California Competes Credit Application Periods Announced for FY 2020-2021

How It Works

The California Competes Tax Credit is available for all taxable years that begin on or after January 1, 2014, and before January 1, 2030.  The amount of available credit for each fiscal year is capped at a particular amount, which makes the application process very competitive.  For the 2020-2021 fiscal year, the available credit is capped at $231.1 million. The application due dates for this period are as follows:

1. July 27, 2020, through August 17, 2020 ($80 million in credits available)
2. January 4, 2021, through January 25, 2021 ($80 million available)
3. March 8, 2021, through March 29, 2021 ($71.1 million plus any remaining unallocated amounts from previous periods) 

 

To begin the application process, taxpayers must submit an online application with the Governor of California’s Office of Business and Economic Development, commonly referred to as GO-Biz.  Applications are accepted only during certain application periods. 
 
Once submitted, the application begins a two-step evaluation process.  The first step of the process includes an analysis of the amount of credit requested relative to the taxpayer’s proposed employment and project investment.  The top ranking applications (i.e., those with the best ratios) are moved forward to the second step of the process, which considers the taxpayer’s plans for creating and retaining jobs; compensation to be paid, including wages, benefits, and fringe benefits; duration of the proposed project; the opportunity for future growth, training opportunities offered by an applicant to its employees and the extent to which the credit will influence the taxpayer’s ability, willingness or both to create jobs in this state that might not otherwise be created in the state by the applicant.
 
When the evaluation process is complete, selected taxpayers will be given the opportunity to negotiate the terms and conditions of a credit contract.  This tax credit agreement, which expressly defines the taxpayer’s commitment to certain employment or project investment requirements, referred to as “milestones,” is negotiated between the taxpayer and GO-Biz and then must be approved by the California Competes Tax Credit Committee.  The committee meets only during certain periods.  For the 2020-2021 fiscal year, the Committee meets on the following schedule:

1. November 5,2020
2. April 22, 2021
3. June 17, 2021

 

Once approved, if the taxpayer meets its milestones for a taxable year as specified in the credit agreement, then the credit for that year is earned and may be claimed on its tax return.  If the milestones for a taxable year are not met, the credit is not earned for that taxable year.

 

Who Is Eligible

Any California business may apply (i.e., there are no industry or size restrictions).  Further, to help ensure that credits are available to more taxpayers, no more than 20 percent of the total available credits may be granted to a single taxpayer.
 
Finally, it is worth noting that taxpayers should be encouraged to apply even if it appears that they would be unable to use 100 percent of the credits granted for any particular year.  Although the credit is nonrefundable, it may be carried forward up to six (6) years.

 

Targets

Anyone looking to expand via headcount or via capital expenditures in California or if receiving the credit will prevent lay-offs or relocation from California.