Since 2013, when California eliminated its statewide enterprise zone tax credit and incentive programs, we have been following the evolution of the California Competes Tax Credit (“CCTC”) program, which seeks to award tax credits to companies locating to or expanding within California. The program has had its issues, certainly. Not the least of which is that few companies have been able to take advantage of the program, either because they do not engage in the type of expansion necessary, or because they are not paying income tax due to excess net operating losses, tax credits (i.e.; Research and Development Credits) or other reasons.
For this fiscal year, the Governor has included in his budget a new grant program called the California Competes Grant Program (“CalCompetes Grant Program”), which promotes that it will allow more companies to qualify and utilize cash grant funds (as opposed to tax credits) in the name of expansion in the state. The goal of this new program is to make funds available to companies which could previously not qualify for the tax credit, but might be making the necessary investments and could benefit from the grant instead.
The primary goal of the CalCompetes Grant Program is to incentivize businesses to choose California for investment and to stimulate the creation of quality, full-time jobs in the state. California’s goal is to attract out of state companies to the state and/or to keep companies from moving elsewhere.
Details of the Program
According to the Governor’s Office of Business and Economic Development (GO-Biz), the first application period for this program will be from January 3 to January 24, 2022. This application period has a cap of $120 million, increased from $80 million.Interestingly, up to $36 Million may be available to a single taxpayer. One of the following criteria must be met for a business to take advantage of the CalCompetes Grant program:
- Will create at least 500 new full-time jobs in California,
- Will make capital investments of at least $10 million,
- The project will take place in a area of high unemployment and/or poverty as defined in the California Competes Tax Credit regulations.
There are several evaluation factors that are considered. A few of them include:
- Number of jobs created or retained,
- Training opportunities offered to employees,
- Compensation paid to employees, including wages and fringe benefits,
- Extent of unemployment and poverty in current or proposed site location.
- Amount of investment
- Extent to which the grant influences the creation of new CA jobs.
Please click here for short synopsis from the state (LINK to PDF). Note that additional information will be forthcoming in the next few months. The next application period will take place from March 7, 2022 through March 28, 2022. Increased from $71.1 million, $104.7 is estimated to be available plus any remaining amounts.
What Does the Future Hold?
If your business is considering investing in new, full-time jobs in California or contemplating relocating some or all of your operations, this grant program might be good for you. Stay tuned to our future blogs for further updates on this new grant program. We are here to help with all of your multistate tax needs. Call us today!
