational Facilities Authority provided a signed College Access Tax Credit Certification
Apply online here.
Not sure what tax credits or exemptions you qualify for? Contact our tax experts at 925.271.8700 or at email@example.com.