California Incentives Shake Up

 
California
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On June 27, 2013, the California legislature passed an economic development package that will significantly restructure the tax credits and incentives offered to new and existing corporate citizens.  Lawmakers approved Assembly Bill 93 in part, to enact comprehensive reform to the Enterprise Zone program, California’s keystone economic development tool, as the program has “no statistically significant effect on either employment levels, or employment growth rates.”  In its place, lawmakers have enacted three new tax incentives to encourage growth of middle-class jobs and reduce barriers to employment. 
 
Enterprise Zone Sunset
The Enterprise Zone program (“EZ”) will sunset on December 31, 2013. Employers may make use of the Program’s Jobs Tax Credit for eligible employees employed as of December 31, 2013, for the full five-year period.  Additionally, eligible companies can make use of the Enterprise Zone sales and use tax credit on qualified assets so long as the assets are placed in service by December 31, 2013. 
 
Job Creation Tax Credit
California lawmakers enacted an Enterprise Zone successor program, the Job Creation Tax Credit, which is available to companies in former EZs or designated census tracts who hire qualified employees between January 1, 2014, and January 1, 2021.  Qualified employees belong to one of four categories:  veterans unemployed at discharge; individuals unemployed for more than six months; individuals eligible for Earned Income Tax Credits; and ex-convicts.  Companies must pay qualified employees between 150%-350% of the minimum wage.   This program expressly excludes retailers, restaurants, bars, and casinos from participating.  Companies wishing to take advantage of the Tax Credit will need to submit a reservation to the Franchise Tax Board within 30 days of the eligible employee’s hire. 
 
California Competes Tax Credit
Under SB 93, California will now offer a competitive, negotiable tax credit to companies creating and retaining jobs in the state, the amount of the credit must be negotiated with the Governor’s Office of Business and Economic Development.  Factors that determine the amount of the credit include poverty in the project area, wage thresholds, anticipated job creation and retention, and the proposed project’s economic impact.  While currently there are no established limits or requirements, it is anticipated that the Governor’s Office of Business and Economic Development should provide further program administration rules and regulations in the near future.  All awards will be fully transparent and posted on a government website.  Companies who fail to fulfill their agreements may be required to repay any funds received. 
 
Manufacturing Sales and Use Tax Exemptions
The State is also encouraging manufacturing facilities to bring jobs to California by offering a sales and use tax exemption on the first $200 million of equipment (per combined entity) placed in service between January 1, 2014, and January 1, 2019. 
 
True Partners Consulting’s Credits and Incentives team of professionals can assist your business with all aspects of incentives negotiation and compliance, including California retention and expansion projects.  Our team of knowledgeable professionals assists in all aspects of credits and incentives negotiation strategy and compliance processing, enabling clients to increase their return on investment for new and expanding facilities.  If you have any questions or need help in maximizing your awarded incentives, please contact us.   
 
Minah C. Hall
312.235.3316
Minah.Hall@TPCtax.com
 
 

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