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1 California Competes Tax Credit Program

Presented by Bruce Dobb, Concerned Capital

March 2014

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Concerned Capital• Concerned Capital is a social benefit corporation helping

small business grow and create positive social change. • Use tax credits & government grants and/or loans to create

jobs & green technology.• Help companies grow in urban areas • I’m Bruce Dobb, CEO and founder • Contact Info: bdobb@concernedcapital.org

323 855-9445

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Disclaimer: Not your accountant or lawyer and not providing tax or legal advisory services.

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Today’s Webinar

• Overview - What is the California Competes Tax Credit?

• Does it applies to your company and how you can use it

• The application process - April 14th

deadline• Questions and Answers as we go

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The OverviewThe Governor’s Office of Business and Economic Development (G0 Biz Web Site) newly created to attract and keep businesses in California

• Financial assistance and loan programs • Labor availability and education information • State and local permit assistance • Transportation and infrastructure information • Information on incentive programs • Economic and demographic data

.California Competes Tax Credit – IS TODAY’S FOCUS

FY 13/14 application period is March 19 through April 14 GO-Biz administers

.Manufacturing Partial Sales Tax Exemption - Starts July 1, 2014 Board of Equalization administers along with revised Enterprise Zone Tax Credit Program – will not be covered today..

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Advantages of New Program over the Old Enterprise Zone Program• Go to FBI Webinar TAX INCENTIVES FOR THE FASHION

INDUSTRY to understand old program• No voucher process -No application cost-voucher charge is

now $75 per voucher application in LA County.• New program has set-aside for small business with sales less

than $ 2 million per year• No geographic restrictions• Credit can be applied to personal outside income• Old program -

http://www.hcd.ca.gov/fa/ez/enterprise/newmap.html

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California Competes Tax CreditThe California Competes Tax Credit is an income tax credit available to businesses that want to locate in California or stay and grow in California.

Based on 11 factors: • # of jobs to be created or retained •Compensation paid to employees

•Amount of total investment •Extent of unemployment or poverty in business area

•Other incentives available in California •Incentives available in other states

•Duration of proposed project and duration of commitment to remain in this state

•Overall economic impact •Strategic importance to the state, region, or locality

•Opportunity for future growth and expansion •Extent the benefit to the state exceeds the amount of the

tax credit

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Dollars Available

California Competes

Tax Credit - Tentative

amount of credits

available:

•$30 million in fiscal year 2013/14

•$150 million in fiscal year 2014/15

•$200 million in

each fiscal year

2015/16 - 2017-18.

• No more than 20% may go to any one applicant

• 25% of total amount each fiscal year reserved for small business

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What’s In Awarded Agreement

Negotiated written agreement between GO-Biz and the applicant for the credit. Terms and conditions of the agreements to include:

Minimum employee compensation and retention period

Credit distribution period – one to 5 years

Recapture provisions if applicant fails to meet commitments 8

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Who Can Apply

ENTITY TYPES INCLUDE •Individual (sole

proprietor)

•C Corporation

•S Corporation

•General Partnership

•Limited Partnership

•LLC (treated as a partnership)

•LLC (treated as a corporation)

•Other Type

9KEY POINT IS THE CREDIT IS TRANSFERABLE TO PERSONAL TAX LIABLITY

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Application – Phase I

On-line application

submissions ONLY

No fee needed to

apply

Rolling application

process versus

expiration date set

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Evaluation Process

Applications with the highest cost-benefit ratio

will move into the second phase

Applications from small businesses will be compared

to applications from other small

businesses

The first phase is a quantitative evaluation

Entire process to take 90 days

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The Formula for Success

Aggregate Employee Compensation Package + Aggregate Investment Package

Divided by

Amount of Credit Requested

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What’s in this Formula• The number of full-time employees is determined on an

“annual full-time equivalent” (AFTE) basis

• One AFTE employee is: •For full-time employees paid by the hour, 1,750 hours worked for the applicant during the tax year •For salaried full-time employees, 50 weeks worked for the applicant during the tax year

• Only employees that work on average 35 hours or more per week in California are taken into consideration for this computation

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What Counts as Investment

“Investment” is real and personal property purchased related to the applicant’s business that is placed in service in California

Purchases up to one year prior to the date the applicant files its California Competes Tax Credit Application

Projected purchases during the 2014-2018 tax years

Use aggregate investment package calculator at Go Biz Website for final number 14

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Example of One Ratio

.Amount of credit requested = $300,000 over 5 years - $ 60,000 per year

Aggregate employee compensation = $1,431,384.75 over 5 years

Aggregate investment = $1,050,000 over 5 years

$300,000 Divided by $ 2,481,384 ($1,431,384.75+$1,050,000)

Ratio = .1209 15

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Ranking ApplicantsFringe Benefits Provided Employees

Job retention and unemployment/poverty in area Opportunity for future growth and expansion Economic impact in California –Strategic importance

Incentives available in/out of state

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Phase II of the Process

GO-Biz will contact applicants moved into Phase II and additional information will be requested, including: • Description of benefits/fringe benefits provided to

employees • Entity relationship chart, parent company, affiliated

corporations • Financial information and/or related business

documentation to verify information provided in the application

• Readiness and site control 17

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Negotiation and Award Phase

GO-Biz and applicant will negotiate terms of the contract

GO-Biz will recommend fully executed contracts for Committee approval

Contract will be made public prior to the Committee meeting

Committee will either approve or deny the recommendation

Award information will be posted on GO-Biz’s website upon approval by the Committee within 5 business days

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This Works for You If:

1. You’re creating new jobs and investment or faced with a choice of staying or leaving California

2. If you pay State taxes – not everyone does.

3. You’re not JUST creating jobs but will be expanding or adding new investments

4. You can demonstrate how your jobs are critical to the community you’re in

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THANK YOU FOR YOUR TIME 20

• Contact Info: bdobb@concernedcapital.org323 855-9445

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Qualifications for New Hires Under 2014 Revised Tax Credit Program• Unemployed for the six months immediately preceding hire. If the individual

completed a college or similar program and received a baccalaureate, postgraduate, or professional degree, the completion date must be at least 12 months prior to hire. For purposes of this definition, an individual is unemployed for a period if all of the following circumstances apply:

• Not receiving wages subject to withholding.• Not self-employed.• Not a full-time student at a high school, college, university, or postsecondary

education institution.• Veteran separated from the U.S. Armed Forces in the preceding 12 months.• Recipient of the Earned Income Tax Credit in the previous taxable year.• Ex-offender convicted of a felony.• Current recipient of CalWORKS or general assistance in accordance with the

applicable sections of the Welfare and Institutions Code. ---- • NOT REQUIRED FOR CALIFORNIA COMPETES INITIATIVE

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