The final window for the 2017-18 fiscal year, and possibly the program, is now open, but it closes March 26th
The California Competes Tax Credit is an income tax credit designed to incentivize companies to grow quality jobs and invest in projects and real estate in California. It began in 2013 and unless the current law changes, this may be the last opportunity to receive a share of the more than $200 million in awards granted for the 2017-18 fiscal year.
The only remaining window for the 2017-18 fiscal year closes in three short weeks on March 26th, possibly forever. The initial $780 million slated for this program were slated to be awarded according to the following schedule: $30 million in year one, $150 million in year two, and $200 million per year in each of the following three years. The Department of Finance (DOF) annually adjusts the amount available to reallocate (1) credits not awarded in a prior year and (2) “recaptured” credits that were awarded, but not taken advantage of by the intended recipients. In 2016‑17, for example, DOF allocated $243.4 million to California Competes because $39.9 million in tax credits were not awarded during the prior year and an additional $3.5 million had been recaptured.
Here are the key factors that companies who win awards have:
- They are hiring. Cal Competes Tax Credit is designed to incentive companies to grow “quality jobs” in California. Eligible companies can receive $5000 – $20,000 in tax credits for every new employee hired after acceptance into the program.
- They offer “quality” jobs. Cal Competes favors companies offering salaries of $40,000 per year or more. The higher the salaries, the greater the credit awarded.
- They are investing in projects and/or real estate. Businesses that buy buildings or production equipment can get extra-large incentives.
- They are manufacturers or tech companies. Cal Competes favors technology and manufacturing companies. Businesses that develop software, fabricate or assembles products, or produces food have a great chance of winning an award. A company does not need to be in manufacturing or technology to win, but the
- They don’t ask for too much. No one wants to leave money on the table, but companies that ask for too much do not receive a counter-offer. They simply get rejected.
Some examples of Cal Competes winners:
King Shock Technology, a Garden Grove automotive parts company, got a $750,000 tax credit for a pledge to invest $11.5 million and hire 26 people.
Envoy Group, an Irvine online marketing and advertising company, got a $450,000 credit for a pledge to invest $163,400 and hire 69 people.*
LCPtracker, an Orange company that makes wage-tracking software, got a $330,000 tax credit for a pledge to invest $659,000 and hire 46 people.
Lean Technology, an Irvine electrical engineering firm, got a $150,000 tax credit for a pledge to invest $2 million and hire six people.
Pivot Technology Solutions, a San Diego computer consulting firm with an office in Huntington Beach, got a $300,000 tax credit for a pledge to invest $4.1 million and hire 30 people.
Stage One Financial, an Anaheim accountancy firm, got a $30,000 credit for a pledge to invest $35,000 and hire 10 people.
How do we set ourselves up to win?
Though it sounds like meeting eligibility requirements should guarantee success, the road to an award is not that easy. This is a competition with more than 90% of applicants not receiving a reward. Not having the experience or expertise in the company is usually the issue. A CPA that is experienced and knowledgeable about the Cal Competes application process and requirements is a good choice but expect to pay a fee whether you are successful or not. The risk-free, low cost alternative is to work with a firm like DCI that has the specialized tax credit expertise, and a track record for getting substantial awards for companies of all sizes, and across multiple industries.
Getting a credit is not guaranteed, but not applying will guarantee you won’t. A team working with an experienced company like DCI should expect to spend 3-4 hours of executive time to receive a six-figure award. Businesses with revenue under $2MM can receive extra-large incentives. For a no-cost assessment call: (888) 395-0809 or email us at info@DCISolutions.net.
NOTE: This currently is the last scheduled application period for Cal Competes. There is a bill in the state legislature to extend the Cal Competes program and it has the support of the Gov. but approval is not certain.